RE PAUL Y. CONSTRUCTION COMPANY, LTD

HCCW 10/2025

[2025] HKCFI 1108

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 10 OF 2025

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D E C I S I O N

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1.  I have before me a summons dated 3 March 2025 issued by the Company’s Provisional Liquidators. They were appointed on 21 February 2025 by Recorder Jin Pao SC.

2.  The Company is part of the Paul Y. Engineering Group Limited (“Group”), a long established Hong Kong based conglomerate specialising in construction engineering and related property services. The Group has recently been gone into high profile insolvency proceedings.

3.  The background to the present application is as follows. On 3 March 2023, the Company entered into a joint venture agreement (“JVA”) with Canvest Environmental Protection Group Company Limited (“Canvest”) to form an unincorporated joint venture for executing an Environmental Protection Department (“EPD”) project for the HKSAR Government (“Project”). The Company holds a 35% participation share in the joint venture.

4.  Facing financial difficulties, the Company sought to exit the Project and, on 1 November 2024, executed a Deed of Transfer of Interests (“Transfer Deed”) with Master Star Industrial Limited (“Master Star”) to sell its 35% participation share and associated interests in the JVA for HK$35 million. Under the Transfer Deed, the Company has received HK$10 million as the first instalment, which is refundable if the conditions precedent are not satisfied. Two key conditions precedent remain outstanding:

(1) written confirmation or non-objection from the EPD regarding the transfer of the Company’s participating share; and

(2) execution of the necessary agreements with the Government to formalise the transfer.

5.  The EPD has indicated that it will not approve the transfer to Master Star but would agree to a transfer to Canvest instead. To satisfy this condition, the Company must execute two agreements, namely:

(1) An Amendment to the Transfer Deed; and

(2) A Consent to Assignment, under which Master Star will assign its rights to Canvest.

6.  In light of the Summons hearing, Canvest has agreed to defer execution of the Proposed Agreements until Friday, 7 March 2025, pending the hearing’s outcome. Canvest had originally intended to terminate the Transfer Deed if the Proposed Agreements were not executed by 4 March 2025.

7.  Failure to complete the transaction would result in significant adverse consequences for the Company and its creditors:

(1) The Company would be required to refund the HK$10 million already received;

(2) The Company would lose the opportunity to receive the remaining HK$25 million;

(3) The Company would remain exposed to liabilities and obligations under the Project despite being excluded from the joint venture.

8.  The position of the Provisional Liquidators is that paragraphs 4(7) and 4(14) of the Order appointing them gives them the power to execute the proposed agreement for the contract number EP/SP/221/22. Those two sub-paragraphs of the Order read as follows:

“4(7) Close or cease to operate all or any part of the Company’s business operations, as the Provisional Liquidators shall think fit, but so far only as may be necessary for the purpose of protecting the Assets and managing the affairs of the Company.”

“4(14) Terminate, complete, or perfect any contracts or transactions relating to the business of the Company including, without prejudice to the generality of this power to novate or assign any such contracts or transactions, but so far only as may be necessary for the purpose of protecting the Assets, and managing the affairs of the Company.”

9.  It seems to me to be debatable whether paragraph 4(7) does cover the execution by the Provisional Liquidators of the contract necessary to complete the transaction. However, in my view, paragraph 4(14) fairly clearly does. The order permits the Provisional Liquidators completing any transaction relating to the business of the Company, including a novation or assignment, if they are necessary for the purpose of protecting the Company’s assets and managing its affairs.

10.  It is implicit in the Order generally and in particular in the language “purpose of protecting the Assets”, that the Provisional Liquidators are being given the power to execute agreements which in their opinion are necessary in order to maximise the potential returns available to unsecured creditors proving in the Company’s liquidation. It is clear from my brief recitation of the transaction which this application relates to that the completion of that transaction satisfies this criteria.

11.  I will, therefore, make the following orders:

(1) Time for service of the summons be abridged;

(2) The execution of the Proposed Agreements would fall within the powers of the Provisional Liquidators set out in paragraph 4(14) of the Order dated 21 February 2025 made by Recorder Jin Pao SC, and the Provisional Liquidators may execute the Proposed Agreements (as defined in the 3^rd Affirmation of So Man Chun) for contract number EP/SP/221/22 which relates to the execution and completion of the design, construction and operation of the capital works and facility for the North Lantau Transfer Station and Outlying Islands Transfer Facilities – Second Follow-On Contract on behalf of the Company as they see fit; and

(3) Costs of this application be paid out of the assets of the Company.