Kin Shing Tong Ltd v. Planar Semiconductor Ltd

HCCW000068/1974

IN THE SUPREME COURT OF HONG KONG

COMPANIES WINDING-UP

NO. 68 OF 1974

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Coram: Li, J.

Date of Judgment: 25th April 1975 at 2.30 p.m.

Present: Mr. Murphy (John Ip & Company) for the petitioner

Mr. Kwong (N.K. Tsang & Company) for the respondent

Mr. Patel for the Official Receiver

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JUDGMENT

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1. This is a petition by Kin Shing Tong Limited (hereinafter referred to as the petitioner) for an order to wind up the Planar Semiconductor Limited (hereinafter referred to as the respondent) on the ground that the respondent is insolvent and is unable to pay its debt due to the petitioner. The petitioner's case is that by various loans made by the petitioner to the respondent on divers days between the 17th of December, 1973 and the 29th of May, 1974, the respondent is indebted to the petitioner in the sum of $377,000 less two repayments by the respondent of $37,000 on the 30th of March, 1974 and $10,000 on the 11th of May, 1974. Thus by the 29th of May, 1974 a sum of $330,000 was owed by the respondent to the petitioner, and this was the state of affairs up to the 30th of June, 1974.

2. By an agreement in writing dated the 30th of June, 1974 the respondent agreed to repay the sum owed to the petitioner on or before the 30th of October, 1974. In November the petitioner, through its solicitors, demanded payment. The respondent was not in a position to repay and refused to repay at that time. For this reason this petition was filed on the 4th of December, 1974 and served on the respondent.

3. The respondent's case is set out in the affidavit by one of its directors, LEE Sui Mo. It is said that two of the petitioner's directors and shareholders are Mr. CHU Tak Chun and Mr. Ivenhoe CHU Tak Fan who were, at the material time, directors and majority shareholders of the respondent. In October, 1973 the two Mr. CHU's in their capacity as directors of the petitioner orally agreed to finance the respondent's running expenses for two years by various loans. Thus between December, 1973 and May, 1974 a total sum of $377,000 was lent to the respondent. By an agreement in writing on the 30th of June the petitioner agreed further to grant a loan of $330,000 to be repaid in four months' time. Thus in July and August the petitioner advanced another $65,000 to the respondent, which sum the respondent admitted to be repayable on demand after October, 1974. The payment of the original debts that were given between December, 1973 and June, 1974 were not due until October, 1975, namely a period of two years. The previous payments or repayments made by the respondent to the petitioner were made by the two Mr. CHU's without authority or knowledge of the respondent at all. Thus the issue is whether the debt of $330,000 was due in November, 1973 and whether the agreement dated the 30th of June was indeed an acknowledgment of debt for repayment or for an additional loan.

4. Before I decide on this issue I should go through very quickly a summary of the events. After the petition was filed, leave was granted to the respondent to file an affidavit to oppose the petition out of time in Chambers on the 7th of February this year. Then in open Court on the same day the petitioner asked for an adjournment on the condition that the respondent should pay $65,000.00 to the petitioner in ten days, and in default of such payment the petitioner would be at liberty to appoint provisional liquidators. The respondent failed to pay the $65,000 and on the 21st of February, 1975, the petition was further adjourned. It was further ordered that provisional liquidators should be appointed without any opposition on the part of the respondent. The provisional liquidators were to be agreed upon between the parties and to be appointed on the 26th of February. On the 26th of February three persons - Mr. S.H. YEUNG, Mr. HO Choi Chiu and Mr. Kenneth YOUNG were appointed provisional liquidators with the power to inspect all relevant documents and books of accounts. The petition was therefore further adjourned and the deponents of affidavits were ordered to attend Court for the purpose of cross-examination if necessary.

5. On the 23rd of March, 1975 the case came up in Chambers again and the Court was informed that Mr. HO Choi Chiu was unwilling to act as a provisional liquidator. Accordingly he was granted leave to withdraw from the appointment, and the remaining provisional liquidators were to report to the Court within 28 days. On the 18th of April, 1975 the report was ready and was presented to this Court. Briefly the terms of report were that the accounts were not kept in the proper order, indicating that there has been mishandling and mismanagement.

6. At the hearing yesterday neither party asked for leave to cross-examine the deponent on any affidavit. Thus the case was heard entirely on evidence by affidavit. The provisional liquidators' report was not of great assistance to me because it reported that the books of accounts kept were in such a disorderly manner so that no statement of accounts could be prepared and because of this they were unable to ascertain the true and correct financial position of the respondent. The report did indicate that there had been mishandling and mismanagement and offered the opinion that it was proper that the respondent should be wound up. However, this ground for winding up the respondent was not the original ground for the petition.

7. I now come to the issue of whether the debt was due or whether the written agreement of the 30th of June was an agreement for an additional loan. The June agreement which was exhibited as Exhibit A and attached to the affidavit of Mr. CHU Tak Fan alias Ivanhoe CHU, dated and filed on the 26th of February, 1975 did not expressly state it was an acknowledgment of previous debts. It reads:-

AS WITNESS the hands of the parties the day and year first above written."

This document had not made quite clear whether it was for an additional loan of $330,000 or was merely an acknowledgment of the previous debt given in pursuance to their alleged oral agreement. If it was merely an acknowledgment of the previous debt and an agreement as to the matter of repayment as from the 30th of June 1974 then it would appear rather surprising that on the 30th of July, 1974 and the 1st of August, 1974 the petitioner advanced a further loan of $65,000, as evidenced in paragraph 5 of the petition. On the other hand there was a repayment only of $85,000 on the 22nd of July, 1974 by the respondent.

8. Having read the affidavit and having considered counsels' arguments I find that there are lots of facts which are not as yet before me. I can find lots of gaps in between the affidavits filed. As a result I am unable to resolve the issue whether the written agreement on the 30th of June, 1974 was in fact an agreement to grant a further loan and whether the loan of $65,000 granted in July and August 1974 were made in pursuance of an alleged oral agreement or was granted in the June agreement. Reading the affidavits there appears to be a prima facie defence if the petitioner were in a civil action suing the respondent for the debt due in November, 1974. If the debt was due then, it was up to the petitioner to initiate civil proceedings against the respondent and obtain a judgment debt. Then it would be abundantly clear that the debt was due as such.

9. On the balance of probability there is in my mind a doubt as to whether the debt was in fact due in November or December. When the petition was filed the debt might well be due not in 1974 but only in 1975. For these reasons I will now dismiss the petition. The costs would have to follow events. The petition is dismissed with costs.

Representation:

Mr. Murphy (John Ip & Company) for the petitioner

Mr. Kwong (N.K. Tsang & Company) for the respondent

Mr. Patel for the Official Receiver