Super Speed Ltd (in Liquidation) v. Bank of Baroda
Read the full judgment text of HCCW 273/2012 on BabelCite. This High Court CFI judgment was delivered on 4 August 2014.
1. There are 2 applications before the court made by the Joint and Several Liquidators (“Liquidators”) of Super Speed Ltd (“Super”) and Marshel Exports Ltd (“Marsel”) against Bank of Baroda (“Bank”) for :
Cites 1 case
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HCCW 273/2012 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES (WINDING-UP) PROCEEDINGS NO. 273 OF 2012 ___________________
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__________________ HCCW 274/2012 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES (WINDING-UP) PROCEEDINGS NO. 274 OF 2012 ___________________
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__________________ (Heard together)
________________ D E C I S I O N ________________ 1.There are 2 applications before the court made by the Joint and Several Liquidators (“Liquidators”) of Super Speed Ltd (“Super”) and Marshel Exports Ltd (“Marsel”) against Bank of Baroda (“Bank”) for :
Factual background 2.The facts are not in dispute and they can be briefly stated as follows. 3.Both Super and Marshel are the Bank’s customers. Marshel opened its bank account with the Bank on 28.7.2007 whereas Super’s account was opened on 24.8.2007. At all material times, Mr Sharma Nipun, a director of both companies, operated the 2 bank accounts on behalf of the 2 companies. 4.On 17.9.2007, Marshel granted a first mortgage over the Marshel Property in favour of Dah Sing Bank Limited to secure “all monies” in respect of general banking facilities and interest (“Dah Sing Mortgage”). On 7.8.2008, Marshel granted a second mortgage over that property in favour of the Bank to secure all monies obligations and liabilities owing or incurred by Marshel (“Marshel Mortgage”). 5.On 25.10.2007, Super granted a mortgage over the Super Property in favour of the Bank to secure a term loan in the sum of HK$3,500,000. In around October 2010, that mortgage was discharged and on 28.10.2010, Super granted a new legal charge/mortgage over the same property in favour of the Bank to secure “all monies” in respect of general banking facilities and interest (“Super Mortgage”). 6.On 3.8.2012, 2 creditor’s winding-up Petitions were issued, one against Super and the other against Marshel. On 24.10,2012, both companies were wound-up. 7.Prior to the making of the winding-up orders, the Bank was informed by the solicitors acting for Super and Marshel on 11 September 2012 that winding-up Petitions were presented against them. 8.In January 2013, the Liquidators requested the Bank for information on the loans that the Bank had advanced to Super and Marshel. 9.On 8.7.2013, the Bank submitted proofs of debt in respect of both Super and Marshel to the Liquidators. The sum due from Super was US$1,110,607.46 or HK$8,618,313.89 whereas the sum due from Marshel was US$1,665,338.03 or HK$12,923,023.12. 10.It is common ground that the Bank had advanced loans to both Super and Marshel after 3.8.2012. Further, the Bank acknowledges that despite the fact that it became aware of the winding-up Petitions against Super and Marshel by 12.9.2012 (the Liquidators contend that the Bank had constructive knowledge of the Petitions on 24.8.2012 when they were gazetted), it nevertheless continued to advance further loans to the 2 companies. 11.In respect of Super, the Bank had advanced a total of US$743,534.74 (principal) to it between 24.8.2012 and 18.9.2012 :
12.As for Marshel, the Bank had advanced a total of US$1,655,671.03 (principal) to it between 23.8.2012 and 28.9.2012.
13.On 28.11.2013, the Liquidators issued the Summonses in respect of the 2 applications that are before this court. S 182 14.S 182 provides as follows :
The arguments 15.With respect, the Liquidators’ arguments are quite difficult to understand. In respect of the Post-Petition Loans, the Liquidators stated in their skeleton submissions that they are no longer pursuing the argument that those loans were dispositions of the 2 companies’ respective assets but they are maintaining that what they refer to as the “Post-Petition Charges”[2] were dispositions of the 2 companies’ assets. 16.However, in their reply submissions, it was stated that the above concession is a mistake. 17.As regards the Post-Petition Charges, what is contended by the Liquidators is that the Post-Petition Loans have reduced the equity in the mortgaged properties belonging to Super and Marshel and such reduction constituted dispositions for the purpose of S 182. 18.Clearly, the Post-Petition Loans and Post-Petition Charges go hand-in-hand. However, it is very difficult to see how the former can constitute dispositions of the assets of Super and Marshel when, in truth, assets were transferred to them by the Bank. The kernel of the disputes in these applications concerns the “enlargement” of the charges over Super Property and Marshel Property as a result of the Post-Petition Loans. Hence, the resolution of these applications will determine whether the Bank is a secured creditor in respect of the Post-Petition Loans. 19.The Liquidators’ case is heavily relied upon the view taken by Professor Goode set out in his book Principles of Corporate Insolvency Law, 4th edn, at para 13-133 :
20.The Bank’s response is, in gist, as follows :
Were the Super Property and Marshel Property charged to their full value? 21.I should say at the outset that the case of the Liquidators is greatly handicapped by the absence of any expert evidence on their side to counter that adduced by the Bank. 22.According to the expert evidence adduced by the Bank, Super Property is valued at HK$5,300,000 (US$679,487) as at 24.8.2012. To work out the value of that property as at September 2012, Mr Chan, who appeared for the Bank, submitted that the said valuation should be increased by 7.4% to reflect the price increase between August and September 2012. The price becomes US$729,769 with that adjustment. The 7.4% comes from the statistics from the Rating and Valuation Department (“RVD”) produced by the Liquidators. 23.Instead of adducing their own expert evidence, what the Liquidators did was to extrapolate the price for the Super Property based, firstly, on an offer dated 3.12.2013 to purchase both the Super Property and the Marshel Property at HK$24,045,000. Based on the respective gross floor area of the 2 properties, the Liquidators worked out that the offer price for the Super Property was HK$7,607,460 (US$975,000). Secondly, the Liquidators rely upon the statistics from the RVD to show that the average prices for Grade B offices in the Tsim Sha Tsui area, to which the Super Property belongs, went up by 14.94% between August 2012 and August 2013. With those data, the Liquidators then worked out the estimated value of the Super Property as at August 2012 to be US$848,543. 24.Further, by making an upward adjustment of 7.4% the estimated value of the Super Property as at September 2012 becomes US$911,335. 25.In respect of the Marshel Property, the Bank’s valuation evidence is that it was worth HK$11,500,000 (US$1,474,359) as at 23.8.2012. With the 7.4% increase, the value as at September 2012 becomes US$1,583,462. 26.With the same exercise, the valuations extrapolated by the Liquidators for the same property are US$1,833,458 as at August 2012 and US$1,969,134 as at September 2012. 27.Before I deal with the debts owed under the Super Mortgage and Marshel Mortgage, I should say that I am not inclined to accept the Liquidators’ valuation evidence in preference over the Bank’s expert evidence. The latter is in the form of “abbreviated” valuation reports. I do not find them entirely satisfactory because whilst they referred to a “Direct Comparison Approach” as the valuation method, there is no mention of any comparable which had been considered. However, the extrapolation exercises carried out by the Liquidators can, at best, only provide a rough idea on the market prices in question. Therefore, and not without reluctance, I prefer the Bank’s evidence. 28.As regards the debts owed to the Bank, as at 3.8.2012 (date of Petition) the total principal sum due from Super to the Bank stood at US$2,231,878.22. 29.Between 23.8.2012 and 19.9.2012 (the period during which the Post-Petition Loans were advanced to Super), the daily total principal sum due from Super to the Bank fluctuated between US$1,167,597.54 (the lowest) and US$2,231,878.22 (the highest). 30.According to the Bank’s evidence, the total principal sum that remains due from Super to the Bank is US$1,092,942.53. 31.In the case of Marshel, as at 3.8.2012 the total principal sum due from Marshel to the Bank stood at US$2,904,287.03. 32.Between 22.8.2012 and 28.9.2012, the daily total principal sum due from Marshel to the Bank fluctuated between US$1,521,101.85 and US$2,726,895. 33.The current total principal sum due from Marshel to the Bank is US$1,655,777.44. 34.In addition, the outstanding principal and interest calculated up to 28.9.2012 due from Marshel to Dah Sing Bank, which was and is secured by the Dah Sing Mortgage, stood at HK$4,767,643.20 (US$611,236). 35.On the basis of the above figures, the lowest amount of the combined sum that Marshel owed to Dah Sing Bank and the Bank between 22.8.2012 and 28.9.2012 is in the region of US$2,132,337.85 (US$1,521,101.85 + US$611,236). 36.The above evidence of debts is not disputed. In the light of those figures, it is quite plain that both the Super Property and Marshel Property were at all material times charged to their full value. 37.Indeed, Mr Chung, who appeared for the Liquidators, recognised the difficulty of his case in this regard. However, he sought to argue that there were substantial repayments which had been made by Super (and Marshel) to the Bank and those repayments have somehow changed the picture. I regret to say that I am unable to understand the submission. The repayments in the case of Super had been set out in a table at bundle A, pp 1068-1069). Looking at that table, I cannot see how the repayments contradict the proposition that the Super Property was charged to its full value at all material times. The same can be said for Marshel (see bundle C, pp 5069-5071). 38.In the premises, I am satisfied that there was no reduction of the equity in the Super Property and Marshel Property which belonged respectively to Super and Marshel, and therefore no disposition which fell within by S 182. 39.It is unnecessary to deal with the arguments on the validity of Professor Goode’s opinion. 40.Accordingly, these applications are dismissed with costs to the Bank.
Mr Jerry M S Chung, instructed by Johnnie Yam, Jacky Lee & Co, for the applicant in both cases Mr Anthony H K Chan, instructed by Holman Fenwick Willan, for the respondent in both cases [1] The date of the winding-up Petitions against the 2 companies. [2] This is a misnomer because the only securities given to the Bank by Super and Marshel are the “all monies” mortgages granted over, respectively, the Super Property and the Marshel Property and both mortgages were executed before 3.8.2012. [3] The English equivalent of S182. |
Cases cited in this judgment
Further hearings and rulings under HCCW 273/2012