RE PAR EXCELLENCE CO LTD

IN THE SUPREME COURT OF HONG KONG

COMPANIES WINDING-UP NO. 128 OF 1989

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JUDGMENT

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1. A petition was presented by Lyndley John Holloway (the petitioner) on the 16th August 1989 to wind up a private company Par Excellence Company Limited (the company) on the grounds that it is insolvent and unable to pay its debts.

2. The petition was based upon a statutory demand dated the 22nd July 1989 for $5,444,245.00, but was later amended to include a further claim for £65,000. A notice of opposition was filed on the 19th September 1989 by Madam Mei Siah Mooi Guat (the respondent) who claimed to be a contributory of the company. She denies that the company is indebted to the petitioner for the two sums claimed. After some preliminary hearings I gave directions on the 18th December 1989 for the future conduct of the case and the petition was eventually set down for hearing on the 14th March with the 15th March also reserved.

3. The petitioner and the respondent owned the whole of the issued share capital of the company in equal shares through nominee companies. The dispute in fact is between the two shareholder's of the company. The company was not represented before me. In fact the hearing of the petition was delayed for a period to enable the respondent to seek an order from the court in separate proceedings by way of originating summons for the nominee companies to be removed as trustees of the shares and for the shares to be transferred to the petitioner and the respondent. I made an order to this effect upon that application.

4. On the 8th March, a consent summons signed by the solicitors for the petitioner and the respondent without any reference being made to the official receiver was placed before me in which I was asked to make an order for the hearing dates on the 14th and 15th March to be vacated, for further evidence to be filed and for the petition to be restored for hearing not before the 1st May in consultation with counsel. The application was stated to be made under Order 42, rule 5A of the Rules of the Supreme Court, which of course does not apply to companies winding-up proceedings. No evidence was filed in support of the application whilst the parties were not aware that the application should have been made in open court see Re X10 Limited [1989]2 H.K.L.R. 306 at p.308. Accordingly the application was refused.

5. However, the solicitors for the parties made a further application again by summons on the following day but this application was also refused for the same reason.

6. The application in the terms to which I have referred has been renewed today before me in open court. The peititoner's solicitor in an affidavit made on the 8th March that has been filed in support of the application states that the evidence of indebtedness relating to the sum of $5,444,245.00 appears from audited accounts prepared by the accountants Coopers & Lybrand. However, further information has been sought from Coopers & Lybrand whilst the respondent solicitors have intimated that they may wish to cross-examine the petitioner.

7. Although Mr Wong counsel for the petitioner submits that there is only a dispute as to the quantum of the debt alleged to be due, Mr Barlow for the respondent states that not only is the indebtedness of the company in dispute, but also contends that the company is not insolvent. It is therefore quite clear that there will be a substantial dispute as to the existence of any debt claimed by the petitioner which cannot be decided in the companies court see Mann v. Goldstein [1968]1 W.L.R. 1091 and Cornhill Insurance Plc v. Improvement Services Limited [1986] 1 W.L.R. 114. As was stated in Mann v. Goldstein, when a debt is substantially disputed, the winding-up procedure is an abuse of the process of the Court. In his judgment in this case at p. 1098, Ungoed-Thomas J. cited a passage from the judgment of Kekewich J. in New Travellers' Chambers Ltd. v. Cheese and Green 70 L.T. 271, 272 when he said :-

"Of course the question whether this is a debt or not may possibly be tried by a winding-up petition; but it has been said over and over again, that the presentation of a winding-up petition is not a convenient, and often not a proper method of trying a disputed debt. If there is any reasonable ground for disputing the existence of the debt - if the question is not a mere question of quantum, but whether there is in fact a debt or not - a petition ought not to be presented, and therefore the court ought to restrain the presentation of the petition."

8. It is indeed quite extraordinary that two prominent firms of solicitors have conducted the present petition as if it was an ordinary common law action between the petitioner and the respondent. This is also evidenced by the filing of an application to set down the petition for the hearing and a notice of setting down that are not applicable to companies winding-up proceedings whilst the reasons given for the adjournment sought are those often put forward in a High Court action. I adverted to the difference between a companies winding-up petition and an ordinary action in Re X10 Limited at p. 309 when I said :-

"Some practitioners appear to be under the impression that a creditor's compulsory winding-up petition and bankruptcy petitions can be dealt with in the same way as an ordinary action. They are not ordinary actions for they have wider implications in the public interest. The court is not merely concerned with the interests of the petitioner and any opposing creditor, but with the general body of creditors."

9. Before winding-up proceedings are commenced, the debt must be clearly established and until this has been done, the petitioner has no locus standi for he is not a creditor of the company Not only was the application for a further adjournment misconceived, so that the petition should be dismissed on this ground alone, but it is also an abuse of the process of the Court. The petition is therefore dismissed.