RE PING AN SECURITIES GROUP (HOLDINGS) LTD

HCCW 217/2020

[2021] HKCFI 1394

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 217 OF 2020

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D E C I S I O N

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1.  On 5 March 2021 there was a substantive hearing of Yang Xueli’s petition (the “Petitioner”). For reasons that can be found in my decision dated 12 March 2021 I granted an adjournment until 10 May 2021. Directly relevant to my reasons for doing so are [21] and [22] of the decision [1]. In [22] I say this:

“22. The JPLs expect it to be possible to sign the subscription agreement in April. Once this is done they can take steps to introduce a scheme of arrangement at the end of April or beginning of May. This explains why the Company and the JPLs are content with a short adjournment of two months by which time they hope to be able to have commenced the formal restructuring process.”

2.  A number of matters were clear by the time the hearing had been completed.  The relevant ones are that, firstly, Ms Yang was firmly of the view that it was in her best interests that the Company be wound up.  Ms Yang was sufficiently strongly of that view that subsequent to my decision, Ms Yang issued a notice of appeal.  Secondly, in agreeing to make an order for an adjournment I had relied on what I had been told which is summarised in [22] of the decision.

3.  The expectation that is recorded in [22] has not been realised, instead, matters have progressed as follows.  The provisional liquidators have made no effort to contact the Petitioner and not provided her with any information at all about the progress of the restructuring until Ms Yang received a copy of the 2^nd affirmation of Lai Wing Lun, one of the provisional liquidators, on Friday 7 May 2021, in other words, the working day before the petition came back on for hearing before me.  The only other source of information received by Ms Yang would have been Ms Yuen’s skeleton argument which was also served sometime on Friday.

4.  Mr Lai’s 2^nd affirmation summarises, it did exhibit any documents, the progress of the restructuring. It would appear that agreements including a subscription agreement were signed, on Thursday 6 May 2021.  It would also appear that on Monday 3 May 2021 a 54-page PowerPoint presentation was provided to the three largest unsecured creditors who the provisional liquidators have decided they would inform of the progress of the restructuring.  Those three opposing creditors support a further adjournment.  The way in which this matter has progressed, is in my view, entirely unsatisfactory.  Clearly the Petitioner had a right to be kept properly informed of the progress of the restructuring.

5.  Neither Ms Yang nor the Court, should had been put in the position of being given information which is manifestly incomplete, so close to the hearing that it was difficult to deal with.  I have reached the stage at which I am increasingly concerned about the way soft-touch provisional liquidation, and what is generally referred to as the Z-Obee [2] technique, is being used.  I have explained this in a number of decisions and I have recently completed other decisions which will be handed down very shortly developing those concerns further.  Soft-touch provisional liquidation need close monitoring by the Court and I expect soft-touch provisional liquidators and their legal advisers to ensure that this is possible not, as in the present case, make representations to the court on which they know the court has relied and then ignore them.

6.  It seems to me to be perfectly reasonable for the Petitioner to seek a winding up today.  She has a substantial claim against this Company, the return if the restructuring were to be completed would according to the provisional liquidators only be approximately 2.75%, and proper regard to her interests has manifestly not been given.  In these circumstances I consider it appropriate to exercise my discretion and make the normal winding up order.  I would only add one comment, namely, that the provisional liquidators are not appointed by this court and therefore, the Official Receiver will become the first provisional liquidator in Hong Kong.