LEUNG CHI KAI MINTIS v. CHINA-TECH ENGINEERING CO. LTD. AND OTHERS

HCMP 209/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 209 OF 2002

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D E C I S I O N

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1. The Originating Summons in this action was taken out by the Applicant on 18 January 2002. The Applicant claims that by reason of the matters set out in his affirmation dated 29 January 2002, the affairs of the 1st Respondent, China-Tech Engineering Co. Ltd, have been conducted in a manner unfairly prejudicial to the Applicant's interest as a member of the 1st Respondent.

2. That this action was founded on s. 168A(1) of the Companies Ordinance, Cap. 32 is obvious: see the title of the action and paragraph 24 of the Applicant's said affirmation.

3. S. 168A(1) provides that:-

"Any member of a company who complains that the affairs of the company are being or have been conducted in a manner unfairly prejudicial to the interests of the members generally or of some part of the members (including himself)......may make an application to the court by petition for an order under this section (emphasis supplied)."

4. The 2nd to 4th Respondents took out a summons on 12 March 2002 asking for this action to be struck out effectively on the ground that this action fails to comply with s. 168A(1) in that it was commenced by way of an originating summons rather than a petition.

5. The Applicant opposes this application. No reason has been given to explain why this action was commenced by way of an originating summons. Reliance was, however, placed by him on O. 102 r. 2(1) and O. 102 r. 5(1). O. 102 r. 2(1) provides that:-

"Except in the case of the applications mentioned in rules 3,4 and 5 and applications made in proceedings relating to the winding up of companies, every application under the Ordinance must, in accordance with Order 5, rule 3, be made by originating summons."

6. O. 102 r. 5(1) expressly provides for a number of applications to be made by way of petition but an action commenced pursuant to s. 168A has not been included. The Applicant argues therefore that it is open to him to have commenced this action by way of an originating summons. The argument ignores 3 matters:

(1) O. 102 r.2(1) makes an exception to an application made in proceedings relating to the winding-up of companies. At the time when this action was commenced, one of the relief asked for was the winding-up of the 1st Respondent (although this was abandoned later);

(2) s. 168A(1) is a statutory provision specifically applicable to actions relating to petitions based on the so-called "just and equitable" ground whereas O. 102 r. 2(1) and 5(1) are general provisions only;

(3) s. 168A(1) is a provision in a statute whereas O. 102 is only a provision in a subsidiary legislation.

7. The Applicant also relies on O. 2 r. 1(3) and r. 209 of the Companies (Winding Up) Rules Cap. 32. They respectively provide that:-

(a) in the case of O. 2 r. 1(3):-

"The Court shall not wholly set aside any proceedings or the writ or other originating process by which they were begun on the ground that the proceedings were required by any of these rules to be begun by an originating process other than the one employed."

(b) in the case of r. 209, Cap. 32:-

"No proceedings under the Ordinance or the rules shall be invalidated by any formal defect or by any irregularity, unless the court is of opinion that substantial injustice has been caused by the defect or irregularity, and that the injustice cannot be remedied by any order of the court."

Because of O. 1 r. 2(2), the Rules of the High Court (including O. 2 r. 1(3)) do not have effect in relation to proceedings relating to the winding-up companies. As stated above, winding-up was prayed for when this action was commenced. R. 209, Cap. 32 is irrelevant to this application.

8. The Applicant also relies on Re Wing Yick Bamboo Scaffolders Ltd [2002] 1 HKC 395, 399 and Wong Kam Chuen v Wing Hop Yuen Enterprises Ltd Civ. App. 153 of 1990. In short, the argument is that the court should not strike out a proceeding (1) merely because the wrong originating process has been used or (2) because of formal defect. If this argument is taken to the extreme, it will mean that the provisions in the Rules of the High Court and the Companies Ordinance regarding how legal proceedings are to be commenced can be wholly ignored without consequence. I do not consider this to be correct.

9. I agree that at the end the court retains a discretion to treat a proceeding as having been commenced by the correct mode even though in fact it has not. The following matters are however important:-

(1) the need for proceeding by way of petition under s. 168A is expressly provided for by statute;

(2) actions brought on the so-called "just and equitable" ground (whether for winding-up or for other relief) are common and therefore should be well-known to practitioners in Hong Kong;

(3) no material has been placed before me to justify or explain why there has been a departure from the method expressly provided for by statutory and commonly adopted by practitioners in Hong Kong.

10. In these circumstances, there is nothing to justify my discretion to be exercised in the Applicant's favour. Indeed, the discretion should be exercised against him.

11. By reason of the above matters, I will make an order in terms of paragraph 1 of the 2nd to 4th Respondents' summons dated 12 March 2002 but this is without prejudice to the Applicant commencing a similar action using the proper mode.