RE HONG KONG UNITED GROUP LTD.

HCCW266/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO.266 OF 2000

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J U D G M E N T

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1. This is a creditor's petition based on a judgment debt of just under $119,000. The underlying debt was made up as to $25,759 as the judgment sum and as to $93,203, mesne profits of the premises from 1 April 1999 to 13 September 1999, the day upon which vacant possession was given.

2. The tenant of the property was a company called Centre Target Limited. Hong Kong United Group Limited ("the Company") was in possession of all or part of those premises, according to the petitioner, as trespasser and according to the Company, as licensee. Be that as it may, those proceedings (HCA 5659/1999) commenced against both Centre Target Ltd and the Company culminated in the judgment of Master Cannon ordering the payment of that amount to the petitioner.

3. The Company opposed the winding-up petition. It transpired that it did not dispute that, at a minimum, $66,273 was due to the petitioner. The Company disputed the balance which was equal to the deposit of $52,689 paid to the Company under the lease and which, it submitted, ought to be taken into account. Leaving aside the question of the deposit for the time being, the Company is not in a position to make repayment of the undisputed part of the debt immediately. It can only do so by way of instalment over several months. That was not acceptable to the petitioner. So on this basis alone, there is no reason why the court should not make a winding-up order.

4. Turning now to the question of the deposit, it is common ground that deposit was paid by the tenant which was Centre Target, that, of course, is a different legal entity from the Company although the Company now seeks to assert that they were all part of the same group. Looking at the Tenancy Agreement which has been exhibited, section 9(1) contained provisions relating to the deposit. It specifically provided that the deposit should be retained by the landlord and in the event of any breach or non-observance or non-performance by the tenant of any of the agreements, stipulations or conditions, the landlord would be entitled to terminate the agreement and to deduct from the deposit the amount of any monetary loss incurred by the landlord in consequence of the breach, non-observance or non-performance by the tenant. Section VII of the Tenancy Agreement contained provisions relating to default. Paragraph (6) of that section specifically provides that the landlord is to be entitled to recover solicitor's and/or counsel's fees and court fees incurred by the landlord for the purposes of recovering the rental and/or management charges and other moneys unpaid from the tenant.

5. In the present case, the Tenancy Agreement was not due to expire until 15 November 1999. On 13 September 1999, vacant possession was given. This was a case of early termination and as a result, the tenant was plainly in breach of the Tenancy Agreement.

6. The petitioner's case is that the deposit paid by Centre Target was to be offset against monetary loss it has sustained through breaches by the tenant of the Tenancy Agreement. On this basis, the deposit cannot offset the amount that the Company was obligated to pay under the order made on 28 October 1999. There is in fact no need for the court to go further into this question of the deposit. As already mentioned, the Company is unable to make repayment of the undisputed part of the debt. In so far as there is any doubt as to how the deposit is to be applied, that is a matter that can be dealt with by the Liquidator when proofs of debt are submitted.

7. The parties attempted to reach a settlement but all efforts did not come to fruition. In the circumstances, there is little option left for the court but to make a winding-up order. The costs of the petitioner shall be a liquidation expense.