WAN TAI INVESTMENTS LTD v. TEMPUS HOLDINGS LTD

HCCW 259/2023

[2023] HKCFI 2513

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 259 OF 2023

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REASONS FOR JUDGMENT

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1.  At the hearing of the petition presented by Wan Tai Investments Limited (萬鈦投資有限公司)(“Petitioner”) on 14 June 2023 (as amended on 2 August 2023) seeking to wind up the Templus Holdings Limited[1] (騰邦控股有限公司) (“Company”) on insolvency ground (“Petition”), this Court made a usual winding-up order against the Company. These are the reasons for my judgment.

2.  The Company was incorporated in Cayman Islands on 20 January 2011.  Since 16 August 2011, the Company has been registered as an oversea company under the former Companies Ordinance (Cap. 32) and thereafter, a non-Hong Kong company under the Companies Ordinance (Cap. 622). 

3.  The Company’s principal place of business is and has always been in Hong Kong.  Since 2011, the shares of the Company have been listed on the Main Board of The Stock Exchange of Hong Kong Limited (“SEHK”).  Trading of the shares has since 3 April 2023 been suspended. 

4.  The Company engages in the business of development and retail of health and wellness products including products sold under the brand name “OTO”. 

5.  Pursuant to a subscription agreement dated 15 May 2018 entered into between the Petitioner (as original bondholder) and the Company (as issuer) (as amended by the amendment agreement dated 30 May 2018) (“1^st SA”) the Company issued to the Petitioner senior guaranteed convertible bonds in the aggregate principal amount of HK$160 million with maturity date of 30 May 2019 (“1^st CBs”).   

6.  Pursuant to another subscription agreement dated 9 October 2018 entered into between the Petitioner (as original bondholder) and the Company (as issuer) (“2^nd SA”) the Company issued to the Petitioner senior guaranteed convertible bonds in the aggregate principal amount of HK$30 million with maturity date of 14 October 2019 (“2^nd CBs”).   

7.  Between 10 December 2018 and 9 December 2020, the Company made partial payments towards outstanding principal and interest due and payable under the 1^st and 2^nd CBs.  On 23 March 2021, the Petitioner through its solicitors served a statutory demand on the Company requiring it to pay the outstanding amount then due. 

8.  By a bonds restructuring deed dated 27 August 2021 entered into between the Company and the Petitioner (“Deed”), the Petitioner confirmed and agreed that:

(1)  As at 30 April 2021, the aggregate outstanding principal, unpaid interest and other fees due and payable by the Company under the 1^st and 2^nd CBs was HK$197,449,615.31;

(2)  The Company would pay a Settlement Amount of HK$144 million to the Petitioner, with (a) HK$56 million to be paid in cash by 4 instalments (as Part I Cash Settlement Amount); (b) subject to full repayment of Part I Cash Settlement Amount, allotment and issuance of shares in the Company; and (c) subject to completion of the allotment and issue of shares, a Part II Cash Settlement Amount (representing the remaining balance of the Settlement Amount) be paid by 2 instalments; and

(3)  If the Company acts in breach of the Deed, the Petitioner is entitled to claim the amount due under the 1^st and 2^nd CBs together with interest.

9.  In breach of the Deed, the Company failed to pay HK$35,294,238 to the Petitioner on or before 3 February 2023, whereupon the Petitioner was entitled to request payment of the amounts due under the 1^st and 2^nd CBs. 

10.  On 6 February 2023, the Petitioner issued 2 event of default notices in respect of the 1^st and 2^nd CBs and demanded the Company to pay HK$202,602,837.  On 7 February 2023, the Company issued an announcement acknowledging the debt owed to the Petitioner.

11.  On 19 May 2023, the Petitioner through its solicitors served a statutory demand on the Company requiring it to pay the amount due (“SD”).

12.  No payment was made by the Company.  On 14 June 2023, the Petitioner presented the Petition seeking a winding-up order against the Company on the ground that it failed to comply with the SD and was indebted to the Petitioner in the amount of HK$215,177,427.32 (“Debt”) as at the date of the Petition. 

13.  The Petitioner is entitled ex debito justitiae to a winding up order against the Company. There is no dispute that the Debt was due and payable and the Company was unable to pay the same.  The Company is deemed insolvent by virtue of s.178(1)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32).

14.  The 3 core requirements for the court to exercise its discretionary jurisdiction to wind up the Company are satisfied. 

15.  As pleaded in §§34-37 of the Petition, the Company has substantial connections with Hong Kong in that (1) its headquarters and principal place of business have been in Hong Kong; (2) it has been registered as an oversea and non-Hong Kong company for over 12 years; (3) its shares have been listed on SEHK; (4) the Company’s auditors, legal advisers and principal bankers are from Hong Kong; (5) the Company through subsidiaries incorporated in Hong Kong operate retail outlets in Hong Kong and they contributed revenue in the amount of HK$44.7 million in the financial period ended 30 June 2022, more than the revenue generated from the operations in the Mainland and Singapore; (6) the management including 7 out of 8 directors, the company secretary and authorised representatives are residents of, and have residential addresses in Hong Kong; (7) the Debt was incurred in Hong Kong; and (8) the 1^st and 2^nd SA, the 1^st and 2^nd CBs are governed by Hong Kong law and the parties agreed that Hong Kong court has exclusive jurisdiction and is the most appropriate forum in determining any disputes arising from such instruments.

16.  There is a reasonable possibility of benefit that the winding up of the Company in Hong Kong would benefit the Petitioner and the creditors given that (1) the Company has assets including subsidiaries in Hong Kong; (2) the affairs of the Company have been managed in Hong Kong and any investigation which the liquidators have to carry out in relation to the causes of the Company’s failure and recovery of assets would have to be carried out in Hong Kong; and (3) the adverse consequence on the listing status of the Company and the leverage brought about by the Petition may result in payment of the Debt to the Petitioner if the Company has the means to do so.

17.  There are creditors within the jurisdiction including the Petitioner. 

18.  The Company appointed solicitors to act for it in June 2023 but failed to file any affirmation in opposition to the Petition in accordance with rule 32(1) of the Companies (Winding-Up) Rules (Cap. 32H).  It was only on 21 August 2023 that the Company belatedly filed the affirmation of Zhong Yiming seeking a 15-week adjournment of the Petition on the following grounds:

(1)  The Company published an announcement on 28 July 2023 stating that it had been considering and exploring fundraising opportunities for the purpose of securing funds to be applied towards satisfaction of the outstanding debts and liabilities.  If the “Plan” (which has been put in a sealed envelope and not provided to the Petitioner) is implemented, the Company can establish a long term-sustainable capital structure for the benefit of all creditors.  The Plan has already been submitted to SEHK for consultation and approval.  CCB International Capital Limited, an associated company of the Petitioner, was involved in assisting the Company to formulate and implement the Plan;

(2)  The Company’s subsidiary in Shenzhen has obtained judgments in the aggregate amount of RMB4.04 million, and the Company has lodged claims in Shenzhen Qianhai court for HK$34 million.  This shows that the Company is willing and able to repay at least part of the Debt;

(3)  2 creditors who have entered to whom an aggregate amount of HK$18.46 million do not support the Petition against the Company; and

(4)  the Company can restructure its debts and requires time to come up with a restructuring proposal and the 15-week adjournment is the “typical turnaround time”.

19.  Although the Company says that the affirmation is “without prejudice to the right of the [Company] to contest the [Debt] in relation to the computation of the 18% IRR” including by reason that this offends against the rule against penalty, no particulars have been given as to how the IRR constitutes a penalty or what it claims is the correct amount of the debt.  The matters raised in the affirmation are clearly not valid grounds in opposition to the Petition.  If anything, it only confirmed that the Company is insolvent and unable to pay its debts in the near future.  The 2 creditors have not entered appearance to oppose the Petition.

20.  At the first hearing of the Petition on 28 August 2023:

(1)  Mr Tom Ng, counsel for the Petitioner, sought an immediate winding-up order against the Company on the grounds that the affirmation was filed out of time and leave should only be given conditional upon the Company paying the Debt into court[2]; even if the court were to consider the affirmation, it is clear that the Company did not have the means to pay its debts and had no concrete plan to restructure its indebtedness.  As the Company failed to show that there is a concrete restructuring proposal and that such proposal had the support of the requisite majorities of creditors, there was no useful purpose for the court to adjourn the Petition[3].

(2)  Mr Kwan Ping Kan, counsel for the Company, confirmed that the Company did not oppose the Petition, but would seek an adjournment on the ground that there is a potential restructuring plan, which was at the time “sketchy”.

(3)  Having regard to the value of the listing status and the Plan said to have been put forward by the Company to SEHK, this Court adjourned the Petition for 4 weeks and indicated that it is incumbent upon the Company to provide the Plan to the Petitioner and file evidence to demonstrate that it had or would be able to put forward a viable restructuring proposal which has the support of the requisite majorities of creditors.  If the Company failed to do so, a winding-up order would be made against it at the next hearing.

21.  Notwithstanding the adjournment, the Company did not file any affirmation to update the court on the steps (if any) which had been taken to progress or revise the Plan or any restructuring proposal. 

22.  At the hearing, the Company did not instruct any counsel or lodge any submissions.

23.  There is no valid ground for the Company to oppose the Petition:

(1)  The Plan is not a genuine restructuring proposal. Other than proposing a subscription of new shares and convertible bonds, the key terms of the subscriptions such as number of shares to be issued, the subscription price, the principal amount of the convertible bond and the conversion price are missing. 

(2)  As the Petitioner does not support the Plan, there is no prospect of the Company being able to implement such Plan. 

(3)  According to the Plan, even after the proposed subscriptions, only partial repayment of the Debt will be made.  There is no evidence or analysis to demonstrate that upon implementation of the Plan, the Company will be able to restore its solvency[4].