TANAPAY LTD. t/a THE B.S.C. BOUTIQUE

HCCW928/98

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H E A D N O T E

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Companies winding-up - unopposed creditor's petition based on an undisputed judgment debt - creditor's application for dismissal of the petition - exercise of court's discretion - whether in the public interest to dismiss petition

HCCW928/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP NO.928 OF 1998

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R E A S O N S

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1. This is a creditor's petition filed by Wharf Properties Limited ("the Petitioning Creditor") to wind up Tanapay Limited trading as The B.S.C. Boutique ("the Company") based on a judgment debt. The petition which was advertised on 5 February came on for hearing before the Master on 3 March 1999. The Company did not appear. As the papers were not in order inasmuch as the affidavit to verify the re-amended petition had not been filed, it was adjourned to 10 March 1999. At the adjourned hearing before the Master, the Petitioner informed the Master that "the parties have settled the case". The Petitioner then asked for the petition to be dismissed but as it had already been advertised, the matter was adjourned to the Companies Judge for hearing on 15 March. Quite what was meant by "the parties" was not explained to the Master. It would quite naturally have been understood to include the Company which is the subject matter of the petition. That is unsupported by subsequent events.

2. The request made to the Master was somewhat surprising, coming as it did from a Petitioning Creditor, particularly, as the Company did not appear and there was absolutely no opposition to the petition.

3. Prior to the hearing on 15 March, the Petitioner's solicitors submitted a consent summons allegedly entered into between the Petitioning Creditor and the Official Receiver for the dismissal of the petition with provision for the payment of the Official Receiver's costs. Upon the court's refusal to make an order in terms, an affirmation in support of the Petitioning Creditor's application for an order that the petition be dismissed was filed by its solicitor on its behalf. The relevant part reads :

"8) I was informed by the Petitioning Creditor and verily believe that the Respondent Company has already fallen apart; and that no one else (including other creditor or contributory of the Respondent Company, if any) is interested in the (sic) these proceedings.

9) I was also informed by the Petitioning Creditor and verily believe that (i) no deal whatsoever either preferential or secret is made between the Petitioning Creditor and the Respondent Company and (ii) no benefit was received or will be received by the Petitioning Creditor as a result of the dismissal of these proceedings.

11)(sic) I was further informed by the Petitioning Creditor and verily believe that, in order to save time and costs of the Court and the Official Receiver, the Petitioning Creditor has made a commercial decision to apply for dismissal of the Petition on the following reasons:-

(a) The Petitioning Creditor has already incurred substantial legal costs and expenses in proceedings against the Respondent Company including the present Petition. If the Petition is not to be dismissed, further legal costs and expenses will be incurred by the Petitioning Creditor, which legal costs and expenses include drawing up the winding-up order and preparation and filing of the Proof of Debt etc.; and

(b) The Official Receiver has agreed that if the Petition is to be dismissed at this stage, they will charged against the Petitioning Creditor at the agreed sum of HK$6,500.00. The balance of the costs on account already paid to the Official Receiver in the region of HK$5,000.00 will be refunded to the Petitioning Creditor."

4. It is to be noted that the affirmation was not made by an authorized officer or member of staff of the Petitioning Creditor with first hand knowledge of the matters deposed to. Be that as it may, the assertion that "the Respondent Company has already fallen apart" is unclear, imprecise and unsubstantiated. One can only speculate as to what the Petitioning Creditor "verily believes". Further, the "commercial decision" to apply for dismissal of the petition appears to be wholly irrational : in fact, by insisting on applying for a dismissal, the Petitioning Creditor has had to incur costs that it could have avoided by simply obtaining a winding-up order at the adjourned hearing before the Master. It is difficult to see quite what other costs a petitioning creditor will be "compelled" to incur as a result of any winding-up order. The fact that the Petitioning Creditor has had to incur costs in presenting this petition is obviously a matter that should have been taken into account before deciding to present the petition. If the costs exceeded any estimate given by its solicitors, as a result of having to amend and re-amend the petition, a more pertinent inquiry would have been why the additional costs had to be incurred and whether the Petitioning Creditor ought to pay for them.

5. Counsel for the Petitioning Creditor accepted that the court has a discretion whether or not to dismiss the petition and is not bound to do so at the behest of the Petitioning Creditor. See In re The Shop Clothing Ltd trading as Theme HCCW927 of 1998. The Petitioning Creditor's case is that whilst public interest lies in ensuring that insolvent companies should not remain a hazard to potential creditors (see Bozell Asia (Holding) Ltd v CAL International Ltd & Anr. [1997] HKLRD 1 at 8E), it is not against the public interest to have the petition dismissed where the company has already fallen apart and is not carrying on business. As noted above, the assertion that the Company has already fallen apart and is not doing business is hearsay and unsubstantiated. With the greatest respect, the logic of the submission escapes me : wherein lies the public interest in permitting insolvent companies to continue in existence so long as they are not doing business? Who is to monitor the activities of such companies?

6. The Petitioning Creditor originally sought also to rely upon the fact that the Official Receiver did not oppose the application and in fact has signed a consent summons. It emerged that the consent summons was signed because the relevant officer at the Official Receiver's office was given to understand by the Petitioning Creditor's solicitors that the court required him to sign the consent summons when in fact no such direction had been made. Suffice to say that a most serious view would be taken if the Official Receiver had been intentionally misled. I do not propose at this stage to enquire into whether it all arose through a misunderstanding as the Petitioning Creditor no longer relies upon the consent of the Official Receiver.

7. As to the position of the Official Receiver, it would appear that he simply had none. That is not acceptable : the court has a right to expect assistance from an officer of the court in circumstances such as the present.

8. No valid reason has been advanced in support of the application for the petition to be dismissed. The Petitioning Creditor's stance is so irrational, illogical and untenable as to excite suspicion that some undisclosed ulterior purposes may exist notwithstanding the affirmation filed on its behalf. The petition is solidly founded, based as it is on an undisputed judgment debt. In circumstances such as these, the public interest would require that such companies be wound up and not remain a hazard to potential creditors. Accordingly, I make the usual compulsory order with costs to the Petitioner.