RE TIANCHENG FORTUNE MANAGEMENT LTD

HCCW 19/2022

[2022] HKCFI 3333

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 19 OF 2022

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REASONS FOR DECISION

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A.  INTRODUCTION

1.  This is the petition for the winding up of Tiancheng Fortune management Limited (天誠財富管理有限公司) (“the Company”) presented by the petitioner, China Cinda Asset Management Co., Ltd. (中国信达资产管理股份有限公司) (“the Petitioner”).

2.  This is also the hearing of the Summons filed by the Petitioner on 21 July 2022 (“the Continuation Summons”) seeking the continuation of the injunction order granted by Au-Yeung J on 20 July 2022 (“the Injunction Order”).   The circumstances in which the Injunction Order was granted will be further elaborated hereinbelow.

3.  At the hearing on 1 August 2022, I dismissed the petition filed on 17 January 2022 (as amended pursuant to the Order of Master Hui dated 27 April 2022) (“the Petition”) presented by the Petitioner and discharged the Injunction Order, with reasons to be given later.  In view of my decision, Counsel for the Petitioner did not dispute that costs should be awarded on an indemnity basis. Hence, at the end of the hearing, I also ordered that the Petitioner do pay the costs of and occasioned by the Continuation Summons and the Petition (including the costs of the hearing on 1 August 2022) to the Company on an indemnity basis with certificate for two counsel.  

4.  These are my reasons.

B.  FACTUAL BACKGROUND

5.  The largely undisputed background leading up to the presentation of the Petition is summarised below.

6.  The Company was incorporated in Hong Kong on 13 May 2016 and was between 18 July 2016 and 26 May 2021 a wholly owned subsidiary of Creat Tiancheng Investment Holdings Co., Ltd. （科瑞天诚投资控股有限公司） (“Creat Tiancheng”), a company incorporated under the laws of the People’s Republic of China (“PRC”). Mr. Ng Yuk (“Ng”), was and is the legal representative of Creat Tiancheng and the sole director of the Company.

The 1^st Restructuring in 2017

7.  On 1 January 2016, Shenzhen RAAS Kaiji Investment Consulting Co., Ltd (深圳莱士凯吉投资咨询有限公司) (“the Original Creditor”) as lender entered into a loan agreement with Shanghai Kaiji Import & Export Co., Ltd (上海凯吉进出口有限公司) (“Shanghai Kaiji”) as borrower for the principal amount of RMB 2,880,000,000 (“the Principal Amount”).

8.  In around September 2017, Creat Tiancheng was in need of working capital and China Cinda Asset Management Co., Ltd. Guangdong Branch (中国信达资产管理股份有限公司广东省分公司) (“Cinda Guangdong”), a branch of the Petitioner, was agreeable to financing Creat Tiancheng.  A financing arrangement by way of a debt restructuring was therefore reached between Creat Tiancheng, the Original Creditor and Cinda Guangdong, which, in short, involved the following: -

(1)  Cinda Guangdong would acquire the debt of the Principal Amount owed by Shanghai Kaiji from the Original Creditor in consideration of RMB 2,880,000,000;

(2)  The Original Creditor would advance the said sum to Shanghai Kaiji; and

(3)  Shanghai Kaiji would then in turn provide the said sum to Creat Tiancheng by way of a loan.

9.  Against this background, the parties therefore entered into the 《债权收购暨债务重组协议》 (Contract No. 信粵-A-2017-016) (“the 1^st Restructuring Agreement”) to effect the above financing arrangement.  Pursuant to the 1^st Restructuring Agreement, Cinda Guangdong acquired from the Original Creditor the debt of the Principal Amount owed by Shanghai Kaiji, and Creat Tiancheng assumed the liability to repay the debt jointly with Shanghai Kaiji (collectively, “the Debtors”).   Pursuant to Clause 7 of the 1^st Restructuring Agreement, the debt restructuring period during which the Debtors were to repay the Principal Amount was agreed to be 24 months.

10.  The Debtors’ obligations under the 1^st Restructuring Agreement were guaranteed by, inter alia, a guarantee dated 4 September 2017 which was provided by a Hong Kong company, RAAS China Limited (“RAAS”), the sole shareholder of the Original Creditor.

11.  Pursuant to the 1st Restructuring Agreement, by an agreement dated 8 September 2017, Shanghai Kaiji provided a loan of RMB 2,880,000,000 to Creat Tiancheng for a period of 2 years at an interest rate of 8% p.a.

12.  It is not in dispute that the Debtors thereafter failed to comply with the terms of the 1^st Restructuring Agreement in around the fourth quarter of 2018, which led to Cinda Guangdong commencing proceedings in the PRC.   By a ruling (No. (2019) 沪02执406号之一) made by the Shanghai Second Intermediate People’s Court (“the Shanghai Court”) dated 13 May 2019 (“the PRC Ruling”), the Debtors and RAAS were ordered to, inter alia, comply with the enforcement certificate issued by Fangyuan Notary Office of Beijing for the enforcement of the terms of the relevant contractual documents.

13.  Meanwhile, while Cinda Guangdong was taking enforcement action on the strength of the 1^st Restructuring Agreement in the PRC, the parties started in or around December 2018 to engage in negotiations with a view to exploring the possibility of a further debt restructuring.  Such negotiations were primarily carried out between Ng (on behalf of Creat Tiancheng) and representatives of Cinda Guangdong, namely Mr. Lan Xiaohan (“Lan”) (the person in charge of Cinda Guangdong as stated in the 1^st Restructuring Agreement), and Mr. Zou Jinsong (“Zou”), Deputy General Manager of Cinda Guangdong. 

14.  As will be elaborated hereinbelow, for the purposes of these proceedings, the main factual disputes between the Petitioner and the Company lie, amongst other things, in whether certain representations were made during such negotiations and the intended effect (or the lack thereof) of a Deed of Guarantee (Contract No.信粵-A-2017-016-08) dated 21 June 2019 (“the Company’s Guarantee”) entered into by the Company as guarantor following such negotiations.

The 2^nd Restructuring in 2019

15.  As a result of such negotiations, the parties eventually reached an agreement on, inter alia, a stay of enforcement of the PRC Ruling and a further restructuring of the underlying debt, which culminated in an enforcement settlement and debt restructuring agreement (《执行和解暨债务重组协议》) (Contract No. 信粵-A-2017-016-05) and a supplemental agreement thereto (《执行和解暨债务重组协议之补充协议》)  (Contract No. 信粵-A-2017-016-06) (collectively, “the 2^nd Restructuring Agreement”), both dated 21 June 2019 and entered into between Cinda Guangdong as creditor, the Debtors as debtors and RAAS as the guarantor.

16.  In furtherance of the 2^nd Restructuring Agreement, RAAS as guarantor entered into a deed of guarantee with Cinda Guangdong on or around 21 June 2019 (“the RAAS Guarantee”).

17.  On or around 21 June 2019, the Company likewise issued the Company’s Guarantee to Cinda Guangdong.  The Guarantee is governed by the laws of Hong Kong and clause 2.1 of which provides that if the Debtors fail to make any payment which has become due and payable under or in connection with any transaction document, the Company shall, within 5 business days after receiving Cinda Guangdong’s written demand, pay all such outstanding sums to Cinda Guangdong as if the Company is the primary obligor.

18.  It is noteworthy that the Company is not a party to the 2^nd Restructuring Agreement which made no mention of either the Company or the Company’s Guarantee.  Although both RAAS and the Company issued a guarantee to Cinda Guangdong in respect of the Debtors’ obligations under the 2^nd Restructuring Agreement, only RAAS was named as the guarantor (保証人) in the 2^nd Restructuring Agreement and was made a party thereto, whereas the Company was not featured at all as part of the 2^nd Restructuring Agreement.

19.  Clause 4 of the 2^nd Restructuring Agreement provides, inter alia, that if the Debtors or their associates are in breach of the terms of the relevant transaction documents or in the event of the occurrence of an event of default, Cinda Guangdong has the right to announce that the further restructuring contemplated under the 2^nd Restructuring Agreement fails, and apply to the court for the restoration of the enforcement of the PRC Ruling.

20.  Following the execution of the 2^nd Restructuring Agreement, on 19 July 2019, Cinda Guangdong, Creat Tiancheng, and RAAS attended the Shanghai Court and made a memorandum of the settlement.  It is not in dispute that on that occasion, Cinda Guangdong did not mention to the Shanghai Court that the Company had provided security in respect of the debt restructuring by way of the Company’s Guarantee, nor was the Company’s Guarantee included in the bundle of documents placed before the Shanghai Court.

21.  In around January 2021, the Petitioner discovered that apparently in breach of various terms of the RAAS Guarantee, RAAS charged its 9% shares in a Hong Kong company, Tiancheng International Investment Limited (天誠國際投資有限公司) (“Tiancheng International”), of which the Company was and is a shareholder, to Tiancheng International pursuant to a share pledge agreement dated 12 November 2020 without Cinda Guangdong’s written consent.

22.  In the circumstances, pursuant to Clause 4 of the 2^nd Restructuring Agreement, Cinda Guangdong exercised its right to announce that the further restructuring contemplated under the 2^nd Restructuring Agreement failed, and applied to restore the enforcement of the PRC Ruling against the Debtors and RAAS.

The Assignment Agreement

23.  On 13 April 2021, Cinda Guangdong and the Petitioner entered into an assignment agreement (《资产划转协议》) (Contract No. 信粤-A-2017-016-09) (“the Assignment Agreement”), pursuant to which Cinda Guangdong assigned, inter alia, all its rights under the 2^nd Restructuring Agreement and the Company’s Guarantee to the Petitioner with effect from 13 April 2021.

24.  By a ruling (No. (2021) 沪 02 执异 63 号) dated 19 May 2021, the Shanghai Court approved the change of applicant for the enforcement of the PRC Ruling from Cinda Guangdong to the Petitioner.

Statutory Demand

25.  It later transpired that the Debtors failed to repay the outstanding sums in accordance with the terms of the 2^nd Restructuring Agreement, although the Debtors did, on 12 August 2021, partially settle with the Petitioner the outstanding sums in the sum of RMB 1,817,492,122.82.

26.  In exercise of its rights under the Company’s Guarantee, the Petitioner served a written demand on the Company on 13 December 2021 demanding the payment of RMB 3,148,128,639.31 to the Petitioner on or before 20 December 2021.

27.  As the Company did not make any payment on or before 20 December 2021, the Petitioner proceeded to serve a statutory demand on the Company on 24 December 2021 demanding RMB 3,202,438,576.97 (“the SD”).

28.  Since no payment was made by the Company within 21 days after the service of the SD, the Petitioner presented the Petition on 17 January 2022 on the ground of the Company’s insolvency and inability to pay its debts.  It is the Petitioner’s case that as at the date of the Petition, the Company was indebted to the Petitioner in the sum of RMB 3,243,834,420.12.

C.  PARTIES’ RESPECTIVE CASES

29.  The Petitioner filed (1) the Affirmation of Yang Jing dated 17 January 2022 and (2) the Affirmation of Zhang Weidong dated 27 April 2022 in support of the Petition and its amended version respectively.

30.  In opposition to the Petition, the Company filed the Affirmation of Ng dated 20 May 2022 (“Ng’s Affirmation”).

31.  In reply to the matters raised in Ng’s Affirmation, the Petitioner filed (1) the Affirmation of Zou and (2) the Affirmation of Yan Yiwen (“Yan”), both dated 14 June 2022.

The Company’s Case

32.  It is the Company’s primary position that the Petition should be dismissed on the following grounds: -

(1)  The Guarantee is a sham and that neither Cinda Guangdong nor the Company intended that the Company’s Guarantee would actually to create the legal rights and obligations that it appears to create (“Ground 1”);

(2)  Alternatively, the Company’s Guarantee was obtained or procured by various fraudulent misrepresentations made by Zou during the negotiation process leading up to the execution of the Company’s Guarantee and the 2^nd Restructuring Agreement, including representations to the effect that the purpose of requiring the Company to execute a guarantee was merely to go through the motion for Cinda Guangdong’s management and that the guarantee was not intended to be enforceable against the Company (“Ground 2”);

(3)  The Guarantee should not be given any effect on the ground of foreign illegality as it was entered into in breach of the foreign exchange regulation of the PRC (“Ground 3”).  In support of this contention, the Company has, by way of an exhibit to Ng’s Affirmation, produced a PRC legal opinion prepared by Mr. Gao Qiang (高强) of Beijing Haotian (Shenzhen) Law Firm (北京浩天(深圳)律师事务所) dated 15 May 2022 (“Gao’s PRC Legal Opinion”).

33.  The Company also raised 2 procedural objections to the Petition, namely that (1) the Petitioner lacks locus standi to present the Petition on its own; and (2) the SD is ineffective as the Petitioner did not join the assignor, i.e. Cinda Guangdong, as a party to these proceedings.  Both of these procedural objections are premised on the Petitioner’s contention that the Assignment Agreement took effect only in equity for failing to comply with the requirements under section 9 of the Law Reform (Amendment and Consolidation) Ordinance (Cap. 23) (“LARCO”) and hence the Petitioner is only an equitable assignee of the petitioning debt.

34.  In seeking to establish that there are bone fide disputes of the petitioning debt on substantial grounds, Ng has in his affirmation elaborated extensively on the negotiation process between Ng on the one hand and Zou and Lan on the other (on behalf of Cinda Guangdong) leading up to the execution of the 2^nd Restructuring Agreement and the Company’s Guarantee.  Ng’s evidence may be summarised as follows.

35.  Since around December 2018, Ng started to communicate with Zou with a view to exploring the possibility of a further debt restructuring as Zou was responsible for handling the debt restructuring concerning Creat Tiancheng.  They communicated with Zou mostly by telephone initially until 25 December 2018 when he first got connected with Zou on WeChat.

36.  On 26 January 2019, Ng had a face-to-face meeting with Lan and Zou, at which Lan adamantly told Ng that Zou had full authority to handle the matters concerning the debt restructuring of Creat Tiancheng.

37.  On 28 February 2019, Zou circulated to Ng via WeChat Cinda Guangdong’s preliminary proposal of the intended further debt restructuring (《上海莱士项目交易结构发测算说明(讨论稿）》) (“the Preliminary Proposal”) for Ng’s consideration.

38.  Thereafter, a number of face-to-face meetings took place between Ng and Zou in Beijing.  They also continued to engage in communication over WeChat to discuss the terms and direction of the intended debt restructuring.

39.  On around 17 June 2019, an agreement in principle had been reached between Cinda Guangdong, Shanghai Kaiji and Creat Tiancheng.  It was then that Cinda Guangdong requested the Company to execute a guarantee securing the restructuring of the debt owed by the Debtors, to which Ng agreed in principle.  Arrangement was then made for Ng to execute the 2^nd Restructuring Agreement and the Company’s Guarantee on 21 June 2019 in Beijing.

40.  However, on around 18 June 2019, the Company’s legal advisers advised Ng against the execution of the Company’s Guarantee for 2 reasons:

(1)  Such a guarantee would be an inbound guarantee (外保內貸) arrangement which would require the permission of the PRC’s State Administration of Foreign Exchange (“SAFE”) as well as the registration therewith.  If the Company were to issue the Company’s Guarantee, it would be in breach of the regulation as no permission and registration was given; and

(2)  By virtue of Clause 23.20 of a senior facility agreement between the Company as guarantor, and various branches of China Merchants Bank Co Ltd dated 4 May 2017 (“the Senior Facility Agreement”), the Company was under an obligation not to incur any guarantee in respect of any obligation of any person.  Hence, the Company would be in breach of the terms of the Senior Facility Agreement if it were to execute the Company’s Guarantee.

41.  Having been so advised by the Company’s legal advisers, Ng had 3 telephone conversations through WeChat with Zou on 19 June 2019 to inform Zou of the advice given to him by the Company’s legal advisers and the Company’s concerns over the breach of PRC’s foreign exchange regulation and of the Senior Facility Agreement if the Company were to execute a guarantee.

42.  It is Ng’s evidence that in response to his concerns as expressed during those telephone conversations, Zou said to him that the Company’s Guarantee was not intended to be enforceable against the Company, but was merely for going through the motion to satisfy Cinda Guangdong’s management.  Zou therefore asked Ng not to be concerned about the legal advice given to him by the Company’s legal advisers as “the guarantee would practically have no effect”. Zou further assured Ng that after signing the intended guarantee, Ng could place the relevant written resolution and director’s certificate approving the execution of the guarantee in a sealed envelope, which would be safekept by Zou personally.

43.  As a matter of objective evidence, according to the WeChat screen captures provided by Ng, shortly after the 3 telephone conversations that he had with Zou on 19 June 2019, Ng sent via WeChat various documents to Zou, including (1) a document in pdf format entitled 《跨境担保外汇管理规定》 and (2) a screen capture of Clause 23.20 of the Senior Facility Agreement.  In addition to sending Zou the relevant documents, Ng further said to Zou by way of a WeChat voice message as follows: -

“邹总，这个我把那个，就是关于天诚财富我跟你讲的那两个，一个事是招行事，另外一个是 外管局的相关规定，那个律师跟我们的律师刚刚发给我，我转发给你，让俩心中有数。”

44.  According to the WeChat records provided by Ng, Zou responded to the above by a text message which reads “明白，您放心。我们一条船!”.

45.  On the strength of the assurances provided by Zou, Ng, after discussing the matter with other relevant personnel of Creat Tiancheng and the Company’s legal advisers, confirmed with Zou that the Company agreed to proceed to execute the Company’s Guarantee by way of a WeChat voice message sent by Ng at 6:19 p.m. on 19 June 2019 which, according to Ng, was as follows, “邹总，我已经跟他们讲了，那个就按照我们刚讲的意思办，但是那个东西你千万记得放在你的手上，谢谢。”.  In response, Zou replied by a text which read “一言为定!”.

46.  On 21 June 2019, Ng, acting on the assurances given by Zou during the various telephone conversations and WeChat exchanges that took place on 19 June 2019, proceeded to execute various documents in respect of the further debt restructuring, which included: -

(1)  An undated guarantee agreement (“the Preceding Guarantee”), which, according to Ng’s evidence, is in the same form as the Company’s Guarantee presently relied upon by the Petitioner except for the fact that the signing page of the Preceding Guarantee contains the reference to the use of the common seal of the Company (并于本契约上加盖钢印), whereas that of the Company’s Guarantee does not.  No common seal of the Company was in fact impressed on the Preceding Guarantee notwithstanding the reference to its use;

(2)  An undated written resolution of the board of the Company approving the execution of the Company’s Guarantee (“the Preceding Board Resolution”);

(3)  An undated director’s certificate (《董事证明信》) certifying that all relevant internal procedures of the Company required to authorise the execution of the Company’s Guarantee have been completed and that such execution was compliant with the Company’s articles of association (“the Preceding Director’s Certificate”); and

(4)  The 2^nd Restructuring Agreement.

47.  Notwithstanding the fact that there was a reference to the use of the Company’s common seal on both the Preceding Board Resolution and the Preceding Director’s Certificate, no such common seal was in fact affixed on either of those documents.

48.  After the execution of those documents on 21 June 2019, Ng had, pursuant to his earlier communications with Zou on 19 June 2019, placed the Preceding Board Resolution and the Preceding Director’s Certificate into a sealed envelope (“the Sealed Envelope”) and passed it to Mr. He Shan (“He”) of Cinda Guangdong.  In doing so, Ng specifically told He that the Sealed Envelope must be handed over to Zou as opposed to any other person.

49.  On 24 June 2019, Zou sent 2 photographs of the Sealed Envelope (showing only the cover of the Sealed Envelope as opposed to the contents therein) to Ng via WeChat and texted Ng as follows, “没开封交给我了”, to acknowledge receipt of the Sealed Envelope.

50.  On the same day, Zou requested Ng in a telephone conversation via WeChat to re-execute the guarantee agreement because although the Preceding Guarantee contained a reference to the use of the Company’s common seal on its signing page, no such common seal had in fact been affixed on the document. The same problem also applied to the Preceding Board Resolution and the Preceding Director’s Certificate, which also had to be re-executed as a result.

51.  In response, Ng queried the need for such re-execution in circumstances where the Company’s Guarantee was not meant to be used or to have any real effect.  Zou nevertheless explained that although the Company’s Guarantee was not meant to be used or to have any real effect, they should at least ensure that the Company’s Guarantee would look proper on its face.

52.  In light of Ng’s reluctance to actually affix the Company’s common seal onto the documents, Zou suggested that the references to the use of the Company’s common seal on the respective documents be removed, to which Ng agreed.

53.  In the premises, on 25 June 2019, Ng executed the Company’s Guarantee, and the revised board resolution of the Company (“the Board Resolution”) and the revised director’s certificate (“the Director’s Certificate”).  The only difference between the preceding set and this latter set of documents is that the references in these respective documents to the use of the Company’s common seal were removed in the latter set.

54.  It is the Company’s case that consistently with Ng’s understanding (stemming from Zou’s representations to him) that the Company’s Guarantee was only executed for going through the motion and was not intended to have any real or practical effect: -

(1)  Cinda Guangdong had never purported to exercise any of the rights that it has under the Company’s Guarantee. For instance, Cinda Guangdong had never asked the Company to provide the Company’s audited or interim financial statements even though it was entitled to under Clause 5.1(1) of the Company’s Guarantee;

(2)  Further, Ng had never informed the Company’s auditor that the Company had executed the Company’s Guarantee as he would otherwise have informed the auditor of the same;

(3)  Cinda Guangdong has not to date sought permission from SAFE nor has it registered the Company’s Guarantee with the relevant authority in the PRC.

The Petitioner’s Case

55.  It is the Petitioner’s position that the Company has failed to discharge its burden of showing a bona fide dispute on substantial grounds by sufficiently precise and believable evidence.  The Petitioner’s reply to the matters raised in Ng’s Affirmation may be summarised as follows.

56.  In respect of Ground 1, it is the Petitioner’s case that the Company’s Guarantee was not a sham and that Cinda Guangdong had all along intended that the Company’s Guarantee would create the legal rights and obligations that it appeared to create: -

(1)  Zou accepts that he had circulated the Preliminary Proposal to Ng on 28 February 2019 for discussion purposes and maintains that it is abundantly clear from the Preliminary Proposal that the provision of the Company’s Guarantee by the Company was a condition precedent and thus part and parcel of the 2^nd debt restructuring, not least because Cinda Guangdong made it clear in the Preliminary Proposal that the guarantors of the original debt and the Company shall jointly and severally guarantee the debtors’ liability to make up any shortfall (“原债务担保人及天诚财富公司为上述债务人的补足义务承担连带担保责任”);

(2)  Similarly, Zou does not dispute the fact that Ng did on 19 June 2019 send him parts of the Senior Facility Agreement.  Zou also accepts that he did respond to Ng by way of 2 threads of text messages, namely “明白，您放心。我们一条船!” and “一言为定!”, on 19 June 2019. Nevertheless, Zou strenuously denied that these text messages were sent to Ng against the context of any alleged assurance or promise to the effect that the execution of the Company’s Guarantee was only for going through the motions of approving the 2^nd debt restructuring transaction or that the Company’s Guarantee was not meant to create any legal effect;

(3)  Rather, it is Zou’s evidence that since as early as in late May 2019, Ng had already requested that the Company’s Guarantee be kept confidential for 2 main reasons: (i) because the Company was bound by the terms of the Senior Facility Agreement not to provide guarantees and (ii) to avoid other creditors of Creat Tiancheng (which was in grave financial difficulties then and was thus likely to require further financing or further debt restructuring with its other creditors) also insisting on the Company providing a guarantee as part of the potential further debt restructuring.   It is therefore Zou’s evidence that the above threads of text messages were sent to Ng against the background of Zou’s assurance/acknowledgement that the Company’s Guarantee shall be kept confidential between the parties;

(4)  In this regard, whilst Zou does not dispute the fact that he had received the Sealed Envelope from Ng, it is Zou’s evidence that the Sealed Envelope did not contain the Preceding Board Resolution or the Preceding Director’s Certificate as Ng contends.  Rather, it contained certain additional documents provided by RAAS;

(5)  Further, Zou adduced various contemporaneous communication records between Cinda Guangdong and its legal advisor in the transaction, Hogan Lovells in Beijing (“Hogan”) to show that Cinda Guangdong had always taken great care to ensure that the Company’s Guarantee would be legally enforceable and effective: -

(a)  Notably, on 23 May 2019, He emailed Hogan concerning Cinda Guangdong’s queries as regards the enforceability of the Company’s Guarantee to be entered into.  Specifically, one of the queries concerned whether the fact that, owing to confidentiality reasons, the Company’s Guarantee would not be recorded in the court filing of the Shanghai Court as part of the memorandum of settlement, nor would the Company become a party to the 2^nd Restructuring Agreement, would in any way affect the enforceability of the 2^nd Restructuring Agreement (“我司与科瑞天诚在上海法院进行执行和解并签订《债务重组协议》，天诚财富自愿为《债务重组协议》提供担保；但出于保密原因，天诚财富与我司签订的《保证契 669 约》（将委托贵方起草）不在法院备案，也不是上述《债务重组协议》的签约方。请问：当科瑞天诚违反本次《债务重组协议》时，我方是否可以凭上述《债务重组协议》、《保证契约》在香港起诉天诚财富？”);

(b)  On 6 June 2019, Hogan was instructed by Cinda Guangdong to draft and prepare, inter alia, the Company’s Guarantee;

(c)  On both 21 and 25 June 2019, Cinda Guangdong instructed Hogan to send a lawyer to witness the due execution of the Preceding Guarantee and the Company’s Guarantee respectively;

(d)  Since the execution of the Company’s Guarantee, Cinda Guangdong had instructed Hogan to regularly conduct due diligence on the Company as to changes in the status of its corporate filings and share charges as well as litigation searches, so as to monitor the Company and other relevant parties to the restructuring in case of the occurrence of any event of default;

(6)  According to Yan’s evidence, Cinda Guangdong also regularly exercised its rights under the Company’s Guarantee by demanding the Company to provide financial statements under Clause 5.1(1) of the Company’s Guarantee.

57.  Insofar as Ground 2 is concerned, it is Zou’s evidence that: -

(1)  He has never given any assurance or promise to Ng to the effect that the execution of the Company’s Guarantee was only for going through the motions of approving the 2^nd debt restructuring transaction or that the Company’s Guarantee was not meant to create any real legal effect.  In any event, it is abundantly clear from the Preliminary Proposal that the Company’s Guarantee was a condition to Cinda Guangdong’s approval of the restructuring;

(2)  He would in any event not dare or have the requisite authority to give any such assurance or promise as alleged by Ng.  Cinda Guangdong is a large state-owned enterprise and any suggestion of change to the transaction structure of the 2^nd debt restructuring would require the collective approval of Cinda Guangdong and the Petitioner’s management;

(3)  Given the significant amount of the underlying debt and Ng’s knowledge and experience with similar types of transactions, it could not be suggested that Ng, in his capacity as the legal representative of Creat Tiancheng and the sole director of the Company, would execute the Company’s Guarantee on the Company’s behalf and thereby commit the Company to an enormous contingent liability solely on the alleged oral promises made by Zou.

58.  As to Ground 3, although the Petitioner has not produced any PRC legal expert opinion to address any of the points raised in Gao’s PRC Legal Opinion, the Petitioner denies that the performance of the Company’s Guarantee would amount to foreign illegality on the basis that the non-registration of the Company’s Guarantee with SAFE would result in nothing more than an administrative punishment.

59.  Insofar as the 2 procedural objections raised by the Company are concerned, the Petitioner maintains that Cinda Guangdong’s assignment of its rights under the Company’s Guarantee to the Petitioner has fully complied with the requirements laid down in section 9 of LARCO and thus, it is a legal assignee of the Company’s Guarantee.  Alternatively, and in any event, it is the Petitioner’s case that even if it is an equitable assignee, it nevertheless still has locus standi to present the Petition on its own without joining Cinda Guangdong (as the assignor) as a party to these proceedings.

D.  APPLICABLE LEGAL PRINCIPLES: WINDING-UP PETITIONS

60.  The parties are not in dispute over the well-established legal principles governing the resolution of winding-up petitions.

61.  Winding-up petitions are not meant to be used for the purpose of debt collection, and the winding-up jurisdiction of the Court would be exercised only in very clear cases.  Where oral evidence is required to decide a real and substantial dispute of fact, the court will dismiss the petition: Re Leung Cherng Jiunn (Debtor) [2016] 1 HKLRD 850 at §27(5), per Kwan JA (as she then was).

62.  If the company has a bona fide defence on substantial grounds to the petitioning debt, the petition should be dismissed: Re Alpha Building Construction Ltd (unreported, HCCW 283/2014, 20 May 2015) at §5, per Harris J.

63.  A convenient summary of the relevant principles on the relevant threshold for establishing a genuine dispute of the debt on substantial grounds may be found in Re Hong Kong Construction (Works) Ltd (unreported, HCCW 670/2002, 7 January 2003), per Kwan J (as she then was) at §6: -

“(1) The burden is on the company to establish that there is a genuine dispute of the debt on substantial grounds. In this context, “substantial” means having substance and not frivolous. An honest belief in an insubstantial ground of defence is not sufficient to avoid a winding-up order.

(2)  The court should look at the company’s evidence against so much of the background and evidence that is not disputed or not capable of being disputed in good faith; in other words, the evidence is not to be approached with a wholly uncritical eye.

(3) The court would caution itself against unsubstantiated and unparticularised assertions, especially where particulars and information have been sought by the other side. It is incumbent on the company to put forward “sufficiently precise factual evidence” to substantiate its allegations.

(4)  The court does not try the dispute on affidavit but is to determine whether a substantial dispute exists. In so doing, the court necessarily has to take a view on the evidence, to see if the company is merely “raising a cloud of objections on affidavits” or whether there really is substance in the dispute raised by the company. Even where the company has obtained unconditional leave to defend in an application for summary judgment, the Companies Court is not precluded from examining the evidence and taking a view on whether the debt is disputed on substantial grounds.”

64.  If a petition is presented at a time when the petitioner is aware of the matters which constitute a bona fide defence on substantial grounds and the court subsequently so finds, the petition will be dismissed with costs to be paid by the petitioner ordered on an indemnity basis: Re Alpha Building at §4.

E.  ANALYSIS ON THE PETITION

65.  Having taken into account the parties’ evidence and written and oral submissions, I find that there are real and substantial disputes of facts of the petitioning debt which arose out of the Company’s Guarantee on substantial grounds and that these factual disputes could not be determined summarily on affidavit but must be resolved at trial.

66.  This is plainly not the proper forum for a lengthy discussion of the substantive merits of the parties’ respective cases.  For present purposes, I would only highlight some of the factual disputes between the parties.

Ground 1: Sham

67.  Whilst Zou has in his affirmation proffered an alternative interpretation of his exchanges with Ng on 19 June 2019 (not least as to the context in which his text messages, namely “明白，您放心。我们一条船!” and “一言为定!”, were sent), Zou did not dispute that he did have 3 telephone conversations with Ng on 19 June 2019, nor did he in his evidence go into any details to address the contents of those telephone conversations.  There is therefore, on current evidence, no effective rebuttal from the Petitioner of Ng’s evidence that such conversations were made for the purpose of conveying Ng’s concerns over the execution of the Company’s Guarantee following the legal advice that he obtained on 18 June 2019 from the Company’s legal advisers on the requirement of SAFE registration and the restriction in the Senior Facility Agreement against the provision of guarantees by the Company.  As part of his evidence, Zou merely said that the sending of the extract of the Senior Facility Agreement by Ng via WeChat on 19 June 2019 was only done pursuant to his request to keep the Company’s execution of the Company’s Guarantee confidential.

68.  Further, Ng’s version of the background leading to the execution of the Preceding Guarantee on 21 June 2019 and the Company’s Guarantee on 25 June 2019 cannot be dismissed as merely “raising a cloud of objections on affidavits”, not least because it is prima facie corroborated by and consistent with contemporaneous and objective records in the form of WeChat screen captures produced by Ng, to which Zou has not in his evidence directly responded (less still refuted).

69.  For instance, as shown in some of the WeChat screen captures, on 19 June 2019, following the 3 telephone conversations between Ng and Zou, Ng then sent to Zou various documents, including (1) a document in pdf format entitled 《跨境担保外汇管理规定》 and (2) a document entitled “Senior Facility Agreement”.  Shortly after those documents were sent, Ng then followed up by way of a WeChat voice message, which according to Ng’s evidence, was as follows: -

“邹总，这个我把那个，就是关于天诚财富我跟你讲的那两个，一个事是招行事，另外一个是 外管局的相关规定，那个律师跟我们的律师刚刚发给我，我转发给你，让俩心中有数。”

70.  Notably, the contents of Ng’s voice message above were not disputed by Zou.

71.  That notwithstanding, no explanation was proffered by Zou as to the circumstances in which the above exchanges took place on 19 June 2019 when, on the Petitioner’s case, Ng had already requested that the Company’s Guarantee be kept confidential since as early as in late May 2019.  Indeed, according to Zou’s evidence, as early as on 23 May 2019 when He emailed Hogan to seek Hogan’s advice as to whether the confidential arrangements over the Company’s Guarantee would affect its enforceability, the Petitioner had apparently already acceded to the Company’s request to keep the Company’s Guarantee confidential.  On the Petitioner’s case, therefore, there is nothing which explains why such exchanges took place between Ng and Zou on 19 June 2019.

72.  The need to engage in the series of  communication between Ng and Zou on 19 June 2019 is however accounted for by Ng’s evidence which is that on 18 June 2019, he was first alerted by the Company’s legal advisers to the inherent problems associated with the execution of the Company’s Guarantee by the Company and that on 19 June 2019 (2 days before the execution of the Preceding Guarantee on 21 June 2019), the Company through Ng raised with Zou 2 fundamental concerns over the potential contractual and regulatory consequences of executing the Company’s Guarantee.  If that were the case, one would readily query why Ng would have been persuaded to proceed to execute the Preceding Guarantee just two days thereafter.

73.  As the evidence presently stands, the Court simply cannot rule out the Company’s case that something over and beyond Zou’s assurance that the Company’s Guarantee would be kept confidential (which assurance, on the Petitioner’s case, had already been given to the Company back in late May 2019) was said by Zou (on behalf of Cinda Guangdong) between 19 and 21 June 2019 which carried the effect of causing Ng to alleviate his concerns and decided to proceed with the execution of the Preceding Guarantee on 21 June 2019.

74.  Further, both the Petitioner and the Company agree that after the Preceding Guarantee was signed on 21 June 2019, Cinda Guangdong requested for the re-execution of, inter alia, the Company’s Guarantee, which eventually took place on 25 June 2019.

75.  On the Petitioner’s case, the request for re-execution was made by Cinda Guangdong as it was concerned about the enforceability of the Preceding Guarantee where there was a reference to the use of the common seal of the Company on its signing page but no such common seal was in fact affixed thereon. Nevertheless, if that were the case, it would be difficult to discern any reason why Cinda Guangdong would have opted for the more cumbersome route of having the reference to the use of the Company’s common seal removed from the signing page and then for a new set of documents bearing no reference to the use of the common seal to be executed.  Rather, Cinda Guangdong could have simply insisted upon the Company affixing its common seal on the original set of Preceding Guarantee already executed.

76.  The adoption of a more cumbersome route also appears to be consistent with and explained by Ng’s evidence that the Company was reluctant to actually affix the Company’s common seal onto the documents because it was given to understand that the Company’s Guarantee was not meant to be used or to have any real effect.

77.  Moreover, there is nothing in the evidence of either Zou or Yan which disputes that Cinda Guangdong neither sought the requisite approval from SAFE, nor arranged for the registration of the Company’s Guarantee with the relevant PRC authority.

78.  In the circumstances, I consider that there is force in the Company’s contention that had the Company’s Guarantee been intended to be a genuine transaction as opposed to merely a sham, it is inconceivable why Cinda Guangdong, as a large state-owned enterprise, would have chosen to flout the relevant regulations and risk being rendered liable for administrative punishments for not having registered the Company’s Guarantee or sought the requisite permission from SAFE.

79.  In the circumstances, I agree with the Company’s submission that there are factual disputes in this case which cannot be resolved purely on the strength of affidavits in the absence of oral evidence.  For the above reasons, I am satisfied that the Company has shown a bona fide dispute that the Company’s Guarantee is a sham.

Ground 2: Fraudulent Misrepresentation

80.  The Company submits in the alternative that if this were not a case of sham, i.e. that Cinda Guangdong had, in executing the Company’s Guarantee, genuinely intended that the Company’s Guarantee would be enforceable and would have real legal effect as against the Company, it must at least be a case of fraudulent misrepresentation by Zou as to the purpose and nature of the Company’s Guarantee and as to Cinda Guangdong’s intention on the effectiveness or enforceability of the Company’s Guarantee.

81.  As discussed above, Ng’s factual account as to the assurances and representations allegedly made to him by Zou to the effect that the Company’s Guarantee was not intended to be enforceable against the Company, but was merely for going through the motions to satisfy Cinda Guangdong’s management and that “the guarantee would practically have no effect” could hardly, on current evidence, be dismissed summarily.  On the basis of such alleged assurances and representations, whether the Company could make out a case of fraud or one of misrepresentation would obviously depend on the parties’ state of mind at the material time.

82.  In the circumstances, I accept the Company’s submission that as an alternative to Ground 1, there is also shown to be a bona fide dispute on whether the Company’s Guarantee is tainted by misrepresentations made by Zou to Ng.

Ground 3: Foreign Illegality

83.  Parties are not in dispute as to the applicable legal principles laid down in the authorities.  A sufficiently serious breach of foreign law which reflects important policies of the foreign state or separate law district may be such that it would be contrary to public policy to enforce a contract: Ryder Industries Ltd v Chan Shui Woo (2015) 18 HKCFAR 544 at §§39 and 57, per Lord Collins.

84.  According to Gao’s PRC Legal Opinion, the Company’s Guarantee is a cross-border inbound guarantee and the execution of the Company’s Guarantee violated various SAFE’s regulations because Cinda Guangdong has failed to register the Company’s Guarantee as well as to seek permission from SAFE in respect of quota.  In the circumstances, it is Gao’s opinion that Cinda Guangdong is liable for administrative punishment.

85.  The Petitioner does not seek to dispute the correctness of Gao’s PRC Legal Opinion and no expert evidence to the contrary has been adduced by the Petitioner.  The Petitioner merely contends that in light of the fact that the non-registration of the Company’s Guarantee with SAFE would result in nothing more than an administrative punishment, it cannot be regarded as a sufficiently serious breach of foreign law such that it would be contrary to public policy to enforce the Company’s Guarantee.

86.  The Company, on the other hand, maintains that violations of PRC’s foreign exchange control regulations are clearly foreign illegality which can render a transaction unenforceable.

87.  It is a well-established proposition that where the applicability and/or force of foreign law is in dispute, the Court cannot determine the summary application on assumed facts and would need to resolve the expert evidence before the Court can decide whether to enforce the specific transaction in question would be contrary to public policy: see e.g. Lesnina H DOO v Wave Shipping Trade Co. Ltd. [2022] 2 HKLRD 727 at §§58-59, per DHCJ Dawes SC.  I therefore agree with the Company that the issue on foreign law in the present case should be resolved at trial.

88.  For the foregoing reasons, the Petition should be dismissed.

Procedural Objections: Legal or Equitable Assignment

89.  In view of my ruling hereinabove that there are bona fide disputes on substantial grounds in respect of the petitioning debt arising out of the Company’s Guarantee and that therefore the Petition should be dismissed, it is unnecessary for me to express any view on the procedural objections raised by the Company as to whether the Assignment Agreement takes effect in equity only.

F.  THE INJUNCTION ORDER

90.  It follows from the dismissal of the Petition that the Injunction Order should be discharged and I have so ordered at the end of the hearing on 1 August 2022.

91.  Nevertheless, in view of the circumstances in which the Petitioner obtained the Injunction Order, I find it necessary to canvass a few issues in this context.

The Granting of the Injunction Order on 20 July 2022

92.  The background leading up to the Petitioner’s ex parte application for the Injunction Order on 20 July 2022 may be summarised as follows: -

(1)  Tiancheng International, of which the Company owns around 19.03 shareholding, and of which Ng is one of the directors, wholly owned a German company known as Tiancheng (Germany) Pharmaceutical Holdings AG (“the German Company”);

(2)  On or about 14 September 2021 (about 4 months prior to the presentation of the Petition), Tiancheng International held a shareholders’ meeting approving, inter alia, the sale of the German Company.  It was further resolved that within 1 month after receiving the sale proceeds (“the Sale Proceeds”), and upon obtaining advice from tax accountants and auditors as well as PRC lawyers, another shareholders’ meeting would be convened to confirm the mode of distribution of the Sale Proceeds to the shareholders (e.g. by way of special dividends, capital reduction and share repurchase, company’s winding-up or other modes);

(3)  After the sale of the German Company was completed, Tiancheng International convened a shareholders’ meeting to be held on 20 July 2022 (“the Shareholders’ Meeting”). On 20 July 2022, the Shareholders’ Meeting was held and the following resolutions were passed: -

(a)  There is to be a capital reduction in the share capital of Tiancheng International in the sum of RMB 8,408,549,225 ("the Capital Reduction”);

(b)  Prior to the completion of the Capital Reduction, each shareholder of Tiancheng International has the option to take out a loan from Tiancheng International equivalent to such shareholder’s total entitlement in the Capital Reduction and in the loan repayment by RAAS in respect of a previous loan advanced by Tiancheng International to RAAS;

(c)  Such borrowings will be set off against such shareholders’ respective entitlements to the Sale Proceeds by way of distribution at the completion of the Capital Reduction;

(d)  If the shareholders have not exercised the borrowing option, after the Capital Reduction is completed, the corresponding capital reduction sum shall be paid to the shareholders who did not exercise the borrowing option;

(4)  Between February and July 2022, the Petitioner through its solicitors, Messrs. Fangda Partners (“Fangda”), wrote on various occasions to the Company’s solicitors, Messrs. Cheung Yan & Associates (“CY”), to, among other things: -

(a)  urge the Company to comply with its obligation under section 182 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (“CWUMPO”) and to “obtain the leave of the Court before [the Company] is entitled to deal with any of its property pending the final determination of [the Petition]”; and

(b)  demand a written undertaking from the Company that that it shall not dispose of any of its assets pending the determination of the Petition unless with the sanction of the Court, and a written undertaking that it shall not exercise its option to howsoever take out any loan of an amount from Tiancheng International until the final determination of the Petition (“the Requested Undertaking”);

(5)  Between March and July 2022, the Company through its solicitors, CY, replied to Fangda setting out the following: -

(a)  The Company had no intention of effecting any disposition of its property or assets without leave of the Court pending the determination of the Petition, nor did it have the intention to exercise its option to take out a loan from Tiancheng International pending the determination of the Petition by the Court;

(b)  The operation of section 182 of the CWUMPO is contingent upon the making of a winding up order by the Court, but not the mere presentation of a winding up petition.  Section 182 does not per se prevent a company subject to winding up proceedings from disposing of its property or assets, but the company doing so runs the risk of such a disposition being rendered void by a subsequent winding up order; and

(c)  Therefore, there is no legal or factual basis upon which the Petitioner could properly demand the Requested Undertaking from the Company.

93.  Despite the Company’s positions mentioned above, the Petitioner proceeded, on 20 July 2022 (i.e. the day of the Shareholders’ Meeting), to apply on an ex parte basis for the Injunction Order.  The application was supported by the Affirmation of Chan Chun Chung Howard dated 20 July 2022, which exhibited a copy of the signed but unsworn 2^nd Affirmation of Yang Jing (“Yang’s Affirmation”).

94.  In the Petitioner’s skeleton submissions in support of its application for the Injunction Order filed on 20 July 2022 (“the Injunction Skeleton”), it has been argued that the evidence suggests that there is “a serious risk of the Company dissipating” the proceeds of a loan in the sum of up to US$238,365,666 (“the Loan Proceeds”) which the Company may receive from exercising its option to borrow from Tiancheng International “in advance of the substantive Petition hearing scheduled for 1 August 2022, thereby defeating the operation of section 182” (§2 of the Injunction Skeleton) and that the Company “fudged” and “outright refused to acknowledge the … obligation to comply with section 182” (§12 of the Injunction Skeleton).

95.  The Company was given notice of the Petitioner’s ex parte application for the Injunction Order about 1 hour before the hearing on 20 July 2022, at which the Injunction Order was granted in the following terms:

“1. The Company be restrained from exercising its option to howsoever take out any loan of an amount up to USD 238,365,666 from [Tiancheng International], until 1 August 2022 or further order of the Court, whichever is the earlier;

2. Liberty to apply; and

3. Costs of this application be the Petitioner’s costs in the cause”

96.  On 21 July 2022, the Petitioner filed the Continuation Summons seeking the continuation of the Injunction Order until further order of the Court.

The Injunction Order Should Be Discharged

97.  It is the Company’s submission that the Petitioner’s initial application for the Injunction Order ex parte, and the Continuation Summons, should both be dismissed.

98.  Indeed, in view of the circumstances outlined above, I was rather surprised that the Petitioner chose to proceed with the application for the Injunction Order at all.

Material Non-disclosure

99.  The Petitioner’s application for the Injunction Order was premised, amongst other things, on the Company’s refusal to comply with section 182 of the CWUMPO in declining to provide the Requested Undertaking.  According to the Petitioner, in refusing to provide the Requested Undertaking, the Company has essentially “refused to undertake what it is supposed to be legally obligated to do in seeking a prior sanction of the Court before dealing with any of its property…” (§63 of Yang’s Affirmation).

100.  Since the application for the Injunction Order was made ex parte, it was no doubt incumbent on the Petitioner to comply with the duty to make full and frank disclosure of all material matters which may have a bearing on the court’s decision-making.  The duty of disclosure upon an ex parte application extends to matters of law and encompasses “significant factual, legal and procedural aspects of the case”: East Asia Satellite Television (Holdings) Ltd v New Cotai LLC [2011] 3 HKLRD 734, 757-758.

101.  In this respect, taking into account matters raised in the Injunction Skeleton and Yang’s Affirmation, I consider that there is a material non-disclosure on the part of the Petitioner of relevant legal principles which would have a material impact on the Court’s consideration of the ex parte application.

102.  The Petitioner simply failed to, either by way of the Injunction Skeleton or otherwise, to refer the Court to one of the key legal aspects of the case, namely the proper construction and effect of section 182 of the CWUMPO, including the fact that its invalidating effect is retrospective.

103.  The construction and effect of section 182 of the CWUMPO have been explained by the learned authors of Company Law in Hong Kong – Insolvency 2022 at §9.031 as follows: -

(1)  Where only a winding-up petition has been presented, and no winding-up order has yet been made by the court, section 182 of the CWUMPO has no immediate or present operation on the disposition.  The operation of section 182 of the CWUMPO is therefore contingent upon the making of a winding-up order by the court in the future;

(2)  If the court eventually makes no winding-up order at all, the disposition concerned will be seen as having been fully valid since it has taken place and continues to be so at all times;

(3)  Once a winding-up order is made by the court, the position changes retrospectively.  Section 184(2) of the CWUMPO comes into operation and deems the winding-up of the company to have commenced on the date of the presentation of the winding-up petition such that the disposition which is, before the making of the winding-up order, valid, will be retrospectively deemed to be void.

104.  Further, section 182 of the CWUMPO does not preclude a company incurring or continuing to incur liabilities, nor does it invalidate liabilities so incurred.  The presentation of the winding-up petition has no impact on the powers of the directors of the company, nor the powers of disposition of the company: Super Speed Ltd (in liq) v Bank of Baroda [2015] 2 HKLRD 965 at §20(3) and (4), per Kwan JA (as she then was), citing Coutts & Co v Stock [2000] 1 WLR 906 at 909H to 910H.

105.  None of the above legal principles was referred to or addressed by the Petitioner as part of its application for the Injunction Order.  This is so notwithstanding the fact that the above legal authorities were specifically cited and relied on by the Company, not least in CY’s letter dated 11 July 2022.  Counsel for the Petitioner did not explain why the important duty to make full and frank disclosure was not complied with.  Naturally, the Petitioner’s eagerness to obtain the Injunction Order was one of the reasons but this could not in any way compromise a party’s duty to the Court.  I find the Petitioner’s conduct unacceptable.

106.  In this regard, I consider that the above material (and blatant) non-disclosure would justify discharging the Injunction Order.

No Real Risk of Dissipation of Assets

107.  Further or alternatively, I accept the Company’s submission that the Injunction Order should in any event be discharged on the basis that there was no real risk of dissipation of the Company’s assets.

108.  As referred to above, throughout the correspondence between Fangda and CY shortly before the Petitioner’s making of the ex parte application of the Injunction Order, the Company has repeatedly made clear that it had no intention of effecting any disposition of its property or assets without leave of the Court, nor did it have the intention to exercise the option to take out a loan from Tiancheng International pending the determination of the Petition.

109.  The Petitioner did not seem to have any concrete evidence to establish that it has “legitimate concerns about the Company trying to dissipate its entitlements to the Loan Proceeds (i.e. US$ 238,365,666)…” (see §12 of the Injunction Skeleton).

110.  Further, one of the reasons relied upon by the Petitioner in support of its argument that there was a real risk of dissipation on the part of the Company was the timing of the Shareholders’ Meeting.  At §13(b) and (c) of the Injunction Skeleton, the Petitioner contends, in purported support of its case on the alleged risk of dissipation, that: -

“(b) The Shareholders’ Meeting is apparently an attempt to complete the [plan of distribution of the Sale Proceeds] just before the substantive Petition hearing scheduled for 1 August 2022.

(c) The Company is merely an investment holding company with no business of its own.  There is no commercial rationale for the Company to rush to exercise the Loan Option before the substantive Petition hearing.”

111.  Whilst the Shareholders’ Meeting was held on 20 July 2022, Tiancheng International’s intention to, after the completion of the sale of the German Company, explore and confirm the mode of distribution of the Sale Proceeds to its shareholders (upon obtaining tax and legal advice) by way of convening another shareholders’ meeting was in fact flagged as early as September 2021 (i.e. about 4 months prior to the presentation of the Petition).

112.  The fact that Tiancheng International held a shareholders’ meeting on or around 14 September 2021 and the contents of that meeting were clearly known to the Petitioner as it was mentioned at §35 of Yang’s Affirmation (although not mentioned as part of the Injunction Skeleton).  Indeed, a copy of the minutes of the said shareholders’ meeting of Tiancheng International which took place on or around 14 September 2021 was exhibited to Yang’s Affirmation.

113.  The above clearly militates against the Petitioner’s allegation of a real risk of dissipation of assets on the part of the Company.  On this basis alone, the Injunction Order ought to be discharged and the Continuation Summons should be dismissed.