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HCCW 297/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO 297 OF 2014

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO 298 OF 2014

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO 299 OF 2014

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO 300 OF 2014

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO 301 OF 2014

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(HEARD TOGETHER)

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D E C I S I O N

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1.  I have before me five winding-up petitions. The petitions were issued on 17 October 2014 on the application originally of the companies and provisional liquidators were appointed. The companies, which are all private companies, carry out associated businesses concerning garment manufacturing and have common ultimate beneficial shareholders who initiated these proceedings.

2.  The petitions have been adjourned frequently during the course of the last two years in order to give the contributories the opportunity to introduce a plan for restructuring the debt of the companies.  The key to this as I have understood it has been realisation of the value of land owned by an associated company. 

3.  It is not proved possible for the contributories to produce a firm proposal.  By “firm” I mean a form of agreement which can be signed by the provisional liquidators on behalf of the various companies and whatever entity that is proposing to inject capital into the company in order to restructure its debt sufficient to satisfy its creditors.

4.  When the petition was last before me I made it clear that unless that kind of proposal was available by today’s date, I would wind the five companies up.  The position as it has always been on the hearing of the petitions previously is that once again the contributories have failed to produce a concrete proposal with supporting agreements. 

5.  In the case of two of the petitions HCCW 300/2014 and HCCW 301/2014, what is now the petitioning creditor, China CITIC Bank International Limited, seeks a winding-up order today and in the case of HCCW 300/2014 this is supported by various employees who I understand from the liquidators are owed in total about HKD 5.4 million.  I will make winding-up orders in the case of those two companies. 

6.  In the case of the other three petitions I have been urged, by Mr Clifford Smith SC on behalf of the contributories, to at least adjourn those petitions in order to give the contributories one last opportunity to see if they can come up with a concrete restructuring proposal.  I am not minded to do that.  It is quite clear from what I have read of the papers during the course of the last year or so that the debts of the companies are interrelated and that realistically for the principal debtors which are in HCCW 300/2014 and HCCW 301/2014 to recover value in order to pay their creditors, it is necessary for them to take action to recover from the other companies in particular the company in HCCW 298/2014.

7.  In many ways what has happened during the last two years is an unsatisfactory example of the misuse of the provisional liquidation jurisdiction. Whilst the reality is that on occasions the jurisdiction, despite the decision of Court of Appeal in Re Legend International Resorts Ltd  [2006] 2 HKLRD 192,has continued to be used as a mechanism through which the debt particularly of listed companies is restructured, it is quite clear that that is not the principal purpose of the jurisdiction.  In Hong Kong, the purpose is primarily to allow the court to appoint provisional liquidators to protect the assets of a company in order that their value is maintained for the benefit of creditors. 

8.  In the present case it seems to have been assumed when the provisional liquidation application was made, what would effectively be achieved was a moratorium on the enforcement of debt and a structured mechanism for restructuring for the benefit in part of the contributories who of course, as the companies are insolvent, did not have a material interest qua shareholders in the companies. As a result this matter has dragged on, in large part I admit because when it became apparent to me that matter was not proceeding satisfactorily, it still seemed sensible all the time the creditors and the provisional liquidators thought there might be some possibility of the debt being restructured, to allow the provisional liquidations to continue in the hope that it would prove beneficial for creditors.  Clearly the stage has now been reached where it would be inappropriate to continue to allow the provisional liquidations to continue and I will therefore make the normal winding-up orders in respect of each of the five companies.  I will also order that the current provisional liquidators continue in office.