Re Kailey Development Co Ltd

HCCW000027/1984

COMPANIES (WINDING-UP)

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Coram: The Honourable Mr. Justice Jones in Court.

Dates of hearing: 20 February and 3 April 1984

Date of delivery of judgment: 3 April 1984

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JUDGMENT

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1. This is a creditors winding-up petition presented by Yamakawa (H.K.) Limited (the petitioner) against Kailey Development Company Limited (the company) on the grounds that the company is insolvent and unable to pay its debts and that it is just and equitable that an order be made. The application is based upon a statutory demand made on the 16th December 1983 under Section 178(a) of the Companies Ordinance for payment of the sum of $67,708.20. This arose when a cheque dated the 13th December 1983 for this sum drawn by the company in favour of the petitioner was dishonoured.

2. The company disputes the claim on the grounds that there has been a total failure of consideration. Accordingly the company applies for the petition to be dismissed on the grounds that there is a substantial dispute of fact to be tried.

3. Mr. Chau Kai Keung a director of the company in his affirmation of the 15^th February 1984 states that on about the 6th September 1983 and the 26th October 1983 the company entered into two purchase orders with the petitioner for the sale of chocolates, candies and biscuits. It is alleged that the sale was by sample and that the petitioner was aware that the goods were required for re-sale. Payment was secured by the cheque dated the 13th December 1983. After partial delivery had been made after October 1983 the company discovered that some of the goods were defective. Complaint is also made that the petitioner did not deliver the full quantity of the goods. The company informed the petitioner of these matters and requested immediate replacement, but agreed to pay interest on the amount payable under the cheque. It is claimed that the sum of $1,184.75 in respect of interest was paid by the company to the petitioner, but the petitioner denies receiving the cheque. However no replacement was made by the petitioner. The company alleges that it has suffered loss and damage amounting to $58,281.16 and claims to set off this amount against the petitioner's claim.

4. Mr. Wong Yih Ching a sub-manager of the petitioner says that goods were sold on 60 days credit to the company between the 31st August 1983 and the 27th October 1983 for the sum of $245,781.50. The company made payment by issuing ten post dated cheques. Six of these cheques were dishonoured when presented for payment. The petitioner subsequently allowed the company further time for payment and the company agreed to pay interest on the amount of the cheques. Payment of the interest was made by the company. Later the petitioner exchanged four cheques for the ten original cheques. These four cheques which included the cheque for which the statutory demand was made were all dishonoured. The petitioner denies the allegation made by the company that the goods were defective. The petitioner produced evidence that the goods were received by the company subject to inspection. The petitioner concedes that the full quantity was not supplied due to the company's failure to honour the cheques issued in payment of the goods already delivered.

5. There was no evidence to support the bare assertion made by Mr. Chau that the goods were defective. Miss Yew who appeared for the company sought an adjournment to obtain a survey report. However, I refused this application as the company had had ample time to obtain one had they thought it to be necessary, but in any event the companies court is not the appropriate forum to decide a sutstantice dispute. In a second affirmation Mr. Chau has stated that claims have been made against the company for compensation from sub-purchasers in respect of the alleged defective goods. He also claims that there was an agreement with Mr. Wong that the four cheques would not be presented for payment until the dispute was settled.

6. Upon the evidence before me there are disputes of facts which require viva voce evidence. As I have said the Companies Court is not the appropriate forum to determine such disputes. Although it is the normal practice to dismiss a petition where a substantial dispute has been raised I consider in the circumstances of this case that the hearing of the petition should be adjourned pursuant to Section 180(1) of the Companies Ordinance until the 2nd July 1984 at 9.15 a.m. to enable the petitioner to bring an action to establish the debt. Costs will be reserved. Liberty to apply.

Representation:

Miss Josephine Pinto (Lau, Wong & Chan) for Petitioner.

Miss Lily Yew (W.S. Lo & Co.) for Company.