RE GRAND CHINA SHIPPING (HONG KONG) CO LTD

HCCW 485/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) ACTION NO 485 OF 2012

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D E C I S I O N

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1. On 1 November 2012, a partial final arbitration award was issued in arbitration proceedings between the petitioner and the company in London. The award ordered that the company pay the petitioner US$58,375,709.52 plus interest. I understand that both parties in those arbitration proceedings were represented by leading counsel.

2. That award was not paid and on 28 December 2012, the petitioner issued the petition currently before me, seeking a winding-up order against the company on the grounds of insolvency.  This was not the first occasion on which the petitioner had had to issue a winding-up petition to obtain payment of a debt from the company.  Previously, it had issued proceedings HCCW 402/2011.  Those proceedings were terminated when the debt was paid in full. 

3. On 5 March 2013, a notice of intention to appear on the petition was filed by Armada (Singapore) Pte Limited in respect of a debt for £ 3,282,768.50.  Armada support the petition.

4. It was not until Friday, 5 April 2013, that the company took steps to file evidence opposing the petition.  The affirmation of Mr Liu Yaxin tells me very little of substance about how the company proposes to repay the petitioner.  I note that there is no suggestion - and it would not seem to me that there could be - that the debt is not payable. 

5. What Mr Liu has done, which is instructive, is to exhibit to his affirmation the company’s audited financial statement for the year ending 31 December 2011. That shows that at the end of 2011, it made a gross loss on its principal business of US$175,376,993 and had net liabilities of US$391,523,299.  Mr Liu has also filed some recent management accounts which are in Chinese.  No translation was produced for me but it does not seem to me, from the brief explanation of the documents by Miss Fong, who appeared on behalf of the company, that those management accounts suggest that there has been a radical improvement in the financial situation of the company.

6. The upshot of Mr Liu’s evidence seems to be that there is reason to think the business of the company is improving and that by playing around with the company’s balance sheet, its financial position can be made to look as if it has improved, and the company would like more time in order to file evidence explaining how it proceeds to address the petitioner’s claim. 

7. Also on 5 April 2013, a further notice of intention to appear on the petition was filed by seven creditors who oppose it.  No evidence has been filed by those opposing creditors.  In the skeleton submissions of Ms Law who appeared for the opposing creditors, the opposing creditors are described as “internal creditors of the company”.  However, Ms Law told me during her brief address to the court that she had been instructed that, in fact, there was no common shareholding between the opposing creditors and the company.  This seems rather surprising in the light of the extract from the company’s website that Mr Liu has exhibited to his affirmation which does appear to describe a number of the opposing creditors as being part of the business group within which the company operates. 

8. Be that as it may, the opposing creditors themselves have not given any particular reason why the company, which I am assuming is clearly insolvent, should not be wound up.  There is no proposal by them, or the company itself, for any restructuring of its debt.

9. I am not inclined to adjourn the petition in order to allow the company and the opposing creditors to file more evidence.  There are various reasons for this. First, no particular reason has been given for thinking that any sensible proposal which it might be reasonable to anticipate the petitioner would accept is about to be made.  Secondly, it is highly unsatisfactory that a company which, it must be assumed, given its history, understands the winding-up process in Hong Kong and has access to commercial lawyers, should have left dealing with the petition so late. 

10. Companies Winding Up Rule 32 provides that affidavits in opposition to a petition that a company may be wound up by the court shall be filed within seven days, or such longer time as the court may direct, of the date on which the affidavit verifying the petition is filed.  A few months ago, at my request, the Law Society issued a circular to its members, reminding them of this rule and stating that the Companies Court would expect companies to comply with it. 

11. This was to emphasise a point that I had made to similar effect in paragraph 10 of my unreported judgment in Re Creative Asia Limited (19 December 2011).  If a company and its associated and/or affiliated creditors wish to contest a petition based on a substantial debt which cannot be disputed, it is incumbent upon them to come before the court at an early stage with evidence supporting a sensible proposal which justifies the court adjourning a petition issued against what, on the face of the evidence, would appear to be an insolvent company.  If a company does not do so, as is the case in the present matter, it should not assume that the court is going to indulge it by granting adjournments in order for it to try and put together a proposal. 

12. I will therefore make the normal winding-up order.