CHAN YAT FUNG v. YING SHING DESIGN & DECORATION LTD AND OTHERS

HCCW 180/2022

[2024] HKCFI 416

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 180 OF 2022

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BETWEEN

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JUDGMENT

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1.  This is an application to strike out a winding-up petition (the “Strike Out Application”). The petition was presented by Chan Yat Fung (the “Petitioner”) on 24 May 2022 in respect of the 1^st Respondent, Ying Shing Design & Decoration Limited (the “Company”). The petition seeks the winding-up of the Company on the just and equitable ground under section 177(1)(f) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32).

2.  There is an application to amend the summons for the Strike Out Application before the court. The amendment was necessary to: 1) correct the error that the strike out is in relation to the “amended” petition rather than the “re-amended” petition, and 2) strike out the whole of the amended petition rather than just specific paragraphs of the amended petition. No objection was raised by the petitioner. I will thus grant an order in terms of the summons filed by the 2^nd and 3^rd respondents on 19 October 2023.

3.  The 2^nd and 3^rd respondents rely on:

1) non-compliance with the Companies (Winding-Up) Rules (Cap 32H) (the “Winding-Up Rules”);

2) want of prosecution; and

3) unreasonable conduct

as grounds for the Strike Out Application.

4.  The history since the presentation of the petition is summarised in the following table prepared by Mr Kwan, counsel for the 2^nd and 3^rd Respondents:

	Date	Events
1	24 May 2022	Petitioner presented the petition against the Company
2	29 July 2022	Petitioner sought leave to amend the petition
3	3 August 2022	1st call-over hearing: adjourned because the Petitioner failed to obtain the Registrar’s Certificate (as defined in Paragraph 6 hereinbelow).
4	14 September 2022	2nd call-over hearing: adjourned because the Petitioner failed to obtain the Registrar’s Certificate. The Petitioner indicated to the Court that he only intended to exit the Company. Leave was granted to the Petitioner to amend and file the Amended Petition.
5	12 October 2022	3rd call-over hearing: adjourned because the Petitioner failed to obtain the Registrar’s Certificate and failed to file the Amended Petition.
6	9 November 2022	4th call-over hearing: adjourned because the Petitioner failed to obtain the Registrar’s Certificate and failed to file the Amended Petition.
7	14 December 2022	5th call-over hearing: adjourned because the Petitioner failed to obtain the Registrar’s Certificate and failed to file the Amended Petition.
8	4 January 2023	The Petitioner applied to re-amend the Amended Petition.
9	11 January 2023	6th call-over hearing: adjourned because the Petitioner failed to obtain the Registrar’s Certificate and failed to file the Amended Petition.
10	15 February 2023	7th call-over hearing: adjourned because the Petitioner failed to obtain the Registrar’s Certificate.
11	29 March 2023	8th call-over hearing: adjourned because the Petitioner failed to obtain the Registrar’s Certificate. Master told the Petitioner to seek legal advice.
12	4 May 2023	The 2nd and 3rd Respondents took out the Strike Out Application.
13	24 May 2023	9th call-over hearing: adjourned because the Petitioner failed to obtain the Registrar’s Certificate. Master reminded the Petitioner to engage lawyers. The Petitioner told the Court that he was aware of the Strike Out Application.
14	27 June 2023	Call-over hearing for the Strike Out Application before Ng J. Ng J adjourned the Strike Out Application for substantive argument.
15	27 September 2023	10th call-over hearing: adjourned because the Petitioner failed to obtain the Registrar’s Certificate. When Master asked the Petitioner for progress, no satisfactory answer was provided. The hearing has been adjourned to 27 March 2024. The longer adjournment is designed to avoid successive call-over hearings.

Non-Compliance with the Winding-Up Rules & Want of Prosecution

5.  As I see non-compliance with the Winding-Up Rules and want of prosecution on the petitioner’s part as part of abuse of process, I will deal with these grounds together.

Rule 29 Requirements and Consequence of Non-Compliance

6.  Rule 29 of the Winding-Up Rules requires that the petitioning creditor shall satisfy the Registrar that the petition has been duly advertised, the verifying affidavit and the affidavit of service have been duly filed and that the relevant rules have been complied with. After due compliance, a certificate of compliance from the Registrar (the “Registrar’s Certificate”) will be issued to the petitioner and the winding-up petition can be proceeded with.

7.  Although Rule 29 does not provide for the time frame for the obtaining of the Registrar’s Certificate, the new Practice Direction 3.1, which came into effect on 17 July 2023 provides that the Registrar’s Certificate should be obtained without undue delay and a failure to obtain the Registrar’s Certificate within 3 months of the date of the petition without good reasons may result in the dismissal of the petition.

8.  Mr Kwan relies on the dicta in the English case of Re Royal Mutual Benefit Building Society[1] for the proposition that where a petitioner fails to comply with Rule 33 of the English Winding-Up Rules (which for present purposes, is identical to our Rule 29), the ordinary practice is to strike out the petition.

9.  There is no dispute that no Registrar’s Certificate has been obtained for more than 1.5 years. Even after giving the petitioner some indulgence and leeway as he acts in person, this is a huge delay by any standard.

Want of Prosecution

10.  The foundation for the jurisdiction to strike out for delay is based on an abuse of the process of the Court by the party whose case is to be struck out. Inordinate and inexcusable delay causing prejudice to a defendant, contumelious conduct or initiating proceedings without any intention to bring them to a conclusion which is commonly referred to as ‘warehousing a claim’, are examples of abuse[2].

11.  Where abuse was clearly demonstrated, for example where there was contumelious conduct on the part of the plaintiff, proceedings could be struck out even where prejudice to the defendant could not be shown. However, in the majority of applications, prejudice would often be extremely relevant.

12.  I agree that the petitioner in the present case has shown by conduct that he has no intention of obtaining a Registrar’s Certificate or to prosecute the Petition:

(1) The Petitioner has failed to obtain the Registrar’s Certificate for more than 1.5 years. The delay is clearly inordinate. No satisfactory explanation has been given for such delay.

(2) Mr Kwan submitted that in all the previous call-over hearings, the petitioner, acting in person, simply turned up, paid lips service to the court’s orders, and then went completely radio silent until the next call-over hearing. Nothing of substance had been achieved since the presentation of the petition.

(3) The petitioner has not filed any evidence in opposition to rebut this. There is also no evidence that he did not understand the court’s requisitions or orders.

(4) The only evidence that the petitioner has filed in opposition to the Strike Out Application was to take the technical point that in the original summons, the application to strike out the “re-amended” petition was erroneous as there was no leave granted for the petitioner to file the re-amended petition yet.

(5) On 9 March 2023, the court issued its requisitions to the petitioner in relation to his application to re-amend the petition (the “March 2023 Direction”). The petitioner was specifically asked to apply for leave to re-amend the Petition by summons. No steps have been taken by the petitioner to comply with the March 2023 Direction.

(6) At the 10^th call-over hearing on 27 September 2023, the petitioner showed no sign of wishing to progress with the Amended Petition. He did not explain why the Registrar’s Certificate had not been obtained, or when he expected to obtain it.

(7) At the oral hearing for the Strike Out Application, when the petitioner was asked to explain the non-compliance with the March 2023 Direction for more than 10 months, he claimed that he lacked the requisite legal knowledge to proceed. This is disputed by the 2^nd and 3^rd respondents, as some of the letters sent by the petitioner were clearly drafted by someone who has received legal training. However, even assuming the petitioner has no legal knowledge and having all along acted in person, he had been repeatedly directed by various Masters to seek legal advice and to engage solicitors. He had failed to do so, with no explanation given. As agreed by the petitioner himself, a lack of legal knowledge is not an excuse for non-compliance or for delaying the progress of the petition for more than 10 months.

(8) At the oral hearing, the petitioner did not even indicate nor ask for further time for complying with the March 2023 Direction, or to continue with the Petition.

(9) The petitioner had previously stated in open court on 14 September 2022 that his only intention was to exit the Company. It is thus clear that the petitioner had no intention to wind up the Company.

13.  The petitioner, in not answering the requisitions properly and in failing to obtain a Registrar’s Certificate for the last 10 call-over hearings, had shown a wholesale disregard of the court’s directions and orders and has as a result wasted the court’s time, which is a public resource. I am of the view that contumelious abuse on the part of the petitioner is clearly demonstrated.

14.  Thus, although the 2^nd and 3^rd respondents could only point to the Company having to deal with a winding-up petition over its head as prejudice, I am of the view that the amended petition ought to be struck out for abuse of process in the circumstances of the present case.

Costs

15.  Costs follow the event. I make a costs order nisi that costs of and occasioned by the summons filed on 4 May 2023 (as amended) and of the Amended Petition be paid by the petitioner to the 2^nd and 3^rd respondents on a party and party basis, with certificate for 1 counsel, to be summarily assessed if not agreed.

16.  The costs order nisi will become absolute if there is no application to vary it within 14 days hereof.

Order

17.  I hereby order that:

(1) The Amended Petition filed on 18 January 2023 be struck out on the ground that it is an abuse of process of the Court.

(2) There be a costs order nisi that costs of and occasioned by the summons filed on 4 May 2023 and of the Petition be paid by the petitioner to the 2^nd and 3^rd respondents on a party and party basis, with certificate for 1 counsel, to be summarily assessed if not agreed.

18.  The 2^nd and 3^rd respondents shall lodge and serve its statement of costs within 7 days hereof. The petitioner shall lodge and serve its list of objections (if any) to the 2^nd and 3^rd respondents’ statement of costs within 7 days thereafter. The court will proceed to summarily assess costs on paper after the lodging of the list of objections, or after the expiry of the deadline, whichever is earlier.