RE ZHUANG PP HOLDINGS LTD

HCCW 56/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 56 OF 2005

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D E C I S I O N

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1.  This is a summons of Zhuang PP Holdings Limited (“the Company”) issued on 30 June 2006, for leave to file further affirmations in opposition to the petition within 35 days thereof.

2.  In the affirmation in support, being the 4^th affirmation of Au Yeung Kai Wah, the Company explained what further affirmations it intended to file.

3.  The Company would like to file in the winding-up proceedings all relevant materials regarding its claim against the petitioner in High Court Action No. 1589 of 2003.  For the nature of the claim in the High Court Action, I refer to the judgment of the Court of Appeal in CACV No. 288 of 2005 on 15 June 2006, paragraph 4.

4.  The deponent for the Company said if the Company is successful in the High Court Action, the whole of the petitioner’s debt or the petitioner’s counterclaim in the High Court Action would be extinguished as the result of a set-off, and the petitioner would have no interest to wind up the Company.  Hence, the petitioner’s locus to present the petition and if it has interest in the winding up should be dealt with first, before the grounds of the petition are to be considered.  To determine locus and the petitioner’s interest, it was contended that the Company’s claim against the petitioner in the High Court Action would have to be tried, and the Company’s claim should be dealt with “at length” in this petition.  For this reason, the Company seeks leave to file all the relevant materials and evidence in the High Court Action and it would ask the court in the winding-up proceedings to examine such evidence.

5.  I am given to understand that if all the materials, pleadings, affidavits, documents in the High Court Action are to be adduced in the further affirmations of the Company intended to be filed in these proceedings, the volume would be quite substantial.

6.  This court was told in August 2005 that the solicitors for the Company anticipated the trial in the High Court Action might take place in 6 months’ time, subject to availability of dates from the court.  This optimistic estimate proved to be woefully inadequate when the appeal came to be heard by the Court of Appeal 10 months later.  Nevertheless, this court had been told on the previous occasion that the High Court Action has reached the stage when witness statements have been exchanged by the petitioner and the Company.  No mention was made in the supporting affirmation for this application of what further progress, if any, has been made in the High Court Action, or in the bundle of documents placed before me at this hearing.  I am not aware of any impediment for the Company to get on with the High Court Action.

7.  The application to adduce further affirmations is opposed by the petitioner, and rightly so.

8.  Mr Bartlett for the petitioner submitted this is an attempt to re-run an unsuccessful argument raised in the Court of Appeal to the effect that the petitioner could not establish it has locus to present the petition until the cross-claim by the Company in the High Court Action is determined (see paragraph 17 of the judgment of the Court of Appeal).

9.  Having failed in persuading the Court of Appeal that the petition should be adjourned or stayed until after the determination of the High Court Action for the petitioner’s locus to be established, the Company now says, in effect, never mind the trial of the High Court Action, the Company’s claim in the High Court Action could and should be dealt with in this petition instead.  I see little material difference in this stance from the stance taken previously.

10.  The Court of Appeal has held that the petitioner does have a claim against the Company and that is sufficient to give it locus to present and prosecute the petition.  The Court of Appeal considered there are special circumstances in this case which far remove it from a situation where there are simply cross-claims arising out of normal transactions, and the court did not think the determination of important matters raised by the petition should be delayed (paragraphs 19, 20 and 25 of the judgment).  No leave has been sought to appeal the judgment of the Court of Appeal.

12.  The attempt to re-run the locus argument is misconceived.

13.  Even if there were no issue estoppel, I would not have allowed the Company to file evidence for which leave is sought.

14.  It would be an utter waste of costs for the evidence filed in the High Court Action to be duplicated wholesale or substantially in these proceedings, and for the evidence in the High Court Action to be examined critically in these proceedings as they would and should be tried in the High Court Action.

15.  The Company should get on as expeditiously as it can with its prosecution of the High Court Action, if the High Court Action is already at an advanced stage of readiness to be set down for trial, as alleged by the Company.

16.  The Court of Appeal has expressed the view that the Company has no intention to proceed with the High Court Action with “any degree of appropriate dispatch”.  And having noted the seriousness of the allegations against the Company in the winding-up petition, the Court of Appeal said “there can be no doubt of the importance of determining the issues raised on petition with dispatch” (paragraph 22 of the judgment).

17.  To allow the Company to duplicate the evidence and try issues raised in the High Court Action in the winding-up proceedings, quite apart from costs, is bound to delay the resolution of the winding-up petition.

18.  Besides, as Mr Bartlett submitted, it is not so simple just for the Company to introduce wholesale or substantially the evidence in the High Court Action in the winding-up proceedings.  There are other parties involved in the claim in the High Court Action.  Former directors who were sued have dropped out of the picture without any admission of liability, leading the Court of Appeal to comment in paragraph 14 of the judgment if the Company could prove its case against the petitioner.  The Company’s case against the petitioner is in dishonest assistance.  It was alleged that the petitioner had made loans to the Company’s subsidiary when it knew or should have known that the property furnished as security was grossly over-valued by Vigers.  Vigers is still a defendant in the High Court Action.  Without establishing the allegation of over valuation against Vigers, I find it difficult to see how the court can come to any proper view or make proper finding on the allegation of dishonest assistance against the petitioner.

19.  If the claim in the High Court Action is resolved in the Company’s favour, and if it then seeks leave to adduce evidence to inform the court seized with the winding-up petition of the outcome of the trial in the High Court Action, that may be a good reason for doing so.  But that is a very different situation.

20.  I have considered the submissions of Ms Liu on the Company’s behalf, I am not persuaded I should exercise my discretion in a different manner.  The cases cited by her where there is dispute of the petitioning debt on substantial grounds are of no relevance.  Her submission that somehow the court in the winding-up proceedings would have to make a determination of the claim of the Company in the High Court Action before the court is to consider the grounds of the petition, is just missing the point.  I am unable to see how the proper administration of justice would have anything to do with the contentions she put forward.

21.  I have not done anything to bar the Company from taking whatever action it sees fit to have its claim determined with expedition in the High Court Action.

22.  In the exercise of my discretion of case management, I would also refuse leave to the Company to file further evidence for the purpose as stated in its supporting affirmation.

23.  The summons of the Company issued on 30 June 2006 is dismissed.  I order the Company to pay the petitioner’s costs of this application in any event.