ELM SITE SERVICES LTD v. THREE WISE MONKEYS LTD

HCCW323/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 323 OF 2011

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BETWEEN

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D E C I S I O N

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1.  On 4 October 2011, the Petitioner, which is a company incorporated in the United Kingdom, issued a winding-up petition on the grounds of insolvency against a Hong Kong company, Three Wise Monkeys Limited.

2.  Today, I have heard an application to strike out the petition.  As matters transpired, when the hearing came on before me, the Petitioner agreed to the dismissal of the petition with costs and, therefore, it was not necessary for me to deal with the substance of the strikeout application.  However, the Company, which was represented by Mr Andrew Sheppard, sought to have its costs assessed on an indemnity basis.  The grounds for seeking indemnity costs can be explained quite simply.  The underlying work which founds the claim for payment by the Petitioner was carried out in the United Kingdom.  The documents before me do appear to clearly suggest that that work was carried out not on behalf of the Company but on behalf of a UK incorporated company with a similar name, namely The Club of the Three Wise Monkeys Limited. 

3.  Mr Sheppard submitted that it should have been clear to the Petitioner that there was no basis for issuing the petition against the Company and that, taking the step of issuing a petition and causing serious adverse consequences for a company which is actively carrying on business in Hong Kong, was clearly abusive.

4.  I asked Mr Cheung, who appeared today for the Petitioner, the basis upon which the Petitioner said that it had issued the petition against the Company.  The only information Mr Cheung was able to direct me to was evidence of one payment by the Company to the Petitioner through Barclays Bank in April 2011.  It may be that that payment was connected with the project to which the Petitioner’s claim relates and it may be that the payment is a settlement of some moneys due by The Club of the Three Wise Monkeys to the Petitioner.  That does not, of course, mean that the Company has any legal liability to discharge the UK company’s debts.

5.  I agree with Mr Sheppard that issuing a winding-up petition against a company is a serious step and that petitioners need to ensure that there is justification for taking such a step and that if the court is satisfied, as I am in this case, that a petition has been issued for no good reason and the only apparent reason being to exert commercial pressure on a related entity to the true debtor, then it is appropriate, if a petition is dismissed, to order costs on an indemnity basis, which I hereby do.

6.  I have ordered today the dismissal of the petition and I have made a gross sum assessment of the Company’s costs.