Case Document

100%Judiciary

HCCW000019C/1998

HCCW 19/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING UP NO. 19 OF 1998

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	In the matter of section 221 of the Companies Ordinance, Chapter 32

	AND

	In the matter of Weihong Petroleum Company Limited

BETWEEN
	PINEMILL COMPANY LIMITED	Applicant

	AND

	LAI HONG SAN	1st Respondent
	YUE CHUN SHAN	2nd Respondent
	TONG CHI KEUNG	3rd Respondent
	LIU YING SHING, CLAUDIUS	4th Respondent
	DS CHEUNG & COMPANY	5th Respondent

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Coram: Hon Kwan J in Chambers

Dates of Hearing: 17 and 18 July 2001

Date of Decision: 18 July 2001

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D E C I S I O N

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1.This is an application made by Pinemill Company Limited, the applicant herein, and the liquidators of Weihong Petroleum Company Limited ("the Company") for an interlocutory injunction to restrain the 3rd respondent Mr Tong Chi Keung from leaving the jurisdiction until after the completion of a private examination ordered by Yuen J on 10 May 2000 under section 221 of the Companies Ordinance, Cap. 32.

2.The hearing of the examination commenced on 10 July 2001. The 3rd respondent did not appear. I made a warrant for his arrest on that day. That was discharged by me when the 3rd respondent was apprehended and brought to the court on 17 July. It is in those circumstances that the applicant and the liquidators applied for the injunction that I have mentioned.

3.There are two broad issues to be considered here. One is whether I have jurisdiction to grant the injunction sought; and if that is answered in the affirmative, whether I should exercise my discretion and grant the injunction.

4.On the jurisdiction issue, it was submitted by Mr Ambrose Ho, SC and Mr Kinnison that my jurisdiction is vested under section 21L of the High Court Ordinance, Cap. 4, which provides as follows:

"(1) The Court of First Instance may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the Court of First Instance to be just or convenient to do so.

(2) Any such order may be made either unconditionally or on such terms and conditions as the Court thinks just."

5.I was also referred to the case of Re Oriental Credit Limited [1988] Ch. 204, a decision of Harman J in which he held that the court does have jurisdiction in granting an injunction to restrain a director from leaving the jurisdiction in aid of an order that the director is to attend court for private examination, under section 561 of the Companies Act 1985, which is similar to our section 221. It was held that the injunction sought must necessarily be available to be made in aid of and ancillary to an order for examination, for it would be astonishing if the court could exercise a summary power to arrest a person for failing to attend and not have jurisdiction to restrain him from leaving the jurisdiction until the examination is concluded. It would appear from the report that an appeal was made to the Court of Appeal. Harman J's decision on the jurisdiction point must have been affirmed as the Court of Appeal had only reduced the amount of the bond ordered from ￡250,000 to ￡50,000.

6.Mr Benjamin Chain, who appeared on behalf of the 3rd respondent, has not argued that Re Oriental Credit Limited was wrongly decided on the point concerning jurisdiction. And I do not understand him to contend that the court would have no jurisdiction to grant an injunction sought under section 21L of the High Court Ordinance if there had been no other provision of relevance in Cap. 4.

7.Mr Chain's argument is that the jurisdiction to grant the injunction is founded only on section 21B in Cap. 4, not section 21L, because section 21B has provided for a comprehensive code. Hence, the powers of the court to grant an injunction under section 21L must have been circumscribed and cannot be invoked. I was referred by Mr Chain to the case of L.A.C. Louvet & Anr. v. M. S. Louvet [1990] 2 HKLR 596 at 602 D. I do not consider that judgment of the Court of Appeal to be of assistance, because the very point, namely that whether section 21L has been circumscribed by section 21B has not been considered by the court.

8.For my part I entertain doubts if section 21B, which provides for a prohibition order, is applicable, notwithstanding Mr Chain's submission that the present case would fall within 21B(1)(b)(ii) in that there is an order against the 3rd respondent, "requiring him to deliver any property or perform any other act".

9.It is unnecessary for me to resolve the point if section 21B is indeed applicable. For this application I am satisfied that I do have jurisdiction under section 21L, which is worded in very wide terms. In the absence of clear language in Cap. 4, I do not think the powers under that provision have been circumscribed as submitted.

10.I turn to consider whether I should exercise my discretion in this situation. The question I have to consider is whether there is a serious risk that the 3rd respondent may not turn up at the adjourned hearing of the private examination.

11.I have considered the affirmation he filed today and the submissions made on his behalf yesterday and today. The 3rd respondent has alleged that he did not receive the Notice of hearing sent by fax by his former solicitors to his office in Hong Kong on 28 October 2000, because the company that occupied the office, Grand Petroleum Holdings Limited, had vacated the premises in late September or early October 2000.

12.Assuming in his favour that he did not receive the fax on 28 October 2000, I would still need to consider the other matters in his affirmation to assess whether there is a risk that he may not turn up, and how serious that risk would be.

13.The 3rd respondent was aware of the investigation by the liquidators as early as 1998. He was aware of the application of Pinemill Company Limited for an order for examination. That application was made in 1999 and was opposed by the 3rd respondent initially, although he subsequently withdrew his opposition.

14.In July 1999 he filed an affirmation deposing that he had moved out of his residential address at No. 8 Repulse Bay Road since October 1997. He did not, however, give his new residential address in his affirmation. Instead, he provided a "correspondence address" being the address of Grand Petroleum Holdings Limited at Vicwood Plaza.

15.During all this time, it would appear from the 3rd respondent's affirmation in July 1999 and his latest affirmation, that he had spent over two-thirds of his time in China, and that he rarely attended the Hong Kong office.

16.When Grand Petroleum Holdings Limited vacated the premises at Vicwood Plaza, the 3rd respondent did not notify the solicitors who were then acting for him of this. It would appear from paragraph 12 of his recent affirmation that the 4th respondent had notified the same solicitors of the change of his office address as correspondence from 28 October 2000 onwards addressed to the 4th respondent had been sent to the 4th respondent's new address.

17.No explanation was given why his solicitors was not notified of the 3rd respondent's new office address in Hong Kong, when his company moved, as I have been told, to a new office at China Merchants Tower early this year.

18.The 3rd respondent's former solicitors had attempted to contact the 3rd respondent and his wife, by leaving messages on their pagers on no less than five occasions in April and May 2001. It was because the solicitors could not contact the 3rd respondent that they applied to cease to act for him in June 2001.

19.I have considered the explanation given by the 3rd respondent as to why he and his wife did not receive the messages left on their pagers. I do not think they are valid reasons. I am left with the distinct impression that the 3rd respondent had put himself in a position not to be reached when it suited his convenience. He had never, of his own initiative, made enquiries with his former solicitors of the hearing date or contacted his solicitors to give instructions to them, or made any enquiries with the 4th respondent whom he was meeting in connection with their company, Grand Petroleum Holdings Limited, as late as in April 2001. There was no explanation as to why the 3rd respondent and his wife had failed to check any one of the five messages left on their pagers when they were in Hong Kong.

20.The inference I draw is that there is a risk the 3rd respondent may not co-operate with the liquidators and attend for examination at the adjourned hearing. That risk would be increased substantially if he were allowed to leave the jurisdiction as he has every intention to do, because he has business to attend to in the mainland.

21.In my judgment, an injunction is warranted in this situation. The question I have to ask is whether conditions should be imposed, and that is where I come to the hardship that may be suffered by the 3rd respondent. I bear in mind that the hearing of the examination is to be adjourned to a date to be fixed. It is not known how early the new hearing dates would be, even if I were to direct that early dates be given. The 3rd respondent's business is conducted in China with offices in Shenzhen, Guangzhou and Beijing. I gather that he travels frequently in the mainland.

22.It seems to me that he would suffer hardship if he is not allowed to leave the jurisdiction to attend to his legitimate business in the meantime. In my view, the interests of justice would be served if the 3rd respondent is allowed to leave the jurisdiction on condition that he provide sufficient security for his attendance.

23.I do not propose to fix the amount of the security by reference to the amount of the judgment obtained by the applicant against the Company, or the loss of assets suffered by the Company. In my view, the objective of the security is to ensure the 3rd respondent's attendance.

24.The security that was offered by Mr Chain for the 3rd respondent is that the 3rd respondent's wife would give an undertaking to pay an amount up to HK$1.5 million in the event that the 3rd respondent does not appear. Mr Chain produced a copy of a land search of a shop in Mosque Street which is owned by the 3rd respondent's wife with a letter from the mortgagee bank to the effect that the outstanding loan balance as at 3 July 2001 was about HK$1.8 million. The property was bought in 1993 at about $HK6.1 million. I have been told by Mr Chain, although no valuation has been provided, that he is instructed that the value of the property at present would be about HK$3.5 million. The 3rd respondent's wife will further undertake not to dispose of or further encumber that property in the meantime.

25.It is trite that any security offered for this purpose must be sufficient security. I have no information regarding the financial situation of the 3rd respondent. I was told by Mr Chain that none would be provided to the court. I have no idea of the size of the business, or the nature of the business conducted by the 3rd respondent, except that he has offices in three cities in China, and an office in Hong Kong.

26.It is with a degree of reluctance that I fix the amount of security in this instance at HK$1.5 million. However, the method of providing the security would not be as proposed by Mr Chain, given the wholly inadequate information I have regarding the assets of the 3rd respondent and his wife.

27.As property prices in Hong Kong have fluctuated greatly in the past few years, providing the unencumbered equity of the wife's property as security is wholly unsatisfactory in my view. I propose to order that the security be provided, either by making a payment into court, or by providing a bank guarantee.

28.In the event that the 3rd respondent should fail to attend court, the amount of the security is to be forfeited to the Company. I should add that I do not propose to order any undertaking as to damages to be given by the applicant or the liquidators for the reasons that I have given in my ruling yesterday.

29.Given that there is a history of the 3rd respondent failing to contact his solicitors, and failing to provide a new address when he has moved, I would make an appropriate order in that regard.

30.The orders I make are as follows:

(1) An injunction is granted that the 3rd respondent be restrained from leaving the jurisdiction until after the completion of the private examination ordered by Yuen J on 10 May 2000.

(2) The injunction in paragraph (1) is to cease to have effect on the 3rd respondent making payment of HK$1.5 million into court, or providing a bank guarantee to the liquidators of a like amount as security for his attendance at the private examination.

(3) The security provided pursuant to paragraph (2) is liable to be forfeited to the Company in liquidation on failure of the 3rd respondent to attend court for examination.

(4) The 3rd respondent is to inform the solicitors for the applicant and the solicitors for the liquidators in writing if there should be any change of the information provided in paragraphs 4 and 5 of his affirmation made on 18 July 2001 within three days of any such change.

(5) In the event of any disagreement on the terms of the guarantee to be provided by the 3rd respondent, the parties be at liberty to apply to the court.

[Ruling on costs omitted.]