Re Neway Music Ltd (Company Number 1218812)

HCCW 171/2021

[2021] HKCFI 2260

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP)  PROCEEDINGS NO 171 OF 2021

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REASONS FOR JUDGMENT

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1.By a petition presented on 3 May 2021 the petitioner, Hong Kong Karaoke Licensing Alliance Limited, seeks a winding up order against Neway Music Limited (“Company”)  on the ground that the Company is insolvent and unable to pay its debts. At the hearing, I made the usual winding up order against the Company. These are the reasons for my judgment.

2.The Company was incorporated under the former Companies Ordinance (Cap 32)  on 18 March 2008.  Its current registered office is at 8/F, Phase I, Austin Tower, 22-26 Austin Avenue, Tsim Sha Tsui (“Austin Tower Address”). 

3.By an order dated 11 November 2020 made by the Copyright Tribunal in CT 2/2020 (“Order”), the Company was adjudged liable to pay the amount of HK$90,350,640, being the licence fees payable under the petitioner’s K-Server Licensing Scheme (“Scheme”)  for the period from 1 July 2010 to 30 June 2015. 

4.Pursuant to the order of L Chan J dated 7 November 2013 in HCCT 45/2012, the Company paid HK$25 million into Court for the purpose of securing the amount it may be found liable to pay to the petitioner in CT 2/2020.  By an order dated 3 August 2020 in HCCT 45/2012, the petitioner obtained payment out of the sum of HK$27,054,079 (being the amount paid by the Company into Court together with interest accrued thereon).  Taking into account the payment received by the petitioner, the Company still owed the amount of HK$63,296,561 to the petitioner (“Debt”).

5.On 30 November 2020, the petitioner caused a statutory demand to be served on the Company at its then registered office at Unit 801-802, East Ocean Centre, 98 Granville Road, Tsim Sha Tsui (“East Ocean Address”), requiring the Company to pay the Debt within the next 21 days (“1^st SD”).  Further, on 22 January 2021, the petitioner caused another statutory demand to be served on the Company at the Austin Tower Address, requiring it to pay the Debt within the next 3 weeks (“2^nd SD”). 

6.The Company did not comply with the 1^st SD or the 2^nd SD.  Nor has the Company paid or offered to secure or compound for the Debt.  By virtue of s 178(1)(a)  of the Companies (Winding Up and Miscellaneous Provisions)  Ordinance (Cap 32), the Company is deemed to be insolvent and unable to pay its debts.   

7.Shortly before the hearing, the Company filed an affirmation of Ma Wing Kiu Arwen on 26 July 2021 and raised 3 grounds in opposition to the petition. 

8.First, it is alleged that the verifying affirmation filed by the petitioner on 4 May 2021 is “defective and irregular” and “cannot be used in evidence except with leave of the court as the signature was not made opposite to the jurat”.  The allegation is misconceived.  As pointed out by Ms Natalie So, counsel for the petitioner, the verifying affirmation complied with the standard form of affidavit/affirmation issued by the Judiciary.  In any event, the signature of the affirmant is opposite to the jurat. 

9.Second, it is alleged that there was no effective service of the 1^st SD or the 2^nd SD in that by the time the 1^st SD was served, the Company’s staff and operations had already moved from the Austin Tower Address to Room 1011, Block B, New Mandarin Plaza, 14 Science Museum Road, Tsim Sha Tsui East.  There is no merit in the allegation. 

(1)  It is not in dispute that according to the Notice of Change of Address of Registered Office filed by the Company at the Companies Registry, the effective date of the change in the registered office of the Company was 7 December 2020.  In other words, by the time the 1^st SD was served on 30 November 2020, the East Ocean Address was still the registered office of the Company. 

(2)  Similarly, according to the Notice of Change of Address of Registered Office filed by the Company at the Companies Registry, the registered office of the Company was changed to the Austin Tower Address with effect from 1 January 2021.  This means that by the time the 2^nd SD was served at the Austin Tower Address on 22 January 2021, such address was the registered office of the Company.

10.Lastly, the Company contends that it has “strong merits” in its appeals against the decisions of the Copyright Tribunal dated 23 December 2019 (“1^st Decision”)  and 10 November 2020 (“2^nd Decision”)  in HCMP 89/2020 and HCMP 2257/2020, which will be heard before Lok J on 15-16 December 2021.  In the 1^st Decision, the Copyright Tribunal held that the Scheme is reasonable and ordered the Company to pay the petitioner licensing fee for the period from 1 July 2010 to 30 June 2015.  As the parties were unable to agree on the amount of licence fees to be paid by the Company, the 2^nd Decision was handed down whereby the Company was ordered to pay HK$90,350,640 to the petitioner.  The Company says that it is entitled as of right to bring the appeals on points of law against the 1^st and 2^nd Decisions and, if the Company is ordered to be wound up at this juncture, it would render the appeals to become nugatory. 

11.It is well established that the petitioner whose debt is not in dispute is entitled ex debito justitiae to an order for the compulsory winding up of the company.  The burden is on the company to demonstrate that there is a bona fide dispute on substantial grounds in respect of the debt or that there is some other reason for the Court not to make a winding up order against the company. Where, as here, the debt is derived from the decision of a tribunal made after a fully contested hearing and the decision has not been stayed or suspended, the Companies Court would normally require the company to pay or secure the debt by paying an amount equivalent to the debt into Court within a very short time if it wants to avoid a winding up order. 

12.In the present case, the 1^st Decision was made on 23 December 2019 by the Copyright Tribunal.  The hearing took place between 9 August 2017 and 14 March 2019 and lasted for 37 days.  The Company’s requests to suspend the operation of the 1^st Decision and the 2^nd Decision were unsuccessful.  The Company was fully aware that in the absence of a stay, the petitioner is entitled to enforce the Order and require the Company to pay the Debt even if there are pending appeals against the 1^st and 2^nd Decisions.  However, the Company chose not to pay the Debt. 

13.As the Company had not offered to pay or secure for the Debt, this Court caused a letter to be sent to the parties informing the Company that if it does pay or give an undertaking to pay the Debt by 4 August 2021, it is most likely that the Court will wind up the Company.  At the hearing, Mr Joseph Wong, counsel for the Company, informs the Court that the Company will not pay the Debt or give an undertaking to pay the Debt by 4 August 2021. 

14.As the Company has not shown any valid ground in opposition to the petition nor offered to pay or secure for the Debt, the petitioner is entitled to seek a winding up order against the Company.

15.Ms So asks the Court to award costs against the Company on an indemnity basis in view of the conduct of the Company in resisting the petition when there is no valid ground to do so.  I do not think the fact that the Company has filed an affirmation to oppose the petition, albeit on grounds which the Court does not consider to have any merit, is sufficient for the Court to depart from the usual order as to costs.

Ms Natalie So, instructed by Ellalan, for the petitioner

Mr Joseph Wong, instructed by S.W. Wong & Associates, for the company

Mr Raymond Kong, instructed by Official Receiver’s Office, for the Official Receiver