Re Kong Wah Holdings Ltd. (in Compulsory Liquidation)
Read the full judgment text of HCCW 49/2000 on BabelCite. This High Court CFI judgment was delivered on 7 September 2004.
1. I have before me two applications in each of the liquidations. The earlier application is that taken out by the liquidators of Akai Holdings Limited (“AHL”) and Kong Wah Holdings Limited (“Kong Wah”) (collectively “the Companies”) on 6 November 2003 under section 221 of the Companies Ordinance, Cap. 32, seeking an order that James Henry Ting (“Mr. Ting”) is to be examined on oath and to produce any books, correspondence, papers and documents in his custody or power relating to the Companies
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HCCW 49/2000 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES (WINDING-UP) NO. 49 OF 2000 ____________
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AND HCCW 50/2000 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES (WINDING-UP) NO. 50 OF 2000 ____________
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____________ (Heard together) Before: Hon Kwan J in Chambers Date of Hearing: 5 May 2004 Dates of Further Submissions in Writing: 7 and 11 May 2004 Date of Handing Down of Decision: 7 September 2004 _____________ D E C I S I O N _____________ The applications 1.I have before me two applications in each of the liquidations. The earlier application is that taken out by the liquidators of Akai Holdings Limited (“AHL”) and Kong Wah Holdings Limited (“Kong Wah”) (collectively “the Companies”) on 6 November 2003 under section 221 of the Companies Ordinance, Cap. 32, seeking an order that James Henry Ting (“Mr. Ting”) is to be examined on oath and to produce any books, correspondence, papers and documents in his custody or power relating to the Companies and their subsidiaries. Mr. Ting was the chairman and chief executive of AHL and a director of Kong Wah. 2.The other application is a summons issued by Mr. Ting in each of the liquidations on 29 December 2003 and amended on 5 May 2004 seeking a stay of the liquidators’ aforesaid application pending:
3.Mr. Ting’s grounds to stay the liquidators’ application are as follows:
4.I understand from Mr. Griffiths, SC, who appeared for Mr. Ting, that although his summonses asked for dismissal of the liquidators’ applications, alternatively a stay in the terms as related, he would not pursue the application for dismissal. 5.Subsequent to the hearing, Mr. Ting’s appeal in the Bermuda Action was heard in the Court of Appeal for Bermuda on 23 and 24 June 2004. Judgment was given on 2 July 2004 and the appeal was dismissed. The letter of the liquidators’ solicitors dated 5 July 2004 advising the court of the outcome of the appeal was copied to the solicitors for Mr. Ting. I have not heard from the latter of any further appeal that has been or is intended to be pursued against the judgment of the Court of Appeal for Bermuda. In the light of that development, I do not need to consider if the stay of the liquidators’ applications should be granted pending the final determination of all appeals against the judgment in the Bermuda Action on the grounds as advanced in the summonses. The background 6.Until 1999, AHL was part of the Semi-Tech Corporation Limited (“STC”) group of companies, which was listed on the stock exchanges of Toronto and New York. Mr. Ting was in control of STC, as well as a number of other listed companies, of which he was the chairman, and in most cases, the chief executive officer. In the annual report of AHL for 1996, the STC group was described as an international business comprising numerous public companies listed on the world’s leading stock exchanges, with market capitalisations aggregating US$4.5 billion (equivalent to about HK$35 billion), and employing 100,000 people in over 120 countries worldwide. The Companies were listed among the principal assets of STC in that report. 7.The shares of AHL were listed on The Stock Exchange of Hong Kong Limited (“the HKSE”) since 1987. Its corporate domicile was transferred from Hong Kong to Bermuda in 1991. The annual report of AHL for 1999 listed 20 subsidiaries and associated companies held directly or indirectly by AHL (“the Akai Group”), with net assets of over US$1 billion as at 31 January 1999. Mr. Ting was the chairman and chief executive of AHL. 8.Kong Wah was incorporated in Bermuda in 1991, and was at one time a listed company in Hong Kong and the largest television manufacturer in Asia, outside Japan. In 1995 it was acquired by AHL through Akai Electric Co. Limited, in 1996 it was privatised. The annual report of Kong Wah for 1999 listed 25 subsidiaries and associated companies held directly or indirectly. 9.Petitions were presented in Hong Kong to wind up the Companies on 13 January 2000 and winding-up orders were made on 23 August 2000. On 29 September 2000, the Companies were ordered to be wound up by the Supreme Court of Bermuda. On 6 February 2004, an order was made whereby the liquidators of the Companies in Hong Kong were empowered and authorised to enter into and implement a cross-border protocol between themselves and the liquidators of the Companies in Bermuda, who are the same individuals. 10.The collapse of the Akai Group constitutes the largest corporate insolvency in the history of Hong Kong. The liquidators have discovered that as at the date of the winding-up orders, AHL was massively insolvent, it had no business, staff or premises of its own and barely any relevant documentary records in relation to what had been, and purported to be, an international conglomerate. The Akai Group appeared to have liabilities in excess of US$1 billion, but few assets remaining in the possession or control of AHL which could be realised for the benefit of the creditors, as many assets now appear to be controlled by or are claimed to be beneficially owned by The Grande Holdings Limited (“Grande HK”) or companies controlled by or associated with Grande HK. 11.On 12 November 1999, AHL entered into a management agreement (“the Management Agreement”) with a subsidiary of Grande HK registered in Singapore, The Grande Group Limited (“Grande Singapore”), by which AHL gave complete and unfettered authority to Grande Singapore to manage and conduct the business of AHL and its subsidiaries. The existence of the Management Agreement was not disclosed to the shareholders of AHL, the steering committee representing the bank creditors of the Companies, the HKSE, the Hong Kong Securities and Futures Commission, and the court hearing the winding-up petitions. This only came to the knowledge of the provisional liquidators in September 2000. Mr. Ting has subsequently claimed that he ceased to have any role in the affairs of the Companies since 12 November 1999. However, this would appear to be at odds with his active participation in opposing the winding up of the Companies, the six affidavits and affirmations he made in the winding-up proceedings, the transactions he had entered into on behalf of AHL after the Management Agreement as mentioned below, and the public announcements he made on behalf of AHL after November 1999. 12.Mr. Ting was an executive director and substantial shareholder of Grande HK from September 1990 to November 1992. At this time, and from July 1997, he was chairman and/or chief executive of Toyo Holdings Limited (“Toyo”). The president and group chief executive of Grande HK, Christopher Ho, was the former executive chairman of Toyo. Three days after the Management Agreement, Mr. Ting on behalf of AHL and Toyo entered into an underwriting agreement (“the Toyo Underwriting Agreement”), by which Toyo agreed to subscribe for convertible bonds in AHL. The Toyo Underwriting Agreement as revised was not completed due to the winding-up petitions. In the public announcements made in relation to this, statements were made of independence between AHL, Toyo and Grande HK. It was stated that arm’s length negotiations were conducted and that Toyo was independent of and not connected with AHL, any of its directors, chief executives, substantial shareholders or any of its subsidiaries or associates. Such statements were apparently incorrect. 13.On the same day as the Toyo Underwriting Agreement, Mr. Ting on behalf of AHL entered into a revolving “on demand” loan facility with Toyo for HK$630 million (“the Toyo Loan Facility”). The liquidators are unable to identify how the Toyo Loan Facility was applied in purportedly funding the working capital requirements of the Akai Group. 14.Most of the key directors and executives of the Akai Group had left Hong Kong or were uncooperative with the liquidators and their requests for assistance. Grande HK, Grande Singapore and Toyo have all refused to provide any meaningful assistance. The investigation of the financial affairs has been severely hampered by the lack of sufficient books and records. Although 650 boxes of records have since been taken into possession in relation to AHL and 1,800 boxes in relation to Kong Wah, in the light of the size of the businesses of the Companies, these clearly do not constitute the entire books and records by any means. 15.To date, the liquidators have identified and/or taken control of US$2.39 million worth of assets, the majority of which are subject to alleged claims by third parties. The liquidators have not been able to confirm, in any detail, the extent of the assets which had been owned or controlled by AHL and what they comprised, how, when and why they were allegedly disposed of or transferred to Grande HK or third parties controlled or previously controlled by Grande HK. Even now, some subsidiaries of the Companies and their roles are unknown to the liquidators. 16.Mr. Ting is the most important and crucial person to provide information to the liquidators. In the principal supporting affidavit in this application, the liquidators have identified 18 areas of concern involving US$1.5 billion for which they require information from Mr. Ting. Various matters as described in the affidavit went back to 1998, so claims in relation to which Mr. Ting’s assistance is required would become time-barred against third parties fairly soon, unless protective writs are issued by the liquidators or unless the liquidators are able to postpone the limitation period by virtue of fraud, concealment or mistake under section 26 of the Limitation Ordinance, Cap. 347. There is clearly a need for the liquidators to be assisted by Mr. Ting with a first-hand account of the complex events and transactions, which contributed to the massive collapse of the Akai Group. The provision of a statement of affairs by Mr. Ting and answers in writing to a questionnaire could not be considered adequate in the circumstances. 17.After the winding up of the Companies, and over a period of more than three years, there was a lengthy exchange of correspondence between the Official Receiver as the provisional liquidators, the liquidators, the solicitors of the liquidators, with Mr. Ting and his solicitors, requesting Mr. Ting’s attendance at an interview. Despite his professed willingness to meet with the then provisional liquidators, and despite being in Hong Kong on at least one occasion in October 2000, Mr. Ting did not meet with the provisional liquidators. It is alleged that he was in Shanghai from about the time of the winding up of the Companies on 23 August 2000 until his return to Hong Kong on 30 April 2003. The liquidators have again attempted to meet with Mr. Ting since his return, but he has refused to cooperate. Hence, the present summonses were issued. 18.On 2 May 2003, Mr. Ting was arrested by the Commercial Crime Bureau of the Hong Kong Police (“the CCB”) and charged with an offence of false accounting under section 19(1)(a) of the Theft Ordinance, Cap. 210. On 5 March 2004, four additional charges of false accounting were laid against Mr. Ting. All the charges of false accounting relate to documents required for accounting purpose in respect of AHL. It is alleged that for the audited accounts of AHL for 1999, Mr. Ting falsified a document purporting to show that AHL had an interest in an associated company, namely 50% shareholding in MicroMain Systems Limited (“MicroMain”); that he falsified documents purporting to show that AHL made a payment of US$12,936,610.61 on behalf of Fortune 2000 Limited (“Fortune 2000”) in relation to an investment; and that he falsified a document purporting to show that AHL had purchased certain shares held by Winsoft Limited in MicroMains at a consideration of US$38.46 million. 19.Of the 18 areas of concern identified by the liquidators in the main supporting affidavit as requiring investigation, one of them is in respect of an investment loss of HK$300 million purportedly made by AHL through its wholly owned subsidiary, Fortune 2000, to purchase 50% of the equity of MicroMain. The liquidators would wish Mr. Ting to explain the payments made from the bank accounts of AHL supposedly in accordance with the share sale and purchase agreement for the equity interest in MicroMain, and to identify the information and documents provided to the auditors of AHL to perform their audit of the MicroMain investment. The Settlement Agreement and the Bermuda Action 20.On 30 December 2002, the Settlement Agreement was reached between, inter alia, Mr. Ting and the liquidators in relation to a scheme of arrangement, whereby Mr. Ting agreed to withdraw, inter alia, his opposition to the sale of the listing status of AHL on the HKSE. In return, the liquidators agreed in clause 3 not to “sue or otherwise pursue any claims against Mr. Ting … from any and all past, present and future rights, claims, demands, debts, causes of action and suits at law or in equity of any kind or nature whatsoever … [in] Hong Kong, Bermuda, PRC and any other competent jurisdiction arising out of or in connection with [the Companies] and/or their respective Liquidators [sic].” Having regard to the imminent long-stop date on 31 December 2002 (when the shares of AHL would be de-listed if there was no completion of the transaction in the scheme of arrangement), and that the objection application of the liquidators to the votes against the scheme cast by the entities controlled by Mr. Ting could not be heard by the Bermuda court before the long-stop date, the liquidators exercised their discretion to enter into the Settlement Agreement, so as to liberate funds to be made available for the liquidations as a whole. 21.The Settlement Agreement contained an exclusive jurisdiction clause vesting jurisdiction in the Bermuda court and a provision that the interpretation and validity of the agreement are to be governed by the laws of Bermuda. 22.There are no claims and proceedings being undertaken or contemplated by the liquidators against Mr. Ting. In the liquidators’ letters to Mr. Ting’s solicitors in November 2003 and their supporting affidavits, the liquidators stated clearly that they have not undertaken and are not undertaking any investigations with a view to or in connection with issuing proceedings or making claims against Mr. Ting, as they accepted to do so would breach clause 9 of the Settlement Agreement. They are merely seeking to secure Mr. Ting’s assistance in ascertaining the truth about the affairs of the Companies, in the context of the existing winding-up proceedings, and in helping to locate the assets of the Companies. The results of the examination may be used by the liquidators in subsequent proceedings against relevant parties, but not against Mr. Ting, owing to the Settlement Agreement. The liquidators have also given an undertaking that no claim for costs, even if awarded by this court in their favour in the present applications, would be enforced against Mr. Ting. 23.When the liquidators requested for Mr. Ting’s assistance with their inquiries on a voluntary basis in May 2003, failing which an application for private examination would be made, Mr. Ting’s solicitors responded that the liquidators’ request was in breach of clause 3 of the Settlement Agreement. On 10 October 2003, Mr. Ting and others issued the writ in the Bermuda Action (served only on the liquidators on 17 December 2003 after it was amended), alleging among other things breach of the Settlement Agreement and seeking inter alia an injunction that the liquidators be restrained from pursuing further claims against him, that they should cease all further investigations for this purpose, and that they should be restrained from issuing any proceedings or summons against him in relation to the affairs of the Companies. Upon the application of the plaintiffs in the Bermuda Action in December 2003 for an interim injunction against the liquidators pending trial, an order was made by consent for the speedy trial of that action. By similar orders by consent made on 20 January 2004 in Hong Kong, upon the liquidators’ undertaking not to proceed with their section 221 applications until delivery of judgment in the Bermuda Action, the summonses of Mr. Ting to stay the liquidators’ applications were adjourned sine die with liberty to restore. 24.Judgment in the Bermuda Action was given against the plaintiffs on 24 February 2004. In short, the Supreme Court of Bermuda held that the natural and ordinary meaning of the words of clause 3 does not extend to the summonses to examine Mr. Ting under section 221 and that clauses 3 and 9 are complementary provisions, so that the latter is not breached by the section 221 summonses, where the investigation is not undertaken with a view to issuing proceedings or making claims against Mr. Ting. The trial judge also rejected an alternative claim based on an alleged separate oral agreement that Mr. Ting should be “left alone”. On appeal, the alternative claim was not pursued. The Court of Appeal for Bermuda upheld the construction of clauses 3 and 9 of the court below that the liquidators’ action in seeking to examine Mr. Ting otherwise than to advance a substantive claim against him does not contravene either provision. 25.Mr. Griffiths has contended that although the nature of the section 221 applications differs from the Bermuda Action, the issues in the two proceedings (of breaches or otherwise of the Settlement Agreement) are similar if not the same. Given the exclusive jurisdiction clause in the Settlement Agreement, the more appropriate forum to resolve such issues is the court in Bermuda and such issues should be litigated to finality in Bermuda before the Hong Kong court is to consider the section 221 applications. He also invoked the principle of lis alibi pendens that the additional inconvenience and expense of two sets of proceedings in two different jurisdictions could not be justified in these circumstances, particularly where the proceedings in Bermuda have reached an advanced stage. So for these reasons, he submitted that the liquidators’ applications in Hong Kong should be stayed until the Bermuda Action is “finally concluded” in Bermuda. 26.Were it necessary to decide whether I should exercise my discretion to stay the liquidators’ applications pending the conclusion of the proceedings in Bermuda, I would have no hesitation in refusing a stay. The liquidators’ applications were adjourned by consent until after the delivery of judgment in the Bermuda Action. The appeal against that judgment was dismissed by the Court of Appeal for Bermuda, after the hearing of the liquidators’ applications. Mr. Ting has failed twice in litigating his case that the liquidators have breached the Settlement Agreement by seeking an order of private examination against him. No good grounds were made out why his further appeal (even if he were minded to appeal further) should have been determined before the Hong Kong court should adjudicate on the liquidators’ applications. 27.As I have indicated at the outset, it is now unnecessary to consider if the liquidators’ applications should be stayed pending the resolution of the appeal in the Bermuda Action. As things now stand, the Bermuda Action has been litigated to finality. I have mentioned the Settlement Agreement and the Bermuda Action at some length only because they are relevant to the consideration if it would be oppressive to order Mr. Ting to attend for private examination. It is pertinent to bear in mind the objective of the investigation sought by the liquidators against Mr. Ting and their acceptance that the information obtained would not be used in connection with issuing proceedings or making claims against him, and the findings of the court in Bermuda that the liquidators’ applications are not in breach of the Settlement Agreement. Stay pending conclusion of criminal proceedings 28.It would be seen from the above that one of the 18 areas of investigation intended to be pursued by the liquidators with Mr. Ting overlaps with the subject of the criminal charges that have been laid against him. Further charges may still be laid against Mr. Ting. It was contended that it would be oppressive to order him to attend for private examination, as this would erode his right to a fair hearing in his criminal case, drawing on the principles relating to the inherent power of the court to stay civil proceedings pending the resolution of criminal proceedings against the defendant in respect of the same subject matter (Jefferson v. Bhetcha [1979] 1 WLR 898; Petroliam Nasional Berhad & Ors. v. Tan Soon-gin & Ors. [1990] 1 HKLR 4 at 9E to 10B; Wang Din Shin v. Nina Kung, CACV No. 1479 of 2001, 11 July 2001). This is particularly so in the present case as criminal charges have been laid, the criminal trial is “imminent” (at the hearing of the application in May 2004, I was given to understand that the criminal charges would “shortly” be committed to the High Court for trial before a judge and jury; I have not since been provided with any information by Mr. Ting’s solicitors of any significant progress in the criminal proceedings), and Mr. Ting should have the full protection under Article 11(2)(g) of the Bill of Rights. 29.Mr. Griffiths has not contended that there should be an absolute bar to ordering a person to attend for private examination after he has been charged with a criminal offence, but there is a discretion in this situation not to make any order, or to stay the application for such an order or the enforcement of such an order if made, if the court is satisfied that the element of unfairness or oppression to the individual concerned in the particular circumstances would outweigh the public interest in ordering an examination or in ensuring that an examination should be conducted without any further delay. In carrying out the balancing exercise, the abrogation of the privilege against self-incrimination is a factor that may be taken into account (Bishopsgate Investment Management Ltd. v. Maxwell [1993] Ch 1 at 63C). 30.Mr. Griffiths pointed out that in the cases in Hong Kong (both decided at first instance, Re Weihong Petroleum Co. Ltd. [2002] 1 HKLRD 541; and Re Asher & Co. (Hong Kong) Ltd. [2004] 330 HKCU 1) where it was held that the privilege against self-incrimination at common law has been implicitly abrogated by section 221, the individuals concerned were not charged with any criminal offence, hence it was rightly decided in those cases that the separate immunity under Article 11(2)(g) would not need to be considered (In re Tse Chu-fai, Ronald [1993] 2 HKLR 453 at 461 to 462; HKSAR v. Lee Ming Tee & Anr. [2001] 1 HKLRD 599 at 635F to G, 636B). The present situation is different in that Mr. Ting has been charged with criminal offences, so the decisions in Weihong Petroleum and Asher are not applicable. 31.In this connection, I think it is pertinent to note that the common law privilege is broader in scope than the immunity under Article 11(2)(g), a point made by Ribeiro PJ in Lee Ming Tee, supra. at 635B to G. He has quoted Lord Mustill in R v. Director of Serious Fraud Office, ex p Smith [1993] AC 1 at 30 (that the common law privilege is “a general immunity, possessed by all persons and bodies, from being compelled on pain of punishment to answer questions the answers to which may incriminate them”) and commented that the common law privilege is “self-evidently of a broad application, protecting every person against any questioner”. See also Fu Kin Chi Willy v. The Secretary for Justice [1998] 1 HKC 411 at 419D, per Li CJ, that the common law privilege is “capable of application in non-judicial proceedings”. 32.In contrast, Article 11(2)(g) provides as follows:
33.Hence, Ribeiro PJ stated at 635F that the Article “only applies to persons who face a criminal charge and the immunity then conferred is only a testimonial immunity, namely, the right ‘not to be compelled to testify against himself or to confess guilt’.” Further, derivative use of independently obtained evidence, “even if obtained pursuant to clues provided by the compelled testimony falls outside the purview of Article 11(2)(g) since, in adducing such independent, albeit derivative, evidence, the prosecution does not seek to compel [the accused] to testify against himself or to confess guilt” (at 635J to 636A). 34.The present case would appear to be the first occasion in which the court has to resolve squarely if the separate immunity conferred by the Article has been abrogated under section 221. I maintain the views I expressed in Weihong Petroleum, supra. on the implicit abrogation of the privilege against self-incrimination at common law. I should mention that in approaching the question in the way I did in Weihong Petroleum as a matter of statutory interpretation with regard to the purpose of an examination under section 221, although I had considered safeguards with the abrogation of the privilege in paragraphs 18 and 19 of the decision (at 546D to F), it was not necessary in that situation to consider the adequacy of the safeguards by applying the proportionality test from the perspective of the Bill of Rights, as no criminal charge was laid against the examinee. I note also that in Fu Kin Chi Willy, supra. where it was held that the common law privilege against self-incrimination has been implicitly abrogated by the relevant provisions in the Police Force Ordinance, Cap. 232 so that the privilege would not be available to a police officer in a disciplinary investigation, the Court of Final Appeal did not find it necessary to pursue the situation where the disciplinary offence is also a criminal offence as this “raises another question” (at 420F to G). Whether Article 11(2)(g) is applicable in an examination under section 221 35.Before I consider whether the immunity under Article 11(2)(g) has been abrogated under section 221, it is necessary first to deal with an issue raised by Mr. Sheppard for the liquidators that this Article does not apply in an application under section 221 or an examination conducted under the same, by virtue of section 7 of the Hong Kong Bill of Rights Ordinance, Cap. 383 and the decision of the Court of Appeal in Tam Hing-yee v. Wu Tai-wai [1992] 1 HKLR 185. I do not think Article 11(2)(g) can apply to an application under section 221 at all, if this is meant to be an application for an order that a person is to be examined or to produce documents. As stated in Lee Ming Tee, the immunity in this Article is a “testimonial immunity”. I cannot see how an application for an order under section 221 would involve a person being “compelled to testify against himself or to confess guilt”. That would only happen in the course of an examination, if an order is made under this provision for a person to be examined on oath. It seems to me that Mr. Sheppard’s argument on the non-applicability of Article 11(2)(g), if properly framed, must relate only to an examination conducted under section 221. 36.Section 7 of Cap. 383 provides as follows:
37.In Tam Hing-yee, it was held by the Court of Appeal that by virtue of section 7 of Cap. 383, the Bill of Rights would have no application to a dispute between private individuals. Mr. Sheppard submitted that as Tam Hing-yee is still good law, Article 11(2)(g) cannot be invoked in an examination under section 221 as this is a civil proceeding between private parties, and the court in conducting an examination under section 221 is not a part of “the Government” or a “public authority” or “acting on behalf of the Government or a public authority” within section 7(1) of Cap. 383. Besides, the court in conducting the examination is not determining any criminal charge against the examinee; this Article “arises only in relation to criminal proceedings, and not civil proceedings”. Whether any evidence obtained from the examinee under compulsion in the private examination may be used against him in his criminal trial would be a matter for the criminal court subsequently and need not concern the court conducting the examination. 38.In A Solicitor v. The Law Society of Hong Kong, CACV No. 302 of 2002, 18 February 2004, the Court of Appeal (Woo VP, Cheung JA and Burrell J) had considered a submission by the appellant that Tam Hing-yee is no longer good law. The submission was on the following lines. The ruling in Tam Hing-yee was reversed by the Hong Kong Bill of Rights (Amendment) Ordinance 1997, which came into effect on 30 June 1997 in that section 3 of Cap. 383 was amended by the addition of these two subsections:
39.Thus, when the Hong Kong Special Administrative Region came into existence on 1 July 1997, the ruling in Tam Hing-yee that was reversed by section 3(3) of Cap. 383 was no longer part of “the laws previously in force in Hong Kong” and was not adopted as the law of the Special Administrative Region under Articles 8 and 18 of the Basic Law. Although the amendment ordinance in 1997 was suspended on 18 July 1997 and was repealed on 28 February 1998 by the Provisional Legislative Council under the Hong Kong Bill of Rights (Amendment) Ordinance 1998, by virtue of section 23(a) and (b) of the Interpretation and General Clauses Ordinance, Cap. 1, the repeal of the amendment to section 3 of Cap. 383 does not “revive anything not in force or existing at the time at which the repeal takes effect”. 40.The Court of Appeal, by a majority (Woo VP and Cheung JA), took the view that the Solicitors Disciplinary Tribunal is a “public authority” within section 7(1) of Cap. 383. As for the question whether the Bill of Rights could be applied to the proceedings before the Solicitors Disciplinary Tribunal because the parties to the proceedings, namely the Law Society of Hong Kong and the solicitor concerned, are private persons, Tam Hing-yee posed a hurdle in that it was held that the Bill of Rights would have no application to “inter-citizen litigation”. Woo VP and Cheung JA resolved this question in different ways. 41.Woo VP was inclined to think that Tam Hing-yee is still binding, the ruling in that case was not an interpretation of the provisions of section 3 of Cap. 383, but was a construction of section 7. Hence, the amendment to section 3 in 1997 did not reverse the ruling of Tam Hing-yee in the context of the proper construction of section 7, “because the application of the HKBORO to legal relations between private persons introduced by the amendment to section 3 of HKBORO, which amendment should be viewed as widening the scope of section 7, was repealed and section 7 has remained intact” (at paragraph 104). However, even though the court would be precluded from applying the Bill of Rights to inter-citizen litigation, Woo VP considered that the court could apply an article in the International Covenant on Civil and Political Rights (“the ICCPR”) which is identical to the article in question in the Bill of Rights, by virtue of section 6(1) of Cap. 383, and following the approach of the Court of Appeal in Cheung Ng Sheong Steven v. Eastweek Publishers Ltd. (1995) 5 HKPLR 428 at 436D to 437GF and 451H to I (at paragraphs 105 to 109). 42.Cheung JA took the view that Tam Hing-yee is no longer binding and the court is free to look at the matter afresh (at paragraph 208) and to adopt a “more comprehensive interpretation of section 7” (at paragraph 214). The fact that “individuals” is not mentioned in section 7 does not mean that the Bill of Rights is not applicable. In deciding whether the Bill of Rights applies, the status of the parties is “only one factor to be considered”; the Bill of Rights “will be engaged if the dispute is concerned with a legislation which is promulgated by the government through the legislative branch which also comes into within [sic] the definition of a public authority” (at paragraph 212). Thus, if the Solicitors Disciplinary Tribunal in the adjudication of disputes of private individuals should make an order pursuant to a statute, “such an order is equally subject to the application of the HKBORO because the Tribunal is a public authority and is bound by the HKBORO” (at paragraph 213). 43.In the present situation, it does not matter if the reasoning of Woo VP or that of Cheung JA is to be followed, as either route would lead to the same result. Article 11(2)(g) of the Bill of Rights is identical to Article 14.3(g) of the ICCPR, if the approach of Woo VP of applying an identical provision in the ICCPR is adopted. An examination under section 221 is sui generis, it is an inquisitorial procedure conducted by the court for the purpose of obtaining information necessary for the proper conduct of the winding up (Re Rolls Razor Ltd. (No. 2) [1970] 1 Ch 576 at 592A to B, per Megarry J). Such an examination is not just a private matter concerning the creditors and shareholders of a company, as it has long been recognised that insolvency proceedings serve another purpose apart from the orderly settlement of a company’s liabilities and the distribution of surplus assets; public interest is involved in another aspect which is the investigation of the causes of failure of a company and the conduct of those concerned in its management (In re Pantmaenog Timber Co. Ltd. [2004] 1 AC 158 at 173C to D, 177E to G, and 180F to G). In ordering an examinee to answer a question in an examination under section 221 notwithstanding that his answer might tend to incriminate him, the power of the court is founded on a statutory provision, namely section 221. Thus, the Bill of Rights will be engaged where the exercise of the power by the court in this situation is pursuant to a legislation promulgated by the legislative branch of the government, using the approach of Cheung JA in adopting a “more comprehensive interpretation of section 7”. 44.As to Mr. Sheppard’s argument that Article 11(2)(g) should have no application to an examination under section 221 because the examination is not “the determination of any criminal charge” against the examinee, I do not think this Article should be construed and applied in such a restrictive manner. Where the examinee has been charged with a criminal offence, and there is possibility that any evidence given by him in the examination may be used against him in the criminal trial, this is sufficient to invoke the immunity under the Article. 45.For the above reasons, I hold that Article 11(2)(g) applies to an examination conducted under section 221 where the examinee has been charged with a criminal offence. I turn to consider whether the immunity under this Article has been abrogated in this situation. Whether the immunity under Article 11(2)(g) has been abrogated 46.As I understand Mr. Griffiths, he has not contended that the immunity under Article 11(2)(g) cannot be abrogated by statute. The issue, as he framed it, is “whether the right under Article 11(2)(g) (as opposed to the common law right) is implicitly abrogated on the basis and justification that it will not be a disproportionate response to a serious social problem and that it will not undermine the respondent’s right to a fair trial viewed in the round, the ‘proportionality test’”, citing Lee Ming Tee, supra. at 640 to 641. In his submissions that the privilege under Article 11(2)(g) has not been implicitly abrogated by section 221, Mr. Griffiths made the following points. 47.Section 221 should be contrasted with other provisions in Cap. 32 relating to examinations of other kinds and other powers of investigation. 48.For instance, section 222(5) provides that “all questions” should be answered by the person examined in a public examination; section 222(7) permits the notes of the public examination to “be used in evidence” against the examinee and this is supplemented by rule 59 of the Companies (Winding-up) Rules (“the Winding-up Rules”). It would appear that section 222 has abrogated the privilege against self-incrimination. 49.Another example is section 145(3A) which provides that in an examination conducted by an inspector appointed by the Financial Secretary, “a person is not excused from answering a question put to him under this section by an inspector on the ground that the answer might tend to incriminate him but, where such person claims, before answering the question, that the answer might tend to incriminate him, neither the question nor the answer shall be admissible in evidence against him in criminal proceedings other than proceedings in relation to a charge of perjury or proceedings for an offence under section 36 of the Crimes Ordinance (Cap. 200) in respect of the answer”. Section 145(3AA) provides that “if a claim of tendency to incriminate is not made in advance under subsection (3A), an answer given by a person to a question put to him in exercise of powers conferred by this section may be used in evidence against him.” Here, the privilege is expressly abrogated and compensatory protection is given by a “direct use prohibition”, which “only applies to the questions asked and answers given”, but permits inferentially “derivative use of the questions and answers obtained in the course of an inspection” (Lee Ming Tee, supra. at 625A and 634C to E). 50.In contrast, section 221 is silent on all these issues. It does not use words like “answer all questions”. It is silent as to both direct use and derivative use of answers which may tend to incriminate. Given this status, Mr. Griffiths submitted that subject to any restrictions that could be imposed by the court based on rule 62(2) of the Winding-up Rules, there is apparently no restriction on the usage of the notes of a private examination and that is highly prejudicial to a person faced with a criminal charge as there are no safeguards. One cannot discount the possibility of the police having access to the notes of examination by means of a search warrant. That creates a real risk of prejudice in that the notes could be used against the examinee in his criminal trial where he could be cross-examined on his deposition in the private examination based on the doctrine of previous inconsistent statement. Mr. Griffiths pointed to In re Arrows (No. 4) [1995] 2 AC 75 for the proposition that although the Companies Court judge has a discretion under rule 9.5 of the Insolvency Rules 1986 whether to authorise the unconditional release of the transcripts of a private examination, it is not for the Companies Court judge to exercise that discretion so as to prevent the prosecuting authorities from obtaining and leading in evidence the transcripts; it is for the judge at the criminal trial alone to decide, in the light of all the circumstances known to him but not to the Companies Court judge, whether the admission of the transcripts would prejudice a fair criminal trial. 51.Mr. Griffiths further submitted that in applying the “proportionality test” and in balancing the interest of the community against the protection of the rights of the individual, the court must bear in mind the competing public interest in an accused being assured of a fair trial. If prosecuting authorities were given access to material through the “back door” when that could not be done under normal circumstances, this would lead to a fundamental erosion of the rule of law and would promote underhand tactics by the prosecuting authorities. 52.The above submissions are directed against an implicit abrogation of the privilege against self-incrimination. Neither Mr. Griffiths nor Mr. Sheppard has alluded to section 33(1) of the Theft Ordinance, Cap. 210, which provides as follows:
53.As mentioned earlier, the five existing charges laid against Mr. Ting are in respect of an offence under section 19(1)(a) of Cap. 210. The immunity in Article 11(2)(g) from answering any question tending to incriminate in an examination under section 221 of Cap. 32, which may be regarded as “proceedings for the recovery or administration of any property”, is expressly abrogated by virtue of section 33(1) of Cap. 210, insofar as these criminal charges relate to an offence under Cap. 210. Section 33(1) also provides for a direct use prohibition of any answer which may tend to incriminate in the criminal trial of Mr. Ting in respect of these charges. This compensatory protection is similar to the safeguard found in other statutory provisions, such as sections 145(3A) and 152A of Cap. 32, section 359(4) of the Securities and Futures Ordinance, Cap. 571, sections 19(10) and 29(3B) of the Bankruptcy Ordinance, Cap. 6. I should mention that the last two provisions, relating to public and private examinations in bankruptcy proceedings, were enacted following the recommendations in the Report on Bankruptcy (May 1995) of the Law Reform Commission of Hong Kong, Chapters 11 and 12, which have taken into account the implication of Article 11(2)(g). I am satisfied that the mechanism adopted in section 33(1) of Cap. 210 is not “a disproportionate response to a serious social problem”. Here, a fair balance has been struck between the general interest of the community as canvassed in Lee Ming Tee, supra. at 640G to J and the protection of the rights of the individual. I hold that the express abrogation of the immunity under Article 11(2)(g) by section 33(1) is not in breach of the Bill of Rights. 54.The above is sufficient to dispose of the argument advanced by Mr. Griffiths that there should be no implicit abrogation of the immunity under Article 11(2)(g) in the present situation. As it is not strictly necessary to consider whether the immunity under Article 11(2)(g) is to be regarded as implicitly abrogated in the event that Mr. Ting should be charged with some other offence not under Cap. 210, I would leave this difficult question to another occasion. Whether it would be oppressive to order private examination 55.Mr. Griffiths raised other matters that may render a private examination oppressive in this situation, apart from the abrogation of the privilege against self-incrimination. They are as follows. 56.The winding up of the Companies has been widely publicised locally and internationally and many articles have been written in the press about Mr. Ting. Mr. Ting’s criminal hearing, which is expected to take place fairly soon, could be prejudiced in one or more of these respects:
57.I do not think the mere fact that Mr. Ting has been examined would have caused such prejudice on the minds of potential jurors as to render the holding of a private examination oppressive. I have held that the effect of section 33(1) of Cap. 210 is that any answer which tends to incriminate Mr. Ting in respect of his charges under Cap. 210 would not be admissible in the criminal trial, so the second matter, which is said to prejudice a fair trial of the criminal case, does not arise. As to the other 17 areas of concern which are not the subject of any criminal charge at present and which the liquidators may wish to investigate in the examination, I see no reason why it should be regarded as necessarily oppressive even if the prosecuting authorities were to obtain the transcripts and make derivative use of the information obtained, such as by following the leads provided to pursue further investigation or bringing further charges against Mr. Ting. After all, derivative use of such information obtained compulsorily is not prohibited, whether at common law or under the Bill of Rights (Lee Ming Tee, supra. at 634C to E, 640A to 641D, 642J to 643B). 58.I bear in mind that in exercising my discretion whether to order Mr. Ting to attend for private examination, I ought to balance the reasonable needs of the liquidators to obtain information by this method and the possible oppression and hardship that may be occasioned to Mr. Ting. I ought also to balance the public interest in ordering an examination to be conducted without further delay and any element of real danger that a fair trial of the criminal proceedings might be prejudiced. I am satisfied that the balance is clearly in favour of ordering a private examination without further delay. There is a pressing need of the liquidators for first-hand information from the most important person in the management, to assist them to disentangle complex relationships and transactions and to trace and recover assets in a massive liquidation. Due to the Settlement Agreement, the information obtained by the liquidators in the examination would not be used against Mr. Ting to pursue any claim against him. I am not satisfied, for the reasons I have given earlier, that if Mr Ting were to be examined in a private examination prior to his criminal trial (for which no hearing date would appear to have been fixed as yet), this would cause a miscarriage of justice in the criminal proceedings. Orders 59.For the above reasons, I grant the liquidators’ application in each of the proceedings for an order that Mr. Ting should attend court on a date to be fixed to be examined on oath concerning the affairs of the Companies and their subsidiaries. Mr Ting’s summons in each of the proceedings to stay the liquidators’ application is dismissed. 60.The liquidators also seek an order that Mr. Ting is to produce documents in his custody or power relating to the Companies and their subsidiaries. As Mr. Ting has not mentioned in any of his opposing affirmations he has no such documents, I order him to produce to the liquidators all documents relating to the Companies and their subsidiaries in his custody or power within 28 days hereof. 61.As for the costs of these four applications in the two proceedings, in view of clause 3 in the Settlement Agreement and the undertaking given by the liquidators they will not enforce any claim for costs against Mr. Ting even if costs were awarded in their favour, I make an order nisi in each of the proceedings there be no order as to costs save that the liquidators’ own costs will be paid out of the assets of the company concerned.
Mr. Andrew James Sheppard, of Holman Fenwick & Willan, for the Applicants Mr. John Griffiths, SC and Mr. Peter Pannu, instructed by Andrew W.Y. Ng & Co., for the Respondent Appeal by the Respondent to Court of Appeal. Appeal dismissed. Please refer to the appeal judgment of CACV304/2004 and CACV305/2004. |
Cases cited in this judgment
Further hearings and rulings under HCCW 49/2000