The Joint and Several Trustees in Bankruptcy of Nanik Dayaram (also known as Nanik Dayaram Hathiramani), A Bankrupt v. Lee Pei Yin

HCB 7651/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 7651 OF 2011

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JUDGMENT
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A. Introduction

1.This is an application by the Trustees in Bankruptcy of Nanik Dayaram (“Bankrupt”) by amended summons dated 2 September 2015 against the Respondent for (i) production of 13 categories of documents and (ii) provision of information on oath as set out in the Schedule to the amended summons, as well as (iii) oral examination of the Respondent, pursuant to section 29(1) of Bankruptcy Ordinance, Cap. 6 (“BO”).

2.The Respondent is an authorised signatory of Sovereign Managers Limited (“SML”), a company incorporated in Turks and Caicos Islands (“TCI”). SML and Sovereign Trust (Hong Kong) Limited (“SHK”) are part of the Sovereign Group of companies (“Sovereign Group”) which have offices around the world and provide inter alia corporate services to their clients. In addition to being the authorized signatory of SML, the Respondent is also the office manager and company administrator of SHK. The office of SML and SHK was and probably still is on 16/F,   Kinwick Centre, 32 Hollywood Road, Central, Hong Kong. The Respondent has been under the employment of SHK since at least March 2001.

3.In or around March 2001, SML was appointed a corporate director of Days Properties Limited (“DPL”), a company incorporated in TCI.  According to the Respondent, DPL was and is one of the many clients’ companies which SML manages in the course of its business.

4.DPL is the registered owner of inter alia two luxurious residential properties in Hong Kong[1] ie Flat 2 on the 6^th Floor in Block A and Car Parking Space No.72, Villa Monte Rosa, No.41A Stubbs Road, Hong Kong (“Property A2-6”) and Flat 2 on the 7^th Floor in Block A and Car Parking Space No.289, Villa Monte Rosa, No.41A Stubbs Road, Hong Kong (“Property A2-7”) (“collectively “Properties”). DPL has been the registered owner of the Properties since 1997.

5.After considerable fine-tuning by Mr Wong SC in the morning of 7 October 2015, the Trustees’ application is now confined to the provision of information on oath by, and oral examination of, the Respondent. The revisions made by Mr Wong SC have now been incorporated in a re-amended summons dated 27 October 2015 the relevant parts of paragraphs 1 and 2 read:

“1. The Respondent does within 14 days from the date of the Order to be made herein state on oath, the information relating to the Bankrupt, [DPL]…[Property A2-6] and… [Property A2-7] as stated in the Schedule hereto:

…

2. The Respondent shall attend an oral examination before a Master with 3 hours reserved on a date to be fixed for the purpose of giving evidence in relation to the information and/or documents stated in the Schedule hereto.”

6.The Schedule to the re-amended summons reads:

“(c) Documents and/or information in relation to the directorship of [SML];

(d) Information as to the “single corporate shareholder” that beneficially owns [DPL] and also as to the trust related thereto and supporting documents thereof;

(e) Documents and/or information relating to the appointment of SML as corporate director of [DPL];

(f) The resolution(s) of the board of directors as referred to in the execution clauses of the documents below:

(i) Mortgage in respect of [Property A2-6] dated 8 May 2014 registered at the Land Registry by Memorial No.14060402440093 (“1^st Mortgage”);

(ii) Rental Assignment in respect of [Property A2-6] dated 8 May 2014 registered at the Land Registry by Memorial No.14060402440102 (“1^st Rental Assignment”);

(iii) Mortgage in respect of [Property A2-7] dated 8 May 2014 registered at the Land Registry by Memorial No.14060402440111 (“2^nd Mortgage”); and

(iv) Rental Assignment in respect of [Property A2-7] dated 8 May 2014 registered at the Land Registry by Memorial No.14060402440126 (“2^nd Rental Assignment”);

(g) Documents and/or information in relation to any trust arrangements directly or indirectly involving [DPL] either in respect of [Property A2-6] and/or [Property A2-7], other properties or generally;

(h) Any other documents (either internal or external) in relation to the 1^st and 2^nd Mortgages and the 1^st and 2^nd Rental Assignments in respect of [Property A2-6] and/or [Property A2-7] (such as shareholders’ resolution of [DPL], certificate of good standing, certificate of no encumbrance, power of attorney, notice(s) to mortgagor and facility letter(s) issued by Bank of China International Limited, etc.);

(i) Documents evidencing and/or details of the registration of the 1^st and 2^nd Mortgages and the 1^st and 2^nd Rental Assignments in Turks and Caicos Islands or elsewhere;

(j) The lease(s)/tenancy agreement(s) and/or details of the tenancy in respect of [Property A2-6] and/or [Property A2‑7] from December 2006 onwards;

(k) All correspondence entered into between SML and any entities (either individual or corporate) and/or details of the communication between SML and any entities (either individual or corporate) in relation to the execution of the 1^st and 2^nd Mortgages and the 1^st and 2^nd Rental Assignments and/or the transaction(s) contemplated thereunder, including but without limitation to, all letters, emails, call reports and telephone notes, etc.;

(l) Fee note(s) and/or invoice(s) issued by SML in respect of its service(s) provided to [DPL], either in connection with the execution of the 1^st and 2^nd Mortgages and the 1^st and 2^nd Rental Assignments, the transaction(s) contemplated thereunder or otherwise; and

(m) Documents in relation to or specifying details of, and/or details of the “service(s) provided” (as referred to in (l) above) (whether or not such services were provided directly or indirectly in relation to the Bankrupt), e.g. nature and subject matter of the services, when and to whom were the services rendered.”

7.In so far as the Trustees seek information from the Respondent on “documents”, the information sought is essentially confined to whether the documents in question were once in the Respondent’s possession, power or custody, if so, the identities of the persons/ entities to whom the documents were given and the present whereabouts of them.

8.The Trustees say, upon investigation, they believe the Properties and DPL are or have been beneficially held or controlled by the Bankrupt via offshore trust arrangements. They submit the information sought is reasonably required for them to carry out further investigation into the beneficial ownership of DPL and the Properties and pursue discovery of documents and/or further relevant information from other persons/ entities who may be in possession of them.  The Trustees submit the Respondent is likely to able to provide the information sought.

9.The application, as fine-tuned, is opposed by the Respondent.

B. Further Background

10.By an order dated 13 June 2013, a bankruptcy order was granted against the Bankrupt. In his Statement of Affairs dated 15 July 2013, the Bankrupt reported that his only asset was cash in banks in the sum of HK$71,907.72. As the Bankrupt has substantial outstanding liabilities amounting to over HK$221 million and US$39 million, the realization from his bank accounts can only be regarded as minimal. 

11.The Trustees say they discovered that Bankrupt and his family had close connection with a group of companies whose names begin with the word “Days” including DPL.

12.The Trustees suspect DPL was under the control of the Bankrupt as far back as 1997. This is said to be evident by a number of documents, including, for instance, a nomination in respect of Property  A2‑6 dated 14 March 1997 by which Days Impex Limited nominated DPL to take up the assignment of Property A2-6 from the vendors pursuant to a sale and purchase agreement dated 3 February 1997. The nomination was signed by the Bankrupt as director on behalf of DPL. Similarly, the assignment and mortgage of Property A2‑6, both dated 17 March 1997, were also signed by the Bankrupt as director on behalf of DPL. Regarding Property A2-7, it was found that the Bankrupt had also signed a nomination, assignment and mortgage as director on behalf of DPL in November 1997.

13.In a Citibank account opening form dated 21 December 2000 signed by the Bankrupt, he gave Property A2-6 as his address. 13 years later, in his Statement of Affairs dated 15 July 2013, the Bankrupt still gave Property A2-6 as his address. In his letter to RSM Nelson Wheeler dated 10 January 2014, the Bankrupt admitted he was residing in Property A2-6 but claimed he had no connection with DPL. [2]

14.In the “Know your Client” Report (“Citibank Report”) prepared by Citibank sometime in April 2011, it was stated that the Bankrupt had a total net worth of over $76 million, of which more than $40 million was “onshore”. The report further recorded that the Dayaram family owned 3 units at Villa Monte Rosa. Most important of all, the report stated the Bankrupt was both the “Owner” and “Provider of Funds” of DPL and Goldfinch Investments Limited (“Goldfinch”).

15.Goldfinch is a company incorporated in Cayman Islands. It  has been the sole registered member of DPL since at least 2006, as evident from a special resolution dated 28 June 2006. The resolution was signed by Donat Investments SA, Madeleine Investments SA and Hitchcock Investments SA. All 3 companies are said to be shell companies controlled by Citibank and/or Cititrust (Cayman) to function as the board of directors of private investment companies assigned to Citibank’s clients for the purpose of setting up trust arrangements.

16.Further investigation by the Trustees reveals that DPL entered into 2 loan arrangements with Bank of China International Limited in 2014, whereby Property A2-6, Property A2-7 and the rental income generated therefrom were charged to the bank as securities, as evident from 2 mortgages and 2 rental assignments dated 8 May 2014. These are the 1^st and 2^nd Mortgages and 1^st and 2^nd Rental Assignments referred to in the Schedule. All these instruments were executed by SML, as a corporate director of DPL. In turn, the Respondent signed them on behalf of SML.

18.As I said earlier, in his letter dated 10 January 2014, the Bankrupt denied any connection with DPL. By letter dated 16 July 2014 to the Respondent, the Trustees attempted to seek clarification from her instead.  In the letter, the Trustees requested substantially the same information as those set out in the amended summons.  The Respondent did not reply to the letter. Instead, by a letter dated 28 July 2014 signed by the Respondent on behalf of SML, SML replied to the Trustees which gave very little away. The reason why this court takes such a dim view of SML’s reply will become apparent later in this judgment.

19.Upon further request from the Trustees by letter dated 28 August 2014, SML issued to Trustees a “cease and desist” letter dated 8 September 2014, describing Trustees’ requests as “oppressive” and “harassment” and threatening to seek a wasted costs order against them in court proceedings.

20.On 24 December 2014, the Trustees issued the present summons.

C. Discussion

21.Section 29(1) of BO provides:

“(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.” (emphasis added)

22.Section 29 of BO, like its counterpart in section 221 of the Companies (Winding-Up and Miscellaneous Provisions) Ordinance (“CO”), Cap. 32, is designed 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 might be able, as effectively and with as little expenses as possible, to complete his functions, one of which is to collect the assets of the bankrupt, settle his liabilities and distribute surplus funds to his creditors. The powers it confers is necessarily wide: Joint & Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd. (2006) 9 HKCFAR 766; Re Lai Kwok Ying (A Bankrupt) unrep., HCA8750 of 2007, 7 August 2009.

23.The 3-stage test which governs applications under section 29 was set out by Kwan J (as she then was) in Re Lai Kwok Ying (A Bankrupt) supra at paragraph 5:

(1) First, the provision of information or documents must be reasonably required for the trustee to carry out his functions (“1^st Requirement”).

(2) Second, there is a prima facie case that the respondent is able to provide such information or documents (“2^nd Requirement”).

(3) Third, if the above criteria are met, the court must strike a balance between the applicant’s reasonable requirements and the need to avoid making an order which is wholly unreasonable, unnecessary or oppressive (“3^rd Requirement”).

24.There is no dispute between the parties that the principles relating to the court’s exercise of similar powers in the insolvency context under section 221 are relevant to an application under section 29 of BO. In  Joint & Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd. supra, the leading case on section 221, Lord Millet said this at [33]:

“33. …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…  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 in 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.”

25.At the hearing, this court was informed by the parties that the Respondent no longer took issue on the 1^st Requirement. She, however, maintained her opposition on the basis that the Trustees had failed to satisfy the 2^nd or 3^rd Requirement.

C.1. 2^nd Requirement - Respondent’s ability to provide information

Preliminary

26.Mr Gray submitted to this court that the Trustees failed to satisfy the 2^nd Requirement. The reason essentially was that the Respondent had stated on oath that she could think of no other relevant matters over and above what she had already said in her affirmation and the court had no reason not to accept her statement in this regard.

27.As to be expected, Mr Wong SC disagreed. He submitted that the Respondent’s evidence on this issue was evasive and the court should not take her denial of knowledge at its face value. Specifically, Mr Wong SC invited this court to compare the Respondent’s reply to the Trustees’ request for production of documents and her reply to the Trustees’ request for information.

28.With regard to the former, the Respondent said at paragraph 35 of her 1^st affirmation:

“None of the documents specified in paragraph 1(a) – (m) are in my possession, control or power. Nor do I know of their existence save for the following…

c. – m. None of the documents are in my possession, control or power.”

29.However, with regard to the provision of information, which is what the present application, after fine-tuning, is about, the Respondent resorted to a general denial of her ability to provide further information. At paragraph 26 of her 1^st affirmation, the Respondent said:

“A[s] I have already explained I am not capable of providing the information or evidence the [Trustees] requested.”

30.This court agrees with Mr Wong SC.

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.

32.If a general denial on oath is sufficient to tip the balance in favour of a respondent with regard to the 2^nd Requirement, then every respondent to an application of the present nature can easily thwart a trustee’s investigation and request for information by asserting he has nothing or nothing more to offer. Adopting a purposive approach to the interpretation of section 29, and drawing from the wisdom of cases like Joint & Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd. supra; Re New China (Hong Kong) Group Ltd supra, Re Lai Kwok Ying (A Bankrupt) supra and Re Lee Priscilla Hwang (bankrupt) [2012] 4 HKLRD 581, this court does not find anything in that section which allows a respondent to take such a convenient “escape route”. Nor does section 29 compels this court to allow a respondent to do so.

33.Further, despite the general denial, the examples cited by Mr Wong SC in oral submissions reasonably establish that the Respondent has much more information to provide than what has been disclosed in her 1^st (or 2^nd) affirmation filed in these proceedings. For reasons which will become apparent, the identity of SML’s directors is, in my view, a clear case in point. Another case in point is the services provided by SML to DPL.

34.With these preliminary observations in mind, I now turn to the specific requests in the Schedule.

Para. (c) of Schedule

35.This is open and shut.

36.The Respondent, at paragraphs 7 and 24 of her 1^st affirmation, said:

“7. As an authorised signatory of SML I take orders from the directors of SML, signing documents on behalf of SML when requested to do so…

24. With regard to paragraph 32 [of the Trustees’ first affirmation], I discussed the contents of the letters from the Trustees in Bankruptcy with the directors of SML.  Although it was the directors’ view that the Bankrupt had no known interest in [DPL], the directors wished to be as co‑operative as possible with the [Trustees] without disclosing maters private to SML, the Sovereign Group, or [DPL] which the directors were of the view had no known present connection to the Bankrupt.”

37.It should be perfectly obvious from the two paragraphs that the Respondent has maintained contact with some, if not all, directors of SML, both in the course of her day to day duties as an authorized signatory of SML and specifically in considering the Trustees’ request for information in correspondence. It is more than likely that she would be able to provide information on the directors of SML.

38.For the present purpose, the threshold is a relatively low one of showing a prima facie case. This court is satisfied that threshold has been met.

Paras. (d) and (g) of Schedule

39.These two paragraphs relate to (i) the beneficial ownership of DPL and (ii) trust arrangements directly or indirectly involving DPL, including the Properties.

40.In the letter dated 28 July 2014 signed by the Respondent for and on behalf of SML, it is said “The beneficial owner of [DPL] is a single corporate shareholder which we believe has shares and control issued to a trust…To our knowledge, the Bankrupt is not a beneficiary or shareholder of either component of the structure.”

41.Mr Wong SC submitted, and this court agrees, that the Respondent would likely know something about the “single corporate shareholder” said to be the beneficial owner of DPL. If the Respondent, on behalf of SML, can assert positively that the Bankrupt is not (i) the beneficial owner of DPL, or (ii) a shareholder of the beneficial owner of DPL, it implies she has some knowledge of who that beneficial owner or shareholder might be. The same can be said in relation to the trust arrangements involving DPL. After all, setting up a trust in relation to the shares of DPL’s single corporate shareholder is one way of acquiring, directly or indirectly, beneficial ownership of DPL.

42.As for trust arrangements in respect of the Properties registered in DPL’s name, since the Respondent is an authorized signatory of SML who in turn, as director of DPL, will be required to sign documents giving effect to such trust arrangements, it stands to reason that the Respondent would likely have some information concerning the existence or non-existence of such arrangements, and if exist, what those arrangements might be.

43.This court is satisfied that threshold of showing a prima facie case has been met.

Para. (e) of Schedule

44.Since the Respondent was already working in the Sovereign Group in March 2001 when SML was first appointed a director of DPL, it stands to reason that she would likely have some information relating to SML’s appointment. This court is satisfied that the threshold of showing a prima facie case has been met.

Paras. (f); (h) - (i) and (k) of Schedule

45.These four paragraphs relate to the 1^st and 2^nd Mortgages, as well as the 1^st and 2^nd Rental Assignments, and can conveniently be dealt with together.

46.As office manager and company administrator, one of the Respondent’s duties was and is to keep company files up to date, file  documents with the Companies Registry and ensure the other administrators perform their duties. As SML’s authorized signatory, her duty was of course to sign documents for and on behalf SML when requested to do so. In view of the foregoing, and since the Respondent was the person who signed the 1^st and 2^nd Mortgages, as well as the 1^st  and 2^nd Rental Assignments, on behalf of SML as director of DPL, it is rather futile for her to deny she is able to provide information concerning the execution of these documents (and other related documents) and their subsequent registration whether in Hong Kong or TCI.

47.As far as other related documents are concerned, at the very least, there should be some correspondence, internal memo etc. leading up to Bank of China offering banking facilities to DPL. There should also be board resolutions approving the facilities and authorizing the execution of the 1^st and 2^nd Mortgages, as well as the 1^st and 2^nd Rental Assignments, to which the Respondent would likely be able to testify. The Respondent should also be able to inform the Trustees of the existence or otherwise of any other documents seen, signed or filed by her in relation to the mortgages and rental assignments.

48.This court is satisfied that the threshold of showing a prima facie case has been met.

Para. (j) of Schedule

49.This paragraph relates to the tenancies of the Properties. During oral submission, Mr Wong SC told this court he only sought information on such tenancies from December 2006 to the present.

50.As I said earlier, DPL is the registered owner of Property A2‑6 and Property A2-7. Apart from the 1^st and 2^nd Rental Assignments dated 8 May 2014 in favour of Bank of China, this court has also been provided with an earlier Rental Assignment dated 19 March 2001 executed by DPL in favour of Citibank covering both Properties. All these Rental Assignments presuppose the Properties have been leased out by DPL the income from which was charged to Citibank and subsequently Bank of China. Hence, prima facie, DPL has leased out both Properties since 2001, intermittently if not continuously. If so, it is likely that SML would have executed tenancy agreements on behalf of DPL and similarly the Respondent would have signed such tenancy agreements and may have some information to provide.

51.Further, the Bankrupt is and has been residing in Property A2‑6 since at least 2000 and claims to be doing so under a tenancy entered into by his son’s employer with DPL. If so, it stands to reason that SML, as director of DPL, would likely have signed board resolutions authorizing the grant of the tenancy and the execution of the tenancy agreements in question. It also stands to reason that the Respondent may have signed such documents for and on behalf of SML and therefore would have some information to provide.

Para. (l) and (m) of Schedule

52.These two paragraphs relate to the services provided by SML to DPL and fee notes/invoices issued by SML for such services.

53.According to the Respondent, DPL was and is one of the many clients’ companies which SML manages in the course of its business. Obviously, SML does not provide such corporate services to DPL for free. If so, there would likely be fee notes/ invoices issued by SML, which in turn would set out in general, if not in detail, the services for which DPL is charged. As an authorized signatory of SML, the Respondent may have personally provided such services to DPL ( at least in relation to the 1^st and 2^nd Mortgages and 1^st and 2^nd Rental Assignments), recorded such services internally to enable fee notes/ invoices to be prepared, signed off such fee notes/ invoices  and/or filed them.

54.This court is satisfied that the threshold of showing a prima facie case has been met.

Conclusion

55.To conclude, on the totality of the evidence, and for the reasons set out above, this court is satisfied that the Trustees have shown a prima facie case that the Respondent is able to provide the further information sought. That deals with the 2^nd Requirement.

C.2.   3^rd Requirement - Balancing Exercise

56.In Joint & Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd. supra at [29] and [30], Lord Millet NPJ said this with regard to a liquidator’s application under section 221 for production of documents:

“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…

30. Over the years the courts have laid down general principles governing the balancing exercise which the court is called upon to undertake…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.” (emphasis added)

57.In my view, the same principles apply mutatis mutandis to trustees’ request for information in a bankruptcy context and this court shall be guided by them in carrying out the balancing exercise in the present case.

58.With regard to the 3^rd Requirement, Mr Gray raised a number of points in support of his submission that the Trustees’ request was unreasonable, unnecessary and/or oppressive.

59.Firstly, Mr Gray submitted that there is an element of oppression in requiring a party to provide information which exposes him to potential liability: Joint & Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd. supra at [30(3)].   In this regard, Mr Gray said an Order requiring the Respondent to disclose the information sought by the Trustees would render her (i) in breach of the confidentiality clauses of her employment contract with SHK; and (ii) potentially liable under TCI laws.

60.As far as her employment contract is concerned, clause 14.1, for instance, provides that, unless authorized by SHK’s directors, the Respondent may not disclose any confidential information concerning the business or finances of SHK, its Subsidiaries and Associated Companies or any of their dealings, transactions or affairs or any such information concerning the affairs of any clients or customers of SHK, its Subsidiaries or Associated Companies.

61.Mr Wong SC submitted, and I agree, that the point about breach of the confidentiality clauses of the Respondent’s employment contract is untenable and should be rejected.

62.Clause 26 of the employment contract expressly provides that Hong Kong laws are to govern and, under Hong Kong laws, it is well‑established that confidentiality is not a valid ground for resisting disclosure of documents or information if ordered by the court: Alfred Crompton Amusement Machines Ltd v Commissioners of Customs and Excise (No.2) [1974] AC 405; 433 D v NSPCC [1978] AC 171, 218; 230; 237. This rule is most commonly invoked in relation to discovery of documents in litigation and the testimony of witnesses in court. Specifically in relation to provision of information, it was held by the House of Lords in D v NSPCC supra at 218 the fact that information has been communicated by one person to another in confidence is not of itself a sufficient ground for protecting from disclosure in a court of law the nature of the information or the identity of the informant if either of these matters would assist the court to ascertain facts which are relevant to an issue on which it is adjudicating.

63.In the event that SHK brings a breach of confidence or breach of employment contract claim against her, the Respondent will have a defence on the ground that she is under compulsion of law to make the disclosure. This defence is of general application and applies to all relationships in which a duty of confidence is imposed. As Diplock LJ (as he then was) emphasized in Parry Jones v Law Society [1969] 1 Ch 1, 9:

“Such a duty [of confidence] exists not only between solicitor and client, but, for example, between banker and customer, doctor and patient and accountant and client. Such a duty of confidence is subject to, and overridden by, the duty of the party to that contract to comply with the law of the land. If it is the duty of such a party to a contract … to disclose in defined circumstances confidential information, then he must do so, and any express contract to the contrary would be illegal and void.” (emphasis added)

64.As far as potential liability under TCI laws is concerned, Mr Gray prayed in aid the TCI Companies Ordinance (“TCICO”) and Confidentiality Relationships Ordinance (“CRO”) which, he alleged, prohibit the disclosure by the Respondent of confidential information pertaining to SML and DPL, both TCI incorporations.

65.Mr Wong SC’s principal, though not the only, answer is this. He submitted that the Respondent, being the party who bears the burden of proof, has failed to establish a real likelihood that she will be prosecuted in the TCI if she is compelled to provide the information sought by the Trustees. In this regard, Mr Wong SC referred this court to a passage in Mathews & Malek Disclosure in the context of objections to disclosure:

“8.26 The court may take into account, in deciding whether to order disclosure, the fact that compliance with the order would or might entail a breach of foreign law… It will also need to be shown that the foreign law concerned contains no exception for legal proceedings, and that it is not just a text, or an empty vessel, but is regularly enforced, so that the threat to the party is real. Even so, the court has a discretion and, on the basis that English litigation is to be played according to English and not foreign rules, it will rarely be persuaded not to make a disclosure order on this ground.”

66.Mr Wong SC further prayed in aid Morris v. Banque Arab et Internationale D’Investissement S.A. [2001] I.L. Pr 37, a decision of Neuberger J (as he then was).

67.Morris v. Banque Arab was a case in which the claimants, liquidators of BCCI S.A. and BCCI Overseas, commenced proceedings against the defendant French bank under section 213 of the Insolvency Act 1986. Directions given in the proceedings included orders for disclosure and inspection of documents located in France. The defendant resisted inspection on the basis of a French “Blocking Statute”, according to which the production of such documents for use as evidence in foreign legal proceedings was prohibited.

68.Neuberger J first distinguished between acts prohibited by English law and those prohibited by foreign law. While an English court could not order a person to breach English law, there was authority to suggest that less deference was due to a foreign law: the forum state had a legitimate interest in the conduct of its own judicial proceedings which should not be undermined by the encroachment of foreign law.

69.At [46], Neuberger J said:

“For reasons given by Lord Nicholls [in the Privy Council decision in Brannigan v Davison [1997] AC 238 at 249-250], risk of prosecution in another country should not be an absolute reason for refusing to answer questions or refusing to produce documents. Thus, Lord Nicholls said this:

‘Different countries have their own interests to pursue. At times national interests conflict. In its simple, absolute, unqualified form the privilege, established in a domestic law setting, cannot be extended to include foreign law without encroaching unacceptably upon the domestic country’s legitimate interest in the conduct of its own judicial proceedings.’ ”

70.On the facts, Neuberger J concluded that the order for inspection should stand. Among the reasons given, his Lordship stated that there was no evidence that any prosecutions had ever been attempted under the French Blocking Statute and the documents sought were clearly highly material to the case.

71.In reliance on these authorities, Mr Wong SC submitted that the burden rests on the party objecting based on foreign law, ie the Respondent, to show that the foreign law is regularly enforced so that the threat of prosecution by the relevant authorities is real rather than theoretical. He submitted that the Respondent’s expert has produced no evidence or statistics on whether offences under section 222 of TCICO and section 4 of CRO have ever been prosecuted in the TCI. On the contrary, there is clear evidence from the Trustees that prosecution for breach of the TCICO and CRO in the TCI is unheard of.  The Respondent has provided no real answer to that evidence.

72.I agree with Mr Wong SC.  Further, it is well‑established under Hong Kong laws that our courts will not lend its aid to the enforcement, either directly or indirectly, of foreign penal laws: Chershire and North’s Private International Law 14^th Ed. pp 121-2; 126‑7; Dicey, Morris and Collins The Conflicts of Laws 15^th Ed. Vol. 1 paras 5R‑019 and 020. Since the Respondent is a Hong Kong resident who ordinarily lives here, any suggestion that she will be arrested in Hong Kong, extradited to TCI and charged with the alleged offences is rather far‑fetched. Such a suggestion, even if made, is certainly not borne out by the expert evidence.

73.In the circumstances, it is not necessary for this court to decide, and this court shall refrain from deciding, Mr Wong SC’s subsidiary point which is that, on the evidence, the Respondent has also failed to show that the information sought by the Trustees is confidential information protected by the terms of either the TCICO or CRO.

74.For these reasons, I reject Mr Gray’s TCI law point.

75.Next, Mr Gray submitted that the Trustees should pursue other avenues of obtaining the information required, for instance, from SML or DPL, and no order should be made against the Respondent. 

76.This court disagrees.

77.As a matter of law, the fact that the Trustees can or may be able to obtain the required information from some other persons or entities is not a bar to an application under section 29. No authority has been cited by Mr Gray in support of his submission – on the contrary, the express wording of section 29 is, in my judgment, against it.  Section 29 empowers the court to summon before it any person whom the court may deem capable of giving information respecting the bankrupt, his dealings or property. There is no requirement that the person so summoned is, and no other persons are, capable of giving such information. It follows that, 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.

78.Section 29 certainly does not impose any requirement on the part of the Trustees to attempt to obtain the required information from some other persons/ entities, let alone exhausting such attempts, before launching an application against the target respondent. Indeed, it is difficult to see how such a requirement can work in practice. If such a requirement does exist, it would mean, when the Trustees make a section 29 application against DPL, DPL can legitimately defend the application by contending the Trustees should go after SML instead, and vice versa. If the Trustees do proceed against both DPL and SML, they would say the Trustees should proceed against some individual directors of DPL and/or SML, and vice versa. This way, the Trustees will end up going round in circles.

79.Further, both SML and DPL are companies incorporated in TCI. DPL’s sole corporate director is SML, and SML’s directors are unknown to the Trustees. In the afternoon of 7 October 2015, this court specifically asked Mr Gray whether SML had directors in Hong Kong who would be available for oral examination. Mr Gray said he could not reveal that to the court. That is fair enough but it also means the so‑called alternative means of obtaining the required information from SML and DPL are illusory.

80.Lastly, Mr Gray submitted that, if this court is minded to compel the Respondent to provide the information sought, it should only order her to answer written interrogatories from the Trustees, rather than to attend court for oral examination.

81.This court disagrees. First, Mr Gray’s submission was premised on the alleged need of the Respondent to comply with TCI laws and seek permission from the TCI Court before providing the information sought. Since this court has rejected Mr Gray’s TCI law point, the underlying premise on which the submission was based also falls away. Further, speaking from experience, oral examination is clearly a more effective way of soliciting information than written interrogatories. It is also a more expeditious way. In practice, answers to written interrogatories will likely be prepared by the target respondent’s lawyers whereas answers given in oral examination will be much more spontaneous. Given this court is satisfied that the Trustees reasonably require the information from the Respondent, this court should, in principle, make an order which facilitates, rather than delay or impede, the obtaining of such information. An order for oral examination would fit the bill. An order for answers to written interrogatories would not.

82.In these circumstances, this court rejects the submission that only written interrogatories should be ordered.

D. Disposition

83.For all the above reasons, this court hereby grants an Order in terms of paragraphs 1, 2 and 4 of the re-amended summons. Regarding paragraph 3 of the re-amended summons, this court orders the Trustees to bear the reasonable photocopying charges, if any, to be incurred by the Respondent in compliance with the Order so made.

84.In the absence of agreement within 14 days on the costs of the application, including all costs previously reserved, the parties are at liberty to restore the application for argument on costs before this court, ½ hour reserved. The parties are further directed to file and serve written submissions on costs 3 clear days before the restored hearing.

Mr Anson Wong SC and Mr Ross Li, instructed by Wilkinson & Grist,for the applicants

Mr Jonathan Gray, of Fitzgerald Lawyers, for the respondent