RE HONGKONG BAI YUAN INTERNATIONAL BUSINESS CO., LTD

HCCW 219/2021

[2022] HKCFI 960

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 219 OF 2021

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J U D G M E N T

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1.  There is before the Court a petition presented by the petitioner, ACTATRADE SA (“P”), on 10 June 2021 (“Petition”) seeking a winding up order against Hongkong Bai Yuan International Business Co., Limited (香港百源國際商務有限公司) (“Company”) on the ground that the Company is insolvent by reason of its failure to comply with a statutory demand (“SD”) in respect of a debt of EUR955,000 (“Debt”). In the SD the Debt was described as “[c]argo price due under the Contract Number: 2/202018” incurred on 15 January 2021.

2.  In the Petition, P relies on the “Original Clarity Contract” (as defined in §7 below), the Debt payable under the “Invoice” (as defined in §15(3) below) and the fact that the Company took delivery of the Cargo on 17 January 2021.  P says that by reason of the Company’s failure to comply with the SD, it is deemed insolvent by virtue of s.178 of the Companies (Winding-up and Miscellaneous Provisions) Ordinance (Cap. 32) (“Ordinance”).

Factual background

3.  P and AVA Petroleum Services SA (“AVA”) are companies incorporated in Switzerland and are associated companies.  They are managed by a service company, Actamare SMPC, whose operation manager is Mr Alexandros Kollias (“Kollias”).  Kollias acted on behalf of both P and AVA in dealing with the Company. 

4.  The Company is incorporated in Hong Kong.  Ms Dyma Duan (“Duan”) is the methanol purchasing director of Jiangyin Shengyuan Petrochemical Trade Co., Ltd (“Shengyuan”) and she acted on behalf of the Company and Shengyuan in dealing with P and AVA. 

5.  In October 2020, Duan was introduced to Kollias as a director of Shengyuan. 

6.  By a sales contract dated 5 November 2020 made between the Company (as seller) and Shengyuan (as buyer), the Company agreed to sell 43,000 mt (+/-10% at seller’s option) methanol to Shengyuan for EUR9,202,000.

7.  The Company in turn entered into a sales contract dated 12 November 2020, number 2/202018, whereby P (as seller) agreed to sell and the Company (as buyer) agreed to buy 43,000 mt (+/- 5% at sellers’ option) of methanol (“Cargo”) at US$217.33/mt CFR, to be loaded in the beginning of November 2020 and delivered via vessel MT Clarity from Venezuela to China (“Original Clarity Contract”).

8.  Under the Original Clarity Contract:

(1)  payment is to be made “By Telegraphic transfer 100 percent value of each discharge port cargo latest upon vessel berthing AND hose connecting BUT in any-case before commencement of discharge at each discharge port”; and

(2)  all disputes are to be referred to CIETAC for arbitration under Chinese law in English language.

9.  On 3 December 2020, Duan asked Kollias to issue a bill of lading (“BL”) in respect of the Cargo with the Company as the notify party and “to order” of the consignee.  This allows the holder of the BL to transfer ownership of the Cargo by endorsing the name of the new holder on the reverse side of the BL, whereupon the endorsee will be entitled to take delivery of the Cargo from the carrier or shipowner of MT Clarity. 

10.  Upon Duan’s assurance that 57% of the price of the Cargo would be paid, the originals of the BL were issued in the name of Shengyuan and delivered to Duan on 28 December 2020. 

11.  On 30 December 2020, the Company paid EUR 4,541,151.52, being 57% of the price payable for the Cargo, to AVA.

12.  Mr Lavesh Kirpalani, counsel for the Company, points out that the Original Clarity Contract was superseded by 2 contracts bearing the same number “2/202018” as the Original Clarity Contract (together “Clarity Contracts”):

(1)  First, a sales contract dated 28 December 2020 made between the Company (as buyer) and AVA (as seller) for sale of the Cargo, loaded in December 2020 and delivered via a vessel to be notified[1] (“AVA Clarity Contract”).  The payment term is as follows:

“By Telegraphic Transfer, 57 percent against copy of invoice, and 43 percent value latest upon vessel berthing second discharging port and hose connecting BUT in any-case before commencement of discharge at second discharge port.”

(2)  Second, a sales contract dated 28 December 2020 made between P (as seller) and the Company (as buyer) for sale of the Cargo, to be loaded in the beginning of November 2020 and delivered via vessel MT Clarity (“Actatrade Clarity Contract”):

(a)  The preamble stated:

“The buyer and the seller both agree and confirm that conclude [sic] the methanol deal under the following terms and conditions of this contract as a guarantee contract to the contract (NO.2/202018) between HK BAI YUAN with ACTATRADE’s nominee payee [AVA] dated 28 dec.2020”.

(b)  The payment term is as follows:

“By Telegraphic Transfer, 57 percent against original BL and usual loadport shipping documents (CAD) and 43 percent value latest upon vessel berthing second discharging port and hose connecting BUT in any case before commencement of discharge at second discharge port.”

13.  Mr Kirpalani submits that AVA “was only used as a nominee payee and no more”, and the contract made with AVA is a “dummy” contract, the “true agreement” between the parties is the Actatrade Clarity Contract.  If it is P’s stance that the proper party to the contract is AVA, the Petition is defective and there is a bona fide dispute as to whether P is the proper claimant. 

14.  Neither the AVA Clarity Contract nor the Actatrade Clarity Contract has been referred to in the Petition nor in the written submissions of Mr Ping Kan Kwan, counsel for P.  At the hearing, Mr Kwan accepts that the Original Clarity Contract was superseded by the Clarity Contracts, but submits that the parties subsequently agreed to revert back to the Original Clarity Contract, evidenced by the following facts and matters, which have been pleaded in the Petition and corroborated by contemporaneous documents. 

15.  The emails between P and the Company show that on 13 January 2021[2]:

(1)  At 11:37, Duan requested P to “make a contract and invoice based on 5000MT *EUR191/MT=955000 EUR”, and stated that she would draft the contract for P to “fill in the receiving bank and sign”;

(2)  At 18:09, Kollias sent an invoice and relevant contract for payment of EUR 955,000 to P; and

(3)  At 19:25, P replied stating that “for good orders [sic] sake, please find attached revised contract”, and attached a commercial invoice dated 12 January 2021 issued by P to the Company for 5,000 mt of methanol at EUR 955,000 (“Invoice”).  Under “Remittance Instructions”, P was described as the beneficiary and its bank account was stated (“P’s Account”).  The payment term was described as “By Telegraphic Transfer before discharging”. 

16.  Upon receipt of the Invoice, at 20:00 on 14 January 2021, Duan copied the remittance instructions on the Invoice and requested Kollias to “reconfirm the receiving bank to receive the last 955000 euro dollar under clarity, pls confirm it is safe to receive”.

17.  On 15 January 2021[3]:

(1)  At 14:42, MT Clarity berthed at the Zhenhai Terminal;

(2)  The Company remitted EUR 2,398,140.13 to AVA;

(3)  As for the last payment in the amount of EUR 955,000, Duan sent a copy of 滙款指令明細which showed that Ms Jiang Qiuling, a shareholder and supervisor of Shengyuan, had remitted the sum to P’s Account at 16:22; and

(4)  Between 19:48 and 20:48, the hose connecting the methanol and MT Clarity was connected.

18.  At 01:00 on 16 January 2021, MT Clarity began to discharge the Cargo and the process was completed at 0:00 on 17 January 2021[4]. Based on the BL received from P, the Company took delivery of the Cargo[5]. 

19.  According to the Company:

(1)  At 8pm on 15 January 2021, it became aware that the Cargo had a discoloration issue (“Discoloration Issue”).  Under the Actatrade Clarity Contract, the methanol must be in accordance with the 2016 IMPCA standards, and the colour of methanol is a significant factor in the trade of methanol sale; and

(2)  On 18 January 2021, the Company considered that it was entitled to withhold the last payment and suspended remittance of the Debt to P. 

20.  On 5 May 2021, P served the SD on the Company. 

21.  The Discoloration Issue was subsequently settled by the insurer:

(1)  MT Clarity has the benefit of a protection and indemnity insurance cover from West of England P&I Club (“Insurer”).

(2)  Shengyuan as holder of the BL lodged a claim against the shipowner of MT Clarity on the ground that the Cargo had Discolouration Issue. 

(3)  On 6 July 2021, the Insurer paid EUR 1,030,000 to Shengyuan on a without admission of liability basis in settlement of Shengyuan’s claim on Discoloration Issue. 

22.  There is another dispute between P and the Company in respect of the 2 other contracts for sale of methanol (“Honesty Contracts”):

(1)  AVA (as seller) entered into a sales contract dated 28 December 2020 with the Company (as buyer) whereby AVA agreed to sell 43,000 mt of methanol (“Honesty Cargo”) to the Company to be delivered via MT Honesty (“Honesty Sales Contract”).

(2)  Another “sales contract” dated 28 December 2020 was entered into between P (as seller) and the Company (as buyer) whereby the parties agreed that such contract would act “as a guarantee contract” to the Honesty Sales Contract (“Honesty Guarantee Contract”).

(3)  The Company contends that P was the real seller and the Honesty Sales Contract was merely a “dummy” contract.  In any event, P acted in breach of the Honesty Guarantee Contract as the Honesty Cargo was never delivered to the Company and, instead, was sold it to another buyer in India between 18 and 20 February 2021. 

(4)  On 29 April 2021, the Company commenced arbitration at CIETAC against P for US$2.2 million, being the difference between the price of Honesty Cargo and the replacement methanol purchased by the Company to fulfil the contract it had entered into with Shengyuan.

(5)  Notice of arbitration was served on the Company on 9 June 2021. 

Applicable principles

23.  The principles are well established.   A winding-up petition should only be presented if the creditor is owed a liquidated sum and the debtor company does not have any valid ground for refusing payment.  Where the company disputes the debt in question, it bears the burden to show that there is a bona fide dispute on substantial grounds and, for this purpose, must adduce sufficiently precise factual evidence to substantiate its allegations.  The Companies Court is not precluded from examining the evidence and taking a view on whether the debt is disputed on substantial grounds, but the Court does not try the dispute on affidavits (Re Yueshou Environmental Holdings Ltd, HCCW 142/2013, 16 July 2014, §8, per Harris J).   

24.  It would be an abuse of process for the petitioner to present a winding up petition if it is aware of matters that constitute a bona fide defence on substantial grounds to the debt (Re Alpha Building Construction Ltd, HCCW 283/2014, 20 May 2015, §7, per Harris J):

25.  Where, as here, the petitioner relies on a statutory demand, the demand should give the correct basis of liability for the debt as it is “the straight and narrow gateway” through which a creditor must pass in order to establish insolvency pursuant to section 178(1)(a) of the Ordinance.  If a statutory demand is defective, the Court will be alert to see whether those mistakes have caused or will cause any prejudice to the debtor (TSB Bank plc v Platts (No 2) [1998] BPIR 284 at 288D-H; Re Leung Cherng Jiunn [2016] 1 HKLRD 850 (CA) at §§13, 15).   

26.  Where the company opposes the petition on the ground that it has a cross-claim against the petitioner which is greater than or equal to the petition debt, it bears the burden of establishing that the cross-claim is genuine, serious and of substance.  There must be supporting relevant details to demonstrate that the cross-claim is based on substantial ground (Re Sinom (Hong Kong) Ltd [2009] 5 HKLRD 487, §§11-12, per Kwan J (as she then was); Re Alpha Building, §8).

27.  Mr Kirpalani in his skeleton made extensive submissions in support of his argument that a petitioner should not be allowed to subvert the arbitration agreement between the parties by serving a statutory demand instead of commencing arbitration as agreed in contract.  In short, he submits that:

(1)  The Court should not follow the approach in Re Southwest Pacific Bauxite (HK) Ltd [2018] 2 HKLRD 449 (“Lasmos”), per Harris J or the traditional approach of requiring the debtor to demonstrate a bona fide dispute on substantial grounds as adopted in the many authorities cited in But Ka Chon v Interactive Brokers LLC [2019] 4 HKLRD 85 at §19, per Kwan VP. 

(2)  Instead, the Court should follow the Singapore approach expounded in AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Company) [2020] SGCA 33, §§60-74 and the English approach in Salford Estates (No.2) v Altomart Ltd (No.2) [2015] 1 Ch 589, which applies the prima facie standard applicable to a mandatory stay of an action to winding up proceeding even through the latter proceeding is not arbitrable under the relevant Arbitration Act.  Once the court finds that there is a prima facie dispute, it would ordinarily dismiss the petition as a stay of such petition carries severe consequence for the company. It is only if the petitioning creditor is able to demonstrate legitimate concerns about the solvency of the company and no triable issue is raised by the debtor that the court can grant a stay, as opposed to a dismissal, of the winding up proceeding (AnAn Group, §§110-113).

28.  It seems to me that whether one describes the threshold as a prima facie standard (as adopted by the Singapore and English courts where the agreement giving rise to the petitioning debt contains an arbitration clause) or a bona fide dispute on substantial grounds (as adopted by our courts), it is incumbent upon the debtor to demonstrate that there is a genuine dispute on the debt which requires determination of a tribunal.  It would be pointless to require the parties to resolve their dispute through the contractually agreed forum if no genuine dispute exists.  For this purpose, the Court would review the evidence and arguments adduced by the parties to see whether there is a genuine dispute over the debt and, if so, it is ordinarily appropriate to dismiss the petition, rather than leaving it hanging over the head of the company.  As observed by Kwan VP in But Ka Chon, §§57-71, prior to Lasmos, the Companies Court would in the exercise of discretion under the insolvency legislation give considerable weight to the fact that there is an arbitration agreement between the parties and other relevant circumstances.  The discretion is not exercised only one way as discussed in Lasmos: the petition should “generally be dismissed” save in “exceptional” or “wholly exceptional circumstances” once the company satisfies the 3 requirements (viz., (a) the debit is not admitted, (b) the dispute is covered by the arbitration clause, and (c) the company has taken step to commence arbitration).   

No bona fide dispute in respect of the Debt

29.  There is no dispute that the Company took delivery of the Cargo including the 5,000 mt of methanol covered by the Invoice, but has not paid the Debt to P.  The stance of the Company, as stated in Lu 2^nd, is this[6]:

(1)  At the time the Company suspended remittance of the Debt, it “had been prepared to effect payment to [P] upon determining the cause of discoloration (whether due to the fault of [P] and/or carrier)”. 

(2)  Although Shengyuan settled the Discoloration Issue and received payment from the Insurer, the settlement is on a without admission of liability basis.  In any event, it has “nothing to do” with the Company because (a) it was a settlement between Shengyuan and the shipowner of MT Clarity (and Sea Pioneer which managed MT Clarity); (b) it “did not exclude the possibility that the discoloration of methanol was due to the fault of [P] under the Clarity Contract”; and (c) the Company is still entitled to claim against P under the Clarity Contracts.   

30.  In my judgment, the Company has failed to demonstrate that there is a bona fide dispute, let alone on substantial grounds, in respect of the Debt for the following reasons:

(1)  It is clear from the documents described in §§15 - 18 above and in Lu 2^nd that the Company has admitted liability to pay the Debt but considered that it was entitled to suspend payment pending determination of the cause of the Discoloration Issue. 

(2)  The Company has not identified any provision, whether under the Original Clarity Contract, the Clarity Contracts, the Invoice or the BL, which entitles it to withhold payment of the Debt. 

(3)  On the Company’s own case, the payment term of the Clarity Contracts provided that the remaining 43% of the price of the Cargo should be paid “upon vessel berthing second discharging port and hose connecting BUT in any case before commencement of discharge at second port”.  It is not in dispute that the condition for payment of the Debt was fulfilled on 15 January 2021.

(4)  The Discoloration Issue has already been settled between the shipowner and the owner of the Cargo (Shengyuan).  Other than the assertion that the settlement has “nothing to do” with the Company, the Company has not identified any basis or adduced any evidence to show that it has suffered any loss from the Discoloration Issue or that P was the cause of the Discoloration Issue. 

31.  At the hearing, Mr Kirpalani submits that there is a bona fide dispute in respect of the Debt, which should be determined in arbitration.  As I understand his submissions, the Original Clarity Contract has been superseded by the Clarity Contracts whereby the parties agreed that 43% of the contract price should be paid in 2 instalments.  The Debt was the 2^nd instalment.  When the Company was about to make payment, it discovered the Discoloration Issue.  Under the Actatrade Clarity Contract, the Cargo must be in accordance with the 2016 IMPCA standards, and a breach of such term entitles the Company to claim against P for damages.  I disagree. 

(1)  As stated in §14 above, there is no dispute that the parties entered into the Clarity Contracts.  Nor is there any dispute that the Company is liable to pay the Debt to P once the hose between the Cargo was connected to MT Clarity. 

(2)  The Company has no basis to withhold payment of the Debt.  A mere assertion that it may have a claim against P in respect of the Discoloration Issue does not constitute a bona fide dispute in respect of the Debt. 

32.  Indeed, the Company itself does not consider that there is a bona fide dispute in respect of the Debt as it has not taken any step to commence arbitration in respect of the Clarity Contracts. 

33.  It follows that P was entitled to issue the SD and to present the Petition upon the Company’s failure to comply with the SD. 

Cross-claim against P

34.  The Company advances another ground in opposition to the Petition.  It is said that the Company has a serious cross-claim against P under the Honesty Contracts for US$2.2 million, which exceeds the Debt.   

35.  According to the Company and the documentary evidence adduced by the parties, the cross-claim arose in this way:

(1)  P/AVA agreed under the Honesty Contracts to sell and deliver the Honesty Cargo to the Company for US$11,524,000.  The Company was obliged to pay 50% of the price of the Honesty Cargo against the original bill of lading (“Honesty BL”).  This is disputed by P which claims that 50% of the price is payable against a copy of the Honesty BL and load port documents.

(2)  The Company entered into a contract with Shengyuan dated 4 January 2021 to sell the Honesty Cargo.

(3)  Between 27 January 2021 and 5 February 2021, Kollias and Duan communicated on the documentations including details on the Honesty BL and the invoice for the Honesty Cargo. 

(4)  On 10 February 2021, P discovered in its SGS report that the color quality of the Honesty Cargo exceeded the 2016 IMPCA standards. 

(5)  On 12 February 2021, the Company received a copy of the SGS report. 

(6)  On 16 February 2021, P provided the Company with copies of the revised Honesty BL and invoice for the latter’s confirmation.

(7)  On 18 February 2021, Duan informed Kollias that the buyer would not accept discoloured methanol.  The discharge port might need to be changed so that the Company could sell the Honesty Cargo to other buyers at a discounted price and the decision would be made in a few days’ time.

(8)  On 20 February 2021, Duan learnt that MT Honesty had changed route and enquired with Kollias as to whether the Honesty Cargo had been sold to another party and stated that the Company still wanted the Honesty Cargo. 

(9)  During the teleconference on 26 February 2021, Kollias notified the Company that due to (a) the Company’s act in withholding payment of the Debt, (b) the Company’s failure to pay for the Honesty Cargo, (c) the deposit of US$1 million already paid to the owners of MT Toyama (as discussed in §37 below), and (d) the Company’s plan to arrest MT Honesty, the Honesty Cargo had been sold to a third party in mitigation of AVA’s loss.  On the other hand, the Company indicated that it would accept the Honesty Cargo “whatever the composite result is” and P would get payment for the Honesty Cargo.

(10)  On 27 February 2021, the Company stated that if the Honesty Contracts were not performed, it would sustain “huge losses” and requested P to perform the Honesty Contracts. 

(11)  Due to P’s breach of the Honesty Contracts, the Company had to use a replacement cargo purchased from Sage International Trading Ltd (“Sage”) under a contract dated 18 January 2021 to fulfil the contract with Shengyuan, and suffered a loss of US$2,216,043 as claimed in the CIETAC arbitration. 

36.  Mr Kwan submits that the Company has not demonstrated that it has a serious cross-claim against P for the following reasons:

(1)  P was not the seller of the Honesty Cargo (AVA was).  The ongoing arbitration should have been commenced against AVA instead of P.

(2)  In any event, AVA/P were entitled to treat the Company as having repudiated the Honesty Contracts and to mitigate their loss by selling the Honesty Cargo to another party in view of (a) the Company’s failure to pay 50% of the price for the Honesty Cargo against the copy of the Honesty BL, (b) the Company’s failure to provide information on the discharge port, without which the Honesty BL could not be re-issued, and AVA would not be able to obtain payment for the Honesty Cargo; and (c) the Company's threat to arrest MT Honesty.

(3)  The alleged loss was not caused by the breach of Honesty Contracts as the replacement cargo had been purchased from Sage one month before the Company was informed about P’s decision to suspend performance of the Honesty Contracts.  There was thus no causal link between the alleged breach of the Honesty Contracts and alleged loss.

37.  Further, Mr Kwan submits that it is open to P to put forward a “reverse cross-claim” in order to neutralise the cross-claim relied on by the Company provided that the reverse cross-claim is either a debt or is certain to become a debt because there is no realistic defence to it (Re Jade Union Investment Ltd, HCCW 400/2003, 5 March 2014, §11, per Barma J (as he then was)).  The Company has a reverse cross-claim on substantial ground against the Company in that:

(1)  P relied on the Company’s representations to the effect that the Company would purchase a cargo of methanol to be shipped via MT Toyama and entered into a charterparty dated 17 December 2020 with Gerd Shipping Ltd (as owner of MT Toyama) (“Gerd”) (as shipowner), Grains Middle East Trading DWS, a company associated with P (“Grains”) (as charterer) and P (as guarantor) in respect of MT Toyama (“Toyama Charterparty”) and for which a deposit of US$823,723.23 was paid to Gerd.

(2)  There is a “side contract” between P and the Company to the effect that the Company would, in consideration of P entering into the Toyama Chaterparty, purchase the cargo of methanol from P.

(3)  The Company failed to purchase the cargo of methanol from P which rendered Grains and P to become liable to compensate Gerd for damages for breach of the Toyama Charterparty. 

(4)  Gerd commenced arbitration against P claiming US$2,073,397.39 in addition to the deposit paid by P. 

38.  Mr Kirpalani submits that the reverse cross-claim is “amorphous” because:

(1)  it is only raised by P in the reply affirmation;

(2)  While Duan was involved as an “intermediary” in assisting P to locate a vessel so that the Company could purchase the cargo of methanol from P, it did not assume any liability to compensate Grains or P under the Toyama Chaterparty as it was not a party to such Charterparty.  The Company has not given any guarantee or indemnity to P;

(3)  P was merely a guarantor, and would only become liable if Grains fails to satisfy any arbitral award which may be made against it; and

(4)  The Company did not fail to purchase the cargo of methanol from P as P had not been able to supply any methanol for sale to the Company. 

39.  As the evidence now stands, I do not think that the Company has demonstrated that it has a serious cross-claim against P for US$2.2 million for breach of the Honesty Contracts, assuming P was the real seller of the Honesty Cargo.  As can be seen from the objective facts set out in §35 above, the Company did not provide the requisite information for P to re-issue the Honesty BL in good time without which P would not be able to obtain payment for the Honesty Cargo.  This coupled with the Company’s indication that the buyer would not accept the Honesty Cargo owing to the coloration issue, it is at least arguable that the Company had evinced an intention not to perform the Honesty Contracts such that P was entitled to terminate the Honesty Contracts and mitigate its loss by reselling the Honesty Cargo to another buyer.  Further, as pointed out by Mr Kwan, the evidence adduced by the Company shows that the loss suffered by the Company was not caused by the alleged breach of the Honesty Contracts.

40.  In any event, even if, contrary to my view, the Company does have a serious cross-claim against P for breach of the Honesty Contracts, it does not seem to me that there is any valid basis for the Company to withhold payment of the Debt pending determination of its cross-claim.  There are 2 reasons for this. 

(1)  There is no provision under the Clarity Contracts which confers a right on the Company to retain the Debt, whether as a security or otherwise.  To allow the Company to withhold payment of the Debt in circumstances where it has received the Cargo and on-sold it to Shengyuan would be tantamount to giving a right to the Company to retain the Debt as security when the parties did not include such provision in their contracts. 

(2)  The cross-claim arose out of the Honesty Contracts and has nothing to do with the Clarity Contracts. The mere fact that the parties to Honesty Contracts are the same as the parties to the Clarity Contracts does not provide a basis for the Company to withhold payment of the Debt.  Indeed, other than asserting that it has a serious cross-claim against P, the Company has not articulated any reason as to why the existence of such claim can constitute a “defence” to P’s right to receive payment of the Debt. 

41.  In light of the above conclusions, it is not necessary to consider the arguments advanced by the parties on the reverse cross-claim, which arose out of yet another set of contract and has nothing to do with the Honesty Contracts. 

42.  At the hearing, Mr Kirpalani confirms to the Court that the Company is able to provide full security for the Debt, should the Court find that there is no bona fide dispute on substantial ground in respect of the Debt and requires 35 days to do so.  On the other hand, Mr Kwan submits that the Debt has been overdue for over a year and the Company should be required to pay within 7 days of the Judgment to be handed down by the Court.  In light of the Company’s stance and the fact that there is no other creditor in support of the Petition, it would be appropriate to give 14 days for the Company to pay the Debt.  Upon payment of the Debt, the parties may lodge a consent summons for dismissal of the Petition, with the costs of and occasioned by the Petition, including the costs of the Official Receiver, be paid by the Company to P, to be taxed if not agreed.  If the Company does not pay the Debt within 14 days of this Judgment (or any other time limit as may be agreed between the parties or allowed by the Court), P has liberty to restore the Petition for hearing on a Monday callover whereupon a usual winding order will be made against the Company.