Insolvency — The Companies Court strikes out winding-up petition as abuse of process
On 17 October 2023, the Court of First Instance (presided by Deputy High Court Judge Le Pichon) handed down judgment ([2023] HKCFI 2671, “the Judgment”) allowing the Company’s application in HCCW 159/2023 to strike out the winding-up petition against it on the ground that the petition is an abuse of process. Anson Wong Yu Yat acted for the successful Company.
In this case, the Petitioner’s solicitors wrote to the Company (on 16 January 2023) to the effect that the Petitioner had engaged the Company for the provision of “Design Architecture Service of an NFT Marketplace” for $1.2 million such that the Petitioner could commence issuing NFT via the NFT Marketplace in May 2022. The Company had issued invoices to the Petitioner in the amount of $400,000 each on 21 September 2021, 6 October 2021 and 16 November 2021 which were duly paid. As of the date of the letter (16 January 2023), the NFT Marketplace was still not ready for launch. The delay in the delivery of the Company’s service constituted a repudiatory breach.
By the letter dated 16 January 2023, the Petitioner’s solicitors gave notice to the Company of the Petitioner’s purported acceptance of the Company’s repudiatory breach and demanded the immediate refund of the $1.2 million paid. The Petitioner’s solicitors followed up with a letter on 1 February 2023 enclosing a statutory demand dated 31 January 2023 in respect of the $1.2 million.
Notwithstanding that correspondence was exchanged between the Company’s solicitors and the Petitioner’s solicitors in February and March 2023, whereby the Company’s solicitors provided particulars and documents demonstrating that the Company had a bona fide defence to the Petitioner’s claim, the Petitioner presented a winding-up petition against the Company on 6 April 2023. The Company took out an application to strike out the petition on the ground that it is an abuse of process.
The Court held that the Company has adduced credible evidence that services had been rendered and that the Company has shown that it has a bona fide defence to the Petitioner’s claim. The Court further found that the winding-up petition is not the proper means for recovering damages from the Company for breach of contract, remarking that it is “an abuse of the winding up procedure”. The Court thus allowed the Company’s application to strike out the petition and made an order nisi of costs of and occasioned by the winding-up proceedings with certificate for counsel in favour of the Company on an indemnity basis.
The Judgment serves as a reminder to practitioners that it is improper for a winding-up petition to be used to exert pressure on a company to pay a disputed debt. If a petitioner or its advisors are aware of matters which they appreciate if raised by a company, would be likely to constitute a bona fide defence on substantial grounds, a petition should not be issued. Commonly if a petition is presented at a time when the petitioner is aware of the matters, which a court subsequently finds constitute a bona fide defence on substantial grounds, the petition will be ordered to pay the costs on an indemnity basis. Such reminder has previously been given by the former Companies Judge, Harris J, in Re Alpha Building Construction Ltd (unrep, HCCW 283/2014, 20 May 2015) at §4 and Re Sino Pacific Corporation Ltd (unrep, HCCW 257/2015, 20 January 2016) at §14.
The Judgment can be found here.
The Company was represented by Anson Wong Yu Yat.
Anson Wong Yu Yat
“Anson is intelligent, detail-oriented and practical. He is highly capable of analysing and deconstructing complicated legal issues.”
Legal 500 Asia-Pacific from 2022 – 2023, Commercial Disputes & Administrative and Public Law — Rising Stars
Anson has appeared in more than 150 court judgments (including 16 cases in the Court of Final Appeal with 11 substantive appeals) over the mere span of 8 years of full practice, reflecting the exceptional wealth of experience and exposure in civil litigation for his seniority.
Anson is experienced in handling complex questions of law, including those of great general or public importance which reached the Court of Final Appeal. For example, he has recently appeared in (among others) three civil appeals before the Court of Final Appeal dealing with important questions concerning insolvency matters, land law and equity, service out of jurisdiction and statutory interpretation.
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This article was first published on 19 October 2023.
Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case. The photographs which appear in this article are included for decorative purposes only and should not be taken as a depiction of any matter to which the case is related. The views and opinions expressed in this article/material are solely those of the members authoring it and do not necessarily reflect the official policy or position of Denis Chang’s Chambers, or of any other member or members of Denis Chang’s Chambers.