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HCCW 233/2020
[2021] HKCFI 207
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMPANIES WINDING-UP PROCEEDINGS NO 233 OF 2020
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IN THE MATTER of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Chapter 32, Laws of Hong Kong
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and
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IN THE MATTER of Lerthai Group Limited (勒泰集團有限公司)
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Before: Hon Harris J in Court
Date of Hearing: 19 January 2021
Date of Decision: 22 January 2021
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D E C I S I O N
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The Petition
1. On 29 September 2017 the Industrial and Commercial Bank of China (Asia) Limited (“ICBC”) entered into a facility agreement with LT Commercial Limited (“LT”). The facility was for HK$1,500,000,000 and was made available to reduce the debt of six members of LT Commercial Real Estate Limited, which is listed on the Main Board of the Stock Exchange of Hong Kong Limited. The terms of the facility were varied by a consent and variation letter dated 10 May 2019 pursuant to which Lerthai Group Limited (“Company”), which is incorporated in Hong Kong and also listed on the Stock Exchange of Hong Kong Limited became jointly and severally liable. LT and the Company defaulted on their repayment obligations. On 19 May 2020, ICBC obtained judgment against LT for in excess of HK$1,700,000,000 (“Debt”). On 2 July 2020, ICBC issued a statutory demand against the Company in respect of the Debt. There is no dispute that the Company is indebted to ICBC for the sum claimed, although ICBC has substantial security for the Debt, which at present it has chosen not to enforce. The Company wishes the Petition to be adjourned in order that it can progress a restructuring of its debt. ICBC considers this to be futile and seeks an immediate winding-up order. Including the Debt it would appear from the evidence that the Company’s total debt is approaching HK$4 billion.
2. A number of other creditors have given notice to appear on the Petition although none appeared at the hearing before me.
(1) China Railway Urban Construction Group Co Ltd is owed approximately RMB400,000,000. Initially it opposed the Petition, but has withdrawn its opposition.
(2) Sun Guiying and Zhao Qiang, who are owed HK$21,600,000.
(3) Shenzhen Angel Excellence Fund Company Ltd, which by a letter dated 29 December 2020 from its solicitors to the Company asserted it was owed over HK$1 billion and intended to oppose the Petition. However, it has not filed a notice to appear and on 15 January 2021 its solicitors wrote to the Court saying that they no longer had instructions to act or file a notice to appear. Shenzhen Angel did not appear on the hearing of the Petition and have provided no other information about their alleged debt or the position in respect of the Petition. ICBC understand that Shenzhen Angel’s basis for asserting that it is a creditor is an assignment of a debt, but that the assignment has not been executed and, therefore, it is not a creditor. Be that as it may, or may not be, given Shenzhen Angel’s failure to file a notice to appear little weight can be given to its initial indication that it intended to oppose the Petition.
3. Given the position of the Company’s creditors unless the Company is able to point to compelling evidence that it would be better for the creditors of the Company and possibly creditors of its subsidiaries in the Mainland for the Petition to be adjourned in order to allow time for it to progress a restructuring, in my view, the Court should accede to ICBC’s wish to obtain an immediate winding-up order to which on the face of the matter it can legitimately submit it is entitled ex debito justitae.
Principles relevant to an application for time to restructure debt
4. I have explained in a number of recent decisions how in broad terms the Court should approach applications to adjourn petitions. I say this in [6] of SMI Corporation Limited [1]:
“6. It seems to me that, in the circumstances, there is no sensible reason for the Court not to wind up the Company. As I explain in my recent decision in Re Chase on Development Limited [2], an important consideration when the court is faced with an application by an insolvent company to adjourn a petition based on an undisputed debt is the views of the creditors, their reasons for supporting or opposing the petition and the feasibility of the proposed restructuring. Necessarily this will require evidence to be put before the court that allows the court to make an informed decision whether or not to agree an adjournment of a petition to allow a company to restructure debt. The evidence will need to be all the more compelling if a company is unable to find a creditor to oppose an immediate winding-up.”
5. I develop this further in Re China Huiyuan Juice Group Ltd [3]:
“50. As the New Zealand Court of Appeal has recently observed ‘Insolvency law is a mix of principle and pragmatism. The [insolvency legislation] is to be used in a practical way. It does not require liquidation when that will not serve any useful purpose’[4]. The way in which the courts assess applications by financially distressed companies that seek adjournments of petitions reflects this.
‘When the court considers the possibility of benefit resulting from an order, the normal starting point is to consider any possible benefit to the petitioner, whether it be a debtor or a creditor. In many cases, showing benefit to the petitioner will be sufficient to persuade the court to make the order… I do not see why a consideration of benefit should be restricted to the possibility of benefit to the petitioner; benefit to others should also be relevant. Conversely, disadvantages or unfairness to others may also be relevant. After all, the court is exercising a discretion and is surely required to consider the effect of the proposed order on all relevant persons. In such a case, as is normal, the court will consider the effect of making the order and the effect of not making the order and will then consider what to do, having regard to all relevant considerations, including the legitimate aspirations of all potentially affected persons.’[5] (emphasis added)
‘I accept that as a general proposition, in the absence of good discretionary grounds to the contrary, an applicant for winding up who has proved its debt and has proved insolvency ought to achieve a winding up order. However, … the discretion can be exercised in favour of granting a stay where the refusal of a stay would be likely to work a substantial injustice.’[6] (emphasis added)
51. I summarise how this...
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