Re Gold-face Finance Ltd

HCCW 870/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 870 OF 2004

____________

____________

Before: Hon. Kwan J. in Chambers

Date of Hearing: 14 July 2005

Date of Decision: 14 July 2005

______________

D E C I S I O N

______________

1.I have before me a summons issued by Gold-Face Finance Limited (“the Company”) under section 182 of the Companies Ordinance, Cap. 32.  The summons was issued on 7 July 2005, some 10 months after the creditor’s petition was presented in August 2004.  In this summons, the Company seeks an order to validate two types of expenses.  The first is operating expenses in the amount of HK$145,371.00 a month as from the date of the order.  The other item of expenditure is professional fees in the sum of HK$503,000.00, anticipated to be incurred for proceedings brought by the Company in HCMP No. 2890 of 2004 for sanction of a scheme of arrangement with its creditors.  That application for sanction of the scheme is opposed by the petitioning creditor and has been adjourned to a date to be heard.

2.The Company is an indirectly wholly owned subsidiary of Gold-Face Holdings Limited, which is a listed company.  As I understand from the evidence filed in support of this application, after its bank account was frozen on presentation of the winding-up petition, the Company has been funded in respect of its operating expenses and the professional fees incurred for the restructuring of the Company by a company in the Gold-Face group called Braemar Associates Limited (“Braemar”).  I have, however, not been provided with full information as to how much Braemar had funded the Company.  There is placed before the court the management account of Braemar showing assets in the form of cash of about HK$390,000.00.  I note that the net liability of Braemar is in the region of HK$43 million.  So it seems from the financial statement that Braemar has for some time been in financial difficulty and it cannot be said that Braemar has suddenly found itself unable to support the Company further.

3.In his submissions for the Company, Mr Harris has realistically reduced the amount sought for operating expenses per month from HK$145,000.00 odd to HK$12,971.00.  He recognised that the largest item being salaries and wages in the sum of over HK$130,000.00 odd a month cannot be supported, as most of the employees would seem not to be employed by the Company but by other entities in the Gold-Face group.  The amount sought at HK$12,000.00 odd a month is only to cover rent and expenses like communication and travelling expenses and other miscellaneous items.  Even so, I am not minded to make a validation order for such operating expenses.  The Company has been carrying on without a validation order for some 10 months and would appear to have been funded in its operation by one or more of the entities in the Gold-Face group.  The winding-up petition and the petition for sanction of the scheme are to be heard in less than 2 months’ time.  It does not seem to me appropriate to make a validation order in respect of the operating expenses at this stage.

4.As for the professional fees to be incurred for the proceedings for sanction of the scheme, I note from the scheme documents that it was estimated that expenses of about HK$5.3 million might be incurred by the Company prior to the effective date of the scheme in connection with the negotiation and preparation of the scheme, including the costs of holding the court meeting and the costs of obtaining the sanction of the court.  It was never envisaged that this part of the expenses would come out of the scheme funds to be put up by the investor.  Of the estimated sum of HK$5.3 million, I have been given no information as to what portion of the estimated expenditure had been incurred and from what source the expenses had been met, although I would venture to think that the expenses incurred so far would probably have taken up a large portion of the estimated expenses.

5.I do not think I have been given sufficient information to form a view as to whether the Company could and should have obtain funding from another source, as it had envisaged all along, to meet these expenses.  In the circumstances, I do not think it would be appropriate to make a validation order for this item of expenditure.

6.For the above reasons, I dismiss the application of the Company.  I make a gross sum order in respect of the Official Receiver’s costs.  The Company is to pay the Official Receiver HK$4,000.00 as his costs of this application.

Messrs Lily Fenn & Partners, for the Petitioner, absent

Mr Jonathan Harris, instructed by Messrs Sidley Austin Brown & Wood, for the Respondent

Ms P. Mckenna, for the Official Receiver