Re Legend International Resorts Ltd

cacv 210/2005

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 210 of 2005

(on appeal from HCCW NO. 1139 of 2004)

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Before: Hon Rogers VP and Le Pichon JA in Court

Date of Hearing: 26 April 2006

Date of Judgment: 26 April 2006

Date of Handing Down Reasons for Judgment: 3 May 2006

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.This was an application for leave to appeal to the Court of Final Appeal under the provisions of section 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance.  At the conclusion of the hearing, the application was refused with costs with reasons to be given in writing.

2.The questions to be submitted to the Court of Final Appeal on the basis that they were of great general or public importance or otherwise were matters which should be submitted were as follows:

1. Is it an abuse of the Court’s process to petition for the winding up of a company when: --

(a) the petitioner’s claim to be a creditor of the company is the subject of a reasonable challenge which is made by the company on substantial grounds; and

(b) the company has commenced an ordinary action to have that challenge tried and determined?

2. Is such a company entitled to have such a challenge determined by trial?

3. Can such a challenge be summarily determined, without trial, by the transposition of the findings of fact and law by the trial judge in other proceedings, not involving the petitioner or the Company, in which the parties, facts, countries and time periods are were all different?

3.The facts of this case may be gleaned from the judgments of this court handed down on 1 March 2006 and the judgment of Kwan J handed down on 6 June 2005.  For present purposes it suffices to say that in the court below and in this court the company sought to have the petition for winding up struck out on the basis that the petitioner was not entitled to take an assignment of the relevant loans because it did not come within the meaning of “Eligible Transferee”.  That application was refused in both courts.  In the course of the judgment in this court it was said:

“…..and on the basis of the evidence and arguments that have been presented to-date, I have no doubt that the petitioner does come within the definition of Eligible Transferee.”

4.As set out in paragraph 23 of the judgment of this court of 1 March 2006 the facility agreement was governed by and to be construed in accordance with the laws of England and under clause 23.02 of the facility agreement the parties irrevocably submitted to the non-exclusive jurisdiction of the Courts of Hong Kong and England.  In those circumstances there is no doubt that the courts of Hong Kong are in a position to determine whether the petitioner does indeed fall within the definition of Eligible Transferee.  The fact that the company may, sometime after the petition was presented, have commenced an action in England to determine that issue cannot prevent the courts in Hong Kong from exercising their own jurisdiction.

5.In support of the application Mr Barlow, who appeared on behalf of the company, relied upon the proposition that: --

“It is trite law that the Companies Court’s summary procedure for winding up companies is not a suitable venue for the trial of substantial issues of fact, the determination of which is likely to cause the winding up petition to overhang the company concerned for an inordinate time…”

6.Accepting for the purposes of this application the soundness of that proposition, the question that it raises is whether there is a substantial dispute of fact.  According to the practice in the Companies Court the facts relied upon have to be set out on affidavit in the first instance.  It can then be seen whether there is a dispute of fact.

7.To date both courts have held that, on the basis of the evidence that has been filed so far and on a proper construction of the facility agreement, the petitioner does come within the definition of Eligible Transferee.  At least when this matter came before this court there was no dispute on the facts which needed to be resolved before the construction of the facility agreement and the petitioner’s status under it could be decided.  The petition is due to be heard within the next two months.  It is no doubt still open to the company to produce further evidence directed to showing that the petitioner is not an Eligible Transferee.  If it were to do so it would be for the judge hearing the petition to decide whether, on the evidence that had then been filed, there was a dispute which needed to be resolved as to whether the petitioner does fall within the category of Eligible Transferee and, if so, whether the issue could be tried as part of the petition or whether the matter had to be resolved in some other way.

8.It appears to me that part of the burden of this application for leave to appeal to the Court of Final Appeal stems not from the judgment of this court on the application to strike out the petition but following the directions which have been given by the Companies Judge following the decision of this court.  Those directions were in respect of the hearing of the petition.  Quite apart from the fact that those are matters of case management, if after the hearing of the petition the company were to consider that the petition had been wrongly decided it would be open to it to bring whatever appeal it considered appropriate.

Hon Le Pichon JA:

9.I agree.

Mr Jeremy J Barlett, instructed by Messrs White & Case, for the Petitioner/Respondent

Mr Barrie Barlow, instructed by Messrs Richards Butler, for the Company/Applicant