RE HORIZON GROUP INVESTMENTS LTD.

HCCW 109/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 109 OF 2002

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REASONS FOR JUDGMENT

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1. This is a petition to wind up Horizon Group Investments Limited ("the Company") under section 177(1)(d) of the Companies Ordinance, Cap. 32 on the ground that the Company is unable to pay its debts. The debt, which is not in dispute, is a judgment debt in the sum of HK$168,533.28, being taxed costs in HCA No. 9668 of 2000 for which an allocatur was issued on 27 December 2001. The High Court Action and the costs made against the Company arose in this manner.

2. The Company is the Hong Kong subsidiary of a company in Latvia and it brought proceedings against the petitioner in the High Court claiming US$187,710.80 for the price of goods sold and delivered. The contract between the parties contained an arbitration clause providing that all disputes and differences arising out of the contract shall be resolved by the Arbitration Court of the International Chamber of Commerce in Stockholm, Sweden.

3. After the High Court Action was commenced, the petitioner applied to stay the action to arbitration and was successful, with the order for costs made against the Company being the petitioning debt.

4. The petitioner served a statutory demand for the taxed costs on the Company on 7 January 2002. By a letter of the Company's solicitors to the petitioner's solicitors dated 23 January 2002, the Company stated that there was no basis upon which a winding-up order could be sought as the Company had claimed the price of goods sold and delivered against the petitioner in arbitration proceedings commenced on 19 April 2001 and the arbitration had reached an advanced stage. The amount claimed by the Company against the petitioner is 10 times the claim made in the statutory demand.

5. Notwithstanding this, the petitioner filed the petition to wind up the Company on 29 January 2002. On 4 May 2002, the arbitrator issued an award in favour of the Company. The petitioner was ordered to pay to the Company US$187,710.80 being the price for goods and delivered; US$28,156.62 being interest on late payment up to the date of the award; and US$76,991.46 being reimbursement of the Company's legal fees, expenses and the costs of the arbitration.

6. It is not disputed by the petitioner that this award is a "Convention award" within Part IV of the Arbitration Ordinance, Cap. 341. Section 41 of that Part provided that "a Convention award shall, subject to this Part, be enforceable either by action or in the same manner as the award of an arbitrator is enforceable by virtue of section 2GG." Section 42(2) provided that "any Convention award which would be enforceable under this Part shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in Hong Kong and any reference in this Part to enforcing a Convention award shall be construed as including references to relying on such an award."

7. On behalf of the petitioner, it was submitted that the award of the arbitrator has not "attained the status of being a debt or money demand", and the Company cannot rely on a defence based on legal set-off. Reliance was placed on section 43 of Cap. 341 which provided that the party seeking to enforce a Convention award must produce, inter alia, (a) the duly authenticated original award or a duly certified copy of it; and (b) the original arbitration agreement or a duly certified copy of it. I am unable to see how section 43 would assist the petitioner. The Company is not seeking to enforce the Convention award in these proceedings. All that is required for present purpose is for the Company to establish that it has a valid cross-claim or set-off that is equal to, or would exceed the petitioning debt, as it is provided in section 42(2) that a Convention award "which would be enforceable" under Part IV may be relied on by way of defence, set-off or otherwise in any legal proceedings in Hong Kong. The petitioner's argument must be rejected. I also reject the petitioner's argument that there is an absence of mutuality in this situation.

8. For the above reasons, I am satisfied that the Company has a valid cross-claim or set-off against the petitioner well in excess of the petitioning debt. I dismiss the petition with costs to the Company and I order that the Official Receiver's costs in the sum of HK$5,300.00 be paid out of the petitioner's deposit.