LAU SIU HUNG AND KWOK SIN KWAN (BEING THE JOINT AND SEVERAL LIQUIDATORS OF TOM IP & PARTNERS, ARCHITECTS, ENGINEERS & DEVELOPMENT CONSULTANTS LTD (IN LIQUIDATION)) v. P & T INTERNATIONAL INC.

HCCW 216/2018

[2021] HKCFI 2850

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP)  PROCEEDINGS NO 216 OF 2018

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REASONS FOR DECISION

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1.  The Applicants, by their Re-Amended Summons dated 5 January 2021 (“Leave Summons”), apply for leave to appeal against this Court’s Order dated 23 December 2020 dismissing the Applicants’ summons dated 24 July 2020 (“2020 Summons”), on the grounds as set out in their draft Notice of Appeal.

2.  Mr Yung for the Applicants submitted that an appeal will generally be granted where there is a reasonable prospect of success or some other reason in the interest of justice for permitting an appeal is demonstrated. The Court of Appeal will not disturb a judge’s exercise of discretion in making an order unless it is demonstrated that the judge misunderstood the law or evidence; or that the exercise of his discretion was plainly wrong such that it was outside the generous ambit within which a reasonable disagreement is possible.

3.  In Wong Kar Yee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 at §§29 -30, Kwan JA (as she then was)  said:

“29. The principles on granting leave to appeal are well established. Leave can be granted if the court is satisfied that: (a)  the appeal has a reasonable prospect of success; or (b)  there is some other reason in the interests of justice why the appeal should be heard. Reasonable prospect of success involve the notion that the prospects of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”. As the leave requirement was introduced largely to address satellite litigation on interlocutory issues which almost invariably gives rise to major delay and expense, so for the court to be satisfied that the appeal does have “reasonable prospects of success”, merely showing that the appeal is “arguable” and “not fanciful” would not be sufficient.

30. Even if the threshold test of reasonable prospect of success is satisfied, the court still retains a discretion whether to grant leave, although the fact there is, ex hypothesi, a reasonable prospect of success would heavily influence the court’s exercise of discretion. The court may refuse leave to appeal in the interests of procedural economy and proportionality.”

ANALYSIS

4.  This Court has received comprehensive submissions from Mr Yung for the Applicants and Mr Lam for the Respondent. Having carefully considered both parties’ submissions including oral submissions in court, this Court dismissed the application. Here are the reasons.

5.  First, I do not consider that the Applicants have satisfied the test that there is a reasonable prospect of success in their intended appeal. Mr Lam for the Respondent is right that the Applicants cannot escape the fact that the 2020 Summons only sought an order under Section 286B(1)(c)  of the Companies (Winding Up and Miscellaneous Provisions)  Ordinance, Cap.32 (“the Ordinance”). Paragraph 1 of the 2020 Summons specifically sought an order that “the Respondent do submit to the court an affidavit containing information as set out in the schedules…”. It is not an application under Section 286(B)(1)(d)  for an order to “produce any books and papers in the person’s custody or power relating to the company or the promotion, formation, trade, dealings, affairs or property of the company.”

6.  Insofar as information is concerned, as I set out in my Reasons for Decision dated 11 January 2021, the Respondent had already filed an affirmation to depose that it does not have any further information or documents to provide other than those already provided (§11)  and if this Court were to order the Respondent to file an affirmation, the Respondent would file an affirmation to say exactly what it had deposed (§§18, 24).

7.  Further, in paragraph 21 of my Reasons for Decision, I stated:

“On the facts of the present case, as confirmed by Mr Lau, the Applicants’ case is not that the ex-directors are still in possession of some documents of the Respondent. There is no evidence to that effect. Indeed, Mr Lau relies on Section 286B(1)(c)(ii)  of the Ordinance and not section 286B(1)(d)  of the Ordinance to seek information and/or explanations about the transactions that the Applicants are investigating.” (Emphasis added.)

8.  Hence, Mr Lam for the Respondent is definitely right that the Applicants cannot, now at the leave application stage, seek to rely on a ground that they chose not to rely on in the 2020 Summons and at the substantive hearing. Mr Lam has a point that this has never been the basis of the 2020 Summons or the case which the Respondent had to meet. The Respondent prepared its affirmations in opposition solely in response to the Applicants’ request for an affidavit containing the requested information. Had the Applicants mounted their application on this alternative basis, the Respondent’s affirmations would have been prepared differently.

9.  I also agree with Mr Lam that insofar as the reference to documents in Schedule B of the 2020 Summons is concerned, they should be read with paragraph 1 of the 2020 Summons to mean that it is an application for information as contained in the documents but not for an order under Section 286B(1)(d)  of the Ordinance. In fact, the Respondent had by oath stated that they had produced all the documents that they had had to the Applicants.

10.  Further, I am of the view that it is, in any event, not open to the Applicants to run this new ground at the appeal as the Applicants have clearly not run the point before this Court. (See Flywin Co Ltd v Strong & Associates Ltd (2002)  5 HKCFAR 356 at §38 per Bokhary PJ.)

11.  Secondly, Mr Yung for the Applicants submitted that the Respondent could obtain “better information” from its ex-directors and if the Court made such an order, the Respondent would obtain such “better information”. It is not entirely clear what is the factual basis. In any event, Mr Yung has not cited any case or authority to support the proposition that for an application under Section 286B(1)(c)  of the Ordinance, the Court can order the Respondent to take the extra step of obtaining “better information” from its ex-directors.

12.  Thirdly, as a matter of discretion, what puzzles this Court is that if the Applicants took the view that the Respondent’s ex-directors have in their possession better information or documents, why is it that the Applicant chose not to take out any applications against the ex-directors? About eight months have passed since my Reasons for Decision and the Applicants took no action to seek information or documents from the ex-directors. Yet, it chooses to engage in these interlocutory applications to argue that under the 2020 Summons, the Court should order the Respondent to obtain better information or documents from its ex-directors.

13.  Finally, I should deal with the grounds as stated in the draft Notice of Appeal. In §1(2)(a)  of the draft Notice of Appeal, the Applicants relied on the case of Re Richbell Strategic Holdings Ltd [2001] BCC 409 at 419H for the proposition that a respondent is required “to give the best answers that it is able to give and to provide information and/or documents requested to the best of its ability”. I agree with Mr Lam for the Respondent that this case is not applicable. The case concerned a public examination of a witness. The legal principles set out there could apply if the Applicants obtain an order for examination of the Respondent’s representative under Sections 286B(1)(b)  and 286C of Ordinance.  However, they do not apply in the present situation where the Applicants are effectively asking the Court to disbelieve the Respondent’s affirmation evidence stating that it is “unable to provide any further documents or information”. The 2020 Summons is not the appropriate avenue for the Applicants to challenge the Respondent’s evidence on oath.

14.  Insofar as the Applicants’ reliance on Joint & Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings (2006)  9 HKCFAR 766 for the proposition that the Court should “give sufficient weight, to the Applicants’ views (as liquidators as to the inadequacy of the Respondents’ explanation in the affidavit evidence filed”. I am of the view that the said proposition of law is not entirely accurate.

15.  In §27, Lord Millett NPJ said:

“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…” (Emphasis added.)

16.  Hence, I agree with Mr Lam for the Respondent that the “great weight” placed on the liquidators’ views only relates to the formulation of the scope of information and documents required to enable them to carry out their functions. There is no basis to extend this principle to cover the liquidators’ views as to whether a respondent has provided sufficient answers under a court application or order. This is plainly a matter within the exclusive purview of the Court to decide.

17.  In any event, I am of the view that this issue is not entirely relevant. Whether the Court should place any weight on the views of the liquidators must depend on the nature of the application. The Court cannot abdicate its responsibility by simply endorsing the views of the liquidators. The liquidators have not even stated on what basis they take the view that the Respondent’s ex-directors are still in possession of corporate documents of the Respondent. For the reasons set out above, this Court cannot see how it can agree with the liquidators and to order the Respondent to file yet another affidavit when it has already filed one or to order the Respondent to seek for better information from its ex-directors under Section 286B(1)(c)  of the Ordinance.

18.  Further, this Court did not reverse the burden of proof to require the Applicants to prove the existence of documents. The Court merely held that, as a matter of reality, the order sought would serve no purpose as the Respondent has already provided affirmation evidence stating that it was unable to provide any further documents or information. The Court did not (and did not need to)  rule on whether the Respondent’s explanation was adequate or satisfactory (see §17 of the Reasons for Decision)

19.  Mr Lam for the Respondent is right that the only way for the Applicants to challenge the veracity of the contents of an affirmation is to cite the Respondent for contempt or, alternatively, subject the Respondent’s representative to a private examination. This is the necessary consequence of the Applicants’ decision to pursue an application under Section 286B(1)(c)  of the Ordinance.

DISPOSITION

20.  For the reasons stated above, I dismiss the Leave Summons.

21.  I also summarily assess the costs at HK$200,000. The same is to be paid by the Applicants to the Respondent forthwith.

22.  Finally, it remains for me to thank Mr Yung for the Applicants and Mr Lam for the Respondent for their helpful assistance.

Mr Isaac Yung, instructed by Raymond Siu & Lawyers, for the Applicants

Mr Justin Lam, instructed by Jones Day, for the Respondent

HCCW 216/2018

[2021] HKCFI 105

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 216 OF 2018

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______________________________

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REASONS FOR DECISION

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APPLICATION

1.  By a summons dated 24 July 2020 (the “Summons”), Lau Siu Hung and Kwok Sin Kwan (the Joint and Several Liquidators of Tom Ip & Partners, Architects, Engineers & Development Consultants Limited (in liquidation) (the “Company”)) (the “Applicants”) seek, inter alia, an order that P & T International Inc. (the “Respondent”) do submit to the Court an affidavit containing information and documents relating to a five-party agreement (the “FPA”) to which, inter alios, the Respondent and the Company were parties.

2.  The requests in the Summons relate to the following dealings and transactions:

(1)     On or about 9 September 1992, the Respondent and the Company jointly signed an agreement (the “1992 Agreement”) with Country Eagle Development Limited for services in respect of a development project in Guangzhou, Guangdong Province, the People’s Republic of China and reached an agreement in respect of the fee split between the Respondent and the Company.

(2)     There was a dispute amongst the parties under the 1992 Agreement.

(3)     In or about 2003, the Higher People’s Court of Guangdong Province issued a judgment in favour of, inter alios, the Respondent and the Company in the Action No.379 of 2003 (the “PRC Judgment”).

(4)     In order to facilitate the execution and enforcement of the PRC Judgment, the Respondent and the Company (amongst others) entered into the FPA on or about 13 June 2018 for the purpose of setting out, inter alia, the allocation of the execution sum pursuant to the PRC Judgment.

3.  On 25 September 2020, the Respondent filed the Affirmation of Che Kwai Leung Chris to provide all the information and documents which it could provide. This includes, inter alia, a copy of the 1992 Agreement, correspondence in 1992 and 1998 in respect of the fee split between the Respondent and the Company and letters and board minutes in 2018 concerning the FPA.

4.  The Applicants filed the 4^th Affirmation of Lau Siu Hung and stated their position that:

(1)     The Respondent has complied with items 1(i), (ii) of Schedule A and item 1, 2(i) and (ii) of Schedule B to the Summons; but

(2)     The Respondent still needs to provide item 2 of Schedule A and item 3 of Schedule B, as well as item 1(iii) of Schedule A and item 2(iii) of Schedule B (the “Outstanding Items”).

5.  The Applicants submit that an order should be made against the Respondent and it should be directed to provide information in relation to the Outstanding Items.

6.  At the conclusion of the hearing, I dismissed the Applicant’s application for an affidavit in relation to the Outstanding Items and gave brief reasons. I now set out my reasons in detail.

ANALYSIS

7.  First, I agree with Mr Lam for the Respondent that Mr Che has stated in very clear terms in his affirmation (§§17, 20 and 21) that, in respect of each of the Outstanding Items, “other than what [has] already been produced, the Respondent is unable to provide any further documents or information because it is not in possession of any such requested documents”. (Emphasis added.)

8.  By a summons dated 21 December 2020, Mr Che filed his second affirmation. In §§9 and 12, Mr Che affirmed that the individuals who were involved in the subject dealings and transactions in June 2018 have already all left the Respondent and “apart from those individuals, I verily believe that none of the existing employees of the Respondent has any personal knowledge of any information.”

9.  The Respondent does not dispute that the Applicants are entitled to rely on Section 286B(1)(c) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap.32 (the “Ordinance”) to request for information and documents from the Respondent by requiring the Respondent to submit an affidavit.

10.  The Respondent’s position is that it has already provided what is sought in the Summons, namely, an affirmation setting out all the required information and documents which the Respondent could provide and confirming that it is unable to provide any further information and documents in response to the Summons.

11.  Notwithstanding the Respondent’s confirmation in the Affirmation of Che Kwai Leung Chris that it does not have any further information or documents to provide other than those already provided, the Applicants still continue to pursue the Summons in respect of the Outstanding Items which they claim the Respondent has failed to provide.

12.  Mr Lam for the Respondent is right that the Applicants’ approach is wrong. The Summons seeks an order for the Respondent to submit an affidavit in response to their requests. The Respondents has already provided the Affirmation of Che Kwai Leung Chris. If for some reason the Applicants are dissatisfied with the Respondent’s explanation as to why it is unable to provide further information or documents other than those already provided, the Applicants might consider applying for a private examination of the Respondent’s representative under Section 286B(1)(b) and 286C of the Ordinance. However, to still ask for an order requiring the Respondent to submit a further affirmation is academic and serves no useful purpose. Mr Lam for the Respondent submitted that the Respondent will simply provide an affirmation which repeats the contents of the Affirmation of Che Kwai Leung Chris. I am of the view that Mr Lam is right.

13.  Mr Lau, one of the Applicants, submitted that if this Court makes an order that the Respondent do file an affidavit setting out its knowledge of the Outstanding Items, the Respondent somehow would be able to produce the Outstanding Items. I do not see how that could have happened in view of Mr Lam’s submission and the content of the two affirmations of Mr Che Kwai Leung Chris. Mr Lam is right that if it happens, it would mean that Mr Che lied on oath. There is no evidential basis for this Court to make such a speculation.

14.  Secondly, Mr Lau submitted that, on a balance of probabilities, the affirmations of Mr Che cannot be believed because in a letter dated 1 September 2020 from the Respondent’s solicitors, Messrs. Jones Day, it is stated, inter alia, that:

“…In this connection, we are instructed that the Respondent intends to oppose the Summons generally on the basis, inter alia, that the information/documents as sought have already been provided or such information/documents have not been in the Respondent’s possession.”

15.  However, in the Affirmation of Che Kwai Leung Chris, the Respondent was able to provide some documents. It shows that the stance of the Respondent is not believable and if ordered, the Respondent might be able to produce some more documents. Mr Lam for the Respondent submitted that at the time when the letter of 1 September 2020 was written the Respondent was basically under the legal advice of its PRC lawyers and when the present solicitors come on board, they have duly advised and discussed with the Respondent which resulted in the two affirmations which were filed by Mr Che Kwai Leung Chris.

16.  The Respondent strenuously denies that its explanation as to why it is unable to provide further information or documents is unsatisfactory.

17.  At the end of the day, I do not see how this Court could on the evidence before it form a view that the Respondent lied on oath and hence Mr Che’s evidence is unbelievable. I agree with Mr Lam for the Respondent that if the Applicants maintain the said view, it is up to them to take out appropriate applications.

18.  If this Court were to order the Respondent to file an affirmation as Mr Lam submitted the Respondent would file an affirmation to say that the Respondent cannot provide any further information and documents which it has already said so in the affirmations of Mr Che. Court orders should not be made in vain.

19.  Thirdly, Mr Lau submitted that the Respondent has the power to demand its ex-directors to provide the relevant information and documents. He submitted that the Respondent’s ex-directors owe a fiduciary duty to explain business affairs of the Respondent even though they have resigned. It is correct that the Respondent can make such a request but I am not convinced that the Respondent has the power to compel its ex-directors to provide the relevant information without commencing legal proceedings.

20.  Mr Lam for the Respondent referred this Court to §24/2/8 of Hong Kong Civil Procedure 2021 Vol 1 which states that:

“Documents that are or have been in his power – These include all documents which, though they are not in his possession or custody, he has a right to obtain from the person who has them – e.g. where he is the owner and has not parted with the right to possession.”

21.  On the facts of the present case, as confirmed by Mr Lau, the Applicants’ case is not that the ex-directors are still in possession of some documents of the Respondent. There is no evidence to that effect. Indeed, Mr Lau relies on Section 286B(1)(c)(ii) of the Ordinance and not Section 286B(1)(d) of the Ordinance to seek information and/or explanations about the transactions that the Applicants are investigating.

22.  Mr Lau has cited no case which shows that the Court can make an order to direct a company to compel its ex-directors to provide information to the Applicants. Further, what if the subject company fails to compel its ex-director to provide such information? It may entail the serious consequence of breaching a court order by the subject company.

23.  On the other hand, Section 286B(4) does give power to the Applicants to make an application to get information directly from ex-directors of the Respondent.

24.  In the circumstances, I am of the view that discretion should not be exercised to order the Respondent to file an affirmation which it has already filed. It is up to the Applicants to take further appropriate steps or proceedings in their investigation exercise, whether against the ex-directors or otherwise.

DISPOSITION

25.  For all the above reasons, this Court will not make any order in respect of the Outstanding Items and will dismiss the rest of the Summons other than the parts that have already been complied by the Respondent.

26.  As far as costs is concerned:

(1)     The Respondent is to pay the costs of Summons from the date of its issuance up to the filing of the Affirmation of Che Kwai Leung to the Applicants and the said sum is assessed at HK$59,199.00

(2)     The Applicant is to pay the costs of the Summons from the date of the filing of the Affirmation of Che Kwai Leung Chris to the Respondent including the costs of the hearing and the said sum is assessed at HK$150,000.00

27.  Finally, it remains for me to thank Mr Lau for the Applicants and Mr Lam for the Respondent for their helpful assistance.

Mr Lau Siu Hung, one of the Joint and Several Liquidators of Tom Ip & Partners, Architects, Engineers & Development Consultants Limited (in liquidation), from Sammy Lau CPA Ltd, for the Applicant

Mr Justin Lam, instructed by Jones Day, for the Respondent