CHAN HOW CHUNG, VICTOR AND ANOTHER v. TKR FINANCE LTD AND ANOTHER

HCCW 657/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 657 OF 2004

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D E C I S I O N

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1.  This is an application by the contributories of TKR Finance Limited seeking a permanent stay on the winding up of the company.  Whether or not a stay should be granted is ultimately a matter for the court’s discretion, but it is well established that the court should only grant a stay if it is positively satisfied that there are good reasons for doing so.  In this case, having considered the concerns that have been raised by the liquidator, it does seem to me that there are good reasons for granting a stay.

2.  The purpose of obtaining a stay is to enable the company to resume business and operations.  Arrangements have been made for that to be done in the event that the stay is granted.  Given that this is the objective, it seems to me that, unless there is some reason, having regard to the interests of the various parties whose interests are engaged, to refuse a stay, this provides a real reason why a stay should be granted.

3.  The court will obviously be concerned with the interests of the company’s creditors.  However, in the present case, these have now been fully resolved in that a number of the company’s creditors have been paid and the remainder have assigned their debts to the company’s holding company, which is now its only remaining creditor.  The holding company itself will effectively be paid in full as a result of the debt consolidation arrangement which I approved on 19 September 2007.  Thus, so as far as creditors are concerned, there are no relevant concerns relating to them.

4.  As far as the shareholders are concerned, again there are no relevant concerns relating to them.  The shareholders are in fact the applicants in this matter.

As far as the liquidator’s position is concerned, he has indicated that although he had a number of concerns that he had raised in his earlier reports to the court, at present the only remaining concern relates to three lots of shares (in other companies) which are held by the company on behalf of persons who have had dealings with it.  As to that, I think that the proposals put forward by Mr Yuen S.C, appearing for the company, as to how those shares should be dealt with should satisfactorily deal with this.  In the case of the two third parties who are not debtors of the company, as I understand it, the only reason that the shares have not been physically returned to them is that the company has not been able to contact them.  The company has offered to continue to hold the shares belonging to these persons at their disposal.  Such an undertaking is, in my view, sufficient to protect their interest.

5.  As far as the Official Receiver’s position is concerned, the Official Receiver represents the public interest.  Where there are matters relating to the company’s affairs that require investigation or where there are possible steps that might need to be taken in the public interest, such as proceedings relating to the disqualification of directors, these would obviously be factors that militated against the granting of a stay.

6.  In the present case, the Official Receiver has sought explanations in relation to the various matters of concern that have been raised by the liquidator and has indicated that he does not consider that there is any basis for seeking disqualification orders in relation to those matters.  Although there was one matter in respect of which the Official Receiver had indicated that he is of the opinion that there remains an issue, namely a possible breach of the provisions of the Companies Ordinance relating to the keeping of proper books and records (an allegation which the company disputes) this is not, at the end of the day, a matter that requires the liquidation to be prolonged as the Official Receiver has made it clear that he does not propose to take any disqualification proceedings against the company’s directors on the basis of that complaint alone.

7.  If there has been an offence that has been committed under Section 121 which it is thought should be pursued, that is a matter that can be dealt with outside a liquidation.  Thus, I do not regard it as a reason to refuse the order sought where it would otherwise be proper to grant a stay of the winding up.

8.  As far as costs are concerned, the position is that the applicants are agreeable to the company paying the costs of the provisional liquidators, liquidators and the Official Receiver in relation to the liquidation, such costs to be agreed if possible, or, failing agreement, to be taxed.  The Official Receiver has in fact provided a skeleton bill of costs which has not been challenged and which appears to me to be reasonable.  I shall therefore order the applicants to pay the Official Receiver his costs, assessed in the gross sum of HK$274,000, and to pay the costs of the liquidator and provisional liquidator their costs in the liquidation, such costs to be taxed if not agreed.