CHINNEY CONSTRUCTION CO, LTD v. ONWAY ENGINEERING LTD

HCCW 495/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 495 OF 2007

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BETWEEN

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JUDGMENT

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1.  I have before me a summons for specific discovery issued by Onway Engineering Limited (“the Company”). The amended petition for winding up of the Company is restored for hearing at the same time. The petition was presented by Chinney Construction Company Limited (“Chinney”). The Company is not proceeding with the summons today but seeks nominal costs of $1,500 from the petitioner. This is resisted by the petitioner, who seeks a costs order against the Company for this application.

2.  The summons was issued on 1 September 2008, seeking extensive discovery of 11 classes of documents. This is odd, to say the least, bearing in mind the petition is a creditor’s petition and the only issue raised is whether the Company had a genuine cross-claim or set off against the petitioner.

3.  The Company’s counsel Mr Yip submitted today that specific discovery was sought because the petitioner might have told lies in the affirmations filed and documents are required to verify the Company’s allegations. I am unable to see how it might be appropriate to order specific discovery in this instance, as the court is not required to make a final determination on the merits of the Company’s alleged cross-claim or set off, but merely to be satisfied the cross-claim is genuine and bona fide.

4.  Before the first hearing of the summons on 16 October 2008, the Company withdrew the application in respect of 7 classes out of the 11 classes of documents sought. On 3 November 2008, in an attempt to avoid an unnecessary and wasteful application and to expedite the hearing of the petition, the petitioner offered to provide item 1 of the documents in the schedule and stated that it does not have in its possession, custody or power the other 3 items. The Company’s solicitors responded by agreeing to withdraw the application for the other three items, on condition that the petitioner was to pay the Company nominal costs of $1,500. It was submitted on behalf of the Company today that as the petitioner had agreed to disclose item 1 of the documents sought voluntarily, the Company’s request must be reasonable. I do not agree. The whole application is ill-founded and if it had proceeded I would not have granted it. I order the Company to pay the petitioner’s costs of the application, to be taxed if not agreed.

5.  I turn to consider the petition.

6.  The petition was presented in November 2007 on the basis of a debt arising out of a costs order in favour of Chinney in HCCT No. 10 of 2002. The amount owing to Chinney being the taxed costs with interest amounted to $5,208,288.48. Chinney had issued a statutory demand against the Company to pay the taxed costs with interest on 12 October 2007. The amount of the taxed costs has not been disputed. The Company resisted the petition on the ground there was a debt due and owing to it by Shun Wing Construction and Engineering Co. Ltd. (“Shun Wing”) in excess of the petitioning debt, and this debt could be used to set off the petitioning debt by lifting the corporate veil of Shun Wing. The Company issued a writ in HCA No. 88 of 2008 in January 2008 to pursue this claim against Shun Wing which was for $11 million odd. This claim against Shun Wing was struck off by Deputy Judge Carlson on 18 November 2008, on the basis the action was time barred and the audit request forms issued by the Company were a mistake. The Company’s appeal to the Court of Appeal was dismissed on 4 February 2009. The Court of Appeal refused leave to appeal to the Court of Final Appeal on 1 April 2009 and the Appeal Committee of the Court of Final Appeal refused leave to appeal on 8 September 2009.

7.  This being the position, it is not open to the Company to contend that its alleged claim against Shun Wing could be used to set off its debts due to Chinney, leaving aside any argument if the corporate veil could be lifted. The Company has indicated by the letter of its solicitors dated in 11 December 2009 it would not oppose the petition. The Company seeks an order that Chinney should not dispose of all the relevant papers in relation to the construction contract in issue as the Company has lodged a complaint with the Commercial Crime Bureau of the police and this may be the subject of investigation. I see no need for such an order. If there is any need to preserve the papers held by Chinney for the purpose of the police investigation, the Company’s solicitors or the Company would no doubt have alerted the police to this and the police would take such steps as necessary to further their investigation.

8.  I order the Company to be wound up. Chinney’s costs in these proceedings, including all costs reserved, are to be paid out of the Company’s assets.