Company law — winding-up — petition — dispute by company of debt relied on by petitioner — dispute covered by arbitration clause — petition should generally be dismissed — winding-up order as discretionary class remedy — exceptional circumstances in which issuance of petition before conclusion of arbitration justified
P issued a petition to wind up a company, C, on the grounds of insolvency relying on a statutory demand. The statutory demand sought payment of a debt said to arise under a management services agreement (the Agreement). C applied to strike out the petition. The Agreement contained a clause which provided for the parties to refer any dispute to arbitration if it was not settled by mediation. At issue was the impact of an arbitration clause on the Court’s discretion to make a winding-up order.
Held, dismissing the petition, that:
- A winding-up petition should generally be dismissed: (a) if a company disputed the debt relied on by the petitioner; (b) the contract under which the debt was alleged to arise contained an arbitration clause that covered any dispute relating to the debt; and (c) the company took the steps required under the arbitration clause to commence the contractually mandated dispute resolution process (which might include preliminary stages such as mediation) and filed an affirmation in accordance with r.32 of the Companies (Winding-up) Rules (Cap.32H, Sub.Leg.) demonstrating this. The Companies Court would be holding a creditor to his contractual bargain to resolve any dispute by arbitration. A creditor issued a petition for the purpose of recovering his debt, not out of some altruistic concern for the creditors of the company generally (Re Quicksilver Glorious Sun JV Ltd  4 HKLRD 759, Salford Estates (No 2) Ltd v Altomart Ltd (No 2)  Ch 589, Revenue and Customs Commissioners v Changtel Solutions UK Ltd  1 WLR 3911, Eco Measure Market Exchange Ltd v Quantum Climate Services Ltd  BCC 877, BDG v BDH  5 SLR 977 applied; In re Crigglestone Coal Co Ltd  Ch 327, In re Cases of Taffs Well Ltd  Ch 179, New Hampshire Insurance Co v Rush & Tompkins Group plc  2 BCLC 471, Joseph Ghossoub v Team YR Holdings Hong Kong Ltd (CACV 6/2017,  HKEC 1532) considered; Hollmet AG v Meridian Success Metal Supplies Ltd  4 HKC 343, Re Sky Datamann (Hong Kong) Ltd (HCCW 487/2001,  HKLRD (Yrbk) 22), Re Jade Union Investment Ltd (HCCW 400/2003,  HKEC 306) not followed). (See paras.24–28, 31.)
- As a consequence of a winding-up order’s character as a discretionary class remedy, there might be exceptional circumstances in which a creditor whose debt was disputed would be justified in issuing a petition before an arbitration had been concluded. An example would be where there was a risk of misappropriation of assets or some other matter, which would normally justify the court appointing provisional liquidators (Jinpeng Group v Peak Hotels and Resorts (BVIHCMAP 2014/25 and 2015/0005, 8 December 2015) considered). (See paras.29–30, 31.)
- Further, failure to comply with r.32 might have the same consequences even where there was an arbitration clause as would be the case where there was not. The Companies Court might take the view in the exercise of its discretion that in the absence of any evidence being filed in time by the company, it should be wound up immediately or a condition imposed for allowing the necessary evidence to be filed out of time such as payment into court. (See para.31.)
- Here, C disputed the debt and required the dispute to be resolved in accordance with the arbitration clause in the Agreement. The petition should therefore be dismissed. (See para.32.)
This was an application by the respondent-company to strike out a petition for its winding-up. The facts are set out in the judgment.