XCHRX Re Fook Tai Credits Ltd.

HCCW 932/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO.932 OF 1999

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J U D G M E N T

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1. On 3 January 2000 I made a winding-up order.

2. On 25 January 2000, an inter partes summons was taken out by Mr Foo, a director of the Company, and apparently, subject to the leave of the court, also on behalf of the Company, for leave under section 186 to appeal against the order made on 3 January 2000. They also sought an order that conditional upon the deposit of HK$250,000 made by the solicitors of Mr Foo and the Company ("the Applicants") on behalf of William A. Graham on account of the costs of the Official Receiver and, where appropriate, in partial satisfaction of the judgment debt owed by the Company to the petitioner, there be a stay of execution of the order pending appeal. The stay application was opposed by the petitioner as well as the Official Receiver.

3. The Company has an undoubted right to appeal against the winding-up order. Whilst counsel for the Applicants submitted that the Board was functus, it has never been doubted that the Company itself has the right to appeal. On that basis, section 186 is irrelevant and I will concentrate on the real issue arising in today's application which is for a stay of the winding-up order.

4. First of all, I should make it clear that this application for a stay is not made under section 209 of the Companies Ordinance. Rather it is made under Order 59, rule 3 of the Rules of the High Court.

5. In considering whether or not I should exercise my discretion to grant a stay, I must take into account the prospects of success of any appeal. Evidence has been filed since the date of the winding-up order. It is clear from the authorities that for the purposes of an appeal, those matters are not to be taken into account. See Re Industrial and Commercial Securities plc (1988) 5 BCC 320; French on Applications to Wind Up Companies at p.150. What is relevant is the material before the court when it made its order.

6. Having reviewed the matter, I am of the view that the appeal has little prospect of success, and for that reason, it would be wrong for me to grant a stay. This is quite apart from the line of authority to the effect that as a matter of practice, orders made in winding-up petitions are not normally stayed : seeIn re A. & B.C. Chewing Gum Ltd [1975] 1 WLR 579, 592H and Re Grace Garments Ltd (1996) CWU 231 of 1995 (unreported). Counsel for the Applicants submitted that the practice of not staying winding-up orders is confined to cases where such orders are based on deadlock. I disagree. The reasoning at 592H is plainly applicable to orders made on creditors' petitions.

7. For these reasons, the application is refused.

8. I should add that the Applicants never sought to discuss these matters with the Official Receiver who is the Provisional Liquidator. It is to be borne in mind that if any rescue is to be mounted, it would be sensible to have the matters reviewed in conjunction with the Official Receiver, rather than to act entirely independently, without consulting the Official Receiver or enlisting his support.

9. So far as costs are concerned, they must follow the event and I understand that Mr Foo is agreeable to paying the costs of this unsuccessful application.