EASTLITE INDUSTRIES LTD v. WILLIAM HUNG YU YANG

HCB22514/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDING NO.22514 OF 2002

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J U D G M E N T

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1. This is a bankruptcy petition filed on 2 November 2002, which is based on a summary judgment obtained by the petitioner before the Master on 13 July 2000 in the sum of $5,583,156, with interest and costs.

2. The subsequent appeals by the debtor to a judge in Chambers and to the Court of Appeal were all dismissed. The statutory demand dated 16 November 2001 was served on the debtor by way of substituted service on 28 January 2002. The petition was also served by way of substituted service on 24 December 2002.

3. The debtor, in essence, put forward two grounds in opposing the petition. He offers to pay the entire judgment debt, including interest, now standing over 7 million, by way of monthly instalments of $140,000 starting in July 2003. In this connection he offers to charge his beneficial interest in a company called National Wealth International Holdings, together with the interest in another company as a charge for his obligation - or as security for his obligation to repay the monthly instalments. (These two companies hold interest in a PRC company called Dalian Bond Debt International Finance Centre Company Limited).

4. Alternatively, he offers to pay the whole sum in one go, upon the successful disposal of the PRC company, or his interest. He gathers that the selling price will be in the region of 500 million renminbi and the deal shall take place in the near future. He wants 14 days to gather further information to substantiate the offers and what he has said in his affirmation filed on 13 February 2003.

5. In my view, nothing can be gained by adjourning this petition further to enable the petitioner to file further evidence.

6. The first offer of paying by monthly instalments of $140,000 to be secured by his interest in the two companies, in the circumstances, is unreasonable. The petitioner is not obliged to take the risk of having the debt paid over a long period of time. He is not obliged to accept the proposal to take as charge and as a security the interest that the debtor offers in securing the repayment obligations.

7. As rightly observed by counsel acting for the petitioner, if those interests are of substantive and real value, there is no reason why the debtor himself is unable to raise sufficient finance to discharge at least a substantial part of his debt.

8. In my view, no reasonable hypothetical creditor would have accepted the offer put forward by the debtor to repay by monthly instalments. So there is no point in adjourning the petition further to enable the debtor to file any evidence in this regard.

9. Turning to the offer to pay in one go upon successful disposal of the PRC company, that is, in my view, simply too remote on the evidence now before me. Even with this letter of intent now placed before me, there is no indication whatsoever as to when this deal will conclude, or what is the selling price.

10. Again, as already observed by counsel, it would be rather odd, even on the debtor's own evidence, that the potential investor will be prepared to invest 500 million renminbi in a company with a net asset, as at 31 December 2001, of about 54 million renminbi. He would have to pay 10 times more than the net asset value to conclude the deal.

11. A simple calculation of the figures would take us to this conclusion : taking the case of the debtor to the highest, the best that he can get out of the deal personally will be far less than the judgment debt, contrary to what he has alleged in his affirmation. He only owns 0.1 per cent beneficial interest in the company which in turn owns 70 per cent interest in the PRC company, so the best that he can get, assuming 500 million renminbi represents the net sale proceeds, would be 350,000 renminbi.

12. So on this offer, I see no merit at all in adjourning the petition further to enable the petitioner to come up with evidence to substantiate what he has said in the affirmation. What he will put in the affirmation will not take his case any further.

13. So I would refuse to adjourn the petition further and proceed to make the usual bankruptcy order with costs against the debtor.