China Medical Technologies, Inc (Liquidators) v Abbiss & 90 others
Court of First Instance
Miscellaneous Proceedings No 2590 of 2017
Harris J in Chambers
25 July 2018, 9 January 2019

Company law — liquidation — order for production under Companies Ordinance (Cap. 32) [repealed] s. 221 — Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) s. 286B — contempt proceedings against partnership in firm’s name — whether Rules of the High Court (Cap. 4A, Sub.Leg.) O. 81 r. 1 applicable to actions against partnership for contempt arising from s. 221 order — whether order binding on all individual partners by merely naming firm, but without naming partners —— “cause of action” under O. 81 r. 1

Ls, the joint and several liquidators of C, obtained orders against KPMG, a partnership, and 16 individuals at the time assumed to be partners thereof, under s. 221 of the Companies Ordinance (Cap. 32) (repealed, now s. 286B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32)) requiring compliance by only KPMG (the “Orders”). Ls brought contempt proceedings for con-compliance with the Orders naming as defendants 91 alleged partners of KPMG (Ds) since 5 February 2015. In the contempt proceedings, Ds applied to strike out: eight partners who had retired by the date the contempt proceedings were issued (the First Category); and partners who were neither named as respondents to the Orders nor involved in, or knew of, the s. 221 proceedings (the Second Category). The parties had agreed the orders in the striking out application, but not the issue of costs. Ds sought the determination of a preliminary issue in the contempt proceedings, namely whether O. 81 r. 1 of the Rules of the High Court (Cap. 4A, Sub.Leg.) (RHC), which was a procedural device to avoid the need to name all the partners by permitting the partnership to be sued in the firm’s name, applied to an order under s. 221 and was binding on all the individual partners by merely naming the firm.

Held, that:

1) In both Categories, Ls should pay costs. There was never any realistic prospect of any substantive orders, including adverse costs orders, against partners who were not respondents to the Orders and in respect of whom there was no reason to believe they were in some way culpable for any contempt that was established. (See para. 6.)

2) As to the preliminary issue, a s. 221 order could be made against a partnership. Order 81 r. 1 referred to claims in a “cause of action”. A cause of action could be defined as simply a factual situation which entitled one party to obtain from the court a remedy against another. This was wide enough to cover a liquidator seeking a s. 221 order for production. It was unnecessarily restrictive to read O. 81 r. 1 as applicable only to partnerships suing or being sued. Order 81 rr. 2–7 were not to be read as defining what kind of action r. 1 applied to (Letang v Cooper [1965] 1 QB 232 applied). (See paras. 13, 19–20.)

3) Given the parties’ agreement, the defendants were apparently no longer the partnership as a whole, but the remaining individual partners. Whether or not orders against particular partners, instead of the partnership, should be made if contempt were proved, would depend on whether or not O. 45 r. 7(2)(a) of the RHC had been complied with. Any individual partner served in accordance with r. 7(2)(a) was under a personal obligation to take steps to facilitate compliance with the Orders by KPMG, since a partnership imposed joint liability for the obligations of the partnership on each partner. (See para. 21.)

Application

This was an application by Christopher Barry Abbiss and 90 other persons (the defendants) to strike out as against certain defendants the contempt proceedings brought by the joint and several liquidators of the subject company; and for determination of a preliminary issue in those proceedings. The facts are set out in the judgment.

Jurisdictions: 

Thomson Reuters – Sweet & Maxwell are the publishers of the Authorised Hong Kong Law Reports & Digest ("HKLRD") and the Authorised Hong Kong Court of Final Appeal Reports ("HKCFAR"), and providers of Westlaw HK (www.sweetandmaxwell.com.hk / www.westlaw.com.hk).