RE PAUL Y. CONSTRUCTION COMPANY, LTD

HCCW 10/2025

[2025] HKCFI 1411

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 10 OF 2025

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REASONS FOR DECISION

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1.  There is before the Court a summons issued by Chevalier (E&M Contracting)  Limited (“CEM”)  dated 20 March 2025 for a validation order pursuant to section 182 of the Companies (Winding Up and Miscellaneous Provisions)  Ordinance (Cap. 32). The application is supported by the affirmation of Chu Hoi Lung dated 19 March 2025.

2.  The Company is part of the Paul Y. Engineering Group (“Group”), a long-established Hong Kong-based conglomerate specialising in construction, engineering, and related property services.  Since around mid-2024, the Group has been in financial distress and is facing multiple winding up petitions from creditors.

3.  The present application relates to a construction project (“Project”)  entered into between the Airport Authority of Hong Kong (“AA”)  and a joint venture consisting of the Company and CEM (“JV”)  under a main contract dated 28 June 2022[1] (“Main Contract”). Similar to an earlier application for validation order in these proceedings[2], the Project also relates to the construction of the automated parking system at the Hong Kong-Zhuhai Macau Bridge Hong Kong Port Island.

4.  On 20 February 2025, in light of the Company’s default, CEM served a written notice on the Company to exclude the Company from the JV pursuant to Clause 17.01 of the Joint Venture Agreement (“JVA”). Following the exclusion, the Company no longer plays a role in the Project but retains residual rights to the proportionate share of profits or other entitlement earned (if any)  under Clause 17.04 of the JVA.

5.  On 21 February 2025, upon the Company’s urgent application, Recorder Jin Pao SC made an order appointing provisional liquidators over the Company and a number of its associated companies.

6.  A validation order is now sought by CEM to allow payment of debts owed to the subcontractors and suppliers of the Project and payment for the ordinary course of business of the JV so that the Project can continue.

7.  No interested party has opposed the present application.  At the hearing, Mr Hunsworth, appearing for CEM, told me that the AA has indicated its support for the application by way of letter dated 31 March 2025, a copy of which he handed up to me.

8.  The relevant principles that guide the Court in deciding whether to grant a validation order are recently summarised in [13]-[16] of my Reasons for Decision[3] dated 1 April 2025 in these proceedings.

9.  In the present case, I am satisfied that granting the validation order serves the interests of the Company’s general body of creditors.  The JV currently owes substantial sums to the subcontractors and suppliers of the Project.  Timely payments to them are necessary to allow the JV to continue performing the Main Contract, which would likely generate revenue for the JV, including the Company, given its residual interest in the JV.

10.  This would also prevent the Project from being brought to a premature termination, which might cause the JV to incur legal liabilities for non-performance of works under the Main Contract and bear any additional costs incurred by AA in engaging replacement contractors.  Such costs would likely be substantial given the Project’s scale, complexity, and advanced stage of progress[4].

11.  As the Company remains responsible for liabilities of the JV in accordance with its participation share under the Main Contract, an increase of liabilities of the JV would also increase the debts of the Company, which would in turn reduce the amounts that might otherwise be available to the Company for distribution to its unsecured creditors.

12.  I, therefore, made an order in the terms of the summons.