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 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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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