The recent decision of Re Sunni International Limited unreported, HCCW 121/2013 (22 September 2014) discussed the application of the provisions in the Companies (Winding-Up) Rules and the Rules of the High Court for service out of the jurisdiction of a petition to wind up a foreign company.  

Background

Sunni International Limited (the “Company”) is a company incorporated in the British Virgin Islands. It is not registered in Hong Kong under Part 11 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) (“CWUMPO”) or Part 16 of the Companies Ordinance (Cap 622) (“CO”).

The Petitioner is a shareholder of the Company and a judgment creditor, having obtained final judgment against the Company in December 2012 of over HK$2.9 million.

The Petitioner then petitioned to wind up the Company as an unregistered company pursuant to s.327(3)(b) of CWUMPO, on the ground that the Company was unable to satisfy the judgment debt.

The Law

General principles

The jurisdiction to wind up unregistered companies is derived from s.327 of CWUMPO. Pursuant to s.326(1) of CWUMPO, a foreign company is an unregistered company and may therefore be wound up by the Court under s.327.

The Court categorized two different situations:

1.       a foreign company registered under s.333 of CWUMPO or s.777 of CO; and

2.       a foreign company which has no place of business in Hong Kong and is not so registered.

Where a foreign company belongs to category (1), the petition may be served in Hong Kong on the specified person(s) authorized to accept service on behalf of the company. However, for companies which fall within category (2), the petition cannot be served on the company at any address in Hong Kong; instead, the petition has to be served on the company at its registered office outside the jurisdiction.

The Companies (Winding-Up) Rules

The Court analysed the applicability of Rule 25 of the Companies (Winding-Up) Rules (Cap 32H) (“CWUR”) that a petition can be served at the “registered office” or “principal place of business” of the company. Having referred to the English decision of Re Tea Trading Co K and C Popoff Brothers [1933] Ch 647, it was held that CWUR 25 is not intended to enable a petition to be served out of the jurisdiction at a place outside Hong Kong. Where there is no registered office or principal place of business in Hong Kong, CWUR 25 cannot be relied on.

Since there is no relevant provision in CWUR which is relevant to the present context, the Court fell back on to the general rules, i.e. the Rules of the High Court (Cap 4A) (“RHC”), by virtue of CWUR 210.[1] According to Murray-Jones v Guardforce Ltd [1982] HKC 31, 38C, it is clear from the wording of CWUR 210 that CWUR are not intended to be a complete code, accordingly, RHC are applicable to winding-up proceedings if there is no specific provision in CWUMPO or CWUR.

Order 11, RHC

Order 11, rule 1(1) of RHC sets out the numerous gateways for service of a writ of summons outside Hong Kong. It provides that service of a writ out of the jurisdiction is permissible with the leave of the Court if the action begun by the writ satisfies any one of the conditions set out in paragraphs (a) to (p). Order 11, rule 9(1) makes rule 1 applicable to a petition. Therefore, the Court held that, Order 11, rule 1 applies to the service of a winding-up petition outside Hong Kong.

The Petitioner then sought to argue that no leave should be required pursuant to Order 11, rule 1(2)(b) of RHC. The Court rejected the Petitioner’s argument, citing the Hong Kong decision of Re Giant Wizard Corporation HCCW 1196/2004 that there must be specific reasons in order to obviate the requirement of obtaining leave but such specific reasons are absent in s.327 of CWUMPO. The Court made it clear that s.327 was enacted to provide for the winding-up of unregistered companies generally, not specifically foreign companies, and went on to emphasize that unregistered companies are not necessarily foreign entities. It was noted that, the main thrust of s.327 is to confer jurisdiction on the Court to wind up an unregistered company (which includes certain partnerships, associations and companies) but it is not a specific legislation allowing the Court to wind up a non-Hong Kong company.

It was pointed out that a petition based on an unpaid judgment debt cannot properly be characterised as a “claim … brought to enforce any judgment or arbitral award” under Order 11, rule 1(1)(m) of RHC because a winding-up petition seeks to initiate a statutory process of bringing the operations of the company to a close and results in a class remedy in the form of the distribution of the assets of a company for the benefit of its creditors generally. 

Conclusion

The Court held that, the preferable, though far from ideal, route is to rely on CWUR 210, which incorporates RHC for the purpose of winding-up proceedings. However, it is noteworthy that this is subject to the clause “unless the court otherwise in any special case directs”, which actually empowers the Court to direct the application of the rules and procedures as set out in Order 11, rule 1 of RHC when faced with a petition to wind up a foreign company without a registered office or principal place of business in Hong Kong.

Insofar as the issue of jurisdiction for the Court to wind up a foreign company, G Lam J commented that it is well-established that the Court’s jurisdiction to wind up a foreign company will not be exercised unless there is a sufficient connection between the company and Hong Kong. G Lam J then cited the Court of Appeal’s decision in Re Yung Kee Holdings Ltd [2014] 2 HKLRD 313, where the following three core requirements were laid down:

1.       There must be a sufficient connection with Hong Kong, but this does not necessarily have to consist in the presence of assets within the jurisdiction;

2.       There must be a reasonable possibility that the winding-up order would benefit those applying for it; and

3.       One or more persons interested in the distribution of the company’s assets must be persons over whom the Court is able to exercise jurisdiction.

For leave to serve a petition out of the jurisdiction to be given, the petitioner must demonstrate that there is a serious issue to be tried on the merits. Although G Lam J was satisfied that there may well be a good arguable case, due to the insufficiency of evidence presented by the Petitioner, the application for leave was adjourned for it to be revised.