Wing Sze Tiffany Wong and Edward Simon Middleton in Their Capacity As the Joint and Several Liquidators of China Properties Group Ltd (in Liquidation) v. Wong Sai Chung and Others

HCCW 67/2022

[2024] HKCFI 539

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 67 OF 2022

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REASONS FOR DECISION

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1.On 6 December 2023, this Court heard the Liquidators’ Ex Parte Summons dated 4 October 2023. Upon receiving the 1^st, the 4^th and the 5^th Respondents’ (the “Relevant Respondents”) undertakings, this Court did not find it mature and correct to make an order under Section 570 of the Companies Ordinance, Cap 622.

2.Now this Court gives its reasons.

THE EX PARTE SUMMONS

3.Mr Anson Wong SC, on behalf of the Relevant Respondents, fairly offered undertakings from Mr Wong that he will not act or hold himself out or otherwise give any instruction, without leave of the Court, as a director of the Company, or, in any other capacity represent the Company (without prejudice his conduct of the appeal against the Winding-up Order in CACV 197/2023), including by voting or purporting to vote the Company’s shareholdings in its wholly owned BVI Subsidiaries.

4.This Court also ordered that Mr Xu and Dr George Wang be injuncted under s.21L of Cap 4 from acting or holding themselves out or otherwise giving any instruction (without leave of the Court) as directors of the Company, or, in any other capacity representing the Company, including by voting or purporting to vote the Company’s shareholdings in the BVI Subsidiaries.

5.This Court is fairly familiar with the background of the case, having recently heard the parties on two previous occasions on 11 September 2023 and 18 October 2023 (“18 October Hearing”). This Court has also handed down its Decision on the Liquidators’ previous Summons on 15 September 2023 (the “15 September Decision”). Hence, it is not necessary for this Court to repeat the background facts of the present case.

SECTION 570 OF THE COMPANIES ORDINANCE, CAP 622

6.This Court fully appreciates that the Liquidators are keen to take control of the entire group of companies. Mr Wood for the Liquidators submitted that the Liquidators working through the group structure cannot begin to secure the physical real estate assets in the Mainland without first being in control of the BVI Subsidiaries and secondly being in control of the Hong Kong Subsidiaries. Everything hinges on this corporate chain.

7.This Court has repeatedly reiterated that Ms Tiffany Wong is the sole director of the BVI Subsidiaries. It is up to the BVI Subsidiaries then to take control of the Hong Kong Subsidiaries by proper and legal means.

8.Mr Wood for the Liquidators took the stance that given the past conduct of the Relevant Respondents and its aides including one Ms Amy Yu who holds 0.1% of the shares of the Hong Kong subsidiaries, in all probabilities, taking a realistic view, is not going to attend any general meetings of the Hong Kong subsidiaries and thus renders it impracticable to convene proper general meetings of the Hong Kong subsidiaries. In such circumstances, the Court should invoke its jurisdiction under section 570 of the Companies Ordinance, Cap 622 to order a meeting of the Hong Kong subsidiaries with one person constituting proper quorum for such meetings.

9.This Court will try its best to assist the Liquidators but this Court has to do it within the four corners of the law and certainly cannot possibly bend the law to suit a just case.

10.Mr Wong SC relied on the following observations from Loh & William Wong SC: Company Law: Powers and Accountability (2^nd ed), “[t]he burden of proof in establishing ‘impracticability’ is on the applicant. To discharge the burden, empirical evidence of ‘impracticability’ must be adduced and proved. Evidence of a speculative nature is not sufficient” (at §20-88). Mr Wood does not dispute that proposition of law.

11.I agree with Mr Wong SC that the Liquidators have failed to put forward any evidence as to the alleged impracticability for the general meeting, and the Liquidators assertions are at best speculative. At the 18 October Hearing, this Court had already raised the issue as to the speculative nature of the Liquidators’ application, in particular due to the lack of notice for any general meetings at the time.

12.Recently, on 24 November 2023, the Liquidators made requests for convening general meetings of the Hong Kong Subsidiaries pursuant to s.566 of the Companies Ordinance, Cap 622. Mr Wong SC rightly observed that by virtue of s.567 of the Companies Ordinance, Cap 622, the directors of the Hong Kong Subsidiaries would have 21 days from the request to give notice to call a meeting (i.e. by 15 September 2023).

13.Mr Wong SC cannot be faulted in submitting that not only are these directors not parties in the present proceedings, their statutory 21-day window under s.567 has yet to expire. Indeed, even on the Liquidators’ own evidence, the Liquidators say that it “remains to be seen” whether these directors would convene the general meetings of the Hong Kong Subsidiaries.

14.Hence, I am of the view that based on the evidence before the Court, it is speculative for the Court to conclude that there is impracticability in calling the general meetings. That is enough to dispose of this application under section 570 of the Companies Ordinance, Cap 622.

15.Secondly, I am of the view that there is merits in the submission that the Liquidators have taken a wrong procedure in their s.570 application with respect to the Hong Kong Subsidiaries. An application under s.570 of Cap 622 must be made by Originating Summons pursuant to RHC O.102, r.2— and a party “cannot circumvent the originating summons procedure by issuing a summons for substantive relief under the Ordinance”: Hong Kong Civil Procedure 2024, at §§102/2/1 to 2.

16.As explained by Deputy High Court Judge Le Pichon in David Golan v Janek Davitashvili and Anor, HCCW 255/2016 (1 March 2017), the originating summons procedure is mandatory under RHC O.102, r.2, and an applicant’s failure to follow the originating summons procedure would itself lead to the dismissal of the application (at §§74 to 75).

17.As such, it is also correct that the Liquidators cannot seek any substantive or final relief under s.570 of the Companies Ordinance, Cap 622 by issuing the Ex Parte Summons. Any such reliefs sought with respect to the Hong Kong Subsidiaries must proceed by way of originating summons.

18.Thirdly, it is also fundamental that none of the Hong Kong Subsidiaries (nor their directors) are even parties to the present proceedings. The Liquidators are not themselves even directors or shareholders of any of the Hong Kong Subsidiaries. I agree that it will not be right to make any orders over the Hong Kong Subsidiaries when none of the necessary parties are made parties to this application.

19.Fourthly and for the sake of completeness, I reject the arguments based on a statutory trust for an application under section 570 of the Companies Ordinance, Cap 622.

20.I should also record that this Court in clear terms stated that if the Hong Kong Subsidiaries do not convene EGMs as requisitioned by the BVI Subsidiaries (acting at the direction of Ms Tiffany Wong as sole director) or Ms Amy Yu (the 0.1% shareholder of certain HK Subsidiaries) did not agree to attend the proposed EGMs such as to render such general meetings inquorate, then the Liquidators could return before this Court or any other courts for further directions to give effect to the liquidation.

SECTION 200 OF THE COMPANIES ORDINANCE, CAP 622

21.I also reject an application under section 200 of the Companies Ordinance, Cap 622.

22.First, I agree that it is not appropriate for the Liquidators to seek directions with respect to the BVI and Hong Kong Subsidiaries, as opposed to the Company itself. This is impermissible as a matter of law. As observed by the Court in Re Easy Champ Cort Ltd (in Liq) [2022] HKCFI 769, a s.200(3) application can only be brought in relation to any particular matter arising from the winding up of the company concerned — “It does not permit the Liquidators to apply for “directions” in relation to a matter which concerns another company” (at §13). This should be the end of the analysis.

23.Secondly, it is established law that any directions sought under s.200(3) cannot determine the substantive issues in dispute — still less to make any binding orders on third parties (namely the BVI and Hong Kong Subsidiaries in this case).

24.As observed by Harris J in Re Founder Information (Hong Kong) Ltd [2021] HKCFI 1749, an application by a liquidator for directions is “not the occasion for the making of order affecting the rights of outsiders. Its effect is merely to sanction a course of conduct on the part of the liquidator so that he may adopt that course free from the risk of personal liability for breach of duty” (at §11(1); see also Australian Securities and Investments Commission v Edwards [2009] QSC 360 at §6).

25.Moreover, as observed by McLelland CJ in Re Magic Aust Pty Ltd (in liq) (1992) 7 ACSR 742 — “no such binding determination can arise from a direction given in a liquidator’s application for directions, and such an application is not an appropriate vehicle for the determination of substantive issues” (at 745). Moreover, it is “no part of the court’s function on such an application to resolve factual conflicts” (at 746).

26.I agree that it is not appropriate for this Court to resolve the substantive issues relating to the control and ownership of assets over the BVI and/or Hong Kong Subsidiaries by a s.200(3) application, much less to make any binding orders which may affect the BVI or Hong Kong Subsidiaries, which are not even parties to this application.

27.Thirdly, I also agree that §2(a) and (b) of the Ex Parte Summons do not involve matters of Hong Kong law. There are merits in Mr Wong SC’s submissions that they involve matters of BVI law which fall to be determined in the pending BVI Proceedings, and cannot be resolved by this Court under the guise of giving directions to the Liquidators under s.200(3) of the Companies Ordinance, Cap 32.

28.It is established law that matters of internal management (including the validity of the appointment of directors) fall to be determined accordingly to the law of the place of incorporation— i.e. BVI law in the case of the BVI Subsidiaries: Sheldon QC, Cross-Border Insolvency (4^th ed) at §6.30. These are not questions of Hong Kong law, and indeed these BVI law issues are now pending resolution by the BVI Court in the BVI Proceedings.

29.Mr Wong SC submitted that the BVI Court’s recent refusal to grant the interim injunction sought by the BVI Subsidiaries does not alter the analysis at all. Whilst the BVI Court did decide the interim application on the materials before it (and gave its brief oral reasons), the BVI Court cannot (and did not purport to) make any final determination as to the issues of directorship or control over the BVI Subsidiaries. These are matters which remain to be fully argued — including with “developed submissions and evidence of Cayman law” at the substantive hearing of the BVI Proceedings.

CONCLUSION

30.For the reasons stated above, I made the Orders on 6 December 2023.

31.As far as costs is concerned, I also made an order that the Liquidators are to pay the costs of and occasioned by the Ex Parte Summons to the Relevant Respondent. This Court will make a gross sum assessment on the same.

32.Finally, it remains for this Court to thank Mr Wood for the Liquidators and Mr Wong SC and Mr Kok for their helpful assistance.

Mr James Wood instructed by Messrs YTL LLP, for the Applicants (Liquidators)

Mr Anson Wong, SC, Mr Martin Kok and Mr Christopher KH To instructed by Messrs Kobre & Kim, for the 1^st, 4^th and 5^th Respondents

The Official Receiver, attendance is excused