Re Up Energy Development Group Ltd (in Liquidation)

CACV 233/2022, [2025] HKCA 555

On appeal from [2022] HKCFI 1329

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 233 OF 2022

(ON APPEAL FROM HCCW 91 OF 2016)

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J U D G M E N T

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Hon Barma JA (giving the Judgment of the Court):

1.The question in this case is whether the second threshold requirement[1] for the Hong Kong court to exercise its power to wind up a foreign company, namely, Up Energy Development Group Ltd (“Company”), is satisfied.

2.In a nutshell, the issue has arisen in this way.  Winding up petitions were presented by creditors against the Company, which was incorporated in Bermuda and listed in Hong Kong, first in Hong Kong and then in Bermuda.  Provisional liquidators (“PLs”) were appointed by the Bermuda court and were granted a recognition order in Hong Kong pursuant to a letter of request from the Bermuda court.  The Bermuda court sanctioned a restructuring scheme in November 2019, but this lapsed, leading to that court making a winding up order on 11 March 2022.  When the petition in Hong Kong came on to be heard, despite opposition by the PLs and certain creditors, Linda Chan J made a winding up order on 6 May 2022 in her judgment handed down on that date (“Judgment”).[2]  From the Judgment, one of the opposing creditors, Integrated Capital (Asia) Limited (“ICA” or “Opposing Creditor”), now appeals to this court, on the ground that the second threshold requirement is not met.

Background

3.The Company was incorporated in Bermuda in 1992 and established a principal place of business in Hong Kong, with its shares listed on the Main Board of the Hong Kong Stock Exchange (“HKEx”).  It is registered as a non-Hong Kong company under Part 16 of the Companies Ordinance (Cap 622).

4.The Company is an investment holding company, with its subsidiaries (together, “Group”) principally engaged in the development, construction and operation of coal mining and coke processing facilities in Mainland China.  The subsidiaries (in which the Company held a 70% stake[3]) that directly hold the mines and production facilities in the Mainland are all Mainland companies, which are held within the Group by either (i) Up Energy (Hong Kong) Ltd (“UE HK”), a Hong Kong company, which is in turn (100%) held by Up Energy International Ltd (“UE International”), a BVI company directly wholly-owned by the Company; or (ii) Up Energy (Xinjiang) Mining Ltd, a Mainland company, which is in turn held (as to 70%) by Up Energy Investment (China) Ltd, another BVI company directly wholly-owned by the Company.  The Company carried out most of its financial activities in Hong Kong, including the issuance of convertible notes, the borrowing of long-term facilities and loans, and the issuance of new shares.

5.On 19 February 2016, the Company announced its default on certain convertible notes that were due in 2016, leading to cross-default on certain other convertible notes that were (following an extension) due in 2018, with the amounts payable totalling HK$3,459 million.  There is no dispute that the Company had become insolvent.

6.On 29 March 2016, HEC Securities Limited (subsequently renamed Seekers Markets Limited) (“Petitioner”), which was owed HK$230 million under convertible notes issued by the Company, presented a winding up petition (HCCW 91/2016) (“Petition”) against the Company in Hong Kong on the ground of insolvency under section 327 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) (“CWUMPO”).  The Petition was amended on 31 May 2016 and re‑amended on 12 July 2016.

7.On 18 May 2016, another creditor, Credit Suisse AG, Singapore Branch (“CS”), presented a winding up petition against the Company in the Supreme Court of Bermuda (the “Bermuda court”).  CS also filed a notice of intention to appear and support the Petition in the winding up proceedings in Hong Kong.

8.On 7 and 28 October 2016, upon CS’s application, the Bermuda court appointed Mr Lai Wing Lun and Mr Osman Mohammed Arab (of RSM Corporate Advisory (Hong Kong) Ltd) and Mr Roy Bailey (of EY Bermuda Ltd) as the PLs.

9.Based on a letter of request issued by the Bermuda court on 23 June 2017, the PLs applied for recognition in Hong Kong of their appointment.  By an order dated 16 August 2017 (in HCMP 1570/2017), Harris J recognised their appointment and allowed them to exercise an array of powers in Hong Kong for the purposes of, inter alia, requesting and receiving from third parties documents and information concerning the Company, protecting and taking into possession and control the assets of the Company within the jurisdiction of Hong Kong Court as well as the books and records of the Company, retaining legal advisers and bringing legal proceedings whether in their own name or in the name of the Company.  The breadth of the order was the subject of comment by Linda Chan J subsequently[4]but we need not dwell on this for present purposes.

10.From 2017 to August 2021, the Petition was adjourned a number of times by consent between the Petitioner and the PLs to allow the PLs to introduce a restructuring scheme, apparently without obtaining the consent of the creditors who had given notice of intention to appear.  Also, from September 2017 to December 2021, under the control of the PLs, the Company took various steps with a view to resuming trading on HKEx, but to no avail.

11.On 1 November 2019, the Bermuda court sanctioned a scheme of arrangement between the Company and all its creditors (“Scheme”), which had been approved by the requisite majority of the creditors on 30 September 2019.  The Scheme would not become effective, however, until it was sanctioned also by the Hong Kong court and HKEx approved the resumption of trading of the Company’s shares.  The Listing Committee of HKEx decided on 6 April 2020 to delist the Company.  That decision was upheld by the Listing (Review) Committee and finally by the Listing Appeals Committee on 3 May 2021.

12.In the circumstances, by the time of the next hearing of the Petition in August 2021, the Petitioner was no longer prepared to have it adjourned by consent, and took the stance that the Company should be wound up.  At the hearing on 31 August 2021, Harris J declined to make an immediate winding up order, and adjourned the Petition pending the outcome of the Company’s judicial review proceedings commenced against the Listing Appeals Committee’s decision to delist it, giving leave to the Petitioner to re-re-amend the Petition to recite the progress of the restructuring.[5]  In reaching his decision, Harris J took the view that the general rule was that a company should be wound up in its place of incorporation, noted that there was no plea in the Petition of how the three threshold requirements were satisfied, and doubted in the context of the second threshold requirement that a Hong Kong liquidator would be able to obtain control of the Mainland subsidiaries through the BVI intermediate subsidiaries.

13.The Company’s application for leave to apply for judicial review of the Listing Appeals Committee’s decision was eventually dismissed by Coleman J on 21 December 2021.[6] As the Company remained unable to resume the trading of its shares by December 2021, the Scheme lapsed.

14.Shortly before the hearing of the Petition listed on 10 January 2022, the Company and the Petitioner filed a consent summons seeking the dismissal of the Petition. There was no explanation of the order sought and as to whether other creditors had agreed to the proposed order.  The change in the Petitioner’s stance perhaps explained why it did not actually make the re-re-amendments to the Petition for which Harris J gave leave on 31 August 2021.  Nor did it amend the Petition to plead how the three threshold requirements were satisfied, a point to which we shall return below.

15.Linda Chan J had become seised of the matter and the consent summons came before her Ladyship.  On 7 January 2022 she indicated by letter to the parties that she was not minded to dismiss the Petition and took the view that a winding up order should be made “in light of the insolvency state of the Company and the absence of a viable scheme to compromise the indebtedness”.

16.At the hearing on 10 January 2022, the Petition was adjourned to 14 February 2022 for the PLs to file evidence to deal with several questions raised by the judge including (1) whether a winding up order made in Bermuda would be sufficient to deal with all the affairs of the Company in Hong Kong, including all the provisions which would apply to a company wound up in Hong Kong under the CWUMPO, (2) whether a winding up order in Bermuda would be recognised more easily and efficiently in the Mainland, (3) whether liquidators appointed in Hong Kong could take control of BVI subsidiaries, and (4) any other matters the PLs considered relevant to the question whether or not the Company should be wound up in Hong Kong. 

17.In response the PLs filed two affirmations on 8 and 10 February 2022 respectively.

18.By letter dated 11 February 2022, Linda Chan J further asked the PLs and the Company to address the court on whether the PLs intended to seek recognition of their appointment after they became liquidators pursuant to an order made by the Bermuda court and, if so, why it would not be in the interests of the creditors to wind up the Company in Hong Kong so that the PLs would have the requisite powers under the CWUMPO.  The judge also commented that it was not unusual for companies incorporated in one jurisdiction but listed in another to be wound up in both and that the expert evidence adduced by the PLs did not sit well with the fact that in many instances, liquidators of companies wound up in Hong Kong had no difficulty in getting control over BVI subsidiaries by passing resolutions in accordance with their constitutions.

19.At the hearing of the Petition on 14 February 2022, the PLs, representing the Company, opposed a winding up order solely on the ground that the second core requirement was not satisfied.  In response to the judge’s question raised on 11 February, counsel’s supplemental skeleton submissions stated that, at that point in time, the PLs were unable to confirm whether they would be appointed as liquidators by the Bermuda court, or whether they would definitely seek recognition of their appointment in Hong Kong which would depend on the needs of the liquidation as they arose.  The Petition was further adjourned for the parties to prepare themselves to address the court on whether in the absence of a winding up order made in Hong Kong, the provisions of the CWUMPO would apply to the Company.

20.Meanwhile, on 11 March 2022, the Bermuda court made an order to wind up the Company.

21.On 21 March 2022, the Petitioner filed a reply affirmation which essentially simply exhibited an expert opinion on Bermudian law.

22.The Petition was finally heard on 1 April 2022. The position of the Petitioner, as indicated in its skeleton argument lodged on 29 March 2022, was no longer that the Petition should be dismissed as sought in the consent summons of January 2022, but that a winding up order should be made in Hong Kong, ancillary to the Bermuda liquidation.  It was submitted that there were material advantages to the liquidators (and hence the creditors) for an ancillary winding up to take place in Hong Kong as opposed to those liquidators operating under a recognition order in Hong Kong.

23.The PLs submitted to the judge that an additional winding up order in Hong Kong would likely not benefit the creditors.  Such an order would be unlikely to be recognised in the BVI, so that the Hong Kong-appointed liquidators could not obtain control of the BVI subsidiaries.  There was no suggestion by the Petitioner or the PLs themselves that there was any issue or transaction that needed immediate investigation in Hong Kong which would be aided by any additional powers available under the CWUMPO.  They submitted that in so far as the Bermuda liquidators wished to perform any winding-up related work in Hong Kong, they could in due course seek the Hong Kong court’s assistance by applying for a recognition order.

24.ICA also appeared at the hearing to oppose the Petition, on the principal ground that the second threshold requirement was not satisfied.

25.On 6 May 2022, Linda Chan J made a winding up order (“HK WU Order”) in her Judgment handed down on that date.[7] ICA now appeals to this court.

The Judgment below

26.In light of the Company’s insolvency, Linda Chan J proceeded on the basis that so long as the Petitioner was able to satisfy the three threshold requirements, it was entitled ex debito justitiae to a winding up order.[8]  The three threshold requirements are, as set out in Shandong Chenming Paper Holdings Ltd v Arjowiggins HKK 2 Ltd (2022) 25 HKCFAR 98 (“Shandong Chenming (CFA)”) at §3:

“(1) There must be a sufficient connection with Hong Kong, but this did not necessarily have to consist in the presence of assets within the jurisdiction; (2) There must be a reasonable possibility that the winding-up order would benefit those applying for it; and (3) The court must be able to exercise jurisdiction over one or more persons in the distribution of the company’s assets.”

27.A number of arguments raised in opposition to the Petition were considered by the judge,[9] the one that is the focus of this appeal being that the second threshold requirement for winding up a foreign company was not satisfied.

28.In relation to that ground, Linda Chan J rejected two preliminary points made by ICA.  First, she did not accept the submission that Harris J had already made a finding in his decision of 31 August 2021 that the second threshold requirement was not satisfied.  Her Ladyship noted that Harris J only refused to grant an immediate winding up order but did not dismiss the Petition outright and also stated that at the end, if there was no opposition, he might be “prepared to make an order in Hong Kong”.[10]  Secondly, she also rejected the argument that no benefits of a winding up in Hong Kong had been pleaded in the Petition and thus none could be relied on by the Petitioner.  The judge said that it was the PLs who contended at the hearing on 10 January 2022 that there was no benefit, to which the Petitioner was allowed to respond, and that there was no unfairness as the parties had sufficient time and opportunity to address this issue given the procedural history since 10 January 2022.[11]

29.As to whether the second threshold requirement was satisfied, Linda Chan J noted that the requirement is not a high threshold to surmount and the Petitioner only had to demonstrate a real possibility of benefit.^[12] She found the requirement satisfied, having regard, it seems to us, essentially to two matters.

30.First, the judge held that the Company had various assets in Hong Kong, namely: (1) cash deposits of HK$200,000 in the Company’s bank account; (2) funds that the Company had in the past 5 years, as reflected in the substantial legal costs incurred in dealing with the resumption of trading, the Scheme, the Petition and the Bermuda proceedings and the remuneration paid to the PLs, which would become void and liable to be returned upon the court’s making of a winding up order; and (3) at least 3 direct subsidiaries in Hong Kong, namely (a) UE HK, (b) Up Energy Resources (Hong Kong) Ltd (“UE Resources”) and (c) Up Energy Finance Ltd (“UE Finance”) which has HK$6 million of receivables.[13]

31.Secondly, Linda Chan J accepted the Petitioner’s argument that there were certain “clear advantages” available to the liquidators if the Company was wound up in Hong Kong but not otherwise, namely, (1) the liquidators would have “more extensive powers” under the CWUMPO i.e. “the full suite of powers of winding up as available in the ancillary jurisdiction”, as opposed to the limited powers that can be granted by rendering assistance pursuant to a recognition order; (2) some powers that may be conferred by a recognition order would be “more effectively exercised” by liquidators appointed in Hong Kong; and (3) there would be a saving in time and costs for the Hong Kong court to make a winding up order compared to granting an application for a recognition order.^[14]

32.In particular, in relation to the full suite of powers available on a winding up, the judge held that most of them, by the wording of the relevant statutory provisions, would only come into operation in a winding up in Hong Kong and could not be conferred on foreign liquidators as such through a recognition order.  In particular, the judge set out the following as provisions that had no application to a foreign company that had not been wound up by the Hong Kong court:[15]

“(1) s.182 which renders any disposal of assets after the commencement of the winding up void unless sanctioned by the court;

(2) s.183 which renders any attachment, sequestration, distress, or execution put in force against the estate after the commencement of the winding up void;

(3) s.199 which gives a wide range of powers to the liquidators specified in Schedule 25 some of which may be exercised without the sanction of the court or the committee of inspection;

(4) s.200 and s.204 which empower the court and the OR respectively to supervise and control over the conduct of the liquidators. They provide the avenues for the creditors to challenge any conduct which has fallen short of the standards required of the liquidators. These are important safeguards to ensure that the liquidators would faithfully perform their duties and observe all the requirements imposed on them by statutes, rules or otherwise with respect to the performance of their duties;

(5) s.211 which empowers the court to order any contributories, trustee, receiver, banker, agent or officer of the company to pay, deliver, convey, surrender, or transfer to the liquidators any money, property, or books and papers in their hands to which the company is prima facie entitled;

(6) s.224 which empowers the court, on proof of probable cause, for believing that a contributory or any past or present officer of the company has absconded or is about to quit Hong Kong or otherwise to abscond or to remove or conceal any of his property for the purpose of evading payment of calls or debts due to the company or avoiding examination respecting the affairs of the company, to order that the contributory or officer be arrested and his books, papers and movable personal property seized and safely kept;

(7) the provisions which confer a right on the liquidator of a company wound up by the court (and no one else) to set aside antecedent transactions which were not in the interests of the company or otherwise upset the pari passu distribution of assets amongst the creditors including (a) s.264B in respect of extortionate transaction entered into by the company 3 years before the winding up order; (b) s.265D in respect of transaction at an undervalue; and (c) s.266 in respect of unfair preference;

(8) s.267 which renders invalid a floating charge on the undertaking or property of the company created in favour of any person in the period of 1 to 2 years before the commencement of winding up of the company;

(9) s.268 which empowers the liquidator to disclaim any onerous property of the company;

(10) s.269 which restricts the right of a creditor as to execution or attachment over the company’s property to retain the benefit thereof unless he has completed the execution or attachment before the commencement of winding up;

(11) ss.271 – 274 which give “teeth” to the liquidator’s exercise of power to require the past or present officer of the company to provide information, disclose and deliver the property, books and papers to the liquidator by making it an offence if they fail to do so;

(12) s.275 which makes the directors liable for fraudulent trading, both in respect of having to compensate the company for the loss suffered and as a criminal offence;

(13) s.276 which provides for commencement of misfeasance proceedings against delinquent officer of the company, and makes them liable to pay damages to the company and as an offence; and

(14) s.268A which empowers the court to order public examination of promoters, directors, officers, provisional liquidator and provisional liquidator of the company, while s.268B empowers the court to order private examination of any person capable of giving information concerning the promotion, formation, trade, dealings, affairs or property of the company.”

33.The PLs submitted to the judge that there was nothing to suggest that the Bermuda liquidators would require the broader powers under the CWUMPO to investigate the affairs of the Company or to deal with the Company’s assets in Hong Kong. Linda Chan J did not accept this submission, stating that the PLs had not carried out any meaningful investigation into the affairs of the Company, and that the PLs’ suggested course that a winding up order could be sought and made “as and when the need arises in future” would be manifestly disadvantageous to the creditors as the commencement date of the winding up would be postponed for at least 6 years, as a result of which the Company would lose the benefit of the provisions for setting aside antecedent transactions.[16]

34.Separately, there were arguments before the judge concerning the relative costs and burdens of obtaining in Hong Kong a recognition order as opposed to an ancillary winding up order, albeit not advanced in the context of the second threshold requirement.  The judge considered that the costs and expenses incurred in the latter would not be substantial.  In particular, regarding the ad valorem duty payable to the Official Receiver from the realisation of the Company’s assets pursuant to ss 203 and 296 of the CWUMPO and ss 6-7 and Item 1 of Table B of Schedule 3 to the Companies (Fees and Percentages) Order (Cap 32C), the judge said that the ad valorem duty would only be levied on “the assets realised in Hong Kong” at scaled rates from 1% to 10%.  The judge also considered that in the absence of a Hong Kong winding up order, the Bermuda liquidators might have to incur time and costs in making multiple applications to the Hong Kong Court for recognition orders for specific purposes.[17]

35.We should also mention that there were other arguments rejected by the judge including the submission that the Hong Kong court should recognise the “primacy” of the legal regime at the place of incorporation of the Company (i.e. Bermuda), and on this basis, should decline to make a winding up order in light of the fact that the Company had been wound up by the Bermuda court.[18]

36.In the result, the judge concluded that the Petitioner had demonstrated that there was a reasonable possibility of benefit to the creditors if a winding up order were to be made and had thus satisfied the second threshold requirement.[19]  For this and other reasons, she made a winding up order.

The appeal

37.ICA appeals against the Judgment and seeks an order that the HK WU Order be set aside and the Petition be dismissed with costs.  The Petitioner opposes the appeal.  The Official Receiver, some of the creditors, and the liquidators of the Company appointed by the Bermuda court have expressly indicated that they take a neutral stance.  No other creditor has taken part in the appeal.

38.A considerable number of complaints can be found in the Notice of Appeal but as developed in the written and oral submissions of ICA’s counsel, Ms Audrey Eu SC leading Mr Anson YY Wong, the attack is primarily based on the contention that the Judge was wrong to conclude that the second threshold requirement for the winding up of a foreign company was satisfied. 

39.It is understandable that ICA has narrowed down its arguments and focused on the second threshold requirement.  While it has been held that the three threshold requirements go to the court’s discretion rather than jurisdiction (Kam Leung Sui Kwan v Kam Kwan Lai (2015) 18 HKCFAR 501, §21), they are threshold requirements.  In contrast, the subsequent and distinct stage of deciding whether the power to make a winding up order should actually be exercised in the court’s discretion (Shandong Chenming (CFA) at §24) will usually depend on balancing many considerations, a process the outcome of which will be something with which the appellate court will be slow to interfere: China Medical Technologies, Inc. v Samson Tsang Tak Yung [2018] HKCA 111, §27.

40.The threshold requirements play a role in the international context, as the Hong Kong court will not wind up a foreign company in cases in which it has no legitimate interest to do so, for that would be to exercise an exorbitant jurisdiction contrary to international comity: Shandong Chenming (CFA) at §23.  The Petitioner accepted below that even in the case of a petition for a winding up order in Hong Kong ancillary to an ongoing liquidation in the place of incorporation of the company, the three threshold requirements have to be satisfied, see Re Information Security One Ltd [2007] 3 HKLRD 780, §8.

41.The general principles relating to the second threshold requirement are not in dispute.  The nature of the inquiry in relation to this requirement is to ascertain whether it would be appropriate to put into motion the winding-up machinery in respect of a particular overseas company.  Unlike the other requirements, the second threshold requirement is indispensable.  However, the test is a low one, and allows for some flexibility as to the nature or extent of the likely benefit to the petitioner that needs to be shown in order to satisfy the requirement.  It will be satisfied so long as the benefit can be said to be a real possibility, rather than a merely theoretical one: Shandong Chenming (CFA), §§56 & 83-85 and Shandong Chenming Paper Holdings Ltd v Arjowiggins HKK 2 Ltd [2020] HKCA 670 (“Shandong Chenming (CA)”), §§21-27.

42.At §54 of their joint judgment in Shandong Chenming (CFA), Fok and Lam PJJ stated that a pragmatic approach should be applied in assessing whether it would be useful to entertain a winding-up petition in respect of a foreign company.  In addition their Lordships made the following observations from the authorities (§54):

“(1) There is no doctrinal justification for confining the relevant benefit narrowly to the distribution of assets by the liquidator in the winding up of the company;

(2) It is sufficient that the benefit would be enjoyed solely by the petitioners;

(3) There is also no doctrinal justification requiring the relevant benefit to come from the assets of the company;

(4) There are cases where even though there was nothing for the liquidator to administer the courts did not find any difficulty in holding that the second requirement was satisfied so long as some useful purpose serving the legitimate interest of the petitioner can be identified;

(5) The benefit need not be monetary or tangible in nature; and

(6) The fact that a similar result could be achieved by other means does not preclude a particular benefit from being relied upon for the purposes of fulfilling the second requirement.”

Decision of Harris J of 31 August 2021

43.ICA has again raised the argument that Harris J had already decided in his decision on 31 August 2021 that the second threshold requirement was not satisfied, though it is fair to say this argument was not prominently pursued by Ms Eu.  Harris J did criticise the absence of a plea in the Petition on how the three threshold requirements were met, and it is true that the tenor of Harris J’s decision was to doubt whether the second threshold requirement was satisfied.  But we do not think that his Lordship intended to, and it is quite clear he did not need to, determine that issue for the purpose of reaching his decision to adjourn the Petition.  There is in our view no question of any issue estoppel arising from his decision.

Lack of plea in the Petition

44.ICA also submits that the Petitioner failed to plead in the Petition any benefit in the context of the second threshold requirement and only changed their stance to seek a winding up and specified the alleged benefit in submissions at very late stage.  ICA complains that this led to unfairness in that ICA (and the PLs) did not have a proper opportunity to respond. 

45.As a matter of fact, in relation to the exercise of winding up power over a foreign company, all that the Petition (as re-amended on 12 July 2016) stated was (in §15): “For reason of the foregoing, the Petitioner believes that this Honourable Court has jurisdiction to order a winding-up of the Company, particularly having regard to its close connection with Hong Kong, being a company listed on The Stock Exchange of Hong Kong Limited.”  In the earlier paragraphs, so far as relevant for present purposes, the Petition merely gave the Company’s principal place of business in Hong Kong and stated that it had “a number of directly or indirectly wholly-owned or non-wholly owned subsidiaries, comprising almost all of the Company’s businesses, which were incorporated in Hong Kong.”  The Petition did not contain any specific plea concerning the second threshold requirement.  No additional averment was offered even after Harris J’s criticism. 

46.The requirement to aver in a petition to wind up a foreign company facts and matters demonstrating the three threshold requirements are satisfied is not imposed by statute or rules of court, but has been developed by Harris J in the cases, on the ground that all the allegations necessary for obtaining the relief sought in a petition should be contained in the petition: see Re Pioneer Iron and Steel Group Co Ltd (HCCW 322/2010, 6 March 2013), §31; Re Grand China Logistics Holding (Group) Company Limited (HCCW 130/2013, 19 August 2013); Re Up Energy Group Ltd (HCCW 185/2013, 25 October 2013).  In Re China Huiyuan Juice Group Ltd [2021] 1 HKLRD 255 at §29, Harris J said:

“… it seems to me that it is necessary for a petitioner to demonstrate by evidence that there is a real possibility of a tangible benefit to creditors. The relevant facts and matters, which the evidence is adduced to prove should be set out in the petition and if it is not the petition is demurrable.”

47.Accordingly it is submitted on behalf of ICA that Linda Chan J should have held that the second threshold requirement was not satisfied and rejected the Petition on this ground alone.  At the hearing, Ms Eu also impressed on this court that this is not a technical point.  She submits that in saying that it was the PLs who contended that there was no benefit from a Hong Kong winding up,[20] the judge wrongly reversed the burden of proof.  Further, Ms Eu said that after the Petitioner had filed a consent summons on 7 January 2022 seeking the dismissal of the Petition, it only changed its position and sought a winding up order in its skeleton submission dated 29 March 2022.  The Petitioner’s earlier skeleton dated 23 August 2021 (signed by its then counsel, not Mr Brown) identified two benefits under the second threshold requirement, namely, “enhancing access to PRC subsidiaries” and “avoiding further delay and costs”.  But these were not relied upon before Linda Chan J.  Instead, the Petitioner’s new skeleton submission dated 29 March 2022, lodged three days before the substantive hearing on 1 April 2022, identified for the first time the three advantages alleged (as set out in the Judgment at §56).

48.Ms Eu submits that ICA was unfairly prejudiced because matters were relied upon by the judge in coming to her conclusion on the second threshold requirement, including matters not relied upon by the Petitioner, to which ICA had no or no proper opportunity of responding.  As examples she refers to the judge’s findings or comments on the Company’s management presence in Hong Kong,[21] the lack of investigation by the PLs,[22] and to an extent the presence of assets in Hong Kong.[23]

49.On behalf of the Petitioner Mr Brown submits that Harris J’s criticism of the lack of plea was “somewhat overtaken by events” given the Petitioner and the PLs signed a consent summons for the dismissal of the Petition.  He submits that there was no prejudice to ICA arising from the lack of plea since the parties were directed by Linda Chan J to address her concerns and the PLs had provided a table of comparison of liquidators’ powers under Bermudian law and the CWUMPO respectively in their skeleton submissions as early as 14 February 2022.

50.Mr Brown has not sought to impugn the rule laid down in the cases requiring averment in the petition of facts and matters relied on to meet the threshold requirements for the winding up of a foreign company.  It seems to us the rule is conducive to focusing attention on and narrowing down the real issues, giving fair notice of the petitioner’s case to the other parties and avoiding surprises.  As the judge said, the issue was whether the Petitioner was able to satisfy the second core requirement.[24] It is therefore quite unsatisfactory in light of the procedural history outlined by Ms Eu that there was no clear indication of the Petitioner’s case, whether in the Petition or elsewhere, until skeleton submissions were lodged shortly before the substantive hearing.  We should mention that, shortly before the skeleton submissions, on 21 March 2022, the Petitioner did file an affirmation to provide further evidence of Bermudian law pursuant to the judge’s directions of 14 February 2022, but the affirmation, apart from exhibiting the expert opinion, merely pointed out that where a winding up order is made separately in Hong Kong, the liquidators may enjoy additional powers.

51.Having said that, the requirement of pleading how the threshold requirements are satisfied is a rule of practice rather than a rule of law, and if in the circumstances of a particular case, the judge can properly be satisfied that there is no unfairness occasioned to any party and that the petition can fairly be argued and determined without such averments formally in place, we do not see that the judge must necessarily dismiss the petition solely because of the absence of the averments in the petition itself.  The real question in this case, as it seems to us and as Ms Eu recognised, is whether the judge was correct to find that the second threshold requirement is satisfied on the evidence, bearing in mind the unsatisfactory history as to how the issue was dealt with by the Petitioner in the court below.  It is to this question that we now turn.

The finding of sufficient benefit

52.As mentioned above, the judge considered that the second threshold requirement was met because there were assets in Hong Kong and a Hong Kong winding up would provide liquidators with more extensive powers, would enable powers that may be conferred by a recognition order to be more effectively exercised, and would save time and costs as opposed to the liquidators making an application for a recognition order.  ICA submits that the benefits relied upon by the judge are either non-existent or theoretical rather than real. 

Assets in Hong Kong

53.There is no dispute that the presence of assets of a company in Hong Kong may well mean there would be a sufficient and tangible benefit resulting from its winding up in Hong Kong.  In §§54 and 55 of the Judgment the judge said that the company had assets in Hong Kong which may be recovered by the liquidators appointed in Hong Kong for the benefit of the creditors, and that for this reason alone she was satisfied there was reasonable prospect of the Petitioner deriving a sufficient benefit from the making of a winding up order.  In particular, the judge relied on the following 3 assets referred to in the Petitioner’s skeleton argument below:

“(1) There is cash deposit in its bank account presently stands at HK$0.2 million.

(2) Although the PLs have not disclosed how much cash funds the Company has had during the past 5 years, it is reasonable to assume that the amount would be substantial as the Company had incurred substantial legal costs in dealing with resumption of trading, the Scheme, the Petition and the Bermuda Proceedings, and paying remuneration to the PLs. Ms Lam confirms that these costs and remuneration were paid by the Company, part of which had been derived from the loans advanced by 2 funders, Kaisun and ICA. Upon the court making a winding up order against the Company, these payments insofar as they were made after the presentation of the Petition (being the date of the commencement of the winding up) and not sanctioned by the court are void and liable to be returned to the Company.

(3) The Company has at least 3 direct subsidiaries in Hong Kong namely, (a) UE HK, (b) UE Resources (which can readily be revived), and (c) UE Finance which has HK$6 million of receivables.”

54.ICA argues that the Judge erred in relying on the presence of assets in Hong Kong as showing the requisite reasonable prospect of a sufficient benefit.  ICA submits that the Petitioner only relied on the Company’s assets in Hong Kong in the context of the liquidator’s ability to conduct investigation into the Company’s assets.  We are not impressed by this submission as we do not think the Petitioner’s argument should be so narrowly interpreted.

55.But a more complete view of the evidence shows there are real problems with respect to the assets relied on by the judge.  First, the evidence is that of the bank deposit of HK$200,000, HK$170,000 is expected to be irrecoverable upon liquidation due to the liabilities owed to the bank.  This leaves only HK$30,000 which, in the scheme of things, we regard as negligible.

56.Secondly, reliance on the Company’s “cash funds” in the Judgment at §54(2) is in our view problematic.  This was not a matter raised by the Petitioner in its evidence or even its skeleton submissions, as a result of which there was no evidence on it at all and no opportunity for the PLs to explain by evidence the circumstances of such expenses and their justification and no opportunity for ICA to respond or comment.  There is no evidence whether there was court approval granted, either in Bermuda or Hong Kong, for such dispositions.  Nor is there any evidence of the terms or purpose of the loans from the two funders.  It would be speculative to assume that, upon the expenses being disapproved, the loan proceeds would necessarily belong to the Company rather than, for example, held on trust for the funders.  Further, a winding up order had already been made in Bermuda based on a petition presented on 18 May 2016, which was only about a month and a half later than the Petition filed in Hong Kong.  There was no discussion of the impact of the similar provision rendering post-petition dispositions void that existed in Bermuda (s 166(1) of the Companies Act 1981).  In these circumstances, we do not consider it would be right to rely on this possibility as satisfying the second threshold requirement.

57.Thirdly, as to the Company’s “3 direct subsidiaries in Hong Kong”:

(1)  It appears that the judge misunderstood the evidence relating to UE HK.  On the evidence, UE HK, whilst itself a Hong Kong company, is not a direct subsidiary of the Company, but is held through UE International, a BVI company.  In other words, the Company’s asset in this respect is the shares in a BVI company.  The Petitioner’s own expert considered that a Hong Kong winding up order would be unlikely to be recognised in the BVI (or, for that matter, in Mainland China).  That expert evidence was in these terms:

“… a winding-up order issued against the Company anywhere other than in Bermuda would not appear to be beneficial to the Petitioner outside of the country in which the order is made. This is because such a winding-up order would be unlikely to be recognised in the BVI (the Company’s wholly-owned direct subsidiary being BVI-incorporated) or the PRC (the location of the Company’s indirect operating and asset-owning subsidiaries).”

Moreover, the evidence is that both the shares in UE International held by the Company and the shares in UE HK held by UE International have been charged as security for the convertible notes, and that the underlying operational assets, i.e. the mines and processing plants, many of which are held by Mainland subsidiaries down the chain from UE HK, have also been charged to creditors.

(2)  UE Resources, a Hong Kong company, is not a direct subsidiary of the Company either.  As stated in the Judgment at §10(2), UE Resources was held through Up Energy Development Group (BVI) Co Ltd, a BVI company.  Further, UE Resources was struck off the Companies Register on 1 April 2021.  The judge said it “can readily be revived” but there is no evidence it has any value.  In any event, the relevant asset of the Company relating to UE Resources is the shares in the BVI intermediate holding company.

(3)  As for UE Finance, while the Petitioner submitted, and the judge accepted, that it had receivables of some HK$6.38 million, the audited accounts of UE Finance exhibited in the evidence show that those receivables were dwarfed by liabilities, resulting in net liabilities of approximately HK$179.65 million.  There is no basis to regard the Company’s shareholding in UE Finance as a meaningful asset likely to produce any real value for creditors.

(4)  Mr Brown has not referred the judge or this court to any other Hong Kong subsidiaries or any other asset that may be regarded as an asset of the Company in Hong Kong.

58.On the evidence, there does not seem to us to be even a prima facie case that the Company has assets in Hong Kong that are of value and would enure to the benefit of the creditors should the Company be wound up in Hong Kong.  In these circumstances Mr Brown’s submission that whether the assets in Hong Kong have any value would require an investigation rings hollow. 

The powers under the CWUMPO as benefit

59.As we understand her submissions, Ms Eu does not dispute the Petitioner’s thesis, accepted by the judge, that the powers available to a liquidator via a Hong Kong winding up order are more extensive than those that can with proper legal basis be conferred on a foreign liquidator via a recognition order.  It is unnecessary for us to discuss what the differences are and their extent.  On behalf of ICA, Ms Eu makes two broad points on the “advantages” derived from the powers under the CWUMPO.  First, she submits that the “clear advantages” identified by the Petitioner in this respect (see §31 above) are theoretical, as the Petitioner did not explain why, and there was no evidence that, the more extensive powers under the CWUMPO would be needed or would benefit the creditors.  The Company’s major assets and directors are in Mainland China and there is no allegation of misconduct or relevant activity in Hong Kong requiring investigation or the assistance of the court.  She submits that previous decisions do not show that the mere availability of statutory powers under the CWUMPO to liquidators appointed in Hong Kong is itself sufficient to satisfy the second threshold requirement.  In the absence of facts and evidence showing the need for those powers and how their exercise might benefit the creditors, any alleged benefit would be theoretical and speculative.  She submits that if such theoretical advantage were sufficient to satisfy the second threshold requirement, it would frustrate the raison d’être for recognising foreign proceedings and would render that requirement largely otiose.

60.Secondly, Ms Eu also contends that even if there are benefits in this regard, these must be weighed against the additional time and costs that would be incurred as a result of a winding up order being made in Hong Kong: Re Pioneer Iron and Steel Group Co Ltd, supra, at §§39(5)-(6) and 40.  She points out that of the creditors who have expressed a preference, those in opposition to the Petition outweigh those in support.  Relying on Re Joint Liquidators of Supreme Tycoon Ltd [2018] 1 HKLRD 1120 at §12, Re G Ltd [2016] 1 HKLRD 167 at §6, and Re Grand Peace Group Holdings Ltd [2021] 4 HKLRD 230 at §18, she submits that the “more straightforward and cost effective” course is for the liquidators appointed by the Bermuda court to consider whether or not it is necessary to seek recognition and potentially assistance from the courts in Hong Kong.  However, since it is not suggested that the second threshold requirement must be met by a benefit not otherwise obtainable under the existing winding up in Bermuda, this second point, as Ms Eu confirmed at the hearing, seems to us to go really to whether the court should exercise its discretion to wind up the Company if the second threshold requirement is satisfied, with which this appeal is not concerned, rather than whether that requirement is met.  The judge seems to have proceeded on the basis that, once past the thresholds, a petitioner who is owed a debt is entitled ex debito justitiae to a winding up order.  Whilst this is the case for a company which is not otherwise being wound up, there may be an argument as to whether this approach applies to a petition for a winding up in Hong Kong in circumstances where the company is already in liquidation in its place of incorporation.  As this has not really been ventilated before us, we express no opinion on this question.

61.We shall therefore focus on the first point.  As mentioned above, the benefit has to be a real possibility, rather than a merely theoretical one: Shandong Chenming (CFA), §83, endorsing Shandong Chenming (CA), §27.  There is in our view force in Ms Eu’s submission that if the availability of the “full suite of powers” under the CWUMPO will of itself give rise to a real possibility of benefit, then the second threshold requirement is entirely otiose as it will automatically be met in every case.  And if it is said that the full statutory armoury of powers is sufficient to satisfy the second threshold requirement so long as there is a sufficient connection with Hong Kong (such as where the company is listed here), this will effectively mean that the second requirement is subsumed under the first.

62.Ms Eu does not contend that the availability of the powers under the CWUMPO cannot be relied upon to satisfy the second threshold requirement, but, she submits, one must show on the facts what it is that the powers are intended and likely to achieve in the particular case.  She relies on what Harris J said in Re China Huiyuan Juice Group Ltd, supra, at §26:

“… the petitioner must be able to point to a discernible and real benefit. Hypothetical benefits that potentially arise in all cases will be insufficient to satisfy the second core requirement. An example of such a hypothetical benefit would be the investigation of the affairs of a company by a liquidator, which might, but then again might not, identify a claim against officers of the company or locate an asset unidentified at the time of presentation of the petition, which would increase the assets available for distribution amongst creditors. In my view, it is clear from Barma JA’s judgment that these possible benefits would be too theoretical to satisfy the second core requirement. …”

63.An examination of the other cases, including those relied upon by Mr Brown, does not reveal any different approach.  It seems to us that insofar as they suggest the availability of certain statutory powers on a winding up may be a sufficient benefit, they do so on the basis that there is a real possibility of some discernible benefit on the facts of the case. 

64.In Re Insigma Technology Co Ltd (HCCW 224/2013, 15 October 2014), where it was pleaded that there was a reasonable possibility of benefit to the petitioner from the winding up in that the liquidators could investigate the affairs of the company and identify, take control of and recover assets of the company located in Hong Kong and elsewhere, but the assertion was not substantiated by facts and evidence, the court held that this was speculative and not capable of constituting a relevant benefit for the purposes of the second threshold requirement.

65.Re China Medical Technologies, Inc. [2018] HKCA 111 concerned a petition by the company itself, acting through its liquidators appointed in the Cayman Islands, for its winding up in Hong Kong.  There were a large number of fund movements in Hong Kong, based on instructions given by persons in Hong Kong, by which the company’s assets were allegedly dissipated.  In these circumstances the Cayman liquidators considered it worthwhile to proceed by way of a Hong Kong liquidation and make direct use of the procedure for oral examination under s 221 of the CWUMPO,[25] rather than make multiple applications by letters of request for assistance.  Harris J made a winding up order which the Court of Appeal saw no ground to disturb.

66.In Re Allied Weli Development Ltd (CACV 58/2016, 18 July 2017), the Court of Appeal found that there had been a sudden change of management and change of domicile of the company from the BVI to the Marshall Islands after it lost an action and was ordered to pay over HK$210 million in damages and its appeal was dismissed.  The company’s ultimate parent was a company listed in Hong Kong.  There were suspicious circumstances with regard to the asset position of the company.  In these circumstances, the argument that the second threshold requirement was not satisfied – raised for the first time on appeal – was rejected.  As Harris J said in Re China Huiyuan Juice Group Ltd, supra, at §28, the judgment in Re Allied Weli Development Ltd should not be read as a thorough exploration of the parameters of the second core requirement, but rather a robust rejection of an issue raised for the first time on appeal.

67.In Re Victor River Ltd [2021] HKCFI 886, a securities broker petitioned for the winding up of its client, a BVI corporate vehicle of one Mr Lin, based on unpaid margin facilities.  The company had transferred large sums of money to Mr Lin before (§§10-11).  The securities accounts were in Hong Kong, and contained securities situated in Hong Kong.  Upon default, Mr Lin did not provide the petitioner with any information regarding the assets and liabilities of the company (§63).  In these circumstances DHCJ William Wong SC held it could not be said there would be no practical benefit to the petitioner to have a liquidator appointed to investigate the financial position of the company, and also found that a liquidator would be able to exercise the company’s right to protect or maximise the value of the remaining securities in the accounts.

68.In Re Zhu Kuan Group Co Ltd (HCCW 874/2003, 2 August 2004), the company had, after defaults in repayment of bank loans, charged its shareholding in a subsidiary, and that subsidiary had also charged certain listed securities it held, both in favour of a company in its parent group (§11).  The provisional liquidators were unable to locate much of the documentation one would have expected to exist in relation to the debt allegedly owed to the chargee, and considered both share charges merited investigation.  In these circumstances, Barma J (as he then was) said an investigation into the share charges might produce some benefit for the creditors (§49).  The provisional liquidators also took the view there might be further undiscovered assets which might come to light on further investigation and that investigations might also shed light on the financial position and activities of certain Hong Kong companies in which the company in question had substantial shareholding. Barma J found that in the light of the uncooperative stance of the former directors and management, there was (or at least might be) information in Hong Kong which might be obtained through the use of the powers of the provisional liquidators or liquidators, which might well be of benefit to the creditors, whether such powers resulted in the obtaining of information that led to recoveries in Hong Kong, or of information that led to recoveries in Macau or elsewhere by the liquidators appointed in Macau (§§56-57). 

69.Mr Brown submits that the existence and the value of the benefit can be uncertain, as illustrated by the finding of the assumed commercial pressure generated by the prospect of a winding up order as sufficient benefit in Shandong Chenming.  There is however, in our view, a difference in substance between saying with proper factual basis that there needs to be investigation about certain targeted aspects of the company’s affairs albeit with an uncertain outcome, and simply asserting that there should be investigation generally.

70.The judge seems to have adopted the Petitioner’s submission below that:

“the point is that the Liquidator will under a recognition order go without these powers [available in a winding up] that are potentially very useful. It may be the case that ultimately these additional powers are not needed, but it is difficult to see that this can be finally determined at this point in time. In the circumstances, the sensible decision for the Liquidators is to accept these powers as opposed to electing once and for all to go without them.” (original emphasis) [26]

71.With respect, we do not agree that this is a sufficient answer to the second threshold requirement.  It is tantamount to saying that an ancillary winding up should be ordered in Hong Kong in every case where there exists a liquidation in the company’s place of incorporation, which seems to us to be an undesirable fetter on the court’s discretion.  The Petitioner accepted that the second threshold requirement applies even in relation to the making of an ancillary winding up order in Hong Kong.  It is the Petitioner that was seeking a winding up, and it was for the Petitioner to satisfy that requirement, examined as at the date of the hearing.[27]  If the Petitioner failed to do so and as a consequence the Petition had to be dismissed, this does not mean that the Bermudian liquidators had “elected” “once and for all” not to avail themselves of those powers.  First, the threshold requirements generally have to be satisfied even if it is the foreign liquidators who are seeking an ancillary winding up in Hong Kong.  Secondly, even though a creditor’s petition has failed, there would be nothing to prevent the liquidators from procuring another petition to be presented in Hong Kong for a winding up should that become necessary subsequently and should there be proper grounds to do so: for an example of petitions brought by foreign liquidators acting on behalf of the company, see Re Pioneer Iron and Steel Group Co Ltd, supra.[28]

72.The Petitioner did not file any evidence as to, or point out in its skeleton argument before the judge, any aspect of the Company’s affairs that called for investigation whether for the purpose of recovery of value or from the perspectives of public interest, or any specific “more extensive power” which the Bermudian liquidators would need on the facts of this case or which would benefit the Petitioner.  The judge said in the part of the Judgment on the “Background”[29] that according to subsequent public announcements and annual reports, “the assets in Hong Kong as identified in the Petition continued to reduce”.  But there was no suggestion from the Petitioner before the judge that there was anything suspicious or untoward in that regard; nor does her Ladyship appear to have held this to be a specific matter warranting investigation in Hong Kong using the more extensive powers available on a winding up here.  Nor did the PLs find that there was any need for investigation in this regard.

73.In the judgment the judge observed more than once[30] that the PLs had, on their own admission, not carried out any “meaningful investigation” into the affairs of the Company.  Ms Eu said that no such admission was made below, but it seems to us that what the judge meant was that the PLs, who were appointed as “soft-touch” provisional liquidators for the purpose of pursuing financial restructuring, had not yet carried out investigations of the kind that an actual liquidator might pursue (which was a point the Petitioner had made in its affirmation of July 2021). What the PLs had actually done by way of investigation is not clear because this was not a matter the Petitioner had pleaded or raised, to which the PLs could then respond with evidence.  Be that as it may, it seems to us significant that the PLs, who had been in their office for several years and would undoubtedly have acquired considerable familiarity with the structure, the assets and liabilities and generally the affairs of the group headed by the Company for the purpose of carrying out their tasks in relation to the restructuring and maintaining the listing status, did not see any specific matter that called for investigation.  It is not sufficient simply to say, as the Petitioner said in its affirmation of July 2021, that “it cannot be ruled out that additional assets and/or possible causes of action can be identified in Hong Kong or in the PRC, which at the end of the day may lead to recovery of additional assets.”

74.Mr Brown submits that it would be unreasonable to expect an arm’s length creditor to be able to point out exactly what powers would be used for what and against whom.  We do not think that the second threshold requirement can only be satisfied by the petitioner providing detailed particulars as to which section of the CWUMPO would be invoked against whom and for what purpose.  On the other hand, there has to be some factual basis for saying that there is a reasonable possibility of real benefit for the petitioner from the winding up.  In the case of a listed company, there will be a fair amount of publicly available information.  In the case of a petition in Hong Kong for an ancillary winding up, there may be reports or information available from the foreign liquidators.  It is for a creditor to decide for himself, with such information as he may obtain, whether he wishes to petition for an ancillary winding up, bearing in mind that the law requires him to show what benefit he seeks to derive from it.  In our view that requirement is not satisfied by a petitioner simply saying there are greater powers available to a liquidator in Hong Kong if the company is wound up here as well.  We do not think it is sufficient for a petitioner to say, as Mr Brown did, that he is owed a debt which is not paid and would like it to be recovered and would also like to find out why it has not been paid.  Otherwise every arm’s length creditor can satisfy the second threshold requirement in this way, which in our opinion is not the law.

75.Ms Eu also submits that the judge erred in saying[31] that it would not be difficult to satisfy the three threshold requirements in the case of a non-Hong Kong company whose primary listing has been on the HKEx.  We do not think that there can be any presumption that the threshold requirements would be met in the case of a Hong Kong listed company, but neither do we think that the judge meant there was such a presumption. Counter examples include Re China Huiyuan Juice Group Ltd, supra, where Harris J said that satisfying the court that the first and third threshold requirements are satisfied is normally straightforward if the company is listed in Hong Kong (§56) but did not find the second requirement satisfied.  Likewise, in Re Grand Peace Group Holdings Ltd, supra, which concerned a company listed on the Main Board of the HKEx, Harris J held that the second threshold requirement was not satisfied.  Accordingly, even in the case of Hong Kong listed companies, there is no substitute for looking at the facts of the individual case.

76.In §47 of the Judgment the judge also set out 6 matters, namely, that a Hong Kong listed company would invariably have “(1) maintained a principal place of business in Hong Kong and have given an undertaking to comply with the Listing Rules; (2) maintained sufficient management presence in Hong Kong; (3) raised funds through the issue of shares, convertible notes or bonds and benefitted from the ability to trade such equities and financial instruments on HKEx; (4) borrowed loans from banks and other financial institutions in Hong Kong; (5) the obligation to comply with the provisions under the CO which apply to a non-Hong Kong company; and (6) the obligation to comply with the Securities and Futures Ordinance (Cap 571) and the regulatory regime administered by the Securities and Futures Commission.”  Ms Eu complains that these matters were not pleaded or asserted and were not supported by evidence, and would at best satisfy the first threshold requirement only.  More specifically, Ms Eu says that the judge’s inference that the Company had maintained sufficient management presence in Hong Kong by reason of the Listing Rules was contrary to the evidence showing that all directors of the Company reside in the Mainland and not supported by the rule in question, namely, rule 8.12, which she submits only applies in relation to a new applicant for listing.  It is unnecessary for us to deal with these matters.  Suffice it to say that we do not think that the judge relied on these matters for her conclusion that the second threshold requirement was satisfied.  Nor do we think that these matters alone would justify saying that there is a reasonable possibility of real benefit derived from the availability of the more extensive powers on a winding up.

77.Finally, we should mention that ICA submits that the judge erred in finding that the ad valorem duty is payable only “out of the assets realized in Hong Kong”, and that this finding is contrary to Re Pioneer Iron and Steel Group Co Ltd, supra, at §§39(5) and 40.  Ms Eu submits that if the same set of liquidators were appointed in both Bermuda and Hong Kong, the assets realized from outside Hong Kong would be subject to ad valorem duty under Hong Kong law, thus duplicating the costs.  The Official Receiver’s submission to the judge was that the ad valorem fee would be payable for all assets realised by a liquidator appointed by the Hong Kong court.  As the Official Receiver did not appear in the appeal, we do not wish to say anything on this point, which, as Ms Eu recognises, goes really to the question of the subsequent exercise of discretion rather than to the second threshold requirement.

Conclusion

78.For the reasons set out above, we are of the view that the Petitioner has failed to show that the second threshold requirement is satisfied for the purpose of its Petition to wind up the Company.  ICA’s appeal is accordingly allowed.  The judge’s order dated 6 May 2022 is set aside.  There will instead be an order that the Petition be dismissed.

79.Counsel are in agreement that costs between the Petitioner and ICA should follow the event.  Accordingly, we order the Petitioner pays ICA’s costs here and below with a certificate for two counsel.  We also make an order nisi that the Petitioner pays the Company’s/PL’s costs below after 10 January 2022.