RE LIFESTYLE RESTAURANT LTD (formerly known as CLUBONE GROUP LTD, formerly known as THE LIFESTYLE GROUP LTD)

HCCW 224/2021

[2024] HKCFI 1005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP)  PROCEEDINGS NO 224 OF 2021

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J U D G M E N T

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1.  By petition presented on 18 June 2021 (as amended on 26 July 2023)  (“Petition”)  the petitioner, Mengiwa Property Investment Ltd (“Petitioner”), seeks a winding up order against Lifestyle Restaurant Limited (“Company”)  on the ground that it is insolvent and unable to pay its debts.

2.  Pursuant to a tenancy agreement dated 27 December 2019 (“TA”), the Petitioner agreed to let to the Company a part of Stelux House at 698 Prince Edward Road East (“Premises”)  for a fixed term of 3 years at a monthly rent of HK$400,000 or 10% of gross sales turnover whichever is higher.  Under the TA, the Company was obliged to pay management fees, rates and Government rent attributable to the Premises.  

3.  The Company has since 1 May 2020 been in default of its payment obligations under the TA.  In December 2020, the Petitioner took enforcement actions against the Company and obtained payment of the guaranteed amount from HSBC, which has been applied to pay part of the amount then owed by the Company.

4.  After the Petitioner had terminated the water and electricity supply at the Premises, on 21 April 2021, the Company moved out of the Premises.  On 23 April 2021, the management company of Stelux House locked the entrance to the Premises for security purpose.

5.  On 28 April 2021, the Petitioner served a statutory demand on the Company requiring it to pay HK$3,945,923.40, being the rent, management fees, rates and Government rent due and payable under the TA (“Debt”), within 21 days thereof (“SD”).

6.  The Company did not comply with the SD and the Petition was presented on 18 June 2021.

  (1)  The Company opposed the Petition on the basis that there is a bona fide dispute on the Debt relying on substantially the same defence subsequently raised in HCA 1864/2021 (as described in §7(1)  below).

  (2)  By order dated 2 September 2021, the Petition was adjourned for substantive arguments with 3 hours reserved. However, neither party took step to fix a date for the hearing of the Petition. 

7.  On 10 December 2021, the Petitioner commenced HCA 1864/2021 against the Company to seek vacant possession and arrears of rent and other charges.

(1)  The Company disputed liability to pay the Debt on the grounds that (a)  there should be an abatement of rent by reason of COVID-19; and (b)  it had a counterclaim for HK$3 million as a result of the Petitioner’s act in locking up the Premises on 23 April 2021. 

(2)  The Petitioner issued a summons on 31 January 2022 for summary judgment and interim payment.

(3)  On 7 June 2022, Master Benny Lo gave final judgment against the Company on liability with quantum to be assessed and dismissed the Petitioner’s application for interim payment.

8.  On 7 June 2022, vacant possession of the Premises (except the store room)  was delivered to the Petitioner.  On 7 July 2022, vacant possession of the store room was delivered to the Petitioner.

9.  The Petitioner appealed against the dismissal of the application for interim payment.  At the hearing of the appeal on 5 December 2022, DHCJ MK Liu made an order requiring the Company to pay HK$3,622,764.93 (“Sum”)  as interim payment pending assessment of quantum, on the basis that the Sum represented the amount payable by the Company after taking into account all the points put forward by the Company in its favour, and ordered the Company to pay costs in the amount of HK$181,500 (“Costs”)[1]. There is no appeal against the order.

10.  In the Petition, the Petitioner relies on the Company’s failure to comply with the SD, and its failure to pay the Sum/Costs as grounds in support of its contention that the Company is insolvent and unable to pay its debts.

11.  The burden is on the Company to establish by sufficiently precise factual evidence that there is a bona fide dispute on substantial grounds in respect of the debt (Re Swiss Cosmeceutics (Asia)  Limited [2024] HKCA 186, §21).

12.  In the present case, there is no bona fide dispute on substantial ground in respect of at least the Sum/Costs, which has been adjudged by the court to be due and payable.  The Company is barred by the principles of res judicata and/or abuse of process, and cannot re-open the issue as to whether or not the Sum/Costs were due and payable (Re Pan Sutong [2022] HKCFI 2076, §25).  

13.  The failure to pay the Sum/Costs despite having been ordered by the court to do so on 5 December 2022 is sufficient for the court to conclude that the Company is insolvent and unable to pay its debts. 

14.  Further, as the Company has failed to comply with the SD, it is deemed insolvent by virtue of s.178(1)(a)  of the Companies (Winding Up and Miscellaneous Provisions)  Ordinance (Cap. 32).

15.  For the above reasons, it is appropriate for the court to make a usual winding-up order against the Company and I so order.