RE ZHU KUAN (HONG KONG) CO LTD

HCCW 875/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO. 875 OF 2003

____________

____________

_____________

D E C I S I O N

_____________

1. I have before me an application by the provisional liquidators of Zhu Kuan (Hong Kong) Company Limited seeking leave to sell certain assets of the Company. The assets in question consist of:-

(1)	two motor vehicles, both of which were first registered in 1994;
(2)	a property located in City Garden, North Point, which is subject to a mortgage, and in respect of which there is evidence that the mortgagee has indicated an intention to sell the property, and that the provisional liquidators have suggested that they should sell the property instead, in the expectation that they will be able to achieve a better price for it;
(3)	certain furniture and fixtures and other miscellaneous items of equipment which are listed in a schedule exhibited to the affidavit filed by the provisional liquidators in support of this application.

2. The first issue that arose at the hearing was whether or not the Company had locus to appear by counsel to resist the application. It seems to me that, in principle, there might well be cases in which the Company would have such locus. Although provisional liquidators may be appointed with various powers, the principal purpose of their appointment is usually the need to preserve the assets of the company. I recognise that there have, in recent years, been instances in which provisional liquidators had been appointed apparently for other purposes, such as the promotion of schemes of arrangement, but even in those cases, the underlying objective appears to have been to best preserve the value of the company for its creditors.

3. In a situation where it is not certain that a winding-up order will be made at the end of the day, it seems to me that it will usually be appropriate to allow the Company to be heard on application such as this. That being so, I consider that Mr Ng was entitled to be present today, and I heard submissions from him as to whether or not the order sought should be made.

4. Turning to the substantive question of whether or not the order sought should be made, it seems to me that it is necessary to have regard to the terms of the order appointing the provisional liquidators, and the circumstances in which they were appointed, with a view to ascertaining the purpose of their appointment.

5. As I have said, the principal purpose of such an appointment will usually be to preserve the assets of the Company. In this case, the provisional liquidators were given wide powers, including powers to investigate the affairs of the Company. It seems to me that those powers were given, in part at least, on the basis that such investigations would be necessary in order to ascertain what assets the Company might have and to ensure that those assets were either recovered or preserved. It seems to me that to the extent that such investigations are being carried on, it cannot necessarily be said that the provisional liquidators are not thereby seeking to preserve the assets of the Company.

6. The order by which the provisional liquidators were appointed in this case has not been appealed, and no objection has been taken to the powers which have been provided to the provisional liquidators. That being so, it seems to me to be appropriate to proceed on the basis that that order was properly made, so that I should consider this application on its merits, having regard to those powers and the circumstances of this application.

7. It seems to me that in this case, Mr Harris, who appears for the provisional liquidators, is justified in saying that the application is directed to the protection of the assets of the Company in a number of senses.

8. The first sense in which I think this can be said is that at the broadest level, looking at it in terms of the investigative powers of the provisional liquidators, those powers are at least in part, directed towards enabling them to preserve assets of the Company which may be either obscure or difficult to locate, and which may be difficult to take control of. The attempt to take control of such assets, whether in or out of Hong Kong, may well proved to be a time-consuming and costly exercise and it will be for the provisional liquidators to exercise their own judgment as to what steps should be taken in this regard. However, I would observe that the taking of preliminary investigatory steps would appear to be a matter which they could reasonably decide to pursue.

9. That being so, it seems to me that the funding of such investigations could well be a proper step to take, where those investigations may turn up other assets (whether in or out of Hong Kong) which the provisional liquidators are tasked to preserve.

10. In addition, it seems to me that in the case of the two motor vehicles, these are now some 9 years old and are likely to be wasting assets - they would seem likely to depreciate as time goes on and it may well be that, as Mr Harris suggested, the sale of the motor vehicles is the best way to preserve the value of those assets for the Company.

11. In relation to the property, it seems to me that in the light of the apparent intention of the mortgagee to sell the property, and the evidence placed before me that indicates that the provisional liquidators believe that they would be best placed to achieve a better price for the property than a mortgagee sale would raise, that the enhancement of the recovery to the Company, after payment of the mortgagee debt, is to be characterised also as preservation of the assets of the Company.

12. In these circumstances, it seems to me that the provisional liquidators, in seeking to sell the assets with which this application is concerned, are acting in a manner designed to preserve the assets of the Company, both in relation to the specific assets in question, and also in the sense of providing funding to enable other assets of the Company to be located and preserved so far as that may be possible.

13. I therefore do not see that this application involves any extension of the traditional function of the provisional liquidator in preserving and protecting the assets of the Company.

14. I also bear in mind that Mr Ng very fairly did not suggest that there was any particular value or purpose in the retention of these assets, in their current form, as assets of the Company. It seems to me that any such suggestion would have been hard to substantiate given the nature of the assets concerned.

15. In these circumstances, it seems to me that this is an appropriate case in which the provisional liquidators should be given authority to sell the assets in question and I give them that authority. I therefore propose to make an order in terms of the summons taken out by the provisional liquidators.