RE MEI CHEONG IEONG HONG (H.K.) LTD.

HCCW 375/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 375 OF 1999

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R U L I N G

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1. I will give leave to the Company to file the 3rd affirmation of Wong Chung Fat made on 4 November 1999 and, subject to an undertaking from Silverdew to see that the affirmation of Christina Cheung Choi Oi is duly affirmed, I will also give leave for that affirmation to be relied upon at this hearing.

2. The application made by the Company and by Silverdew, one of the opposing contributories is for an adjournment: in the case of the company, for another 2 months, and in the case of Silverdew for 6 weeks, with a view to putting forward proposals for the possible restructuring of the debt in the present case.

Silverdew's application

3. In the case of Silverdew, the 6-week period is said to be required for the preparation by independent expert of such restructuring proposals. It therefore follows that realistically, some significant period thereafter would be required before the matter could be brought before the court, if an adjournment was granted.

4. The last minute affidavits are unsatisfactory, in my view, given the ample opportunity that Silverdew in particular has had for putting in any evidence it wishes to rely upon.

5. The petition was presented in April this year but, on the evidence, it appears that there was discussion of restructuring even before its presentation. Thus I have been referred to the joint venture board minutes of 18 March 1999, where there was discussion of restructuring. Indeed, justification of one of the contentious steps taken in this case, namely, application for dissolution of the joint venture, has been put forward on the basis that this was done to encourage acceptance of restructuring on the part of the joint venture partner, GGSC. Therefore, the question of restructuring has been obviously in the minds of the parties for at least some 8 or 9 months.

6. I find it wholly unsatisfactory that on the day of the hearing itself, proposals, very much in their infancy, should be placed before the court as the basis for an adjournment. I note that in June, the Company had asked for a 2 months' adjournment on the basis that it was trying to formulate a proposal for putting up security. However, even that was apparently an initiative that did not have the support of GGSC or of its parent company. I refer to a letter of 11 June 1999 where the parent company indicated that despite much talk, there had "not been an inch of progress" in this matter.

7. In any event on 14 June 1999, Le Pichon J. gave directions on the filing of evidence and at that stage, it should have been obviously that if anyone wanted to put a realistic proposal before the court, they had to get it ready. It is now November and it is only today being suggested that a proposal might be formulated by an expert who has not yet even been asked to review the position.

The Company's application

8. The Company has put forward a draft proposal based on a memorandum of understanding which it has entered into with a company called Scott's Holdings or more accurately, its subsidiary called Stamford. However, it is plain from a perusal of this memorandum and understanding that it is subject to some very significant conditions and contingencies. In particular, it will obviously require the cooperation of the petitioning banks and also the cooperation of the joint venture partner.

9. The basic suggestion is for conversion of the hotel into serviced apartments with a loan of US$5 million to assist. The banks have indicated their position in a letter from Messrs. Baker & McKenzie dated 3 November 1999 where they have essentially taken the view that the proposal is not viable.

10. It seems clear from the Petitioner's attitude of today, i.e., to resist any further adjournment, that the likelihood of such proposal securing the banks' acceptance and coming to any fruitful conclusion is remote in the extreme.

11. Accordingly, I do not see that there is any basis for an adjournment and I dismiss the application.