Re Gw Electronics Co Ltd

CACV 24/2017

[2020] HKCA 316

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 24 OF 2017

(ON APPEAL FROM HCCW NO 81 OF 2016)

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Before: Hon Yuen, McWalters JJA and L Chan J

Dates of Written Submissions: 7 and 15 April 2020

Date of Decision: 20 May 2020

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DECISION

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Hon Yuen JA (giving the Decision of the Court):

1.On 2 April 2020, this court handed down judgment in CACV24/2017 and CACV84/2017 (“the C/A Judgment”) which had been heard together.

2.We dismissed the Company’s appeal in CACV84/2017 which was its appeal from Anthony Chan J’s order made on 30 December 2016 dismissing its application to strike out the petitioner’s (“TEAL’s”) petition to wind it up. 

3.As for CACV24/2017 which was the Company’s appeal from Harris J’s winding-up order made on 9 January 2017, we said this at §44 of the C/A Judgment:

“As for CACV24/2017 (the appeal from the Winding-up Order), it will be seen from this Judgment that Harris J was also correct in making that order. However, the Winding-up Order was stayed on 27 March 2017 [“the Stay Pending Appeal”], and the OR was appointed the Company’s provisional liquidator. It would appear from the latest report [29 December 2017] that in the meantime, the Company has been able to recover certain funds, and that the Company was (as at the date of the report) solvent. That being the case, even though CACV24/2017 should likewise be dismissed, the Company may wish, in light of the subsequent change of circumstances, to apply to the court to discharge the Winding-up Order. Accordingly, this court invites submissions from the parties (including the OR) as to the form of order that the court should make in CACV24/2017. In the absence of such submissions, the [Stay Pending Appeal] would be lifted and CACV24/2017 dismissed with costs”.

OR’s submissions

4.On 7 April 2020, the OR provided her submissions as follows:

(a)  she has recovered a total of approximately HK$126,132,281.21;

(b)  on 10 October 2018, Dawes DHCJ made a declaration in HCMP1449/2018 that control over the affairs of the Company reverted to the board of directors upon the Stay Pending Appeal;

(c)  since then, she has had no information about the Company’s financial position, and so the solvency of the Company is uncertain;

(d)  in the absence of further information on the Company’s financial position, the Stay Pending Appeal should be lifted and the appeal from the Winding-up Order dismissed;

(e)  however, she would leave it to the Company to substantiate its case that there were sufficient assets to pay all its creditors and the expenses of liquidation, such as to warrant an order for a stay (presumably meaning a permanent stay).

The Company’s update

5.On 9 April 2020, the Company’s solicitors wrote to the OR and to TEAL’s solicitors with an update on the Company’s financial position, alleging that the Company was solvent with a net asset position of HK$8,347,629.13 as per Annex 1 to the letter (“the Alleged Surplus”).

TEAL’s submissions

6.On 15 April 2020, TEAL provided its submissions in which it disputed the Alleged Surplus, by reason of the Company’s outstanding liabilities for:

(1)  legal costs incurred by TEAL in the appeals and the court below which the Company would be liable to pay, which TEAL estimated at $8.4 million; and

(2)  interest on taxed costs of the petition and the provable debt of USD15,263,129.39 (approximately HK$118,747,146.65), though no figure was given for such interest.     

The Company’s submissions

7.1.On the same day, the Company provided its submissions in which it sought:

(1)  an interim stay of the Winding-up Order;

(2)  liberty to interested parties and/or the Company to apply for the rescission or permanent stay of the Winding-up Order within 28 days, failing which the Winding-up Order would be restored;

(3)  costs of CACV24/2017 to be in the cause;

(4)  liberty to apply.

7.2.In the submissions, the Company indicated that:

(a)  it would challenge TEAL’s estimation of costs of $8.4 million, and

(b)  it expects to continue to recover further payment from its debtor DTT, the maximum amount of which is HK$44.5 million in accordance with a civil consent judgment handed down by a PRC court on an unspecified date.

7.3.Although the Company sought an order that costs of CACV24/2017 be “in the cause”, no submissions were made in support. 

Discussion

8.As far as costs of CACV24/2017 are concerned, both counsel for TEAL and the Company had agreed at the conclusion of the appeal hearing that costs should follow the event, and as indicated in §44 of our Judgment, CACV24/2017 would have been dismissed if not for the possible solvency of the Company due to funds recovered after the Winding-up Order.  There is therefore no reason why the costs of CACV24/2017 should not be paid by the Company to TEAL.  As usual, the costs would be taxed if not agreed.     

9.As for the dispute over the Company’s solvency now, there is on the face of it a net surplus but it is not open to this court to order a permanent stay without a determination of the disputed facts at §6(1)-(2).  (Rescission is in any event out of the question as the Winding-up Order has been sealed¹).

Order

10.Accordingly we would make the following order:

(1)  the Winding-up Order is stayed for 28 days;

(2)  if, during this period, an interested party (eg a contributory) makes an application to the Companies Court pursuant to s.209(1) Companies (Winding Up and Miscellaneous Provisions) Ordinance Cap.32 for a permanent stay of the winding-up, the stay ordered under §(1) above will be extended pending the Companies Court’s determination of that application;

(3)  if no such application is made during the said period of 28 days, CACV24/2017 will be dismissed;

(4)  costs of CACV24/2017 (to date) to be paid by the Company to TEAL whether or not an application referred to above is made, to be taxed if not agreed. 

Ms Andrea Yu, instructed by ONC Lawyers, for the Respondent (the Company)

Mr Samuel Chan, instructed by Fred Kan & Co., for the Petitioner

Ms Carmen Leung, of the Official Receiver’s Office, for the Official Receiver