Companies Winding-up Proceedings1984

RE SHUI HING INVESTMENT CO LTD

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40602-EN-1985-10-14

RE SHUI HING INVESTMENT COMPANY LIMITED

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HCCW000101B/1984

Action 1983 No. 4298

IN THE HIGH COURT OF JUSTICE

HONG KONG

___________

BETWEEN

	WAYCHONG ENTERPRISES LIMITED (suing on behalf of itself and other holders of shares in the 1st and 2nd Defendant	1st Plaintiff
	CHENG KWEI SHENG (suing on behalf of himself and other holders of shares in the 1st and 2nd Defendant	2nd Plaintiff
	and
	YICK FUNG ESTATES LIMITED	1st Defendant
	SHUI HING INVESTMENT COMPANY LIMITED	2nd Defendant
	WANG TEH HEUI	3rd Defendant
	NINA T. H. WANG	4th Defendant
	TAI CHING PING	5th Defendant
	ON LEE INVESTMENT COMPANY LIMITED	6th Defendant
	HOP KAY COMPANY LIMITED	7th Defendant
	WING WONG COMPANY LIMITED	8th Defendant
	RIPPLE CORPORATION LIMITED	9th Defendant

___________

1984 No. 100

IN THE HIGH COURT OF JUSTICE

COMPANIES (WINDING-UP)

-----------------

	IN THE MATTER OF YICK FUNG ESTATES LIMITED
	and
	IN THE MATTER OF COMPANIES ORDINANCE (Chapter 32 of the laws of Hong Kong)
	---------------

1984 No. 101

IN THE HIGH COURT OF JUSTICE

COMPANIES (WINDING-UP)

-----------------

IN THE MATTER OF SHUI HING INVESTMENT COMPANY LIMITED

and

IN THE MATTER OF COMPANIES ORDINANCE (Chapter 32 of the laws of Hong Kong)

--------------

Coram: Mortimer, J.

Dates of Hearing: 10th & 11th October 1985

Date of delivery of Judgment: 14th October 1985

__________

JUDGMENT

__________

1. There are two applications with which I have to deal. The first is an application by the Petitioners who seek a number of amendments to the petition and the second relates to the Statement of Claim and the defence. I am asked to consider an application first for an amendment to the re-re-amended Statement of Claim which is not in dispute and amendments to the defence.

2. I will deal, first with the application made by Mr. Ching on behalf of the Petitioners for amendments to the petition. He says that the matters the Petitioners wish to raise by way of amendment are examples of the way in which the Petitioners say the Wangs ran the company so as to forfeit the confidence of the Petitioners in a number of ways by running it with a lack of probity and good faith and by excluding them from such participation as was contemplated in the joint venture. It is important to remember that those are broad issues. The evidence in the case will obviously take some time and matters will be raised in the course of hearing these petitions which will have to be dealt with from tine to time by argument between counsel.

3. By way of amendments the main allegations are these:

4. The first allegation is that the Petitioners say that the Wange unjustly enriched themselves in certain ways; first by failing to put out to tender and to properly contract at a reasonable fee so that the companies paid too much for the contracting or building work; secondly they say that they called for contributions which were not required by the costs which had been incurred and were not in appropriate proportion to the original agreement for the joint venture; finally they say that in the course of the dispute a further $30,000,000 was added into the account by way of a prior year adjustment and the consequence of that is that there was less money in the company than there should have been.

5. Secondly, the allegation is that they were putting the assets of the company at some risk by playing fast and loose with them.

6. Thirdly, they say that they were excluded from such participation in the company's affairs by way of information and so forth which they were entitled to and they wish to add some particulars of excluding or an attempt to exclude.

7. I hope I will not do violence to the detailed and very helpful submissions which I have had from counsel on both sides if I summarise their submissions. Mr. Ching says, in effect, that the applications are admittedly very late, and apart from one instance which was simply an oversight of his own, the burdens which have arisen during discovery and inspection and the late preparation of the case for trial is one reason why these applications are made late. He says the general allegations are already made in the petition and these are properly to be regarded as further particularization of them and indicate the matters upon which the Petitioners will seek to rely in the course of the trial. He says it is not necessary for him to allege fraud as such in relation to this conduct in order for him to succeed. Total loss of confidence in the Wangs and in their probity acid good faith towards the Petitioners is enough and therefore the comparison which is made with the allegations in the derivative action where fraud is alleged is not appropriate or may not be appropriate.

8. He says then that it is unrealistic to conduct a trial which involves an investigation of the way in which the Wangs have run the company and to shut out from that investigation those matters which are known to everyone from the documents if he wants to rely on them as most of those matters are in front of the court, anyway. Most of the factual matters, that is the basis of the allegations, will not be in dispute and he submits that the real issues will be whether the Wangs had the authority to do what they did. Did they do what they did with probity and good faith? Did the Petitioners properly lose confidence in them? That, of course, excludes loss of confidence simply as businessmen. In other words what are the proper inferences to be drawn from all those facts?

9. Finally he says that even if the Petitioners are wholly at fault in seeking these amendments late, any injustice that may otherwise arise can be cured by the terms on which such amendments are allowed. He has pointed to a number of matters which he says show that an adjournment (if required) will not cause significant injustice in the particular circumstances of this case.

10. On the other hand, it submitted by Mr. Millet and Mr. Sherrard that the leave to make these amendments must be rejected. They say that the allegations of lack of probity and good faith amount to allegations of misconduct to which the principles in relation to late allegations of fraud ought to be applied. Secondly, that some of the allegations are vague and unparticularised and that if the allegations are to be equated with fraud, as is well known, those allegations must be unequivocally pleaded and, of course, clearly proved. They say the application is now too late and such amendments at this stage should not be allowed without very good reason, careful scrutiny, and if necessary, evidence by way of affidavit to show the truth of the allegations; there is no such evidence here and there are no good reasons advanced for making late amendments of this kind. They say then that these proceedings, which involve allegations of fraud and lack of good faith must be brought to trial as quickly as possible; these serious allegations should not be allowed to hang over the heads of those against whom they are made any longer. It is pointed out that these proceedings, the petitions and the Statement of claim, the derivative action, are so bound up that they must be tried together. Therefore, a delay involving one inevitably means a delay in the other. Finally, they say, in any event, these applications are not made in good faith, that they are part of a pattern of forensic tactics to put the pressure on the Wangs in order to achieve what they failed to achieve in an earlier application in front of me to vacate the dates of the trial until some date, well in the future, next year.

11. Mr. Sherrard, borrowing the words of Lord Wilberforce in Westbourne Galleries, said that it is proper to indict the application as part of a "paradigm of obscure forensic tactics" and the application cannot be allowed without injustice.

12. Now bearing all those submissions in mind, the approach of the court to applications to amend to allege behaviour which amounts to misconduct(I use that word advisely because it is the conduct, as I think all counsel agree, which I must look at and make my own assess-ment without labelling it) and the matters upon which I must exercise my discretion in making my decision are clearly and well set out in Associated Leisure Ltd. v. Associated Newspapers Ltd. [1970] 2 Q.B. at p.450. In that case, a party wished to amend to allege in the defence justification in a libel action but the principles are similar. The two sides of the coin were referred to by Lord Justice Edmund Davies, as he then was, when he said this on p.457 just below D: -

"The defendants rightly accept that the words here complained of mane grave charges. They also accept that their application for leave drastically to amend their defence is very belatedly make. So it is. Even so, should it be granted?"

He then refers, with approval, to what was said by Lord Justice Bowen in Cropper v. Smith (1884) 26 Ch. D. 700, 710-711: -

"I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversay, and I do not regard such amendment as a matter of favour or of grace...... It seems to me that as soon as it appears that the way in which a party has framed his case will not lead to a decision of the real matter in controversy, it is as much a matter or right on his part to have it corrected if it can be done without injustice, as anything else in the case is a matter of right."

Lord Justice Edmund Davies continued: -

"To that approach all other considerations must be subordinate. Applying it here, the machinery of the law having been set in motion by the institution of these proceedings, the issues involved are of great importance to the community, and it is in the public interest that they should be properly ventilated notwithstanding the delay which will in consequence arise in bringing the matter to trial."

That was putting one side of the matter. The Master of the Rolls at p. 456 dealt with another view. He said at E: -

"I have always understood such to be the duty of counsel."

He then refers to Gatley "A defendant should never place a plea of justification on the record unless he has clear and sufficient evidence of the truth of the imputation" and continues: -

"Like a charge of fraud, he must not put a plea of justification on the record unless he has clear and sufficient evidence to support it. The defendants in their case have observed that duty.''

Then at G: -

But when the defendant seeks to plead justification at a late stage, his conduct will be closely inquired into. The court will expect him to have shown due diligence in making his inquiries and investigations. The court may well refuse him application if he has been guilty of delay or not made proper inquiries earlier."

13. In passing, I have been asked to consider other cases in which examples of that principle have been put forward.

14. Inevitably in considering the instant case one consideration which has arisen in the course of argument is what do the Petitioners have to establish for the court to order a winding-up under the just and equitable principle. Apart from exclusion cases, do the Petitioners have to prove something in the nature of fraud or will some lesser misconduct, perhaps even fairly minor misconduct, suffice if it has the requisite results? Quite rightly counsel have not fully argued this but have merely indicated what legal issues may arise. I have been invited by Mr.Ching to consider Daniels v. Daniels[1978] 1 Ch. 406. This was an interlocutory matter, it was not a petition for winding-up but it has inferential relevance and being a decision of Mr. Justice Templeman, as he then was, must carry certain weight. The Headnote is sufficient. It indicates in that case that relief was possible even though fraud had not been actually alleged. I was pointed out by Mr. Sherrard, I think rightly, that fraud could well have been alleged in that case.

15. Inevitably one has to turn to Ibrahimi v. Westbourne Galleries[1973] A.C. 360 to find the possible limitations of the just and equitable principle for on the face of it the principle is very wide indeed. Lord Cross said (at p. 387 G): -

"A petitioner who relies on the 'just and equitable' clause must come to court with clean hands, and if the breakdown in confidence between him and the other parties to the dispute appears to have been due to his misconduct he cannot insist on the company being wound up if they wish it to continue. But the judge dealt with the case on the footing that the respondents' loss of confidence in the petitioner might have been due to a tragic and inexplicable misunderstanding. If it was right in the light of the evidence to deal with the case on that basis then I would have thought that a winding-up order should have been made."

Now I accept for present purposes that no relief would be given for loss of confidence in someone in a joint venture because of him simply being a bad businessman. I have been asked to look at a Canadian case, Chetal Enterprises, 39 D.L.R. 116 and the strict view expressed by Lord Shaw in Loch v. John Blackwood Ltd. [1924] A.C. 783. The particular passage is on p.788. I have been invited to look at passages in Gore Brown. Dealing with Westbourne Galleries in Chapter 31 paragraph 13, (2nd supplement November 1980): -

"That the application of the above principles to situations not involving expulsion remains to some degree uncertain ..... Any course of dealing which produces a breakdown in mutual confidence may well suffice to justify the making of a winding-up order under section 222 unless that breakdown in mutual confidence is referable to the conduct to the complaining shareholders."

Now, the only point of my referring to those matters is that inevitably there will be argument at the end of this case as to what may or may not be properly relied upon. This is a factor I have to bear in mind in considering this application. It is possible to exclude allegations from the court's consideration after argument but it is not possible to consider matters that have not been dealt with in the course of the trial.

16. Turning to considerations which arise in this case. The first is lack of bona fides in the application. Lack of bona fides may, of course, become very clear in the course of submissions, it is unlikely to do so, but it may. However, without the matter being tested in evidence on both sides I must be very slow to come to the conclusion that applications are made without good faith. It is usually impossible to decide such an issue on applications of this nature and it is certainly not possible for me to decide whether this application is or is not made in good faith. By the end of the trial it may become absolutely clear but it is not something I am able to take into account now.

17. It is necessary for me to consider the whole of the circumstances. A party ought to be allowed to present all matters which maybe relevant and fault in not making proper applications to amend, one has to bear in mind, can rarely be put at the door of the parties themselves. Secondly, there may be practical considerations to be taken into account. It is artificial if there are documents in front of the court setting out facts which may be open to cross examination on credit and nothing else. It is very difficult for the court to blind itself to something which is already in the documents about which amendments have been refused and it may not be correct to do so. And then, if there are basic facts which which are not really in dispute and what is in dispute is (a) the relevance of them and (b) more likely, the proper inference that is to be drawn from them, in such circumstances, it seems to me amendments can be more readily allowed, on terms if necessary. Then sometimes it occurs, and I believe it has in this case, that one party may provoke an issue by his conduct or by some act taken prior to trial and that act will inevitably feature in the evidence and argument. It may, in those circumstances, be necessary or advisable to allow an amendment to deal with issues that have been provoked in that way and also any associated amendments. Of course, where a party seeks to add particulars to issues already before the court and which are in the documents then, of course, those would be allowed more easily still.

18. The court's approach has to be a practical one and one in which it seeks to have the proper issues tried and not to approach pleadings in too technical a manner. If matters properly arise in the course of the trial, they can usually be put right.

19. Now turning to the particular amendments sought. (If I omit to deal with any paragraph about which there was some minor dispute then of course counsel will draw it to my attention and I will deal with it.) The paragraph 66 is the first one about which there was a dispute. I am simply going to say that the amendment in that paragraph will be allowed subject to particulars being given of the agreement alleged.

20. Of the more fully disputed amendments, it is convenient to consider first the amendment sought in paragraph 96A. This relates to an allegation which the Petitioners wish to make in relation to a matter to which I have already adverted. It is the prior year adjustment. As everyone here knows only too well by now, it arose when the Petitioners raised the question about the cost of the construction works to the company, (paraphrasing counsel), the Wangs took the view "Well if you want to play it that way we'll play it that way as well" and therefore they took their own quantity surveyor's report, decided that the costs which had been asked of the company were too low and then put it right by this sum of $30,000,000. It was, to say the least of it, carrying the fight right into the enemy camp. I am bound to ask what on earth did the Wangs expect to happen as a result of that? It is a matter which inevitably will be raised in evidence. The report has been disclosed and at an early stage the Wangs invited the other side to obtain, (if not satisfied) their own independent report. They can say with some justification "Well you knew about this years ago and you ought to have made appropriate amendments there and then", but looking at this from a practical point of view and considering what is inevitably going to be considered at trial, the Wangs must have known this was going to be raised. They must have known that this would raise questions of confidence and probity. To cut the matter short, I think in spite of everything, that this is a perfectly proper and practical amendment to allow. Indeed, it would be unjust to the Petitioners not to allow it.

21. That has inevitable results. Having been invited so long ago to take independent advice and that independent advice having been obtained, I turn to the application in relation to paragraph 67A. Mr. Ching says that amendment is only particularizing the words in paragraph 67 where the petition alleges, among other things, that in breach of good faith the Wangs failed to employ contractors at a reasonable fee. I should read the earlier part: -

"They failed to invite competitive bidding for the carrying out of construction works from other contractors or employ contractors at a reasonable fee."

Mr. Ching says that amounts to an allegation that they employed contractors at an unreasonable fee. Well, it would be quite wrong for me to say that I understood that as being the basis of the plea in paragraph 67 as originally made, I think it was a rolled-up allegation of failure to employ independent contractors. So it would not be right for me to allow this amendment on the basis that this is simply particularizing an allegation already made. However, having made the decision under 96A, an issue provoked it seems to me, by the Wangs, this is an associated matter and it is one which will inevitably arise in the course of the trial. It is therefore an amendment which I am prepared to allow. I should say in passing that it seems to me that no cost to the actual construction company can be relevant. It is a question of what is reasonable and there is a fairly high onus on the Petitioners. Of course, no assessment of damages in this case falls to be made. It is a general allegation here of the results of not doing as the Petitioners say the Wangs ought to have done. It is only related to the question of how the joint venture should have been run. If the Wangs succeed in showing that there was never any intention, never any contemplation that anyone should do the work other than Chinachem companies that will be an end of the matter.

22. Let me turn now to the application in relation to 76A. This allegation is that in calling for the loans the Wangs produced totally false, dishonest notices for money that was not and could not, under any contemplation, be required and particulars are given. The particulars are given on the basis that they relate one document, the contribution notice, with another, the ledger. The allegation relies upon the comparison of those documents. Whether or not those documents can properly be compared, I know not but it is an entirely new allegation made after the date on which the trial was due to begin. It raises extremely complicated matters. Matters which, as one sees from Paragraph 76A the dates alleged are from time to time between the 18th May 1978 until September 1980. This seems to me to be a wholly dangerous allegation to make at this stage. After this length of time, it may not even be possible to make the proper answer, whatever happened may have been done by employees. The reasons for particular sums being called for may now have disappeared into history and it seems to me to be quite unjust to make such a serious allegation based simply (as it is) on a comparison of documents at this stage. The court should not allow there to be a risk of injustice of this nature. I do not think it can be put right by adjournment or by costs and, therefore, I in my discretion disallow it.

23. In paragraph 79 there was no real dispute about the amendment there say for the word "assuming" and as I understand it, the matter was dealt with in the course of argument by agreement between counsel. Instead of the word "assuming" about 5 lines from the bottom of P.33 the words "if it is not admitted" are going to be substituted. Subject to that correction, that amendment will be allowed.

24. The next proposed amendment can be dealt with in this way. Paragraphs 83C - 83E are allegations the Petitioners wish to make in relation to a book entry which has been found of $65,000,000. The accounts in which this figure appears are, as I understand it, in court and will be part of the evidence in the case. The Petitioners wish to make a number of points and they are set out in these paragraphs. It is very difficult indeed for me at this stage to say whether or not those matters are in point. It is a very large sum. There cannot be any difficulty, in dealing with the matter subject perhaps to one allegation which is whether the Chinachem Finance Ltd. was or was not a deposit taking company. I propose to allow this amendment but I say this: Mr. Sherrard said that allowing this is going to mean that there is going to be trial by ambush. Now I can say with some confidence there will be no trial in front of me that will be trial by ambush. However, as these matters are in the accounts and the Petitioners wish to raise some matter about them I think they ought to be allowed to do so and the decision will fall to be made in the course of the trial as to whether these allegations mean something or in the end mean nothing. So I allow that amendment.

25. Similarly, turning to paragraph 97A the Petitioners wish, following an allegation that the Wangs have further excluded Waychong and Cheng from participating in all major decision making or consultation process in relation to the affairs of Yick Fung and Shui Hing, to allege certain particulars (that are set out) in relation to meetings which were said to be held on the 6th September 1980 and the 14th November 1980. Those documents relating to those meetings are in evidence. It may be, as the Wangs say, that those allegations lead nowhere, it said that they are evidence of exclusion but it cannot be so because the allegations do not lead to the final allegation "and they were excluded because ....." and then a further particular. The point sought to be made, as I understand it, is that there was exclusion in the way alleged earlier in the petition and this is a particular on two documents, upon which they wish to rely, as being an indication of the attitude and perhaps preparation for doing something which was not done. Now, of course, those documents may mean something, they may mean absolutely nothing and may be simply a proper way of the Wangs dealing with this joint venture as was always intended. They say they were intended to do it and Waychong and Mr. Chang were not going to be involved in it at all, save at the end, to take the profit. Now if they are right about that then that allegation falls the ground. As the documents are in front of the court, it would be unrealistic to say that they cannot be relied on because of a pleading point. I am going to allow that amendment and the matter will fall to be dealt with in the course of the trial.

26. I think those are all the matters that were in dispute. Those matters which were not in dispute will be allowed. I am not going to say anything at this moment about any terms because having made my mind up about the principle of the matter, I will hear counsel about any terms which they say follow from those decisions.

27. I turn now to the proposed amendments of the defence. That has been in the hands of the Plaintiffs since the 20th September. I am not going to deal with them in detail because it seems to me those amendments are a clarification of the issues and that such clarification is as much for the benefit of the Plaintiffs as for anyone. They relate to issues which have been raised at earlier times and the particular amendment relates to the Defendants' answers about the Wing Wong and Ripple affair, if I can put it that way. It seems to me that it is as useful to the Plaintiffs as to anyone else to have the Defendants' case about that set out with particularity and clarity. The point which Mr. Ching sought to raise that the pre sales were not known and that was something new to the Plaintiffs on the documents where it was disclosed, in my judgment at this stage does not hold water. So I am going to allow those amendments to be made. Of course, so far as the amendments to the re-re-amended Statement of Claim there was no dispute and I give leave for those amendments to be made as well.

	(J. B. Mortimer)
	Judge of the High Court

Representation:

Charles Ching, Q.C., Winston Poon & Miss Gladys Li instructed by Philip K.H. Wong & Co. for joint Petitioners & Plaintiffs.

Michael Sherrard, Q.C. & Benjamin Cheng instructed by Ip, Ku & Stopper for D3 & D4/opposing contributories.

Peter Millet, Q.C. & R.K. Sujanani instructed by Ip, Ku & Stopper for D5 to D9.

23834-EN-1985-05-03

RE SHUI HING INVESTMENT CO LTD

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HCCW000101/1984

IN THE HIGH COURT OF JUSTICE

NO. 100 OF 1984
COMPANIES WINDING-UP

IN THE MATTER OF YICK FUNG ESTATES LIMITED

AND

IN THE MATTER OF THE COMPANIES ORDINANCE (CAP. 32)

________________

IN THE HIGH COURT OF JUSTICE

NO. 101 OF 1984
COMPANIES WINDING-UP

IN THE MATTER OF SHUI HING INVESTMENT COMPANY LIMITED

AND

IN THE MATTER OF THE COMPANIES ORDINANCE (CAP. 32)

__________________

Coram: The Honourable Mr. Justice Jones in Chambers

Dates of hearing: 25, 26 & 29 April 1985

Date of delivery of judgment: 3 May 1985

____________

JUDGMENT

___________

1. I have before me summonses for the appointment of a provisional liquidator pursuant to Section 193 of the Companies Ordinance for two companies, Yick Fung Estates Limited (Yick Fung) and Shui Hing Investment Limited (Shui Hing).

2. Petitions were presented by two contributories, Waychong Enterprises Limited (1st petitioner) and Cheng Kwei Sheng (2nd petitioner) on the 19th March 1984 to wind up the two companies on the just and equitable ground. An order for consolidation of the two petitions was made on the 27th April 1984. The hearing of the petitions has been fixed to commence on the 1st October 1985.

3. Motions to strike out the petitions by the companies were heard by me over a period of ten days last year and were dismissed on the 15th June 1984. For convenience I will set out the facts of the case as they appear on pages 2, 3 and 4 of my judgment.

"FACTS

	T.H. Wang and his life Nina Wang (the Wangs) control a group of private companies known as the Chinachem group. the group includes the two respondent companies, Hop Kay Company Limited (Hop Kay), On Lee Investment Company Limited (On Lee), Wing Wong Company Limited (Wing Wong) and Ripple Corporation Limited (Ripple). The first petitioner and the two respondent companies were incorporated for the purpose of real estate development. The Wangs control 80% of the issued share capital of the respondents whilst the 1st and 2nd petitioners each hold 10%. The Wangs, Tai Ching Ping (Tai) an employee of the Wangs, the 2nd petitioner, and Ho Chew who represents the interests of the 1st petitioner are directors of both the respondent companies. Another company under the control of the Wangs Sunday Investment Limited is also a director of the 2nd respondent.
	Prior to 1976 the Wangs representing the Chinachem group and the 1st petitioner represented by Ho Chew or other companies carried out certain real estate developments as joint ventures. The 2nd petitioner had also been engaged in joint ventures with the Wangs.
	In May 1976 a joint venture agreement was entered into between the Wangs on the one hand and the 1st and 2nd petitioners on the other for the development of Shatin Town Lot No. 11 as a residential and commercial complex. For this purpose the two respondent companies acquired land as tenants in common in equal undivided shares from the Hong Kong Government by public tender for $66,500.000. Completion of the development was to be on or before the 31st December 1982. It is common ground that the management of the project has throughout been under the control of the Wangs.
	Disputes arose between the parties at an early stage in the development, but were resolved by correspondence in September 1977.
	In December 1979 four residential blocks that were in the course of erection on the land were sold by the respondent companies at an alleged under value to Wing Wong and Ripple. The petitioners claim that they had no knowledge of these transactions.
	On the 22nd December 1982 the petitioners, solicitors wrote to the the Wang requesting explanations on various documents and accounts. Further correspondence ensued until April 1983 when the writ in the derivative action was issued. It is clear that the petitioners had contemplated filing a winding up petition in May 1983, but a petition in draft form was not ready until October 1983. Negotiations held without prejudice to try to achieve a settlement were conducted between the solicitors for the parties in December 1983 and January 1984, but were unsuccessful. Of the 14 tower block that were originally contracted to be built 8 have so far been completed and some progress has been made on the other 6.
	By reason of the failure to complete the project within the stipulated period government re-entered the undeveloped portion of the land on the 20th January 1984. However, the re-entry was subsequently cancelled on the 15th May 1984.
	On the 15th April 1983 the petitioners as minority shareholders commenced a derivative action against the respondent companies and their associates on behalf of the respondent companies and their shareholders for damages for fraud and conspiracy.
	...............................................................................
	The statement of claim includes a number of allegations of fraud, breach of fiduciary duty and lack of bona fides. The petitions contain a series of allegation of breaches of duty by the Wangs which the petitioners claim resulted in their exclusion from consultation and decision making. In particular the petitioners rely on paragraph 21 of the petition which reads:
	"	21. Notwithstanding the vesting of the management of each of these joint ventures in a particular participant, it was fundamental that the other parties should be kept informed of all important developments and that the other parties should be consulted on matters of policy. Those matters included matters relating to the layout and design of the development, employment of architect and contrators, financing of the project and the disposal of the same."
	Specific allegations are made that construction costs were high, architectural fees excessive, funds were improperly diverted, failure to disclose accounts, and that the Wangs were guilty of mala fides.
	By virtue of the conduct alleged the petitioners contend that the joint venture has been prejudically affected by putting the assets of the companies in jeopardy. The petitioners also claim that they have lost confidence in the Wangs because of an abuse of their power as directors and controlling shareholders of the companies with a view to benefiting themselves at the expense and to the detriment of the petitioners and the companies.".

In those proceedings counsel for the companies conceded that the petitions revealed a good cause of action whilst I held at page 10 of my judgment as follows:-

"The evidence if accepted supports the petitioners' allegation that they have no confidence in the continued management of the companies by the Wangs.".

4. Mr. Millett who appeared for the companies on the present applications concedes that if the evidence of the petitioners is accepted at the trial, a winding up order will be made and equally justifies grounds for fearing that the assets of the company are in jeopardy. He also concedes that the petitioners had produced prima facie evidence in June 1984 to support some of their allegations.

5. The summonses were issued on the 19th March 1984 and the hearing was due to commence on the 21st May 1984. However, the motions to strike out the petitions began on the 17th May 1984 and did not finish until the 30th May 1984 when judgment was reserved. As a result the summonses were adjourned until the end of July 1984. However, on the 31st July the parties by a consent order agreed that the summonses be adjourned sine die with liberty to restore on two clear days notice on certain terms. The principal terms of the order were as follows:-

"	1.1 A11 monies in the hands of Yick Fung Estates Limited ("Yick Fung") and Shui Hing Investment Company Limited ("Shui Hing"), all proceeds from the sales of units in the Shatin Town Lot No. 11 Development ("the Development") and all rentals and other income be paid into an interest-bearing bank account to be opened in the names of Messrs. Woo, Kwan, Lee & Lo and Messrs. Philip K.H. Wong & Company jointly ("the Account").
	1.2 The Account be one which can only be operated by signatures of at least 2 signatories, one of which must be one of the partners of Messrs. Philip K.H. Wong & Company designated as signatories by the joint petitioners and one of which must be one of the partners of Messrs. Woo, Kwan, Lee & Lo designated as signatories by the opposing contributories.
	1.3 The joint petitioners designate at least 3 of the partners of Messrs. Philip K.H. Wong & Company as such signatories. The opposing contributories designate at least 3 of the partners of Messrs. Woo, Kwan, Lee & Lo as such signatories.
	2.1 Except to the extent set out in paragraph 3.1 below, expenditure on the Development be against certificates of the authorised person, Mr. K.K. Wong and countersigned by a quantity surveyor to be appointed. The quantity surveyor be selected by agreement of the joint petitioners and the opposing contributories or, failing such agreement, by the Court.
	2.2 Yick Fung and Shui Hing will not enter into any contract the terms of which provide for payment by them or either of them in excess of $10 million save with the prior approval, of the joint petitioners or the Court.
	2.3 This order is without prejudice to the right of the boards of Yick Fung and Shui Hing to exercise their own unfettered commercial judgment in good faith.
	3.1 A cash impressed account be operated by Yick Fung and Shui Hing for miscellaneous expenses (''the impressed account").
	3.2 $1 million be paid from the Account into the impressed account upon opening, and the amount therein shall never be allowed to exceed $1 million or fall below $100,000.00
	3.3 The opposing contributories will supply the joint petitioners with itemised statements of expenditure when seeking to replenish the impressed account.".
	5. Within 56 days from the date hereof the opposing contributories shall make such contribution (according to their record as at the 30th June 1984) towards the costs of the Development as may be necessary to bring the contributions of the opposing contributories, Waychong Enterprises Limited and Mr. Cheng Kwei Sheng respectively to the proportions 80:10:10 respectively. The amount shall be adjusted as necessary on completion of audit of Yick Fung and Shui Hing's for the year ended 30th June 1984.
	6. The joint petitioners and their accountants (at their expense) shall within 14 days from the date hereof have access to the accounts and documents for carrying out an audit of Yick Fung and Shui Hing from the date of the last audited accounts, i.e for the year ended 30th June 1981 for the purpose of carrying out up-to-date audits of Yick Fung and Shui Hing.".

6. As a result of investigations made by Messrs. Coopers & Lybrand, the petitioners' accountants, it was discovered after the consent order had been made that the Wangs had made charges for sales commission and management fees during 1982 and 1983 without the knowledge or consent of the petitioners. As a result an order was made to amend the petition on the 19th September 1984 to include two additional paragraphs. They are paragraphs 83A and 83B which read: -

"83A. Further, during the years ended 30th June, 1982, and 30th June, 1983, the Wangs and their servants or agents without the knowledge or consent of Waychong or Chang procured Shui Hing to pay to or to credit Yau Fook Hong Company Limited, a company under the actual or effective control of the Wangs, the respective sums of $12,762,383.75 and $16,104,284.60 purportedly by way of commission on the sale of units in the project and "management fee".

PARTICULARS

Year ended

30th June 1982

Year ended

30th June 1983

Sales commission

"Management fee"

$ 7,582,383.75

5,180,000.00

___________

$12,762,383.75

=========

$13,704,284.60

2,400,000.00

____________

$16,104,284.60

=========

83B. The payment or credit by Shui Hing to Yau Fook Hong Company Limited of sales commissions and of "management fee" allegedly in respect of office maintenance services were wholly unjustified and were not made bona fide and in the interests of Shui Hing but were intended by the Wangs to benefit themselves to the detriment and at the expense of Shui Hing and ultimately Waychong and Cheng. If and insofar as it may be found that Yau Fook Hong Company Limited was entitled to any sales commission, the sales commission was charged at 7.5 per cent of the sale price and was excessive.".

These charges have been admitted by Mr. Wang, but he denies that there is anything wrong or improper about them.

7. The main thrust of Mr. Litton's submission on behalf of the petitioners is that there have been breaches of the consent order by the Wangs which now require the appointment of a provisional liquidator as a matter of urgency. Mr. Millett on the other hand asserts that there have been no breaches of the order, that it is not an appropriate case for the appointment of a provisional liquidator, but instead invites the court to deal with the application by means of undertakings. In any event he submits that the petitioners should not have restored the summonses, but instead should have referred the matter back to the court under the provision for liberty to apply.

8. I will now turn to the terms that were agreed to by the parties in the consent order and consider the evidence. Clauses 1 and 3 joint bank accounts. It is not in dispute that neither an interest bearing account nor an imprest account has been opened. On the 15th August 1984 the solicitors for the Wangs, Woo, Kwan, Lee & Lo suggested that the accounts should be opened with the Continental Illinois Bank Limited (C.I.B.L.). The petitioners' solicitors, Philip K.H. Wong & Co. replied that before expressing an opinion upon this suggestion, they wished to have a detailed account of the money that the companies proposed to pay in. Eventually Woo, Kwan, Lee & Lo replied that the sum to be paid in was $23,140,400.08. As C.I.B.L. had experienced financial problems in the United States at this time, the parties agreed by the 24th September 1984 to open the accounts with the Chase Manhattan Bank. However, despite further correspondence between the solicitors for the parties, no steps were taken to open the accounts. On the 4th December 1984 the Wangs changed their solicitors to Ip, Ku & Stoppa and on the 17th December 1984 they wrote to the petitioners' solicitors requesting their consent to the names of the prospective signatories to the accounts being changed. Consent was given somewhat belatedly on the 1st February 1985 and the documents for the opening of the accounts were sent to Ip, Ku & Stoppa on the 6th March 1985. However, on the 18th March 1985 they replied to the effect that it would be preferable to open the accounts with C.I.B.L. as the interest rates offered were higher than those of the Chase Manhattan, and also on the grounds that the Chase Manhattan had refused to open the imprest account. Correspondence then ensued between the parties' solicitors, some from Ip, Ku & Stoppa being unnecessarily acrimonious. This correspondence achieved no positive result. It is true that the consent of the petitioners to the identity of the bank is not required by the order, but quite obviously the accounts cannot be opened without their approval having regard to the fact that the accounts are to be joint accounts.

9. The Wangs contend that the Chase Manhattan refused to open the imprest account because of the pending litigation between the parties. This seems an extraordinary reason when the account was to be credited with up to $1 million whilst banks are concerned with matters of litigation everyday of the week. No evidence was adduced by anyone from the Chase Manhattan Bank to support this allegation. Mr. Wang in paragraph 6 of his affirmation of the 24th April 1985 says:-

"At all material times, and at the present time, all the moneys relating to the sale and leasing of units in Shatin Town Lot No. 11 have been deposited in a day call deposit account with CIBL, which amount is now in the region of approximately $104 million and which is earning interest at 7.75% per annum.".

The name of tire account holder is not mentioned.

10. In my judgment there is abundant evidence that the Wangs have deliberately delayed the opening of the accounts, and have now raised the issue of interest as a further excuse for delay.

11. Clause 5 was to be complied with within 56 days of the order, but no payment has been made. The Wangs say that they were unable to make an payment until they had received their accountants' report to determine how much was required. Nevertheless, the order required payment to be made according to the companies' records as at the 30th June 1984 which need not be audited. Only upon completion of the audited accounts would it be necessary to adjust the amount if that happened to be necessary. There has been a clear breach of this clause.

12. Clause 6 has not been complied with, but the Wangs deny that there has been a wilful refusal to supply the accounts and documents. Coopers and Lybrand, the accountants instructed to carry out the audit have set out in their report of the 17th April 1985, details of the steps they have taken to gain access to the records of the company. From the outset they encountered difficulties in obtaining the necessary records. On the 12th December 1984 they wrote to the companies requesting that they be supplied with certain documents and for bank statements and records up to the 30th June 1984, but no reply was received. Mr. Millett said that Coopers & Lybrand should have followed up this letter with a reminder and commented that businessmen tend to regard litigation as of secondary importance to their business activities. That is no doubt true but affords no excuse for the Wangs' failure to comply' with the consent order. It was not the accountants' responsibility to try and prise out the documents from the Wang. Again there has been a clear breach of the order whether wilful or otherwise.

13. My attention was drawn to various allegations made by the petitioners which support their claims that they have lost complete confidence in the Wangs. In particular I was referred again to the Wing Wong and Ripple agreements, the Land Exchange Entitlements and the tenders invited for the four remaining blocks that are to be built. I do not propose to analyse these arguments for these disputes cannot be decided on the affidavits. That evidence can only be considered at the trial. However, if the petitioners' evidence is true a winding up order will be made for the Wangs have abused their power as directors in the conduct and management of the companies.

14. The matter of appointing alternate directors on behalf of the petitioners was also raised, but I do not consider that it is relevant to the present application.

15. The court has an unfettered discretion to appoint a provisional liquidator if it is shown that there is a prima facie case to make a winding up order and either the property of the company is in danger or it is alleged that those in control are misappropriating or wasting its assets or any other good cause exists.

16. Mr. Millett concedes that the petitioners have cause for complaint, but that they themselves have contributed to the delays that have occurred. He submits that the petitioners should not have restored the application for the appointment of a provisional liquidator, but that an application should have been made under the provision for liberty to apply. Mr. Millett asserted that if a provisional liquidator is appointed it will deter tenders being made for the contract for the remaining blocks or tenders will be submitted with onerous terms imposed. This matter is not relevant to the circumstances of this case but in any event I do not consider that there is any merit in this argument for tenderers are likely to know that a petition has been presented and that litigation is pending.

17. Mr. Millett submitted that the solution to the present impasse would be by way of undertakings. I assume although it was not stated that the undertakings would be given by the Wangs. Mr. Wang on his own evidence regards the project as his own. The management is under the control of the Wings. Large payments have been received by way of commission and management fees by the Wangs without any explanation which indicates that the assets are being misappropriated, and there is no reason to suppose that this situation will not continue. The evidence if accepted supports the petitioners claims that they have lost all confidence in the Wangs. Having treated the consent order with complete disdain one wonders how any faith can be placed in any undertaking that might be given by the Wangs. It is indicative of his attitude that Mr. Wang has not even complied with Section 122(l) of the Companies Ordinance by placing the last annual accounts of the companies before a general meeting within the statutory period.

18. The petitioners have shown remarkable tolerance and forbearance in not restoring the summonses earlier in view of the Wangs' attitude. The order was made to preserve the position until the petition but that is no longer possible having regard to the Wangs' failure to comply with the order. It is therefore necessary to protect the assets until the hearing of the petition for they are undoubtedly in jeopardy. Accordingly in the exercise of my discretion I am satisfied that the Official Receiver should be appointed as the provisional liquidator of the two companies.

(B.L. Jones)
Judge of the High Court

Representation:

Mr. H. Litton, Q.C. & Mr. W. Poon (Philip K.H. Wong & Co.) for Petitioners.

Mr. P. Millett, Q.C. & Mr. R. Sujanani (Ip, Ku & Stoppa) for Companies.

Mr. E.G. Knos for Official Receiver.

35803-EN-1984-06-15

RE SHUI HING INVESTMENT CO LTD

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HCCW000101A/1984

IN THE HIGH COURT OF JUSTICE

NO. 100 OF 1984

COMPANIES (WINDING UP)

IN THE MATTER OF YICK FUNG ESTATES LIMITED

AND

IN THE MATTER OF COMPANIES ORDINANCE (Chapter 32 of The Laws of Hong Kong)

_________

IN THE HIGH COURT OF JUSTICE	NO. 101 OF 1984
COMPANIES (WINDING UP)

TN THE MATTER OF SHUI HING INVESTMENT COMPANY LIMITED

AND

IN THE MATTER OF COMPANIES ORDINANCE (Chapter 32 of The Laws of Hong Kong)

_________

(CONSOLIDATED BY THE ORDER OF
THE HONOURABLE MR. JUSTICE JONES
MADE ON THE 27TH APRIL, 1984.)

___________________

Coram: The Honourable Mr. Justice Jones in Court.

Dates of hearing: 17 - 18, 21 - 25 & 28 - 30 May 1984

Date of delivery of judgment: 15 June 1984

__________

JUDGMENT

__________

1. On the 19th March 1984 petitions were presented by two contributories Waychong Estates Limited (1st petitioner) and Cheng Kwei Sheng (2nd petitioner) to wind up Yick Fung Estates Limited (1st respondent) and Shui Hing Investment Limited (2nd respondent) on the just and eguitable ground under Section 177(f) of the Companies Ordinance. An order for consolidation of the two petitions was made on the 27th April 1984.

2. I have before me motions to strike out the petitions on the grounds that they are vexatious, prejudicial or embarrassing to the fair trial of the derivative action between the petitioners and the respondents and their associates or as an abuse of the process of the court. In the alternative an order is sought for a stay until after judgment in the action.

FACTS

3. T.H. Wang and his wife Nina Wang (the Wangs) control a group of private companies known as the Chinachem group. The group includes the two respondent companies, Hop Kay Company Limited (Hop Kay), On Lee Investment Company Limited (On Lee), Wing Wong Company Limited (Wing Wong) and Ripple Corporation Limited (Ripple). The first petitioner and the two respondent companies were incorporated for the purpose of real estate development. The Wangs control 80% of the issued share capital of the respondents whilst the 1st and 2nd petitioners each hold 10%. The Wangs, Tai Ching Ping (Tai) an employee of the Wangs, the 2nd petitioner, and Ho Chew who represents the interests of the 1st petitioner are directors of both the respondent companies. Another company under the control of the Wangs Sunday Investment Limited is also a director of the 2nd respondent.

4. Prior to 1976 the Wangs representing the Chinachem group ant the 1st petitioner represented by Ho Chew or other companies carried out certain real estate developments as joint ventures. The 2nd petitioner had also been engaged in joint ventures with the Wangs.

5. In May 1976 a joint venture agreement was entered into between the Wangs on the one hand and the 1st and 2nd petitioners on the other for the development of Shatin Town Lot No. 11 as a residential and commercial complex. For this purpose the two respondent companies acquired land as tenants in common in equal undivided shares from the Hong Kong Government by public tender for $66,500,000. Completion of the development was to be on or before the 31st December 1982. It is common ground that the management of the project has throughout been under the control of the Wangs.

6. Disputes arose between the parties at an early stage in the development, but were resolved by correspondence in September 1977.

7. In December 1979 four residential blocks that were in the course of erection on the land were sold by the respondent companies at an alleged under value to Wing Wong and Ripple. The petitioners claim that they had no knowledge of these transactions.

8. On the 22nd December 1982 the petitioners' solicitors wrote to the Wangs requesting explanations on various documents and accounts. Further correspondence ensued until April 1983 when the writ in the derivative action was issued. It is clear that the petitioners had contemplated filing a winding up petition in May 1983, but a petition in draft form was not ready until October 1983. ,Negotiations held without prejudice to try to achieve a settlement were conducted between the solicitors for the parties in December 1983 and January 1984, but were unsuccessful. Of the 14 tower blocks that were originally contracted to be built 8 have so far been completed and some progress has been made on the other 6.

9. By reason of the failure to complete the project within the stipulated period Government re-entered the undeveloped portion of the land on the 20th January 1984. However, the re-entry was subsequently cancelled on the 15th May 1984.

10. On the 15th April 1983 the petitioners as minority shareholders commenced a derivative action against the respondent companies and their associates on behalf of the respondent companies and their shareholders for damages for fraud and conspiracy. A defence was filed on the 4th July 1983, a request for further and better particulars of the defence was delivered on the 30th September 1983, and particulars were filed on the 21st November 1983. A reply was filed on the 10th April 1984 and a request for further and better particulars of the reply was delivered on the 15th May 1984.

11. The statement of claim includes a number of allegations of fraud, breach of fiduciary duty and lack of bona fides. The petitions contain a series of allegations of breaches of duty by the Wangs which the petitioners claim resulted in their exclusion from consultation and decision making. In particular the petitioners rely on paragraph 21 of the petition which reads:-

"21. Notwithstanding the vesting of the management of each of these joint ventures in a particular participant, it was fundamental that the other parties should be kept informed of all important developments and that the other parties should be consulted on matters of policy. Those matters included matters relating to the layout and design of the development, employment of architect and contractors, financing of the project and the disposal of the same.".

Specific allegations are made that construction costs were high, architectural fees excessive, funds were improperly diverted, failure to disclose accounts, and that the Wangs were guilty of mala fides.

12. By virtue of the conduct alleged the petitioners contend that the joint venture has been prejudicially affected by putting the assets of the companies in jeopardy. The petitioners also claim that they have lost confidence in the Wangs because of an abuse of their power as directors and controlling shareholders of the companies with a view to benefiting themselves at the expense and to the detriment of the petitioners and the companies.

LACK OF GOOD FAITH

13. A petition presented to put pressure on a company in order to achieve a collateral purpose is not properly presented See In re a Company (1894) 2 Ch. 349, In re Bellador Silk Ltd. (1965) 1 All E.R. 667, In re a Company (No. 001573 of 1983) The Times 12th May 1983.

14. Mr. Bromley who appeared for the applicants gave several illustrations of conduct by the petitioners which he contended was oppressive. First without prejudice negotiations between the parties solicitors were held under the threat of the petitioners to file winding up petitions if a satisfactory settlement was not reached. Secondly the petitions were advertised despite a request to delay publication until after the hearing of the motions to strike out. Thirdly the prosecution of the derivative action has been delayed by the petitions which has caused further harassment to the Wangs. Fourthly the petitions are not bona fide and contain paragraphs that are tricky. Fifthly the oaths of the deponents in support of the petitions areunreliable. Sixthly the petitioners have filed the petitions in disregard of the class rights of creditors.

15. It is clear that the petitioners have instituted these proceedings in order to extricate their investments from the respondents. Negotiations conducted with a view to settling the proceedings do not in my opinion amount to imposing pressure. In fact the respondents at one stage expressly requested the petitioners to defer instituting proceedings so that negotiations could continue Having regard to these facts I am unable to agree that the petitions are stale although the petitioners did not proceed as expeditiously as they might have done.

16. The petitions were served three weeks before the respondents made their request to delay the advertisement of the petitions. During that time the respondents had ample time to apply for an interlocutory injunction to restrain the publication of the advertisements but chose to take no action. Having taken no steps to do so it ill behoves the respondents to complain that the petitioners were guilty of more than a solecism when they did not accede to their request.

17. Sinister motives have been suggested for delay in the action by the petitioners despite extensions granted by both sides for the filing of pleadings. No summonses were issued by the respondents for orders to compel filing of pleadings within a specified period. I do not consider that the delay amounted to oppressive conduct.

18. It is conceded that the petitions reveal a good cause of action. However, whether or not they are bona fide and contain paragraphs that are tricky cannot be tested without viva voce evidence. Again for the same reason it is premature to express any opinion on the reliability of the oaths of the respective deponents. The assertion that the petitioners have acted in disregard of the class rights of creditors was without foundation for no creditors have announced an intention either to support or to oppose the petitions.

EXCLUSION

19. Mr. Bromley submitted that although exclusion is fundamental to the petitioners case it is untenable upon the evidence. On the other hand Mr. Ching who appeared for the petitioners asserts that whereas it was agreed that the day to day management of the project was to be in the hands of the Wangs, it.was still their duty to keep the petitioners informed of all policy matters and to consult them on all major decision making.

20. The petitioners' main complaints relate to the lack of knowledge of the transactions with Wing Wong and Ripple, the monies drawn down from Citibank, the failure of the Wangs to contribute towards the joint venture up to their proportion of 80% and the failure to inform them of the possibility of re-entry by Government. Mr. Bromley says that the petitioners did not accept the applicant's invitation to attend board meetings where they could have acted as watchdogs. Having lost confidence in the Wangs, the rejection of this offer does not appear to be unreasonable.

21. Whilst there is a great deal of common ground on the facts there are substantial disputes with regard to the actual or implied authority of the Wangs. The contention that exclusion is untenable is much too ambitious without hearing and seeing the witnesses.

DUALITY OF PROCEEDINGS

22. The main thrust of Mr. Bromley's argument is that it is an abuse of the process of the court for the petitioners to elect to litigate substantially the same matters in two sets of concurrent proceedings. It is therefore necessary to examine the circumstances of the two sets of proceedings See Metropolitan Bank v. Pooley (1885) 10 A.C. 210. In Wright v. Bennett (1948) 1 All E. R. 227 it was held that where the facts in a second action between the same parties were substantially the same as in the first action, the proceedings were an abuse of the process of the court and were struck out. In principle the court discourages multiplicity of litigation in any form, see Thames Launches Ltd. v. Trinity House Corporation (1961) 1 Ch. 197, Royal Bank of Scotland Ltd. v.Citrusdal Investments Ltd. (1971) 1 W.L.R. 1469.

23. The petitioners are also the plaintiffs in the action whilst apart from Tai who is a defendant in the action the Wangs and their associates are the other parties to both sets of proceedings. Many issues are included in the two proceedings, and some matters are raised in one proceedings, but not the other. Fraud is alleged in the action, but not in the petitions. However Mr. Bromley complains that the allegations in the petitions have been deliberately pleaded to cloak what in reality are allegations of fraud. Mr. Ching maintains that it was not necessary to plead fraud in the petitions.

24. There is a clear distinction between the two sets of proceedings. The derivative action has been brought by the petitioners on behalf of the companies and their shareholdersbecause the Wangs have refused to allow the companies to be sued. The action is brought for damages done to the companies in the past in respect of breaches of duty which the Wangs as directors owed to the companies. The companies are joined in the proceedings as a matter of procedure. No damages however can be awarded on the hearing of the petitions which are proceedings for the benefit of the contributories to extricate their investments.

25. Mr. Bromley maintains that the companies in reality are quasi-partnerships. He submits that the petitioners should prove their case for damages for fraud first and then if successful prove afterwards in the winding up. If the petitioners are allowed to proceed he says that there is a danger that res judicata will arise at the hearing of whichever Proceeding is heard last. Accordingly the court should not encourage the likelihood of this happening. He therefore urges me to strike out or stay the petitions on the grounds that the petitioners by instituting the action ab initio should be bound by that election.

26. In Re San Imperial Corporation Limited (1980) H. K. L. R. 649 it was held that it was not oppressive to allow a minority shareholders' action and a winding up petition to be brought since both the action and the petition were required to remedy the situation that had arisen and what could be foreseen as to the future-In his judgment at p. 650 O'Connor J. said:-

" The power to dismiss or strike out in limine should be exercised with great circumspection. Nevertheless, where it is clear that the court, in the exercise of its discretionary power, would not make a winding up order on the hearing of the petition, it is proper to strike it out in limine, and if the court is of that opinion it ought to have the courage of its opinions and strike out or dismiss the petition. I do not find this to be such a case. Many matters that may carry weight at the hearing of the petition, carry less weight at a hearing in limine.".

27. Mr. Bromley sought to distinguish that case because no evidence had been filed to effectively challenge the allegations in the petition. At that stage O'Connor J. was only in a position to determine whether the evidence adduced on affidavit was sufficient to justify the grounds held by the petitioners for their lack of confidence in those in control of the company. Indeed although no evidence in opposition had been filed the petition was opposed by the company. Upon analysis there is no distinction on that ground between that case and the instant case.

SUITABLE ALTERNATIVE REMEDIES

28. Having argued that the petitions should be struck out on the grounds of duality of proceedings Mr. Bromley went on to submit that the petitioners should have availed themselves of alternative remedies to winding up. He suggested that a receiver or manager could be appointed under Section 19 of the Supreme Court Ordinance or that a petition be filed pursuant to Section 168A of the Companies Ordinance which enables a member of a company who complains that the affairs of the company are being conducted in a manner unfairly prejudicial to the interests of some part of the members to apply to the court for an order inter alia for the purchase of his shares. The argument against duality was therefore confined to the applicant's fear of a winding up order.

29. However, Section 180(1A) of the Companies Ordinance provides that a winding up order will not be refused where it is just and equitable on the ground that some other remedy is available unless the petitioners have acted unreasonably. The onus is upon the applicants to establish that the petitioners have acted unreasonably.

30. A contention for the applicants that there was no evidence to show that the petitioners were not in a position to transfer their shares was on the facts unrealistic. There was no evidence that there is a potential buyer in the offing.

31. Mr. Bromley asserted that it was necessary to prove that there will be a surplus available for distribution to shareholders on the making of a winding up order. At the hearing it will be necessary to prove that the petitioners will have a tangible share of the surplus to receive, see In re Rica Gold Washing Company (1879) 11 Ch. D. 36. However, at this stare such an allegation need only be pleaded. In Lenka Investments Ltd. and Another v. Cheung Kong (Holdings) Ltd. and Another (1983) H. K. L. R. 258 it was held:-

"Where the court is being asked to exercise its jurisdiction to restrain a person from exercising the constitutional right to institute legal proceedings it is necessary to bring the case within the settled legal principles governing the circumstances where the courts will restrain vexatious litigation."

32. It is unfortunate that the project may not come to fruition as a result of a winding up order. Nevertheless the applicants have failed to persuade me that the petitioners have acted unreasonably in filing the petitions. The evidence if accepted supports the petitioners' allegation that they have no confidence in the continued management of the companies by the Wangs. I do hot consider that the petitioners have commenced procaedings for an improper motive or for a collateral purpose. Both sets of proceedings are necessary to resolve the matters in issue.

33. As a result the motions will be dismissed.

	(B.L. Jones)
	Judge of the High Court

Representation:

Mr. L. J. Bromley, Q.C., Mr. K. Bokhary, Q.C. & Mr. A. Ismail (Woo, Kwan, Lee & Lo) for Applicants (Respondents).

Mr. Charles Ching, Q.C. & Mr. Winston Poon (Philip K. H. Wong & Co.) for Petitioners.

Mr. E. J. Davison for Official Receiver.