RE KEN FORWARD ENGINEERING LTD

HCCW 803/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 803 OF 2002

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J U D G M E N T

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1. This petition to wind up Ken Forward Engineering Limited ("the Company") is presented by Weltime Hong Kong Limited, on the ground that the Company is unable to pay its debts. The debt in the petition is in the sum of HK$17,102,218.97 ("the Debt"), being the amount awarded by the arbitrator in an arbitration between the Company and the petitioner in their disputes arising out of construction works at the site at Lot No. 1861, DD 100, Sheung Shui, New Territories, Hong Kong ("the Project"), in which the petitioner was the developer and the Company the contractor.

2. The award was published by the arbitrator on 1 March 2002, and the Company should have satisfied the Debt within 21 days of the publication of the award. The Company however only collected the award on 24 April 2002 when it paid for its share of the fees of the arbitrator, by which time the time limit to appeal against the award had expired.

3. On 14 May 2002, the Company issued a summons in HCCT No. 47 of 2002, for leave to appeal to the Court of First Instance against the award out of time, and for leave to appeal under s. 23(2) of the Arbitration Ordinance, Cap. 341. The application was dismissed by Burrell J on 30 May 2002.

4. On 8 June 2002, the petitioner served a demand on the Company for the Debt under s. 178(1)(a) of the Companies Ordinance, Cap. 32. This petition was presented on 23 July 2002.

5. On 31 July 2002, the Company filed a Notice of Appeal against the decision of Burrell J in HCCT No. 47 of 2002. The appeal was heard and dismissed by the Court of Appeal on 13 November 2002 in CACV No. 321 of 2002. Leave to appeal to the Court of Final Appeal was refused by the Court of Appeal on 22 May 2003. A Notice of Motion was filed by the Company on 19 June 2003 in FAMV No. 20 of 2003, seeking leave to appeal to the Court of Final Appeal. On 20 August 2003, the Appeal Committee of the Court of Final Appeal dismissed the Company's application, on the ground that the application disclosed no reasonable grounds for leave to appeal.

6. Due to the litigation regarding the Company's application for leave to appeal against the award, the hearing of this petition was adjourned a few times, to await the outcome of the appeal brought by the Company.

7. The Company's solicitors have obtained leave to cease to act in these proceedings on 29 April 2003. The petitioner's solicitors have received a letter from the Company on 3 September 2003, stating that it would not appear at today's hearing.

8. One creditor, Victory Mark Investment Limited ("Victory Mark"), has given notice of intention to appear and to support the petition. Victory Mark is a judgment creditor with a debt of HK$806,100.00. Judgment was entered against the Company in HCA No. 9556 of 2000 by consent on 8 July 2002 and was stayed under a Tomlin order, by which the Company was to pay the judgment debt to Victory Mark in 2 instalments. As no payment was made, on 29 July 2002 Woolley DJ ordered the stay under the Tomlin order to be lifted and at the same time imposed a stay of proceedings in the High Court Action under s. 181 of Cap. 32, pending the hearing and determination of the winding-up proceedings, as the petitioner had on 23 July 2002 presented this petition. I am satisfied that Victory Mark has locus to appear as a supporting creditor.

9. The Company has filed a number of affidavits by its director, Mr David Chow Ching Kwong, setting out various grounds of opposition to the petition.

Alleged formal defects

10. It is alleged by the Company that the petition should be dismissed as there are a number of "fundamental defects" in the manner in which various documents filed in these proceedings were prepared. They are as follows:

(1) in the verifying affirmation being the 1st affirmation of Sum Wing Mui Vivien filed on 24 July 2002, it was not exhibited any evidence to show that the deponent was duly authorised to make the affirmation and she did not recite she was authorised under seal from the petitioner;

(2) Ms Sum was not directly involved in the Project and so was not an appropriate person to make the verifying affirmation;

(3) the registered address of the Company stated in the statutory demand and the affirmations of service was "130-132 Connaught Road", whereas the registered office was "130-136 Connaught Road";

(4) there is ambiguity in the identity of the party presenting the petition as the word "petitioner" is not defined in the petition;

(5) in the petition, the registered address of the Company was incorrectly stated as "Connaught Rod" instead of Connaught Road.

11. None of the alleged defects are of any substance. Ms Sum was authorised under seal of the petitioner to act on behalf of the petitioner in the petition. She was a director of the petitioner at the time of the petition and did have knowledge of the matters raised in the petition. The statutory demand and the petition were duly served on the Company's registered office. There is no ambiguity of the identity of the petitioner in the petition.

Alleged improper motive

12. Next, it is alleged that the petitioner, Victory Mark and Healthy Sun Ltd ("Healthy Sun") all have a common interest in seeing the Company wound up. These 3 companies have a common shareholder, KSH Nominees Ltd. The Company has obtained an arbitration award against Healthy Sun on 5 March 2002 in the sum of HK$2 million with costs in its favour. It is alleged by the Company that it has suffered "temporary impecuniosity" in March to April 2002, and was unable to pay its share of the fees of the arbitrator in the arbitration with the petitioner so as to uplift the award and bring an appeal against that award in time, due to the deliberate delay by Healthy Sun in paying the Company the amount due to the Company.

13. This allegation is equally of no substance. Firstly, the court is not concerned at all with any improper motive of the petitioner in presenting this creditor's petition, even if it were established. Secondly, there is no factual basis to support the Company's allegation that the petitioner knew that the delay of Healthy Sun in settling its debt to the Company would have caused the alleged consequence.

Alleged attempts to seek funding

14. In the 3rd affidavit of Mr Chow, he stated that he has attempted to seek funding from others to service the existing indebtedness claimed by the petitioner and Victory Mark and expressed confidence that the attempts, at least for the debt of Victory Mark, would be fruitful.

15. No further evidence has been filed in relation to the attempts at seeking funding.

Cross claims against the petitioner

16. Mr Chow asserted that the Company has outstanding, genuine and significant claims against the petitioner for damages, loss and expenses arising out of the Project of at least HK$20 million, which is in excess of the petitioning debt. These cross claims relate to delayed commencement and suspension of work, disruptions and finance or interests costs. In support of these claims, Mr Chow has referred to an expert report obtained by the Company which was adduced in evidence in the arbitration with the petitioner.

17. The cross claims were in fact raised by the Company in the arbitration proceedings. The arbitrator had considered and rejected these claims because they had not been pleaded. The Company had chosen to proceed with the arbitration on the basis that it did not need to plead these claims, notwithstanding that the petitioner had objected to the Company raising these claims for lack of proper pleadings. In the end, the arbitrator ruled against the Company and declined to take these claims into consideration.

18. The Company had argued before the Court of Appeal in challenging Burrell J's decision to refuse leave to appeal it had a meritorious ground of appeal in that the arbitrator had erred in law in declining to consider the claims of the Company against the petitioner in respect of delay and disruption. The Court of Appeal did not think this ground of appeal, as well as other grounds of appeal advanced by the Company, would have "any prospect of success".

19. In the circumstances, I am unable to see any such cross claim could be regarded as a serious and genuine cross claim. The Company would have formidable difficulties to overcome if it should bring proceedings against the petitioner for these claims that this would not be an abuse of process, having already advanced such claims against the petitioner in a previous arbitration and was unsuccessful.

Conclusion

20. For the above reasons, none of the grounds advanced by the Company in opposition is of substance. I therefore make a winding-up order against the Company. The costs of the petitioner and of the supporting creditor are to be paid out of the Company's assets, including all the costs reserved on previous occasions on 17 October 2002, 4 November 2002, 31 March 2003 and 3 April 2003.