China Linkage International Ltd (in Compulsory Liquidation) v. Gemini Asset Management Ltd

HCCW 120/2017

[2018] HKCFI 2661

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING‑UP PROCEEDINGS NO 120 OF 2017

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D E C I S I O N

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1.I have before me a summons dated 6 July 2018 issued by the liquidators of the applicant which is in compulsory liquidation. The applicant seeks a declaration that a charge dated 15 November 2016 is invalid pursuant to section 267 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 (“CWUP”). Initially the application was opposed but in the fullness of time the respondent withdrew its objection.

2.A consent summons was sent to the court in late October 2018.  The court pointed out to the parties that as the relief sought was a declaration, the court could not make an order without considering the merits of the application.  It follows, however, that today’s application has been unopposed and is therefore straightforward. 

3.Section 267 of the CWUP provides:

“267. Effect of floating charge

(1) This section applies in relation to a company if the company goes into liquidation.

(2) If the company creates a floating charge on its undertaking or property at a relevant time (within the meaning of section 267A), the charge is invalid except to the extent of the amount specified in subsection (3).

(3) The amount is the aggregate of—

(a) the value of so much of the consideration for the creation of the charge that consists of—

(i) money paid to the company at the same time as, or after, the creation of the charge;

(ii) money paid at the direction of the company at the same time as, or after, the creation of the charge; or

(iii) property or services supplied to the company at the same time as, or after, the creation of the charge; and

…

(5) In this section—

…

floating charge (浮動押記) means a charge which, when created, was a floating charge.”

As the application is not opposed, it follows that the court is not concerned with the exceptions referred to in sub-section (3).  The court needs to be satisfied with the two proceeding requirements, namely, that the charge is a floating charge on the undertaking or property of the company, and that it was created at a relevant time, namely, within 12 months of the commencement of the winding up which was the date of presentation of the petition as a compulsory winding-up order was made.

4.The charge, on its face, states that it took effect on 24 January 2017 and this is the date which is treated as the date of creation of the charge: see Re Moulin Global Eyecare Holdings Limited (2009) 12 HKCFAR 621 at [48]–[49].  The second of the two requirements is therefore satisfied.

5.So far as the first element is concerned, namely, whether or not the charge is a fixed or a floating charge, it seems to me clear that the charge is the latter and therefore caught by the section.  The charge extends to book debts and, on its face, permits the chargor to dispose as it sees fit of assets covered by the charge.

6.In conclusion, it therefore seems to me that section 267 applies to the charge and in the circumstances, it is appropriate for the court to make a declaration that it is invalid which I do. 

7.I will order that the costs of the proceedings are paid by the respondent to the applicant, such costs to be taxed if not agreed.

Mr Patrick Chong, instructed by Howse William Bowers, for the applicant

Mr Tim Au, of Tanner De Witt, for the respondent