KA WAH CONTAINER STORAGE LTD v. SUPER EASTERN LTD AND OTHERS

HCCW 238/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO.  238 OF 2006

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D E C I S I O N

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1.  This is an application by the Petitioner to file the 7^th affirmation of Wan Chi Hing dated 14 September 2007 in support of the Petition.  For convenience, I shall call that document “the Affirmation”.

2.  Mr Wan, through the Petitioner, owned 50% of the shares of More Elegant Ltd (“the Company”), while Mr Wong Chung Kai, through the Respondents, owned the other 50%.  The Company and other companies were vehicles set up by Mr Wan and Mr Wong to pursue a carpark business.

The Petitioner’s claim

3.  The Petition, presented on 15 May 2006, seeks to wind up the Company on the just and equitable ground under s. 177(1)(f) of the Companies Ordinance.  The Petition accused Mr Wong and the 1^st Respondent of various misconduct, so that the Petitioner has lost trust and confidence in them.  It is claimed that there is a deadlock in the management of the Company.

4.  One of the complaints pleaded in §§18-19 of the Petition is what I may call the diversion of business claim.  The claim is, in substance, that the two carparks operated by the Company have suffered loss of business since November 2005 as a result of Mr Wong/the Respondents diverting the Company’s business to carparks run or controlled by or related to Mr Wong.

5.  These other carparks operated by Mr Wong identified in §18(a) of the Petition are:

5.1.	KX 2367 – commencement date 30 September 2005
5.2.	KX 2429 and 2430 – commencement date 13 November 2005.

6.  The Petitioner further pleads in §18 that:

“	(b)	There were the tendencies that customers of the Company had moved to the aforesaid nearby car parks.
	(c)	In one case, one existing customer changed to the site under KX2367, and the deposit had been transferred directly from the Company to the tenant/occupant of the said site under KX2367 without the knowledge or consent of the Petitioner.
	(d)	Such acts constituted a serious conflict of interest on the part of the 1st Respondent to the detriment of the Company.”

7.  There is another plea in §19 of the Petition that Mr Wong had caused the customers previously using one of the carparks operated by the Company which had to be closed down to move to one of Mr Wong’s sites mentioned above instead of to the other carpark operated by the Company.

8.  Needless to say, the Respondents dispute these claims.

The present application

9.  The material paragraphs in the Affirmation read as follows:

“	4.	In July 2007, Eternal East Cross-Border Coach Mgt Limited (“Eternal East”), one of the major customers of the car park at site KX2358, withdrew and joined a new nearby temporary car park rented from the Government, under STT No KX2552.  Eternal East had been a customer of the Company since July 2005, and had over 50 coaches parked at the site for a monthly fee of around HK$125,000.00.
	5.	We learned about the intended withdrawal only from perusal of the income statements from the 1st and 2nd Respondents.  We then made enquiries and found that the tenant of KX2552 is one Era International Investment Limited (“Era”).”

10.  Mr Wan further says, in §7 of the Affirmation, that enquiries made by his staff revealed that Era was connected to Mr Wong.

11.  It is the Petitioner’s contention that these facts are relevant to the diversion of business claim, in that the facts sought to be introduced fall within that claim.   These facts do not purport to add any new cause of action, but serve to particularise a further act of diversion of business by the Respondents which has occurred after the presentation of the Petition.  It is also said that the matter is relevant to credibility.

12.  The Respondents took objection to the introduction of these allegations on the following grounds:

12.1.	The Petitioner is not entitled to raise the new allegations, these being beyond the matters complained of in the Petition.
12.2.	The allegations are post-petition events which may not be pleaded, let alone raised by way of affirmation, as grounds for seeking the winding-up relief.
12.3.	The allegations are vague and speculative hence falling foul of RHC O.  41 r 5.
12.4.	It is too late to raise the allegations at this stage.

Determination

13.  I am not minded to allow the application, for three reasons.

14.  First, in my view, it is not permissible for the Petitioner to attempt to broaden the attack by the introduction of facts not pleaded in the Petition.  If, as is submitted on behalf of the Petitioner, the new facts serve to particularise a further act of diversion of business warranting the relief sought, the proper way is to seek to amend the Petition to introduce the facts, rather than seeking to widen the attack by way of affirmation.  See: Barma J in Re Linea Trading Co Ltd, HCCW 350 of 2004, 7 December 2005, at §§9-12.

15.  Secondly, I also take the view that it is too late to introduce the allegation in the circumstances of this case.   The Petition has been ordered to be heard together with two other winding-up Petitions presented by another of Mr Wan’s companies against other companies in the joint venture.  The parties have filed many affirmations in support of and in opposition to the Petitions.  The case has reached an advanced stage.  The trial of the three Petitions was set down on 9 July 2007 on the basis of the evidence already filed.  The trial has been fixed for 19 May 2008 with 8 days reserved.  The introduction of this allegation at this late stage, which will necessitate further affidavit evidence to be filed, and I think probably discovery which is likely to be disputed, may jeopardise the trial.  Even if the trial dates are not threatened, the 8 days reserved may not be enough with this new allegation.

16.  Thirdly, I also agree that the allegation that Era is connected to Mr Wong is vague and speculative for the reasons advanced by the Respondents.

17.  For all these reasons, in the exercise of my discretion, I will refuse the application.

18.  Finally, I should add that it is unnecessary for me to come to any view on the “post-petition cause of action” point, and I do not propose to do so.