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

Re Silver Base International Development Co Ltd (銀基國際發展有限公司) (The “Company”)

Judgment Cited authorities 9 Cited in Precedent Map Related
Vincent
Judgment Date15 June 2022
Neutral Citation[2022] HKCFI 1793
Year2021
Judgement NumberHCCW328/2021
Subject MatterCompanies Winding-up Proceedings
CourtCourt of First Instance (Hong Kong)
HCCW328/2021 RE SILVER BASE INTERNATIONAL DEVELOPMENT CO LTD (銀基國際發展有限公司) (THE “COMPANY”)

HCCW 328/2021

[2022] HKCFI 1793

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 328 OF 2021

_______________

IN THE MATTER OF SILVER BASE INTERNATIONAL DEVELOPMENT CO. LIMITED (銀基國際發展有限公司) (the “COMPANY”)

and

IN THE MATTER OF THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE (CAP. 32)

_______________

Before: Hon Linda Chan J in Court
Date of Hearing: 6 May 2022
Date of Judgment: 15 June 2022

_______________

J U D G M E N T

_______________

1. By petition presented on 7 September 2021 (“Petition”) the petitioner, Techian International Development Limited (“P”), seeks a winding-up order against Silver Base International Development Co. Limited (“Company”) on the ground that it is unable to pay its debts.

2. In the Petition, P relies on the Company’s failure to:

(1) comply with a statutory demand served upon it on 16 August 2021 (“SD”) requiring it to pay HK$43,922,031.30 (“Debt”). The Debt comprises HK$37,798,650, being refund of deposit paid by P on 14 December 2020 (“Deposit”) and interest accrued thereon at 2% per month from 14 December 2020; and

(2) honour a post-dated cheque in the amount of HK$37,798,650 drawn in favour of P (“Cheque”) but was dishonoured when presented for payment on 31 August 2021.

3. P and the Company both seek leave to file further evidence:

(1) the Company applies by summons dated 3 May 2022 for leave to file and serve the 2nd Affirmation of Liang Guoxing (“Liang”) dated 3 May 2022 to refute P’s point about inability to trace the products and to expose the flaws and incompleteness in P’s evidence on sale of the products to Singapore and Vietnam, both raised only in P’s reply evidence; and

(2) P applies by summons dated 12 April 2022 for leave to adduce a report made by the provisional liquidators of “ListCo” (as defined in §5 below) which became available to P on 14 February 2022.

4. I dismissed both summonses with costs as I do not see any justification for the Company or P to file further evidence at the eve of the hearing when the parties were required to file all their evidence by 7 February 2022. Nor do I think that the new evidence assists the determination of the Petition, given that it is not in dispute that the Debt was owed and the only issue is whether the Company has demonstrated a serious cross claim against P and, if so, whether such claim is sufficient to defeat the Petition. If the Company is not able to demonstrate this in Liang’s affirmation (and the voluminous exhibits) already filed in opposition to the Petition, I do not see how the position would be improved by allowing the Company to file yet another affirmation.

Background

5. The Company was incorporated in Hong Kong in 1997 and is an indirectly wholly-owned subsidiary of Silver Base Group Holdings Limited, a listed company in Hong Kong (“ListCo”). ListCo itself is under financial difficulty and provisional liquidators were appointed by the court in the Cayman Islands on 8 December 2021.

6. The Company has since 2000 been appointed the exclusive distributor of “Wuliangye (五糧液) 52% Vol. 500ml (1x6)” (“Products”) by 四川省宜賓五糧液集團進出口有限公司 (Sichuan Yibin Wuliangye Group Import and Export Co., Ltd) (“Sichuan Wuliangye”) pursuant to 2 agreements dated 18 May 2020 (“Distributorship Agreements”). Clause 2.4 of the Distributorship Agreements (as translated) provides that:

“[the Company] shall strictly comply with the terms of the contract entered into by both parties, to ensure that the sale of goods to the specified international markets and to prohibit re-sale to the Mainland China” (“Prohibition”)

7. P engages in the business of exporting wine, Chinese liquor and tobacco manufactured in the Mainland to the rest of the world. Until the dispute arising from the Debt, P was the largest customer of the Company and contributed to over 90% of its turnover.[1]

8. Since around 2000, P has been purchasing the Products from the Company for resale to its customers and the modus operandi is as follows:

(1) P would issue a purchase order setting out the quantity and unit price of the Products it offered to purchase from the Company.

(2) The Company would then issue a sales confirmation (written in Chinese) (“SC”) to P which set out the quantity, unit price and total price of the Products and with the following terms (as translated):

“1. For all good, the buyer must guarantee that they will only be supplied to overseas markets (excluding Mainland China) which are taxed or duty-free markets.

2. The Buyer guarantees to apply on its own accord to the Customs and Excise Department of Hong Kong for all documents for export and to bear all the export freight and insurance.

3. Upon re-sale of its products, the Buyer is to ensure compliance with the important regulations of the market to which the goods are imported and pay all necessary fees or taxes.”

(3) The SC would be signed by the Company (as seller) and P (as buyer).

(4) The parties would enter into a supplemental agreement (“SA”) to set out their agreement on the terms governing delivery of the Products, payment of the price and arrangement for refund.

(5) P was not provided with copies of the Distributorship Agreements.

9. On 13 August 2019, the Company received a notice from Sichuan Wuliangye (“1st Complaint”) stating that the Products sold to the Company under a sales contract (no. W17HK02-01C/01D) were found to have been re-imported into the Mainland. The Company asserts that the re-imported Products were traceable to those sold to P under a SC dated 22 September 2017 (“2017 Products”).[2]

10. It is the Company’s case that when confronted with the 1st Complaint, Mr Ng Ma Mui (“Ng”) of P admitted to the re-importation of Products and undertook to Liang that such re-importation would not occur again in the future.[3] As a result, the Company reduced the quantity of Products sold to P, from 643,998 bottles (in 2018-2019) to 448,002 bottles (in 2019-2020), and further to 228,000 bottles (in 2020-2021) to mark its disapproval of P’s actions.[4]

11. Following the above modus operandi, the Company and P executed:

(1) a SC dated 11 December 2020 (“Subject SC”) whereby P agreed to purchase 18,666 cartons of Products at HK$75,597,300 (“Subject Products”); and

(2) a SA dated 11 December 2020 (“1st SA”) which states, inter alia, that (a) the Subject Products shall be delivered by 31 January 2021; (b) P shall pay 50% of the price to the Company as deposit, and the Company must provide P with proof of delivery by 31 January 2021; (c) if the Company fails to deliver the Subject Products by 31 January 2021, the Company shall repay the amount paid by P together with interest at 2% per month within 14 days of confirmation of the matters giving rise to the refund.

12. P paid the Deposit to the Company on 14 December 2020, but the Company failed to deliver the Subject Products by 31 January 2021.

13. On 6 May 2021, the Company provided P with the numbers of 2 letters of credit (together “LCs”) issued by Bank of China (Hong Kong) Limited (“BOC”) to show that it had purchased the Subject Products from Sichuan Wuliangye.[5]

14. On 20 May 2021, following P’s complaints, the Company provided the Cheque (post-dated to 31 August 2021) to P.[6]

15. The LCs expired on 14 June 2021, and the Company said that it needed to provide Sichuan Wuliangye with a new letter of credit to secure the supply of the Subject Products but did not have sufficient cash flow to do so. It requested P to provide a letter of credit in favour of the Company so as to enable the Company to apply for a back-to-back letter of credit in favour of Sichuan Wuliangye. P agreed to co-operate since it still wished to secure the shipment of the Subject Products.[7]

16. By a 2nd Supplemental Agreement dated 15 June 2021 (“2nd SA”) the Company and P agreed, inter alia, that (1) the Deposit would be returned to P no later than 15 July 2021; and (2) if the Subject Products were not delivered by 31 August 2021, and the Deposit not refunded, P could cash in the Cheque.

17. On 16 June 2021, BOC issued a letter of credit to P with the Company as beneficiary for HK$75,597,300 under LC number 267A21LC004094.

18. On 19 July 2021, P through its solicitors referred to the cancellation of the LCs, the fund returned by BOC to the Company and the Company’s obligation to repay the Deposit pursuant to clause 4 of the 2nd SA, and requested the Company to repay the Deposit within 7 days.

19. In response, the Company through its solicitors’ letter dated 28 July 2021 (“July 2021 Letter”) referred to the Subject SC and stated that “the most important foundation for [the trade between P and the Company] is that [P] cannot re-sell [the Products] purchased from [the Company] to [the Mainland]” (as translated). As the Products sold to P appeared in the Mainland, it proves that P acted in breach of the “essential terms” of the SC. This, in turn, led to Sichuan Wuliangye stopping the supply of the Products to the Company, and rendered the Company unable to deliver the Subject Products by 31 January 2021.

20. By a further letter dated 13 August 2021 the Company’s solicitors referred to the Subject SC and requested P to provide the names of the subsequent purchasers of the Products, the dates and quantities of the Products purchased and the relevant documents including the sales contract, purchase order, warehouse list and delivery orders, and reiterated that P’s resale of the Products to the Mainland had caused Sichuan Wuliangye to suspend supply to the Company, and the Company suffered loss of profits from the Subject SC and other...

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