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Ting-Foong Fang v Amazing International Co Ltd [2009] WSSC 118 (30 November 2009)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

IN THE MATTER: of the International Companies Act 1988

BETWEEN:

TING-FOONG (ANDREW) FANG
of Palm Island Resort, Huizhou City, Guang Dong Province, China. Businessman.
Petitioner

AND:

AMAZING INTERNATIONAL CO. LIMITED
a duly incorporated international company having its registered office at Mossack Fonseca &
Co. (Samoa) Limited, Level 5, Development Bank of Samoa Building, Beach Road, Apia, Samoa.
Respondent

Counsels: Mr RT Faaiuaso for the Petitioner
Mr S. Leung Wai for the Respondent

Decision: 30 November 2009

DECISION OF NELSON J.

The respondent is an international company registered in Samoa under the International Companies Act 1987 ("the Act"). Its shareholders are the petitioner (40%), his father (40%) and his sister (20%). The petitioners father is the sole and governing director of the respondent company.

The respondent owns Huizhou Li Da Yi Sports Co. Ltd. ("Huizhou") a company incorporated in the Peoples Republic of China and carrying on business in Guangdong, China. Huizhou is a wholly owned subsidiary of the respondent and the petitioner was at all material times employed as president and chief executive officer thereof. He maintains he was involved in its formation and has been instrumental in its development and business for many years.

In 2008 the respondent became extremely concerned at certain activities being undertaken by Huizhou and potential mismanagement of its China operations by the petitioner. It says the petitioner failed to address these concerns. It accordingly dismissed the petitioner and barred him from re-entering the companys premises. It also issued civil proceedings against him and filed a criminal complaint with the Chinese authorities. The petitioner says these actions were unlawful and unjustified and he will or is in the process of issuing proceedings against Huizhou and his father. Obviously this is a family in disarray and conflict.

The petitioner now brings a petition to wind up the respondent on the basis of section 159(1)(e) and (f) of the Act. Those subsections relevantly provide:

"159(1) - Subject to section 158 the court may order that an international company be wound up if:

(e) Directors have acted in the affairs of the company in their own interest rather than in the interests of the members as a whole or in any other manner whatsoever which appears to be unfair or unjust to other members;

(f) The court is of the opinion that it is just and equitable that the company should be wound up."

Section 158 relevantly provides:

"(1). An international company whether or not it is being wound up voluntarily, may be wound up compulsorily by order of the court.

(2) The court may order the winding-up of an international company upon the petition of:

(a) The company;

(b) A creditor including a contingent or prospective creditor of the company;

(c) A contributory of the company;

(d) The liquidator of the company;

(e) The Minister of Finance;

or any two or more of those persons."

Section 2(1) of the Act contains these definitions:

"contributory" in relation to an international company, means a person liable to contribute to the assets of the company in the event of it being wound up, and includes the holder of fully paid shares in the company and, prior to the final determination of the persons who are contributories, includes any person alleged to be a contributory.

"court" means Supreme Court of Samoa.

"creditor" means any person capable of enforcing any debt (whether contingent or actual) against the company in Samoa (excluding for the avoidance of doubt, any taxation, fine or penalty imposed by any government or governmental or semi-governmental authority of a government other than Samoa).

The Petition:

The petition alleges that the sole director of the respondent "summarily and unfairly" dismissed the petitioner without notice or proper remuneration. Further that the petitioner was wrongly barred from entering the companys premises in China. The petitioner claims various sums as compensation for his dismissal and says the sole director has acted in his own interests and not in the interests of the members as a whole, and has acted in an unfair and unjust manner. Section 159(1)(e) therefore comes into play and the company should be wound up on that basis. He also argues that given all the circumstances it is just and equitable the respondent be wound up pursuant to s.159(1)(f).

He also seeks judgment for the amount of his claims against the respondent and the appointment of a local liquidator to attend to liquidation of the company.

Unfair dismissal:

As there is no cause of action for unfair or unjustified dismissal under Samoan law (see Liki v Samoa Breweries Ltd. [2005] WSSC 3) the petitioner in his submission sought to amend the petition by deleting "unfairly" and substituting "wrongfully" where appropriate. The respondent quite properly objected and said a proper application to amend needed to be filed. In fact what is required is more than that, what is necessary is an amended petition be filed and served.

However such would be superfluous in the present case. Because it is clear from the affidavits that the petitioner was employed not by the respondent but by Huizhou. Any claims he may have in relation to his dismissal must therefore be directed towards Huizhou in China and not at the respondent in Samoa. The petitioners prayer for judgment for the amount of his claim for unfair or wrongful dismissal, which has no place in a petition to wind up in any event, is accordingly dismissed.

Basis of petition:

The respondent argues there is no jurisdiction to issue a winding up order because the petitioner is not a person qualified to bring a petition under s.158(2). He does not fall within any of the categories listed therein.

That is not correct. I agree he is not a creditor as he has no substantiated or sustainable claim against the company. But he is a "contributory" as that term is defined by s.2(1). Because as a shareholder holding unpaid shares, he is a person "liable to contribute to the assets of the company in the event of it being wound up." If he is a fully paid up shareholder, he is also within the definition because s.2(1) expressly extends to "the holder of fully paid shares in the company" and "any person alleged to be a contributory." It is not clear from the affidavits which he is, but he is listed as a shareholder and would be in my view within the definition of "contributory." It is not necessary that the petition specifically allege he is a contributory. As a matter of fact, he is one

Grounds of petition:

The real question is not his capacity to petition but whether he can establish the grounds of his petition. That is a matter for determination at the hearing of his petition and the onus is on him to prove to the requisite standard that the sole director has acted in pursuit of his own interests and not those of the shareholders or that he acted in a manner unjust and unfair to the other members of the company. Alternatively that the circumstances are such that it is just and equitable the company be wound up.

Such matters cannot and should not be adjudicated upon at an interlocutory stage. They are matters for a full hearing and if the petitioner proves his case then the court should consider winding the company up. But in my respectful opinion subject to the rider that the court should be hesitant to wind up a company that is clearly solvent and trading strongly. All circumstances of the matter should be considered for as noted in the quotation cited by the respondents counsel from Keays ‘Law of Company Liquidation’ 4th edition paragraph 152:

"The courts will not order winding up if the company is solvent and the applicant is either acting unreasonably or has some other available remedy."

This is the test that the authorities agree should apply to an inquiry under s.159(1)(f) but arguably it can also apply in appropriate cases to petitions based on s.159(1)(e). At least the court should be hesitant to wind up a company that is commercially alive and well if the petitioner is being unreasonable or has some other available remedy. If of course the petitioner fails and it appears there was no basis for the petition then the court should consider the abuse of process argument and its other options, indemnity costs against the petitioner for bringing a baseless petition being one of them.

Conclusion:

The petition will be allowed to proceed but only insofar as it rests on subsection 159(1)(e) and (f) of the Act. The respondents application to strike it out is declined.

As the respondent obviously contests the basis of the petition this matter should be assigned a hearing date as soon as practicable.

Costs reserved.

JUSTICE NELSON