RE DYNASTY LINE LTD

HCCW 382/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP NO. 382 OF 2007

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D E C I S I O N

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1.  There is before me a petition for the winding up of Dynasty Lines Limited (“the Company”), a BVI company which is not registered in Hong Kong under Part XI of the Companies Ordinance (Cap. 32).  In August 2007, I had, on the Petitioner’s ex parte application, appointed provisional liquidators in respect of the Company with a view to pursuing what the Petitioner considered to be a claim that the Company had against Mr Sukamto Sia, one of its directors.  At the hearing today, Mr Burns, appearing for Mr Sia, sought the adjournment of the hearing of the petition until after an appeal by Mr Sia against a decision by Deputy Judge Carlson declining to set aside or stay proceedings which have been commenced against Mr Sia by the provisional liquidators, on the grounds that if that appeal were successful, there would be no asset within the jurisdiction the realisation of which could benefit its creditors in Hong Kong, and thus no basis for seeking to wind the Company up in this jurisdiction.

2.  On balance, I am persuaded by Mr Burns’s submissions.  I think that the position in this case is different from that in In re Compania Merabello [1973] 1 Ch 75, Re Allobrogia Steamship Corporation [1978] 3 All ER 423and Stocznia Gdanska v Latreefers Inc. (No. 2) [2001] 2 BCLC 116, in that in all of those cases there was unquestionably an asset within the jurisdiction in the form of a cause of action that was justiciable or capable of being brought within the jurisdiction of the proposed winding-up.  The question in those cases was as to the degree of success, or degree of likelihood of success that had to be shown in relation to the proposed action that was said to be an asset of the company that would exist to benefit the creditors. 

3.  In this case, it seems to me the position is rather different in that there is, I think, at least an arguable basis on which to challenge the jurisdiction of the Hong Kong court in relation to the action that the provisional liquidators wish to bring against the proposed Defendants.

4.  In that situation, the resolution of that question by the Court of Appeal will determine, one way or another, whether or not there is an asset within the jurisdiction at all.  If the Court of Appeal holds that the challenge to jurisdiction should succeed, there will then be no asset within the jurisdiction and therefore no conceivable benefit to creditors in Hong Kong, and one of the essential elements for the founding of the jurisdiction to wind up an overseas company in Hong Kong would not then exist.  I therefore think that the case, in that respect at least, is as Mr Burns submits, distinguishable from the three cases which I have mentioned.

5.  The other factor that I think is of relevance in this case is that, as Mr Yu quite frankly accepted, there was no conceivable prejudice to the Petitioner that would arise from the delay of some six or seven months that will be involved in adjourning this matter until after the decision of the Court of Appeal is given.  The only asset that it is suggested exists, in relation to the Company, is the claim that the provisional liquidators wish to pursue.  That claim is not one that can progress until after the Court of Appeal has given its judgment on the appeal.

6.  Further, to the extent that there are investigations that the provisional liquidators wish to carry out which they have not already carried out in the year or so that they have been in office, there is nothing that prevents them from carrying on with such investigations or any other preparations they may think necessary.

7.  I think it is also fair to say that the underlying claims against the Defendants to the proceedings brought by the provisional liquidators on behalf of the Company date back some considerable period.  There has already been substantial delay in these proceedings because of the failure to seek to wind up this company at an earlier stage and, therefore, I do not think that it can be said that there is any significant prejudice from the further delay for this reason also.

8.  Finally, as to Mr Yu’s point that it is generally undesirable for winding-up petitions to be left hanging around, bearing in mind the possible rights of other creditors and other general factors, as far as the other creditors are concerned, it seems to me that the position is much the same as the Petitioner in that the only asset in which those creditors have any real prospect of sharing is whatever may be recovered from the proceedings which are currently the subject of the challenge to jurisdiction.

9.  As for other general factors, it is of course true that it is generally undesirable to leave a petition hanging over a company’s head, but that is because, in the ordinary case, the company will be one which is carrying on business or which is still active, so that the longer the delay between presentation of the petition and its the eventual determination and making of a winding-up order, if one is made, the longer the period during which transactions undertaken by the company will be subject to being set aside or avoided by virtue of the provisions of section 182 of the Companies Ordinance.  That is clearly a significant disadvantage to having a petition hanging over a company’s head for some considerable time.  There is also, of course, the difficulty that is caused to companies by the need to obtain validation orders and the like, and the difficulties that are placed in the way of doing business and the consequent impact, almost inevitably detrimental, on the company’s business. 

10.  But those are not factors that arise here because this company is clearly one that is, and has been, defunct for a very long period of time.  It was, in fact, struck off the register of companies in the BVI, on two occasions, it seems, although it is now perhaps finally rehabilitated and restored to the BVI register.

11.  In those circumstances, I do not think that the usual concerns about allowing a winding-up petition to hang over a company’s head for an indefinite period of time apply with anything near the same force here as they might do in a more ordinary case.

12.  For all of those reasons, but principally because it seems to me that the outcome of the appeal on the jurisdiction point in the provisional liquidators’ action against the directors of this company is likely to determine, one way or another, whether or not there is an asset within the jurisdiction which could conceivably produce a benefit to the creditors of the company in Hong Kong, it seems to me that the better course is to await the outcome of that appeal before proceeding to deal with the winding-up petition itself.

13.  I shall therefore adjourn the petition sine die with liberty to restore, and no doubt it can be restored after the Court of Appeal has given judgment on the appeal which is pending before it.