SEAMLESS GREEN CHINA (HOLDINGS) LTD v. iREADY 360 MEDIA NETWORKS LTD

HCMP2527/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2527 OF 2010

____________________

________________

D E C I S I O N

________________

1.  I have before me an originating summons issued on 10 December 2010, seeking an injunction restraining the Defendant from presenting a winding-up petition to this Court based on an alleged debt in respect of which a statutory demand was served on 25 November 2010. At the time of hearing the application, the originating summons had not been served on the Defendant, although leave to serve out of the jurisdiction was granted by Master de Souza on 15 December 2010. The Defendant is incorporated in the Cayman Islands.

2.  The statutory demand seeks repayment of interest-free loans allegedly made under two loan agreements dated 26 June 2009 and 24 August 2009.  There is no dispute that the sums claimed had been advanced by the Defendant to the Company. 

3.  The defence advanced in the papers before me was principally that the loan agreements were entered into by one Director of the Company, Sandy Yu, without the authority of the Board, and that this was a matter of which the person controlling the Defendant, Mr Wong Yee Wah Edward, should have been aware at the time the advances were made.  I drew to the attention of counsel who appeared for the Company the decision of the English Court of Appeal in Seldon v Davidson [1968] 1 WLR 1083, which was followed in Hong Kong in Mak Ka Hing v Pang Ming Chung CACV215/2002 (unreported), which explains that in cases in which a person admits to receiving money in circumstances in which the presumption of advancement does not apply, the burden is upon the recipient to explain why the money should not be repaid as, prima facie, it is repayable on demand.  I explained that, having regard to the acceptance by the Company that it had received the money and the evidence before me, I was not persuaded that it had been demonstrated, at present, that the Company has a bona fide defence on substantial grounds to the debt.

4.  The background to this matter is, however, complicated and there are other legal proceedings between the individuals behind various associated companies, including the Company and the Defendant.  It was suggested before me that having regard to the other disputes that had arisen and the relationships between the parties, there were grounds for the Company arguing that it had a cross-claim against the Defendant in respect of certain breaches of fiduciary duty by Miss Sandy Yu which it was, albeit vaguely, suggested arose in connection with the advances with which this application is concerned.  Whether or not this is the case, I cannot determine on the basis of the evidence before me. 

5.  However, as the hearing developed, Mr Wong, who appeared on behalf of the Company, changed tack and suggested that there was another basis upon which the injunction that he sought could be justified.  In brief, it is as follows.  There is already an injunction in place in High Court Action 2441/2009.  In those proceedings, the Plaintiff is Good Capital Resources Limited which I understand to be controlled by the individuals in control of the Company.  Mr Wong Yee Wah Edward is the 6th defendant in those proceedings and an injunction was granted, on 8 December 2009, by To J, enjoining Mr Wong from dealing with his shares in the Defendant in the present application.  Mr Wong suggested that the plaintiff in those proceedings, Good Capital Resources Limited, would be able to obtain a variation to that order to restrain Mr Wong from instructing the Defendant’s solicitors from issuing a winding-up petition against the Company. He submitted that, in the circumstances and given the potentially serious impact of a winding-up petition against the Company which is listed on the Hong Kong Stock Exchange, it was appropriate for the court to grant an injunction restraining presentation of a winding-up petition until determination of an application for variation of the order of 8 December 2009.  Mr Wong told me that the Company was willing to pay into court the amount of the debt within seven days.

6.  On the evidence before me, it does seem that the Company is solvent and that, given the undertaking to pay the amount of the debt into court, it is willing to secure the debt.  It may therefore be difficult for the Defendant to bring itself within section 178(1)(a) of the Companies Ordinance.  I also think that, given the relatively complicated commercial background to this matter, it is appropriate to grant an injunction which restrains the presentation of the petition until the determination of the application to vary the order dated 8 December 2009 in High Court Action No. 2441/2009.

7.  I therefore make an order restraining the presentation of a petition until a further hearing before me at 9.30 am on 5 January 2011.  I will give both parties liberty to apply.  If Good Capital Resources Limited fails to make an application to vary the 8 December 2009 order, or if such an application is unsuccessful, the Defendant may come back before the Companies Court to apply to have the injunction I am granting lifted or varied. 

8.  In case this matter comes back before another judge, I would also note that, given the way the matter has developed before me and the fact that the basis upon which an injunction has been granted is materially different from what was envisaged when the papers were put together, and also the fact that no offer to secure the debt has been made to the Defendant, regardless of the ultimate outcome of these proceedings, I would not expect the Defendant to be ordered to pay any of the costs incurred up to and including the hearing before me.