RE POLY FRIENDS LTD

HCCW 1345/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 1345 OF 2003

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J U D G M E N T

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1. This is a petition to wind up Poly Friends Limited ("the Company") on the ground that it is unable to pay its debts. The petitioner is the incorporated owners of AIE Building, No. 33 Connaught Road, Central, Hong Kong ("the Building"). The Company is the registered owner of the 12th floor of the Building.

2. The petitioning debt being the subject of a demand served on the Company by the petitioner on 18 August 2003 comprises four items:

(1) HK$61,379.70 due under the memorandum of charge dated 3 June 1997 ("the 1997 Memorandum of Charge");

(2) HK$169,725.43 due under the memorandum of charge dated 27 February 2001 ("the 1st 2001 Memorandum of Charge");

(3) HK$14,111.80 due under the memorandum of charge dated 27 February 2001 ("the 2nd 2001 Memorandum of Charge"); and

(4) HK$39,500.00 due under a charging order absolute dated 7 March 2001 ("the Charging Order") in Lands Tribunal Application No. LTBM No. 112 of 1997 ("the Lands Tribunal Application").

3. As the Company has failed to settle any of the amounts demanded, the petition herein was presented on 2 December 2003.

4. The Company has filed two affirmations in opposition by its director, Roger Shui Kee Wong. Mr Wong is the sole proprietor of Messrs Roger S K Wong & Co., a firm of solicitors. Mr Wong's firm had occupied the Company's premises at the 12th floor of the Building from 1996 to January 2004. It has acted for the Company and is still acting for the Company in various legal proceedings with the petitioner, including this petition, the Lands Tribunal Application, the appeal by the Company against the judgment in the Lands Tribunal Application in CACV No. 42 of 1998, and a claim brought by the Company against the petitioner and others in HCA No. 4001 of 2003.

5. The Company is apparently a property holding company and Mr Wong claims it has not carried on any trading activity.

6. The grounds for opposing the petition, as appeared from Mr Wong's affirmations, may be summarised as follows:

(1) Item 1 of the petitioning debt is in dispute, this is the subject of the appeal brought by the Company in CACV No. 42 of 1998 and the appeal is pending.

(2) The Company has a substantial cross claim in damages against the petitioner and others in HCA No. 4001 of 2003 in the sum of HK$4.35 million.

(3) Part of the amount claimed in item 3 of the petitioning debt, being a sum of HK$8,268.00, is the contribution that the Company was required to make towards the legal costs incurred by the petitioner in defending the Lands Tribunal Application. It is the subject of proceedings in the Small Claims Tribunal which was to be heard in February 2004.

7. When this petition came to be heard, the grounds of opposition in the affirmations of Mr Wong have been overtaken by events. There is a letter from the Company's solicitors to the petitioner's solicitors dated 13 July 2004 proposing a winding-up order be made on the petition by a consent summons. The petition cannot be disposed of in the manner as suggested, but I take note of the Company's stance in that letter.

8. What remains for me to do is to examine each item of the petitioning debt and see if there is any valid ground of opposition in respect of each of them.

Item 1 of the petitioning debt: HK$61,379.70

9. The background of this debt is as follows.

10. On 3 February 1997, the petitioner resolved to renovate the lift lobby and part of the external wall of the Building. Each owner's share was HK$59,592.00. The only owners who did not pay were the Company and the registered owner of the 5th floor of the Building, one Mr Chan. By the 1997 Memorandum of Charge, a total of HK$61,379.70 (which comprised the Company's share and interest of HK$1,787.70) became charged to the Company's premises.

11. On 28 August 1997, the Company and Mr Chan took out the Lands Tribunal Application to vacate inter alia the 1997 Memorandum of Charge. The Company's only objection to paying its contribution was that certain parts of the Building to be renovated were alleged to be private property and not common parts of the Building, hence the resolution to renovate was invalid and in contravention of the deed of mutual covenant. That contention was rejected by the Lands Tribunal in the judgment of Judge Z E Li on 22 January 1998. The Lands Tribunal Application was dismissed with costs.

12. On 11 February 1998, the Company and Mr Chan filed a notice of appeal in CACV No. 42 of 1998 to appeal against the judgment of the Lands Tribunal. Mr Chan subsequently withdrew his appeal and agreed to pay the petitioner all outstanding charges and costs.

13. The Lands Tribunal appeal was set down by the Company on 11 February 1998. Since then, the Company did nothing to fix a date for the hearing of the appeal. Eventually, the petitioner applied for a date to be fixed and the appeal is due to be heard on 17 September 2004.

14. I agree with Mr Fung who appeared for the petitioner that it is plain that the Company never has any or any serious intention to proceed with this appeal which has been pending for over 6 years. There is no explanation by Mr Wong for this inexcusable and inordinate delay of his firm in the conduct of the appeal. Moreover, I fail to see any merit in the appeal, having considered the contention of the Company and the reasons for rejecting it in the judgment of the Lands Tribunal.

15. I find there is no bona fide dispute on substantial grounds on item 1 of the petitioning debt.

Item 2 of the petitioning debt: HK$169,725.43

16. This amount is made up of the arrears of management fees owed by the Company from July 1998 to February 2001 and late payment interest for the contribution towards the renovation expenses as in February 2001. Hence, the 1st 2001 Memorandum of Charge was issued.

17. The petitioner has obtained various judgments from the Small Claims Tribunal for the Company's arrears of management fees from July 1998 to October 2000. HK$127,032.04 out of HK$169,725.43 in the 1st 2001 Memorandum of Charge was the subject of judgments in the Small Claims Tribunal.

18. The bulk of the debt in question is therefore judgment debt and there has never been any appeal lodged by the Company in respect of any of these judgments. The Company has adduced no evidence to dispute these debts. The only ground of opposition advanced was the cross claim for damages of HK$4.35 million in HCA No. 4001 of 2003. The petitioner as the 3rd defendant in that action had applied to strike out the statement of claim. By a letter dated 27 April 2004, Mr Wong's firm informed the court that the Company would not oppose the application. Accordingly, an order was made by Deputy Judge Jat, SC on 28 April 2004 to strike out the statement of claim against the 3rd defendant and the action was dismissed with costs of the 3rd defendant to be paid by the plaintiff on an indemnity basis.

19. There is clearly no bona fide dispute on this item.

Item 3 of petitioning debt: HK$14,111.80

20. This is the subject of the 2nd 2001 Memorandum of Charge and is made up of various costs orders made by the Small Claims Tribunal and the contribution that the Company was required to make towards legal costs of the petitioner in the sum of HK$8,268.00. The latter is now a judgment debt as judgment in favour of the petitioner was given on 26 February 2004. There is no appeal from that judgment or any of the other judgments of the Small Claims Tribunal.

21. There is therefore no dispute on this item.

Item 4 of the petitioning debt: HK$39,500.00

22. In the Lands Tribunal judgment, Judge Li awarded the costs to the petitioner against the Company and Mr Chan in equal share. The petitioner's costs were taxed at HK$79,000.00, so the Company's share is HK$39,500.00 and that is the subject of the Charging Order.

23. There is no appeal against the Charging Order. As I have found earlier, the Company does not have a bona fide appeal arguable on the merits from the judgment of Judge Li. Again, there is no bona fide dispute on this item.

Conclusion

24. The Company has failed to discharge its onus to show a bona fide dispute on substantial grounds in respect of any item in the petitioning debt. It is not necessary to go into the further judgments obtained by the petitioner in the Small Claims Tribunal in respect of management fees due by the Company after February 2001 and other miscellaneous items.

25. I therefore make a winding-up order against the Company.

26. Mr Fung sought an order for costs against the Company on an indemnity basis, on the ground that the petition was unreasonably opposed and the Company has only abandoned its opposition at the eleventh hour as it had done in HCA No. 4001 of 2003.

27. Notice was given by the petitioner's solicitors to the Company's solicitors yesterday that the petitioner would seek costs on this higher basis. The Company has not attended today despite this notice.

28. I agree the circumstances here justify the exercise of my discretion to award indemnity costs. The petition was resisted on the basis of an appeal which the Company has left pending for some six years and a cross claim which was eventually struck out as disclosing no reasonable cause of action when the Company indicated that it would not oppose the striking out application. Further, most of the other items that made up the petitioning debt, although they consist of smaller amounts, are judgment debts and there has been no appeal from these judgments.

29. For these reasons, I order that the petitioner's costs are to be paid out of the assets of the Company and be taxed on an indemnity basis.