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Re Silver Base (Holdings) Ltd

Judgment Cited authorities 1 Cited in Precedent Map Related
Vincent
JurisdictionHong Kong
Judgment Date20 March 2024
Neutral Citation[2024] HKCFI 855
Subject MatterCompanies Winding-up Proceedings
Judgement NumberHCCW20/2023
Year2024
HCCW20B/2023 RE SILVER BASE (HOLDINGS) LTD

HCCW 20/2023

[2024] HKCFI 855

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 20 OF 2023

__________________

IN THE MATTER of sections 177(1)(d) and 178(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32)

and

IN THE MATTER of Silver Base (Holdings) Limited (銀基(集團)有限公司)

__________________

Before: Deputy High Court Judge Le Pichon in Chambers (Paper Disposal)
Date of Submissions: 1, 4, 5 and 13 March 2024
Date of Decision: 20 March 2024

_______________________________

DECISION

_______________________________

1. This is the application of Liang Guoxing (“the Applicant”) by summons dated 21 February 2024 (“the Summons”) for leave to appeal this Court’s refusal on 7 February 2024 (“the Decision”) to stay the Winding up Order made on 6 November 2023 (“the WU Order”) pending the Company’s appeal to the Court of Appeal.

2. When this Court handed down its Reasons for the Decision dated 23 February 2024 (“the 2024 Reasons”), the Applicant had already issued the Summons. By summons dated 1 March 2024, the Applicant seeks leave to amend the Summons and the draft Notice of Appeal (“the NOA”) to address the 2024 Reasons. As such, leave is granted to make the amendments sought.

3. For the relevant background and applicable legal principles, reference should be made to the Reasons for Judgment dated 10 November 2023 (“the Judgment”) as well as the 2024 Reasons.

Merits

4. Mr Look-Chan Ho and Mr Joshua Yeung (counsel for the Applicant) advanced the same three grounds they had relied on, unsuccessfully, for a stay. The principal thrust of their submissions is that the Court adopted a wrong approach to winding-up in a case where the company only has one creditor. The Applicant considers it arguable that the winding up order should not have been made, citing new authorities.

A. Approach to winding-up with a company only has one secured creditor

5. The Applicant submits that this Court adopted the wrong approach in holding (at §6 of the 2024 Reasons) that “the court will rarely grant a stay of winding-up order, and a stay will be an exception” because this is a case where there are no other creditors other than the Petitioner who is a secured creditor.

6. The Applicant relied on this passage from the judgment of Nugee LJ in Khan v Singh-Sall [2023] EWCA Civ 1119 at 52:

“… secured creditors stand outside the bankruptcy process, the whole purpose of taking security being to enable the creditor to have recourse to specific assets for payment of his debt without having to share them with other creditors”.

7. However, in that passage, the English Court of Appeal was referring to sections 267(2)(b) and 269(1) of the Insolvency Act 1986. Those provisions are equivalent to sections 6(2)(b) and 6B(1) of the Bankruptcy Ordinance (“the BO”) respectively but have no counterpart in the winding-up statutory regime in Hong Kong.

8. The wording in section 178(1)(a)(ii) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 (“CWUMPO”) informs and provides that

“a company shall be deemed to be unable to pay its debts if … the company has, for 3 weeks after the service of the demand, neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor.” (Emphasis added)

9. No such provision exists in the BO or the Bankruptcy Rules. The passage from the Khan case (based on English provisions that have no Hong Kong counterpart) does not and cannot assist the Applicant.

10. In his reply submissions, the Applicant maintained that the Khan case stands for the proposition that the Petitioner, as a secured creditor, stands outside of the winding-process, citing the following passage from a new authority, namely, Re Progetto Jewellery Co Ltd [2022] HKCFI 364 at §40:

“It is well established that where a petitioner asserts that the company is insolvent, secured creditors stand apart from the collective process of liquidation and do not have any real interest in the company’s assets except those on which they have security. It is only the unsecured creditors who have any real interest in the company. This is because a secured creditor has the right to realize the security provided by the company for the purpose of repaying the debt owed to it …”

11. The Applicant submits that the same legal principles apply to the winding-up statutory regime.

12. Once again, the citation relied on is taken wholly out of context. First, the heading for §§37-45 (which appears immediately above §37) reads: “Whether the Petitioner was a creditor[1]”. That was the question before the court in Progetto. In that case the court concluded that the petitioner was not a creditor.

13. In the present case the Petitioner is unquestionably a creditor of the Company when this Court rejected its defence based on the debt being a bona fide disputed.

14. Second, the court in Progetto was not concerned with the position of secured creditors but “a creditor who owes a debt to the company which remains unpaid[2]”.

15. Third, the background to that...

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