Re Blockchain Group Co Ltd

HCCW 118/2018

[2018] HKCFI 2590

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 118 OF 2018

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Before: Hon Anthony Chan J in Court

Date of Hearing: 19 November 2018

Date of Judgment: 19 November 2018

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J U D G M E N T

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1.The picture before the court is not an encouraging one. Even assuming that the Company is solvent due to the substantial amount of cash being held in the hands of its subsidiaries in the Mainland as it suggests, the evidence is abundantly clear that it has been habitually in default of its obligations to pay its debts. This is highlighted by the fact that the settlement obligations to the Petitioner have not been met.

2.The court also takes into account the latest Announcement of the Company in which many outstanding, and some long overdue, financial obligations were set out.  In addition, today’s application is supported by a number of other creditors.

3.I regret to say that the evidence of the Company that it intends to preserve its cash and invest heavily on new business ventures so as to pull the Company out of its financial difficulties is quite sketchy in details.  More importantly, plainly the creditors (including the Petitioner) do not share the Company’s optimism about the business prospects and are in fear that the cash will be wasted to their prejudice.

4.It is trite that the Company cannot insist on trading itself out of financial trouble.  Nor is it entitled to resist a winding-up petition based on the fact that it is not insolvent (assuming this to be the case in favour of the Company) whilst persistently fails to pay its debts.

5.As regards the technical issues raised on behalf of the Company, firstly, I am satisfied that the Amended Petition has set out sufficient averments on the connection with Hong Kong to justify the exercise of this court’s jurisdiction in this case.  Further, Mr Chiu, appearing for the Petitioner, has undertaken to further amend the Petition to refer to s.327 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32, upon which this Petition is based.  I take the view that the lack of reference to s.327 is technical in nature and does not hinder the court from granting the relief in these matters today.

6.Secondly, regarding the fact that the statutory demand was only issued after the Amended Petition was re-filed.  The reason for that is that the Petitioner came into the shoes of the original petitioner by way of substitution as explained by Mr Chiu. However, it is quite clear from the Amended Petition that it is premised on the failure of the Company to meet its obligations under the Settlement Agreement despite various demand letters.

7.In any case, even if the court is to assume that the Company is solvent, I fail to see why the Company can persist in not paying its creditors. I should add that this kind of behaviour constitutes a danger to the other traders who may deal with the Company without knowledge of the habitual non-payment of debts on its part.

8.For these reasons, subject to the above undertaking by the Petitioner, I grant the relief sought in prayers (i) and (iii) of the Amended Petition, namely, I make the usual winding‑up order and the costs be paid out of the estate of the Company.      

Mr Byron Chiu, instructed by Clifford Chance, for the Petitioner

Mr Michael Lok and Ms Jasmine Cheung, instructed by Joseph S C Chan & Co, for the Company

Mr Brian Chok, instructed by Official Receiver’s Office, for the Official Receiver

Ms Lynnmarie Yip, instructed by C W Heung & Partners, for Ji Jingyang (creditor)

Ms Lee Wing Ki, instructed by Johnny K K Leung & Co, for Sun Quanhong (creditor)

Mr Li, Taylor L K, instructed by Chin & Associates for Zhang Sheng, Xu Jinghong, Chen Wujie, Chen Guoji, Sun Guangyue and Liao Jing (creditors)

Ms Chiu Tsz Yin Rachel, instructed by Ong & Chung, for Fan Haipeng and Pan Yuen Jie (creditors)