SNEE ENTREPRISE v. HK SHAOJI TRADE CO. LTD AND ANOTHER

HCA 1609/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1609 OF 2016

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ACTION NO 1744 OF 2016

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REASONS FOR DECISION

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Introduction

1. On 17 June 2016, Snee Entreprise (“1609P”) issued the writ in HCA No 1609 of 2016 against Too Hui Clothing Trade Co Ltd as the 2^nd defendant (“Too Hui”).

2. On 4 July 2016, Li Hailing (“1744P”) issued the writ in HCA No 1744 of 2016 against Too Hui as the defendant.

3. The following is a chronology of the relevant litigation history of the two actions against Too Hui:

	HCA 1609/2016	HCA 1744/2016
Date of writ	17 June 2016	4 July 2016
Date of injunction (amount)	17 June 2016 (HK$2,452,140)	8 July 2016 (US$3,777,287)
Date of judgment (amount)	26 July 2016 (HK$2,452,140)	12 August 2016 (US$3,777,287)
Date of garnishee order nisi (amount)	4 August 2016 (HK$2,452,140)	31 August 2016 (US$3,777,287)
	(“1609 Order Nisi”)	(“1744 Order Nisi”)
Name of garnishee	The Hongkong and Shanghai Banking Corporation Limited (“HSBC”)
Return date of garnishee order nisi	8 September 2016	28 September 2016

4. On 8 September 2016, 1609P applied before me to make the 1609 Order Nisi absolute.  I gathered from the papers that 1744P would apply on 28 September 2016 to make the 1744 Order Nisi absolute.  HSBC was the garnishee in both actions.  I adjourned 1609P’s application to 28 September 2016 to be heard together with 1744P’s application.

5. As at 8 August 2016 the net balance of Too Hui’s account(s) with HSBC was US$320,006.26 in credit.

Orders made on 28 September 2016

6. On 28 September 2016, having heard both 1609P and 1744P (Too Hui and HSBC were both absent), I made the following Orders:

(1) 1609 Order Nisi be made absolute;

(2) 1744 Order Nisi be discharged; and

(3) 1744P do pay 1609P costs of today, to be taxed if not agreed.

7. The following are my reasons.

8. 1609P was first in time in all the steps referred to in the chronology in §3 above.

9. 1744P opposed the making of the 1609 Order Nisi absolute.  On 27 September 2016, ie the day before the return date of 28 September 2016, Mr Wai Siu Chung Dominic deposed to the following in his 3^rd affidavit:

“3. As a [sic] solicitor having the conduct of this matter, I confirmthat we have today (i.e. 27 September 2016) received confirmed instructions from [1744P], the Judgment Creditor in these proceedings to commence and proceed with winding‑up proceedings against the Judgment Debtor [Too Hui], if necessary and irrespective of whether the two garnishee orders nisi would be made absolute or discharged on 28 September 2016, as it is [1744P’s] belief that the Judgment Debtor is not able to repay [sic] her judgment debt in full and hence is insolvent.

4. I am further instructed that [1744P] is currently in the Mainland China and is not yet in a position to make an affirmation confirming the above or in support of her intended winding‑up petition, but she does intend to do so as soon as possible and is happy to undertake to do so if necessary, …” (emphases added)

10. I note the following salient points:

(1) 1744P did not make any affidavit herself.  No reason was given why she could not have made an affidavit herself in Hong Kong or elsewhere in the world.

(2) The “confirmed instructions to commence and proceed with winding‑up proceedings” were qualified by the phrase “if necessary”.

(3) 1744P’s happiness to give an undertaking is again qualified by the phrase “if necessary”.

(4) No ground is given for 1744P’s belief that Too Hui was insolvent.  I attach no weight to her belief.

(5) More importantly, no petition for winding‑up has been presented.

11. The relevant principles governing the making of a garnishee order absolute are:

(1) For the purpose of the exercise of the court’s discretion there is, in general at any rate, no material difference between the making absolute of a charging order nisi on the one hand and a garnishee order nisi on the other.  The question whether a charging order nisi should be made absolute is one for the discretion of the court, per Lord Brandon in Roberts Petroleum Ltd v Kenny Ltd [1982] 1 WLR 301, 307E–H, applied by DHCJ Le Pichon in United Asia Finance Ltd v Yiu Tsz Ngar, [2015] 2 HKLRD 189, HCA 774/2014 at §21, 28 January 2015.

(2) The liquidation of the company, whether by a resolution for voluntary winding up or by a compulsory order for winding up brings into operation a statutory scheme for dealing with the company’s assets, and accordingly if such liquidation occurs after the making of the charging order nisi and before such order is made absolute, the court in its discretion will decline to make the charging order absolute, per DHCJ Le Pichon in United Asia Finance at §24.

(3) Under the principles stated in Re Ling (Re Ling, Ex parte Enrobook Pty Ltd (1996) 142 ALR 87 at 92), Mareva relief is no bar to a judgment creditor taking steps to enforce its rights through obtaining a charging order over assets that are subject to a Mareva injunction, per DHCJ Le Pichon in United Asia Finance at §18.

(4) In Wardley Ltd v Aik San Realty Ltd, unreported, HCA 379/1984, 18 December 1984, Hunter J, as he then was, rejected a submission based on a line of authority culminating in Roberts Petroleum Limited v Bernard Kenny Limited [1983] 2 AC 192 showing that if the court has a choice between allowing a particular creditor to obtain a preference or ensuring a pari passu distribution of a debtor’s total assets amongst his creditors, it will opt for the latter and equality.  But in the case of a corporate debtor no choice arises unless a pari passu distribution will follow from a refusal to make a Charging Order absolute ie because winding‑up proceedings have already been commenced or perhaps because their equivalent in the form of some scheme of arrangement is imminent.  Unless these circumstances exist the above choice is not available to the court.

(5) The following statement in §50/9A/23 of Hong Kong Civil Procedure 2017 is to the same effect:

“The liquidation of a company, whether by a resolution for voluntary winding up or by a compulsory order for winding up brings into operation a statutory scheme for dealing with the company’s assets, and accordingly if such liquidation occurs after the making of the charging order nisi and before such order is made absolute, the court in its discretion will decline to make the charging order absolute, ….”

12. In the cases before me, not even a petition for winding up has been presented.  A hearsay assertion of intention to commence winding up proceedings, “if necessary” is plainly insufficient.

13. That was why I made the 1609 Order Nisi absolute and discharged the 1744 Order Nisi.

14. On 28 September 2016, 1744P opposed the making of 1609 Order Nisi absolute and lost.  I saw no reason why costs should not follow the event and ordered 1744P to pay 1609P’s costs of 28 September 2016.