RE PERAK PIONEER LTD

HCCW000231B/1984

IN THE HIGH COURT OF JUSTICE

NO. 231 OF 1984

COMPANIES WINDING-UP

	IN THE MATTER of the Companies Ordinance
	and
	IN THE MATTER of PerakPioneer Limited
	___________________

IN THE HIGH COURT OF JUSTICE

NO.298 OF 1984

COMPANIES WINDING-UP

 

	IN THE MATTER of the Companies Ordinance
	and
	IN THE MATTER of PlesseyInvestments Limited
	___________________

Coram: The Honourable Mr. Justice Jones in Court

Dates of hearing: 1st and 2nd April 1985

Date of delivery of judgment: 9th April 1985

___________

JUDGMENT

___________

1. I have before me two summonses which have been converted into motions whereby the joint petitioners seek orders that Petro1iam Nasiona1 Berhad (P.N.B.) be added as a joint petitioner or alternatively on the part of P.N.B. that P.N.B. be substituted for the joint peitioners.

2. Bumiputra Malaysia Finance Limited (B.M.F.L.) is a finance company which is wholly owned by Bank Bumiputra Malaysia Berhad (B.B.M.B.). Large sums of money were lent by B.M.F.L. to both Perak Pioneer Limited (Perak) and to Plessey Investments Limited (Plessey). Up to the 31st December 1983 Perak is alleged to have owed over HK$31 million and Plessey over US$80 million, HK$36 million and 5,000,000. By equitable assignments in writing dated the 31st December 1983 B.M.F.L. assigned all its rights and interests in the debts to B.B.M.B.

3. A petition to wind up Perak was presented by the joint petitioners on the 24th July 1984 and a petition to wind up Plessey was presented on the 17th September 1984. B.B.M.B. joins in both petitions as an equitable assignee of the debts. Motions to strike out the petitions on the grounds that the debts are the subject matter of a genuine dispute have been issued by the companies and are due for hearing in May. On the 17th September 1984 by deeds of assignment in writing the debts were assigned by B.B.M.B. to P.N.B.

4. Mr. Ching who appeared for the joint petitioners and P.N.B. submitted that the application to add P.N.B. as a party was made pursuant to either rule 6 or 7 of Order 15 of the Rules of the Supreme Court, but Mr. Potts on behalf of the companies contended that the Rules of the Supreme Court cannot be invoked unless no other provision is made under the Companies Ordinance or the Companies (Winding Up) Rules see Rule 210. He submitted that the application can only be for substitution under Rule 33 of the Companies (Winding Up) Rules for B.M.F.L. and B.B.M.B. are no longer creditors by virtue of the assignments. I accept that if the assignments were absolute assignments the assignor effectively parted with the debit and if they were equitable assignments the assignor has parted with the real interest see Re Penta1ta Exploration Co. (1898) W.N. 55. As a result the application falls to be dealt with by way of substitution under Rule 33.

5. Mr. Potts argued that P.N.B. cannot be substituted because it is not a creditor within S. 179 of the Companies Ordinance as the claim is the subject matter of a substantial dispute see Mann v. Go1dstein (1968) 1 W.L.R. 1091, Re Lympne Investments (1972) 1 W.L.R. 523, Stonegate Securities v. Gregory (1980) 1 Ch. 576. Reliance was also placed by Mr. Potts on Re Paris SkatingRink (No. 1) (1887) 5 Ch. 959 which held that that the sale of the right to proceed with a winding up petition ought not to be allowed and the petition was therefore dismissed. However, whilst I accept that the companies court is not the appropriate forum to determine liability when a genuine dispute is put forward, nevertheless I do not consider that the issue can be decided without evidence to show that there is in fact a genuine dispute. A mere assertion that the applicant is not a creditor will not suffice. An adjudication can only be made at the hearing to consider whether the debts are disputed in good faith based on a substantial ground. If it is the petition will be dismissed, but otherwise the hearing can proceed to a winding up order. If of course the companies are successful in establishing that the petitions should not have been presented they will be protected by orders for costs.

6. Other matters were canvassed before me, but I do not propose to refer to them as they are issues that should be raised on a motion to strike out the petitions.

7. Accordingly I shall make an order on both motions substituting P.N.B. as the petitioner in place of the joint petitioners.

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

Representation:

Mr. C. Ching, Q.C. & Mr. A. Neoh & Mr. J. Bleach (Peter Mark & Co.) for Petitioner.

Mr. R. Potts, Q.C. & Mr. W. Poon (Fairbairn & Kwok) for Company.

Mr. Osborn for Official Receiver.

HCCW000231A/1984

IN THE HIGH COURT OF JUSTICE	NO. 141 OF 1984 & NO. 231 OF 1984
COMPANIES WINDING UP

IN THE MATTER of the Comoanies Ordinance and IN THE MATTER of Perak Pioneer Limited

______________

Coram: The Honourable Mr. Justice Jones in Chambers

Date of hearing: 15 November 1984

Date of delivery of judgment: 16 November 1984

_______________

J U D G M E N T

_______________

 

1. A creditor's petition No. 141 of 1984 was presented by Carrian Holdings Limited (in liquidation) (the applicant) on the 4th May 1984 to wind up Perak Pioneer Limited (the company) a company in the Carrian Group. The petition is due to be heard on the 10th December 1984.

2. A second creditor's petition No. 231 of 1984 was presented by Bumiputra Malaysia Finance Limited and Bank Bumiputra Malaysia Berhad on the 24th July 1984. An order was also made on the same day appointing the Official Receiver to be the Provisional Liquidator. The second petition is due to be heard on the 26th November 1984.

3. The applicant applies by summons filed on the 13th November 1984 in both sets of proceedings for an order under Section 186 of the Companies Ordinance for leave to commence and thereafter proceed with an application by originating motion for an order under Section 143(1)(a) of the Ordinance declaring that the affairs of the company ought to be investigated by an inspector appointed by the Financial Secretary. Section 186 provides:-

"When a winding-up order has been made, or a provisional liquidator has been appointed,no action or proceeding shall be proceeded with or commenced against the company except by leave of the court, and subject to such terms as the  court may impose."

4. The application is supported by an affidavit sworn by Mr. T.D. Stevenson who is one of the joint liquidators of the applicant in which he avers that there has been grave misconduct and mismanagement of the company's affairs with a total disregard for the interests of its creditors and with no commercial justification. He alleges that although the company is hopelessly insolvent enormous sums of money have been expended to defend both sets of winding up proceedings to the detriment of creditors.

5. Service of the summons was effected upon the Official Receiver, but not upon the company. However, as a matter of courtesy copies were delivered to the solicitors acting for the company on the afternoon of the 13th November so that in any event 2 clear days notice had not been given.

6. Mr. Ma for the applicant submitted that on such an application the company has no locus for the practice only requires Service on the liquidator. He also contended that the company has no interest in the application in the context of the winding up. On the other hand Mr. Osborne who appeared on behalf of the Official Receiver shared the view of Mr. Poon who represented the company that the company has locus.

7. Mr. Poon cited the well known authority of In re Union Accident Insurance Co. Ltd. (1972) 1 W.L.R. 640 which held:-

"that notwithstanding the appointment of a provisional liquidator on a winding up, the board of directors of a company retained the residuary power to instruct solicitors and counsel to oppose the petition and to appeal against the order, and also to act in interlocutory proceedings, including a motion to discharge the provisional liquidator.".

This case was followed in Re Laverton Nickel N.L. and the Companies Act 3 ACLR 945 which was referred to by Mr. Poon.

8. Having regard to the authorities cited I am satisfied that the company is entitled to be represented upon the hearing of the application in 231/1984. Section 186 does not apply to 141/1984 as no provisional liquidator has been appointed. Accordingly, the summons in this petition will be dismissed. The summons in 231/1984 will be adjourned for service to be effected on the company.

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

Representation:

Mr. G. Ma (Wilkinson & Grist) for Applicant.

Mr. Osborne for Official Receiver.

Mr. W. Poon (Fairbairn & Kwok) for Company.

HCCW000231/1984

IN THE HIGH COURT OF JUSTICE COMPANIES WINDING-UP

NO. 231 OF 1984

IN THE MATTER of the Companies Ordinance and IN THE MATTER of Perak Pioneer Limited

_____________

Coram: The Honourable Mr. Justice Jones in Chambers.

Date of hearing: 26 July 1984

Date of delivery of judgment: 27 July 1984

 

__________

JUDGMENT

__________

1. A creditor's petition was presented by Bumiputra Malaysia Finance Limited (the petitioner) to wind up Perak Pioneer Limited (the company) on the 24th July 1984 on the grounds that the company is insolvent and unable to pay its debts and that it is just and equitable to do so. On the same day the Official Receiver was appointed to be the provisional liquidator.

2. Upon the application of the Official Receiver John William Crawford, Thomas Brian Stevenson and Wilfred Keith Timso accountants in the firm of Ernst & Whinney were appointed to be special managers. The three accountants are also the liquidators of Carrian Holdings Limited.

3. Carrian Holdings Limited (in liquidation) presented a petition to wind up the company on the 4th May 1984. The Official Receiver was appointed to be the provisional liquidator and the same accountants from Ernst & Whinney were appointed on the Official Receiver's application to be special managers. The company was ordered to be wound up on the 10th July 1984, but the order was later set aside on appeal by the company. It was also ascertained at the hearing of the appeal that the appointments of the provisional liquidator and the special managers were a nullity for they had been made prior to the presentation of the petition.

4. Mr. Poon has made an application on behalf of the company that the appointment of the three accountants as special managers should be discharged on the grounds that as they are also the liquidators of Carrian Holdings Limited which is engaged in litigation against the company, there is a conflict of interest.

5. Mr. Davison for the Official Receiver has challenged the locus of the company to appear on the application. Although in principle the directors' powers cease on the appointment of a provisional liquidator, they retain the power to appoint solicitors and may take part in the winding-up proceedings on behalf of the company. They are entitled to apply to the court to discharge the provisional liquidator. In my view they can also apply for the discharge of special managers upon cause being shown. Accordingly I hold that the company has locus.

6. Mr. Poon cited an Australian authority, Re Nickel Mines Ltd. and the Companies Act (1978) 3 A.C.L.R. 686 where it was held that:-

        It was undesirable that the same person should act as provisional liquidator of two companies who were engaged in litigation against one another.".

In his judgment at p. 688, Weedham J. said:-

"It is not unusual, in the first instance, for the one liquidator to be appointed to two or more related companies: it usually saves expenses and ensures a speedier and more satisfactory liquidation. However, the question of conflict of interest is always a matter of concern and, when a liquidator feels that such a conflict has arisen, he applies to the court for discharge from one of his conflicting positions.".

And later on p. 689, he went on to say:

'

.......... it is, in my opinion, most undesirable that one man should be provisional liquidator of two companies who are engaged in litigation against one another. The provisional liquidator is an officer of the court in the sense that he is appointed by and answerable to the court. Events which are under the control of the court should not create an air of equivocation or unfairness.'.

However, in the instant case the accountants are not provisional liquidators, but special managers appointed by the court with restricted powers that have been conferred by the court. A special manager is a very different creature to a provisional liquidator. He exercises his power under the control of the Official Receiver to whom he must account when required to do so. The liquidation is controlled by the provisional liquidator who performs judicial functions. A special manager has no judicial capacity and has no power to distribute the assets of the company. In fact, as submitted by Mr. Davison, his function is administrative.

7. In my judgment, I do not consider that any conflict of interest arises in the circumstances of this case. The application will therefore be dismissed with costs to the Official Receiver.

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

Representation:

Mr. W. Poon (Fairbairn & Kwok) for Applicant.

Mr. E.J. Davison for Official Receiver.