RE AREON INTERNATIONAL TRADING LTD

HCCW 1112/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 1112 OF 2004

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J U D G M E NT

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1.  This petition for winding up was presented by Carven Enterprises Limited.  The petitioning debt was in the sum of HK$2,740,758.84.  This was the subject of eight invoices issued by the petitioner to Areon International Trading Limited (“the Company”) between 25 January 2003 and 7 April 2004 and a debit note issued to the Company dated 17 April 2003.  Of this amount, HK$2,712,196.67 was the price of pants supplied by the petitioner to the Company.  The balance of HK$28,562.17 was for miscellaneous charges incurred by the petitioner on the Company’s behalf.

2.  A demand for the debt was served under section 178(1)(a) of the Companies Ordinance, Cap. 32 on 15 September 2004 and the petition herein was presented on 20 October 2004.

3.  The Company has filed evidence in opposition pursuant to directions given on 13 December 2004.  It was alleged that there is dispute of the petitioner’s claim both as to liability and quantum.

4.  According to the evidence in opposition, the Company entered into two purchase contracts with Long Art Investment Limited in November 2002 to supply pants to the latter.  As a result, in January 2003, the Company entered into two processing agreements with the mainland factory of the petitioner to manufacture the pants.  It was alleged that in breach of the processing agreements the pants were not reasonably fit for purpose and not of merchantable quality; the colour was found to be fading and the goods were unacceptable to the ultimate buyers.  The Company asserted that the petitioner was not entitled to claim the price of goods but should compensate the Company for the losses of the price of materials supplied and that the petitioner was liable to pay damages in respect of any potential claim by the ultimate buyers. The Company claimed that it is entitled to set off the petitioner’s claim by its losses.

5.  Other than the contracts entered into with Long Art Investment Limited and the processing agreements with the mainland factory, the Company has not adduced any documentary evidence in support of its case.  It would appear on the Company’s case that the goods were sent to the ultimate buyers and the Company must have lost its right of rejection.  Any claim that the Company would have against the petitioner would only be a claim for damages, to be set off against the price of goods for which it is liable to pay.

6.  There were no particulars in the evidence adduced by the Company as to the alleged defects, except of a very general nature.  There was no indication as to the amount involved in relation to any claim for damages and no documents as regard any claim by the ultimate purchasers.

7.  The amount outstanding from the Company was in the region of HK$2.7 Million and this amount was outstanding for six months when the demand was issued by the petitioner under section 178.

8.  Prior to that, it would appear from the petitioner’s evidence in reply that there were two letters of demand for the debt dated 29 April 2004 and 7 May 2004.

9.  There was no denial of liability in writing until the Company filed its evidence in opposition in January 2005.  Furthermore, it would appear from an agreement entered into between the petitioner and the Company on 30 April 2004 that the Company had admitted liability on the basis that it was to compensate the petitioner for the amount outstanding from the Company.

10.  I note also from the petitioner’s evidence in reply that for the goods in question they had been inspected by the Company and accepted by the latter after passing inspection.

11.  In view of the above matters, it does not appear to me that the Company has raised a bona fide dispute of the petitioning debt on substantial grounds.

12.  The Company has not appeared at the hearing today.  Its solicitors have obtained leave to cease to act for the Company on 4 February 2005.

13.  I make a winding-up order against the Company.  The petitioner’s costs are to be paid out of the Company’s assets.