IN RE TSE YU HONG LTD.

HCCW184, 185 and 186/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP NOS.184, 185 AND 186 OF 1999

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J U D G M E N T

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1. There are before me three winding-up petitions. The first, HCCW 184 concerns Tse Yu Hong Ltd. ("TYH"). The amount of debt owing to the petitioning creditor is US$1.9 million and JP￥260 million odd. This petition is supported by ABSA Asia Ltd., an unsecured creditor, in the amount of over US$4.19 million and HK$6.9 million, as well as Nedcor Asia Ltd., an unsecured creditor, in the amount of HK$8 million. The second winding-up petition concerns Tse Yu Hong Textiles Ltd. ("Textiles"). The amount owing to the petitioning creditor is the same as in HCCW184. This petition is supported by Standard Chartered Bank, an unsecured creditor, in excess of the amount of US$3.6 million and HK$21.24 million, Nedcor Asia Ltd., an unsecured creditor, in the amount of HK$8 million, and ABSA Asia Ltd., an unsecured creditor, in excess of the amount of US$4.192 million and HK$6.9 million. Finally, the third winding-up petition concerns Tse Yu Hong Metal Ltd. ("Metal"), and is also supported by Standard Chartered Bank, Nedcor Asia Ltd. and ABSA Asia Ltd. for similar amounts. There are no unsecured creditors opposing the petitions and the making of the winding-up orders.

2. Mr Lau Kwok Wah, Benjamin, is present in Court today, he says he is a director of Tse Yu Hong Holdings Ltd. (which is not the respondent in the petitions before me) and Textiles, and that Textiles is a director of Metal. If so, Mr Lau would be in a position to seek an order from the Master authorising him to represent Textiles but he has not sought to do so.

3. The petitions came before the Master on 28th April 1999. Mr Lau who was present at that hearing and who was allowed by the Master to make submissions opposed the petitions. No evidence has been filed on behalf of the Respondent companies.

4. It would appear that before the Master two grounds of opposition were advanced. These were repeated by Mr Lau. First, it was submitted that the group comprising five companies including the three Respondent companies is trying to re-organise its debts and that there would be some sort of scheme of arrangement. The second reason is that the debts, or the petitioning creditors' debts, are disputed. The dispute, as I understand it, is only as to the amount. It is not disputed that the Respondent companies are indebted to the Petitioners.

5. Mr Lau sought an adjournment on the basis that after the Master's hearing, he did try to retain solicitors but for some reason the firm of solicitors is not yet able to decide whether or not to accept instructions because this is a complicated matter. As noted earlier, there is no affidavit evidence from the Respondent companies before this Court.

6. It appears to me that there are no prospects whatsoever of the Respondent companies successfully resisting winding-up petitions which are based on statutory demands. The Respondent companies' excuse in not being able to put forward any different figure in respect of the amounts alleged to be owing is because the Commercial Crimes Bureau has taken away a quantity of documents and data of the Respondent companies so that it is not possible to verify the amounts claimed to be owing by the petitioning creditor. It is said that unless and until the companies are able to retrieve the documents from the Commercial Crimes Bureau or in some manner to get access to them, they would not be in a position to verify the exact amounts owing to the petitioners.

7. It appears to me that this is not a valid reason, or a valid answer, to the petitioners' claims. I would have expected some evidence to have been filed if there was an adequate and sufficient basis for believing that the amounts claimed are inaccurate. In any event, Mr Lau accepts that the amounts owing to the creditors are far in excess of HK$5,000. We are here dealing with very large sums of money, particularly when one takes into account the amounts owing to the supporting creditors. Dispute as to quantum only is not a valid excuse for not making any payment. The failure to pay anything at all is relevant to the question of the solvency of the Respondent companies.

8. Whilst there is the assertion that there will be an attempt by the group to re-organise its debts, it is a bare assertion on the part of Mr Lau. On the evidence any such proposal would be opposed by the unsecured creditors who support the petition. In the absence of any support that can be demonstrated for such a rescue and I emphasise that there is simply no evidence before this Court that there is any proposal much less a scheme of arrangement to rescue the company that enjoys in principle support from a majority of the unsecured creditors, it is doomed to fail. To adjourn these petitions would simply increase the costs unnecessarily and serve no useful purpose.

9. For these reasons, I make the usual compulsory orders in respect of all three Respondent companies, and the petitioning creditor is entitled to the costs of the petitions.