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Re Hang Fung Jewellery Co Ltd

Judgment Cited authorities 13 Cited in Precedent Map Related
Vincent
Judgment Date02 December 2009
Year2009
Citation[2010] 2 HKLRD 1
Judgement NumberHCCW503/2008
Subject MatterCompanies Winding-up Proceedings
CourtHigh Court (Hong Kong)
HCCW000503B/2008 RE HANG FUNG JEWELLERY CO LTD

HCCW 503/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 503 OF 2008

____________

IN THE MATTER of HANG FUNG JEWELLERY COMPANY LIMITED (恆豐珠寶首飾有限公司)
and
IN THE MATTER of the Companies Ordinance, Chapter 32

____________

Before: Hon Kwan JA (sitting as an additional Judge of the Court of First Instance) in Chambers

Date of Hearing: 29 September 2009

Date of Handing Down of Decision: 2 December 2009

_____________

D E C I S I O N

_____________

The issue

1. This is a summons issued by the provisional liquidators of Hang Fung Jewellery Company Limited恆豐珠寶首飾有限公司 (“the Company”) under section 200(3) of the Companies Ordinance, Cap. 32 for determination of the following issue:

“Whether, and if so to what extent, Standard Chartered Bank (Hong Kong) Limited (‘the Bank’) has any proprietary interest/right over or in any of the gold bars found inside the Safe Box of the Company situated at 2/F, Kaiser Estate, Phase II, 28 Man Lok Street, Hung Hom, Kowloon on 22 October 2008, which is to say, those 60 1 kg 9999 gold bars bearing serial numbers H53991 to H54010 and H54801 to H54840.”

2. Provisional liquidators were appointed for the Company on 17 October 2008. They took control of the Safe Box on 22 October 2008. The Bank claims it is entitled to possession of 40 of the 1 kg gold bars aforesaid, as their purchase by the Company was financed by a letter of credit drawn under the facility provided by the Bank. The provisional liquidators have taken a neutral position and made submissions to address concerns they have identified in this complex issue.

The background

3. The background matters are not controversial and may be stated as follows.

4. The Company was an indirect wholly owned subsidiary of 3D-Gold Jewellery Holdings Limited金至尊珠寶控股有限公司 and the key asset-holding subsidiary in the group. The subsidiaries in the group were engaged in the manufacture, wholesale, trading and retailing of gold products, other precious metal products and jewellery products. Provisional liquidators were appointed for the Company and its ultimate parent company not long after the death of the group chairman. A creditor’s petition to wind up the Company was presented on 17 October 2008.

5. By an order made on 7 July 2009, schemes of arrangement were sanctioned whereby an investor acquired certain companies within the group and other assets. The Company and the gold bars to which this application relates are not affected by the schemes. On 7 September 2009, the Company was wound up by this court.

6. By facilities letters dated 26 March 2008 and 28 May 2008, the Bank granted facilities to the Company. I set out below the material provisions in the facilities documentation:

Facilities letter dated 26 March 2008

“D. Security and Conditions Precedent:

The availability of the Facilities is conditional upon the Bank’s receipt of the following documents, items and evidence (both in form and substance) satisfactory to the Bank:

…

6. Such other documents, items or evidence that the Bank may request from time to time.

F. Other Terms and Conditions:

3. The Bank’s Standard Terms and Conditions for Banking Facilities and Services (including the Trade Finance Supplement) and Terms and Conditions for Foreign Exchange Business (‘Standard Terms and Conditions’) attached and/or referred to in this letter forms an integral part of this letter and the Customer agrees to observe and be bound by such Standard Terms and Conditions.”

Standard Terms and Conditions for Banking Facilities and Services

“6. Security

6.1 The Bank holds all Assets of the Customer including those Assets held to the Bank's order or for account of the Customer (whether for safe custody, collection, security or for any specific purpose or generally) as continuing security for the payment and discharge of all the Customer's obligations and liabilities to the Bank.

6.2 The Bank may (at any time, without prior notice to the Customer or any other person and in such manner as the Bank thinks fit) sell, dispose of or otherwise deal with any of the Assets of the Customer the subject of the security hereby created.

6.3 The Bank may apply the net proceeds of any sale, disposition or dealing in or towards discharge of the Customer's obligations to the Bank in whatever priority that the Bank may determine.

6.4 The Customer shall, upon demand by the Bank: -

(a) provide such further security in form and value as may be required in the opinion of the Bank sufficient to secure any of the Customer's obligations to the Bank; and

(b) execute and deliver to the Bank any documents in form and substance satisfactory to the Bank over any of the Customer's Assets as the Bank specifies in any such demand.

12. Lien and Power of Sale

The Bank shall have a lien on all property of the Customer coming into the possession or control of the Bank, for custody or any other reason and whether or not in the ordinary course of banking business, with power for the Bank to sell such property to satisfy any obligations owed by the Customer to the Bank.

15. Authorisation

15.2 To secure due performance of obligations by the Customer under the Agreement, the Customer irrevocably and unconditionally authorises the Bank to be the Customer's true and lawful representative (with full power of delegation and substitution) to execute, sign and do all documents, acts and things (in the name of the Customer or otherwise) for carrying out any of the Customer's obligations or for exercising the Bank's rights under the Agreement.

18. Continuing Agreement, Waivers and Remedies

This is a continuing agreement and the rights of the Bank hereunder: -

(a) may be exercised as often as necessary;

(b) are cumulative and not exclusive of its rights under any other agreement and the general law; and

(c) may be waived only in writing and specifically.

Delay in exercising or non-exercise of any such rights is not a waiver of that right.”

Trade Finance Supplement

“3. Pledge of Goods

3.1 In consideration of the Facilities and/or Services, the Bank shall have a pledge on (i) the goods and (ii) the documents, bills of exchange, negotiable instruments, documents of title, transport documents, insurance policies, delivery orders, godown warrants and any other documents processed or handled through the Bank (‘Documents’), until all the obligations owed by the Customer to the Bank have been fully discharged.

3.2 The pledge shall be a continuing security in addition to any other security held by the Bank and the Bank is authorised to sell, dispose of or otherwise deal with any of the goods or Documents subject to the pledge.

3.3 The risks in the goods shall be with the Customer and the Bank shall not be responsible for any loss or damage or depreciation in value of any goods or Documents held by the Bank as security.

9. Release of Pledged Goods

If any goods or Documents relating to goods pledged to the Bank are released to the Customer or to its order, the Customer shall execute and deliver to the Bank trust receipts in form and substance satisfactory to the Bank together with any other documentation that the Bank may require.

10. Trust Receipts

10.1 For shipping or other documents in respect of such pledged goods which have been handed over to the Customer, the Customer shall hold such goods, bills of lading or other transport documents, certificates or receipts on trust for the Bank and shall sign a trust receipt agreement in the form required by the Bank. The Bank and/or its agent may at any time inspect such goods and take possession thereof and the Customer shall arrange for the inspection and possession by the Bank.

10.2 For goods held by the Customer on trust for the Bank, the Customer shall dispose of such goods only to bona fide buyers for full value and on normal commercial terms. Proceeds of the goods shall be received and held by the Customer on trust for the Bank.

12. Customer's Undertakings

The Customer represents and undertakes to the Bank that: -

(f) it will not encumber, transfer, sell, dispose of or otherwise deal with the Documents and/or the goods except as directed by or with the prior consent of the Bank;

(g) it will not take any action which might prejudice the value of the goods and/or the effectiveness of the pledge;

(h) it will keep the goods and/or the sales proceeds of the goods separate from any other property or accounts respectively of the Customer or other persons;

(i) it will, at the request of the Bank, provide the Bank with such information concerning the Documents and any sales proceeds of the goods shall be held on trust for the Bank;

(j) it will keep the Bank informed of the whereabouts of the goods and of any change in the condition, market price, quality or quantity of the goods; and

(k) it will execute such documents and perform such acts as the Bank may consider expedient in connection with the exercise of its powers and rights hereunder.”

7. On 2 October 2008, the Company placed a purchase order for 40 1 kg 9999 gold bars with a gold bullion supplier, Heraeus Limited (“Heraeus”), at the total price of HK$8,756,240.

8. On the same day, the Company prepared an Application for the Issuance of a Letter of Credit to the Bank for HK$8,756,240 in favour of Heraeus for the purchase of the gold bars aforesaid and by way of local delivery. This letter of credit was applied for by way of utilisation of the facilities, and it was issued dated 2 October 2008. The term of payment of the letter of credit was “at sight” and the documents required to be produced to draw under the credit were “Cargo Receipt issued and signed by authorised signatory(ies) of Applicant … evidencing receipt of the goods … in good order and...

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