CHAN WOON FUI v. CHAN WING SUEN AND OTHERS

HCCW 350/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO. 350 OF 2004

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J U D G M E N T

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1.  By these proceedings, the Petitioner, Mr Chan Woon Fui (“the Petitioner”), seeks either to wind up Linea Trading Company Limited (“the Company”) on the just and equitable ground pursuant to section 177(1)(f) of the Companies Ordinance (Cap. 32) (“the Ordinance”) or to obtain relief pursuant to section 168A of the Ordinance.  The respondents to the petition are Mr Chan Wing Suen (“the 1^st Respondent”), his son, Mr Chan Lap Koon (“the 2^nd Respondent”), his father in law, Mr Ng Chau Kwan (“the 3^rd Respondent”), a company beneficially owned by him, River Hill Company Limited (“the 4^th Respondent”), and the Company.  The 3^rd Respondent has passed away since the commencement of the proceedings, and is no longer represented.

2.  A number of the allegations and items of relief sought in the petition are the subject of a striking out application taken out by the 1^st, 2^nd and 4^th Respondents on 28 April 2005.  This application was adjourned for argument, and is now due to be heard on 26 October 2005.  The present application concerns various parts of the 3^rd Affirmation of the Petitioner, filed on 23 August 2004 in reply to the 3^rd Affirmation of the 1^st Respondent, which was filed on 3 July 2004 and which represented the response of the 1^st, 2^nd and 4^th Respondents to the allegations in the petition.  It is said that the Petitioner’s 3^rd Affirmation contains numerous passages which are irrelevant, scandalous, oppressive and/or embarrassing, and that such passages should be struck out from that affirmation pursuant to the provisions of RHC Order 41 rule 6.

3.  That rule provides as follows:-

“The Court may order to be struck out of any affidavit any matter which is scandalous, irrelevant or otherwise oppressive.”

4.  The principles on which the court acts when considering whether or not to strike out matters in an affidavit pursuant to the rule were not, I think, seriously in dispute.   For present purposes, I summarise them as follows:-

(1)	Scandalous has the same meaning in Order 41 rule 6 as it does in Order 18 rule 19 dealing with the striking out of pleadings.  Thus, degrading, indecent and offensive charges made in an affidavit will be regarded as scandalous if they are irrelevant or inadmissible in evidence to prove any material allegation in the petition (see e.g. Cashin v Cradock (1877) 3 Ch 376; Christie v Christie (1873) LR 8 Ch App 499, in the context of striking out a pleading);
(2)	Matters which are material will not generally be struck out even if they are offensive, although where unnecessary detail is given, that may be susceptible to being struck out (see e.g. Blake v Albion Assurance Society (1846) 45 LJCP 663, also in the context of striking out of pleadings).
(3)	Irrelevant matter may be struck out even if not scandalous (Re J (An Infant) [1960] 1 All ER 603).
(4)	It is wrong to include argumentative material in affidavits and such material may be struck out (see e.g. Deak v Deak Perera Far East Limited [1991] 1 HKLR 551).
(5)	The court may take one of three approaches to an affidavit in which there is scandalous, irrelevant or oppressive matter:-
	(a)	It may decline to strike the matter out, on the basis that it is capable of excluding such material from its mind when deciding the issues which arise for decision; or
	(b)	It may think it appropriate to strike out some or all of the material complained of; or
	(c)	It may, in an extreme case, order the entire affidavit to be taken off the court file.
	Which of these courses is adopted will depend on the circumstances of the case, regard being had to the nature and extent of the objectionable material.

5.  As relevance of the material complained of is a key criterion, it will be helpful briefly to summarise the complaints which are made in the petition.

6.  According to the petition, the Petitioner and the 1^st Respondent were the initial shareholders and only directors of the Company, with the Petitioner holding 2,100 shares, or 35% of the Company’s issued capital, and the 1^st Respondent holding 3,900 shares, or 65%.  However, the present position is that the 1^st Respondent is no longer a shareholder or a director, his shares now being held as to 100 shares by the 2^nd Respondent and 3,800 shares by the 4^th Respondent, both of whom are now directors of the Company.  The Petitioner alleges that at the time of incorporation of the Company it was orally agreed between himself and the 1^st Respondent that the Company was to be a partnership business, that they should be the Company’s only shareholders and directors, and that all decisions relating to the Company and its business should be made jointly by them.  It is said that it was also agreed that the Company’s only business would be garment trading, with the Petitioner responsible for production and operations and the 1^st Respondent responsible for financial matters.  According to the Petitioner, the Company originally carried on its business by obtaining orders for garments from customers, and sub-contracting the manufacturing of such garments to one of four factories on the Mainland, supplying the factories with the raw materials, absorbing the costs of washing and dyeing services and paying the factories for their services in manufacturing the garments.  This method of operation was said to produce margins of some 8% for the Company.

7.  It is then said that the 1^st Respondent emigrated to Australia in about 1985 or 1986, but retained control over the affairs of the Company through his brother, Chan Ha Kin, who was made an authorised signatory of the Company’s bank accounts.  The 1^st Respondent remained in Australia until about 1997.

8.  While the 1^st Respondent was in Australia, the first matters complained of took place.  These involved what are said to have been payments that he wrongfully procured the Company to make to himself and his son in the amounts of HK$1,392,000 and A$350,000 respectively.

9.  The Petitioner then says that there were discussions about closing the Company down in about 2002, but that the 1^st Respondent later proposed that their sons should take over the business, and their sons subsequently began working for the Company.

10.  The next complaint appears to relate to a factory in Shenzhen.  It is said that in about June 2003, the 1^st to 4^th Respondents represented to the Petitioner and staff, employees, suppliers and customers of the Company that the Company owned the Shenzhen factory.  The 1^st Respondent says that this is indeed the case.  The Petitioner says, however, that this was not the case, and that he believes the Shenzhen factory to be owned by persons under the control of the 1^st to 4^th Respondents, and that despite requests, no documentation or other evidence of the ownership of the Shenzhen factory has been provided.  The Petitioner then complains that he was excluded from his role in relation to the production and operations side of the Company’s business, as instructions were given for substantially all orders received by the Company to be referred to the Shenzhen factory, on terms less favourable to the Company than had previously been obtained from the factories which it had previously dealt with.  It is said that as a result of this, the Company’s margins have been reduced to some 5%, and also that the Shenzhen factory has been permitted to build up a substantial debt of some HK$1,882,000 odd to the Company.  It is said that notwithstanding the existence of this debt, the Company has been continuing to make payments to the Shenzhen factory for its services instead of seeking to offset or recover the amounts due to it, and that when the Petitioner sought to query this, a board meeting was called with a view to adding the 2^nd Respondent as a signatory of the Company’s bank accounts, passing a resolution for the bank mandates to be amended to permit accounts to be operated by any two signatories, and passing a resolution for the termination of the Petitioner’s son’s employment with the Company.

11.  There is then a complaint about allegedly wrongful transfers of funds or diversion of monies due to the Company to the Shenzhen factory in amounts totalling some HK$893,000 odd.

12.  This is followed by an allegation that the transfer by the 1^st Respondent of his shareholding in the Company to the 2^nd and 4^th Respondents, and the appointment of the 2^nd to 4^th Respondents as directors of the Company was procured wrongfully.

13.  There is next an allegation that the Petitioner has been harassed by the 1^st to 4^th Respondents since early 2003, and that, the Petitioner having been induced to pay some HK$866,000 to the Company by representations by the 1^st to 4^th Respondents that he would be bought out at a fair price, the 1^st to 4^th Respondents have neither bought out his interest in the Company, nor procured the return of the sum paid by his to the Company.

14.  There is then a complaint that the Petitioner has been denied access to the books and records of the Company.

15.  Finally, complaint is made as to the engagement by the Company of solicitors to write to the Petitioner, making various allegations against him, on the apparent instructions of the 1^st to 4^th Respondents.

16.  These matters are said to have led to a loss of trust and confidence in the 1^st to 4^th Respondents on the part of the Petitioner, such that it would be appropriate for the Company to be wound up, or the other relief sought granted.  The relief sought, apart from the winding up of the Company and the alternative of the purchase by the 1^st to 4^th Respondents of the Petitioner’s shares at a fair value includes a variety of other relief, the nature of which is not of particular relevance at this stage, although certain items are, as I have said, together with various paragraphs in the petition, the subject of a separate striking out summons which is to be dealt with later this year.

17.  I now turn to consider the passages in the Petitioner’s 3^rd Affirmation of which complaint is made.  Mr Remedios, appearing for the 1^st, 2^nd and 4^th Respondents contended that each of the passages in question was irrelevant, since they did not relate to any of the issues raised in the Petition, which serves the purpose of defining the scope of the matters in issue and the disputes which the court is to resolve (see Re Tourmaline Ltd [2000] 4 HKC 348).  Ms Lam, appearing for the Petitioner, sought to respond to the criticisms made in a number of ways, which I shall consider in the context of the various passages under attack.  However, I can at this stage dispose of a general submission which she made, to the effect that the court should not at this stage seek to dispose of disputes of fact that existed between the parties.  As to this, I do not consider that anything in what I am about to say involves me in trying to resolve disputes of fact on the basis of the affidavit evidence alone, as the question is not whose version of the facts is to be believed, but whether the matters raised are relevant to the proceedings, regardless of which parties’ version is to be preferred, and if not relevant, whether they should be permitted to remain in the affirmation.

18.  Paragraph 3.  The 1^st, 2^nd and 4^th Respondents seek to strike out the whole of this paragraph, which reads as follows:-

“CWS [i.e. the 1^st Respondent] and I are now old men of 63 and 61 years of age respectively.  I came to know CWS in my native village in Chiu Chow, Mainland China when we were teenagers.  His parents were dirt peasants in Chiu Chow.  CWS does not have to lie in paragraph 2 of 3^rd Affirmation of CWS about his family being labeled as “capitalists” and persecuted politically in order to falsely boost he was from bloodline of a successful family of business.  There is no sense for this unnecessarly lie for this petty matter except CWS is a habitual liar.  In any event, CWS obviously does not seem to have inherited the DNA of his alleged successful business parents manifested by his repeated total failure in business ventures and interaction with peoples.  Perhaps these failures were contributed by his bad character of the worst type of being conceited, incompetent, dishonest, paranoiac, lazy and greedy.  I am no perfection either, but I am at least hard working, humble, harmonious, loyal, honest, forgiving and tolerant.”

19.  It is not difficult to see why this paragraph is objected to.  Although the first two sentences are unobjectionable, the rest of it is highly offensive.  It is impossible to see how material such as this could be said to be in any way relevant to the matters in issue in these proceedings.  They certainly do not in any way bear on the allegations in the petition which I have summarised above.

20.  Ms Lam at first suggested that this paragraph was no more than a response to the 1^st Respondent’s version of the background of his relationship with the Petitioner, which he set out in paragraph 2 of his 3^rd Affirmation, in which he described how he first came to know the Petitioner when both were children or teenagers in China.  This may be so in relation to the first two sentences, and perhaps the third, but it clearly is not the case in relation to the rest of the paragraph.

21.  Ms Lam eventually accepted that this was the position, and did not resist the striking out of the third and subsequent sentences.  In my view, these sentences must be struck out from the affirmation.  They are clearly both irrelevant and scandalous, consisting of what can only be described as mere abuse.  While I can appreciate that relations between the Petitioner and the 1^st Respondent may be very strained as a result of their differences which have resulted in the bringing of this petition (and, I am told, other proceedings as well), I do not see that this can justify the inclusion of such material in an affidavit, which is intended to be the means by which the Petitioner places his evidence before the court.

22.  I have set out the entirety of this paragraph in this judgment because it seems to me that its content has, in my view unfortunately, set the tone for several other passages in the affirmation.  It does not reflect well on whoever was responsible for drafting this affirmation that material such as this should have been permitted to remain in it.

23.  Paragraphs 6 and 8.  In these paragraphs, which respond to the 1^st Respondent’s account of how he met the Petitioner again after they had both come to Hong Kong and how they worked together for a time for a common employer and later left to set up a business in partnership, there are passages (part of the first sentence of paragraph 6, part of the second sentence of paragraph 8 and the third sentence of paragraph 8) in which it is sought to suggest that the 1^st Respondent was dismissed from such employment for insubordination, and that the Petitioner resigned out of loyalty to him, and to allege that the 1^st Respondent has twisted the truth to conceal that he was a difficult person to get along with.

24.  Again, Ms Lam contended that this was responsive to the 1^st Respondent’s account of the background.  Although she eventually accepted that the third sentence of paragraph 8 should be struck out, consisting as it did of a mere argument that the 1^st Respondent had twisted the true version of events, she submitted that , notwithstanding that the allegations as to the 1^st Respondent’s dismissal were at best matters of background only and did not bear directly on any of the matters complained of, the Petitioner was entitled to set the record straight where he considered that the 1^st Respondent’s version of events was not strictly correct.

25.  While there could be some situations where a respondent introduces matters which do not strictly arise from the allegations in the petition which it would be appropriate to allow the petitioner to comment on or to investigate at trial, in my view, this is not one of them.  The fact that the 1^st Respondent and the Petitioner were at one time co-employees and subsequently set up a business together is simply a matter of background.  There does not appear to be any dispute as to this, other than in relation to the circumstances in which the 1^st Respondent left such employment.  However, those circumstances form no part of the issues arising on the petition, and that dispute is therefore irrelevant, so far as these proceedings are concerned.  I cannot imagine that much, if any, time at trial would be occupied (or allowed to be taken up) in relation to this matter.  In these circumstances, it seems to me that the objection to the passages identified is well founded, in that they are irrelevant, and they should therefore be struck out.

26.  Paragraphs 9, 11, 12 and 13.  Objection is taken to the whole of paragraph 9, the second, fourth and fifth sentences of paragraph 11, the whole of paragraph 12 and part of the first sentence and the whole of the last two sentences of paragraph 13.  All of the passages complained of relate again to matters of background, this time in relation to the circumstances in which other persons who had formerly been partners of the Petitioner and 1^st Respondent, or co-shareholders with them in a predecessor company of the Company, terminated their relationships with them.  Again, the Petitioner seeks to suggest that the 1^st Respondent was responsible in some way for the other partners’ departure, as he was unreasonable and difficult to get on with.  There are also rather vague suggestions of impropriety in respect of the way in which the 1^st Respondent (and on one occasion the Petitioner himself) acquired the interests of such persons, it being suggested without any details being given that funds of the company concerned may have been used or misused for that purpose.

27.  These passages stand in much the same position as those complained of in paragraphs 6 and 8, although the complaint here would seem to me to be one which has even greater justification.  These matters took place over 20 years ago, in relation to a different company.  They were raised by the Petitioner simply as a matter of general background, and there appears to be no dispute as to the fact that the persons mentioned were at one time involved in a business venture with the Petitioner and 1^st Respondent, but ceased to be so involved.  The reasons for their ceasing to be so involved are not in any way relevant to the matters alleged in the petition.  Ms Lam did not seek to suggest that there was any complaint that could or would be advanced in these proceedings in relation to the circumstances or manner in which their shares were acquired by the 1^st Respondent and the Petitioner.  I cannot see that time would (or would be permitted to) be spent at trial on these matters.  I am satisfied that they are quite irrelevant, and should be struck out from the Petitioner’s 3^rd Affirmation, particularly as they hint at impropriety and wrongdoing without making it clear what, if any, complaint there is in relation to the matters they refer to.

28.  Paragraph 17.  Mr Remedios objected to part of the first and second sentences of this paragraph.  The passages objected to appear to be merely abusive comment on the character of the 1^st Respondent, of a similar nature to the comments in paragraph 3 of the Petitioner’s 3^rd Affirmation.  Ms Lam accepted that these passages could be struck out, and I am satisfied that they should be.

29.  Paragraphs 19 to 21.  These paragraphs set out certain dealings in the shareholding of the 1^st Respondent, by which part of his shareholding was transferred to two of his brothers, and subsequently transferred back to him, and changes in the directorship of the Company, by which his brothers were (at least for a time) made directors of the Company.  These matters took place between about 1989 and 1996, when the 1^st Respondent was in Australia.  However, unlike several other paragraphs of which complaint was made, with the exception of the last part of the second sentence of paragraph 19(1), there does not appear to be anything particularly objectionable in the way in which these paragraphs are framed, as they set out for the most part matters of fact.

30.  At first sight, these paragraphs appeared to have little relevance to the matters complained of in the petition.  No complaint appears in the petition as to the fact that these brothers of the 1^st Respondent became shareholders and directors of the Company during this period, and Ms Lam did not suggest at the hearing that there was any complaint about these matters per se.  However, she submitted that the matters deposed to in these paragraphs were relevant to the following issues:-

(1)	She pointed out that there was an allegation in paragraph 13 of the petition that the 1st Respondent retained control of the Company while in Australia through the appointment of one of his brothers as an additional signatory on the Company’s bank accounts, and suggested that these matters also went to the issue of control of the Company by the 1st Respondent during this period.
(2)	This issue of control was (according to Ms Lam) relevant to the complaint about the setting up of the Shenzhen factory.
(3)	It was also relevant to the allegations in paragraph 35 of the petition concerning manipulation of the Company’s affairs by the 1st Respondent.
(4)	Apart from the matters raised in the petition, the 1st Respondent had in paragraph 52 of his 3rd Affirmation made allegations of wrongful transfers of funds by the Petitioner and one of his brothers during the time when he was in Australia, and it was therefore necessary for the Petitioner to respond to this allegation.  The matters mentioned in these paragraphs 19 to 21 went to show that the 1st Respondent remained in control of the affairs of the Company during this period, and that he would have known of such alleged transfers through his brothers.  Ms Lam drew my attention to paragraph 56 of the Petitioner’s 3rd Affirmation in which reference is made to paragraph 20 and the matters stated there are relied on in answer to these allegations by the 1st Respondent.

31.  Ms Lam also said that these changes in shareholding and directorship only came to the attention of the Petitioner after the filing of the petition, and that this was the reason why they were not mentioned in the petition.  As to this last point, it must be pointed out that the changes in question would appear all to have been matters of public record in the Companies Registry.  No explanation was provided as to why these matters could not have been ascertained before the commencement of proceedings, and I do not place any weight on this excuse for failing to deal with these matters in the petition.

32.  I have great difficulty in seeing how the matters referred to in these paragraphs have any relevance to the complaints mentioned in paragraphs 30(2) and (3) above.  The matters there complained of are said to have taken place after 2002, many years after the changes in question.  I would not have regarded these matters as relevant on this basis.

33.  So far as the suggestion that these matters are relevant to paragraph 13 of the petition is concerned, the short answer is that they are not, since none of the material facts are mentioned in the petition.  If it is desired to rely on them in respect of any matter raised in the petition, an application should be made to amend the petition to make specific reference to them.  Until that is done, I do not regard them as being of relevance to the complaints in the Petition.

34.  However, I am prepared to accept that, although it was not immediately apparent from the Petitioner’s 3^rd Affirmation, these matters may be of relevance in relation to the 1^st Respondent’s allegations of wrongdoing on the Petitioner’s part.  For this reason, I am not prepared to strike out these paragraphs in their entirety.  That said, however, I cannot see that the last part of paragraph 19(1), from the words “which with hindsight” down to the end of the sentence, is of any relevance to these proceedings.  Given their offensive and abusive tone, they must in my view be struck out.

35.  Paragraph 22.  Objection is taken to sub-paragraphs (1) and (3) to (6).  This paragraph relates to changes in directors and shareholders since 1997.  Sub-paragraph (1) is simply an assertion as to the 1^st Respondent being untruthful.  I do not see that it adds anything to the other matters stated in this paragraph, and accordingly, having regard to the offensive way in which it is put, I shall order it to be struck out.  Sub-paragraphs (3) and (4) seem to me to be unobjectionable, and may be relevant to one or more of the matters referred to in paragraph 30 above.  Mr Remedios did not, I think, particularly press the point that these should be struck out, and I am disinclined to do so.

36.  So far as sub-paragraph (5) is concerned, this puts forward the Petitioner’s views as to the reasons for the changes.  The first two reasons given are that they were made to give the 1^st Respondent control of the board of directors, and to oust the Petitioner from management of the Company.  Although Mr Remedios complained that there was no detail given as to how these matters would have afforded the 1^st Respondent control as alleged, or served to oust the Petitioner from management, it is tolerably clear that these are matters complained of in the petition, at least in relation to the later period.  That being so, I do not think that either of sub-paragraphs (a) or (b) should be struck out.  Sub-paragraphs (c) to (e), however, stand on a different footing.  They assert as reasons for the changes of directors and shareholders a desire on the 1^st Respondent’s part to evade liability for an unspecified fraud committed in relation to unspecified investments in Mainland China during 1993 and 1994, to cover up an alleged tax fraud against Hong Kong and Australian tax authorities, of which no particulars are given, and an alleged fraud on the Housing Society in Hong Kong.  I shall have more to say about the last of these allegations later, in the context of paragraph 27 of the Petitioner’s 3^rd Affirmation.  However, at this stage, it is sufficient to say that none of these are matters which appear to have the remotest relevance to the allegations in the Petition.  Nor is there anything to suggest that these matters in any way impinged on the affairs of the Company.  In these circumstances, the allegations in these sub-paragraphs, which are in wholly general and unparticularised terms, should be struck out as being irrelevant and scandalous.  In my view, it would also be oppressive on the 1^st Respondent to have to attempt to deal with them, given their utter lack of detail, and they should be struck out on this ground also.

37.  Paragraph 22(6) alleges that the 1^st Respondent has sought, since 1997 to hide his identity by the use of a different name and signature, and to hide the fact that he is a Hong Kong resident from the Mainland authorities.  I am quite unable to see what relevance this has to any matters in issue in these proceedings.  Ms Lam suggested that this was no more than a statement of fact, by which the court was informed that certain documents, although signed under a different name, were in fact documents signed by the 1^st Respondent.  If that were the point, it could have been made simply enough, by reference to the documents concerned, but that has not been done here.  In the circumstances, I am satisfied that this sub-paragraph, too, should be struck out from the Petitioner’s 3^rd Affirmation.

38.  Paragraph 23.  This paragraph ties in the transfers of the 1^st Respondent’s shares to the 2^nd and 4^th Respondents and the appointment of the 4^th Respondent as a director of the Company to the reasons put forward in paragraph 22(5).  Having regard to the fact that the objectionable parts of paragraph 22(5) have been struck out, I do not see any remaining problem with this paragraph, and therefore decline to strike it out.

39.  Paragraph 24.  The second sentence of this paragraph contains speculation by the Petitioner as to the reason for the appointment of the 3^rd Respondent as a director.  It does not appear to me to be admissible evidence, and is accordingly irrelevant.  Ms Lam accepted that this sentence should go, and I accordingly strike it out.

40.  Paragraph 27.  This paragraph purports to give details of an alleged fraud by the 1^st Respondent on the Housing Society, in connection with an application for residential premises and a related loan from the Housing Society.  According to Ms Lam, this arose out of the 1^st Respondent’s contention that the sum of A$350,000 transferred to his son while he was in Australia represented a dividend from the Company payable to him.  As I understood the point, it was suggested that the failure to disclose the receipt of this dividend in the salary certificate provided to the Housing Society cast doubt on this explanation.

41.  The difficulty with this attempt to justify the contents of paragraph 27 is that nowhere in the paragraph is this point made.  Instead, it is alleged that there has been a fraud on the Housing Society, which would appear to have nothing to do with the Company’s affairs, or with the allegations in the petition.  In the circumstances, I have no doubt that the contents of this paragraph are both irrelevant and scandalous, and the entire paragraph must be struck out.

42.  Paragraph 32.  The second, third and fourth sentences of this paragraph are objected to.  Ms Lam did not resist the striking out of the second and third sentences, which simply set out the Petitioner’s views as to the motivation behind the retention of documentary records by the 1^st Respondent, and I shall strike out those sentences.  She suggested, however, that the last sentence, which accused the 1^st Respondent of selective disclosure of documents was relevant to the complaint that the Petitioner had been deprived of access to the Company’s books and records.  This sentence was in the following terms:-

“Although CWS can produce the information and full sets of documents, books and accounts in his possession, for his own convenience and benefit he has only produced piecemeal of documents and accounts and has withdrawn many documents, books and accounts adverse to his case on incredible excuses.”

43.  I have considerable difficulty in seeing how this statement relates to the complaint in question, and therefore order that it be struck out as irrelevant and scandalous, having regard to its terms.

44.  Paragraph 33.  Objection was taken to the last two words in this paragraph, as they contained an insinuation to the same effect as what was stated in paragraph 22(6).  Ms Lam accepted that this stood or fell with the earlier paragraph, and, having decided that paragraph 22(6) is to be struck out, I shall order that these words be similarly struck out for the same reasons.

45.  Paragraph 36.  The fifth and subsequent sentences of this paragraph are objected to.  The fifth sentence is again simply abusive of the Petitioner, and Ms Lam did not resist its being struck out.  As to the balance of the paragraph however, Ms Lam said that this contradicted the 1^st Respondent’s statement that he had been replaced as a signatory on the Company’s bank accounts while he was in Australia, since there was documentary evidence (which was exhibited) indicating that he remained a signatory throughout, with his brothers simply being added as signatories, rather than being made signatories in his place.  Although the point would seem to be a rather narrow one, I am prepared to accept that this might be of some relevance to the matters in issue, and thus do not propose to strike out the remainder of this paragraph.

46.  Paragraphs 38 and 39.  These two paragraphs are objected to on the basis that they appear to make allegations of wrongdoing against the 1^st Respondent in relation to the proceeds of a loan of which the Company was borrower, which was secured by a mortgage over property owned by the 1^st Respondent and his wife.  This was mentioned in the 3^rd Affirmation of the 1^st Respondent as an example of support provided by him for the Company.  The Petitioner in essence disputes that this was truly support for the Company, and suggests that this was really a means for the 1^st Respondent to obtain funds from the Company.  Ms Lam said that this was not a matter of which complaint was made, but as it appeared to be relied upon by the 1^st Respondent, it was something to which the Petitioner was entitled to reply.  She indicated that if the 1^st Respondent did not wish to rely on this matter, the Petitioner would not either.

47.  Although this is not a matter of which complaint was made in the petition, it seems to me to be a matter on which some reliance is intended to be placed by the 1^st Respondent.  In this respect it would appear to stand on a different footing to the matters purportedly responded to by paragraphs 6, 8, 9, 11, 12 and 13, which were clearly matters of background only.  If the 1^st Respondent wishes to place reliance on the matters in paragraph 21 of his 3^rd Affirmation, it seems to me that the Petitioner should not be debarred from putting forward his version of these events, and I accordingly decline to strike out these paragraphs.  Although there are some phrases in these two paragraphs which are unsatisfactory, I do not think that they are such as to require them to be struck out, as the court will be able to shut them out of its mind when coming to its decision on these proceedings.  Further, if it transpires at trial that this issue is not a live one, it can be set on one side without affecting the court’s consideration of the matters in issue.

48.  Paragraph 40.  Complaint is made of the last sentence of this paragraph.  This is again an example of the Petitioner simply disparaging the 1^st Respondent, which is of no relevance to the issues in the proceedings.  Ms Lam did not suggest that it should be permitted to remain, and I therefore strike it out.

49.  Paragraph 43.  This paragraph states that the Petitioner was advised by his accountants that the conduct of the 1^st and 2^nd Respondents in relation to the payment of A$350,000, said by the 1^st Respondent to be in the nature of a dividend from the Company, was “quite improper and irregular”.  No explanation of the basis of this comment was proferred, although it was qualified by the statement that the advice was preliminary.  Ms Lam said that this was tied in to paragraph 42, which stated that the 2^nd Respondent was not entitled to any dividend, as he was not a shareholder at the time.  In my view, unless the basis on which it is sought to suggest that there was impropriety or irregularity is explained, it would be impossible and hence oppressive to expect the 1^st Respondent to respond to this statement.   I therefore propose to strike out this paragraph, although the Petitioner may, if he is able to do so, introduce this contention at a subsequent stage with proper justification for the allegations made.

50.  Paragraph 48.  Ms Lam did not resist the striking out of the passage complained of in this paragraph (i.e. the third sentence).  It is similar in tone and content to the passages complained of in paragraphs 36 and 40 which have been struck out, and I therefore strike out this sentence also.

51.  Paragraph 49(1).  The fifth and last sentences of this paragraph are objected to.  Ms Lam did not seek to defend the last sentence, which is objectionable for reasons similar to those given in relation to paragraph 48, and I therefore strike it out.  As to the fifth sentence, which states that the 1^st Respondent planned to steal the assets of the Company by the expedient of moving its pattern production room to Shenzhen on the pretext of cutting costs, Ms Lam submitted that this was part of the complaint that the Petitioner was misled into agreeing to shift this facility to Shenzhen, which is made in the balance of paragraphs 49 to 53, in answer to the 1^st Respondent’s case that the Shenzhen factory was set up by agreement between himself and the Petitioner.  I think that this is arguably so, and therefore do not propose to strike out the fifth sentence of this paragraph.

52.  Paragraph 51(3).  This subparagraph comments on the expenses incurred on the setting up of the pattern production facility in Shenzhen, and complains about the extent of such expenses.  I do not see that there is anything particularly objectionable in this paragraph, which appears to be relevant to the question of the circumstances of the setting up of the Shenzhen factory.  I do not regard the reference to various items of equipment having been taken by the 1^st Respondent so much as an allegation of misappropriation of such items, but more of a comment on the sum of money spent when these items did not have to be paid for.  I therefore decline to strike out this sub-paragraph.

53.  Paragraph 53(2).  Ms Lam accepted that sub-clauses (a) and (b) should be struck out, but suggested that the introductory part of this sub-paragraph should be permitted to remain in the affirmation.  However, if that were done, the introductory words would make no sense.  They are in any event at best a matter of submission, couched in offensive terms, which are thus irrelevant, and in my view should be struck out.

54.  Paragraph 53(4).  The complaint here was in relation to the first sentence of the sub-paragraph.  This is in similar terms to the passages complained of in relation to paragraph 32, and I strike this sentence out for the same reasons.

55.  Paragraph 60(3).  In his 3^rd Affirmation, the 1^st Respondent stated that he had been informed that the Petitioner had been arrested and released on bail in connection with the affairs of the Company.  It seems that there was a complaint by the 1^st Respondent to the police, and that there was a counter-complaint against him by the Petitioner, and this is mentioned in paragraph 60(3).  Exception was taken to the third sentence in this paragraph.  However, it seems to me that this is a relatively minor matter which does not call for the passage in question to be struck out, and I decline to do so.

56.  Paragraphs 63 to 65.  In these paragraphs, three further complaints, which do not appear in the petition, are made.  These relate to the alleged theft of a vehicle registration mark belonging to the Company, the diversion of the Company’s business to businesses alleged to be controlled by the 1^st Respondent, and the alleged theft of moneys belonging to the Company.  Ms Lam acknowledged that these were not matters of which complaint was presently made in the petition, but indicated that it was the intention of the Petitioner to amend the petition to include them.  It is, however, to be noted that notwithstanding the fact that the Petitioner’s 3^rd Affirmation was filed as long ago as 23 August 2004, the present application made by summons issued on 17 September 2004, and an application to strike out parts of the petition made on 28 April 2005, no application for leave to amend the petition has yet been made.  The allegations in these paragraphs are also in vague and general terms.  As things stand, the matters mentioned are irrelevant to the issues arising on the petition.  In these circumstances, I am satisfied that the correct course would be to strike out the parts of these paragraphs of which complaint is made, and to leave it to the Petitioner to make such application for amendment of the petition as it wishes to, and to file evidence in support of the petition as amended in due course, assuming that it is successful in such an application.

57.  I therefore order that the passages in the Petitioner’s 3^rd Affirmation which I have identified above as being objectionable should be struck out.  Although fairly extensive parts of the affirmation will therefore be excluded, I do not think it necessary in the circumstances to order the removal of the entire affirmation from the court file.  So far as the costs of this application are concerned, while the 1^st, 2^nd and 4^th Respondents have not been entirely successful in their application, it seems to me that they have been substantially successful and should have the costs of this application against the Petitioner.  As for the basis of taxation if such costs cannot be agreed, I have given serious consideration to whether or not it would be appropriate to order such costs to be taxed on a higher basis than a normal party and party taxation.  Although I consider that there are aspects of the Petitioner’s 3^rd Affirmation which are highly objectionable, for the reasons which I have given, I have also borne in mind that the application has not been wholly successful.  Taking these matters into account, I have come to the conclusion that the appropriate order for costs would be that the Petitioner should pay the 1^st, 2^nd and 4^th Respondents their costs of this application, such costs to be taxed on the party and party basis in default of agreement, and I make an order nisi to this effect.