Re UDL Argos Engineering & Heavy Industries Co. Ltd.

Re UDL Argos Engineering & Heavy Industries Co. Ltd.

The court applied the rights test to determine classes: internal creditors (including subsidiaries) could properly vote within the single class because their legal rights were not so dissimilar as to cause confiscation or injustice; disputed claims valued at zero in good faith may be excluded from voting; the Schemes preserved preferential and secured rights and enjoyed substantial support from independent creditors, so the court exercised its discretion to sanction all 25 Schemes (subject to stated conditions).

Citation
Re UDL Argos Engineering & Heavy Industries Co. Ltd.
Parties
Petitioner (company): UDL Holdings Limited; Petitioner (subsidiary): UDL Argos Engineering & Heavy Industries Co. Ltd; Petitioner (subsidiary): Everpoint Company Limited; Petitioner (subsidiary): Econo Plant Hire Company Limited; Petitioner (subsidiary): East Coast Towing Limited; Petitioner (subsidiary): Universal Dockyard Limited; Petitioner (subsidiary): UDL Ship Management Limited; Petitioner (subsidiary): UDL Marine Pte Limited; Petitioner (subsidiary): UDL Marine Operation Limited; Petitioner (subsidiary): UDL Contracting Limited; Petitioner (subsidiary): UDL Civil Contractors Limited; Petitioner (subsidiary): UDL Employment Services Limited; Petitioner (subsidiary): Wellful Time Limited; Petitioner (subsidiary): UDL Steel Fabricators & Shipbuilders Company Limited; Petitioner (subsidiary): UDL Management Limited; Petitioner (subsidiary): UDL Investment Limited; Petitioner (subsidiary): UDL E & M (BVI) Limited; Petitioner (subsidiary): UDL Dredging Limited; Petitioner (subsidiary): S.K. LUK Construction Company Limited; Petitioner (subsidiary): Keen Yield Investment Limited; Petitioner (subsidiary): Graceful Ease Investment Limited; Petitioner (subsidiary): Full Keen Investment Limited; Petitioner (subsidiary): Faith On International Limited; Petitioner (subsidiary): Fairking Transportation Limited; Petitioner (subsidiary): Exact Profit Limited; Objector / Disputed Creditor: Nishimatsu Construction Company Limited; Objectors (preferential Creditors Represented by Director of Legal Aid): Opposing Preferential Creditors; Creditor (guarantor Claimant, Disputed Quantum): American Home Assurance Company; Creditor (winding Up Petitioner, Absent at Hearing): HSBC
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
18 April 2000
Case Number
HCMP437/1999
Procedural Posture
Scheme of Arrangement Under Companies Ordinance (cap.32) S.166 / Sanction Hearing and Judgment (sanction Stage)
Outcome
The court sanctioned the 25 Schemes of Arrangement (sanction granted subject to fulfillment of condition precedent).
Legal Topics
Scheme of Arrangement, Class Composition, Creditors' Voting, Disputed Claims Valuation, Preferential Creditors, Moratorium on Enforcement, Security Realisation, Court Discretion in Sanctioning
Source Language
EN
Company Law Insolvency Law Corporate Restructuring Procedural Law Scheme of Arrangement Class Composition Creditors' Voting Disputed Claims Valuation +4 more

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Parties

UDL Holdings Limited

Petitioner (company)

UDL Argos Engineering & Heavy Industries Co. Ltd

Petitioner (subsidiary)

Everpoint Company Limited

Petitioner (subsidiary)

Econo Plant Hire Company Limited

Petitioner (subsidiary)

East Coast Towing Limited

Petitioner (subsidiary)

Universal Dockyard Limited

Petitioner (subsidiary)

UDL Ship Management Limited

Petitioner (subsidiary)

UDL Marine Pte Limited

Petitioner (subsidiary)

UDL Marine Operation Limited

Petitioner (subsidiary)

UDL Contracting Limited

Petitioner (subsidiary)

UDL Civil Contractors Limited

Petitioner (subsidiary)

UDL Employment Services Limited

Petitioner (subsidiary)

Wellful Time Limited

Petitioner (subsidiary)

UDL Steel Fabricators & Shipbuilders Company Limited

Petitioner (subsidiary)

UDL Management Limited

Petitioner (subsidiary)

UDL Investment Limited

Petitioner (subsidiary)

UDL E & M (BVI) Limited

Petitioner (subsidiary)

UDL Dredging Limited

Petitioner (subsidiary)

S.K. LUK Construction Company Limited

Petitioner (subsidiary)

Keen Yield Investment Limited

Petitioner (subsidiary)

Graceful Ease Investment Limited

Petitioner (subsidiary)

Full Keen Investment Limited

Petitioner (subsidiary)

Faith On International Limited

Petitioner (subsidiary)

Fairking Transportation Limited

Petitioner (subsidiary)

Exact Profit Limited

Petitioner (subsidiary)

Nishimatsu Construction Company Limited

Objector / Disputed Creditor

Opposing Preferential Creditors

Objectors (preferential Creditors Represented by Director of Legal Aid)

American Home Assurance Company

Creditor (guarantor Claimant, Disputed Quantum)

HSBC

Creditor (winding Up Petitioner, Absent at Hearing)

Procedural Posture

Scheme of Arrangement Under Companies Ordinance (cap.32) S.166 / Sanction Hearing and Judgment (sanction Stage)

Legal Issues

  1. 1 Whether the court had jurisdiction to sanction schemes where internal creditors voted in the same class as external creditors
  2. 2 Whether internal creditors (including subsidiaries) should be excluded from the single creditors' class
  3. 3 Whether preferential creditors required separate class meetings or were properly included

Ratio Decidendi

The court applied the rights test to determine classes: internal creditors (including subsidiaries) could properly vote within the single class because their legal rights were not so dissimilar as to cause confiscation or injustice; disputed claims valued at zero in good faith may be excluded from voting; the Schemes preserved preferential and secured rights and enjoyed substantial support from independent creditors, so the court exercised its discretion to sanction all 25 Schemes (subject to stated conditions).

Court Disposition

The court sanctioned the 25 Schemes of Arrangement (sanction granted subject to fulfillment of condition precedent).

Orders

  • Sanction granted to all 25 Schemes of Arrangement before the court
  • Sanction made conditional upon obtaining Stock Exchange approval by 30 April 2000 or such later date as the court may allow