Re Merdeka Financial Services Group Ltd
Read the full judgment text of HCCW 343/2017 on BabelCite. This High Court CFI judgment was delivered on 24 January 2018.
1. This is a creditor’s winding-up petition based on a judgment debt. There are 3 applications arising thereunder:
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HCCW 343/2017 [2018] HKCFI 163 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES (WINDING-UP) PROCEEDINGS NO 343 OF 2017 ____________
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_____________ D E C I S I O N _____________ 1.This is a creditor’s winding-up petition based on a judgment debt. There are 3 applications arising thereunder:
(1) Application to amend 2.The petition sought winding-up of the Company on the just and equitable ground. It relied on section 178(1)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32. It was an erroneous reference, as that section referred to winding-up of a Hong Kong company whereas the Company in question was a company incorporated in the Cayman Islands but registered as a non-Hong Kong company. 3.The petitioner sought to amend the petition to correct the reference to section 327(4)(a) of Cap 32 and pleaded additional facts showing 3 core requirements to invite the court to exercise its jurisdiction to wind-up the foreign corporation. The 3 core requirements were that:
4.The application was not opposed and I have granted leave to amend, subject to some clerical and technical amendments. Costs of and incidental to the amendments should be to the Company, to be taxed if not agreed, upon disposal of the petition. (2) Application to strike-out 5.As a result of the amendments, the petition would be put in order. The Company sought to withdraw the summons for striking out but sought costs. 6.Mr Derek Chan, counsel for the petitioner, submitted that the strike-out summons should not have been issued in the first place. The court plainly had jurisdiction to decide the petition once the requirements in section 327(4) were met, which were in this case. The 3 core requirements only went to discretion of the court under section 327: Re China Medical Technologies Inc [2014] 2 HKLRD 997, §28, Harris J. 7.The facts in support of the 3 core requirements were stated in the petition although the term “core requirements” was not used. Those facts included the fact that the Company is listed on the GEM Board of the Hong Kong Stock Exchange. The Company was registered as a non-Hong Kong company under Cap 32 since October 2001. The Company has had a principal place of business in Hong Kong. The winding-up would benefit the petitioner who has obtained a judgment debt of about HK$4.4 million. 8.The present petition could be distinguished from the case of Armada (Singapore) Pte Ltd v Grand China Logistics Holding (Group) Co Ltd, HCCW 130/2013, 19 August 2013, Harris J,wherein the company incorporated in the PRC simply was not registered as a non-Hong Kong company, had no place of business in Hong Kong, and the petition was based on an arbitral award with no indication as to where the arbitral seat was. As there was nothing to demonstrate a connection between the company and Hong Kong, Harris J struck out the petition. 9.Accordingly, Mr Chan submits that strike out was not a plain and obvious consequence in the first place. 10.Mr Chan was correct insofar as the law and pleaded facts were concerned. However, as Mr Lam, counsel for the Company, pointed out, the original petition was plainly based on a wrong section of the Companies Ordinance and that one mistake was enough to justify the summons. I agree. Costs should be to the Company. 11.The next question raised by the petitioner is whether or not costs should only be awarded up to 4 January 2018 when the draft amended petition was given to the Company and the Company was invited to withdraw its summons. Apart from a holding reply the Company gave no indication of its present stance until its counsel lodged the skeleton submission on 19 January 2018. In the meantime, the petitioner issued the amendment summons on 9 January 2018. 12.I am of the view that the proposed amendments have been given in good time before 19 January 2018. Today’s hearing could have been saved if the Company had stated its stance earlier. 13.I therefore order that the petitioner should bear costs of the strike-out summons up to and including the date it issued the amendment summons, ie 9 January 2018, with certificate for counsel. There shall be no costs for today’s hearing. I summarily assess costs at $26,000. (3) Validation summons 14.The validation order was not opposed. The only dispute was whether it should be subject to provision by the Company of all the monthly bank statements commencing from November 2017 to the petitioner within 3 days of their receipt (“Rider 2”, as the parties called it). 15.The Company had disclosed consolidated financial statements for the period up to September 2017 (the month in which judgment was handed down) and offered to disclose such statements and the annual reports as and when available. It stated that more disclosure would be onerous and might offend the Listing Rules. 16.This was a creditor’s petition. The Company was deemed unable to pay its debts. However, the consolidated financial statements showed the Company to be solvent and has an ongoing business. The bank balances or cash were in the region of HK$68.74 million. The total comprehensive income for the 3 months ending 30 September 2017 was about HK$25 million, about 6 times the judgment debt. The net assets were HK$146 million. 17.In cases of shareholders’ dispute, the petitioner/minority shareholder may have concerns about the use of company funds. Those concerns have to be supported by evidence. Even so, only monthly lists of payments have to be provided. The company does not need to provide supporting documents and bank statements as a condition for a validation order: Hui Wah Chuen v Siu Kwok Sun, HCCW 318/2014, 29 May 2015, Au-Yeung J, §§22-25. 18.Requiring the Company to produce all monthly bank statements up to the disposal of the petition was onerous, unsupported by authority or evidence. That is especially so when the bank information could amount to price sensitive information. An express undertaking (which Mr Derek Chan offered) from the petitioner not to use the monthly bank statements except for the present petition would not in itself justify the court granting such an onerous order. 19.Mr Chan sought to justify Rider 2 by pointing out that the consolidated financial statement for September 2017 showed liabilities of HK$131 million, much greater than the bank balances and cash. The petitioner was concerned as to the Company’s disposal of assets or its liquidity. 20.With respect, disclosure of bank statements (which Mr Chan suggested could be redacted except for the balance amounts) would not alleviate the petitioner’s concern. Those bank balances would unlikely be different from those stated in the consolidated financial statements. The bank statements would not explain how and why liabilities build up or reduce. 21.Mr Lam also mentioned potential breach of the Listing Rules if the Company were to disclose financial information beyond those in the public domain. I am unable to adjudicate on this for lack of information even as to which Listing Rule was involved. 22.In summary, in my view, the offer by the Company was reasonable. It struck the right balance between informing a creditor as to the financial position of the Company, and protecting the Company’s sensitive financial information from the public domain. 23.I therefore alter Rider 2 as follows:
24.Costs of the validation summons shall be in the cause.
Mr Derek J Y Chan, instructed by Christine M. Koo & Ip LLP, for the petitioner Mr Justin Lam, instructed by Khoo & Co, for the respondent |
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