Newocean Energy Holdings Ltd

• Jurisdiction: Bermuda
• Judge: Mussenden J
• Judgment Date: 25 November 2022
• Court: Supreme Court (Bermuda)
• Docket Number: COMPANIES (WINDING UP)

In the Matter of Newocean Energy Holdings Limited

And in the Matter of the Companies Act 1981

[2022] SC (Bda) 15 Com

COMPANIES (WINDING UP)

2021: No. 338

In The Supreme Court of Bermuda

COMMERCIAL COURT

Winding up petition, application for adjournment of petition to pursue restructuring, appointment of joint provisional liquidators, discretion of the Court, good reasons, exceptional circumstances

Appearances:

Kevin Taylor, Walkers (Bermuda) Limited for the Petitioner

Keith Robinson, Carey Olsen Bermuda Limited for the Company

RULING

RULING of Mussenden J

Introduction

1 The Hong Kong Shanghai Banking Corporation (“ HSBC”) filed a Petition on 22 October 2021 (the “ Petition”) for the purposes of winding up NewOcean Energy Holdings Limited (the “ Company”) and to appoint Kenneth Fung, Roderick Sutton (Hong Kong) and Alexander Niles Whittaker (Bermuda) as joint and several provisional liquidators (“ JPLs”) of the Company. The hearing of the Petition was listed for 19 November 2021.

2 The Petition was supported by:

• a. The affidavit of Timothy Calvin Tse (“ Mr. Tse”) sworn on 27 October 2021 (“ TSE 1”) with Exhibit “ TCT-1” and his Second Affidavit (“ TSE 2”) with Exhibit “ TCT-2” which exhibited support letters from other creditors.

• b. The affidavit of Nicholas Howard sworn 19 November 2021 (“ Howard 1”) with Exhibit “NPH-1”. His evidence was that he was a Registered Associate of Walkers and that the firm had received confirmation from three creditors the day before of their position in relation to the Petition.

• c. The First and Second Affirmations of Leung Ming Kai Melodie affirmed on 24 November 2021 and 8 December 2021 with Exhibits “ LMKM-1” and “ LMKM-2” respectively. Her evidence in her Second Affirmation was that creditors who supported the Petition had provided email confirmations that they still supported the making of a winding up order and opposed the appointment of the JPLS on a ‘light touch’ basis in order to restructure the Company.

• d. The First Affidavit of Chan Hiu Yan sworn on 13 December 2021 (“ Chan 1”).

3 The Company filed a Summons dated 17 November 2021 for a hearing also on 19 November 2021 for an application for an order as follows:

• a. Pursuant to section 170(2) of the Companies Act 1981 (the “ CA 1981”) for the appointment of Ms. Lee and Ms. Chan (Hong Kong) and Alexander Niles Whittaker (Bermuda) as JPLs of the Company with immediate effect on a “soft touch” basis to supervise and assist in the formulation and implementation of a scheme of arrangement, leaving the management of the day-to-day affairs of the Company in the hands of the Directors; and

• b. That the Winding Up Petition presented by the Petitioner be adjourned for 4 months.

4 The Company's application was supported by:

• a. The First Affirmation of Shum Chun, Lawrence (“ Shum 1”) dated 15 November 2021 with Exhibit “ SC-1” and his Second Affirmation (“ Shum 2”) dated 18 November 2021 with Exhibit “ SC-2”.

• b. The affidavit of Kyle Masters sworn 25 November 2021 (“ Masters 1”), a counsel of Carey Olsen who brought to the Court's attention letters dated 25 November 2021 received from substantial shareholders of the Company.

• c. The First Affirmation of Shum Siu Hung (“ Hung 1”) dated 9 December 2021 with Exhibit “ SSH-1” and his Second Affirmation (“ Hung 2”) dated 14 December 2021 with Exhibit “ SSH-2”.

5 I held a consolidated hearing of the Petition and the Summons. On 14 December 2021, having heard detailed submissions, reviewed the affidavit evidence and noting that it was in effect the first return date of the Petition, I made several orders including that:

• a. The Petition be adjourned for 4 months to 8 April 2022 at 9:30 a.m.;

• b. Joint provisional liquidators be appointed as proposed by the Petitioner, namely, Kenneth Fung and Roderick Sutton of FTI Consulting (Hong Kong) Limited and Alexander Niles Whittaker of R&H Services Limited, Bermuda with immediate effect; and

• c. The powers of the JPLS will be on the soft touch basis as set out in the Company's Summons dated 17 November 2021 in the Draft Order at Annex A.

6 I stated that I would provide my reasons which I now do.

Company Background

7 The Company (formerly known as Sound International Limited and NewOcean Green Energy Holdings Limited) was incorporated in Bermuda on 19 November 1998 and has been listed on the Main Board of the Stock Exchange of Hong Kong Limited (the “ HKEx” since 3 March 1993.

8 The Company is an investment holding company headquartered in Hong Kong and together with its subsidiaries (collectively, the “ Group”) principally engages in the sales of and distribution of liquefied petroleum gas and natural gas, sales of oil products, sales of electronic products and property dealing and development.

The Petition and Statutory Demand

9 The Petition set out that HSBC is a creditor of the Company as a result of several transactions as follows:

• a. A “ Facility Letter” – dated 21 January 2020 related to a combined limit of US$80,000,000 made available to Sound Agents Limited (a wholly owned subsidiary of the Company “ SAL”) and NewOcean Resources (Singapore) Pte. Ltd. (a wholly owned subsidiary of the Company “ NRS”).

• b. An “ SAL Guarantee” dated 20 September 2007 and an “ NRS Guarantee” dated 23 January 2015 whereby the Company agreed to repay on demand all sums of monies and liabilities incurred and owing by:

  • i. SAL to HSBC under banking facilities provided by HSBC to SAL including the Facility Letter; and

  • ii. NRS to HSBC under the Facility Letter.

• c. A “ 2016 Facility Agreement” dated 25 August 2016 relating to a US$150,000,000 term loan facility; and

• d. A “ 2018 Facility Agreement” dated 28 May 2018 relating to HSBC's participation of US$30,000,000 of a term loan facility with an aggregate amount of US$340,000,000.

10 The Petition set out that over time, the Company defaulted under various circumstances to repay amounts owing to HSBC. On 30 September 2021, HSBC served a Statutory Demand (the “ Statutory Demand”) on the Company demanding the immediate repayment of the sum of HK$5,799,061.20 and US$70,646,036.85 (together, the “ Aggregate Outstanding Amount”). By the 22 October 2021 date of the Petition, the Company had not made payment of the Aggregate Outstanding Amount in full or in part to HSBC, which had engaged with the Company with a view to agreeing a repayment plan or restructuring agreement without success due to lack of cooperation by the Company. The Petition stated that pursuant to sections 162(a) and/or (c) of the CA 1981, the Company is deemed to be unable to pay its debts and should therefore be wound up. Further, or in the alternative, it was just and equitable that the Company should be wound up.

Submissions of the Petitioner

11 Mr. Taylor submitted that it was indisputable that the Company was insolvent pursuant to the CA 1981 and should be would up as it had failed to satisfy the Statutory Demand in accordance with section 162(a) and as such was unable to pay its debts in accordance with section 162(c).

12 Mr. Taylor submitted that the Court's discretion in whether to make a winding up order upon the hearing of a petition is set out in section 164(1) of the CA1981, namely:

“On hearing a winding-up petition the Court may dismiss it, or adjourn the hearing conditionally or unconditionally, or make any interim order, or any other order that it thinks fit, but the Court shall not refuse to make a winding-up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets or that the company has no assets.”

13 Mr. Taylor submitted that the Bermuda Court has repeatedly confirmed, for example, in Re LAEP Investments Limited [2014] Bda LR 35 that on an application for a winding up order:

“A petitioner who can prove that a debt is unpaid and that the company is insolvent is entitled to a winding-up order ex debito justitiae, which has been taken to mean that, in accordance with settled practice, the court can exercise its discretion in only one way, namely by granting the order …”

14 Mr. Taylor also submitted that a petitioning creditor is not required to demonstrate that the winding up order will result in the greatest return to creditors as a whole in order to establish his right to a winding up order. He cited Neuberger J (as he then was) who considered the test in Re Demaglass Holdings Ltd [2001] 2 BCLC 633 at 638a, stating:

“… the petitioning creditor has to establish the possibility of the prospect of some sort of benefit from a winding up. The test, however appears to be a low one. In Re Crigglestone Coal Company Limited [1906] 2 Ch 327 Collins, MR, appears to have thought that the petitioner need only show a reasonable possibility of some advantage (see 333A). The other two members of the Court of Appeal seem to have considered that the test was even lower than that. Romer LJ at 338 observed that he could not say that the prospect was “hopeless”. At 339 Cozens-Hardy LJ said the evidence against the petitioners “did not support the contention that there is no possibility” of a dividend being paid to the unsecured creditors.”

15 Mr. Taylor's principal submission in light of the above-referenced cases was that in the absence of a good reason, a creditor of a company is entitled to a winding up order virtually as of right.

Views of the Creditors

16 Mr. Taylor referred to evidence that there were numerous supporting creditors who supported the winding of the Company and the appointment of the JPLs. Those creditors were owed a significant majority of the Company's total debt, around 65.37%. He relied further on Neuberger J in Re Demaglass at 638 where he stated:

“… there is authority for the proposition that a winding-up order will be made if the majority of creditors support the petitioner, and can only be refused if the...