Re Fook Tai Credits Ltd.

HCCW 932/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO.932 OF 1999

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R E A S O N S

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1. This is a creditor's petition presented by the Hong Kong Land Property Company Limited against Fook Tai Credits Limited formerly known as Man Sun Finance (Hong Kong) Limited ("the Company"). The underlying indebtedness arises from a judgment debt in respect of rent, management charges and rates due and payable by the Company to the petitioner. At the hearing of the petition on 3 January 2000, a compulsory winding-up order was made. The reasons appear below.

2. The petition was opposed by the Company. Richard Foo, its director, filed two affirmations in opposition. The first, filed on 20 December 1999, referred to a tentative agreement he had reached with a potential investor in Canada, a Mr Graham, to provide fresh capital to the Company. This was apparently subject to a satisfactory review of the audited financial accounts of the Company. Mr Foo referred to an initial agreement for Mr Graham to take up 30% of the issued shares of the Company for CAD500,000 with an option to acquire a further 20% for a further CAD500,000. Further, it was stated that Mr Graham had agreed to respond within three weeks upon receipt of the audited financial accounts which Mr Foo intended to forward to him immediately after his return to Hong Kong in early January 2000. On that basis, an adjournment of 1 1/2 months was sought.

3. The Company proposed a tentative repayment schedule to discharge the $1.18 million (which is not disputed) owed to the petitioner. This schedule envisaged four monthly payments of HK$250,000, to be made on the 25th day of each month, commencing February 2000, with the balance payable by 25 June 2000. The petitioner did not find the staged repayments acceptable.

4. Prior to the hearing on 3 January 2000, Mr Foo filed a second affirmation and exhibited a copy of the agreement he had entered into with Mr Graham ("the Agreement"). Under this Agreement, Mr Graham was to invest in the Company by taking up a third of its issued capital. The shares were to be paid for by instalments. Interestingly, the first four instalments are the mirror image of what had been proposed by way of repayment to the petitioner. Under the Agreement the fifth instalment of HK$1.5 million was to be payable not in June but in July 2000. $100,000 was payable as a deposit which was refundable save and except under the condition referred to in clause 7 of the Agreement.

5. Clauses 5 and 7 of the Agreement provide :

"5.	This Agreement is subject to the following conditions :
	a.	Subject to Graham satisfactory review of the Financial Accounts of the Company that the Company's assets and liabilities as at 30/9/1999 is more or less in the balance.
	b.	On or before January 5, 2000, Foo must produce to Graham the following Financial Statement of the Company :
		- Audited Financial Statement Report as at March 31, 1998
		- Audited Financial Statement Report as at March 31, 1999
		- Management Account as at November 30, 1999
	c.	In the event that this Agreement shall consummate, Foo undertakes to procure Graham to be elected as a Director in the Company."
"7.	Foo shall render all books of accounts of the Company to Graham for inspection and verification after the submission of the Financial Statement and Graham shall have until 15th of February 2000 to decide whether to proceed with the purchase of the shares hereinafter mentioned. If Graham shall not have responded by the said 15th of February 2000, it shall be assumed unless provided otherwise that Graham has accepted the Financial Statement of the Company and if the sale and purchase herein is not provided with, the deposit paid by Graham shall be absolutely forfeited to Foo."

6. None of the financial documents referred to in clause 5b of the Agreement was exhibited to Mr Foo's affirmations notwithstanding that he had to provide these to Mr Graham on or before 5 January. All there was before the court was a draft balance sheet as at 30 September 1999 prepared by the Company's accountant. Suffice to say that the evidence as to the financial condition of the Company was less than satisfactory given what had to be supplied to Mr Graham if the Agreement were to proceed to completion. Moreover, whilst Mr Foo's first affirmation referred to a three-week period for review by Mr Graham, the Agreement effectively gave Mr Graham until 15 February to do so. There is no affidavit from Mr Graham to the effect that he would reach a decision within three weeks of receiving the financial information.

7. The adjournment of seven weeks sought by the Company would achieve nothing save to establish whether or not the Agreement with Mr Graham would go ahead. Assuming it were to proceed, all the Company is able to do is to offer the petitioner staged repayments which the petitioner has already rejected.

8. There is little point in granting the adjournment sought. The Company will not be in a position to make any better offer than it has already done.

9. In all the circumstances, and bearing in mind the undesirability of lengthy adjournments for winding-up petitions (see In re Esquire Electronics Limited [1996] 3 HKC 309), I have no difficulty in concluding that the evidence does not warrant the lengthy adjournment sought. The application is refused and the petitioner is entitled to a compulsory winding-up order.