CHUN WO CONSTRUCTION AND ENGINEERING COMPANY LTD v. CHINA JINGYE ENGINEERING CORPORATION (HONG KONG) LTD

HCCW 240/2024

[2024] HKCFI 2816

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 240 OF 2024

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REASONS FOR DECISION

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1.  There was before this court a Petition presented on 22 April 2024 in respect of a debt of over HK$95 million (“Debt”). The Petitioner sought and this court granted a usual winding-up order against the Respondent (“Company”) after hearing the parties. Here are the reasons.

2.  The Petition was based on a statutory demand dated 11 March 2024 served by the Petitioner’s solicitors on the Company at its registered address on the same day. There was non-compliance with the statutory demand and the Company was thus deemed to be unable to pay its debts by virtue of Section 178(1)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap.32 (“CO”).

3.  Almost 3 month after the presentation of the Petition, on 15 July 2024, the Company purported to file the Affirmation of Yu Kexin (“Yu 1”) in opposition out of time and without leave, contrary to rule 32 of the Companies (Winding-up) Rules, Cap 32H.

4.  On 22 July 2024, at the 1^st Monday morning hearing, Linda Chan J gave leave to the Company to file and serve Yu 1, conditional upon the Company paying HK$95,000,000 into Court within 42 days (“Order”).

5.  Instead of complying with the condition, on 5 August 2024, the Company issued a summons seeking leave to appeal against the Order and asking for unconditional leave to file and serve Yu 1 (“Leave Summons”).

6.  On 9 September 2024, upon the Company’s failure to make payment into Court, the Petitioner notified the Company that it would take steps to restore the Petition. Hence the hearing before this court.

7.  As stated in the Petition, between July 2022 and August 2023, pursuant to the Application Forms for Advance Payment to Subcontractor (“Application Forms”), the Petitioner had made advance payments (“Advance Payments”) to the Company and/or the Company’s vendors, suppliers, sub-contractors, labour and/or staff for, inter alia, settling the outstanding balance owed by the Company to them.

8.  Pursuant to the undertaking set out in the Application Forms, the Company had undertaken to repay the Advance Payments together with interest thereon to the Petitioner as a debt.

9.  According to the Court’s record of the hearing on 22 July 2024, at least those Advanced Payments in the principal sum of over HK$83 million are not in dispute. Further, according to the same Court’s record, the Petitioner had sent 3 pre-action letters to the Company on 26 July, 8 and 27 November 2023 to demand for payment, which was also not disputed. At that hearing, Counsel for the Company, Mr Chester Fung, told Linda Chan J that he had no instructions as to why the Company did not respond to those pre-action letters.

10.  It is evident that the Company has up to the hearing failed to comply with the condition imposed by the Order and has no intention to comply with it. Accordingly, Yu 1 was not in evidence and there was no other evidence upon which the Company could rely on to oppose the Petition at the hearing before this court.

11.  As the Company is deemed insolvent, the Plaintiff is entitled ex debito justitiae to a winding up order: Re Hong Kong Easy Charge Ltd [2024] HKCFI 2134 at [35], per Linda Chan J.

12.  At the hearing before this court, Mr Lee for the Company was asked what took it so long for his client to come up with evidence in opposition to show it had a bona fide dispute to the Debt.[1] The answer was (i) many of the staff of the Company had left; (ii) the directors and the parent company ie those who were making decisions, were in the Mainland and not familiar with the system and communication was delayed; (iii) the Company instructed solicitors quite late in the day.

13.  It seems to this court the answers were merely excuses and could not justify the time taken by the Company to come up with evidence of the so-called bona fide dispute to the Debt.

14.  As rightly pointed out by Mr Tai, the intended appeal against the Order for imposing the said condition is an appeal against the exercise of a discretion. It is well established that the court will not overturn such an exercise unless the Learned Judge had erred in principle or was plainly wrong.

15.  It is equally well established that an appeal of the Order, let alone an application for leave to appeal against the Order, does not of itself operate as a stay of execution of the Order appealed against. Hence, the fact that the Company had issued the Leave Summons would not assist it to oppose the grant of a winding up Order or to buy time.

16.  Regarding the Company’s last minute attempt to put off the inevitable by issuing the summons dated 25 September 2024 (“Stay Summons”) for an interim stay alternatively adjournment of the proceedings until the final determination of the appeal against the Order, this court was of the view that this was just a delaying tactic. Since the Company had not even obtained leave to appeal the Order, the final determination of the appeal against the Order, even in the unlikely event that leave was granted[2], would be in the indefinite future. This court was not minded to grant the Stay Summons in these circumstances.

17.  For these reasons, this court granted the usual winding up Order against the Company as requested.