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Re Value Food Supply Ltd

Judgment Cited authorities 1 Cited in Precedent Map Related
Vincent
Judgment Date05 November 2020
Neutral Citation[2020] HKCFI 2776
Year2020
Judgement NumberHCCW149/2020
Subject MatterCompanies Winding-up Proceedings
CourtCourt of First Instance (Hong Kong)
HCCW149/2020 RE VALUE FOOD SUPPLY LTD

HCCW 149/2020

[2020] HKCFI 2776

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 149 OF 2020

________________

IN THE MATTER of Value Food Supply Limited

and

IN THE MATTER of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Chapter 32 of the Laws of Hong Kong

________________

Before: Hon Harris J in Court

Date of Hearing: 14 October 2020

Date of Decision: 5 November 2020

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D E C I S I O N

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1. On 5 June 2020 Win-Chain (Hong Kong) Co, Limited (“WC HK”) and Shanghai Win-Chain Supply Chain Management Co, Ltd (“WC Shanghai”) issued a petition to wind up the Company on the grounds of insolvency [i]. The Petitioners rely on two statutory demands totalling approximately US$21m arising from non-payment, so they allege, of a series of purchase orders for substantial quantities of fish. The purchase orders are detailed in a schedule to the statutory demand. There is no dispute that the fish ordered was delivered on time and in a satisfactory condition. On the face of the matter the Company owes the Petitioners the purchase price of the fish. However, the Company contends that it has a bona fide defence to the claim for payment of the purchase orders. Put very briefly the Company says that the obligation to pay does not arise from the terms of the purchase orders, but another agreement, which was intended to regulate the payment obligations, the obligation to pay under that agreement is in dispute and as it contains an arbitration clause the dispute should be resolved by arbitration. Before considering that argument in detail I will deal with the principles that guide the determination of petitions to wind up a company on the grounds of insolvency, which are well-established and uncontroversial.

2. As explained in my judgment in Re Yueshou Environmental Holdings Ltd [1]:

(i) A winding-up petition can be successfully resisted if there is a bona fide dispute on substantial grounds on the petition debt. The onus is on the company to prove the same.

(ii) The company must put forward sufficiently precise factual evidence to substantiate its allegations and cannot merely raise a cloud of objections on affidavits.

(iii) The company’s assertions must be believable in the context of so much of the background as is either undisputed or beyond reasonable dispute. In other words, the evidence is to not to be approached with a wholly uncritical eye.

3. Bare oral allegations, uncorroborated by documentary evidence or contrary to common and commercial sense, are insufficient to raise a bona fide dispute on substantial grounds: see e.g. Re GW Electronics Co Ltd [2] and Re Kinston Entertainment (HK) Ltd [3].

4. Where there is opposition as to the amount of the debt, the company must demonstrate that it has a bona fide defence on substantial grounds to a claim that the petitioner is owed at least $10,000: see Re China Cultural City Limited [4].

5. Although the principles that apply generally to petitions to wind up a company on the grounds of insolvency are uncontroversial, what is more complicated is the relevance of an arbitration clause in a contract giving rise to a debt. This is an issue of some controversy. However, it is only relevant if it can be demonstrated that the relevant agreement contains an arbitration clause. As I have concluded that it does not it is not a controversy, which I need to explore in this decision.

6. As I have already explained if all one looks at are the purchase orders it would appear that the sums claimed are due and payable. Ms So accepted that if I were to conclude that the purchase orders governed the parties’ payment rights and obligations it followed that the Company has no defence to the claim.

7. The purchase orders signed by the Petitioners and the Company commence in July 2018 and run through until September 2019. The periods are not exactly the same for both of the Petitioners, but nothing turns on that. Prior to this period commencing other agreements had been entered into....

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