RE Hon Seng Engineering Ltd.

HCCW 59/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING UP) PROCEEDINGS NO. 59 OF 2000

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R U L I N G

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1. This is an application for two orders, the first being for the rescheduling of the length of hearing of the petition and secondly for the appointment of provisional liquidators. The background position is as follows.

2. There has been an Interim Payment Order made by the Court against the Company in favour of the Petitioner. An application for a stay of execution of that Interim Payment Order has been refused by Suffiad J. The Interim Payment Order was on the basis of money payable by the Company to the Petitioner which is one of the sub-contractors of the works done in relation to an ASD contract.

3. ASD is now in the process of assessing the value of those works. In this process of assessment of the value of those works, there are two possible scenarios.

4. The first possible scenario is that if the final result in the assessment is that ASD has overpaid, then the money which has been paid by ASD to the Company should be repaid by the Company to ASD, and the Petitioner would have no locus standi to press for the payment of money by the Company to it, subject to the Petitioner's argument that the costs orders may be subject to a different consideration.

5. The second possible scenario is that if there has been no overpayment by ASD, then it is common ground apparently that the Company is unable to pay its debt to the Petitioner.

6. There is some dispute before me today as to whether ASD's present assessment shows a downward adjustment or an upward adjustment, although I am inclined on reading those documents briefly that there has not been a substantial downward adjustment. Although there may be said to be an arguable case on behalf of the Company, I am satisfied that in this respect, the Petitioner has a good prima facie case on winding-up.

7. As to the estimate of the length of the hearing, the matter appears sufficiently crystallised for me to re-estimate the length of hearing, and I would therefore reschedule it with an estimate of one day, but not to be heard before the end of January 2001 by which time it is hoped ASD would have provided a final determination of the assessment of value of the works.

8. As far as the appointment of provisional liquidators is concerned, I am concerned with the fact that the directors of the Company have not applied for a section 182 order and yet has taken money due to the Company from another contractor and spent at least part of the money on apparently personal expenses, or at least on entertainment when the Company is admittedly only undergoing minimum operations.

9. There has been no proper explanation furnished even in the last affirmation provided to me this morning to say what has happened to the rest of the money that apparently had been due by this contractor to the Company, nor has there been a proper explanation as to why this means of processing the money from the contractor has been used.

10. Accordingly, I am concerned with the assets of this Company which may come into its hands and I am therefore going to order the appointment of provisional liquidators, the Official Receiver having indicated that they do not have the resources or the time to take up the provisional liquidation of this Company and there being no objection as such to the two persons who have been nominated as a provisional liquidators.

11. I would order that Mr Kennic Lai Heng LUI and Mrs Lauren LAU WU Kwai King of Messrs Kennic L H Lui & Co., be appointed as provisional liquidators of the Company.