RE CHINA PUTIAN FOOD HOLDING LTD

HCCW 193/2020

[2020] HKCFI 2652

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 193 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 8 September 2020 (“Summons”) issued by China Putian Food Holding Limited (“Company”) to strike out the winding-up petition presented by Financial Asia Limited (“Petitioner”) on 30 June 2020.

2.  The Company is a listed company in Hong Kong.  It has substantial cash / bank balances and net assets of RMB 18.6 million and RMB 671 million respectively.    

3.  It is the Company’s case that the Petitioner was until 3 October 2019 engaged by the Company to provide public relations services pursuant to a Service Agreement dated 30 May 2018 (“Agreement”).  The Agreement provides, inter alia, as follows:

(1)  The Agreement lasts for 12 months, from 1 July 2018 to 30 June 2019, and any party may terminate the same by issuing a one-month notice to the other party.

(2)  The Company is to pay a monthly service fee of HK$18,000 to the Petitioner on the first working day of the following month. 

(3)  Should any dispute between the parties arise which cannot be resolved through negotiation, both parties have the right to submit the dispute to Hong Kong International Arbitration Centre for arbitration, the result of which shall be final and binding on both parties.   

4.  By a letter dated 4 September 2019, the Petitioner gave one month’s notice to terminate the Agreement with effect from 3 October 2019 (“Notice”).   

5.  However, by a letter dated 19 November 2019 the Petitioner through its former solicitors, Messrs Robertsons (“Robertsons”), issued an invoice for monthly fee for October 2019 and a statutory demand requiring the Company to pay HK$18,000 (“1^st SD”).  In response, the Company through its former solicitors, Messrs Matthew Ng & Co (“MNC”), denied that the Petitioner had provided any service to the Company since 4 September 2019 and that the 1^st SD was “frivolous”.

6.  On 5 December 2019, the Petitioner issued another letter to the Company enclosing invoices for monthly fees for 3 months from October 2019 to December 2019.  In response, Robertsons sent a letter to the Company enclosing a draft petition based on the 1^st SD and threatened to present a winding-up petition against the Company. 

7.  In view of the insignificant amount involved, the Company (through MNC) on a without admission liability basis and for the purpose of saving time and costs, issued a letter dated 12 December 2019 stating that it would send a cheque for HK$18,000 (“Cheque”) in full and final settlement of all alleged liability of the Company towards the Petitioner and put on record that the Petitioner had not provided any service to the Company since the date of the Notice (i.e. 4 September 2019) (“Settlement Letter”).  The Cheque was sent to and received by the Petitioner on 16 December 2019.

8.  Despite receipt of the Settlement Letter and the Cheque, the Petitioner in its letter dated 20 December 2019 claimed that the Agreement had not been terminated and insisted that it remained “legal, valid and binding”. 

9.  By a letter dated 11 February 2020, the Petitioner enclosed 3 invoices for monthly fees from November 2019 to January 2020 and a statutory demand requiring the Company to pay HK$54,000 within 21 days (“2^nd SD”).  In response, the Company in its letter of 13 February 2020 referred to the Notice and the Settlement Letter and reiterated that the Agreement had been terminated and that the Petitioner had not provided any service to the Company since 4 September 2019. 

10.  On 18 March 2020, the Petitioner issued a letter to the Company enclosing another draft petition to wind up the Company based on the 2^nd SD and threatened to present a winding-up petition against the Company. 

11.  On 30 June 2020, the Petitioner presented the petition in these proceedings on the basis that the Company had failed to satisfy the 2^nd SD.  On 10 July 2020, the Petitioner issued another letter to the Company enclosing invoice for monthly fee for February 2020 and another statutory demand requiring payment of HK$18,000 (“3^rd SD”).

12.  By letters dated 13 July 2020 and 4 September 2020, the Company through Messrs Ince & Co demanded the Petitioner to withdraw the petition with no order as to costs but to no avail.   

13.  At the first hearing of the petition before Master, the Petitioner did not attend the hearing.  Robertsons attended the hearing and informed the Court that they had obtained leave to cease acting for the Petitioner.  The petition has not been advertised by the Petitioner. 

14.  Mr Terence Tai, counsel for the Company, submits that there is a bona fide dispute on the petitioning debt given that:

(1)  the Petitioner has already terminated the Agreement with effect from 3 October 2019;

(2)  the Petitioner has since 4 September 2019 ceased to provide any service to the Company;

(3)  in any event, the Petitioner has accepted the Cheque on the basis of the terms set out in the Settlement Letter and, as such, is estopped from contending that the Agreement has not been terminated. 

15.  In the affirmation filed in support of the Summons, the Company also contends that the Petitioner is bound by the arbitration agreement and, therefore, is obliged to submit the dispute in relation to the Agreement for arbitration. 

16.  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 HK$54,000 said to be the outstanding monthly fees from November 2019 to January 2020.  This is reinforced by the fact that since 4 September 2019 the Petitioner has not provided any service to the Company.

17.  It is abusive for the Petitioner to issue the 1^st SD, the 2^nd SD and the 3^rd SD, having been told in clear terms by the Company’s solicitors that it is not a proper use of the winding up proceedings for a party to present a winding-up petition against the Company when there is a bona fide dispute on the Petitioner’s claim.   

18.  I therefore order the Petitioner to pay the costs of the Summons and of the Petition on an indemnity basis.  I assessed these costs at HK$150,000.  The Official Receiver’s costs in the amount of HK$4,100 shall be deducted from the deposit paid by the Petitioner.