CFA upholds winding-up; consent judgment fixes creditor standing

The Court of Final Appeal has unanimously dismissed China Properties Group Limited's appeal against its winding-up orderJudiciary, holding that a Mainland consent judgment conclusively establishes the petitioner's standing as a creditorJudiciary. In FACV8/2026 ([2026] HKCFA 34), dismissed at the hearing on 11 September 2026Judiciary with reasons given on 14 October 2026, the Court further held that assignment of the underlying loan without notice to the debtor leaves the assignor with standing to petitionJudiciary, and that where an appeal against a winding-up order brought in the sole name of an insolvent company is dismissed, the Court has power to order the costs of and occasioned by the appeal to be paid to the respondent by the instigators and funders of the appeal rather than out of the company's assets.

In September 2017 JIC Trust Co., Ltd lent RMB 1.2 billion to a subsidiary of the company, with the company as guarantor. After default, Zhejiang High People's Court proceedings ended in a consent judgment dated 3 April 2020Judiciary under which the company acknowledged joint and several liability. Following enforcement against security realising RMB 1,444,930,866.20, the petitioner issued a Hong Kong statutory demand in January 2022 for the balance of RMB 713,082,934.17 and petitioned to wind up the company.

The company's challenge turned on an alleged assignment of the loan to a third party before presentation of the petition. The Court gave three answers. First, the petition debt is the consent-judgment debt, not the underlying loanJudiciary, and the Zhejiang consent judgment is final and conclusiveJudiciary: unalterable in the court that pronounced it, confirmed by dismissal of every retrial application and the People's Procuratorate's refusal to intervene, and entered after the company withdrew its own standing challenge. It therefore conclusively establishes the petitioner as a creditorJudiciary, with standing to petition following under Hong Kong law as the lex foriJudiciary.

Secondly, there was no evidential basis for going behind the judgmentJudiciary: the Court of Appeal had refused the new evidence because the Zhejiang transcript showed the company knew of the alleged assignment as early as April 2020, so no own-motion inquiry into jurisdiction arose.

Thirdly, even taken at face value the assignment would not defeat standingJudiciary. An assignment without notice to the debtor takes effect in equity onlyJudiciary, and an equitable assignor keeps locus to petitionJudiciary: unlike an action to enforce the debt, a petition invokes collective execution in which creditors' rights are settled later, so the assignee need not be joined. Creditor standing goes to locus, not jurisdictionJudiciary — section 176 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance confers the jurisdiction, and an error on standing is appealable, not a nullityJudiciary.

On costs, the Court held it has power, through section 17 of the Hong Kong Court of Final Appeal Ordinance and section 52A of the High Court Ordinance, to order the appeal's instigators and funders to pay the petitioner's costs on an indemnity basisJudiciary, certified fit for two counsel, with each joined party given 14 days to show cause. On security for costs, only up to HK$400,000 may be required of non-parties as a leave condition under section 25Judiciary; a consensual top-up given after leave conditions are met is not caught by the cap. The Court urged the Chief Executive in Council to raise the 1997-era maximum and legislate an express non-party security power.

Legal basis: Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32), ss 176–178; Hong Kong Court of Final Appeal Ordinance (Cap. 484), ss 17, 25; High Court Ordinance (Cap. 4), s 52A.