RE SHANGHAI HUAXIN GROUP (HONG KONG) LTD

HCCW 126/2018

[2018] HKCFI 2082

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING‑UP PROCEEDINGS NO 126 OF 2018

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D E C I S I O N

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1.  On 17 May 2018 the petitioner, Harbour Vanguard Limited, issued a petition for the winding up of the company, Shanghai Huaxin Group (Hong Kong) Limited (“Company”), on the grounds of insolvency.

2.  On 17 July 2018, the Company applied for the appointment of provisional liquidators.  The application was made on the basis that the Company would be wound up when the petition came on before the court, and that because of the substantial nature of the Company’s operations and the significant amount of work that was required in order to successfully progress a liquidation, it was desirable that provisional liquidators were appointed immediately so that there was no hiatus when the Company was put into liquidation as a consequence of the Official Receiver becoming the first provisional liquidator. I made an order on that day appointing partners from PricewaterhouseCoopers provisional liquidators of the Company.

3.  When the petition came on before the Master on 25 July 2018, the solicitor appearing for the petitioner explained, or rather, began to explain, to the Master that the petition was unopposed.  The solicitor appearing for the Company interrupted and stated that the Company had not indicated that the petition would be unopposed.  The petition was adjourned until the following Monday and heard by Anderson Chow J, who further adjourned the petition.  An affirmation filed on behalf of Mr Ngan, a director of the Company, for the purposes of that application, states in para 6 that he had never informed the solicitors for the Company that winding‑up order would be consented to.

4.  I subsequently wrote to the solicitors for the Company, when I became aware of the submissions and evidence filed for the two hearings I have just referred to, asking the solicitors to explain the inconsistency between the basis of the application made before me and the submissions of counsel on 17 July 2018, and what the court had been told at subsequent hearings.  Suffice it to say that in the ensuing exchange of correspondence, the letters that I received from the solicitors were contradictory, inconsistent, and on some occasions simply failed to answer the court’s questions.  As a consequence of this, unnecessary costs have been incurred, in requiring at least one more hearing of the petition than would otherwise have been the case, and the provisional liquidators having to file evidence informing the court of their understanding of the circumstances in which the application came to be made.  In these circumstances, it seems to me that it is appropriate that the wasted costs be paid by the solicitors personally.

5.  I will, today, make an order for the winding up of the Company.  

6.  I will order that the costs of the petitioner, and the Official Receiver, and insofar as the provisional liquidators have been represented at hearings the provisional liquidators, be paid out of the assets of the Company, save for the hearing on 27 August 2018. 

7.  I will make an order that the Company’s solicitors show cause why they should not pay the petitioner, the Official Receiver, and the provisional liquidators’ costs of the hearing on 27 August 2018, and also the provisional liquidators’ costs of the affirmation sent to the court on 29 August 2018.  If the Company’s solicitors wish to contest the order, they should file a notice to that effect with the court within 20 clear days.  If they do not, I will make a final order.

8.  The difficulties that have arisen in this case show the importance of solicitors getting clear instructions from their clients in relation to ex parte applications of this sort, and making sure that those instructions are passed on to counsel.  The way in which this matter has proceeded has wasted a considerable amount of the court’s time as well as other parties’, and I would urge solicitors in similar cases in future to take considerably more care than was taken by the Company’s solicitors in the present petition.