RE CARRIBEAN CONNECTION LTD

HCCW 106/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO 106 OF 2015

____________

____________

_________________________

D E C I S I O N

_________________________

1.  I have before me a winding-up petition issued on 25 March 2015 by UCO Bank (“the Bank”) against Carribean Connection Limited (“the Company”). The petition is on the grounds of insolvency.

2.  On 13 October 2014, the Bank served a statutory demand in respect of a debt of US$1,107,075.72 plus interest from 9 October 2014.  The debt arises in respect of a trade finance facility.  There is no dispute that on the face of the contemporaneous documents that the Bank provided the facility and that the amount claimed is due.

3.  I will explain the Company’s alleged defence later in my reasons.

4.  The Company is owned by Mr Gobind Mahtani and his wife.  Mr Mahtani says that the company was established to facilitate the business of his brother’s company Spex Clothing Company (“Spex”). 

5.  On 26 January 2005 Mr Mahtani and his wife, as directors of the Company, authorised Ashok Vaswani (“Ashok”) to conduct the business of the Company and sign documents on its behalf.  Mr Mahtani says that the negative balance in the Company’s account with the Bank has arisen as a result of a number of fraudulent transactions conducted by Ashok.  They are as follows:

	Date	Amount (USD)	Beneficiary
(1)	Aug - Oct 2013	301,313.26	Sheila’s Exports & Others
(i)	16 Aug 2013	45,791.11	OCCL
(ii)	30 Aug 2013	75,000	Jagdish
(iii)	4 Sep 2013	36,000	Sheila’s Exports
(iv)	5 Sep 2013	25,000	[Silver Reed]
(v)	17 Oct 2013	97,773.94	OCCL
(vi)	17 Oct 2013	21,748.21	OCCL
(2)	19 Sep 2013	103,248.03	Silver Reed
(3)	19 Sep 2013	211,954.21	Silver Reed
(4)	28 Oct 2013	279,670.60	OCCL
(5)	28 Oct 2013	341,390.72	OCCL
	TOTAL	1,237,576.82

6.  Mr Mahtani says that the Bank should have been suspicious about these transactions for three reasons:

(1)   The Company’s ordinary course of business was limited to dealing with Spex.

(2)   Sheila Exports, Silver Reed and OCCL were Ashok’s companies and the Bank should have queried with the Company’s directors, in other words Mr Mahtani, the propriety of these transactions.

(3)   These transactions involve the use of trust receipts and the Company had not previously entered into transactions involving their use.

7.  In my view the evidence filed by the Bank shows that each of these defences is without substance:

(1)   The Bank’s records show that the Company had conducted between August 2005 and February 2014 80 transactions with companies other than Spex, many with companies with no connection with Ashok, and which are not now questioned by Mr Mahtani.

(2)   Mr Mahtani himself counter-signed some of the documents in respect of the 3^rd and 4^th transactions referred to in the table above.

(3)   On 29 May 2013, the Company sent to the Bank its financial statement which was signed by Mr Mahtani for 2012 showing that contrary to what Mr Mahtani had said, the Company had used trust receipts for at least the years 2011 and 2012.

(4)   Copies of bank statements had been sent to the address given to the Bank by Mr Mahtani and no queries have ever been raised about any transactions prior to the Bank making its claim which has given rise to the petition.

8.  I can see in these circumstances no sensible reasons for thinking that the Company has a defence to the claim because the Bank should have been put on notice of the impropriety of the transactions referred to in the table above. 

9.  I should note that the Company sought discovery of financial documents from the Bank which I have declined.  It seems to me that the Company should not need discovery in order to make good its suggested defence to the Bank’s claims.

10.  At the end of the hearing before me I was told that in the event that I was minded to make a winding-up order, the parties had agreed that the order should be in the following terms: unless the Company pay to the petitioner within 14 days US$1,107,075.72 plus interests, the Company shall be wound up (the costs will be paid out of the assets of the Company save for the Official Receiver’s costs be reserved).