RE WAH YING CHEONG CO LTD

HCCW 225/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 225 OF 1996

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D E C I S I O N

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1.  This is an application for a validation order taken out by Wah Ying Cheong Company Limited (“the Company”)  on 8 December 2006. For the background of the Company and the previous applications for validation orders, I refer to the decision I gave on 14 March 2003, paragraphs 2 to 11. 

2.  The broad principles for making a validation order in the case of a solvent company are set out in paragraphs 15 and 16 of that decision.  I had also dealt with the financial position of the Company in paragraphs 17 and 18 of my decision. 

3.  The up-to-date financial position of the Company could be seen from the audited accounts for the years ended December 2004 and December 2005 exhibited to the supporting affirmation for this application.  As at 31 December 2005, the current assets were close to $31 million, of which cash and bank balances amounted to $28.5 million.  Current liabilities stood at $14.4 million.  Net current assets were $16.6 million, with retained profits of $16.4 million. 

4.  The Company seeks to validate the payment of various amounts to its accountant, company secretary and legal advisers in the total sum of about $1.7 million and payment of $8.4 million as special interim dividends to the shareholders.  As the latter item is opposed by the petitioners and they propose to file evidence in opposition,  I will adjourn that part of the summons to a date to be fixed and merely deal with the payments to be made to the accountants, company secretary and legal advisers.  These items are not opposed by the petitioners. 

5.  The Official Receiver has raised a point that some of these expenses had been incurred in the winding-up proceedings and they should not at this stage be paid out of the assets of the Company.  The winding-up petition has been stayed since July 1997.  The legal expenses although incurred in the winding-up proceedings were not incurred for the purpose of opposing the petition.  As mentioned in paragraph 33 of my previous decision, the major part of the costs incurred in these proceedings was for various applications for declaration of special interim dividends,  validation orders, and directions relating to the Company assets and trust monies and properties.  The work done was not really in relation to disputes between various groups of shareholders as such.  Expenses incurred in relation to applications for validation order had been sanctioned on previous occasions.  That could be seen in the orders made on 17 March 1997 and 14 March 2003. 

6.  I have been taken by Ms Terry Chan for the Company to the invoices and fee notes of the legal advisers.  I am satisfied that the fees queried by the Official Receiver were incurred for the two applications for validation orders and for declaration and payment of special interim dividends in 1999 and 2003.  It would be proper to validate payment of these expenses.  I therefore sanction the payments sought in paragraphs (1)(a) to (c) in the application.  For the remaining item in paragraph (1)(d), this would be adjourned for argument to a date to be fixed. 

7.  I give the following directions :

(1)     leave to the petitioners to file and serve an affirmation in opposition within 14 days hereof; 

(2)     leave to the Company to file and serve an affirmation in reply within 14 days thereafter; 

(3)     no further evidence be filed without leave; 

(4)     on compliance with paragraphs 1 and 2 hereof, leave to seek a hearing date of the adjourned application with one hour estimated. 

8.  I order the costs of the application and of the hearing today be in the cause of the petition.