Geoglobal Partners, Llc v. Peaktop Technologies (Usa) Hong Kong Ltd and Another

HCCW 87/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 87 OF 2007

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BETWEEN

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Before: Hon Kwan J in Chambers

Date of Hearing: 12 December 2007

Date of Decision: 12 December 2007

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D E C I S I O N

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1.This is a summons to amend a winding-up petition on the just and equitable ground.  The petition was presented by Geogolobal Partners, LLC against Peaktop Technologies (USA) Hong Kong Limited (“the Company”) on 22 February 2007.  The Company is the 1^st respondent, the 2^nd respondent is Peaktop Investment Holdings (BVI) Limited (“PT Investment”).  The summons to amend the petition was issued on 15 August 2007.  It is opposed by the respondents on two broad grounds.  Firstly, it is alleged that the amendments introduce new grounds of complaint to found the petition that did not exist at the time the petition was presented.  Secondly, it is contended that the amendments are useless, immaterial and irrelevant.

2.It is unnecessary to set out the background to the petition.  Suffice it to say that the petitioner alleged that the Company is a quasi-partnership between the petitioner and PT Investment.  A number of complaints to found the petition were set out from paragraph 54 onwards of the petition.  Of particular relevance to the present application are two heads of complaint: the exclusion of the petitioner from the management of the Company (paragraphs 78 to 81), and the denial of access to the books and records of the Company (paragraphs 82 to 86).

3.Before I address the arguments whether the amendments do introduce new grounds to found the petition or whether they merely particularise, clarify or add to the two existing complaints aforesaid as submitted by the petitioner, it is necessary to set out in gist these two complaints as they now stand in the petition.

4.For the exclusion from management complaint, these allegations are made in the petition:

(1)     PT Investment has wrongfully and deliberately excluded the petitioner from the management of the Company.

(2)     In a letter dated 14 September 2006 sent by CK Lin of PT Investment to all the customers of the petitioner, in which he identified himself as the chief executive officer of Peaktop International Holdings (Bermuda) Limited (“PT Holdings”; a listed company in Hong Kong and the parent company of PT Investment), it was stated that Jeffrey Robbins (“Jeffrey”; the petitioner’s representative on the board of directors of the Company) was removed as the president of the Company and replaced with a nominee of PT Investment.  Such removal and replacement was contrary to the agreement or understanding reached between the petitioner and PT Investment in 2004.

(3)     PT Investment further stated in the letter that the Company was managed by PT Holdings and Jeffrey did not represent the Company, thereby securing “the total exclusion of the petitioner from the management of the Company”.

(4)     By proclaiming in the said letter that the Company was “owned” and “managed” by PT Holdings, PT Investment and/or PT Holdings treated the Company as its own in total disregard of the petitioner’s shareholding in the Company and unreasonably and falsely asserted a right to the sole management of the Company notwithstanding the equal representation of the petitioner on the board of the Company in that Jeffrey and Gregory Schutte (“Gregory”) represented the petitioner on the board.

5.The amendment the petitioner seeks to introduce in this regard deals with the removal of Jeffrey and Gregory as directors of the Company by the resolutions in an extraordinary general meeting held on 10 April 2007 in which the petitioner was outvoted by PT Investment.

6.For the complaint of denial of access to the books and records of the Company, these allegations are made in the petition:

(1)     On 6 October 2006, Jeffrey and Gregory issued a letter to the Company requesting for inspection of the books and records.  Despite repeated demands, inspection was wrongfully refused and this was engineered by PT Investment.

(2)     As a result, Jeffrey and Gregory were compelled to bring proceedings under section 121 of the Companies Ordinance, Cap. 32 in HCMP No. 2456 of 2006 in November 2006 to enforce their right to inspection as directors of the Company and to properly discharge their duties as directors.

7.The amendments the petitioner seeks to introduce in this regard cover the following matters:

(1)     The application in HCMP No. 2456 of 2006 was adjourned on 13 December 2006 as the Company alleged it required more time to file evidence in opposition.

(2)     During the adjournment of the originating summons, PT Investment took action to remove Jeffrey and Gregory as directors so they would have no locus to seek inspection of the books and records of the Company in the application.  Such action culminated in the extraordinary general meeting on 10 April 2007, in which Jeffrey and Gregory were removed as directors.

(3)     The originating summons was bound to fail after Jeffrey and Gregory were removed as directors, albeit wrongfully, so Jeffrey and Gregory had no alternative but to seek leave to withdraw the application at the adjourned hearing on 16 May 2007.  Barma J gave leave to withdraw and award costs of the application including the costs of the adjourned hearing to Jeffrey and Gregory.  The Company has sought leave to appeal against the costs order made against it.

8.It is contended by Mr Brian Wong for the respondents that the above amendments are within the rule in Eshelby v Federated European Bank Ltd [1932] 1 KB 254 in that a pleading may not be amended by bringing in new causes of action which accrue since the issue of the originating process.  The only exception to this rule is where the amendment is made with the consent of the parties (Eshelby, supra. at 262; Wing Siu Company Limited v Goldquest International Limited [2003] 2 HKC 64 at 68B to F, paragraph 9).

9.Here, the respondents choose to withhold consent.  I am quite unable to see what real advantage the respondents hope to gain out of this, by forcing the petitioner to issue a fresh petition if the petitioner should wish to rely on the matters covered in the amendments, in the event that the petitioner’s application to amend the petition should fail.  Be that as it may, the respondents have opted to take a legalistic approach, so I need to consider if the respondents can make good their contention that the amendments do raise new causes of action, or in the context of a winding-up petition, new grounds of  complaint to found the petition.

10.In respect of the amendment to deal with the removal of Jeffrey and Gregory as directors of the Company, I am inclined to think this is adding a further fact to the existing complaint, which is to secure “the total exclusion of the petitioner from the management of the Company”, already raised in the petition as mentioned earlier.  It has been alleged that in September 2006, PT Investment had falsely asserted a right to the sole management of the Company notwithstanding that Jeffrey and Gregory were still directors at the time.  The subsequent removal of these individuals was to formalise a position that had existed for some time and for which complaint was already made in the petition.  I would not regard this amendment as within the rule in Eshelby.

11.For the other amendments to deal with the further development in the originating summonswhich resulted in the withdrawalof the application, again it appears to me that these matters are to give the updated progress of the application which has been mentioned in the petition and are adding further facts to the existing complaint that the petitioner has been denied access to the books and records of the Company.  As was said by Megarry J in the context of a winding-up petition on the just and equitable ground in In re Fildes Brothers Limited [1970] 1 WLR 592 at 597E to G, the question whether it is just and equitable to wind up a company is one which must be answered on the facts which exist at the time of the hearing, a winding-up order under this head must be based on subsisting facts and not upon past history.  Having made the allegation that the directors nominated by the petitioner to the board of the Company were forced to bring proceedings to obtain access to the books of the Company, the court should be put in the picture of what has subsequently transpired in the proceedings, that the proceedings are no longer pursued and for what reason.

12.I reject Mr Wong’s contention that the petitioner is advancing a new case in the amendments or is shifting its ground from the existing complaints.

13.Mr Wong mentioned a number of cases in his submission.  I do not intend to deal with them with the exception of one case, as the reason why amendments to pleadings are allowed or disallowed and whether amendments should be regarded as raising new causes of action that did not exist at the time of the writ are fact-sensitive to the particular case in question.

14.The case that I wish to say something about is the decision of Barma J in Cheung Hon Wah v Cheung Kam Wah [2005] 2 HKLRD 509 at 607C to 609F, paragraphs 33 to 44, in particular paragraphs 40 to 42, as heavy reliance was placed on this by Mr Wong.  In dealing with amendments concerning post-petition events in a petition under section 168A, Barma J approached the matter by posing the question whether there is a viable claim on the basis of the material presently pleaded, and if so, the amendments sought would be unnecessary as they would add little or nothing to the claim and should not be allowed.  On the other hand, if there was no or no sufficient basis for the court to grant relief on the petition on the basis of the material as at the date of the petition, there would be no basis for the claim as at that date, so the amendment is to introduce a cause of action that did not exist at the time of the petition and should also not be allowed.  I acknowledge this to be a logical and useful test but it does not seem to me it would be possible to apply it in every situation, as amendments to a petition vary from case to case and do not always come within one of the two ends as postulated.  I note also that in Cheung Hon Wah, it was held that a fresh petition should be issued any way in order to seek winding-up relief, so it would be open to the petitioner in that case to rely on post-petition matters in the new petition and to seek relief under section 168A as well.

15.The other ground of opposition of the respondents may be dealt with shortly.  I cannot see how it could be said that the amendments are useless, immaterial or irrelevant. I agree with the petitioner’s counsel that their relevance to the real dispute in the proceedings is apparent, otherwise the court would be asked to adjudicate on the question whether it is just and equitable to wind up the Company on the basis of complaints without regard to subsequent developments germane to the dispute.

16.I would allow the amendments sought in the draft amended petition.

17.I order costs of and occasioned by the amendments be to the respondents in any event.  As for the costs of the hearing today, there is no reason why costs should not follow the event.  I order costs of today’s hearing be to the petitioner in any event.

Ms Frances Lok, instructed by Coudert Brothers, for the Petitioner

Mr. Brian CW Wong, instructed by Messrs Hastings & Co., for the 1^st and 2^nd Respondents