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[2024] HKCFI 3710-EN-2024-12-30

CHEN YUNG NGAI KENNETH AND ANOTHER v. OLDHAM, LI & NIE (A Firm)

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HCB 3819/2011

[2024] HKCFI 3710

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

________________________

Re:

HO YUK WAH DAVID (the “Discharged Bankrupt”)

________________________

BETWEEN

	CHEN YUNG NGAI KENNETH and CHEN MEI MEI (Trustees-in-bankruptcy of the Discharged Bankrupt)	Applicants
	and
	OLDHAM, LI & NIE (A Firm)	Respondent

________________________

Before:

Hon Au-Yeung J in Chambers

Date of Hearing:	12 September 2023
Closing Date for Further Submissions:	10 November 2023
Date of Decision:	30 December 2024

________________________

D E C I S I O N

________________________

A. INTRODUCTION

1. The Trustees in Bankruptcy of David Ho obtained an order under s.29 Bankruptcy Ordinance (“”) for the Respondent (“OLN”), a firm of solicitors, to produce various documents (“OLN Order”). This is the Trustees’ summons dated 5 May 2023 for leave to use the documents produced by OLN (“Disclosed Documents”) pursuant to the OLN Order for the following specified purposes:

(1)  Disclosing and using the same in HCA 2587/2017 (“2587 Action”)  (“1^st Purpose BO”);
(2)  Commencing a civil action against OLN for the purpose of enforcing and/or pursuing and/or accounting for the Trustees’ rights over monies belong to David Ho (“2^nd Purpose”);
(3)  Lodging a criminal complaint against OLN (“3^rd Purpose”);
(4)  Lodging a complaint to the Law Society of Hong Kong (“Law Society”)  (“4^th Purpose”); and
(5)  Facilitating other relevant investigations, whether civil, criminal or regulatory in nature (“5^th Purpose”).

2. OLN oppose the present application.

B. BACKGROUND

B1. Background leading to the OLN Order

3. On 2 August 2011, a bankruptcy order was made on David Ho’s own petition and his bankruptcy was discharged on 2 August 2019.

4. On 7 June 2012, the Former Trustees (Ip Pui Lam Arthur and Ip Pui Sum) commenced HCA 971/2012 (“971 Action”) against David Ho and various defendants. D2 to D5, D8 and D9 (“971 Defendants”) were originally represented by Tanner de Witt, and then Hugill & Ip (“H&I”), until trial in September 2019, when they were replaced by OLN.

5. On 28 September 2020, Ng J gave judgment in the 971 Action in [2020] HKCFI 2518 (“971 Judgment”) and found, amongst others, that the 971 Defendants were nominees of David Ho and/or beneficially owned and controlled by David Ho.

6. The Trustees considered that there was at least an arguable case based on circumstantial evidence that the litigation expenses for the trial of the 971 Action must have been funded by David Ho. They took out a summons under s.29 of BO against H&I and OLN for disclosure of certain documents in each firm’s possession, custody or power relating to, amongst others, details of payment records made to in respect of the 971 Action. As a result, the OLN Order was made on 13 January 2023. See the “OLN Decision” in [2023] HKCFI 151.

7. Pursuant to the OLN Order, OLN disclosed the Disclosed Documents to the Trustees under a cover letter dated 10 February 2023 (“OLN’s Cover Letter”).

8. The Trustees accept that there is an implied undertaking not to use the Disclosed Documents for other purposes than those of the proceedings for which the documents were disclosed (“the implied undertaking”).

9. Upon OLN’s complaint that the Trustees were trying to seek a wholesale uplifting of the implied undertaking, and as directed by the Court, the Trustees have classified the Disclosed Documents into 5 classes:

(1)  Class 1: Summary of OLN’s legal fees (HCA 971/2012);
(2)  Class 2: Details of payments made to OLN for its legal fees in the 971 Action;
(3)  Class 3: Retainer agreements in the 971 Action;
(4)  Class 4: Affirmation of Chiu Eunice Kwan Yee (“Chiu 1^st”)  confirming matters as ordered; and
(5)  Class 5: Communications with Liu Shu (held by Ng J to be a person closely associated with David Ho under the 971 Judgment)  in the 971 Action.

B2. The Trustees’ Case

10. It is the Trustees’ case that the Disclosed Documents reveal, amongst others, the following matters.

11. First, OLN received a total sum of HK$4,823,100.00 as costs on account for the 971 Defendants in the 971 Action, the breakdown of which was as follows:

Table 1

Date Payor Amount (HK$)
1. 16 July 2019 Shang Jinglin (“Shang”) 1,500,000
2. 16 September 2019 Unidentified account holder of HSBC Premier account 718-533599-888 (“Unidentified HSBC Account Holder”) 680,000
3. 18 October 2019 Unidentified HSBC Account Holder 420,000
4. 14 January 2020 Unidentified HSBC Account Holder 600,000
5. 7 July 2020 Unidentified HSBC Account Holder 1,600,000
6. 9 October 2020 Transferred from client account of Grassmere Services Limited (“Grassmere”) in the 2587 Action to client account of Gladius Limited (“Gladius”) in the 971 Action 23,100
Total: 4,823,100

12. It can be seen from Table 1 that a total sum of HK$3,300,000.00 was received from the Unidentified HSBC Account Holder and placed as costs on account for the 971 Defendants.

13. OLN’s position, as set out in Class 1, is that “OLN accounts department did not receive any notification from HSBC as to the name of the account holder”.

14. Pursuant to another s.29 BO order dated 29 May 2023 made by this Court on the Trustees’ application: [2023] HKCFI 1429, HSBC disclosed that the Unidentified HSBC Account Holder was Shang. The account number for his remittance to OLN in item 1 of Table 1, was the same as that for item 2.

15. Further, in respect of items 1 and 6 of Table 1, the Trustees submit that there was no due diligence by OLN to verify the source of those funds and their relationship with the 971 Defendants.

16. Second, all the 971 Defendants were struck off and/or dissolved at some point after the trial of the 971 Action, between 1 November 2019 and 5 June 2020. Accordingly, the retainers with the respective 971 Defendants would have been terminated by operation of law, despite the fact that OLN’s applications to cease to act were only formally granted on 30 November 2020 (for D3) and 16 December 2020 (for D2, D4, D5, D8 and D9).

17. However, it appeared that OLN continued to receive funds as costs on account of the 971 Action and continued to request for and receive instructions from the 971 Defendants, including instructions regarding the allocation of funds on the costs on account in item 6 of Table 1.

18. Third, out of the total sum of HK$4,823,100.00 received, there were instructions for the sum of HK$3,180,000.00 to be transferred to Grassmere’s client account or to settle Grassmere’s liabilities. Ultimately, there were transfers totalling HK$2,406,821.97 from the 971 Defendants’ client account, in accordance with those instructions.

19. The Trustees say that these were “extremely unusual” and “highly improper” circumstances:

(1)  No due diligence appeared to have been conducted by OLN as to whether there was any valid authorization to transfer the sums from the 971 Defendants’ clients account to Grassmere’s client account.
(2)  In fact, a total sum of around HK$845,475.59 was transferred to Grassmere’s client’s account from 30 October 2020 to 29 January 2021 after the 971 Judgment was handed down on 28 September 2020. Such transfers were highly suspicious given that Ng J already found the 971 Defendants to be nominees of David Ho and that they were beneficially owned and/or controlled by David Ho.
(3)  After the 971 Judgment was handed down, OLN was still taking instructions from Liu Shu. And yet OLN had represented to the Trustees that they had ceased to act for and did not have further instructions from the 971 Defendants on 9 and 14 October 2020.

20. Fourth, in respect of items 3, 4 and 5 in Table 1 which were purportedly, on instructions, allocated to Grassmere’s client account, OLN has not produced any written instructions.

21. Specifically, in respect of item 5, whilst OLN has enclosed an email from Alison Sun Li Hua dated 7 July 2020 and stated that it had “instructions to allocate [the COA of $1,600,000.00] to Grassmere’s client account”, that email in fact did not contain any such instructions. Instead, the email expressly referred to the 971 Action only and stated, amongst others, “I also enclose the Remittance of HK$1,600,000 to your firm’s bank account as costs on account”.

22. There was no conceivable reason why money for Grassmere had to be routed through the 971 Defendants’ clients’ account. Accordingly, the Trustees submit that OLN’s file for the 971 Action (“971 File”) was served “as a conduit to channel monies from Shang to Grassmere’s client account.”

23. Fifth, given that the Trustees’ claims in both the 971 Action and the 2587 Action are actions for recovery of assets belonging to David Ho, the suspicious transfers of monies between the 2 clients’ accounts suggested that the legal fees for both actions were (and are) funded by David Ho. Further, Shang and the 971 File were allowed to be used as channels through which David Ho continued to use his own assets to pay for legal fees in participating in legal proceedings against the Trustees.

24. Sixth, the Trustees submit that it was suspicious that the retainers were all dated 15 July 2019 by OLN when, they were all signed and pre-dated by Sun Li Hua on 12 July 2019. For D5 and D9 of the 971 Defendants, they were already close to being struck off in the BVI for non-payment of fees at the time.

25. However, I place little weight on the preceding paragraph. D5 and D9 were only struck off in November 2019. Absent any evidence before this Court to justify any suggestion that OLN was complicit in the actions of David Ho or his nominees, there was no reason why OLN would know that D5 and D9 would be struck out in the BVI within 4 months of the signing of the retainer agreements. In particular, I note from an email dated 27 November 2020 that Ms Eunice Chiu, the handling partner of the 971 Action, told Liu Shu that “[t]o be honest, had you told us that the BVI companies were struck off, we could have saved a lot of work and time.” This email suggested that Ms Chiu only found out about the striking off in around November 2020, i.e. over a year after the retainers were signed.

26. Seventh, the Trustees refer to certain Disclosed Documents (at tab 5/57-58, 62-63, 71, 76, 79 of the hearing bundle) alleging that OLN have “clearly intentionally blurred” certain documents to make them illegible”. However, this is not part of the Trustees’ case on affirmation and I place no weight on this.

27. Based on the first 5 matters above, the Trustees submit that they have legitimate grounds to believe that there was a potential breach of the anti-money laundering provisions found in the (a) Organized and Serious Crimes Ordinance (Cap 455) (“OSCO”); (b) Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap 615) (“AMLO”); (c) Practice Directions P and K issued by the Law Society; (d) Solicitors’ Accounts Rules (Cap 159F); (e) any other relevant provisions and rules; and (f) Solicitors Guide to Professional Conduct Rules and the Solicitors Practice Rules.

28. Accordingly, the Trustees took out the present Summons on 5 May 2023 to lift the implied undertaking for the 5 Purposes.

B3. Grounds in opposition

29. OLN challenge each of the 5 Purposes and the relevance of the Disclosed Documents to each of them. OLN questions whether it is the Trustees’ functions to pursue criminal and disciplinary complaints. The 5^th Purpose, in particular, is too broad and vague. The legal fees were not funded by David Ho but Grassmere, who had reason to do so and had funds all along. OLN was satisfied that the reasons for Grassmere’s payment of legal fees for the 971 Defendants’ defence were bona fide and that all necessary “know your client” (“KYC”) and anti-money laundering (“AML") checks had been properly performed and fulfilled. Those checks involved Grassmere’s Legal Professional Privilege (“LPP”). No special circumstances are shown for lifting the implied undertaking. To do otherwise would cause injustice to OLN.

30. After hearing counsel’s submissions on 12 September 2023, upon the Court’s directions, the parties have lodged further written submissions to address this Court on the applicability of Order 24, rule 14A and the privilege against self-incrimination (“PSI”).

31. In their further written submissions, the Trustees raised new issues as to whether leave of the Court is required, as Classes 1 and 5 were not produced under compulsion; and the Disclosed Documents were read in open Court by OLN such that the implied undertaking has been waived.

C. ISSUES

32. I have distilled from the affirmations and the written submissions, the following issues:

(1)  Whether Order 24A rule 14A of RHC is applicable to the present Summons to lift the implied undertaking;
(2)  Whether the trustees need leave to use the Disclosed Documents;
(3)  Whether the Trustees are the “owners” of the Disclosed Documents;
(4)  Whether Classes 1 and 5 were produced without compulsion of law such that no leave is required to use them;
(5)  Whether the Disclosed Documents have been referred to by OLN in open court such that the implied undertaking was waived;
(6)  Whether each of the 5 Purposes justify release of the implied undertaking.

33. I have at one stage considered if PSI can be relied on by OLN, especially in relation to the 3^rd Purpose. However, I am persuaded by Mr Wong, counsel for the Trustees, that this is not in issue since OLN have never relied on it. A person will lose his PSI if he has not claimed it before producing the incriminating documents, whether or not he knew of the privilege. The witness will suffer the consequences and no retrospectivity of protection was available: Yaron Brown v Lexinta Ltd[2018] HKCFI 2302, §30. In any case, due to my findings in relation to the 3^rd Purpose in Section K below, PSI is irrelevant anyway.

D. WHETHER ORDER 24A, RULE 14A OF RHC IS APPLICABLE

34. This Summons was taken out under Order 24 rule 14A of the RHC and the inherent jurisdiction of the Court.

35. Order 24, rule 14A provides as follows:

“Any undertaking, whether express or implied, not to use a document for any purposes other than those of the proceedings in which it is disclosed [limb 1] shall cease to apply to such document after it has been read to or by the Court, or referred to, in open court [limb 2], unless the Court for special reasons has otherwise ordered on the application of a party or of the person to whom the document belongs [limb 3].” (underline and words in square brackets added)

36. This rule is applicable and has constantly been referred to by the courts when releasing an implied undertaking.

37. Limb 1 stems from the common law rule in Home Office v Harman [1983] 1 AC 280, 307F-G. It was applied in the context of insolvency proceedings, eg Re NDT (BVI) Trading Ltd (No.2) [2009] 5 HKLRD 615, Kwan JA (as she then was, sitting as an additional judge of CFI) at §4-5; and Li Bao Tian[2019] HKCFI 1961, §§6 & 11, DHCJ William Wong SC (concerning documents disclosed to trustees in bankruptcy under s.29 BO).

38. Limb 2 applies to automatic cessation of the implied undertaking and has been applied in the context of insolvency proceedings: Re Ho Yuk Wah David (bankrupt) (No 3), [2019] HKLRD 961, §26(1),Recorder Eugene Fung SC.

39. Limb 3 refers to the power of the Court to release the implied undertaking on the application of the party to whom the document belongs.

40. The test governing the release of the implied undertaking over documents disclosed under a s.29 BO order have been set out in a decision in the present case on 30.6.2015, at §§41-42, Lok J, following Secretary for Justice v Florence Tsang (2014) 17 HKCFAR 739, 22-23.

“41. The general rule is that there is an implied undertaking not to use information or documents obtained by the liquidators or trustees by the use or under the threat of the exercise of their statutory powers (such as private examinations) other than for the purposes for which their powers were conferred.
42. However, the implied undertaking can be released by the Court. It is for the applicant to demonstrate cogent and persuasive reasons as to why it should be released. Each case turns on its own facts and no general principle can be formulated beyond stating that the Court will not release or modify the implied undertaking save in special circumstances and where the release will not occasion injustice to the person giving discovery.” (underline added)

See also NDT, §§4-9.

41. The words underlined in §41 of Lok J’s decision regarding the use of documents subject to the implied undertaking are different from the words underlined in Order 24, rule 14A, as a trustee in bankruptcy’s powers are different to that of a litigant in an action.

42. The court has discretion to relax or modify the implied undertaking for special reasons: Re NDT, §§6-8:

(1)  In exercising this discretion, the court may have regard to many factors and they vary from case to case. It is not possible to give an exhaustive list. The factors include the nature of the document, the nature of the information in the document, any prejudice the author of the document may sustain, and the likely contribution of the document to achieving justice in the second proceedings.
(2)  Leave of the court is required before reporting any wrongdoings revealed by documents disclosed on discovery to the appropriate authorities. It is a balancing exercise whether what is sought to be achieved by relaxing the implied undertaking is more important for the administration of justice generally, such as in discouraging and punishing false evidence, than in maintaining confidentiality so as not to operate as a disincentive to full and frank discovery.
(3)  Whilst acknowledging the public interest in full and frank disclosure on discovery, if a court is satisfied there had been illegal or unlawful conduct which it had no power to deal with itself, it should generally report the relevant material to the relevant public authority. In the absence of any other factors argued to constitute some injustice, the public interest in the investigation or prosecution of serious fraud should take precedence over the general concern of courts to control the collateral use of compulsorily disclosed documents.

43. To justify release of the implied undertaking, the applicant only needs to show a prima facie case of misconduct or criminal conduct: e.g. Re NDT, §11 (prima facie case of forgery); Anite Telecoms Limited v World Best Cargo-Link Company Limited, HCA 2560/2013, 19 October 2015, B Chu J (prima facie case of a serious fraud) (§159).

E. WHETHER THE TRUSTEES NEED LEAVE TO USE THE DISCLOSED DOCUMENTS

44. Despite the apparent stance in the Summons that leave to use the Disclosed Documents is required, Mr Wong gives 3 reasons why no leave is required:

(1)  The Trustees have stepped into the shoes of the 971 Defendants and Liu Shu (OLN Decision, §§29 and 41). The Trustees are essentially the “owner” of the Disclosed Documents”, using their “own” documents for the purpose of seeking relief in other proceedings.
(2)  Classes 1 and 5 were not produced under compulsion.
(3)  The Disclosed Documents have been referred to by OLN in open court.

I will deal with each of these in turn.

45. Mr Wong also submits that no leave is required where the production of the materials by the office holder is (i) for the beneficial pursuit of the insolvency proceedings in the sense that there is at least some real as opposed to fanciful prospect of recovery for the estate (1^st and 2^nd Purposes in this case); and (ii) to facilitate discovery of dishonesty or other malpractice by bankrupts and officers of insolvent companies (limited to disclosure to public authorities for the purposes of criminal investigations and directors’ disqualification proceedings) subject to the caveat that the production of such material is not made to third parties (3^rd and 4^th Purposes). Mr Wong relies on Willmont v Shlosberg; Re Webinvest Ltd [2017] EWHC 2446 (Ch), 57, 66, 74-80.

46. With respect, the issue in Willmont involved sharing of information between common office holders, which does not arise in the present summons. The 2 examples in paragraph 45 on use of documents are still guided by the principles set out in paragraphs 40-43 above.

F. WHETHER THE TRUSTEES ARE THE “OWNERS” OF THE DISCLOSED DOCUMENTS

47. I agree with Mr Kwok that the finding that the Trustees have stepped into the shoes of the 971 Defendants addresses the issue of whether OLN can assert LPP against the Trustees. However, that does not mean that the Trustees are the owners of the Disclosed Documents.

48. Not all documents in a solicitor’s file belong to the client. Principle 5.23 of the Hong Kong Solicitors’ Guide to Professional Conduct, §1(b) and (c) contain examples like books of account of the solicitor, documents sent to the solicitor during the retainer like letters, authorities or instructions. They belong to the solicitor.

49. The Disclosed Documents have their source from OLN. As a party compelled to make disclosure (“document producer”) for the purpose of particular proceedings, OLN should not be in peril of, amongst others, having those documents made available to third parties who might use them to the detriment of OLN: Yang Foo Oi v Wai Wai Chen [2013] 3 HKC 131 at §§19-20, DHCJ B Chu (as she then was). This applies to the 1^st, 3^rd to 5^th Purposes in the present case.

G. WHETHER CLASSES 1 AND 5 WERE DISCLOSED WITHOUT COMPULSION OF LAW

50. Compulsion is the bedrock of the implied undertaking: Derby & Co Ltd v Weldon (No. 2) [1988] 10 WLUK 175, Times, October 20, 1998, Browne-Wilkinson VC, adopted in Shun Kai Finance Co Ltd v Japan Leasing (HK) Ltd, CACV 87/2000, Rogers VP, §§14-15.

“The voluntary disclosure of documents in the course of interlocutory proceedings by a party does not come within the rationale which is the basis of the implied undertaking relating to documents disclosed on discovery. In relation to documents voluntarily disclosed the Court has not invaded the privacy of the party. The party has, for his own purposes in defending a case, decided himself to use the documents rather than maintain his privacy. It is the party who has destroyed the privacy of the document, not the plaintiff or the Court ...”

51. There is no dispute that Class 1 was produced by OLN voluntarily in a bid to assist the Trustees.

52. Mr Kwok submits that the disclosure was made before it was known that the Trustees were targeting OLN. Had OLN known this, they would never have prepared and provided Class 1 at all. There was material non-disclosure on the part of the Trustees. It would be wrong for the Trustees to be given leave to use Class 1 irrespective of whether it was voluntarily disclosed. Mr Kwok cites the Australian authority of Re Southern Equities Corporation Ltd at headnote §§(v) to (viii) in support.

53. With respect to Mr Kwok, the facts of Southern Equities are distinguishable. There, the liquidator had the intention to institute an action for misfeasance against the examinee prior to the application for an examination order. The liquidator did not disclose it by affidavit but only informed the court orally before the examination order was made. Here, the OLN Order was, like any s.29 BO order, a kind of “fishing expedition” for the Trustees, premised on reasonable suspicion: OLN Decision §8. The Trustees only discovered the alleged misconduct of OLN after the Trustees have perused the Disclosed Documents. There was no material non-disclosure which would have invalidated the OLN Order.

54. I hold that no leave is required to use Class 1.

55. I would add that Class 1 is relevant to all of the 5 Purposes as guiding the reader to understand the relevant Classes and the flow of funds. Class 1 will not be covered in the discussion below.

56. With regard to Class 5, Mr Wong submits that it was sought but was not ordered. Hence, Class 5 was voluntarily produced, as stated in OLN’s Cover Letter, §4.

57. I am unable to agree because the implied undertaking applies not only upon a s.29 order but also under the threat of the exercise of the s.29 BO powers: Lok J’s Decision, §41.

(1) In §41 of the OLN Decision, this Court rejected OLN’s assertion of LPP in relation to Class 5, in view of Ng J’s express finding that Liu Shu was a nominee of David Ho and hence the Trustees stepped into the shoes of Liu Shu.
(2) In OLN’s Cover Letter, OLN specifically acknowledged that Class 5 was not included in the OLN Order. However, they referred to §41 of the OLN Decision and stated that there was no basis for OLN to withhold production of the Cindy Liu Shu Communications. OLN’s stance accorded with this Court’s intention.

58. I hold that Class 5 was produced under compulsion.

H. WHETHER THE DISCLOSED DOCUMENTS HAVE BEEN REFERRED TO IN OPEN COURT

59. Mr Wong submits that the Disclosed Documents were openly discussed at the hearing on 12 September 2023, attended by members of the public. Accordingly, the implied undertaking has been waived by OLN.

60. I reject the submission on the following grounds:

(1)  Hong Kong legislation maintains a distinction between open court hearings and chambers hearings. See eg s.32A of the High Court Ordinance, Cap 4 (“HCO”)  entitled “proceedings in court and in chambers”; section 33 of HCO entitled “powers of judge in chambers”; and 5 of the Bankruptcy Rules (Cap 6A)  concerning matters and applications that “shall be heard and determined in open court”; and rule 6 concerning adjournment from chambers to court and vice versa. Under PD 25.1, §2, all chambers hearings are held in public subject to specified exceptions The hearing on 12 September 2023 was a chambers hearing open to the public but it was not an open court hearing.
(2)  Mr Wong concedes that he is unable to find any authority to support his proposition that a hearing in chambers (open to public)  could be regarded as a hearing in open court.
(3)  Mr Wong’s reliance on Slade v Abbhi [2020] EWHC 2181 (Comm)  is misplaced as that case is based on CPR 31.22, which does not refer to “open court” but “a hearing which has been held in public” and thus includes chamber hearings.

61. I hold that OLN has not referred to the Disclosed Documents in open court which would have caused waiver of the implied undertaking.

62. I now turn to each of the 5 Purposes.

I. 1^st PURPOSE: PURSUING THE 2587 ACTION

63. The Trustees seek leave to use Classes 1, 2, 4, 5 for the 1^st Purpose. This Purpose is aimed at recovering assets for David Ho’s estate, a legitimate purpose that follows on a s.29 BO Order.

64. Leave is required to use Classes 2, 4 and 5 because they have to be disclosed to third parties who were not the document-producer.

65. In the 2587 Action, the Trustees claim that David Ho has beneficial ownership in Grassmere through the use of nominees.

(1) The shares in Dan Form International Limited (“DFIL Shares”) were held on resulting trust by Grassmere for David Ho who had solely funded the capital injection for the DFIL Shares; and
(2) The alleged sale of Grassmere shares from APIDL to Yu Yang in June 2010, and onward sales to Luck Creation Limited in July 2012 and to Su Lan Lan in July 2016 were sham transactions with intent to defraud David Ho’s creditors. The 971 Judgment has now provided the “building blocks” for the Trustees’ alternative claim under the second route. Accordingly, David Ho still retains beneficial ownership of the DFIL Shares by reason of his control over APIDL and Grassmere through his nominee and associate, Sun Li Hua.

66. Grassmere is the only active defendant in the 2587 Action. Its defence is that David Ho had not funded the capital injection for the DFIL Shares and that the 2 transfers of Grassmere shareholding in July 2010 and July 2016 were genuine arms’ length transactions.

67. The Trustees assert that the documents disclosed by OLN are material to the 2587 Action as showing that the 971 Defendants and Grassmere were funded by the same entities and that costs were actually transferred from the 971 Defendants’ to Grassmere’s account to fund the legal fees in the 2587 Action. It was inevitable to draw the inference that the funds received and processed by OLN for the 971 Defendants and Grassmere were in fact related to David Ho.

68. The Trustees also considered it material that Luck Creation, which apparently divested itself of its interest in Grassmere since July 2016, would still be settling Grassmere’s liabilities concerning Henry Ho’s professional fees even as of 2019. This would be a significant piece of evidence for the Trustees in challenging the genuineness of the transactions regarding the interest in Grassmere concerning Luck Creation.

69. OLN opposes the application. In sum, their grounds are that:

(1)  The 971 Action and 2587 Action are different and unrelated actions with different defendants.
(2)  Grassmere’s sole shareholder is Su Lan Lan and she is not alleged to be a nominee of David Ho.
(3)  There is no obligation on Grassmere to disclose any of the Disclosed Documents.
(4)  It is unjust to OLN to grant leave to the Trustees.
(5)  The Trustees have not identified why each Class or which document is relevant.

70. With regard to the 1^st ground of opposition, no doubt the 2 Actions are different and involve different parties. But the common thread is the Trustees’ case that the 971 Defendants and Grassmere are nominees of David Ho.

71. In fact, this Court has in [2023] HKCFI 826 at §3, referred to Ng J’s findings that David Ho has been operating a complex scheme using offshore companies and nominees to conceal his assets, carry on his business ventures and litigation, and pay his personal and family expenses. Through his nominees, David Ho has diverted significant amount of funds out of reach of his creditors. When those findings are viewed together with Classes 2, 4 and 5, I am of the view that there is a prima facie case as stated in paragraphs 67-68 above.

72. With regard to the 2^nd ground of opposition, Mr Kwok points out that there is no assertion, evidence or finding that Su Lan Lan is a nominee of David Ho.

73. With respect to Mr Kwok, it is unnecessary for there to be any actual finding of nomineeship. A prima facie case to that effect suffices. As held by this Court in [2023] HKCFI 1462 at §§56 and 117, the terms of the sale of the DFIF Shares to Su Lan Lan were unusual and looked more like a loan agreement than a sale and purchase agreement. As such, Su Lan Lan may not even have enjoyed any rights as Grassmere’s shareholder. With the same source of funding, and transfer of funds from the 971 File to that of Grassmere through OLN, it is at least reasonably arguable that there is connection between those entities. It would reinforce the Trustees’ case in the 2587 Action that the transfer to Su Lan Lan was in fact a sham transaction. This is not the forum to debate the strength of the 2587 Action.

74. With regard to the 3^rd ground of opposition, I am unable to agree. Classes 2, 4 and 5 would arguably fall with the Peruvian Guano principle of discovery, in leading to a train of inquiry that may advance the Trustee’s case or damage Grassmere’s.

75. Whilst the Trustees can seek discovery from Grassmere in the 2587 Action, the Trustees would still need to disclose their bases for the application. They have to seek leave in the present case anyway.

76. With regard to the 4^th ground of opposition, OLN contend that their legal fees for the 971 Defendants’ defence at the trial were paid by Grassmere and OLN was satisfied that the reasons for it were bona fide and that all necessary KYC and AML checks had properly been performed and fulfilled. With Grassmere as its existing client, OLN is unable to disclose Grassmere’s reasons in this regard as they are subject to LPP. The Trustees themselves acknowledge that Grassmere had an incentive to see that the former’s claim against the 971 Defendants fail as judgment in the Trustees’ favour in the 971 Action would provide the building blocks for the Trustees’ alternative claim under the second route against Grassmere in the 2587 Action. It is incorrect to say that Grassmere had no legitimate interest in helping the 971 Defendants.

77. With respect to Mr Kwok, even if his submission is correct, why would Grassmere’s funds need to be channelled to the 971 File first and then back to Grassmere’s client’s account with OLN? This is best answered in the 2587 Action.

78. If the funds were really Grassmere’s, there could not be conflict of interest between OLN and Grassmere. If OLN had really done the necessary KYC or AML checks, there is nothing to bar OLN from seeking approval from Grassmere for disclosure. In fact, such evidence is necessary for Grassmere’s defence in the 2587 Action as well.

79. OLN further claims that they would be left in the awkward position in the 2587 Action that:

(1)  OLN will be the source of the Disclosed Documents to be produced by the Trustees in the 2587 Action for use against OLN’s own client, Grassmere.
(2)  Grassmere would not continue to use OLN’s service.
(3)  It will cause injustice to Grassmere who would be forced to produce privileged information as to why it funded the 971 Action at the trial and its tactics for the 2587 Action.

80. I am unable to accept these arguments.

(1)  It is not uncommon for solicitors to have prepared documents for, or have received written instructions from or is in possession of documents on behalf of a client. I do not see OLN/Grassmere being in a different position from any litigant who is obliged to disclose relevant documents in compliance with his discovery obligation, whether the document is for or against him.
(2)  That a party ceases to use a firm of solicitors due to eg conflict of interest oft arises in litigation and cannot form the basis for asserting injustice in this Summons.
(3)  It is disingenuous for OLN to claim LPP on behalf of Grassmere now. Under the OLN Order, all the Disclosed Documents were in relation to the 971 Defendants or 971 Action. The fact that Grassmere was mentioned would not make the Disclosed Documents less so. LPP was a core issue in the OLN Decision (eg in §§13, 38 and 39). As the Court of Appeal stated in Citic Pacific Ltd v Secretary for Justice (No 2) [2015] 4 HKLRD 20 at §76(1), the person claiming LPP should (a)  identify the materials over which LPP is claimed; (b)  specify, with respect to each of the materials identified, whether the LPP claimed is legal advice privilege or litigation privilege; and (c)  support the LPP claims by statement or affirmation setting out the full factual context upon which LPP is claimed in respect of each of the materials. Being the solicitors for Grassmere, OLN has not identified, at the hearing which led to the OLN Decision or in their submissions for the present Summons, which of the Disclosed Documents are covered by Grassmere’s LPP and why OLN has not seen fit to assert LPP for Grassmere then.

81. With regard to the 5^th ground of opposition, OLN question the relevance of each Class. I have no doubt that Classes 2, 4 and 5 are relevant to assist the Trustees in establishing the alleged nomineeship of Grassmere and to testing the credibility of Grassmere.

(1)  Class 2: The Trustees are relying on the overall fund flows. I accept that it is practically impossible to identify each single document for each specified Purpose. Singling out documents may cause them to lose their context.
(2)  Class 4 (Chiu 1^st)  states OLN’s side of the story, which should be weighed against the Trustees’ case in the 2587 Action. It disclosed for the first time that Shang is Su Lan Lan’s son, plainly a matter relevant to credibility of Grassmere.
(3)  Class 5 consists of continuous communications between Liu Shu and OLN. It is relevant to show Liu Shu’s involvement as a nominee herself, giving instructions to OLN concerning the transfer of funds in the 971 File. It would be difficult to the Trustees to identify individual documents as the context in which a document appeared might be lost.

82. For the reasons given, I grant leave to the Trustees to use Classes 2, 4 and 5 for the 1^st Purpose.

J. 2^nd PURPOSE: COMMENCING A CIVIL ACTION AGAINST OLN

83. The Trustees say that the 2^nd Purpose is for the beneficial pursuit of insolvency proceedings as there is real prospect of recovery for the estate. They seek leave to use Classes 2, 4 and 5.

84. The undisputed facts were that OLN acted for the 971 Defendants until it applied to cease to act on 9 October 2020 and the application was formally granted on 30 November 2020 (for the 3^rd Defendant) and 16 December 2020 (for the remaining 971 Defendants).

85. OLN were and still are solicitors on record for Grassmere in the 2587 Action since 17 July 2019.

86. The Disclosed Documents show that OLN had failed to verify the source of funds of HK$4,823,100 as costs on account. OLN received “instructions” after the 971 Defendants were struck off or dissolved. OLN used the 971 File to channel funds to the 2587 File, after the retainers of the 971 Defendants were terminated. The Trustees allege that all funds originated from David Ho and/or assets of or beneficially belonged to David Ho. Shang had made the transfers as nominee of David Ho.

87. From the draft Statement of Claim, it can be seen that the causes of action against OLN are as follows:

(1)  Claim of trust over the HK$4,832,100 paid to OLN for costs on account for the 971 Action;
(2)  Claim of trust over the HK$2,358,221.87 transferred to the account of Grassmere under the 2587 Action File;
(3)  Fraud against creditors of David Ho pursuant to s.58 of BO;
(4)  Knowing receipt and/or dishonest assistance in David Ho’s money-laundering and/or asset-dissipating scheme; or
(5)  Alternatively, dishonest assistance in champerty and/or maintenance in the event that the payors were found to be third party funders.

88. The causes of action in (1) to (3) fall within the purpose of the OLN Order. However, I decline to give leave to use any Class for the causes of action in item (4) money laundering, and item (5) champerty or maintenance. The reasons will appear under the 3^rd Purpose below.

89. OLN oppose saying that the legal fees were received in 5 tranches from 16 July 2019 to 9 October 2020. All but the 1^st tranche was received by OLN after David Ho’s discharge from bankruptcy (on August 2019). Section 32(2) of BO provides that, subject to certain exceptions, the discharge of bankruptcy releases a discharged bankrupt from all bankruptcy debts. The Trustees therefore have no claim over the last 4 tranches (totalling HK$3,323,100) after his discharge (even assuming that David Ho was the one who paid the monies in question).

90. The first tranche of HK$1,500,000 was received from Shang. Whilst Su Lan Lan’s alleged ownership of Grassmere is yet to be investigated in the 2587 Action, there is no allegation that her son Shang is a nominee of David Ho, or reason for OLN to suspect the same.

91. However, OLN claims not to be aware of the dissolution of the 971 Defendants until after OLN applied to cease to act after the 971 Judgment. OLN was obliged to follow Grassmere’s instructions as to its funds (which are subject to privilege belonging to Grassmere). The dissolution of the 971 Defendants would not have any impact upon Grassmere’s instructions in this regard.

92. As stated above, this is not the forum to assess the strength of the Trustees’ intended claim against OLN’s defences. The consistent flow from the 1^st to the last 4 tranches of money go to merits and credibility of the Trustees’ intended claim.

93. I am satisfied that Classes 2, 4 and 5 require leave of the Court and they are relevant to the pleaded causes. There is no need to identify individual documents in order not to lose the context in which each Class ought to be considered. I grant leave to use them for the causes of action in §87(1) – (3) above in respect of the 2^nd Purpose.

K. 3^rd PURPOSE: LODGING CRIMINAL COMPLAINT AGAINST OLN

94. The Trustees want to lodge a criminal complaint, especially relating to AML regulations and champerty/maintenance. However, they have not identified any other suspected criminal conduct. They seek to rely on all 5 Classes.

95. Mr Wong submits that the complaint is to facilitate discovery of dishonesty or other malpractice by bankrupts and officers of insolvent companies: Willmont, §§76-80. With respect, OLN is neither of these categories of persons.

96. The 3^rd Purpose can be dealt with simply. There is no hint at all that the funds received by OLN were proceeds of an indictable offence or that the transfer of part of them to a third party (Grassmere) was to launder money. The money was used for OLN’s legal fees and disbursements in the 971 Action (and probably 2587 Action). OLN’s fee notes for the 971 Action were among the Disclosed Documents. It cannot be suggested that OLN’s acting in either Action was a sham or that the legal fees and disbursements were not incurred for so acting.

97. Further, it is one thing to suggest that David Ho has been hiding his funds and disposing of them through his nominees. It is another to say that the channelling of funds to Grassmere involved champerty and/or maintenance. In Unruh v Seeberger(2007) 10 HKCFAR, 31, §§ 82, 89-94, Ribeiro PJ, held that champerty and maintenance are directed at “officious intermeddling in a suit” and excludes cases where the funder has a “legitimate common interest in the outcome of litigation sufficient to justify him in supporting the litigation conducted by another”.

98. This is not the situation here. As proven/suspected nominees of David Ho, the 971 Defendants and Grassmere may be acting in concert. Even so, there is nothing to suggest that OLN was complicit in their common interest other than acting on the purported instructions of their clients then. And if the payor were a third party, what loss would have been caused to David Ho’s estate to warrant fixing OLN with liability?

99. In the Decision of this Court in this case [2023] HKCFI 151, at §47, on a s.29 BO application by the Trustees, this Court stated that:

“I have disregarded the Trustees’ submission that OLN were not analogous to a completely innocent party under a Norwich Pharmacal application because OLN were acting for David Ho’s corporate nominees and were receiving instructions from Yu Yang and Liu Shu. This is because there is nothing before the Court to justify any insinuation that OLN were complicit in the actions of David Ho or his nominees at the time OLN acted for the 971 Defendants.”

100. I maintain the same view even taking all Classes at their highest. Findings against David Ho and/or the 971 Defendants cannot be imputed to OLN. To hold otherwise would dissuade lawyers from acting for persons accused of wrongdoing to the detriment of the rule of law in Hong Kong.

101. As there is not a prima facie case shown,I decline to give leave to use any Class for the 3^rd Purpose and the intended claim relating to money laundering, champerty or maintenance under the 2^nd Purpose.

L. 4^th PURPOSE: LODGING COMPLAINT TO LAW SOCIETY AGAINST OLN

102. The Trustees intend to lodge a complaint to the Law Society in respect of the irregularities of OLN in acting on behalf of the 971 Defendants and transferring monies from the 971 File to Grassmere’s client’s account. The Trustees seek to rely on all 5 Classes.

103. There is a prima facie case that for over 3 years (from the time of receipt of the funds until disclosure pursuant to the OLN Order) OLN did not know the source of a significant amount of HK$3,000,000 (62.5% of the total received). It had caused the Trustees to incur considerable effort and expenses in seeking the information from HSBC.

104. It is all the more incredible that Chiu-2^nd affirmed on 3 November 2023 stated that Shang is Su Lan Lan’s son, and Su Lan Lan was and is OLN’s client in the 2587 Action.

105. These matters are in stark contradiction to the alleged KYC checks done by OLN.

106. It is normally not the function of a trustee in bankruptcy to police the professional conduct of solicitors. However, OLN channelled money from one client’s account to another without written instructions. The irregular conduct of OLN had a direct impact on funds of David Ho’s estate and the Trustee’s investigation.

107. The Classes named by the Trustees are relevant to the Trustees’ complaint and may assist the Law Society:

(1)  Class 3, which sets out OLN’s client due diligence obligations and handling partner’s role in the 971 Action, shows OLN’s awareness of their professional obligations.
(2)  Class 4 will enable the Law Society to take into account OLN’s side of the story as well.
(3)  Classes 2 and 5 will give the background on fund flows and the context to the complaint.

108. I do not see any injustice to OLN. Public interest in punishing breach of professional standards in a case where the bankrupt’s estate and the Trustees investigation are directly affected outweighs the adherence to the implied undertaking. Grassmere is still the client of OLN. There is no suggestion that Grassmere will not permit OLN to disclose information relating to KYC checks. Whilst the documents will be handed to the Law Society, it is up to the Law Society to decide whether to investigate OLN’s conduct. The Court need not give any directions to the Law Society.

109. For the reason given, I give leave to use Classes 2 – 5 for the 4^th Purpose.

M. 5^th PURPOSE: FACILIATATION OF OTHER RELEVANT CIVIL, CRIMINAL OR REGULATORY INVESTIGATIONS

110. This purpose is too wide and too vague. Till the hearing, the Trustees have not been able to identify what other investigations are required. Releasing the implied undertaking will put OLN in peril of having their documents used generally for limitless purposes other than for which disclosure was ordered: Yang Foo Oi v Wai Wai Chen. I decline to release the implied undertaking for the 5^th Purpose.

N. CONCLUSION AND COSTS

111. Having regard to the above analyses, I hold that Class 1 is not subject to the implied undertaking and the Trustees are at liberty to use it.

112. I am satisfied that the Trustees have shown cogent and persuasive reasons to release the implied undertaking and permit the use of the Classes of Disclosed Documents for the following purposes:

(1)  1^st Purpose – Classes 2, 4 and 5;
(2)  2^nd Purpose, except for the intended causes of action relating to money laundering, champerty and maintenance – Classes 2, 4 and 5;
(3)  4^th Purpose – Classes 2-5;

113. The application to release the implied undertaking in respect of the 3^rd and 5^th Purposes is dismissed.

114. The Trustees have succeeded on some Purposes but lost on others. I make an order nisi that there be no order as to costs.

115. I thank counsel for their assistance.

	(Queeny Au-Yeung)
	Judge of the Court of First Instance High Court

Mr Joseph Wong, instructed by Lee, Wong & Lam, for the applicants

Mr Eugene Kwok, instructed by Oldham Li & Nie, for the respondent

[2024] HKCFI 3169-EN-2024-11-08

CHEN YUNG NGAI KENNETH AND ANOTHER v. CHINA NEW INVESTMENTS LTD AND OTHERS

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HCB 3819/2011

[2024] HKCFI 3169

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

____________

Re: HO YUK WAH DAVID (the “Discharged Bankrupt”)

____________

BETWEEN

	CHEN YUNG NGAI KENNETH and CHEN MEI MEI (Trustees-in-bankruptcy of the Discharged Bankrupt)	Applicants
and
	CHINA NEW INVESTMENTS LIMITED	1st Respondent
	CHEUNG TUNG LAN, TONY	2nd Respondent
	HANG SENG BANK LIMITED	3rd Respondent
	CMB INTERNATIONAL SECURITIES LIMITED	4th Respondent

____________

Before:

Hon Au-Yeung J in Chambers

Date of Hearing:	27 October 2023
Date of Decision:	8 November 2024

____________

D E C I S I O N

____________

Contents		Paragraph
A.	INTRODUCTION	1
B.	BACKGROUND	7
C.	THE TRUSTEES’ CASE	25
D.	CNIL AND MR CHEUNG’S CASE AND GROUNDS OF OBJECTION	30
E.	RELEVANT LEGAL PRINCIPLES	32
F.	ANALYSES OF THE TRUSTEES’ CASE	34
G.	GROUNDS OF OBJECTION RAISED BY CNIL AND MR CHEUNG	73
H.	DISCOVERY AS REGARDS THE LSF AND SFC ACTIONS	103
I.	CONCLUSION AND COSTS	106

A. INTRODUCTION

1. Before the Court is Summons filed by the Trustees-in-Bankruptcy of David Ho (“Trustees”) on 5 May 2022 and amended and re-filed on 11 January 2023 (“Amended Summons”) for an order for disclosure (1) under section 29 of the Bankruptcy Ordinance, Cap 6 (“BO”) (“s.29 Order”) and (ii) section 21 of the Evidence Ordinance, Cap 8, against the 4 respondents (“CNIL”, “Mr Cheung”, “HSB” and “CMB” respectively and “Respondents” collectively).

2. The Trustees initially ask that each of CNIL and Mr Cheung do produce documents and information set out in the Schedule to the Summons (“Schedule”), by way of affirmation, and that Mr Cheung do undergo examination concerning all relevant matters and transactions as set out in the affirmation to be filed by him.

3. The documents and information sought by the Trustees against CNIL and Mr Cheung relate to the following actions funded by CNIL, in which the Trustees suspect David Ho is/was involved:

(1) HCA 806/2006 (“806 Action”);
(2) The personal bankruptcy of Lee Siu Fung Siegfried (“LSF”); and
(3) The liquidation of Siu Fung Ceramics Holdings Limited (“SFC”) (“SFC Liquidation”).

4. The documents and information pertain to:

(1) CNIL’s relationship with Asia-Pac Infrastructure Development Limited (in Creditors' Voluntary Liquidation) (“APIDL”), and/or its liquidators, Alan Chung Wah Tang (“Tang”) and Hou Chung Man (“Hou”) (together, “the APIDL Liquidators”) in the context of the Respondents' funding of APIDL's claim against its former legal advisors in the 806 Action;
(2) CNIL’s relationship with True Treasure Enterprises Ltd (“TTEL”) who was involved in the funding arrangements of the 806 Action;
(3) Correspondence and documents regarding the consultancy services of 北京廣宇天華房地產信息資詢有限公司(“GYTH”) to assist the APIDL Liquidators in the 806 Action;
(4) CNIL’s relationship with Fidelity Insurance Co. Ltd. (“FICL”) who was (as alleged by the Trustees) also involved in the funding arrangements of the 806 Action;
(5) Any correspondence with David Ho in relation to the funding arrangements of the 806 Action and other litigation involving him; and
(6) Correspondence between CNIL/Mr Cheung with certain email addresses in relation to the funding arrangements of the 806 Action and other related litigation.

5. The Summons was opposed by CNIL and Mr Cheung, who claimed that they were innocent and independent litigation funders unrelated to David Ho.

6. The Summons was later amended to its present form to bring in HSB and CMB, requiring them to preserve books and records relating to accounts held by CNIL and Mr Cheung respectively. HSB and CMB remain neutral to the Amended Summons.

B. BACKGROUND

7. The facts have been aptly summarized by Mr Wong, counsel for the Trustees, and I adopt the same.

B1. The Parties

8. On 2 August 2011, a bankruptcy order was made on David Ho’s own petition and his bankruptcy was discharged in 2019.

9. The current Trustees were appointed in January 2020. Before that, the trustees-in-bankruptcy were Ip Pui Lam Arthur and Ip Pui Sum (“Former Trustees”), who were appointed on 30 September 2011.

10. APIDL was a company incorporated in Hong Kong. By a judgment in HCA 971/2012 (“971 Action”) dated 28 September 2020, Ng J held that APIDL was and is beneficially owned and controlled by David Ho: [2020] HKCFI 2518 (“971 Judgment”). APIDL went into creditors’ voluntary liquidation on 5 April 2013. Tang and Hou were appointed as its liquidators.

11. As for CNIL:

(1) It was incorporated in the British Virgin Islands (“BVI”) on 18 September 2009.
(2) Its sole director and sole shareholder, has at all material times, been Mr Cheung.
(3) According to Mr Cheung, CNIL has been used by him as an investment vehicle.
(4) CNIL was struck off on 1 May 2014 for failing to pay its annual fees since 2013, and was restored to the register on 19 January 2015.

B2. The 806 Action

12. By the 806 Action, APIDL and 3 other companies in the Asia-Pac Group (controlled by David Ho) namely, Asia-Pac Infrastructure Finance Limited (“APIFL”), Asia-Pac Group Investments Limited (“APGIL”) and Greater Beijing Region Expressways Limited (“GBRE”) (“Other 806 Plaintiffs” collectively), commenced legal proceedings in 2006 against their former legal advisers for negligence and breach of duty.

13. After APIDL was put into creditors’ voluntary liquidation in April 2013, the APIDL Liquidators decided to continue the 806 Action.

14. At this hearing, the Court was informed that APIDL’s claim in the 806 Action was dismissed pursuant to a consent order dated 18 May 2023.

B3. The LSF Debts

15. By way of background, both Keentrade Investments Limited (“Keentrade”) and Heartbest Commercial Company Limited (“Heartbest”) were at all material times companies incorporated in the BVI. Keentrade was incorporated on 6 January 2005 and was struck off the BVI Register of Companies on 1 November 2011 for non-payment for administrative fees. Meanwhile, Heartbest was incorporated on 29 February 2012 but was also struck off the BVI Register of Companies on 3 November 2020 for non-payment of administrative fees.

16. Pursuant to a funding agreement entered into in around August 2005, Keentrade purchased part of the personal debts of LSF (“LSF Debts”) from HSBC.

17. Keentrade received a settlement sum from the liquidation of CWT Textile Supplies Company Limited (“CWT”), which was said to have been funded by David Ho, and part of it was used to fund the bankruptcy proceedings of LSF in HCB 345/2011 (“LSF Actions”).

18. The funding agreement entered into by Keentrade for the LSF Actions was, however, terminated on 25 March 2013.

19. Prior to 10 June 2013, Keentrade assigned the LSF Debts to Heartbest, which had agreed to fund the LSF Actions.

20. In 2015, Heartbest in turn assigned the LSF Debts to CNIL, which had agreed to fund the LSF Actions.

B4. The SFC Debts

21. On or around 28 February 2006, David Ho purchased, through Keentrade, the debts of SFC and its subsidiaries (“SFC Debts”) from HSBC for a sum of HK$3 million:-

(1) David Ho remitted a total sum of HK$3.4 million from his Standard Chartered bank account to Top Adventure Limited (“Top Adventure’) on 23 and 24 February 2006.
(2) Top Adventure then remitted (i) a total of HK$1.9 million to King Ocean Development Inc. (“King Ocean”), a company ruled to be a nominee of David Ho in the 971 Judgment, on 2 and 27 February 2006; and (ii) HK$1.5 million to Sunridge Property Consulting Ltd (“Sunridge”) on 24 February 2006;
(3) Sunridge remitted HK$1.5 million to Hawthorn Agents Limited (“Hawthorn”) on 27 February 2006;
(4) King Ocean remitted a total of HK$1.9 million to Hawthorn on 27 and 28 February 2006;
(5) Hawthorn on 3 March 2006 ordered a cashier’s order in the sum of HK$3 million as consideration for Keentrade’s purchase of the LSF Debts and SFC Debts from HSBC.

22. The relevant bank documents show that HK$3 million was originated from David Ho by channeling the sum through a few layers of his corporate nominees and ultimately was transferred from Hawthorn to HSBC by a cashier’s order dated 3 March 2006.

23. Then, on 9 July 2012, Keentrade assigned the SFC Debts to Heartbest on 9 July 2012 (“First Assignment of the SFC Debts”).

24. Heartbest subsequently assigned the SFC Debts to CNIL on 10 February 2015 (“Second Assignment of the SFC Debts”).

C. THE TRUSTEES’ CASE

25. The Trustees submit that they have ample and strong evidence which demonstrates at least a reasonable suspicion that CNIL’s funding of APIDL in (i) the 806 Action; (ii) the LSF Debts; and (iii) the SFC Debts were all related to David Ho.

26. In respect of the 806 Action, the Trustees rely upon, amongst others, the following matters:

(1) Involvement of David Ho in the action;
(2) Funds flowing to other litigations relating to David Ho despite funds being provided pursuant to the Funding Agreement for the 806 Action dated 10 February 2015 (“the 806 Funding Agreement”);
(3) Lack of proper due diligence in the investment;
(4) Suspicious timing of the start and end of CNIL’s funding in the 806 Action;
(5) Lack of commercial rationale in the terms of CNIL’s litigation funding; and
(6) Involvement of David Ho’s nominees.

27. Meanwhile, in respect of the LSF Debts and the SFC Debts, the Trustees rely upon, amongst others, the following, matters:

(1) Alignment of interests with David Ho;
(2) Lack of proper due diligence in the investment;
(3) Suspicious timings;
(4) Lack of commercial rationale;
(5) Substantial involvement of David Ho’s nominees; and
(6) Curious features of the assignment of the SFC Debts.

28. In essence, the Trustees’ case is that the subject funding was David Ho’s money and was provided by him.

29. The Trustees submit that they have shown at least a prima facie case that CNIL and Mr Cheung are capable of giving the information sought. The documents sought and the proposed examination are not onerous or oppressive as the subject matter is specific and limited in scope as relating to the litigation funding which CNIL and Mr Cheung must have ready access to. The information and examination are reasonably required for the Trustees to carry out their functions, in particular for the purpose of tracing the fund source of the litigation funding arrangements.

D. CNIL AND MR CHEUNG’S CASE AND GROUNDS OF OBJECTION

30. The case of CNIL and Mr Cheung essentially is that:

(1) Mr Cheung has accumulated wealth throughout his career and from successful private investments. All funding provided by CNIL came from his own sources, and CNIL and himself were not in any way related to or connected with David Ho and were definitely not David Ho’s nominee. CNIL and Mr Cheung were innocent and independent litigation funders.
(2) Mr Cheung and Tang were primary school classmates and had established a close relationship. Tang offered litigation funding opportunities in the 806 Action and HCB 345/2001 (i.e. one of the LSF Actions) to Mr Cheung during a causal social occasion in mid-December 2014.
(3) In late December 2014, he met David Ho for the first time in Beijing to discuss about the 806 Action.
(4) In respect of the 806 Action, he at first approached his family friend, Mr Chan Ping Che (“Chan”), a billionaire who has been highly successful in both the manufacturing and investment sectors and a director at FICL, to co-invest in the funding of the 806 Action. Initially, Chan indicated that he may be interested in taking up 50% of the project, but changed his mind a few days later.
(5) After conducting due diligence work, CNIL formally signed the 806 Funding Agreement in February 2015 and became the sole funder of the 806 Action. The 806 Funding Agreement was terminated on or about 15 January 2021 after CNIL noted repeated defeats of the APIDL Liquidators in various interlocutory applications filed by the Defendants in the 806 Action. CNIL incurred a total loss of HK$14.74 million in the funding project.

31. The main grounds put forward by CNIL and Mr Cheung in opposition to the Summons may be summarized as follows:

(1) Ground 1: The main theme of the Trustees’ case is that David Ho’s money had been channelled through his nominees to find various pieces of litigation. However, there appears to be no bases to suggest that David Ho was hiding funds which he could use for litigation funding purposes.
(2) Ground 2: The objective and undisputed evidence demonstrates that CNIL and Mr Cheung were bona fide funders who were/are not under the control of David Ho and/or his nominees, and had acted contrary to the interests of David Ho.
(3) Ground 3: The Trustees should enforce the s.29 BO order made in CACV 83/2020 against the APIDL Liquidators rather than burdening innocent parties and outsiders with a substantial application.
(4) Ground 4: Any order to be made is wholly unreasonable, unnecessary or oppressive in light of the dismissal of the 806 Action.

E. RELEVANT LEGAL PRINCIPLES

32. The applicable legal principles have been summarized in the decision of this Court in Re Ho Yuk Wah David (Bankrupt) (No. 5) [2020] 2 HKLRD 608 at §§22, 31 and 47, Au-Yeung J; affirmed on appeal in Chen Yung Ngai Kenneth v Alan Chung Wah Tang, CACV 83/2020, 19 January 2022 (“CA Judgment”) at §12. In gist, the Trustees must satisfy the Court that the information or documents “relate to the bankrupt, his dealings or property”; that the provision of information or documents is reasonably required for them to carry out the Trustees’ functions; and that the respondent is able to provide such information or documents. The standard of proof is reasonable suspicion. The trustee is not entitled to embark on expeditions that ignore costs and proportionality, or to extract information from persons in respect of a matter when there is no well-founded ground upon which to consider him prima facie capable of giving information, or to conduct an examination without any clear suspicions and to conduct it to determine if matters or facts might emerge which may be of interest or assistance.

33. Applications for oral examination are more oppressive than those for disclosure of documents, and the Court should be cautious when considering such applications: The Joint and Several Trustees of the Property of So Ching Wan v Assen Ltd (in liq.) & others[2019] HKCFI 1491 at §24 per DHCJ William Wong SC.

F. ANALYSES OF THE TRUSTEES’ CASE

F1. The Funding of the 806 Action

F1.1 David Ho’s involvement in the 806 Action

34. It is well-documented from previous Court proceedings that David Ho has been providing assistance to the APIDL Liquidators in the conduct of the 806 Action. See APIDL v Shearman and Sterling [2018] 1 HKLRD 113, §19, Anthony Chan J.

35. The Trustees rely, amongst others, various email accounts as evidencing David Ho’s involvement in the 806 Action:

(1) A Gmail account address at [email protected] (“Gmail Account”) in which CNIL communicated on behalf of Mr Cheung;
(2) A [email protected]
(3) Mr Cheung’s email address at [email protected]
(4) A [email protected] email address (“Headman Account”)

36. These accounts showed that substantial communications between the APIDL Liquidators, ONC Lawyers (“ONC”) who represented APIDL in the 806 Action, CNIL/Mr Cheung were copied to David Ho and/or the Headman Account. In particular, Mr Michael Szeto of ONC’s email to the APIDL Liquidators relating to the brief fee of counsel for a hearing for the 806 Action was copied to the Headman Account. That hearing was related to determination of the preliminary issue of whether the deeds of assignment of the Other 806 Plaintiffs to APIDL in the 806 Action were void for being champertous as it involved the assignment of a bare right to litigate (“Preliminary Issue”).

37. The Trustees submit that they have a reasonable suspicion that the Headman Account was related to David Ho as important emails regarding the communications with APIDL Liquidators’ lawyers regarding the 806 Action were always copied to it. In any event, the Headman Account could not belong to some “nobody”. CNIL/Mr Cheung must know the identity of the person behind it as it was copied in communications between CNIL/Mr Cheung and the lawyers.

38. Mr Cheung did not address the Headman Account at all in any of his affirmations; Whilst he claimed in Cheung-2^{nd [1]}, §16, that the Gmail Account was for the use of the email domain of FICL “for convenience sake as suggested by [Chan]”, FICL decided against co-funding the 806 Action after agreeing to it for a few days and the email was always signed off by the words “for and on behalf of Tony Cheung”. The Trustee find it highly suspicious why Mr Cheung would continue to use that email with FICL’s email domain despite FICL’s interest in the project lasted for only a few days.

39. One should remember that David Ho was a member of the former management of APIDL who should have first-hand knowledge of the claims under the 806 Action. Hence, even a bona fide third party funder may genuinely require his assistance. However, I find that the Trustees do have reasonable suspicion justifying their investigation into the Gmail Account and Headman Account, given the contents of the emails.

F1.2 Funds flowing to other litigations/matters relating to David Ho

40. Despite the fact that the 806 Funding Agreement only provided for CNIL to fund the 806 Action, CNIL also provided payments to other actions relating to David Ho:

(1) A deposit of HK$500,000.00 was paid on or around 2 March 2017 to ONC as “Costs on account for 806 and LSF” (as provided in the email from the Gmail Account on 3 March 2017 said to be sent on behalf of Mr Cheung);
(2) A deposit of HK$300,000.00 was paid on or around 9 July 2018 to ONC for the counsel fees of HCB 3819/2011 on 12 July 2018; and
(3) A deposit of HK$185,000.00 was paid on or around 25 July 2019 for the counsel fees for the summons in HCMP 2719/2017 taken out by the defendants in the 806 Action to remove the APIDL Liquidators.

41. Apart from APIFL, CNIL / Mr Cheung also:

(1) Made payments for and on behalf of Other 806 Plaintiffs, namely, APGIL and GBRE, including a remittance from CNIL of HK$5,700.00 to APIDL on 6 March 2018, which was then drawn by Hou, one of the APIDL Liquidators on 8 March 2018 to pay for obtaining the certificates of incumbency for APGIL, APIFL and GBRE, to Portcullis (Hong Kong) Limited, APGIL’s BVI agent, in the sum of US$200.00 on 7 March 2018;
(2) Funded for the restoration of APIFL.

42. In relation to the above matters, the explanation offered by Mr Cheung is that those payments were ancillary to the 806 Action. The reference to “806 and LSF” was plainly an inadvertent mistake as the subject invoice from ONC indicated that the request for costs on account was for the 806 Action only.

43. The Trustees submit that the payments being ancillary to the 806 Action give rise to reasonable suspicion:

(1) First, the 806 Funding Agreement did not require CNIL to finance other actions, which were ancillary to the 806 Action. Clause 1.1 provided that CNIL only agreed to finance the 806 Action up to a maximum amount of HK$30,000,000. Clause 1.5 also provided that CNIL was under no obligation to provide any other assistance (legal or otherwise) to the APIDL Liquidators in pursuit of the 806 Action.
(2) Second, as pointed out by Mr Wong, the funding of restoration of APIFL by CNIL lacked commercial rationale:
(a) The restoration of APIFL could not provide any benefit to APIDL as the Other 806 Plaintiffs had already assigned all causes of action to APIDL. The Other 806 Plaintiffs would not have any claim against the defendants of the 806 Action if the Assignments were ruled to be valid and enforceable, as the claims had been assigned to APIFL.
(b) The Trustees say that the more probable rationale for the restoration appears to be that if the Assignments were ruled to be void and champertous, attempts could be made for the causes of action to be re-assigned to the other plaintiffs (including APIFL) such that the action could be revived. This would only make sense if David Ho was “calling the shots” on all the Plaintiffs of the 806 Action behind the scenes.
(c) Further, APIFL was subsequently transferred to Liu Shu (whose role should only be limited to that of a minor creditor of APIDL) according to the addressee for the certificate of incumbency invoice of 2018 and the company search report of the addressee: Beijing Huan Shang Zong Heng Co. Ltd (which appears to be a reference to a PRC company named 环商纵横（北京）房屋租赁有限公司 (Global Alliance (Beijing) Property Leasing Co Ltd) (“Global Alliance’), which was at the material time held by Sun Li Hua, a suspected nominee of David Ho (seeRe Ho Yuk Wah David (No. 6) [2023] 2 HKLRD 586 at §§26-27, Au-Yeung J).

F1.3 Lack of proper due diligence in the investment

44. Mr Cheung asserts that he had conducted due diligence work for the 806 Action. Tang provided him with “substantial volumes of papers regarding the 806 Action, including Counsel’s opinion from a QC from London on merits of the 806 Action…” However, he seems to acknowledge that although he was told to seek independent legal opinion in respect of the matter, he did not do so, basing his personal trust in Tang. The Trustees considered such conduct of a claimed independent funder, who had to commit to fund up to a maximum amount of HK$30,000,000, to be commercially inecplicable.

F1.4 Suspicious timing of the start and end of CNIL’s funding

45. CNIL’s funding commenced in January / February 2015 and terminated in January 2021.

46. In respect of the timing of the commencement of the funding:

(1) True Treasure Enterprises Ltd (“TTEL”) was involved in the 806 Action and provided funding up to 9 January 2015.
(2) By a letter dated 18 December 2014, TTEL stated that it was willing to provide funding upon the successful approval of the latest application to amend. By a letter dated 6 January 2015, it claimed that its decision to fund was on the basis that the proposed amendments would be approved, and that it needed more time, including to seek independent legal advice, and to assess the prospect of the 806 Action before committing to further substantial funding.
(3) On 9 January 2015, TTEL entered into the Ninth Supplemental Initial Funding Agreement.
(4) Then, at the hearing before DHCJ B Chu (as she then was) on 14 January 2015 (when the learned judge considered APIDL’s application for extension of time to pay security for costs), TTEL produced a letter dated 12 January 2015 indicating that it would be willing to fund HK$6.5 million security for costs once they received a substantial sum from a business deal in February 2015, and that TTEL would continue funding APIDL’s claim in the action to trial.
(5) However, one day before the hearing, TTEL had already entered into the Deed of Lockout Agreement with CNIL on 13 January 2015 (“Deed of Lockout”) and that CNIL (through FICL) would remit the HK$6.5 million security for costs on 3 February 2015. At that time, CNIL was still a company that was struck off.
(6) Then, on 2 February 2015, TTEL entered into the Tenth Supplemental agreement to the Initial Funding Agreement (for HK$20,000). Eight days later, on 10 February 2015, CNIL was to buy out TTEL’s funding position for the 806 Action under the 806 Funding Agreement, up to a maximum amount of HK$30,000,000.
(7) Despite the fact that, on 3 February 2015, CNIL had (through FICL) remitted a sum of HK$6.5 million to Cheng, Yeung & Co (“CYC”) (the then instructing solicitors of APIDL Liquidators and the Other 806 Plaintiffs), the APIDL Committee of Inspection only resolved to approve the funding from CNIL and the entering into of the 806 Funding Agreement on 10 February 2015.
(8) In view of the above, the Trustees say that there was a complete lack of rationale that CNIL would risk releasing litigation funds which would be locked up in Court as security for costs before the Committee of Inspection gave its formal approval.

47. Incidentally, it also appeared highly suspicious that FICL would indicate its interest to co-fund “Project 806” by a letter dated 5 January 2015 just in time for the hearing on 14 January 2015, in particular when Mr Cheung claimed that FICL had changed its mind “a few days” after late December 2014.

48. In respect of the timing of the termination of the funding:

(1) Between 15 and 16 April 2021, the trial of the Preliminary Issue in the 806 Action took place, and the judgment was handed down by A Chan J on 18 May 2021: [2018] 1 HKLRD 113.
(2) If the Deeds of Assignment were ruled invalid (which were ultimately held to be so by A Chan J), then the Other 806 Plaintiffs’ funding in the 806 Action would be champertous and void, meaning that the Defendants of the 806 Action could request a substantial amount of security for costs against the Plaintiffs given that the Other 806 Plaintiffs were BVI companies.
(3) In this regard, the Trustees submit that it made no sense for a genuine litigation funder to stop funding just before the trial of the Preliminary Issue without recourse for remuneration of its funding. By that time, CNIL had already funded and lost approximately HK$14.74 million (almost half of its commitment under the Funding Agreement). Tang had to fund the total of HK$1.09 million to continue the 806 Action for the hearing of the Preliminary Issue.
(4) The reason given in Cheung 2^nd, §39, for the termination of the 806 Funding Agreement was the “repeated defeats of the [APIDL Liquidators] in various interlocutory proceedings filed by the Defendants in the 806 Action”. The Trustees say that this was a vague reason, and was done at a point which was “most critical” without any investigations as to whether there was any negligent handling of the project, any demand for explanations, or any questions as to who should be held accountable for such failure. An independent commercial funder would not have come to such a decision.

F1.5 Lack of commercial rationale in the terms of the CNIL’s litigation funding in the 806 Action

49. The Trustees’ case is that the 806 Funding Agreement entered into by CNIL lacked commercial rationale:

(1) According to Clause 4.1.2(b) of the 806 Funding Agreement, CNIL would distribute 30% of the final amount to be received by APIDL / APIDL Liquidators in the 806 Action to a PRC company, GYTH, based on providing some undefined consultancy services. In the Trustees’ submission, it was suspicious as to what consultancy services a PRC company could provide to the APIDL Liquidators, who had already engaged qualified lawyers for proper legal advice and had David Ho himself providing assistance in a litigation based in Hong Kong.
(2) In fact, GYTH is a creditor of APIDL according to the Statement of Affairs of APIDL dated 5 April 2023. It, together with 北京觉先行咨询有限公司 (Beijing Jue Xian Hang Consulting Co Ltd) (“JXH”), another alleged creditor of APIDL), was Yu Yang’s “Beijing entrusted companies” according to the active defendants in the 971 Action. Yu Yang was held to be a nominee of David Ho under the 971 Judgment. David Ho’s own affirmation filed in CACV 242/2009 on 14 December 2010 disclosed that David Ho was employed by GYTH sometime in May 2010 for a salary of RMB10,000. As such, GYTH is either David Ho’s company or at least one which is closely connected to David Ho, and it is unsurprising that CNIL would be “sharing” 30% of the recovered fees with GYTH.
(3) Under Clause 6.2 of the 806 Funding Agreement, TTEL was entitled to seek HK$15 million past costs from CNIL’s future recovery regardless of the amount of CNIL’s future recovery. The Trustees say that it was inconsistent with the notion that CNIL was an independent funder.

F1.6 Involvement of David Ho’s nominees

50. Lastly, David Ho’s nominees were involved in the 806 Action:

(1) The Trustees believe that GYTH, was a corporate nominee of David Ho, or at least a company closely associated with him.
(2) Tang, one of the APIDL Liquidators, was held to have placed himself in conflict of interests in funding APIDL through Aim Best Group Limited and acting as a liquidator of APIDL at the same time (see Re Ho Yuk Wah David (No. 6) at §§28-31 per Au-Yeung J). Tang was heavily involved as (i) a liquidator of APIDL in the 806 Action; (ii) a liquidator of CWT; (iii) a liquidator of SFC; and (iv) a trustee in bankruptcy in the LSF Actions.

F1.7 Summary

51. The reasons given in Section F1 do support the Trustees having reasonable suspicion that CNIL’s funding of the 806 Action was related to David Ho.

F2. The LSF Actions and the SFC Liquidation

F2.1 Alignment of interests with David Ho

52. The Trustees submit that, given David Ho’s continuing beneficial interest in the LSF Debts and the SFC Debts, David Ho has an interest in the LSF Actions and the SFC Liquidation.

F2.2 Lack of proper due diligence in the investment

53. Mr Cheung did not conduct any due diligence as to who was the ultimate beneficial owner of the LSF Debts and the SFC Debts before they were assigned to CNIL.

54. Unlike the funding for the 806 Action (of which Mr Cheung has given a mere assertion that he had done due diligence – see §44 above), there was not even an assertion from CNIL/Mr Cheung that they had conducted due diligence on the LSF Debts and the SFC Debts.

F2.3 Suspicious timing

55. The Trustees submit that the timing of the assignments of the SFC Debts was suspicious.

56. In relation to the First Assignment of the SFC Debt from Keentrade to Heartbest on 9 July 2012:

(1) The date of assignment was just days after David Ho’s various corporate nominees in the 971 Action received notice of the 971 Action on 29 June 2012. The Trustees believe that it was an attempt to protect the SFC Debt from the reach of the Trustees.
(2) The First Assignment took place 7 months after Keentrade was struck off the BVI Register of Companies on 1 November 2011. If Heartbest was a genuine bona fide purchaser of the SFC Debts, there was no reason why it would have purchased from a company which was already struck off. Given that Heartbest’s actions were conducted by Sun Li Hua and Sun Bo (persons who appeared to be nominees of David Ho), the fact that Keentrade was struck off before the First Assignment made it more likely that the assignment was not for genuine commercial reasons.

57. In respect of the initial funding of the SFC Debt by David Ho in February 2006, the Trustees are now able to trace from bank documents that the HK$3 million originated from David Ho, was channeled through a few layers of his various corporate nominees (with his nominees Nina Jia, Peter Lo and Kellie Chan being the signatories), and ultimately was transferred from Hawthorn to HSBC by a Cashier’s Order dated 3 March 2006. But the Court notes that all these happened before the bankruptcy of David Ho.

58. In relation to the Second Assignment of the SFC Debt, the Trustees say as follows:

(1) The assignment was entered into on the same date as the 806 Funding Agreement was entered into by CNIL, and after CNIL was restored on 19 January 2015, 8 months after it was struck off.
(2) At the hearing before DHCJ B Chu (as she then was) in the 806 Action on 14 January 2015, when applying for extension of time to make payment into court as security, Hou indicated that CNIL would be a potential funder for APIDL in the 806 Action. However, at that time, CNIL was not even restored to the register. It was only restored 5 days later, “just in time to fund the 806 Action” and such timing could not be explained away as mere coincidence.
(3) Therefore, the restoration of CNIL was simply to fund David Ho’s legal proceedings against LSF and the 806 Defendants. Otherwise, it would have made no sense for a continuing investment vehicle to be struck off for non-payment of its annual fees since 2013 just in time for the assignment of the debt.

59. However, Mr Cheung explained that the striking off of CNIL on 1 May 2014 was due to inadvertent delayed payment of the annual fees and he had no intention to discontinue the operations of CNIL at that time. This is supported by the fact that, after the termination of the 806 Funding Agreement, he continued to pay further annual fees for CNIL on 3 November 2021 and 12 October 2022. In particular, the payment on 3 November 2021 was made before the Trustees took out the present summons on 5 May 2022. If Mr Cheung had the intention to discontinue the operations of CNIL, he would have ceased paying the annual fees after termination of the 806 Funding Agreement, but he did not do so. Further, the LSF bankruptcy and the SFC liquidation were still ongoing. CNIL was a funder of the LSF Action and creditor of both LSF and SFC. There was no reason for CNIL to discontinue its operation.

60. These explanations were logical and I accept the same.

F2.4 Lack of commercial rationale

61. The Trustees say that there was no commercial reason why CNIL would have purchased the SFC Debts, other than its being related to David Ho. Despite the fact that there seemed to be no activity or no court proceedings in relation to the SFC Liquidation for the purposes of recovering further monies for its creditors, CNIL still purchased the SFC Debts. Any recovery from the LSF Actions was related to LSF only and was independent of the creditors’ positions in the SFC liquidation. Therefore, the Trustees claim that they reasonably believe that one of the main considerations why the SFC Debts were purchased (together with the appointment of Tang as its liquidator) was because of their access to information relating to the SFC companies in order to assist David Ho’s pursuit of the LSF Actions.

F2.5 Substantial involvement of David Ho’s nominees

62. David Ho’s nominees were involved in the Assignments of the LSF Debts and the SFC Debts:

(1) The Assignments were conducted and executed by David Ho’s nominees and/or persons closely associated with him on both sides of the transaction in Keentrade and Heartbest, including: (i) Peter Lo; (ii) Fong King Yiu; (iii) Sun Li Hua; and (iv) Sun Bo.
(2) In particular, Sun Li Hua signed the First Assignment of the SFC Debts on behalf of Keentrade as assignor, and the Second Assignment of the SFC Debts on behalf of Heartbest as assignor. The Trustees say that this was compelling evidence that the First Assignment was a sham.
(3) Other nominees involved include (i) Nina Jia (also known as Jia Yin); (ii) Yu Yang; and (iii) Chan Hau Yu.
(4) The heavy involvement of Tang and David Ho in the 806 Action, the LSF Actions and the SFC Liquidation gave rise to at least a reasonable suspicion that CNIL’s funding of APIDL, LSF and SFC was related to David Ho.

63. The roles of the nominees mentioned in §62 above have been summarized in Mr Wong’s submission §§65-82.

64. As regards Peter Lo, apart from having been held to be David Ho’s nominee and was accustomed to acting in accordance with David Ho’s instructions under the 971 Judgment, he also:

(1) was a director of Keentrade at the material times before and after the First Assignment of the SFC Debts;
(2) a member of the Committee of Inspection in respect of SFC with effect from 8 April 2013;
(3) one of the signatories of cheques facilitating the convoluted fund flows from David Ho into HSBC for assignment of the SFC Debts in February 2006;
(4) a member of the Committee of Inspection in respect of the bankruptcy estate of LSF after the assignment of the LSF Debts in around August 2005.

65. As regards Fong King Yiu, apart from having been held to be David Ho’s nominee and was accustomed to act in accordance with David Ho’s instructions under the 971 Judgment, he was also a director of Keentrade and was said to have signed letters on behalf of Keentrade to the then SFC liquidators in around 2006 to 2007.

66. As regards Nina Jia/Jia Yin, apart from having been held to be a person closely associated with David Ho under the 971 Judgment, she was also one of the signatories of cheques for the fund flows from David Ho into HSBC for the assignment of the SFC Debts in February 2006.

67. As regards Yu Yang, he was a former brother-in-law of David Ho who has been held under the 971 Judgment to be David Ho’s nominee acting under his instructions. Further, in his witness statement filed in the 971 Action, he claimed that Hawthorn (i.e. the company which paid for assignment of the SFC Debt on 3 March 2006) was one of his Hong Kong companies acquired from the investment by him and his sister (i.e. David Ho’s former wife) in around 2008. These showed the involvement of the same nominees and entities closely connected to David Ho.

68. As regards Chan Hau Yu (“Kellie Chan”), she:

(1) was the person who signed the cashier order in the sum of HK$43 million from Hawthorn in favour of HSBC for assignment of the SFC Debts on 3 March 2006;
(2) employed by David YW Ho & Co (a sole proprietorship set up by David Ho and allegedly sold to his sister Jade Ho in November 2004, and later renamed as YK Ho & Co) as an executive secretary from 15 February 1995 to 22 December 2004, and then as executive secretary by Pacific Shine Limited from 23 December 2004 to 30 June 2011;
(3) acted as bank signatory of various corporate nominees of David Ho including Hawthorn; and
(4) admitted herself that she was strictly following orders and instructions from David Ho and the law firm’s management in acting as bank signatories and dealing with transactions.

69. As regards Sun Li Hua:

(1) she had signed the First Assignment of the SFC Debts on behalf of Keentrade on 8 April 2013 and the Second Assignment of the SFC Debts on behalf of Heartbest on 23 February 2015 (using a Chinese signature);
(2) Yu Yang claimed in his statement filed in the 971 Action that Sun was his employee at APIDL and had arranged for remittance of funds to Hong Kong under his instructions;
(3) she had previously remitted HK$305,011.21 in November 2011 to Wendy Yim, an accounts supervisor of David YW Ho & Co. Yim had admitted that she had been instructed by her employer to transfer monies in and out of her own bank account.
(4) she was the Chairman of Meeting of Creditors of APIDL’s voluntary liquidation in 2013. She, together with Liu Shu (another person found to be a person closely associated with David Ho in the 971 Judgment), had confirmed the appointment of Tang as one of the APIDL Liquidators.
(5) she is said to be knowledgeable of David Ho’s transactions in the transactions, dealings, background and personal life of David Ho, as evidenced by her affirmation evidence in the discontinued action in HCA 2752/2012. She also signed the Statement of Truth in the original defence filed in that action. There was a reference to a class of persons defined as David Ho’s “UK Relatives and Friends” in the original defence, which was only removed from the amended defence after the Former Trustees had taken out a request for further and better particulars regarding such “UK Relatives and Friends”.
(6) JXH, the creditor who was said to have assigned APIDL debt to TTEL, shared the same official registered address with Global Alliance of which Nina Jia was its shareholder until 6 April 2017 and Sun Li Hua was its sole shareholder from 6 April 2017 to 29 September 2018. Sun also represented TTEL, and hence the Trustees say that the alleged assignment of loan from JXH to TTEL would “just be passing the APIDL debt from one hand to another” and would make “no commercial sense”.

70. As regards Sun Bo, she:

(1) was the person who signed the First Assignment of the SFC Debts on behalf of Heartbest on 8 April 2013 and who replaced Peter Lo as a member of the Committee of Inspection of SFC on the same date;
(2) was the sole shareholder and director of Luck Creation Limited, a company that entered into a share purchase agreement dated 16 July 2012 for the sale of the sole share of Grassmere Services Limited (“Grassmere”) and thereafter appointed as a director of Grassmere, replacing Yu Yang. Sun Bo was thereafter appointed as a director of Grassmere (together with Sun Li Hua) on 17 June 2016, and both of them resigned as directors together on 18 July 2019. The Trustees say that these matters show that Sun Bo, Yu Yang and Sun Li Hua are closely connected to each other and David Ho; and
(3) was the sole shareholder and director of TTEL, which previously funded the 806 Action from April 2013 to February 2015 before CNIL came into the picture.

F2.6 Curious features of the SFC Debts

71. The SFC debt has the following curious features suggesting that the SFC Debts were related to David Ho:

(1) The address of Heartbest as stated in the First Assignment of the SFC Debts was “Room 112G, No. 59 Chaibang Hutong, Dongcheng District, Beijing, People’s Republic of China, postal code: 100009”, which was the same address as TTEL as stated in the Notice to Borrower (from JXH (Assignor) & TTEL (Assignee) to Shinewing (Liquidators of APIDL) dated 24 April 2013.
(2) The Notice to Borrower (from Keentrade (Assignor) & Heartbest (Assignee) to KPMG (liquidators of the SFC Group) dated 8 April 2013 shared the same format and wordings as the Notice to Borrower referred to in sub-paragraph (1) above.

F2.7 Summary of the LSF Actions and the SFC Liquidation

72. Subject to what I have stated about the struck off of CNIL in §§59-60 above, the facts in Section F2 above support the Trustees having reasonable suspicion that CNIL/Mr Cheung are in possession of information that relate to David Ho, his dealings or property.

G. GROUNDS OF OBJECTION RAISED BY CNIL AND MR CHEUNG

73. A few facts must be borne in mind before analyzing the grounds of objection.

(1) Till the present application, the only persons found to be nominees of David Ho had been his subordinates or family members.
(2) It is fair to say that the subject funding was related to David Ho, but what is the purpose of this application? The main basis of the Trustees is the flow of funds, with a source from David Ho, to CNIL/Mr Cheung, who were suspected to be his nominees. Allegedly David Ho’s strategy with CNIL was to hide either the fund flow to the various actions that CNIL funded or the receipt of the funds are to end up in David Ho’s pockets (Chen-19^th, §62).
(3) A bona fide funder would have common interest with the person/party funded. Both would look to the fruits of the litigation. Hence, it would not be surprising for CNIL/Mr Cheung to have communications with David Ho and the APIDL Liquidators. However, that is far from establishing that the funder and the party funded were related in the sense of one being a nominee of the other, or that the funds had come from David Ho.

G1. Ground 1 – No bases to suggest that David Ho was hiding funds for litigation funding purposes

74. In gist, Mr Szeto, counsel for CNIL/Mr Cheung, contends that the effect of the 971 Judgment is, amongst others, that David Ho used nominees to cover up his ultimate beneficial ownership in APIDL and has nothing to do with his having nominees in respect of the litigation funding arrangement. As stated in the 971 Judgment:

(1) David Ho had been in an unfavourable financial position after a number of litigation involving him and/or his corporate nominees ended unfavourably to him in 2004 and 2011 (§10);
(2) By the end of 2007, David Ho had run out of funds for his litigation projects and had to rely on funding from Yu Yang and David Ho’s other relatives to finance his (or APIDL’s) litigation projects (§§57-58);
(3) By the end of 2007, APIDL itself was in serious financial difficulties (§132); and
(4) David Ho attempted to recapitalize APIDL in order to strengthen its balance sheet when faced with security for costs application in the 806 Action (§§105-112) although the recapitalization exercise of APIDL was held to be a sham by Ng J (§143).

75. Further, Mr Szeto submits that the Trustees had taken out numerous section 29 applications but they have not been able to show any evidence that David Ho has had any funds since his bankruptcy in 2011 to be recouped by the Trustees.

76. Similar arguments were raised by Mr Szeto in an earlier s.29 application in respect of David Ho’s estate, which led to Chen Yung Ngai Kenneth & Anor v Indo-Sino Manufacturing & Trading Institute Ltd & Ors[2023] HKCFI 1462. At §125 of that Decision, this Court stated:

“125. I do not think these affect the overall view of the present Summons. Matters in §122 above [i.e. matters in §74 of this Decision] were not findings of Ng J that David Ho was impecunious but were just background facts. As the 971 Judgment shows, David Ho put his assets into a complicated corporate web. It has taken about 10 years for the Trustees to obtain the 971 Judgment. It has not been an easy case of administration of David Ho’s estate. The fact that the Trustees have not been successful so far in recouping assets affects the discretion to be exercised but not jurisdiction of the Court in this Summons.”

77. Mr Szeto relies upon an even earlier decision in [2019] 1 HKLRD 961 at §§30-33, involving the Former Trustees applying for a s.29 Order against the trustees in bankruptcy of LSF’s estate for discovery of documents, including the funding agreements and related documents in relation to the LSF Actions (“Recorder Fung SC’s Decision”). Recorder Eugene Fung SC held that the Former Trustees had no evidence to show any reasonable suspicion that David Ho was related to or connected with CNIL in relation to the LSF/SFC matters.

78. Likewise, this Court found that the Former Trustees had no basis to assert that David Ho was related to the funders, TTEL, CNIL and FICL: Ip Pui Lam Arthur v Alan Chung Wah Tang[2020] HKCFI 578, 8 April 2020, Au-Yeung J, §§18-19, 38-43, 49-50.

79. It was this clear that even in 2019, funding by CNIL of the LSF and SFC Actions was no secret to the Trustees.

80. Four years have lapsed since Recorder Fung SC’s Decision till the present hearing. The Trustees have no better evidence than the position before Recorder Fung SC. Suspicious source and flow of the litigation funding (despite documented transfers from CNIL/Mr Cheung) are the foundations of the Trustees’ application. If CNIL/Mr Cheung can show the source of funding not to be from David Ho, that would be the end of this application. This leads to Ground 2.

G2. Ground 2 – Bona fide funders not under the control of David Ho

81. This is the main ground of opposition of CNIL/Mr Cheung. In gist, Mr Szeto submits that the objective and undisputed evidence demonstrates that CNIL and Mr Cheung were not nominees of David Ho nor under his control. Mr Cheung was and is a man of means. CNIL has been his company. The funding came (in chronological order) from TTEL, potentially from FICL and then CNIL and Mr Cheung. The subject funds flowed from FICL (on behalf of CNIL), or from CNIL to the APIDL Liquidators or its designated payees. These funders had, on various occasions, acted contrary to the interests of David Ho, and could not be his nominees.

82. First of all, Mr Cheung was not David Ho’s subordinate or family members but was and is a man of means. He was and is a chairman of a publicly listed company on the Hong Kong Stock Exchange, with investments in real and personal assets, including landed properties in Hong Kong, corporate bonds and cash savings in various banks, and shares in various public and private companies.

83. In this regard, the Trustees complain that the evidence provided by Mr Cheung in showing his financial means is unsatisfactory, as the evidence adduced by him only demonstrated his financial means in 2010 or 2014, when the 806 Funding Agreement was between around February 2015 and January 2021.

84. With respect, this complaint misses the effect of the evidence. CNIL was incorporated in BVI in 2009 as an investment vehicle. David Ho has never been a shareholder or director and the Trustees have not challenged this. Mr Cheung’s financial means in 2010 or 2014 supported Mr Cheung’s case that he had been a man of means who could afford the funding. There was no reason for him to act as nominee of a bankrupt whom he did not know until about December 2014 (i.e. 2 months before the Funding Agreement was signed.)

85. Secondly, the change of funder from TTEL to CNIL/Mr Cheung was important to show that CNIL/Mr Cheung was not a nominee of David Ho for the following reasons:

(1) By an order dated 19 November 2014, APIDL was ordered to pay further security for costs in the sum of HK$6.5 million on or before 19 January 2015, failing which APIDL’s claims would be struck out without further order. As such, it was vital for such funds to be raised as soon as possible by David Ho, if TTEL was indeed his nominee, so as to save the 806 Action. If David Ho had hidden funds, he would not have let the deadline lapse.
(2) APIDL took out an extension of time application on 6 January 2015 to extend the deadline for payment by 2 months to 19 March 2015. That application was heard by DHCJ B Chu (as she then was) on 14 January 2015.
(3) In resisting the original application for security and the application for extension of time, the Court was informed that TTEL was no longer willing to fund the litigation. Subsequently, TTEL produced a letter to the Court at the “eleventh hour” indicating that it would continue to fund the litigation if and when TTEL were to receive a substantial sum of investment in February 2015. Such a conditional stance of TTEL was simply not in the interest of David Ho, as it risked dismissal of the 806 Action.
(4) As pointed out by Mr Szeto, if TTEL was David Ho’s nominee, what APIDL would have done to buy time would be to focus on the evidence of the investment return for TTEL in February 2015 with solid proof so as to persuade the Court to extend time. And yet, in the light of such a substantial claim in the 806 Action which David Ho was allegedly funding, David Ho took the risky step of tendering unsworn evidence at the eleventh hour. He also allegedly changed to or brought in a new nominee at this moment. APIDL had to rely on the evidence of funding coming from 2 potential funders, namely, CNIL and FICL, in support of the extension of time application. Such evidence was in fact rejected by DHCJ B Chu for the reason that the evidence did not show any commitment of funding by CNIL and FICL.
(5) The entity who eventually provided the security for costs was not TTEL but CNIL.

86. Thirdly, before CNIL stepped in, FICL in fact took an interest at one stage in co-funding with CNIL/Mr Cheung but changed its mind.

(1) Through previous s.29 applications, the Trustees knew that FICL was the direct payor of over HK$7 million prior to this application, ie HK$6,500,000 + HK$659,000 to Cheng Yeung & Co; and HK$500,000 to Shinewing Specialist Advisory Service Ltd.
(2) By a letter dated 31 March 2022 (“FICL’s Letter”), upon the Trustees’ enquiries, FICL informed the Trustees of the following:
“2. In around December 2014, CNIL invited FICL to co-fund the project. Although FICL had seriously considered the proposal, we eventually refused to participate due to the high-risk nature of the project.
3. FICL has been a regular business partner of CNIL and its director Mr. Cheung. FICL made the Payments according to Mr. Cheung’s specific instruction. According to our record, these payments were refunds for previous payments made to FICL prior to 2015. The Payments therefore are completely unrelated to any commercial interest on our part in the Case.
4. No funding agreement or agreement of any kind in relation to the Case has been signed by FICL with CNIL or any other parties.
5. FICL has no interest in the Case and is an unrelated party hence we are unable to reply any of your enquiries.
6. We confirm that none of the shareholders or directors of FICL know Ho Yuk Wah David (“David”) either in person, written correspondence or any other forms of communication.
…” (emphasis added)
(3) The Bank of China reference letter showing positive bank balance of over HK$500 million in FICL’s account was provided to CNIL when FICL and CNIL were considering co-funding of the 806 Action.
(4) CNIL/Mr Cheung had investment of over HK$14 million in FICL in 2014 and had asked FICL to withdraw the same on behalf of CNIL to fund the 806 Action.
(5) The Trustees did not make further enquiries with FICL nor take out any section 29 application against FICL. The Trustees did not even allege that money of FICL/CNIL came from David Ho.
(6) FICL’s position was exactly what CNIL and Mr Cheung told the Trustees. However, the Trustees complained that Mr Cheung failed to provide proof that the payments made by FICL on behalf of CNIL came from refunds for his previous payments except FICL’s say so in the FICL Letter. In my view, if CNIL/Mr Cheung was indeed David Ho’s nominee and knew that the funding project was part of his “unlawful scheme” to divert his assets out of the reach of his creditors, Mr Cheung would not have approached its regular business partner and an innocent third party, FICL, to co-invest in the 806 Action (using its own monies).
(7) If CNIL and Mr Cheung were indeed the nominees of David Ho, there was no reason why Mr Cheung had to withdraw his investment with FICL to fund the 806 Action, instead of using money from David Ho.

87. The funding for 6 years caused CNIL/Mr Cheung to suffer a total loss of HK$14.74 million. The funding included what the Trustees called “7 dubious transfers” coming from Mr Cheung. However, Mr Szeto has demonstrated, with documents, that the source of HK$14.74 million was CNIL/Mr Cheung (Cheung-3^rd, §§35-36, A80-89, §25-40) and that the vast majority of payees were lawyers. Contrary to the Trustees’ submission, the source of funds for the “7 dubious transfers” had been established by Mr Cheung’s bank statements (§37 of Cheung-2^nd; B2/611-613, 615-618, 630, 632-633). I agree with Mr Szeto that each payment out to the APIDL Liquidators or their nominated payees need not be matched with an exact amount of payment-in to FICL or CNIL’s account, so long as it is shown that the payments-in were from sources unrelated to David Ho, which was the case here.

88. The 806 Funding Agreement was terminated at a crucial stage in January 2021 when the trial on the Preliminary Issue for the 806 Action was scheduled to take place on 15 and 16 April 2021 (i.e. within 3 months). Indisputably, the determination of the Preliminary Issue was important, as it may affect the future conduct of the 806 Action. Therefore, if CNIL/Mr Cheung were indeed David Ho’s nominees, David Ho would have done everything he could to ensure that there would be funding for that trial. However, CNIL terminated the 806 Funding Agreement. Tang eventually had to personally pay legal costs allegedly of HK$1.09 million for the 806 Action himself.

89. The Trustees then point out that, after termination of the 806 Funding Agreement, there was a surplus of HK$3,442,834.52. If CNIL was a bona fide funder, one would have expected Mr Cheung to have injected funds to CNIL on a needs basis and would not have run up such a huge surplus in CNIL’s account.

90. With respect, I fail to see what weight could be attached to this argument. Whether as between CNIL and the APIDL Liquidators funds were provided on a needs basis depended on the terms of the Funding Agreement. Any surplus is still to be accounted for by the APIDL Liquidators to CNIL.

91. I also accept Mr Szeto’s submission that, even if the funding provided by it eventually went to David Ho from the APIDL Liquidators’ hands, that would be a matter beyond the control of CNIL/Mr Cheung and was for the APIDL Liquidators to explain.

92. The Trustees are unable to rebut the above points in Ground 2. Based on the evidence under Ground 2 and on the balance of probabilities, I am satisfied that CNIL/Mr Cheung were bona fide funders not under the control of David Ho and had acted against David Ho’s interest at a critical moment. Once that is established, the suspicions on the part of the Trustees as to fund flow can no longer be regarded as “reasonable”. The s.29 application should be dismissed.

93. For completeness, I will also deal with other grounds of objection raised by Mr Szeto briefly.

G3. Ground 3 – The trustees should enforce the s.29 Order made in CACV 83/2020

94. In the CA Judgment, the Court of Appeal held that the APIDL Liquidators were required under s.29 BO to produce information and documents relating to litigation funding in the 806 Action and other proceedings in which APIDL was a party.

95. The only explanation offered by the Trustees as to why they pursued the present application is that the APIDL Liquidators have failed to fully comply with the CA Judgment. Therefore, they have “no choice” but to ask CNIL and Mr Cheung to provide such information instead. The Trustees rely on the authority of Nanik Dayaram HCB 7651/2011, 6 November 2015, §77, wherein Ng J held that there was no requirement that the person summoned was and no other persons were, capable of giving the information sought. If there are a number of persons deemed capable of giving such information, the Trustees may go after only one such person but not the others, or they may go after one such person first and, depending on the outcome of their pursuit, decide whether they need to go after the others.

96. However, it has been held that the Court may not grant a s.29 BO order if the trustee has not exhausted available alternative sources of information or documents which he can readily obtain without incurring trouble or expense appreciably greater than would be incurred under s.29 of BO. In Re Castle New Homes Ltd [1979] 1 WLR 1075, at 1093, Slade J held that: -

“The second principal reason advanced by the banks as to why the court should not exercise its discretion by making an order pursuant to section 268, at least at the present time, is that the liquidator has not yet exhausted all the possible alternative sources of information available to him in relation to the principal questions which concern him. …, I accept that this could be a relevant factor, at least in a case where the person against whom the order was sought demonstrated to the court that (a) there existed alternative sources available to the liquidator, which would afford the information which he sought; (b) he could readily obtain all such information from these sources, without incurring trouble or expense appreciably greater than would be incurred in the desired examination; (c) he had not chosen to avail himself of such alternative sources.”

This authority was not cited to Ng J.

97. The present situation is where the Trustees, depending on the outcome of the pursuit, decided to go against CNIL despite the s.29 Order against APIDL. If the Trustees had to incur expenses in e.g. committal proceedings to enforce the s.29 Order appreciably greater than the present Amended Summons, there may be justification for the present application, but there is no such evidence before the Court.

98. More importantly, the APIDL Liquidators have not completely refused to provide further documents/information. By a letter dated 11 April 2022, they asked the Trustees to justify their “new requests” for additional documents. The Trustees therefore should have at least addressed such query before considering taking out the present application. There is no evidence that they have done so. The Court should exercise its discretion to decline relief. Ground 3 is made out.

G4. Ground 4 – Dismissal of the 806 Action should be taken into account

99. The Trustees’ case has always been that, if David Ho was involved in the funding of the 806 Action, then if APIDL were successful in prosecuting the 806 Action, the fruits of the 806 Action would form part of David Ho’s estate.

100. Dismissal of the 806 Action means that that Action would not bring in value for David Ho’s estate. It would be an abuse of the Trustees’ powers to insist on the discovery under s.29 BO.

101. It was all the more so because the Trustees have not ascertained the progress of the 806 Action before this hearing. They say that they were not privy to the 806 Action. With respect, they were interested in the outcome to that Action. There was an application to strike out the 806 Action to be heard in March 2023. CNIL/Mr Cheung had enquired about the outcome of the 806 Action before this hearing and so had Mr Szeto in his written submission. And yet it was in midst of this hearing, upon being pressed by the Court, that the Trustees discovered that the 806 Action had been dismissed by consent.

102. The Court should exercise its powers effectively, but not so as to support over-zealousness of a trustee or cause oppression. The Court must do what, all things considered, appears at the time to be just and proper: The Joint and Several Trustees of the Property of So Ching Wan v Assen Ltd (in liq.) & others[2019] HKCFI 1491 at §§8.10. It would not be fair and just to CNIL/Mr Cheung for a s.29 Order to be made against them in the light of the dismissal of the 806 Action and their evidence that the source of money for funding came from them.

H. DISCOVERY AS REGARDS THE LSF AND SFC ACTIONS

103. I only need to deal with the discovery regarding the LSF and SFC Actions briefly. The fundamental bases of the Trustee’s application is that CNIL was funding the 806 Action, the LSF and SFC Actions. It was too much of a coincidence and the reasonable inference to draw is that CNIL is related to David Ho.

104. Funding by CNIL of the LSF and SFC Actions was no secret to the Trustees. Recorder Fung SC’s Decision (in 2019) found the Former Trustees to have provided sufficient evidence to support the belief that David Ho had all along been involved in the LSF Actions (§§18, 19 and 21 of that Decision). That has not changed, in my view. I repeat §77 above.

105. However, given the analyses under Grounds 1 and 2 above, there is no bases to draw the inference that CNIL was related to David Ho. Four years have lapsed since Recorder Fung SC’s Decision and the Trustees are still not able to show the nominee relationship between David Ho and CNIL. I see no basis for making a s.29 Order against CNIL/Mr Cheung.

I. CONCLUSION AND COSTS

106. CNIL/Mr Cheung have shown themselves to be bona fide funders instead of nominees of David Ho. They have at a critical time acted against David Ho’s interest. There was no better evidence before Recorder Fung SC than before this Court in relation to the relationship between CNIL and David Ho. Any suspicion that the Trustees hold about David Ho providing, through CNIL, the funding for the 806 Action (now dismissed) and LSF/SFC Actions is accordingly not reasonable. There are no bases for making a s.29 Order against CNIL/Mr Cheung. The Trustees’ application for preservation orders against HSB and CMB also falls away as a result. The Amended Summons is thus dismissed.

107. I accept that the Trustees had a prima facie case to invoke s.29 BO. On the other hand, CNIL and Mr Cheung virtually have to prove their innocence in opposing this substantial application involving over a thousand pages of documents, covering a period of 6 years of funding.

108. Costs should follow the event and be to CNIL/Mr Cheung. Based on their costs statement and adopting a broad brush approach, I summarily assess their costs with certificate for 2 counsel at HK$650,000. I make an order nisi along the terms of this paragraph.

109. I thank Mr Wong and Mr Szeto for their thorough preparation and assistance to the Court.

	(Queeny Au-Yeung)
	Judge of the Court of First Instance
	High Court

Mr Joseph Wong, instructed by Lee, Wong & Lam, for the applicants

Mr Patrick Szeto, instructed by Cheng, Yeung & Co, for the 1^st and 2^nd Respondents

[1] To denote the affirmant and the rank of his affirmation.

[2023] HKCFI 2786-EN-2023-10-31

CHEN YUNG NGAI KENNETH AND ANOTHER v. CHINA MERCHANTS BANK CO LTD

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HCB 3819/2011

[2023] HKCFI 2786

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

____________

Re: HO YUK WAH DAVID (the “Discharged Bankrupt”)

____________

BETWEEN
	CHEN YUNG NGAI KENNETH and CHAN MEI MEI (trustees-in-bankruptcy of the Discharged Bankrupt)	Applicants
	and
	CHINA MERCHANTS BANK CO., LTD.	Respondent

____________

Before:

Hon Au-Yeung J in Chambers

Closing Date of Written Submission:	5 July 2023
Date of Further Written Submission:	26 October 2023
Date of Decision:	31 October 2023

________________

D E C I S I O N

________________

A. INTRODUCTION

1. This is an application made the Trustees in Bankruptcy of David Ho for discovery of documents from the respondent (“CMB”), pursuant to section 29 of the Bankruptcy Ordinance, Cap 6.

2. Despite the terms of the summons, the Trustees have made clear in Ms Kong’s submission that they are only seeking the documents of the consolidated bank account of Million Nice Corporation Ltd (“Million Nice Account”) held with CMB as described in the summons and not “any account”. The Trustees suspect that Million Nice is a corporate vehicle of David Ho’s nominee. The documents sought relate to the Bankrupt’s dealings or property.

3. Million Nice has been served with the summons and supporting affirmation on 21 April 2023 but has not responded.

4. CMB maintains a neutral stance and makes no representation.

B. LEGAL PRINCIPLES

5. Section 29 BO provides (where material) that:

“(1) The court may, on the application of the … trustee, at any time after a bankruptcy order has been made against a bankrupt, summon before it … any person whom the court may deem capable of giving information respecting the bankrupt, his dealings or property, and the court may require any such person to produce any documents in his custody or power relating to the bankrupt, his dealings or property.”

6. The applicable principles have been set out in Re Ho Yuk Wah David (No. 5) [2020] 2 HKLRD 608, §§22 and 31, Au-Yeung J; confirmed in the Court of Appeal judgment in Re Ho Yuk Wah David (No. 5) [2022] HKCA 110, §12. In gist, the Trustees must satisfy the court that the information or documents “relate to the bankrupt, his dealings or property”; that the provision of information or documents is reasonably required for them to carry out the Trustees’ functions; and that the respondents are able to provide such information or documents. The standard of proof is reasonable suspicion. Confidentiality is no bar to an order for disclosure: §19.

C. BACKGROUND

7. In January 2023, this Court gave a section 29 Order in this action requiring 2 firms of solicitors, HIP and OLN, to produce various classes of documents (“HIP/OLN Order”); the relevant decision is [2023] HKCFI 151 (“HLP/OLN Decision”). Those documents related to funding provided to what were known as the 971 Defendants of HCA 971/2012 (“971 Action”).

8. The bases of the Trustees’ application against HIP and OLN accepted by this Court as per the HIP/OLN Decision, were that:

(1)  D2-D5, D8 and D9 (“971 Defendants”) have been found in the judgment in the 971 Action handed down by Ng J on 28 September 2020 (“971 Judgment”) to be nominees of David Ho and hence belonged beneficially to David Ho. The Trustees have stepped into the shoes of David Ho (§23 of the HIP/OLN Decision);
(2)  Yu Yang (the former brother-in-law of David Ho) and Liu Shu (a person closely associated with David Ho by reason of her association with Yu Yang) were found to be nominees of David Ho (§28 of the HIP/OLN Decision);
(3)  Yu Yang and Liu Shu essentially controlled the 971 Defendants at the material time of the 971 Action, when HIP or OLN were the instructing solicitors for the 971 Defendants (§§18 and 22); and
(4)  the Trustees have always suspected that David Ho was involved in funding arrangements for various actions and took the view that those nominees’ litigation expenses for the trial of the 971 Action must have been funded or at least related to David Ho, given that the 971 Defendants, Yu Yang and Liu Shu were found to be his nominees (§30).

9. Pursuant to the HIP/OLN Order, both HIP and OLN produced documents to the Trustees.

10. Amongst the documents produced by OLN, it was discovered that a total of HK$3.3 million was remitted to OLN from an HSBC account 718-5xx5xx-888 (“Unidentified Account”) in 2019 and 2020. The sum were costs on account to OLN for the 971 Action (“971 costs on account”).

11. On 16 September 2019, specific instructions were given by Sun Li Hua (“Sun”) by email, to allocate part of the 971 costs on account as follows:

(1)  HK$360,000 for “settlement of P’s statutory demand against Grassmere”;
(2)  HK$200,000 for “settlement of Grassmere’s outstanding bill and Henry Ho’s past and future costs”; and
(3)  HK$54,000 (out of the above HK$200,000) to Luck Creation as reimbursement by making remittance to the Million Nice Account, because Henry Ho’s bill of HK$54,000 has been settled.

12. However, on 20 September 2019, only HK$48,600 was transferred by OLN to the Million Nice Account.

13. In respect of documents produced by HIP, it was discovered that, on 28 September 2018, Million Nice remitted HK$100,000 to HIP as the costs on account for the 2587 Action. However, Million Nice was neither a client of HIP, nor a party to the 2587 Action.

14. On 29 May 2023, upon the application of the Trustees, this Court made a Section 29 Order against HSBC in the present proceedings in respect of the Unidentified Account: [2023] HKCFI 1429.

15. On 31 May 2023, this Court made another Section 29 Order against Indo-Sino Manufacturing & Trading Institute Ltd (“Indo-Sino Order”) to produce documents relating to the loans provided by Indo-Sino to Grassmere Services (“Grassmere”): [2023] HKCFI 1462. Grassmere was one of the defendants in HCA 2587/2017 (“2587 Action”), which concerned the recovery of the shares held by Grassmere of Dan Form International Ltd valued at HK$55 million. In resisting the Trustees’ application, Indo-Sino claimed to have been misled into granting the loans upon the lies and non-disclosure of Sun/Grassmere. The Indo-Sino Order was premised on the reasonable suspicion that the loans were not genuine and were related to David Ho due to strong evidence of his continued beneficial ownership of Grassmere.

16. On 27 June 2023, pursuant to the Indo-Sino Order, Indo-Sino produced documents via its solicitors. The documents disclosed by Indo‑Sino show that monies had been given to law firms (including ONC who had nothing to do with Grassmere or the shares of Dan Form). The cover letter of Indo-Sino’ solicitors confirmed that “as at 30 September 2022, HK$43,986,417.43 (after deducting repayment of HK$220,000) plus costs on an indemnity basis are still outstanding due from Grassmere to Indo-Sino”. The HK$220,000 was repaid by Million Nice when it was neither a party to the Indo-Sino loans nor the 2587 Action.

D. REASONABLE SUSPICION

17. The Trustees say that they have reasonable suspicion that Million Nice was a corporate vehicle used by David Ho to conceal his assets, through his nominee, Sun Li Hua (“Sun”).

D1. Million Nice

18. Million Nice was incorporated on 13 October 2014. Sun became a shareholder and was appointed a director since 17 November 2014. In her email dated 16 September 2019, Sun had admitted that she was a director of Million Nice.

19. On 16 December 2019, Sun resigned from Million Nice and was replaced by one Liu Xiao Li (“Liu”) on the same day.

20. On 24 December 2020, Sun disposed of her entire shareholding of Million Nice to Liu who allegedly resides in Mainland China. This took place right after OLN’s reimbursement of Luck Creation’s alleged advancement on 20 September 2019, followed by the 971 Judgment on 28 September 2020.

21. The Trustees suspect that the information or documents held by CMB in the Million Nice Account relate to assets of David Ho because (i) Sun was neither a director nor a shareholder of any of the 971 Defendants. Despite being authorized by the 971 Defendants, there was no justification for her to receive money through the Million Nice Account from the 971 Defendants; (ii) Million Nice was neither a party to the 971 Action nor 2587 Action; (iii) Sun was responsible to procure the alleged loans for Grassmere in the 2587 Action; it was inconceivable that she was acting in any other capacity but as David Ho’s nominee; and (iv) No evidence has been provided to the Trustees to justify why the 971 Defendants had to make reimbursement for Grassmere in the 2587 Action or for Million Nice to repay Indo‑Sino, unless both the 971 Defendants and Grassmere are owned or controlled by David Ho and/or David Ho has interest in both the 971 Action and 2587 Action.

D2. Other bases of the Trustees’ reasonable suspicion

22. First, the 971 Defendants were not parties to the 2587 Action. Grassmere was not a party to the 971 Action but only a defendant in the 2587 Action. And yet the 971 costs on account under OLN’s file were used for both the 971 Action and 2587 Action.

23. Second, from the documents disclosed by OLN, it can be seen that the source of the costs on account was not the 971 Defendants, Yu Yang or Liu Shu (who were the shareholders and/or directors of the 971 Defendants)

24. Third, Sun was involved in the procurement of the costs on account. She was alleged to a nominee of David Ho in another instance when a section 29 order was granted against various banks: [2023] 2 HKLRD 586, §26(1), Au-Yeung J. Sun gave instructions to HIP and OLN on behalf of the 971 Defendants to make remittances to the client accounts from the Unidentified Account. However, Sun was neither a client nor shareholder of any of the 971 Defendants at the time of the 971 Action.

25. OLN claimed that they have documentary proof that Sun had authority to represent the 971 Defendants. However, OLN declined to produce the proof to the Trustees because it was not covered by the HLP/OLN Order.

26. In my view, whether OLN has produced the documentary proof of Sun’s authority or not, the Trustees do have reason to suspect that Sun had a role to play in the dealings and property of David Ho.

27. Fourth, Sun appeared to have been using Million Nice to move money around for the purposes of the 971 Action and 2587 Action. Million Nice had remitted money to HIP and received remittance from OLN, when there appeared to be no reason for Sun / Million Nice to get involved in money with the 971 Defendants.

28. Fifth, Luck Creation was not a party to the 971 but it was related to Grassmere in the 2587 Action and Sun Bo, the sole shareholder and director of Luck Creation. Yu Yang sold Grassmere to Luck Creation in July 2012. Luck Creation then sold Grassmere to an individual called Su Lan Lan in July 2016. Su Lan Lan appeared to have taken control after 14 July 2019. There was no apparent reason why Luck Creation should make advance payment for the law costs draftsman’s fees of Grassmere and the reimbursement was made to Million Nice’s Account.

29. Sixth, on 3 February 2021 Million Nice repaid HK$220,000 to Indo-Sino when Liu was still the sole director and shareholder. There was no reason for Million Nice to do so when (i) Sun should have nothing to do with Million Nice anymore; and (ii) Million Nice was not a party to the loan from Indo-Sino, nor a party to the 2587 Action or 971 Action.

30. Seventh, Indo-Sino had actually been making payments to various firms in Hong Kong, including HIP, OLN, ONC Lawyers, and Kwok, Yih & Chan. Apart from the 971 Action and the 2587 Action, the legal actions also included HCA 806/2006 and HCB 3819/2011.

31. Eighth, in the 971 Action, the Plaintiffs in the HCA 806/2006 (“806 Action”) were found to be related to David Ho. The 1^st Plaintiff/liquidators of APIDL and the 3^rd Plaintiff/APGIL were found to be beneficially owned and controlled by David Ho. Persons ruled to be David Ho’s nominees were employed by the 3^rd Plaintiff/APIFL and 4^th Plaintiff/Greater Beijing Region Expressways Limited. All the corporate defendants were found to be beneficially owned and controlled by David Ho.

32. I am satisfied that the Trustees have shown bases set out above for holding reasonable suspicion that Million Nice was a corporate vehicle used to handle money transactions by David Ho and that David Ho had interests in both the 971 Action and 2587 Action.

E. DOCUMENTS SOUGHT

33. The Trustees seek documents in relation to Million Nice’s Account. The stated purposes are to find out:

(1)  How much funds were remitted into and out of the Million Nice Account;
(2)  What the sources and destinations of the funds in the Million Nice Account were;
(3)  What other matters the Million Nice Account was funding; and
(4)  Whether each of the remitters to the Million Nice Account or the recipient of funds from that Account was related to David Ho or his nominees.

34. Apart from purpose (3), which I find to be pure fishing, the other purposes are valid in assisting the Trustees to investigate David Ho’s property and dealings and trace his assets.

35. By a letter dated 24 March 2023, the Trustees have sought the documents from Million Nice but to no avail. They have no other means to obtain the documents.

36. CMB has no objection in principle to the present application, though they would not consent to the making of an order. The documents are in their possession. They have made suggestions to the proposed order, which the Trustees agree. The draft order is limited in scope and time.

37. The draft is in order save that for §§2(a) and (b), I have deleted the word “details” as details are not documents. I have also replaced the phrase in §3 which refers to “beneficial owner’s account” with “Million Nice Account”.

F. ORDER

38. For the reasons given, the Trustees have satisfied the tests for a section 29 Order. I therefore make an order as follows:

(1)  The Respondent do within 45 days of the day on which the Order is served on the Respondent produce the account opening records and documents (if any and available), in its possession, power and/or custody relating to the Million Nice Account from the account opening date to present;
(2)  The term “documents” in sub-paragraph (1) above refers to:
(a)  records and/or documents in connection with the opening of account or accounts including, without limitation, records or forms identifying the beneficial owner or owners of the Million Nice Account and/or the authorized signatory(ies) provided by the Million Nice Account holder; and or
(b)  records of all transactions in the account or accounts including, without limitation, bank statements, bank vouchers, forms, instructions, transaction advices, cheques and correspondence issued by China Merchants Bank Co., Ltd, Hong Kong Branch to the Million Nice Account holder in the ordinary course of business in relation thereto;
(3)  The term “account opening records” in sub-paragraph (1) above refers to all bank account opening documents and changes to the particulars and authorized signatory and any power of attorney of the Million Nice Account with the Respondent.

39. I thank Ms Kong for her assistance.

(Queeny Au-Yeung)
Judge of the Court of First Instance
High Court

Ms Charlotte Kong, instructed by Lee, Wong & Lam, for the Applicants

The Respondent was not represented and their attendance was excused

[2023] HKCFI 1462-EN-2023-05-31

CHEN YUNG NGAI KENNETH AND ANOTHER v. INDO-SINO MANUFACTURING & TRADING INSTITUTE LTD AND OTHERS

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HCB 3819/2011

[2023] HKCFI 1462

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

____________

Re: HO YUK WAH DAVID (the “Discharged Bankrupt”)

____________

BETWEEN
	CHEN YUNG NGAI KENNETH and	Applicants
	CHAN MEI MEI (trustees-in-bankruptcy of
	the Discharged Bankrupt)
	and
	INDO-SINO MANUFACTURING &	1^st Respondent
	TRADING INSTITUTE LIMITED
	YEUNG KA SING, CLARENCE (楊家聲)	2^nd Respondent
	YEUNG YIK PING, ROSE (楊憶萍)	3^rd Respondent

____________

Before:

Hon Au-Yeung J in Chambers

Date of Hearing:	19 January 2023
Date of Decision:	31 May 2023

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D E C I S I O N

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Contents		Paragraph
A.	Introduction	1
B.	Background	5
C.	Trustees’ case	22
D.	Respondents’ case and grounds of objection	25
E.	Legal principles	34
F.	Analyses of Trustees’ case	38
G.	Inherent improbabilities and internal inconsistencies of the Respondents’ case	92
H.	Ground 1 – Investigation of Grassmere a matter for liquidators of APIDL	99
I.	Ground 2 – Failure to show information / documents sought are related to the bankrupt, his dealings and his property	109
J.	Ground 3 – No bases to suggest that David Ho had hidden funds	120
K.	Ground 4 – No bases to suggest that Indo-Sino is a nominee	126
L.	Ground 5 – Lack of merits of the 2587 Action	129
M.	Ground 6 – Balance does not swing in favour of Trustees’ reasonable requirements	132
N.	Capability of the respondents to give the information	154
O.	Conclusion	159
P.	Costs	161

A. INTRODUCTION

1. Before the Court is a summons taken out by the Trustees in Bankruptcy on 17 November 2021 (“the Summons”) under section 29 of the Bankruptcy Ordinance, Cap 6 (“BO”) against 3 Respondents (“Indo‑Sino”, “Mr Yeung” and “Ms Yeung” respectively and “Respondents” collectively). Mr Yeung and Ms Yeung have been the only directors and shareholders of Indo-Sino.

2. The Summons seeks an order that each of the Respondents do produce, by way of affirmation, and that Mr Yeung and Ms Yeung do undergo examination, concerning the following matters, namely, information and documents relating to:

(1) All loans, past and present, provided by Indo-Sino to Grassmere Services Ltd (“Grassmere”), and repayments thereof; and
(2) Payments by or on behalf of Indo-Sino to Grassmere’s lawyers and/or professional invoices relating to valuation of Grassmere’s shareholding in the DFIL Shares (defined below).

These documents/information are tied to the Trustee’s allegation that Grassmere is beneficially owned and funded by David Ho and that David Ho had used his hidden assets to effect those loans.

3. The summons is opposed by the Respondents, who deny having any relationship with David Ho or any of his alleged nominees/associates. Assets of the Respondents were and are theirs and had nothing to do with David Ho. The Respondents’ only involvement in the whole matter was Indo-Sino’s provision of loans to Grassmere, which were genuine and bona fide commercial transactions. The Respondents had no knowledge of the background involving Ho and the allegations about his relationship with Grassmere until the Summons and supporting affirmation of the Trustees were served on them. To the Respondents, this is but an application by over zealous Trustees in seeking discovery, at all costs and at the expense of innocent third parties.

4. The relevant affirmations filed by the Trustees will be referred to as “Chen-3^rd” and “Chen-5^th”; and the affirmation filed by Ms Yeung will be referred to as “Ms Yeung-1^st”.

B. BACKGROUND

5. The background is taken from the succinct summary of Mr Szeto, counsel of the Respondents.

B1. The Parties

6. David Ho was adjudged bankrupt in August 2011 upon his own petition in this case, and his bankruptcy was discharged in 2019.

7. The current Trustees were appointed in January 2020. Before that, the trustees-in-bankruptcy were Ip Pui Lam Arthur and Ip Pui Sum (“Former Trustees”).

8. Asia-Pac Infrastructure Development Limited (“APIDL”) is a company incorporated in Hong Kong. It was involved in extensive litigation. By a judgment in HCA 971/2012, dated 28 September 2020, Ng J held that APIDL was and is beneficially owned and controlled by David Ho: [2020] HKCFI 2518 (“971 Judgment”). APIDL went into creditors’ voluntary liquidation in April 2013, and Alan Chung Wah Tang (“Tang”) and Hou Chung Man (“Hou”) were appointed as liquidators (“APIDL Liquidators”).

9. Indo-Sino is engaged in, amongst others, substantial and legitimate trading business of shipping goods from Hong Kong and China and trading and distributing them in Nigeria and West Africa.

10. Grassmere, a BVI company, is the registered shareholder of the DFIL Shares, ie 5% of the shareholding in a BVI company known as Dan Form International Limited (“DFIL”). The remaining 95% was held by Harlesden Limited which was beneficially owned and controlled by one Mr Dai Xiao Ming (“Mr Dai”).

11. In turn, DFIL held, directly and indirectly, 34.416% of the shareholding of Dan Form Holdings Company Limited (“DFHCL”), a company listed on the Hong Kong Stock Exchange. On 16 November 2016, DFIL’s shareholding in DFHCL was acquired by Autobest Holdings Limited for over HK$1.17 billion.

B2. Valuation of the DFIL Shares

12. In around late 2016, Mr Dai / Harlesden procured DFIL to redeem Grassmere’s DFIL Shares at fair value. Grassmere rejected Mr Dai’s offer of HK$10 million as redemption price and required the fair value to be determined by formal appraisal (“the Valuation”). DFIL deposited HK$75 million with Stephenson Harwood in escrow (“Escrow Money”) pending the Valuation and release of the fair value to Grassmere.

13. In around late 2016, Sun Li Hua Alison (“Sun Li Hua”), a director of Grassmere at the material time from 2016 onwards, invited Indo-Sino (via Ms Yeung) to invest in the Valuation.

14. Indo-Sino eventually lent a total of about HK$4.2 million (“the Loans”) to Grassmere, comprising:

(1)  HK$3 million pursuant to a written Loan Agreement dated 6 January 2017, for financing the Valuation, including paying professional fees related thereto; the material terms were as follows: -
(a)  The interest rate was to be 20% p.a. (clause 2.1);
(b)  If the Valuation was above HK$20 million, for each extra HK$10 million, Indo-Sino would receive a bonus of HK$2 million (clause 3.1); and
(c)  Within 30 days of completion of the Valuation, Grassmere was to repay the principal, accrued interest and any bonus (clause 4.1).
(2)  Subsequent short-terms loans of around HK$1.2 million (“Short-Term Loans”) for payment of professional fees.

15. In November 2017, the Former Trustees commenced HCA 2587/2017 (“2587 Action”) against, David Ho, APIDL, Grassmere, DFIL and Stephenson Harwood, contending that the DFIL Shares are held by Grassmere on trust for David Ho as nominee, and that David Ho was and is the beneficial owner of the DFIL Shares.

16. On 8 December 2017, the Former Trustees obtained interim interlocutory injunction against dissipation of the Escrow Money (“the Injunction”).

17. On 11 December 2017, the Former Trustees applied to continue the Injunction whereas Grassmere applied to discharge it 2 days later. The matter was argued before DHCJ Kent Yee on 4 January 2018 (“Injunction Hearing”).

18. On 8 January 2018, the Valuation was completed and the fair value of the DFIL Shares was assessed at HK$55,052,041 (“the Assessed Amount”).

19. On 20 April 2018, the decision to continue the Injunction was handed down (“Injunction Decision”). The Injunction is still in force.

20. The 2587 Action is ongoing. According to the exhibits to Chen 3^rd, the most recent filing was Grassmere’s Amended Defence filed on 28 January 2020.

21. Separately, HCA 2752/2015 was commenced by the Former Trustees prior to the 2587 Action to claim that certain companies, including Grassmere (instead of the DFIL Shares) were beneficially owned and controlled by David Ho. HCA 2752/2015 was discontinued against Grassmere after the latter had filed evidence to strike out that action.

C. TRUSTEES’ CASE

22. The core contention of the Trustees in the 2587 Action is that the DFIL Shares were at all material times held on trust by Grassmere but beneficially owned by David Ho, and that a series of sham transactions were undertaken to prevent David Ho’s creditors from obtaining access thereto. The Respondents are not parties to the 2587 Action but the relevant background provides the context within which the present Summons was taken out.

23. The Trustees submit that they have reasonable grounds of suspicion that the Loans were not arm’s length transactions and were or are related to David Ho due to:

(1)  Strong evidence of David Ho’s continued beneficial ownership of Grassmere;
(2)  The role and involvement of Sun Li Hua, a person closely related to David Ho;
(3)  Attempts by Grassmere to conceal the identity of Indo-Sino and the identity of the actual payors of the remittance advices to professionals when the Loan Agreement was first disclosed in the 2587 Action at the inter parte stage of the Injunction application; and
(4)  Various unusual / irregular features of the Loans, including the Respondents’ apparent intimate knowledge of transactions and legal proceedings involving David Ho and/or companies under his control despite being just a creditor of Grassmere.

24. The Trustees submit that the Respondents are capable of giving the information sought. The information and the examination are not onerous or oppressive as the documents are of limited scope as relating to loan transactions which the Respondents must have ready access to. The information and examination are reasonably required for the Trustees to carry out their functions, in particular to investigate into David Ho’s financial affairs and to trace the fund source of the Loans.

D. RESPONDENTS’ CASE AND GROUNDS OF OBJECTION

25. The Respondents assert that Mr Yeung and Ms Yeung came from a very rich and resourceful family with a group of companies (“Yeung’s Group”).

26. In December 2016, upon the misrepresentation of Sun Li Hua and the good impression formed of her, Ms Yeung was misled into granting the Loans on behalf of Indo-Sino which it would otherwise not have made had it known the truth. The Loans came from Indo‑Sino’s own resources and for its own benefit. Indo-Sino was to be repaid out of the Escrow Sum well within one year. After assessing the risks and returns, Ms Yeung procured Indo‑Sino to sign the Loan Agreement.

27. As confirmed by Ms Yeung, Indo-Sino procured Afrikon Industrial Ltd (“Afrikon”) to settle professional fees out of the internal resources of the Yeung’s Group’s, upon receipt of the invoices payable by Grassmere, in accordance with the Loan Agreement.

28. In respect of the Short-Term Loans, in around December 2017, Sun Li Hua asked Ms Yeung for a further loan to settle the appraisers’ final professional fees and compliance fees, in order to release the appraisers’ report. Sun Li Hua told Ms Yeung that as soon as the appraisers’ report was released, Grassmere would use the fair value to repay the total outstanding sum due to Indo-Sino before expiration of the one-year loan period in January 2018. Subsequently, Sun Li Hua confirmed that the assessed value was HK$55 million.

29. As the further loans were modest, attracted interest and was backed up by the security of HK$55 million sitting in escrow, had warranty and guarantee, Indo-Sino granted the Short-Term Loans. Given the strong financial position of the Group, there was no time pressure to recoup the Loans.

30. The Respondents only discovered the lies and material non‑disclosure of Sun Li Hua / Grassmere upon reading Chen-3^rd:

(1)  Failure to disclose the major risk factors including the complicated background of Grassmere, the significant amount of money claimed by Mr Dai (which would have wiped out the entire value of the DFIL Shares) and the Trustees’ claim of ownership of Grassmere;
(2)  Failure to disclose the commencement of the 2587 Action and the Injunction proceedings, which delayed repayment of the Loans; and
(3)  Failure to disclose that some of the Loans were used to settle legal fees for the Injunction rather than costs relating to release of the redemption money from the Escrow Sum.

31. The Respondents object to the Summons on the following grounds: -

(1)  Ground 1: This Summons is related to the true ownership of Grassmere, which is an issue to be investigated by APIDL’s Liquidators instead of the Trustees who are contributories of APIDL.
(2)  Ground 2: The Trustees have failed to show that the information or documents sought are related to the bankrupt, his dealings and his property. In particular: -
(a)  The Respondents contend that the correct test ought to be a “factual test” and not one of “reasonable suspicion”.
(b)  Even applying the test of “reasonable suspicion”, the Trustees have failed in showing that the Respondents are related to David Ho.
(3)  Ground 3: There appears to be no basis to suggest that David Ho has any hidden funds capable of being recouped by the Trustees.
(4)  Ground 4: There appears to be no basis to suggest that David Ho and Indo-Sino have any relationship of beneficiary and nominee.
(5)  Ground 5: This Summons is closely related to the 2587 Action, the merits of which are doubtful.
(6)  Ground 6: The balance does not swing in favour of the Trustees, it being oppressive and abusive brought without regard to costs and proportionality.

32. The Respondents emphasize that their objections to the Summons are based on the above grounds and are not to “assist Grassmere”.

33. The Trustees dispute these grounds. They assert that the Respondents’ case is full of internal inconsistencies, self-serving bare assertions, and is unsupported by documentary evidence. Their case is also inherently incredible for lack of due diligence on Grassmere / Sun Li Hua and lack of enforcement against Grassmere. Upon discovery of the “truth” from Chen‑3^rd, the Respondents continued to support and defend Grassmere’s position in the 2587 Action against the Trustees and failed to explain the irregular features in the Loans.

E. LEGAL PRINCIPLES

34. The purpose of s.29(1) is to enable “the court to help a trustee to discover the truth and circumstances connected with and to gather information about the bankrupt’s property, affairs and dealings, in order that the trustee may be able, as effectively as possible, and with as little expense as possible, to complete his function; to put the affairs of the bankrupt in order and to administer the bankruptcy in all its various aspects, including the getting in of any assets of the bankrupt”: Hau Po Man Stanley (in bankruptcy) & others v Joint & Several Trustees [2008] 1 HKC 256 (Court of Appeal) at §20.

35. The relevant legal principles have been summarized in Re Ho Yuk Wah David (bankrupt) (No 5) [2020] 2 HKLRD 608 at §22, Au‑Yeung J; affirmed on appeal in CACV 83/2020, Cheng Yung Ngai v Alan Chung Wah Tang[2022] HKCA 110, §12 (“the CA Judgment”).

(1)  The power conferred by section 29 is general, wide, unlimited, and discretionary in nature;
(2)  The information or documents must “relate to the bankrupt, his dealings or property” and not just any information that the trustee wants;
(3)  The applicant must satisfy the court the essential condition that the provision of information or documents is reasonably required for him to carry out his functions;
(4)  The applicant must also establish a prima facie case that the respondent is able to provide such information or documents;
(5)  If the above criteria are met, the court must carefully strike a balance between the applicant’s reasonable requirements and the need to avoid making an order which is wholly unreasonable, unnecessary or oppressive to the person concerned. The burden is on the applicant to satisfy the court, after balancing all the relevant factors, that there is a proper case for such an order to be made;
(6)  In considering if the information or document is reasonably required to enable the trustees to carry out their functions, great weight would be given to the views of the trustees. A production order is not necessarily oppressive merely because it is inconvenient for the party subject to it or would cause him a lot of work or make him vulnerable to future claims;
(7)  Since a trustee is a stranger to the affairs of the bankrupt, he relies on orders for examination and production to reconstitute the knowledge of the bankrupt, which would enable the trustee to perform and discharge his duties effectively and with as little expense and as expediently as possible;
(8)  The information and documents discoverable under section 29 BO are wider than those discoverable under RHC O.24, as the former are unrestricted by issues defined by pleadings (as there are no pleadings in the context of section 29). Indeed, a trustee is necessarily engaged in a “fishing” or speculative expedition to discover whether he has further avenues to recover the bankrupt’s assets for the benefit of the creditors; and
(9)  That said, the trustee is not entitled to embark on expeditions that ignore costs and proportionality, or to extract information from persons in respect of a matter when there is no well‑founded ground upon which to consider him prima facie capable of giving information, or to conduct an examination without any clear suspicions and to conduct it to determine if matters or facts might emerge which may be of interest or assistance.

36. The legal threshold is one of “reasonable suspicion”: CA Judgment, §12.

37. Applications for oral examination are more oppressive than those for disclosure of documents, and the Court should be cautious when considering such applications: The Joint and Several Trustees of the Property of So Ching Wan v Assen Ltd (in liq.) & others[2019] HKCFI 1491 at §24 per DHCJ William Wong SC.

F. ANALYSES OF TRUSTEES’ CASE

38. In the 2587 Action, the Trustees’ causes of action are in David Ho’s continued beneficial ownership of Grassmere, holding of Grassmere shares through the use of nominees, or the DFIL Shares being held on resulting trust for David Ho and avoidance of transfer of the Grassmere shares in fraud of creditors.

39. The Trustees’ case is supported by, amongst others, a joint public announcement involving DFHCL dated 22 September 2016 (the “Joint Announcement”) which stated that: “The remaining 5% of DFIL is owned by Mr David Ho Yuk Wa”. The Joint Announcement is appended to the Escrow Agreement signed by Grassmere.

F1. David Ho’s continued beneficial ownership of Grassmere

40. The table below shows Grassmere’s shareholding and directorship over the years:

From Shareholder Director
1992.06.20 David Ho David Ho
1994.10.03 Timothy Sun Kwong Wah Timothy Sun Kwong Wah
2004.01.19 Grand Asia Capital Investments Ltd David Ho
2004.12.13 Chung Chen Ning
2006.11.13 Grand Asia Group Holdings Ltd Fong King Yiu
2006.12.29 APIDL
2008.06.18 Yu Yang
2010.06.30 Yu Yang
2012.07.16 Luck Creation Limited (“Luck Creation”) Sun Bo
2016.07.17 Sun Bo and Sun Li Hua
2016.07.18 Su Lan Lan
2016.07.19 Sun Bo,
Sun Li Hua,
Su Lan Lan, and
Qi Yu Gang

41. In the 971 Judgment, Ng J held that David Ho continued to beneficially own and control APIDL and that David Ho had the tendency to use nominees for his clandestine purpose (§97). David Ho used at least 19 associates/nominees including, relevant to the present Summons, Yu Yang (§160), for the purpose of concealing his ownership of APIDL.

42. Even after ownership of Grassmere apparently changed hands from APIDL to Yu Yang and eventually to Su Lan Lan, Sun Li Hua and Sun Bo who are closely associated with David Ho, continued to be involved as directors of Grassmere.

43. More importantly, 2 months after the last change of shareholding in the Table above, the Joint Announcement stated that David Ho was the owner of the DFIL Shares.

44. The Trustees’ case in the 2587 Action is that the purported transfers of shares from APIDL to Yu Yang and eventually to Su Lan Lan were all shams to disguise David Ho’s continued beneficial ownership of Grassmere. Such purported transfers of shares were made with intent to defraud creditors and are thus voidable under section 60 of the Conveyancing and Property Ordinance (Cap 219) (“CPO”).

F2. Use of Nominees / Persons Closely Associated with David Ho

45. Sun Li Hua is closely associated with David Ho and is yet another nominee of his:

(1)  She is extremely knowledgeable regarding the transactions, dealings, background and personal life of David Ho as evidenced by:
(a)  Her affirmation in the discontinued action in HCA 2752/2012; even if one accepts her assertion that the information was passed on by Yu Yang, she must have been a person within the “inner circle” of David Ho in order for such personal and private information to be passed on to her.
(b)  She signed the statement of truth in the original defence of Grassmere in the 2587 Action. There was reference to a class of persons defined as David Ho’s “UK Relatives and Friends”, which was only removed from the amended defence after the Former Trustees have taken out a request for further and better particulars regarding such “UK Relatives and Friends”.
(2)  Sun Li Hua was the Chairman of the Meeting of Creditors in APIDL’s voluntary liquidation in 2013. She, together with Liu Shu (already found to be a person closely associated with David Ho in the 971 Judgment, footnote 45), had confirmed the appointment of Alan Tang as one of the APIDL Liquidators.
(3)  Yu Yang claims in his witness statement in the 971 Action that Sun Li Hua was his friend or employee at APIDL in around 2010-2011.
(4)  Sun Li Hua had previously remitted HK$305,001.21 in November 2011 to Wendy Yim, an accounts supervisor of the law firm (named David YW Ho & Co, later renamed as YK Ho & Co) owned or previously owned or controlled by David Ho. Yim had admitted that she had been instructed by her employer to transfer monies in and out of her own bank account.

46. Sun Li Hua’s role was crucial as it was based on her representation that Ms Yeung procured Indo-Sino to grant the Loans.

47. Sun Bo is the sole shareholder and director of Luck Creation. Although she is not stated in Chen-3^rd to be a nominee of David Ho in respect of the Grassmere shares, the evidence shows that she is also the sole shareholder and director of True Treasure Enterprises Limited (“TTEL”), another BVI-incorporated company. In turn, TTEL claimed to be APIDL’s “major creditor”. As stated by APIDL’s Liquidators, TTEL previously funded APIDL’s action in HCA 806/2006 on a “needs” basis from April 2013 to February 2015 (when APIDL has all along been beneficially owned by David Ho).

48. Mr Szeto complains that the Trustees’ heavy emphases on the role of Sun Li Hua and her alleged connection with David Ho do not go anywhere to show any connection between the Respondents and David Ho, as the Loans were done on the bases of misrepresentation and material non‑disclosure of Sun Li Hua.

49. With respect, the Trustees’ case in Section F2 is not to show the direct connection between the Respondents and David Ho. That is too high a test: the CA Judgment. The Trustees’ case in the 2587 Action has some merits and reasonable suspicion to justify the Trustees’ further investigation into the Loans.

50. Mr Szeto further points out that despite finding that David Ho has had at least 19 nominees, the 971 Judgment made no finding that Luck Creation, Sun Bo, Su Lan Lan and Sun Li Hua were nominees. However, Mr Szeto has overlooked that Grassmere was not the subject matter of the 971 Judgment.

F3. DFIL Shares held on trust for David Ho

51. It is also the Trustees’ case that David Ho solely funded the purchase of the DFIL Shares such that those Shares were and are held by Grassmere as nominee for and/or on resulting trust for David Ho.

52. The reasons are that: from June 1992 to early 1993, DFIL was a shelf company without any substantive assets. And yet DFIL was to invest US$18,000,000 in北京敬遠房地產開發有限公司 (“北京敬遠”), a PRC real estate development company, which in turn owned a real estate development project in Beijing. It was agreed that Mr Dai and David Ho would respectively contribute US$17,100,000 (ie 95%) and US$900,000 (5%). From May 1993 to October 1994, David Ho did inject US$900,000 as agreed, with money drawn from his personal bank accounts in 5 tranches. The ultimate shareholding in DFIL reflected the ratio of fund contribution by Mr Dai (95% held through Harlesden) and David Ho (5% held through Grassmere).

53. There is no counter evidence from the Respondents and there is an arguable case in resulting trust.

F4. Irregular features of the transfers of shareholding in Grassmere

54. APIDL’s alleged transfer of its shareholding in Grassmere to Yu Yang was never recorded in APIDL’s audited accounts. The DFIL Shares continued to be booked as “available-for-sale investments” (the only assets which could have been so booked) even as of 31 December 2011. This calls for an explanation as to why the auditors of APIDL were never informed of the alleged transfer if it had in fact happened.

55. On 16 July 2012, Yu Yang allegedly transferred his shares in Grassmere to Luck Creation for HK$500,000. It would have been sale at a substantial undervalue in the light of David Ho’s proposed sale price of the DFIL Shares of HK$20m (or at least HK$10m) to Mr Dai in a letter dated 15 July 2008.

56. On 18 July 2016, Luck Creation allegedly transferred its interest in Grassmere’s shares to one Su Lan Lan for RMB10 million under the Share Sale and Repurchase Agreement. This happened just 3 weeks after DFHCL had made an announcement regarding the potential acquisition of the shares in DFHCL on 28 June 2016. Further, the alleged “transfer” simply did not give any shareholder’s rights to Su Lan Lan at all. According to the PRC legal opinion obtained by the Former Trustees, the Share Sale and Repurchase Agreement would be treated as a loan agreement with interest under PRC law, since Su Lan Lan did not enjoy any rights as a shareholder under it.

57. Mr Szeto points out that while the Respondents had no dealings with Grassmere before late 2016 and had no knowledge at all about the changes in ownership in Grassmere, from the documents exhibited to Chen-3^rd, there does not seem to be basis for suggesting that the sale at RMB10M was at an undervalue. This is because at the time, the DFIL Shares were already subject to 2 claims by Mr Dai against David Ho existing since August 2008 involving HK$303 million and HK$31.2 million respectively. This has been the case until December 2016, when the redemption and valuation issue arose.

58. Mr Szeto may be right in his observation, but that is a matter for trial. His observation cannot explain why in September 2016 David Ho was still regarded as owner of the DFIL Shares.

F5. David Ho’s control over Grassmere

59. According to the organizational chart provided by the auditor of APIDL, it appears that Yu Yang was or had been a director of Grassmere at the time when Grassmere was holding the investment in DFHCL.

60. Further, certain invoices issued to Grassmere dated or around 2006 and 2007 were addressed to David Ho directly, whilst other invoices dated in or around 2009 and 2010 were addressed to Kellie Chan, David Ho’s secretary in the Firm.

61. There is reasonable suspicion that Grassmere was and continues to be beneficially owned by David Ho, and that he has always exercised control over Grassmere.

F6. Attempts by Grassmere to conceal information in the 2587 Action

62. Sun Li Hua filed an affirmation (“Sun-1^st”) on behalf of Grassmere at the inter parte stage of the Injunction proceedings. She alleged that Grassmere would suffer irreparable harm unless the Injunction was discharged forthwith. Grassmere allegedly financed the Valuation and related legal proceedings by Short Term Loans and had to repay HK$10,799,517.36 (“the Debt”) by 6 January 2018. In default of repayment, Grassmere had to bear interest at 30% p.a. on the outstanding loan.

63. There is no dispute that Sun-1^st produced a copy of the Loan Agreement with the full name of Indo-Sino as the lender and its registered office redacted. Indo-Sino failed to confirm its identity as lender despite request of the Trustees’ solicitors in mid-2017.

64. In Sun-3^rd, the Loan money was allegedly applied towards paying various professionals acting for Grassmere, including its solicitor. Again, all the names of the payors in the remittance advices were completely redacted except one which was partially redacted. And even on that remittance advice, the name of the payor was “[redacted] Industrial Co” which was clearly not Indo-Sino. As can be seen from Ms Yeung 1^st, that company was probably Afrikon, the financial arm of the Yeung’s Group. Grassmere has not produced any invoices or receipts from those professionals.

65. Grassmere may have good reasons to redact the information as the Respondents were not parties to the 2587 Action. There was no evidence to show that the redaction was with the knowledge/consent of the Respondents. Ms Yeung even claims that they were not aware of the 2587 Action before receiving Chen-3^rd. However, Chen-5^th accused Ms Yeung of making bare assertions without documentary proof. Despite that, the Respondents have not produced the unredacted documents before this hearing.

66. The evidence, in my view, supports the Trustees’ reasonable suspicion that there was something in the Loan documents between Indo-Sino and Grassmere / David Ho hidden from the Trustees which may throw light on David Ho’s dealings or property.

F7. Loan Agreement entered into under commercially inexplicable circumstances

67. Mr Szeto points out that, before signing the Loan Agreement, Indo‑Sino was presented with documentary evidence in support of all the matters mentioned in the recitals (in particular recitals E & F).

68. That may well be true. However, there was no due diligence on Grassmere itself before the Loan Agreement was entered into, contrary to the “prudent and cautious investment strategy” adopted by the Yeung’s Group as claimed by Ms Yeung. The matters that Ms Yeung now claims Sun Li Hua / Grassmere had failed to disclose (§30 above) were in fact publicly available and verifiable had Indo-Sino cared to investigate.

69. Further, had Indo-Sino cared to investigate before the Short-Term Loans were advanced, they would have found out the existence of the 2587 Action and the ex parte Injunction.

F8. Unreal and irregular features of the Loans

70. The Loan Agreement was governed by PRC law. The returns thereunder were interest at 20% p.a. and a bonus. Based on the Assessed Value, Indo-Sino would be entitled to HK$ 600,000 as interest and HK$6,000,000 as bonus. It would result in a de facto annual interest rate of 220% (ie HK$6,600,000 ÷ HK$3,000,000). That was why DHCJ Kent Yee commented that the financing costs to Grassmere for the purpose of the Valuation were huge and disproportional to the Assessed Value (§89 of the Injunction Decision).

71. According to the PRC legal opinion obtained by the Former Trustees, the legally permissible interest rate should not exceed 24% per annum; any excess is unenforceable in the PRC courts.

72. It is also curious that the Loan Agreement was governed by PRC law when the parties were a Hong Kong company (Indo-Sino) and a BVI company (Grassmere); the loan was denominated in Hong Kong dollars, and the purpose of the loan was ostensibly for litigation / Valuation in the BVI.

73. Despite Sun Li Hua’s affirmation that Grassmere was obliged to repay the Debt to Indo-Sino by 6 January 2018, during the Injunction Hearing, Senior Counsel for Grassmere conceded that there was no urgency to repay.

74. Whilst his decision was pending, DHCJ Kent Yee raised a requisition on 13 March 2018 as to whether the Debt had been repaid or not. Sun Li Hua replied by affirmation 3 days later, stating that Grassmere had been unable to repay the Debt due by reason of the Injunction. However, since the Injunction Hearing, she had “repeatedly sought to reassure” Indo-Sino that the loan repayment (together with the default interest) would be repaid soon. Indo-Sino issued a demand letter to Grassmere dated 9 March 2018 threatening to take enforcement action, including taking winding-up proceedings if the Loan was not repaid within 30 days of the date of the letter.

75. Ms Yeung claims that the Respondents only looked after their own interests and they could choose to recoup the Debt in different ways, which was a commercial decision involving litigation and enforcement risks. There was no basis for the Trustees to allege that the interests of the Respondents were completely aligned with Grassmere.

76. However, I find it commercially inexplicable that:

(1)  Despite Sun Li Hua’s assertion that Grassmere would, if the Injunction were to continue, apply for immediate partial release of HK$10,799,517.36 from the Escrow Money for settlement of the Debt, Grassmere has not done so.
(2)  Indo-Sino has not taken out enforcement action even up to now, ie more than 5 years since the Loans allegedly first became due on 6 January 2018.
(3)  Indo-Sino took no proceedings against Sun Li Hua, despite discovery of her “misrepresentation” which induced Indo‑Sino to enter into the Loan Agreement.

77. Mr Szeto refers to the interest of 20% per annum, the bonus and an equitable assignment to use the HK$55 million to repay all Loans due to Indo-Sino (as evidenced in an email from Grassmere to Indo-Sino dated 6 December 2017). That equitable assignment would have the effect of keeping a certain sum of money out of a bankrupt’s estate: Secretary for Justice v Global Merchant Funding Ltd (2016) 19 HKCFAR 192. The Loans to Grassmere were genuine commercial transactions on acceptable risks with security and based on reasonable return. Through the Respondents’ solicitors, Cheng Yeung & Co (“CYC”), Indo‑Sino has given notice of the equitable assignment to the Trustees and that security would have taken priority over the Trustees’ claim in the 2587 Action.

78. Mr Szeto could well be right at the end of the day. However, the disproportionate bonus has not been explained by the Respondents. The Short‑Term Loan Agreements were never produced. These, together with §72 above, do give rise to reasonable suspicion on the part of the Trustees that neither Indo-Sino was an independent lender lending for profit, nor was Grassmere a responsible borrower keen on repaying the lender in a timely fashion; or that Indo-Sino was/is connected with Grassmere and would grant unlimited indulgence to Grassmere.

79. The Trustees further rely on the fact that the timing of the demand letter from Indo-Sino dated 9 March 2018 was suspect, suggesting that it was to facilitate a response to DHCJ Yee’s requisition on 13 March 2018 and appeared to allege a collusion between Grassmere and Indo-Sino.

80. I place little weight on that as pure speculation. The Loan was made in January 2017 with a repayment date a year later. The demand letter was issued after the Injunction Hearing. The Respondents could not speak to why Sun Li Hua only produced this demand letter to the Court on 16 March 2018 and not before, but it should not be taken against them.

F9. Use of part of the Loans to pay for legal fees of Grassmere

81. From Recitals H and M and Clause 1.2 of the Loan Agreement, Indo-Sino was to advance money “upon presentation by [Grassmere]’s relevant lawyers’ or other professionals’ invoice(s) (including the Overdue Outstanding Professional Invoices incurred in connection with the Valuation”. Sun-2^nd also deposed that the loan was taken out for the sole purpose of financing the Valuation.

82. Contrary to the above terms of the Loan Agreement, about HK$300,000.00 were paid to Messrs Sit, Fung, Kwong & Shum (“SFKS”), solicitors for Grassmere in HCA 2752/2015. That action was completely unrelated to the Valuation, and had already been discontinued against Grassmere on 21 August 2017.

83. Another HK$300,000 from the Short-Term Loans were used to pay costs on account to Messrs Kwok, Yih & Chan, (“KYC”), the solicitors who formerly acted for Grassmere in relation to the inter parte Injunction application up until 5 July 2018. The sum was requested by Grassmere on 6 December 2017, one day after the Former Trustees took out the Summons for injunction against Stephenson Harwood and two days before the hearing on 8 December 2017 (in which Grassmere’s legal representatives were present).

84. Ms Yeung claimed that the Respondents simply did not know that a portion of the Loans were used for deviating purposes. She put the blame on Sun Li Hua / Grassmere, stating that “some of the settlement of legal fees were for the Injunction proceedings instead of legal costs for compliance or due diligence to release the Sale Proceeds as misrepresented to me”. However, there was no explanation as to why Indo-Sino would cause Afrikon to directly settle the professional fees of SFKS and KYC without even making any inquiries with Grassmere.

85. I would not hold the facts in Section F9 against the Respondents in this Summons. This is because,

(1) As Mr Szeto points out, as a lender, Indo-Sino was only under a duty to ensure that the instructions to pay out the loan were genuine, but not to investigate the genuineness of the recipient or the purpose of the loan: Luk Wing Yan v CMB Wing Lung Bank Ltd[2021] HKCFI 279, at §§167 & 178, Coleman J.
(2) The purpose of the Loan was to finance the Valuation and to apply the Escrow Sum to repay the Loans. The use of the Loans to overcome any opposition to release the Escrow Sum to repay the Loans would have been incidental to the purpose of the Loans.

F10. The Court’s findings that the Loans were not genuine

86. In the Injunction Decision (§96), DHCJ Yee took the view that the Debt (due to Indo-Sino, whose identity was not revealed at the time) was not genuine and was skeptical of Grassmere’s ability to settle it without the HK$55 million. He found that Grassmere was obviously not frank with its financial position.

87. As Mr Szeto points out, Indo-Sino was not a party to the Injunction Hearing. However, in my view, that did not mean that the Trustees’ reasonable suspicion was not sustainable on the facts in Section F.

F11. Intimate Knowledge of David Ho’s Affairs

88. Two letters dated 30 December 2021 and 9 February 2022 respectively had been sent by CYC in relation to the present matter. The Trustees rely on them to show that Indo-Sino, a mere creditor of Grassmere, somehow has in-depth knowledge of the past dealings and past legal proceedings involving David Ho and/or companies under his control. CYC even advised the Respondents that the 971 Judgment (of which Indo-Sino was not a party) was wrong. The Respondents appeared to be advancing the case of David Ho, claiming that he had been relying on relatives to finance his personal litigation, asserting that he has no hidden valuable assets, defended David Ho and Alan Tang and disputed the Trustees’ recovery actions against David Ho. The Respondents even say that the 2587 Action was liable to be struck out. They acted as if stepping into the shoes of Grassmere or whoever is ultimately interested in the outcome of the 2587 Action.

89. I have considered the 2 letters, which must be read in the light of the Respondents’ assertion of innocence. The letters contained the Respondents’ strong protests against the Trustees oppressive conduct in the issue of the present Summons, in that the Respondents were made to go through voluminous exhibits of 3,516 pages with judgments spreading over 16 substantial actions spanning over 20 years. The judgments were not binding on the Respondents and the complex background to the litigation have been withheld from them. They had to consider the documents carefully in the light of the Summons without enabling the Trustees to gain unfair advantage in the extant 2587 Action. They also commented that the alleged contingent claims (including that over the DFIL Shares) had negligible value but the Trustees have not been able to show cash/assets hidden by David Ho during the 10 years since commencement of his bankruptcy.

90. Those were observations based on documents disclosed by the Trustees and not necessarily personal knowledge of David Ho’s affairs. I will not hold them against the Respondents.

F12. Summary

91. In summary, the facts analyzed in Section F do support the Trustees’ reasonable suspicion that the Respondents are in possession of information that relate to David Ho, his dealings or property.

G. INHERENT IMPROBABILITIES AND INTERNAL INCONSISTENCIES OF THE RESPONDENTS’ CASE

G1. R1’s legitimate business

92. The Respondents say that Indo-Sino is an independent third party unconnected to anyone, including Ho or Grassmere. The Group has been closely held and controlled by immediate members of the Yeung family without any third party interests for around 50 years. Since its incorporation in 1998, Indo-Sino has been under the sole control and ownership of the Group. The Group is a substantial trading and investment business with annual turnover in excess of HK$1 billion per annum. Indo‑Sino provided the Loans out of its own resources.

93. Indo-Sino and the Group are engaged in legitimate trading business of sourcing goods in Hong Kong and China and trading, marketing and distributing them in Nigeria and West Africa.

94. The Group has substantial assets and cash flow in Hong Kong and Nigeria, a small portion of which has been disclosed by Ms Yeung. They include Afrikon, which enjoys substantial banking facilities, has substantial credit balance in its bank accounts and acts as the financing arm of the Group. There are 2 other subsidiaries.

95. Mr Szeto submits that there is simply no basis to suggest that the financing for the relatively modest Loans of around HK$4.2 million compared to the Group’s assets, came from anywhere but Indo-Sino and the Group’s own financial resources.

96. On the other hand, Ms Lam SC and Mr Joseph Wong, counsel for the Trustees submit that the 3 companies within the group are not really parent and subsidiaries. Mr Yeung used to have the same address as Ms Yeung in the annual returns but he got a different address in Hong Kong in 2021. The banking facilities, as evidenced by letters from the banks, were for Afrikon and another company, but not Indo-Sino. It is not clear what the role of Indo‑Sino within the group is and there is nothing to show that Indo-Sino has substantial assets. Even if Indo-Sino is rich, that does not necessarily mean that it does not have connection with David Ho.

97. I fail to see how the submission of Ms Lam SC can assist her case. It is not uncommon for companies within a group to take up different roles. Given the financial background of Afrikon and the other company, I am not satisfied that the Group, through Indo-Sino, could not afford to lent the Loans to Grassmere. This is one factor for the Court to consider in the exercise of its discretion.

98. I now turn to the grounds of objection.

H. GROUND 1 – INVESTIGATION OF GRASSMERE A MATTER FOR LIQUIDATORS OF APIDL

99. Mr Szeto contends that it is for the APIDL Liquidators and not the Trustees as shareholders/contributories of APIDL to investigate the affairs of APIDL, including the alleged sham transfers of shares in Grassmere away from APIDL and the assets of Grassmere including the DFIL Shares.

100. In support of his proposition, Mr Szeto relies on the authority of The Joint and Several Trustees of the Property of So Ching Wan v Assen Ltd (in liq.) & others[2019] HKCFI 1491. The trustees-in-bankruptcy of So Ching Wan made a s.29 BO application requiring the 1^st respondent, Assen, and each of R2-R4, as Assen’s directors, to answer questions and provide documents to help the trustee ascertain the worth of So’s shareholding in Assen. DHCJ William Wong SC dismissed the application on the grounds that:

(1)  The affairs of Assen were under the supervision of its liquidators, who had the primary responsibility to investigate its affairs (§§26-27).
(2)  Since the bankrupt was a shareholder of Assen, the trustees of the bankrupt could only exercise the rights of a shareholder of Assen (§27).
(3)  If disclosure of documents from R2-R4 was necessary, the liquidators of Assen would take responsibility to apply for the same. In that case, the liquidators had affirmed that they did not consider it to be in the interest of the liquidation to make such an application (§28).
(4)  If any interested parties in the liquidation were dissatisfied with the decisions of the liquidators in relation to the investigations, recoveries and/or distributions, the proper procedure was for such parties to take out an application before the Companies Court, as it was not conducive to the orderly administration of liquidation for concurrent investigations to take place (§31).

101. The Court of Appeal rejected the trustee’s appeal in [2020] HKCA 1081. Cheung JA held that: -

(1) It should be borne in mind that whether and if so how the powers conferred on the Court under s.29 BO ought to be exercised in any given case will depend on the circumstances of the case. The court must exercise its powers effectively but of course not so as to support over‑zealousness or cause oppression. The court must do what, all things considered, appears at the time to be just and proper (§8.10).
(2) There was no principle to be extracted from case law that, because the bankrupt had been a shareholder of Assen, the applicant would be entitled to obtain a section 29 order on the basis that it is for the bankrupt’s ultimate benefit (§8.15).

102. Mr Szeto points out that the Former Trustees have been informed of this stance of the Respondents already but for years the Trustees have bypassed the APIDL Liquidators.

103. Further, the APIDL Liquidators have already been ordered to disclose certain documents under a separate section 29 BO order pursuant to the CA Judgment, on appeal from this Court’s decision in the present case.

104. Still further, Mr Szeto submits that the Trustees in their capacities as contributories of APIDL need to satisfy the additional requirements under section 286B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 in order to obtain a section 29 BO order. In other words, the application has to be made for the purpose of the winding-up of APIDL and not for some ulterior purpose. The contributory has to demonstrate that the examination will probably result in some benefit (such as a surplus) accruing to him as such: Embassy Art Products Ltd (1987) 3 BCC 292, at 297 by Hoffman J (as he then was); Burnden Group Holding Ltd v Hunt [2018] EWHC 463 (Ch); it would not be right to invoke section 29 BO to order the liquidators and directors of the company to carry out a futile exercise: So Ching Wan (CFI, §36).

105. Mr Szeto submits that the Trustees’ claim in the 2587 Action is liable to be struck out. Even if there is prospect of recovering the HK$55 million, there would not be any surplus going to the Trustees as contributory because the money has to first settle all outstanding liquidation costs and unsecured creditors’ claims. That would include the heavy costs of the APIDL Liquidators’ in HCA 806/2006 until the claims were dismissed in May 2021.

106. Without disrespect, I am unable to agree. The Trustee’s claim in the 2587 Action is premised on various causes set out in §38 above. If the Trustees are successful, the DFIL Shares would not fall into the estate of APIDL or Grassmere. This is not a situation of the Trustees (as contributory) taking the place of the APIDL Liquidators to investigate the affairs of APIDL in liquidation. Section 286B of Cap 32 simply does not apply.

107. Further, the orders made against APIDL in the CA Judgment concerned funding arrangements for APIDL’s litigation but not Grassmere or the DFIL Shares.

108. Ground 1 fails.

I. GROUND 2 – FAILURE TO SHOW THAT INFORMATION OR DOCUMENTS SOUGHT ARE RELATED TO THE BANKRUPT, HIS DEALINGS AND HIS PROPERTY

109. Whilst accepting that the reasonable suspicion test laid down in the CA Judgment, §§12 and 14 is binding on this Court, Mr Szeto submits that it is not the correct test. The correct test is a “factual test”.

110. To the extent that he seeks to overturn the Court of Appeal’s reasonable suspicion test, this Court is not the proper forum.

111. However, Mr Szeto’s proposition on the “factual test” is that it is not enough that the documents may relate to the bankrupt or may be thought to relate to the bankrupt, unless the documents do relate to the bankrupt there is no power to order their production.” See Re Mid East Trading Ltd [1998] BCC 726 at 747D‑E (in the context of a company).

112. That proposition is in line with §35(2) of the legal principles above. In essence, it means that the Trustees should not embark on fishing and the Court would not have power to order production of documents not “relating to the bankrupt”: Re Weihong Petroleum Co Ltd (No. 2) [2003] 2 HKLRD 747 per Kwan J (as she then was) at §§39, 42 (in the context of a company under section 221(3) of the Companies Ordinance. Re Lee Priscilla Hwang [2012] 4 HKLRD 581 at §20 & 23, Recorder Anderson Chow SC (as he then was).

113. Mr Szeto submits that even if the APIDL liquidators were seeking a s.29 BO order, the documents and examination sought would not satisfy the “factual test” because:

(1)  The jurisdiction of the court under s.221, Cap 32, is limited to the production of documents which relate to the company in liquidation and does not extend to documents which relate to its current or former subsidiary or associated companies unless they also relate to the company itself: Joint & Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd (2006) 9 HKCFAR 766 at §62.
(2)  The affairs of a subsidiary could be regarded as the affairs of a holding company for present purpose if the latter had de facto control over the former, which would normally be satisfied via the control of the composition of the board of directors or by the control of the voting power exercisable by the shareholders: Re China Metal Recycling (Holdings) Ltd (order for examination) [2015] 2 HKLRD 747, §§56-57.
(3)  According to the Table above, Grassmere has changed ownership many times since the bankruptcy of David Ho in 2011, with the last 2 genuine transfers (to Luck Creation and Su Lan Lan) for valuable consideration.

114. Accordingly, the Court has no jurisdiction to make any section 29 BO order because Grassmere or Indo-Sino is unconnected to David Ho, so Mr Szeto submits.

115. Sun Li Hua was removed as a director of Grassmere in July 2019. Mr Szeto submits that even if she was once adjudged as David Ho’s nominee, such could not be stretched to say that Sun Li Hua would forever and for all purposes remain as Ho’s nominee.

116. I am unable to agree. The DFIL Shares have always, on the Trustees’ case, been held by nominees. As late as the date of the Joint Announcement, the DFIL Shares were still owned by David Ho. It was not unreasonable for the Trustees to trace their whereabouts. The causes of action arguably rest in the Trustees and not APIDL.

117. Further, the bona fides of the transfers to Luck Creation and Su Lan Lan are the subject matter of the claim in the 2587 Action, of which the Court cannot now even form a preliminary view. As pointed out by Ms Lam SC, the terms of sale to Su Lan Lan were unusual. The sale and purchase agreement was subject to PRC law (which is not challenged by the Respondents) and looked more like a loan agreement than a sale and purchase agreement. There is basis for the Trustees to form a reasonable suspicion.

118. As for Sun Li Hua, at the time she was removed as director of Grassmere, Grassmere was still within the Asia Pacific Group, David Ho’s corporate web.

119. Accordingly, even applying the “factual test” that Mr Szeto propounds, the test is satisfied. Ground 2 is not established.

J. GROUND 3 – NO BASES TO SUGGEST THAT DAVID HO HAS HIDDEN FUNDS

120. In the CA Judgment (§§8.1, 8.2 and 17.2), the Court of Appeal found that the Trustees’ did have reasonable suspicion that David Ho was involved in funding arrangements for HCA 806/2006 and other proceedings in which APIDL was a party, and thus assumed that David Ho still had substantial hidden funds to finance HCA 806/2006.

121. The suspicion underlying the present Summons is that David Ho has hidden funds capable of being invested in Indo-Sino or Grassmere, which are liable to be recovered by the Trustees.

122. Mr Szeto submits that from the objective undisputed facts, it is clear that David Ho cannot and could not have any hidden funds as early as at the end of 2007. As stated in the 971 Judgment:

(1)  David Ho had been in an unfavourable financial position after a number of litigation involving him and/or his corporate nominees ended unfavourably to him in 2004 and 2011 (§10);
(2)  By the end of 2007, David Ho had run out of funds for his litigation projects and had to rely on funding from Yu Yang and David Ho’s other relatives to finance his (or APIDL’s) litigation projects (§§57-58);
(3)  By the end of 2007, APIDL itself was in serious financial difficulties (§132); and
(4)  David Ho attempted to recapitalise APIDL in order to strengthen its balance sheet when faced with security for costs application in HCA 806/2006 (§§105-112) although the recapitalization exercise of APIDL was held to be a sham by Mr Justice Ng (§143).

123. APIDL was put into creditors’ voluntary liquidation in April 2013 such that it had to obtain funding from third parties to maintain HCA 806/2006 in 2015.

124. The Trustees have obtained documents via numerous successful s.29 BO applications but they have not been able to show any evidence that David Ho still has any funds since his bankruptcy in 2011 to be recouped by his bankruptcy estate, not least funds related to Grassmere’s actions.

125. I do not think these affect the overall view of the present Summons. Matters in §122 above were not findings of Ng J that David Ho was impecunious but were just background facts. As the 971 Judgment shows, David Ho put his assets into a complicated corporate web. It has taken about 10 years for the Trustees to obtain the 971 Judgment. It has not been an easy case of administration of David Ho’s estate. The fact that the Trustees have not been successful so far in recouping assets affects the discretion to be exercised but not jurisdiction of the Court in this Summons.

K. GROUND 4 – NO BASES TO SUGGEST THAT INDO-SINO IS A NOMINEE

126. In the context of this Summons, the allegation is that Yu Yang was a first-tier nominee of David Ho, and Sun Li Hua, through assisting Yu Yang, is a second-tier nominee, and Indo-Sino who granted loans to Grassmere could be a third-tier nominee.

127. Mr Szeto points out that while the 971 Judgment declared that ownership of APIDL was vested in David Ho, the Former Trustees have never proved that the funding of HK$70 million provided to APIDL during 2007 to 2013 came from David Ho. There is no objective evidence showing how the above first tier nominees ever received funds from David Ho. Further, as discussed above, Indo-Sino’s funds to Grassmere came from the Yeung’s family business. There is simply no basis to say that Indo-Sino had any relationship with Ho or that it had facilitated fund flow to Ho.

128. In my view, Mr Szeto is pitching the Trustees’ case too high. The Trustees do not have to establish nomineeship at this stage. For the reasons given in Section F above, the reasonable suspicion threshold has been met.

L. GROUND 5 – LACK OF MERITS OF THE 2587 Action

129. In the CA Judgment (§17.2), the Court of Appeal stressed that it was relevant to take into account the merits of the underlying action (HCA 971/2012 action, judgment of which was then outstanding) in support of a s.29 BO application for the relevant funding documents.

130. In the context of the present Summons, the underlying action is the 2587 Action. Although not parties to it, the Respondents submit that there may be grounds for striking it out. These include: lack of locus of the Trustees; the last 2 transfers of shareholding in Grassmere to Luck Creation and Su Lan Lan were to bona fide purchasers for value; and lack of basis for suggesting that the transfer to Su Lan Lan was a sale at an undervalue. Further, a claim against Grassmere was within the knowledge of the Former Trustees upon their appointment on 30 September 2011 but the writ was taken out only on 10 November 2017. The action appears to have been barred by time or laches. As the 2587 Action lacks merits, it follows that there is no reasonable suspicion that the Respondents are related to David Ho and/or would be capable of providing information or documents related to David Ho.

131. I am unable to agree that the 2587 Action lacks merits. The 2587 Action has stood for 6 years without any defendant applying to have it struck out. It is impossible for this Court to come the conclusion that the claim is so plainly and obviously bad as to justify striking it out. Further, Section F1-5 above also cast doubt on the suitability of striking out.

M. GROUND 6 – BALANCE DOES NOT SWING IN FAVOUR OF TRUSTEES’ REASONABLE REQUIREMENTS

132. Mr Szeto submits that even if the Trustees can satisfy the requirements in section 29 BO, the Court in striking a balance should still deny the Trustees relief for three reasons: (i) it is oppressive and gives unfair advantage to the Trustees; (ii) it is abuse of power in that the Trustees ignore the costs and proportionality in making this application; and (iii) the rule in ex parte James should apply.

M1. Oppressiveness and unfair advantage to the Trustees

133. The relevant legal principles are as follows:

134. Firstly, if the purpose of an application for private examination is to enable the applicant to gain advantage in an action that is above the ordinary advantages available to parties in litigation, the application will be refused: Re Bletchley Boat Co. Ltd [1974] 1 WLR 630, 637B-F; Joint Liquidators of Sasea Finance Ltd v KPMG (No. 1) [1998] BCC 216 per Robert Walker J at p.224F-G.

135. In Bletchley Boat, a former director of a company under voluntary liquidation applied to discharge the order for examination made against him. The director had issued proceedings against the company and the liquidators had in turn commenced an action against the director. Brightman J accepted the director’s submission that the real purpose in applying for private examination in that case was to enable the company to gain an advantage in the action brought by O’Connell and the action which the company had started, over and above the ordinary advantages available to ordinary litigants (p 637F). The order was discharged.

136. Secondly, it is wrong to require a person suspected of wrongdoing to prove the case against himself on oath prior to proceedings being brought: So Ching Wan (CA), at §§8.20-8.22.

137. Thirdly, the Court may not grant a section 29 BO order if the trustee has not exhausted available alternative sources of information or documents which he can readily obtain without incurring trouble or expense appreciably greater than would be incurred under section 29 BO. In Re Castle New Homes Ltd [1979] 1 WLR 1075, at 1093, Slade J held that: -

“The second principal reason advanced by the banks as to why the court should not exercise its discretion by making an order pursuant to section 268, at least at the present time, is that the liquidator has not yet exhausted all the possible alternative sources of information available to him in relation to the principal questions which concern him. …, I accept that this could be a relevant factor, at least in a case where the person against whom the order was sought demonstrated to the court that (a) there existed alternative sources available to the liquidator, which would afford the information which he sought; (b) he could readily obtain all such information from these sources, without incurring trouble or expense appreciably greater than would be incurred in the desired examination; (c) he had not chosen to avail himself of such alternative sources.” (underline added)

138. However, even if the preceding paragraph is satisfied, that does not necessarily mean that the court should be less willing to make an order against a particular respondent: Re Allied Weli Development Limited[2022] HKCA 664, §58, CA.

139. The Court should remind herself to exercise its powers effectively but not so as to support over-zealousness or cause oppression. The Court must do what, all things considered, appears at the time to be just and proper: So Ching Wan (CA), §8.10.

140. The classes of documents sought by the Trustees are as follows:

(1)  All documents relating to all loan(s) past and present made by, for and/or on behalf Indo-Sino to Grassmere and/or its designated recipient(s) (including but not limited to the Loan Agreement and the alleged Short-Term Loans and the status and purpose of the said loan(s);
(2)  All documents relating to any repayments made by, for and on behalf of Grassmere to Indo-Sino and/or its designated recipient(s) in respect of the said loan(s); and
(3)  In particular and without prejudice the generality of §(2) above, all documents relating to and/or evidencing all payemnts by, for and/or on behalf of Indo-Sino to Grassmere’s lawyers and/or other professional invoice(s) incurred in connection with the Valuation.

141. In respect of the Loans, I am satisfied that seeking a production order is not an abuse of the Trustees’ power in view of Section F above. At least the agreements relating to the Short-Term Loans have not been disclosed by Indo-Sino so far.

142. The Trustees have, of course, the alternative remedy of seeking discovery of the same documents against Grassmere in the 2587 Action. It appears that as early as January 2018, Grassmere had disclosed a substantial volume of loan documents which were challenged before DHCJ Yee as not genuine. However, there is reason for the Trustees to seek disclosure against Indo-Sino directly under the section 29 BO procedure because the production would enable the Trustees to find the fund source of the Loans and the person responsible for giving the wiring instructions to advance such Loans (Chen-5^th, §15), something which Grassmere may not be able to provide. If an order is granted, it may enable the Trustees to decide whether to pursue the 2587 Action against Grassmere, and/or to pursue Indo-Sino itself. A section 29 BO application in respect of the Loans is justified.

143. On the other hand, there is not a scintilla of evidence to show that Indo‑Sino had granted other loans to Grassmere or that any such loan is most likely related to funding of Grassmere in the litigation. It is oppressive, abuse of power and sheer fishing for the Trustees to infer, from the HK$4.2 million Loans, that there were other loans granted by Indo‑Sino to Grassmere. No order for production will be made for this class of documents.

144. As for the order for examination, there is no difference between this Summons and any other s.29 BO application re David Ho to justify examination as opposed to only production of documents. So Ching Wan also applies to prevent the Respondents from being examined prior to proceedings brought against them.

M2. Abuse of Trustees’ power to ignore costs and proportionality

145. The powers of the Trustees should not be used abusively for improper purpose but “may only be invoked for a legitimate purpose in relation to the company which is being wound up, and the court, which has discretion to make or refuse an order, should be astute to see that the powers conferred by the section are not abused. It would plainly be an abuse to use those powers for a purpose which is foreign to the functions of the applicant in relation to the company which is being wound up.” See Re Wing Fai Construction Co Ltd [2004] 3 HKLRD 357, at §49 per Kwan J (as she then was), following Re Pantmaenog Timber Co Ltd [2004] 1 AC 158, §64, Lord Millett.

146. Mr Szeto points out that the Former Trustees have taken out more than 15 section 29 BO applications within HCB 3819/2011 itself in order to gather information. Since the current Trustees took over in 2020, they have also taken out around 10 s.29 applications ostensibly to gather information, over a decade after the commencement of Ho’s bankruptcy. The Trustees have been abusing their extensive investigatory power to badger innocent third parties including the Respondents. It is highly doubtful whether the Trustees’ numerous s.29 BO exercises assist them in discharging their functions as effectively and with as little expense as possible.

147. I do not think there is enough to enable me to make a finding of abuse against the Trustees. This is the 4^th section 29 BO application by the Trustees that came before me. In these applications (including the one which led to the CA Judgment), the Trustees were not found to be abusive.

M3. Ordering the Trustees not to enforce their strict legal rights under the rule in ex parte James

148. In Lehman Brothers Australia Ltd v MacNamara [2020] EWCA, Civ 321, §35, David Richard LJ held that:

“The principle established by the decision of the Court of Appeal in Ex p James is that the court will not permit its officers to act in a way which, although lawful and in accordance with enforceable rights, does not accord with the standards which right-thinking people or, as it may be put, society would think should govern the conduct of the court or its officers. The principle applies to a failure to act, as much as to positive acts: see In re Hall; Ex p Official Receiver [1907] 1 KB 875, a decision of this court. As a public authority and given its role in society, the court is expected to apply standards to its own conduct which may go beyond bare legal rights and duties……Trustees in bankruptcy, liquidators in compulsory liquidations and administrators are all officers of the court……they are acting on behalf of the court and they will accordingly be held to these standards by the court.” (underline added)

149. Given the multiplicity of s.29 BO applications filed by the Trustees over the last decade, and the lack of bases for issuing this Summons against the Respondents, Mr Szeto invites the Court to order the Trustees not to enforce their strict legal rights under s.29.

150. In my view, this has not been an easy piece of administration for the Trustees, who got the 971 Judgment only 10 years after commencement of David Ho’s bankruptcy. The sheer number of section 29 BO applications is not sufficient, in itself, to show abuse on the part of the Trustees. The Court is not even shown the success or failure of those applications.

151. The reference to the Trustee’s aggressive attempt to bar one of the APIDL Liquidators, Alan Tang, from practice as an office-holder, which would remove one of the main grounds for striking out the 2587 Action is even more far-fetched in the context of this Summons.

152. Accordingly, I decline to accept Mr Szeto’s submission.

M4. Summary

153. The balance swings in favour of granting a production order under s.29 BO in respect of the Loans only.

N. CAPABILITY OF THE RESPONDENTS TO GIVE THE INFORMATION

154. A respondent is deemed capable of producing a document if the document is within his control or power in the discovery context. It covers a presently enforceable legal right to obtain, from whoever actually holds the document, inspection of it without the need to obtain the consent of anyone else. See Re Ho Yuk Wah David (bankrupt) [2015] 2 HKLRD 603, §68, To J.

155. In the present case, the classes of documents relating to the Loans are specific and limited in scope. They should be readily available to any commercial lender, especially since the Loans have not yet been repaid. Indo-Sino and Ms Yeung (the person in charge of the Loans) are plainly the persons against whom a section 29 BO order can be made. Ms Lam SC does not insist on production by affirmation.

156. However, Mr Yeung stands in a different position. He has been permanently resident in Nigeria since 1979. He is in charge of the family business in West Africa and is not involved in the Hong Kong or China side of the business. He was not involved in Indo-Sino’s granting of the Loans. Ms Yeung also deposed that she did not inform Mr Yeung of the loans until the Trustees threatened to serve the Summons on Mr Yeung’s family residence in Hong Kong. He only visits his family members in Hong Kong on vacations. Mr Yeung is in no position to provide information or documents in relation to the Loans.

157. Ms Lam SC submits that Mr Yeung has acted as alternate director of Indo-Sino since at least March 2017 and has acted as director (and shareholder) since at least March 2018 up to the present. The Loan Agreement was made on 6 January 2017, before he became a director. The Loans have never been repaid. Accordingly, Mr Yeung would at the very least prima facie have the power to produce the documents and information sought regarding the Loans. In any event, it remains a bare assertion of Ms Yeung that Mr Yeung was never involved in the Loans. In fact, Mr Yeung did not even make an affirmation himself to state his position. His silence is itself telling.

158. I am unable to agree with Ms Lam SC. I do not know what more Mr or Ms Yeung could have come up with to say that the former was not involved. Chen-5^th has not come up with anything to rebut Ms Yeung’s evidence that Mr Yeung was not involved. The fact that he himself has not made an affirmation does not help the Trustees either. Ms Yeung would be equally liable for perjury if she has not told the truth about Mr Yeung. I am not satisfied that an order for production should be made against Mr Yeung.

O. CONCLUSION

159. The Trustees have demonstrated that there is reasonable suspicion that the information sought relating to the Loans is related to David Ho, his dealings or property. The provision of such information is reasonably required for the Trustees to carry out their functions of tracing the source of funds of the Loans to see if they had come from David Ho. Accordingly, I grant an order for production of documents against Indo‑Sino and Ms Yeung in relation to the Loans but dismiss the rest of the application for documents and examination.

160. The application against Mr Yeung is dismissed in its entirety.

P. COSTS

161. The Trustees are agreeable to giving reasonable costs to the Respondents for comply with the section 29 BO order and I so order as regards Indo-Sino and Ms Yeung.

162. Additionally, on a nisi basis, costs of Mr Yeung are to be borne by the Trustees, as Ms Yeung has made clear Mr Yeung’s case right from the start.

163. The Trustees have only obtained an order in relation to a small class of documents. Their success is wholly disproportionate to the volume of exhibits to the Trustees’ affidavits. The Respondents have to trawl through 3,500 pages of documents to figure out the history of the litigation involving David Ho, which never involved the Respondents.

164. On the other hand, if the Respondents had conceded the Trustees’ application for production of documents relating to the Loans, a formal application would have been unnecessary. Anyhow, despite their rigorous contest, I am not satisfied that the Respondents were advancing the case of Grassmere / David Ho, or have otherwise gone beyond the bounds of assisting the Court in deciding on the propriety of the section 29 BO Summons.

165. Balancing all factors, I am of the view that there should be no order as to costs as between the Trustees and Indo-Sino and Ms Yeung.

166. I therefore order as follows: -

(1)  Within 28 days, the 1^st and/or 3^rd Respondents shall produce the following to the Trustees:
(a)  All documents relating to the loan agreement dated 6 January 2017 between the 1^st Respondents and Grassmere (the “Loan Agreement”) and an alleged short-term loan totaling HK$1,216,636 (allegedly covering settlement of FTI’s invoices of US$37,777, settlement of Ernst & Young’s invoices of HK$335,870, costs on account to Messrs. Kwok Yih Chan of HK$300,000, and 10% commitment fee and 20% lump sum interest totaling HK$286,106) and the status and purpose of the said loan(s) (including but not limited to any written agreements, written resolutions, correspondence(s) and minutes of meeting(s) of the 1^st Respondent approving / authorizing such loan(s) and records of loan drawdowns which include but are not limited to cheque(s), bank draft(s), cashier order(s), invoice(s), receipt(s) and any other accounting documents);
(b)  All documents relating to any repayments made by, for and/or on behalf of Grassmere to the 1^st Respondent and/or its designated recipient(s) in respect of the loan(s) under §(a) above and the status or purpose of the same (including but not limited to any demands made by, for and/or on behalf of the 1^st Respondent to Grassmere and/or its designated recipient(s) for repayment of such loan(s), bank draft(s), cashier order(s), invoice(s), receipt(s) and any other accounting documents);
(c)  In particular and without prejudice to the generality of §(b) above, all documents relating to and/or evidencing all payments by, for and/or on behalf of the 1^st Respondent to Grassmere’s lawyers and/or other professional invoice(s) incurred in connection with the valuation of Grassmere’s 5% shareholding in Dan Form International Limited as referred to under Clause 1.2 of the Loan Agreement (including but not limited to all invoices, receipts and records of payments which include but are not limited to cheque(s), bank draft(s), cashier order(s), invoice(s), receipt(s) and any other accounting documents);
(2)  The Trustees’ shall pay the costs of the 1^st and 3^rd Respondents to comply with §(1) above;
(3)  The Trustees shall bear the costs of the 2^nd Respondent for this Summons;
(4)  There be no order as to costs as between the Trustees, and the 1^st and 3^rd Respondents as regards the Summons; and
(5)  I make an order nisi as regards §§(3) and (4).

193. I thank counsel on both sides for their thorough preparation and great assistance to the Court.

(Queeny Au-Yeung)
Judge of the Court of First Instance
High Court

Ms Rachel Lam SC and Mr Joseph Wong, instructed by Lee, Wong & Lam, for the Applicants

Mr Patrick Szeto, instructed by Cheng, Yeung & Co., for the 1^st to 3^rd Respondents

[2023] HKCFI 1429-EN-2023-05-29

CHEN YUNG NGAI KENNETH AND ANOTHER v. THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD

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HCB 3819/2011

[2023] HKCFI 1429

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

____________

Re: HO YUK WAH DAVID (the “Discharged Bankrupt”)

____________

BETWEEN
	CHEN YUNG NGAI KENNETH and	Applicants
	CHAN MEI MEI (trustees-in-bankruptcy of
	the Discharged Bankrupt)
	and
	THE HONGKONG AND SHANGHAI	Respondent
	BANKING CORPORATION LIMITED

____________

Before:

Hon Au-Yeung J in Chambers

Date of Hearing:	23 May 2023
Closing Date for Further Submission:	25 May 2023
Date of Decision:	29 May 2023

______________

D E C I S I O N

______________

A. Introduction

1. This is the hearing of a summons filed on 28 March 2023 by the Trustees in Bankruptcy (“Trustees”) of David Ho under section 29 of the Bankruptcy Ordinance (“BO”) for an order requiring the Respondent (“HSBC”) to produce documents relating to a specified bank account. HSBC has been served with the application papers and remains neutral to the application.

2. The Court may, on the application of the trustee, order production of documents under section 29 BO against any person whom the Court may deem capable of giving information respecting the bankrupt, his dealings or property. The legal principles have been summarized in the decision of this Court in Re Ho Yuk Wah David (Bankrupt) (No. 5) [2020] 2 HKLRD 608 at §§22, 31 and 47, Au-Yeung J; affirmed on appeal in Chen Yung Ngai Kenneth v. Alan Chung Wah Tang, CACV 83/2020, 19 January 2022 at §12.

3. In gist, the Trustees must satisfy the Court that the information or documents “relate to the bankrupt, his dealings or property”; that the provision of information or documents is reasonably required for them to carry out the Trustees’ functions; and that the respondent is able to provide such information or documents. The standard of proof is reasonable suspicion.

B. Circumstances Leading to Reasonable Suspicion

4. On 13 January 2023, this Court gave an order in this case requiring 2 firms of solicitors, Hugil & Ip (“HIP”) and Odham, Li & Nie (“OLN”) to produce various classes of documents pursuant to section 29 BO (“HIP/OLN Order”). Those documents were said to relate to the funding provided by D2 to D5, D8 and D9 (“971 Defendants”, all corporations) of HCA 971/2012 (“971 Action”). HIP and OLN had, one after another, been the legal representatives for the 971 Defendants at the material times.

5. In the Decision ([2023] HKCFI 151, 13 January 2023, Au‑Yeung J) which led to the HIP/OLN Order, the bases of the Trustees’ application against HIP and OLN were that:

(1)  The 971 Defendants have been found in the 971 Judgment to be nominees of David Ho and hence belong beneficially to David Ho. The Trustees have stepped into the shoes of David Ho;
(2)  Yu Yang (the former brother-in-law of David Ho) and Liu Shu (a person closely associated with David Ho by reason of her association with Yu Yang) were found to be nominees of David Ho (§§25 & 26);
(3)  Yu Yang and Liu Shu essentially controlled the 971 Defendants at the material time of the 971 Action, when HIP or OLN were the instructing solicitors for the 971 Defendants (§§25 & 26); and
(4)  the Trustees have always suspected that David Ho was involved in funding arrangements for various actions and took the view that those nominees’ litigation expenses for the trial of the 971 Action must have been funded or at least related to David Ho, given that the 971 Defendants, Yu Yang and Liu Shu were found to be his nominees (§30).

6. Pursuant to the HIP/OLN Order, OLN produced documents to the Trustees which showed, amongst others, that a total of HK$4.8 million was remitted to OLN. Out of that, HK$1.5 million were remitted by one Shang Jinglin on 16 July 2019; and a total of HK$3.3 million was remitted from an account in HSBC no. 718-5xx5xx-888 (“Unidentified Account”) to OLN 2019 and 2020.

7. The HK$3.3 million were costs on account (“COA”) to OLN, with specific instructions to allocate HK$120,000 for Gladius (a 971 Defendant), and the rest in relation to Grassmere (a defendant in HCA 2587/2017 and/or HCA 2507/2017).

8. It was apparent that:

(1)  Although all such funds came under OLN’s file for the 971 Action, the 971 Defendants were not parties to HCA 2587/2017 and/or HCA 2507/2017;
(2)  None of the funding came from the 971 Defendants themselves, or the bank accounts of Yu Yang or Liu Shu, who were shareholders/directors of the 971 Defendants;
(3)  Alison Sun Li Hua (“Sun”) was a PRC individual whom the Trustees alleged to be a nominee of David Ho ([2023] HKCLC 135, Au-Yeung J, §§25(5), 26). She gave instructions to HIP and OLN on behalf of the 971 Defendants to make remittances to the client accounts of OLN from the Unidentified Account. Sun was neither a director nor shareholder of any of the 971 Defendants at the material time of the 971 Action. OLN alleged that they have documentary proof that Sun had authority to represent the 971 Defendants but that was not produced to the Trustees because it was not covered by the HIP/OLN Order.

9. The Unidentified Account has probably been closed by its account holder. The Trustees asked OLN for details of the account holder of the Unidentified Account but OLN declined, saying that it was not covered by the HIP/OLN Order. Hence the Trustees took out the present Summons, asking HSBC to produce to them:

(1) the details, records and/or documents in connection with the opening and closing of the Unidentified Account (including the bank account for any remittances made for the purposes of account closure); and
(2) the details and/or records of all transactions in the account or accounts including, without limitation, bank statements, bank vouchers, forms, instructions, transaction advices, cheques and correspondence;

from the account opening date to account closing date of the Unidentified Account, and the bank accounts and other bank accounts also held by the account holder of the Unidentified Account.

10. The Trustees have by letter dated 25 May 2023 clarified that they only seek the consolidated accounts under the Unidentified Accounts.

11. In the light of §§6-8 above, I find that the disclosure by OLN did confirm the Trustees’ reasonable suspicion which led to the HIP/OLN Order. The Trustees now also have reasonable suspicion that the remittances from the Unidentified Account to OLN as COA for the 971 Action represented that the account holder was related to David Ho, as that person was funding the defence to that action for the benefit of David Ho. The documents sought do relate to the bankrupt, his dealings or property.

C. Necessity for the Documents

12. The Trustees seek the documents to ascertain:

(1)  the account holder of the Unidentified Account;
(2)  the amount of funding remitted to, and out of, the Unidentified Account;
(3)  the person who remitted funds into the Unidentified Account;
(4)  what other matters the Unidentified Account was funding; and
(5)  whether any of the account holders, the remitters to the Unidentified Account, or the recipients of funds of the Unidentified Account is related to David Ho or his nominees.

13. The scope of documents is limited. I accept that the Trustees reasonably require the documents sought in order to trace and collect in assets of David Ho and pay his creditors.

D. Ability of HSBC to Provide the Documents

14. In response to the letter of the Trustees’ solicitors dated 21 March 2023 requesting for production, HSBC informed the Trustees that they have no objection to the granting of an order in the terms set out in the draft order attached to that letter. I am satisfied that the documents sought are within the custody or power of HSBC.

E. Exercise of Discretion

15. The Trustees have made reasonable efforts to try and seek the documents before taking out the present summons:

(1)  They have requested for the documents from OLN, who have refused the request.
(2)  Even if the Trustees were to issue another section 29 BO application against OLN, OLN would not be able to provide all or part of the information now sought by the Trustees.
(3)  The Trustees have tried to ascertain the identity of the account holder of the Unidentified Account at the ATM machine but the name of the account holder could not be ascertained.
(4)  The Trustees have written to HSBC to see if the latter would agree to disclose the documents sought but HSBC reasonably asked for a court order to be able to make the disclosure.

16. The source of the information is in any event with HSBC. Confidentiality is not bar to an order for disclosure: Re Ho Yuk Wah David [2023] HKCLC 135 at §19.

17. The Trustees have exhausted all reasonable avenue to obtain the documents. It is thus most cost-effective for the Trustees to investigate the Unidentified Account by this Summons against HSBC directly.

F. Conclusion

18. The Trustees have made out a case under section 29 BO. The threshold test of reasonable suspicion has been met. I exercise my discretion to grant an order in terms of the Summons. HSBC shall have 42 days from the date of service of the order on them to comply. There be no order as to costs of the Summons.

(Queeny Au-Yeung)
Judge of the Court of First Instance
High Court

Ms Charlotte Kong, instructed by Lee, Wong & Lam, for the Applicants

The Respondent was not represented and did not appear

[2023] HKCFI 826-EN-2023-03-20

CHEN YUNG NGAI KENNETH AND ANOTHER v. CHONG HING BANK LTD AND OTHERS

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HCB 3819/2011

[2023] HKCFI 826

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

____________

Re: HO YUK WAH DAVID (the “Discharged Bankrupt”)

____________

BETWEEN
	CHEN YUNG NGAI KENNETH and	Applicants
	CHAN MEI MEI (trustees-in-bankruptcy of
	the Discharged Bankrupt)
	and
	CHONG HING BANK LIMITED	1^st Respondent
	THE HONGKONG AND SHANGHAI	2^nd Respondent
	BANKING CORPORATION LIMITED
	CHINA MERCHANTS BANK CO., LTD.	3^rd Respondent
	CMB WING LUNG BANK LIMITED	4^th Respondent
	BANK OF CHINA (HONG KONG) LIMITED	5^th Respondent
	STANDARD CHARTERED BANK	6^th Respondent
	(HONG KONG) LIMITED

____________

Before: Hon Au-Yeung J in Chambers

Date of Hearing: 17 November and 20 December 2022

Closing Date for Further Affirmations: 13 and 15 March 2023

Date of Decision: 20 March 2023

_______________

D E C I S I O N

_______________

A. BACKGROUND

1. This is an application by the Trustees of the estate of the Discharged Bankrupt, David Ho, for discovery against 6 banks (“the Banks”) under section 29 of the Bankruptcy Ordinance, Cap 6 (“BO”). The Trustees apply for production of bank account opening documents and transaction records concerning various entities and persons who are suspected to be the nominees of David Ho (“the Production Application”).

2. David Ho was formerly a partner in a law firm and a businessman involved in substantial projects in the Mainland. He founded Asia-Pac Infrastructure Development Limited (“APIDL”) in 1996.

3. On 2 August 2011, a bankruptcy order was made on David Ho’s own petition. David Ho had debts of over HK$160 million but declared negligible assets. After investigation, he was found to be operating a complex scheme using offshore companies and nominees to conceal his assets, carry on his business ventures and litigation, and pay his personal and family expenses. Through his nominees, David Ho has diverted significant amount of funds out of reach of his creditors.

4. Many legal actions were brought by or against his nominees. Among them, 2 are of importance for the present purpose, namely HCA 971/2012 (“the 971 Action”) and HCA 806/2006 (“the 806 Action”).

5. The judgment in the 971 Action was summarised in Chen Yung Ngai Kenneth v Hugill & Ip (a firm)[2023] HKCFI 151 at §§16-28. In gist:

(1)  The following entities were held to be his nominees and/or beneficially owned by David Ho: Gladius Limited, Ontrade Properties Limited, King Ocean Development Inc, Asia-Pac Group Investment Limited, APIDL, Grand Asia Capital Services Limited, Pacific Shine Limited, and Ferdinan Limited.
(2)  A Mr Yu Yang was found to be the shareholder and director of many of the aforementioned companies.
(3)  A Ms Liu Shu was found to be the director of many of the aforementioned companies, including APIDL.
(4)  Yu Yang and Liu Shu were found to be David Ho’s nominees. Yu Yang is his former brother-in-law, while Liu Shu was an employee of the Asia-Pac Group and an alleged colleague of David Ho. Yu Yang was closely associated with Liu Shu.
(5)  David Ho’s purported sale of APIDL in 2004 was a sham and David Ho has always beneficially owned APIDL.

6. There was no appeal from the judgment, but the liquidators of APIDL resisted the Trustees’ investigation despite the finding that APIDL was held beneficially by David Ho.

7. The 806 Action is an ongoing action. In gist, APIDL and 3 other companies in the Asia-Pac Group (controlled by David Ho) sue their former legal advisers for negligence and breach of duty.

8. On 10 April 2013, APIDL was put into creditors’ voluntary liquidation. Mr Alan Tang and Ms Anita Hou were appointed as liquidators (“the Liquidators”). The Liquidators decided to continue the 806 Action.

9. On 2 August 2019, David Ho was discharged from bankruptcy.

10. The Trustees have always suspected that David Ho was involved in funding arrangements for various actions (eg the 806 Action), which may result in funds available for David Ho’s estate if the litigation was successful.

11. In Re Ho Yuk Wah David (No. 5)[2022] HKCA 110 (“the83 Judgment”), the Court of Appeal allowed a section 29 BO application in respect of the 806 Action. At §17.2, the Court of Appeal commented that:

“17.2 … First, unlike unrelated funders, [David Ho] would have an intimate knowledge of the affairs of [APIDL], and consequently the merits of the litigation. More importantly, the claim of [APIDL] in the 806 Action was for a substantial amount: US$322,000,000 plus HK$62,000,000. The Liquidators did not adduce any evidence before this court of the total amount of creditors’ claims against [APIDL]. If [APIDL] succeeded in the litigation, any surplus funds would go to the shareholder. As [David Ho] has retained the ownership of the shares in [APIDL], he has even more incentive to fund this litigation so as to benefit from any surplus funds (which, until the finding of the sham sale in the Judgment in the 971 Action, would not have fallen into his estate in bankruptcy). This should be considered in conjunction with his record of litigation funding especially in co-operation with [Mr Alan Tang].”

12. The Liquidators claim that the 806 Action received funding from alleged third parties upon APIDL’s liquidation, who were not connected to David Ho. They further claim that there was no litigation funding arrangement for the 971 Action. However, since David Ho was found to have beneficially owned APIDL all along, the Trustees suspect that David Ho has been substantively involved in the funding arrangements for the 806 Action. The Trustees also suspect that David Ho has funded other proceedings in which Mr Alan Tang was involved as liquidator or trustee in bankruptcy, including: HCA 4188/2002 (“the CWT Case”); and HCA 345/2001 (“the LSF Case”) which are not relevant for present purposes.

13. In the 971 Action, Yu Yang produced a witness statement stating that there was an agreement between David Ho and him about the proceeds obtained from the 806 Action. After covering the investment capital, the proceeds were to be distributed in a 60/40 split between Yu Yang/his sister and David Ho’s family members. Yu Yang stated that huge amount of assets were invested into APIDL for litigation. All returns went to David Ho or his family, or “reinvested” into ongoing actions such as the CWT Case and the LSF Case.

14. As beneficial owner of APIDL, David Ho would be entitled to surplus funds of APIDL. If APIDL succeeds in the 806 Action, any surplus funds would go to the shareholder. David Ho would have even more incentive to fund the 806 Action.

15. The Production Application before me now is a sequel to the production order made against the Liquidators under the 83 Judgment. The aim is to further investigate and identify the entities or individuals who purportedly funded APIDL in the 806 Action.

16. Two issues arise:

(1) Whether the documents sought should in principle be produced to the Trustees (“the production issue”)?
(2) Whether the court should grant an order without joining or giving notice to the entities or individuals whose accounts are to be inspected (“the notice issue”)?

B. THE PRODUCTION ISSUE

B1. Legal Principles

17. Section 29 BO provides (where material) that:

“(1) The court may, on the application of the … trustee, at any time after a bankruptcy order has been made against a bankrupt summon before it … any person whom the court may deem capable of giving information respecting the bankrupt, his dealings or property, and the court may require any such person to produce any documents in his custody or power relating to the bankrupt, his dealings or property.”

18. The applicable principles have been set out in Re Ho Yuk Wah David (No. 5) [2020] 2 HKLRD 608, §§22 and 31, Au-Yeung J; confirmed in the 83 Judgment, §12. In gist, the Trustees must satisfy the court that the information or documents “relate to the bankrupt, his dealings or property”; the provision of information or documents is reasonably required for them to carry out the Trustees’ functions; and the respondents are able to provide such information or documents. The standard of proof is reasonable suspicion: the 83 Judgment, §14.

19. Confidentiality is no bar to an order for disclosure in a section 29 application: The Joint and Several Trustees in Bankruptcy of Nanik Dayaram (also known as Nanik Dayaram Hathiramani) v Lee Pei Yin, HCB 7651/2011, 6 November 2015, §62, Ng J.

20. The same principles apply even when a bankrupt is discharged, because the property vested in the Official Receiver and Trustees does not re-vest in the bankrupt upon discharge: Re Lee Siu Fung Siegfried [2017] 1 HKLRD 1155, §§25-27, G Lam J (as he then was).

B2. Application of the legal principles

21. The bank accounts of the following entities or individuals are in issue:

Respondent Banks Names of the Entities / Individuals as holders Accounts
R1 APIDL Account 1
R2 Guan Qiaoling / Guan Qiao Ling Account 2
Zhao Jian Hong Account 3
Shinewing Specialist Advisory Services Limited Account 4
R3 Sun Lihua / Sun Li Hua / Sunlihua Account 5
Han Liang Account 6
R4 Sun Lihua / Sun Li Hua / Sunlihua Account 7
R5 Ma Yun Ru Account 8
R6 Bryne & Co. Account 9

22. Regarding APIDL (Account 1), the production order sought by the Trustees should plainly be granted in light of the 83 Judgment and the 971 Action. See §11 and 5(a) above.

23. Regarding the bank accounts of the other entities and individuals, the starting point for analyses is the documents disclosed by the Liquidators as a result of the 83 Judgment. They reveal that, amongst others, two BVI companies had funded the 806 Action by injecting funds into APIDL:

(1) True Treasure Enterprise Limited (“True Treasure”)[1]; and
(2) Aim Best Group Limited (“Aim Best”), allegedly owned by one of the Liquidators.

24. For the following reasons, the Trustees reasonably suspect that True Treasure and Aim Best are merely corporate vehicles for David Ho to fund the 806 Action or to aid him in the transfer and concealment of his assets post-bankruptcy.

B3. True Treasure (Accounts 2-3, 5-8)

25. In relation to True Treasure, the Trustees submit, and I accept, the following points:

(1) True Treasure executed 11 initial funding agreements with APIDL which covered both the 806 Action and 971 Action. However, the payments purportedly made by True Treasure were in fact injected into APIDL through the personal accounts of the following individuals (whose bank accounts are the subject matter of the Production Application):

Date Bank Name Relevant Funding Agreement Amount (HK$)
28 May 2013 R3 Sun Li Hua Initial Funding Agreement 50,000
30 September 2013 R4 Sun Li Hua Supplemental Initial Funding Agreement 45,000
17 January 2014 R2 Guan Qiao Ling 2^nd Supplemental Initial Funding Agreement 60,000

28 February 2014 R2 Zhao Jian Hong 3^rd Supplemental Initial Funding Agreement 234,000
16 May 2014 R5 Ma Yun Ru 4^th Supplemental Initial Funding Agreement 240,000
7 August 2014 R3 Han Liang 5^th Supplemental Initial Funding Agreement 70,000
21 August 2014 R3 Sun Li Hua 6^th Supplemental Initial Funding Agreement 45,000

(2)  The 3^rd Supplemental Initial Funding Agreement clearly showed that True Treasure had also funded the 971 Action. §5 above describes the nature of the action. There was no reason for True Treasure, as a genuine third party or a creditor of APIDL, to fund the action. The only explanation is that True Treasure was David Ho’s nominee, because David Ho as the ultimate beneficiary of APIDL would be affected by an adverse outcome in the 971 Action.
(3)  Ms Sun Bo has been the sole shareholder and director of True Treasure since its incorporation on 27 June 2012. However, the name “Sun Bo” has never appeared in the documents relating to True Treasure. Instead, all correspondence and injections of funds into APIDL have been handled by other individuals (e.g. Sun Li Hua and Liu Shu) related to David Ho.
(4)  Ms Sun Bo is the shareholder of Luck Creation Limited, which was the shareholder and director of Grassmere Services Limited (“Grassmere”). Grassmere at one point was wholly owned by Yu Yang. Grassmere is yet another alleged nominee of David Ho in HCA 2587/2017.
(5)  Ms Sun Li Hua has represented True Treasure in multiple occasions. In one of such occasions, on 2 February 2015, she sent an email to the Liquidators via the email address “[email protected]”. The same email address has been used by Beijing Guan Yu Tian Hua Property Consulting Co, Ltd. (“GYTH”), which was controlled by Yu Yang and related to David Ho.
(6)  Liu Shu has also represented True Treasure in some email correspondence with APIDL.

26. In addition, the Trustees’ suspicion that Sun Li Hua, Guan Qiao Ling and Ma Yun Ru were the nominees of David Ho is buttressed by the following evidence:

(1)  Sun Li Hua displayed her familiarity with David Ho’s transactions, background and personal life in HCA 2587/2017. She was the only signatory of the defence in HCA 2587/2017, and was once referred to as David Ho’s “UK Relatives and Friends” therein. Further, Sun Li Hua and Liu Shu were named in Grassmere’s corporate filings and records of annual return payments to the BVI government in 2011. Sun Li Hua was also the sole shareholder of Global Alliance (Beijing) Property Leasing Co Ltd (“Global Alliance”), which shared the same official registered address with Beijing Jue Xian Hang Consulting Co., Ltd (“JXH”). Both Global Alliance and JXH were controlled by Yu Yang, and had the same PRC legal representative.
(2)  Guan Qiao Ling has represented GYTH on various occasions, including as a member of the Committee of Inspection of APIDL. She was named as a creditor of APIDL but no evidence of the debts owed to her could be found after the Trustees’ investigation. She had remitted funds on behalf of True Treasure to APIDL on 17 January 2014.
(3)  In Yu Yang’s witness statement for the 971 Action, Sun Li Hua, Guan Qiao Ling and Ma Yun Ru were named as the employees of Yu Yang. They had acted on the instructions of Yu Yang to transfer funds from Mainland to David Ho’s secretaries in Hong Kong in 2010 relating to bogus “entrusted companies of Yu Yang”. This is supported by remittance records.

27. There are thus reasonable grounds to suspect that the account holders of Accounts 2-3, 5-8 were nominees of David Ho.

B3. Aim Best (Accounts 4 & 9)

28. In relation to Aim Best, the Trustees submit, and I accept the following points:

(1)  Aim Best funded APIDL under an Urgent Interim Funding Agreement dated 22 February 2021 (“the UIFA”). That was just after the former funder, China New Investment Limited (“CNIL”), strangely terminated its funding arrangement with APIDL before the start of the 806 Action after providing HK$14 million. Aim Best was owned and managed by Mr Alan Tang, one of the liquidators of APIDL. Mr Alan Tang appeared to represent Aim Best when signing the UIFA[2], while Ms Anita Hou represented the Liquidators. This put Mr Alan Tang in a position where there was conflict of interests as a creditor and a liquidator.
(2)  It appears that not all the creditors were aware of the UIFA because the resolutions in writing were only agreed by Liu Shu and Guan Qiao Ling (on behalf of GYTH) but not Sun Li Hua (on behalf of True Treasure).
(3)  The Committee of Inspection agreed that the incentive award made to Aim Best was neither excessive nor commercially reasonable. The Committee also agreed that given the nature and size of the 806 Action, it was practically impossible to find any genuine third party funder under the then global depressing economic conditions.
(4)  The payments purportedly made by Aim Best were in fact injected into APIDL through the accounts of the following entities (whose bank accounts are the subject matter of the Production Application):

Date Bank Name Amount (HK$)
22 January 2021 R2 Shinewing Specialist Advisory Services Limited 150,000
9 March 2021 R6 Bryne & Co. 690,000
24 March 2021 R6 Bryne & Co. 250,000

(5) Shinewing Specialist Advisory Services Limited was the Liquidators’ company for carrying out their insolvency practice, whereas Bryne & Co. was Mr Alan Tang’s partnership with Ms Alison Wong. This is borne out by the affirmations of Tam Cheuk Hin Joey and Lai Kwai Fa both filed on 28 December 2022.
(6) Clause 5 of the UIFA states that Aim Best ranked higher in priority than all other funders without addressing True Treasure and CNIL’s interests.

29. There are thus reasonable grounds to suspect that Aim Best, Shinewing Specialist Advisory Services Limited and Bryne & Co. are merely channelling funds from David Ho to fund the 806 Action or that they are nominees David Ho.

30. Aim Best paid far more than the fixed counsel fees, because the UIFA states that Aim Best should cover all costs of ONC Lawyers without specifying an amount. No reasonable funder would subject itself to such “unlimited liability”.

31. Lastly, the Trustees’ suspicion is also supported by the following conduct of the Liquidators:

(1)  The disclosure regarding the funding arrangements was highly irregular. The Liquidators did not provide any payment records for the 7^th to 10^th Supplemental Initial Funding Agreements. Further, the full remittance advice in relation to the 2^nd Supplemental Initial Funding Agreement had not been provided until the Trustees’ solicitors raised the issue with the Liquidators. Even when the Liquidators supplied the relevant documents, certain crucial details as to the remittances were missing or redacted and the Trustees had to request for better copies.
(2)  Ms Anita Hou failed to disclose the funding arrangement between APIDL and Aim Best in her affirmation dated 25 February 2022 (after the 83 Judgment was handed down). The arrangement came to light only until 14 June 2022 when it was mentioned by Ms Anita Hou in her letter.
(3)  Mr Alan Tang put himself in a position of conflict with the funding of Aim Best in the 806 Action.
(4)  David Ho has a record of funding litigation in which Mr Alan Tang was involved as liquidator or trustee in bankruptcy: See §11 above. Mr Alan Tang has a history of unreasonably resisting section 29 applications, which was adversely commented on by To J in Ip Pui Lam Arthur v Alan Tang, HCMP 450/2016, 18 October 2016, §88.

32. In view of §§25-31 above, I am satisfied that the Trustees have demonstrated reasonable grounds for suspecting that the litigation funding originated from David Ho, channelled through the bank accounts of his nominees, and was eventually injected into APIDL. It is entirely appropriate for the Trustees to seek information from the nominees or suspected nominees’ Banks in order for them to consider what actions may be taken for the benefit of the creditors. I give great weight to the views of the Trustees.

C. THE NOTICE ISSUE

33. The Trustees submit that it is unnecessary to give notice to or to join the relevant entities or individuals holding the bank accounts for 3 reasons.

(1)  There is no such express statutory requirement.
(2)  Breach of confidentiality is merely one of the various factors that the court should take note of, analogous to section 21 of the Evidence Ordinance, Cap 8 (“EO”).
(3)  On the facts this requirement is both impracticable and impossible to achieve. Amongst the 5 individuals, the Trustees only have the address of Sun Li Hua, who resides in the Mainland.

34. With respect, I disagree. The analogy between section 21 EO and section 29 BO is inapt. Whilst both sections do not expressly require notice to the account holder, under section 21 EO, the test is one of relevance: See Chan Wai Sun v Law Kai Andrew [2003] 3 HKLRD 954, §10, Chu J (as she then was). Since relevance is established, the applicant deserves a more robust approach of the court as set out in Tiger Resort Asia Ltd v Kazuo Okada & Ors[2018] HKCFI 472, DHCJ K Yeung SC (as he then was). Any insistence that service or notice should be a prerequisite for an application under section 21 EO would impose unjustified fetters upon the court’s discretion that can be exercised (§22). In contrast, under section 29 BO, the test is reasonable suspicion. The two sections are by nature different, with section 29 BO having a far lower standard of proof.

35. In principle, the court’s power under section 29 BO is to be exercised in the same way as an application under the repealed section 221 of the Companies Ordinance and the now equivalent section 286B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32: Joint and Several Trustees of the Property of So Ching Wan v Assen Ltd (In Liquidation)[2020] HKCA 1081, §8.4. The English corresponding provisions (similar but not identical) are sections 236 and 366 of the Insolvency Act 1986. The issue on notice has been reviewed by the English courts.

36. In, Marcel v Commissioner of Police of the Metropolis [1992] Ch. 225, the police had seized documents, under Part II of the Police and Criminal Evidence Act 1984, which might be relevant to a criminal investigation. All the members of the Court of Appeal expressed the view that where a subpoena duces tecum was served on the police calling for seized documents the police should inform the owner of the documents about the subpoena, in order to give him the opportunity of raising an objection.

37. Then came Morris v Director of the Serious Fraud Office [1993] Ch. 372, in which the liquidators of B.C.C.I. sought under section 236 to obtain documents which its auditors had delivered to the Serious Fraud Office (“the SFO”) under section 2(3) of the Criminal Justice Act 1987. Sir Donald Nicholls V.-C. held that the SFO had no express or implied power to make voluntary disclosure of the documents to the liquidators. Sir Donald Nicholls V.-C. then turned to section 236 and held at pp. 382-383:

“…When the documents whose production is sought belong to or relate to the affairs of a third party, in principle it must be right that the court should also take into account any prejudice the third party may suffer if production is ordered. By a ‘third party’ I mean a person other than the person who has possession or control of the documents. Otherwise the position would be that a liquidator would be in a better position by bringing an application under section 236 against an agent of a third party than if he had made the application directly against the third party. That cannot be right, and I can see nothing in the legislative scheme of which section 236 is part which would lead to that conclusion. Under the section the court has an unfettered discretion. There is no reason why the court should have to wear blinkers when exercising this discretion and be unable to have regard to the interests of a third party who would be adversely affected by an order to produce documents…
In a broad sense … there is a public interest in seeing that [liquidators or trustees in bankruptcy] have the assistance of those who were involved in running a company’s business or had dealings with the company… [but] this head of public interest does not necessitate or justify refusing to afford to those whose documents have been seized an opportunity to advance any proper objections they may have to the court making a section 236 order regarding the documents in question.”

38. Sir Donald Nicholls V.-C. referred to Marcel as a “compelling analogy”, and summed up the position at p. 385:

“…in the ordinary way when an application is made or proposed to be made against the SFO for an order under section 236 regarding documents acquired by the office under compulsory powers, the third party from whom the documents were obtained should be notified of the application or proposed application. He should be told of the SFO's attitude to the production sought, and asked whether he objects to an order being made. If his consent is not forthcoming, steps should be taken to join him as a respondent to the application. This should be the normal course. There will be exceptional cases. For instance, there may be cases where notice to a third party of the [liquidator or trustee’s] application might seriously prejudice the object the [liquidator or trustee] is seeking to achieve in existing or proposed proceedings; or a third party may not be traceable; or the documents may be needed as a matter of dire emergency. This is not intended to be a comprehensive list. There may be cases where for other reasons it is not appropriate or practicable to follow the ordinary route. In such exceptional cases, if it is just to do so the court may make an order under section 236 in the exercise of its discretion even though the third party had not been notified.” (emphasis added)

39. These principles were applied by Lightman J in In re Murjani [1996] 1 W.L.R. 1498, pp 1510H-1511E. There the trustee in bankruptcy applied for a production order against two solicitors believed to be acting for the bankrupt’s wife and two alleged nominee companies (“the Clients”) under section 366 of the Insolvency Act 1986. The trustee had no other information concerning the Clients. Lightman J held that non-joinder of the Clients as respondents could be justified. The solicitors and Clients had taken all steps to render the clients untraceable, and it was obvious that the Clients would learn of the orders from the solicitors in ample time to challenge them before the solicitors would be compelled to comply with them.

40. In Soden & Anor v Burns [1996] 1 W.L.R. 1512, A and B were public limited companies but went into administration. Inspectors appointed under section 432 of the Companies Act 1985 to investigate A’s collapse took evidence from 112 witnesses, including directors and witnesses from the merchant bank, the strategy consultants and both auditors. The administrators of B applied for an order under section 236 of the Insolvency Act 1986 for disclosure of the transcripts of evidence of 53 of those witnesses. The Secretary of State refused to disclose that evidence because the witnesses were not given prior notification and an opportunity to object.

41. Robert Walker J (as he then was) firstly held that there was a qualified (not absolute) duty of confidence attaching to information obtained under compulsory powers, although the transcripts of evidence were owned by the Secretary of State. The duty of confidence was owed to the witness who gave evidence to the inspectors (at p. 1525 D-E).

42. Secondly, citing Morris, Walker J held that such witness should be given the opportunity to raise objections to disclosure. He explicitly rejected the argument that those individual witnesses had no standing. At pp. 1528H-1529B:

“…these considerations about confidentiality, important though they are, are by no means the only factor that has to come into the balancing exercise. There is also possible oppression to individual witnesses who gave evidence to the inspectors, where those witnesses are involved in the civil litigation, in the administrators obtaining at this stage of the litigation transcripts which might not otherwise come to them until a later stage, or at all … the [Secretary of State] should not and cannot be expected to put before the court the individual concerns and objections of these witnesses, and that they must have a right to be heard themselves …”

43. In Hong Kong, the same principles apply. In The Joint and Several Liquidators of Kong Wah Holdings Limited and Akai Holdings Limited v Herbert Tsoi & Partners & Anor (unreported, HCCW 49/2000, 19 November 2004), the liquidators sought documents under the repealed section 221 of the Companies Ordinance from a law firm in respect of its professional services rendered for 3 former subsidiaries of the Company. At §36, Kwan J, as she then was, held that the proper way to proceed was to join the subsidiaries as respondents, because no exceptional circumstances had been made out as to why the application should proceed in their absence.

44. In Ip Pui Lam Authur v Hang Seng Bank Ltd & others, unreported, HCB 3819/2011, 30 June 2015, Lok J similarly held that “under ordinary circumstances it would be better that the person whose account is to be looked at should be served” (§38).

45. It can be distilled from the above authorities that notice should be given to the bank account holders where an application is made under section 29 BO for disclosure of information of their bank accounts, unless the trustee can make out exceptional circumstances like urgency, serious prejudice to the trustee or that the trustee has made reasonable efforts to trace the account holders but to no avail.

46. The Trustees make 2 further points:

(1) That section 123 of BO provides that all notices and other documents for the service of which no special mode is directed may be sent by post to the last known address of the person to be served therewith. Ms Kong, counsel for the Trustees, submits that “last known address” is limited to an address within the jurisdiction of Hong Kong. Ms Kong has not provided any authority in support and I am unable to accept her submission. The confidentiality that governs a banker and customer relationship applies, wherever the customer is. Accordingly, the principle in §45 above should apply, whether or not the bank account holder has a last known address in Hong Kong or not.
(2) The strict undertakings not to use the information obtained for any purpose other than for proceedings against David Ho may be sufficient safeguard to confidentiality such that the notice requirement can be dispensed with altogether. I am unable to agree. These strict undertakings are necessary to prevent abuse in the use of information obtained, but they do not come into play until the first hurdle (ie notice) is overcome.

47. Here, the documents sought are of a historical nature. The application is not urgent. §45 should apply, save where otherwise specified in respect of a particular account.

D. DISPOSITION

48. The documents sought are those in connection with:

(1) the opening of the bank account, including records identifying the beneficial owner and/or authorized signatory, and any changes to such information; and/or
(2) records of all transactions in the account, including bank statements and correspondence in relation thereto.

49. Those documents are reasonably necessary for the Trustees to carry out their functions in investigating the assets of the bankrupt. Those documents are plainly within the possession of the relevant Bank. The scope of disclosure sought is not unreasonable.

50. In respect of the 1^st Respondent, Chong Hing Bank, notice of the application to APIDL is not required as it has already been found to be the nominee of David Ho in the 971 Action. The disclosure sought related to only one bank account, 258-1x-1xxx8x-4. The period covered is from opening of the account to the date of this order. The terms of the order are reasonable. Chong Hing Bank can produce within 14 days. I grant the order sought.

51. In respect of the 2^nd Respondent, HSBC, the Trustees do not have the addresses of 2 account holders, Guan Qiao Ling and Zhao Jian Hong.

52. To insist on service, (including substituted service) would prejudice the Trustees’ investigation. As the disclosure would cover account opening documents and identity of beneficial owner and authorized signatory, this would assist the Trustees in tracking down Guan and Zhao.

53. The disclosure sought is in relation to all bank accounts in HSBC:

(1) held in the name of Guan from the opening date of the account to the present; the opening date is chosen because Guan kept appearing in the bankruptcy period in the 971 Action and was likely to be connected to David Ho and Yu Yang;
(2) held in the name Zhao for the period between 1 January 2013 and 31 December 2014; this period was chosen because the relevant remittance involving Zhao was on 28 February 2014; the Trustees want information one year before and after this date for the purpose of investigating if there was money from David Ho or his nominees.

54. The terms of the order are reasonable. HSBC can produce the documents within 28 days. I grant the order sought.

55. In respect of Shinewing, it is a Hong Kong company. The summons ought to be served on Shinewing before this Court would consider making the order sought.

56. In respect of the 3^rd Respondent, China Merchants Bank Co Ltd, the Bank has confirmed that it does not have an account holder in the name of Sun Li Hua and no record of the relevant transaction on or around 28 May 2013. No order will thus be made with regard to her.

57. Han Liang has not been served. The Bank also stated in its letter dated 10 November 2022 that it was not in a position to provide the information sought in the place of the remitting banks. I make no order with regard to the China Merchants Bank Co Ltd.

58. In respect of the 4^th Respondent, CMB Wing Lung Bank Ltd, the Trustees initially sought a “provisional order” such that “upon the provision of further or other identification information and/or bank account number of Alison Sun Lihua (and/or Sun Li Hua/Sunlihua, Chinese name 孙立花)”, CMB Wing Lung Bank do produce the documents sought.

59. With respect, this is putting the cart before the horse. An applicant should first satisfy the Court as to the identity of the account holder before the Court would even consider making an order.

60. Subsequent to the hearing, the Trustees obtained more information pursuant to a discovery order in Ho Yuk Wa David (No. 5) [2020] 2 HKLRD 608, Au-Yeung J; and filed the 2^nd affirmation of Tam Cheuk Hin Joey on 13 March 2023. It shows Sun Li Hua’s Chinese passport number, 2 addresses in Beijing and an email address. That affirmation gives further information, which I accept, showing Sun Li Hua to likely be David Ho’s nominee giving detailed and thorough instructions on behalf of the 971 Defendants in the 971 Action when she was neither a director nor shareholder of any of the 971 Defendants. The draft order provided by the Trustees even provided the Chinese citizenship identification number of Sun Li Hua. Such particulars of Sun Li Hua can be provided to the Bank to search for the account of Sun when an order is made.

61. Notice of the summons ought to be given to Sun Li Hua before the Court will consider making an order. Given that her address is out of jurisdiction, the application is adjourned with liberty to restore within 2 months for the Trustees to serve her.

62. In respect of the 5^th Respondent, Bank of China (Hong Kong) Limited, Chungs Lawyers acting on its behalf stated in their letters dated 26 October, 31 October, 9 November and 13 December 2022 that, based on the only information currently available, ie name of the account holder Ma Yun Ru (or Ma Yun Ru, China), Ma does not maintain any bank account with the 5^th Respondent. I therefore make no order with regards to Bank of China.

63. In respect of the 6^th respondent, Standard Chartered Bank (Hong Kong) Ltd, the account holder, Byrne & Co, is a registered partnership in Hong Kong. The summons ought to be served on Byrne & Co before this Court would consider making the order sought.

64. The orders granting disclosure strike a balance between the Trustees’ reasonable requirements and the need to avoid making an order which is wholly unreasonable, unnecessary or oppressive to the Banks or the account holders concerned.

65. For the reasons given,

(1)  There be an order in terms of §§1 and 2 of the draft order submitted on 3 January 2022 in respect of the 1^st Respondent, Chong Hing Bank (account of APIDL); the 2^nd Respondent, HSBC (accounts of Guan Qiao Ling and Zhao Jian Hong)
(2)  There be no order made in respect of the 3^rd and 5^th Respondents;
(3)  The applications in respect of
(a)  the 2^nd Respondent, HSBC (account of Shinewing);
(b)  the 4^th Respondent (account of Sun Li Hua) and
(c)  the 6^th Respondent (account of Byrne & Co),
are adjourned sine die with liberty to restore within 2 months to enable the Trustees to give notice to the account holders.

66. I thank Ms Kong for her assistance.

(Queeny Au-Yeung)
Judge of the Court of First Instance
High Court

Ms Charlotte Kong, instructed by Lee, Wong & Lam, for the Applicants

The 1^st Respondent was unrepresented and did not appear

The 2^nd Respondent was unrepresented and did not appear

The 3^rd Respondent was unrepresented and did not appear

The attendance of the 4^th Respondent represented by Myra Li & Co. was excused

The attendance of the 5^th Respondent represented by Chungs Lawyers was excused

The 6^th Respondent was unrepresented and did not appear

[1] On 1 November 2019, True Treasure was struck off the BVI Register for non-payment of annual fee.

[2] The signature “CWT” appeared to represent the initials of Mr Alan Tang’s Chinese name: “Chung Wah Tang”.

[2023] HKCFI 151-EN-2023-01-13

CHEN YUNG NGAI KENNETH AND ANOTHER v. HUGILL & IP (A Firm) AND ANOTHER

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HCB 3819/2011

[2023] HKCFI 151

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

____________

Re: HO YUK WAH DAVID (the “Discharged Bankrupt”)

____________

BETWEEN

	CHEN YUNG NGAI KENNETH CHEN MEI MEI (Trustees-in-bankruptcy of the Discharged Bankrupt)	Applicants
and
	HUGILL & IP (A Firm)	1st Respondent
	OLDHAM, LI & NIE (A Firm)	2nd Respondent

____________

Before: Hon Au-Yeung J in Chambers

Date of Hearing: 15 September 2022

Closing Date of Submission: 6 October 2022

Date of Decision: 13 January 2023

____________

D E C I S I O N

____________

A. Introduction

1. By this summons, the applicants (“Trustees”) apply for an order against the respondents, (respectively “H&I” and “OLN”; collectively, “the 2 Firms”) under section 29 of the Bankruptcy Ordinance, Cap 6 (“BO”). The 2 Firms are asked to produce documents concerning the Discharged Bankrupt, David Ho, and various entities who are said to be his nominees. The 2 Firms had acted for the nominees (“971 Defendants”) in HCA 971/2012 (“971 Action”).

2. Six Categories of documents are sought by the Trustees:

(1) Details of payments to OLN for the 971 Action;
(2) In particular and without prejudice to Category 1, copies of bills, receipts, correspondence and various payment records and supporting instructions and communications in respect of such payments made to OLN in relation to the 971 Action;
(3) Retainer agreements between OLN and each of the 971 Defendants;
(4) The amount of funding made to OLN (inclusive of disbursements paid by OLN) for the 971 Action;
(5) Communications with one Liu Shu, director of three 971 Defendants in the 971 Action, witness statements and affirmations of Liu Shu; and
(6) Communications with David Ho.

3. H&I maintain a neutral stance and their attendance was excused.

4. OLN also maintain a neutral stance but have made written submission to assist the Court (for which the Court is grateful) and seek costs. The following analyses address OLN’s submissions, but the reasoning and conclusion will ultimately apply to H&I.

5. OLN’s submissions are these:

(1) Some documents are subject to legal professional privilege (“LPP”). OLN are in no position to waive it and some clients have ceased to exist. OLN query if the privilege can be waived by the Trustees.
(2) Part of the documents in Categories 1 and 2, Categories 3 and 4 as a whole are confidential but not subject to LPP. Some parts subject to LPP can be redacted before production.
(3) Category 5 is subject to LPP.
(4) They confirm and are willing to provide an affidavit to confirm that (a) they have never acted for the 971 Defendants in any other action besides the 971 Action; and (b) they have never had any dealings with David Ho.

6. Accordingly, the Trustees have since reduced the scope of the order sought. The only substantive dispute remains that of LPP.

B. Legal Principles under Section 29 BO

7. Section 29 BO provides as follows:

“(1) The court may, on the application of the … trustee, at any time after a bankruptcy order has been made against a bankrupt summon before it … any person whom the court may deem capable of giving information respecting the bankrupt, his dealings or property, and the court may require any such person to produce any documents in his custody or power relating to the bankrupt, his dealings or property.”

8. The applicable principles for considering whether to make an order under section 29 BO have been set out in Re Ho Yuk Wah David(No. 5)[2020] HKCFI 578, §§22 and 31, Au-Yeung J; CA Judgment (“83 Judgment”) [2022] HKCA 110, §12. In gist, the Trustees must satisfy the Court that the information or documents “relate to the bankrupt, his dealings or property”; the provision of information or documents is reasonably required for him to carry out the Trustees’ functions; and the respondent is able to provide such information or documents. The standard of proof is reasonable suspicion: 83 Judgment, §14.

9. Under sections 29(1A) and (3) of BO, the court may order the respondent to answer interrogatories by way of an affidavit, or order a respondent to submit an affidavit to the court containing an account of his dealings with the bankrupt. However, section 29 does not confer power on the court to order the making of an affidavit to produce documents or to explain what has become of documents no longer in the respondent’s possession. Re Ho Yuk Wah David [2019] 1 HKLRD 961, §§40 and 42, Recorder Eugene Fung SC.

10. Confidentiality is no bar to an order for disclosure in a section 29 application: The Joint and Several Trustees in Bankruptcy of Nanik Dayaram (also known as Nanik Dayaram Hathiramani) v Lee Pei Yin, HCB 7651/2011, 6 November 2015, §62, Ng J.

C. Legal Principles on Legal Professional Privilege

11. The principles on LPP have been summarized in HKSAR v Wong Chi Wai (2013) 16 HKCFAR 539, at §§34-37. It is for the party refusing disclosure to establish LPP: Wauth v British Railways Board [1980] AC 521, at 541G. Once established, LPP cannot be overridden by the court: Wong Chi Wai, §37.

12. LPP falls into 2 categories, legal advice privilege and litigation privilege. The latter covers all documents brought into being for the purposes of litigation. The former covers communications between lawyers and their clients whereby legal advice is sought or given: Three Rivers District Council & ors v Governor and Company of the Bank of England (No.6) [2005] 1 AC 610, §10, Lord Scott.

13. Privilege does not attach to everything a claimant says to the lawyer. It is the purpose of the communication (ie to enable the client to seek advice or for the lawyer to give it) contained in a document that determines whether or not LPP attaches. Privilege, Colin Passmore, 4^th ed, at §2-012.

14. Using the test in §§12 and 13 above, the following documents are confidential but should not automatically be regarded as privileged in their entirety in the light of Three Rivers (No. 6): The Law of Privilege, Bankim Thanki QC, 3^rd ed, at §2.128-2.129.

(1) A fee note, bill of costs or statement of account, because it is brought into existence principally for the purpose of recording and charging for work which had been already completed. No privilege will attach where, eg the fee notes merely set out the dates and refer to the action taken in respect of which a charge is made: Hodgson v Amcor Ltd [2011] VSC 204, §§59-63 (Australia); or where the fee note does not relate to the giving of advice at all: Time Super International Ltd v The Commissioner of ICAC [2002] 2 HKC 581, Seagroatt J.
(2) “Mere collateral facts”, of which the address and identity of a client or an individual are examples. They are formalities that occur before the legal advice is sought or given and records nothing which passes between the solicitor and client in relation to the obtaining of or giving of legal advice. See Wong Chi Wai, §95; R on the Application of Miller Gardner Solicitors v Minshull Street Crown Court [2002] EWHC 3077, §20, CA.
(3) Retainer agreements, which will only be privileged if they reveal the nature of the advice sought. See Thanki, The Law of Privilege, 3^rd ed, at §2.133.

15. Parts of the documents in the preceding paragraphs which are subject to LPP can be covered up, whilst parts which are not subject to LPP should not: Ainsworth v Wilding [1900] 2 Ch 315, at 325 (fee note).

D. Application of the Legal Principles under Section 29 BO

16. David Ho and the following entities were/are defendants to the 971 Action:

(1) Gladius Limited (D2);
(2) Ontrade Properties Limited (D3);
(3) King Ocean Development Inc (D4);
(4) Asia-Pac Group Investments Limited (D5);
(5) Grand Asia Capital Services Limited (D8); and
(6) Pacific Shine Limited (D9).

17. One Asia Pac Infrastructure Development Limited (“APIDL”) was D6 in the 971 Action.

18. D2-D5, D8 and D9 (971 Defendants) were represented by H&I between 11 December 2018 and 17 July 2019; and then by OLN from 17 July 2019.

19. According to Ms Chiu who appeared on behalf of OLN at the call-over hearing of this summons on 15 September 2022, there was a natural person who gave her instructions on behalf of the 971 Defendants. However, OLN had not informed that natural person of this summons because the Trustees asserted that “any unauthorized disclosure or divulge of information about the Defendants and other related companies will be regarded as a breach of confidentiality and will be dealt with professionally”.

20. It is not clear why the Trustees needed to assert that position since the documents sought were historical in nature and there was no secrecy or urgency involved in the summons. However, I agree with the Trustees that the natural person is not a party to this application and it is not known in what capacity he/she was instructing OLN at the time. He/she has no right to be heard.

21. All the 971 Defendants have been struck off or dissolved after the Judgment. However, D2 and D9 have been restored by the Trustees for the purpose of enforcing the Judgment and Orders in the 971 Action. The summons and supporting affirmation have been served on D2 and D9 but they have not responded.

22. On paper, Mr Yu Yang owned and controlled the 971 Defendants and APIDL. The Trustees’ case is that D2 held 1 share in APIDL since about 2004. David Ho sold 999,999 shares of APIDL to APIHL, which ultimately ended up in the hands of D5. D3 and D4 recapitalized APIDL in December 2007. D8 was a guarantor for D3’s recapitalization. D9’s shares were held by D2 and an entity called Ferdinan.

23. Ng J handed down judgment on 28 September 2020 in Chen Yung Ngai Kenneth & anor v Ho Yuk Wah David (a bankrupt) & ors[2020] HKCFI 2518 (“971 Judgment”). It was found, amongst others, that:

(1) The sale and recapitalization were shams, such that David Ho still beneficially owns 1 million shares in APIDL and D2 and, via them as his nominees, APIDL and Ferdinan (971 Judgment, §§68-75; 76-104, especially 96; 105-153);
(2) David Ho owned and controlled D2 as his nominee (971 Judgment, §§74, 154, 164);
(3) D5 was David Ho’s nominee by reason of the fact that its director and shareholder as at 22 June 2007 were all David Ho’s nominees (971 Judgment, §103). As the recapitalization was a sham, the allotment of APIDL’s shares to D3 and D4 were null and void. D2 and D5 remained the only shareholders of APIDL after the whole exercise (971 Judgment, §153).
(4) David Ho beneficially owned and controlled D5 as his nominee (971 Judgment, §§165-170).
(5) D3, D4, APIDL and D8 had all acted as David Ho’s nominees in the sham recapitalization (971 Judgment, §§123, 148, 151, 178 and 179);
(6) D2 was holding its one share in D9 as David Ho’s nominee. Ng J would have held that Ferdinan held the other share as David Ho’s nominee if Ferdinan were a defendant (§§184-185; 161-163).

24. The shareholding position of the 971 Defendants is as follows:

Name Place of Incorporation Last
Shareholders Last
Directors
D2 Gladius Limited
(previously D Ho Nominees Limited) Hong Kong Ferdinan,
Yu Yang Ferdinan,
Liu Shu
D3 Ontrade Properties
Limited BVI Yu Yang Liu Shu
D4 King Ocean
Development Inc BVI Yu Yang Yu Yang
D5 Asia-Pac Group
Investments Limited BVI Yu Yang Liu Shu
D8 Grand Asia Capital Services Limited BVI Yu Yang Yu Yang
D9 Pacific Shine Limited Hong Kong Gladius,
Ferdinan Gladius,
Ferdinan
Ferdinan Limited (previously D Ho
Corporate Services
Limited) Hong Kong Gladius, Yu Yang Gladius, Yu Yang

Name Place of Incorporation Last
Shareholders Last
Directors
D6 APIDL Hong Kong D2, D5, D3, D4 (latter two based on re-capitalization) D2,
Ferdinan,
Liu Shu

25. Yu Yang was the former brother-in-law of David Ho. Yu Yang was held to be David Ho’s nominee shareholder of D2, D3 and Ferdinan (971 Judgment, §§160, 178, 163).

26. Liu Shu was a director of D2, D3, D5, D6, an employee of the Asia-Pacific Group and alleged colleague of David Ho in 2007 (971 Judgment, §59). She was held to be a person closely associated with David Ho by reason of her association with Yu Yang (footnote 45 at page 63 of the 971 Judgment).

27. Yu Yang and Liu Shu made witness statements but refused to testify at the trial (971 Judgment, §52). The assertions in the witness statements that Yu Yang was the ultimate beneficial owner of the corporate entities (including the 971 Defendants) was found to be bare assertions and rejected by Ng J (§§55-58, 66-67, 134-142).

28. It has always been the Trustees’ reasonable suspicion that David Ho has always been the beneficial owner of APIDL and that his estate is entitled to any surplus funds of APIDL (§6 of the 83 Judgment). This has become an eventuality by virtue of the 971 Judgment when Ng J found that (i) the 971 Defendants were all nominees of David Ho and/or beneficially owned by him; and (ii) Yu Yang and Liu Shu were nominees acting under David Ho’s instructions.

29. The Trustees consider themselves to have stepped into the shoes of David Ho and essentially own and/or control all the 971 Defendants. I agree.

30. The Trustees have always suspected that the Bankrupt was involved in funding arrangements for various actions (§§2, 8 of the 83 Judgment). They draw the conclusion that those nominees’ litigation expenses for the trial of the 971 Action must have been funded or at least related to David Ho. The present application is primarily to ascertain the “fund flows” or payment records against the 2 Firms, to ascertain if funds are available for David Ho’s estate.

31. I am satisfied from the facts in this Section that the Trustees have demonstrated reasonable grounds for suspecting that the documents or information sought are related to David Ho, his dealings or his property and that the Trustees require them to carry out their functions.

32. There is no issue that the 2 Firms are able to produce the documents or information, if ordered, that are in their possession, custody or control.

E. Legal Professional Privilege

33. OLN assert LPP in respect of part of Categories 1 and 2 and the whole of Category 5. OLN point out that they can redact Categories 1 and 2 but the LPP in Category 5 is in such a classic sense that redacting certain parts of the documents may give away clients’ instructions to OLN.

34. OLN point out that Ng J only ordered the following to be transferred to the Trustees (§§20 and 188 of the 971 Judgment):

(1) Shares held by D2-D5 in D6 (APIDL);
(2) D2’s 50% shareholding in D9.

Ng J did not order the shares in any of the 971 Defendants to be transferred to the Trustees.

35. Accordingly, OLN submit that it does not appear to be correct to say that D2-D5 now “belong” to the Trustees. At most the Trustees are now the shareholders of APIDL (D6), but D6 was not one of the 971 Defendants and was never a client of OLN. The Trustees do not even assert that they are directors, shareholders or liquidators of any of the 971 Defendants (except 50% shareholder of D9).

36. Despite the 971 Judgment, it is not clear to OLN that the documents created and prepared prior to that Judgment for the sole benefit of the 971 Defendants in defending the 971 Action belong to the Trustees.

37. In the premises, OLN do not believe that it can safely assume that the Trustees are able to waive privilege on behalf of the 971 Defendants or at least D2-D5.

38. I am unable to agree. Having regard to the express findings (set out in §§23-28 above) that D2, D3, D5 and D9 (not just their shareholders or directors) were nominees of David Ho, the Trustees would step into the shoes of these 971 Defendants. On top of that, D2 and D9 have not responded to the summons to assert LPP. That being the case, LPP of the nominees cannot be asserted against the Trustees.

F. Categories 1 to 3 – Details of Payments and Retainers

39. Insofar as OLN raise an issue of LPP, it cannot stand in the light of the holding in §38 above. As for the other documents in these Categories, OLN say that they are confidential but does not raise an issue of LPP. These include the contact information of the transferors and transferees under the payment records. Confidentiality does not preclude an order for production: §10 above. If LPP does not attach to client’s identity, there is even less reason for LPP to attach to non-clients’ identity: §14(2) above. I make an order to produce these 3 Categories.

G. Category 4 – Amount of Funding to OLN

40. OLN submit that this is confidential but not privileged. OLN are willing to provide an affidavit confirming the amount. I accept this approach.

H. Category 5 – Communications, Witness Statements and Affirmations of Liu Shu

41. In respect of communications with Liu Shu, OLN assert LPP. That cannot stand in view of the express finding of Ng J that Liu Shu is a nominee of David Ho and hence the Trustees step into the shoes of Liu Shu.

42. In respect of witness statements and affirmations, OLN are not aware of their existence other than in the 971 Action and is willing to say so an affidavit. The Trustees do not object. I accept this approach.

I. Category 6 – Communications with David Ho

43. OLN have confirmed that they never had any dealings or communication with David Ho and are willing to say so on affidavit. The Trustees do not object. I agree with OLN’s approach.

J. Costs

44. OLN have communicated substantively with the Trustees as early as 11 April 2022 before the summons was taken out. They reviewed and collated documents sought by the Trustees, assessed whether they were confidential or privileged and responded to the Trustees’ submission. They seek an order for costs against the Trustees personally.

45. The Trustees oppose and suggest that costs should be limited to reasonable photocopying charges: The Joint and Several Liquidators of Kong Wah Holdings Limited and Akai Holdings Limited v Ernst & Young (unreported, CACV 356/2003, 17 March 2004) at §§37-39. Upon compliance with the order to be made, if OLN are shown to be fully co-operative with the Trustees in providing the necessary information, an order may be made that OLN be paid reasonable costs incurred by them in providing such information, to be paid out of the estate, under rule 87C of the Bankruptcy Rules (Cap 6A): Re Ho Yuk Wah David (bankrupt) (No.2), (§§12-13), Au-Yeung J.

46. The grounds of OLN’s application for costs are these:

(1) Costs should be personally borne by the Trustees because an order for costs against the estate would likely be hollow.
(2) The general rule is that a trustee in bankruptcy, liquidator, trustee or personal representative, is personally liable for any costs order unless there is an express order directing otherwise: Re Lee Shuk Yee [2005] 4 HKC 318, §§10 & 11, Barma J (as he then was); upheld on appeal in [2006] 3 HKC 396, §§9-12. In To Pui Kui v Ng Kwok Piu, CACV 281/2012, 29 January 2015, the Court of Appeal stated that Re Lee Shuk Yee stood as authority for the proposition that even if there were to be an indemnity, the plaintiff personally bore the risk of the estate not having enough assets to pay for such costs liability. OLN therefore submit that a personal order for costs should be made, leaving the Trustees to recoup from the estate or any third party funder.
(3) Kong Wah is distinguishable. OLN do not seek to charge for being present at the inspection of documents to be produced, as the auditors did in Kong Wah. Unlike OLN who have to collate documents and assess their confidentiality and LPP, the production of documents by the auditors was purely a manual task. The Court of Appeal in Kong Wah did not hold that a former solicitor would never be entitled to recover such costs and is limited to only claiming photocopying charges. If that were the case, it would have the unfortunate effect of discouraging solicitors from upholding their duties to their former clients. The other case relied on by the Trustees, at §83, Ng J), also did not involve production by former solicitors.

47. In deliberating on the question of costs, I have disregarded the Trustee’s submission that OLN were not analogous to a completely innocent party under a Norwich Pharmacal application because OLN were acting for David Ho’s corporate nominees and were receiving instructions from Yu Yang and Liu Shu. This is because there is nothing before the Court to justify any insinuation that OLN were complicit in the actions of David Ho or his nominees at the time OLN acted for the 971 Defendants.

48. Even so, I am unable to agree with OLN.

49. With regard to ground 1, there should not be a personal costs order against the Trustees as there was no litigation conduct on their part that required punishment on costs. Even OLN accept that the Trustees are just doing their duty. Difficulty in recovering costs from the bankrupt’s estate is not a reason to order the Trustees to personally bear costs.

50. With regard to ground 2, Re Lee Shuk Yee concerns hostile litigation taken by a personal representative. However, a section 29 BO application is far removed from hostile litigation. It is a “fishing expedition” made on reasonable suspicion of a trustee in bankruptcy, to discover whether he has further avenues to recover the bankrupt’s assets for the benefit of the creditors: Re Ho Yuk Wah David (No. 5), §22(8).

51. With regard to ground 3, both an auditor and a solicitor would need to incur time to peruse the s.29 BO summons and supporting affidavit, collate and review documents sought and make proposals on production. The auditor in Kong Wah was not allowed to recover the aforesaid costs; neither would the solicitor. The only thing that distinguishes the solicitor from the auditor is that the former has to consider questions of LPP but the latter does not. The costs for considering LPP (and any redaction) would be adequately covered by the proposed order of the Trustees under section 87C of BO. Moreover, it has been clear from the express findings of the 971 Judgment who were the nominees of David Ho such that LPP cannot be raised against the Trustees.

52. For the reasons given in §§49-51 and without disrespect, I reject OLN’s submission for costs and accept the costs order proposed by the Trustees.

K. Conclusion and Orders

53. I make an order for H&I and OLN to disclose, within 28 days from the handing down of this decision, the following documents which are in their respective possession, custody or power:

(1) Copies of all details of the payments made to each Respondent for the legal proceedings in the 971 Action.
(2) In particular and without prejudice to the generality of paragraph (1), copies of all bills, receipts, correspondence, counsel fee notes, invoices, cheques, bank drafts, cashier orders, online transfer records and all other payment records and supporting wiring instructions and communications in respect of such payments made to each Respondent in relation to the 971 Action.
(3) Copies of all retainer agreements between each Respondent and each and every of the Defendants they had acted for in relation to the legal proceedings in the 971 Action.
(4) Statements on affirmation by each Respondent confirming:
(a) That Respondent has never acted or represented (i) David Ho at all; and (ii) any of the Defendants which it has acted for in 971 Action save and except in the 971 Action itself;
(b) The total funding made to that Respondent (inclusive of disbursements paid by that Respondent) for the legal proceedings in 971 Action;
(c) That Respondent does not have in its possession, custody or power any witness statements or affirmations made by Cindy Liu Shu (if any) in relation to any legal proceedings other than in the 971 Action;
(d) That OLN have never had any communications with David Ho at all (whether in relation to all email correspondence involving the specified email address or otherwise);
(5) The Trustees do bear reasonable photocopying costs to be incurred by each Respondent in compliance with this order, to be paid out of the bankruptcy estate of the Discharged Bankrupt David Ho;
(6) Liberty to each Respondent to make an application under rule 87C of the Bankruptcy Rules (Cap 6A) for reasonable costs upon due compliance of §§(1)-(4) of this Order; and
(7) There be general liberty to apply.

54. I thank Mr Joseph Wong and OLN for their assistance.

	(Queeny Au-Yeung)
	Judge of the Court of First Instance
	High Court

Mr Joseph Wong, instructed by Lee, Wong, Lam, for the Applicants

Attendance of the 1^st Respondent was excused

Ms Eunice Chiu, of Oldham, Li & Nie, for the 2^nd Respondent

[2020] HKCFI 1621-EN-2020-07-17

IP PUI LAM ARTHUR AND ANOTHER v. ALAN CHUNG WAH TANG AND ANOTHER

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HCB 3819/2011

[2020] HKCFI 1621

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

____________

Re:

HO YUK WAH DAVID

(the Bankrupt)

____________

BETWEEN
	IP PUI LAM ARTHUR	Applicants
	IP PUI SUM
	(Joint and Several Trustees in bankruptcy)
and
	ALAN CHUNG WAH TANG and	Respondents
	HOU CHUNG MAN (Joint and
	Several Liquidators of Asia-Pac
	Infrastructure Development
	Limited)

____________

Before:

Hon Au-Yeung J in Chambers

Closing Date for Written Submission:	14 July 2020
Date of Decision on Costs:	17 July 2020

____________________________

D E C I S I O N O N C O S T S

____________________________

Introduction

1. This is an application to vary a costs order nisi.

2. By a decision dated 8 April 2020 (“the Decision”), this Court dismissed the Trustees’ application for discovery against the Liquidators and made a costs order nisi that costs be to the Liquidators on indemnity basis with certificate for one counsel (“the order nisi”).

3. The Trustees have since resigned (and referred to below as “Former Trustees”) but there is no dispute that they remain liable to pay costs under the Decision. They applied by summons dated 22 April 2020 (sent to the court by fax) to vary the order nisi such that costs are to be assessed on party-and-party basis (“variation summons”).

4. The variation summons was not filed during the General Adjourned Period (“GAP”) when the Court Registry was closed due to COVID-19. The Court gave directions for paper disposal of the variation application on the suggestion of solicitors for the Former Trustees (“LWL”) that they would “file the [variation] summons as soon as practicable when the High Court Registry re-opens after the General Adjourned Period.”. The Former Trustees have not filed the summons on the day following re-opening of the Registry on 6 May 2020. This court raised requisition as to filing on 23 June 2020.

5. The Former Trustees therefore applied by ex parte summons dated 2 July 2020 for retrospective leave to file the variation summons out of time. The reason for the lateness was that since late April, LWL has had to attend to an unusually high volume of work, despite the pandemic. Consequently, the staff at LWL has been stretched thin and they proceeded to continue with the preparation of written submissions and statement of costs on the mistaken assumption that the variation summons had already been filed. LWL wholeheartedly apologized to the Court for the oversight.

6. The ex parte nature of the summons was of course wrong in procedure. LWL by letter later “confirmed” that the Former Trustees were agreeable to the ex parte summons to be dealt with as if it were an inter partes summons.

7. In any case, when considering leave to file out of time, the Court has to consider the length of delay, the reasons for delay, the merits of the substantive application and the prejudice to the other party.

8. In the present case, the length of delay, up to filing of the wrong ex parte summons was 2 months. The ground was oversight of the solicitors. That was not a valid explanation; it virtually was breach of a promise to the Court.

9. The use of electronic means during GAP was to facilitate the processing of cases with expedition. It required good faith and industry of both the Court and the profession. Solicitors who got the Court’s approval to dispose of a summons on paper must do their part to keep the Court record proper and complete as soon as possible after the GAP was over.

10. In this case, LWL failed. That is especially so since the directions for lodging submissions were given after the GAP. LWL had had ample opportunity to review the papers and do the proper filing.

11. That said, the intention to vary costs was raised within time. No prejudice has been caused to the Liquidators as both parties had argued fully in respect of the variation summons on the papers before the failure to file the summons was discovered. Any prejudice could be remedied by an appropriate costs order for the Liquidators. Accordingly, I give leave to the Former Trustees to file the variation summons out of time. The filing on 2 July 2020 shall stand.

Legal principles on ordering indemnity costs

12. The principles are well-established. Costs are in the discretion of the Court. In exercising its discretion, the Court should take into account, amongst others, the conduct of all parties and whether a party has succeeded on part of his case: Order 62, rule 5(1)(e) and (f) of the Rules of the High Court (“RHC”)

13. Under Order 62, rule 5(2) of RHC, the conduct of the parties includes:

(a)  whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(b)  the manner in which a party has pursued or defended his case or a particular allegation or issue;
(c)  whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and
(d)  conduct before, as well as during, the proceedings.

14. For costs on indemnity basis, the successful party should show that the case has some special or unusual feature. The discretion is not to be fettered beyond the requirement that costs on indemnity basis must be “appropriate”: Town Planning Board v Society for Protection of the Harbour Ltd (2004) HKCFAR 114, at 123-124, Li CJ.

15. What constitute appropriate circumstances to award indemnity costs must be fact-sensitive. The conduct of the party against whom indemnity costs are sought is cogently relevant. Thus, where the proceedings in question should never have been brought or defended but the party nevertheless unreasonably and unjustifiably persisted, he may well be visited with indemnity costs. See Huge Dragon Corporation Ltd v Incorporated Owners of Lung Mun Oasis [2014] 3 HKLRD 286, at §13, Poon J (as he then was).

The Court’s reasons for ordering indemnity costs

16. The reasons for which this Court ordered indemnity costs can be found in §85 of the Decision, ie the decision of Re Ho Yuk Wah David [2019] HKLRD 961 made clear that the affidavit sought in the underlying summons was not within the Court’s jurisdiction to order (“1^st reason”); and there was no evidence of any relationship between the Bankrupt and at least CNIL (“2^nd reason”).

17. The same legal team appeared for the Former Trustees in that decision. Further, by 2 letters before the underlying summons, ONC had drawn the Former Trustees’ attention to the Recorder’s decision but the Former Trustees had not responded to it. Eventually the Former Trustees wholly failed in the underlying summons.

18. Mr David Chen, counsel for the Former Trustees, submits that neither ground justified the unusual indemnity costs order.

The Former Trustees’ reasons for contesting indemnity costs

19. With regard to the 1^st reason, Mr Chen submits that whilst Recorder Eugene Fung SC held that the Court had no express power under section 29(1A) of the Ordinance to make such an order, Madam Recorder Linda Chan SC (as she then was) clarified in another Decision within the present case [2019] HKCFI 1398, §30, that the Court had inherent jurisdiction to make an ancillary order for the filing of such an affidavit to ensure that the exercise of its jurisdiction or the remedies it granted were effective.

20. With respect, the decision of Recorder Linda Chan SC was made after the hearing of the underlying summons in this case and it was never brought to the attention of this Court before the Decision was handed down. In fact, Mr Chen has conceded that the Court had no jurisdiction to order the filing of the affidavit sought: §25 of the Decision. This line of submission does not assist the Former Trustees.

21. Then Mr Chen submits that this part of the underlying summons did not generate any evidence, nor substantial submission from the parties or detailed consideration by the Court. It did not materially add to the length or complexity of the hearing before the Court.

22. Mr Chen is correct but it only affects the quantum of costs and not the basis of assessment for costs.

23. Accordingly, the 1^st reason holds good.

24. With regard to the 2^nd reason, Mr Chen distinguishes the factual scenario between Recorder Fung’s decision in Re Ho Yuk Wah David and the present case:

(1) Alan Tang and Hou Chung Man were involved in both cases in different capacities – as trustees in bankruptcy of Lee Siu Fung Siegfried in that case;and as liquidators of APIDL in the present case.
(2) The 2 cases involved different funders and funding agreements although the Bankrupt was allegedly involved in both cases. It just so happened that CNIL was a common funder.

25. Mr Chen also points out that the evidence in support of each application was different. In Re Ho Yuk Wah David, the evidence of the Former Trustees did not mention CNIL at all, which led to the learned Recorder’s observation that “no evidence has been adduced by the applicants to assert that they believe, or have any reasonable suspicion, that the Bankrupt is related to or connected with [CNIL].”

26. By contrast, in the underlying summons in the present case, the Former Trustees have set out the evidential basis for and expressly stated their belief that “the Funders are associated with the Bankrupt”. Yu Yang’s statement explaining the funding arrangement and distribution agreement with the Bankrupt in respect of the 806 Action, the 3 Deeds of Assignment and Hou’s evidence that the Funders provided funding to APIDL were not before the learned Recorder.

27. Accordingly, the underlying summons was a different application to that in Re Ho Yuk Wah David, with more extensive evidence, although the Former Trustees failed in the end. Mr Chen submits that there is nothing unusual in a failed application to justify indemnity costs.

28. Mr Chen is correct in principle. The fact that the Former Trustees took a bold application with weak evidence and failed on a low standard of proof would not in itself justify costs on indemnity basis.

29. However, the fact was that the Liquidators had on 2 occasions by letter and by affirmation informed the Former Trustees of the Liquidators’ position, with reasons that were eventually accepted by this Court: §§37, 38, 64, 67, 68 & 73 of the Decision. In drawing attention to Re Ho Yuk Wah David, ONC specifically pointed out that the Former Trustees had failed to provide any evidence to suggest and/or prove that the Funders in 806 Action were related to the Bankrupt.

30. The purpose of this Court’s reference to Re Ho Yuk Wah David was to illustrate that the Former Trustees, as parties to a similar application in that case and represented by the same lawyers in the present case, should not have missed the principle therein. The differences in factual background and capacities of the Former Trustees were not truly distinguishing factors from the present case.

31. The Liquidators’ statement that they were not in a position to provide any information or documents on any funding arrangements that APIDL might have prior to its winding-up was a particularly weighty statement to show that the Former Trustees were bound to fail. It was unreasonable for the Former Trustees to disregard that statement and pursue the underlying summons (§§41-42 of the Decision).

32. For all the reasons given above, I am of the view that the order for indemnity costs was appropriate. The variation summons is thus dismissed.

Summary Assessment

33. On quantum, with certificate for one counsel, I summarily assess the Liquidators’ costs on indemnity basis to be $400,000.

34. Costs of this variation summons should also be to the Liquidators on indemnity basis, summarily assessed at $40,000.

35. On a nisi basis and unless LWL shows cause to the contrary, they should bear the Liquidators’ costs on the ex parte summons on indemnity basis, which I assess to be $11,600.

	(Queeny Au-Yeung)
	Judge of the Court of First Instance
	High Court

Written Submission by Mr David Chen, instructed by Lee, Wong & Lam, for the applicants

Written Submission by ONC Lawyers, for the respondents

[2020] HKCFI 578-EN-2020-04-08

IP PUI LAM ARTHUR AND ANOTHER v. ALAN CHUNG WAH TANG AND ANOTHER

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HCB 3819/2011

[2020] HKCFI 578

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

________________________

Re: HO YUK WAH DAVID (the Bankrupt)

________________________

BETWEEN

	IP PUI LAM ARTHUR IP PUI SUM (Joint and Several Trustees in bankruptcy)	Applicants
	and
	ALAN CHUNG WAH TANG and HOU CHUNG MAN (Joint and Several Liquidators of Asia-Pac Infrastructure Development Limited)	Respondents

________________________

Before: Hon Au-Yeung J in Chambers

Date of Hearing: 2 May 2019

Date of Decision: 8 April 2020

________________________

D E C I S I O N

________________________

A. INTRODUCTION

1. The applicants are the Joint and Several Trustees (“Trustees”) in bankruptcy of Ho Yuk Wah David (“Bankrupt”).

2. The respondents (“Tang” and “Hou” respectively and Liquidators collectively) are the Joint and Several Liquidators of Asia-Pac Infrastructure Development Ltd (“APIDL”), which commenced liquidation in April 2013.

3. This is the Trustees’ application by way of Summons dated 6 October 2017 under section 29 of the Bankruptcy Ordinance (Cap 6) (“section 29”) for an order that the Liquidators do produce information and documents set out in the Schedule to the Summons, or else explain by affidavit what has happened to those documents.

4. The information and documents sought pertain to APIDL’s commercial relationships with 3 companies which are Funders of APIDL’s claim against its former legal advisors in HCA 806/2006 (“806 Action”). The Trustees believe that the Bankrupt is involved in the operations of the Funders and might be entitled to share in their profits from funding the 806 Action. The Trustees say that their duty to investigate the Bankrupt’s affairs requires them to look into the funding arrangements involving APIDL.

5. Further, having regard to the Bankrupt’s track record in litigation finance, the Trustees also seek to investigate the funding arrangements involving APIDL in legal proceedings other than the 806 Action.

6. The information and documents sought can be classified as follows:

(1)  Class 1 concerning the Funders (§§1, 4, 5.1-5.5 of the Schedule);
(2)  Class 2 concerning other funders in the 806 Action (§5.6 of the Schedule); and
(3)  Class 3 concerning other funders in proceedings other than the 806 Action (§6 of the Schedule).

§§2 and 3 of the Schedule are not pursued by the Trustees.

7. The Liquidators say that the Funders are not related to the Bankrupt. The Trustees have not produced evidence that the Funders or other funders are related to the Bankrupt. Information or documents sought simply have nothing to do with the Bankrupt and hence the Trustees’ functions as trustees of the estate.

8. The core issue turns on whether the Funders or other funders are related to the Bankrupt.

B. BACKGROUND

9. The background is largely not disputed and is taken from the helpful summaries of Mr David Chen, counsel for the Trustees, and Mr Carolan and Mr Kwok, counsel for the Liquidators.

10. On 2 August 2011, a Bankruptcy Order was made against the Bankrupt on his own petition. The Trustees were appointed on 30 September 2011 at the general meeting of creditors. According to the Bankrupt’s Statement of Affairs, his debts exceeded $160 million but he had negligible assets. The Trustees’ investigations, however, showed that the Bankrupt retains an interest in the Asia-Pac group of companies, including APIDL which he founded in about 1996.

11. Despite his bankruptcy, the Bankrupt has been operating a complex scheme using offshore companies and nominees to conceal his assets, continue to carry on his business ventures and litigation, and pay for his personal and family expenses. (The Trustees say there are 30 of such offshore companies but have only named 12.) Through these offshore companies and his family members, the Bankrupt diverted a significant amount of funds out of reach of his creditors. See Re Ho Yuk Wah David (Bankrupt) [2015] 2 HKLRD 603 (“March 2015 Decision”), §4, To J.

12. APIDL was/is involved in various sets of legal proceedings in Hong Kong, including HCA 16778/1999 (“16778 Action”), the 806 Action and HCA 971/2012 (“971 Action”).

13. The 16778 Action was commenced by APIDL in 1999 against its former management for breach of duties. It was settled at the beginning of 2011.

14. The 806 Action was commenced by APIDL in 2006 against its former solicitors for alleged negligence. After APIDL was wound up on 10 April 2013 and Tang and Hou were appointed as its provisional liquidators (later full liquidators on 30 April 2013), they decided to continue the 806 Action on APIDL’s behalf. However, as APIDL had limited funds, Tang and Hou had to seek litigation funders.

15. From April 2013 to February 2015, Tang and Hou secured interim funding from 3 Funders: True Treasure Enterprises Ltd (“True Treasure”), China New Investments Ltd (“CNIL”) and Fidelity Insurance Company Ltd (“FICL”).

16. The 971 Action is an action by the Trustees against the Bankrupt and various BVI companies who allegedly hold APIDL on behalf of the Bankrupt. On 18 November 2004, the Bankrupt sold his indirect shareholding in APIDL. The Trustees contend that the sale was a sham and that the Bankrupt still retains a beneficial interest in APIDL (as at the commencement of his bankruptcy and as of now). The Trustees seek against the Bankrupt and the 4 corporate shareholders: (1) a declaration that they hold their interest in APIDL for the Bankrupt; (2) an order that those shares be transferred to the Trustees. The trial of the 971 Action has taken place in September 2019 and judgment has been reserved. Nothing turns on the merits of the 971 Action here.

17. The Trustees believe that the Bankrupt is involved, through his offshore companies and family members, in litigation finance.

18. Historically, one piece of the litigation funded by the Bankrupt and/or his associates concern CWT Textile Supplies Co Ltd (in creditors’ voluntary liquidation) (“CWT”), of which Tang and Alison Wong Lee Fung Ying (“Wong”) were the joint and several liquidators (“CWT Liquidators”).

(1)  CWT sued its former auditors for professional negligence. The matter was settled and the CWT Liquidators were paid a settlement sum of $45 million.
(2)  A significant part of the settlement sum was paid to Topmark Asia Ltd (“Topmark”) as the consultant of CWT and Sun Ascent International Ltd (“Sun Ascent”) as the funder of the CWT litigation.
(3)  The Trustees believe that the Bankrupt was the person behind Topmark and Sun Ascent. The belief is substantiated by one Yu Yang’s evidence in the 971 Action that the CWT litigation was an investment project of the Bankrupt’s family members.

19. Another piece of historical litigation concerned the bankruptcy case of Lee Siu Fung Siegfried (“LSF Case”), of which Tang and Wong were the joint and several trustees in bankruptcy.

(1) Out of the $45 million settlement sum received in the CWT litigation, $1.56 million was used for the LSF Case.
(2) Hou’s own evidence was that “the funders for the LSF Funding and Sun Ascent apparently belonged/were related to same group of investors or they were investors with a close business relationship”.

20. Turning to the present Summons, the Trustees’ case as regards funding of APIDL’s claim in the 806 Action is as follows:

(1)  APIDL received funding from Yu Yang, who was the Bankrupt’s brother-in-law until the Bankrupt’s divorce with Yu Yang’s sister in 2015. According to the agreement between Yu Yang and the Bankrupt, the proceeds obtained from the 806 Action would be paid out:
(a)  First, to the Bankrupt’s family members for their investment capital;
(b)  Then, to Yu Yang (and his sister) for their investment capital;
(c)  Finally, any remaining proceeds would be distributed between (i) Yu Yang and his sister (total 60%) and (ii) the Bankrupt’s family members (total 40%).
(2)  By three separate Deeds of Assignment all dated 3 August 2009, the 2^nd to 4^th plaintiffs in the 806 Action assigned their causes of action within that Action to APIDL, the 1^st plaintiff. The 4^th plaintiff, Greater Beijing Region Expressways Ltd (“GBRE”), received $1 million and was entitled to receive 30% of the proceeds from the 806 Action.
(3)  Hou’s evidence was that:
(a)  True Treasure provided funding to APIDL from April 2013 to February 2015; and
(b)  CNIL and FCIL provided at least $6.5 million in funding to APIDL in February 2015.

C. LEGAL PRINCIPLES UNDER SECTION 29 OF THE ORDINANCE

21. Section 29 of the Ordinance provides, insofar as relevant:

“(1) The court may, on the application of the Official Receiver or trustee, at any time after a bankruptcy order has been made against a bankrupt summon before it the bankrupt or his spouse, or any person known or suspected to have in his possession any of the estate or effects belonging to the bankrupt or supposed to be indebted to the bankrupt, or any person whom the court may deem capable of giving information respecting the bankrupt, his dealings or property, and the court may require any such person to produce any documents in his custody or power relating to the bankrupt, his dealings or property. (underline added)
(1A) The court may require a person referred to in subsection (1), other than the bankrupt, to submit an affidavit to the court containing an account of his dealings with the bankrupt or to produce any documents in his possession or under his control relating to the bankrupt or the bankrupt’s dealings, affairs or property.
(2) If any person so summoned, after having been tendered a reasonable sum, refuses to come before the court at the time appointed, or refuses to produce any such document, having no lawful impediment made known to the court at the time of its sitting and allowed by it, the court may, by warrant, cause him to be apprehended and brought up for examination.
(3) The court may, by itself or by a commissioner appointed for the purpose, examine on oath, either by word of mouth or by written interrogatories, any person so brought before it concerning the bankrupt, his dealings or property and any other matter the court considers relevant. (underline added)
(3A) It shall be the duty of a person examined under subsection (3) to answer all questions that the court may put or allow to be put to him.”

22. The principles governing section 29 of the Ordinance are well-established and are taken from the helpful summaries of Mr Chen, Mr Carolan and Mr Kwok: see eg Joint and Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd (2006) 9 HKCFAR 766, §§27, 29-30 ; Hau Po Man Stanley (in bankruptcy) v Joint and Several Trustees [2008] 1 HKC 256, §§20 & 21 (CA); Re Lai Kwok Ying (A Bankrupt) (unreported, HCB 8750/2007, 7 August 2009); Re Lee Priscilla Hwang (bankrupt) [2012] 4 HKLRD 581; Re Ho Yuk Wah David (bankrupt) (supra), §§15-17; Re Lee Siu Fung Siegfried [2017] 1 HKLRD 1155.

(1)  The power conferred by section 29 is general, wide, unlimited, and discretionary in nature (Kong Wah (§27), Re Ho Yuk Wah David (§17);
(2)  The information or documents must “relate to the bankrupt, his dealings or property” and not just any information that the trustee wants;
(3)  The applicant must satisfy the court the essential condition that the provision of information or documents is reasonably required for him to carry out his functions (Hau Po Man §21, Re Lee Siu Fung §30);
(4)  The applicant must also establish a prima facie case that the respondent is able to provide such information or documents (Hau Po Man §21, Re Lee Siu Fung §30);
(5)  If the above criteria are met, the court must carefully strike a balance between the applicant’s reasonable requirements and the need to avoid making an order which is wholly unreasonable, unnecessary or oppressive to the person concerned. The burden is on the applicant to satisfy the court, after balancing all the relevant factors, that there is a proper case for such an order to be made (Hau Po Man §21, Re Lee Siu Fung §30);
(6)  In considering if the information or document is reasonably required to enable the trustees to carry out their functions, great weight would be given to the views of the trustees. A production order is not necessarily oppressive merely because it is inconvenient for the party subject to it or would cause him a lot of work or make him vulnerable to future claims (Kong Wah §27, §30, Re Lai Kwok Ying §6, Re Lee Priscilla Hwang §24);
(7)  Since a trustee is a stranger to the affairs of the bankrupt, he relies on orders for examination and production to reconstitute the knowledge of the bankrupt, which would enable the trustee to perform and discharge his duties effectively and with as little expense and as expediently as possible (Kong Wah §25, Re Ho Yuk Wah David §14);
(8)  The information and documents discoverable under section 29 of the Ordinance are wider than those discoverable under RHC O.24, as the former are unrestricted by issues defined by pleadings (as there are no pleadings in the context of section 29). Indeed, a trustee is necessarily engaged in a “fishing” or speculative expedition to discover whether he has further avenues to recover the bankrupt’s assets for the benefit of the creditors (Kong Wah §33, Re Ho Yuk Wah David §15-16); and
(9)  That said, the trustee is not entitled to embark on expeditions that ignore costs and proportionality, or to extract information from persons in respect of a matter when there is no well-founded ground upon which to consider him prima facie capable of giving information, or to conduct an examination without any clear suspicions and to conduct it to determine if matters or facts might emerge which may be of interest or assistance (Hau Po Man §§31-32, Re Lee Priscilla Hwang §§19, 23, Re Lee Siu Fung §§31-34).

23. Under sections 29(1A) and (3), the court may order the respondents to answer interrogatories by way of an affidavit. Under section 29(1A), the court may also order a person to submit an affidavit to the court containing an account of his dealings with the bankrupt. Other than those situations, section 29 does not confer power on the court to order the making of an affidavit to produce documents or to explain what has become of documents no longer in the respondent’s possession. Re Ho Yuk Wah David [2019] 1 HKLRD 961, §§40 and 42.

24. There is no magic in the word “produce” in section 29; it simply means “hand over” or at least “make available for inspection”: Joint and Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd (2006) 9 HKCFAR 766, at §22, Lord Millett NPJ.

D. APPLICATION FOR AFFIDAVIT

25. Insofar as the Summons seeks an affidavit from the Liquidators, the application does not fall under section 29(1A) or (3). The court has no power to order the making of an affidavit for the reasons given in paragraph 23 above. Mr Chen has, rightly, conceded this point.

E. CLASS 1 CONCERNING THE FUNDERS IN THE 806 ACTION

E1. Trustees’ case

26. There is no dispute that the Bankrupt has been in the business of litigation funding, including in the CWT case and LSF case. It was he who introduced Topmark and Sun Ascent to the CWT Liquidators in around 2003, some 8 years before the Bankruptcy Order was issued.

27. The Trustees believe that the Bankrupt retains beneficial interest in APIDL (which is the subject matter of the 971 Action) and, through the Funders, may receive proceeds from the 806 Action if APIDL’s claim were to prevail. Their case is that:

(1)  The Bankrupt allegedly disposed of his interest in APIDL in November 2004. Tanner De Witt (APIDL’s solicitors in the 16778 Action), however, continued to take instructions from him in 2009 and 2010, and the bills issued to APIDL in 2009 and 2010 were expressly addressed to the attention of the Bankrupt. This supports the Trustees’ belief that the Bankrupt retains an interest in and continues to control APIDL.
(2)  It is reasonable for the Trustees to believe that the Bankrupt is connected with, if not beneficially interested in, the Funders because:
(a)  The Bankrupt has a track record of investing in litigation funding.
(i)  According to Yu Yang, the Bankrupt introduced him to investment in litigation involving APIDL and the Bankrupt himself (eg the 16778 Action, the 806 Action and HCA 1212/2002), and litigation which did not involve APIDL and the Bankrupt (eg the CWT litigation).
(ii)  It also appears that the Bankrupt has invested in the LSF Case. As mentioned above, $1.56 million from the settlement sum out of the CWT litigation was used for the LSF Case.
(iii)  The Bankrupt’s continued investment in APIDL’s claim in the 806 Action is consistent with the Bankrupt’s previous business affairs and conduct.
(b)  On the limited evidence available to the Trustees, it could already be seen that the ultimate distribution of proceeds from the 806 Action was highly complicated.
(i)  At the very least, (1) the Bankrupt’s family members, (2) Yu Yang and his sister and (3) GBRE were entitled to a share of those proceeds, though the proportion of their respective entitlements was unclear.
(ii)  While it appeared from Yu Yang’s evidence that all of the proceeds would be distributed among the Bankrupt’s family members, Yu Yang and his sister, it was unclear how their shares would be affected by GBRE’s entitlement to 30% of the balance pursuant to the Deed of Assignment between APIDL and GBRE.
(c)  There was an injunction dated 1 June 2012 in the 971 Action that restrained APIDL from disposing of its assets pending trial (“the Injunction”). The Funders might receive nothing out of their investments if the Trustees were to prevail in the 971 Action.
(d)  Given these complications and uncertainties, it was highly unlikely that an independent third party would participate in the funding of the 806 Action. Any negotiations between the existing funders (ie the Bankrupt’s family members, Yu Yang and his sister, and GBRE) and the new funders would be difficult to come to fruition, unless the new funders are the same or related parties.
(e)  Accordingly, based on the materials presently available to the Trustees, the inference that the Funders are related to the Bankrupt and/or the existing funders is eminently sensible.

28. It could be seen from the Trustees’ evidence that the Bankrupt could be related to funders even though his name did not appear on formal legal documents as a shareholder, director or funder.

29. Having regard to the above, the Trustees believe that the information and documents sought by the Summons are reasonably required for them to further investigate the affairs of the Bankrupt and to get in his assets. The Trustees’ views should be given great weight: paragraph 22(6) above.

E2. The standard of proof required of the Trustees

30. The Liquidators deny that the Funders were related to the Bankrupt. Mr Carolan submits that the Trustees need to “produce cogent evidence establishing that the Bankrupt controls or has a close connection with the Funders so as to justify the order sought”.

31. With respect, that is too high a burden because it was precisely due to the Trustees’ lack of full knowledge of the Bankrupt’s affairs that section 29 helps them to discover the truth and gather information about the bankrupt’s dealings or property: paragraph 22(7) above. There is no merits threshold for the Trustees to get past. There is an element of “fishing” on the part of the Trustees with some evidential foundation. The threshold test remains that as stated in paragraphs 22(2), (4), (8) and (9) above.

32. That said, the Court must not ignore the evidence of a respondent.

E3. Liquidators’ case

33. The Liquidators have expressly denied the Trustees’ allegation that the Bankrupt was related to the Funders by (i) letters before the Summons was issued; (ii) statement under oath; (iii) refuting the assertions in paragraphs 26-27 above; and (iv) objecting to the Trustees’ reliance on Yu Yang’s witness statement.

E4. Letters before Summons

34. The first letter before the Summons was dated 31 May 2017 issued by ONC Lawyers (“ONC”) acting on behalf of the Liquidators to Li, Wong, Lam & WI Cheung, former solicitors for the Trustees as follows:

“…we are instructed that, regarding the third party funders for APIDL in HCA 806/2006, to our clients’ best knowledge, these are third party funders which are not connected to the bankrupt, Ho Yuk Wah, David (“Mr. Ho”) in any way. If you have any information and/or documents which may suggest otherwise, please kindly provide the same to us.
…
… we are also instructed that there are no litigation funding arrangements for HCA 971/2012.”

35. The second letter was dated 15 August 2017, wherein ONC stated:

“We see no indication that True Treasure, CNIL and FICL are financially related to the Bankrupt in any way.”

This statement was made in the context of ONC’s explanation that they had followed the anti-money laundering procedures, compliance with law and regulatory requirements, Practice Direction P of the Law Society and the common law offences of maintenance and champerty and that they had conducted background checks and had understood the Liquidators’ funding arrangements for the 806 Action.

36. The Trustees never responded to ONC’s letters before they issued the Summons; or even commented on the inadequacy of steps taken by ONC in paragraph 35.

E5. Statement under oath

37. After the Liquidators were served with the Summons, Hou stated on oath in unequivocal terms that the Bankrupt had no beneficial interest in any funding arrangements in relation to the 806 Action or other proceedings of which APIDL was a party:

“4. At the outset, for the avoidance of doubt, let me make it very clear that, to the best of the Liquidators’ knowledge, information and belief, the Liquidators do not possess any documents or information which suggest, or may tend to suggest, or which lead to a line of enquiry which may suggest, or that may raise any doubts over, that the Bankrupt has any financial interest in the litigation funding agreements of the proceedings in HCA 806/2006 (“the 806 Action”) or any other legal proceedings APIDL is currently a party of. The Liquidators are also unaware of any circumstances which may suggest, or which may tend to raise doubts over whether, the Bankrupt is or was in control of any of the litigation funders which have litigation funding agreements with the Company.”

38. The Liquidators have disclosed who the Funders are, supported by Certificates of Incumbency and Register of Members.

(1)  True Treasure was one of the existing creditors of APIDL, who agreed to provide interim funding for the 806 Action after the Liquidators were appointed, pending other longer term funding being secured. True Treasure had provided approximately HK$1 million from April 2013 to February 2015. This arrangement was approved by APIDL’s Committee of Inspection (“CoI”).
(2)  In early 2015, Tang was introduced to the 2 other Funders, CNIL and FICL by his primary school mate, Mr Tony Cheung. After approval by the CoI, CNIL provided funding of HK$6.5 million to meet an unless order for APIDL to provide further security for costs. The involvement of the Funders and their identities were made known to DHCJ B Chu (as she then was) at the hearing of the unless order on 14 January 2015.
(3)  FICL (a Hong Kong company) is merely a co-funder of CNIL.
(4)  True Treasure and CNIL are both BVI companies. The Liquidators have produced their Certificates of Incumbency and Registers of Members. They show that Mr Tony Cheung is the sole director and shareholder of CNIL, whilst Ms Sun Bo is the sole director and shareholder of True Treasure.
(5)  Since 29 September 2009, CNIL has been under the administration of a firm of CPAs, who have stated by letter that:
“We confirm that the names, Ho Yuk Wah or Ho Yuk Wah David, have never been registered as a shareholder, director or beneficiary of China New Investments Limited from the date of incorporation to now.
We further certify that there has been no change in the shareholder, director or beneficiary of China New Investments Limited ever since 29th Sep 2009.”

39. Further, the Liquidators were never directly related to the Bankrupt. The Liquidators were also trustees of LSF’s bankruptcy and Tang was a co-liquidator of CWT. Tang became one of the Liquidators of APIDL. Ip Pui Lam Arthur, who filed an affirmation filed on behalf of the Trustees, mistook Tang as an employee of APIDL. In fact, Tang was never one. He was engaged as an external consultant in 2008 to provide an independent review of APIDL’s audited accounts.

40. Neither an applicant nor the Court are, of course, obliged to accept at face value a respondent’s statement that no information could be given or that there was no relationship between the bankrupt and the funders. There must be assessment of the respondent’s statement against the background facts.

“31. It is apparent from the decision of Kwan J (as she then was) in Re New China (Hong Kong) Group Ltd unrep., HCMP 2180 of 2005, 14 February 2006, at paragraphs 16 – 20 that the trustees, and, a fortiori, the court are not bound to accept a respondent’s statement that he has no recollection or, by analogy, no information to give, at its face value. In my view, the proper approach is for the court to assess the weight to be given to such a statement against all the background facts and the manner in which the statement is made. This approach is sound in principle and accords with ample common sense.” Re Nanik Dayaram (HCB 7651/2011, 6 November 2015), Ng J.

41. However, looking at paragraphs 34-39, once can see that the Liquidators’ denial of the Bankrupt’s relationship with the Funders was not a bare denial but with credible details.

42. The Liquidators have challenged the Trustees to show otherwise but the Trustees never came back with anything before the Summons was issued.

43. Considering the evidence and applying the low threshold set out in paragraph 31 above, even giving great weight to the views of the Trustees, I am not satisfied that the Trustees have shown that the Funders were/are related to the Bankrupt.

44. This Summons is similar to the one made before Recorder Eugene Fung SC in Re Ho Yuk Wah David [2019] 1 HKLRD 961:

“30. There is no dispute that the LSF Funding Agreement was terminated on 25 March 2013. According to the respondents, the LSF administration is now being funded by a company called China New Investment Ltd (“the New Funder”) [ie CNIL in the present application]. Further, Ms Anita Hou of the respondents, who is an officer of the Court, has both stated in correspondence and confirmed on oath that the New Funder is not related to the Bankrupt. (underline added)
31.  The applicants submitted that the Category 2 Documents are reasonably required to carry out their functions. I can well understand the basis of this request if the applicants believe that the Bankrupt is in control of, or has a close connection with, the New Funder. However, no evidence has been adduced by the applicants to assert that they believe, or have any reasonable suspicion, that the Bankrupt is related to or connected with the New Funder. It follows that the applicants’ submission is nothing more than a bare assertion. (underline added)
32.  Instead, Mr Chen submitted that the Court should not accept Ms Hou’s evidence that the New Funder is not related to the Bankrupt. He criticised that Ms Hou has not given any details on how she came to her conclusion, and asked the Court not to accept her bare denial, citing §§26 – 32 of Ng J’s judgment in Re Nanik Dayaram (unreported, HCB 7651/2011, 6 November 2015). In my view, I do not consider Ms Hou’s evidence as a bare denial and do not accept Mr Chen’s criticism of her evidence.
33.  Given that (1) the applicants have adduced no evidence to suggest that the Bankrupt is any way connected with the New Funder, and (2) the respondents have stated on oath that the Bankrupt is not related to the New Funder, I consider the applicants have failed to discharge their burden to satisfy the Court the Category 2 Documents are reasonably required for them to carry out functions.”

45. I note that the Trustees do not even rely on Nanik Dayaram in the present Summons. They do not show what extra evidence has been adduced in relation to CNIL on the present summons. However, they do invite the Court to draw the inferences based on what was set out in paragraphs 26 and 27 above.

E6. Refuting the assertions in paragraphs 26 and 27

46. As a matter of law, inferences must be properly grounded on facts and not speculation. Mr Carolan relies on Ming Shiu Chung & Ors v Ming Shiu Sum & Ors (2006) 9 HKCFAR 334, wherein Ribeiro PJ reiterated that:

(1) an, “inference must be properly grounded in the primary facts found. The court guards against indulging in conjecture under the guise of drawing an inference where the primary evidence does not logically and reasonably justify the particular inference in question” (at §78); and
(2) “a court is not entitled to: “… choose between guesses, where the possibilities are not unlimited, on the ground that one guess seems more likely than another or the others. The facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied”” (at §79).

47. With respect, that again is too high a standard for present purposes. Mr Chen submits there is a distinction between fishing without well-founded grounds for suspicion and probing the circumstances in the hope of determining whether there is another line of enquiry which should be pursued to ascertain the truth: Re Lee Siu Fung Siegfried [2017] 1 HKLRD 1155, §34, G Lam J. He says the Summons fell within the latter.

48. Do the matters set out in paragraphs 26 and 27 meet the submission of Mr Chen?

49. With regard to paragraph 26, the Liquidators point out that the CWT proceedings were commenced in 2002 and settled in 2009 at HK$45 million. They explained that, out of that amount, HK$20 million was distributed to Topmark and HK$5.6 million to Sun Ascent who were the consultant and funder respectively. The Bankrupt had also made payments in 2004 to Grant Thornton to settle legal fees incurred by CWT. Another sum of HK$1,560,200 was used to pay for legal fees in the LSF Case on the request of Sun Ascent. At that time, Sun Ascent was related to the funders of the LSF bankruptcy (Keentrade and Sinowood, both controlled by the Bankrupt).

50. The settlement took place 2½ years before the Bankruptcy Order was made. There was no evidence to show that the Liquidators had anticipated that bankruptcy. I agree with Mr Carolan that whilst the Trustees could show what the Bankrupt was related to Topmark, and Sun Ascent, that could not form the basis to assert that the Bankrupt is related to the current Funders.

51. With regard to paragraph 27(1)(a), for present purposes, the 971 Action provides sufficient basis for the Trustees to think that the Bankrupt was related to APIDL.

52. With regard to paragraph 27(2)(a), it does not follow from the fact that the Liquidators have previously used funders introduced to them by the Bankrupt for other liquidations or bankruptcies that the current Funders must be related to the Bankrupt.

53. With regard to paragraph 27(2)(b) to (d), it should be borne in mind that litigation funding is a business. The pleaded damages in the 806 Action were in the region of US$322,000,000 plus HK$62,000,000. It is not inherently improbable for unrelated litigation funders to be interested.

54. Further, the Injunction was subsequently varied on 13 July 2012 so that, “The Injunction Order does not prevent the 6^th Defendant [ie APIDL] or any other party from taking any steps in, or raising funds in relation to, pursuing or prosecuting its cause of action in HCA 806 of 2006, or any matters ancillary thereto, including for the avoidance of doubt paying costs and disbursements in relation to HCA 806 of 2006 or matters ancillary thereto”: see Order of Barma J (as he then was) at §3i.

55. Both the Injunction and the variation order were made prior to the winding up of APIDL and well before the Liquidators had secured the assistance of the Funders. Existence of the Injunction does not make it more likely that any funder is related to the Bankrupt.

E7. Objection to the reliance on Yu Yang’s witness statement

56. Mr Carolan further disputes the Trustees’ case under §27 as follows:

57. Firstly, the Trustees claim that Yu Yang’s family funded APIDL from mid-2008 to 2012, basing themselves on Hou’s affirmation at §61.

58. However, Hou’s affirmation at §61 was merely a “Summary of defence of the shareholders of APIDL” in the 971 Action, according to the defence of those shareholders and the witness statements of Yu Yang and Liu Shu filed in that action. Hou did not say that she was aware of any information concerning any funders before APIDL was wound up.

59. I agree that the Trustees have misunderstood Hou’s evidence.

60. Secondly, the Trustees rely on Yu Yang’s witness statement filed in the 971 Action to assert that the Bankrupt’s family members are existing funders of APIDL’s pursuit of 806 Action. Mr Carolan objects to its use, relying on Order 38, rule 2A(11), which provides:

“Where a party serves a witness statement under this rule, no other person may make use of that statement for any purpose other than the purpose of the proceedings in which it was served –
(a) unless and to the extent that the party serving it gives his consent in writing or the Court gives leave; or
(b) unless and to the extent that it has been put in evidence (whether pursuant to a direction under paragraph (7)(a) or otherwise).”

61. Mr Carolan submits that until that witness statement has been put in evidence it remains confidential. It is not permissible for the Trustees to use Yu Yang’s witness statement in the present case. He relies on Hong Kong Civil Procedure 2019, §38/2A/11, p 880:

“Witness statements which have been exchanged under O.38, r.2A are not put in evidence by the fact of exchange, but remain confidential until the witness makes the statement public by verifying it on oath in the witness box, or the party who served the statement waives the privilege.”

62. With respect to Mr Carolan, the witness statement of Yu Yang was produced by Hou in her affirmation made in 2018, rather than by the Trustees. Accordingly, the Liquidators have waived the privilege attached to that witness statement and the Trustees are at liberty to refer to it.

63. With reference to Yu Yang’s statement, Yu Yang alleged that he and his sister had provided funding prior to the winding up of APIDL. He claimed to be using his own money. After the winding up of APIDL, Yu Yang considered his funding of APIDL’s pursuit of the 806 Action to have been completely lost. This resulted in a dispute with the Bankrupt and the Bankrupt’s eventual divorce from Yu Yang’s sister. However, all such funding occurred before the Liquidators took office.

64. Hou has stated on oath that the Liquidators are not in a position to provide any information or documents on any funding arrangements that APIDL might have prior to its winding up. The Trustees have not contradicted her.

65. In summary, the guesses are many and the possibilities are not unlimited. The Trustees have not begun to meet ONC’s challenge for something to suspect the Bankrupt’s relationship to the Funders. I do not find enough evidential basis for me to support the Trustees’ suspicions. I decline to make an order under section 29 for Class 1.

F. CLASS 2 CONCERNING OTHER FUNDERS FOR THE 806 ACTION

66. There had been funders for APIDL’s claim in the 806 Action before APIDL was wound up – King Ocean Development Inc (“King Ocean”) and Sparkle Lanes Ltd (“Sparkle Lanes”) which are BVI companies related to the Bankrupt. They are parties to the 971 Action.

(a) In respect of King Ocean Limited, the Bankrupt and his sister were signatories to the Hang Seng Bank account in 2002 though he was not a director. In the 806 Action, APIDL was ordered to provide security for costs. On 27 February 2008, APIDL issued a cashier order to Registrar of High Court for $1 million security. The money had come from King Ocean. Such a convoluted mode of providing security was probably to prevent people from detecting the Bankrupt’s involvement in APIDL’s litigation.
(b) In respect of Sparkle Lanes, the Bankrupt could sign singly with company chop according to the mandate given by Sparkle Lanes to Hang Seng Bank on 18 March 2003. The Trustees do not have the register of shareholder and director.

67. The funding through King Ocean was provided in 2008, 3 years before the Bankruptcy Order was made; and 5 years before APIDL was wound up and the Liquidators appointed. By the time APIDL was wound up, existing funding arrangements had to cease. The Liquidators had thus to secure the Funders to continue the 806 Action.

68. The Liquidators have confirmed on oath through Hou-2^nd, and I accept, that they are not in a position to comment on funding arrangements (if any) before the winding-up of APIDL and appointment of the Liquidators in April 2013.

69. Hou also stated on oath that:

(1) “The Liquidators are not aware of any transactions between Topmark, Sun Ascent and King Ocean (or any other alleged BVI/nominee companies mentioned in paragraph 11 of Trustee 1^st [which includes Sparkle Lanes] (on the one hand) and the Company (on the other hand) since April 2013”: Hou-2^nd, at §23.
(2) “The Liquidators do not have any records to show Ontrade and King Ocean (or for that matter Tsun King and the other two registered shareholders) were funders of the 806 action at any stage.” Hou-1^st, at §25.

The Trustees have neither refuted this nor identified other funders.

70. The Trustees refer to APIDL’s co-plaintiffs assigning their causes of action to APIDL in paragraph 20(2) above. That was not a funding arrangement and hence irrelevant to the present Summons.

71. On the evidence in Section F, I am not satisfied that there have been other funders for the 806 Action since the winding up of APIDL who are related to the Bankrupt. I decline to make a section 29 order for Class 2.

G. CLASS 3 CONCERNING FUNDERS OTHER THAN IN THE 806 ACTION

72. Other than the 806 Action, Mr Chen has referred to 3 actions in his skeleton submission – the 16778 Action, HCA 1212/2002 and the 971 Action.

73. The 16778 Action was settled in 2011. HCA 1212/2002 ended with the Bankrupt losing in the Court of Final Appeal in 2011. Both actions thus ended 2 years before the Bankruptcy Order and 4 years before the Liquidators took office. The Liquidators claim that they are not in a positon to provide any information or documents on any funding arrangements that APIDL might have prior to its winding-up. There is nothing to contradict this.

74. In respect of the 971 Action, ONC has stated affirmatively in their letter dated 31 May 2017, supra, that there are no litigation funding arrangements. The Trustees have not begun to show otherwise.

75. There is simply no basis for making a section 29 order for Class 3.

H. CLASSES OF INFORMATION AND DOCUMENTS

76. The Schedule of the Summons sets out the information and documents required. I just deal with them for the sake of completeness in case I am wrong in my conclusions above.

(1)  §1 concerns the commercial relationship in general between APIDL and the Funders. The funding arrangements have been admitted but the funding agreements are yet to be produced.
(2)  §4 concerns the discussions pertaining to APIDL’s funding arrangements which may shed light on the persons in control of the Funders, and the precise terms of such arrangements.
(3)  §5 asks for the accounting documents (eg cheques, payment records, invoices and receipts) in relation to the funding agreements, as they would demonstrate the fund flow, and enable the Trustees to ascertain whether the relevant bank accounts overlap with the bank accounts in connection with other funding arrangements, eg those in relation to the CWT litigation and the LSF Case. As the Bankrupt had a history of concealing his trails, such fund flows and correspondence may assist the Trustees in finding out the persons in control of the Funders, and the terms of such arrangements. §§5.1-5.6 relate to particulars of information which would give the Trustees a more complete picture of the funding arrangements between APIDL and the Funders.
(4)  §6 seeks the same documents and information in relation to §5 but in respect of funders other than the Funders.

77. The information and documents sought are clearly defined. The Court is not expected to indulge in fine judgments as to the precise width of the order which should be made, and the Court must take care not to cut down the width of the order sought by the Trustees in a way which would risk making it ineffective (Kong Wah, §30(8), Re Ho Yuk Wah David §14).

78. Save for class 5.2, the Classes are clearly defined and not oppressive to the Liquidators. Class 5.2 is ambiguous as it asks for “the degree of communication between the Liquidators and each of the Funders in relation to the conduct of the 806 Action”. There is simply no objective standard to measure the “degree” of communication.

79. If the Bankrupt is related to the Funders/funders, the information and documents sought by the Trustees are reasonably required for them to properly discharge their duties.

I. LIQUIDATORS’ ABILITY TO PRODUCE THE INFORMATION AND DOCUMENTS

80. There is no dispute that the Funders have in fact provided funding to APIDL for the 806 Action after the Liquidators took office in 2013. The information and documents sought are likely to exist in the ordinary course of things. The Liquidators would be able to produce them.

81. Accordingly, if I were satisfied that the information and documents sought do relate to the Bankrupt’s dealings or property, I would make an order for production of all Classes except Class 5.2.

J. CONCLUSION

82. I dismiss the Summons as the Trustees have failed to show that the information and documents sought are related to the Bankrupt’s property or dealings.

K. COSTS

83. This matter initially came before me on 12 July 2018. However, the Trustees’ evidence at the time (being affirmations of Dennis Lam, ie Lam-27^th and 30^th) was defective as these were made by solicitors, rather than the Trustees themselves. The Summons was therefore adjourned to the present hearing with directions that the Applicants file proper evidence. I ordered that:

(1) the costs thrown away by Lam-27^th and -30^th; and
(2) the costs of the “2018 Summons” (which was issued by the Trustees a day before the hearing for leave to file an affirmation by Mr Ip Pui Lam),

be to the Liquidators (with certificates for 2 counsel), to be dealt with by way of summary assessment at the present hearing.

84. I have considered the statement of costs of the Liquidators for the hearing on 12 July 2018. Lam-27^th and -30^th were not put into the hearing bundle for this hearing, however, Hou-2^nd did refer to Lam-27^th. Not all of the costs of those 2 affirmations were really thrown away. Overall, I summarily assess and allow a sum of $200,000 for costs awarded to the Liquidators on 12 July 2018.

85. As for costs of the present application, costs should follow the event and be to the Liquidators. The Liquidators asks for costs on indemnity basis with certificates for 2 counsel because the decision of Recorder Eugene Fung SC in the present case [2019] 1 HKLRD 961 made clear that (i) the affidavit sought in the summons was not within the Court’s jurisdiction to order; and (ii) there was no evidence of any relationship between the Bankrupt and at least CNIL. The same legal team appeared for the Trustees in that decision. By 2 letters dated 27 February 2019, ONC has drawn the Trustees’ attention to that decision but the Trustees had not responded to it. Eventually, the Trustees are not successful over all Classes at this hearing.

86. I agree that costs should be on indemnity basis. However, without disrespect, the present application is not more difficult than the one before Recorder Eugene Fung SC. That application involved only one counsel on each side.

87. I therefore make an order nisi that costs should be to the Liquidators on indemnity basis with certificate for only Mr Carolan. Such costs are to be summarily assessed on the papers. The Liquidators shall lodge and serve their costs statement within 7 days of the handing down of this decision. The Trustees shall lodge and serve their grounds of objection within 7 days thereafter.

	(Queeny Au-Yeung)
	Judge of the Court of First Instance
	High Court

Mr David Chen, instructed by Hobson & Ma, for the applicants

Mr Paul Carolan & Mr Eugene Kwok instructed by ONC Lawyers for the respondents

[2019] HKCFI 2073-EN-2019-08-27

IP PUI LAM ARTHUR AND ANOTHER v. ALAN CHUNG WAH TANG AND OTHERS

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HCB 3819/2011

[2019] HKCFI 2073

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

____________

RE :	HO YUK WAH DAVID, a bankrupt
BETWEEN
	IP PUI LAM ARTHUR and IP PUI SUM, Joint and Several Trustees in Bankruptcy	Applicants
	and
	ALAN CHUNG WAH TANG and ALISON WONG LEE FUNG YING	1^st Respondents
	ALAN CHUNG WAH TANG and HOU CHUNG MAN, Joint and Several Trustees in Bankruptcy of the Estate of LEE SIU FUNG, SIEGFRIED, the Bankrupt	2^nd Respondents

____________

Before:

Madam Recorder Linda Chan SC in Chambers

Date of Hearing:	19 August 2019
Date of Decision:	19 August 2019
Date of Reasons for Decision:	27 August 2019

________________________________

REASONS FOR DECISION

________________________________

1. On 31 May 2019, this Court ordered the 1^st and 2^nd respondents to comply with the order made by Au-Yeung J on 7 April 2017 (“Production Order”) within 28 days of the Order [1]. Amongst the 1^st and 2^nd respondents, Mr Tang and Ms Hou (together “Respondents”),seek to appeal against the Order by filing a Notice of Appeal dated 28 June2019 in CACV 291/2019. On the same day, they issued a summons under Order 59, rule 13 of the Rules of the High Court for a stay of the Order until determination of the appeal. Although §3 of the summons seeks an extension of time for compliance with the Order within 28 days from the date of the determination of the summons, that part of the application is not pursued by Mr Hew, counsel for the Respondents, in his written and oral submissions. At the end of the hearing, I dismissed the summons with costs to be paid by the Respondents to the Trustees with reasons to be handed down. These are the reasons for my decision.

Whether the appeal is competent

2. The Order against which the Respondents seek to appeal was made under Order 45, rule 6(1) to enforce the Production Order, specifically, to give one last chance for the Respondents to comply with it. It seems to me that the Order is an interlocutory order, which requires leave to appeal under section 14AA(1) of the High Court Ordinance. Prior to filing the Notice of Appeal, no application has been made by the Respondents for leave to appeal against the Order.

3. When the point is raised by this Court at the hearing, Mr Hew accepts that the Order does not fall within any of the classes of order stipulated in Order 59, rule 21(1) – (2) but contends that leave to appeal is not required as the Order is not an interlocutory order but a final order. He submits that applying the application test, the Order I made “determines the issues between the parties” raised in the Trustees’ summons for enforcement of the Production Order and, as such, is a final order. I do not think this is right, as the Order is made to give one last opportunity for the Respondents to comply with the Production Order within the new time limit stipulated. It did not “determine the whole action” or “a substantive part of the final trial, or ‘crucial issue’ that goes to the root of the case” or a “dominant feature of the case” in the sense discussed in Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd (2003) 6 HKCFAR 222.

4. Mr Hew then changes his submissions and contends that the Order falls within Order 59, rule 21(1)(a), being “a judgment or order determining in a summary way the substantive rights of a party to an action”for the same reason articulated. The submission is misconceived, given that the Order did not determine any substantive rights of the parties.

5. Lastly, Mr Hew asks the court to adjourn the summons so that the Respondents can consider whether to make an application for leave to appeal or to allow the Respondents to make an application for leave to appeal orally. I refuse to accede to either course suggested, in light of (a) the delay and inaction on the part of the Respondents in seeking leave, (b) the time limit for the Respondents to apply for leave to appeal has long expired, and (c) the requirements for seeking leave, as stipulated in Order 59, rule 2A(1), have not been complied with.

6. On the same day after conclusion of the hearing, Mr Chen, counsel for the Trustees, lodged a supplemental submission to draw to the Court’s attention the decision of Godfrey Lam J in Re Lee Siu Fung Siegfried (No2) [2018] 3 HKLRD 765, where the learned Judge held that the order against which the appeal was brought was a dismissal of an application for discovery made by the Court of First Instance sitting in its bankruptcy jurisdiction and, therefore, is an order of the “court” within the meaning of section 98(2) of the Bankruptcy Ordinance (Cap 6) as well as an order “made … in the matter of any bankruptcy” within the meaning of Order 59, rule 4(1)(b) (§12). As section 98(2) is in mandatory terms and has exclusive application to bankruptcy matters, it should be given effect over section 14AA (§14), citing Mita Kogyo Kabushiki Kaisha v Mitac Inc [1993] 2 HKLR 466; WFM Motors Pty Ltd v Malcolm Maydwell [1996] 2 HKLR 236). Mr Chen submits that on the basis of Re Lee Siu Fung Siegfried (No2), there is basis for saying that neither section 14(1) nor section 14AA(2) of the High Court Ordinance is intended to apply to bankruptcy appeals, the jurisdiction of which is provided by section 98(2) of the Bankruptcy Ordinance. Mr Hew in his supplemental submissions, agrees with Mr Chen’s submissions.

7. The Court is grateful for Mr Chen’s assistance. In Re Lee SiuFung Siegfried (No2), the order against which the appeal was brought was a dismissal of an order for discovery made in the bankruptcy proceedings of LSF. In the present case, the Order was made in the exercise of the power under Order 45, rule 6(1) pursuant to a summons issued by the Trustees in the bankruptcy proceedings of David Ho. Thus, while I agree that the Production Order made under section 29 of the Bankruptcy Ordinance (Cap 6) is an order made by the court “sitting in its bankruptcy jurisdiction” and, therefore, is covered by section 98(2), the same may not be said of an order made by the Court in the exercise of its power under Order 45, rule 6(1) of the Rules of the High Court. Nevertheless, for the purpose of considering the Respondents’ summons for stay, I am prepared to proceed on the basis that leave to appeal is not required.

Grounds of appeal not reasonably arguable

8. I do not think that the grounds of appeal raised in the Notice of Appeal by the Respondents are reasonably arguable for the following reasons.

9. Ground 1 contains a repetition of the arguments made at the substantive hearing, which I have considered in the Decision. In his written submissions (§§22 – 24), Mr Hew submits that the specific items identified in the Table do not show that the Respondents had failed to produce the documents covered by the Production Order. I do not think this is a point which can be made by the Respondents in the appeal:

(1)   As noted in §18 of the Decision, at the substantive hearing, the Respondents did not dispute the accuracy of the Table. Mr Hew confirms that this remains the position of the Respondents but goes on to say that the Respondents take issue with the descriptions in the Table insofar as they stated the Respondents had failed to produce the documents identified.
(2)   As I understand his submission, Mr Hew says that the Respondents did not fail to produce the documents identified in the Table, given that they had either been disclosed before the substantive hearing or that they were not documents within the possession, custody or control of the Respondents. Despite this Court pointing out to Mr Hew that the latter assertion is not supported by the affirmations filed by the Respondents, Mr Hew maintains that submission, on the basis that the Court can “infer” such evidence upon reading all the affirmations filed by the Respondents as a whole. I am unable to see why the Court should “infer” the existence of such evidence when the Respondents did not say so in their affirmations.
(3)   Mr Hew asserts that the Respondents did not confine their search for the documents covered by the Production Order to the physical case files of CWT and LSF, and they also searched the “electronic files”. Again, when it is pointed out to Mr Hew that the Respondents did not in their affirmations say that they had for the purpose of complying with the Production Order also searched the “electronic files”, Mr Hew asks the Court to “infer” such evidence on the basis that amongst the documents produced by the Respondents, there were a few emails which, it is said, could only have been produced upon a search of the “electronic files”. The submissions must be rejected for the same reason that it is not for the Court to infer the existence of any evidence when the Respondents did not say so in their affirmations.
(4)   This is particularly so when the Respondents were fully aware of the fact that (a) the Trustees had in the 7^th Affirmation of Ip Pui Lam Arthur dated 11 February 2019 (at §5(1)), made a specific complaint about the Respondents’ failure to produce the “email correspondence between the Respondents and David Ho”; and (b) counsel for the Trustees, in his written submissions, specifically made the point that the Respondents had confined their search on the physical files of CWT and LSF and did not search the electronic files of the CWT and LSF.

10. As for Ground 2, which concerns §2 of the Production Order,again, I do not consider the points raised are arguable. They are repetitions of the same arguments raised at the substantive hearing, all of which have been considered at §§27 – 30 of the Decision. The Respondents have not even articulated any basis for saying that the reasons set out in those paragraphs of the Decision are in any way incorrect.

11. Ground 3 only sets out the findings which the Respondents contend ought to have been made by this Court. No substantive point has been raised.

Appeal would not be rendered nugatory

12. In his written submissions, Mr Hew argues that the Respondents’ appeal would be rendered nugatory if no stay is granted, on the basis that “the Respondents would have to expend considerable manpower and resources to handle the considerable logistical difficulties in complying with the Order. They would have to locate and comb throughvoluminous documents yet again after a lengthy lapse of time and numerous office moves, and of the 10 boxes in relation to CWT. They would not be compensated for this considerable effort if the appeal is successful.” I do not think it is open to Mr Hew to make that submission, as neither Ms Hou nor Mr Tang has in the affirmations filed in support of the summons for stay said anything to the effect submitted by Mr Hew. As pointed out by Mr Chen, this is despite the fact that he has in his written submissions (§18) specifically made the point that there is no evidence in support of Mr Hew’s contention that the Respondents would have to expend “considerable manpower and resources to handle the considerable difficulties in complying with the Order”. As such, it was possible for the Respondents to file a further affirmation to say so, should they truly believe that there is any factual basis in support of Mr Hew’s contention.

13. As a matter of fact, in her 5^th Affirmation, Ms Hou said (and adopted by Mr Tang) the following in support of her contention that without a stay, the appeal would be rendered nugatory:

(1)   the Respondents “would suffer loss which would not be compensated by damages” (§5). However, what loss would be suffered by the Respondents has not been identified let alone explained;
(2)   if the Respondents succeed in the appeal, the Trustees “would already have used, read, made copies and/or distribute the documents (if any) and, as such, the appeal would be rendered nugatory (§6). However, the Respondents never opposed production of the documents covered by the Production Order to the Trustees. Nor has it ever been suggested that the documents covered by the Production Order should not be produced to the Trustees, whether on the ground of privilege, confidentiality or any other ground. That being the position, it is difficult to see how the Respondents can contend that the production to, and the use of the documents by, the Trustees would render the appeal to become nugatory in the sense that information and documents, once produced, could not be reversed; and
(3)   “once the affirmation in compliance and/or documents (if any) are produced by the [Respondents], there would be prejudice caused to the [Respondents]”. On the contrary, there would be no prejudice to the Trustees if a stay if granted (§7). I am unable to accept the Respondents’ bare assertion as to prejudice when they have not been able to identify what prejudice they would suffer without a stay. Nor do I accept that there would be no prejudice to the Trustees if the Order is stayed. As the successful party, the Trustees are entitled to expect the Order to be complied with by the Respondents within the time limit stipulated. This is particularly so when there has already been a considerable delay on the part of the Respondents in complying with the Production Order made in April 2017 which, in turn, has impeded their on-going investigations on the affairs of Mr Ho and the BVI Companies associated with him.

14. As the Respondents have not adduced any evidence to show that without a stay the appeal would be rendered nugatory, even if,contrary to my view, the three grounds identified in the Notice of Appeal are arguable or have reasonable prospects of success, I would not exercise my discretion to grant a stay of the Order.

	(Linda Chan SC)
	Recorder of the High Court

Mr David Chen, instructed by Lee, Wong & Lam, for the applicants

Mr Yang-wahn Hew and Mr Keith Tam, instructed by ONC Lawyers, for the 2^nd respondents and Mr Alan Tang, one of the 1^st respondents

[1] Unless otherwise stated, I adopt the same abbreviations used in the Decision dated 31 May 2019

[2019] HKCFI 1398-EN-2019-05-31

IP PUI LAM ARTHUR AND ANOTHER v. ALAN CHUNG WAH TANG AND OTHERS

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HCB 3819/2011

[2019] HKCFI 1398

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

____________

RE :

HO YUK WAH DAVID,

a bankrupt

BETWEEN
	IP PUI LAM ARTHUR and IP PUI SUM, Joint and Several Trustees in Bankruptcy	Applicants
	and
	ALAN CHUNG WAH TANG and ALISON WONG LEE FUNG YING	1^st Respondents
	ALAN CHUNG WAH TANG and HOU CHUNG MAN, Joint and Several Trustees in Bankruptcy of the Estate of LEE SIU FUNG, SIEGFRIED, the Bankrupt	2^nd Respondents

____________

Before: Madam Recorder Linda Chan SC in Chambers

Date of Hearing: 15 May 2019

Date of Decision: 31 May 2019

_____________

D E C I S I O N

_____________

1. By summons dated 27 April 2018, the applicants (“Trustees”), the joint and several trustees of the estate of Ho Yuk Wah David (“Bankrupt”), applies for an order under Order 45, rule 6(1) to enforce the order made by Au-Yeung J on 7 April 2017 against the 1^st and 2^nd respondents for production of various documents relating to the Bankrupt or his dealings, affairs or property (“Production Order”).

2. The 1^st respondents, Mr Tang and Mrs Wong, are the joint and several liquidators of CWT Textile Supplies Company Limited (“CWT”). The 2^nd respondents, Mr Tang and Ms Hou, are the joint and several trustees in the bankruptcy of Lee Siu Fung Siegfried (“LSF”). Mr Tang, Mrs Wong and Ms Hou became partners of Shinewing Specialist Advisory Services Limited (“Shinewing”) in 2011. Mrs Wong retired as a partner on 30 June 2014 although she remains a liquidator of CWT.

3. The Production Order was the fourth order obtained by the Trustees under section 29 of the Bankruptcy Ordinance (Cap 6) against the 1^st and 2^nd respondents for production of documents relating to the affairs of the Bankrupt.

Background

4. The background fact has been set out in the judgment of To J in Re Ho Yuk Wah David (bankrupt) [2015] 2 HKLRD 603 at 606 – 608 and the judgment of Recorder Eugene Fung SC in Ip Pui Lam & anor v Alan Chung Wah Tang& anor[2019] HKCFI 149 at §§1 – 11, 17 – 19. The salient fact relevant to the present application is as follows.

5. On 2 August 2011, a bankruptcy order was made under a petition presented by the Bankrupt himself. The Trustees were appointed on 30 September 2011. The Trustees are of the view that the Bankrupt has been operating a complex scheme using about 30 offshore companies and nominees to carry on business ventures and litigations, conceal his assets and pay his personal and family expenses. The offshore companies include Topmark Asia Ltd (“Topmark”), Sun Ascent International Ltd (“Sun Ascent”), Keentrade Investments Ltd (“Keentrade”) and Sinowood International Ltd (“Sinowood”), all of which were incorporated in the British Virgin Islands (collectively “BVI Companies”).

6. Amongst the documents obtained by the Trustees pursuant to previous production orders, there was a consultancy agreement between the 1^st respondents and Topmark and a funding agreement between the 1^st respondents and Sun Ascent, both of which relate to CWT’s claim against its former auditors for alleged professional negligence. After the claim had been settled, a sum of HK$45 million was paid to the 1^st respondents who, in turn, caused payments to be made to Topmark and Sun Ascent. According to the 1^st respondents, the CWT liquidation was completed by 2009.

7. Similarly, there was an agreement between the 2^nd respondents and Keentrade in respect of funding for litigations arising from the bankruptcy of LSF, and a consultancy agreement for providing service in respect of such litigations. No recovery, payment or refund was made to Keentrade or Sinowood. The agreements were terminated in March 2013. Since then, the funder of LSF bankruptcy has changed a number of times.

8. As recorded in the Decision of Au-Yeung J dated 7 April 2017, the Production Order was made without any opposition from the 1^st and 2^nd respondents. The only points raised on behalf of the 1^st and 2^nd respondents were the time limit for production of documents and costs. Under the Production Order, the 1^st and 2^nd respondents were ordered to produce, by 6 June 2017, copies of the following three categories of documents:

(1)  documents in connection with 10 payments made between 28 November 2003 and 25 March 2008 in the aggregate sum of HK$4,198,240.30 set out in a document entitled “CWT Textiles Supplies Company Limited (in creditors’ voluntary liquidation) Interest calculation on Fundings [sic] (excluding HK$920,000 security for costs)”;
(2)  the supporting documents in connection with the amount of HK$1,560,200 set out in a document entitled “Distribution schedule for settlement sum of HK$45 million”; and
(3)  the documents in connection with a funding agreement dated 4 August 2005 made between Keentrade and the 2^nd respondents.

9. In relation to these three categories of documents, it was expressly stated in the Production Order that they included, but not limited to, the agreement(s), correspondence, minutes of meeting(s) / written resolution(s) of the creditors / committee of inspection / court order(s), cheque(s), bank draft(s), cashier order(s), invoice(s), receipt(s) and any other accounting documents in relation thereto.

10. Under §2 of the Production Order, if any of the documents falling within the three categories “had never been or is no longer in his/her custody and/or power, the 1^st Respondents and/or the 2^nd Respondents (where applicable) do by 6 June 2017 file an affidavit/affirmation in respect of each document whether it had been in his/her custody and/or power, and if it had been, when it was last in his/her custody and/or power, and the reason it is now no longer in his/her custody and/or power”.

11. It is common ground that the Production Order covers the documents falling within the scope of the three categories, whether they were stored in electronic or physical form.

12. The 1^st and 2^nd respondents through their solicitors provided the Trustees with 151 items consisting of 835 pages of documents on 6 June 2017, 7 August 2017 and 11 December 2017. They considered thatthey had complied with the Production Order. This is despite the fact that they have not filed any affirmation as required by §2 of the Production Order.

13. Although Mrs Wong retired from Shinewing in June 2014 and has since then spent most of her time looking after her family members, she accepts that as a liquidator of CWT, she was (and still is) under an obligation to comply with the Production Order. The only steps taken by her in compliance with the Production Order were:

(1) to request for a list of books and records concerning CWT from Ms Hou on 28 February 2018, which was provided to her on 2 March 2018. Thereafter, Mrs Wong inspected five box files of documents and was satisfied that they relate to litigation funding; and
(2) to invite the Trustees’ solicitors to attend the office of Shinewing for the purpose of inspecting the files of CWT (approximately 250 box files) on 13 March 2018. However, the Trustees declined to take up the invitation on the basis that it was the responsibility of the 1^st respondents to go through the files and identify the documents which fall within the scope of the Production Order and produce them to the Trustees.

14. The Trustees were dissatisfied with the extent of the documents produced by the 1^st and 2^nd respondents and their failure to file the requisite affirmation and issued the summons to secure compliance with the Production Order.

Applicable principles

15. Order 45, rule 6(1) provides that:

“ Notwithstanding that a judgment or order requiring a person to do an act specifies a time within which the act is to be done, the Court shall, without prejudice to Order 3, rule 5, have power to make an order requiring the act to be done within another time, being such time after service of that order, or such other time, as may be specified therein.”

16. In Re Ho Yuk Wah David (bankrupt) [2015] 2 HKLRD 603, To J stated (at §19 [1]) the principle governing an application made under Order 45, rule 6(1) in this way:

“ This jurisdiction is an absolute one. The rule enables the court to give the respondent one last chance to comply with its order before the applicant may invoke the penal sanctions available in the court’s armory. The burden is on the applicant to prove that an order had been made requiring the respondent to perform an act within a specified time and the respondent failed to do so. Once that is proved, the burden is then shifted to the respondent to show why he should not be required to comply with the order to perform the act, upon being given a second chance. The obligation to perform the act required had been determined and made an order of the court. Thus, in considering whether to exercise the discretion under this rule, there is no need for the court to revisit the appropriateness or otherwise of its previous order. The question is simply whether in all the circumstances the respondent should be excused from performing the act underits previous order. As the court’s orders are made to be complied with, such circumstances must be very rare indeed. A possible example would be impossibility of performance as a result of a change in circumstances.”

Discussion

17. The Trustees contend that the 1^st and 2^nd respondents have failed to comply with the Production Order. They identified 18 specific instances of documents which fall within the scope of the Production Order but have not been produced by the 1^st and 2^nd respondents. Mr David Chen, counsel for the Trustees, has helpfully summarised the 18 instances of alleged failure to produce documents and the response of the 1^st and 2^nd respondents in a table (“Table”) based on the contents of the 2^nd Affirmation of Ip Pui Lam Arthur filed on behalf of the Trustees on 7 August 2018 and the 3^rd Affirmation of Hou Chung Man filed on behalf of Mr Tang and Ms Hou on 8 November 2018 (“Hou 3^rd”).

18. At the hearing, Mrs Wong (acting in person) and Mr Patrick Siu, counsel for Mr Tang and Ms Hou, do not dispute the accuracy or completeness of the Table. Accordingly, I shall refer to the Table on the basis that it is an accurate summary of the Trustees’ specific complaints onnon-compliance and the 1^st and 2^nd respondents’ response to such complaints.

19. For Items 1 – 17, the Trustees identified the source documents which suggest that further documents might be in existence but have not been produced by the 1^st and 2^nd respondents. Mr Chen submits that:

(1)  the 1^st and 2^nd respondents must be aware that the documents which they failed to produce are directed to (a) establishing the connection between the Bankrupt and the BVI Companies and (b) identifying the payors and payees of the fund flows between the BVI Companies, the 1^st and 2^nd respondents and the Bankrupt;
(2)  the documents under Items 4, 6, 8, 9 and 12 were only produced by the 1^st and 2^nd respondents in Hou 3^rd, as exhibits “HCM-17” to “HCM-19”, “HCM-21” to “HCM-23” and “HCM-25”;
(3)  the documents belatedly produced by the 1^st and 2^ndrespondents are said to have been located after further detailed search of CWT and LSF case files. This suggests that either the earlier production of documents was incomplete or the 1^stand 2^nd respondents deliberately withheld production of certain documents falling within the scope of the Production Order. There is no explanation as to why these documents were not produced earlier; and
(4)  although the 1^st and 2^nd respondents assert that the specific documents identified by the Trustees in Items 1 – 3, 5, 7, 10 and 11 are not available, such assertion should not be accepted as their search was only confined to the CWT and LSF physical case files. Under the Production Order, the 1^st and 2^nd respondents are required to produce the documents that are within their custody or power. This requires the 1^st and 2^nd respondents to search for the relevant documents stored in electronic form. For example, there might be email correspondence stored in the email servers of the office wherethey practised, and copies of cheques, invoices, cashier orders,receipts kept by the accounting department.

20. As for Item 18, it concerns the 1^st and 2^nd respondents’ failure to file an affirmation to explain the documents which were once, but no longer in, their custody or power.

21. Mr Siu, on behalf of Mr Tang and Ms Hou, advances the following grounds in opposition to the summons:

(1)  the Trustees have failed to say, let alone prove, what documents the 1^st and 2^nd respondents have omitted to produce under the Production Order. It is not sufficient for the Trustees to say that there are “outstanding documents” which the 1^st and 2^nd respondents have failed to produce or to refer to source documents which suggest that further materials “might be available”;
(2)  the 1^st and 2^nd respondents never said that they had only searched the physical but not the electronic files. Indeed, it was from their search of the electronic files that they were able to identify and produce some emails which show the involvement of the Bankrupt in dealing with the litigation of CWT including the use of the settlement sum paid to CWT;
(3)  the 1^st and 2^nd respondents have searched the files again and, where possible, produced some additional documents. There is “nothing further that the Respondents can do”;
(4)  the documents identified in Items 2, 3, 5 to 12 fall outside the scope of the Production Order as they relate to “outward payments” (i.e. payments made by CWT), but the Production Order only requires the 1^st and 2^nd respondents to produce documents relating to “inward payments” (i.e. payments made to CWT);
(5)  the Production Order requires the 1^st and 2^nd respondents to produce documents within their “custody and/or power”. However, under section 29 of the Bankruptcy Ordinance, the court can only order a respondent to produce documents within his “possession and control”;
(6)  Ms Hou has already explained (in Hou 3^rd) that given the “very vague description of the documents sought”, the long lapse of time, their endeavour to locate the relevant documents and produced all such documents, she “cannot tell if there would beother documents that may have existed, and the whereabouts of those documents that may have existed but can no longer be located”. Mr Tang has adopted the same stance. In the premises, Ms Hou and Mr Tang have already complied with §2 of the Production Order “by explaining every relevant matter known to them”. It would be futile to make an order against the 1^st and 2^nd respondents as they would only file an affirmation to say that the same thing; and
(7)  it is now clear law that the court cannot under section 29 of theBankruptcy Ordinance order a respondent to make an affidavit as required by §2 of the Production Order, citing Ip Pui Lam & anor v Alan Chung Wah Tang & anor[2019] HKCFI 149, §§39 – 42, per Recorder Eugene Fung SC. As such, the court“should not exercise its discretion to continue with an obvious and indisputable legal mistake”.

22. As for Mrs Wong, her grounds in opposition to the summons may be summarised as follows:

(1)  she does not have direct access to or control over the records covered by the Production Order;
(2)  the documents sought by the Trustees go beyond what they reasonably require;
(3)  she did not know what further documents the Trustees sought and they should have accepted her invitation to inspect the case files of CWT and LSF so as to identify the documents they wanted; and
(4)  she trusted that Mr Tang and Ms Hou are “decent professionals” and have responded to the requests made by the Trustees.

23. I consider these grounds in turn.

24. First, I am unable to accept the 1^st and 2^nd respondents’ contention that the Trustees have not identified or proved that they had failed to comply with the Production Order (§21(1) and §22(4) above). As can be seen from the Table, it is indisputable that when the summons was issued, the 1^st and 2^nd respondents had failed to produce the documents identified in Items 4, 6, 8, 9 and 12.

25. Second, I do not think there is a proper basis for Mr Siu’s submission that the 1^st and 2^nd respondents have already searched all the physical and electronic files within their custody or power or that there is “nothing further that the Respondents can do” (§21(2) – (3) above):

(1)  The 1^st and 2^nd respondents have not in Hou 3^rd made clear what files or records (physical or electronic) she had searched and reviewed for the purpose of complying with the Production Order. This was despite the fact that in the emailscorrespondence between Ms Hou and Mrs Wong (“AWLFY-6”), it is clear that Ms Hou had obtained a list of books and recordsof CWT generated from “the latest available storage records”.
(2)  Instead, in §10 of Hou 3^rd, Ms Hou used general wordings to describe her search, stating that she together with Mr Tang andMrs Wong had “tried (and continue to try) to locate and review in detail the remaining available files and documents of the CWT and LSF cases, which are the two main insolvency administrations that are subject to the [Production Order]”. She even emphasises that “although there was a general filing system (subject to modifications) which was supposed to be followed by supporting staff who did the filing …, the completeness and correctness of the actual filing or safekeeping of documents cannot be guaranteed by anyone. It is common business knowledge that documents do go missing or get mis-filed over time (and following a number of office relocations)”.
(3)  A similar point was made in §17 of Hou 3^rd, where Ms Hou stated that “Mr Tang and I cannot guarantee all the documents sought ever existed in the first place; and to the extent they might have existed, that all of these documents can now be located and retrieved, as most of the transactions were over at least 10 years ago”.

26. Third, the suggestion that §1 of the Production Order only requires the 1^st and 2^nd respondents to produce documents relating to “inward payments” (§21(4) above) is plainly wrong. Each of the three categories is described in terms of documents “in connection with” the specific payments, the specific sum in the distribution schedule and the funding agreement made between Keentrade and the 2^ndrespondents. Such description is wide enough to cover both inward and outward payments. Indeed, that was the understanding of the 1^st and 2^nd respondents, evidencedby their act in producing documents relating to the outward payments made by CWT.

27. Fourth, the contention that the Production Order, to the extent that it requires the 1^st and 2^nd respondents to produce documents in their “custody or power”, was made without jurisdiction (§21(5) above), is wholly without merit:

(1)  It is not open to the 1^st and 2^nd respondents to ask the court to revisit the appropriateness or propriety of the Production Order.
(2)  In any event, under section 29(1) of the Bankruptcy Ordinance,“the court may require any person to produce any documents in his custody or power relating to the bankrupt, his dealing or property”.
(3)  §1 of the Production Order does not refer to “custody or power”. In light of the wordings of section 29(1) of the Bankruptcy Ordinance, it is clear that the 1^st and 2^nd respondents can only be required to produce documents which are within their custody or power. Indeed, this was the understanding of the Trustees and the 1^st and 2^nd respondents.
(4)  While §2 of the Production Order refers to documents “which had never been or is no longer in his/her custody and/or power”, it does not render §2 of the Production Order to be made without jurisdiction. As discussed in §30 below, §2 of the Production Order is an ancillary order made by the court to ensure that §1 of the Production Order is effective, and the court has inherent power or jurisdiction to make such an order.

28. Fifth, I do not accept Mr Siu’s bold suggestion that Hou 3^rd constituted an affirmation in compliance with §2 of the Production Order (§21(6) above). Indeed, neither the 1^st and 2^nd respondents have made such a suggestion in their affirmations. Nor have they explained why theyhad failed to file the affirmation as required by §2 of the Production Order.

29. Sixth, I am unable to accede to the submission that the court has no jurisdiction to make an order in terms of §2 of the Production Order or that the court should not enforce such an order (§21(7) above). It is not the occasion to ask the court to revisit the propriety of the Production Order.

30. Further and in any event, as Mr Chen submits, the court has inherent power under section 29 of the Bankruptcy Ordinance or the inherent jurisdiction to make an ancillary order to ensure that the exercise of its jurisdiction or the remedies it grants is effective. He relies on the well established principle propounded in AJ Bekhor & Co Ltd v Bilton[1981] 1 QB 923, a case concerned with the jurisdiction of the court to makean ancillary order requiring disclosure of assets in aid of Mareva injunction,at 940G–H, 942G–H, per Ackner LJ. I agree. Indeed, an order requiring a respondent to file an affirmation to explain the whereabouts of the documents which were once, but no longer in, the “custody or power” of the respondent is frequently made by the court under section 286B[2] of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32), which confers the power on the court to make an order for private examination and production of documents against the respondent.

31. As for the other grounds raised by Mrs Wong, they are equally without merit:

(1)  The suggestion that she has no direct access to or control over the records falling within §1 of the Production Order (§22(1) above) is untenable. She is a liquidator of CWT and, in that capacity, has power over the records of CWT. As a matter of fact, she has exercised such power and obtained access to the CWT files without any difficulty.
(2)  The argument that the documents sought by the Trustees go beyond what they reasonably require (§22(2) above) is an attempt to ask the court to revisit the Production Order, which is not permissible.
(3)  The suggestion that she did not know what further documents the Trustees sought and that the Trustees should inspect the case files of CWT and LSF to identify the documents they want runs contrary to the terms of §1 of the Production Order,which requires the 1^st and 2^nd respondents to produce the three categories of documents.

32. For the above reasons, I hold that the Trustees have discharged the burden of proving that the 1^st and 2^nd respondents had failed to comply with the Production Order. None of the grounds advanced by the 1^st and 2^nd respondents constitute a valid reason for not complying with the Production Order.

Conclusion

33. I order the 1^st and 2^nd respondents to comply with §§1 and 2 of the Production Order within 28 days of this Decision.

34. As for costs, I make an order nisi that:

(1) the costs of the summons be paid by 1^st and 2^nd respondents to the Trustees, to be assessed by way of gross sum assessment. The Trustees do submit their statement of costs within 3 days of this Decision, and the 1^st and 2^nd respondents do submit their objections to the statement of costs, if any, within 3 days thereafter; and
(2) the costs of the summons shall be borne by Mr Tang/Ms Hou and Mrs Wong as to 85% and 15% respectively, on the basis that most of the grounds in opposition to the summons are raised by Mr Tang and Ms Hou.

	(Linda Chan SC)
	Recorder of the High Court

Mr David Chen, instructed by Hobson & Ma, for the applicants

Mr Patrick Siu, instructed by ONC Lawyers, for the 2^nd respondents and Mr Alan Tang, one of the 1^st respondents

Mrs Alison Wong, one of the 1^st respondents, appeared in person

Attendance of the Official Receiver was excused

[1] Which has been applied in Wah Sun Hong Limited v Wong Lee Yuk Ping Agnes HCA 874/2015, 12 August 2016 at §17 per DHCJ Wilson Chan (as he then was)

[2] Formerly section 221

[2019] HKCFI 942-EN-2019-04-12

IP PUI LAM ARTHUR AND ANOTHER v. ALAN CHUNG WAH TANG AND OTHERS

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HCB 3819/2011

[2019] HKCFI 942

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

________________

RE :

HO YUK WAH DAVID (the Bankrupt)

BETWEEN
	IP PUI LAM ARTHUR and IP PUI SUM	Applicants
	(Joint and Several Trustees in Bankruptcy)
and
	ALAN CHUNG WAH TANG and HOU CHUNG MAN	Respondents
	(Joint and Several Trustees in Bankruptcy of the estate of LEE SIU FUNG SIEGFRIED, the Bankrupt)

________________

Before: Mr Recorder Eugene Fung SC in Chambers

Date of Respondents’ Written Submissions: 22 February 2019

Date of Applicants’ Written Submissions: 8 March 2019

Dates of Respondents’ Reply Submissions: 22 March 2019

Date of Decision on Costs: 12 April 2019

___________________________

DECISION ON COSTS

___________________________

1. In my Decision dated 18 January 2019 (“the Decision”), I ordered the respondents to produce the documents set out in paragraph 1 of the Schedule to the applicants’ summons dated 27 April 2018 (“the Summons”) and dismissed the remainder of the Summons. I also made an order nisi that 50% of the applicants’ costs of the Summons be borne by the respondents to be taxed if not agreed.

2. By a summons dated 29 January 2019 (“the Variation Summons”), the respondents seek to vary my costs order nisi to contend that either (1) 50% of the respondents’ costs of and occasioned by the Summons be borne by the applicants to be taxed if not agreed, or (2) there be no order as to costs of the Summons. The parties have agreed that the Court should deal with the Variation Summons on paper and written submissions have now been filed by the parties, which have been considered by the Court. The applicants oppose the Variation Summons and contend that my costs order nisi should be made absolute.

3. In determining this application, I have borne in mind the following rules and principles:

(1) Order 62, rule 3(2) of the Rules of the High Court relevantly provides that “the Court shall, subject to this Order, order thecosts to follow the event, except when it appears to the Courtthat in the circumstances of the case some other order should be made as to the whole or any part of the costs.”
(2) There is a discretion in the court to deprive a successful party of the whole or part of his costs because he had caused significant increase in the length or costs of the proceedings by raising issues on which he did not succeed. Whether or not it should be done depends on all the circumstances. This discretion exists for the purpose of avoiding the rigour of too inflexible an application of the rule that costs generally follow the event. It is to be approached with due circumspection so as not to undermine the utility of that general rule. Too ready a departure from the general rule encourages unnecessary arguments. See Commissioner of Inland Revenue v HIT Finance Ltd (No2) [2014] 4 HKLRD 412 at §7 (Bokhary PJ); Kam Leung Sui Kwan, Personal Representative of the Estate of Kam Kwan Sing, deceased v Kam Kwan Lai (unreported, FACV 4/2015, 3 February 2016) at §8.
(3) Order 62, rule 5 of the Rules of the High Court provides:
“ (1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account—
(aa) the underlying objectives set out in Order 1A, rule 1;
…
(e) the conduct of all the parties;
(f) whether a party has succeeded on part of his case, even if he has not been wholly successful;
…
(2) For the purpose of paragraph (1)(e), the conduct of the parties includes—
(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;
(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and
(d) conduct before, as well as during, the proceedings.”
(4) The burden rests with the losing party to demonstrate the circumstances which justify the exceptional course of displacing the general rule that costs should follow the event. See Mariner International Hotels Ltd v Atlas Ltd (No2) (2007) 10 HKCFAR 246 at §18 (Bokhary PJ).
(5) Where the successful party raises issues or makes allegations improperly or unnecessarily, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs. See Re Elgindata Ltd (No2) [1992] 1 WLR 1207 at 1214B–C (Nourse LJ), applied with modification by Yuen JA in Wang Din Shin v Nina Kung (unreported, CACV 460/2002, 19 April 2005) at §39.

4. In this case, the applicants sought from the respondents production of two broad categories of documents as described in the Schedule to the Summons under section 29 of the Bankruptcy Ordinance (Cap 6). They have successfully obtained a production order in respect of one of the two broad categories of documents, and have therefore been partially successful in their application. The time taken up by the parties on the issues on which the applicants succeeded on the one hand and the issues on which the applicants failed on the other was about 50:50. I therefore consider that the applicants should be awarded 50% of their costs to reflect their partial success in the application.

5. The respondents’ primary position is that they should be awarded 50% of the costs of the Summons. They contend that the applicants sought four “remedies” in the application and only succeeded on one, that the respondents are the more successful parties or the “overall winner”, and that the respondents should be awarded 50% of the costs on a broad-brush basis. I cannot accept these contentions; they ignore the reality that the applicants had to come to court to obtain the production order which I ultimately gave.

6. The respondents’ fallback position is that there should be no order as to costs because they claim that they are the more successful parties. I also reject this contention. It is unrealistic for the respondents to assert that they are relatively more successful than the applicants in the application when they unsuccessfully opposed the production of one of the two broad categories of documents in the applicants’ Summons.

7. For the reasons given above, I dismiss the Variation Summons with costs to be borne by the respondents, to be taxed if not agreed. I also make absolute the costs order nisi in the Decision.

	(Eugene Fung SC)
	Recorder of the High Court

Written submissions by Mr David Chen, instructed by Hobson & Ma, for the applicants

Written submissions by Mr Patrick Siu, instructed by ONC Lawyers, for the respondents

[2019] HKCFI 149-EN-2019-01-18

IP PUI LAM ARTHUR AND ANOTHER v. ALAN CHUNG WAH TANG AND OTHERS

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HCB 3819/2011

[2019] HKCFI 149

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

________________

RE :

HO YUK WAH DAVID (the Bankrupt)

BETWEEN
	IP PUI LAM ARTHUR and IP PUI SUM	Applicants
	(Joint and Several Trustees in Bankruptcy)
and
	ALAN CHUNG WAH TANG and	Respondents
	HOU CHUNG MAN (Joint and Several
	Trustees in Bankruptcy of the estate of
	LEE SIU FUNG SIEGFRIED, the Bankrupt)

________________

Before:

Mr Recorder Eugene Fung SC in Chambers

Date of Hearing:	9 January 2019
Date of Decision:	18 January 2019

____________

DECISION

____________

A. INTRODUCTION

1. This is an application by the trustees in bankruptcy of the estate of Ho Yuk Wah David (“the Bankrupt”) under section 29 of the Bankruptcy Ordinance (Cap 6) for the production of certain documents. The respondents are the trustees in bankruptcy of the estate of Lee Siu Fung Siegfried (“LSF”).

B. THE RELEVANT FACTUAL BACKGROUND

2. On 2 August 2011, a bankruptcy order was made against the Bankrupt on his own petition. On 30 September 2011, the applicants were appointed the joint and several trustees of the property of the Bankrupt.

3. As a result of their investigations, the applicants believe that the Bankrupt has been operating a complex scheme using about 30 offshore companies and nominees to conceal his assets, carry on his business ventures and litigations, and pay his personal and family expenses. Their investigations also revealed that through those offshore companies and his family members, the Bankrupt had diverted a significant amount of funds out of reach of his creditors.[1]

4. The applicants believe that the offshore companies include Topmark Asia Ltd (“Topmark”) and Sun Ascent International Ltd (“SunAscent”), which are both companies incorporated in the BVI. They consider that the Bankrupt is beneficially interested in and has control over Topmark and Sun Ascent.

5. One of the respondents, Mr Alan Tang (“Mr Tang”), together with Mrs Alison Wong, were the joint and several liquidators (“the CWT Liquidators”) of CWT Textile Supplies Co Ltd (“CWT”).

6. Pursuant to a previous application of the applicants for production of documents, the CWT Liquidators produced (1) a consultancy agreement dated 29 December 2003 between the CWT Liquidators and Topmark (“the CWT Consultancy Agreement”) and (2) a funding agreement dated 29 December 2003 between the CWT Liquidators and Sun Ascent (“the CWT Funding Agreement”), collectively as “the CWT Agreements”.

7. Pursuant to the CWT Agreements, Topmark provided consultancy services to the CWT Liquidators in relation to CWT Liquidators’ litigation against CWT’s former auditors for professional negligence (“the CWT Litigation”), and Sun Ascent provided funding to the CWT Liquidators in respect of the CWT Litigation. The CWT Litigation was considered by the applicants to be the Bankrupt’s distress assets investments with him behind Sun Ascent and Topmark.

8. The CWT Litigation was eventually settled, resulting in the payment of a sum of HK$45 million to the CWT Liquidators. Substantial sums were paid to Topmark and Sun Ascent pursuant to the CWT Agreements.

9. Subsequently, the applicants were provided with the following documents:

(1) A funding agreement dated 4 August 2005 between Keentrade Investments Limited (“Keentrade”) and the respondents (“theLSF Funding Agreement”). This was provided by Messrs ONC Lawyers representing Mr Tang in HCMP 450/2016 in late 2016.
(2) A consultancy agreement between Sinowood International Limited (“Sinowood”) and the respondents (“the LSF Consultancy Agreement”). This was provided by Messrs ONC Lawyers representing the respondents in December 2017.

The two agreements are collectively referred to as “the LSF Agreements”.

10. Pursuant to the LSF Agreements, Sinowood provided consultancy services to the respondents in connection with the latter’s litigation against LSF and other parties (“the LSF Litigation”), and Keentrade provided funding to the LSF Litigation.

11. The applicants believe that the Bankrupt controls Keentrade and Sinowood and stands to benefit from any payments that the companies may receive from the Respondents under the LSF Agreements

12. By an inter-partes summons dated 27 April 2018 (“the Summons”), the applicants seek the production of the following documents from the respondents within 14 days:

(1) Copies of the documents leading up to, arising out of or in connection with the LSF Consultancy Agreement, including but not limited to any further agreement(s), correspondence(s),minutes of meeting(s)/‌written resolution(s) of creditors/‌committee of inspection/‌court order(s), and cheque(s), bank draft(s), cashier order(s), invoice(s) and receipt(s) and any other accounting documents in relation to the Consultancy Agreement.
(2) Copies of any other funding agreement and/or consultancy agreement in relation to the claim(s) against LSF and any other parties and the documents arising out of or in connection with this/these agreement(s), including but not limited to any further agreement(s), correspondence(s), minutes of meeting(s)/‌written resolution(s) of creditors/committee of inspection/court order(s),and cheque(s), bank draft(s), cashier order(s), invoice(s) and receipt(s) and any other accounting documents in relation to this or these agreement(s).

C. THE RELEVANT LAW

13. Sections 29(1) and 29(1A) of the Bankruptcy Ordinance provide as follows:

“ (1) The court may, on the application of the Official Receiver or trustee, at any time after a bankruptcy order has been made against a bankrupt summon before it the bankrupt or his spouse, or any person known or suspected to have in his possession any of the estate or effects belonging to the bankrupt or supposed to be indebted to the bankrupt, or any person whom the court may deem capable of giving information respecting the bankrupt, his dealings or property, and the court may require any such person to produce any documents in his custody or power relating to the bankrupt, his dealings or property.
(1A) The court may require a person referred to in subsection (1),other than the bankrupt, to submit an affidavit to the court containing an account of his dealings with the bankrupt or to produce any documents in his possession or under his control relating to the bankrupt or the bankrupt’s dealings, affairs or property.”

14. The relevant legal principles on the provision of information or documents under section 29 are as follows:

(1) The Court’s power under section 29 of the Bankruptcy Ordinance (Cap 6) to order production of information or documents is to be exercised in the same way as an application under the now repealed section 221 of the Companies Ordinance (Cap 32): Re Lai Kwok Ying (a bankrupt)(unreported, HCB 8750/2007, 7 August 2009) §5 (Kwan J (as she then was)).
Whether provision of information or documents is reasonably required
(2) The applicant must satisfy the court the essential condition that the provision of information or documents is reasonably required for him to carry out his functions: Hau Po Man Stanley (in bankruptcy) v Joint and Several Trustees [2008] 1 HKC 256 at §21(a) (Chung J sitting in the Court of Appeal);Joint & Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd (2006) 9 HKCFAR 766 at §27 (Lord Millett NPJ).
(3) In considering this question, great weight should be given to the views of the applicant, for he is an officer of the court and alone has the necessary knowledge of the problems facing him un understanding the affairs of the estate and his reasons for seeking production of documents in the terms proposed: Kong Wah Holdings Ltd (above) at §27.
Whether respondent is able to provide information or documents
(4) The applicant must also establish a prima facie case that the respondent is able to provide such information or documents:Hau Po Man Stanley (above) at §21(b).
Balancing exercise
(5) If the above criteria are met, the court must carefully strike a balance between the applicant’s reasonable requirements and the need to avoid making an order which is wholly unreasonable, unnecessary or oppressive to the person concerned. The burden is on the applicant to satisfy the court,after balancing all the relevant factors, there is a proper case for such an order to be made. See Hau Po Man Stanley (above) at §21(c).
(6) The applicant may not embark on a “fishing expedition” that ignores costs and proportionality: Re Lee Priscilla Hwang (bankrupt) [2012] 4 HKLRD 581 at §23 (Recorder A Chow SC(as he then was)); Re Lee Siu Fung Siegfried [2017] 1 HKLRD 1155 at §34 (G Lam J).

D. DISCUSSION

15. It is common ground that the documents sought by the applicants in this section 29 application can be categorised as follows:

(1) Documents leading up to, arising out of or in connection with the LSF Consultancy Agreement (“Category1 Documents”).
(2) Other funding agreements in relation to the claims against LSF, and the documents arising out of or in connection with such funding agreements (“Category2 Documents”).
(3) Other consultancy agreements in relation to the claims against LSF, and the documents arising out of or in connection with such consultancy agreements (“Category3 Documents”).

D1. Category 1 Documents

16. Mr David Chen, on behalf of the applicants, submitted the Category 1 Documents are reasonably required for the applicants to carry out their functions to investigate the affairs and property of the Bankrupt. On the basis of the following matters, the applicants believe that the Bankrupt controls Keentrade and Sinowood and stands to benefit from any payments that the companies receive from the respondents under the LSF Consultancy Agreement and the LSF Funding Agreement:

(1) The applicants believe that the Bankrupt funded, or at least was substantially involved in, the CWT Litigation.
(2) Additionally, the applicants believe that the Bankrupt is involved in the LSF Litigation through Keentrade and Sinowood.

17. I consider that the applicants’ belief that the Bankrupt funded, or was substantially involved in, the CWT Litigation to be supported by sufficient evidence:

(1) The Bankrupt was a director of Topmark and, through his corporate vehicle, a director of Sun Ascent. It is reasonable to infer that the Bankrupt was beneficially interested in and controlled Topmark and Sun Ascent. I note that To J made the same inference in §§36 and 39 of his judgment in Re Ho Yuk Wah David (bankrupt) [2015] 2 HKLRD 603.
(2) The CWT Liquidators paid HK$24.8 million out of the settlement sum to Topmark, which subsequently paid over HK$12 million to two companies, which in turn paid substantial sums to the Bankrupt and his nominees. In this connection, I note that To J in §27 of Re Ho Yuk Wah David (above) said that “[t]here is clear evidence that, at least, some of the funds paid by CWT to [Topmark] and Sun Ascent found their way to the Bankrupt through those offshore companies and were used to discharge the Bankrupt’s personal liabilities”.
(3) The respondents have not put forward anything to cast doubt on the applicants’ belief.

18. Further, I consider there is sufficient evidence to support the applicants’ belief that the Bankrupt has been involved in the LSF Litigation through Keentrade and Sinowood:

(1) According to the Distribution Schedule dated 5 March 2009, an amount of HK$1,560,200 from the settlement sum in the CWT Litigation was used in the LSF bankruptcy matter. The respondents’ evidence is that “the funders for the LSF Funding and Sun Ascent apparently belonged / were related to same group of investors or they were investors with a close business relationship”. Given that the applicants have adduced sufficient evidence to establish that the Bankrupt was beneficially interested in and controlled Sun Ascent, it follows from the respondents’ evidence that the Bankrupt was related to, or had a close business relationship with, the funders in the LSF bankruptcy matter.
(2) The respondents’ evidence further shows that the proceeds recovered in the CWT Liquidation were used to discharge legal fees incurred in the LSF bankruptcy matter. In the absence of any suggestion from the respondents to the contrary, I agree with Mr Chen’s submission that this arrangement could only be explained by the fact that the funders behind the CWT Litigation and the LSF case were the same person(s) who approved the arrangement.
(3) Further, Mr Tang on behalf of the respondents sent two letters dated 9 May 2012 and 8 October 2012 to Keentrade. Each of the letters was recorded to have been copied to “Sinowood International Limited Attn: MrDavid Ho (via email)”. Moreover, the Bankrupt was identified by Mr Tang in his letter to Keentrade dated 8 October 2012 as “MrDavid Ho of your consultants, Sinowood International Limited”. These letters in my view show that the Bankrupt at the relevant time controlled,or had substantial connections with, Sinowood.

19. For these reasons, I consider the applicants have cogent evidential basis to believe that the Bankrupt at the material times controlled Keentrade and Sinowood, and stands to benefit from any payments that the companies receive from the respondents under the LSF Consultancy Agreement and the LSF Funding Agreement. The Class 1 Documents seek the production of all the documents leading up to, arising out of or in connection with the LSF Consultancy Agreement. The applicants consider that such documents are reasonably required for them to discharge their duties and I attach weight to their views. I am satisfied that the Class 1 Documents are reasonably required for the applicants to carry out their functions.

20. Mr Patrick Siu, on behalf of the respondents, submitted that the Class 1 Documents are not reasonably required to discharge the applicants’ functions. He relied on the fact that (1) the applicants had commenced proceedings in HCA 2752/2015 (“the Declaration Proceedings”) to seek a declaration that the shares in, amongst others, Keentrade, Sun Ascent and Topmark were held on behalf of the Bankrupt and (2) the applicants had discontinued the Declaration Proceedings in August 2017. Mr Siu submitted that as a result of the discontinuance of the Declaration Proceedings, the applicants must be taken to have abandoned their speculation that the Bankrupt has been in control of Keentrade, Sun Ascent and Topmark, and therefore cannot be heard to say that they reasonably require the Class 1 Documents. In making these submissions, I understand that Mr Siu was not seeking to rely on the legal doctrine of waiver or estoppel.

21. I am unable to accept the respondents’ submissions:

(1) The applicants’ evidence for the discontinuance of the Declaration Proceedings in August 2017 is that it would enable the Applicants to focus their efforts on other aspects of the bankruptcy. They further say that if they have sufficient time and resources, they will consider reviving the claims in the Declaration Proceedings.
(2) Further, Mr Chen submitted that new evidence surfaced in December 2017 when the applicants received from the respondents’ solicitors the above-mentioned letters written by Mr Tang to Keentrade, and that this bolstered the appellants’belief that the Bankrupt has been in control of Keentrade and Sinowood.
(3) In any event, the applicants have filed affidavit evidence to state that one of the primary purposes of this application is to confirm whether their belief that the Bankrupt is the person behind Keentrade and Sinowood is correct. This clearly shows that the applicants have not abandoned this belief.
(4) In these circumstances, I cannot see how the applicants can be said to be no longer maintaining the belief that the Bankrupt is the person controlling Keentrade and Sinowood.

22. Further, I am satisfied that the applicants have established a prima facie case that the respondents are able to provide the Class 1 Documents. Indeed, the respondents did not put forward anything to contend otherwise.

23. As far as the balancing exercise is concerned, Mr Siu submitted that an order for production of the Class 1 Documents should not be granted because (1) it is oppressive, (2) it is disproportionate and (3) the applicants are in collusion with LSF in making this application.

24. On oppression, the respondents submitted that the applicants could have sought discovery of the Class 1 Documents against Keentrade in the Declaration Proceedings and that it is now oppressive to seek production of documents in this application, relying on Re China Medical Technologies Inc [2016] 2 HKLRD 962 at §24 and Cloverbay Ltd v Bank of Creditand Commerce International SA [1991] Ch 90 at 102C. I am not satisfied that it is oppressive for the respondents to produce the Class 1 Documents:

(1) As Mr Chen informed the Court during the hearing, Keentrade did not acknowledge service of the Writ in the Declaration Proceedings. It therefore cannot be said that the applicants could have obtained discovery of any documents from Keentrade in those proceedings.
(2) The two authorities cited by the respondents also do not assist them. In both Cloverbay and Re China Medical, it was held that the Court is required to balance the legitimate need of the liquidator against any possible oppression to the person to the examined, and that such balancing depends on the relationship between the importance to the liquidator of obtaining the information on the one hand and the degree of oppression to the person sought to be examined on the other. I do not believe it can be said that the applicants currently have sufficient information to proceed with an action but nonetheless seek an order to compel the respondents to provide more.
(3) I have also borne in mind what Lord Millett NPJ said in Kong Wah Holdings Ltd (above) at §30(6) that an order is not necessarily oppressive because it is inconvenient for the party subject to it or causes him a lot of work or may make him vulnerable to future claims.

25. Further, the respondents submitted that the applicants have made over 20 section 29 applications and that it is disproportionate to pursue this application particularly when the Declaration Proceedings have been discontinued. However, the previous applications were made against banks and other professional parties and the documents sought in this application are not the subject matters of the previous applications. I am unable to see why it is disproportionate to order the production of the Class 1 Documents.

26. Finally, the respondents relied on two matters and asked the Court to draw the inference that this application is made by the applicants to assist LSF and that the applicants are colluding with LSF:

(1) First, the respondents pointed to an incident in 2017 where the applicants disclosed to LSF’s associates the contents of a document produced by the respondents. Documents provided by the respondents to the applicants pursuant to a section 29 application would be covered by an implied undertaking on the part of the applicants not to use the documents for any collateral purpose. However, as explained by the applicants to G Lam J in correspondence and at a hearing on 24 August 2017, the contents of the relevant documents had previously been read out in open court in November 2016, and the relevant implied undertaking would, by virtue of RHC Order 24, rule 14A, cease to apply. Insofar as the respondents suggest that the Applicants would breach their implied undertaking and supply documents obtained under this application to any third parties, I am unable to see any basis for such a suggestion.
(2) Further, the respondents relied on the timing of this application and suggested that there might be some kind of collusion or communication between the applicants and LSF (or his associates). Specifically, the respondents referred to the facts that (a) the Summons herein was issued on 27 April 2018, (b) the Judiciary announced also on 27 April 2018 that G Lam J’s judgment in a specific discovery application made by LSF’s associates against the respondents would be handed down on 30 April, (c) the applicants’ supporting affirmation herein was not filed until 4 May 2018. Based on the timing of these events, I am not able to infer any collusion or communication between the applicants and LSF (or his associates). Indeed, the applicants have filed evidence to deny any form of collusion with the LSF or his associates.
(3) In any event, the applicants have filed evidence and stated on oath that the documents sought in this application are reasonably required for them to carry out their functions. I am not satisfied that the matters relied upon by the respondents are sufficient for me to cast doubt on the genuineness of the Applicants’ reasons for needing the documents sought.

27. For these reasons, I would exercise my discretion and order the respondents to produce the Class 1 Documents.

D2. Category 2 Documents

28. In the Summons, the applicants seek, amongst other things, copies of “any other funding agreement and/or consultancy agreement” from the respondents. This is the reason why the Category 2 and the Category 3 Documents principally deal with “other funding agreements” and “other consultancy agreements” respectively.

29. At the hearing, Mr Chen submitted that the Category 2 Documents should include the LSF Funding Agreement and its related documents. I reject this submission. As pointed out by Mr Siu, the applicants had already issued a summons on 3 March 2017 against the respondents in these proceedings seeking, amongst others, the LSF Funding Agreement and its related documents pursuant to section 29 of the Bankruptcy Ordinance, and that a consent order had already been made for the respondents to provide such documents. The Category 2 Documents must therefore be confined to funding agreements other than the LSF Funding Agreement.

30. There is no dispute that the LSF Funding Agreement was terminated on 25 March 2013. According to the respondents, the LSF administration is now being funded by a company called China New Investment Ltd (“the New Funder”). Further, Ms Anita Hou of the respondents, who is an officer of the Court, has both stated in correspondence and confirmed on oath that the New Funder is not related to the Bankrupt.

31. The applicants submitted that the Category 2 Documents are reasonably required to carry out their functions. I can well understand the basis of this request if the applicants believe that the Bankrupt is in control of, or has a close connection with, the New Funder. However, no evidence has been adduced by the applicants to assert that they believe, or have any reasonable suspicion, that the Bankrupt is related to or connected with the New Funder. It follows that the applicants’ submission is nothing more than a bare assertion.

32. Instead, Mr Chen submitted that the Court should not accept Ms Hou’s evidence that the New Funder is not related to the Bankrupt. He criticised that Ms Hou has not given any details on how she came to her conclusion, and asked the Court not to accept her bare denial, citing §§26 – 32 of Ng J’s judgment in Re Nanik Dayaram (unreported, HCB 7651/2011, 6 November 2015). In my view, I do not consider Ms Hou’s evidence as a bare denial and do not accept Mr Chen’s criticism of her evidence.

33. Given that (1) the applicants have adduced no evidence to suggest that the Bankrupt is any way connected with the New Funder, and (2) the respondents have stated on oath that the Bankrupt is not related to the New Funder, I consider the applicants have failed to discharge their burden to satisfy the Court the Category 2 Documents are reasonably required for them to carry out functions.

34. In the event that I am wrong to conclude that the applicants have not satisfied the Court that the Category 2 Documents are reasonably required for their discharge of duties, I now consider the respondents’ assertion of legal professional privilege (“LPP”) over the Category 2 Documents to resist their production. For the reasons below, I do not consider that the respondents’ claim of privilege is made out:

(1) In her affirmation on behalf of the respondents, Ms Hou stated:
“ Mr Tang and I would also assert legal advice / litigation privilege over the current / (any) further funding agreements and related correspondence in relation to the claims against LSF et al. As deposed to above, the LSF Trustees enter into funding arrangements to deal with the legal issues arising from the investigations of the LSF case, to seek legal advice and to commence legal actions against LSF and related parties …
The funding agreement would give the readers clues as to the funding mechanism, our litigation strategy, the legal actions we have contemplated, and the advice that we intend to seek from lawyers in relation to the merits of the case, as well as other matters such as overall strategy and tactics.”
(2) As the Court of Appeal stated in Citic Pacific Ltd v Secretaryfor Justice (No2) [2015] 4 HKLRD 20 at §76(1), the person claiming LPP should (a) identify the materials over which LPP is claimed; (b) specify, with respect to each of the materials identified, whether the LPP claimed is legal advice privilege or litigation privilege; and (c) support the LPP claims by statement or affirmation setting out the special basis or bases and the full factual context upon which LPP is claimed in respect of each of the materials (“Supporting Affirmation”).
(3) In his oral submissions, Mr Siu only asserted LPP over the funding agreement involving the New Funder (“the New Funder Funding Agreement”). He likened the New Funder Funding Agreement to the LSF Funding Agreement and submitted that the former would give the readers clues as to the funding mechanism, litigation strategy, overall tactics, contemplated legal actions and advice the respondents intend to seek.
(4) However, the respondents’ affirmation merely asserts what a reader would know on the basis of the disclosure of an unidentified funding agreement; it does not set out the special bases and the full factual context upon which legal advice privilege and litigation privilege are claimed in respect of the New Funder Funding Agreement. I am therefore not satisfied that the materials from Ms Hou’s affirmation quoted above are sufficient to satisfy the requirements as to what should be contained in a Supporting Affirmation.

35. For these reasons, I would not exercise my discretion to order the production of the Category 2 Documents.

D3. Category 3 Documents

36. In her affirmation filed on behalf of the respondents, Ms Hou stated on oath that Sinowood was the only consultant for the LSF actions, and there is no further consultancy agreement or arrangement in place subsequent to the termination of the LSF Consultancy Agreement in March 2012. Based on such evidence, the respondents submitted that they have nothing to produce under this category.

37. At the hearing, Mr Chen fairly accepted that the applicants have no basis to challenge Ms Hou’s evidence on oath.

38. In these circumstances, it is plain that the applicants cannot establish a prima facie case that the respondents are able to provide the Category 3 Documents. It follows that an order for production of such documents cannot be made.

D4. The Proposed Affidavit

39. In their Summons, the applicants further seek an order that if any of the documents sought “had never been or is no longer in his/her/its custody and/or power, [the respondents should] file an affidavit/affirmation stating in respect of each document whether it had been in his/her custody and/or power, and if it had been, when it was last in his/her custody and/or power and the reason it is now no longer in his/her custody and/or power” (“the Proposed Affidavit”).

40. Section 29 of the Bankruptcy Ordinance does not confer any power on the court to order a party to file the Proposed Affidavit. Specifically, section 29(1A) only empowers the court to “require a person referred to in subsection (1), other than the bankrupt, to submit an affidavit to the court containing an account of his dealings with the bankrupt or to produce any documents in his possession or under his control relating to the bankrupt or the bankrupt’s dealings, affairs or property”. The respondents submitted that the court does not have jurisdiction to order the making of the Proposed Affidavit.

41. In response, Mr Chen relied on section 99(1) of the Bankruptcy Ordinance, which provides that “[t]he rules and practice of the High Courtfor the time being for regulating the ordinary civil procedure of the court shall, so far as the same may be applicable and not inconsistent with the provisions of this Ordinance, be applied to bankruptcy proceedings”. He submitted that the court’s power to order the making of the Proposed Affidavit is contained in RHC Order 24, rule 7, which allows the court to make an order requiring any other party to make an affidavit stating whether any document described in the application is, or has any time been, in his possession, custody or power, and if not, when he parted with it and what has become of it.

42. I am unable to accept these submissions. This application is made by the applicants pursuant to section 29 of the Bankruptcy Ordinance, and the power conferred on the court under RHC Order 24, rule 7 has no relevance in such an application. I am not satisfied that I have jurisdiction to order the respondents to make the Proposed Affidavit, and I decline to do so.

E. DISPOSITION

43. For the reasons given above, I make the following orders on the Summons:

(1) The respondents do, within 14 days of the date of the order, produce the documents set out in paragraph 1 of the Schedule to the Summons.
(2) The remainder of the Summons be dismissed.
(3) A costs order nisi that 50% of the applicants’ costs of the Summons be borne by the respondents to be taxed if not agreed.

	(Eugene Fung SC)
	Recorder of the High Court

Mr David Chen, instructed by Hobson & Ma, for the applicants

Mr Patrick Siu, instructed by ONC Lawyers, for the respondents

[1] See Re Ho Yuk Wah David (bankrupt) [2015] 2 HKLRD 603 at §4 (To J).

110004-EN-2017-04-07

IP PUI LAM ARTHUR AND ANOTHER v. ALAN CHUNG WAH TANG AND OTHERS

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HCB 3819/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

____________

Re: HO YUK WAH DAVID (the Bankrupt)

____________

BETWEEN
	IP PUI LAM ARTHUR	Applicants
	IP PUI SUM (Joint and Several Trustees in bankruptcy)
	and
	ALAN CHUNG WAH TANG and	1st Respondents
	ALISON WONG LEE FUNG YING
	ALAN CHUNG WAH TANG and	2nd Respondents
	HOU CHUNG MAN (Joint and Several Trustees in bankruptcy of the estate of Lee Siu Fung Siegfried, the Bankrupt)

____________

Before: Hon Au-Yeung J in Chambers

Date of Hearing: 7 April 2017

Date of Decision: 7 April 2017

_____________

D E C I S I O N

_____________

1. The respondents do not contest the production of documents sought under section 29 of the Bankruptcy Ordinance. The outstanding questions are the time for production of those documents and costs of the summons.

Time for production

2. Mr Szeto, acting for Mr Alan Tang of the 1^st respondents and the 2^nd respondents, has informed this court that there may be 100 to 130 boxes of documents involved which the respondents have to read before being able to make the affidavit sought or to produce the documents. I am satisfied that the court should allow them a period of two months in which to comply with the discovery sought. At present, I understand the respondents are waiting for response from the partners of Grant Thornton to inform them as to the time for access to those documents.

Costs

3. Ms Wong, of the 1^st respondents, is acting in person. She is retired and is concerned as to costs. She has no opposition at any time to the summons and is willing to file the affidavit, although her position is that she has no documents to produce. The matter could have been disposed of without a hearing but for the fact that she is acting in person. Taking the circumstances into account, I am not satisfied that the court should make an order for costs against her.

4. The 2^nd respondents and Mr Alan Tang of the 1^st respondents ask for costs of the summons, and initially, for personal costs against the trustees. The latter limb has now been abandoned; rightly, in my view.

5. Mr Chen, acting for the applicant trustees has referred me to various authorities in Hong Kong on costs in the present situation. Amongst these is the case of The Joint and Several Liquidators of Kong Wah Holdings Limited and Akai Holdings Limited v Ernst & Young, CACV 356/2003, 17 March 2004. In paragraphs 37 to 39 of the decision, Cheung JA declined to order payment by the liquidators to Ernst & Young other than the photocopying charges.

6. The application for production of documents was made in the context of a section 221 application in the Kong Wah Holdings case. But there is nothing different in substance between section 221 of the Companies Ordinance and section 29 of the Bankruptcy Ordinance. In fact, Ng J in the case of The Joint and Several Trustees in Bankruptcy of Nanik Dayaram, HCB 7651/2011, 6 November 2015, also made a similar costs order in a bankruptcy context under section 29 of the Bankruptcy Ordinance. Accordingly, the respondents should not be entitled to costs in performance of the production order sought except for reasonable photocopying costs.

7. Mr Szeto refers me to a Privy Council decision of Singularis Holdings Limited v PricewaterhouseCoopers [2015] 2 WLR 971. It was on appeal from the Court of Appeal of Bermuda in 2014. The proposition relied on by Mr Szeto is in paragraph 25 of that decision:

“As with other powers of compulsion exercisable against an innocent third party, its exercise is conditional on the applicant being prepared to pay the third party’s reasonable cost of compliance.”

8. For the following reasons I decline to follow the Singularis Holdings case:

(a) It is not a binding authority on the Hong Kong court. The Court of Appeal decision in Kong Wah Holdings is.
(b) Singularis Holdings deals with a different question, set out in paragraph 8 of the decision, which is more complex than that before this court. That question was whether the Bermuda court has the common law power to assist a foreign liquidation by ordering production of information in circumstances where (i) the Bermuda court has no power to wind-up an overseas company, such as Singularis; and (ii) a statutory power to order the production of information is limited to cases where the company has been wound-up in Bermuda. The second issue was whether if such a power exists it is exercisable in circumstances where an equivalent order could not have been made by the court in which the foreign liquidation is proceeding. The context is therefore completely different.

9. Applying the Kong Wah Holdings case, I accept the proposed order as to costs made by Mr David Chen for the trustees.

10. Mr Szeto also submits that there has been no pre-summons letter. I have been referred by Mr Chen to the letter of Li, Wong, Lam & W I Cheung about four months before the summons was taken out. That letter requested Mr Tang and Ms Wong, but not Ms Hou, to produce documents, and the substance of what was sought in the letter is largely similar to that in the summons now before this court.

11. Mr Szeto also refers this court to a letter from Li, Wong, Lam & W I Cheung offering to pay the 2^nd respondents’ costs. That letter was dated 31 March 2017 and issued in the course of negotiation over disposal of the summons. The offer was not accepted due to negotiation over other matters. It was, in my view, far from saying that the trustees had conceded to pay the costs of the 2^nd respondents. There was nothing in that letter to bar them from relying on the authorities, as they now do, as regards costs of the present application.

12. Further, Mr Chen has referred me to rule 87C of the Bankruptcy Rules. Sub-rule (2) provides that:

“Where a person in respect of whom an order has been made under section 29 of the Ordinance co-operates fully with the ... trustee in providing the necessary information, the court may order that that person be paid, out of the bankrupt’s estate, the reasonable costs incurred by him in providing such information.”

13. The time has not yet come to show that the respondents have co-operated fully with the trustees. Accordingly, at this stage, I am not inclined to grant any order for costs in favour of the respondents, except to the extent agreed to as regards photocopying charges. Those photocopying charges shall be paid out of the estate.

14. As regards costs of the summons, I have indicated that I make no order as to costs against Ms Wong. This hearing was necessitated due to argument over costs of the summons, which the 2^nd respondents and Mr Tang have now failed. I therefore order that costs of this hearing should be borne by Mr Tang and Ms Hou.

15. I will summarily assess those costs.

(Discussion re costs)

16. Costs are summarily assessed and allowed at $5,000.

	(Queeny Au-Yeung) Judge of the Court of First Instance
	High Court

Mr David Chen, instructed by Li, Wong, Lam & W I Cheung, for the applicants

Mr Michael Szeto of ONC Lawyers, for Mr Alan Chung Wah Tang of the 1^st respondents and the 2^nd respondents

Ms Alison Wong Lee Fung Ying, of the 1^st respondents appeared in person

97570-EN-2015-03-18

IP PUI LAM ARTHUR AND ANOTHER v. ALAN CHUNG WAH TANG AND OTHERS

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HCB 3819/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

____________

RE: HO YUK WAH DAVID (“the Bankrupt”)

	Ip Pui Lam Arthur	Applicants
	Ip Pui Sum
	(Joint and Several Trustees in bankruptcy)
	and
	Alan Chung Wah Tang and Alison Wong Lee Fung Ying, the Joint and Several Liquidators of CWT Textile Supplies Company Limited (in creditors’ voluntary liquidation)	1^st Respondents
	JBPB & Co (formerly known as Grant Thornton)	2^nd Respondent

____________

Before: Hon To J in Chambers

Date of Hearing: 24 June 2014

Date of Decision: 18 March 2015

_______________

D E C I S I O N

_______________

INTRODUCTION

Background

1. This is an application for enforcement of a discovery order and for a fresh discovery order, pursuant respectively to Order 45, rule 7 of the Rules of the High Court (“RHC”) and section 29 of the Bankruptcy Ordinance.

2. On 2 August 2011, a bankruptcy order was made upon the bankrupt (the “Bankrupt”) on his own petition. In a general meeting of creditors held on 30 September 2011, the Applicants were appointed the joint and several trustees in bankruptcy of the Bankrupt (the “Trustees”).

3. The 1^st Respondents, Alan Chung Wah Tang (“Tang”) and Alison Wong Lee Fung Ying (“Wong”) are the joint and several liquidators of CWT Textile Supplies Company Limited (in creditors’ voluntary liquidation) (“CWT”). At the time, they were partners of an accounting firm known as JBPB & Co (“JBPB”), formerly known as Grant Thornton. JBPB is the 2^nd Respondent herein. Subsequently, JBPB had a split into two camps consisting of Tang and Wong (the “minority partners”) in one camp and the other ten partners (the “majority partners”) in another camp. The 2^nd Respondent is now represented by its majority partners (the “majority partners”).

4. The Bankrupt declared negligible assets. To investigate the financial affairs of the Bankrupt, the Trustees successfully obtained a number of disclosure orders against third parties pursuant to section 29 of the Bankruptcy Ordinance. As result of the investigation, the Trustees believe that the Bankrupt has been operating a complex scheme using about 30 offshore companies and nominees to conceal his assets; carry on his business ventures and litigations; and pay his personal and family expenses. The investigation also revealed that through those offshore companies and his family members the Bankrupt had diverted significant amount of funds out of reach of his creditors.

5. On 1 November 2013, upon the joint application and by consent of the Trustees and the 1^st Respondents, in their capacity as liquidators of CWT, Deputy High Court Judge Le Pichon made an order pursuant to section 29 of the Bankruptcy Ordinance (“R1’s Order”). Under paragraph 1 of the R1’s Order, Tang and Wong are required to produce certain documents set out in a schedule attached to the order, or if those documents are no longer in their possession, custody and/or power, to make an affirmation under paragraph 2 of the order. At the time, the 1^st Respondents were represented by Messrs Cheng Yeung & Co (“CY”).

6. Similarly, on 5 November 2013, upon the joint application and by consent of the Trustees and the majority shareholders of JBPB, who were then represented by Messrs Chiu, Szeto & Cheng (“CSC”),Deputy High Court Judge Le Pichon made an order requiring JBPB, under paragraph 1 of the order, to produce certain other documents set out in the schedule attached to that order or under paragraph 2 to make an affirmation if those documents are no longer in their possession, custody and/or power (“R2’s Order”). The 1^st Respondents dispute that they are bound by the R2’s Order which was made by the consent and instructions of the majority partners of JBPB. They also deny CSC had authority to represent them in that application.

7. On 2 December 2013, in purported compliance with the R1’s Order, the 1^st Respondents served a copy of a consultancy agreement between 1^st Respondents and Topmark Asia Ltd (“Topmark Asia”) and a funding agreement between the 1^st Respondent and Sun Ascent International Limited (“Sun Ascent”) (collectively, the “CWT Agree-ments”). Thereafter, they refused the Trustees’ request for production of other documents required to be produced under the R1’s Order.

8. The CWT Agreements show that the 1^st Respondents secured funding from Sun Ascent to sue CWT’s former auditors for professional negligence and with consultancy services agreed to be provided by Topmark Asia to the 1^st Respondents. The litigation was settled and the 1^st Respondents were paid a settlement sum, a significant part of which was paid to Topmark Asia and Sun Ascent, pursuant to the CWT Agreements. The Trustees believe that the CWT litigation was one of the Bankrupt’s investments in distress assets with himself being the person behind Sun Ascent funding the litigation and Topmark Asia pocketing on his behalf the proceeds of that successful investment.

9. Pursuant to the R2’s Order, the majority partners of JBPB produced some documents and filed an affirmation saying that they do not have any other documents specified in that order and that those documents, if they existed, were in the possession, custody and control of the 1^st Respondents who were the partners responsible for handling the matters to which those documents related.

10. Hence, on 7 February 2014 the Trustees took out the present summons seeking:

(1) an order pursuant to Order 45, rule 7 of the RHC that Tang and Wong, in their capacity as the joint and several liquidators of CWT, to comply with paragraphs 1 and 2 of the R1’s Order within 14 days (the “R1’s Enforcement Order”);
(2) an order pursuant to section 29 of the Bankruptcy Ordinance that Tang and Wong, in their capacity as partners of JBPB, to produce certain documents set out in the schedule (which is the same schedule as the one in the R2’s Order) or to make an affirmation if those documents are no longer in their possession, custody and/or power (“R2’s Fresh Order”);
(3) an order that penal notice be indorsed on the order to be made (“Penal Notice Order”); and
(4) costs.

At the hearing, Mr Yu, counsel for the Trustees, asks for personal service of the order to be made be dispensed with.

Legal principlesapplicable to an application under Section 29 of the Bankruptcy Ordinance

11. The legal issue at the heart of this application is what documents are discoverable by a trustee in bankruptcy under section 29 of the Bankruptcy Ordinance. In Re Lee Priscilla Hwang (bankrupt)[1], Recorder Anderson Chow SC, as he then was, answered that question by making reference to discovery under the statutory regime in company insolvency under the Companies Ordinance for which there is a Court of Final Appeal authority: see Joint and Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd[2]. I agree entirely with that approach and the conclusion he reached.

12. The functions of a trustee in bankruptcy and those of a liquidator in the company insolvency context are essentially similar in nature: ie to put the affairs of the bankrupt or the insolvent company in order and to administer his or its affairs in all their various aspects, including the getting in of any of his or its assets to pay creditors. For that purpose, the court is given very wide power under the Bankruptcy Ordinance and the Companies Ordinance to secure production of information and documents from third parties so as to enable the trustee or the liquidator to discover the truth and circumstances connected with and to gather information about the assets, affairs and dealings of the bankrupt or insolvent company as effectively as possible, and with as little expense as possible, to complete those functions.

13. The court’s power to order discovery is derived from section 29(1) of the Bankruptcy Ordinance in the case of personal bankruptcy and from section 221(1) and (3) of the Companies Ordinance in the case of company insolvency. Section 29(1) of the Bankruptcy Ordinance provides as follows:

“The court may, on the application of the Official Receiver or trustee, at any time after a bankruptcy order has been made against a bankrupt summon before it the bankrupt or his spouse, or any person known or suspected to have in his possession any of the estate or effects belonging to the bankrupt or supposed to be indebted to the bankrupt, or any person whom the court may deem capable of giving information respecting the bankrupt, his dealings or property, and the court may require any such person to produce any documents in his custody or power relating to the bankrupt, his dealings or property.”

These provisions are essentially similar to those in section 221(1) and (3) of the Companies Ordinance, which reads:

“(1) The court may, at any time after the appointment of a provisional liquidator or the making of a winding-up order, summon before it any officer of the company or person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or any person whom the court deems capable of giving information concerning the promotion, formation, trade, dealings, affairs, or property of the company.
…
(3) The court may require him to produce any books and papers in his custody or power relating to the company …”

14. The court’s power to order discovery under these two sections is discretionary. These two sections serve the same purpose of arming the trustee or the liquidator as officers of the court with the necessary powers to investigate the affairs of the bankrupt or the insolvent company. A trustee in relation to the bankrupt is in the same position as a liquidator in an insolvent company. He is a stranger to the affairs of the bankrupt and faces similar difficulties as those facing a liquidator. Thus, in my view, the principles governing the court’s exercise of the discretion under the two sections are essentially the same. Accordingly, I would adopt the principles as set out in the judgment of the Court of Final Appeal in Joint and Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd[3], which is the leading authority in Hong Kong on the exercise of the court’s powers under Section 221 of the Companies Ordinance, as equally applicable to the exercise of the court’s powers under section 29(1) of the Bankruptcy Ordinance. In paragraph 25 of that judgment, Lord Millett NPJ, with whom the other members of the Court of Final Appeal agreed, set out the principles as follows:

“25. The section is a vital part of the statutory insolvency regime. It is designed to meet the difficulties faced by liquidators in finding out what has happened to the company’s assets and what has caused the failure of the company. It has often been observed that a liquidator is usually a stranger to the affairs of the company. He relies on orders for examination and production to reconstitute the knowledge of the company, in circumstances where the records are often inadequate, in order to be able to perform his duties in recovering the company’s assets and generally to enable him to carry out his functions effectively and with as little expense and as expediently as possible.
…
27. It has been repeatedly stated, and the legislative purpose demands, that the powers conferred on the court by the section or its overseas equivalents are wide, general and unlimited. The liquidator must satisfy the court that the information or documents sought are reasonably required to enable him to carry out his functions. In considering this question, the authorities establish that great weight should be given to the views of the liquidator, for he is an officer of the court and alone has the necessary knowledge of the problems facing him in understanding the affairs of the company and his reasons for seeking production of documents in the terms proposed; moreover, there are often great difficulties in seeing how the terms of the order can be cut down and remain effective: see In re Rolls Razor Ltd (No.2) [1970] Ch 576 at p.592 per Megarry J; In re Castle New Homes Ltd[1979] 1 WLR 1075at 1092, per Slade J; Cloverbay Ltd (Joint Administrators) v. Bank of Credit and Commerce International SA[1991] Ch 90 per Sir Nicolas Browne-Wilkinson V.-C. at p.104; and British & Commonwealth Holdings Plc v. Spicer and Oppenheim (supra).
28. The jurisdiction conferred on the court by the section is necessarily wide, and being of an inquisitorial nature it is capable of working with great severity against third parties: see Re North Australian Territory Co. (1890) 45 Ch D 87 at p.93 per Bowen LJ. The width and potentially oppressive nature of the jurisdiction, however, is tempered by the fact that it does not follow that the court is bound to make an order merely because it has jurisdiction to do so. It has a discretion to make or refuse the order sought or to modify or limit its terms…
29. In exercising its discretion, the court must endeavour to strike a balance between the liquidator’s reasonable requirements and the need to avoid making an order that is unreasonable, unnecessary or oppressive to the party from whom the documents or information are sought: see for example In re British & Commonwealth Holdings Plc (Nos 1 and 2)[1992] Ch 342 at p.370 perRalph Gibson LJ, and at p.384 per Woolf LJ; British & Commonwealth Holdings Plc v. Spicer and Oppenheim (supra)at p.439; Re BCCI (No.12)[1997] 1 BCLC 526 at p.537 per Robert Walker J. These cases have been consistently followed in Hong Kong: see for example the Chark Fungcase (supra).
30. Over the years the courts have laid down general principles governing the balancing exercise which the court is called upon to undertake. They are conveniently set out in the Cloverbay case (supra) at pp 102-103 per Sir Nicolas Browne-Wilkinson V.-C. and In re British & Commonwealth Holdings Plc (Nos 1 and 2) [1992] Ch 342 at p.372 per Ralph Gibson LJ and at p.392 per Woolf LJ. They can be summarised as follows:
(1) The liquidator must show that the documents are reasonably required to enable him to carry out his functions, not that they are necessary to enable him to do so;
(2) the case for making an order under the section in respect of a former officer is usually stronger than in respect of a stranger who owes no fiduciary duties to the company and who is not under a statutory duty to assist the liquidator;
(3) there is an element of oppression in requiring a party to provide information which exposes him to potential liability;
(4) an order for oral examination is likely to be more oppressive than an order to produce documents;
(5) it is oppressive to require a person suspected of wrongdoing to prove the case against himself on oath prior to proceedings being brought;
(6) an order is not necessarily oppressive because it is inconvenient for the party subject to it or causes him a lot of work or may make him vulnerable to future claims;
(7) in the light of the summary nature of the procedure and the need for expedition, the court cannot be expected to indulge in fine judgments as to the precise width of the order which should be made; and
(8) the court must take care not to cut down the width of the order sought by the liquidator in a way which would risk making it ineffective.”

15. Tang and Wong do not accept the first proposition set out above in the bankruptcy context, ie the test for discovery is just reasonable requirement to enable the trustee to carry out his functions. They argue that the discovery sought must be relevant and discovery of the nature of a “fishing” expedition should not be allowed. Presumably, they equate discovery under section 29 of the Bankruptcy Ordinance with general discovery under Order 24 of the RHC. This issue was dealt with in the context of company insolvency by Lord Millett NPJ when he contrasted discovery under section 221 of the Companies Ordinance with discovery under Order 24. He said in paragraph 33 of the judgment:

“The power of a court or arbitral tribunal to order discovery is very narrow, and narrower than the powers of the court under s.221 in at least two respects. First, discovery is limited to documents which “relate to any matter in question in the action” in circumstances where there are existing proceedings in which the issues have been defined by the pleadings. Section 221 by contrast is concerned with documents “relating to the company” in circumstances where there is no dispute and there are no existing proceedings or issues defined by pleadings. Secondly, a party seeking discovery is not entitled to the production of documents which may help him discover whether he has other claims not covered by the pleadings; he must not be engaged on a “fishing” or speculative expedition. The liquidator, by contrast, is necessarily engaged in just such an expedition and the purpose of s.221 is to enable him to carry it out effectively.”
(emphasis underlined)

16. As in the case of company insolvency, the jurisdiction conferred on the court by the section 29 of the Bankruptcy Ordinance is inquisitorial in nature. It must of necessity be general, wide and unlimited. The trustee has a wider agenda than a party seeking discovery under Order 24. His general mandate is to investigate the affairs and property of the bankrupt. His functions are to put the bankrupt’s affairs in order and administer his affairs to which he is a total stranger. He needs far wider discovery to enable him to discharge his functions than what is permissible in an ordinary inter-party or third party discovery under Order 24. He may not know what he had to unravel from the bankrupt’s affairs. He cannot be confined to pleaded issues. He is not required to prove any pleaded issues on a balance of probability. It is therefore inappropriate to compare the discovery sought under section 29 of the Bankruptcy Ordinance with that under Order 24. Public policy requires that the trustee in bankruptcy be given a “fishing license” for the benefit of the creditors. As in the case of company insolvency, the essential requirement is whether the information or documents sought are reasonably required to enable the trustee to carry out his functions in gathering information about the assets, affairs and dealings of the bankrupt as effectively as possible, and with as little expense as possible.

17. From the judgment of Lord Millett NPJ, the authorities cited therein and the analogy to company insolvency, the following principles applicable to the court’s exercise of its power under section 29(1) of the Bankruptcy Ordinance could be distilled:

(a) the power conferred by the section is general, wide, unlimited, and discretionary in nature;
(b) to invoke the court’s exercise of this discretion, the trustee bears the burden of proving (i) that the provision of information or documents is reasonably required for him to carry out his functions; and (ii) a prima facie case that the respondent is able to provide such information or documents; and in considering the issue of reasonable requirement, great weight should be given to the views of the trustee;
(c) as the power is general, wide and unlimited, exercise of such power may be oppressive to a third party or the bankrupt, the court must carefully strike a balance between the trustee’s reasonable requirements and the need to avoid making an order which is wholly unreasonable, unnecessary or oppressive to the person concerned; the burden is on the trustee to satisfy the court, after balancing all the relevant factors, it is a proper case for such an order to be made; and in this balancing exercise, the court may consider the factors mentioned in paragraph 30 of the judgment of Lord Millett NPJ quoted above.

R1’S ENFORCEMENT ORDER

The applicable legal principles

18. The legal basis of the Trustees’ application for the R1’s Enforcement Order is Order 45 rules 6(1) which provides as follows:

“(1) Notwithstanding that a judgment or order requiring a person to do an act specifies a time within which the act is to be done, the Court shall without prejudice to Order 3, rule 5, have power to make an order requiring the act to be done within another time, being such time after service of that order, or such other time, as may be specified therein.”

19. This jurisdiction is an absolute one. The rule enables the court to give the respondent one last chance to comply with its order before the applicant may invoke the penal sanctions available in the court’s armory. The burden is on the applicant to prove that an order had been made requiring the respondent to perform an act within a specified time and the respondent failed to do so. Once that is proved, the burden is then shifted to the respondent to show why he should not be required to comply with the order to perform the act, upon being given a second chance. The obligation to perform the act required had been determined and made an order of the court. Thus, in considering whether to exercise the discretion under this rule, there is no need for the court to revisit the appropriateness or otherwise of its previous order. The question is simply whether in all the circumstances the respondent should be excused from performing the act under its previous order. As the court’s orders are made to be complied, such circumstances must be very rare indeed. A possible example would be impossibility of performance as a result of change in circumstances.

The documents required to be produced and non compliance

20. The documents required to be produced are set out in the schedule attached to the R1’s Order, which are as follows:

“Copies of the supporting documents of the following payments made by the 1^st Respondent (on behalf of CWT Textile Supplies Company Limited (“CWT”)), including but not limited to, agreement(s) pursuant to which the following payments were made, correspondence(s) in relation to the following payments, minutes of meeting(s)/written resolution(s) of the creditors/ committee of inspection of CWT/court order(s) approving the following payments, invoice(s) and receipt(s) for the following payments:
(a) cheque no. 404944 dated 6 March 2009 in the sum of HK$20,842,330 in favour of Topmark Asia Limited;
(b) cheque no. 404943 dated 6 March 2009 in the sum of HK$4,041,965 in favour of Sun Ascent International Limited (“Sun Ascent”); and
(c) bank transfer on 8 April 2009 in the sum of HK$1,039,530 to the HSBC account no 047-896717-001 of Sun Ascent.”

The schedule is clear and unequivocal. The documents required to be produced are documents in various classes of documents described in the schedule and not specific documents. In short, the 1^st Respondents were required to produce all supporting documents falling within those classes in respect of three payments made by CWT to Topmark Asia and Sun Ascent, including agreements, correspondence, minutes of meeting or written resolutions of the creditors or committee of inspection of CWT or court orders.

21. The obligation is not at all an onerous burden to the 1^st Respondents, as joint and several liquidators of CWT. However, they only served a copy of the CWT Agreements to the Trustee’s solicitors, Li, Wong, Lam & WI Cheung (“LWLC”) on 2 December 2013 and nothing else. Despite repeated requests, they obstinately refused to produce any correspondence, minutes of meetings, resolutions, court orders, invoices or receipts as set out in the schedule; or file any affirmation pursuant to paragraph 2 of the R1’s Order stating in respect of each document whether it had been in their custody and/or power, when it was last in their custody and/or power and the reason it is now no longer so.

22. On 9 December 2013, LWLC wrote to CY reminding them that production of the CWT Agreements was not sufficient compliance with the R1’s Order. CY replied on 13 December 2013 that by producing the CWT Agreements, the 1^st Respondents had discharged their obligations under the R1’s Order and R2’s Order because those agreements have proved the business relationship between CWT, Topmark Asia and Sun Ascent.

23. When repeatedly pressed for production of all documents falling within the description of the schedule, CY wrote on 2 January 2014 and made the follow points:

“1. The documents requested by the Trustees concern 3 payments by CWT Textile Supplies Company Limited (“CWT”), and nothing more. You and the Trustees already have the requisite bank transfer documents.
2. The supporting documents for the 3 payments are the two Agreements that our clients have disclosed under our letter dated 13^th December 2013, based on which the payments were calculated and made, and nothing else.
3. There is no need for “approval” of the payments per se as such; the payments were made pursuant to the terms of the two Agreements. Approval of the agreements (given many years before the payments) is a totally different matter which is of no concern to the Trustees. Approval of these agreements has no bearing whatsoever on the Trustees’ case to prove that Topmark Asia and/or Sun Ascent belong to the Bankrupt.
4. Calculation of the amount paid is part of the “working papers” of the CWT case administration, and is based on the settlement amount recorded in the settlement deed concerning the relevant litigation involving third parties (hence subject to confidentiality undertakings). These calculations have no bearing whatsoever on the Trustees’ case to prove that Topmark Asia and/or Sun Ascent belong to the Bankrupt.
5. The Order is essentially an interlocutory order pending the Trustees establishing their claims and case to prove that various companies which the Trustees allege belong to the Bankrupt, including Topmark Asia and Sun Ascent, do indeed belong and are owned by the Bankrupt as at the date of the Bankruptcy Order (and not before, subject to bankruptcy claw back provisions). Before the Trustees have proven their case, they cannot assume that they are in control of Topmark Asia and/or Sun Ascent and then attempt to seek unrelated and unnecessary information and documents from third parties concerning (or even NOT concerning) these two companies.”

24. In his second affirmation filed for the purpose of resisting this application, Tang recited and adopted the position taken by CY in these two letters. While asserting in point 2 through their solicitors that there are no other documents, the 1^st Respondents repeatedly refused to file an affirmation deposing to that effect in respect of each class of documents. That is not performance of paragraph 2 of the R1’s Order. Point 3 indicates there are actually documents in existence relating to approval of the agreement for payments, but the 1^st Respondents obstinately refused to produce them.

25. The thrust of CY’s argument, which is adopted by the 1^st Respondents, is that the CWT Agreements which have been produced proved the business relationship between CWT, Topmark Asia and Sun Ascent is sufficient for the Trustees, that the calculations and approval for payment are of no concern to the Trustees and have no bearing on the Trustee’s case that Topmark Asia or Sun Ascent belong to the Bankrupt. These arguments are futile. On their own admission, the 1^st Respondents had received legal advice and instructed their solicitors to consent to an order to be made in the terms of the R1’s Order, though Tang now says he consented to save time and costs. An order in the terms of the R1’s Order has been made by the court with their consent. It is not for them to define what the documents the Trustees need or to re-define the terms of the order of the court. It is not for them to have second thoughts about their consent and decide whether a document is relevant for proving the Trustee’s case and not to produce it, if it is not. If a document exists and is within one of the classes of documents set out in the schedule, it shall be their obligation to produce it under paragraph 1 of R1’s Order. If the document does not exist, it shall be their obligation to file an affirmation in the terms of paragraph 2 of R1’s Order. It is not permissible for them to hide behind their solicitors to assert their non-existence, without doing so on oath. Tang merely recited the contents of CY’s letters. His second affirmation plainly falls short of compliance with paragraph 2 of R1’s Order. The 1^st Respondents’ failure to perform the act required under the R1’s Order is manifest.

Conclusion

26. As I have said, in considering whether to exercise its discretion to grant an enforcement order under Order 45, rule 6, the court shall not revisit the issue as to the propriety of its previous order. But, if I have to do so, I would have no difficulties at all to find it appropriate to make a fresh discovery order under section 29 of the Bankruptcy Ordinance.

27. Firstly, I am satisfied that the various classes of documents sought are reasonably required for the Trustees to perform their functions. This is particularly so, as I shall demonstrate later, because the Trustees have established a strong case that the Bankrupt operated a complex scheme using nominees and offshore companies, including Topmark Asia and Sun Ascent to conceal his assets from his creditors. There is clear evidence that, at least, some of the funds paid by CWT to Topmark Asia and Sun Ascent found their way to the Bankrupt through those offshore companies and were used to discharge the Bankrupt’s personal liabilities. This suggests it is possible that Topmark Asia and Sun Ascent are under the control of the Bankrupt and that the CWT litigation is one of the Bankrupt’s investments in distress assets. It is therefore reasonably necessary for the Trustees to obtain the documents sought to enable them to investigate whether it is proper to treat Topmark Asia and Sun Ascent as alter egos of the Bankrupt for the purpose of establishing the Trustees’ right to claim the funds paid by CWT to Topmark Asia and Sun Ascent for the benefit of the Bankrupt’s creditors.

28. Secondly, the documents sought are reasonably expected to be in the possession, custody or control of the 1^st Respondents as the joint and several liquidators of CWT. The 1^st Respondents never disputed their existence and even consented to the R1’s Order to be made. I am satisfied that the Trustees have made out a prima facie case that the documents existed and are in the possession, custody or control of the 1^st Respondents.

29. Thirdly, the 1^stRespondents have not asserted that the production of the documents would be oppressive, whether to CWT or to themselves in their personal capacity, so that upon balancing the oppression to them as third parties against the interest of the Bankrupt’s creditors a discovery order should not have been made.

30. The 1^st Respondents only adopted an antagonistic, as opposed to a neutral, approach towards the discovery application and towards this application for enforcement order. I am surprised by the stand they are now adopting. They have utterly failed to offer any reason why the enforcement order should not be made. There is no suggestion that the R1’s Order is now incapable of performance. There is no change in circumstances. Accordingly, I grant the Trustees’ application for the R1’s Enforcement Order in the terms sought.

R2’S FRESH ORDER

Companies allegedly under the control of the Bankrupt or his nominees

31. The thrust of the Trustees’ case that the documents sought are reasonably required is founded on their belief that the Bankrupt is operating a complex scheme using about 30 offshore companies and nominees to conceal his assets, to carry out his business ventures and litigations and to pay his personal and family expenses.

32. The following seven of those companies are featured in the present application, the first four of which are related to the documents sought under the R2’s Order and the R2’s Fresh Order:

(1) Topmark Asia Limited (“Topmark Asia”);
(2) DH China Consulting Limited (“DH China”);
(3) Grand Asia Capital Services Limited (“Grand Asia”);
(4) Asia-PacInfrastructureDevelopmentLimited(“APIDL”);
(5) Sun Ascent International Limited (“Sun Ascent”);
(6) Hawthorn Agents Limited (“Hawthorn Agents”); and
(7) Mainwell Development Ltd (“Mainwell”).

33. The Trustees believe that the following family members of the Bankrupt and nominees are central to his asset concealment scheme:

(1) Jade Ho: the Bankrupt’s sister, partner of the Bankrupt’s firm of solicitors, David YW Ho & Co (the “Firm”); a director and a signatory of the bank accounts of Topmark Asia, Hawthhorn Agents, Sun Ascent, Grand Asia and DH China;
(2) Brian Chan: a former partner of the Firm, admitted nominee director of DH China; and a signatory of the bank accounts of Topmark Asia, Hawthhorn Agents, Grand Asia and DH China;
(3) Fong King Yiu: a law clerk of the Firm; a director and a signatory of the bank accounts of Topmark Asia, Grand Asia and DH China; and signatory of the bank account of Mainwell;
(4) Kellie Chan: The Bankrupt’s secretary, a director of DH China, a signatory of the bank accounts of Topmark Asia, Hawthorn Agents, Sun Ascent, Grand Asia, Mainwell, and DH China;
(5) Jeff Li: the accountant of APIDL from 1998 to 2005; an admitted nominee director of Topmark Asia; an admitted nominee director and signatory of the bank accounts of APIDL, Grand Asia, Sun Ascent and DH China;
(6) Peter Lo: the accountant who handled the Bankrupt’s investment projects held under APIDL from 2001 to 2006, an admitted nominee director of APIDL, Topmark Asia, Sun Ascent and DH China, bank account signatory of Sun Ascent and Grand Asia;
(7) Yu Yang: a staff member of the Bankrupt’s business in the People’s Republic of China (“the PRC”); the brother of the Bankrupt’s rumoured girlfriend; a director of Grand Asia; and a signatory of the bank accounts of Topmark Asia, Grand Asia and Mainwell; and
(8) Pei Xin Yu: an accounting manager employed in the Bankrupt’s PRC business, director of Topmark Asia.

Topmark Asia

34. The Bankrupt was the sole director and bank account signatory of Topmark Asia upon its incorporation until 17 December 2004. He was succeeded by his nominees in the following order: Jeff Li, Peter Lo, Fong King Yu, Jade Ho and lastly, Pei Xin Yu. All the successors are related in one way or another to the Bankrupt as set out in paragraph 33 above. In particular, Jeff Li and Peter Lo admitted to be the Bankrupt’s nominees. Brian Chan admitted that he signed documents and arranged payments to APIDL on the instruction and behalf of the Bankrupt.

35. Under the CWT Agreements, Topmark Asia provided consultancy services to CWT in connection with CWT’s litigation against its former auditors for professional negligence and with Sun Ascent providing the funding. The litigation was settled. The 1^st Respondents were paid a settlement sum, out of which substantial sums were paid to Topmark Asia and Sun Ascent pursuant to the CWT Agreements. On 6 March 2009, the 1^st Respondent paid $24.8 million to Topmark Asia on behalf of CWT. Four days later, Topmark Asia made payments in excess of $12 million to Grand Asia and Hawthorn Agents, which paid substantial sums to the Bankrupt, DH China and his nominees to settle the Bankrupt’s expenses shortly afterwards. At that material time, Jade Ho was the sole director of Topmark Asia and sole signatory of its bank account. The payments-out by Hawthorn Agents and Grand Asia were effected by cheques signed by Jade Ho and Kellie Chan.

36. From the above fund flow and the use of the funds of Topmark Asia as his own, the Bankrupt’s beneficial interest in and control over Topmark Asia could be readily inferred. This inference is reinforced by the fact that the line of directors of Topmark Asia after the Bankrupt were all admittedly his nominees, employees of his Firm or his business in the PRC or otherwise related to him, particularly his sister Jade Ho who was the sole signatory of the bank account of Topmark Asia at the time of those fund transfers.

Sun Ascent

37. Jade Ho, Jeff Li and Peter Lo were directors and bank account signatories of Sun Ascent. Jade Ho was represented to the Hong Kong and Shanghai Banking Corporation as the ultimate beneficial owner of Sun Ascent.

38. On 6 March and 8 April 2009, pursuant to the CWT Agreements, the 1^st Respondents paid Sun Ascent two sums totalling over $5 million on behalf of CWT. Between 19 March and 17 July 2009, about the same amount was paid by Sun Ascent to Grand Asia and Mainwell, which then made payments to settle the Bankrupt’s personal expenses and to APIDL. The payments-out by Sun Ascent were all effected by cheques signed by the Bankrupt’s secretary, Kellie Chan. The payments-out from Mainwell were signed by Kellie Chan. The payments-out from Grand Asia were signed by Kellie Chan.

39. From the above fund flow, it is manifestly obvious that the funds received from CWT by Sun Ascent were paid to Mainwell and Grand Asia which used the funds to pay the Bankrupt’s personal expenses and to pay APIDL. All these payments were effected by the Bankrupt’s secretary and law clerk of his Firm, who were obviously his nominees. From the use of the funds of Sun Ascent as his own, the Bankrupt’s beneficial interest in and control over Sun Ascent could be readily inferred.

DH China

40. The Bankrupt was a director of DH China until 17 December 2004 when he was succeed by Jeff Li, Peter Lo, Fong King Yiu. Initially, he and Jade Ho were signatories of the bank account of DH China. Then Fong King Yiu succeeded as the sole signatory in 2005 and by Kellie Chan since 2008.

41. Between March and August 2009, which was around the time when Topmark Asia paid substantial sums to Grand Asia, DH China received numerous payments from Grand Asia. Between 2009 and 2012, DH China made numerous payments to a number of companies believed to be under the control of the Bankrupt, including a payment of $120,000 to Mainwell in November 2011. It should be recalled that between March and July 2009 Mainwell received substantial payments from Sun Ascent which are thought to be related to the settlement sum received by CWT.

Grand Asia

42. The Bankrupt was a director of Grand Asia and its sole bank account signatory with Hang Seng Bank. He was later succeeded as bank account signatory by Jade Ho, Jeff Li, Peter Lo, Brian Chan and Fong King Yiu and Kellie Chan.

43. On 1 April 2011, one share in Grand Asia was transferred to Yu Yang, the Bankrupt’s employee in the PRC for US$1. The Trustees believe that Yu Yang held the share as a nominee of the Bankrupt.

44. It should be recalled that Grand Asia received $12 million from Topmark Asia on 10 March 2009. It is significant also to note that Grand Asia paid the Bankrupt’s ex-wife up to 22 Mary 2012 and settled Wilkinson & Grist’s legal fees up to 9 May 2011. Notably, Wilkinson & Grist was engaged by the Bankrupt to act for him in his personal litigations. Grand Asia also settled the travel expenses of his children up to 15 October 2010 and their dental expenses up to 15 April 2010. Those payments were effected by cashier orders or cheques signed by Kellie Chan.

45. Thus, through Grand Asia and with the help of his secretary, Kellie Chan, funds originating from CWT and on the face belonging to Topmark Asia were applied to discharge the Bankrupt’s liabilities to his ex-wife, children and his personal expenses. The inference that the Bankrupt was the beneficial owner and person in control of Grand Asia can be readily drawn.

APIDL

46. APIDL is a member of the Asia-Pac group. The Bankrupt alleged that he had disposed of his entire interest in APIDL in 2004 and that the company underwent a re-capitalization with issue of 750,000 shares to new owners, which further dissociated himself from APIDL. However, the Trustees have shown that the 2004 sale and the 2007 re-capitalization were all fictitious.

47. It is the Bankrupt’s assertion in his tenth affirmation filed in HCA 806/2006 that he had sold his entire interest in APIDL in 2004 and exhibited a cashier order dated 18 November 2004 in the sum of $2 million as evidence of his receipt of the sale proceeds. However, it transpired that the cashier order was issued by Brian Chan, a partner of his Firm, through his shelf company under the Bankrupt’s instruction and from funds which the Bankrupt arranged to be paid into Brian Chan’s shelf company. Put another way, the consideration for the Bankrupt’s purported sale of his interest in APIDL was paid by the Bankrupt himself. The sale was a sham engineered by the Bankrupt to put up a façade that he is no longer the owner of APIDL.

48. As for the re-capitalization in 2007, the Bankrupt deposed that APIDL issued 500,000 shares to Ontrade Properties Limited (“Ontrade”) in return for the only issued share in Tsun King Group Limited (“Tsun King”) which holds certain properties in Beijing City (“Ontrade Subscription Agreement”); and issued 250,000 shares to King Ocean Development Inc (“King Ocean”) in return for cash of $25 million (“King Ocean Subscription Agreement”). The Trustees’ case is that the re-capitalization scheme was a complex one. For the present purpose, the Trustees’ burden is to show that the documents sought are reasonably required to enable them to perform their functions. There is therefore no need to engage in detail analysis of the evidence. Simply put, there is evidence to support that the properties held by Tsun King are properties belonging to the Asia-Pac group and the consideration for the subscription under the King Ocean Subscription Agreement, if paid, also originated from the Asia-Pac group. Hence, the Trustees argue that the Bankrupt is the ultimate beneficial owner of the shares in APIDL issued under the re-capitalization scheme. They believe that the re-capitalization was a sham and have commenced action in HCA 971/2012 to recover the shares in APIDL issued under the Ontrade Subscription Agreement and King Ocean Subscription Agreement.

49. The Trustees have also shown that there were significant fund transfers between APIDL and other offshore companies which the Trustees believe to be under the control of the Bankrupt, including Sun Ascent and Mainwell mentioned above.

The documents required to be produced

50. The R2’s Order was directed at all the partners of JBPB, including the 1^st Respondents, in respect of documents in the possession, custody and/or power of JBPB. Now that the 1^st Respondents dispute their consent to be bound by the decision of the majority partners in consenting to the order to be made, to avoid unnecessary argument, the Trustees seek a fresh order solely against the 1^st Respondents in similar terms as the R2’s Order. The documents sought to be produced are set out in the schedule to the R2’s Order which reads:

“Copies of the supporting documents of the following payments made to the 2^nd Respondent, including but not limited to, agreement(s) pursuant to which the following payments were made, correspondence(s) in relation to the following payments, minutes of meeting(s)/written resolution(s) of creditors/ committee of inspection/court order(s) approving the following payments, invoice(s) and receipt(s) for the following payments:-
(a list of twelve particularized payments, including one cashier order and eleven payments by DH China, Topmark Asia, Grand Asia and APIDL)”

Whether the documents sought are reasonably required

51. The first item sought under the R2’s Fresh Order relates to a payment by a cashier order dated 23 December 2004 in the amount of $500,000 to JBPB. The Trustees believe that Topmark Asia and Sun Ascent were vehicles established and used by the Bankrupt to carry out his personal investment in distressed assets. This belief is based on Jeff Li’s letter to the Trustees dated 22 April 2013. In the letter, Jeff Li told the Trustees that during his employment with the Bankrupt, he learned that the Bankrupt invested in distressed assets in Hong Kong and the PRC which were under litigation and that the Bankrupt told him that he had a friend in JBPB who introduced the distressed assets to him. Jeff Li recalled that the payments made to JBPB were related to the Bankrupt’s investments in those distress assets. The Trustees believe that “the friend” mentioned by Jeff Li was Tang who was the partner in JBPB responsible for handling the affairs of APIDL and that the payment of $500,000 by cashier order to JBPB dated 23 December 2004 was related to the Bankrupt’s investment in distressed assets. In addition, according to Brian Chan, this payment was made by him while he was a partner of the Firm and at the instruction of the Bankrupt who told him that the payment was in relation to litigation expenses he or his companies incurred.

52. Jeff Li was an accountant of APIDL from 1998 to 2005. He admitted he was appointed by the Bankrupt as a nominee director of Topmark Asia, Sun Ascent, APIDL, Grand Asia and DH China and a signatory of their bank accounts. He has left the employment of the Bankrupt or APIDL and may be regarded as an independent and credible witness. It is reasonable for the Trustees to act on his assertions relating to affairs of APIDL which occurred during his employment with APIDL or the Bankrupt. Brian Chan was a former partner of the Bankrupt’s Firm. For the same reasons, there is no reason not to believe him. Hence, taking the two assertions together, the Trustees reasonably believe that the documents sought in relation to this cashier order may cast light on the Bankrupt’s investments and more specifically his personal role in the litigation funding arrangements under the CWT Agreements and other arrangements that the Bankrupt may have had with Tang or JBPB. Hence, it is reasonably necessary to discover documents relating to the cashier order.

53. The other eleven items sought are documents relating to payments to JBPB made by DH China, Topmark Asia, Grand Asia and APIDL (“the four companies”). The Bankrupt was the sole director of the first three of these companies and then he was succeeded by people who admittedly were his nominees and by his employees or secretary. From the Bankrupt’s use of the funds of these companies as his own, it could be inferred that he is the beneficial owner of these three companies.

54. Though the Bankrupt alleged that he had disposed of his entire interest in APIDL in 2004 and that there was another re-capitalization in 2007 which further distanced him from APIDL, the Trustees have demonstrated prima facie that the disposal in 2004 was a sham and the issue of new shares to Ontrade and King Ocean under the re-capitalization scheme in 2007 were also shams. The Trustees therefore entertain a reasonable belief that these disposals were made to create a façade to cover up the Bankrupt’s very substantial beneficial interest in APIDL.

55. The Trustees have demonstrated substantial fund flows between the Bankrupt and the four companies and Sun Ascent. In particular, substantial funds received from CWT, which possibly represent the Bankrupt’s return for his investment in distressed assets, were transferred to Topmark Asia and Sun Ascent, which were then siphoned to APIDL or to Grand Asia, Hawthorn Agents, Mainwell and DH China to be applied to settle the Bankrupt’s personal or family expenses, litigation costs and payments to his ex-wife. The Bankrupt used the funds of these companies as if they were his own. The natural persons in three of these companies, namely, DH China, Topmark Asia and Grand Asia, who effected or authorised the transfers were his sister Jade Ho and his secretary Kellie Chan. It is reasonable for the Trustees to believe that the Bankrupt is the beneficial owner of these four companies.

56. In addition, the documents or information in relation to the above twelve payments may throw light on the Bankrupt’s investments or more specifically his personal role in the litigation funding arrangements under the CWT Agreements and other arrangements that the Bankrupt may have had with JBPB through Tang. The documents sought may also assist the Trustees to identify the corporate entities used by the Bankrupt in carrying out his investments and asset concealment scheme, which may lead to a further train of inquiry.

57. Along the lines of CY’s letter dated 2 January 2014 quoted above, Tang argues rigorously that the discovery order is essentially an interlocutory order pending the Trustees establishing their case that the various companies which the Trustees allege belong to the Bankrupt, including these four companies, do indeed belong to and are owned by the Bankrupt as at the date of the Bankruptcy Order (and not before, subject to bankruptcy claw back provisions). He submits that before the Trustees have proven their case, they cannot assume that they are in control of these companies and entitled to seek unrelated and unnecessary information and documents from third parties relating to these companies. He also accused the Trustees of “fish trawling”.

58. For reasons as already explained, the arguments of CY and Tang are based on a false premise that discovery under section 29 of the Bankruptcy Ordinance stands on the same principles as discovery under Order 24. The test for discovery under section 29 is whether the documents are reasonably required to enable the trustee in bankruptcy to perform his functions, to discover the truth relating to the bankrupt’s affairs, business and his assets; and a fair amount of fishing is expected and permissible under section 29: see paragraphs 15 and 16 above. There is no need for the Trustees to prove that the Bankrupt is the actual owner of the four companies and Sun Ascent at the time of his bankruptcy.

59. Even after the hearing, the 1^st Respondents wrote to my clerk to make further submissions on this ownership argument and accuse Mr Yu of unprofessional conduct. I do not find it necessary to deal with the points raised in their letter. The reasons given in the above paragraph and the legal principles as set out in paragraph 17 above are sufficient to dismiss their arguments. I would just make the remark that their accusation of unprofessional conduct and breach of duty on the part of Mr Yu is wholly unfounded. “Ownership” of the various companies as mentioned by Mr Yu was intended and understood to mean beneficial ownership and not legal ownership. It is all along the Trustees’ case that these four companies and Sun Ascent are façades under the control of the Bankrupt to conceal his assets. I have to repeat that the test for an application for discovery under section 29 of the Bankruptcy Ordinance is whether the documents sought are reasonably required to enable the trustee in bankruptcy to perform his functions. It does not depend on proof of ownership of the companies issuing the documents.

60. Tang argues that the Trustees should not be allowed to “improperly” use evidence obtained from other actions in support of the present application. The evidence relied on by the Trustees are mainly affirmations filed in proceedings brought by APIDL in HCA 806/2006, in particular the Bankrupt’s tenth affirmation filed in that action. They are not obtained by way of compulsion in other proceedings, eg by discovery, but were voluntarily produced. As was held by Rogers VP in Shun Kai Finance v Japan Leasing (HK) Ltd[4], where a party voluntarily chooses to refer to a document in his pleading or an affidavit, it is he who has destroyed the privacy of the documents and not the other party or the court. I do not find there was any impropriety in using the affirmations and exhibits produced by the Bankrupt and others in those other proceedings which were introduced voluntarily and not by compulsion.

61. To enable the Trustees to discover the truth and circumstances connected with the Bankrupt’s affairs, his assets and dealings, it is reasonably necessary for them to be given access to supporting documents relating to the payments received by JBPB from these companies. I am fully satisfied that the documents sought are reasonably required to enable the Trustees to perform their functions.

Whether R1 are able to provide the documents sought

62. There is no dispute that JBPB has had possession of the relevant documents sought. However, the majority partners claimed that the documents are in the possession of Tang and Wong who had conduct of the affairs of APIDL and the Bankrupt on behalf of JBPB. This is denied by the 1^st Respondents who assert that the documents remain with the majority partners.

63. The managing partner of JBPB, Jonathan Russell Leong (“Leong”) filed an affirmation on behalf of the majority partners. According to Leong, Tang and Wong were the only partners in JBPB specialized in insolvency and restructuring work and were therefore the only partners engaged in the CWT liquidation. Hence, they were the only partners of JBPB privy to the communications between CWT and others. JBPB had two offices, one in Causeway Bay and another one in Central. Tang and Wong and the administration department of JBPB operated in the Causeway Bay office while the other ten partners operated in the office in Central. JBPB ceased trading on 31 December 2010. To wind down its business, JBPB instructed Tang and Wong, who had by then joined Shinewing (HK) CPA Limited (“Shinewing”) to, inter alia, maintain the books and records of JBPB and update the general and sub-ledgers/ accounts for payments made to creditors and funds received from debtors. Hence, since 31 December 2010, the books and records of JBPB were by and large under Tang’s and Wong’s control. After cessation of trading, the majority partners had only retained part of JBPB’s electronic documents from the office in Central and kept the books and records subsequent to around mid-2011. Leong averred that the books and records of JBPB prior to that time were never returned to the majority partners and they had no knowledge where they are now being kept. Leong further alleged that despite numerous requests, Tang and Wong did not return the books and records. The majority partners produced three documents which they said are the only documents they were able to locate.

64. In his third affirmation filed for the purpose of this application, Tang said that the partnership under JBPB split in December 2010 and the partners have since been in litigation amongst themselves. He said that the administration function, including storage of books and records and computer system was the responsibility of either the managing partner, Leong, or the chief executive officer, Rozario. He and Wong were never involved with any of those functions and had no idea where and how the books and records are kept. In response to Leong’s affirmation, he said that while he and Wong in their engagement of Shinewing agreed to update the accounting books and records of JBPB, they were never asked and never agreed to take care of or be responsible for any and all the past books and records of the partnership. He believed that the vast volumes of old books and records would have been kept at some off-site storage which neither he nor Wong knew about. Thus, they are unable to produce the documents now sought.

65. Mr Yu argues that Tang’s averment is entirely inadequate. He submits that Tang had opportunity to file his first affirmation in opposition to the Trustees’ summons dated 27 June 2013 (the “2013 summons”) applying for the R2’s Order, but chose to remain silent in the face of the above allegations by the majority partners that he and Wong had possession of the documents sought. He did not correct the Trustees of any misunderstanding about his and Wong’s position on the R2’s Order, including their ability to provide the documents, even when the consent summons for the R2’s Order was executed. Now for the first time since the present application, Tang alleges that the documents were kept and maintained by the administration department of JBPB. He submits that Tang’s assertion is incredible.

66. I cannot help feeling a sense of skepticism about Tang’s equivocal conduct. He admitted that he was aware of the 2013 summons seeking the R2’s Order against JBPB, including the majority partners and themselves as minority partners, and had notice that CSC was to be engaged by the majority partners to represent JBPB. He kept silent in the face of the majority partner’s assertion that he and Wong had possession of the documents sought. He also adopted an antagonistic, as opposed to a neutral, approach towards the discovery application and towards this application for enforcement order and the R2’s Fresh Order as if the Bankrupt is standing in his shoes. Anyway, this is not a mini-trial on affidavit evidence. Even assuming that his assertion is to be accepted, his Third Affirmation failed in two respects.

67. First, Tang said nothing to respond to Leong’s assertion that he and Wong are the only partners of JBPB who had the conduct of the affairs relating to CWT liquidation, APIDL and the Bankrupt and that they were the partners who were privy to the communication with CWT and APIDL. They operated in the Causeway Bay office where the records and documents sought were kept. They had conduct of the CWT liquidation, the affairs of APIDL and the Bankrupt. In that position, the likelihood is that they had possession of the documents at some stage and should know from whom they obtained the books and records and where they were kept and are in a better position than the majority partners in the remote office in Central who had nothing to do with those matters which they were handling. Tang’s simple assertion of no knowledge is inadequate, apart from being incredible, irresponsible, insincere, and evasive. Tang and Wong cannot just get away with a bald assertion of lack of knowledge without giving more particulars.

68. Second, under section 29(1), an order for discovery may be made against a person “whom the court may deem capable of giving information respecting the bankrupt, his dealings or property”. In Re Hau Po Man Stanley[5], the Court of Appeal held that an order may be made against a respondent if the applicant can “establish a prima facie case that the respondent is able to provide such information or documents”. The applicant need not assume the higher burden of proving that the respondent actually has the documents or information in his possession. In my view, even if a person does not have physical possession or custody of a document, he may be deemed capable of producing the document if the document is within his control or power in the discovery context. I would construe the words “deem capable” in section 29(1) or the word “able” as used by the Court of Appeal in Re Hau Po Man Stanley as having the same meaning as the word “power” in the discovery context and adopt the following meaning of the word “power” as construed in Gotland Enterprises v Kwok Chi Yau[6]:

“a presently enforceable legal right to obtain from whoever actually holds the document inspection of it without the need to obtain the consent of anyone else.”

69. Section 26 of the Partnership Ordinance provides:

“The interests of partners in the partnership property, and their rights and duties in relation to the partnership, shall be determined, subject to any agreement, express or implied, between the partners, by the following rules-
(i) the partnership books are to be kept at the place of business of the partnership …, and every partner may, when he thinks fit, have access to and inspect and copy any of them.”

70. As partners of JBPB, Tang and Wong have a presently enforceable right under section 26 of the Partnership Ordinance to inspection of partnership property and to discovery from their co-partners of all matters relating to the partnership dealings and transaction. This right is incontestable: see Lindley & Banks on Partnership[7]. As I have said, Tang and Wong are in a better position than any of the majority partners to know where and how the records and documents were kept. The majority partners are likely to assist them in complying with the R2’s Fresh Order. Their willingness to assist the Trustees is amply demonstrated by their consent to the R2’s Order. Tang and Wong said nothing about their inability to provide the documents, including their inability to seek such documents from the majority partners and their staff. Tang’s as well as Wong’s position is wholly contrived. They either have the documents in their possession and custody or have a power to obtain them from the majority partners.

Conclusion

71. I am satisfied that the documents sought are reasonably required to enable the Trustees to perform their functions and that the 1^stRespondents are able to provide the information or documents. There is nothing to suggest that making an order against them would be oppressive. Accepting the possibility that they might need the cooperation of the majority partners to produce the documents, I would make the order and grant them 21 days to comply.

PENAL NOTICE AND DISPENSATION OF PERSONAL SERVICE

72. The 1^st Respondents have demonstrated a determined refusal to comply with the R1’s Order which was made with their consent. Tang adopted a hostile, as opposed to a neutral, attitude towards this application as if the Bankrupt were standing in his shoes. Wong adopted Tang’s position. They impressed me that they will not comply with any order of this court unless endorsed with a penal notice. It is appropriate that a penal notice be endorsed on the order to be made.

73. The Trustees also seek dispensation with personal service on Tang and Wong. Mr Yu referred me to the difficulties the Trustees had encountered in effecting personal service on them and urges me to dispense with personal service as the 1^st Respondents are attending the hearing and could be notified of the terms of the orders to be made including the penal notice and consequences of default. As I was not in the position to make an order forthwith, I do not think it appropriate to take that course now.

COSTS

74. Mr Yu asks for costs of this application be made against the 1^stRespondents on an indemnity basis.

75. Tang and Wong have shown themselves to be evasive and unduly antagonistic towards the application. The terms of the R1’s Order are plain. Despite that, Tang and Wong still maintain the untenable position that disclosure of the CWT Agreements suffices. Such a stance is plainly contradicted by the terms of the R1’s Order. The R1’s Enforcement Order is entirely necessitated by their recalcitrant attitude in failing to comply with the R1’s Order and in attempting to re-define the terms of that order. Tang is an experienced accountant and has ample experience in liquidation. He should be familiar with the legal principles applicable discovery in company insolvency which are applicable to discovery in personal bankruptcy. He took every possible technical objection and made unfounded accusations of unprofessional, oppressive and hostile conduct against the Trustees, their solicitors and their counsel. I am surprised that he is taking such a hostile stance in this application as if he is appearing on behalf of the Bankrupt resisting discovery. Wong adopted the same stance. They have stepped outside the realm as joint and several liquidators of CWT. There is no reason why the creditors or contributories of CWT should bear the costs of their contesting the application on behalf of the Bankrupt. Tang and Wong should therefore bear the Trustees’ costs of the application for the R1’s Enforcement Order on an indemnity basis and personally.

76. Mr Yu argues that the R2’s Fresh Order is also necessitated by Tang’s and Wong’s equivocal conduct. They were aware that CSC was representing JBPB, including themselves. Though Tang sent an email to CSC expressly stating that CSC should not act for him, neither Tang nor Wong brought that issue to the attention of the Trustees or their solicitors, LWLC, before the R2’s Order was sought by consent. The 1^stRespondent could and should have filed an affirmation in response to the summons in their capacity as minority partners of JBPB. They did not. Had they done so, the argument today could have been disposed of at the hearing before Deputy High Court Judge Le Pichon in November 2013. By their silence, the Trustees were led down the path of error into thinking that CSC represented all the partners of JBPB. The application for the R2’s Fresh Order is necessitated by Tang and Wong. There is no merit in Tang’s and Wong’s resisting the application. For the same reasons as given in relation to the R1’s Enforcement Order, Tang and Wong should pay the costs of the application for R2’s Fresh Order on indemnity basis. They resisted the application in their personal capacity as minority partners of JBPB. They should therefore bear the costs of the application for the R2’s Fresh Order personally.

77. Accordingly, I make an order that the 1^st Respondents shall pay the Trustees’ costs of the entire application on an indemnity basis and personally.

78. The Trustees and the majority partners agree that the latter’s costs of this application be paid out of the estate of the Bankrupt.

CONCLUSION

79. Accordingly, I make an order against Tang and Wong in terms of paragraphs 1, 2 and 6 of the Trustees’ inter partes summons dated 7 February 2014 and in terms of paragraph 5 of the said summons but allow them 21 days to comply. I also make an order nisi that Tang and Wong shall personally bear the costs of the said summons and the costs of the hearing on an indemnity basis. Any party who wishes object to the costs order nisi shall do so by taking out an inter partes summons for that purpose within 14 days. I also make an order by consent that the costs of the majority partners of JBPB shall be paid out of the estate of the Bankrupt.

	( Anthony To )
	Judge of the Court of First Instance
	High Court

Mr Jason Yu, instructed by Li, Wong, Lam and WI Cheung, for the Applicants

The 1^st Respondents appeared in person

Mr Ken To, instructed by Chiu, Szeto & Cheng, for the 2^nd Respondent

Attendance of the Official Receiver was excused

[1] [2012] 4 HKLRD 581

[2] (2006) 9 HKCFAR 766

[3] (2006) 9 HKCFAR 766

[4] [2000] 3 HKLRD 539, 543I-J.

[5] [2008] 1 HKC 256, 261.

[6] [2007] 1 HKLRD 226, paragraph 11.

[7] 19^th ed, 2010, paragraphs 22-10, 22-16, and 23-97 to 104,

Please refer to HCMP995/2014 for the relevant appeal(s) to the Court of Appeal.

	Date	Payor	Amount (HK$)
1.	16 July 2019	Shang Jinglin (“Shang”)	1,500,000
2.	16 September 2019	Unidentified account holder of HSBC Premier account 718-533599-888 (“Unidentified HSBC Account Holder”)	680,000
3.	18 October 2019	Unidentified HSBC Account Holder	420,000
4.	14 January 2020	Unidentified HSBC Account Holder	600,000
5.	7 July 2020	Unidentified HSBC Account Holder	1,600,000
6.	9 October 2020	Transferred from client account of Grassmere Services Limited (“Grassmere”) in the 2587 Action to client account of Gladius Limited (“Gladius”) in the 971 Action	23,100
		Total:	4,823,100

From	Shareholder	Director
1992.06.20	David Ho	David Ho
1994.10.03	Timothy Sun Kwong Wah	Timothy Sun Kwong Wah
2004.01.19	Grand Asia Capital Investments Ltd	David Ho
2004.12.13	Grand Asia Capital Investments Ltd	Chung Chen Ning
2006.11.13	Grand Asia Group Holdings Ltd	Fong King Yiu
2006.12.29	APIDL	Fong King Yiu
2008.06.18	APIDL	Yu Yang
2010.06.30	Yu Yang	Yu Yang
2012.07.16	Luck Creation Limited (“Luck Creation”)	Sun Bo
2016.07.17	Luck Creation Limited (“Luck Creation”)	Sun Bo and Sun Li Hua
2016.07.18	Su Lan Lan	Sun Bo and Sun Li Hua
2016.07.19	Su Lan Lan	Sun Bo, Sun Li Hua, Su Lan Lan, and Qi Yu Gang

Respondent Banks	Names of the Entities / Individuals as holders	Accounts
R1	APIDL	Account 1
R2	Guan Qiaoling / Guan Qiao Ling	Account 2
	Zhao Jian Hong	Account 3
	Shinewing Specialist Advisory Services Limited	Account 4
R3	Sun Lihua / Sun Li Hua / Sunlihua	Account 5
R3	Han Liang	Account 6
R4	Sun Lihua / Sun Li Hua / Sunlihua	Account 7
R5	Ma Yun Ru	Account 8
R6	Bryne & Co.	Account 9

Date	Bank	Name	Relevant Funding Agreement	Amount (HK$)
28 May 2013	R3	Sun Li Hua	Initial Funding Agreement	50,000
30 September 2013	R4	Sun Li Hua	Supplemental Initial Funding Agreement	45,000
17 January 2014	R2	Guan Qiao Ling	2^nd Supplemental Initial Funding Agreement	60,000
28 February 2014	R2	Zhao Jian Hong	3^rd Supplemental Initial Funding Agreement	234,000
16 May 2014	R5	Ma Yun Ru	4^th Supplemental Initial Funding Agreement	240,000
7 August 2014	R3	Han Liang	5^th Supplemental Initial Funding Agreement	70,000
21 August 2014	R3	Sun Li Hua	6^th Supplemental Initial Funding Agreement	45,000

	Name	Place of Incorporation	Last Shareholders	Last Directors
D2	Gladius Limited (previously D Ho Nominees Limited)	Hong Kong	Ferdinan, Yu Yang	Ferdinan, Liu Shu
D3	Ontrade Properties Limited	BVI	Yu Yang	Liu Shu
D4	King Ocean Development Inc	BVI	Yu Yang	Yu Yang
D5	Asia-Pac Group Investments Limited	BVI	Yu Yang	Liu Shu
D8	Grand Asia Capital Services Limited	BVI	Yu Yang	Yu Yang
D9	Pacific Shine Limited	Hong Kong	Gladius, Ferdinan	Gladius, Ferdinan
	Ferdinan Limited (previously D Ho Corporate Services Limited)	Hong Kong	Gladius, Yu Yang	Gladius, Yu Yang