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Ricco (International) Co Ltd v Uni-harvest International Ltd

Judgment Cited authorities 4 Cited in 1 Precedent Map Related
Vincent
Judgment Date22 January 2020
Neutral Citation[2020] HKCFI 201
Year2020
Judgement NumberHCCW229/2018
Subject MatterCompanies Winding-up Proceedings
CourtCourt of First Instance (Hong Kong)
HCCW229/2018 RICCO (INTERNATIONAL) CO LTD v. UNI-HARVEST INTERNATIONAL LTD

HCCW 229/2018

[2020] HKCFI 201

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 229 OF 2018

____________

IN THE MATTER of UNI-HARVEST INTERNATIONAL LIMITED
(Incorporated in the British Virgin Islands BVI Company No. 1388298)
and
IN THE MATTER of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance (Cap.32)

____________

BETWEEN

RICCO (INTERNATIONAL) COMPANY LIMITED
 Petitioner
and
UNI-HARVEST INTERNATIONAL LIMITED Respondent

____________

Before: Deputy High Court Judge Abraham Chan, SC in Chambers
Date of Hearing: 21 November 2019
Date of Decision: 22 January 2020

_____________

D E C I S I O N

_____________


A. THE APPLICATIONS

1. These applications emerge from a somewhat tangled web of personal, corporate, and litigious relationships, but the primary lines are clear.

2. By its Summons dated 29 October 2018, Uni-Harvest International Ltd (“the Company”) seeks to either strike-out or stay the creditor’s winding-up petition presented by the Petitioner (“Ricco”) on 21 August 2018 (“the Petition”).

3. As detailed in the Petition[1], the petitioning debt (“the Debt”) is essentially what is due to Ricco under a costs order (“Costs Order”) made against the Company in April 2017 in HCMP 1808/2016 (“the HCMP Proceedings”).

4. The Company has not appealed against the Costs Order or the underlying judgment for Ricco. Nor has it sought to vary or stay the Costs Order, which was granted at a time when separate proceedings (HCA 1856/2016 and HCA 1858/2016, together “the HCA Proceedings”) variously involving Ricco, the Company and related parties were underway.

5. While not denying the unpaid Debt, the Company seeks to strike-out the Petition on abuse of process grounds. It contends that:

(1) Service of the statutory demand (“the Demand”) was defective and presentation of the Petition was premature.

(2) Ricco is misusing the winding-up procedure to serve as an advantage in the HCA Proceedings.

6. The Company alternatively seeks a case management stay of the Petition pending the resolution of issues on Ricco’s constitution in the HCA Proceedings.

B. THE BACKGROUND

B1. The parties and the HCMP Proceedings

7. Ricco is a Hong Kong company in the jewelry trade. Since its 2002 incorporation, Lui Fung Yee (“Madam Lui”) has been a director and a registered holder of 1,500,000 shares.

8. Madam Lui was in a longtime intimate relationship with Chan Kwok Hung (“Jimmy”) until his death from cancer in April 2015. In that time, Madam Lui apparently believed – incorrectly – that Jimmy had earlier divorced his wife, Liu Siu Foon (“Ms Liu”).

9. The Company is an unregistered BVI company. Before Jimmy died, it served as his corporate vehicle. It was used, inter alia, to hold shares in Ricco on trust for Madam Lui during Jimmy’s lifetime.

10. Between 2002 and July 2007, Madam Lui’s registered shares constituted 50% of the total shareholding in Ricco. The other 50% (1,500,000 shares) were owned by her Malaysian business partner.

11. Around July 2007, Madam Lui financed the Company’s acquisition of those 50% shares from her business partner in order for Jimmy, whose bankruptcy was just discharged, to take part in Ricco’s business.

12. Around August 2007, the Company was further allotted 7,000,000 shares in Ricco (“the Allotment”). This was financed by a HK$7million loan from Ricco itself, contrary to section 47A of the then Companies Ordinance (Cap 32). The Allotment was recorded as fully paid up, but Ricco never actually received any payment for the shares.

13. In 2016, Ricco brought the HCMP Proceedings against the Company to set aside the Allotment. On 26 April 2017, Anthony Chan J handed down Judgment declaring the Allotment null and void and made the Costs Order in favour of Ricco.

14. As earlier noted, by the time of the Costs Order, the HCA Proceedings were also underway. I will address the nature and significance of those proceedings further below, where I assess the Company’s claim that Ricco is pursuing some improper purpose in those proceedings by bringing the Petition.

B2. Service of Demand and Petition

15. The Allocatur confirming the amount of Ricco’s taxed costs in the HCMP Proceedings was handed down on 8 June 2018.

16. On 30 July 2018, Ricco’s BVI lawyers sought to personally serve on the Company the Demand[2] for repayment of the sum of HK$350,103.17 by attending its registered office in the BVI.

17. On 31 July 2018, Ricco through its Hong Kong solicitors further wrote to Gary Tam & Co, the Company’s solicitors in the HCMP Proceedings, notifying them that the Demand and other documents had been served at the Company’s registered BVI office, and enclosing the documents served in the BVI.

18. Ricco filed the Petition on 21 August 2018. The Demand was then (as it now remains) wholly unpaid. The Petition refers to the deeming provision as to inability to pay debts under s.327(4)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap. 32 (“the Ordinance”). However, the Petition does not solely rest on the deeming ground. It relies also on the underlying factual position as to the actual non-payment of the Demand. As will be seen, this affects the Company’s challenge to the validity of the Petition.

19. On 23 August 2018, Ricco further applied for leave to serve the Petition out of jurisdiction in the BVI at the Company’s registered office. Leave was granted on 16 October 2018 and the order was sealed on 22 October 2018.

20. However, on 24 October 2018, when Ricco was still arranging for service in the BVI, Gary Tam & Co filed a Notice to Act and a Notice of Intention to appear on Petition for the Company.

C. ABUSE OF PROCESS?

C1. Two Aspects of Alleged Abuse

21. The Company’s inter partes summons to strike-out (or alternatively stay) the Petition was filed on 29 October 2018. The main ground is abuse of process by Ricco.

22. As elaborated in the Company’s affirmation evidence and in the submissions of Mr Dan Leung for the Company, there are two distinct aspects to the abuse claim.

23. The first aspect is narrow. It is also – as Mr Leung candidly accepted at the hearing – entirely technical. The Company’s case here is simply that:

(1) The Demand was not properly served through any of the methods provided under s.327(4)(a)(i) of the Ordinance, these being (the Company submits) the only ones available to the Petitioner.

(2) The Petition was in any event prematurely presented. The Company contends that, even assuming a proper mode of service, the Demand was only effectively served on 31 July 2019 and not 30 July 2019 as required for the deeming mechanism under s.327(4)(a)(ii).

24. At the hearing, Mr Leung resiled from suggesting that these alleged failures were deliberate attempts to disadvantage the Company. That was sensible. On the facts before me, I do not see how such defects, even if found, could prejudice the Company or benefit Ricco.

25. The second aspect of the Company’s case on abuse does however involve stark accusations of “misuse” by the Petitioner of the statutory winding-up scheme “to obtain some collateral advantage in the related proceedings”.[3]

26. The Company’s essential case here is that, although it “does not presently have a direct crystallised claim against the Petitioner”,[4] there is a bona fide dispute as to Ricco’s ownership. The Company essentially points to this dispute, and the ongoing litigation involving inter alia Ricco in the HCA Proceedings, to contend that Ricco is seeking to gain some kind of “collateral advantage” in the instant proceedings.[5]

C2. General Principles on Striking-Out

27. The following general principles on striking-out apply here:

(1) The strike-out power under O.18, r.19 of the Rules of the High Court must be sparingly exercised and confined to clear and obvious cases: Hong Kong Civil Procedure 2020 at §18/19/4; Re Unibo Trading Ltd, HCCW 733/2005, unreported, 27 January 2006, at §13, Barma J (as he then was).

(2) Where abuse of process is invoked as a strike-out ground, the applicant must show that the court’s process is not being used bona fide or is being used vexatiously or oppressively: Hong Kong Civil Procedure 2020 at §18/19/9.

(3) Where a company does not or cannot dispute the petitioning debt, but puts forward a counterclaim which is disputed, the petition cannot be treated for striking-out purposes as an abuse of the process even though the cross-claim may be relevant to the exercise of the court's discretion on the hearing of the petition: Re Hong Kong Construction (Works) Ltd HCCW 670/2002, unreported, 7 January 2003, at §6(6), Kwan J (as she then was).

C3. The Section 327(4)(a) Ground

The Company’s stance

28. The Company claims that “there has never been good service of the statutory demand, and in any case the petition was issued before the expiry of 21 days after the purported or deemed service of the statutory demand”.[6]

29. The Company notes that the Petition was issued on the basis that it is insolvent within the meaning of s.327(4)(a) of the Ordinance.

30. Section 327(4)(a) materially provides that:

“An unregistered company shall, for the purposes of this Ordinance, be deemed to be unable to pay its debts–

(a) if -

(i) a creditor, by assignment or otherwise, to whom the company is indebted in a sum then due that equals or exceeds the specified amount, has served on the company a written demand in the prescribed form requiring the company to pay the sum so due-

(A) by leaving the demand at the principal place of business of the company;

(B) by delivering the...

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1 cases
  • Synergy Lighting Ltd v The Hongkong And Shanghai Banking Corporation Ltd
    • Hong Kong
    • Court of First Instance (Hong Kong)
    • 18 September 2020
    ...has not come into play is not a ground for striking out a petition: Ricco (International) Co Ltd v Uni‑Harvest International Ltd [2020] HKCFI 201, §§32‑38 (a decision based on the equivalent section 327(4)(a) applicable to unregistered companies). Nor, in my view, is it a ground for restrai......

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