RE KENSLAND REALTY LTD.

HCCW 581/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO. 581 OF 2001

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J U D G M E N T

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1. This is the petition to wind up the respondent company in essence for its inability to pay a judgment debt in the region of $20.6 million pursuant to a Judgment of the Court of Appeal entered on 26 March 2001.

2. The petition is opposed by the respondent company and a K Y Ltd, a shareholder and creditor of the respondent, and they seek an adjournment of this petition until after the disposal of the respondent's appeal to the Court of Final Appeal.

3. The background leading to the petition has been set out in the written judgment dated 5 June 2001 of the Court of Appeal when it refused the respondent's application for stay of execution of the said Judgment of 26 March 2001 pending the respondent's appeal to the Court of Final Appeal (scheduled to be heard on 9 and 10 October 2001). The reasons for refusing the stay application have also been set out in the written judgment dated 5 June 2001. Neither the background nor the said reasons will be repeated here. Suffice it to say, that the nature of the arguments advanced by the respondent and K Y Ltd to seek an adjournment of this petition are in substance the same as those advanced earlier in the Court of Appeal. Having said that, I bear in mind that the matter which fell for determination by the Court of Appeal was whether to grant the stay sought but the matter which falls for determination today is whether or not to grant the adjournment sought.

4. In coming to a decision, I have assumed that the market value of the shop property, which is said to be the only asset of the respondent, is about $37 million (as contended for by the respondent). Further, although the position of the respondent and K Y Ltd is dealt with under separate paragraphs, I have considered the relevant matters not only separately but also cumulatively (including the practical matters referred to by the Official Receiver). Since the petitioner has obtained a charging order against the said shop property, and since the prior secured debt (owed to Wing Hang Bank Ltd) only amounts to about $14.6 million, the petitioner's judgment debt is (at least arguably) fully secured.

5. I disagree with Mr Chain's argument that if a debt is secured, a winding up petition is normally refused. There is no support for such an argument in judicial precedents or textbooks. I rather find that it is only one of the factors relevant to the exercise of the court's discretion. The argument in the petitioner's favour, on the other hand, is that as a judgment creditor, it is prima facie entitled to enforce the judgment in whatever way it considers to be of advantage.

6. The proximity of the dates of the appeal hearing is again a relevant factor in favour of the respondent and K Y Ltd. Further, the Official Receiver submitted at today's hearing that postponing any winding up order which may be made until after the appeal to the Court of Final Appeal has been disposed of, is likely to simplify the work of the Official Receiver, and possibly lessen the time and expenses involved. However, those matters again will have to be weighed against the petitioner's prima facie right to have a judgment enforced.

7. K Y Ltd further argues that its opposition to the respondent's winding-up should be given more weight than the wish of the petitioner to have the respondent wound up because, as a shareholder and unsecured creditor, it stands a much higher risk of losing more in the distribution of the respondent's assets if a winding up is ordered. That, however, has to be considered in the light of the Court of Appeal's observation (in its Judgment of 5 June 2001) that

K Y Ltd may well be in a position to pay off the petitioner's debt but has so far not done so.

8. It would appear that the said arguments regarding (1) the petitioner being a secured creditor and (2) the wish of K Y Ltd not to wind up the respondent, are relevant to an application to dismiss the petition. However, for reasons not apparent to me, only an application for an adjournment has been made today.

9. Having taken all matters (especially those set out above) into account, I find it appropriate to exercise my discretion to refuse the adjournment sought. Further, counsel for the respondent has indicated that no further (or other) arguments would be advanced to oppose the petition. Accordingly, I consider it appropriate to make an order for winding up the respondent.