XCHRX Re Flour City Architectural Metals (Asia) Ltd.

HCCW 1048/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

WINDING UP NO. 1048 OF 2001

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D E C I S I O N

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1. This is an application by a company ("the Company") against whom a petition for winding up has been presented for an order that all further proceedings in 8 actions in the District Court be stayed until the hearing of the petition or until further order.

2. The petition was presented against the Company on 13 September 2001. In relation to the 8 District Court actions, these actions were commenced between 28 August 2000 and 18 September 2001. Some of them have gone to judgment. In relation to those which have gone to judgment, viz., Nos. 13388, 12749, 13105 and 14426, one was the subject of a judgment on 15 October 2001 and three others were the subject of default judgments granted between 15 October 2001 and 27 October 2001. Another action has been made the subject of an O.14 application.

3. The application for stay is made on well-established grounds. It is clear that when a petition for winding-up has been presented against a company, the general principle is that proceedings against the company should be stayed to avoid the judgment creditors getting priority over other creditors. This is so even if judgment had been entered before the presentation of the petition because it has been held in Attlee Investments Limited v Lee Chuen (trading as Lee Chuen Furniture Company) [1983] HKLR 420 that the power under s.181 of the Companies Ordinance to stay any action or proceeding pending against a company which is the subject of a winding-up petition extends to the execution stage and permits the Court to order even a stay of execution of a writ of fieri facias. It also extends to a stay of a garnishee order obtained by a plaintiff. Therefore it seems clear to me that, unless there are any special circumstances, there should be a stay of these 8 actions whether they have gone to judgment before the presentation of the petition or not.

4. The only exception to these 8 actions is an application for Employees Compensation in DCEC 421 of 2001. In relation to this, the Plaintiff was a workman injured in an accident on 8 July 1999. The application under the Employees Compensation Ordinance was taken out against the direct employer (being a sub-contractor of the Company) and the Company as the 2nd Respondent. In respect of the Employees Compensation case, I take the view that it would not be right to stay that proceeding.

5. According to counsel for the Company, the insurer in relation to that employees compensation case has been wound-up, so it may be the case that the Company would be looked to by the injured workman for compensation instead of directly to the insurer.

6. However, I have been referred to the Employees Compensation Assistance Ordinance which provides at s.16 that a person who is unable to recover from an employer payment of an amount of compensation or damages for which the employer is liable may apply for payment of that amount from the Fund. For the purpose of that section, an employer is not to be regarded as liable for the payment of an amount of compensation or damages unless the amount is payable pursuant to a judgment or order of a court or tribunal of relevant jurisdiction in Hong Kong.

7. Section 16(3) of that Ordinance provides that for the purpose of that section, a person is not to be regarded as being unable to recover from an employer payment of an amount for which an employer is liable unless the person has taken such proceedings to recover payment of the amount from the employer or his insurer as are reasonable in the circumstances having regard to the likely costs of such proceedings, the resources available to him and the amount likely to be recovered from the employer or his insurer.

8. Therefore, it seems to me upon the interpretation of these provisions of the Employees Compensation Assistance Ordinance that it is necessary for the injured workman to obtain a judgment from a court before he can make an application from the Fund, but that the administrators of the Fund would also look to the likelihood of recovery from the employer.

9. In the present case, the Company by an affidavit of one of its directors filed on 26 October 2001 has confirmed that the Company is insolvent and unable to pay its debts in full. Therefore it would appear to me that the administrators of the Fund may well consider the injured workman as eligible for payment of that compensation under that Fund without necessarily having to require the workman to seek full recovery from the Company.

10. In any event, even if the injured workman were to be required to seek full recovery, it is not necessarily a case where other unsecured creditors would be prejudiced if the proceedings were allowed to be continued. S.265(1)(cb) of the Companies Ordinance provides that in a winding up there should be paid in priority to all other debts any amounts due in respect of compensation or liability for compensation under the Employees Compensation Ordinance accrued before winding-up. Counsel for the Company has not made any submissions to the effect that a sub-contractor's employee would not fall within that provision.

11. Accordingly, it seems to me that balancing the prejudice that would be suffered by the injured workman should his claim for compensation be stayed against the prejudice to other unsecured creditors in light of the circumstances set out above, I would not make an order in relation to DCEC 421 of 2001, but I would make the order staying the other 7 actions.