Esther Chan Pui-Kwan v Gilbert Leung Kam-Ho and Others
| Jurisdiction | England & Wales |
| Judge | Sir Terence Etherton |
| Judgment Date | 10 March 2015 |
| Neutral Citation | [2015] EWHC 621 (Ch) |
| Docket Number | Case No. 004911 of 1998 and No. 282 of 1999 |
| Court | Chancery Division |
| Date | 10 March 2015 |
[2015] EWHC 621 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
THE CHANCELLOR OF THE HIGH COURT
Case No. 004911 of 1998 and No. 282 of 1999
In the Matter of Melodious Corporation
And in the Matter of the Insolvency Act 1986
And in the Matter of the Companies Act 2006
Mr John McDonnell QC (instructed by Charles Russell Speechlys LLP) for the Applicant
Mr James Pickering (instructed by SBP Law) for the Respondents
Hearing dates: 24 and 25 February 2015
The Chancellor of The High Court ( Sir Terence Etherton):
The central issues on this application are whether the second defendant, Melodious Corporation ("Melodious"), a company incorporated in the British Virgin Islands and which is registered at Companies House as having a branch in England, is or has ever been in administration or liquidation here.
The records at Companies House currently show that Melodious went into administration on 1 November 2007 with the fourth defendant, Simon Paterson, as its administrator, and then went into creditors' voluntary liquidation on 23 October 2008 with Mr Paterson as its liquidator.
The applicant, Esther Chan Pui-Kwan ("Miss Chan"), who is a director and a 51 per cent shareholder of Melodious, claims that Melodious never went into administration because the meeting of the board of directors of Melodious purporting to place Melodious into administration out of court pursuant to paragraph 22(2) of schedule B1 ("schedule B1") to the Insolvency Act 1986 ("the 1986 Act") was inquorate. She further contends that, if Melodious did go into administration, the administration expired by effluxion of time on 31 October 2008 before Mr Paterson sent or, at any event, the Registrar of companies ("the Registrar") received a notice under paragraph 83(3) of schedule B1 for conversion of the administration into a creditors' voluntary liquidation ("a conversion notice").
Mr Paterson disputes those contentions.
The background up to 2002
The application is made against the backdrop of a suite of proceedings between Miss Chan and Mr Leung, which first began in 1998. The factual background to those proceeding is set out in the judgment handed down on 30 November 2001 by His Honour Judge McGonigal, sitting as a High Court judge, in Chan Pui-chun v Leung Kam-ho [2002] BPIR 723.
It is only necessary to state the following parts of that background for the purpose of this application.
In 1992 Miss Chan, then aged 26, began to work for the first respondent, Gilbert Leung Kam-Ho ("Mr Leung"), in Hong Kong as a political assistant. He was a chartered surveyor and property developer and a member of Hong Kong's Legislative Council. They developed a personal relationship. He promised to marry her. In June 1993 he was convicted of a criminal offence of bribery in connection with his election to the Legislative Council and was sentenced to three years imprisonment. Miss Chan managed his property business for him while he was in prison.
In May 1995 Miss Chan came to England and found Hill House, which is a large house in Woking, Surrey, as a property in which she and Mr Leung would live together when Mr Leung was released from prison. The purchase was completed in June 1995 in the name of Melodious, which, as I have said, is a BVI company, whose shares are owned as to 51 per cent by Miss Chan and as to 49 per cent by Mr Leung. Mr Leung was released from prison in June 1995 and he and Miss Chan then began living together in Hill House.
From December 1996 Melodious was also used to buy nine properties in England for renting out. They generated a significant rental income. Those properties were then sold. The net proceeds of the sales of the investment properties amounted to some £1.3 million, realising a capital profit of some £108,000 subject to deduction of the costs of sale.
The relationship between Miss Chan and Mr Leung broke down in 1998.
Being unable to obtain joint instructions from Miss Chan and Mr Leung, the original corporate nominee director of Melodious resigned. Miss Chan was appointed a director in its place on 26 June 1998. Her mother, Ho Mo Ching ("Madam Ho"), was subsequently appointed a further director on 1 July 1998.
Mr Leung presented two winding up petitions in relation to Melodious. One, presented on 29 August 1998, was a creditor's petition based on Melodious' alleged insolvency and its indebtedness to Mr Leung in the amount of £644,366. The other petition, presented on 18 January 1999, was a contributory's petition on the ground that Melodious was a quasi-partnership between Miss Chan and Mr Leung and, the personal relationship between them having irretrievably broken down, it was just and equitable that Melodious should be wound up.
Miss Chan, for her part, commenced proceedings under section 33 of the Family Law Act 1996 and section 15 of the Trusts of Land and Appointment of Trustees Act 1996 for, among other things, a declaration as to her beneficial interest in Hill House. She claimed a 51 per cent interest. Those proceedings were opposed by Mr Leung, who claimed that Hill House belonged beneficially to Melodious.
On an application by Mr Leung, in the creditors' winding up petition, for the appointment of a provisional liquidator of Melodious, Mr Justice Park ordered that the net proceeds of sale of the investment properties be paid into an account ("the stake-holder account") with HSBC Bank plc ("HSBC") in the joint names of Fenwick & Co, Miss Chan's then solicitors, and Penningtons, Mr Leung's then solicitors.
The three sets of proceedings were eventually all heard together at a five day trial in the Chancery Division by Judge McGonigal, sitting as a High Court judge. So far as relevant to the present application, Judge McGonigal made an order declaring that Melodious holds Hill House on trust for Miss Chan as to 51 per cent and for Mr Leung as to 49 per cent. He ordered that Hill House should be sold but not until the end of the academic term in the summer of 2003 unless, before that date, Miss Chan ceased to be engaged on the course of study she was then undertaking or she consented to an earlier sale; and, until then, Miss Chan would be entitled to occupy Hill House as her residence. Judge McGonigal dismissed both winding up petitions. He ordered an account to be taken in order to ascertain the sums (if any) that were due and ought to be paid or distributed by Melodious to its creditors (including Miss Chan and Mr Leung) and its contributories. He ordered that, for the purpose of that account, each of Miss Chan and Mr Leung should file and serve their evidence on or before 31 January 2002.
Mr Leung appealed Judge McGonigal's decision. The appeal was dismissed by the Court of Appeal: [2002] EWCA Civ 1075, [2003] BPIR 29.
Subsequent developments
Following the judgments of Judge McGonigal and of the Court of Appeal, no steps were taken by either Miss Chan or Mr Leung to proceed with the sale of Hill House or the taking of the account.
Miss Chan having become dissatisfied with her solicitors, Fenwick & Co, she filed Notice of Change stating that she would be acting in person. Fenwick & Co no longer exists as a firm of solicitors.
Mr Leung was made bankrupt in Hong Kong in 2002 and the Hong Kong Official Receiver took control of his bankrupt estate. The bankruptcy was discharged on 30 December 2006.
Miss Chan has entered into a number of business transactions since 2002. It is not necessary to describe them here. It is sufficient to say that some of them involved John Gurney, with whom she also formed a personal relationship and who lived in Hill House from about 2005 until excluded by court order in November 2008. Those business dealings and her relationship with Mr Gurney brought her into contact with Mr Paterson, who is an insolvency practitioner and, until very recently, a partner in the accountancy firm Moore Stephens LLP, based in their office in Chatham, Kent.
On the breakdown of her relationship with Mr Gurney in 2007, Miss Chan wished to have advice about how to sell Hill House. It is common ground that in early September 2007 she went to see Mr Paterson with her brother Tony Chan to discuss how such a sale might be brought about. Much of what took place and was said on that occasion is disputed between Miss Chan and Mr Paterson. It is common ground, however, that one suggestion made by Mr Paterson was that Melodious be put into administration. Miss Chan decided to pursue that course.
Mr Paterson completed and Miss Chan signed, as director, an application (viz Form BR1) dated 1 October 2007 for the registration at Companies House of a branch of Melodious at the Hill House address. Miss Chan and Madam Ho were stated to be directors. In relation to each of them, in the box dealing with "Scope of Authority", there was handwritten by Mr Paterson the words "Full Powers". He ticked the box indicating that those powers "may be exercised alone".
A certified copy of the memorandum and articles of association of Melodious had to be supplied with Form BR1. Mr Paterson requested a corporate services company in the BVI to supply them. They were sent to him on about 10 October 2007. Article 106 of Melodious' articles of association states that the quorum for a directors' meeting is not less than one half of the total number of directors unless there are only two directors, in which case the quorum is two. Article 105 states that a director may by a written instrument appoint an alternate, who shall be entitled to attend and vote at meetings in place of the appointing director. There was no written instrument...
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