深圳巿均翔房地產經紀有限公司 v. HONGKONG ZHONGXING GROUP CO LTD

HCCW 256/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING UP) NO 256 OF 2011

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BETWEEN

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J U D G M E N T

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1.  This was the hearing of three applications in relation to a winding up petition presented by深圳巿均翔房地產經紀有限公司 (“the Petitioner”) against Hongkong Zhongxing Group Co Ltd (“the Company”) on 2 August 2011. The first was an application by the Company, by summons dated 24 August 2011, to strike out the petition on the grounds that the Company had not been properly served with either the statutory demand referred to in the petition, or with the petition itself. The second was an application by the Petitioner, by summons dated 21 September 2011, seeking leave to amend the petition. The third was an application by the Company, by summons dated 31 October 2011, just over a week before the hearing, seeking leave to make an amendment to its striking out summons.

2.  The last mentioned of these summonses was not opposed by the Petitioner, subject to the Petitioner being awarded its costs of the application, as all that was sought was an additional direction that if the petition were struck out, it should be listed for formal dismissal without the need for the parties’ attendance as soon as possible thereafter.  At the beginning of the hearing, Mr Lau, who appeared for the Company, indicated that his clients were prepared to pay the Petitioner the costs of that application, and I therefore gave leave to the Company to amend its summons for striking out, with the costs of that application to be to the Petitioner.  Such costs are to be taxed on the party and party basis if not agreed.

3.  This leaves the other two applications for determination.  The background in relation to them can be summarised as follows:-

(1)    The registered office of the Company is situated at Unit 102, 1^st Floor, Hong Kong Trade Centre, 161-167 Des Voeux Road Central, Hong Kong.  It is common ground that this was at all material times the registered office of the Company according to the records maintained by the Company Registry.

(2)    On 11 July 2011, a process server employed by the Petitioner’s solicitors attempted to serve a statutory demand, demanding payment of the sum of RMB 2,000,000 or its Hong Kong dollar equivalent on the Company at its registered office.  For this purpose, she went to the building in which the Company’s registered office was situated.

(3)    The Company’s name did not appear on the list of occupants displayed in the lobby of the building.  Nor did it appear outside the door for Unit 102 on the first floor.  The door to Unit 102 was closed and locked, and no one from Unit 102 answered when the bell for that unit was rung by the process server.

(4)    Instead, according to the Petitioner, someone came out from Unit 101 next door (which happened to be the offices of the solicitors now representing the Company).  When asked by the process server if the Company was to be found on that floor, this person went back into Unit 101 to make a phone call, accompanied by the process server.  Thereafter, a man came out to the reception area of Unit 101, identified himself as an employee of the Company, and took delivery of the statutory demand.  However, he declined to acknowledge receipt of the statutory demand by affixing the Company’s chop on the process server’s delivery record, saying that he did not have one.

(5)    This version of events is denied by the Company.  The solicitor acting for the Company has affirmed that on 11 July 2011, a woman entered his firm’s offices and handed an envelope addressed to the Company at Unit 102 to the receptionist.  On being told by the receptionist that Unit 102 was next door, the process server said that there was no answer there, and left the envelope with the receptionist, notwithstanding the receptionist’s protestations that she had no authority to accept service of it.  The Company’s solicitor also stated that no-one employed by the Company was working at his office at that time.

(6)    Thereafter, on 27 July 2011, the Company took out proceedings seeking an injunction to prevent the Petitioner from presenting a winding up petition against it based on an amount of HK$2,000,000 (sic) “claimed in the statutory demand dated [11 July 2011] served on the Company on [11 July 2011]”.  It is not clear whether the originating summons was served on the Petitioner – at any rate, there is no evidence of any further steps having been taken in relation to it.

(7)    On 2 August 2011, the petition was issued.  A process server employed by the Petitioner’s solicitors (not the same one who had attempted service of the statutory demand) tried to serve it on the Company at its registered address.  According to his evidence, he, too, found that the door to Unit 102 was closed, and went into Unit 101 to make enquiries as to whether or not the Company was to be found on the first floor.  Again, the receptionist made a telephone call, after which a man came out to the reception area and identified himself as an employee of the Company.  The process server then left the petition with him.

(8)    Again, this version of events is disputed by the Company, and the Company’s solicitor reiterated that at this date also, no one employed by the Company was stationed at his office.  The Company has also made an affirmation to the effect that it does not maintain any business in Hong Kong or employ or deploy any of its staff there.

4.  The petition alleged that the registered office of the Company was at Unit 101 of the Hong Kong Trade Centre (not Unit 102, as recorded at the Companies Registry), that the Company was indebted to the Petitioner in the amount of RMB 2,000,000 or its equivalent in Hong Kong dollars, that the Petitioner had served the Company with a statutory demand on 11 July 2011 by leaving it at the Company’s registered office at Unit 101, and that despite three weeks having elapsed since the date of service of the statutory demand, no payment in respect of the debt had been forthcoming from the Company.  It is further alleged that the debt remains unsatisfied and due to the Petitioner, and that the Company is insolvent, so that it would be appropriate to wind it up.

5.  Mr Lau, for the Company, submits that the petition should be struck out, because it is bound to fail.  He says that this is because the only matter relied upon by the Petitioner to justify the allegation that the Company is insolvent are the matters stated in relation to the statutory demand, from which it is (he says) clear that the Petitioner is relying on the statutory deeming of insolvency under section 178(1)(a) of the Companies Ordinance as the basis for the assertion of insolvency on the part of the Company.  However, because the statutory demand was, on the Petitioner’s own case, purportedly served at Unit 101 of the Hong Kong Trade Centre, and not Unit 102, it was not in fact served on the Company at its registered office, so that the Petitioner could not rely on section 178(1)(a) to deem the Company insolvent.

6.  In case this was not right, Mr Lau further submitted that the petition should be struck out because the petition itself had not been served on the Company at its registered office, which was at Unit 102 and not Unit 101. 

7.  Mr Chai, who appeared for the Petitioner disputed this.  He submitted that the petition was not bound to fail.  He contended:-

(1)   The Company could not deny that the statutory demand had been properly served, having itself asserted in its Originating Summons seeking to restrain the Petitioner from presenting the petition that the statutory demand had been served on it on 11 July 2011.

(2)   In any event, it was at least arguable that the service of the statutory demand at Unit 101 was good service, as it could be inferred that Unit 101 was the proper location for service on the Company at its registered office.

(3)   Alternatively, he suggested that it was arguable that whatever might have been stated in the records at the Companies Registry, Unit 101 was the actual registered office of the Company at the time of service of the statutory demand and the petition.

(4)   Even if none of those submissions were accepted, the petition relied simply on an allegation of insolvency to seek a winding up under section 177(1)(d) of the Companies Ordinance.  Although the deemed insolvency arising under section 178(1)(a) was relied upon, this was not the only basis on which it might be shown that the Company was insolvent, and it did not follow that if the deeming provision did not operate in the circumstances of this case that the Petitioner would be unable to prove that the Company was insolvent.  This was because it was open to the Petitioner to ask the court to infer that insolvency was established on the basis that the Company had failed for a period of some weeks to settle an undisputed debt.  He pointed out that for the purposes of the striking out application, the Company had not suggested in its evidence that it had any basis for disputing the debt, and relied on the Originating Summons filed by the Company seeking to restrain the Petitioner from presenting a petition as showing that the Company must have been aware of the Petitioner’s claim and demand since at least 11 July 2001, just over three weeks before the petition was issued and served.

(5)   As to the alleged improper service of the petition:-

(a)   the points mentioned in sub-paragraphs (2) and (3) above were repeated; and alternatively,

(b)   if service was not properly effected as required by the Companies (Winding Up) Rules, this was a mere irregularity, which the court could overlook pursuant to rule 209 of the Winding Up Rules.

8.  I do not think that Mr Chai’s first submission is well founded.  There is nothing in the terms of the Originating Summons to indicate that the Company regarded it as having been properly served on it at its registered office.  All that is said about the statutory demand in the Originating Summons is that the statutory demand was dated 11 July 2011 and was served on the Company on that date.  Although the Company must, I think, be taken to have accepted that the statutory demand was served on it, and thus came to its attention, on 11 July 2011 by virtue of what it has itself asserted in its Originating Summons, it does not follow that it must have come to the Company’s attention by reason of being served at the registered address.  Thus, what was asserted by the Company does not go far enough to assist the Petitioner in the way that Mr Chai suggests.

9.  As to Mr Chai’s second submission, as I understood it, he put this in two ways.

10.  First, he suggested that having regard to the fact that there was nothing either in the lobby of the building or on the first floor (whether outside Unit 102 or Unit 101) to indicate that the Company was to be found there, it was reasonable for the Petitioner to serve the statutory demand on the Company at Unit 101, since this was likely to (and did) bring the statutory demand to the Company’s attention.

11.  In this regard, he relied on the observations of Recorder B Yu SC in UDL Constructing Ltd v Apple Daily Printing Ltd [2008] 2 HKC 534, a case in which the question was whether it was sufficient to leave a notice to be served at a company’s registered office at the entrance to the address which was a compound of rooms, with no clear indication of which room represented the premises of the company concerned.  Holding that this was sufficient, the learned Recorder said at page 539G that:-

“… the subject matter being a notice, it is implicit in the provisions of section 92 [of the Companies Ordinance] that, if served by leaving at the proper address of the person to be served, it must be left there in a proper way; that is to say, in a manner which a reasonable person, minded to bring the document to the attention of the person to whom the notice is addressed, would adopt.”

12.  Mr Chai also relied on the decision of the English Court of Appeal in Mearing v Qureshi (unreported, 27 July 1983), in which an attempt was made to serve a notice at a specified address (464 Edgware Road, London), which was a shuttered shop premises.  It was apparent that there was a concrete wall behind the shutter.  It was said that there was also living accommodation above the shop, and that the entrance to this was around the corner on the adjoining street. The evidence of the process server in that case was that there was a door around the corner, but that it had no number on it, and he therefore inserted the notice under the shutter.  The English Court of Appeal concluded that the layout of the premises would have indicated to a reasonable person that the entrance to the living accommodation at 464 Edgware Road was in fact around the corner on the next street, and that to leave the notice where he wrongly guessed the shop entrance to be was not good service, since it was not in fact at the shop entrance.  Mr Chai suggested that this case was authority for the proposition that leaving a document somewhere other than the “assigned address” for certain premises could, in certain circumstances, be the proper way of effecting service.

13.  I am unable to accept this submission.  It seems to me that the position is quite straightforward.  In order to be able to rely on the deemed inability to pay debts provided for by section 178(1)(a) of the Companies Ordinance, it is necessary for the creditor to serve his statutory demand on the company by “leaving it at the registered office of the company”.  All that is required is for the statutory demand to be left at the registered office.  This could easily have been done in the present case by either inserting the statutory demand under the door at the entrance to Unit 102, or by leaving it outside, at the foot of the door.  However, this was not done.

14.  Neither the UDL Constructing Ltd case, nor Mearing v Qureshi is authority for any proposition to the effect that service at the registered office of a company may be effected by service of the document in question at some other address.  In the UDL Constructing Ltd case, what the court was concerned with was how service should be effected at the proper (i.e. registered) address.  In Mearing v Qureshi, the court was concerned with whether or not what had been done, at the registered address, was reasonably to be regarded as being likely to bring the document to the attention of the addressee.  In neither case was there an attempt to serve at somewhere other than the registered address.

15.  The other way in which Mr Chai sought to suggest that service at Unit 101 was effectively service at Unit 102 was to suggest that Unit 101 might in fact be an access point for Unit 102, in that there might be internal access between the two units.  This submission cannot be accepted.  There is no evidence at all to suggest that this might have been the case.  On the contrary, the Company’s solicitor (whose office was at Unit 101) has deposed in his affirmation evidence that there is no such internal access.  Moreover, the suggestion does not sit well with the fact that Unit 102 had what appeared to be its own separate entrance, at which there was a bell to get the attention of its occupants.

16.  Thus, I do not accept that service of the statutory demand at Unit 101 can be regarded as amounting to service of it at Unit 102, and thus at the registered office of the Company.

17.  As to Mr Chai’s third submission, it is equally untenable.  There is nothing to suggest that the Company’s registered office was no longer at Unit 102, and had been changed to Unit 101.  Throughout, the registered address as recorded at the Companies Registry was the Unit 102 address.  Moreover, even though there may theoretically be a short period during which there might be a mismatch between a company’s location and the address stated at the Companies Registry (for example, between the time a company changes address and the time that it notifies the Companies Registry of this fact), there is no evidence that this was the case here.  Moreover, regardless of the physical location of the Company, its registered address remains that recorded at the Companies Registry until such time as notice is given of the address having changed – so much would appear to be clear from section 92 of the Companies Ordinance – so that all that a person wishing to serve a statutory demand on the company need do is leave it at the registered office as appearing in the Companies Registry’s records.  As we have seen, this is not what was done here.

18.  It is well established that in order to take advantage of the deeming provision under section 178(1)(a), the provisions as to service must be strictly complied with (see, e.g. Re Tung Fung Hong Forwarding Agents Ltd [1984] HKC 406, per Jones J at page 408C).  In the present case, the Petitioner has not strictly complied with the requirements of section 178(1)(a), as it did not leave the statutory demand at Unit 102, which was the registered address of the Company.  Instead, it left the statutory demand at Unit 101, which was not. Notwithstanding that the demand appears to have come to the attention of the Company soon afterwards, what was done was not in accordance with the statutory requirements, and the Petitioner is accordingly unable to rely on any deemed insolvency of the Company pursuant to section 178(1)(a)

19.  Thus, I do not think that it is arguable that the Petitioner can rely on any deemed insolvency in respect of the Company in support of its petition.

20.  However, contrary to Mr Lau’s submission, I do not think that the petition is based on an allegation of insolvency that relies solely on the deeming provision in section 178(1)(a) of the Companies Ordinance.  There is no reference to section 178(1)(a) in the petition, much less any indication that it forms the only basis of the allegation of insolvency.  While I have little doubt that it was the desire of the Petitioner to be able to rely on that provision, it remains open to the Petitioner to seek to establish that the Company is insolvent by other means.  That this is possible is clear from the authorities – see e.g. Re AuraSound Speakers Ltd [2004] 3 HKLRD 502, per Tang J at paragraphs 50 to 51 of the judgment, and Re Simpson Devp Investment (HK) Co Ltd [1999] 1 HKLRD 202, per Le Pichon J at pages 204I-J.

21.  These authorities establish that it is open to the court to infer that a company is insolvent where there is evidence that an undisputed debt has been the subject of a demand, which has not been paid within a reasonable time.  In the present case, although Mr Lau initially sought to suggest that it was not clear when the statutory demand, although not properly served, first came to the notice of the Company, he accepted that having regard to the terms of the Company’s own Originating Summons, it had to accept that it had been aware of the demand from 11 July 2011.  Moreover, having put in no evidence for the purposes of this hearing to suggest that it had any basis for disputing the debt, he acknowledged the difficulty he faced in establishing that the debt was not undisputed (at least for present purposes).  In those circumstances, it cannot be said on the evidence before me that there is no reasonable prospect of the Petitioner being able to establish that the Company is insolvent otherwise than by reliance on section 178(1)(a), and it would accordingly be inappropriate to strike out the petition as having no reasonable prospects of success.

22.  This is not, of course, to say that the Company may not be able to demonstrate in due course, by filing appropriate evidence, that there is a bona fide dispute of substance in relation to the debt.  If it is able to do this, the petition will fall to be dismissed in any case, and questions of the Company’s solvency will not arise.

23.  That leaves Mr Lau’s suggestion that the petition should be struck out because the petition was not properly served.  Rule 25 of the Companies (Winding Up) Rules provides that every winding up petition “shall, unless presented by the company, be served on the company at the registered office, if any, of the company…”.  Having regard to the views to which I have come in relation to service of the statutory demand, it follows that the petition was not properly served either.

24.  However, as Mr Chai submitted that a failure to effect proper service of a petition was not fatal, because of the provisions of rule 209 of the Companies (Winding Up) Rules, which is in the following terms:-

“No proceedings under the Ordinance or the rules shall be invalidated by any formal defect or by any irregularity, unless the court is of opinion that substantial injustice has been caused by the defect or irregularity, and that the injustice cannot be remedied by any order of the court”.

25.  It is clear from that rule that a failure to effect proper service is a procedural irregularity.  It is one that can readily be remedied, where necessary, by adjourning the hearing of a petition so that proper service can be effected, or by ensuring that the company responding to the petition is afforded sufficient opportunity to file its evidence in opposition.  In the present case, had the only point being taken in respect of the petition been that it had not been properly served, this would almost inevitably have been the course taken by the court.  That being so, it seems to me that this argument does not give rise to a ground for striking out the petition altogether.

26.  I am therefore satisfied that it would not be right to strike out the petition, and the Company’s striking out summons is therefore dismissed.

27.  Turning to the Petitioner’s summons for leave to amend the petition, I can see no real objection to amending the description of the registered office of the Company to the correct address, as recorded at the Companies Registry.  Nor can I see any objection to correcting the spelling of the representative of the Petitioner verifying the petition.  I therefore give leave to make those amendments.

28.  However, I do not think it would be right to allow the Petitioner to amend its allegation as to the place of service of the statutory demand from Unit 101 to Unit 102.  The Petitioner’s own evidence has made it clear that service was in fact effected at Unit 101 and not 102.  To allow the amendment would be to permit the Petitioner to put forward a false case, the falsity of which would be exposed by its own evidence already filed.  This should not be done.  I therefore refuse leave to make the proposed amendment to paragraph 6 of the petition.

29.  So far as costs are concerned, it seems to me that although the striking out application has failed, the Petitioner has been to a large extent responsible for the difficulties which have arisen, and which led to the making of the application.  As will also be apparent from the reasons which I have given above, most of the submissions Mr Chai made were untenable.  In all the circumstances, I consider that the appropriate course would be to make no order as to costs in respect of the striking out application.  So far as the application for leave to amend the petition is concerned, I shall make the usual order (suggested by the Petitioner in its summons) that the costs of and occasioned by the application are to be paid by Petitioner, as the party seeking the amendment, to the Company, such costs to be taxed on the party and party basis if not agreed.

30.  It would also, I think, be appropriate to direct that the petition be listed for hearing before the Companies Judge, at 9:30 on the first Monday falling not less than 7 days after the date of this judgment, for further directions as to the conduct of the petition to be given.  I expect that this will involve the filing of further evidence by the Company in opposition to the petition, and the filing of evidence replying thereto on the part of the Petitioner.  It would be as well for the Petitioner to effect proper service of the petition on the Company before then.

31.  I therefore make the following orders:-

(1)    The Company’s application to strike out is dismissed, with no order as to costs.

(2)    The Petitioner’s application for leave to amend its petition is granted in respect of the proposed amendments as shown in the draft annexed to the summons, except for the amendment in relation to paragraph 6, with costs of and occasioned by the application to be paid by the Petitioner to the Company, to be taxed on the party and party basis if not agreed.

(3)    The Company’s application for leave to amend its striking out summons is granted, with costs of the application to be paid by the Company to the Petitioner, to be taxed on the party and party basis if not agreed.

(4)    The petition is to be listed for a further directions hearing before the Companies Judge on the first Monday falling not less than 7 days after the date hereof.

32.  All of the costs orders indicated above are orders nisi, which will become absolute if no application is made to vary them within 14 days of this judgment.