RE GOOD FORTUNE AGENCY LTD.

HCCW 944/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP NO. 944 OF 2000

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J U D G M E N T

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1. This is a creditor's petition based on a Court Order for payment of rent due to a landlord. The statutory demand which was presented in September 2000 was for $214,000.00. Since then, mesne profits had continued to accrue such that as at date hereof, something in the region of $600,000 odd is owing to the Petitioner landlord by the Company.

2. The petition was presented in October 2000. Nothing was heard from the Company until 6 January 2001 when its solicitor filed an affirmation saying that he was instructed and verily believed that the Respondent was not insolvent and that its inability to comply with the Statutory Demand was due to a short-term cash-flow problem. That is notwithstanding the fact that the petition was based on landlord and tenant proceedings which were commenced as long ago as June 2000.

3. The Company's solicitor further indicated in his affirmation that the Company now proposed to repay the sum of $287,740.65 to the Petitioner within 21 days. There is nothing mentioned as to the further mesne profits which have been accrued due to the Petitioner. There is no dispute that such further mesne profits were due and accruing.

4. On the last occasion, I queried why the affirmation filed on behalf of the Company was done by solicitors rather than by a director, and I gave an Order that the Company should file an affirmation by a director by noon of 12 January.

5. On 12 January about 3.30 p.m., an affirmation was filed on behalf of the Company by a Chan Hung Shan who says he is a director of the Respondent Company.

6. Today, the Petitioner's counsel has queried that because according to the company search effected in December 2000, Mr Chan Hung Shan was not a director of the Company. There have been no further or further updated company searches done, and the Company's counsel has not been able to provide an updated company search to show that since December 2000, this person Chan Hung Shan has been appointed a director of the Company, but be that as it may, even if I were to assume that this Chan Hung Shan is a director of the Company, the contents of his affirmation do not go anywhere to assist it in asking the Court to exercise its discretion to refuse to make an immediate winding-up order.

7. I note that the Company has not exhibited any profit and loss account. All that it has exhibited is a balance sheet as at 11 January 2001. A balance sheet is understood and well established to be only a "snapshot" of a company's balances at that particular date, but even looking at this balance sheet itself, it seems that the Company is in very poor financial circumstances.

8. According to the balance sheet, the Company has an accrued loss of $3.5 million and its current liabilities are in the amount of $849,582.04. As far as its current assets are concerned, cash in bank is only $500 odd; petty cash is $12,000 odd; cash receipts and cheques receipts "held by director" would only be in the region of about $116,000 odd; and the rest are in rental and utilities deposits and an amount of $200,000 odd being "commissions receivable" (without any indication as to the likelihood of being able to receive these commissions).

9. The Company has also, by the affirmation of Mr Chan Hung Shan, exhibited various documents from a finance company. It is clear, however, from the affirmation itself that the terms and conditions of the loan are dependent, amongst other things, on the provision of security of a piece of land.

10. There is nothing in the affirmation before me to show that the owner of that piece of land is willing to execute a mortgage in favour of the lender (this registered owner is said to be the mother of Mr Chan Hung Shan). There is nothing to indicate the value of this piece of land and whether it has been already mortgaged or not to anyone else. There is no indication as to any agreed draw-down date save to say that it "would be as soon as practicable and in any event not later than the end of January 2001".

11. In all the circumstances, it seems to me that this Company has failed to satisfy me that I should exercise my discretion against making the usual winding-up order on the basis of the Court Order. Accordingly, I will make the usual winding-up order.