RE RICHEL GROUP HONG KONG LTD.

HCCW 77/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING UP PROCEEDINGS NO. HCCW 77 OF 1999

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REASONS FOR DECISION

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The Action

1. On 3 October 1998, the writ in HCA No. A16812 ("the Action") was issued. Carrefour Korea Ltd was the Plaintiff. Worldplex Industrial Ltd was named as the 1st Defendant, Richel Group Hong Kong Ltd ("the Company") as the 2nd Defendant and Mr Hector Gerardo Pines as the 3rd Defendant.

2. On 12 January 1999 default judgment was entered against all defendants in the Action.

The Petition

3. On 21 January 1999, a Petition was presented for the winding up of the Company on the basis of the default judgment in the Action.

4. On 14 April 1999, the Company was wound up without opposition.

5. On 15 June 1999, Mr Nicholas Hill and Mr Fan Wai Kuen both of Nelson Wheeler were appointed joint and several liquidators of the Company, they having previously been appointed Provisional Liquidators on 4 March 1999.

Mr Pines' application to set aside default judgment

6. On 28 October 1999, Mr Pines issued a summons in the Action seeking to set aside the default judgment. That summons is due to be heard by Mr Justice Sakhrani on 17 March 2000.

The Contributories' request and Liquidators' response

7. Meanwhile, in September 1999, the same solicitors, acting for Mr Julian Gonzalez and Mr Alberto Martinez Boehden ("the Contributories") being the only contributories of the Company, wrote to the Liquidators informing the Liquidators that the Contributories proposed to apply to the Court to stay the winding-up and to dismiss the Petition, and to set aside the default judgment on the basis that they, as the last directors, were not aware of the Action, that there was a meritorious defence and that the proceedings should have been litigated in Korea and not in Hong Kong. At least some of the points raised are similar to the points raised by Mr Pines in his summons.

8. The solicitors said that they were "instructed to invite you [the Liquidators] to make or request you to give consent to [the Contributories] making application for and on behalf of the Company for stay and/or rescission of the winding-up order and dismissal of the said Petition in HCCW No. 77 of 1999 as well as setting aside the said default Judgment in the High Court Action."

9. The Liquidators replied that it was not their role to "refuse to act" or "give consent" to the application, but that should the Contributories' application be successful, the Liquidators would abide by the decision of the Court.

10. In a subsequent letter, the Liquidators confirmed that they themselves were not prepared to make the application to set aside the default judgment, but would not oppose such an application should one be made.

Notice of Motion

11. On 29 November 1999, a Notice of Motion was issued by the Contributories asking, inter alia, for a stay of the winding-up and for the Court's leave to act in the name of the Company for the purpose of an application to set aside the default judgment in the Action.

12. On 10 January 2000, the matter came before me on a 15-minute hearing. Counsel then acting for the Petitioner said that he also acted for the Liquidators and challenged the locus standi of the Contributories to make the application, which he said could only be made by the Liquidators. This appeared to me to be inconsistent with the position taken by the Liquidators in the correspondence. I adjourned the hearing to 11 January 2000 to enable the Liquidators to put in an affidavit to inform the Court of their current position.

13. On 11 January 2000, the Liquidators through Herbert Smith informed the Court that their position remained as stated in the correspondence with the Contributories' solicitors. The Liquidators were reluctant to themselves apply to set aside the judgment for want of funds and lack of information. However they had no objection to the Contributories seeking to stay the winding-up and to set aside the default judgment.

Preliminary issue

14. The Petitioner however argued as a preliminary issue that there was no jurisdictional basis for the Contributories' issue of the Notice of Motion.

15. In my view, s.209 Companies Ordinance provides a jurisdictional basis upon which the Contributories could apply to Court for a stay of the winding-up. It is expressly provided in that section that a contributory could apply for a stay of the winding-up - this is not disputed by the Petitioner.

16. It is clear that the Contributories' application for a stay is grounded upon the proposed application to set aside the default judgment, on which the Petition is based, so the question is whether it is open to a contributory to apply in the name of the company to set aside a judgment against the company, which is one of the reliefs the Contributories seek in the Notice of Motion.

17. It would appear from an unreported decision of the Court of Appeal referred to the court by Mr Jonathan Wong, counsel for the Petitioner today, that a contributory could apply to set aside a judgment against a company if he does so in the Company's name with the consent of the liquidator (see Guangdong (HK) International Company Limited v Gleeful Investment Ltd and others Civ. App. No. 103 /1995, unrep.).

18. So the only difference between the course of action which the Court of Appeal found acceptable in Guangdong v Gleeful and that taken here is that, whilst the liquidators in the quoted case eventually gave consent to the contributory to use the name of the company in the application to set aside, in the present case, the liquidators have adopted a neutral position.

19. I took the view that such a difference is, in the circumstances of the present case, merely procedural and not substantive, and does not warrant the dismissal of the Notice of Motion on the preliminary issue.

20. Counsel for the Petitioner submitted that the power to make an application to set aside the judgment vested with the Liquidators under s.199 of the Companies Ordinance, and a meeting should have been called under s.287 of the Companies Ordinance to ascertain the wishes of the creditors and the contributories of the Company, so that the Liquidators could have regard to such wishes expressed at such a meeting (s.200).

21. But the only creditor of the Company is the Petitioner who was the plaintiff in the Action and who is enforcing the judgment by winding up the Company, and the only contributories of the Company are Mr Gonzalez and Mr Martinez Boehden who are seeking to set aside the judgment in the Action. Their respective wishes are obvious. Nothing would be gained from the Liquidators taking the extra step of calling a meeting of the same parties.

22. The Contributories had in their solicitors' first letter to the Liquidators asked the Liquidators themselves to make the application. The Liquidators have declined to do so by reason of lack of funds and knowledge of the factual situation, but had no objection to the Contributories making the application should the Court permit the Contributories to do so, although there was no express exchange of views as to the Contributories doing so in the name of the Company.

23. Where liquidators do not wish to take any particular step, it is open to anyone, including contributories, to apply to the Court to make such order as it thinks just (s.200(5) Companies Ordinance). The Liquidators are themselves also entitled under s.255 of the Companies Ordinance to ask the Court to determine any matter, such as in this case, whether they should consent to the Contributories applying to set aside the judgment in the Company's name.

24. That is, in effect, the same question that the Contributories are posing to the Court in paragraph 3 of the Notice of Motion and which is to be decided by Mr Justice Sakhrani in March. It would of course be up to the judge then to decide if the Contributories should be permitted to apply to set aside the default judgment in the name of the Company, and if so on what terms (including any terms as to costs).

Accordingly, I took the view that the Petitioner could not dispose of the Notice of Motion at this stage by means of the preliminary issue, and on 11 January 2000, I dismissed its application on the preliminary issue with costs and gave directions as to the filing of evidence on the Motion with a view to it being heard by Mr Justice Sakhrani immediately after Mr Pines' Summons.