RE KELAB LTD

HCCW 1147/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 1147 OF 2004

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AND

HCCW 1148/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 1148 OF 2004

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(Heard Together)

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J U D G M E N T

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1.  I had before me a petition to wind up Kelab Limited (“Kelab”) and a petition to wind up Great One Development Company Limited (“Great One”)(collectively “the Companies”).  Both petitions were presented by the Bank of China (Hong Kong) Limited.  They were ordered to be heard together.  At the hearing, I made a winding-up order against each company and these are the reasons for judgment.

2.  In respect of Kelab, the petitioner had obtained the following judgment debts:

(1) in HCA No. 3391 of 2002, on 17 October 2002 for HK$2 million, interest and fixed costs; and

(2) in HCMP No. 2861 of 2002, on 10 February 2003 for HK$5,301,331.44 with interest and costs assessed at HK$25,000.00.

3.  As at 24 May 2004, Kelab was indebted to the petitioner in the sums of:

(1) HK$2,552,338.02, being the balance of the judgment debt in HCMP No. 2861 of 2002 with interest; and

(2) HK$2,335,255.07, being the judgment debt in HCA No. 3391 of 2002 with interest.

4.  In respect of Great One, the petitioner had obtained the following judgment debts:

(1) in HCMP No. 3074 of 2002, on 23 October 2002 for HK$20,816,528.67 with interest and costs assessed at HK$25,000.00; and

(2) in HCMP No. 2862 of 2002, on 10 February 2003 for HK$4,695,680.04 with interest and costs assessed at HK$28,750.00.

5.  As at 24 May 2004, Great One was indebted to the petitioner in the sums of:

(1) HK$2,559,323,91, being the balance of the judgment sum in HCMP No. 2862 of 2002 with further interest; and

(2) HK$5,850,342.52, being the balance of the judgment sum in HCMP No. 3074 of 2002 with further interest.

6.  On 25 June 2004, the petitioner served a demand under section 178(1) (a) of the Companies Ordinance, Cap. 32 against each of the Companies for the debts I have mentioned.  As payment was not made, these petitions were presented on 4 November 2004.  The total petitioning debts in respect of the Companies amounted to about HK$13 million odd. 

7.  The Companies have filed evidence in opposition and were represented at the earlier stage of these proceedings.  The main ground of opposition raised by the Companies was that mortgaged properties were disposed of by the petitioner at below the market value and that if the petitioner had acted properly the proceeds of sale of the mortgaged properties should have been sufficient to discharge the total indebtedness of the Companies.

8.  It is not necessary for me to deal with the other allegations raised by the Companies in evidence, relating to wrong interest rates applied and a surmise that the petitioner might have received payments from another defendant in HCMP Nos. 2861 and 2862 of 2002, as these allegations were shown to be factually incorrect in the evidence in reply filed by the petitioner.

9.  The Companies have obtained a valuation report from a property valuer on the market value of the mortgaged properties and the opinion may be summarised as follows:

(1)	in respect of the property in Fung Tak Road, which was sold by the petitioner in about June, 2003 at HK$5 million, the valuer assessed the market price at HK$7.6 million;
(2)	for the property in Hereford Road, which was sold by the petitioner in November, 2003 at HK$12 million, the market price assessed was HK$13 million;
(3)	for the 9 units in King Star Commercial Centre at Yamatei, which were sold by the petitioner in December, 2003 at the total price of HK$6.3 million, the valuer assessed the market price at HK$14.1 million, based on selling to a buyer with a special interest.

10.  Thus, the total proceeds of sale realized by the petitioner amounted to HK$23.3 million, whereas the total market price of the above properties would be about HK$34.7 million.

11.  The big difference in the sale price of the units in King Star Commercial Centre and the assessed market price was due to two reasons.

12.  Firstly, the 9 units were sold to Easy Asia Limited, which is owned by one Hui Kwok Wah who also owns beneficially interests in other companies that hold other units in the building.  As most of the units in that building are now beneficially owned by Mr Hui, the 9 units sold by the petitioner would have been of particular importance to this buyer.  The valuer was the opinion that a premium of 25% should be applied to the open market value to take account of the special interest of this buyer.

13.  Secondly, the building was converted into a hotel in 1997 and the units were used as guestrooms under hotel operation although the design use of the building was for office use initially.  In assessing the open market value, the valuer was of the opinion that it would not be appropriate to use comparables of office units and he had taken his valuation from sale evidence of hotels and guesthouses.

14.  The crux of the matter is whether the Companies have genuine and serious cross claims that would probably exceed the amounts of the petitioning debts.

15.  When the petitions came before me on 28 February 2005, the approach taken by Miss Po Wing Kay for the petitioner was this.  Assuming but without accepting the Companies might have cross claims against the petitioner, on the valuation given by the Companies’ valuer, the petitioner contended that the Companies’ cross claims would not have exceeded the amounts of the petitioning debts.  In respect of Kelab, after setting off the proposed cross claim, Kelab would still owe the petitioner HK$104,486.12; for Great One, after setting off the proposed cross claim, it would still owe the petitioner HK$315,985.09.

16.  I do not propose to set out the details of the arithmetic.  I am satisfied Miss Po’s calculations are correct.

17.  Thus, without going into an analysis of the merits of the Companies’ cross claims, the petitioner has demonstrated to my satisfaction that HK$104,486.12 is indubitably due from Kelab and HK$315,985.09 is indubitably due from Great One.

18.  I had adjourned the petitions for argument on 28 February 2005, on condition that the Companies were to pay into court within the stipulated time the amounts that are indubitably due.  I gave leave to the petitioner to restore the petitions to an earlier date to the call-over list if the condition for adjournment was not complied with.  I also gave leave to the Companies to file further evidence restricted to a particular issue and for the petitioner to file evidence in reply to that.

19.  The Companies have filed further evidence pursuant to the directions given on 28 February 2005.  I have considered such evidence and the petitioner’s evidence in reply.  No valid ground of opposition was raised in the further evidence filed by the Companies.

20.  The Companies have not complied with the condition for adjournment by making any payment into court, whether within the stipulated time of 28 days or at all.  The petitioner has therefore given notice to restore the petitions to the call-over list.

21.  Prior to the restored hearing of the petitions, I had made an order for the Companies’ solicitors to cease to act for the Companies.  The Companies were not represented at the hearing of the petitions.  A winding-up order must be made against each of the Companies, as there is no dispute at least as to part of the petitioning debts in the amounts that I have mentioned and the Companies are unable to pay.  I have therefore ordered the Companies to be wound up and that the petitioner’s costs are to be paid out of the assets of each of them.