RE CHINA GREENFRESH GROUP CO, LTD

HCCW 213/2020, HCCW 83/2020 and HCCW 187/2020
(HEARD TOGETHER)

[2021] HKCFI 1257

HCCW 213/2020

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 213 OF 2020

____________________

____________________

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 83 OF 2020

____________________

____________________

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 187 OF 2020

____________________

____________________

(HEARD TOGETHER)

________________

D E C I S I O N

________________

1.  I have before me three petitions issued against the Company. One of these HCCW 83/2020 has already been the subject of a substantive decision which is dated 14 April 2021. I will not repeat the reasoning in that decision. My conclusion was to adjourn the petition until today. I also have before me HCCW 187/2020, which has also been the subject of a decision, is dated 21 December 2020. I adjourned that petition until today in order to decide when considering the other petitions what form of order I should make.

2.  As I explained in the decision of 21 December 2020, this Company is unfortunately illustrative of an unhealthy practice which has come to my attention, namely, of creditors issuing winding up petitions when a petition has already been presented.  There is another relevant decision, although it does not concern this Company, in HCCW 21/2021 in which I deal with how the court should dispose of subsequent petitions which it is of the view should not have been issued in the first place.  I do not need to repeat the contents of that decision which is dated 19 April 2021.

3.  The first Petition to be presented was HCCW 83/2020. The Petitioner and the Company have agreed the directions that I should make which are as follows:

(1) The Petition be adjourned to 26 July 2021 at 9:30am before the Companies Judge.

(2) The Company do have leave to file and serve affidavit evidence dealing with the progress of the restructuring of the Company’s indebtedness generally by 5:00pm on 12 July 2021.

(3) The Petitioner do have leave to file and serve affidavit evidence in reply by 5:00pm on 19 July 2021

(4) No further affidavit evidence be filed without the leave of the Court.

(5) The parties are to file and serve their proposed directions and brief explanatory submissions by 4:30pm on 21 July 2021.

(6) Costs of today’s hearing be in the cause of the Petition.

4.  So far as HCCW 187/2020 is concerned, the Petitioner and the Company have agreed that I should make an order that the petition be removed from the court file and there be no order as to costs.

5.  During the hearing of the petition involving Grand Peace Group, I considered with Mr Ho what in practice, is the difference between ordering dismissal and ordering removal of a petition which should never been issued removed from the court file was.  In short, as I explained it will normally be appropriate to order dismissal where the court takes the view that it is clear the petition should never had been presented, but order removal if there is some extenuating circumstance, such as the Petitioner not being aware of the earlier petition.

6.  There is the purely administrative question of what in practice the order means.  Since the hearing on 19 April 2021 Mr Ho has helpfully checked how the practice operates in the Chancery Division in London.  I am told that the practice there is as follows.  If the document in question is a physical document, it is removed from the physical court file and destroyed.  If the document, and this is not currently relevant in Hong Kong but presumably will become so in due course, is digital, the digital document is simply deleted.  It would seem to me that this is how as a matter of administration the Hong Kong Court should deal with the file if the court orders that a document be removed from it.

7.  The remaining matter to be dealt with is petition HCCW 213/2020.  It is not in dispute that I should make an order dismissing that petition which I do.  The only issue is costs.  My initial view was that as the Petitioner was at fault for issuing the petition, it should bear the costs.  However, having heard from Mr Lok and Mr Ho and looked at the correspondence passing between the solicitors, it seems to me that the way in which both parties’ solicitors dealt with the matter was sufficiently muddled, that it is appropriate to make no order as to costs.

HCCW 187/2020

[2021] HKCFI 36

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING‑UP PROCEEDINGS NO 187 OF 2020

________________

________________

________________

D E C I S I O N

________________

1.  I have before me an amended petition seeking the winding up of the Company on the grounds of insolvency. The Company is incorporated in the Cayman Islands and its shares are listed on the Main Board of the Hong Kong Stock Exchange, with stock code: 6183. If the petition were to proceed the Company would object to a winding-up order being made on the grounds that the three core requirements which a petitioner needs to satisfy before the court will exercise its discretionary jurisdiction to wind up a company incorporated outside Hong Kong cannot be satisfied. However, it will not be necessary, at least on this petition, to determine that issue for the following reasons.

2.  This Petition is not the only petition that has been issued against the Company.  There are four other petitions.  In terms of date of issue, this is the fourth.  The first petition HCCW 83/2020 is listed for trial before me on 14 April 2021 (“First Petition”). The fifth petition, HCCW 213/2020 has also been listed for trial.  The trial is due to take place on 29 April 2021.  As I understand it the two petitions have been listed for trial pursuant to consent summonses and I assume in the case of HCCW 213/2020, that I was not alerted to the fact that there was already an earlier petition.

3.  It would appear to be becoming an increasing problem this year, perhaps as a result of the very large number of listed companies in Hong Kong which are encountering financial difficulties, for creditors to issue multiple petitions.  This is not the appropriate practice. I will, therefore, explain the relevant principles and practice to discourage solicitors from issuing petitions when the debtor company is already subject to a winding-up petition.  I would note that Ms Euchine Ng who appeared for the Petitioner did not dispute these principles and practice.

4.  It is well-established that:

(a)     “it is inappropriate for there to be more than one petition pending against a company”: Re Anwell Building Construction Co Ltd [1]; and

(b)     “it is most unusual for there to be two bankruptcy (or winding up) petitions pending simultaneously in respect of the same debtor.  Consistent with the principle that a bankruptcy petition is a class remedy, the legislation, rules and court practice are generally based upon the notion that there should only be one petition against a debtor at any one time”: Edgeworth Capital (Luxembourg) SARL v Maud.[2]

5.  In England, paragraph 9.2 of the Practice Direction (Insolvency Proceedings) [3] provides that:

“Before presenting a winding up petition, the creditor must conduct a search to ensure that no petition is pending. Save in exceptional circumstances a second winding up petition should not be presented whilst a prior petition is pending. A petitioner who presents a petition while another petition is pending does so at risk as to costs.”

6.  Where there are multiple petitions, the conventional practice is as follows:

(a)     Absent exceptional circumstances, any winding-up order should be made on the first petition and subsequent petitions should be removed from the court file: Gamlestaden plc v Brackland Magazines Ltd.[4]

(b)     Where there are exceptional circumstances justifying the existence of multiple petitions on the court file, any winding-up order should still be made on the first petition: Edgeworth Captial (Luxembourg) SARL v Maud.[5]

(c)     The first petition would not be dismissed without the subsequent petitioners being given an opportunity to apply for substitution: Islandsbanki HF v Stanford.[6]

7.  With the First Petition pending, this Petition is procedurally improper.  The Petitioner may appear on the First Petition as a supporting creditor.  If necessary the Petitioner “…can be substituted for the petitioner if the petitioner has been paid off or is otherwise unwilling to proceed with the petition”: Hood v JD Classics Ltd.[7]

8.  It seems to me that for the reasons explained in the previous paragraphs, it is inappropriate and would be a waste of resources for the present Petition to be allowed to continue.  As will be apparent from what I have said the standard order that is made in England is that the offending petition is withdrawn from the file.  I considered with counsel whether or not this was the appropriate way to frame the order in Hong Kong given our administrative process which is dealt with by the High Court Registry.

9.  It does not seem to me that I can today determine conclusively what the best form of order is in this kind of case. What I shall do is to adjourn the Petition until the determination of the First Petition, for further consideration of the form of order of that should be made terminating the unnecessary petition proceedings against the Company.

10.  Having said that I anticipate that the order that may be made, regardless of whether or not the First Petition is successful, is that there should be no order on the current Petition.  However, as I have said I will give this further consideration with a view to indicating a more developed view in the decision that will be handed down as a result of the hearing of the First Petition in April.  I will also reserve the costs of the present Petition.