RE CHINA INTERNATIONAL BUSINESS DEVELOPMENT (HONG KONG) LTD

HCCW 603/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 603 OF 2001

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D E C I S I O N

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1.  This is a summons issued on 4 April 2005 by the 1^st and 2^nd respondents, respectively Like Grand Holdings Limited and China International Business Development (Hong Kong) Limited.  The 2^nd respondent is the company that is the subject of the winding-up order in question.  The summons seeks an order that the enforcement of the winding-up order made by me on 14 February 2005 be stayed pending the outcome of the appeal against such an order in CACV No. 94 of 2005.

2.  The summons was said to be issued under the inherent jurisdiction of the court.  This should have been made under section 209 of the Companies Ordinance, Cap. 32, see Bank Negara Indonesia 1946 v Interasian Traders Finance Limited [1980] HKLR 622 and my decision in King Pacific International Holdings Limited,HCCW No. 164 of 2002, 17 July 2002.  Under section 209(1) the 2^nd respondent has no locus to apply for a stay of the winding-up order but the 1^st respondent as a contributory may apply.  I will treat the affidavit of Lee Wing Kee filed herein on 4 April 2005 as evidence filed in support of the 1^st respondent’s application, even though Mr Lee had stated erroneously in his affidavit that he was one of the respondents.

3.  The supporting affidavit of Mr Lee, who is the controlling shareholder of the 1^st respondent, is very brief.  He stated that based on his experience in establishing and running the joint venture, which is the only business of the 2^nd respondent, it is his understanding that the joint venture agreement made with the Chinese entity to run the joint venture known as Xiamen Yongshun Sightseeing Car Limited was made on the basis that the 2^nd respondent is a legal entity, and once the 2^nd respondent is wound up, the Chinese party would dissolve the joint venture business, terminate the joint venture agreement and would probably sell all the equipment, including the cars.  Thus, even if the respondents’ appeal were successful, if execution of the winding-up order is not stayed, it would cause irreparable damage to the 2^nd respondent.

4.  Mr Lee also claimed in his affidavit that the 2^nd respondent is insolvent and owes millions of dollars to him.  He asserted that if the winding-up order were stayed, nobody would suffer because of the delay.

5.  The petitioners have opposed this application.  The Official Receiver does not support the application either, as it would appear from Mr Lee’s affidavit that the 2^nd respondent is insolvent and that a stay of the winding-up order would be detrimental to the liquidation of the company.

6.  I do not propose to go through the grounds of appeal in the Notice of Appeal in detail, save to say that I have taken them into account and it does not appear to me that the grounds of appeal are particularly strong.

7.  As a matter of practice, the court will not order a stay of the winding-up order pending appeal and the reasons for this practice had been stated by Plowman J in Re A and BC Chewing Gum Ltd [1975] 1 WLR 579 at 592.  Where an order was made to wind up a company carrying on profitable business, the order will not be stayed pending appeal, for grant of a stay will hamper the work of the Official Receiver in the discharge of his duties should the appeal be dismissed.  Whereas if the stay is refused, the business can nonetheless be carried on and handed back as a going concern should the appeal be allowed.  If the business can only be carried on at a loss, it should not be carried on at a loss obviously.  This practice has been followed in Hong Kong (Re Cirtex Company Limited [1987] 3 HKC 21; Re King Pacific International Holdings Limited, supra.).

8.  In his supporting affidavit, Mr Lee has not referred to any provision in the joint venture agreement as giving the Chinese party the right to dissolve the joint venture business, or to terminate the joint venture agreement, in the event that the 2^nd respondent is wound up.  It is not clear whether Mr Lee’s assertion was made as a matter of law or of practice.

9.  I see no reason why the Chinese party should close down the operations of the joint venture or sell the cars of the joint venture, as on the evidence led at the trial, the business of the joint venture had proved to be very successful and generated much revenue, so much so that the petitioners expressed the wish to buy out the 1^st respondent’s shares in the 2^nd respondent and the 1^st respondent had refused to sell, see paras 5 and 75 of my judgment dated 14 February 2005.  I also fail to understand Mr Lee’s assertion on affidavit if he meant to say that the 2^nd respondent would cease to be a legal entity once the winding-up order was made, because that is not the law.

10.  There is no evidence to show that failure to grant a stay would have a seriously deleterious effect on the 2^nd respondent.  There is no cogent reason to suggest why the business of the joint venture may not be continued, with or without the participation of the provisional liquidators or the liquidators of the 2^nd respondent, pending the determination of the appeal. I see no good reason why the court should depart from the usual practice of refusing to stay a winding-up order pending appeal.

11.  I therefore dismiss this application.  The respondents are to pay the costs of the petitioners and the Official Receiver.  I assess the Official Receiver’s costs on a gross sum basis at $4,000.00.  As for the petitioners’ costs, the amount I assess as reasonable costs is $12,000.00.