HSIN KUANG RESTAURANT (INVESMENT & MANAGEMENT) LTD v. ABERDEEN HSIN KUANG RESTAURANT LTD

HCCW 94/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 94 OF 2016

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D E C I S I O N

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1. I have before me a winding-up petition issued on 5 April 2016. The petitioner and the respondent are associated companies having common, although possibly not identical, directors and shareholders. The petitioner relies on a debt totaling HKD$14,541,284 to establish insolvency.

2. That debt divides into two parts: one is in respect of management fees and the other, amounting to HKD$2,223,000, is a loan made by the petitioner to the company during the financial year ending 31 March 2002.

3. A verifying affirmation was filed on 6 April 2016 by Mr Woo Chu, who is a director and shareholder of the company and the petitioner.  Apparently, the Master thought that the affirmation was defective because it omitted from its wording the following words which appear in form 8 "or to my own acts and deeds".  

4. However, as the verifying affirmation did not contain any statements relating to the deponent's acts and deeds, the language was unnecessary and in my view, with respect to the Master, it was incorrect to suggest that the verifying affirmation was defective.  Be that as it may a further verifying affirmation was filed on 30 May 2016 by Mr Wong Kwok Keung simply repeating the language used in its totality in form 8.

5. Rule 32 of Companies (Winding-up) Rules (Cap 32H) provides that:

"Affidavits in opposition to a petition that a company may be wound up by the court shall be filed within 7 days, or such longer time as the court may direct, of the date on which the affidavit verifying the petition is filed and notice of the filing of every affidavit in opposition to such a petition shall be given to the petitioner or his solicitor on the day on which the affidavit is

filed."

It follows that either the company or an opposing contributory should have filed evidence in opposition if they wish to oppose the petition by the middle of April. 

6. On 17 June 2016 an opposing contributory, Ms Yuen Wai Yee, issued a summons for an extension of time for filing evidence in opposition of 21 days.  Ms Yuen holds 400 A-shares in the company.  The company has 132,800 issued A-shares with a par value of HKD$100 each, and a further 6,632,000 class B shares with a par value of HKD$1 each.  The company therefore had a total paid-up capital of HKD$19,912,000 of which Ms Yuen's interest amounts to $40,000.

7. It would appear that the company has not carried on any material business since 2009 and accounts (or rather an extract from audited financial statement for the year ended 31 March 2009 which was exhibited to Mr Woo's affirmation) seem to me to show, fairly compellingly, that the company at that time was insolvent.  Therefore the opposing contributory has minimal and probably no interest in the company.

8. Since it would appear to be the position of the petitioner and the board generally of the company that it is insolvent, and the petition is not worthwhile opposing which seems understandable from what I have just said about its current lack of activity and financial state,  it seems to me that in order to justify granting at this late stage an extension of time for filing evidence in opposition, it is necessary for Ms Yuen to at least be able to suggest something that looks like it might be capable of amounting to a bona fide defence on substantial grounds.  I was told by Ms Phyllis Lee who appeared for Ms Yuen that, as her instructions currently stand, Ms Yuen's position is simply that she does not recall being told, and she is a director of the company, about the arrangements which gave rise to the alleged debt. 

9. The company is a rather unusual creature because it appears to have a very substantial number of shareholders, well in excess of 50, and therefore is a public company.  It would appear a very large number of the shareholders are also directors and therefore, presumably, the management of its affairs was fairly cumbersome.  I note in this regard that there are in fact two classes of directors: four permanent directors and then a large number of ordinary directors.  I do not have a copy of the Articles of Association of the company so quite what the distinction in practice amounts to I am not sure. 

10. I cannot, however, see that any useful purpose is going to be served by allowing this matter to drag on; and as Ms Yuen has not been able to advance, in my view, any substantial reason at this stage suggesting that she will be able to file any evidence which is likely to be able to give rise to a bona fide defence on substantial grounds to the debt relied on by the petitioner, I will make the normal winding-up order.