RE POINTER & DENT CO LTD

HCCW 142/2020

[2020] HKCFI 2823

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 142 OF 2020

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D E C I S I O N

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1.  On 27 May 2020 the Petitioners, Mr Emmanuel Vassili Pitsilis (“Pitsilis”) and KD Capital Limited (“KD Capital”), issued a petition to wind up the Company on the grounds of insolvency. As the precise wording of the Petition is material I shall quote them in full:

“7.   The Company claims to engage in the business of operating coal mines and mines of other natural resources. The Company is part of the Pointer & Dent group which includes group companies in Cayman Island, Singapore and Indonesia.

8.   The Petitioner Pitsilis is a shareholder of the Company for 500,000 ordinary shares of US$0.25 each. Cheng Lewis Ka Hang (‘Cheng’) is a shareholder of the Company for 800,000 ordinary shares of US$0.25 each.

9.   By an Application Form dated 12 January 2019 provided by the Company, Pitsilis subscribed for 400,000 shares in the Company at US$0.50 per share. Payment of US$200,000 as consideration was made to the Company by Pitsilis on 28 May 2019. The Company failed to issue the 400,000 shares pursuant to the Application Form, and the consideration of US$200,000 has never been returned to Pitsilis.

10.   By an Application Form dated 28 January 2019 provided by the Company, Cheng subscribed for 800,000 shares in the Company at US$0.50 per share. Payment of US$400,000 as consideration was made to the Company by KD Capital on behalf of Cheng on 28 January 2019. The Company failed to issue the 800,000 shares pursuant to the Application Form, and the consideration of US$400,000 has never been returned to KD Capital or Cheng.

11.   The total amount due and owing to the Petitioners is US$600,000 (the ‘Debt’).

12.   On 2 April 2020, on behalf of the Petitioners, Tanner De Witt served on the Company two statutory demands in writing dated 2 April 2020 (the ‘Statutory Demands’).  The Statutory Demands were duly served by the Petitioner’s solicitors on the Company by leaving the Statutory Demands at the Registered Office Address.”

2.  When the petition first came on before me on 31 August 2020, which was the hearing of the regular Monday winding up list, no evidence had been filed by the Company in opposition. However, Mr Tai who appeared for the Company argued that the Company had a defence to the claim as the Petition was demurrable, it failing to assert that the subscription agreement had been repudiated, the repudiation accepted thus bringing the agreement to an end and entitling the Petitioners to recovery of the sums that they had paid to the Company. Although this is a discrete point I adjourned the Petition until today, which had become available as a result of a trial settling, in order that counsel could provide me with fuller arguments and authority on this issue.  My concern when the petition first came on was that it seemed unsatisfactory that a shareholder of a company could affectively convert what was clearly intended to be a contribution to the Company’s equity into a debt and purport to prove for it in the company’s liquidation: which necessarily is what the Petitioners propose to do if a winding up order is made.

3.  Neither counsel sought directions for the filing of further evidence and, therefore, I proceeded to deal with the matter on the basis of very limited documents: the Petition, the Statutory Demand and the very brief formal verifying affidavit.

4.  As the argument developed before me, it became clear that the determinative issue was discrete, namely whether or not the Petitioner the Company had accepted the Petitioner’s offer to acquire additional shares in the Company.  If it had then the Company argues that the agreement had not been terminated and the Petitioners are not entitled to repayment; it is entitled to have shares allotted to them which the Company is willing to do.  Alternatively, if the offer was never accepted then the Petitioners are entitled in restitution to recover the amounts paid to the Company at the time they applied for additional shares.  The difficulty with this issue is that the statutory demand and the petition are unclear as to whether or not it is the Petitioner’s case that there was an agreement or not.  Mr Tai submitted that if the court took the view that the Petition was ambiguous the correct course (he did not suggest that the petition should be dismissed) was to adjourn the petition in order that evidence could be filed dealing with this issue before the court determined the petition.  It seemed to me that, although I thought it unsatisfactory having adjourned the petition only the previous week, this was necessary otherwise the court was involved in a rather artificial exercise, construing a document which had been drafted without proper thought being given to the basis upon which the Petitioners were entitled to recover the money paid to the Company.

5.  I will make an order that the Petition be adjourned sine die with liberty to restore with costs reserved.