RE: WONG SIU MUI and EX PARTE: GUANG XIN ENTERPRISES LTD.

HCB 4834/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 4834 OF 2000

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J U D G M E N T

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1. There are two petitions for bankruptcy before me. They were ordered to be heard together because the debt is the same and there are common issues involved.

2. The petitions were brought by Guang Xin Enterprises Limited which is in creditors' voluntary liquidation. The debtors are Mr Wong Wah and Madam Wong Siu Mui who are husband and wife. They are the directors of Ngai Fung International Trading Company Limited ("Ngai Fung") and Nam Fong International Holdings Ltd ("Nam Fong"). The latter is a listed company in Hong Kong

3. The petitions were founded on a debt owed by Ngai Fung to the Petitioner in the region of US$2 million under a loan agreement dated 9 January 1998 ("the Loan Agreement"). This debt was guaranteed by the debtors under a guarantee executed on the same date ("the Guarantee"). Ngai Fung was ordered to be wound up by an order of the court made on 25 April 2000 on the petition of the Petitioner.

4. It is not in dispute that under the Loan Agreement, the Petitioner had advanced US$2.5 million to Ngai Fung and the debt was to be repaid on or before 14 April 1998 with contractual interest. Save for the payment of HK$10 million on 8 June 1998, the balance of the loan had not been paid despite various letters of demand to Ngai Fung and the debtors in 1998 and 1999.

5. A statutory demand was served on Madam Wong by advertisement in a newspaper on 24 May 2000 and another statutory demand was served on Mr Wong also by advertisement on 19 October 2000. The petitions were served on their solicitors who had instructions to accept service.

6. Up to the day before this hearing, the debtors had opposed the petitions on the ground that the Guarantee was executed by them under a misrepresentation by the Petitioner's financial manager. It was alleged that they were only told that the documents they were asked to sign were to facilitate the loan arrangement to Ngai Fung and for charging their shareholdings in Nam Fong to the Petitioner as security for the loan. They were not told that one of the documents they were to sign that day was a personal guarantee given by them jointly and severally to guarantee Ngai Fung's liability to the Petitioner. The debtors claimed that they do not know English and they had never intended to provide a personal guarantee to the Petitioner.

7. At the hearing today, Mr Joeson Wong, who appeared for the debtors, informed the court that the debtors would not contest liability to the debt. Instead, he asked for one month's adjournment to give time to the debtors to pay. The proposals he put forward were as follows: HK$1 million was to be paid forthwith by a cashier order; the balance of about HK$15 million was to be paid within a month.

8. Evidence was adduced that Nam Fong Liwan Plaza Ltd, a subsidiary of Nam Fong, had mortgaged a property at Li Wan Plaza in Guangzhou to the China Merchant Bank to raise a loan of RMB30 million. The mortgage was made on 7 April this year. According to Madam Wong's affirmation, the mortgage transaction has not been completed. However, it is believed that the proceeds should be available in a month's time.

9. There was a letter from Nam Fong Liwan Plaza Ltd to Mr Wong and Madam Wong expressing willingness to make available to them the proceeds received from the bank for the purpose of paying off the debt of the debtors in the bankruptcy petitions.

10. Mr Paul Carolan who appeared for the Petitioner informed the court that the proposals were not acceptable to the Petitioner and he asked for a bankruptcy order.

11. One month's adjournment sought is not a long period. In the ordinary circumstances, I might have been more amenable to granting the adjournment. In the particular circumstances of these proceedings, I am not inclined to do so.

12. Firstly, these proposals were made at the eleventh hour. Up to yesterday, the debtors had contested liability with the serious allegation of misrepresentation against the Petitioner's financial manager and the solicitor who had attested the execution of the Guarantee. The debtors have now abandoned these allegations and they have chosen not to give evidence and be cross-examined. Mr Carolan submitted that this cast doubts on their credibility and the bona fides of their offer to pay. I agree.

13. Secondly, having looked at the documents placed before the court regarding the loan raised by Nam Fong Liwan Plaza Ltd, I do not think these documents are satisfactory. The mortgage was not signed by any officer of the bank or anyone from the mortgagor company, only two company chops were placed on these documents. As for the letter from Nam Fong Liwan Plaza Ltd to Mr Wong and Madam Wong expressing willingness to let them use the proceeds to pay the debt to the Petitioner, there is of course no binding obligation on the part of this company to do so.

14. Thirdly, I note that in September 1998, Mr Wong had provided his personal cheque to the Petitioner to settle the debt due and owing and that cheque was dishonoured. No reason was offered by the debtors why Mr Wong had failed to honour his obligation on that occasion.

15. Fourthly, there are other substantial creditors of the debtors and some of them have brought bankruptcy petitions against them and others have given notice to appear in support of the petitions. In the present proceedings, there is a supporting creditor who has given notice to appear and that creditor was owed US$2 million.

16. Earlier this week, I had adjourned the hearing of the petition in HCB No. 927 of 2000 which is a petition for bankruptcy brought against Mr Wong on the joint application of the parties so as to give him time to pay. In that matter, the hearing was adjourned several times because Mr Wong had failed to implement his obligation to pay in accordance with his proposals for repayment. I had indicated at the last hearing that no further adjournment would be granted.

17. My attention was also drawn to two other petitions for bankruptcy, being HCB No. 1881 of 2001 (which is a petition against Madam Wong) and HCB No. 2002 of 2001 (which is a petition against Mr Wong). These petitions were brought on the basis of a judgment debt obtained against them in August of last year in the sum of HK$19 million. The petitions are to be heard in June this year. Given this state of affairs, I have serious doubts whether the proposals made today to pay the balance of HK$15 million within a month would be honoured.

18. In my view, no useful purpose would be served by adjourning the hearing. As the debt is not contested, it would be appropriate in the circumstances to make a bankruptcy order against each debtor and I so order. I further order that the Petitioner is to have its costs in the two petitions.