Hong Kong-listed consumer electronics maker Universal Holdings is facing a claim of more than US$50 million by a disgruntled United States client for alleged breaches of supply contracts involving subsidiaries.
The company, formerly known as Universal Appliances (UAL), was ordered by a US district judge to enter into arbitration with North American Foreign Trading Corp (NAFT), the US client seeking compensation, after failing to prove the subsidiaries were outside its responsibility.
The US lawyer representing NAFT told the South China Morning Post that if UAL refused the arbitration, the case of alleged fraud could be taken to a Hong Kong court for enforcement.
In 1998, NAFT accused Universal Appliances' two indirectly and wholly owned subsidiaries, Smoothline and Greatsino Electronic, of allegedly delivering a large percentage of defective telephones and failing to repair or replace the returned defective units in a timely manner.
NAFT had entered into the supply contracts with Smoothline and Greatsino but demanded arbitration against UAL after finding the latter's two subsidiaries had no money.
UAL, which is described as an 'investment holding company' by Smoothline and Greatsino, claimed it had not signed the contracts, according to a US legal representative of NAFT.
A US judge ruled, however, that UAL needed to provide financial documents to prove that it and Smoothline and Greatsino were not one entity. UAL provided the documents that consisted primarily of a general ledger showing transactions between Smoothline, Greatsino and other UAL entities.
