Yan Qian v. Asia Pacific Geraldton Ltd and Another

HCCW 341/2025

[2025] HKCFI 5237

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP)  PROCEEDINGS NO 341 OF 2025

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BETWEEN

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J U D G M E N T

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I. INTRODUCTION

1.Before me is a variation summons (the “Variation Summons”)  filed by the Petitioner on 18 August 2025 for an order to vary the validation order made by consent on 10 July 2025 (the “Validation Order”). The variation sought by the Variation Summons is to insert the phrase “with the exception of payments to Spring City International Limited” to the Validation Order.  The application for the variation is premised on the Petitioner’s case that the payments to Spring City International Limited (“Spring City”)  is not in the ordinary course of business covered by the Validation Order.

II.  LEGAL PRINCIPLES

2.The present Petition is an unfair prejudice petition.  The legal principles in relation to Validation Order applications are trite.  For convenience, I adopt the summary of the legal principles set out in §12 of the Skeleton Submissions of Mr Thomas Wong, counsel for the 1^st Respondent (the “Company”)  and its 50% shareholder and director 2^nd Respondent (“Mr Gao”)  (collectively, the “Respondents”), drawing on Re Orient Venture Investment Limited [2020] HKCFI 576 at §10; Re Fonfair Company Limite (unrep., HCCW 116/2015, 14.2.2017)  at §§5-6; Re Emagist Entertainment Ltd [2012] 5 HKLRD 703 at §§5-7; Re Raising Engineering Limited (unrep., HCCW 318/2014, 29.5.2015)  at §7:-

“12.1. The weight to be attached to the opposition of a contributory to an application for a validation order in the case of a solvent company is very different from the situation where a petition is presented on the ground of insolvency.

12.2. For a solvent company, the responsibility of managing the business of the company is entrusted by its articles of association to its directors. The Court does not generally, save in the case of proven bad faith or other exceptional circumstances, interfere with the exercise of the discretion conferred on the directors by the articles of association at the instance of a shareholder. This does not change simply because a winding up petition has been presented.

12.3. One would normally expect a company to obtain without difficulty a validation order in respect of payment of expenses made in the ordinary course of business, once the Court is satisfied that the company is solvent and has an active and ongoing business. The Court would not be concerned to check with precision the nature and amount of the expenses.

12.4. A petitioning contributory should not approach an application for a validation order on the basis that there is an adversarial application before the Court. A practical way of alleviating any concerns of a petitioning shareholder may be to provide a regular summary to the petitioner of the expenses that are being paid by the company.

12.5. The Court will not allow the dispute and/or mistrust between the shareholders to prevail over the interest of the company or its creditors, or to allow the application for a validation order to be developed into satellite litigation.

12.6. An application for a validation order is not an opportunity to argue about the wisdom of a proposed transaction. Directors should be allowed to continue to operate the company’s business normally and without close supervision by the Companies Court. The Court is not concerned to adjudicate what is the best commercial course for a company to take.

12.7. The Court would not act as a “de facto financial controller” of the company, and would not allow the opponent to make forensic challenges to certain payments.” (emphasis added)

III. PARTIES’ RESPECTIVE POSITIONS

3.Mr Tommy Cheung, counsel for the Petitioner (the other 50% shareholder), explains in §14 of his Skeleton Submissions why the evidence in relation to the payments to Spring City falls short of the requisite standard of proof that the payments would be for the ordinary course of business of the Company.  In essence, his submissions are that:-

(1)  There are no or no sufficient contemporaneous documents in support;

(2)  The documents adduced are internally inconsistent (including the relevant invoice not matching the relevant work order and the 2^nd Respondent’s change of evidence);

(3)  The Respondents have not produced any metadata in support; and

(4)  Spring City does not have the requisite licence to provide the services as required under the Bangladesh law.

4.In reply, Mr Wong counters Mr Cheung’s submissions in §§52-62 of the Respondents’ Skeleton Submissions.  In summary, he submits that:-

(1)  There are plenty of documents in support;

(2)  There is no inconsistency in the documents;

(3)  Spring City is an independent third party which would not prepare any forged documents;

(4)  The Company’s auditors have examined the invoices issued by Spring City without raising any concern; and

(5)  Even if licence would be required for providing services, Spring City may engage local companies with the requisite licence to provide the service.

IV.  ANALYSIS

5.First, as indicated by Linda Chan J in her directions given on 1 September 2025:-

“The parties should be aware that if the payment to Spring City was not made in the ordinary course of business of [the Company], it falls outside the validation order and the proposed variation is unnecessary.”

6.Second, insofar as there is any allegation to the effect that the transactions with Spring City are not genuine, the evidence is not sufficient to sustain such allegation.  As regards other allegations then non-genuineness, I should bear in mind that it is not my task here to engage in any detailed forensic exercise.  In this regard, Wong Wai Tung v Lam Chun Fung [2019] HKCFI 801 relied upon by Mr Cheung is distinguishable in that in that case, the evidence from the subject company was not sufficient even to sustain a prima facie case that the subject payment was necessary or expedient in the company’s interest.  In the present case, on the evidence, I am satisfied that at least there is a prima facie case that the transactions with Spring City are in the ordinary course of business, while I am not satisfied with the status of the evidence now before me that all these transactions were not genuine.

7.Third, insofar as the Petitioner’s any complaint about the commercial wisdom of the transactions is concerned, I should bear in mind that I should not be the Company’s financial controller and should leave it to the Respondents.

8.Fourth, making the variation to provide an explicit statement that certain transactions have not been proved to be for the ordinary course of business would effectively tell the banks to check every payment and not to release payments for the Spring City transactions.  This would effectively be an injunction.  If there is sufficient evidence to show that the transactions were not for the ordinary course of business, and if the Respondents would insist on the payments in breach of the validation order, there would be other means for the Petitioner to pursue, for example, an injunction.  

9.Fifth, with this status of evidence, the order that the Company shall provide the Petitioner with monthly statements and allow the Petitioner to inspect the underlying documents is, in my view, sufficient to ensure that the Petitioner would be able to take prompt action if necessary.

V.  CONCLUSION

10.In the circumstances, I dismiss the Variation Summons, with costs to the Respondents, to be summarily assessed on paper, with the Respondents to lodge and serve a statement of costs within 3 days from today and the Petitioner to lodge and serve a list of objections within 3 days thereafter. 

Mr Tommy Cheung, instructed by Joseph C.T. Lee & Co., for the Petitioner

Mr Thomas Wong, instructed by Jun He Law Offices, for the 1^st and 2^nd Respondents

The attendance of the Official Receiver was excused