RE MERCURIES- JEANTEX HOLDINGS LTD (IN LIQUIDATION)

HCCW000836/1999

HCCW 836/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 836 OF 1999

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IN THE MATTER of MERCURIES- JEANTEX HOLDINGS LIMITED (IN LIQUIDATION)

AND

IN THE MATTER of the Companies Ordinance, Cap. 32

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Coram: Hon Kwan J in Chambers

Date of Hearing: 27 November 2003

Date of Decision: 27 November 2003

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D E C I S I O N

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1. This is an application taken out by the liquidators of Mercuries-Jeantex Holdings Ltd (“the Company”) under section 199(1)(f) and section 200(3) of the Companies Ordinance, Cap. 32, for an order that they may write off certain remaining assets listed in the statement of affairs of the Company that cannotbe realised to date despite the efforts of the liquidators.

2. These assets comprise investment in stocks, lands and buildings, and debts due to the Company. The total cost of these assets, asstated in the statement of affairs submitted by the directors, amounted to approximately HK$76 million. The total net book valueof these assets as at 7 December 1999 amounted to about HK$10.15 million.

3. The first category, being investment in stocks, consists of shares in nine companies. Seven of these companies are unlisted companiesand are either subsidiaries or related companies of the Company. They are either dormant or of no substance.

4. The 8th company, Mercuries-Jeantex (HK) Ltd (“MJHK”) is also a related company and a private company. The Company holds 100,000 ordinaryshares of HK$10 each in MJHK. In October 2002, an offer was received from Theme International Holdings (BVI) Ltd (“Theme BVI”) topurchase all the Company’s shares in MJHK at HK$1,000, which is substantially lower than the paid up value of these shares beingHK$1 million. That offer was subsequently increased to HK$10,000 in February 2003. As Theme BVI is one of the two members of thecommittee of inspection, the liquidators consulted the other member, DBS Kwong On Bank (“DBS”) about the increased offer, and DBSfound this unacceptable. The liquidators have written to Theme BVI on 26 February 2003 asking the latter to submit a revised offer.No such offer has been submitted to date, so the liquidators do not think the shares in MJHK can be realised.

5. The 9th company in which the Company holds shares is Agristar Inc., the shares of which are traded thinly on the OTC market in theUnited States. These shares are restricted securities and the cost of realisation is likely to exceed the proceeds.

6. The second category of assets is two landed properties in Dongguan, China. The first property is registered in the name of a formerdirector who is now bankrupt. There is no evidence that he was holding the property on trust for the Company. The title documentsand keys have been delivered up by the liquidators to the Official Receiver as the trustee in bankruptcy. The other landed propertyis of insignificant value with title deeds missing. It was gifted to a Chinese government official but without transfer documents.The time costs involved in realising this property would probably exceed expected proceeds.

7. The third category consists of inter-company debts due from subsidiaries or related companies in the total amount of about HK$54.9million. Demand letters were sent in June 2000 and no reply has been received from any of the debtors which are dormant or have ceasedoperation. There are also three overseas debtors and the liquidators have not been able to locate their addresses.

8. On 7 January 2003, the liquidators called a meeting of the committee of inspection and proposed a resolution to be passed to writeoff the above assets that cannot be realised. Theme BVI declined to pass this resolution, after challenging the liquidators on thebasis upon which the shares of MJHK should be valued in the liquidators’ offer to sell them to Theme BVI.

9. The summons today has been served on both members of the committee of inspection, Theme BVI and DBS. There is no response from them.I am satisfied on the evidence before me that sanction should be given to the liquidators to write off the above assets. They areeither of insignificant value or the costs of realisation are expected to exceed the proceeds. Reasonable efforts have been madeby the liquidators to realise the assets and to no avail.

10. I order that the assets may be written off. These assets have not been set out in the summons although they have been identifiedin the supporting affirmation. They should be set out properly in the draft order submitted to the court for approval.

11. I also order that the costs of this application be paid out of the assets of the Company.

12. In respect of the other part of the summons which is for the approval of the liquidators’ remuneration and disbursements, I do notpropose to deal with this today. Quite apart from the fact that I am not minded to cap the legal fees as suggested to do away withthe need for taxation, an application of this kind is to be dealt with on paper without a hearing in the usual way.

(S Kwan)
Judge of the Court of First Instance
High Court

Representation:

Mr G Cheong of Messrs Herbert Smith, for the joint & several liquidators