Re Rotegear Corporation Ltd

HCCW 538/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 538 OF 2009

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Before:  Hon Kwan JA (sitting as an additional Judge of the Court of First Instance) in Court

Date of Hearing:  16 November 2009

Date of Judgment:  16 November 2009

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J U D G M E N T

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1.This is a petition to wind up Rotegear Corporation Limited (“the Company”) by the Hong Kong Housing Authority.  The petition is founded on a judgment debt by the judgment of Reyes J in HCCT No. 26 of 2008, handed down on 14 July 2009.  By that judgment, the Company was adjudged to pay the petitioner the sum of $8,784,880 with interest.  A statutory demand seeking payment of the judgment debt was served on the Company on 20 July 2009. 

2.I have before me an affirmation made by a director of the Company, Wong Yan Wai Hugh, filed on 17 September 2009 opposing the petition.  The Company has appeared by its solicitor today but the solicitor has no right of audience.  I have considered the affirmation in opposition filed by the Company and the submissions made by the petitioner’s counsel.  I would make a winding-up order for the reasons given below. 

3.The Company seeks a stay of the winding-up petition pending the determination of its appeal against the judgment of Reyes J.  A Notice of Appeal was filed on 13 August 2009.  It is asserted by the Company it was advised that there are good grounds of appeal and it has a good prospect of succeeding with the appeal. 

4.The principles upon which the court acts in an application to stay a winding-up petition pending the hearing of an appeal from a judgment upon which the petition is founded were considered by Barma J in Re Sky Talent Properties Ltd, HCCW No. 892 of 2003, unreported, 9 December 2003, paras. 7 to 12.  The fact that an appeal is pending does not amount to a ground for declining to make a winding-up order, where no stay of execution has been obtained.  As stated by Barma J, the alternate basis on which a stay of execution pending appeal may be granted, namely that there are arguable grounds of appeal and the appeal would be rendered nugatory if there should be no stay, would not generally provide a ground for the court to stay the winding-up petition, as the making of a winding-up order would not prevent the appeal from going ahead, it being open to the liquidator to prosecute the appeal if he feels it in the interest of the company to do so and contributories or creditors are willing to provide funding for the exercise.  The requisite degree of strength of merits of the appeal, to justify an exercise of discretion for a stay of the winding-up petition, is not just arguable but very strong prospects of the appeal succeeding.

5.The Company has not sought a stay of execution of the judgment pending appeal.  The statutory demand was served on 20 July and the petition was served on 8 September 2009.  There is no explanation before the court why a stay of execution pending appeal has not been applied for. 

6.The only point taken on appeal in the Notice of Appeal is a short point of law, namely that the judge was in error in holding that the Company had given a warranty to the petitioner to complete the sub-contract works without delay to the main works and to complete the whole of the sub-contract works in accordance with the contractor’s progress of the main works, such that the petitioner could sue for breach of that warranty.

7.The Company had argued before the judge that there was no direct contractual relationship between it and the petitioner which was the employer and that the petitioner had no standing to bring the action against the Company.  That argument was rejected.

8.The judge agreed with the analysis of the petitioner’s leading counsel that the form of tender addressed to the petitioner constituted an offer by the Company to the petitioner.  By the form of tender, the Company promised to progress the sub-contract works in compliance with the main contractor’s programme, in return for being nominated by the petitioner as a sub-contractor.  The Company’s offer in the form of tender was buttressed by its letter to the petitioner of 23 August 2005.  The petitioner accepted the offer by its letter of 22 September 2005 by nominating the Company as sub-contractor for electrical works and requiring the main contractor, Nishimatsu, to engage the Company as a sub-contractor.  There was therefore an actionable contract between the petitioner and the Company and the petitioner could sue for the consequence of breach of promise.  There were two legally binding agreements, one between the petitioner and the Company, the other between the Company and Nishimatsu.

9.The arguments advanced in the Notice of Appeal have been considered and dealt with in the judgment.  The grounds of appeal fall far short of very strong grounds.  I am not persuaded the requisite degree of strength of the appeal to justify a stay of the winding-up petition has been made out.

10.I decline to exercise my discretion to stay the petition pending the Company’s appeal of the petitioning debt.  I make a winding-up order.  The petitioner’s costs are to be paid out of the Company’s assets.

Mr Douglas Lam, instructed by Messrs Lovells, for the Petitioner

Mr Mark Pierrepont, of Messrs Jonathan Rostron Solicitors, for the Company

Ms Vivian Yeung, for the Official Receiver