PRACTICE DIRECTION - 3.4

CASE MANAGEMENT FOR
WINDING-UP PETITIONS UNDER SECTION 177(1)(f) OR 327(3)(c) OF THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE,
PETITIONS UNDER SECTION 724
OF THE COMPANIES ORDINANCE, AND
PETITIONS UNDER SECTION 212(1)(b) OR 214(1) OF THE SECURITIES AND FUTURES ORDINANCE

A. Scope of this Practice Direction

1. This Practice Direction applies to all winding-up petitions on “just and equitable” ground ("just & equitable petitions”)[1] that are opposed, petitions presented pursuant to section 724 of the Companies Ordinance (Cap. 622) (“unfair prejudice petitions”) and petitions presented under section 212(1)(b) or 214(1) of the Securities and Futures Ordinance (Cap. 571) (“SFC petitions”).

2. The company named in the petition (“Company”) is a nominal respondent and, therefore, is not expected to take any step in the proceedings other than for the purposes of (a) applying for a validation order, (b) making discovery, and (c) attending the hearing at which the Court is to consider what substantive relief should be granted and such relief may have an impact on the Company. Accordingly, unless otherwise stated, all references to “Respondents” in this Practice Direction (including Appendix A and B) are to the Respondents named in the petition other than the Company.

 

B. Directions hearing for all petitions

3. In respect of the first directions hearing before a Judge:

3.1 The Petitioner shall lodge with the court, via
the e-Lodgement platform at https://e-services.judiciary.hk/elodge/hc/, (i) skeleton arguments (not exceeding 10 pages) giving a brief summary of his case and the proposed directions; and (ii) electronic bundles prepared in accordance with the requirements set out in paragraphs 5, 6.4, 6.6 of Practice Direction 3.8, at least 48 hours[2] or 72 hours[3] before the hearing, and serve such documents on the Respondents by the same time;

3.2 The hearing bundles shall include (i) the petition, (ii) the substantive affidavits[4] filed by the Petitioner, (iii) any essential exhibits which the parties consider relevant and will refer to at the hearing, and (iv) any summons issued by the parties;

3.3 The Respondent[5] shall lodge with the court, via the e-Lodgement platform, his skeleton arguments (not exceeding 8 pages) giving a brief summary of his case and the issues which require determination of the court, at least 24 hours[6] or 48 hours[7]  before the hearing, and serve such documents on the Petitioner and other Respondents by the same time; and

3.4 Failure to comply with the above time limits may result in an adjournment of the petition and the party in default may be ordered to pay the costs wasted (if any) to the other party irrespective of the merits of the petition.

4. For a just & equitable petition:

4.1 The Respondents[8] should as soon as practicable and in any event, prior to the callover hearing before a Master, inform the Petitioner whether they intend to oppose the petition on “liability” [9] such that it is appropriate for pleadings to be filed;

4.2 Upon being so informed, the Petitioner should consider giving his consent to a joint application for leave to dispense with the requirement of rule 32(1)-(2) of the Companies (Winding-up) Rules. In any case, where it appears to the Master or the Judge that the petition is one for which pleadings should be ordered, an order may be made to dispense with the requirement of rule 32(1)-(2);

4.3 The Court would normally order pleadings to be filed if the Respondent opposes the petition on “liability”. In considering what directions to be sought from the Court, the parties should consider adopting the standard directions set out in the Appendix A hereto as appropriate; and

4.4 As the Official Receiver would normally adopt a neutral stance and ask to be excused from attending any further hearing, the parties may serve their documents in electronic form by sending the same to petitionhearing@oro.gov.hk or by delivering an USB or other storage device containing such documents to the Official Receiver’s Office.

5. For an unfair prejudice petition and a SFC petition:

5.1 The Respondents should as soon as practicable and in any event, prior to the first directions hearing before the Judge, inform the Petitioner whether they intend to oppose the petition on “liability” [10] such that it is appropriate for pleadings to be filed;

5.2 Where the Respondents to a petition presented by the Commission under Section 214(1) of the Securities and Futures Ordinance do not intend to dispute “liability”, they should inform the Petitioner whether they agree to have the petition be disposed of by way of the Carecraft procedure[11]; and

5.3 The Court would normally order pleadings to be filed if the Respondent opposes the petition on “liability”. In considering what directions to be sought from the Court, the parties should consider adopting the standard directions set out in the Appendix A hereto as appropriate.

 

C. Expert Evidence for all petitions

6. With a view to encouraging the parties to resolve their dispute without going through a full trial, the Court may at any stage give directions on valuation of the Company.

7. In considering what directions to be sought from the Court on valuation, the parties should consider adopting the standard directions set out in the Appendix B hereto as appropriate. 

8. No expert evidence (including expert evidence contained in or exhibited to an affidavit) should be filed without leave of the Court.

8.1 Any expert evidence filed without leave may be expunged by the Court with costs against the party in default;

8.2 If a party wishes to adduce any expert evidence, he must apply for leave to do so and identify (i) the specific issue or question which the expert is required to address; (ii) the proposed expert by name and field; (iii) the proposed directions on filing such evidence; and

8.3 The Court may order a Single Joint Expert or a Court-appointed Expert (as appropriate) to deal with all or some of the expert issues or questions. If any party considers that the expert issues (or any of them) cannot be dealt with by a single expert, he should state the brief reasons to why the parties should be allowed to appoint their own experts and file their respective expert evidence.

9. This Practice Direction supersedes the previous Practice Direction 3.4 on Case Management for Bankruptcy Petitions, Winding-Up Petitions and Petitions under Section 724 of the Companies Ordinance dated 24 January 2017.

This Practice Direction shall take effect on 17 July 2023.

Dated this 30^th day of June 2023.

APPENDIX A

Standard Directions on all Petitions

1^st Directions hearing

1. Unless with leave of the Court, the Company shall not take any step in the proceedings save for the purposes of (i) applying for a validation order, (ii) making discovery, and (iii) appearing at the hearing at which the Court is to consider what substantive relief should be granted and such relief may have an impact on the Company.

2. The Petition shall stand as Points of Claim. 

3. The Respondents shall file and serve Points of Defence by [   ].

4. The Petitioner shall file and serve Points of Reply, if any, by [   ].

5. The parties shall on or before [   ] file and exchange their respective lists of documents relating to the issues identified in the pleadings insofar as such documents have not been exhibited to the Petitioner’s verifying affirmation.

6. There shall be mutual inspection of documents within [    ] days thereafter.

7. The Petition shall be adjourned for a case management conference (“CMC”) on [   ] with [ ] minutes / [   ] hours reserved.

8. Seven clear days prior to the CMC, the Petitioner shall file and serve submissions reporting to the Court on[12]:

8.1 Whether the Petitioner or Respondents agree(s) to buy out shares of the other on a “without admission of liability basis” and, if so, the terms on which the parties are in agreement or are unable to agree;

8.2 Whether the parties have made any open offers to buy out shares of the other in line with the principles explained in O’Neill v Phillips[13], or to achieve a distribution of assets in specie, or to put the company into voluntary winding up. If so, the terms on which the parties are in agreement or are unable to agree;

8.3 Whether a mediation has been held, if not, why not; and if one has been held, its result; and

8.4 What further directions the Petitioner proposes to seek from the Court.

9. Five clear days prior to the hearing, the Respondents shall file and serve submissions indicating whether they agree with the Petitioner’s report on the matters stated in §8 above and, if they do not, explain why not and provide their own report and proposed directions.

10. Costs be in the cause of the Petition.

1^st CMC

11. Directions on valuation by a Single Joint Expert or a Court-appointed Expert (if necessary) shall be given.

12. The parties shall file and exchange their respective witness statements within [   ] days thereafter.

13. The parties shall take out all their interlocutory applications, if any, within [   ] days after complying with §12 above.

14. The Petition shall be adjourned for a 2^nd CMC on [   ] with [   ] minutes / [   ] hours reserved.

15. The parties shall within [   ] days before the 2^nd CMC file and serve:

15.1 An Agreed List of Issues in form of a table, setting out (a) the issues which require a determination by the Court; (b) the contentions of the parties on the issues; and (c) the references to the pleadings;

15.2 The Petitioner’s and the Respondents’ respective estimates on the time required for opening submissions, cross-examination of each witness and closing submissions at trial.

16. Costs be in the cause of the Petition.

2^nd CMC (if necessary)

17. The Petition shall be set down for trial with [   ] days reserved. The date is to be fixed in consultation with the diary of one counsel for each party[14].

18. There shall be a Pre-Trial Review (“PTR”) of the Petition not less than 6 weeks before the trial, which shall be attended by the trial counsel and the parties.

19. The Petitioner shall lodge and serve a PTR bundle which contains pleadings, court orders, witness statements, Agreed List of Issues and a draft Index of the documents to be adduced as evidence in trial at least 7 days before the PTR.

20. Costs be in the cause of the Petition.

Pre-Trial Review

21. Unless otherwise directed by the trial judge, the witness statements of the deponents shall stand as their evidence-in-chief. Save with leave of the Court, no party should introduce new evidence not covered in the deponents’ witness statements during examination-in-chief.

22. Witnesses may give evidence in Cantonese, in which case interpretation of questions and answers is dispensed with (where appropriate).

23. For witnesses who give evidence in Putonghua, the questions and answers shall be interpreted into English.

24. All witness statements in Chinese and all essential documents or the essential parts of the documents in Chinese which the parties intend to rely on shall be translated into English and be certified or agreed between the parties by [  ].

25. The trial will be conducted in accordance with the following time table (by way of example):

25.1 Day 1: The Petitioner opens his case ([ ] hour) and calls his [ ] factual witnesses for the Respondents’ cross-examination ([  ] hours).

25.2 Day 2: The Respondents open their case ([  ] hours), Respondents call their [   ] factual witness for the Petitioner’s cross-examination ([  ] hours).

25.3 Day 3: The Single-Joint Expert or Court-appointed Expert for the Petitioner’s cross-examination ([  ] hours), followed by the Respondents’ cross-examination ([   ] hours).

25.4 Day 4: The parties to lodge and exchange their written closing submissions by 4 pm.

25.5 Day 5: Closing submissions by the Respondents ([  ] hours), followed by the Petitioner ([  ] hours).

26. Any interlocutory applications including an application to give evidence via video-conferencing facilities shall be made by [     ] and be listed before the trial Judge. 

27. Agreed trial bundles shall be lodged and served by [  ]:

27.1 The bundles shall comply with Practice Direction 3.8, paragraphs 1, 3-5 and 6.1-6.9.

27.2 Where a number of documents form a specific category, such as bank remittances advices etc, they shall be listed as a separate category and arranged in chronological order.

27.3 Non-contentious documents such as Annual Returns and other documents filed at the Companies Registry etc should not be included in Bundle C. Instead, the parties shall agree on a summary of the information contained in such documents and include them in the Agreed Facts.

28. Parties shall lodge the following documents (endorsed by respective trial counsel) by [   ], both in WORD and PDF format, via the e-Lodgement Platform at https://e-services.judiciary.hk/elodge/hc/:

28.1 An Agreed List of Issues with the bundle reference expressed in the form of [Bundle/Tab/Page/Para].

28.2 An Agreed Facts setting out the background facts and matters relevant to the issues and, the respective contentions of the Petitioner and the Respondents with bundle references in case of disagreement on such facts.

28.3 An Agreed Chronology (with bundle references) and an Agreed Dramatis Personae.

29. The legal representatives are expected to comply with the Court’s directions in their full spirit with a view to assisting the Court in the determination of the real issues at trial. Any non-compliance with the directions or failure to prepare and lodge meaningful agreed documents as required by §28 above without reasonable explanation to the Court may be penalised with costs to be borne by the legal representative in default. 

30. The Petitioner shall file his opening submissions (not exceeding [   ] pages,printed in no smaller than 14 fontsize and with normal one-inch margins), and the list of authorities via the e-Lodgement Platform, in WORD and PDF format, in accordance with the  directions on e-bundles, by [   ], and serve the same on the Respondents by the same time.

31. The Respondents shall file their opening submissions (not exceeding [  ] pages, printed in no smaller than 14 font size and with normal  one-inch margins), and the consolidated list of authorities (including authorities cited by the Petitioner), via the e-Lodgement Platform, in WORD and PDF format, in accordance with the directions on e-bundles by [   ], and serve the same on the Petitioner by the same time.

32. Costs be in the cause of the Petition.

APPENDIX B

Standard Directions on Valuation

 

1. The fair market value of the Company shall be determined in the following manner:

1.1 The Petitioner and the Respondents shall first attempt to agree on the valuer, either as a Single Joint Expert or a Court-appointed Expert (as appropriate) (“Valuer”);

1.2 Absent agreement between the parties, the Petitioner and the Respondents shall respectively submit the names of 2 candidates together with their proposed terms on fees and CVs to the Court within 21 days from the date of this Order;

1.3 The Petitioner and the Respondents shall also agree on the contents of the written instructions to be provided to the Valuer within 28 days from the date of this Order, failing which such parts which are not agreed between the parties shall be determined by the Court on paper;

1.4 Unless the parties agree on the Valuer, the Court shall appoint one candidate out of the names submitted by the parties as the Valuer to determine the fair market value of the Company on the bases that (a) the date of valuation shall be the date as agreed by the parties or directed by the Court; (b) the Company is a going concern; and (c) without any minority discount or majority premium (“Valuation”);

1.5 Each of the Petitioner and Respondents shall, within 28 days from the appointment of the Valuer by the Court, procure and provide the Valuer with copies of all books, accounts and documents of and relating to the Company and its Subsidiar(ies) (“Subsidiar(ies)”), their dealings, affairs and properties relevant to the Valuation of the Company insofar as such documents are in their possession, custody or power;

1.6 The Valuer shall at any time be entitled without restriction to seek whatever further documentation or information the Valuer considers from time to time necessary or appropriate for making the Valuation;

1.7 The Petitioner and the Respondents are entitled to inspect and take copies of the books, accounts and documents provided to the Valuer in accordance with §§1.5 and 1.6 above;

1.8 The Petitioner and the Respondents may make representations in writing to the Valuer (“Representations”) within 35 days from the date of compliance with §1.5 above and serve a copy of the Representations on the other party at the same time;

1.9 The Petitioner and the Respondents may respond to the other party’s Representations made under §1.8 above in writing to the Valuer within 28 days of the service of the other side’s Representations, and serve a copy of the response to the other party at the same time;

1.10 The Valuer may at any time following the making of the Representations ask any party reasonable questions in relation to the Representations, and the party (as the case may be) shall respond thereto within 14 days;

1.11 All Representations and communications with the Valuer shall be in writing and sent by email and simultaneously copied (by email) to the other party’s solicitors, and any questions or responses from the Valuer to any party shall be in writing and sent by email and simultaneously copied (by email) to the other party’s solicitors;

1.12 Save as provided above, no further Representations shall be made by any party to the Valuer;

1.13 The Valuer shall have liberty to seek directions from the Court if, in his professional opinion, this is required in order to make a determination as to the Valuation of the Company;

1.14 The Valuer shall make a determination as to the Valuation of the Company in the form of a written report (“Report”), having regard to any Representations made by the parties, simultaneously copied to the parties in electronic form, and the Report shall set out the assumptions and methodology relied upon in arriving at the Valuation of the Company;

1.15 [The Valuation shall be final and binding on the parties, unless (a) the Valuer has departed in a material aspect from the instructions given to the Valuer; (b) there is fraud or collusion; or (c) there is latent error or omission on the face of the Valuation in the Report, and in the absence of either (a), (b) or (c) being established, the Valuation shall be made as an Order of the Court] OR

[The parties be at liberty to cross-examine the Valuer on the Report at trial, provided that a notice identifying the matters or issues on which a party wishes to cross-examine the Valuer is served on the other party and the Valuer no less than [  ] days before the next CMC or PTR (as the case may be)];

1.16 The fees to be paid to the Valuer for preparing and drafting the Report (including any deposit payable to the Valuer) shall be borne in equal shares by the Petitioner and the Respondents (i.e. 50% each) in the first instance;

1.17 The parties shall have liberty to apply in respect of compliance by any party or the Valuer in accordance with the directions above.

2. The costs of the Valuation be reserved.

3. Liberty to apply.