IN RE GERMAN KITCHEN (H.K.) LTD.

HCCW 854/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO.854 OF 1998

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R E A S O N S

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1. This is a petition filed by Shortridge Limited to wind up German Kitchen (H.K.) Limited ("the Company"). The petition is based on a statutory demand pursuant to section 178(1)(a) of the Companies Ordinance. At the adjourned hearing, a compulsory winding-up order was made. The reasons appear below.

2. Under a facility letter dated 5 July 1997, First Pacific Bank Limited ("FPB") granted facilities to C.W.T. Textile Supplies Company Limited ("CWT") for an amount up to $24 million and the Company executed a guarantee in favour of FPB to the extent of $9.6 million, being 40% of the $24 million, to repay to FPB a sum up to the guaranteed amount if CWT were to default. In consideration of the sum of approximately $11.8 million, FPB assigned, inter alia, the indebtedness under the facility letter to the Petitioner. Notice of the assignment was given to the Company on 20 October 1998 when a demand for repayment of $4,728,435.46 together with interest accrued thereon was made.

3. The statutory demand served on 6 November 1998 was in the following terms :

"Re: Statutory Demand

We act for Shortridge Limited and refer to our letter dated 20th October 1998 to you demanding your payment of HK$4,728,435.46 to our client.

Up to now, you have still and/or refused to pay the said sum or any part thereof.

We are instructed to give you notice, on behalf of our client, by way of statutory demand pursuant to Section 178(1)(a) of the Companies Ordinance, Chapter 32, Laws of Hong Kong that unless the said sum of HK$4,728,435.46 together with interest accrued thereon is paid to our client or us on its behalf in cash or by cashier's order within twenty-one (21) days from the date hereof, we have instructions to commence winding up proceedings against you without further notice."

4. Several affidavits have been filed by various directors of the Company in opposition to the petition. With each new affidavit, new grounds were advanced, jettisoning the old. It is unnecessary to go into the now abandoned grounds since there is no substance in them.

5. At the adjourned hearing, two grounds were left. One of them was rapidly abandoned, leaving only one point concerning the contents of the statutory demand. Counsel for the Company relied on the following passage in Vol.7(3) of Halsbury's Laws of England, para.2207 :

"...The statutory demand must state the amount of the debt and the consideration for it or, if there is no consideration, the way in which it arises..."

The criticism made of the statutory demand is that it did not set out the contents of the letter of 20 October 1998 which fully explains how the debt to the Petitioner arises and is therefore not a valid statutory demand.

6. There is no merit whatsoever in the point taken. First, unlike the U.K. legislation and rules in this regard, there are no statutory forms prescribed for a statutory demand in Hong Kong. Second, it is not suggested that the letter of 20 October 1998 was never received. The point taken is symptomatic of last-ditch and futile efforts by the Company to stave off the inevitable.