Re Chime Corporation Ltd
Read the full judgment text of HCMP 4146/2001 on BabelCite. This High Court CFI judgment was delivered on 31 October 2003.
1. This is a summons issued by Mrs Nina Wangby which she is to provide part of the security ordered by the amended order of Deputy Judge Gill dated 14 December 2001. By that order, Mrs Wang was required to procure an amount equivalent to the dividends received by her in respect of her B shares in Chime Corporation Ltd, the 1st respondent herein ("Chime"), be paid into an escrow account opened by, and in the names of the joint administrators pendente lite of the estate of Wang Teh Huei ("the JAs"
Cites 1 case
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HCMP004146B/2001 HCMP 4146/2001 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 4146 OF 2001 ____________
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____________ Coram: Hon Kwan J in Chambers Date of Hearing: 31 October 2003 Date of Decision: 31 October 2003 _____________ D E C I S I O N _____________ 1.This is a summons issued by Mrs Nina Wangby which she is to provide part of the security ordered by the amended order of Deputy Judge Gill dated 14 December 2001. By that order, Mrs Wang was required to procure an amount equivalent to the dividends received by her in respect of her B shares in Chime Corporation Ltd, the 1st respondent herein ("Chime"), be paid into an escrow account opened by, and in the names of the joint administrators pendente lite of the estate of Wang Teh Huei ("the JAs"), the petitioners herein, within 42 days from the date of the order or such extension as given by the JAs or the court or otherwise be secured to the satisfaction of the court., the 2nd respondent herein, on 22 October 2003 to vary the method 2.On 15 November 2002, I made an order declaring that the following proposed securities in respect of the required sum of HK$1.4925 billion was satisfactory and in compliance with the above order of Deputy Judge Gill:
3.The letter of guarantee issued by BOC is to expire on 12 November 2003. Under the terms of the guarantee, the JAs are entitled to draw the undrawn balance before the expiry date. Mrs Wang does not wish to renew the guarantee due to the costs and expenses involved in providing the guarantee. By this summons, she seeks to replace the guarantee with an alternative security and that is by providing a cash deposit in an aggregate of HK$520 million, in the form of Hong Kong dollars and foreign currencies of an equivalent thereto, to be placed in an interest bearing account in the name of Chime, with a bank in Hong Kong to be operated by joint signatories of one of the JAs (or their nominee) and Mrs Wang (or her nominee), alternatively, by the JA's solicitors and Mrs Wang's solicitors. It is proposed that the monies in this account shall not be withdrawn except by consent of the JAs and Mrs Wang or in accordance with the court's directions. 4.Mrs Wang stated in her supporting affirmation filed on 23 October 2003 that the funds proposed to be deposited in an amount equivalent to HK$520 million will comprise deposits of Hong Kong dollars in the sum of HK$10 million and foreign currencies in the sums of C$59 million and US$21.5 million. These funds form the underlying security for BOC to issue the guarantee to the JAs. On the expiry of the guarantee or its discharge by the court, Mrs Wang can arrange for these funds to be deposited into the proposed account as security within 7 days. 5.The JAs have filed an affirmation on 29 October 2003 raising their concerns on three matters: the source of the funds proposed to be made available as alternative security; the risk of fluctuations in exchange rates for the foreign currency which make up a large part of the funds; and possible difficulties in operating an escrow account. 6.The primary concern of the JAs is the source of the funds proposed to be made available as cash deposit. Mrs Wang has made no mention in her affirmation filed in support of this application as to the source of these funds. The JAs want a personal undertaking from Mrs Wang that these funds are monies beneficially owned by her and do not come from Chime or any company in the Chime group by way of loans advanced or other means. They are concerned that if the funds utilized to provide security should be derived ultimately from Chime, this would just be a circular movement of funds and would defeat the purpose of providing security. The JAs have pointed to the following matters to explain why they have legitimate concerns that the funds might not be owned by Mrs Wang beneficially. 7.Firstly, in all the affirmations filed on behalf of Mrs Wang from February to November 2002 in support of her various applications for extension of time to give security as ordered by Deputy Judge Gill, there was no mention that Mrs Wang had at her disposal these funds which could have been paid into an escrow account as required by the order of the Deputy Judge. 8.Secondly, from land searches conducted by the JAs on two buildings owned by Grand Marseille Enterprises Ltd ("Grand Marseille") and Grand Monrovia Enterprises Ltd ("Grand Monrovia"), it would appear that the letter of guarantee issued by IBA to the JAs in the sum of HK$380 million in June 2002 was obtained on the basis of security in the form of legal charge and rent assignment of these two buildings to IBA. Although at present the estate of Wang Teh Huei does not appear to have beneficial interest in Grand Marseillle or Grand Monrovia, it is the JAs' contention that Chime had lent substantial sums to Chinachem Agencies Ltd ("CAL") and CAL had in turn lent money to companies controlled by Mrs Wang, including Grand Marseille and Grand Monrovia. The JAs are concerned that the ability of Grand Marseille and Grand Monrovia to repay CAL would be adversely affected by pledging the two buildings to IBA that in turn would affect CAL's ability to repay Chime. 9.The JAs are also concerned that if monies are provided by CAL or companies to which CAL has on-lent any part of the loans to it from Chime, this may frustrate or devalue any recoveries against CAL made by the companies owned by the estate of Wang Teh Huei which are the creditors of CAL. 10.Mr Poon, SC submitted that I should look at the basis for providing this security and that is the monies to be repaid as dividends received by Mrs Wang from Chime should be returned to Chime if the allotment of Chime B shares to Mrs Wang were set aside. That seems to me to be right. I must not lose sight of the premise upon which this security was ordered. The purpose or basis of providing this security is not to give protection or safeguard in respect of possible or extent claims made for recovery of loans made by Chime to CAL and which CAL had on lent to others. 11.Besides, there is a protective regime in place as regards disposition of property by Chime and CAL because of undertakings given by Mrs Wang a few months before the order was made to provide security in December 2001. In view of this protective regime which has remained in place, it seems improbable that the funds now proposed to be utilised by Mrs Wang to provide security would have come from Chime or CAL. I do not propose to ask her to furnish an undertaking as suggested by the JAs. 12.The next area of concern is the risk of fluctuation in exchange rates. The total amount of funds proposed to be deposited and converted into Hong Kong dollars is HK$546 million which is equivalent to 105% of the required amount. The JAs have pointed out that the letter of guarantee is to pay in Hong Kong dollars and is not susceptible to problems of fluctuation in exchange rates. They proposed that the funds should all be converted into Hong Kong dollars before the funds are to be put up as security. 13.Mrs Wang has made a counter proposal to meet the concern arising out of the fluctuation in exchange rates and that is along similar lines in relation to the Chelsfield shares over which a legal charge was created. It is proposed that the funds in Hong Kong dollars and foreign currencies are to be paid into the designated account equivalent to 105% of the required amount of HK$520 million. If the aggregate value of the funds with the accrued interest should fall below HK$520 million continuously for more than 10 days, Mrs Wang will pay further sums into the account to bring the aggregate back to 105% of HK$520 million within 10 days of a demand by the JAs. If the aggregate value should exceed 105% of HK$520 million for more than 10 days, the JAs shall within 5 days of a notice issued by Mrs Wang consent to her withdrawal of the excess amount. 14.I am prepared to accept this proposal. A very substantial sum is required to be provided as security. The proposal will allow for a degree of flexibility so that Mrs Wang would not lose out on interest and exchange rates and at the same time the concerns of the JAs are addressed, even though some inconvenience may be caused to the JAs. 15.Lastly, the JAs proposed that the amount should be paid into court instead of being paid into an escrow account, as there may be difficulties in operating such an account. I am not told what these difficulties are specifically. There is no compelling reason why the money should be paid into court instead of being paid into an escrow account operated jointly by the parties. 16.For the above reasons, I will grant the reliefs sought by Mrs Wang and these are the orders:
Representation: Mr Denis Brock, of Messrs Clifford Chance, for the Petitioners The 1st Respondent, attendance excused Mr Winston Poon, SC and Mr Godfrey Lam, instructed by Messrs Baker & McKenzie, for the 2nd Respondent | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCMP 4146/2001