RE PERFECTA DYEING, PRINTING & WEAVING WORKS LTD

HCCW 80/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 80 OF 2009

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REASONS  FOR  JUDGMENT

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1.  This is a petition to wind up Perfecta Dyeing, Printing & Weaving Works Limited (“the Company”) presented by Chong Hing Bank Limited.  I have made a winding-up order against the Company and these are the reasons for judgment.

2.  On 21 May 2008, the petitioner served a demand against the Company under section 178(1) of the Companies Ordinance, Cap. 32 for HK$23,088,430.31 and US$33,126.60, being the debt due under a facility letter dated 30 May 2007 issued by the petitioner to the Company.  On 27 May 2008, the Company paid HK$90,000 to the petitioner.  On the same day, the petitioner exercised its power of set-off against a charge on deposits dated 12 June 2004 executed by the Company’s directors, Thierry Wong and Wong Yuk Tung, in favour of the petitioner by setting off part of the Company’s debt against the credit standing to the account maintained by the Company with the petitioner of HK$35,350.50 and the credit standing to the account maintained by the chargors with the petitioner of HK$4,033,972.90. 

3.  On 7 July 2008, the petitioner received US$21,629.03 under the bills receivables in respect of the banking facilities granted to the Company and applied the same towards partial satisfaction of the Company’s debt.  After that, the Company as at 7 July 2008 owed the petitioner HK$19,154,411.29 and US$495.61 with interest (“the Balance of the Debt”).

4.  On 19 September 2008, the petitioner obtained summary judgment against the Company before a Master for the Balance of the Debt in High Court Action No. 956 of 2008.  The Company’s allegation that there was a promise of forbearance to sue by the petitioner in May 2008 was rejected by the court.  An appeal was lodged by the Company against the Master’s decision and this was dismissed by Deputy Judge Carlson on 30 September 2008.  This winding-up petition was presented on 6 February 2009.

5.  One of the creditors, United Overseas Bank Limited, has filed a notice of intention to appear and to support the petition.  The amount owed to this creditor is HK$43,246,344.52 as of 14 April 2009.  Apart from this creditor, three other bank creditors have provided letters to the petitioner stating that they are in support of the petition.  They are DBS Bank (Hong Kong) Limited (being a judgment creditor for HK$23,043,266.62 and US$846,389.42), Overseas-Chinese Banking Corporation, Hong Kong branch (a creditor for HK$16,171,938.57) and Dah Sing Bank (being a judgment creditor for HK$9,472,783.32 and US$79,246.11).  The total amount of the petitioner’s claim and the claims of these four supporting creditors is in the region of HK$118.3 million.

6.  The petition first came before Deputy Judge To on 27 April 2009.  The Company’s counsel, Miss Kate Poon, informed the court that there would be an injection of capital and sought an adjournment to adduce evidence to oppose the petition.  The Company was granted an adjournment for 7 days, with leave to file evidence in opposition within that time.  An affirmation was made by Wong Kwok Wing on the Company’s behalf.  He is the manager of the Company.

7.  According to Mr Wong, the Company was involved in the manufacturing of textile products until 1994.  In 1996, Silver Yield Industries Limited (“Silver Yield”) was incorporated in Hong Kong and became the holding company of an entity in the People’s Republic of China known as Guangzhou Panyu Perfecta Spinning, Weaving, Dyeing & Printing Limited 廣州番禺潭州振裕紡織染印有限公司 (“Panyu Perfecta”).  I was informed by counsel that the two directors of the Company, Wong Yuk Tung and Thierry Wong, are the directors and the only shareholders of Silver Yield, and that Silver Yield is the only shareholder of Panyu Perfecta.  Products of Panyu Perfecta were sold by Silver Yield to the Company, and the business of the Company is the trading of products manufactured by its related company Panyu Perfecta.

8.  According to the Company’s evidence, liquidity problems first arose in December 2007.  It was alleged by the Company that first DBS Bank and later Hang Seng Bank breached their promises to grant facilities to the Company.  There is no need to go into these allegations.  The Company has adduced extracts of its financial statements for the years ended 31 March 2007 and 31 March 2008.  I am given to understand by Miss Poon these were audited financial statements.  However, the Company has chosen not to make available to the court the auditor’s report.  According to these incomplete financial statements exhibited, the Company made a profit of HK$19 million in 2006, a profit of HK$20 million in 2007 and a loss of HK$85.4 million for the year ended 31 March 2008.  The balance sheet as at 31 March 2008 recorded net current assets of HK$30 million and net assets of HK$90 million.  Of the current assets of HK$545.8 million, trade amounts due from related companies amounted to HK$408 million.  The Company has not adduced evidence, such as management accounts, on the financial position of the Company after March 2008.  I am satisfied on the evidence before the court that the Company is insolvent.

9.  The Company has adduced evidence to show that the local authorities in the Mainland are supportive of the operations of Panyu Perfecta.  There is adduced a letter of intent of cooperation signed on 3 April 2009 between Guangdong Silk-Tex Group Company Limited 廣東省絲綢紡織集團有限公司(“Guangdong Silk-Tex”) and Panyu Perfecta, by which the parties to the agreement would invest jointly to set up a new company.  The new company would take over the factory and equipment of Panyu Perfecta to carry out production and the fixed assets of Panyu Perfecta would be treated as its contribution to the share capital of the new company.  Guangdong Silk-Tex is a large scale state-owned enterprise.  The parties to the agreement would each hold 50% of the shares in the new company.  It was further provided that the letter of intent is not to be regarded as legally binding and Panyu Perfecta is to discharge its own indebtedness during the operation of the new company.

10.  According to a paper produced by a working group of the local authorities dated 12 March 2009, the total indebtedness of Panyu Perfecta to the banks is RMB 392.4 million, its indebtedness to government authorities is RMB 34 million, and its indebtedness to suppliers is RMB 50 million.  Part of the assets of Panyu Perfecta is subject to a freezing order of the court.

11.  Also according to the working paper, Panyu Perfecta has obtained some reprieve from its creditors in the Mainland in that there would be a suspension of maintenance fees for 12 months and an advance of RMB 6 million has been obtained to pay the workers’ wages.

12.  Mr Wong has deposed that Panyu Perfecta is expected to resume production in early May 2009 and full production is expected by the end of the year.  If full production could be achieved, the forecast is that the yearly production could reach over RMB 800 million, depending on the economic climate at the time.  A projection was produced to the effect that the Company could expect to receive a net profit of 20% out of the profit to be generated by Panyu Perfecta.

13.  The Company has put forward a proposal to the petitioner on 28 April 2009 proposing to pay HK$500,000 a month for the first four months commencing on 31 July 2009 and thereafter HK$1 million per month until the petitioner’s debt is to be repaid in full by 30 June 2011.  In the affirmation of Mr Wong, he has proposed to advance the date of the first instalment payment to 28 May 2009.  Miss Poon sought an adjournment for the Company to repay its indebtedness to the petitioner by instalments.

14.  The petitioner does not accept the proposal.  Miss Zabrina Lau submitted on its behalf that the time frame for payment by instalments is too long.  Further, there is no realistic prospect and no assurance from the Company how it is able to meet its obligation to pay by instalments, given its aggregate indebtedness to the financial creditors and the indebtedness of Panyu Perfecta.  She submitted it is highly speculative if the Company would be able to receive the amount of profit projected to be generated by the new company to be formed.  I am inclined to agree with her that no useful purpose would be served by adjourning the petition in the circumstances.

15.  For the above reasons, I have made an order to wind up the Company.  The petitioner’s costs are to be paid out of the Company’s assets.