Your World of Legal Intelligence
 Hong Kong | 1-800-335-6202

Re B+b Construction Co.ltd.

Judgment Cited authorities 3 Cited in Precedent Map Related
Vincent
Judgment Date04 April 2003
Year2003
Judgement NumberHCCW114/2001
Subject MatterCompanies Winding-up Proceedings
CourtHigh Court (Hong Kong)
HCCW000114B/2001 Re B+B CONSTRUCTION CO.LTD.

HCCW000114B/2001

HCCW 114/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 114 OF 2001

____________

IN THE MATTER of B+B CONSTRUCTION COMPANY LIMITED (IN LIQUIDATION)

AND
IN THE MATTER of the Companies Ordinance, Cap. 32

____________

Coram: Hon Kwan J in Chambers

Date of Hearing: 4 April 2003

Date of Decision: 4 April 2003

Date of Handing Down of Reasons for Decision: 11 April 2003

__________________________________

REASONS FOR DECISION

__________________________________

The application

1. This is an application by the Hong Kong Housing Authority ("HKHA") on 4 July 2001 under section 186 of the Companies Ordinance, Cap. 32, for an order that notwithstanding the winding-up order dated 18 April 2001, HKHA do have leave to commence proceedings against B+B Construction Company Limited ("the Company"), by joining the Company as a defendant in the High Court action being HCCT No. 39 of 2001, alternatively to commence arbitration proceedings against the Company pursuant to the contract between HKHA and the Company dated 7 March 1997, provided that no judgment or order obtained by HKHA in the High Court action or in the arbitration proceedings shall be enforced against the Company without leave of the court. The summons was issued on 4 July 2001 and the amended summons seeking leave in the alternative to commence arbitration proceedings against the Company was issued on 28 March 2003.

2. The summons was initially scheduled to be heard on 14 September 2001. The hearing was adjourned to 16 January 2002 and later to 19 March 2002 and eventually to 4 April 2003, for HKHA to ascertain the existence of insurance policies that may provide indemnity for the claim of HKHA against the Company and to obtain documents relating to such policies.

3. This is not the first occasion on which an application was made for leave to commence proceedings against the Company. On 12 June 2001, Yuen J (as she then was) granted leave, on the application of Union Charm Development Limited ("Union Charm"), to proceed with arbitration proceedings against the Company notwithstanding the liquidation. The issue of whether there is insurance cover for the claim of Union Charm, which is in the region of HK$1,100 million, was not raised by Union Charm or the provisional liquidators (who were subsequently appointed joint and several liquidators of the Company on 1 August 2001) at the hearing before Yuen J and I was not told the reason why this was not raised. At the hearing before me, the existence of insurance for the claim of HKHA and the indemnity that such insurance may provide for legal costs in resisting the claim assumed great importance. At the conclusion of the hearing, I made an order granting leave as sought. These are the detailed reasons for my decision.

The discretion under section 186

4. It would be convenient first to set out the legal principles on the exercise of the discretion under section 186. I have taken them from the submissions of Mr Bleach, SC, who appeared for HKHA. They are accepted by Mr Harris, who appeared for the liquidators.

5. The test as to the exercise of the court's discretion whether or not to grant leave is what is right and fair according to the circumstances of each case and this involves a balancing exercise (In Re Aro Co. Ltd [1980] 1 Ch 196 at 209E to H; Re Axona International Credit & Commerce Ltd [1985] 2 HKC 675 at 680A to 681F; Re King's Dyeing & Weaving Factory Ltd (No. 2) [1986] HKC 621 at 623E to H).

6. If the issue can be conveniently decided in the course of the winding up, leave will be refused in the absence of special circumstances, as there is a positive benefit in having the issue decided by the liquidator since this should be less expensive and quicker than an independent action and the liquidator is obliged to act even-handedly as between each class of claimant so prejudice would not normally be caused to any particular class of claimant (Re Exchange Securities & Commodities Ltd & Ors. [1983] BCLC 186 at 195h to 196e).

7. Proceedings will be allowed to be commenced or continued where an action is the most convenient method of trying a question, and specifically so when the questions would involve substantial issues of facts that are in dispute and also matters of law of complexity (Halsbury's Laws of England, 4th ed., Vol. 7(3), para. 2654; Re King's Dyeing and Weaving, supra).

8. Leave is more likely to be granted where the company in liquidation is insured in respect of the claim made against it as the judgment will be funded to the limit of the cover by the insurance company and the costs of the action will be borne by the insurance company (Bristol & West Building Society v. Trustee of the property of Back and another (bankrupts) [1998] 1 BCLC 485 at 488g to 489h, 490h to i).

The claim of HKHA against the Company

9. For present purpose, it is unnecessary to investigate the merits of the claim of HKHA against the Company, so long as the court is satisfied that the claim is "not clearly unsustainable" (Bristol & West Building Society, supra at 489a to d). There is no suggestion by the liquidators that this claim, which they have estimated to be in the region of HK$500 million, is unsustainable.

10. How the claim of HKHA arose, as taken from the supporting affidavit filed by HKHA, may be summarised as follows.

11. HKHA was the employer of a Home Ownership Scheme Project at Tin Shui Wai Area 31, Phase 1 ("the Project"), which involved the construction of six 41-storey blocks of flats. The Company was engaged by HKHA to design and construct the piling foundations pursuant to a contract dated 7 March 1997 for the contract sum of HK$77 million. HKHA appointed Hsin Yieh Architects Associates Limited ("HKA") and Joseph Chow & Partners Limited ("JMK") as, respectively, the architectural and engineering consultants for the Project. The Company carried out and completed the foundation works between September 1996 and June 1997.

12. In July 1999, with the superstructure almost completed, it was discovered that there was uneven settlement to the foundations and investigations revealed that the settlement was caused by irregularities in the construction of the piles accompanied by falsification of the piling records. The resulting scandal has attracted a great deal of publicity and public concern. HKHA brought proceedings in the High Court against HYA and JMK in May 2001, being HCCT No. 39 of 2001, shortly after the winding-up order was made against the Company. The Statement of Claim in that action ran into 69 pages with 14 appendices. The acts and omissions of the Company featured prominently in the Statement of Claim. From the pleading, it would appear that the claim for unliquidated damages against the Company would be founded in breach of contract in the design of the pile foundations and in fraudulent mispresentation and/or deceit as to the length of the as-built piles. The losses suffered by HKHA comprise, inter alia, the cost of remedial works and associated reinstatement works, the compensation payable to the superstructure contractor consequent upon the interruption to the superstructure works, and the loss of interest and other incidental costs arising from the return of deposits to purchasers and from delay in receipt of the completion monies.

13. On behalf of HKHA, it was submitted that the technical issues pertaining to the Company's liability and the quantum of damages are numerous and highly complex, and that it is not within the usual sphere of competence of a liquidator to resolve these issues when called upon to adjudicate HKHA's proof of debt. Further, as there are serious issues of fraud raised in the proposed proceedings, it would be more appropriate for such issues to be determined through the due process of law. It is not known if the allegations of fraud and dishonesty would be disputed by the Company.

14. HKHA has appointed engineering experts to investigate the cause and extent of differential settlement for the purpose of litigation and substantial reports have been prepared. A summary of the technical issues arising from the investigation was given in the first affirmation of the solicitor for HKHA. Some of the findings of HKHA's experts have been disputed by the experts for HYA in the High Court action. A thorough understanding of the theory of geotechnical and structural engineering, and of on-site testing procedures, will be required to evaluate the alleged liability of the Company for breach of its contractual duty of care. Further, to determine whether remedial works are required and whether the scope of the remedial work done is reasonable to mitigate its loss, extensive structural analysis has been carried out by the experts engaged by HKHA. The interpretation of such analysis will require an understanding of the mechanism of failure and the capacity of the individual parts of the structure to withstand stressing. Further, as the...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT