IN RE M.W. LEE & SONS ENTERPRISES LTD.

IN RE M.W. LEE & SONS ENTERPRISES LTD.

The diverted dividends (including the specified sums) were held to be subject to a constructive trust because the company accepted the payments with knowledge they were not beneficially its own; accordingly those moneys were not 'property of the company' for the purposes of s.182 and the court may authorize the company to disburse the specified sums (and interest attributable to them calculated on a pro rata basis) to the executors without rendering such disbursement void under s.182; the Wallersteiner fiction on treating misapplied trust funds as the fiduciary's own does not change the proprietary character of the moneys in this context and does not defeat set-off rights absent a finding...

Citation
IN RE M.W. LEE & SONS ENTERPRISES LTD.
Parties
Petitioner: S.T. Lee; 1st Respondent: Lee Tak Yan (Lee Yan); Company / 2nd Respondent: M.W. Lee & Sons Enterprises Limited
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
16 March 1999
Case Number
HCCW467/1998
Procedural Posture
Companies Winding Up Petition (court of First Instance) / Interlocutory Application Under Section 182 of the Companies Ordinance (authorization of Proposed Disbursement)
Outcome
Summons granted in part: court authorized validation of the proposed disbursement of the specified sums and attributable interest to the named executors so as not to be void under s.182 if a winding up order is made; order nisi for costs in favour of 1st Respondent.
Legal Topics
Constructive Trust, Disposition of Company Property, Section 182 Companies Ordinance, Pro Rata Tracing and Interest, Set Off
Source Language
EN
Company Law Equity and Trusts Insolvency Law Constructive Trust Disposition of Company Property Section 182 Companies Ordinance Pro Rata Tracing and Interest Set Off

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Parties

S.T. Lee

Petitioner

Lee Tak Yan (Lee Yan)

1st Respondent

M.W. Lee & Sons Enterprises Limited

Company / 2nd Respondent

Procedural Posture

Companies Winding Up Petition (court of First Instance) / Interlocutory Application Under Section 182 of the Companies Ordinance (authorization of Proposed Disbursement)

Legal Issues

  1. 1 Whether the diverted dividends constituted property of the company for the purposes of s.182
  2. 2 Whether a constructive trust arose in respect of the diverted dividends
  3. 3 Whether the court could authorize the company to make the proposed disbursement under s.182

Ratio Decidendi

The diverted dividends (including the specified sums) were held to be subject to a constructive trust because the company accepted the payments with knowledge they were not beneficially its own; accordingly those moneys were not 'property of the company' for the purposes of s.182 and the court may authorize the company to disburse the specified sums (and interest attributable to them calculated on a pro rata basis) to the executors without rendering such disbursement void under s.182; the Wallersteiner fiction on treating misapplied trust funds as the fiduciary's own does not change the proprietary character of the moneys in this context and does not defeat set-off rights absent a finding...

Court Disposition

Summons granted in part: court authorized validation of the proposed disbursement of the specified sums and attributable interest to the named executors so as not to be void under s.182 if a winding up order is made; order nisi for costs in favour of 1st Respondent.

Orders

  • The disbursement out of the Company’s funds to pay Lee Tak Yan and Lee Wing Kim (May Lee) as Executors of the Estates of Lee Man Wa and Ng Chan Wa of the sums HK$12,347,500.00 and HK$583,700.00 (the specified sums) and interest attributable to the specified sums, if and so far as they involve any disposition of the...
  • Interest attributable to the specified sums shall include a pro rata share of interest accrued on amounts (of which the specified sums form part) placed on fixed deposits and on the savings account; in computing such pro rata share, withdrawals made to meet the Company’s expenses shall be deemed to have been made...