RE THE INCORPORATED OWNERS OF CASIO MANSION (IN LIQUIDATION)

HCCW 1/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 1 OF 2007

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D E C I S I O N

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1.  This is an application by the liquidators of The Incorporated Owners of Casio Mansion for an order that the winding-up order against the Incorporated Owners be stayed permanently and that they be released upon completion of outstanding matters as identified, pursuant to sections 209 and 205 of the Companies Ordinance, Cap. 32.

2.  Casio Mansion is a building in Shau Kei Wan, Hong Kong with 178 units.  A deed of mutual covenant was registered against the building in 1981 and the Incorporated Owners was registered as a corporation in 1985.

3.  In 2006, an award was made by an arbitrator in favour of a contractor against the Incorporated Owners for unpaid renovation costs of $997,248, interest of $116,203.32, further interest up to payment and the costs of the arbitration.  The contractor obtained leave from the High Court to enforce the arbitration award as a judgment or order of the court.  As no payment was made, the contractor presented a petition to wind up the Incorporated Owners in January 2007.  A winding-up order was made on 7 March 2007 and the liquidators were appointed on 8 November 2007.

4.  On 15 May 2008, on the application by the liquidators, Poon J made an order giving leave to the liquidators to proceed against the owners of the units in the building in respect of the debts and liabilities of the Incorporated Owners owed to external creditors, and the liquidation costs and expenses, with adjustments and credit given for previous contributions as the liquidators consider appropriate.  The liquidators were authorised to establish a contingency fund to meet costs and expenses of the liquidation in accordance with section 20(2) of the Building Management Ordinance, Cap. 344.  They were also authorised to negotiate and enter into settlement agreements with owners where appropriate.

5.  Pursuant to Poon J’s order, the liquidators collected funds from the owners of units.  As of 3 March 2009, the total funds collected amounted to $9,935,159.10.  Proceedings were taken against defaulting owners in the Lands Tribunal and recovery was made from some of them.

6.  Proofs of debt were submitted by two creditors, with total claims of $3,494,433.  Following the sanction of the committee of inspection on 13 November 2008 approving the liquidators’ admission of the claims filed by the creditors in the sum of $3,306,151.80, the liquidators negotiated to settle the claims with the two creditors, and settlement agreements were entered into dated 22 December 2008.

7.  The creditors were paid the settlement sums on 21 January 2009.  They have no objection to the stay of the winding-up order and the release of the liquidators.

8.  As a result of the settlement with the two creditors, there are surplus funds in the external liabilities fund of $262,261.81.  The surplus will be returned to the owners.

9.  All the claims of creditors in the liquidation have been settled, there is no other outstanding claim.

10.  Payments have been made out of the contingency fund to pay liquidators’ fees, legal fees and the petitioner’s winding-up proceedings costs.  Provisions have been made for the estimated ad valorem fees and expected liquidation costs and the legal fees yet to be paid up to the date of release of the liquidators.  It is likely there will be surplus in the contingency fund, this will also be returned to the owners.

11.  The Incorporated Owners will be solvent after discharging its liabilities.

12.  The liquidators are satisfied no further investigation is required to be carried out into the affairs of the Incorporated Owners.  What remains to be completed before the release of the liquidators are the payment of the remaining liquidation costs and the return of the surplus in various funds.

13.  On 6 February 2009, the owners held a meeting and a resolution was duly passed to form a new management committee. Powers of the management committee would become effective as and when the liquidators are released and the winding-up order is stayed.  To accommodate the owners’ wish that the management of the building is to revert to the management committee as soon as possible, the liquidators seek a special direction to allow the new management committee to administer the affairs of the Incorporated Owners and be responsible in respect of any act done or default by it even before the liquidators are to be formally released.  As the liquidators would only deal with specific outstanding matters before their release as set out in the order to be made, it is unlikely that the functions of the management committee and the liquidators under the supervision and direction of the committee of inspection would clash.

14.  In January 2009, the liquidators gave notice to the owners of units and to the Official Receiver of their intention to apply for a stay of the winding-up order and their release.  No objection has been received from any owner and the Official Receiver.

15.  The new management committee has been notified of the application and some of the members have attended the hearing today.  They confirmed to the court it is the desire of the management committee to take charge of the management of the building as soon as possible.

16.  I am satisfied this is an appropriate case to exercise my discretion to stay the winding-up order permanently and make the consequential orders sought.  All the creditors’ claims have been satisfied.  The contingency fund can meet the liquidation costs and expenses and the Incorporated Owners will be solvent after discharging its liabilities.  Further investigation of the Incorporated Owners’ affairs is unnecessary.  Both the liquidators and the owners desire the release of the liquidators and for the management committee to take charge of the management of the building as soon as possible to save costs.  There is nothing to indicate that a permanent stay would be detrimental to commercial morality or the interests of the public at large.  On the contrary, the effect of granting the stay will achieve the advantage of clearing the title to the various properties in the building and to enable the owners of units to deal in them if they wish.

17.  For the above reasons, I make an order in terms of paragraphs 1 to 4 of the summons.