CHEUNG TSUN YUNG, THOMAS AND ANOTHER v. MILLION VISION INVESTMENT LTD AND ANOTHER

BETWEEN

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D E C I S I O N

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1.  This is an application which started off last month as an application for an injunction to prevent the second defendant selling its sole property.  The sole property is a development - which is now some 11 years old - in Beijing.  It is right to say that the second defendant is now the subject of a winding-up petition on the basis that it is insolvent.  On the submissions made to me, it is probably correct to say that it is insolvent.  However, that is a matter for another judge to decide.

2.  The matter has proceeded over the course of the last few weeks before different judges.  It has now transpired that the property which the second defendant had has, in all events, been sold.  The plaintiffs say that it has been sold at an undervalue.  They have produced valuations that show that, according to them, the value of the property was about RMB300 million, whereas it has been sold for about RMB125 million.

3.  The plaintiffs put their case today only on the basis that they have an equity of redemption in respect of a loan made.  It is the second plaintiff which is said to have that equity of redemption.  I am not going to go into all the agreements because I consider it is unnecessary at the moment.  It is right to say that the first plaintiff, who is the sole shareholder of the second plaintiff, also claims to be the beneficiary or have rights under what is called the “call option agreement” which was made in November of last year.

4.  However, as far as today is concerned, all that is sought is that there be an appointment of a receiver in respect of the second defendant on the basis of the second plaintiff’s equity of redemption; no claim is put upon the basis of the call option agreement.  I, therefore, simply proceed upon the basis of the second plaintiff’s claim.

5.  There are some very simple points which appear to me to be relevant in all this.  The first is that the plaintiffs say that the question of the sale at the price of RMB125 million should be investigated.  The reason that they say that there should be appointment of receivers is to investigate that sale.  But there is very little else that is said to justify any such investigation, other than the allegation that the property was sold at an undervalue.

6.  The defendants say, “Well, there was not actually much option in that because the bank that had loaned the money in respect to the second defendant was calling in its loan.  If they did call in the loan, the property, which was in Beijing, was likely to be sold at a considerable undervalue - 40 to 55 per cent is the estimate - of its true value.”  Therefore, they say that they had little option but to sell it.

7.  There are suspicious circumstances about this sale.  It does seem to have taken place in something of a hurry, and the plaintiffs complain that the defendants have not explained how they went about the sale or who the purchaser is.  Nevertheless, it seems to me the underlying claim to the appointment of a receiver is put on a speculative basis.  It is put on the basis that the receiver should then go in and investigate matters which are, as I have said, entirely speculative.  I am not convinced that that is a proper basis for the appointment of a receiver.

8.  Apart from that, Mr Neoh relies upon the fact that it is said that there is this equity of redemption.  Mr Neoh says that that is now no longer in existence because of the terms of the call option agreement.  That is a matter which needs to be investigated.  I make no further comment on it, other than to say that that would be a matter for interpretation at trial.

9.  In any event, as Mr Neoh has pointed out, it is an equity of redemption.  The defendants say that there is some $86 million owing.  The plaintiffs say, “No, it is only $49 million.”  But, in my view, if the plaintiffs wanted to exercise their equity of redemption they would have to pay at least the $49 million.  They would probably either have to give security in that amount or at least pay it into court.

10.  In those circumstances and for those reasons, I think it would be wholly appropriate at this stage for this court to appoint receivers without any offer of providing any such security.  Therefore, I will decline it.  I will simply say that the winding-up petition will take its course.  There is no reason why that cannot be expedited.  Normally these things take some time, but the matter can be put before the companies judge at any stage and applications can be made to the companies judge.

11.  But as far as this application is concerned, on the basis on which it is put, I do not see that I should appoint receivers.