In re ICS COMPUTER DISTRIBUTION LTD. formerly known as CHEFLINK LTD.

CWU No. 615 of 1995

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

____________

____________

_______________

D E C I S I O N

_______________

1. This is a short application to amend an order which was drawn up following the hearing on 29th January 1996.

2. This is a winding-up petition and the amount involved is no small sum. It involves a sum of over US$30m. When the matter first came before me, the company was able to secure, I might say not on the basis of any credible evidence but more on the basis of submissions, an adjournment of the matter. At that stage, counsel for the petitioning creditor asked me to impose terms, which involved a substantial payment into Court. In answer to that request, counsel on behalf of the company said, inter alia, "Secondly, my lord, this whole distributor agreement is in a way secured by a personal guarantee given by the Managing Director and I understand that an action by writ has already begun against the Managing Director on the guarantee. My lord, I would have thought that in those circumstances it would be rather harsh on the respondent company if the company is to make any payment into Court."

3. The matter then proceeded and counsel for the petitioning creditor did point out that he was interested to hear the submission in relation to the personal guarantee because the matter had been heavily disputed by the Managing Director who was saying that he did not do it at all and it was only for the sum of US$6m.

4. At the end of the proceedings counsel for the petitioning creditor quite properly, in my view, requested that the company's affidavit should include a reference to the submission from the Bar that there is a personal guarantee of US$6m outstanding because in his words "We would very much like to have that in other proceedings."

5. To that I said: "Yes, I think that you will have to do that." addressing counsel for the company who responded: "Yes, my lord", and I then clarified that it would have to be from the person involved and he said: "Certainly, my lord."

6. I am informed that when the draft order was submitted the undertaking that was drawn up in the final order was contained in the body of the order but the correction was made to make it an undertaking. That was in the following form "Mr. Lam Chi Man, Jimmy, the Managing Director of the respondent shall make and file an affidavit/affirmation confirming that the personal guarantee dated 22nd December 1994 in the sum of US$6m. given by him in favour of the petitioner in respect of all moneys and liabilities payable or incurred by the respondent to the petitioner on any account whatsoever, whether actually or contingently, together with all interest, costs and other expenses is valid, binding and of full force and effect."

7. I have to say this, that in view of the fact that the petitioning creditor did inform me that they had had difficulties in enforcing the guarantee it was probably too much to ask for that the respondent would submit, in effect, to judgment on the guarantee. Nevertheless, I take a very serious view of what has taken place. I was told about this guarantee specifically so that I would consider not making an order for payment into Court by way of security. The whole purpose of telling the Court about the guarantee was to indicate to the Court that there was some measure of security. I should have been told by counsel for the debtor that that guarantee was disputed.

8. I consider also that the interchange at the end of the hearing to which I have referred whereby it was made clear that this guarantee should be referred to in the evidence was, in any event, honoured in its breach. Mr. Lam's affidavit made no reference to it. It was only after it was pointed out that there had been a breach of the undertaking that, belatedly, he made reference to the fact that he had instructed his solicitors to dispute liability.

9. The question now is what to do about costs. Mr. Garland on behalf of the creditor says that the costs should follow the event because the undertaking was wrongly drawn up. Mr. Poon on behalf of the petitioning creditor says that there should neither be that order nor should there be no order as to costs. He says that if the company eventually were wound-up it would mean that the costs of this would be borne by the creditors. I intend to make this order that there shall be no order as to costs. I think that, unfortunately, the undertaking as drawn up was slightly over enthusiastic and for that reason it has to be varied.

10. On the other hand, clearly an undertaking was given to me, and what is more it was breached and in those circumstances I cannot see it right that the company is allowed costs. Furthermore, in view of the interchange and in view of the fact there were both counsel and solicitors in Court, I consider it may not be right that the respondent company should pay its lawyers for their errors and for correcting them. I intend to make an order that the solicitors for the respondent company appear before the Court within 10 days to show cause why the costs of the company in making this application should not be borne by them personally.