Chan Chung Wai and Others v. Jan Nam Hong Ltd and Others

HCCW000228/1990

IN THE SUPREME COURT OF HONG KONG

COMPANIES (WINDING-UP) NO.228 OF 1990

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BETWEEN

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Coram: Hon. Jones J. in Court

Date of hearing: 8 May 1991

Date of delivery of judgment: 8 May 1991

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JUDGMENT

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1. By a motion dated the 4th February 1991, the 2nd to the 7th respondents apply for an order to strike out the prayer in the petition that seeks a winding up order. The other reliefs sought in the motion are no longer pursued.

2. The petition was presented by four minority shareholders on the 30th July 1990 for a winding up order on the just and equitable ground that the affairs of the company are being conducted in a manner unfairly prejudicial to a part of the members of the company including the petitioners and under s.168A of the Companies Ordinance for an order that the shares of the petitioners be purchased at a fair price.

3. The dispute is between two families, the CHAN family (the petitioners) and the CHANG family (2nd - 7th respondents). The 8th and 9th respondents are a third group of shareholders who do not belong to either family. Mr Chain on their behalf, has taken a neutral stance upon this application as has the Official Receiver represented by Mr Millican.

4. It appears from the petition and supporting evidence that the company was formed as a quasi partnership.

5. When the application started this morning, Mr Chow, on behalf of the 2nd - 7th respondents said that his clients would not oppose the application for a winding up order but, surprisingly, Mr Yuen on behalf of the petitioners, said that he had instructions not to proceed at this stage, but instead made an application for an adjournment in order to make certain investigations. No good reason was put forward in support of the application with the result that the adjournment was refused, see Re X 10 Ltd. (1989) 2 HKLR 306.

6. Mr Yuen went on to say that the petitioners were not prepared to proceed today to obtain a winding up order as they had elected in preference to seek an order under s.168A and only wished to avail themselves of a winding up order if they should fail under s.168A.

7. My attention was drawn by Mr Chow to a Practice Direction issued in England on the 22nd February 1990 by the Vice-Chancellor that is concerned with an alternative prayer for a winding up order when relief is claimed under s.459 of the Companies Act 1985 the equivalent of s.168A. Paragraph 1 of the Practice Direction reads :-

"Practitioners' attention is drawn to the undesirability of including as a matter of course, a prayer for winding up as an alternative to an order under s.459 of the Companies Act 1985. It should be included only if that is the relief which the petitioner prefers or if it is considered that it may be the only relief to which he is entitled."

That practice direction does not apply in Hong Kong, but is a useful guideline and in any event, in England, does not preclude the incorporation of such a prayer in a petition.

8. Mr Yuen cited Re a Company No. 001363 of 1988 (1989) 5 BCC 18, which involved an application to strike out or stay a contributory's petition for a winding up order on the just and equitable ground on the grounds that the petitioner was unreasonable in not accepting an offer by the respondent to purchase the one share registered in the petitioner's name. However, as the petitioner claimed a beneficial interest in half the 6,500 shares of the company, the court held, in its discretion that the petition should stand so that the application was dismissed. The facts in this case are quite different for the petitioners have presented a petition that seeks a winding up order of the company with an alternative prayer under s.168A, but now seek to resile from that "position by exercising their preference to proceed only under s.168A. Such conduct by the petitioners in using the winding up process under these circumstances is an abuse of the process of the court.

9. Mr Yuen submitted that the petitioners will be deprived of its rights under s.168A if a winding up order is made, but this argument is misconceived. Although different considerations apply to a contributories petition as I said in Re X 10 Limited (1989) 2 HKLR 306, it is clearly improper that the petitioners should be allowed to proceed to hold a prayer for a winding up order over the company indefinitely with all the well known consequences that will result.

10. For the petitioners to present a petition, seeking a winding up order, albeit an alternative, and faced today with the respondents' consent to such an order being made and then announcing a preference to proceed under s.168A, can only result in the court expressing its strong disapproval. The action taken by the petitioners, as I have said, amounts to an abuse and in those circumstances, I shall make an order to strike out the prayer for a winding up order.

Representation:

Mr Rimsky K.K. Yuen (Howell. & Co.) for Petitioners

Mr Kenneth Chow (Lau Wong & Chan) for 2nd to 7th Respondents

Mr Benjamin Chain (Wong & Chan) for 8th and 9th Respondents

Mr J.W. Millican for Official Receiver