Re Brite Advisory Group Ltd

HCCW 80/2024

[2024] HKCFI 2574

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 80 OF 2024

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REASONS FOR JUDGMENT

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1.By a petition presented on 6 February 2024 (“Petition”) Heritage Management Consultancy FZE (“the Petitioner”) seeks a winding up order against Brite Advisory Group Limited (“the Company”), a company incorporated in Hong Kong.

2.At the commencement of the hearing, the Company was absent. Towards the conclusion of the hearing, an unidentified person in the public gallery claiming to be one of directors of the Company sought to address the Court. As he had not obtained leave to represent the Company as required by RHC Order 5 rule 6, he could not be heard.

3.At the conclusion of the hearing, I ordered that the Company be wound up. My reasons appear below.

4.After the hearing concluded, the Petitioner’s solicitors conducted a company search on the Company only to discover that, shortly before the hearing, on 17 September 2024, the Company changed its name to BAG HK Limited. In the circumstances, all references to the “Company” in these Reasons must be understood as applying to BAG HK Limited, formerly known as Brite Advisory Group Limited. I also grant to effect any necessary amendments to these proceedings.

Relevant background

5.On 16 November 2021, the Company entered into a loan agreement with the Petitioner (“the Loan Agreement”):

(a) the Petitioner agreed to advance a loan of £470,000 (“Loan”) to the Company, with interest during the term of the Loan at a monthly rate of 1% (clause 1);

(b) the Company acknowledged receipt of the Loan (clause 2);

(c) the Loan would be repayable on 16 December 2021 (the Repayment Date”) and interest shall accrue at the monthly rate of 1% until repayment of the Loan (clauses 4 and 6).

6.On 16 November 2021, on the instruction of Mark Donnelly (“Mr Donnelly”), the Company’s founder and then CEO, the Petitioner transferred the Loan to the account of PSG SIPP Limited (“PSG”).

7.The Company failed to repay the Loan on the Repayment Date (16 December 2021).

8.Brite Advisors Pty Ltd (“Brite Advisors”) made interest payments on the Loan (pursuant to clause 6 of the Loan Agreement) on behalf of the Company to the Petitioner for the periods from (i) 16 November 2021 to 15 April 2022; (ii) 16 April 2022 to 1 June 2022; and (iii) 2 June 2022 to 15 August 2022 on 27 May 2022, 26 August 2022 and 2 September 2022 respectively.

9.The Petitioner’s solicitors (“Kennedys”) issued a statutory demand (“the November SD”) on 3 November 2023 in respect of the Loan and interest outstanding as at 3 November 2023.

10.John Lymer (“Mr Lymer”) a director of the Company wrote to Kennedys on 24 November 2023 seeking additional time to prepare a proper response.

11.On 1 December 2023, Kennedys reissued the November SD (“the December SD”) in respect of the Loan and all outstanding interest as at 1 December 2023 in the sum of £543,094.64 (“the Debt”).

12.As the Company failed to make payment in respect of the December SD, the Petitioner presented the Petition on 6 February 2024 to wind up the Company on grounds of insolvency and relies on non-payment of the December SD to establish insolvency.

13.On 10 April 2024, Messrs ONC Lawyers (“ONC”), solicitors for Au Chi Chiu (“Creditor”), a creditor of the Company gave notice of an intention to appear at the hearing of the Petition and to support the Petition.

14.On 11 April 2024, Messrs Tanner De Witt (“TDW”) filed a notice to act for the Company.

15.On 4 September 2024, the Company filed and served a Notice to Act in Person dated 30 August 2024, stating its intention to act in person in this action.

Relevant legal principles

16.Where a company seeks to resist a petition to wind up the Company on the grounds of insolvency relying on non-payment of a statutory demand, the applicable principles are uncontroversial and well-established.

17.A useful summary may be found in the judgment of Kwan J (as she then was) in Re Hong Kong Construction (Works) Limited, unrep., HCCW 670/2002, 7 January 2003 at §6[1]:

“(1) The burden is on the company to establish that there is a genuine dispute of the debt on substantial grounds. In this context, “substantial” means having substance and not frivolous. An honest belief in an insubstantial ground of defence is not sufficient to avoid a winding-up order.

(2) The court should look at the company’s evidence against so much of the background and evidence that is not disputed or not capable of being disputed in good faith; in other words, the evidence is not to be approached with a wholly uncritical eye[2].

(3) The court would caution itself against unsubstantiated and unparticularized assertions ... It is incumbent on the company to put forward “sufficiently precise factual evidence” to substantiate its allegations.

(4) The court does not try the dispute on affidavit but is to determine whether a substantial dispute exists. In so doing, the court necessarily has to take a view on the evidence, to see if the company is merely “raising a cloud of objections on affidavits” or whether there really is substance in the dispute raised by the company ...”

The Company’s case

18.The Company’s case is set out in the affidavit of Peter David Manktelow filed on 13 May 2024 (“Manktelow aff”). It raised the defences considered below.

(1) The Debt is disputed on substantial grounds

19.The Company submitted that the Loan Agreement is not a stand-alone agreement but came into existence as part of a wider transaction known as the IVCM Deal.

20.According to the Company, the IVCM Deal consists of 3 parts:

(a) A sale and purchase agreement of various UK pension schemes between Brite Advisory Holdings Limited (“Holdings”) and Paul Martin Evans (“Mr Evans”) (defined as the Dubai-Philippines SPA).

(b) Two contemplated agreements between “the Brite Group” and Mr Evans (defined as the Australian Agreement and the Gibraltar Agreement).

(c) An agreement concerning the acquisition of the pension fund between “the Brite Group” and “the Heritage Group”.

21.As regards (a), neither Holdings nor Mr Evans was a party to the Loan Agreement. Nor was the Petitioner a party to the Dubai-Philippines SPA which has an entire agreement clause. As regards (b), those agreements were never executed and there is no explanation as to how those documents between non-parties to the Petition are relevant to the Debt. As regards (c), not only is the agreement not produced, the Company did not specify which entity in each of the 2 Groups referred to entered into it. Nor is there any explanation of how that agreement relates to the Debt such as to raise a dispute on substantial grounds.

22.§3 of the Loan Agreement provides that “the [Company] undertakes to apply the loan only for the purpose (s) of the acquisition of the Heritage Pensions Limited”. Based on that provision, the Company asserted[3] that the IVCM Deal is the foundation of the Loan Agreement. But how the Company’s obligation to apply the loan for a certain purpose is relevant to whether the Debt is due is not explained.

23.Ms Fontanne Chu, counsel for the Petitioner, submitted that in the circumstances, the IVCM Deal is irrelevant to the Debt. I agree.

(2) Lack of authority of the signatory for the Company

24.The Loan Agreement was signed by Mr Donnelly as “director” of the Company.

25.The Company submitted that Mr Donnelly was not a registered director of the Company and therefore lacked authority to act on its behalf.

26.The Petitioner invited attention to clause 5 of the Company’s Articles of Association which authorises its directors to delegate any of the powers conferred on them under the Articles to any person.

27.Contemporaneous documents produced by the Petitioner show written communications between Mr Donnelly (acting for and on behalf of the Company) and Richard Petts (“Mr Petts”) and Colin Worbey (“Mr Worbey”) (acting on behalf of the Petitioner) concerning and finalising the Loan Agreement.

28.They show that Mr Donnelly represented himself as the CEO and Founder of the Company. His email used the domain name of “brite-advisors.com” which is the same as that used by Mr Lymer one of the Company’s directors when he wrote to Kennedys in response to the November SD[4]. Relevantly, in that letter of 24 November 2023, Mr Lymer did not raise the issue of Mr Donnelly’s authority to sign the Loan Agreement.

29.When Tanner De Witt (the Company’s former legal representatives) wrote to the Petitioner’s solicitors on 11 April 2024 (after filing its notice to act for the Company) in relation to these proceedings, they also did not raise the authority point.

30.Authority may be implied from the conduct of the parties and the circumstances of the case: per Lord Denning MR in Hely-Hutchison v Brayhead Limited [1968] 1 QB 549 at 584. In that case, the chairman of the company in question acted as the de facto managing director and chief executive who made the final decision on any matter concerning finance. Those findings carried with it the necessary inference that he had also actual authority, such authority being implied from the conduct of the board acquiescing in his acting as their chief executive and committing the company to contracts without board approval for over a month.

31.The contemporaneous documents mentioned §27 above show that Mr Donnelly had been involved in the management and day-to-day affairs of the Company. Neither Mr Donnelly nor Mr Lymer has come forward to explain this state of affairs. In the absence of any explanation, they give rise to the necessary inference that he had authority to enter into the Loan Agreement.

32.Based on the evidence that is before the Court, I do not accept the Company’s submission that Mr Donnelly lacked authority to enter into the Loan Agreement on behalf of the Company, albeit he was not director.

(3) The Loan Agreement is not a Deed

33.The Company took the point that whilst the Loan Agreement was expressed to be a Deed in the execution clause, it is not a Deed because it failed to comply with the requirements under sections 127 and/or 128 of the Companies Ordinance (Cap 622).

34.However, there is nothing in the point as the Loan Agreement remains a valid contract and is enforceable as such.

(4) Failure of consideration

35.On 16 November 2021, an email exchange took place between Mr Donnelly and Mr Worbey. When Mr Donnelly was informed that the Petitioner could make the loan to PSG and the funds would reach PSG’s bank account that day, Mr Donnelly considered that a loan to the Group could be better and that he would sign for the Group which Mr Worbey accepted. This shows that the parties to the Loan Agreement agreed to the remittance of the amount of the Loan to PSG.

36.In those circumstances, the allegation that the Loan Agreement is void for lack of consideration is misconceived. While consideration must move from the promissee, it need not move to the promisor. The requirement of consideration may be satisfied where the promisee does something at the promisor’s request: see Chitty on Contracts, 35^th Edn at §6-041.

37.That aside, there was an email exchange between Mr Worbey and Mr Donnelly in late April 2022. When Mr Worbey enquired when Mr Donnelly/expected to repay the Loan, suggesting that the interest owing should be settled immediately (indicating £28,200 as the amount due on 16 May 2022), Mr Donnelly agreed “to meet the interest payment due 16^th May and repay the capital due by the end of the (sic) May”.

38.Had there been no consideration, Mr Donnelly would not have represented that the Company was about to obtain funds to repay the Loan and interest.

39.As noted in §8 above, Holdings has made transfers of 9 months’ interest in total described as “Interest Payment on Loan” on behalf of the Company to the Petitioner. Those payments would not have been made had the Loan Agreement lacked consideration.

(5) Jurisdiction of the Hong Kong Court

40.The Company’s challenge to the jurisdiction of the Hong Kong Court is premised on the Loan Agreement being part of the IVCM Deal and hence governed by the jurisdiction clause in the Dubai-Philippines SPA, a submission which I have already rejected[5].

41.The Company’s fall-back position (in the event that the express jurisdiction clause is held not to be applicable to the Loan Agreement) appears to be that the entities involved the IVCM Deal have no real or substantial connection with Hong Kong.

42.But if (as I have found) the IVCM Deal is irrelevant, the fact that the entities involved in that Deal have no connection with Hong Kong is equally irrelevant.

Conclusion

43.For the reasons stated above, none of the defences raised has any merit. Accordingly, a winding up order was made with costs to the Petitioner, such costs to be summarily assessed.

44.The Petitioner was directed to serve its statement of costs on the Company with leave to the Company to file its list of objections (if any) limited to one page within 14 days of service of the Petitioner’s statement of costs.

Ms Fontanne Chu, instructed by Messrs. Kennedys, for the Petitioner (Heritage Management Consultancy FZE)

Mr Ng Siu Wing, Ludwig, of ONC lawyers, for the Supporting Creditor (Au Chi Chiu)

The Company (Brite Advisory Group Limited) was absent

The Official Receiver, attendance excused