HO CHI WA AND ANOTHER v. HO KING WAI, TERRY AND OTHERS

HCCW 433/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 433 OF 2012

____________

____________

____________

___________________

J U D G M E N T

___________________

1.  The Petitioners are the administrators of the estate of Ho Kit Yee. Ho Chi Wa is the Deceased’s husband and Ho Sau King is his Sister. On 23 November 2012 the Petitioners issued the present proceedings seeking in the Prayer to the Petition certain declarations and then an order that the 1^st to 5^th Respondents buy out the 20,000 shares held in the Deceased’s name representing 10% of the Company’s issued share capital. In the alternative the Petitioners seek in paragraph 5 of the Prayer an order that the “Company be wound up pursuant to section 177(1)(f) of the Companies Ordinance if the 1^st to 5^th Respondents refuse to buy out the 20,000 shares …”.

2.  On 26 January 2013 the 1^st to 5^th Respondents issued an application to strike out paragraph 5.

3.  At the application to strike out heard before me today the Petitioner was represented by Mr Gary Lam and the 1^st to 5^th Respondents were represented by Mr Richard Leung.

4.  The Company was incorporated in 1988 by Ho Fook Lum (“Ho Senior”) to carry on a plastics trading business.  Initially Ho Senior and the 1^st Respondent were the sole shareholders and directors.  In 1992 shares were allotted to Ho Senior, the 1^st Respondent and the 2^nd Respondent. In 2003 Ho Senior transferred all his shares to 4 of his children including the Deceased and resigned as a director.  The result was that the 1^st and 2^nd Respondents each held 30% of the issued capital of the Company and the remaining 4 siblings, including the deceased, held 10% each.

5.  The Company still carries on plastics trading in a small way, but its principal asset is a flat in Mei Foo Sun Chuen, which consists of 3 smaller adjacent flats bought between 1995 and 2000.  Ho Senior lives in this flat.  No objection is made about that in the Petition.  The Company has no debt and such plastics trading as it carries out makes a small profit.

6.  The complaints in the Petition can be summarised as follows.  Firstly, that after the Deceased’s death the Respondents procured an unlawful allotment of shares to themselves in order to dilute the Deceased’s shareholding in the Company.  Secondly, that the Company’s substratum has been lost by virtue of the significant reduction in the volume of plastics trading.  The Petition contains no reason for thinking that a winding-up order might be the appropriate remedy to grant.  The only matter referred to in the Petitioners’ evidence for thinking that the 1^st to 5^th Respondents might not buy the Deceased’s shares is that they have so far refused the Petitioners’ offer to sell them.  During argument Mr Lam mentioned one other matter from which he submitted the court could draw the inference that the Respondents might not be willing nor able to buy the Deceased’s shares, namely, the evidence in paragraphs 21 and 22 of the 2^nd Respondent’s affirmation that in 2011 he and the 1^st Respondent needed some money for their own purposes and wanted part of their loans to the Company repaid and as a consequence 2 car parks at Mei Foo Sun Chuen owned by the Company were sold.

7.  Paragraph 5 of the Prayer is peculiarly worded.  If the court orders that the 1^st to 5^th Respondents buy the shares of the Petitioners, the 1^st to 5^th Respondents cannot refuse to do so.  It is, of course, open to the 1^st to 5^th Respondents to invite the court to make a winding-up order if the court finds the Petitioners’ complaints made out and that they are entitled to some relief.  However, this is not their position.  Their position is clear.  If the Petitioners’ complaints are made out they will buy the Deceased’s shares.  They say that they wish to retain the Company for 2 reasons.  Firstly, that their Father lives in the flat that it owns and, secondly, because they believe that the plastics trading business retains value.  The Petitioners’ evidence gives no reason for doubting this.

8.  The criteria by reference to which the court determines these applications is not in dispute. I have considered how they apply in a case such as this one most recently in Re Sunlight Elastic Limited [1]. In short I have to be satisfied that there is no realistic prospect of the court granting after trial a winding-up order.

9.  I do not accept that any inferences can fairly be drawn from the matters relied on by the Petitioners as justifying their concern that the Respondents might not be willing nor able to buy their shares.  It seems to me quite clear that there is no reason to think that if the Petitioners’ complaints are made out at trial the court would not order that the Deceased’s shares are bought by the 1^st to 5^th Respondents.  Neither is there any reason to think that the 1^st to 5^th Respondents would not, or would not be able to, comply with such an order.  My impression is that, as far too often happens, solicitors have included in the Prayer to the Petition the alternative relief of a winding-up order without any regard to the relevant principles or its necessity.

10.  As I have explained in Re Sunlight Elastic Limited not only should such relief only be sought if it is considered necessary, but the reasons why it is contended it is necessary to include such relief should be set out in the Petition.  If drafters of petitions did this and considered the principles explained in the authorities when formulating their clients’ case applications of this sort would be reduced.

11.  I, therefore, will strike out paragraph 5 of the Prayer and order that the Petitioners pay the costs of the application.  I also hope that common sense will prevail and that the 1^st to 5^th Respondents will agree to buy the Petitioners’ shares as soon as possible.