In Re Foreground Securities Co. Ltd.

HCCW 256/99 and HCCW 481/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP NOS.256 OF 1999 and 481 OF 1998

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R E A S O N S

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1. This is the adjourned hearing of a petition based on an award obtained by the Petitioner against the Company in the Labour Tribunal on 10 December 1998. In addition to the Petitioner, the Company is also indebted to seven other employees in the aggregate sum of just under $830,000.

2. By way of background, it is relevant to note that there was an earlier winding-up petition filed by the Petitioner (HCCW 481/1998) ("the earlier petition") which was presented on 16 July 1998. It was based on a statement signed by Mr Yick Ming Kit, a director of the Company of the Company's inability to pay due to financial difficulties. The Company opposed the earlier petition on the ground that the debt was disputed. In view of the alleged dispute, the Petitioner who is legally aided, agreed at the hearing on 14 October 1998 to have the earlier petition dismissed and to have his claim referred to the Labour Tribunal for adjudication. The issue of costs was adjourned sine die with liberty to restore.

3. On 10 December 1998, the Petitioner obtained a Labour Tribunal award against the Company who did not attend the Labour Tribunal hearing itself although a defence was filed on 30 November 1998.

4. Although there was no order authorizing Mr Yick to represent the Company at the hearing of the petition, he was allowed to make submissions on behalf of the Company. The Company opposed the petition on two grounds : first, it claimed that the debt is substantially disputed; second, that the Company's assets are frozen because of an order made by the Securities and Futures Commission ("SFC") on 14 April 1998.

5. There is no merit in either ground. There is a valid award in favour of the Petitioner. The Company defended the claim but its submissions had obviously been rejected by the Labour Tribunal. There was no appeal against the award. As to the second ground, a restriction notice was made by the SFC pursuant to section 40 of the SFC Ordinance. This required the Company :

".... to obtain the prior written consent of the Commission before dealing, in any manner, with any asset held by it, whether as principal or agent. Such consent to be granted by the Executive Director of Intermediaries Division or Director of the Intermediaries Supervision Department."

It is immediately obvious that there was nothing to prevent the Company from applying to the SFC for payment of an award made by the Labour Tribunal. Under the terms of the restriction notice, all that was required was prior consent from the SFC. Clearly, an application could and should have been made by the Company to the SFC to meet the award. It was not. In fact, nothing has been done by the Company to have the restriction notice (which has been in place for over a year) removed. Effectively, the Company has not been doing any business since its imposition.

6. As no valid ground of opposition has been established by the Company, a winding-up order was made pursuant to the Companies Ordinance.

7. The Petitioner also applied for the costs of the earlier petition. There was never any valid defence to the claim of the Petitioner. Rather, what the Company sought to do was simply to delay the inevitable. There was no good reason for the earlier petition not to have proceeded. In these circumstances, it is only fair that the Petitioner be awarded not only the costs of this petition but also of the earlier petition and I so ordered.