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上海船厂船舶有限公司 (Also Known As Shanghai Shipyard Co. Ltd) v Reignwood International Investment (Group) Co Ltd

Judgment Cited authorities 3 Cited in Precedent Map Related
Vincent
Judgment Date16 December 2021
Neutral Citation[2021] HKCFI 3794
Judgement NumberHCCW340/2021
Subject MatterCompanies Winding-up Proceedings
CourtCourt of First Instance (Hong Kong)
HCCW340/2021 上海船厂船舶有限公司 (also known as SHANGHAI SHIPYARD CO. LTD) v. REIGNWOOD INTERNATIONAL INVESTMENT (GROUP) CO LTD

HCCW 340/2021

[2021] HKCFI 3794

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 340 OF 2021

________________________

IN THE MATTER of REIGNWOOD INTERNATIONAL INVESTMENT (GROUP) COMPANY LIMITED (華彬國際投資(集團) 有限公司)
and
IN THE MATTER of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32)

________________________

BETWEEN

上海船厂船舶有限公司
(also known as SHANGHAI SHIPYARD CO. LTD)		 Petitioner
and
REIGNWOOD INTERNATIONAL INVESTMENT
(GROUP) COMPANY LIMITED
(華彬國際投資(集團)有限公司) 		Respondent

________________________

Before: Hon Linda Chan J in Court
Date of Hearing: 6 December 2021
Date of Judgment: 6 December 2021
Date of Decision on Costs: 16 December 2021

________________________

DECISION ON COSTS

________________________

1. At the hearing on 6 December 2021, I dismissed the petition presented by the petitioner, Shanghai Shipyard Co. Ltd. (“Petitioner”), on the ground that the respondent, Reignwood International Investment (Group) Company Limited (華彬國際投資(集團)有限公司) (“Company”), had provided full security for the “Judgment Debt” (as defined in §9 below), the subject matter of the petition.

2. There is no dispute that the petition should be dismissed. The only issue between the parties is who should pay the costs of the petition. This is surprising given that, as will become apparent in the latter part of this Decision, the position is clear. Nevertheless, rather than seeking to save costs, the parties saw fit to incur further costs by instructing counsel (and in the case of the Company, 2 very senior counsel) to argue on costs.

Background

3. By a contract dated 21 September 2011 (“Contract”) the Petitioner (as builder) agreed to build and the Company (as buyer) agreed to buy an offshore drillship (“Vessel”) for USD200 million. On 17 November 2011, the Company issued a guarantee (“Guarantee”) in favour of the Petitioner for payment of the final instalment of the price (in the sum of USD170 million) (“Final Instalment”).

4. On 30 November 2012, the Contract was novated such that the Company’s rights and obligations as buyer were transferred to an indirect subsidiary of the Company (“OT1”). The Company remained a guarantor of payment of the Final Instalment.

5. On 11 January 2017, the Petitioner gave notice of completion of the Vessel to OT1 and demanded payment of the Final Instalment, but OT1 refused to pay on the ground that the Vessel was not deliverable. On 23 May 2017, the Petitioner demanded the Company to pay pursuant to the Guarantee (“Demand”). The Company contended that it should only be required to pay after the dispute between OT1 and the Petitioner was resolved and did not make any payment.

6. On 30 August 2018, the Petitioner commenced an action against the Company in the English Commercial Court to enforce the Guarantee. Separately, on 3 June 2019, OT1 commenced an arbitration in London against the Petitioner for breach of the Contract (“Arbitration”).

7. On 14 June 2019, the English Commercial Court ordered 2 preliminary issues to be tried namely, (1) whether the Guarantee was a demand guarantee such that the Company’s liability thereunder crystallised by reason of the Demand (as the Petitioner alleged), or a “see to it” guarantee such that the Company’s liability thereunder arose only if OT1 was liable to pay the Final Instalment (as the Company alleged); and (2) whether the Company was entitled to refuse payment pending conclusion of the Arbitration.

8. At the first instance, Knowles J ruled in favour of the Company on both issues and stayed the action pending resolution of the Arbitration.

9. On appeal, the English Court of Appeal (“CA”) held that the Guarantee was a demand guarantee such that the Company became liable to pay when the Demand was made, and that the Company was not entitled to defer payment until conclusion of the Arbitration. By an order dated 30 July 2021 (as amended on 13 August 2021), the CA gave judgment[1] (“CA Judgment”) against the Company for USD171,416,666.67, being the amount stated in the Demand, together with interest and costs (“Judgment Debt”).

10. On 19 August 2021, the Company applied to the UK Supreme Court (“UKSC”) for permission to appeal (“PTA”) on inter alia the ground that the CA erred in characterising the Guarantee as a demand guarantee as opposed to a “see to it” guarantee, and seeks to set aside the CA Judgment.

11. On 23 August 2021 the Petitioner served a statutory demand requiring the Company to pay the Judgment Debt within 21 days (“SD”).

12. On 9 September 2021, the Company issued an originating summons in HCMP 1328/2021 to seek an urgent injunction to restrain the Petitioner from presenting a winding up petition based on the SD until determination of its application for PTA and, if leave is granted, determination of the substantive appeal (“OS”). This was followed by a summons filed on 10 September 2021 seeking an interim injunction against the Petitioner in similar terms as the OS.

13. At the hearing on 14 September 2021:

(1) the Company contended that it had applied to the UKSC for PTA which, if successful, would result in the CA Judgment being set aside and the Petitioner cease to be a judgment creditor;

(2) the Petitioner sought a dismissal of the OS and the summons on the ground that it was a judgment creditor and had the right to enforce the Judgment Debt by presenting a winding up petition against the Company;

(3) this Court refused to grant the injunction sought on the grounds that (a) the Petitioner, being a judgment creditor, was entitled to present a winding up petition based on the SD if the Company failed to comply with the SD; and (b) the Company had the means to avoid a winding up petition by providing security for the Judgment Debt pending determination of its application for PTA and the substantive appeal; and

(4) the summons and the OS were dismissed with costs to be paid by the Company[2].

14. Immediately after the hearing, on 14 September 2021, the Petitioner presented the petition based on the Judgment Debt and the Company’s failure to comply with the SD.

15. On 22 October 2021, the UKSC granted a stay of execution of the CA Judgment in the following terms (“1st Stay Order”):

“on condition that the [Company] provides security by paying into court the sum of US$202,611,917.01 on or before 1 November 2021

1. There be a stay of execution of paragraphs 6 to 13 of the [CA Judgment], save that interest shall continue to accrue in accordance with paragraph 8 of the [CA Judgment], until the later of

a) The refusal by the Supreme Court of permission to appeal; or

b) The final determination of the appeal by the Supreme Court”

16. On 11 November 2021, the UKSC granted PTA and varied the condition of stay as follows (“2nd Stay Order”):

“there be a stay of execution of the order of the court below, until the determination of this appeal, on condition that the amount of the judgment debt is paid into court by 1st December 2021”

17. At the hearing of the Petition on 22 November 2021:

(1) Mr Benjamin Yu SC (leading Ms Sara Tong), counsel for the Company, applied for an immediate dismissal of the petition on the ground that the grant of PTA was sufficient in itself to show that the Judgment Debt was bona fide disputed on substantial grounds;

(2) Mr Look Chan Ho, counsel for the Petitioner, sought an adjournment of the petition to 6 December 2021 to see if the Company would comply with the condition under the 2nd Stay Order;

(3) This Court considered that it was appropriate to adjourn the petition to 6 December 2021 to see if the Company would comply with the condition. It seems to me that if the Company...

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