LERIC INTERNATIONAL LTD (In Liquidation) v. EASYRICH INTERNATIONAL HOLDINGS LTD AND ANOTHER

LERIC INTERNATIONAL LTD (In Liquidation) v. EASYRICH INTERNATIONAL HOLDINGS LTD AND ANOTHER

The court refused to set aside the 2nd Mortgage as an unfair preference because there was no evidence of a subjective desire to prefer Yee Fu; the court granted validation under section 182 of the Provisional Sale and Purchase Agreement and the Assignment (and the $668,300 payment) because the sale price was close to market, proceeds discharged secured creditors (so unsecured creditors were not prejudiced), reasonable commercial steps and concessions were shown, and the statutory discretion favored validation in the circumstances.

Citation
LERIC INTERNATIONAL LTD (In Liquidation) v. EASYRICH INTERNATIONAL HOLDINGS LTD AND ANOTHER
Parties
Applicant (in Liquidation): LERIC INTERNATIONAL LIMITED; 1st Respondent: EASYRICH INTERNATIONAL HOLDINGS LIMITED; 2nd Respondent: YEE FU INVESTMENT FINANCE LIMITED
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
13 January 2009
Case Number
HCCW450/2006
Procedural Posture
Companies (winding Up) No. 450 of 2006 / Decision (chambers) 13 January 2009
Outcome
Validation order granted: Provisional Sale and Purchase Agreement and Assignment validated; payment of $668,300 validated; 2nd Mortgage not set aside as unfair preference; costs allocated as ordered.
Legal Topics
Section 182 Validation Orders, Unfair Preference (sections 266 and 266 B), Extortionate Credit (section 264 B), Mortgagee Sale to Related Purchaser, Costs in Liquidation
Source Language
EN
Companies Law Insolvency Law Property Law Equity and Trusts Mortgages and Secured Transactions Section 182 Validation Orders Unfair Preference (sections 266 and 266 B) Extortionate Credit (section 264 B) +2 more

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Parties

LERIC INTERNATIONAL LIMITED

Applicant (in Liquidation)

EASYRICH INTERNATIONAL HOLDINGS LIMITED

1st Respondent

YEE FU INVESTMENT FINANCE LIMITED

2nd Respondent

Procedural Posture

Companies (winding Up) No. 450 of 2006 / Decision (chambers) 13 January 2009

Legal Issues

  1. 1 Whether the 2nd Mortgage constituted an unfair preference and should be set aside under sections 266 and 266B of the Companies Ordinance
  2. 2 Whether the Provisional Sale and Purchase Agreement and the Assignment are void under section 182 or should be validated
  3. 3 Whether the loan agreement was extortionate or otherwise vitiated

Ratio Decidendi

The court refused to set aside the 2nd Mortgage as an unfair preference because there was no evidence of a subjective desire to prefer Yee Fu; the court granted validation under section 182 of the Provisional Sale and Purchase Agreement and the Assignment (and the $668,300 payment) because the sale price was close to market, proceeds discharged secured creditors (so unsecured creditors were not prejudiced), reasonable commercial steps and concessions were shown, and the statutory discretion favored validation in the circumstances.

Court Disposition

Validation order granted: Provisional Sale and Purchase Agreement and Assignment validated; payment of $668,300 validated; 2nd Mortgage not set aside as unfair preference; costs allocated as ordered.

Orders

  • Validation order under section 182 in favour of Easyrich for the Provisional Sale and Purchase Agreement and the Assignment
  • Validation order under section 182 in respect of the payment of HK$668,300 to Yee Fu