Re Zpmc-red Box Energy Services Ltd

HCCW 368/2021

[2022] HKCFI 1648

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 368 OF 2021

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Before:  Hon Cheng J in Chambers

Date of Hearing:  26 May 2022

Date of Decision:  26 May 2022

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D E C I S I O N

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1.The evidence in the Second Affidavit of Philip Jeffrey Adkins (“Adkins 2nd”) which RBF HK Limited (“RBF”) seeks to adduce covers three areas:

1.1    allegations against the Petitioner made in support of the allegation that the Company has substantial cross-claims against it (paragraphs 7 to 19);

1.2    allegations of the Petitioner’s ulterior purposes in presenting the Petition, as well as the Petitioner’s attitude to the petition debt (paragraphs 20 to 25);

1.3    RBF’s reasons as to why the Petition should be adjourned if the Court were to refuse to dismiss it, including an imminent change in the control and ownership of the Company, and RBF’s proposals for revitalising the Company (paragraphs 26 to 46).

2.I agree with the submission of Mr Joffe, counsel for RBF, that in considering whether or not to grant leave to file this additional evidence, the requirement of exceptional circumstances in RHC O.32 r.11A(4) does not apply, as Adkins 2nd is not sought to be filed in support of an interlocutory application.  Whilst Jose Miranda Da Costa Junior v Lorenzo Yih, unreported, HCA 156/2010, 28th April 2014 and HCMP 1127/2014, 21st July 2014 considered the effect of an order prohibiting further evidence to be adduced without leave, this was in the context of an interlocutory application which was accepted to fall within the O.32 r.11A(4).  I accept Mr Joffe’s submission that paragraph 6 of the Court of Appeal’s decision in that case has to be understood in the context of the very late application to file evidence in that case, and that it did not lay down a general requirement that any application for evidence to be filed after the court has given an order that there be no further evidence without leave, in all cases whether interlocutory or otherwise, and whether or not there is prejudice, must meet a requirement of demonstrating exceptional circumstances.

3.I also agree with Mr Joffe’s submissions that:

3.1     r.32 of the Companies (Winding-Up) Rules, Cap.32H, does not apply to the present application, RBF having already filed its initial affidavit in opposition to the Petition (namely, Adkins 1st);

3.2     Re Chinaplus Wines Ltd, unreported, HCCW 220/2016, 21st November 2016, refers to the practice of requiring security from a debtor who seeks to file evidence only after a petition comes on for hearing in open court, and therefore does not apply to the present application;

3.3    it is not a valid objection that there has been no summons taken out for an adjournment of the Petition, since Adkins 2nd is not sought to be filed in support of such an adjournment, but rather to oppose the Petition.

4.The present application should instead be determined by reference to the principles in Re Cao Zhong, ex p Bilistyle Investments Ltd [2021] HKCFI 3143, applying Parsad v Great Wealthy Engineering Co Ltd [2012] 3 HKLRD 705 at [5] to [8] in the context of late applications to adduce late evidence to oppose a bankruptcy petition.  In Parsad, Bharwaney J said at [6]:

“Whilst the primary aim is to secure the just resolution of the dispute in accordance with the substantive rights of the parties, and which must include the right of a party to rely on admissible, relevant and probative factual evidence, the Court must also have regard to other relevant circumstances, such as the potential disruption to the trial, the prejudice to the other parties, and the explanation offered by the applicant for the late application. These matters have to be considered and weighed in the light of and against the underlying objectives of Civil Justice Reform to ensure cost effectiveness and economy, expedition, proportionality, and fairness between the parties.”

5.In terms of probative value, I agree with RBF that the matters raised in Adkins 2nd are directly relevant to the issues between the parties and are of evidential value.

5.1     Paragraphs 7 to 19 of Adkins 2nd set out the factual matters relied on to support a complaint that the Petitioner has been taking part in a dishonest scheme to obscure unauthorised use of the Company’s BOC HK Account and the use of funds from the ICBC Loan.  I do not agree that the allegations can simply be dismissed as “entirely circular” inferences or bare allegations at this stage; contemporaneous documentation has been put forward in support of the cross-claim, the amount of which could potentially exceed the debt owed to the Petitioner.

5.2     Paragraphs 20 to 25 of Adkins 2nd address the allegation of the Petitioner’s ulterior purpose in these proceedings.  Again, a number of specific matters have been raised in support of this complaint, which have not been answered.  Whether or not at the end of the day the allegation can be made out on the evidence is a matter yet to be determined, but it is not possible to say at this stage that the matters raised are merely speculative or demonstrably bad.

5.3     Paragraphs 26 to 46 of Adkins 2nd set out events which have occurred since the previous affidavits, including the imminent change of control over the Company in June 2022, and facts revealed by the 2021 Annual Report of the Petitioner which was released in April 2022, which RBF says show that the value of the Company’s assets has been wrongly diverted but which can be restored (although I note that it is the Petitioner’s case that these are not new matters).  It is said that these matters would, inter alia, justify that no winding up order be made on the Petition.

6.I agree also that today is not the occasion to delve into the detailed merits of the claims, and that this is a matter for consideration at the hearing of the Petition.

7.Mr Zimmern for the Petitioner says that no explanation has been given for the delay in the making of the application, and that much of the evidence could have been included in Adkins 1st.  The Petitioner has sought to put in the 3rd Affirmation of Yuan Yun Yu today, to say that even the matters that appear in the 2021 Annual Report could have been addressed earlier.  However, I accept that as RBF has not had any opportunity to respond to this affirmation, little weight can be placed on it.  Whilst the matters relating to the other events postdating Adkins 1st could obviously not have been included in that affidavit, I agree that no real explanation has been put forward for the delay in relation to the part of Adkins 2nd dealing with the cross-claim and the Petitioner’s ulterior purposes, save perhaps for some parts which could be said to be a response to the Petitioner’s affirmation.  On the other hand, whilst the application is relatively late, being made a month before the substantive hearing fixed for 14th June 2022, there is still time for the Petitioner to respond.  The Petitioner has very fairly indicated that it would be able to do so within 14 days.

8.Finally, the Petitioner also submitted that the substantial amount of new evidence would increase costs and the risk that the hearing would require additional time.  However, neither party suggests that the additional evidence would cause the hearing to run beyond the 1 day currently fixed for the hearing.

9.Taking all the above into consideration, I consider that the evidence in Adkins 2nd is relevant and of probative value, and the factors in favour of its admission are not outweighed by any considerations of delay or prejudice.  Accordingly, I grant leave to RBF to file Adkins 2^nd (service being dispensed with), and leave to the Petitioner to file its evidence in response within 14 days.

Mr Richard Zimmern and Mr Tom Ng, instructed by Lau, Horton & Wise LLP, for the Petitioner  

Mr Victor Joffe and Mr John Leung, instructed by Shearman & Sterling, for RBF HK Limited

The Company was not represented and did not appear