LI JIANGUO v. WEI WEI AND ANOTHER

HCCW 740/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGIONM

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO 740 OF 2009

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AND

HCCW 741/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO 741 OF 2009

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(HEARD TOGETHER)

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J U D G M E N T

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Introduction

1. On 23 December 2009 the Petitioner issued petitions seeking winding-up orders in respect of Gottinghen Trading Limited (“Gottinghen”) and Pacific Overseas Investment Limited (“Pacific”).  The companies are incorporated in the British Virgin Islands and Samoa respectively.  They are thus each an “unregistered company” as defined by section 326 of the Companies Ordinance.  Their winding up is sought pursuant to section 327(3)(c), namely, on the just and equitable ground.

2. The Petitioner and the 1^st Respondent own 50% of each company.  They are both directors of each company.  Gottinghen was acquired in the following circumstances.  The Petitioner established her own garment exporting business in 1996 acting as independent contractor for Shanghai New Star Import/Export Limited.  She established Gottinghen in 1998 to provide what is described in her affirmation as a platform to receive customers’ orders and to sub-contract her own extra orders.  Gottinghen’s business grew and she needed to hire staff to assist her.  She could only do this through a company incorporated in the Mainland. She incorporated Waysung (Shanghai) Fashion Co Limited (“Waysung”) to undertake this function in April 2001.  At that time the 1^st Respondent was the sole shareholder and director of Gottinghen and Waysung.  Initially Waysung’s activities were limited to providing administrative services as it did not have sufficient capital to obtain an export license.  The way the business worked initially was as follows.  Waysung bought fabric, which it sold to exporting companies, which supplied finished garments to Gottinghen, which it in turn sold to overseas customers.

3. In 2002 the 1^st Respondent increased Waysung’s capital and obtained an export license.  Waysung was then able to export finished garments directly to Gottinghen.  I understand that the garments were still manufactured by other companies on the Mainland.  I note that none of these activities had any connection with Hong Kong.

4. The Petitioner met the 1^st Respondent sometime between late 2001 and early 2003.  The Parties have different recollections about precisely when they met and the nature of their personal relationship, but for reasons which will become apparent later in this judgment nothing turns on this.  What is relevant is that they met in Shanghai and all their dealings took place there.  The Petitioner agreed to become the 1^st Respondent’s partner and acquired 50% of the shares of Waysung for RMB2,500,000 in the 1^st quarter of 2003 and subsequently began to work in Waysung.  In 2006 the Petitioner says that he suggested that Gottinghen be used to control foreign exchange risks and to invest in securities.  The Petitioner and the 1^st Respondent came to Hong Kong in June 2006 and Gottinghen opened, what appears from the bank statements to be, private banking accounts with DBS (Hong Kong) Limited, HSBC and China International Capital Corporation Hong Kong Securities Limited and Credit Suisse.  The Petitioner subsequently became a 50% shareholder and director of Gottinghen.  In about May 2007 the Petitioner and the 1^st Respondent acquired Pacific in order to apply for shares in initial public offerings.  They both held 1 share in Pacific and were its only directors.

5. It is common ground that the relationship between the Petitioner and the 1^st Respondent rapidly deteriorated from 2007 onwards, although they differ over why it did so.  There were discussions in 2008 and 2009 concerning ending their business relationship, but they proved inconclusive.  As I understand the evidence Gottinghen has not been involved in the garment business for sometime.  Its sole activity involves holding certain securities and cash deposits.  I have been provided with a schedule of its assets as at the end of 2012 by Mr Maurellet, who appeared for the 1^st Respondent, the contents of which I do not understand to be in dispute.  Gottinghen currently holds equities, which I understand to be largely, if not exclusively, Hong Kong listed shares of Mainland companies to the value of HK$7,201,376.80 held in accounts with DBS and China International Capital Corporation.  It also holds HK$24,440,329.57 in cash with DBS and HSBC in Hong Kong.  In addition it has US$500,000 in an account with Credit Suisse in Singapore.  Pacific was used to apply for 2 shares in 2 initial public offerings and currently has assets, which consist solely of HK$31,953.10 in cash in an account with DBS in Hong Kong.

6. As is apparent from this introduction Gottinghen and Pacific have very little connection with Hong Kong.  The former is incorporated in the British Virgin Islands and its directors and shareholders are citizens of the People’s Republic of China and, for the majority of the material time, were resident in Shanghai.  The 1^st Respondent, who has a green card, relocated to California in August 2008 as a result, she says, of her deteriorating relationship with the Petitioner.  Gottinghen has never had a place of business in Hong Kong.  The garment business has had no connection with Hong Kong.  It did not open bank accounts here until 2006.  Its sole connection with Hong Kong is the private banking accounts opened in that year.  In the case of Pacific the position is similar, but it has minimal assets here.

The Petitions

7. The Petitions seek a winding up of the companies on the just and equitable grounds under sections 327(3)(c) of the Companies Ordinance.  In the case of Gottinghen paragraph 14 of the scanty Petition states that it has been brought on the following grounds:

(1)  The substratum of the Company has gone.

(2)  An irretrievable break down in trust and confidence arising from the 1^st Respondent’s lack of probity and in particular misappropriation of US$1,000,000.

(3)  Failure to provide accounts.

(4)  Deadlock.

As regards Pacific the grounds (see paragraph 13) are the same save that there is no reference to a breakdown of mutual trust and confidence.

8. Section 327(3)(c) and its English equivalent are rarely used.  Ian Fletcher explains why in paragraph 30-027 of the 4^th edition of The Law of Insolvency:

“Section 221(5)(c) of the Act enables the English court to wind up a foreign company ‘if the court is of opinion that it is just and equitable that the company should be wound up.’ This potentially very wide discretion to wind up a foreign company is expressed in terms identical to those employed in s 122(1)(g) of the Act with regard to the winding up of companies registered in England and Wales or in Scotland, and it may be said that the principles which have been developed with regard to the application of s 122(1)(g) could, if appropriate, be invoked in cases falling under s 221(5)(c). However, in practice the latter subsection has seldom if ever been employed in isolation as a ground for the exercise by an English court of its jurisdiction to wind up a foreign company, but has tended to furnish an additional basis for doing so in conjunction with one of the other grounds expressed in para (a) or (b) of s 221(5).^[1] The apparently sparing use which has been made of s 221(5)(c) is perhaps explicable in view of the fact that, as has been explained, the very concept of an English court’s assuming jurisdiction to wind up a foreign company represents a direct exception to the general principle followed by English law in such matters, and is thus only to be undertaken when the court is satisfied that, in the circumstances, this is defensible in terms of justice and expediency. It is notable moreover that the introductory words of s 221(5) itself are permissive, rather than mandatory, and that by providing that an unregistered company may be wound up in the circumstances therein specified they clothe the English court with a discretionary jurisdiction which, it may be said, effectively ensures that in practice no winding-up order is made under s 221(5) unless the court is satisfied that it is just and equitable that this should be done.”

9. A similar explanation appears in paragraph 12-08 of the 6^th edition of Shareholders’ Rights by Robin Hollington QC:

“In contrast to its lack of jurisdiction under s 994 over foreign companies, an English court may have jurisdiction to wind up a foreign company on the petition of a shareholder on the just and equitable ground: s 221 of the Insolvency Act 1986. Its jurisdiction to wind up companies whose ‘centre of main interests’ is in another EU Member State (other than Denmark) is now, however, restricted by the EC Regulation on Insolvency Proceedings 1346/2000, which came into force on May 31, 2002. Its application is not limited to insolvent companies.

If the English court does have jurisdiction over a foreign company, and the provisions of the EU Regulation on Insolvency Proceedings do not apply, it is within the discretion of the court whether it should exercise its jurisdiction or leave it to the courts of another jurisdiction to do so.  Nearly all the authorities are concerned with creditors’ petitions to wind up on the insolvency ground: see, e.g. BNC v Cosmos Trading [2000] 1 BCLC 813 and cases cited therein. These authorities show that, in the case of winding-up of insolvent companies sought by a creditor, it is for the petitioner to show either the presence of substantial assets within the jurisdiction or some other sufficient connection with the jurisdiction.  In the case of solvent companies sought to be wound up by an aggrieved shareholder, it would have to be a very exceptional case for the court to exercise its jurisdiction to wind it up.  For example, it might do so where the parties have concluded a shareholders’ agreement with an English choice‑of‑law and jurisdiction clause.  But there would be a strong presumption in favour of the local court, as appears from the konamaneni case.”

Application to strike out the Petitions

10. Given what appeared to be the very limited connection between the companies and Hong Kong I drew to the parties’ attention at the pre-trial review my concern that the companies’ connection with Hong Kong was not sufficient to justify the court exercising the just and equitable winding up jurisdiction conferred by section 327(1). As a consequence the 1^st Respondent issued summonses to strike out the Petitions returnable on the first day of the trial.  There was no dispute that the court could properly deal with an application to strike out at trial: Tang v Tang [2002] 3 HKLRD 627.  I heard the application at the commencement of the trial and told the parties that if I felt able to determine the application shortly after hearing argument I would do so, otherwise the trial would continue and I would deal with the issue as part of my judgment after trial.  As it transpired argument finished at the end of the first day of trial and I gave my decision the next morning, which was to strike out the Petitions and to hand down my reasons later.  These are my reasons.

11. Section 327(1) and (3) provide:

“(1) Subject to the provisions of this Part, any unregistered company may be wound up under this Ordinance, and all the provisions of this Ordinance with respect to winding up shall apply to an unregistered company, with the exceptions and additions mentioned in this section.

…

(3) The circumstances in which an unregistered company may be wound up are as follows-

(a)  if the company is dissolved, or has ceased to carry on business, or is carrying on business only for the purpose of winding up its affairs;

(b)  if the company is unable to pay its debts;

(c)  if the court is of opinion that it is just and equitable that the company should be wound up.”

12. In Stocznia Gdanskav SA v Latreefers Inc (No 2) [2001] 2 BCLC 116 at 140a Morritt LJ, giving the judgment of the court, said this about the wording of the English equivalent to section 327, section 221(1) of the Insolvency Act 1986, and how the court should approach the exercise of the power which it confers:

“We emphasise the word ‘may’. Whether the power should be exercised in respect of a foreign company is a matter of discretion depending on the facts of the case. In a number of cases judicial guidance has been given as to when the discretion should and when it should not be exercised in relation to foreign companies. It is clear and common ground that the court should not exercise its jurisdiction in respect of a foreign company where there is no connection whatever between the foreign company and this jurisdiction, other than the decision of the petitioning creditor (which would be present in every case) to present a winding-up petition here.”

13. The cases to which Morritt LJ refers are all cases in which a petitioner had presented a petition to wind up a foreign incorporated company, which I shall, consistent with the wording of the section, refer to as an “unregistered company” in the remainder of this judgment, on the grounds of insolvency.  Counsel have managed to find one authority in England or Hong Kong in which the court has considered the circumstances in which the power should be exercised on the just and equitable ground.  Neither counsel cited to me an authority in which the court has wound up an unregistered company on the just and equitable ground.  This is consistent with the extracts from the text books, which I have quoted.  It is, however, apparent from the authorities how the court should approach this issue in the context of a creditor’s petition and, particularly as Mr Wilson Chan, who appeared for the Petitioner, argued that the same approach should be adopted in the case of a just and equitable petition, it is helpful to start with a consideration of the more important of those authorities.

Jurisdiction under section 327(1)

14. Stocznia Gdanska SA v Latreefers Inc concerned a petition presented by a Polish shipyard to wind up on the grounds of insolvency a Liverian company, Latreefers Inc.  The English Court of Appeal upheld the judgment of Lloyd J winding up the company.  Various questions arose for determination in the Appeal including the question of whether or not Lloyd J had been correct to exercise the power to make a winding-up order against an unregistered company on the evidence before him.  Lloyd J had proceeded on the basis that the requirements for the court to exercise jurisdiction as they had evolved through a series of cases starting with Banque de Marchands de Moscou (Koupetschesky) (in liq) v Kindersley [1951] 2 All ER 549, were as summarized by Knox J in Re Real Estate Development Co [1991] BCLC 210 at 217.

(1)  There must be sufficient connection with England and Wales which may, but does not necessarily have to, consist of assets within the jurisdiction.

(2)  There must be a reasonable possibility, if a winding-up order is made, of benefit to those applying for the winding-up order.

(3)  One or more persons interested in the distribution of assets of the company must be persons over whom the court can exercise jurisdiction.

15. The relevant issue on appeal concerned whether it is a necessary requirement for the existence of the jurisdiction to wind up an unregistered company that the company has an asset or assets within the jurisdiction sufficient to provide a reasonable possibility of benefit to the creditors as a whole or to the petitioning creditors alone.  It will be noted immediately that the issue concerned a petition on the insolvency ground.  Morritt LJ after a thorough consideration of the authorities in paragraphs 22 to 34 of the judgment concluded that the court “can and should apply only the three core requirements to which we have referred in determining whether Lloyd J was right to order the winding up of Latreefers”: paragraph 34.  In Re Beauty China Holdings Ltd [2009] 6 HKC 351 at paras 21 to 23 Kwan J followed this judgment and held that these were the principles by reference to which the court should determine whether or not to exercise its jurisdiction under section 327(3)(b).

16. There are a number of other more general principles explained in Stocznia Gdanska SA v Latreefers Inc, which are relevant to a consideration of the circumstances in which the court should exercise its jurisdiction under section 327(3)(b) and (c).

(1)  “… the most appropriate jurisdiction within which to wind up a company is that in which it is incorporated so that the jurisdiction for which s 221 provides is exorbitant”: para 22.

(2)  “Whether the power should be exercised in respect of a foreign company is a matter of discretion depending on the facts of the case”: para 29.

17. Mr Chan argued that the decisions of the English Court of Appeal in Stocznia Gdanska SA v Latreefers Inc and Re Titan International Inc [1998] 1 BCLC 102 establish that the presence of assets within the jurisdiction is sufficient to satisfy the first of the core requirements referred to in paragraph 13 above.  This being the case, he submitted, there was sufficient connection with Hong Kong to engage the court’s jurisdiction.  I disagree.  It is clear from Morritt LJ’s judgment that the issue which was under careful consideration by the Court of Appeal was whether or not the presence of assets within the jurisdiction was a necessary condition for exercise of the court’s jurisdiction.  It does not seem to me that one can read into Morritt LJ’s reasoning a conclusion that if assets were presence this was always sufficient to satisfy the first core requirement.  The first requirement, as framed by Knox J in Re Real Estate Development, and adopted by Morritt LJ, expressly provides that what is required is “sufficient connection” which “may …. consist of assets”.  In Re Real Estate Development there were assets of the company within the jurisdiction, but Knox J found that there was not a sufficient connection.  It, therefore, seems to me that the fair and sensible reading of the first requirement is that assets are one possible way of establishing sufficient connection, but the presence will not necessarily do so in all cases.

18. Re Titan International Inc [1998] 1 BCLC 102 was a very different kind of case.  The Secretary of State for Trade and Industry presented winding-up petitions on the public interest ground against a German company and a German unincorporated partnership involved in running a money circulation scheme referred to as the Titan scheme.  The Court of Appeal held that the scheme was an illegal lottery and upheld injunctions restraining the operation of the scheme within England.  Subsequently the Secretary of State presented petitions to wind up two US companies, LLC and Titan International Inc, on the public interest ground on the basis that they were involved in a variant of the Titan scheme.  The Secretary of Estate applied for the appointment of a provisional liquidator over the two companies.  Blackburne J appointed provisional liquidators over LLC.  He refused the application over Titan on the ground that he was not satisfied that it had sufficient connection with the jurisdiction.  The Court of Appeal upheld this decision on appeal.  In giving the judgment of the court Peter Gibson LJ said this at page 108h to 109b:

“Attractively though Mr Kaye presented his submissions, I find myself unable to accept them. The factors to which he has pointed neither cumulatively nor singly seem to me to establish a sufficient connection between the company and the jurisdiction. There is simply no evidence that the company was involved in the promotion of the varied Titan scheme in this country. The judge’s findings on this point seem to me inevitable and unassailable in the light of the available evidence. The petition against the company makes no allegation of any activity by the company in this country nor as to the presence of any assets within the jurisdiction. The fact of the matter is that the company has done nothing whatever in the jurisdiction. To arrogate to the English court jurisdiction to wind up a foreign company merely because of its association as an investment vehicle outside the jurisdiction with another foreign company that has been active within the jurisdiction would be in my view to make a giant, impermissible and unjustified extension of the jurisdiction of the English court. No authority has been drawn to our attention which supports any such extension of jurisdiction. Accordingly I am not satisfied that a sufficient connection with the jurisdiction has been shown.”

19. I accept that the presence of assets within the jurisdiction may have made a difference to this conclusion, but it does not seem to me that one can read into the judgment the conclusion that it would necessarily have been found that the presence of assets alone was sufficient to establish the necessary connection.

20. In my view in deciding whether or not to exercise jurisdiction when faced with a petition under section 327 the court should be guided by the three core requirements accepted by the Court of Appeal in Stocznia Gdanska SA v Latreefers Inc. However, what constitutes “sufficient connection” (the first core requirement) will probably differ in the case of a petition presented on the ground of insolvency and one, as in the present case, presented on the just and equitable ground. 

21. A creditor presenting a petition to wind up a company because a debt has not been paid is exercising a class right, namely, the right that any creditor, to whom at least a debt corresponding to the current level of minimum indebtedness is due and unpaid, has to present a petition for the winding up of the debtor company.  In general terms the purpose of presenting a petition is to put into operation the process of court supervised compulsory liquidation of the company’s assets for the payment of all creditors on a pari passu basis.  It is unsurprising, therefore, that when considering whether or not an unregistered company has sufficient connection with England or Hong Kong to justify the court exercising its jurisdiction under sections 221(1) and 327(1) respectively over insolvent companies, the focus has been on whether or not there are assets within the jurisdiction, which can be realized by a liquidator for the benefit of creditors.  There would generally be little point in winding up an insolvent unregistered company in Hong Kong unless there are assets here.

22. The issues are materially different in the case of shareholders’ dispute giving rise to a petition on the just and equitable ground in which the court is asked to determine a dispute between the parties over their conduct of the affairs of a solvent unregistered company.  There is also the practical difference that a winding-up petition based on non-payment of a debt is generally resolved at a short hearing.  The issue is normally whether or not the company has a bona fide debt on substantial grounds and the dispute is resolved by the court on affidavit evidence.  Shareholders’ disputes are commonly considerably more factually complicated.  They frequently involve a painstaking assessment of the conduct of the affairs of a company by its shareholders over lengthy periods of time.

23. As I have already noted, generally the most appropriate jurisdiction in which to decide whether any company should be wound up is the jurisdiction of its incorporation.  The jurisdiction conferred by section 327(1) and its English equivalents is, to use the language of Morritt LJ “exorbitant”: para 22 supra.  In order for a Hong Kong court to be justified in exercising this jurisdiction a connection “sufficient to justify the court setting in motion its winding-up procedures over a body which prima facie is beyond the limits of territoriality” must be shown: Re Real Estate Development Ltd 217d-e.  The connection will generally need to be of a type relevant to the basis upon which the petition is brought and the degree of connection needs to be sufficiently strong to justify the court exercising its jurisdiction.

24. In the case of petitions brought on the grounds of insolvency the connection will commonly be the presence of assets within the jurisdiction of an amount, which justifies a winding up in Hong Kong.  In the case of a petition brought on the just and equitable ground and arising from a shareholders’ dispute the considerations will probably be different.  The presence of assets will be a relevant consideration, but probably not as significant as in the case of a creditor’s petition.

25. In the case of a shareholders’ dispute the relevant factors are likely to include where the company carries on business, the shareholders connection, if any, with Hong Kong and where the matters giving rise to the dispute occurred.  There may be cases in which the connection is strong.  A foreign company may be registered under Part XI of the Companies Ordinance and carry on business here.  Some or all of its shareholders and directors may be resident in Hong Kong.  The principal complaint may concern the exclusion from management of a company’s business in Hong Kong of a Hong Kong resident shareholder.  In such a case the court may take the view that the connection is sufficiently strong for it to accept jurisdiction.  I note in passing that such cases may be more likely to occur in Hong Kong than in England.  I assume that there would rarely be situations in which persons resident in England, who are contemplating establishing a business largely conducted in England, would see any reason to use a company other than one incorporated in England and Wales.  Hong Kong may be in a different position by virtue of a common preference for using as opaque a corporate structure as possible whether or not it confers any real practical benefit.

26. In the present case both shareholders were resident in Shanghai until August 2008 when the 1^st Respondent relocated to California.  Neither of them have any connection with Hong Kong.  Gottinghen’s garment business had no connection with Hong Kong.  The Petitioner complains that the 1^st Respondent has failed to provide him with the books and records of Waysung, which has no connection with Hong Kong of any sort, Gottinghen and “Other Jointly-owned Companies” (paragraphs 19 and 32 to 35 of the Petition), which are not identified, but include Pacific.  There is no suggestion that these books and records have ever been kept in Hong Kong or that the requests for documents were made in Hong Kong.  Paragraph 22 of the Petition refers to a meeting in February 2009 in Shanghai and paragraph 23 makes complaint about transfers out of Gottinghen’s HSBC account by, it appears, internet transfer.  There is a reference in the Petition to one matter that took place in Hong Kong, namely, a visit by the Petitioner to DBS in Hong Kong on 27 May 2009 to freeze the DBS and HSBC bank accounts.  I note that Gottinghen also had accounts in Singapore at this time.

27. The only connection with Hong Kong is the companies’ banks accounts.  Morritt LJ observes at paragraph 32 of his judgment in company’s business in Hong Kong Stocznia Gdanska SA v Latreefers Inc, “.. we can see no reason why, in addition to the three core requirements referred to by Know J, the presence of assets should advance the presumed intention of Parliament.  As counsel for the Yard observed liquid assets may be moved from one jurisdiction to another at the entry of a computer command anywhere in the world.”  This is illustrated in the present case by the fact that one of the Petitioner’s complaints is that US$1,000,000 was transferred out of Gottinghen’s account through an internet transfer affected by the 1^st Respondent outside Hong Kong. 

28. The private banking accounts with DBS and HSBC could have been opened with those banks’ relevant entities in Singapore as was the account with Credit Suisse.  The assets, including the securities, kept within those accounts could have been moved to other accounts outside Hong Kong at any time.  There was no necessity for them to be in Hong Kong.  Gottinghen’s connection with Hong Kong is limited to the fact that its owners decided it was convenient to keep some of its cash and investments in securities in a private banking account in Hong Kong.  In my opinion this is not sufficient connection to justify the court exercising its jurisdiction under section 327(1) over Gottinghen.

29. Pacific’s connection is even weaker.  It was used to apply for shares in two initial public offerings. At the time the Petition was issued it had less than HK$50,000 in its bank account in Hong Kong and currently has only HK$31,953.10.  As I have already observed the court is concerned not only with the nature of the connection, but its strength.  The presence of assets is a relevant connection, but if, as in the present case, the amount is very small it becomes of little, if any, relevance.  In considering the question of the strength of the connection in my view it is relevant to have regard to the nature of the exercise, which the court is being asked to undertake when a particular petition is presented to it.  Commonly shareholders’ disputes are factually complex and time consuming. I can see no justification for the court accepting jurisdiction to decide such cases unless the degree of connection with Hong Kong is sufficiently strong to justify the court’s finite resources being utilized in determining them.  As Mr Maurellet pointed out neither the companies nor the shareholders paid or pay tax in Hong Kong other, probably, than stamp duty on the securities that the companies purchased.  This is, of course, not a reason in itself to refuse jurisdiction, but it is an illustration of both how weak the commercial and financial connection is between the companies and Hong Kong and why the court should not be too ready to accept jurisdiction in cases such as the present.

30. In conclusion I do not accept that there is sufficient connection between Hong Kong and the companies and I will dismiss each Petition.  However, I would like to say something more about the third core requirement referred to in Knox J’s judgment.

31. The third core principle had changed since it originally emerged in the judgment of Sir Raymond Evershed MR in Banque de Marchands de Moscou (Koupetschesky) (in liq) v Kindersley where at page 125 the Master of the Rolls says “There must be assets here to administer and persons subject, or at least submitting, to the jurisdiction who are concerned or interested in the proper distribution of the assets.”  Of course, the mere presentation of a petition can clearly not be enough to justify the court exercising jurisdiction and perhaps with this in mind the proposition is reformulated by Knox J in his third core requirement as follows: “One or more persons interested in the distribution of assets of the company must be persons over whom the court can exercise a jurisdiction”.

32. Quite how this requirement applies in the present case is complicated by the fact that the 1^st Respondent submitted to the court’s jurisdiction in respect of a dispute ultimately over assets in which she has an interest.  This was not an issue fully canvassed before me and I express no concluded view in respect of it.  However, if the 1^st Respondent had not submitted to the jurisdiction I consider it doubtful whether the third core requirement would have been satisfied.  The Petitioner apparently obtained leave to serve the 1^st Respondent outside the jurisdiction on the basis that its claims in the Petitions came within RHC O11 r1(1)(c), (f) and (p) in the case of Gottinghen and O11 r1(1)(c) and (f) in the case of Pacific.  It seems to me fairly clear that neither r1(1)(c) nor (f) applied to Pacific.  No claim had been brought at the time of the application against a person duly served within or out of the jurisdiction and, therefore, r1(1)(c) does not apply.  In the affirmation in support of the application for leave to serve out of the jurisdiction it is asserted, in order to bring the application within r1(1)(f), that the Petition is founded on a tort and damages sustained, which is not consistent with the Petition issued in respect of Pacific.  Although, in the case of Gottinghen the petition contains an allegation of misappropriation of assets and this, it was presumably thought, justified reference to r1(1)(p), this was to misunderstand the relevance of what was alleged.  For reasons explained in the next paragraph the Petitioner was not entitled to seek in the Petition an order against the 1^st Respondent for recovery of money he alleged in the Petition had been misappropriated.  In my opinion leave should not have been granted to serve either Petition out of the jurisdiction on the grounds put before the Master in the leave application.  This is what one would expect if the court’s jurisdiction to determine the Petitions is tenuous and in doubt.  In particular, it serves to demonstrate why the third core requirement probably means in practice that at least one shareholder respondent needs to be ordinarily resident or domiciled in Hong Kong before jurisdiction can properly be exercised and that normally applications for leave to serve out of the jurisdiction will be made under r1(1)(a) or (c).  A Petition to wind up a company on the just and equitable ground will rarely, if ever, be capable of being properly characterized as a claim that comes within r1(1)(f) or (p).  The applications for leave in the present case seem to have been made on the basis of a fundamental misunderstanding of the juridical nature of the issues raised by the Petitions, which was regrettably not identified by the Master who granted the applications.

33. Mr Maurellet argued that if I rejected his application to strike out the Petition, I should strike out the second prayer for relief in the Gottinghen Petition which seeks an order that the 1^st Respondent do return US$1,000,000 to the Company and those prayers in both Petitions which sought orders that the 1^st Respondent hand over documents.  Mr Maurellet drew my attention to Barma J’s judgment in Re Victorious Run Ltd [2010] 3 HKLRD 473 in which the judge held that section 327 provided a jurisdiction to make a winding-up order and nothing else.  I agree.  If I had not struck out the Petitions I would have struck out the offending paragraphs of the prayers.

Costs

34. After I gave my decision I informed counsel that I would include a costs order nisi in my reasons but told them that I was minded to make an order that reflected the fact that the application to strike out had been made because of my comments and that I felt that it would be unfair to visit the Petitioner with liability for all the costs of both Petitions.  I was minded to order that the Petitioner pays the costs up to the time that the 1^st Respondent’s legal advisers had a reasonable opportunity to identify the jurisdiction issue.  Both counsel made submissions.  Both accepted that this was a broadly fair approach although they differed on precisely what date should be taken as the cut-off point and Mr Maurellet also pointed out that there would probably have had to be a hearing anyway.  In the circumstances I think an appropriate costs order is that the Petitioner pays the costs of both Petitions up to 6 weeks after they were served on the 1^st Respondent.  I make a costs order nisi in these terms.  If either party wishes to apply to vary the order they should notify the court in writing within 7 clear calendar days of the handing down of these reasons.