IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMPANIES WINDING-UP PROCEEDINGS NO. 1120 OF 2001
Coram: Hon Yuen J in Chambers
Date of Hearing: 11 December 2001
Date of Decision: 11 December 2001
DECISION ON APPOINTMEN OF
1. This is an ex parte application for the appointment of provisional liquidators. The Applicant is HSBC. It presented a petition todayin CW 1324 of 2001, but it has transpired that the Company is already the subject matter of another petition being CW 1120 of 2001presented by an employee pursuant to a Labour Tribunal award. However, that does not affect the locus of HSBC in making the presentapplication because any creditor of a company may apply for the appointment of a provisional liquidator under Section 193 of the Companies Ordinance.
2. The evidence shows that HSBC advanced certain facilities to the Company and to another company which the Company guaranteed by thename of Wayne Construction Company. Apparently, Wayne has also been made the subject of a petition for winding up, that one presentedby Pioneer Construction Company Limited.
3. As far as the Company is concerned, the evidence shows that HSBC has for the past few months been attempting to resolve the Company’sdifficulties in meeting overdue repayments. In mid-October 2001, the Company proposed the making of a $1,000,000.00 p.m. paymentto HSBC commencing from the end of October. However, no payments have been received. Messages left for the directors of the Companyby HSBC staff have not been returned. Since November the Company has only had an answering machine service and the staff of HSBChave not even been able to contact the directors or staff of the Company. Apparently, some senior staff members have also left theemploy of the Company in November. The Company’s principal place of business has also been deserted apparently for some time.
4. Consequently, on 12 November 2001 HSBC served a statutory demand on the Company in respect of a sum of some $20.35 million odd togetherwith interest, less security by way of a charge over Company deposits in the sum of about HK$3 million.
5. The 21 days prescribed by the statute expired without payment or a reply from the Company. Accordingly, the applicant presented itsown petition today. However, as I indicated to Mr Dobby in the course of his submissions, it is inappropriate for there to be morethan one petition pending against a company. Therefore, Mr Dobby has indicated that HSBC will withdraw its petition presented todayand that he would be making this application under CW 1120. The Director of Legal Aid has indicated that he has no objection to thepresent application for the appointment of provisional liquidators.
6. The application for the appointment of provisional liquidators has arisen from the fact that the Company has 3 ongoing constructionprojects which apparently produce cash payments every month. According to a cash flow projection dated 9 October 2001 and presentedto HSBC by the Company’s directors, there are 3 construction projects, at Arbuthnot Road, Boundary Street and Tai Hang Road respectively,which should have provided the Company with a total cash inflow of $5.39 million in October 2001 and $9.8 million in November 2001.According to that cash flow projection, the Company should have cash in hand of $560,000.00 for October and $650,000.00 in November,even having provided for repayment to HSBC of $500,000.00 in October and $700,000.00 in November. However, as stated above, no paymentshave been made by the Company to HSBC and it is not known where the balance of cash of $560,000.00 in October and $650,000.00 inNovember have gone.
7. It is well-established law that a creditor can apply for the appointment of a provisional liquidator at any time after the presentationof a winding-up petition. The relevant factors are that the applicant must establish a good prima facie case for a winding-up orderto be made and that the appointment is, in all the circumstances of the case, appropriate.
8. It would appear clear in this case that the applicant has established a good prima facie case for a winding-up order to be made.Apart from the petition presented by the employee under the Labour Tribunal award which was made as far back as February 2001, thereis also a failure to pay the applicant pursuant to the many demands that have been made and to the statutory demand.
9. More pressing is the fact that it is not known where the cash balances for the past two months have gone, and it would certainlyappear to be worrying that the Company is apparently operating outside its registered office and principal place of business, withoutthe usual staff, and there must arise concerns as to whether these projects are being properly managed and the cash assets properlydealt with. Although it would appear clear that this Company is insolvent, it is apparently still carrying on trading and withoutany evidence where assets arising from such trading have gone.
10. In the circumstances, HSBC giving the required usual undertakings as to damages in the event it were held that this order is improperlymade, I will make an order in terms of the draft order as amended. I will reserve the costs of the application.
Mr C Dobby of Johnson Stokes and Master, for Hong Kong and Shanghai Banking Corporation Limited, a creditor in HCCW 1120/01 and Petitionerin HCCW 1324/01
Mr J Glen, from the Official Receiver’s office