Re Gti Holdings Ltd
Read the full judgment text of HCCW 51/2020 on BabelCite. This High Court CFI judgment was delivered on 22 November 2021.
1. At the hearing of the petition dated 11 March 2020 (“ Petition ”), I made the usual winding up order against GTI Holdings Limited (“ Company ”). These are the reasons for my judgment.
Cited by 4 cases · Cites 3 cases
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HCCW 51/2020 [2021] HKCFI 3647 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES (WINDING-UP) PROCEEDINGS NO 51 OF 2020 _______________
_______________ Before: Hon Linda Chan J in Court Date of Hearing: 22 November 2021 Date of Order: 22 November 2021 Date of Reasons for Judgment: 2 December 2021 __________________________________ R E A S O N S F O R J U D G M E N T __________________________________ 1.At the hearing of the petition dated 11 March 2020 (“Petition”), I made the usual winding up order against GTI Holdings Limited (“Company”). These are the reasons for my judgment. 2.The Company was incorporated in the Cayman Islands in June 2004. Its shares have since 5 October 2005 been listed on the Main Board of The Stock Exchange of Hong Kong Limited (“SEHK”) (stock code 3344). The Company has more than 35 subsidiaries (together “Group”) incorporated in Cambodia, the Mainland, the BVI, Cayman Islands and Hong Kong some of which are operating subsidiaries engaging in production, sale and trading of textile products, trading of petroleum, provision of services for oil industry and provision of financial services. 3.In 2018, the Group started to shift its business focus from the overseas market to Hong Kong market. Petition and appointment of PLs by Cayman Court 4.The Petition was presented by Yu BaoHua (“Petitioner”) following the failure of the Company to satisfy a statutory demand served upon it on 21 January 2020 (“SD”). In the SD, the Petitioner demanded the Company to pay HK$7,815,600, being the principal and interest due and payable on 28 March 2019 (“Debt”) under a bond issued by the Company on 28 December 2018. 5.On 12 and 17 March 2020, 2 winding up petitions were presented against the Company in HCCW 57/2020 and HCCW 65/2020[1]. 6.There is no dispute that the Debt was due. Nor is there any dispute that the Company is insolvent and unable to pay its debts. 7.On 26 May 2020, the Company presented a winding up petition against itself and applied for appointment of provisional liquidators for restructuring purpose with the Grand Court of the Cayman Islands. On 28 May 2020, the Cayman Court appointed Mr Osman Mohammed Arab and Mr Lai Wing Lun, both of RSM Corporate Advisory (Hong Kong) Ltd and Ms Claire Marie Loebell of R&H Restructuring (Cayman) Ltd as joint and several provisional liquidators of the Company (collectively “PLs”). 8.On 17 September 2020, the PLs obtained sanction from the Cayman Court to issue new shares and to enter into a funding agreement.By order dated 14 December 2020 with the consent of the Company and Petitioner, Harris J sanctioned all the sale and purchase of shares of the Company and the corresponding alteration in the status of the members of the Company. 9.On 24 September 2020, the PLs made an ex parte application in HCMP 1556/2020 to seek recognition of their appointment. By order dated 9 November 2020, Harris J recognised the appointment and allowed the PLs to exercise certain powers in Hong Kong for (inter alia) the purposes of putting forward and implementing a restructuring proposal, investigating the affairs of the Company, protecting and securing the assets of the Company, retaining legal advisers as the PLs consider appropriate and bringing or defending legal proceedings in the name or on behalf of the Company. These powers on their face are more extensive than what the Companies Court would normally confer on the provisional liquidators appointed by the Hong Kong Court as the PLs are not required to seek prior sanction of the Court before exercising such powers. 10.The Petition first came to be heard before Harris J on 13 July 2020, and was adjourned to 27 August 2020 for arguments with 3 hours reserved. The Petition was further adjourned to 16 November 2020, 1 February 2021, 22 March 2021, 19 July 2021 and finally to 22 November 2021 pursuant to the consent summonses filed by the Company and Petitioner. 11.The adjournments were sought without the consent of the creditors who had given notices to appear in and support the Petition. The details of the creditors who support the Petition (collectively “Supporting Creditors”) are as follows:
12.By another consent summons dated 11 November 2021, the Company and Petitioner proposed to further adjourn the Petition for another 5 months (to 11 April 2022) and to vacate the hearing on 22 November 2021. No explanation has been provided to the Court as to why the Petition should be further adjourned. Nor has the parties sought the consent of the Supporting Creditors, who have the right to be heard and seek an order to be substituted as petitioner if the Petitioner does not seek a winding up order against the Company. Grounds in opposition to the Petition 13.Mr Michael Lok (appearing with Ms Sharon Yuen), counsel for the Company, submits that the Petition should be further adjourned as the Company has already taken substantial steps in trying to implement a restructuring proposal in respect of all the debts owed to the creditors in that:
14.Mr Lok relies on Re China Huiyuan Juice Group Ltd [2021] 1 HKLRD 255 §§50-51; Re Lamtex Holdings Ltd [2021] 2 HKLRD 177 §§36-38 in particular Harris J’s observations that “the place of incorporation is not necessarily determinative” and that “the views of creditors are also a major consideration” and asks the Court to adjourn the Petition for the reasons summarised in §16 above. 15.In my judgment, there is no proper basis for the Company to seek a further adjournment of the Petition. 16.The starting point is that an unpaid creditor whose debt is not in dispute is entitled ex debito justitiae to seek an immediate winding up order against the Company. Although the Petitioner had signed a consent summons indicating its agreement to have the Petition be further adjourned, upon learning that the Court declined to vacate the hearing, the Petitioner changed his mind and decided to seek a winding up order against the Company. Mr Lok does not dispute that the Petitioner is entitled to seek an immediate winding up order against the Company. 17.In addition, amongst the Supporting Creditors:
18.The burden is on the Company to satisfy the Court that there is a proper basis to further adjourn the Petition. Where, as here, the only grounds in opposition to the Petition are that (1) the Company has been seeking to put forward a proposed restructuring, and (2) PLs have been appointed to assist the Company in implementing such restructuring, the Court will consider the feasibility of the proposed restructuring (Re Lamtex, §38). In assessing the feasibility or otherwise of the proposed restructuring, the Court will have to take into account the views of the unsecured creditors as they have the right to decide whether the proposed restructuring is one which they are prepared to accept. It is not for the Company or the PLs to decide whether it is in the interests of the creditors to accept the proposed restructuring. 19.I do not think that the proposed Scheme is feasible:
20.More importantly, it is clear from the evidence before the Court that despite the appointment of the PLs for about 18 months, the financial position of the Group has not improved and the Company remained unable to comply with the basic obligation of publishing its audited financial statements. 21.The unaudited financial statements of the Group show that both the net current liabilities and net deficits had increased by more than 100% during the past 21 months, and the Group continued to suffer substantial loss as follows:
22.It is highly undesirable for the Company with a substantial net deficit to remain in operation as a going concern. The continued increase in net deficit is prejudicial to the interests of the unsecured creditors. They are entitled to ask the Court to put the Company into liquidation without any further delay. 23.Finally, I am satisfied that the 3 core requirements are satisfied fortheCourttoexerciseits discretion tomake a winding uporder against the Company. The Petitioner has pleaded (at §§14-20 of the Petition) the matters it relies on in support of the contention that the 3 core requirements are satisfied. The Company does not take issue with the contention in the many affirmations filed in opposition to the Petition. I should add that at the hearing, Mr Lok suggests, for the first time, that the 3 core requirements are not satisfied and asks the Court to grant a short adjournment so that the Company can put in evidence to deal with the point. I do not see any basis for Mr Lok to take the point, when the Company has not in any of the affirmations raised such issue. 24.In any event, it seems to me that the point which Mr Lok seeks to make is wholly without merit, given that:
Ms Terri Ha, instructed by Li & Lai, for the Petitioner Mr Michael Lok and Ms Sharon Yuen, instructed by Michael Li & Co., for the Company Mr Andrew Lau, instructed by Tam, Pun & Yipp, for 7 supporting creditors (Huang Wen Chih, Shen Pei Ying, Zhu Wei, 古秀英, 柯雪梅, 潘漢洲, 蔡素霞) Mr Leon CH Chan, instructed by Nixon Peabody CWL, for a supporting creditor (Wang Rujing) Mr Raymond Kong, instructed by Official Receiver’s Office, for the Official Receiver Anthony Siu & Co., for a supporting creditor (Xu Kaimei), is absent C.F. Lee & Co., for 2 supporting creditors (王玉英and 郭濟榜), is absent Lee & Yik Lawyers, for 8 supporting creditors (Wong Shin Kwun, Wong Ho Yin, Wei Qin, Kong Chi Wang, Deng Zhenjie, Mok Siu Mui Iris, Fan Siu Hung and Tong Kan Chuen Arthur), is absent Rowland Chow, Chan & Co., for 4 supporting creditors (Ng Chiu Ming, Kwong Wai Kee, 蔡李原, Tsang Sin Ha), is absent [1] Contrary to the practice that a creditor should participate in the existing winding up proceedings by filing the requisite notice to appear in the petition. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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