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					A                                                                           A
                                                        HCCW1138/1999
B                                                                           B
                     IN THE HIGH COURT OF THE
C         HONG KONG SPECIAL ADMINISTRATIVE REGION                           C

                      COURT OF FIRST INSTANCE
D                                                                           D
               COMPANIES (WINDING-UP) PROCEEDINGS
E                            NO. 1138 OF 1999                               E

                          ____________________
F                                                                           F
                                            IN THE MATTER of The
G                                           Companies Ordinance, Cap. 32    G


H                                                                           H
    BETWEEN
I                                                                           I
                              LAM YUK HON
                  (formerly known as LAM KWOK TUNG)            Petitioner
J                                                                           J
                                    and
K                                                                           K
                             KOOK TAI WAI                     Respondent
L                                                                           L
                          ____________________
M                                                                           M


N
    Before: The Hon. Barma J, in Chambers                                   N
    Date of Hearing: 4 September 2007
O                                                                           O
    Date of Decision: 4 September 2007

P                                                                           P
                            ________________
Q                                                                           Q
                              DECISION
R                           ________________                                R


S                                                                           S


T                                                                           T


U                                                                           U


V                                                                           V
                                           -2-

A                                                                                     A
    1.          This is an application by the Petitioner seeking an order for an
B   interim payment against the Opposing Contributory. The background to              B

    this matter is set out in an earlier judgment that I delivered on 15 April
C                                                                                     C
    2005, slightly over two years ago, when I gave directions to enable the
D   valuation of the Company, which was the subject of a winding up petition          D

    brought under section 177(1)(f) of the Companies Ordinance that had been
E                                                                                     E
    settled on terms requiring such a valuation to be made, to be proceeded
F   with.                                                                             F


G                                                                                     G
    2.          The grounds on which the application is based are as follows:
H               (a)       First, there has been substantial delay in the production   H

                          of a final valuation report by the appointed valuers,
I                                                                                     I
                          PriceWaterhouse Coopers, which the Petitioner says is
J                         due, to a large extent, to delay on the part of the         J

                          Opposing Contributory; and
K                                                                                     K
                (b)       Secondly, the Petitioner has, as a result of the delay,
L                         suffered considerable hardship in that he has been kept     L

                          waiting for a very long time for the moneys which he is
M                                                                                     M
                          to be paid for his shareholding in the Company under
N                         the settlement, which took place as long ago as January     N

                          2003.
O                                                                                     O


P   3.          Notwithstanding that the settlement was reached in January            P

    2003, it took over two years before valuers were appointed to carry out the
Q                                                                                     Q
    valuation in respect of the Company. The background to and reasons for
R   the delay are set out in my earlier judgment, and I do not propose to repeat      R

    those matters here.
S                                                                                     S


T                                                                                     T


U                                                                                     U


V                                                                                     V
                                         -3-

A                                                                                     A
    4.            Following the appointment of the valuers, there has been
B   further delay owing to various difficulties that have arisen in relation to the   B

    valuers obtaining adequate information on which to base their valuation.
C                                                                                     C


D   5.            The application is, according to the summons before me, made        D

    under section 255 of the Companies Ordinance or the inherent jurisdiction
E                                                                                     E
    of the court. I have to say at the outset that I have considerable sympathy,
F   as I did two years ago, for the predicament in which the Petitioner finds         F

    himself – of having nothing to show for these proceedings after the length
G                                                                                     G
    of time that has now elapsed. If anything, my sympathy for him has
H   increased, given that a further two years have passed and he is still not yet     H

    in a position where he has been able to transfer his shares and receive
I                                                                                     I
    payment for them in accordance with terms that were agreed by way of
J   settlement.                                                                       J


K                                                                                     K
    6.            Although Mr Wong, who appeared for the Opposing
L   Contributory, sought to suggest that the Petitioner was himself in perhaps        L

    almost equal measure to blame for the delays that had taken place since the
M                                                                                     M
    making of the Tomlin order and the appointment of the valuers, I do not
N   think that I would accept that the Petitioner bears very much of the blame        N

    for the delay in this case. It is true that the Petitioner has taken out a
O                                                                                     O
    number of applications which have taken a little time to get to court and to
P   be disposed of, but it seems to me that all of those applications were taken      P

    out with a view to progressing the valuation exercise that had been agreed
Q                                                                                     Q
    upon under the Tomlin order by which the proceedings were settled, and
R   that they were applications which were entirely reasonable for the                R

    Petitioner to have made.
S                                                                                     S


T                                                                                     T


U                                                                                     U


V                                                                                     V
                                          -4-

A                                                                                     A
    7.           So far as the delay since the valuation exercise commenced is
B   concerned, it seems to me that part of the delay has been due to the fact that    B

    PriceWaterhouse Coopers have taken sometime to form views on certain
C                                                                                     C
    matters. That said, I think there is more than a grain of truth in the
D   submission by Mr Chan (appearing for the Petitioner) that the Opposing            D

    Contributory has been, in part at least, to blame for the delay that has
E                                                                                     E
    occurred.
F                                                                                     F

    8.           It also seems on the basis of the material that is before me, that
G                                                                                     G
    it is very likely that, at the end of the day, whatever valuation is produced,
H   there will be an amount that will be payable to the Petitioner in respect of      H

    his shares in the Company which are to be transferred to the Opposing
I                                                                                     I
    Contributory.
J                                                                                     J

    9.           At the very least, the valuation of the Company will have to
K                                                                                     K
    reflect the cash and bank balances of the Company together with an
L   indisputable amount of stock that was still retained by the Company at the        L

    valuation date of 31 December 2002. It may or may not be appropriate to
M                                                                                     M
    make deductions from the assets of the Company in respect of certain items
N   of expense that had been incurred since that date. Those items of expense         N

    may or may not be matters which should properly be deducted from the
O                                                                                     O
    value of the company when a valuation is reached. That, however, is a
P   matter for the valuers to determine and not for the court, since the valuer is,   P

    under the terms of the Tomlin order, to act as an expert and the valuer's
Q                                                                                     Q
    decision is to be final and binding on the parties.
R                                                                                     R

    10.          I think, in fairness to Mr Wong, that he accepted that, at the
S                                                                                     S
    end of the day, there might well be an irreducible minimum beyond which
T   the value of the company as at 31 December 2002 would not drop but he             T


U                                                                                     U


V                                                                                     V
                                            -5-

A                                                                                              A
    nonetheless resisted this application on various grounds.           However, at the
B   end of the day, having given this matter careful thought, I am unfortunately               B

    of the view that the court simply does not have jurisdiction in the
C                                                                                              C
    circumstances of this case to grant the interim payment order that is sought.
D                                                                                              D

    11.         The basis on which the application is brought is, as I have said,
E                                                                                              E
    section 255 of the Companies Ordinance. That section, which appears in
F   the part of the Companies Ordinance that is headed "Provisions Applicable                  F

    to Every Voluntary Winding-up", provides that:
G                                                                                              G


H               "The liquidator or any contributory or creditor may apply to the court to      H
                determine any question arising in the winding-up of a company or to
                exercise as respects the enforcing of calls, or any other matter, all or any
I                                                                                              I
                of the powers which the court might exercise if the company were being
                wound up by the court."
J                                                                                              J

    12.         It seems to me that that section has no application at all in the
K                                                                                              K
    circumstances of the present case. The section is clearly one that applies
L   only to companies that are in liquidation and, moreover, to companies that                 L

    are in voluntary liquidation. It is designed to give the court the power to
M                                                                                              M
    give directions, in an appropriate case, as if the company were being
N   wound up by the court.                                                                     N


O                                                                                              O
    13.         In this case, although the original proceedings were
P   winding-up proceedings under the just and equitable ground of section                      P

    177(1)(f), the fact is that there has been no winding-up order and, given the
Q                                                                                              Q
    terms of the Tomlin order, it seems unlikely that there ever will be a
R   winding-up order made in respect of the Company because, on the                            R

    completion of the valuation and the delivery of a final valuation by
S                                                                                              S
    PriceWaterhouse Coopers, there will be an obligation on the part of the
T                                                                                              T


U                                                                                              U


V                                                                                              V
                                         -6-

A                                                                                    A
    Opposing Contributory to acquire the shares of the Petitioner at 45 per cent
B   of the net asset value of the Company as determined by the valuers.              B


C                                                                                    C
    14.          Upon that being done, the petition is to be dismissed or
D   withdrawn. That being the case, there is not likely ever to be any basis for     D

    the court to be exercising its powers under section 255 of the Ordinance in
E                                                                                    E
    relation to the Company.    Moreover, I have some difficulty in seeing how,
F   under section 255, the court would have power to grant an order for an           F

    interim payment in favour of a person in the position of the Petitioner in the
G                                                                                    G
    present case.
H                                                                                    H

    15.          I am therefore satisfied that section 255 provides no basis on
I                                                                                    I
    which an order for interim payment can be made in the circumstances of
J   this case. I have considered whether there is any other basis on which the       J

    court might have jurisdiction to make an order for interim payment.
K                                                                                    K
    Unfortunately, I do not think that there is any basis for such a jurisdiction.
L   Interim payments in ordinary actions are dealt with under Order 29, rule 10      L

    of the Rules of the High Court. However, it is quite clear from a perusal
M                                                                                    M
    of Order 29, rule 10 and the other relevant rules that there is nothing in
N   those provisions that confer on the court the jurisdiction to grant an interim   N

    payment in a situation such as this. In order to exercise its jurisdiction
O                                                                                    O
    under Order 29, rule 10, it seems to me that the court has to be dealing with
P   a matter in which there is either a claim for damages or a claim for an          P

    account, or a claim for possession of land coupled with a claim for mesne
Q                                                                                    Q
    profits. There is nothing in those provisions to suggest that there is any
R   scope for such an application in the context of a situation such as the          R

    present, where there has essentially been a settlement of the case on the
S                                                                                    S
    basis of an agreed buyout of shares and where the court is simply
T                                                                                    T


U                                                                                    U


V                                                                                    V
                                         -7-

A                                                                                   A
    concerned with the workings-out of a Tomlin order that had been agreed
B   between the parties.                                                            B


C                                                                                   C
    16.          At the previous hearing, Mr Chan referred me to the case of
D   Ferguson v Maclennan Salmon Co. Limited & Others [1990] BCC 702, a              D

    decision of the Scottish Court of Session in which an order for an interim
E                                                                                   E
    payment was made pending the resolution of the value at which a
F   company's shares were to be bought out by one party to a petition brought       F

    under the UK equivalent of Section 168A of our Companies Ordinance.
G                                                                                   G


H   17.          However, in that case, it is clear that the basis on which the     H

    court exercised its jurisdiction was that the court there considered that it
I                                                                                   I
    had power in the context of a section 459 petition (the equivalent of a
J   section 168A petition in Hong Kong), to make a wide variety of orders           J

    including interim orders for regulating the affairs of the company pending
K                                                                                   K
    the hearing of the petition and also the making of an order for interim
L   payment of an amount which the court was satisfied would ultimately be          L

    payable to the petitioner in respect of a buyout order that would be made in
M                                                                                   M
    the proceedings. In that case, the facts were rather special in that there
N   was effectively an agreed order for a buyout, the only controversy being the    N

    valuation of the company so as to determine the price at which the shares
O                                                                                   O
    were to be transferred.
P                                                                                   P

    18.          In that case, the court at first instance had in fact determined
Q                                                                                   Q
    the valuation of the shares at three pounds and five pence. There was a
R   dispute as to whether this was the appropriate valuation and there was a        R

    pending appeal against the valuation. However, the appellant in that case
S                                                                                   S
    accepted that there was an irreducible minimum of one pound and 10 pence
T   beyond which the valuation of the company would not fall. In those              T


U                                                                                   U


V                                                                                   V
                                         -8-

A                                                                                     A
    circumstances, given that the court considered that it had jurisdiction under
B   the UK equivalent of section 168A to order an interim payment, it is              B

    perhaps understandable that the court felt able to order an interim payment
C                                                                                     C
    on the basis of the irreducible minimum value of the shares beyond which
D   the ultimate price payable for the shares would not fall.                         D


E                                                                                     E
    19.          In this case, however, although it does seem to me that there
F   may well be an irreducible minimum beyond which the price to be paid for          F

    the shares under the Tomlin order will not fall, it seems to me that given
G                                                                                     G
    that there is now no longer outstanding any action or any proceedings in
H   which the section 168A jurisdiction could be invoked, bearing in mind that        H

    the petition in the first place was based not on section 168A, under which
I                                                                                     I
    the court has wide powers, but under section 177(1)(f) and sought only a
J   winding-up of the company, and bearing in mind also that even if there had        J

    been conjoined with the section 177(1)(f) winding up application a claim
K                                                                                     K
    under section 168A, the petition is in any event stayed, save for the purpose
L   of carrying out the terms of the Tomlin order.                                    L


M                                                                                     M
    20.          In those circumstances, it does not seem to me that there is any
N   basis for the court to exercise any jurisdiction that it might have under         N

    section 168A to order an interim payment.          That leaves the inherent
O                                                                                     O
    jurisdiction but, with respect, I am unable to see that there is any basis in
P   the inherent jurisdiction for ordering an interim payment simply on the           P

    basis that the court feels that it would be a reasonable or just thing to do in
Q                                                                                     Q
    the circumstances of the case.
R                                                                                     R

    21.          I am therefore afraid that I have come to the conclusion –
S                                                                                     S
    which I have reached with some reluctance in the circumstances of this
T   case – that there is simply no jurisdiction enabling me to grant the relief       T


U                                                                                     U


V                                                                                     V
                                           -9-

A                                                                                   A
    that is sought by the summons in this application and I must therefore
B   dismiss the application.                                                        B


C                                                                                   C
    22.         However, bearing in mind that PriceWaterhouse Coopers
D   produced their draft valuation in January this year, and given that they have   D

    had representations from both parties by sometime in March this year, I
E                                                                                   E
    would very much hope and expect that a finalised valuation will be
F   forthcoming in the near future.                                                 F


G                                                                                   G
     (Submissions on costs)
H                                                                                   H


I                                                                                   I


J                                                                                   J

                                                            (Aarif Barma)
K                                                                                   K
                                                         Judge of the Court of
L
                                      First Instance                                L
                                                              High Court
M                                                                                   M

    Mr Edward Chan, of Messrs Chan, Wong & Lam, for the Petitioner
N                                                                                   N
    Mr Wong Chi Kit, Peter, instructed by Messrs Cheung, Chan & Chung, for
O   the Opposing Contributory                                                       O


P   Official Receiver’s attendance excused                                          P


Q                                                                                   Q


R                                                                                   R


S                                                                                   S


T                                                                                   T


U                                                                                   U


V                                                                                   V

				
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