Supreme Court
Action No. 102 of 1983
1st June, 1983.
Moe, C.J.

Mr. H. Elrington for the Plaintiff.
Mr. Horace Young Q.C. for the Defendant.

Application under Section 184 of the Companies Ordinance Cap 206 after voluntary liquidation of company - Rights of members of a company - Principle of supremacy of majority applies - Duties and power of liquidator considered - No allegation against liquidator justifying interference by Court - Order refused - Costs to Defendant.

DECISION

The Plaintiff is a shareholder in Real Estate Limited, hereinafter called the company which went into voluntary liquidation on the 9th April, 1975 and appointed the Defendant sole liquidator of the company on 23rd May, 1975. There was a valuation of the company's properties in 1977 and the liquidation has not yet been finalised. By this Action the Plaintiff seeks an order that: - (1) The liquidator make a new valuation of all the properties and assets of the company and use the new valuation as the basis for the distribution of all the company's properties and assets; (2) The liquidator set a date for distribution of the properties and assets among shareholders and (3) The liquidator be restrained from disposing or distributing any of the properties or assets of the company until he has complied with the two orders above.

The Plaintiff applies for the orders under section 184 of the Companies Ordinance CAP 206 which gives the Court power to determine any question arising in the winding up or to exercise any of the powers it could exercise in a winding up by the Court. The court may accede to the application if it is just and beneficial to do so.

On the basis of the Affidavits filed and the submissions made the Plaintiff contends that there should be a new valuation for the following reasons:-

1. The valuation of the company's properties in 1977 is now out of date, six years having passed;

2. The values of properties have greatly appreciated since 1977 while accepting that some of the company's properties have depreciated;

3. There were certain actions taken by the liquidator in relation to certain properties of the company on the basis of the 1977 valuations in favour of some shareholders which now put the Plaintiff and two other shareholders on whose behalf she acts at a disadvantage;

4. There were certain actions taken by the directors of the company in relation to certain properties of the company which are also unfavourable to the Plaintiff and two other shareholders for whom she acts.

The Defendant pointed the following: - (1) The likely cost to be incurred in having a new valuation; (2) That the valuation is likely to involve some months in view of the properties involved; (3) That the liquidation of the company could be finalised shortly i.e. around about this time and could have been finalised this month of May 1983 had not there been the present application and (4) The complaints about the actions in relation to the properties before the liquidation proceedings do not justify a new valuation at this time.

That six years have passed since the valuation of the properties of the company is a fact and there is also no dispute about the second reason urged by the Plaintiff. In considering these along with the other two grounds, the following matters set out in the various Affidavits weighed heavily in my determination of the question whether to accede to the application.

By resolutions of 1st October, 1969 first by the then Directors of the company and then by the shareholders it was agreed that any shareholder of the company may on approval of the directors take for his/her personal residential use, with an option to purchase, any one property of our company and that on any future winding-up or sale of the company that the property so taken over by the shareholder will be deducted from his/her account at a price to be set and approved by the directors.

In 1970, the Plaintiff and her sisters were invited to choose a residential property. To date none of them has chosen such a property. They say they have declined to do so before proper accounting is made and proper procedures for distribution established.

On 14th March, 1975 it was agreed by the shareholders (a) that the properties now occupied by a shareholder shall be the sole property of the same on any liquidation or winding-up of the company to be valued by the shareholders. (b) that Lorna, Olga and Delba i.e. that the Plaintiff and the two shareholders for whom she acts be allowed to choose any one residential property as part of their share prior to any distribution (other than the properties in item 2).

On 26th May, 1975 i.e. 3 days after the liquidator had been appointed and at a meeting summoned by him, it was resolved that the remainder of the properties forming the assets of the said company were to be distributed as follows: - Shareholders were to be allowed to select one property of more or less the same value; each shareholder had made a first choice, the process was to begin again with the last to select on the first round; being the first to select on the second round and so on until all the properties were distributed.

5. On 2nd June, 1975 it was agreed that certain properties, other than those already taken under the resolution of 1969, be taken over to be held by the named shareholders as part of their share of the company on any division or sale of the company on the condition that they forthwith become responsible for all charges and maintenance of the properties other than property tax.

6. On 6th February, 1981 at a meeting called by the liquidator, the shareholders agreed on a value to be set on properties then occupied or chosen by certain shareholders.

7. The liquidator is bound by the above resolutions.

8. The liquidator has also transferred to each of two shareholders certain properties. The liquidator also in 1979 sold certain properties to two shareholders.

There were also numerous paragraphs set out which in effect referred to the conduct of business of the company before it went into liquidation and alleged that the directors used their power to share up the assets of the company and select for themselves the choicest properties of the company with little or no regard for the rights of other shareholders and without any regard for their duty to pay off the debts and liabilities of the company before distributing the assets of the company. This evidently provides the basis for urging the fourth reason for requesting a new valuation. It seems to me that on this application which is to deal with a matter arising in a winding up, I am not really concerned with the day to day administration of the company's business prior to the company going into liquidation. Nor am I required at this time to investigate what the directors did before the winding up. The actions being questioned are all actions which were within the competence of the company to take or to ratify. It must be borne in mind that, as laid down in Foss v. Harbottle (1843) 2 HARE 461, with respect to the rights of members of a company the principle of the supremacy of the majority applies. Thus even when the company was a going concern the Plaintiff and her sisters would hardly have had a successful complaint on this basis. Nor has there been any allegation or any evidence that the acts complained were of a fraudulent character. I have also looked at the evidence to see whether it can be said that the directors or majority of shareholders have so used their powers as to deprive the minority of their rights. In my opinion the Plaintiff has not shown any such a thing. Rather than showing any oppressive conduct or want of good faith on the part of the directors, the Plaintiff has shown that it is she and her sisters who have failed to grasp the opportunities opened to them.

When I turn to the actions which are shown to have taken place since the commencement of the winding up I find the actions are (1) resolutions of the shareholders in relation to properties of the company. Again the principle of Foss v. Harbottle (supra) applies; (2) the transfer of a property by the liquidator to each of two shareholders; and (3) the sale of certain properties by the liquidator to two shareholders in 1979. It has not been shown that the selection of the properties by the two shareholders and the transfer of the said properties to them were contrary to the resolutions of the shareholders which I have shown were in order and by which the liquidator is bound. The sale of properties in 1979 has been shown to be done in order to raise funds for payment of company debt. Liquidation of a company debt is one of the duties of the liquidator and he certainly has power to sell the property of the company. Consequently the sales concerned have not been shown to be out of order. Again there is no allegation against the liquidator justifying interference by the Court.

Having dealt with the various reasons set out above and given for ordering a new valuation, it is now clear that the burden of the Plaintiff's application really rests on their fear that any distribution of the assets at this time regarding properties as having values as placed on them at 1977 is likely to put them at a disadvantage. This may very well be so but as shown not because of any breach of the law, fraudulent action or any failure to abide by any resolution of the company on the part of the liquidator. I am unable to see how the circumstance that the Plaintiff and her sisters did not put themselves to be in a position similar to or on equal terms with the other shareholders to be in a position similar to or on equal terms with the other shareholders can justify this application.

Looking at the resolutions setting out the rules for selection and distribution of properties, I note that before the company went into liquidation and thus before the liquidator was appointed, the company had resolved not only that any property then occupied by a shareholder was to be that shareholder's sole property but also that the Plaintiffs were to choose any one residential property as part of their share. That was in 1975. Then there was a valuation in 1977 so that in 1977 the value of the properties would have been known. To date the Plaintiff and two other shareholders have not chosen and now wish a new valuation. I do not see how acceding to such a request at this time can be just.

When I consider this factor along with the matters the liquidator wanted the court to take into account, namely, the time and cost likely to be involved in having a valuation exercise at this time and that the liquidation of the company could be finalised at this time, I do not deem it beneficial to order a new valuation.

With regard to the second request, I accept the submission that the liquidator has to follow the rules of apportionment which have been laid down by resolutions of the company. There has been no evidence or submission that the liquidator is not acting in accordance with the relevant resolutions and I find no ground for making an order against him in this regard.

As a consequence, the application for order No. 3 is also refused.

I think that the Plaintiff must stand the costs of this action.

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