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Re Cil Holdings Ltd

Judgment Cited authorities 2 Cited in Precedent Map Related
Vincent
Judgment Date02 August 2006
Year2006
Judgement NumberHCCW702/2005
Subject MatterCompanies Winding-up Proceedings
CourtHigh Court (Hong Kong)
HCCW000702/2005 RE CIL HOLDINGS LTD

HCCW 702/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 702 OF 2005

____________

　 IN THE MATTER of CIL HOLDINGS LIMITED
　 and
　 IN THE MATTER of the Companies Ordinance, Cap. 32 of the Laws of Hong Kong

____________

Before: Hon Kwan J in Court

Date of Hearing: 2 August 2006

Date of Judgment: 2 August 2006

_______________

J U D G M E N T

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1. This is a petition to wind up CIL Holdings Limited (“the Company”) on the ground it is unable to pay its debts. The petitioner is CSI Investment Management Limited. The petitioning debt is $1,541,995.42.

2. A demand for this debt was served on the Company on 9 August 2005. As no payment was made within 3 weeks, the Company was deemed unable to pay its debts under section 327(4)(a) of the Companies Ordinance, Cap. 32, the Company being an unregistered company.

3. The debt may be a relatively small debt for the Company, the Company may or may not have the means of paying. It has chosen not to pay, notwithstanding the service of the demand under section 327(4)(a). If the court should find the debt is indubitably due, but the Company has refused to pay notwithstanding it may have the means of doing so, the petitioner is nevertheless entitled to an order to wind up the Company on the ground of insolvency. The law is clear on this (Cornhill Insurance plc v Improvement Services Limited & Others [1986] BCLC 26). The late evidence the Company has put in as to its alleged funds sitting in a bank in the PRC, or its alleged prospects of success of a claim it brought 5 years ago to recover $98 million, is wholly irrelevant. If the Company wishes to play at high stakes in the face of a petition for its winding up, it must take the consequence if its grounds for opposition are rejected by the court.

4. I will first give the background matters.

5. The Company was incorporated in Bermuda in 1993. Its shares are listed on the Hong Kong Stock Exchange. As its name suggests, it is a holding company. A petition was presented to wind up the Company by a bank in May 2001. The petition was adjourned on several occasions over a two-year period to allow the Company to prepare a scheme of arrangement. Eventually, an investor, Ke Jun Xiang (“Mr Ke”) was found and through his company he agreed to and did subscribe for new shares in the Company for $35 million. A scheme was then put together and the requisite majority of creditors and shareholders voted in favour of it. The scheme received the sanction of the court in April 2003 and the winding-up petition was dismissed on 14 April 2003.

6. Some time between April 2003 and April 2004, it would appear that the shares of the Company were re-listed for trading. Trading was suspended on 1 April 2004 and has since remained suspended.

7. The petitioner is a licensed financial advisor approved by the Securities and Futures Commission. In August 2001, Mr Ke was introduced to the petitioner by a director of the Company, Peter Ho Pui Tsun (“Mr Ho”). It is not in dispute that the petitioner rented office premises in Hutchison House, Central and a lease was granted to the petitioner commencing from September 2001. It is also not in dispute that during September 2001 to September 2003, for a period of 25 months, the petitioner allowed the Company to have use of the office premises, primarily to carry out its restructuring. The petitioner claims it had orally agreed with the Company that the Company was to pay the petitioner $100,000.00 per month as licence fees for use of the business premises and use of the equipment, facilities and resources of the petitioner. It is common ground that the petitioner agreed not to require the Company to pay licence fees before the completion of the restructuring scheme. The Company denies it has agreed to pay licence fees at $100,000.00 a month. I will come back to the Company’s defence raised in this petition later.

8. From September 2001 to September 2003, the petitioner issued 25 invoices to the Company at the end of every month, each for $100,000.00. The description on each of these invoices read: “Licensing fee for the use of office space and human resources facilities at Room 1804-5 Hutchison House, Central, Hong Kong for [the month in question] as agreed”.

9. On 31 March 2002, the petitioner issued an invoice to the Company for $500,000.00. The description on this invoice read: “Progress payment on advisory and consultancy fees pursuant to the Agreement dated 14 September 2002 [sic] for the purpose of a Restructure Proposal of CIL Holdings Limited as agreed”.

10. All these invoices were received by the Company, as they all bore the chop of the Company.

11. On 30 March 2003, Mr Ke issued a personal cheque to the petitioner for $1 million. The petitioner claims that the cheque was in part payment of the outstanding licence fees. Mr Ke alleges that the cheque was given due to threats of the petitioner and was intended merely as a security for payment of the licence fees. After the scheme of arrangement received the sanction of the court, Mr Ke’s cheque was presented for payment sometime in May 2003, it was dishonoured.

12. On 10 June 2003, the petitioner issued a writ against the Company in HCA No. 2114 of 2003, claiming licence fees of $2 million, from September 2001 to April 2003. The Company was represented by solicitors, and through its solicitors obtained an extension of time to file a defence, although a defence was not filed due to subsequent events.

13. On 17 July 2003, Mr Ke and Mr Ho, two directors of the Company, each executed a deed of guarantee. The guarantee was sent to Mr Ke under cover of a letter of the petitioner’s solicitors in Chinese and in English, requesting him to sign if he understood its meaning. It was further stated that to protect his rights, Mr Ke should seek independent legal advice before he considered signing the deed of guarantee. The recitals in the guarantee stated that as at 30 April 2003, the Company was indebted to the petitioner in the sum of $2 million; that prior to the execution of the deed of guarantee, the petitioner had brought HCA No. 2114 of 2003 against the Company for recovery of the debt; and that Mr Ke covenanted to repay the petitioner the debt aforesaid by issuing 4 post-dated cheques in satisfaction thereof, and copies of the cheques were attached to the deed of guarantee.

14. On 17 July 2003, upon the execution of the deeds of guarantee, the petitioner filed a notice of discontinuance of proceedings in HCA No. 2114 of 2003.

15. Pursuant to his guarantee, Mr Ke issued four personal cheques to the petitioner dated 30 July 2003, 30 September 2003, 30 November 2003 and 31 January 2004 for the total sum of $1.6 million. Mr Ke has also claimed that these cheques were given due to threats of the petitioner. He further claims that the cheques were not meant to be “realised and enforced for payment” but were given as “interim security” in place of his earlier personal cheque of $1 million. Needless to say, these four personal cheques were all dishonoured when presented for payment.

16. On 23 October 2003, the petitioner through its solicitors sent a demand letter to Mr Ke for $3 million.

17. On 1 December 2003, the Company acting by Mr Ho, issued 15 promissory notes in favour of the petitioner, each for $200,000.00, all payable on 30 June 2004, with interest at 6% per annum from the date of issue to payment. Mr Ke has claimed in the winding-up proceedings that the promissory notes were all issued under the threat of the petitioner.

18. When the due date for payment on the promissory notes arrived, no payment was made. On 5 July 2004, the petitioner’s solicitors wrote to the Company demanding payment on the promissory notes in the total sum of $3 million with interest. On 14 July 2004, the petitioner issued a writ against Mr Ke in HCA No. 1674 of 2004, on the four dishonoured cheques for the sum of $1.6 million. On 2 August 2005, the petitioner obtained summary...

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