RE DICKSON CONSTRUCTION CO LTD

HCCW 47/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 47 OF 2006

____________

____________

AND

HCCW 333/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 333 OF 2006

____________

____________

AND

HCCW 463/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 463 OF 2006

____________

____________

_______________

J U D G M E N T

_______________

1.  There are three winding-up petitions before me, two are in relation to Dickson Construction Company Limited (“Construction”), the other is in relation to its holding company Dickson Group Holdings Limited (“Holdings”).  The petition first presented in time was against Construction, that was presented on 27 January 2006 by Kenworth Engineering Limited.  The next petition in time was that presented against Holdings by Deloittes on 30 June 2006.  The last petition was presented on 30 August 2006 against Construction by the Hong Kong Housing Authority.

2.  The petitions have been adjourned a number of times to enable the companies to carry out restructuring of their debts.  A number of potential investors have appeared on the scene and the latest investor who has expressed interest in acquiring a stake in the companies is Datawin Trading Limited (“Datawin”).  It is the 6^th white knight to appear.  The petition was last adjourned on 4 December 2006 for the companies to file further evidence to satisfy the court on the extent of creditors’ support of the proposed restructuring and the availability of funds from Datawin.

3.  On the evidence filed by the companies, this court cannot be satisfied of creditors’ support or the availability of funds.  That means the court would have no alternative but to make an order to wind up each of the companies.

4.  In respect of creditors’ support, counsel for the companies, Mr Dawes, has accepted that the percentages put forward in the companies’ evidence are not accurate, in that they have not taken into account the debt of the Hong Kong Housing Authority which is in the region of $235 million.  If the debt of the Hong Kong Housing Authority is taken into consideration, according to the calculation of Mr Ho, counsel for the petitioner in the winding-up petition against Holdings, the total percentages of creditors who are opposed to the proposed restructuring is in the aggregate sum of $243 million, that is 39.03% of the total claims of creditors in Holdings.

5.  In respect of Construction, according to the calculation of Mr Suen who appeared for the petitioner, the percentage of creditors who are in support of the proposed restructuring is only in the region of 56.7%.

6.  That being the position of the creditors, it does not seem to me any purpose would be served by adjourning the petitions for the companies to make further efforts to negotiate with them, as the statutory majority required to carry forward a scheme of arrangement would not be achieved.

7.  The other matter of concern to the petitioners and to the court is the ability of Datawin to fund the proposed restructuring.  On a number of occasions in the past, the restructuring efforts of the companies have fallen through because it transpired that the potential investors were not able to come up with the funds for the restructuring.  On this occasion, Datawin has produced a subscription agreement it entered into with a lender on 14 December 2006, by which the lender is to advance a sum of US$16 million to Datawin for this purpose.  However, as pointed out by Mr Ho, it is misleading for the Datawin to claim in its latest affirmation that it has managed to secure the loan of US$16 million.  The subscription agreement provided that the lender may terminate the agreement if any of the numerous conditions precedent in clause 7 of the agreement has not been satisfied by the date of closing which was 15 December 2006, a day after the subscription agreement was executed.  I understand from Mr Dawes that closing had not in fact taken place on 15 December 2006 and that the parties to the subscription agreement have agreed to postpone the closing date for two weeks to enable the companies to fulfil the conditions precedent.  The court has no information as to which of these conditions have not been satisfied, and there is not a word of this in the latest affirmations filed by the companies on 15 December 2006.

8.  In the circumstances, as I have indicated earlier, the court is left in a position in which it has considerable doubts on the financial ability of Datawin to carry out the proposed restructuring, and it is apparent on the evidence that the required statutory majority for a scheme of arrangement is unlikely to be achieved.

9.  For these reasons, I refuse the application of the companies to adjourn the petitions further for four weeks.  I make an order to wind up each of the companies. 

10.  In respect of the costs of the petitioner, Kenworth Engineering Limited, in the first of the petitions against Construction, its costs would be paid out of the assets of the company.  Likewise, the costs of the petitioning creditor, Deloittes, in the petition against Holdings, are also to be paid out of the assets of Holdings.

11.  I would disallow the costs incurred by the Hong Kong Housing Authority in presenting the 2^nd petition against Construction as this petition, in my view, is unnecessary.  There would be one set of costs for all the creditors who have appeared in each of the petitions, and this set of costs is to be paid out of the assets of the company concerned.