RE K C K GARMENT FACTORY LTD

RE K C K GARMENT FACTORY LTD

The liquidators failed to prove the requisite subjective desire to prefer the 1st respondent: the payments were made to reduce guarantors' contingent liabilities and to attempt to prolong the company's trading; evidence (including requests to extend the loans and lack of contemporaneous demands) was inconsistent with a desire to prefer the 1st respondent, so the summons against Hong Kong Construction Financing Limited is dismissed. Separately, where the presumption in s50(5) Cap 6 applies to payments to an associate (Apparel Partner Ltd) and relevant respondents did not contest, the declarations and orders sought were made against that associate and the directors/associates.

Citation
[2019] HKCFI 585
Parties
Applicant (liquidators): Joint and Several Provisional Liquidators of K C K Garment Factory Limited; Company (subject of Winding Up): K C K Garment Factory Limited; 1st Respondent (licensed Money‑lender): Hong Kong Construction Financing Limited; 2nd Respondent (director and Guarantor): Eric Woo; Respondent/associate (beneficially Owned by Eric Woo and His Father): Apparel Partner Limited; 3rd Respondent (director/associate): 3rd Respondent (father of Eric Woo, bankrupt); 4th Respondent (director/associate): 4th Respondent
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
21 January 2019
Case Number
HCCW300/2014
Procedural Posture
Companies Winding Up Proceedings (liquidators' Summons) / Chambers Hearing and Decision on Liquidators' Summons (application Under Ss 266, 266 A, 266 B and 276 Cap 32)
Outcome
Summons dismissed against Hong Kong Construction Financing Limited for failure to prove requisite desire; declarations and orders granted in respect of payments to Apparel Partner Limited and associated directors where statutory presumption applied.
Legal Topics
Unfair Preference, Preferential Payment, Misfeasance, Directors' Duties, Voidable Transactions, Presumption of Desire
Source Language
EN
Company Law Insolvency Bankruptcy Civil Procedure Unfair Preference Preferential Payment Misfeasance Directors' Duties +2 more

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 4 Authorities cited 9 Party arguments 2 Amounts and remedies 4
Sign in to unlock

Parties

Joint and Several Provisional Liquidators of K C K Garment Factory Limited

Applicant (liquidators)

K C K Garment Factory Limited

Company (subject of Winding Up)

Hong Kong Construction Financing Limited

1st Respondent (licensed Money‑lender)

Eric Woo

2nd Respondent (director and Guarantor)

Apparel Partner Limited

Respondent/associate (beneficially Owned by Eric Woo and His Father)

3rd Respondent (father of Eric Woo, bankrupt)

3rd Respondent (director/associate)

4th Respondent

4th Respondent (director/associate)

Procedural Posture

Companies Winding Up Proceedings (liquidators' Summons) / Chambers Hearing and Decision on Liquidators' Summons (application Under Ss 266, 266 A, 266 B and 276 Cap 32)

Legal Issues

  1. 1 Whether payments of HK$10,246,575 (3 October 2014) and HK$241,667 (10 October 2014) were unfair preferences under ss 266/266B Cap 32
  2. 2 Whether the company was influenced by the requisite subjective desire to prefer the 1st respondent or the guarantors
  3. 3 Whether directors (2nd–4th respondents) were guilty of misfeasance under s276 Cap 32 and liable to contribute to assets

Ratio Decidendi

The liquidators failed to prove the requisite subjective desire to prefer the 1st respondent: the payments were made to reduce guarantors' contingent liabilities and to attempt to prolong the company's trading; evidence (including requests to extend the loans and lack of contemporaneous demands) was inconsistent with a desire to prefer the 1st respondent, so the summons against Hong Kong Construction Financing Limited is dismissed. Separately, where the presumption in s50(5) Cap 6 applies to payments to an associate (Apparel Partner Ltd) and relevant respondents did not contest, the declarations and orders sought were made against that associate and the directors/associates.

Court Disposition

Summons dismissed against Hong Kong Construction Financing Limited for failure to prove requisite desire; declarations and orders granted in respect of payments to Apparel Partner Limited and associated directors where statutory presumption applied.

Orders

  • Dismissed liquidators' summons against Hong Kong Construction Financing Limited (payments of HK$10,246,575 and HK$241,667)
  • Applicants (liquidators) to pay respondents' costs of those proceedings with a certificate for one counsel