Re China Zenith Chemical Group Ltd (Formerly Known As Xinyang Maojian Group Ltd)
Read the full judgment text of HCCW 243/2023 on BabelCite. This High Court CFI judgment was delivered on 17 March 2025.
1. At the end of the hearing, I made a usual winding up order against the Company. These are my reasons.
Cited by 3 cases · Cites 5 cases
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HCCW 243/2023 [2025] HKCFI 1181 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES (WINDING-UP) PROCEEDINGS NO 243 OF 2023 __________________
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___________________________________ REASONS FOR JUDGMENT ___________________________________ 1.At the end of the hearing, I made a usual winding up order against the Company. These are my reasons. I. BACKGROUND 2.The background and the chequered history of the proceedings have been set out in §§3-16 of the Court of Appeal’s judgment handed down on 11 March 2025 [2025] HKCA 253 (the “CA Judgment”) (dismissing the Company’s appeal from Mr Recorder Jenkin Suen SC’s judgment handed down on 10 October 2024 (the “October 2024 Judgment”) ([2024] HKCFI 2769) as well as Linda Chan J’s judgment handed down on 12 August 2024 (the “August 2024 Judgment”) ([2024] HKCFI 2097). I shall not repeat the same. Suffice to highlight the following matters:-
3.Therefore, the Company had been afforded adequate and fair opportunity to dispute the debts and resist the Petition, and one would have thought that on 17 March 2025, the Company should be wound up without much dispute. Indeed, in his skeleton submissions filed on 13 March 2025, Mr Tommy Cheung (counsel for the Petitioner) made it clear that unless the Petitioner would be paid before the hearing of 17 March 2025, the Company should be wound up. Two supporting creditors, namely, Chen Shaohua (represented by Mr Alvin Cheng, of counsel) and Weng Junling (represented by Mr Jeff Yau, of counsel), took the same position in their skeleton submissions. These skeleton submissions clearly served as their respective ultimata to the Company. II. COMPANY’S LATE APPLICATION FOR ADJOURNMENT 4.However, this time, the Company, though having “exhausted the means of opposition” even up to the Court of Appeal, did not indicate any payments within a short time as requested in the ultimata. Instead, on 14 March 2025, that is, just the Friday before the adjourned hearing, the Company filed late the 2nd Affirmation of Law Tze Ping Eric (“Eric Law’s 2nd Affirmation”), the acting Chief Executive Officer of the Company, in support of the Company’s application made in the Company’s skeleton submissions also filed late on 14 March 2025 for an adjournment of the Petition for three months. 5.The ground for the application for adjournment was that the Company was in the process of various fund-raising activities, namely:-
6.The Company also deposed that it had an ongoing business. 7.At the outset of the hearing, Mr Cheung (counsel for the Petitioner), Mr Cheng (counsel for Chen Shaohua) and Mr Dominic Lau (solicitor representing Gu Yandong) made it clear that they sought a winding up order immediately. Mr Yau (counsel for Weng Juling) took a neutral stance. There were other supporting creditors who did not attend the hearing, and there were also creditors who had indicated they would oppose the Petition but did not attend the hearing. 8.The question before me was whether there was any evidence of a precise and credible proposal that would enable the Company to make repayment of the Petitioner’s debt and the other supporting creditors’ debts within a reasonably short period of time: see Re Trinity (Management Services) Ltd [2021] HKCFI 2207 at §§6-7 per Harris J. III. CAPITAL REORGANISATION AND RIGHTS ISSUE 9.While the Company made its proposal of capital reorganisation and rights issue on 3 March 2025 before the handing down of the CA Judgment, on the Company’s own evidence, it did so only in response to “Kwan VP’s indication” in the appeal: see §3 of the 2nd Affirmation of Eric Law. In my view, the Company took its own risk in adopting the wait-and-see approach in respect of the debts in such circumstances. Such risk-taking also was consistent with the Company’s approach in the past – “Creditors were paid off one at a time only when the Company had exhausted the means of opposition, whilst keeping at bay similar claims of other supporting creditors”: see CA Judgment at §5. More accurately, the Company’s tactic this time was even more unpalatable – this time, the Company was simply saying that it would raise funds to pay despite the ultimata. 10.In any event, the funds that could be raised by the Capital Reorganisation and the Rights Issue were uncertain. 11.The fundraising element would of course be the Rights Issue. While “the Company considers it to be most viable and promising way to raise sufficient capital within the following three months”: see §4 of Eric Law’s 2nd Affirmation, the Rights Issue was underwritten on a best effort basis only. 12.Since this proposal was put forward only as late as 3 March 2025, the Company of course would not have any precise or credible evidence to show that the Company would be able to raise sufficient funds. However, in the affirmation, the Company’s management sounded confident in raising sufficient funds by this means. The confidence came from the history of the Company’s fundraising from one placing in 2021 and three placings in 2024, two rights issues in 2022 and 2023, and two bonds issues in 2022 and 2023. The Company pointed out in particular that in 2022 and 2023, the Company raised HK$106,000,000 and HK$75,000,000 by rights issues, and that the current proposal for rights issue would involve a lesser sum of HK$62,200,000, and thus, the Company was confident that the proposed Rights Issue would raise sufficient funds. However, there was no evidence before me on how the circumstances surrounding these past fundraising activities were similar to the present ones such that the “confidence” was at least reasonably founded. 13.I also note that the Company had a history of quickly changing its opinion and/or holding inaccurate opinion on the prospects of its fundraising activities or attempts in the past, as recounted in §§12-15 of the CA Judgment. In particular, while in late October or early November 2024, the Company sought an expedited appeal hearing from the Court of Appeal on the alleged ground that it had entered into a placing agreement and was due to receive a substantial sum, after Kwan VP refused the application for an expedited hearing, on 18 November 2024, the Company, in another attempt to seek an expedited appeal hearing, then alleged that there was a “real and substantial possibility” that it would not be able to obtain funds from share placing or shareholders’ loans. Then, in December 2024 and January 2025, when the Company opposed an application for security for costs, it adduced evidence that it had completed three rounds of “resoundingly successful” share placing in 2024 and the prospect of a new round of placing were “promising”. 14.In the circumstances, I do not pay much regard to the Company’s “confidence”. 15.On the contrary, as a matter of fact, there was no guarantee that even if all the necessary resolutions and conditions for the Rights Issue would be passed and satisfied, all the shares in the Rights Issue would be taken up, especially when:-
16.In the circumstances, I was not convinced that the Capital Reorganisation and the Rights Issue would enable the Company to repay the Petitioner (as well as other Supporting Creditors) within a reasonable short period of time or three months as it estimated. IV. SHORT-TERM BORROWING 17.As mentioned in §5(2) above, Mr Yip (counsel for the Company) only submitted the 16 March 2025 Letter during the hearing in an attempt to give a little more details about the bridging loan mentioned without any particulars in the late affirmation. The Letter stated:-
18.First, the “discussion” only took place the day before the hearing. Second, it was therefore no surprise that no concrete terms could be set out. There was not even any rough timeframe for how “short” the repayment term of this contemplated, yet to be finalised, “short-term” loan would be. Third, the Company did not explain how it would be able to repay this “short-term” loan to avoid yet another creditor coming into the picture in such a short time. Fourth, the short-term loan would cover the three creditors only, who were the three creditors against whom the Company “exhausted the means of oppositions” up to the Court of Appeal. Other creditors were not mentioned and not covered. 19.In the circumstances, I had serious doubt whether the loan would come to fruition, and in any event, I was not convinced that the Short-Term Borrowing would enable the Company to repay the Petitioner (as well as other Supporting Creditors). Even assuming that the three creditors would be covered within a short period of time by this Short-Term Borrowing, the “musical chair” would just be likely to continue with the remaining creditors or at least the remaining supporting creditors. V. ISSUANCE OF BONDS 20.For the Issuance of Bonds, the only evidence adduced by the Company was its voluntary announcement dated 21 February 2025 that:-
21.At the hearing before me, there was no update about this “plan”. There was no evidence before me when this “plan” would be implemented, and how it would be implemented. There was no evidence that this bonds would be issued as planned at all. There was no evidence on how these bonds would finance the Company to repay the debts within a reasonably short time. 22.It remains for me to point out that there were no more bonds issued after the presentation of the original Petition on 8 June 2023 based on bonds issued by the Company. Given the Company’s track record on the repayment of bonds, understandingly, the Company could not even sound out any confidence as it did in relation to the Rights Issue. 23.In the circumstances, I was not convinced that the Issuance of Bonds would enable the Company to repay the Petitioner (as well as other Supporting Creditors). VI. ON-GOING BUSINESS 24.In his skeleton submissions, Mr Yip (for the Company) asked me also to consider that the Company “is… gradually resuming full production of a Mainland subsidiary which is expected to produce outputs amounting to more than RMB300 million”. For this, the evidence was yet another Company’s voluntary announcement, this time made on 11 February 2025. In this announcement, it was stated that the subsidiary “will actively resume production in an all-round way”. However, there was no evidence of any particulars of the “activeness”, how this “active resumption” would yield to an output value of RMB300 million, or how much profit and liquidity it would expect to generate for the subsidiary and the Company. There was also no evidence to explain how this subsidiary would enable the Company to pay the debts within a reasonably short time. Further, at the hearing before me, there was no update about the progress of this “active resumption”. 25.In the circumstances, I did not think that such evidence of on-going business would take the Company any further. VII. SHORT ADJOURNMENT SOUGHT BY COMPANY 26.During the hearing, Mr Yip (for the Company) submitted that if I was not convinced that the Company would be able to repay the debts as it alleged, then I should at least grant a short adjournment of, say, 14 days, for the Company there and then to update the Court with its proposals to raise funds and any further development of the situation. Mr Yip highlighted that the Petition had been adjourned to 17 March 2025 by Anthony Chan J’s Order on 2 December 2024 (mentioned above), and the Company was informed of the handing down of the CA Judgment only on 11 March 2025, the very same day of the handing down itself. In essence, his submissions were that the time between the handing down and the hearing on 17 March 2025 was too short for the Company to get prepared for the hearing. 27.I refused such adjournment because in my view, another adjournment, even though a short one, would serve no useful or meaningful purpose, for the following reasons:-
VIII. A WINDING UP ORDER IN THE INTERESTS OF CREDITORS 28.Not only did I see no reasons to adjourn the matter, whether for a short period of time or three months, I saw that a winding up order would be in the interests of the creditors, because:-
IX. CONCLUSION 29.Having considered all the above, whether as separate grounds or holistically, I made the usual winding up order against the Company. 30.Lastly, I thank Mr Cheung, Mr Cheng, Mr Yau, Mr Yip (as well as his junior Mr Zhang) and Mr Lau for their assistance.
Mr Tommy Cheung, instructed by Li, Kwok & Law, for the Substituted Petitioner (Lyu Yiling) Mr Richard Yip, instructed by A Lee & Partners, for the Company Willington Legal LLP, for the opposing creditors (Wong Chui Bing(黃翠冰), Peng Zhanrong (彭展榮), Shan Yuwei (單玉偉), Luo Xiaoqun (羅小群) and Star Leader Holdings Limited), is absent Chiu Liang & Co., for the supporting creditor (Xu, Wenjing (徐汶靖)), is absent Mr Lau Chun Ming Dominic, instructed by Stevenson, Wong & Co., for the supporting creditor (Gu Yandong) Mr Alvin Cheung, instructed by Christine M. Koo & Ip, Solicitors & Notaries LLP, for the supporting creditor (Chen Shaohua) David Fenn & Co., for the supporting creditor (Jiang Shan (姜山)), is absent Chiu & Co., for the supporting creditor (Li Wenli), is absent S.W. Wong & Associates, for the supporting creditor (Wu Yuanhong (also known as Wu Yuan Hong)), is absent Lee & Yik Lawyers, for the supporting creditor (Qin Yu Huan (秦宇歡)), is absent Zhong Lun Law Firm LLP, for the supporting creditor (Xu, Lingyan (許凌燕)), is absent Ms Rebecca Leung, of Official Receiver’s Office, for the Official Receiver TITUS, for the opposing creditor (Liu Xiangjun), is absent C & T Legal LLP, for the oppposing creditors (Yu Zhangbo (余章波), Shi Meiguan (施美觀) and Xu Hong(徐紅)), is absent Ms S. Lau, instructed by Chiu, Szeto & Cheng, for the supporting creditor (Lin Sai Bo (林賽波)) A Lee & Partner, for the opposing creditor (Chan Yuen Tung), is absent Mr Jeff Yau, instructed by K.T. Chan & Co., for the supporting creditor (Weng Junling) LT Lawyers, for the supporting creditor (Li Yizhou), is absent Lam Lee & Lai, for the supporting creditor (Zhong Jianwei), is absent Ince & Co., for the supporting creditor (He Jianmin (何劍敏)), is absent S.T. Cheng, for the supporting creditor (Lin Guanghan (林光涵)), is absent GH Legal, for the supporting creditor (Liu Oushi), is absent |
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