RE UNION (V-TEX)SHIRTS FACTORY LTD

RE UNION (V-TEX)SHIRTS FACTORY LTD

Section 183 renders distraints executed after commencement of a winding-up void and proceeds from such distraints form part of the company's assets for the winding-up; where goods were seized before commencement but sold after, the sale may be voidable under s.182 but the court has discretion (including under s.186) to validate the sale or permit appropriation. Preferential creditors take priority over floating charge holders under s.265; applying these principles, the court held proceeds from distraints executed and sold after commencement are to be treated as assets of the company, while proceeds from distraints where seizure occurred before commencement but sale occurred after may be...

Citation
RE UNION (V-TEX)SHIRTS FACTORY LTD
Parties
Petitioner / Debenture Holder / Secured Creditor: The Hong Kong & Shanghai Banking Corporation; Company Subject to Winding Up: Union (V-Tex) Shirts Factory Limited; Liquidator / Applicant: Official Receiver; Landlord / Distrainor: China Underwriters; Landlord / Distrainor: Kim Tak Company Ltd.; Landlord / Distrainor: Union (V-Tex) Realty Ltd.
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
12 May 1977
Case Number
HCCW19/1975
Procedural Posture
Companies (winding Up) / Application for Directions in Winding Up Concerning Disposition of Distraint Proceeds
Outcome
Partially in favour of landlords: distraints and sales executed wholly after commencement are void and proceeds are company assets; distraints where goods were seized prior to commencement but sold after are not rendered ineffective and landlords may appropriate the proceeds now held by the Official Receiver subject...
Legal Topics
Floating Charge, Distrain/distraint, Priority of Creditors, Preferential Creditors, Void Dispositions After Commencement of Winding Up, Court Discretion to Validate Distraints
Source Language
EN
Company Law Insolvency Law Property Law Landlord and Tenant Law Statutory Interpretation Floating Charge Distrain/distraint Priority of Creditors +3 more

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Parties

The Hong Kong & Shanghai Banking Corporation

Petitioner / Debenture Holder / Secured Creditor

Union (V-Tex) Shirts Factory Limited

Company Subject to Winding Up

Official Receiver

Liquidator / Applicant

China Underwriters

Landlord / Distrainor

Kim Tak Company Ltd.

Landlord / Distrainor

Union (V-Tex) Realty Ltd.

Landlord / Distrainor

Procedural Posture

Companies (winding Up) / Application for Directions in Winding Up Concerning Disposition of Distraint Proceeds

Legal Issues

  1. 1 Whether distraints executed after commencement of winding-up are void under Companies Ordinance s.183
  2. 2 Whether sales of goods seized before commencement but sold after commencement are void under s.182 or can be validated
  3. 3 Whether preferred creditors take priority over holders of a floating charge and how s.265 interacts with distribution

Ratio Decidendi

Section 183 renders distraints executed after commencement of a winding-up void and proceeds from such distraints form part of the company's assets for the winding-up; where goods were seized before commencement but sold after, the sale may be voidable under s.182 but the court has discretion (including under s.186) to validate the sale or permit appropriation. Preferential creditors take priority over floating charge holders under s.265; applying these principles, the court held proceeds from distraints executed and sold after commencement are to be treated as assets of the company, while proceeds from distraints where seizure occurred before commencement but sale occurred after may be...

Court Disposition

Partially in favour of landlords: distraints and sales executed wholly after commencement are void and proceeds are company assets; distraints where goods were seized prior to commencement but sold after are not rendered ineffective and landlords may appropriate the proceeds now held by the Official Receiver subject...

Orders

  • Proceeds of distraints executed and sold after commencement (Kim Tak Co. distraints K460/75 and K518/75) to be treated as part of the assets of Union (V-Tex) Shirts Factory Ltd. available for distribution in the winding-up.
  • Official Receiver to permit immediate appropriation by the respective landlords of the proceeds attributable to distraints where goods were seized prior to commencement but sold after (V164/75 and V197/75) to satisfy outstanding rents, subject to the statutory charge for preferred creditors under s.265.