DAVID MOY v. THE OFFICIAL RECEIVER

HCCW 20/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING‑UP PROCEEDINGS NO 20 OF 2014

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D E C I S I O N

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1.  I have before me a Notice of Motion dated 8 September 2014 issued by Mr David Moy, a contributory of the Company, seeking an order that the winding up of the Company be stayed and the Official Receiver, who is the provisional liquidator, be discharged. The Company was wound up by an order made by me on 30 June 2014 pursuant to a petition presented by a creditor of the Company, China National Chartering Co Limited, on 23 January 2014. The application for a stay has come before me on previous occasions. It would be fair to say that satisfying the necessary requirements, which I shall explain shortly, which the court looks to when determining applications of this sort has proved difficult and time‑consuming.

2.  Applications to stay winding-up proceedings are relatively common and the relevant principles well established.  The principal authority referred to in cases of this sort is the decision of Kwan J (as she then was) in Re Outboard Marine Corporation Asia Limited [1] in which her Ladyship identified the following criteria:

(1) The power to grant a stay of winding-up proceedings is discretionary.  The burden is on the applicant to make out a sufficient case for a stay that carries conviction.

(2) Where there are sufficient assets to pay all the creditors and the expenses of the liquidation, the interests of the members, in addition to those of the creditors and the liquidator, would be considered.

(3) The court would also consider whether the stay is conducive or detrimental to commercial morality and to the interests of the public at large.

In practice what that means is that the court will have to be satisfied that there is a proper purpose for staying the liquidation, that creditors’ claims are properly dealt with, and three, that the liquidators have confirmed that nothing has come to their attention during the course of the liquidation which calls into question the propriety of the management of the company.

3.  As I understand the matter, the principal reason for this application is the nature of the principal asset of the Company held by its subsidiary Lianyungang Petrocom Coal Reserve & Blending Centre Limited, namely a coal blending facility at the port of Lianyungang.  In short, it is suggested that this facility and its continued operation is sufficiently valuable that it is desirable, if the debts of the Company can be adequately addressed, that the Company is revived and through its subsidiary able to operate that facility.  As I understand the application it is suggested that for various reasons relating to certain intellectual property rights which are not assignable, it would be difficult to sell the facility at a value which reflects its value as an on-going business.

4.  The Official Receiver has provided the court with a number of reports.  The Official Receiver, acting as the provisional liquidator, has not identified any matter which she considers would be a ground for the court to decline the application.  The only term which the Official Receiver has sought imposed is the payment of the fees incurred by her office up to the present date in a total sum of $177,004.  This I will order is paid out of the assets realised by the Official Receiver during the course of the liquidation which are more than sufficient to cover this amount. 

5.  So far as the other creditors of the Company are concerned, the position has now been reached that none of them oppose the application, as was at one time the case, and a number of them actively support it.  I do not think that that distinction is, however, material.  I suspect in most cases it simply reflects how an individual creditor has thought it appropriate to word its present position rather than reflecting any material distinction in its attitude to the application.  It does not seem to me necessary to address how each of the various creditors’ debts has been dealt with; there are however a number where in my view the position requires the court to address the way in which any order to stay the winding up is framed. 

6.  In the case of the debt due to the original petitioner, the debt has been settled by Mr Samuel Wan and his company ENRE Holdings Limited.  Mr Maurellet SC, who appeared on behalf of the applicant, quite rightly noted that, although the precise position is unclear, it may be that Mr Wan and his company therefore step into the shoes of the petitioner and there is therefore a debt due to them.  Mr Maurellet SC proposed that this be dealt with by way of an undertaking, which it is anticipated can be obtained, confirming that if Mr Wan and ENRE Holdings Limited have become creditors of the Company, they will not seek payment of the relevant sums.

7.  One of the more active opponents to the original application was Mr Roderick Mackenzie-Smith, who had a claim for unpaid wages and also claimed an entitlement to 400,000 restricted shares.  His claim for wages was paid in full on 21 April 2015.  It has been agreed that the claim in respect of shares will be resolved after this application has been determined, and Petrocom Limited which owns 40% of the Company’s issued capital will undertake, if necessary, to transfer shares to Mr Mackenzie-Smith if he should in future make good his claim.

8.  The solicitors firm Jones Day were also a fairly substantial creditor of the Company.  The fees owed to them have been settled by Petrocom Limited and Mr Howard Au.  As in the case of the petitioner, an undertaking will be obtained that insofar as Petrocom Limited and Mr Howard Au have stepped into the shoes of Jones Day, they will not enforce their claim for the amount settled by them. 

9.  I am satisfied that if the court is provided with the undertakings that I have referred to, this is now an appropriate case in which to make an order for a stay.  I will not, however, make the order today.  The applicant’s solicitors should submit a draft order to the court containing the necessary undertakings along with letters from either the relevant creditor or their lawyers confirming that an undertaking can be given to the court in the form appearing in the draft order.  If I am satisfied with the undertakings, I will make an order that the winding-up proceedings be stayed and the Official Receiver discharged.

10.  So far as the costs of this application are concerned, other than the payment of the Official Receiver’s costs which I have already dealt with, there will be no order as to costs.