MICK HENDRARSIN and Others v. CHONG LAI FEE and Another

IN THE COURT OF APPEAL

1993, No 40
(Civil)

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J U D G M E N T

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Nazareth, J.A.:

1. This is the judgment of the Court.

This appeal was against the order of Master Woolleymade on 3rd March 1993 for the winding up of HeaterIndustrial Ltd ("Heater") with costs to the two respondents who were the petitioners, to be paid out of Heater's assets. The appellants are contributories who sought to oppose the petition.

2. Having heard the submissions, we allowed the appeal and remitted the matter to be dealt with by the Companies Judge. We now give our reasons.

3. The petition ("the 2nd petition) was made on the ground deposed to in the first affidavit of the 1st respondent, which was filed on 6th February 1993. The ground was that Heater was indebted to the respondents in the sum $280,539.02, which they had paid under a guarantee given to a bank for granting general banking facilities to Heater, together with related expenses of $6,500, the total of which Heater had failed to pay within three weeks' of demand.

4. The three appellants put in notices of intention to appear at the hearing of the petition, recording their intention to oppose it. What transpired before the master on 3rd March is described in the affidavits of appellants' and respondents' respective solicitors in the following way, beginning with that of the former:

"I informed the learned Master that I represented the Opposing Contributories and of the existence of the 1st Winding Up Proceedings commenced by the same Petitioners which had not been finalized. This was subsequently confirmed to the learned Master by Miss Silkstone of the Official Receivers. I also informed the Master that I had instructions to apply for a stay of the 2nd Winding Up Proceedings on the grounds as previously mentioned. I was then questioned by the learned Master for the reason of not filing any opposing affirmation within the prescribed time whereupon I told the learned Master that the Opposing Contributories did not intend to file any opposing affirmation at this stage as it was their intention to apply for a stay as advised by Counsel. At the time, I was thinking that the filing of an opposing affirmation would prejudice the application for stay and I was expecting that the learned Master would adjourn the matters to be dealt with by a Judge as a matter of course as in all contested winding up petitions.

The Learned Master thereafter asked the Solicitor representing the Petitioners whether the effect of the 2nd Winding Up Proceedings was to by-pass the 1st Winding Up Proceedings. The Solicitor for the Petitioners replied that this was so. Upon being told this, the learned Master said that, there being no evidence before him, there was no reason why the usual winding up order should not be made and he so ordered with costs to the Petitioners."

5. The Respondents' solicitor described the matter in the following way:

"I informed the court that the papers were in order and also the fact that three contributories [i.e. the 3 Appellants here] had filed their Notice of Intention to Appear.

The learned Master then turned to the solicitor for the opposing contributories and asked for the grounds of opposition. The solicitor informed the learned Master that there was in existence a separate Petition under C.W.U. No.292 of 1992 ("the 1st Petition") by the same Petitioners against the same Company, Heater Industrial Limited which is still pending. He also stated that his clients would be applying for a stay of the present Petition on the ground of abuse of process of the court and the papers were being drafted by Counsel and would be ready by 5th March, 1993.

The learned Master then ascertained from Miss Silkstone of the Official Receiver who confirmed the existence of the 1st Petition and also supported the said intended application for stay on the ground that there should not be two Winding Up Petitions between the same parties exist in tandem. She also suggested that the Petitioners (i.e. the Respondents here) should either withdraw the 2nd Petition or amend or consolidate it with the 1st Petition.

In reply, I informed the court that subsequent to the filing of the 1st Petition, the Petitioners were compelled, in their capacity as guarantors, to pay to the bank the debt owed by the Company. As the matter only arose after the 1st Petition (which was based on just and equitable ground), it is therefore not possible or appropriate for the Petitioners to amend or consolidate the two Petitioners.

I also submitted that it would be unfair to the Petitioners if the court would not allow the 2nd Petition to be proceeded as it was based on a totally distinct and separate ground and is wholly unrelated to the subject-matter of the 1st Petition.

The learned Master then asked the solicitor for the opposing contributories whether his clients dispute the debt in question. In reply the solicitor said he was advised by Counsel that there is good merit to apply for a stay of the 2nd Petition and that the Petitioners are in breach of an agreement made amongst the shareholders of the Company not to demand for repayment of the loan to the Company.

However, there was no indication whatsoever that the said debt will be or is disputed. As the reply did not in fact answer the question, the learned Master asked the solicitor once again whether he was disputing the debt. The solicitor repeated the same reply as before. Thereupon, the learned Master then asked the solicitor for the opposing contributories for the reason of not filing any opposing affirmation as the present Petition had been filed since 3rd February, 1993. In answer, the solicitor said that the opposing contributories did not intend to file any opposing affirmation as it was their intention to apply for a stay as advised by Counsel.

The learned Master thereafter asked me whether the effect of the 2nd Petition was to by-pass the 1st Petition to which I agreed. Upon being told so the learned Master then said there being no evidence before him and that the debt is not disputed, there was no reason why the usual winding up order should not be made and he so ordered with costs to the Petitioners."

6. The appellants relied upon two grounds of appeal:

(1) That the learned master had no jurisdiction to make the 2nd order.

(2) That if contrary to the above primary contention, the learned master had jurisdiction to make the said order, it was inappropriate to make such order in all the circumstances, including the fact that winding up proceedings (CWU No.292 of 1992) had previously been commenced by the petitioners against Heater on 11th September 1992, and the learned Master should instead have adjourned the matter to be dealt with by a judge of the High Court.

7. Beginning then with the first ground, it was not in dispute that the master's jurisdiction under s.180A of the Companies Ordinance (Cap 32) is confined to unopposed petitions within the meaning of s.180A(1), which reads:

"(1) Subject to general rules limiting the power conferred by this section, the jurisdiction of the court under this Part [i.e. Part V - Winding Up] may, in the case of an unopposed petition for winding-up by the court, be exercised by the Registrar of the Supreme Court."

8. On the competing submissions of counsel, the question of what constitutes an "unopposed" petition within the meaning of s.180A turns essentially upon the construction of rules 30 and 32 of the Companies (Winding Up) Rules which are in the following terms:

"30. Notice by persons who intend to appear

Every person who intends to appear on the hearing of a petition shall serve on, or send by post to, the petitioner, or his solicitor, at the address stated in the advertisement of the petition, notice of his intention. The notice shall contain the address of such person, and shall be signed by him or his solicitor, and shall be served, or if sent by post shall be posted in such time as in ordinary course of post to reach the address not later than 6 o'clock in the afternoon of the day previous to the day appointed for the hearing of the petition, or if such day be a Monday, not later than one o'clock in the afternoon of the Saturday previous to such day. The notice shall be in Form 10 with such variations as circumstances may require. A person who has failed to comply with this rule shall not, without the special leave of the court, be allowed to appear on the hearing of the petition.

32 Affidavits in opposition and reply

(1) Affidavits in opposition to a petition that a company may be wound up by the court shall be filed within 7 days, or such longer time as the court may direct, of the date on which the affidavit verifying the petition is filed and notice of the filing of every affidavit in opposition to such a petition shall be given to the petitioner or his solicitor on the date on which the affidavit is filed.

(2) An affidavit in reply to an affidavit filed in opposition to a petition shall be filed within 3 days of the date on which notice of such affidavit is received by the petitioner or his solicitor."

The material part of Form 10 is in the following terms:

"Take notice that A.B., of ...... a creditor for $ .... of (or opposing contributories holding ...... shares in) the above company intends to appear on the hearing of the petition advertised to be heard on the .... day of ......... , 19 .... , and to support (or oppose) such petition."

9. Mr Reyes for the appellants submits that the notice of intention to appear together with what was stated to the master at the hearing of the petition clearly established that the petition was opposed. But Mr Rimsky Yuen for the respondents contends that whether a petition is opposed is to be determined by reference to rules 30 and 32. The effect of these rules, he submits, is that a person who wishes to oppose a petition must take two steps, first, he has to file a notice of intention in Form 10; and second, he has to file an affidavit in opposition within the time prescribed. He submits that unless both these steps are taken there is no opposition to a petition within the contemplation of s.180A.

10. There is no difficulty about the first step, which we accept is necessary and, it is not in dispute, was taken. As to the second, whether an affidavit is in the nature of a pre-requisite to establishing that a petition is opposed, counsel have not been able to find any authority, apparently because s.180A is unique to Hong Kong and does not appear in the English legislation. However that may be, Mr Yuen's contention that petitions are ordinarily determined on affidavit evidence does not, in our view, support the construction he contends for. Parties who seek to rely upon evidence that is not submitted by affidavit run the risk of not being permitted to do so, just as they run the risk of not being allowed additional time to file late affidavits. And if in particular circumstances they are not able to put in affidavits of opposition timeously, that is not necessarily good reason for the petition opposed to be granted on that account. Equally, if they are not relying upon evidence, or for some other reasons, an affidavit in opposition is unnecessary, it makes little sense to require such affidavit to be filed only for the purpose of confirming the opposition that will already have been placed on record by the notice of intention to appear.

11. So that the filing of an affidavit in opposition can plainly be seen not only not to be required by the wording of rule 32, but equally to be unnecessary for the purpose of proving the fact of opposition. It follows that an affidavit in opposition is not a pre-requisite to establishing that a petition is opposed. We would add that we do not read rule 32(1) as laying down a requirement for affidavits in opposition before a petition can be opposed but rather that, if it is desired to file an affidavit in opposition, this must be done within the 7 days prescribed. We think that is the plain meaning of paragraph (1) of rule 32 and that such construction is supported by the way in which mandatory requirements are provided for in paragraph (2) of rule 32 and elsewhere in the Companies (Winding Up) Rules. Furthermore, it seems to us that rule 32 is directed to notification of intention to appear and to support or oppose, in contrast to the object of affidavits in opposition under rule 32 which, in our view, is to outline and verify the evidence and any other matters relied upon.

12. In our judgment the unequivocal statement of intention to oppose the petition in the notices submitted by each of the appellants, reinforced in this particular case by what the master was told about the earlier petition, was clear evidence that the petition was opposed by the appellants.

13. Whether or not the second petition should have been withdrawn or consolidated with the first petition or stayed, does not affect the question of whether the second petition was opposed; nor, with respect to the master, was the question whether the opposing contributories, i.e. the appellants, disputed the debt in question. In the latter respect, the power to grant the order sought being discretionary, the petition could be defeated on other grounds, as Mr Yuen did not dispute e.g. abuse of the process of the court. We would add that the fact that the petition was opposed went to the master's jurisdiction to make an order for winding-up. Therefore the failure to file an affidavit in opposition or to take out a summons for a stay or even to apply for an adjournment, however regrettable, could not have conferred jurisdiction upon the master. In that latter regard counsel on both sides addressed the question of where the onus lay of establishing that a petition was not opposed, referring to authority that we did not find of assistance. Given the clear evidence that the petition was opposed, we did not find it necessary to pursue or address that matter.

14. It follows that for the foregoing reasons that the master had no power to make the order he did and that the appeal must be allowed.

15. The second ground involved an earlier High Court action by the respondents against Heater and the appellants, in which the claim was struck out leaving the appellants' counter-claim to be heard; it also involved the nature of the counter-claim and of the petition. Some though not all of those matters were brought to the attention of the master. However that may be, in view of the firm conclusion we reached on the first ground, we do not find it necessary to address the second ground.

16. Turning to the matter of costs, we make an order nisi that the appellants are to have their costs of the appeal and of the hearing below.