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OUTER HOUSE, COURT OF SESSION
[2008] CSOH 127
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OPINION OF LORD GLENNIE
in the Petitions of
PUREWAL ENTERPRISES
LIMITED
Petitioner;
for an order to
wind up Cathay Loon Fung Limited (P1209/08) and Oriental Express Scotland
Limited (P1210/08) in terms of Section 122 of the Insolvency Act 1986.
___________
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Petitioner: Thomson; Burness LLP
Respondent: Hawkes, Dawson; Shepherd and
Wedderburn
4 September 2008
Introduction
[1] On
18 June 2008 first orders were made in petitions for the winding up of Cathay
Loon Fung Limited ("Cathay Loon Fung") and Oriental Express (Scotland) Limited
("Oriental Express") and, at the same time, a provisional liquidator was
appointed over the affairs of each company.
I shall refer to Cathay Loon Fung and Oriental Express as "the Company"
or "the Companies" as the case requires.
Mr Liu is the principal director of both Companies. The petitioner in each case is Purewal
Enterprises Limited. Its principal is Mr
Purewal. I appointed the cases to be put
out By Order on 27 June 2008
for the purpose of considering any application which the Companies might wish
to make for recall of the orders appointing the provisional liquidator. The provisional liquidator has duly entered
into possession of the Companies' premises and taken the affairs of the
Companies under his control.
[2] After
a number of continuations of the By Order and other hearings, caused in part by
the Companies' difficulties in obtaining legal representation, answers to the petitions
were lodged on behalf of the Companies and both the petitions and answers were
adjusted. The answers in each case allege
that the Companies had tendered (or at least sought to tender) payment of the
sums claimed prior to presentation of the petition. The adjustments to the petitions deal
specifically with such matters. In light
of this, the Companies have moved for dismissal of the petitions. This Opinion is in respect of those
motions. Although the motions did not separately
seek recall of the appointment of the provisional liquidators, it was accepted
by Mr Thomson, who appeared for the petitioner, that it was open to me to
recall the appointment of the provisional liquidators even if I did not dismiss
the petition. The two petitions have at
all times been dealt with together and, although the facts differ to some
extent in the two cases, it has not been suggested that I should reach
different conclusions on them.
The
background to the petition to wind up Cathay Loon Fung Limited
[3] The
petitioner is the heritable proprietor of premises (the "Restaurant Premises")
in Sauchiehall Street, Glasgow,
having purchased them in January 2008 from Cathay (Scotland)
Limited (which I understand to be a company owned or controlled by Mr Liu). By virtue of becoming owner of the Restaurant
Premises, the petitioner became landlord under and in terms of a lease,
originally between Cathay (Scotland) Limited and New Loon Fung Limited, but
under which the tenant's interest has now been assigned to the Company. Accordingly, the petitioner and the Company now
stand in a relation of landlord and tenant under that lease. The annual rent stated in the lease is
£260,000, equating to £5,000 per week, payable monthly in advance (though the
Company contends that there was an oral agreement that the rent be only £3,000
per week). The lease further provides
that the tenant is obliged on demand to reimburse the landlord all sums which
the landlord has had to pay from time to time for insuring the premises against
certain risks. The petitioner avers that
the debt due by the Company to the petitioner in respect of both rent and
insurance premiums up to 2 June 2008
amounts to £72,458.20 - on the basis of its contention about the oral
agreement, the Company puts the figure at something under £40,000. The parties' agents have corresponded in
relation to the outstanding sums. In Stat.6
of the petition the petitioner makes the following averment:
"On 20 May 2008, Messengers-at-Arms,
acting on the instructions of the Petitioner's agents, served a pre-irritancy
warning notice on the Company. Service
of that notice resulted in an e-mail being sent on 5 June 2008 by the Company's
(then) agents to the Petitioner's agents to which e-mail was attached a letter
of the same date ... . The letter set
forth certain contentions in relation to the validity of the pre-irritancy
warning notice. It further stated that:
'...as Cathay
are in a position to settle the arrears Purewal's calculation as to the amount
of arrears is invited.
Subject to the
above Cathay have calculated that the arrears amount to
approximately £38,000 but in order to cover [any] error on their part we
enclose Bank Drafts (x2) amounting to £40,000.'
The letter then
went on to attach certain conditions [to] the encashment of the payment
referred said to be enclosed with the letter.
The letter of 5 June 2008
and its enclosure were never received by the Petitioner's agents. They drew that to the attention of the
Company's agents by letter dated 6 June
2008 ... . That letter also
confirmed the rental arrears which were outstanding. No response has been received to that
letter."
The petition went on, in Stat.7, to
refer to proceedings raised by the Company in the Court of Session (action
A446/08) seeking declarator and interdict.
A copy of the summons in that action was produced. In that action the Company challenged the
validity of the pre-irritancy notice served on behalf of the petitioners and
made other complaints about their conduct in relation to attempts to terminate
the lease. The Company sought and, on 11 June 2008, was granted interim interdict (in terms of the first
conclusion to the summons) restraining the petitioners from "performing any act
which interferes with [the Company's] right to use and occupy the [Restaurant
Premises]". The petition referred to the
various disputes between the parties which were the subject of that action, and
concluded in this way:
"Notably, in
neither the letter from [their] agents dated 5 June 2008 nor in the Summons itself does the Company
dispute that it is indebted to the Petitioner in respect of monies due under
the Lease. On the Company's own
assessment, the sum outstanding is in the region of £40,000. In truth, the true extent of its current
indebtedness (to 2 June 2008)
is £72, 458.20. The monies due under the
Lease are due to be paid without any demand being made therefor by the
Petitioner. The Company has not paid
that debt, nor even the amount which on its own estimation is outstanding. It has claimed payment is about to be made
without in fact tendering payment. In
all the circumstances, the Petitioner reasonably believes and avers that the
Company is unable to pay its debts as they fall due".
That last sentence is a reference
to one means of establishing the facts relevant to the statutory test for
winding up .
[4] A
company may be wound up by the court if inter
alia it is unable to pay its debts: s.122(1)(f) Insolvency Act 1986. S.123(1) sets out a number of circumstances
in which the company is deemed to be unable to pay its debts. Paras.(a), (c) and (e) thereof apply to Scotland. These include, under para.(a), the service of
a written demand on the company and the lapse of three weeks without payment of
the sum claimed in that demand; and, under para.(c), the expiry of the induciae
of a charge for payment on an extract decree.
Neither of these provisions is relied on in the present case. Section 123(2) sets out another way, which
requires proof that the value of the company's assets is less than the amount
of its liabilities. This is not relied
on either. Instead, the petitioner
relies upon para.(e) of s.123(1), in terms of which it must be proved to the
satisfaction of the court that "the company is unable to pay its debts as they
fall due". The petitioners offer to
prove this by inference from the unexplained failure to pay an admitted
debt. This is the relevance of the
averments that there is an admitted debt of about £40,000 and that there has
been no tender of payment; and this is the context in which the averments in
the petition must be considered.
[5] In
support of the application for the appointment of a provisional liquidator, the
petitioners made the following averment in Stat.9:
"Having regard
to the extent of the company's insolvency ... and the nature of the company's
business (which will largely involve payments in cash), the petitioner further
respectfully submits that the affairs of the company should immediately be
brought under the control of the Court by the appointment of a provisional liquidator. In the summons [i.e. in action A446/08], the
company claims to have a total weekly turnover of between £43,000 and £50,000
in respect of the business it operates from the Restaurant Premises. By such an appointment, the provisional liquidator
could supervise the orderly ingathering of any sums due to the company by
debtors and the securing and subsequent disposal of its assets on the best
terms possible and in a manner which will best protect the position of the
company's creditors. The current position,
namely that the company is insolvent and trading (at the expense of the
Petitioner) whilst not making payment of a debt such as that owed to the
Petitioner is unsatisfactory and ought not to be allowed to continue."
It went on to say that the company
had reneged on an agreement made with the petitioner that it would abandon the
Lease and had also reneged on an agreement made after the grant of interim interdict. It continued:
"In the
circumstances, the petitioner is reasonably apprehensive that the Company may
act in a similarly dishonest fashion, by way of dissipation of its assets, if a
provisional liquidator is not immediately appointed. The petitioner accordingly submits that it
would be expedient to appoint a provisional liquidator under and in terms of
section 135 of the 1986 Act...".
The
petition to wind up Oriental Express (Scotland) Limited
[6] The
petitioner is the heritable proprietor of premises (the "Takeaway Premises") at
Union Street, Larkhall, of
which the Company is the tenant under a lease entered into in February
2008. The annual rent due under the
lease is £31,200 payable in weekly instalments in advance. The petition avers (in Stat.5) that the amount
due by the Company to the petitioner in respect of rent and insurance premiums payable
under the lease amounted, as at the beginning of June 2008, to £11,498.80. It was averred (in Stat.6) that the parties'
agents had corresponded in relation to the outstanding sums owed by the Company
and that on 20 May 2008 Messengers-at-Arms acting on instructions from the
petitioner's agents served a pre-irritancy warning notice on the company in
relation to sums allegedly due but unpaid.
That pre-irritancy notice resulted in an e-mail being sent on 6 June 2008 by the Company's then
agents to the petitioner's agents attaching a letter of the same date, which
letter was also hand delivered to their offices. In addition to putting forward various
contentions concerning the validity of the pre-irritancy notice, the letter
stated that
"....we attach Bank
Draft for £6,500 in settlement of the arrears of [rent] as set out in the
pre-irritancy letter...".
The petitioners aver that the
letter from the Company's agents did not enclose the bank draft referred to and
that this was drawn to the attention of the Company's agents by letter dated 6 June 2008, which also pointed out
that the company had not in fact ever paid any rent under the lease. It is averred that no response was received
to that letter.
[7] As
in the case of the petition to wind up Cathay Loon Fung, the petition refers to
proceedings raised by the Company in the Court of Session (in this case Action
A445/08) and the grant of interim interdict;
makes averments as to the underlying dispute, including an averment that at a
meeting of 3 June 2008 Mr Sandy Liu had said that he was unable to pay the rent
and had agreed that the petitioner should take possession of the premises, an
agreement on which the Company had subsequently reneged. In this petition, as distinct from the Cathay
Loon Fung petition, a charge for payment - though not one satisfying the terms
of s.123(1)(c) of the Act - was served on the Company requiring payment of the
sum of £6,165.00 within 14 days of the date of service, namely 14 April
2008. It is averred that the Company does
not dispute that it is indebted to the petitioner, indeed
"quite the
contrary is the case in the letter of 6 June which claimed to (but did not)
enclose a payment."
However, it has paid neither the
total debt nor even the amount which on its own estimation is outstanding. The petition concludes that the Company
"... has claimed
payment is about to be made without in fact tendering payment. In all the circumstances, the petitioner
reasonably believes and avers that the company is unable to pay its debts as
they fall due."
The petitioners also make averments
to the effect that a provisional liquidator should be appointed. The grounds are similar to those put forward
in the Cathay Loon Fung petition and need not be set out at length.
The
making of first orders and the appointment of the provisional liquidator
[8] On
18 June 2008 I made a first order in each petition, that is to say an order
appointing the petition to be intimated on the walls in common form and to be
advertised once in each of the Edinburgh Gazette and Herald newspapers,
granting warrant for service of the petition upon the Company and allowing any
party claiming an interest to lodge answers to the petition if so advised
within eight days thereafter. I was also
persuaded to appoint a provisional liquidator and authorise him to exercise the
powers contained in Part II of Schedule 4 to the Insolvency Act 1986. The appointment of a provisional liquidator
is, of course, by no means a routine part of the winding up process. It is a course only to be adopted where the
court is persuaded that a prima facie case
has been made out for the making of a winding up order and that there is a real
risk that if the position is not held in the meantime the directors of the Company
will take steps to dissipate or remove its assets. When I say "prima facie case" I should emphasise that I am using that
expression to indicate a "substantial hurdle" equivalent to the expression
"good arguable case": see per Lady Cosgrove in Gillespie v Toondale Limited
2006 SC 304 at paras.[12]-[13]. An order
for the appointment of a provisional liquidator can have serious consequences
for the Company. In some cases it may have
the effect of putting an end to its prospects of continuing in business. For this reason it is clear that, as in the
case of other applications made ex parte,
there is a duty on the party seeking such an order to make full and frank
disclosure when making his application: see per the Lord Justice-Clerk
(Gill) in Bell v
Inkersall Investments Ltd. 2006 SC 507 at para.[20]. That means that he must make full disclosure
of matters which may affect the way in which the court views his application,
whether such matters are favourable or unfavourable to his case. Failure to make full and frank disclosure may
result in any order obtained being set aside without further investigation of
the merits though the court may, in an appropriate case, refuse to set it aside
if it is satisfied that, had all the relevant material been before the court on
the making of the application, it would still have granted the order.
[9] On
the material in the petitions when first presented, I was satisfied that a prima facie case had been made out. The reason for this, put shortly, was that it
appeared that part at least of the sums claimed to be outstanding were
admitted. That being the case, I looked
to see whether any explanation had been put forward for the failure to
pay. On the face of the petition no
explanation had been proffered. All that
had happened was that, in each case, a letter had been intimated indicating
that a bank draft was attached. However,
the bank draft s were not in fact sent to the petitioner or its agents. In the case of Oriental Express, the letter reached
the petitioners but no bank draft was attached.
In the case of Cathay Loon Fung, the e-mailed letter was not followed up
by a physical copy and, again, therefore, the bank draft was not in fact
sent. In both cases a letter had been
sent to the Company pointing out that the bank drafts had not been sent. According to the petition, no response was
received to those letters. Accordingly,
the petitioner put before the court a situation where the debt, or part of it,
was admitted but there had been no genuine attempt to pay and no excuse put
forward for failing to pay. In that
light, the letters purporting to enclose bank drafts suggested that the
Companies were deliberately prevaricating and lent credibility to the
petitioner's averments that the Companies had reneged on promises and were not
to be trusted. It seemed to me that this
justified the making of an order for the appointment of a provisional liquidator.
Matters
becoming apparent after the making of the orders
[10] In this respect the petitions did not tell the whole
story. I take first the petition for
winding up Cathay Loon Fung. The
averments in this case were that an e-mail was sent to the petitioner's agents
on 5 June 2008 attaching a
letter, the terms of which bore to enclose two bank drafts amounting to £40,000
and attaching conditions to the encashment of the payment. The actual letter and any enclosures were
never received. By letter of 6 June 2008 non-arrival of the letter
and its enclosures was drawn to the attention of the Company's agents. It was said that: "No response has been
received to that letter". While that
might strictly be true, it paints an incomplete picture. In the answers it is said on behalf of the Company
that:
"The letter of 5 June 2008 tendered payment of
£40,000 by way of bankers' drafts to the petitioner's solicitors but they
refused to accept them. Later that same
day, Mr Liu attempted to give the letter and bankers draft to Mr Purewal at
Mearns Kirk Oriental Restaurant but he too refused to accept them."
Affidavits were put in on both
sides. In light of those it became
apparent that the first sentence of the passage that I have quoted was
inaccurate, and Mr Hawkes, who appeared on behalf of the Company, expressly
disclaimed any reliance upon it.
However, the second sentence, referring to what happened at Mearns Kirk
Oriental Restaurant is of more direct relevance. Dealing with this in its adjustments to the
petition, the petitioner says this:
"On or around 6
June 2008, the petitioner's Mr Purewal met the respondent's Mr Liu at the
Mearns Oriental Restaurant, Mr Purewal having received a telephone call from
the tenant of the Mears Oriental Restaurant, Mr James Montgomery, asking Mr
Purewal to come to the restaurant to meet Mr Liu. At the meeting Mr Liu showed to Mr Purewal
what appeared to be photocopies of two bank drafts for £15,000 and £25,000
respectively. Mr Liu did not offer
payment by way of the principal bank drafts or indeed by any other means. Again, therefore, necessarily the petitioner
did not refuse to accept payment from the respondent."
There remains a dispute about
precisely what happened on this occasion.
The company's case appears from affidavits by Mr Liu and Winny
Kan.
Their version of events is that at the restaurant Mr Liu tendered the
original drafts for £15,000 and £25,000, possibly with the letter. They say that Mr Purewal refused to accept
the bank drafts, because the conditions in the letter were not acceptable and
he did not want the money - "he told me that he just wanted me out of the
property and that he wanted his property back" as Mr Liu puts it in paragraph
15 of his affidavit. Much of this is
denied by the petitioner. In particular,
they say that no original Drafts were brought to the restaurant - Mr Liu simply
produced photocopies. Mr Purewal then
says this (in para 15 of his affidavit):
"I remember
asking Mr Liu what was the point of showing me copy bank drafts and that this
was now being dealt with by the lawyers.
I do not remember Mr Liu mentioning a letter from his solicitors or
showing it to me. I can repeat, however,
that he did not offer the principal bank drafts."
I cannot resolve the disputes about
this meeting simply on the basis of affidavit evidence. However, one thing is plain, and that is that
Mr Liu sought out Mr Purewal to show him, at the very least, copy bankers'
drafts in the amount of £40,000. It is
not necessary to decide whether this was an unqualified tender of payment. It probably was not. If only copy drafts were produced, they could
not achieve anything unless they were followed up with the originals. Further, whether or not a copy of the letter
was taken to the meeting at the restaurant, the obvious interpretation of what
occurred was that payment would be made only on the conditions set out in the
letter. I do not think it right, therefore,
to say that this amounted to an unqualified tender. However, it was a further encounter arranged
specifically by Mr Liu at which Mr Liu at the very least sought to
initiate a process which could have led to payment being made if certain
conditions were accepted. The response from
Mr Purewal may have been a refusal to consider accepting payment, or it may
have been to the effect that the matter was now in the hands of lawyers. On either view it does not appear to have
been a very welcoming response. This is,
in some ways, understandable and I do not criticise it. The petitioner had served a pre-irritancy
notice and therefore, whether on legal advice or otherwise, might be reluctant
to accept a payment which might be used against it in support of an argument
that it had waived its right to irritate the lease. The petitioner has made no bones about its
desire to bring the lease to an end. So
the account given by Mr Liu of Mr Purewal's response may be correct; or it may
be his gloss upon what he understood to be meant by an expression such as "it
is in the hands of lawyers now". I
cannot decide these matters on affidavit.
However what is absolutely clear is that this meeting took place after
the letters of 5 and 6 June 2008,
which was the point at which the narrative in the petition stopped. It should have been mentioned. Although it was no doubt strictly correct to
say that no response was received to the letter from the petitioner's agents of
6 June 2008 stating that the
original letter and attached bankers drafts had not been received, that was
only part of the story. A very important
sequel was omitted.
[11] In the case of the petition to wind up Oriental Express, the
position is not quite so stark. In its
answers, the Company alleges that on 6
June 2008 Mr Liu tendered £11,000 in cash to Mr Purewal at a hotel,
notwithstanding that he disputed the amount due. It is said that Mr Purewal rejected the cash
and told Mr Liu that he wanted to remove him from both properties. Thereafter, it is said, Mr Liu obtained a
bank draft for £6,500 which was delivered to the petitioner's agents'
offices. This is denied by the
petitioner. I can at present make no
finding one way or the other on this issue.
Material
non-disclosure
[12] The failure to disclose the events at the Mearns Oriental
Restaurant on 6 June 2008 in
the petition to wind up Cathay Loon Fung and in particular the application ex parte for the appointment of a
provisional liquidator constituted a material and serious non-disclosure. It was directly material to the picture
sought to be painted of the director of the company, Mr Liu. Had the full story been set out in the
petition, it is highly improbable that I would have granted the order for the
appointment of the provisional liquidator.
On the averments as they now stand in the adjusted petition, I would not
have done so. In those circumstances I propose
to recall the appointment of the provisional liquidator in the case of Cathay
Loon Fung. I cannot make a similar
finding of non-disclosure in the case of the petition to wind up Oriental
Express. However, the two petitions were
presented together; the material in the Cathay Loon Fung petition was relied
upon to inform the application for the appointment of a provisional liquidator over
the affairs of Oriental Express, and vice
versa. On its own, the material in
the Oriental Express petition does not justify the appointment of a provisional
liquidator over the affairs of that company.
In those circumstances it seems to me that I must recall this
appointment also.
Should
the winding up petitions be dismissed?
[13] In light of the material non-disclosure to which I have
referred, it would be possible to argue that the court should not only recall
the appointment of the provisional liquidators but go further and dismiss the
petitions. After all, the grant of a
first order is an exercise of judicial discretion on the basis of an
application made ex parte. The
first orders were only made on the basis of the (incomplete) averments in the
petitions. I prefer, however, to
approach the matter on a more principled basis.
[14] I have already set out in para.[4] above the basis on which an
order is sought for the winding up of the Company. The burden of satisfying the court under
s.123(1)(e) that the company is unable to pay its debts as they fall due lies
upon the petitioner. The evidence which
he will be able to bring before the court will differ from case to case. Often he will seek to prove his case by
inference from the fact of an undisputed debt and an unexplained failure to
pay. That was the approach taken in Blu Star Security Services (Scotland) Limited, Petitioners 1992 SLT (Sh.Ct.)
80. There is nothing wrong with
this. However, a petitioner who seeks to
proceed by this route rather than by using the mechanism in s.123(1)(a) or (c),
or by seeking to establish balance sheet insolvency under s.123(2), must be
aware that whether or not the necessary inference should be drawn will depend
upon all the circumstances. It does not
follow from the Blu Star case that it
will always, or even usually, be enough to show a demand for payment within a
short time followed by a failure to pay.
In some cases, such a demand and such a failure, when viewed in light of
what has gone before, may indeed be indicative of an inability on the part of
the company to pay its debts as they fall due.
But it does not necessarily give rise to that inference; and it should
not be assumed that s.123(1)(e) can simply be used as a speedier and less
formal version of the statutory demand process set out in s.123(1)(a). Where a debt is disputed on bona fide grounds, it is well
established that a petition to wind up will be dismissed. A winding up petition is not the proper forum
for the resolution of commercial disputes.
The rationale of dismissal in such circumstances is that until the
dispute about the debt has been resolved, it has not been established that the
petitioner is a creditor: Man v Goldstein [1968] 1 WLR 1091. But even if dismissal were not justified on
that ground, in a case where the petition is presented under s.123(1)(e) the
existence of a bona fide dispute
about the debt should mean that the company's failure to pay does not give rise
to the inference that it is unable to pay its debts as they fall due.
[15] Mr Thomson, who appeared for the petitioner, accepted that
where the debt was the subject of a bona
fide dispute, the petition should be dismissed. However, he argued that that was not the
position here. Part at least of the debt
was not disputed. All that was said by
the Company in each case was that it had tendered payment but that the tender
had been refused. The petitioner
disputed this. Accordingly, the court
was simply presented with a dispute about whether the Companies had tendered
payment. That could not be enough to
result in dismissal of the petitions. If
it were, it would be open to any company simply to raise a dispute as to
whether or not it had tendered payment and no petition would ever succeed. He pointed to a passage in the judgment of
Ungoed-Thomas J in Man v Goldstein at p.1096 C-F. If the company is solvent and willing to pay
the undisputed debt, it can do so even after the winding up petition has been
presented. To persist inexplicably in
non-payment after presentation of the petition suggests an inability to pay;
and makes any argument about a previous tender of payment irrelevant.
[16] I do not accept this argument.
If the petitioner seeks, in terms of s.123(1)(e), to prove by inference
that the company is unable to pay its debts as they fall due, he must prove
circumstances from which that inference can be drawn. If he proves only that the debt is undisputed
and has not been paid, that is unlikely to be enough. He must show that the circumstances of the
non-payment give rise to the inference that the company is unable to pay its
debts as they fall due. What are those
circumstances? Even taking pro veritate the petitioner's averments
in the Cathay Loon Fung petition as now adjusted, the position is that the petitioner
is seeking to terminate the lease of the Restaurant Premises at which the
company carries on its business. At the
same time as demanding payment, it served a pre-irritancy notice in respect of
the premises. The Company made moves
towards tendering payment on condition, in short, that the threats to terminate
the lease were withdrawn. Whether that
was a justifiable position or not - and it is relevant to note that the
validity of the pre-irritancy notice has been challenged and interim interdict obtained - it provides
an explanation for its failure to pay which does not require any inference to
be drawn that it was unable to pay. On
the face of it, the existence of the bank drafts, of which the petitioner was
shown at least a copy, is indicative of an ability to pay. It is argued that, once the petition was
presented and a first order made, the company should have put its money where
its mouth was and paid up in response to the petition. However, this ignores the fact that a
provisional liquidator was appointed.
There has never been any question, as I understand it, of the money
coming from the assets of the company. Once
a provisional liquidator was in place and the Company was no longer able to
trade from the premises, there was unlikely to be much incentive for a third
party to pay off the outstanding indebtedness.
The failure to pay in these circumstances is not "inexplicable". Further, notwithstanding the interim interdict, the company has in
fact irritated the lease - this is the subject of contempt proceedings in a
related action. In those circumstances I
do not find it surprising (I do not say it is justifiable) that monies said to
be outstanding have not been paid. It
does not seem to me that the circumstances averred by the petitioner can
possibly give rise to the inference that the company is unable to pay its debts
as they fall due.
[17] Although, as I have indicated, the circumstances in the case of
Oriental Express are not identical, they have in common the same background of an
attempt by a petitioner to irritate the lease and thereby deprive the Company
of its place of business. There are
averments, although in this case the facts averred are not accepted by the
petitioner at all, of offers of payment.
But the cases have been argued before me, just as they were presented to
me originally, as standing or falling together and it seems to me that the
differences do not justify my reaching a different conclusion in the two
cases.
[18] Mr Thomson urged me to have regard to the findings in the
reports of the provisional liquidator.
He makes it clear, for example, that Cathay Loon Fung is unable, from
its turnover, to pay the sum outstanding.
If it were the case that the petition had been presented under s.123(2) on
the basis of an analysis of the company's balance sheet, this might well have provided
significant further relevant material.
But in the present circumstances it seems to me that it misses the
point. The company has never suggested
that the payment of the outstanding sum of £40,000 would come from the assets
of the company. It is, I think, implicit
in the circumstances averred that the bank drafts which (or copies of which)
were shown to Mr Purewal came from another source, be it from another business
run by Mr Liu or from elsewhere. It adds
nothing, therefore, to prove that the Company's turnover is not itself
sufficient to enable the debt to be paid.
[19] In these circumstances, when account is taken of the material
which ought to have been in the petition from the beginning and is now the
subject of adjustment, it seems to me that the petitioner has not proved or
offered to prove facts from which an inference could be drawn that the Companies
are unable to pay their debts as they fall due.
It follows that the petitions should be dismissed and the appointments
of the provisional liquidator recalled.
Conclusion
[20] Had I not dismissed the petitions, I would, in any event, have
recalled the order for the appointment of the provisional liquidator in each
case. As it is, I am persuaded that I
should dismiss the petitions and I propose to make an order to that
effect. Subject to hearing argument to
the contrary, I propose to make an order that the petitioner pay the costs and
disbursements of the provisional liquidator in each case and pay the two
companies their expenses of the petitions.
I will hear argument about whether the order for expenses should be on a
party party or agent client basis.
