RE WAI CHI HOLDINGS CO LTD

HCCW 224/2020

[2020] HKCFI 2202

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 224 OF 2020

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D E C I S I O N

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1.  This is the hearing of a summons dated 24 July 2020 (“Summons”) issued by Wai Chi Holdings Company Limited (“Company”) to strike out the winding up petition presented by Financial Asia Limited (“Petitioner”) on 16 July 2020.

2.  The Company is a listed company in Hong Kong. It has substantial cash and bank balance of over HK$100 million.

3.  It is the Company’s case that the Petitioner was until 31 October 2019 engaged by the Company to provide public relations services pursuant to an Investors Relations Service Agreement dated 2 January 2019 and a Financial Relations Service Agreement dated 14 June 2018 (together “Agreements”). By a letter dated 1 October 2019, the Petitioner terminated the Agreements with effect from 1 November 2019 (“Notice”).

4.  On 27 May 2020, the Company commenced proceedings in Small Claims Tribunal (SCTC 8256/2020) against the Petitioner to claim repayment of HK$40,000 which had been paid to the Petitioner as service fees for October and November 2019 on the basis that no service had been provided by the Petitioner since October 2019. The Petitioner filed its defence on 26 June 2020 denying that it had failed to provide services to the Company in October and November 2019 and alleging that the Agreements were only terminated with effect from 13 February 2020. The Petitioner did not make any counterclaim against the Company.

5.  It is clear from the defence filed by the Petitioner that there is a dispute between the Company and the Petitioner as to (1) whether the Petitioner has provided any services to the Company in October and November 2019; and (2) whether the Agreements were terminated with effect from 1 November 2019 (as the Company contends) or with effect from 13 February 2020 (as the Petitioner contends). Such dispute remains pending in the Small Claims Tribunal.

6.  Nevertheless, the Petitioner went ahead to issue a statutory demand dated 11 February 2020, requiring the Company to pay HK$30,000 allegedly as outstanding service fees for December 2019 and January 2020 pursuant to the Agreements (“SD”). This was followed by the Petitioner presenting the petition on 16 July 2020 on the ground that the Company had failed to satisfy the SD said to have been served on the Company on 11 February 2020. The Company denies that the SD has been served on it.

7.  Immediately after receiving the petition, the Company made an ex parte (on notice) application on an urgent basis to restrain the Petitioner from advertising the petition. At the hearing on 24 July 2020, Mr Justice Harris was minded to grant an injunction to enjoin the Petitioner from proceeding with the petition. The Judge indicated that the Court would be “extremely unhappy if it turns out that it is clear to anybody, lawyer, that winding-up petition should not have been presented”. As the Petitioner through its solicitors, Messrs Robertsons, gave an undertaking to the Court not to advertise the petition, it was unnecessary for the Court to grant an injunction against the Petitioner. The Company gave an undertaking to issue a summons to strike out the petition, which would be heard together with the issue of costs of the ex parte application.

8.  Immediately after the hearing, the Company issued the Summons, which was fixed to be heard on 11 September 2020.

9.  Despite the clear indication from the Court and the repeated requests made by the Company, the Petitioner refused to withdraw the petition.

10.  Meanwhile, in the Statement filed by the Petitioner on 4 August 2020 with the Small Claims Tribunal, the Petitioner did not dispute that it had not provided services to the Company, but sought to put the blame on the Company in refusing to allow the Petitioner to provide services. In the same Statement, the Petitioner stated its belief that the determination by the Small Claims Tribunal will determine whether the Company was liable to pay the “retainer fees” to the Petitioner up to the date of termination of the Agreements (i.e. 13 February 2020).

11.  On 6 August 2020, the Company filed its written submissions in respect of the Summons and requested the Court to bring forward the hearing of the Summons as the existence of the petition has caused the Company to incur considerable time and costs in dealing with the enquiries from the Stock Exchange and the public.

12.  On 7 August 2020, this Court gave directions for the Petitioner and the Company to file its evidence, if any, within a strict time table and bring forward the hearing of the Summons to 26 August 2020. The Petitioner did not file any evidence.

13.  Meanwhile, by letter dated 11 August 2020, Messrs Robertsons, asked to be excused from the hearing on the ground that they had not received further instructions from the Petitioner in relation to these proceedings and would apply for an order to cease to act for the Petitioner (that application will be heard before a Master on 18 September 2020). The attendance of Messrs Robertsons was excused. The Petitioner did not appoint another firm of solicitors to represent it in these proceedings. Nor has the Petitioner applied for leave to be represented by one of its directors under Order 5 rule 6(2) of the Rules of High Court.

14.  In my view, the petition should be struck out. It is clear to the Petitioner that there is a bona fide dispute as to whether the Company was liable to pay the HK$30,000 said to be the outstanding service fees for December 2019 and January 2020. As the Petitioner itself stated in the Statement, the Small Claims Tribunal will in due course determine the issues between the parties. If, as the Company claims, the Agreements were terminated with effect from 1 November 2019, the Company would not be liable to pay any fees to the Petitioner from that date. It is an abuse of process for the Petitioner to present a winding up petition against the Company, knowing full well that (1) there is a genuine dispute between the parties as to the date of termination of the Agreements and (2) the Company has already made a claim against it for repayment of HK$40,000, which exceeds the Petitioner’s claim as stated in the petition. It is particularly abusive for the Petitioner to continue to maintain the petition, having been told in clear terms by the Company’s solicitors and the Court that it is not a proper use of the winding up proceedings for a party to present a petition against the Company when there is a bona fide dispute on the Petitioner’s claim.

15.  I therefore order the Petitioner to pay the costs of the Summons and of the Petition, including all costs reserved, on an indemnity basis. I assessed these costs at HK$200,000. The Official Receiver’s costs in the amount of HK$4,100 shall be deducted from the deposit paid by the Petitioner.