RE CHUEN HING CONSTRUCTION CO. LTD.

HCCW 488/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 488 OF 2002

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J U D G M E N T

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1. This petition is presented by Sang Sang Finance & Investments Ltd on the basis of a judgment debt obtained against Chuen Hing Construction Company Ltd ("the Company") in HCA No. 4826 of 2001 in the sum of HK$800,000.00 with interest and costs of $12,000.00. A statutory demand was served by leaving the same at the registered office of the Company on 5 March 2002. The petition herein was filed on 6 May 2002 and served by leaving the same at the registered office on 10 May 2002.

2. The petition is supported by four creditors who are owed a total sum of HK$5.3 million odd, there are no opposing creditors. Since the presentation of the petition, the Company has applied to court on three occasions for a validation order to pay its workers in various construction projects. A validation order was made on 21 August 2002. On 30 August 2002, the second application for a validation order was dismissed by Chung J, who had considered the financial position of the Company and that another petition to wind up the Company has been presented, being HCCW No. 776 of 2002. As Chung J was not satisfied that the Company is solvent, and that there are known debts of HK$6.6 million on the evidence before him including preferential debts of employees in the amount of HK$2.2 million, he declined to make a validation order.

3. When the matter came before me on 9 September 2002, the Company again sought a validation order. I also refused the application, as I am not satisfied that the Company is solvent, having considered the additional evidence filed by the Company on 6 and 7 September 2002. The principal submission of the Company at the hearing before me on 9 September 2002 was that the petition should be adjourned for three months as it is expected that the Company may receive substantial payments of HK$14.4 million in about three months' time. The director of the Company has deposed to four construction projects in which the Company is involved and stated the estimated sums that the Company might receive from these projects, some of which have been completed and some of which are in progress and might be completed if the Company is able to draw on its bank accounts if and when a validation order is made.

4. It is however apparent on analysis of the affirmations that the only certain amount that might be received by the Company is a sum of HK$1.53 million being retention money in the Siu Sai Wan Project. That, according to the Company, might be released in about 5 weeks' time. The other receivables that were mentioned in the Company's affirmations are only estimates and some of them have been outstanding for quite some time. It is therefore uncertain and far from clear that substantial payments would be received by the Company within the time span that was estimated. As against the receivables, the outstanding claims against the Company as at present amounted to about HK$8.3 million, of which HK$3.4 million is the preferential debt due to employees.

5. In the evidence filed by the Company, mention was made of a proposed sale by the Company of the licence it holds to bid for and conduct construction projects for the Government. According to the Company, it has been approached by an interested purchaser who might offer HK$5 million subject to a due diligence check on the Company. It was further mentioned in the evidence that the shareholders of the Company are thinking of injecting further funds into the Company to ease its financial strain. I adjourned the petition on 9 September 2002 for the Company to file further evidence on the potential purchaser for the Government licence and on the intention of the shareholders to inject further funds into the Company.

6. On 18 September 2002, which was past the deadline by which the Company should have filed such further evidence, the Court made an order on the application of the Company's solicitors giving them leave to cease to act. No order has been made giving leave to any of the Company's directors to represent the Company.

7. Having reviewed the evidence, I am satisfied that the Company is hopelessly insolvent and that no useful purpose would be served by adjourning the petition further. In the circumstances, I make a winding up order against the Company and further order that the petitioner's costs and one set of costs for all the supporting creditors are to be paid out of the Company's assets.