SNK CORPORATION v. C P (HOLDINGS) LTD.

HCCW 55/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO. 55 OF 2001

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J U D G M E N T

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1. This is a petition by a Japanese company, which I will refer to as the Petitioner, to wind up a Hong Kong company, which I will refer to as the Company, on the ground that the Company is indebted to the Petitioner in the sum of HK$634,000.00 odd as a guaranteed minimum royalty under four licence agreements for the use in comic books to be published and printed by the Company of characters from certain video games, the intellectual property rights of which are owned by the Petitioner. The Statutory Demand was served in November 2000 but no payment was made by the Company. The Petition was presented in January 2001 and a verifying affidavit was filed also in January 2001. The Petition has been opposed by the Company on grounds amongst others that there has been a breach of the licence agreement by reason of the omission of certain characters and the promotion of another character, and also on the ground that the Petitioner has made various criticisms of the Company's products allegedly in breach of the licence agreement.

2. Be that as it may, in April 2001, the Petitioner itself was placed in civil rehabilitation under Japanese law. Apparently under the terms of civil rehabilitation, the Petitioner cannot give instructions without the consent of a court-appointed supervisor. In July 2001, the court-appointed supervisor gave consent to the Petitioner to withdraw the Petition but he did not give consent to the dismissal of the Petition which was what the Company sought. However, at the same time, no instructions were given to the solicitors for the Petitioner for the prosecution of the Petition.

3. This is clearly an undesirable state of affairs. As has been well established, a petition is not simply a lis between two individual parties. It is the invoking by the petitioner of a class remedy against a company, that remedy being one of the most potent remedies that can be invoked against a company because it seeks to determine the very existence of that company. Therefore, it is necessary in a situation where the petitioner does not seek to prosecute the petition that the petition be dealt with expeditiously either by way of withdrawal (if the company is happy for that to occur) or by a dismissal of the petition. I would add that in the present case, there are no supporting creditors.

4. Accordingly, the Company has caused this Petition to be restored for hearing and today the Petitioner has not appeared to prosecute it. In the absence of any appearance by the Petitioner for the prosecution of the Petition and also in the absence of any supporting creditors, it is clear that the Petition should not be left in abeyance and should be dismissed with costs.

5. As for who is to be responsible for the costs, Mr Chan for the Company today has sought an order under O.62 r.8. However, it is clear that any application should not be held in the absence of the solicitors who are being asked to bear the costs. Consequently, I will adjourn that part of the hearing today relating to costs until such time as the Petitioner's solicitors have been given full notification of the present application.