In Joint and Several Liquidators of Hsin Chong Construction (Asia) Limited v Wong Po Kee Limited & Others [2026] HKCA 1656, the Hong Kong Court of Appeal has handed down a recent decision clarifying the scope, application and limits of section 182 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32).
Amongst other issues, the judgment addresses (1) the Court’s jurisdiction to grant declarations and payment orders in section 182 applications and (2) the implications of a pre-petition agreement effectively divesting a company of its property. This article considers the implications for liquidators pursuing asset recovery and for parties who have received payments from companies subsequently wound up.
Key Facts
Section 182 of Cap. 32 provides that any disposition of the property of a company made after the commencement of its winding up is void unless the Court otherwise orders.
In this case, the Company was the main contractor for the construction project of the Hong Kong Ocean Park Marriott Hotel. In May 2017, when the Company was in financial difficulty, it entered into a supplementary agreement with the employer providing for the employer to pay certain nominated subcontractors directly rather than via the Company. The Company was subsequently wound up in June 2020, with the winding up deemed to have commenced in November 2018 when the petition was presented.
After the presentation of the winding-up petition, the employer made approximately HKD54.4 million in direct payments to the nominated subcontractors pursuant to the pre-petition agreement. The liquidators of the Company sought declarations that these payments were void under section 182 and orders for repayment. At first instance, the judge held the post-petition payments were caught by section 182 and ordered repayment to the liquidators. The nominated subcontractors appealed.
The Court of Appeal's Decision
On the jurisdictional question, the Court of Appeal rejected the argument advanced by the appellants that the court has no power to grant declarations or payment orders in a section 182 application by liquidators. Where a disposition is found void under section 182, the Court has jurisdiction to grant consequential relief including both proprietary and restitutionary remedies, and is not confined to making validation orders.
However, the Court allowed the appeal on the substantive issue. Departing from the interpretation of the supplementary agreement by the first instance judge, the Court of Appeal held that the pre-petition agreement had effectively divested the Company of its right to receive the relevant payments from the employer. By the time of winding up, that right was no longer the Company’s property. Therefore, the subsequent payments to the nominated subcontractors were not dispositions of the Company’s property and fell outside the ambit of section 182. Importantly, the Court held that a tripartite agreement involving the payment recipients is not necessary. The right to payment was a matter of bilateral contract between the Company and the employer, which could be varied by their mutual agreement alone.
Key Takeaways
The decision provides welcome clarity on the court’s jurisdiction under section 182. Liquidators can be confident that when a disposition is found void, the court has power to grant declarations, payment orders and other consequential relief all within a section 182 summons without the need for separate proceedings.
The decision also highlights an important limitation of section 182. Where a company has entered into a binding pre-petition agreement that effectively divests it of the right to receive certain payments, those payments may fall outside section 182 entirely even if they are made after the commencement of winding up. Liquidators should carefully analyze the pre-petition contractual framework to identify which rights were still vested in the company as of the date of the winding-up petition. The distinction between varying a payment mechanism and extinguishing an underlying right to payment is one that needs to be scrutinized closely.
The decision also addressed several noteworthy points of principle:
- Estoppel not a defence to a section 182 claim: The Court of Appeal has confirmed that parties cannot defend against a claim made by liquidators under section 182, enacted on grounds of general public policy to protect the pari passu principle, by relying on estoppel based on a course of conduct of the parties. The proper route is to seek the Court's validation order.
- Trust assets outside the ambit of section 182: Certain retention monies held by the Company on trust for the nominated subcontractors were held by both the first instance judge and the Court of Appeal to not be beneficially owned by the Company, thus falling outside section 182 altogether.
- Concrete evidence required for Liquidators to exercise the Company's right to set-off: The Company had a contractual right to set-off any amounts owed by the nominated subcontractors to the Company under the relevant subcontracts against the retention monies. The Court of Appeal overturned the first-instance order requiring the nominated subcontractors to pay the trust monies to the liquidators to be held in separate trust accounts pending investigation of the Company's potential set-off claims, holding that the liquidators had not demonstrated a prima facie case of set-off with concrete evidence beyond general assertions and estimated quantum. Liquidators who wish to preserve trust assets pending investigation of potential set-off claims must be prepared with a substantiated case.
- Rule in Ex parte James inapplicable to restrain liquidators seeking recovery of assets for general creditors: The rule in Ex parte James provides for judicial discretion to restrain liquidators from enforcing a claim if it is inter alia "not honourable", "not high minded" or "contrary to natural justice". The Court of Appeal held that it is entirely proper for liquidators to take action to seek recovery of assets caught by section 182 for the benefit of the general creditors in furtherance of the pari passu principle underpinning Hong Kong's insolvency legislation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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