SHANDONG CHENMING PAPER HOLDINGS LTD v. ARJOWIGGINS HKK 2 LTD

HCMP 3060/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3060 OF 2016

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R E A S O N S   F O R   D E C I S I O N

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The Application

1.  On 18 October 2016, the Defendant served a statutory demand on Shandong Chenming Paper Holdings Limited (“Company”).  On the 7 November 2016 I heard an application by the Company ex parte on notice, although not attended by the Defendant, for an order to enjoin the Defendant from issuing a petition for its winding up, which I granted.  On the following day the Company, pursuant to an undertaking given to the court, issued an originating summons seeking a final order restraining presentation of a petition.  On 11 November 2016 I allowed the originating summons to be amended (“Amended O.S.”) to seek rather than a final injunction a declaration:

“since the Plaintiff is an unregistered company, the Defendant will not be able to satisfy the 3 core requirements for the Hong Kong court to exercise its jurisdiction under s327(3) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) to wind up the Plaintiff in Hong Kong.”

2.  At the hearing of the Amended O.S. the Company was represented by Winston Poon SC and Janet Ho.  The Defendant was represented by Russell Coleman SC and Chow Ho Kiu.

The Company

3.  The Company is incorporated in the Mainland[1]. It has a listing of A and B shares on the Shenzhen Stock Exchange.  It also has a dual primary listing of H shares on the Main Board of The Stock Exchange of Hong Kong Limited (“HKEX”).  It is registered as a non‑Hong Kong company under Part 16 of the Companies Ordinance (Cap 622).  As its name suggests the Company is a conglomerate principally engaged in paper making, forestry, finance and real estate.  It is a sizable company.  Its audited financial statement for the year ending 2015 show net assets attributable to shareholders of the Company as being RMB 16,871,494,584.82.  The Company’s position is that it is currently profitable and the annual report for 2015 records the declaration of a dividend of RMB 580,921,640.10.

Circumstances leading up to the Service of the Statutory Demand

4.  The Company and the Defendant entered into a joint venture agreement dated 27 October 2005 (“JVA”).  Under the JVA, the Plaintiff and the Defendant agreed to establish a joint venture company in the Mainland (“JV Co”).  The purpose of the JV Co was to manufacture paper products.  The JV Co and the Plaintiff also entered into a steam supply contract dated 9 September 2005 (“Steam Supply Contract”).

5.  Disputes arose between the Plaintiff and the Defendant as to whether the Plaintiff was entitled to terminate the supply of steam to the JV Co under the Steam Supply Contract, as a result of which various proceedings were instituted in the Mainland.  These included proceedings commenced by the Plaintiff for the dissolution of the JV Co in June 2010.  The JV Co was ordered by the Weifang Intermediate Court to be dissolved.

6.  In October 2012, the Defendant commenced arbitration proceedings pursuant to the JVA, claiming that the Plaintiff was in breach of the provisions of the JVA.  Following hearings in September 2014 and January 2015, the arbitration tribunal rendered its award on 20 November 2015 (“Award”) by which it awarded damages in the sum of RMB 167,860,000 to the Defendant, with interest and costs.

7.  On 7 December 2015, the Defendant obtained leave from Mimmie Chan J to enforce the Award, in Action HCCT 53/2015.

8.  In September 2016, the Plaintiff applied to set aside the Award in HCCT 53/2015.  Mimmie Chan J dismissed the Company’s application on 12 October 2016 describing the application as totally without merit and awarded indemnity costs.  That judgment has not been appealed.  On 18 October 2016 the Defendant served a statutory demand in respect of the following amounts:

(1) Contractual damages of RMB 273,450,830.10;

(2) Legal fees and costs plus interest totalling US$3,807,956.09; and

(3) HKIAC/Tribunal fees plus interest totalling HK$3,545,075.02.

9.  The Company has not paid any part of the debt due to the Petitioner or offered to do so.

10.  The Company does not dispute that as a matter of Hong Kong law the amount of the Award is payable.  What it argues is that the second of the three core requirements referred to in its originating summons, namely, that the Defendant would derive sufficient benefit from a winding-up order to justify putting the Company into compulsory liquidation in Hong Kong, is not satisfied.  It was accepted before me that the other two requirements are satisfied.

The Three Core Requirements

11.  The Companies Court has had to consider the circumstances in which it has jurisdiction to wind up a foreign incorporated company in a number of decisions in recent years.  The majority of cases in which the issue has arisen concern insolvent companies.  However, in Kam Leung Siu Kwan v Kam Kwan Lai [2] (“Yung Kee”) the issue arose in the context of a solvent company and a shareholders’ dispute and the case reached the Court of Final Appeal.  In [18] to [24] of the judgment Chief Justice Ma and Lord Millett summarise the relevant principles:

“D. Section 327(3)(c)

18. Section 327(1) and (3) are in the following terms:

(1) Subject to the provisions of this Part, any unregistered company may be wound up under this Ordinance, …

(3) The circumstances in which an unregistered company may be wound up are as follows:

(a) if the company is dissolved, or has ceased to carry on business, or is carrying on business only for the purpose of winding up its affairs;

(b) if the company is unable to pay its debts;

(c) if the court is of opinion that it is just and equitable that the company should be wound up.

19. As the courts below observed this is a discretionary jurisdiction, though this does not follow from the word ‘may’. This word merely means ‘is liable to’ and is appropriate to describe the conferment of jurisdiction. Nevertheless the most appropriate jurisdiction in which to wind up a company is the jurisdiction where it is incorporated, and the jurisdiction to wind up a foreign company has often been described as ‘exorbitant’ or as ‘usurping’ the functions of the courts of the country of incorporation.[16] These expressions are, however, unhelpful and potentially misleading except as a reminder that there must be good reason to exercise an abnormal jurisdiction even though it is one which statute has expressly conferred on the court. It is well established that there must be some connection between the foreign company and the jurisdiction other than the petitioner’s decision, which would be present in every case, to present a winding-up petition there rather than in the country of incorporation.[17]

20. In these circumstances the courts have adopted some necessary self-imposed constraints on the making of a winding-up order against a foreign company. There is no need to show that the company has ever had a place of business within the jurisdiction or has ever carried on business there.[18] As the law has developed, however, the Courts have laid down three so‑called core requirements which must be satisfied before the court will exercise its statutory jurisdiction to wind‑up a foreign company. These were summarised by Susan Kwan J (as she then was) in Re Beauty China Holdings Ltd [19] as follows:

(1) there had to be a sufficient connection with Hong Kong, but this did not necessarily have to consist in the presence of assets within the jurisdiction;

(2) there must be a reasonable possibility that the winding-up order would benefit those applying for it; and

(3) the court must be able to exercise jurisdiction over one or more persons in the distribution of the company’s assets.

In the present appeal, the parties have focused on only the first of these core requirements.

21. Some Courts have treated these core requirements as going to the jurisdiction of the court under s.327(3)(c). In our view, it is better to treat them as a part of the court’s discretion. The origin of these requirements, which have been adopted in other cases both in England and Hong Kong, is to be found in the judgment of Knox J in Re Real Estate Development Co.[20] In that case Knox J said that the proposition that there must be a sufficient connection between the company and the jurisdiction in which it is sought to wind it up prompted the question: sufficient for what? He answered the question by saying that the connection must be:

sufficient to justify the court setting in motion its winding-up procedures over a body which prima facie is beyond the limits of territoriality.

22. That case and Beauty China Holdings Ltd were both concerned with creditors’ petitions to wind up the company on the grounds of insolvency. In such cases there is a substantial overlap between the different requirements, for the presence of significant assets within the jurisdiction normally means that a winding-up order is likely to benefit the creditors applying for it. But their presence within the jurisdiction is not essential; it is sufficient that the petitioner will derive significant benefit from a winding-up order in the local jurisdiction even though the company is incorporated elsewhere.

23. While the benefit to a petitioning creditor will normally consist of the appointment of a liquidator with access to the company’s assets for distribution to the creditors, it is not necessary that the benefit should be derived from its assets or be channelled through the hands of a liquidator. In Re Eloc Electro-Optieck and Communicatie BV [21] Nourse J made a winding-up order against a company incorporated in the Netherlands which had traded in England but had ceased business some years before, had never had a place of business within the jurisdiction and no longer had assets there. The petitioners were two former employees who had been dismissed by the company. They had applied to the Department of Trade and Industry for payment out of the redundancy fund but under the statutory provisions no payment could be made until the company was wound up. Finding that there was a reasonable possibility that the petitioners would derive a benefit from the making of a winding-up order, the Judge said:[22]

The benefit would consist of assets coming into the hands of the petitioners not from the company but from an outside source which can only be tapped if an order is made. In the light of that consideration and of the facts, first, that the company did carry on business in England and Wales, secondly, that it employed the petitioners in that business, and, thirdly, that the potential source of assets is directly related to that employment, there is, in my judgment, sufficient to found the jurisdiction of the court. To put it another way, it would, in my judgment, be a lamentable state of affairs if the court’s jurisdiction was excluded by the mere technicality that the assets, in respect of which the reasonable possibility of benefit accruing to the petitioners derived, belonged not to the company but to an outside source. I think that support for this view is to be found in the fourth and fifth essentials in Megarry J’s summary [1973] Ch 75, 92:

(4) It suffices if the assets of the company within the jurisdiction are of any nature; they need not be ‘commercial’ assets, or assets which indicate that the company formerly carried on business here.

(5) The assets need not be assets which will be distributable to creditors by the liquidator in the winding up: it suffices if by the making of the winding up order they will be of benefit to a creditor or creditors in some other way.

That shows, first, that the assets can be of any nature and, secondly, that the consequential benefit accruing to a creditor or creditors need not be channelled through the hands of the liquidator. To my mind that confirms that the ownership of the assets by the company is not a matter of crucial importance (our emphasis).

24. In our view the question in the case of a creditor’s petition is whether there is a sufficient connection between the company and this jurisdiction to justify the court in ordering a company to be wound up despite the fact that it is incorporated elsewhere; and that in deciding that question the fact that there is a reasonable prospect that the petitioner will derive a sufficient benefit from the making of a winding-up order, whether by the distribution of its assets or otherwise, will always be necessary and will often be sufficient.”

12.  Commonly, the benefit to be derived from making a winding‑up order will be the opportunity for a liquidator to realise assets within the jurisdiction.  Mr Poon referred me to the decision of Sir Richard Scott VC in Banco Nacional de Cuba v Cosmos Trading Corp [3] to emphasis this point in which the Vice Chancellor says this at 819g-820b:

“In my opinion, the courts of this country should hesitate very long before subjecting foreign companies with no assets here to the winding-up procedures of this country. Of course if a foreign company does have assets in this country, the assets may need to be distributed among creditors, and a winding-up order here, sometimes ancillary to a principal winding up in the place of incorporation of the foreign company, may be necessary. But a winding-up order here, while the foreign company continues to trade in its country of incorporation and elsewhere in the world, is in my view thoroughly undesirable. I would not say a winding-up order in those circumstances could never be right, but I do say that exceptional circumstances and exceptional justification would be necessary. After all, if we presume to make a winding-up order in respect of a foreign company which is continuing to trade in its place of incorporation and elsewhere in the world, where will our winding-up order be recognised? What effect will it have? These questions are difficult to answer and, absent some international convention regarding the winding up of foreign companies, I think no satisfactory answer can be given.

It is, moreover, somewhat of a weakness in our own winding‑up law that it is not possible to have a winding up of a foreign company limited to its activities and assets in this jurisdiction.  It has been held on a number of occasions, and is clear law, that once a winding-up order is made in this jurisdiction it purports to have worldwide effect.  Hence the problems that arise if the order is made in respect of a foreign company that is continuing to trade.  In any event, BNC has no assets in this jurisdiction and even a winding-up order limited to this jurisdiction would not have Cosmos.”

13.  Although, the presence of assets within the jurisdiction will be the most common way of satisfying the second requirement as the Chief Justice and Lord Millett explain in [22] of Yung Kee, it is not essential.  In China Medical Technologies Inc [4]I found that the opportunity for a liquidator to investigate misappropriation and misapplication of a company’s assets including examination pursuant to section 221 of the Companies Ordinance (Cap 32) was capable of being sufficient benefit.  What is required is for it to be demonstrated that there is a reasonable prospect that the petitioner will derive a benefit consistent with the statutory purpose of the winding-up jurisdiction.  Generally, such a benefit is likely to be connected with either the realisation of assets for the benefit of creditors or the broader purpose of investigating the circumstances in which the company has come to be put into liquidation[5]. So long as it is demonstrated that on the balance of probabilities there is a reasonable prospect that a benefit will result, which falls within these categories and that it is sufficiently substantial to justify an order, which engages the Hong Kong insolvency regime, the second core requirement will be satisfied.

The Company’s Case

14.  The Company contends that its only connection with Hong Kong is its listing.  It has no assets here and does not conduct any business from Hong Kong.  The Company says it is solvent, which appears to be borne out by its financial statement.  It has substantial assets and business in the Mainland where its management is located as are most of its shareholders.  It argues that a liquidator appointed in Hong Kong will be able to achieve nothing of any value in the Mainland and a winding-up order made in Hong Kong would be an exercise in futility.  The proper course is for the Defendant to take steps to enforce the Award in the Mainland.

The Defendant’s Case

15.  The Defendant has advanced the following principal reasons for suggesting that it will derive a benefit from a winding-up order:

(1) The Company’s H share listed status is a valuable and realisable asset in Hong Kong;

(2) Prior to April 2015 the Company had a directly held subsidiary in Hong Kong, which controlled a significant part of the Company’s profit: Chenming HK Ltd (“Chenming”).  It was only after the arbitration was underway and, suggests the Defendant, it was probably apparent that the proceedings were not going in the Company’s favour that the Company caused a restructuring of the Group so that Chenming became an indirect subsidiary held through Mainland and British Virgin Island companies.  A liquidator would be able to investigate the restructuring and potentially take action to recover assets held by Chenming.

The Listing

16.  When this matter first came on before me on a call over hearing I queried whether the suggestion that the value of the listing could be realised whether in Hong Kong or the Mainland was credible.  My principal concern was that I could not see how the necessary changes to the capital structure of the Company could ever be achieved.  Certainly any suggestion that just the value of the H share listing in Hong Kong could be realised seems to me to be illusory.

17.  The Company has only one class of shares.  For listing purposes, they are divided into A shares listed on a Mainland exchange, in this case Shenzhen (domestically-owned shares), B shares listed on the Shenzhen Exchange (internationally-owned shares) and H shares listed on the Main Board of the HKEX.  Any restructuring would necessitate a substantial change in the ownership of the share capital of the Company, which would involve a transfer of value from the existing shareholders to a new investor.  This would necessitate resolutions passed by the Company’s shareholders.  Quite how this would be achieved when the large majority of the shareholders hold A and B shares in the Company, and self-evidently would have no interest in a resolution which diluted their interest in the Company and depressed the value of the shares, has not been explained by the Defendant. 

18.  Mr Poon made substantial submissions on the structure both of ownership and control of the Company with a view to demonstrating that the Defendant’s suggestion was unworkable.  It seems to me that this conclusion is so obviously correct that no purpose would be served by reciting and commenting on those submissions in any detail, although they were of interest. I will, however, mention one relevant respect in which the constitution of the Company differs from that one would normally expect in the case of a Hong Kong company.  Although, responsibility for management generally is vested in the directors of the Company (Article 185 of the Articles of Association) the introductory paragraph of Article 185 commences “The Board of Directors is responsible to the general meeting…” and Article 66 provides that “all shareholders of the Company have the following rights: … (3) the right to supervise and manage business activities of the Company and to put forward proposals and raise inquiries”.  This suggests, as Mr Poon submitted, that ultimate control of business decisions lies not in the directors, but in the shareholders in general meeting, which in turn suggests that no proposal to restructure the Company in anyway could be effected without either the approval of A and B shareholders or at least without the risk of a general meeting being convened at which they would vote to overturn any decision by a liquidator.

19.  As I have already indicated it seems to be that the value of the listed status of the Company is, viewed realistically, not capable of providing a material benefit to the Defendant or other creditors of the Company.

Chenming

20.  The Defendant suggests that particularly given the Company’s reluctance to honour the Award it can be inferred that the restructuring of the Group to place mezzanine subsidiaries between the Company and Chenming was done with the intention of avoiding enforcement of the Award.  I accept that this is a possible inference that can be drawn despite the Company’s evidence that it was a bona fide decision, but it seems to me that little turns on it.  What is more relevant is whether Chenming might be available to a liquidator of the Company.

21.  The Company contends that Chenming is not an asset of the Company and, therefore, is not relevant to the assessment of whether or not there is a reasonable prospect of the Defendant obtaining a benefit from a winding-up order.  It says that a liquidator would not be able to take the necessary steps in the Mainland to obtain control of Chenming and Chenming’s assets.  It does not seem to me that the fact that Chenming is indirectly owned matters materially.  In the context of the

first core requirement, a substantial connection with Hong Kong, Chief Justice Ma and Lord Millett said this:

“38. The question in the present case is whether a foreign company, all of whose shareholders and directors live in Hong Kong, and which is the ultimate holding company of a group of indirectly held subsidiaries which carry on business in Hong Kong, has a sufficient connection with Hong Kong to justify the Hong Kong Court in exercising its jurisdiction to wind it up at the suit of one of the shareholders. But the answer is the same as in Waddington Ltd v Chan Chun Hoo and for much the same reason. The shareholder who brings a petition to wind up a company does so in order to realise his investment, and if the company is a holding company then his purpose is to realise the value of its underlying assets, whether they belong to its direct or indirect subsidiaries. Giving effect to the close connection between a holding company and the assets of its direct and indirectly held subsidiaries does not entail identifying the one with the other or treating the businesses and assets of the group as if they belonged to the holding company. It merely reflects the nature of the dispute and the purpose for which the proceedings are brought.”

22.  In my view this approach is also applicable to the second core requirement.  As I have explained the issue is not whether the Company has assets in the jurisdiction, but whether there is a reasonable prospect that the Defendant will derive a benefit for the making of a winding-up order.  The question is whether or not there is a reasonable prospect that the Company’s interest in Cheming can in some way produce a benefit for the Defendant[6]?

23.  The Defendant argues that under articles 546 and 551 of the Civil Procedure Law revised and implemented on 1 January 2013 and the Civil Procedure Law Interpretation passed by the Supreme People’s Court on 4 February 2015, the recognition and enforcement of bankruptcy and winding-up orders made by the courts of Hong Kong may be applied mutatis mutandis.  The articles read:

“Article 546: Where an effective judgment or ruling of a foreign court or a foreign arbitration award requires enforcement by a people’s court of the People’s Republic of China, a party may first apply to the people’s court for recognition. After the people’s court issues a ruling to recognize the aforesaid judgment, ruling or award upon examination, enforcement shall be conducted in accordance with the provisions of Part III of the Civil Procedure Law.”

“Article 551: The people’s courts may apply, mutatis mutandis, the special provisions on foreign-related civil procedures to civil actions that involve the Hong Kong Special Administrative Region, the Macao Special Administrative Region, or the Taiwan region.”

24.  The Defendant’s expert on Mainland Law, Mr Bai Jun, opinion was that these provisions paved the way for recognition of a winding-up petition and this is consistent with article 5 of the Enterprise Bankruptcy Law of the People’s Republic of China, which provides:

“Article 5: The procedures for bankruptcy which have been initiated according to the present Law shall have binding force over the assets of the relevant debtor beyond the territory of the People’s Republic of China.

Where any legally effective judgment or ruling made by a foreign court involves any debtor’s assets within the territory of the People’s Republic of China and if the debtor applies with or requests the people’s court to confirm or enforce it, the people’s court shall, according to the relevant international treaties that China has concluded or acceded to or according to the principles of reciprocity, conduct an examination thereon and, when believing that it does not violate the basic principles of the laws of the People’s Republic of China, does not damage the sovereignty, safety or social public interests of the state, does not damage the legitimate rights and interests of the debtors within the territory of the People’s Republic of China, grant confirmation and permission for enforcement.” [7]

25.  Mr Bai goes onto explain that in so far as there are judgments prior to the January 2013 that are inconsistent with these conclusions, and he specifically identifies Asia Steel (HK) Limited and Norstar Automobile Industrial Holdings Limited [8], they are either not directly applicable or are superseded by the Civil Procedure Law.  Unsurprisingly, the Company’s expert, Mr Chi Weihong, takes a different view.  It seems to me that little purpose is served by scrutinising their different opinions.  The facts of this case are unusual.  Article 5 of the Bankruptcy Law contains a specific qualification that in considering enforcement of a foreign bankruptcy judgment the court shall have regard to and ensure that enforcement will not violate “the basic principles of the laws of the People’s Republic of China, does not damage the sovereignty, safety or social public interests of the state, does not damage the legitimate rights and interests of the debtors within the territory of the People’s Republic of China…”.  I think it is very difficult to predict how a court in the Mainland would react to an order made by the Hong Kong court to wind up a company incorporated in the Mainland, listed in Shenzhen and which is solvent and neither expert has identified a case, which is sufficiently similar to the facts of this case to be of much assistance.

26.  The Defendant’s arguments are not assisted by the fact that it has chosen to proceed to enforce by seeking a winding-up order in Hong Kong rather than enforcement in the Mainland, because, as I understand it, the Defendant is concerned that the procedure for enforcement might give the Company the opportunity to reopen the merits of the case.  This illustrates the possibility that a court in the Mainland would, given the unusual facts of this case, take the view that determining whether or not to enforce the winding-up order necessitated a broader consideration of the facts of the case and the impact enforcement might have on an otherwise solvent company.  Although I do not think one can entirely discount action by a liquidator in the Mainland resulting in a recovery for creditors it is a factor of limited weight.

Other Factors

27.  The Defendant also points to various matters of questionable corporate governance and in particular a suggested breach of rule 19A.189(1) of the Listing Rules by the Company by failing to have at least one INED who is ordinarily resident in Hong Kong.  I agree with Mr Poon that there are other ways of dealing with these kinds of infractions and of themselves they do not justify putting a solvent listed company into compulsory liquidation and, more pertinently, the Defendant would probably derive no benefit from an investigation into breaches of the Listing Rules.  There is, however, in my view reason to expect that the Defendant would benefit from a winding-up order.

28.  The consequence of a winding-up order would be immediate and severe.  The control of the Company in Hong Kong would be immediately taken out of the hands of its directors and placed in those of a liquidator.  Section 182 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance would apply.  All shares transfers from the date of the presentation of the petition would be void unless otherwise ordered by the court.  The Company’s status as a Hong Kong listed company would cease to be viable.  The damage done to the Company’s reputation and the possible interference in its ability to carry on business overseas as a consequence of enforcement action by a liquidator would be immense.  Unless the Company was surprisingly indifferent to these adverse consequences one would expect its management at some point in time to decide that the Company had no choice, but to pay the Award.

29.  Although, generally the Companies Court frowns on the use of winding-up proceedings to pressure solvent companies to pay disputed debts, it is well established that a creditor owed an undisputed or undisputable debt is entitled to a winding-up order ex debito justitiae.  A company cannot contest a petition on the grounds that it is solvent and that a creditor must exhaust all means of enforcement and recovery before resorting to a winding-up petition.[9] A solvent company that fails to pay on a judgment or an award out of intransigence is liable to be wound up.  It seems to me that the Defendant can properly say that this is such a case and that the benefit to be derived from its proposed course of action is the leverage created by the prospect of a winding-up petition or the appointment of a liquidator and the steps a liquidator may take to recover assets even if such steps are problematic.  In my view there is a reasonable prospect that the Defendant would derive a benefit from a winding-up order.  There is also another consideration.

30.  As the Court of Final Appeal explains in Yung Kee, the three core requirements constitute self-imposed restraints on the making of a winding-up order against a foreign company.  As I observe in [50] of China Medical Technologies Inc [10] and [27] of Re Pioneer Iron and Steel Group Co Ltd [11] the core requirements constitute guidance as to the circumstances in which the discretion should be exercised and their application can be moderated if the circumstances clearly call for it.  Although, I have found that there is a reasonable prospect that the Defendant will derive a benefit from the making of a winding-up order, in my view the circumstances of this case would also justify moderation of the requirement that a benefit to the Defendant be shown.  I say this for the following reason.

31.  The Company has chosen to have a second primary listing in Hong Kong.  An arbitration Award has been made against it, which has now become enforceable as a judgment of this court.  The Company does not suggest that it cannot pay the Award.  It simply refuses to do so and takes the position that there is nothing the Defendant can do about it in Hong Kong. This seems to me to be unacceptable.  The Company wishes to take advantage of Hong Kong’s financial system and the legal system that underpins it.  Hong Kong’s legal system and courts provides investors both domestically and internationally with confidence in the reliability and integrity of the financial system.  The Company’s refusal to honour the Award shows disregard for the integrity of our legal system and, in a non-technical sense at least, contempt for the High Court of Hong Kong.  If the Company wishes to be listed in Hong Kong it should honour the Award and respect the decision of Mimmie Chan J.  There is a public interest in steps being taken to remedy this conduct and to disabuse other Mainland companies of the idea that they can take the benefit of access to Hong Kong’s financial system without the burden of complying with our laws.  In the circumstances of this case the obvious and appropriate step is the winding up of the Company in Hong Kong and the delisting of its H shares.

32.  Before ending this judgment, I should deal with a preliminary point taken by Mr Coleman.  The originating summons originally sought only a permanent injunction enjoining the Defendant from presenting a petition.  It was subsequently amended to replace the injunction with the declaration.  Mr Coleman argued that the question of whether or not the second core requirement was satisfied was not one that justified enjoining the presentation of a petition.  It could not sensibly be suggested that the answer to the question was clear and that it would be an abuse to present a petition.  The Company was simply trying to avoid the difficulties caused by presentation; difficulties that would be the result of its own intransigence rather than abusive conduct by the Defendant.  I was referred to Re Sinom (Hong Kong) Limited [12] in which it was held by Kwan J that a creditor should not be prevented from issuing a petition unless the petition was bound to fail.  I agree that this is normally the correct approach.  In the present case I have deviated from it because it has seemed to me given the extensive argument I have heard that the most practical course is to determine the issue immediately on the originating summons rather than delay it to the hearing of a petition.

Conclusion

33.  I will dismiss the originating summons.  I will make a costs order nisi that the Company pays the Defendant’s costs.  Given the views that I have expressed in [31] I consider it appropriate that the costs be assessed on an indemnity basis to reflect what in my view is the unethical conduct of the Company.