Re Ronald Lyon (Far East) Ltd

HCCW000012/1976

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

COMPANIES WINDING-UP

NO. 12 OF 1976

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IN THE MATTER of the Companies Ordinance (Cap. 32)

and

IN THE MATTER OF Ronald Lyon (Far East) Ltd.

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Coram: Li, J. (In Court as Chambers)

Date of Judgment: 19th January, 1978 at 3.35 p.m.

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DECISION

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1. This is an appeal against a Registrar's decision dated the 23rd of September, 1977, to the effect that upon examination of one Eddie Lau Wai Tong (hereinafter referred to as the Appellant) he is obliged to answer questions directed to ascertain how he, the Appellant, dealt with the sums of money he received from Ronald Lyon (Far East) Limited.

2. The facts leading to this appeal may be summarised as follows: Prior to this winding-up the Company, through its directors, purchased a piece of property known as No.63, Repulse Bay Road at the price of $15,000,000. For the sale, commission introduction brokerage fees were paid to the Appellant amounting to $9,480,000. On the Company being wound up there were papers found indicating that the Appellant had paid a certain sum of money to one Mrs. Tebbutt, the wife of the vendor, out of this nine million odd dollars. The Official Receiver, being appointed the Liquidator, in the process of investigating the Company's affairs applied for private examination of the Appellant pursuant to section 221 of the Companies Ordinance. The private examination was conducted before the Registrar on the 22nd and the 23rd of September of last year.

3. Having gone through the transcript of the examination I have no doubt that the line of questions conducted were directed as to how the Appellant dealt with this sum of nine million dollars which he received from the Company. Thus it cannot be gainsaid that the objection was premature in the sense that the actual question as to how the Appellant dealt with the money had not been put in so many words. The Appellant's Solicitors objected to this line of questioning because the Liquidator was about, or was contemplating, to institute proceedings against the Appellant. The Registrar, having heard Counsel and Solicitors then appearing for the Appellant, overruled the objection. Hence this appeal.

4. The provisions of section 221 are fairly wide: it gives the Court and not the Liquidator the right. Sub-section (1) provides that:

"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."

Sub-section (2) provides:

"The court may examine him on oath concerning the matters aforesaid, either by word of mouth or on written interrogatories, and may reduce his answers to writing and require him to sign them."

Paragraph (3), inter alia, provides that:

"The court may require him to produce any books and papers in his custody or power relating to the company ....."

However, such a wide power is subject to judicial interpretation. The power to ask these questions is for the purpose of investigating the monetary or financial affairs of the Company. The objection taken in this case is that the Liquidator was fishing for evidence in order to maintain an action against the Appellant. This point has been the subject matter of consideration in various cases and authorities are not lacking; the latest being the case of Re Bletchley Boat Co. Ltd. in (1974) 1 All England Law Reports at page 1225. I can do no better than with respect, adopting what has been said and reviewed by Mr. Justice Brightman in that case. Having reviewed the authorities his Lordship said at page 1231 the following:

"It seems to me that certain principles emerge from the four cases which I have read. I should mention that I was also referred to Re Repetition Engineering Service Ltd, but I did not gather much assistance from it for the purposes of this case. The propositions emerging from the other four cases are, I think, these: first, it is not a conclusive objection to an order for the private examination of a person that proceedings have been commenced against that person, or against others. It is a matter which has to be taken into account. Secondly, it is prima facie an objection to such an order that interrogatories have already been administered in the action which has been started, So that a private examination would be a second bite at the cherry. Thirdly, it is prima facie an objection to an order for a private examination that the examinee is an important witness for the defence to an action brought by the company, so that the effect of the examination will be to subject the defendant's witness to a premature scrutiny of his evidence. Lastly, I think it emerges from the North Australian Territory case that the court ought to act with very great care indeed before it directs the private examination of a person who is already, or is about to be, the defendant to an action, so that the private examination might be said to be assisting the company to get a favourable judgment in the action which it has already started, or is about to start, and is not merely assisting the liquidator in a general way."

5. Thus I have to weigh between the balance whether the purpose of this question was to investigate into the affairs of the Company, or rather solely directed at the defendant who may be a witness for a party who is a defendant, or is about to be a defendant. At this stage, however, there is no evidence that the Appellant is being sued or that proceedings are about to be instituted by the Company against the Appellant. Solicitors for the Appellant before the Registrar suggested there was a strong possibility that the Appellant would be a defendant in an action. In this case there are no proceedings in being, there has not been any contemplation as yet. There cannot be any action contemplated unless and until the Company's affairs have been thoroughly investigated and a course of action is shown. The investigation could have some bearing on the conduct of the Company's directors or officers. At this stage there is nothing to indicate that the Appellant is definitely about to be a defendant or about to be a witness for the defence.

6. It is hardly for me to suggest what answer the witness or the Appellant should give to the questions directed at him. However, depending on his answers to these questions it may well be the case that on one is going to be a defendant or witness; and the Appellant is not going to be the defendant or a witness for a defendant. On the contrary, it might well be that the Appellant could become a witness for the - if any action is taken at all for the Company.

7. For these reasons I do feel that at this stage the question directed is not improper and I would accordingly dismiss the appeal.

Representation: