RE UNITED HONG KONG LTD.

HCCW 13/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING UP NO. 13 OF 2001

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D E C I S I O N

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1. This is an application for an order that all further proceedings in the winding-up of a company by the name of United Hong Kong Limited ("the Company") be stayed. The history of the matter is as follows.

2. On 21 May 2001 I made an order winding up the Company. The petition was based upon a Small Claims Tribunal award, which had been made in favour of the Company's solicitors. The reasons for the winding-up appear in my written judgment on 21 May 2001 and I will not repeat them here. Suffice it to say that the amount for which the Small Claims award was made was small. Nevertheless, the Small Claims award was not set aside and the Company steadfastly refused to pay that award. Consequently it was wound up.

3. Two months after the winding-up, on 31 July 2001, a motion was issued on behalf of Mr Man Yuen Sing, who was purportedly a contributory of the Company, making an application to stay the winding-up of the Company.

4. Under S.209 of the Companies Ordinance, the Court may, at any time after an order for winding-up, on the application either of the liquidator or the Official Receiver or any creditor or contributory and on proof to the satisfaction of the Court that all proceedings in relation to the winding-up ought to be stayed, make an order staying the proceedings, either altogether or for a limited time on such terms and conditions as the Court thinks fit.

5. It turned out from the evidence that Mr Man Yuen Sing, the Applicant on the motion had no locus standi to make the application because he was neither a creditor nor contributory of the Company. There is therefore an application now by Mr Man Yin Leung, Mr Man Yuen Sing's brother, who is a contributory, to join in the application and to be substituted as the new applicant. It is clear that the Court can order Mr Man Yuen Sing to cease to be the applicant and Mr Man Yin Leung to be substituted as applicant under O.15 r.6 and I so order.

6. The second issue is whether the winding-up should be stayed. The Statement of Affairs filed after the winding-up order showed that there was a deficiency of liabilities over assets in the sum of about $1.55 million. However, it would appear from the balance sheet and from the evidence before me that in respect of these liabilities, a substantial amount was owed to related parties, and these related parties have now all agreed to either waive the liabilities or to allow time to the Company to pay them.

7. Of the liabilities listed, there was owed to Mr Man Yin Leung a sum of $2.86 million. This amount has been waived by him and I have been shown a deed of waiver. That leaves a balance of about $830,000 by way of a debt due to Miss Man Yuen Kay, who is a sister of Mr Man Yin Leung and Mr Man Yuen Sing, and she has filed an affidavit allowing time to the Company to repay that loan. Further, there is an amount of about HK$700,000 which is owing to a company by the name of James Aluminium. That is a company controlled by Mr Man Yuen Sing and his wife, and that company has allowed time to the Company to repay. There is a further loan from Gulford (which apparently is a smaller loan). Gulford is also controlled by the Man family and it has also allowed time to the Company to pay.

8. That leaves only outside creditors being the petitioner and a small amount of HK$10,000 owing to accountants. As far as the petitioner is concerned, it has no objection because it has accepted a personal guarantee from Mr Man and therefore it is no longer interested in looking to the assets of the company.

9. The upshot of the waiver of the $2.86 million debt owed previously to Mr Man Yin Leung is that the balance sheet of the Company would be dramatically changed from showing net liabilities of $1.55 million to net assets of $1.3 million.

10. I have taken into account the fact that the motion was issued more than two months after the winding-up of the company. I have also taken into account the fact that a stay of all proceedings in the winding-up of a company is not the best status that a company can be in.

11. However, I am minded to exercise my discretion to grant the order in the present case because primarily this is a family company whose business is only in the holding of a property which has been rented out to the company of one of the members of the family. If the liquidation were to proceed, the property may well have to be sold in the liquidation process and that would obviously be unsatisfactory as far as the tenant company is concerned. Given that there is no risk to the public in this case because this company has never traded, and there are no external creditors who are prejudiced, I would in the rather unique circumstances of this case give an order staying further proceedings in the winding-up of this company.