RE WINFILL BUILD CONSTRUCTION ENGINEERING LTD

HCCW 290/2025

[2025] HKCFI 4359

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 290 OF 2025

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REASONS FOR DECISION

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1.  By summons dated 18 August 2025 (the “Summons”), the Company applied for a validation order pursuant to section 182 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 (the “Ordinance”) following a winding up petition issued by Hui Ying Chiu (the “Petitioner”) on 14 May 2025 (the “Petition”). The underlying debt of $103,500 concerns wages in lieu of notice and arrears of wages as awarded by the Labour Tribunal. Because of the Petition, the Company’s accounts with OCBC (Hong Kong) Limited (the “Designated Accounts”) are frozen.

2.  At the conclusion of the hearing, I granted the validation order sought subject to certain undertakings given by the Company. My reasons appear below.

Relevant background

3.  The Company, incorporated on 27 February 2020, operates a business of construction engineering. It is licensed to carry out general building, plumbing, electrical and minor building works and holds various certificates (which are still current) issued by the Government in 2022, 2023 and 2024 (the “Certificates”) enabling it to do so.

4.  In support of the present application, the Company’s sole shareholder and director, Cheung Wai Man (“Mr Cheung”) filed an affirmation on 18 August 2025 (“CWM 1”). The Company admits to the underlying debt as well as other debts of $579,000 owed to ex-employees and is ready and willing to repay the same (including the Petitioner’s legal expenses of $32,539.80) in full, resulting in an aggregate sum of $715,039.80 (“Total Liabilities”). Mr Cheung further maintains that the Company is solvent and is carrying on its business (which is profitable) as a going concern.

5.  On 25 August 2025, the Petitioner’s solicitors (“SFKS”) informed the Court that the Petitioner takes a neutral stance to the Summons, leaving it to the Company to substantiate its application and, in the interest of saving costs, sought the Court’s leave to excuse their attendance at the hearing which the Court granted.

6.  At the same time, SFKS also informed the Court by letter dated 25 August 2025 (the “August letter”) that, apart from the Petitioner, they also act for the Protection of Wages on Insolvency Fund Board (the “Board”). There are at least 9 other ex-employees who have obtained awards from the Labour Tribunal and Minor Employment Claims Adjudication Board (the “Board”) (as the case may be) in the sum of $579,000 as affirmed in CWM 1. SFKS made it clear that they will not agree to withdraw or dismiss the Petition unless the debts to the other ex-employees are also settled.

Applicable legal principles

7.  The relevant principles are conveniently set out in the Decision of Cheng J in Re Alco Holdings Limited [2024] HKCFI 73 at §§10-12:

“10. In the case of a solvent company with an active and ongoing business, a validation order would normally readily be made: Emagist Entertainment Ltd [2012] 5 HKLRD 703 at [4] to [5].

11. In the case of an insolvent company which is trading, it may be beneficial for the company and its creditors that the company should be permitted to carry on its business in the ordinary course pending the making of a winding-up order against it. The court must consider where the interests of the unsecured creditors lie. In general, the court will be more disposed to the making of a validation order in respect of an insolvent company where it is satisfied that the carrying on of the business is likely to generate net cash or net assets for the benefit of the creditors, and thus to reduce any deficiency that might otherwise exist on the winding up of the company: Re Century Group Ltd, unreported, HCCW 59/2004, 18th March 2004 at [6] to [9].

12. Where there are doubts as to the solvency of the company, the court will not sanction the proposed transactions unless it is satisfied by affirmative evidence that they would be beneficial and advantageous for the company: Re First Dragon Fashion (Hong Kong) Ltd [2010] 4 HKLRD 592 at [14].”

This application

8.  Mr Griffith Cheng, counsel for the Company, submitted the circumstances of the present case are somewhat unique. Normally, the supporting affidavit would exhibit the Company’s audited accounts/financial statements to show its financial health. In the present case, the Company, which is actively trading, has not produced audited reports or financial statements.

9.  In summary, the evidence shows that:

(a) the Company is actively in business as a going concern;

(b) it has outstanding receivables of $269,620 attributable to contracts it entered into in July 2025;

(c) its turnover in 2025 to date is around $5 million;

(d) it has no significant outgoings or overheads;

(e) its monthly office rental expenses and staff salaries of $30,000-$40,000 per month are paid by a third party and not by the Company itself;

(f) the Company’s ongoing revenue is sufficient to cover any other incidental expenses of its business;

(g) the Company has identified all of its creditors (being the Petitioner and the other judgment debtors mentioned in the August letter) and is willing to repay all outstanding sums;

(h) it has $731,897.32 in its Designated Accounts as at 14 August 2025 which is more than sufficient to repay the Total Liabilities;

(i) it has no other liabilities and no other creditor has appeared after the Petition was advertised;

(j) in addition to operating revenue and receivables, and monies in its Designated Accounts, the Company also owns the Certificates;

(k) the Certificates enable the Company to execute an extensive scope of construction projects; and

(l) as such, they are intangible assets of the Company that are of value despite the absence of any professional valuation as they enable the holder to engage in a range of construction activities.

10.  Mr Cheng highlighted the following facts which show that even after the date of the Petition, the Company continues to trade profitably:

(a) The Company’s receivables of $269,000 odd all stem from contracts entered into in July 2025, 2 months after the date of the Petition.

(b) The Company’s bank statements for the months ending 14 July 2025 and 14 August 2025 show a modest increase in the Company’s portfolio of approximately $20,000. They point to the viability of the Company’s underlying business.

11.  At the hearing, I enquired whether payment of the Company’s monthly rent and salaries stems from any contractually enforceable obligation. While the answer was in the negative, Mr Cheng invited attention to the fact that payments have continued notwithstanding the Petition.

12.  The Company is willing to settle the petitioning debt as well as SFKS’ legal fees as specified in the Schedule to the Summons and also to make payment to the Labour Tribunal or the Board (as the case may be) for the other debts stated in §6 above.

13.  In Dianoor International Limited, HCCW 576/2008, unrep., 23 December 2009, Barma J explained (at §24) where it is necessary for the company to seek a validation order to enable it to settle the debt it owes to a petitioning creditor, it is appropriate for the court to be satisfied that the company is solvent. That would avoid potential difficulties with preferential debts if another creditor were to apply successfully to be substituted as petitioner and the company could not pay off that debt is well.

14.  I am satisfied on the evidence presented that no potential difficulties with preferential debts would arise on settlement of the Total Liabilities since there are no other creditors. I also accept that on the evidence presented, the Company is solvent.

15.  At the hearing, I commented on the absence of any audited accounts since the Company’s incorporation in February 2020, a state of affairs that cannot be condoned. The Company then offered an undertaking to file audited financial statements from incorporation within 56 business days of the validation order of this Court.

16.  Mr Cheng submitted, and I respectfully agree, that even if there are doubts on solvency, the application is clearly beneficial and advantageous to the Company, in that it would remove all constraints due to the Petition and allow the Company to trade unimpeded.

Order

17.  Accordingly, upon the Company’s undertakings (1) to pay the sum of $579,000 to the Labour Tribunal or the Board (as the case may be); and (2) to file audited financial statements mentioned above, I made an order in terms of the draft Order submitted at the hearing.

18.  It provides, inter alia, for the repayment of (1) the Petitioning Debt to the Labour Tribunal and (2) the Petitioner’s Legal Expenses to SKFS as set out in the Schedule thereto, such repayment to be made within 14 days from the date of service of the Order and is conditional on repayment at the same time of the debts owing to the other creditors pursuant to the undertaking (1) mentioned in §17 (1) above.