RE UNITED RESOURCES ENTERPRISES LTD

IN THE SUPREME COURT OF HONG KONG

COMPANIES (WINDING-UP)

CWU 241 OF 1990

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JUDGMENT

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1. A petition was presented by Schenker (H.K.) Limited (the petitioner) on the 14th August 1990 to wind up United Resources Enterprises Limited (the company) on the grounds that it is insolvent and unable to pay its debts.

2. The petition is based upon a judgment of Deputy Judge Sharwood dated the 13th February 1990 for the sum of $407,933.12 plus interest and costs. Execution was levied by the petitioner under the judgment, but only $623 was realised. The total debt, with interest and costs, now amounts to about $850,000. A notice of appeal against the judgment was filed and the appeal was due to be heard on the 25th September 1990, but unfortunately the date had to be vacated with the result that the appeal is now due to be heard on the 21st May 1991. No application for a stay of execution of the judgment pending appeal has been made by the company. However, a sum of $90,000 has been paid into court by way of security for costs for the appeal.

3. It is a well known principle that where a debt is undisputed, as it is in this case by virtue of the judgment, the petitioner is entitled ex debito justitiae to a winding-up order. However, Mr Fok, counsel for the petitioner, in view of the appeal filed by the company drew my attention to an alternative course that was adopted by the court in In re Amalgamated Properties of Rhodesia (1913) Ltd. [1917] 2 Ch 115. In that case it was held that an appeal was not a defence to a petition, so that a winding up order must be made, but the court allowed the order to lie in the office for a limited time, to enable the company to provide security to the registrar's satisfaction for the amount of the judgment debt. If satisfactory security was provided, the petition would be dismissed with costs to be paid by the company. Upon appeal, the court of Appeal adopted another course in which it gave the petitioner, within the same limited period, a security on all the assets of the company subject to those already specifically charged.

4. Mr Chow, on behalf of the company, has argued that there are substantial grounds of appeal and that I am entitled to take this factor into account. He cited Re The United Stock Exchange Limited (1884) 51 LT 687, but this was a case involving collusion and does not provide authority for his proposition. In the absence of any authority, I reject this submission.

5. As a result, the petitioner has established that the debt is due under the judgment, and in the absence of payment or any attempt to secure payment, strong evidence that the company is insolvent and unable to pay its debts.

6. Mr Chow referred to a letter from the petitioner's solicitors to the company's solicitors dated the 27th September 1990 in which they had taken the view that the hearing of the winding up petition should precede the hearing of the appeal which Mr Chow contended, although not alleging any mala fides, was not fair to the company. I do not accept this submission.

7. In my judgment, the petitioner is fully entitled to proceed with this petition in order to preserve its rights, for the company for reasons which have not been explained, has failed to follow the proper procedure by applying for a stay of execution pending appeal. Although Mr Fok in citing the Amalgamated case invited me to consider making a similar order to that which was made by the court at first instance or that adopted by the Court of Appeal, the circumstances in that case were quite different because counsel for the company had suggested that at an early stage the company might be able to provide security for the debt to the satisfaction of the registrar. No suggestion, however, has been made that the company in this case will be able to provide such security to the satisfaction of the registrar although Mr Chow said that the company is prepared to give security over all its assets. However, as there is no evidence that the company has any assets, this would be a fruitless exercise.

8. Accordingly, I am satisfied that a winding up order should be made, so I shall make the usual compulsory order with costs.