RE GREAT HONEST INVESTMENT CO LTD (IN COMPULSORY LIQUIDATION)

HCCW 102/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO 102 OF 2009

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D E C I S I O N

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1. This is a case where the shares were registered in the names of the four persons, Chung, Mo, Siu and Li. Chung was a director of GHI; Mo was a director of GHF; Siu was the brother-in-law of Chung and Li was a licensed person employed by GHI.

2. The evidence shows that the bank accounts in their names were used to receive proceeds of sales of securities which, according to their clients, were unauthorised.  Various sums of clients’ monies were also deposited into these accounts for reasons unknown according to the investigations thus far carried out by, firstly, the administrators and, subsequently, the liquidators. 

3. There was a shortfall in the number of securities which should have been held by GHI in respect of its cash and margin clients.  The circumstances in which the shortfall occurred were explained in greater detail in the application to the court in HCMP 2251/2007 and summarised in the reasons for decision of Barma J, as he then was, handed down on 14 October 2008.

4. The evidence also shows that in the case of the securities apparently held to the account of Chung, Mo and Li, the value of the securities recorded as being held for their accounts as at July 2014 exceeded the sums recorded as being due from them to GHI. 

5. The liquidators have strived to carry out investigation and inquire into the beneficial ownership of the securities in question, among other securities.  Such investigations have, however, been hampered by the lack of available books and records and lack of assistance afforded to the liquidators by the former management and staff and the fact that numerous payments were made over the years using different combinations of the bank accounts of the four individuals I have mentioned, as well as the bank accounts of the securities house.

6. The liquidators have also carried out private examination of Chung, Mo and Li, pursuant to section 221.  As a result of these investigations, the liquidators believe that the securities accounts were used by these individuals for trading in securities which, for the reasons explained in the liquidators’ affidavit, did not beneficially belong to them.

7. The upshot of all of this is that it has been practically impossible for the liquidators to carry out an exact tracing exercise or to come to any meaningful conclusion regarding the exact source of funds used to purchase the securities in question or as to whether the securities were beneficially owned by any identifiable client of GHI. 

8. It is in these circumstances that the liquidators, pursuant to section 200(3) of the Companies (Winding up and Miscellaneous Provisions) Ordinance, Cap 32, as well as the liberty to apply provided in the order of Barma J dated 29 August 2008, have sought from the court a declaration that the securities apparently held to the account of the four individuals are not beneficially owned by any of them and a direction that the liquidators be at liberty to sell those securities in such manner as the liquidators in their discretion think fit for the benefit of the company’s estate.

9. By letters dated 2 September 2014 sent to the addresses of these individuals (and collected personally in the case of Mr Li), they had been informed of the liquidators’ conclusions and the steps that the liquidators proposed to take.  The summons that has since been issued on 5 February 2015 was also sent to them.  There has been no opposition whatsoever and, indeed, no response from any of the four individuals, nor has any one of them either made any submissions in any form to this court in opposition to the application or appeared in person at this hearing. 

10. In these circumstances, it is, in my view, appropriate to make the orders sought by the liquidators.  There will therefore be an order in terms of the summons dated 5 February 2015.

HCCW 101/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 101 OF 2009

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(Heard Together)

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D E C I S I O N

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1.  I make an order in terms of paragraphs 1 to 6 of each of the summonses in the three winding-up proceedings.  I order the costs of the liquidators in this application to be a liquidation expense and be borne by the estate of the company concerned.

2.  There is no opposition to the order for oral examination.  I am satisfied in the circumstances that each of the respondents should be examined before a Master regarding the affairs and dealings of each of the three companies.

3.  On the production of documents, what the respondents are required to do is to produce all documents within the scope of the order that are now in their possession.  So these documents would cover, for instance, documents that Ms Lorrain Chung said her former solicitors have returned to her recently, if they do fall within the scope of the orders.

4.  If the documents are not in their possession but the respondents are in the position to seek them from those who have the documents, they are required to provide letters of authorisation addressed to the bank for the relevant bank accounts, to authorise the bank to release the documents covered by the orders to the liquidators.

5.  For the expenses of the bank in providing the documents, they should be borne by the respondents in the first place.  If however, the respondents are really unable to pay, I understand from the liquidators that the liquidators are prepared to pay the bank the necessary charges.  So there would be no practical difficulties in complying with the orders I make.