RE YIU WING CONSTRUCTION COMPANY LTD.

HCCW 202/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO.202 OF 2002

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D E C I S I O N

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1. I have before me a determination hearing held under s. 206 of the Companies Ordinance, Cap. 32 and r. 45 of the Companies (Winding-up) Rules. This court is asked to determine the appointment of the liquidators for Yiu Wing Construction Co Ltd ("the Company") and the composition of a committee of inspection. The petition to wind up the Company was presented on 22 February 2002 and a winding-up order was made on 5 August 2002.

2. The first meeting of creditors was held on 3 September 2002. 38 creditors had lodged proofs of debt against the Company. The total claims of the 38 proofs admitted for voting purposes amounted to about HK$401 million. Of these 38 creditors, 37 attended the first meeting either personally or by proxy. Their total claims amounted to approximately HK$226 million and RMB$187 million (equivalent to about HK$175 million).

3. The following resolutions were passed at the first creditors meeting:

(1) that Mrs Lau Wu Kwai King Lauren, Ms Ruby Man Yee Leung and Mr Jasper King Shing Man of Messrs Kennic L H Lui and Co. be appointed the joint and several liquidators of the Company,

(2) there should be a committee of inspection in the winding-up,

(3) application be made to the court for the determination of the appointment of members of the committee of inspection, as nine members were voted to the committee of inspection.

4. I should mention that one of the creditors, Zhejiang Yi Cheng Industry Company Limited ("Yi Cheng"), which has a claim for RMB187 million, had nominated Mr Lai Kar Yan Derek and Mr Darach E Haughey, both of Messrs Deloitte Touche Tohmatsu, to be liquidators of the Company. Messrs Lai and Haughey are the liquidators appointed by the court by an order made on 27 September 2002 for the ultimate holding company, King Pacific International Holdings Limited ("KPI"). Only Yi Cheng had voted in favour of its candidates. The other creditors who had cast votes at the meeting for the appointment of liquidators had all voted in favour of the candidates from Messrs Kennic Lui and Co and the combined value of their claims amounted to 51.29% of the voting value.

5. The first meeting of contributories was held twice and was inquorate on each occasion. It was not further adjourned.

6. I have heard submissions from a number of creditors who appeared at the hearing today. Mr Douglas Lam, who appeared for American Home Assurance Company being the second largest creditor, submitted that the candidates from Messrs Kennic Lui and Co. should be appointed liquidators, this is because the Company is a substantial creditor of KPI on account of inter-company debts. If the liquidators for the ultimate holding company were to be appointed liquidators of the Company, the inter-company debts might give rise to a position of conflict. Mr Lam has also drawn my attention to the fact that there was litigation involving the Company with entities related to the ultimate holding company.

7. Ms Mckenna for the Official Receiver has ascertained from Messrs Lai and Haughey that they are both willing and able to act as liquidators for the Company. Further, they do not perceive any conflict in their position on account of the inter-company debts at this stage. I also understand that the Company is not actually involved in litigation with KPI.

8. The approach I am minded to take is a pragmatic one. I have pointed out in a decision I gave on 14 November 2002 in Luen Cheung Tai Construction Company Limited, HCCW No. 190 of 2002, that if there is actual conflict arising on account of inter-company debts at a later stage, the liquidator could always apply to the court for directions. In the meantime and in the absence of any serious or actual conflict demonstrated by anyone in opposition, it is just and convenient that a single liquidator should be appointed for the parent company and the subsidiary. In the exercise of my discretion and acting in the best interest of all persons interested in this winding-up, I would appoint Messrs Lai and Haughey as the joint and several liquidators of the Company.

9. I turn to the composition of the committee of inspection. A total of nine members have been voted to serve on the committee. As submitted by the Official Receiver, this number is too large and to make the committee manageable, the number of members should be reduced.

10. I also bear in mind that the creditors appointed to serve on the committee should be fairly representative of the general body of creditors. On this basis, I propose to appoint four creditors to serve on the committee and a former employee to represent the interest of the preferential creditors.

11. The orders I make are as follows:

(1) Mr Lai Kar Yan Derek and Mr Mr Darach E Haughey, both of Messrs Deloitte Touche Tohmatsu, Certified Public Accountants, be appointed joint and several liquidators of the Company;

(2) the remuneration of the joint and several liquidators should be charged on a time cost basis at the standard scale of fees as agreed from time to time between the Official Receiver and the Hong Kong Society of Accountants under the administrative scheme of contracting out of non-summary court winding-up cases to professional accountants experienced in insolvency matters, and be paid out of the assets of the Company;

(3) the joint and several liquidators do within 7 days from the date of this order give security to the satisfaction of the Official Receiver pursuant to s. 195 of the Companies Ordinance;

(4) notice of the appointment of the joint and several liquidators be advertised by them in one issue of an English newspaper and in one issue of a Chinese newspaper published and circulating in Hong Kong and be gazetted by the Official Receiver;

(5) there be a committee of inspection in this winding-up comprising the following members:

(i) a representative of Zhejiang Yi Cheng Industry Company Limited;

(ii) a representative of American Home Assurance Company;

(iii) a representative of Hong Kong Housing Society;

(iv) a representative of Hong Kong Housing Authority; and

(v) Mr Chan Sei Leung, Edward.

(6) the costs of the Official Receiver in this application be treated as liquidation expenses and be paid out of the Company's assets;

(7) there be one set of costs for the creditors represented by counsel at this hearing and they are to be paid out of the assets of the Company.