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Synergy Lighting Ltd v The Hongkong And Shanghai Banking Corporation Ltd

Judgment Cited authorities 7 Cited in Precedent Map Related
Vincent
Judgment Date18 September 2020
Neutral Citation[2020] HKCFI 2490
Year2020
Judgement NumberHCMP1447/2020
Subject MatterMiscellaneous Proceedings
CourtCourt of First Instance (Hong Kong)
HCMP1447/2020 SYNERGY LIGHTING LTD v. THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD

HCMP 1447/2020

[2020] HKCFI 2490

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1447 OF 2020

____________________

IN THE MATTER of SYNERGY LIGHTING LIMITED

and
IN THE MATTER of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) and the inherent jurisdiction of the High Court

____________________

BETWEEN
SYNERGY LIGHTING LIMITED Plaintiff

and
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED Defendant

____________________

Before: Hon G Lam J in Chambers
Date of Hearing: 18 September 2020
Date of Decision: 18 September 2020

_________________

D E C I S I O N

_________________

1. This is an application by the plaintiff (“Company”) for an order to continue the ex parte injunction granted on 11 September 2020 to restrain the defendant (“Bank”) from presenting a winding‑up petition against the Company.

2. An injunction to prevent the presentation of a winding‑up petition is based on the court’s inherent jurisdiction to prevent the abuse of its own process, to which the American Cyanamid approach[1] to general interlocutory injunctions does not apply. Great circumspection is to be exercised before granting such an injunction, for the right to petition for winding‑up in appropriate circumstances is a right conferred by statute, and a would‑be petitioner should not be restrained from exercising it except on clear and persuasive grounds: Re Sinom (Hong Kong) Ltd [2009] 5 HKLRD 487, §§9‑10; Bryanston Finance Ltd v De Vries (No 2) [1976] Ch 63, 78.

3. If it is demonstrated that a petition would be bound to fail, it could be said that to present it would constitute an abuse. The usual ground on which it is said that a petition would be bound to fail, and should therefore be prevented by injunction, is that the debt is bona fide disputed on substantial grounds. Where that is shown to be the case, the person claiming the debt is not established to be a creditor, and is not entitled to present a petition for winding‑up: Mann v Goldstein [1968] 1 WLR 1091.

4. Here, however, the Company admits that it was indebted to the Bank by way of banking facilities in the amount of approximately HK$48.4 million as specified in the statutory demand served on it on 19 August 2020. It is common ground that after some recent repayments, about HK$35.9 million remains owed to the Bank, which is therefore an undisputed creditor. On what basis then does the Company say that a petition presented by the Bank would be an abuse?

5. The contention is that because the Company has already complied with the statutory demand by securing the debt, and the Bank is now “adequately and safely secured”, a winding‑up petition would be abusive. It seems to me, with respect, that this proposition is misconceived both in law and in fact.

6. It is not in dispute that on 22 September 2016, by way of security for repayment of the banking facilities, the Company had executed an assignment of certain accounts receivable in favour of the Bank. I shall describe the nature of these receivables in a moment.

7. Reliance has been placed by the Company on section 178(1)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32), which provides:

“ (1) A company shall be deemed to be unable to pay its debts—

(a) if—

(i) a creditor, by assignment or otherwise, to whom the company is indebted in a sum then due that equals or exceeds the specified amount, has served on the company a written demand—

(A) in the prescribed form requiring the company to pay the sum so due; and

(B) by leaving it at the registered office of the company; and

(ii) 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.”

It is argued for the Company that since it has secured the debt (by reference to the assignment of receivables given long before the demand) and the Bank ought reasonably to be satisfied with the security, section 178(1)(a) has not been satisfied. It is submitted, and I am prepared to assume for present purposes, that section 178(1)(a) covers security given before service of the statutory demand.

8. But even assuming for the moment that section 178(1)(a) is not satisfied, it does not follow that the Bank would not be entitled to present a winding‑up petition. It is well established that a secured creditor may petition for the winding‑up of the debtor company: see Buckley on the Companies Acts (14th ed), p 539; French on Applications to Wind Up Companies (3rd ed), §7.398; Re Alexanders Securities Ltd (No 2) [1983] 2 Qd R 597 (per McPherson J); Re I J Langleb Ltd [1996] 4 HKC 68, 71‑72. Section 178 merely affords a mechanism whereby a company may be deemed to be unable to pay its debts, which is a ground for winding‑up under section 177(1)(d). A demand under section 178(1)(a) is not a sine qua non for winding‑up.[2] Even without satisfying section 178(1)(a), a petitioner may prove in other ways that the company is unable to pay its debts and therefore should be wound up: Bozell Asia (Holding) Ltd v CAL International Ltd & another [1997] HKLRD 1, 7; Re Simpson Development Investment (HK) Co Ltd [1999] 1 HKLRD 202; Cheong Yip Finance (Hong Kong) Ltd v Moscow Narodny Bank Ltd [1979] HKLR 558. Accordingly, the fact that section 178(1)(a) is not satisfied and the deeming provision has not come into play is not a ground for striking out a petition: Ricco (International) Co Ltd v Uni‑Harvest International Ltd [2020] HKCFI 201, §§32‑38 (a decision based on the equivalent section 327(4)(a) applicable to unregistered companies). Nor, in my view, is it a ground for restraining the presentation of a petition. The Company’s reliance on authorities[3] on the nature and...

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