Re Shun on Co. Ltd.

HCCW000828B/2000

HCCW 828/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 828 OF 2000

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Coram: Hon Kwan J in Chambers

Date of Hearing: 13 September 2002

Date of Handing Down of Decision: 30 September 2002

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D E C I S I O N

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The earlier application

1.This is an application by the petitioners to restore for hearing a summons for specific discovery that was issued on 12 July 2001 and heard by Yuen J (as she then was) on 9 October 2001. The decision was given on 11 February 2002 ("the Decision"). It is necessary to give an account of the earlier application and its outcome before I come to the present application.

2.The petition in HCCW No. 828 of 2000 is brought by six petitioners, who hold 44.76% of the shares in Shun On Company Limited ("the Company"), to wind up the Company on just and equitable grounds. Alternatively, relief is sought under section 168A of the Companies Ordinance, Cap.32 on the basis that the affairs of the Company are being conducted in a manner unfairly prejudicial to the interests of the petitioners. The six individual respondents are the remaining shareholders of the Company. The 7th respondent is the Company and the 8th respondent is a company to which the 1st respondent had transferred some of the shares in the Company. The Company was incorporated by Un Sam in 1937 and the petitioners and the individual respondents are his family members. For details on the background of this petition and a related petition in HCCW No. 829 of 2000, which concerns World Win Management Limited, I refer to paragraphs 2 to 16 of the Decision. These proceedings are substantial litigation, a considerable amount of evidence has been filed on both sides and much discovery has been given.

3.For the purpose of the application before me, I am concerned with allegations made by the petitioners in relation to payments and benefits from a company known as Shun On (USA) Inc ("SOUS") to three entities also incorporated in the United States known as MCI Investments Inc ("MCI"), Cana Realty Group Inc ("Cana Realty") and Cana Corporation ("Cana Corp"). It is the petitioners' case that the Company's assets have been depleted owing to the decisions of the directors to make equity investments and unsecured loans to SOUS, in which the Company has a minority interest of 18%. The 3rd respondent, Yuen Cho Nang, controls a substantial portion of the shares in SOUS and is its president. SOUS had utilised the funds of the Company to invest in five real estate projects in Vancouver, the State of Washington and USA. Since then, the directors have proposed to write off a large amount of the Company's investments in SOUS on the basis of substantial alleged losses suffered by SOUS. In respect of the unsecured loans, SOUS had issued promissory notes for payment due 1998 but the payment date has been extended. In total, SOUS owes the Company well over US$9 million.

4.The five properties in which the Company's funds had been utilised were not held by SOUS directly. Four of them were held through MCI and the development and management of the projects was carried out by Cana Realty. The fifth property, the Arts Building, was co-owned by SOUS with Cana Corp and managed by Cana Realty.

5.The 3rd respondent's involvement in MCI, Cana Realty and Cana Corp is as follows. He is a 50% shareholder of MCI and of Cana Realty. He claims he has ceased to be a director of these two companies as from 15 December 2000. The minutes of the meeting of the board of directors of Cana Realty were produced in support of this, there has not been produced any document of MCI in relation to his resignation as a director. He has a minority interest in Cana Corp with the remaining shares held by his sister and her daughters.

6.In the application before Yuen J, the petitioners sought in their summons specific discovery of, inter alia, "all documents relating to the payments or other benefits received by MCI, Cana Realty and Cana Corp from their dealings with SOUS, the current financial position of such companies and the extent of the interest of the 3rd respondent (or other respondents) in such companies". There followed a list of the particular kinds of documents within this broad class that the petitioners sought discovery of. This class of documents is referred to as the Class 6 documents in the Decision and the application for such documents was pursued against the 3rd respondent only. The decision and order of Yuen J in this respect may be summarised as follows:

(1) The Company's decision to invest in SOUS and to give unsecured loans to SOUS for investments from which the 3rd respondent acquired personal benefits through his shareholdings in MCI, Cana Realty and Cana Corp is relevant to the allegations of unfair prejudice in the petition in HCCW No. 828 of 2000.

(2) It would be oppressive to order the 3rd respondent to disclose all the documents in Class 6, as the range of the documents sought is widely drafted.

(3) Some of the documents sought are the usual documents that would be kept in the course of business where a company's properties (i.e. SOUS in this instance) are held in the name of another or are being managed by another, or are co-owned by another, such as ledgers showing its accounts with them. Further, the Judge is of the view that MCI, Cana Realty and Cana Corp would have periodical financial statements, such as balance sheets and profits and loss accounts, to inform their shareholders of the respective companies' assets and liabilities.

(4) It could be inferred from the available evidence that the 3rd respondent has sufficient control or power over SOUS for the purpose of an application for specific discovery for the documents of SOUS. As for MCI, Cana Realty and Cana Corp, given that the 3rd respondent cannot be regarded as having overriding control or power over these companies, and in the absence of any actual evidence of his power or control over them, he should only be ordered to disclose documents to which he would be entitled purely as a shareholder, i.e. the periodical financial statements issued by these three companies to their shareholders.

(5) In the exercise of her discretion, the Judge considers that "in the first instance", the petitioners' purpose would be served by disclosure within seven days of the order of firstly, the ledger kept by SOUS containing its accounts with MCI, Cana Realty and Cana Corp and secondly, the periodical financial statements received by the 3rd respondent as a shareholder of MCI, Cana Realty and Cana Corp. It is significant to note that the order provides for specific discovery "in the first instance", as it is envisaged in the Decision that "it may be that information contained in the ledger may have to be followed up by inspection of some of the other documents listed in Class 6".

What happened subsequently

7.The Decision given on 11 February 2002 did not mention the time within which specific discovery was required to be given by the 3rd respondent. As the petitioners' summons had mentioned seven days to give specific discovery, the petitioners' solicitors submitted a draft order on this basis. The draft order was approved and sealed on 27 February 2002 and served on the 3rd respondent the same day, by which time the time for complying with it had expired. On 27 February 2002, the respondents' solicitors wrote to the petitioners' solicitors requesting 14 days to take instructions on the existence or availability of the ledgers of SOUS and the financial statements of MCI, Cana Realty and Cana Corp required to be disclosed.

8.A substantive reply was given by the respondents' solicitors in their letter to the petitioners' solicitors dated 13 March 2002. It was stated that SOUS had contracted out all the management, including bookkeeping, and project development works and it does not have an office or salaried staff. For the acquisition and holding of title of investment properties, SOUS has appointed MCI its nominee and for the management of these investment properties, SOUS has appointed Cana Realty the property management company. From time to time, Cana Realty would deliver the bookkeeping data to the data processing department of Mr John Richmond, an outside accountant employed by SOUS ("the Accountant"). Out of such data, the Accountant would prepare the financial statements required for income tax reporting. The data generated by this process ran into 2,000 pages per year.

9.It was asserted by the respondents' solicitors that as SOUS does not have an accounts department and does not keep ledgers, strictly speaking the data maintained by the Accountant are not the ledgers of SOUS. The respondents' solicitors however made an offer to the petitioners' solicitors to allow them or their representatives to inspect the data "on site", subject to the respondents ascertaining from the Accountant the extent of his record keeping as required under the law of the United States. It was pointed out that when the 1st and 2nd petitioners brought proceedings against SOUS and its directors in the United States, they had through their American attorney already inspected the data in 1999 at the offices of both Cana Realty and the Accountant. If the petitioners' solicitors should require a copy of the data or records, this could be done provided that they were to pay all costs incurred in producing and despatching the records.

10.The respondents' solicitors also made a proposal to the petitioners' solicitors instead of the latter going through an inspection of the data kept by the Accountant, as this would be time-consuming and expensive. On the basis of no admission and no obligation, the respondents proposed to provide the following information to the petitioners, which would address the points raised by them relating to MCI and Cana Realty:

(1) summaries of itemised operation expenses of SOUS ("the Summaries") to be prepared by the Accountant;

(2) particulars of the "management fees" charged by MCI and Cana Realty; and

(3) an analysis of charges levied by Cana Realty and MCI ("the Analysis").

11.As for Cana Corp, the respondents' solicitors were instructed that SOUS does not keep any ledgers concerning its accounts with Cana Corp and that Cana Corp makes no payment to and receives no payment from SOUS.

12.For the periodical financial statements of these three entities, which were incorporated in the State of Washington, it was stated that the 3rd respondent has not received any such statements from any of these companies in the past. However, the 3rd respondent has received legal advice that according to the statutes of the State of Washington, he can make a written request to the companies for a copy of the financial statements of the most recent year and these would be disclosed to the petitioners as and when received.

13.On 18 March 2002, the petitioners' solicitors wrote to the respondents' solicitors that on an entirely without prejudice basis, they would accept the proposal for the respondents to produce the Summaries, the particulars of "management fees" charged by MCI and Cana Realty, and the Analysis. The petitioners' solicitors did not agree that the respondents should have five weeks to prepare the Summaries and 21 days thereafter to do the Analysis, as suggested by the respondents.

14.By their letter dated 21 March 2002, the respondents' solicitors sought to justify the time required to produce the Summaries and the Analysis. This was because records for over a decade would have to be gone into in order to prepare the Summaries. As for the Analysis, this would be done by the respondents with assistance from their advisers, including the Accountant.

15.On 22 March 2002, the 3rd respondent made his 2nd affirmation in which he set out the measures he has taken to give specific discovery as ordered by the court. Essentially, he repeated what was set out in the letter of the respondents' solicitors dated 13 March 2002 as to why he was unable to disclose the ledgers of SOUS as ordered. Again, he made the offer to the petitioners of on-site inspection of the records kept by the Accountant.

16.The petitioners' solicitors wrote to the respondents' solicitors on 28 March 2002 stating that if the Summaries were not served by 8 May 2002, an application for an unless order would be made. Further, the petitioners' solicitors pointed out that the periodical financial statements of MCI, Cana Realty and Cana Corp should not be restricted to the most current year and if the 3rd respondent had not requested for financial statements from 1990, he should provide a valid reason why he should not do so, supported by precise reference to the legislative provision that he relies on. In response to this, the respondents' solicitors reiterated their stance in their letter dated 11 April 2002 that only the most recent financial statements would be supplied.

17.On 22 May 2002, the petitioners' solicitors wrote to the court applying to restore the summons for specific discovery, as they had not received any documents or further information from the respondents. On 23 May 2002, the respondents' solicitors sent to the petitioners' solicitors the Summaries for the fiscal years from 1990 to 2001 and stated that the respondents were still in the process of preparing the Analysis, which would be ready in two weeks. The respondents' solicitors once again repeated their offer to the petitioners to attend the office of the Accountants for on-site inspection of the records kept by the Accountant, "so that the figures described in the Summaries could be verified by [the petitioners], if so desired".

18.The Summaries produced by the Accountant merely contain an itemised breakdown of the operating expenses of SOUS. It is not stated in the Summaries which of the items were payments made to MCI or to Cana Realty. Thus, the petitioners' solicitors could only infer from the description of an item that it would probably relate to payments made to one or more of these entities. The items they have singled out, for the purpose of the present application, are "property management fees", "legal, accounting and consulting fee", and "leasing commission".

19.Leave was given to the petitioners to restore the summons for specific discovery on 24 May 2002.

20.It was only on 6 June 2002 that the respondents' solicitors sent to the petitioners' solicitors the Analysis, the financial statements of Cana Corp for the year ended 31 August 2001 and the financial statements of MCI for the year ended 31 December 2000. On 8 July 2002, the financial statements of Cana Realty for the year ended 31 December 2001 were supplied to the petitioners. On 26 August 2002, the financial statements of MCI for the year ended 31 December 2001 were supplied. Those are all the documents and information provided by the 3rd respondent to comply with the order of 11 February 2002 before the hearing of the present application.

The present application

21.Two broad categories of documents are sought by the petitioners in the present application. The first relates to payments and/or benefits received by MCI, Cana Realty and Cana Corp from their dealings with SOUS since August 1983. Instead of seeking discovery of "all documents" relevant to this issue as in their previous summons, the petitioners have now confined the discovery sought to the following kinds of documents, namely, records kept on computer databases; bank statements, mandates, instructions to SOUS's bankers; receipts for payments made by SOUS and/or other benefits provided by SOUS; tax returns; and accounts and financial statements. I shall refer to this category of documents in this decision as "the accounting records of SOUS". It seems to me that the ambit of the types of documents sought is still very wide. The second broad category relates to the periodical financial statements of MCI, Cana Realty and Cana Corp from 1983 or the respective dates of incorporation of MCI, Cana Realty and Cana Corp (if later) to date. I shall refer to this category as "the periodical financial statements".

22.For ease of reference, I annex as a schedule hereto the specific kinds of documents sought by the petitioners in the present application. Items 3 to 5 and 6 to 10 in the schedule are sub-groups of the documents sought in item 1, being the accounting records of SOUS. Items 3 to 5 arise from the Summaries provided by the respondents. The petitioners seek the source documents for "property management fees", "legal, accounting and consulting fee" and "leasing commission" in the itemised operation expenses of SOUS. Items 6 to 10 relate to various matters referred to in the evidence filed by the 3rd respondent after the hearing of the previous summons in October 2001. An explanation was given in paragraphs 11.6 to 11.10 of the second affirmation of the petitioners' solicitor filed in support of the present application why the documents in items 6 to 10 of the schedule are sought. In short, the petitioners have pointed to various further documents disclosed by the respondents to support their assertion that the discovery given by the respondents is incomplete, because there is no mention of some of these matters in the Analysis provided in June 2002 or because of substantial discrepancy in the figures. The 3rd respondent has sought to deal with the matters queried by the petitioners in paragraphs 17 to 29 of his 3rd affirmation. In summary, he stated that the Analysis provided is correct regarding payments made to MCI and Cana Realty and asserted that an examination of the source accounting records would verify the accuracy of the information in the Analysis.

23.On behalf of the petitioners, Mr Bartlett submitted that the present application is to "enforce" the rights of the petitioners under the Decision and order and pursue discovery of the Class 6 documents where Yuen J has either already ruled on the petitioners' entitlement to them or on the petitioners' right to come back to court to seek disclosure of them. On behalf of the 3rd respondent, Mr Fung, SC submitted that in view of the undertaking offered by the 3rd respondent (which I shall deal with) and as Yuen J did not think it appropriate to make the order for discovery of the wide-ranging nature sought by the petitioners on the previous occasion, I should not accede to the present application.

24.I do not think my discretion whether to order the discovery sought in the present application is affected in any way by the Decision. Yuen J had only ruled on what the respondents should disclose "in the first instance". Whether and to what extent the respondents should give further discovery had been left open in the Decision.

The undertaking

25.I turn to the undertaking offered by the 3rd respondent, as this formed the main plank of Mr Fung's submission.

26.The undertaking on behalf of the 3rd respondent is in these terms:

"(1) make arrangement for the petitioners' representatives to inspect all accounting records kept by Mr John Richmond in support of the Summaries and Analysis at the office of Mr John Richmond, or another venue in the United States to be agreed between the parties; and (2) make available to the petitioners copies of such of the above-mentioned accounting records as may be requested by the petitioners upon agreement of the petitioners to pay the reasonable photocopying charges therefore.

For the avoidance of doubt, the above-mentioned accounting records include the accounting records listed under the first paragraph of Part Five of the Analysis."

27.Part Five of the Analysis deals with accounting records and it is stated in the first paragraph that the Accountant had examined a number of source documents to produce a database for accounting records. By the undertaking, the 3rd respondent offered to make available for on-site inspection the source documents examined by the Accountant and the accounting records database produced by him. It was submitted by Mr Fung that what is offered in the undertaking had been offered to the petitioners in correspondence, i.e. the letters of the respondents' solicitors dated 13 March 2002 and 23 May 2002, as well as in the 2nd affirmation of the 3rd respondent made on 22 March 2002 and his 3rd affirmation made on 11 July 2002. This repeated offer of on-site inspection was not taken up by the petitioners.

28.Mr Bartlett submitted that an on-site inspection is not a satisfactory mode of giving discovery. The petitioners seek an order that the 3rd respondent should make a further and better list of documents within the classes specified in the schedule hereto and that he should make an affirmation stating whether any document specified in the present application is, or at any time has been, in his possession, custody or power, and if it is not then in his possession, custody or power, when he parted with it and what has become of it. Various reasons are put forward why formal discovery should be given.

29.Firstly, it was contended in the 4th affirmation of the petitioners' solicitor that the discovery sought is not oppressive and the exercise should be "manageable", as the task of identifying the documents (from records of 2,000 pages a year and 25,000 pages in total) and making them available for inspection should be "straightforward", in view of the fact that the respondents have recently undertaken the exercise of producing the Analysis. I have some difficulty in accepting this, as the solicitor went on to say in the affirmation that the on-site inspection is "not a reasonable or acceptable alternative", because this would mean that the petitioners should search for the relevant documents by inspecting all SOUS records in the United States "without assistance".

30.Secondly, it was submitted that the documents to be disclosed as covered by the specific discovery sought should be listed in a comprehensive list so that the petitioners could choose from the list what they would wish to inspect.

31.Thirdly, the inspection offered by the respondents is to take place in the United States, this would add to the expense and inconvenience for that exercise to be undertaken. I understand the 3rd respondent's position to be that these documents belong to companies incorporated in the United States and it is uncertain if they could be removed out of the country.

32.I accept that in the absence of special circumstances, formal discovery in compliance with the provisions of the Rules of the High Court should be given. It was submitted by Mr Fung that there are the following special circumstances to warrant a different treatment here.

33.Firstly, the documents to be gone through to identify the relevant ones falling within items 1, 3 to 10 in the schedule are voluminous. The accounting records that are available dated back to 1989 for 13 years.

34.Secondly, the respondents have already undertaken the exercise of preparing from the source documents the Summaries and the Analysis, to alleviate the burden of all concerned in going through the massive accounting records. I should add that the Summaries were prepared by the Accountant, an outside professional not in the employ of the respondents, and there is no suggestion that the Summaries he compiled are in any way inaccurate. The petitioners simply want discovery of the source documents in items 3 to 5 of the schedule so that they would be able to verify for themselves the fees itemised as "property management fees", "legal, accounting and consulting fee" and "leasing commission" in the Summaries.

35.Thirdly, the accounting records have been inspected at the offices of the Accountant and Cana Realty by the attorney representing the 1st and 2nd petitioners in 1999 in the course of proceedings brought in the United States, so the legal representatives of the petitioners would not be totally unfamiliar with these records even if they would not be assisted by a list of documents prepared by the respondents. I note that there is no suggestion in any of the affirmations filed by the petitioners that the previous inspection of documents is not of any or any real assistance.

The accounting records of SOUS

36.I have considered the above submissions and the grounds put forward by the petitioners in attacking the disclosure made by the respondents, some of which came after the hearing in October 2001 but before the Decision was given, as inadequate. The view I form at this stage on the evidence before me (this is but a provisional view and has no bearing on any finding that the court may make at the trial on factual matters in dispute) is that the difference between the parties on certain payments or expenses is more a question of how they were treated in the accounting records, not so much whether or not the payments had been made or the expenses incurred. I am not satisfied it is necessary for the fair disposal of the issues in dispute to order discovery of the wide range of documents sought by the petitioners. I also have a suspicion, looking at how discovery has been sought and given and the extensive correspondence exchanged, that the dispute as to the adequacy of discovery given and the relevance of certain documents would not come to an end even if the 3rd respondent were ordered to give formal discovery.

37.It seems to me that the undertaking offered by the 3rd respondent is a pragmatic way to resolve this in the special circumstances of this case. I think it would be far better for the petitioners to inspect the accounting records first instead of requiring the 3rd respondent to give formal discovery right away. The petitioners should know what they would be looking for. If, after inspection of the records and the petitioners are satisfied as to the veracity of the information in the Summaries and the Analysis, or that no issue need be taken with the explanation on the matters queried by the petitioners as given in the 3rd affirmation of the 3rd respondent, there would be no need for some or all of the documents inspected to be formally disclosed.

38.I was referred by Mr Fung to Fuji Photo Film Co. Ltd v. Carr's Paper Ltd [1989] RPC 713 in which Aldous J adopted a similar approach of accepting an offer of inspection by the defendants in the action of all the documents requested (subject to their contention that the documents are not relevant), instead of ordering formal discovery. Aldous J took the view that the discovery sought was of great width, not all the documents sought could be of relevance, in the circumstances the proper thing to do was for the plaintiff to inspect the documents offered first to see if there were any documents which were considered to be relevant and which should have been disclosed. Thereafter, if the parties could not agree as to whether any documents should be incorporated in a formal list, then an application should be made to the court. The court could then look at the documents in dispute and decide as to whether they should be formally disclosed or not.

39.I agree this would be an appropriate course of action to take in relation to the discovery sought of the accounting records of SOUS. If the petitioners have identified any documents of relevance after inspection, such documents and any other documents that the respondents may consider to be of relevance should be disclosed by the 3rd respondent in a further and better list of documents and verified on affidavit. If there is dispute as to which of the documents should be formally disclosed, an application should be made to the court. In this way, the respondents are not relieved from the obligation to give formal discovery of relevant documents.

The periodical financial statements

40.As for the periodical financial statements of the three companies in the United States, what has happened is that the 3rd respondent has made requests in writing asking for the most recent financial statements of each of the companies to be supplied to him and he has disclosed the most recent financial statements he has received from these companies. He did so on the legal advice he received which is to the effect that according to the statutes of the State of Washington, in which the companies were incorporated, his right as a shareholder is to be supplied with a copy of the financial statement of the most recent year on written request. Two letters from the US attorney advising the 3rd respondent dated 25 February 2002 and 26 April 2002 were exhibited, in which reference was made to the Revised Code of Washington ("RCW") 23B.16.020, RCW 23B.16.200(2) and RCW 23B.16.040(3). The RCW came into effect on 1 July 1990.

41.The petitioners have sought advice from their American attorney on the entitlement of a shareholder to the documents of a corporation under the RCW and I have the full text of the relevant statutory provisions. Having read the legal advice and the additional provisions in the RCW, I am satisfied that as a shareholder of MCI, Cana Realty and Cana Corp, the right of the 3rd respondent to ask for periodic financial statements is not confined to the most recent year. I refer to RCW 23B.16.010(2) and (5)(d), and RCW 23B.16.020(1), (2)(b) and (3). By virtue of the former provisions, a corporation is obliged to maintain "appropriate accounting records" and it shall keep at its principal office the financial statements for shareholders "for the past three years". By virtue of the latter provisions, a shareholder is entitled to inspect and copy at the corporation's principal office any of the records kept including the financial statements for the past three years upon written notice of the shareholder's demand at least five business days before the date on which the shareholder wishes to inspect and copy. Further, a shareholder is entitled to inspect and copy at a reasonable location specified by the corporation any accounting records of the corporation upon similar written notice of at least five business days, if his demand is made in good faith and for a proper purpose, that he describes with reasonable particularity his purpose and the records he desires to inspect, and that the records are directly connected with the shareholder's purpose.

42.In item 2 of the schedule, the petitioners seek discovery of the periodical financial statements of MCI, Cana Realty and Cana Corp from 1983 or the respective dates of incorporation of these companies (if later) to date. It seems to me that these documents should probably be regarded as "appropriate accounting records" and kept at the principal office of the companies as from July 1990, when the RCW came into effect, if not before. I am satisfied that these documents are within the power of the 3rd respondent because he has a legally enforceable right to obtain them from the companies that should have possession of them.

43.In the circumstances, I think it would be right to order the 3rd respondent to give formal discovery of this class of documents. There is some debate as to whether the full scope of these documents as sought in the present application was covered by the order of Yuen J and whether there was compliance with that order in that the 3rd respondent was merely ordered to disclose "all periodical financial statements received by him as a shareholder" of these companies. It is not stipulated how far back the periodical financial statements should go and counsel has taken the point that technically there was compliance with the order in that the 3rd respondent has only "received" the most recent financial statements which were specifically requested by him on legal advice. It is not necessary to go into this for present purpose.

Orders

44.I make the following orders:

(1) Upon the undertaking by counsel on behalf of the 3rd respondent in the terms as set out in paragraph 26 above, there be no order for discovery in respect of items 1, 3 to 10 in the schedule.

(2) The 3rd respondent do, within 28 days of the handing down of this decision, (a) make and serve on the petitioners a further and better list of documents within the classes specified in item 2 in the schedule; and (b) make and file an affirmation stating whether he has, or has at any time had, in his possession, custody or power any document within the classes specified in item 2 in the schedule and if the documents or any of them have been but are not now in his possession, custody or power, stating when he parted with them and what has become of the same.

45.As for costs, I make an order nisi that the costs of and occasioned by the present application, including the costs reserved on 14 June 2002, are to be costs in the cause of the petition. I do so for these reasons.

46.The petitioners have only succeeded in obtaining an order for item 2 in the schedule. Most of the evidence filed and the arguments have been taken up with the accounting records of SOUS, being the nine items in the schedule, for which no order is made.

47.As for the 3rd respondent, although an undertaking was offered early on and repeated in the affirmations and correspondence, it is not entirely clear specifically what documents would be offered for the petitioners' inspection, particularly when the offer is read in conjunction with other parts of the letter dated 13 March 2002. It was only in the course of the hearing that the undertaking in the above terms was given with reference to the source documents as mentioned in Part Five of the Analysis.

48.In the circumstances, I do not think it appropriate to award costs of the application to either party in any event.

Representation:

Mr Jeremy Bartlett, instructed by Messrs CMS Cameron McKenna, for the Petitioners

Mr Patrick Fung, SC and Mr Johnny Mok, instructed by Messrs Liu Choi Chan, for the 3rd Respondent

SCHEDULE

The Petitioners now seek an order compelling the Third Respondent to give discovery of the following documents: -

1.	(a) records kept on computer databases,
	(b) bank statements, mandates, instructions to SOUS's bankers,
	(c) receipts for payments made by SOUS and/or other benefits provided by SOUS,
	(d) tax returns, and
	(e) accounts and financial statements,

whether held by SOUS or by a party obliged to account to SOUS for such documents (collectively called "Documents of SOUS") relating to, recording or evidencing the payments and/or other benefits received by MCI, Cana Realty and Cana Corporation respectively from their dealings with SOUS, since August 1983.

2. The periodical financial statements of MCI, Cana Realty and Cana Corporation from 1983 or the respective dates of incorporation of MCI, Cana Realty and Cana Corporation (if later) to date.

3. Without prejudice to the paragraph 1, Documents of SOUS relating to, recording or evidencing payment to MCI, Cana Realty and Cana Corporation respectively of the fees itemized as "building management fee" in the "Itemized Operation Expenses" since August 1983.

4. Documents of SOUS relating to, recording or evidencing payment to MCI, Cana Realty and Cana Corporation respectively of the fees itemized as "legal, accounting and consulting fee" in the "Itemized Operation Expenses" since 1983.

5. Documents of SOUS relating to, recording or evidencing payment to MCI, Cana Realty and Cana Corporation respectively of the fees itemized as "leasing commission" in the "Itemized Operation Expenses" since 1983.

6. Documents of SOUS relating to, recording or evidencing any payment(s) to Cana Realty in respect of the amount payable by SOUS to Cana Realty under the "Construction and Management Agreement" dated 5 July 1989 exhibited as "YCN-12" of Yuen Cho Nang's 1st Affirmation dated 21 January 2002.

7. Documents of SOUS relating to, recording or evidencing any payment to MCI in respect of the sum of US$2.1 million described as "new loan" to MCI in or about 1998 after the disposal of the Arts Building.

8. Documents of SOUS relating to, recording or evidencing payment to Cana Realty in respect of brokerage commission for disposal of the properties of SOUS, including but not limited to the sum of US$50,000 paid as "broker commission" in respect of the sale of the "Normandy Project", as described in "YCN-4" of Yuen Cho Nang's 1st Affirmation of 21 January 2002.

9. Documents of SOUS relating to, recording or evidencing payments received or retained by Cana Realty in respect of the collection of interest as referred to in page 5 of "YCN-13" of Yuen Cho Nang's 1st Affirmation of 21 January 2002.

10. Documents of SOUS relating to, recording or evidencing:

(a) all payments of rental income of SOUS, collected by Cana Realty, including but not limited to payments totalling US$2,709,139.85 for the period between 1 September 1999 and 31 August 2000 as set out in the Schedules at pages 2, 3 & 4 of "YCN-13" of Yuen Cho Nang's 1st Affirmation of 21 January 2002; and

(b) all payments by Cana Realty to SOUS of rental income of SOUS collected by Cana Realty, including but not limited to payments totalling in the sum of US$2,105,327 as set out in the SOUS Accounts for the year ended 31 August 2000.