Re Udl Argos Engineering & Heavy Industries Co. Ltd.

CACV000261A/2000

CACV 157, 258, 259, 260, 261 & 262/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 157, 258, 259, 260, 261 & 262 OF 2000

(ON APPEAL FROM HCMP NO. 437 OF 1999)
(ON APPEAL FROM HCMP NO. 414 OF 2000)
(ON APPEAL FROM HCMP NO. 416 OF 2000)
(ON APPEAL FROM HCMP NO. 418 OF 2000)
(ON APPEAL FROM HCMP NO. 419 OF 2000)
(ON APPEAL FROM HCMP NO. 421 OF 2000)
(ON APPEAL FROM HCMP NO. 422 OF 2000)
(ON APPEAL FROM HCCW NO. 26 OF 2000)
(ON APPEAL FROM HCCW NO. 189 OF 1999)
(ON APPEAL FROM HCCW NO. 709 OF 1999)
(ON APPEAL FROM HCCW NO. 1152 OF 1999)
(ON APPEAL FROM HCCW NO. 1153 OF 1999)

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Coram: Hon. Rogers VP, Wong JA and Seagroatt J in Court

Date of Hearing: 9 March 2001

Date of Judgment: 9 March 2001

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J U D G M E N T

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Hon Rogers VP:

1. This is an application for leave to appeal in this matter. Before going to the merits of the application of the leave to appeal it should be mentioned that, by a judgment handed down last week, on 1 March, Mr Leung Yat-tung was adjudged bankrupt. It suffices to read just a portion of Cheung J's judgment where he said at page 23:

"It is said that the court must sanction the proposal because the debtor is instrumental in putting forward the scheme of arrangement concerning the UDL group of companies. The scheme has been sanctioned by the Court of Appeal. If the debtor is declared bankrupt, he cannot be the chairman and director and cannot ensure implementation of the scheme."

2. Despite that argument, of course, Mr Leung was declared bankrupt. Whether the schemes, which have been sanctioned, can now proceed in the light of Mr Leung's bankruptcy is probably, at best, highly debatable. It does not arise on this application, but it must be very doubtful as to whether the schemes will, in fact, go through now.

3. This application, however, is made on behalf of the preferential creditors and it is made on two bases under section 22 of the Court of Final Appeal Ordinance. The first basis is that the amount in question involves or is of the value of $1 million or more. The point that is made is that, although the particular amounts owing to the preferential creditors, who are in fact represented on this application, does not amount to that figure, when all the other preferential creditors involving these companies are taken into consideration, the amounts which are owed to them would total well over $1 million. Another argument which was put was that the amounts involved in relation to the debts of these companies would total well in excess of $1 million. Those facts are as may be, but before this court are only the preferential creditors who are in fact represented, and the amounts which are owed to them do not amount to $1 million.

4. The next point taken is that there are questions of great or general public importance which should go to the Court of Final Appeal, and included in that, no doubt, is the general wrap-up provision, or otherwise.

5. A question on this appeal was whether the preferential creditors had a right to a separate meeting from the other creditors, notwithstanding that their preferential rights were preserved. As the first affidavits on behalf of the preferential creditors augured, one of the advantages that was perceived when these proceedings were launched that would be gained by the failures of the schemes and the consequent winding-up orders, was that ex gratia payments would be forthcoming under the Protection of Wages on Insolvency Ordinance. Indeed, arguments in this respect clearly featured in the court below and were dealt with by Le Pichon J. The arguments again featured on the application for a stay which was made before the court in July of last year, but on this appeal, those arguments were not put. On the appeal, indeed, it was suggested that the preferential creditors, if given separate meetings, could secure for themselves benefits which were additional to their preferential rights and simply, in effect, in a way, hold the other creditors to ransom.

6. In our view, the judge below followed established authority by judging the question as to whether the preferential creditors formed a separate class entitling them to separate meetings on the basis of the rights test. That appears to us to be the correct application of the law. In our view, there are no issues which arise on this application, or which merit this court giving leave to appeal. On that basis this application is refused.

Representation:

Mr Aarif Barma and Mr Anthony Cheung, instructed by Messrs Joseph C T Lee & Co., for the Companies/Respondents

Mr Martin Lee, SC and Mr Chan Chi Hung, instructed by Director of Legal Aid, for the Opposing Preferential Creditors/Appellants