Re Bga Holdings Ltd (Formerly Known As Beibu Gulf Ocean Shipping (Group) Ltd)

HCCW 251/2019

[2021] HKCFI 3771

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 251 OF 2019

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Before: Hon Anthony Chan J in Chambers

Date of Hearing: 14 December 2021

Date of Decision: 14 December 2021

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DECISION

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1.This is the Company’s application for leave to appeal against the Decision of this court dated 26 November 2021 by which its application to strike out the Amended Petition was dismissed on the ground, inter alia, that there existed no bona fide dispute on substantial grounds in respect of the PBM Loan[1]. On 6 December 2021, this court had made a winding up Order in respect of the Company. There is an appeal on foot in respect of that Order.

2.PBM takes issue with this application both on (a) the need for leave to appeal against the Decision and (b) the lack of merit in the intended appeal.

3.In respect of the necessity for leave, there are authorities binding on this court that the “application approach” is to be applied to determine if the Decision is interlocutory or final (see Bright Shipping Ltd v Changhong Group (HK) Ltd [2019] 2 HKLRD 220 §§7-11 and the authorities therein cited).  Leave to appeal is required for the former.

4.In applying the application approach, the court takes into account, inter alia, (i) the form in which the application was made; (ii) the purpose and substance of the application; (iii) the issues determined by the court; (iv) the effect of such determination on the rights of the parties; and (v) the further conduct of the proceedings and the final disposal of the whole action.

5.With respect, the analysis of Mr Ho, who appeared with Mr Ng for PBM, that the Decision is final for the purpose of appeal is convincing :

(1)  The nature and effect of a striking out application in winding up proceedings were addressed by Harris J in Re GW Electronics Co Ltd, HCCW 81/2016, 9 January 2017, §4:

“The practice of the Companies Court in circumstances of this sort is quite clear. A strike-out application effectively determines the substantive issue in the petition. If the strike-out issue is unsuccessful, a company will normally automatically be wound up, unless the parties agree or the Court is persuaded that the petition should be adjourned in order to allow the company the opportunity to settle the petitioner’s, and possibly other creditors’, claim”

(2)  Further, it is well-established that a finding that there is no bona fide dispute on substantial grounds (in the context of a striking out application) will preclude the debtor from raising the same arguments in the hearing of the Bankruptcy Petition:

(a)  In Re Ma Sik Hung Bruce [2021] HKCFI 1551, Ng J held at §§17-19 that when the court has held that a debtor failed to show a bona fide dispute on substantial grounds in an application to set aside the statutory demand, the principle of res judicata operates to preclude the debtor from raising the same argument at the hearing of the petition for his bankruptcy in the absence of any change of circumstances;

(b)  In Chan Yuk Lun v Chan Ying Chit [2015] 1 HKLRD 501, G Lam J (as he then was) held at §13 that “an order refusing to set aside a statutory demand, coupled with the operation of the principle of res judicata, has the effect of a final determination of specific issues as between the parties”.

(3)  The same principle must be equally applicable in winding up proceedings.

(4)  In light of the application approach and the above case law, the Decision is a final one for the purposes of s.14AA of the High Court Ordinance, Cap 4.  The finding that there was no bona fide dispute in respect of the PBM Loan was not susceptible to further challenge at the hearing of the Amended Petition.  The Decision was therefore determinative of the Insolvency Ground relied upon in the Amended Petition[2], and, unless PBM’s claim was settled, the Amended Petition would be (in fact was) disposed of accordingly.

(5)  Alternatively, if the Decision is an interlocutory order within the meaning of s.14AA, given that it determined in a summary way the rights of the Company in the Amended Petition within the meaning of O.59 r. 21(1)(a), the intended appeal is one which can be brought as of right[3].

6.The Company relies on the proposition that notwithstanding the finding of lack of bona fide dispute the court retains a discretion not to make a winding up order but to, eg, allow a restructure of the company’s debt to be instigated (see Re Yueshou Environmental Holdings Ltd, unrep, HCCW 142/2013, 16 July 2014, §12).  I do not believe that the proposition assists the Company.  The discretion not to wind up the company would be premised on the finding of lack of bona fide dispute on the debt.  The exercise of the discretion only serves to reinforce the notion that the dispute on the debt has been adjudicated upon and not open to challenge in the Companies Court.

7.In the premises, I agree with PBM that this application is misconceived[4].  Even if I am wrong, the finding of lack of bona fide dispute turned quintessentially on factual disputes.  The court was assisted by contemporaneous documents in determining those disputes.  Having analysed the rival contentions, the court came to the view that the Company’s case was “so full of holes to be credible or bona fide” (Decision, §§4 and 72). 

8.Notwithstanding that the findings in the Decision were based on affidavit evidence and contemporaneous documents as opposed to viva voce evidence, the appeal court would not interfere with the same save where palpable error has been demonstrated: see Re Cheung Kwan [2021] HKCA 282, §§31-33.

9.I bear in mind the applicable threshold.  I am not persuaded by anything advanced on behalf of the Company that there is reasonable prospect of success in the intended appeal. 

10.For these reasons, this application is dismissed with costs to PBM, to be taxed if not agreed.  I do not believe that this application justifies the instruction of two counsel.

11.I am grateful to counsel for their assistance.

Mr Justin Ho and Mr Jonathan Ng, instructed by Dentons Hong Kong LLP for the Petitioner

Mr Rimsky Yuen, SC and Ms Sharon Yuen, instructed by Au & Vrijmoed for the Company

The Official Receiver was not represented and did not appear