RE LEADING GLOBAL FUND SPC

HCCW 190/2019

[2020] HKCFI 2307

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 190 OF 2019

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R U L I N G

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1.  On 21 June 2019, a petition was filed by Huge Leader Holdings Limited (“the Petitioner”) seeking to wind up Leading Global Fund SPC (“the Company”) which was incorporated under the laws of the Cayman Islands (“the Petition”).

2.  The basis of the Petition is alleged indebtedness arising from a loan agreement dated 31 January 2019.  For reasons which are apparent below, I need not go into details as to the basis of the alleged indebtedness.

3.  Given that the Petitioner prayed in aid section 327 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 as is conventional, the Petitioner in its Petition pleaded, under the heading of “Jurisdiction”, a number of factors which suggests that the court should exercise its jurisdiction pursuant to section 327(1) because the so-called “three core requirements” have been met.

4.  On 26 September 2019, the Company applied by summons to seek to set aside the order granting leave for the Petitioner to serve the Petition out of the jurisdiction, made by Master Lai on 14 August 2019 and that, alternatively, the Petition presented be struck out on the ground that it disclosed no reasonable cause of action, there being a bona fide dispute on substantial grounds.

5.  On 17 October 2019, Coleman J gave certain directions for the filing of evidence and for the matter to be set down for substantive argument which is before me today.

6.  The matter then proceeded in the conventional way whereby skeleton submissions were filed by the Company seeking the relief it was seeking in the summons and skeleton submissions from the Petitioner opposing both applications to set aside the service-out Order as well as the strike-out.

7.  Very shortly prior to the hearing, there appears to have been some reorganisation at the level of the Company’s management which resulted on the face of it in a change of legal representation, including that of a change of counsel.

8.  For these reasons, counsel for the Petitioner, the original counsel for the Company as well as present counsel for the Company agreed that it was desirable and sought that the matter should be adjourned and re-fixed so that some of the issues which arose by reason of the latest changes in the management of the Company could be resolved before the resumed hearing was fixed.

9.  Having regard to this recent change and the parties’ position, I agree that the matter could and should be re-fixed with costs reserved.

10.  There is only one matter which I need to deal with here, which is one I intimated to the parties during the hearing.

11.  The only judgment which appears to be dealing with the substantive requirements of leave to serve out on overseas companies is that of Mr Justice Godfrey Lam in Re Sunni International Limited [2014] 5 HKLRD 558. 

12.  His Lordship there undertakes an examination of the amendment of the rules and which of the sub-provisions under Order 11 of the Rules of the High Court are apposite for applications such as the one in the present.

13.  His Lordship concludes at paragraph 68 as follows:

“In my opinion, leave to serve a petition out of the jurisdiction should not be given unless the applicant demonstrates a good arguable case that these conditions are met in the particular case. The applicant must also demonstrate there is a serious issue to be tried on the merits, for example, as to the existence of the debt on which the petition is founded. The grant of leave, on an ex parte application as is usually the case, will not, of course, preclude the company or any other proper party from contesting jurisdiction subsequently. Such a threshold requirement at the leave stage is, in my view, appropriate in order to ensure that there are prima facie grounds for invoking what has been called an ‘exorbitant’ (see Re Yung Kee [2014] 2 HKLRD 313 at paragraph 41) jurisdiction under section 327 before the petitioner is permitted to serve the process on the company out of the jurisdiction.”

14.  It would appear that Re Sunni has not been subsequently cited nor is it clear that there were other applications to set aside service out of the jurisdiction.

15.  While of course it is always open to a company to seek to set aside service out, one can easily see why perhaps in the last six years or so, this has not often been done. 

16.  The requirements or the burden which a petitioner needs to meet at the service-out stage (and, conversely, setting-aside of the service-out) is relatively low.

17.  The petitioner only needs to show:

(i)  a good arguable case that the jurisdictional gateway is met, in this case, a good arguable case that the three core requirements are met; and

(ii)  the requirements on merits as Mr Justice Godfrey Lam refers to as demonstrating a serious issue to be tried on the existence of the debt.

18.  Given that it was obviously a parallel which his Lordship was looking at in terms of Rules of the High Court, Order 11 rule 1, in this case, I understand his Lordship to be referring to a serious issue to be tried that the petition will be successful, in other words, a serious issue that ultimately the company would not be able to show a bona fide dispute on substantial grounds.

19.  Both requirements are comparatively low, set at the respective “good arguable case” and “serious issue to be tried” level. 

20.  Unlike a trial in a High Court Action of course, the Court, whether at a setting-aside stage or hearing the winding-up petition proper, would be looking for practical purposes at exactly the same material.  There will often and in fact almost inevitably be no cross-examination of the deponents. 

21.  It is therefore very unlikely and only in a rare case could one envisage some advantage to be had in splitting the argument effectively into two hearings:

(1)  for the setting-aside stage and

(2)  for the petition proper. 

22.  In those cases where the petitioner can demonstrate it crosses the relatively lower threshold, there would then be a second hearing where the court would be analysing the same material, looking at the same legal issues but applying, first, the lower test and then a heightened test which basically would result in duplication and an increase of costs and expense. 

23.  Whilst I am not suggesting that there may not be a sense in pursuing such an application in any given case, it seems to me in most cases it would be more desirable and practical simply to concede leave to serve out so that the matter can be determined in the petition proper, and this is of course which I invited the parties before me to consider during the course of the adjournment before the present application is restored for argument.