Pacific Electric Wire & Cable Co Ltd v. Texan Management Ltd and Others
Read the full judgment text of HCA 2203/2004 on BabelCite. This High Court CFI judgment was delivered on 7 November 2008.
1. There are two summonses before me for consideration. They are:
Cited by 10 cases · Cites 1 case
|
HCA 2203/2004 HCA 2746/2004 HCA 2763/2004 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 2203 OF 2004 ____________ BETWEEN
____________ HCA 2746/2004 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 2746 OF 2004 ____________ BETWEEN
____________ AND HCA 2763/2004 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 2763 OF 2004 ____________ BETWEEN
____________ (Heard together) Before: Hon Saunders J in Chambers Date of Hearing: 3 November 2008 Date of Ruling: 7 November 2008 ___________________________________ R E A S O N S F O R R U L I N G ___________________________________ Background 1.There are two summonses before me for consideration. They are:
The extension of time: 2.In respect of the application for time, (para 1(b)(1) above), by the end of the argument Ms Wong sensibly recognised that some time would have to be given and submitted that it should be 21 days. 3.Mr Hingorani accepted that even if the 28 days allowed by the original order did not begin to run until 17 September 2008, (which I accept it did not), the time had expired. He argued however, and there is force in the argument, that the accounts that are to be produced are not straightforward and accordingly time should be given. 4.At the hearing I made an order extending the time by 35 days from the date of the order. I fixed that time period, having regard to the following facts:
5.Having heard counsel on costs, the summons properly acknowledging that costs would be to PEWC, it was agreed that the parties would endeavour to agree gross sum costs, payable forthwith, in the absence of agreement, the matter is to be set down before me at either 9:30 a.m. or 2:30 p.m. for a short argument to resolve costs. A report from the Receivers: 6.The Receivers have been appointed pursuant to RHC O 30 r 1. Pursuant to O 30 r 5(1), a receiver is required to submit such accounts to the parties at such intervals or on such date as the court may direct. In this case the court has directed that accounts be submitted quarterly, and that they be made available to PEWC. 7.PEWC want further information from the Receivers in relation to what they, at this stage rightfully, say is their property. PEWC say that although the court has held that the property is theirs, they are kept out of the property and do not have a full knowledge of what is taking place in relation to the property. This is a situation that will continue until the litigation is resolved and, having regard to the amounts involved, it may reasonably be expected that that will take some time. 8.There is nothing in the rules of court that require a receiver to file a report to the nature sought by Ms Wong. Ms Wong was unable to cite any authority for the proposition that the Receivers should be required to file and serve any form of report, beyond the accounts required by O 30 r 5(1). 9.When pressed as to what the report should contain Ms Wong was unable to describe it in any more detail than in her skeleton namely: “work done to date and findings made by the Receivers, vacancies, and the general position relating to the management of the suit properties”. Her submission was that “the Receivers would know, from the nature of the work that they had undertaken what would be appropriate to include in the report”. 10.Both Mr Hingorani and Mr Alder opposed any requirement for a report both on the ground of principle and on practical grounds. They reminded me that there was no provision in the High Court Rules that required a receiver to make such a report. They submitted that in the absence of any such requirement no order should be made. There was, they said, no authority which demonstrated any practice that a receiver might be required to make such a report. From a practical point of view, the making of such a report was an onerous task to add to the already onerous tasks of the receiver, particularly when counsel for PEWC were unable to specify what should be contained in the report. 11.Mr Hingorani expressed concern that the real motive of PEWC in seeking such a report was to obtain access to information to which it was not otherwise entitled at the present stage of the proceedings, and which might endeavour to use in the proceedings. I did not find that argument to be persuasive. 12.Mr Alder drew my attention to the provisions of O 30 r 5(2) which gives a right to any party to whom a receiver is required to submit accounts, on giving reasonable notice, to inspect either personally or by an agent the books and other papers relating to the accounts. 13.He handed to me a copy of the accounts prepared in respect of Haddowe in HCA 2763/2004. The accounts are extensive, containing first a summary of the receipts and payments presented in the usual way that an income and expenditure account would be presented. The receipts are recorded broken down into appropriate categories, the payments are deducted, again broken down into appropriate categories, thereby demonstrating the available cash balance. 14.Attached to this statement of account are eight pages, setting out the individual payments made from, and to, the three bank accounts held by the particular company. These schedules show the date, the recipient of each payment and the payer of each deposit. The relevant of voucher number, or cheque number, and the amount in the transaction, are set out, together with a running balance. 15.The statement of account provides a comprehensive description of the activities that have taken place in relation to the particular company over the relevant period. Mr Alder assured the court that if PEWC had any specific queries in relation to any payment or deposit of those queries would be answered. 16.A review of the schedule shows that it is so comprehensive that, with certain exceptions, there would be little reason for PEWC to make any particular enquiries of the Receivers. If PEWC wished to know the extent of vacancies in the shopping centre for example, a straightforward enquiry could be made and simply answered. 17.A very few of the entries might require a further explanation. I note, for example, a payment on 24 July 2008, of the sum of $438,000 described as “Works for Shop G46, G49C & G49E”. It would be perfectly reasonable for PEWC to ask the Receivers to explain the nature and purpose of the works involving the expenditure of a substantial son. I note from the Summary of Receipts and Payments that “Tenancy and capital works” during the relevant period totalled $1,282,800. Plainly the $438,000 just mentioned would form part of that sum. If it is not entirely clear to PEWC how the balance was spent it would not be unreasonable for PEWC to ask for an explanation and it would be sensible for the Receivers to respond promptly. 18.But answering occasional questions such as those is a long way from imposing upon the Receivers an obligation to prepare and submit a formal report, effectively describing in the words everything that is demonstrated by the accounts, at the same time as accounts are submitted. I have no doubt at all that if some special issue arose which required a step or decision on the part of the Receivers they would recognize that it would be prudent not only to consult with PEWC over that step or decision, or even to get the approval of the court to any such step or decision. 19.I note too the provisions of O 30 r 5(3) & (4), which enable a party dissatisfied with the accounts to give notice specifying the item to which objection is taken. If following examination by on behalf of the court of any item objected to, an order may be made as to the incidence of any costs or expenses incurred. 20.I was not persuaded that there was any need, in the light of the provisions in the Rules, the detailed nature of the accounts, and the willingness of the Receivers to respond to appropriate enquiries, that it was appropriate to impose upon the Receivers by way of order of the court an obligation to file a report. 21.For these reasons I refused the application set out at para 1(b)(i) above. Notification of changes in directorship: 22.Both Ms Wong and Mr Hingorani accepted my suggestion in relation to this application (para 1 (b)(ii) above), that there should be an order that there be no change in the directorship of any of the companies represented by Mr Hingorani, without the leave of the court. 23.Ms Boreham for the 18th & 19th defendants in HCA 2763/2004, (Blinco BVI and Patagonia, both BVI companies), opposed PEWC’s request for notification such changes, and had no instructions which enabled her to agree to a compromise requiring no change with a leave of the court. This aspect of the summons was accordingly fully argued. 24.There is no requirement at law for a BVI company to disclose, or to file in the Companies Registry in the BVI, details as to the directors of such a company. 25.Subsequent to the order for the summary judgement, consequent upon an order made by me, not opposed by either Blinco BVI or Patagonia, affidavits were made setting out the directorships of the two companies since the commencement of HCA 2763/2004, to 23 June 2008. Both affidavits are made by Ms Yvette Walker, a resident of Panama, who is one of two human directors of two Seychellois companies, Goldkey Developments Ltd the director of Patagonia, and Dunsmore Services Inc. The other director of the two companies is also a Panamanian resident. 26.When the proceedings began the sole director of both Blinco BVI and Patagonia was Mr Hu. The affidavits of Ms Walker confirmed information given to the court the time of the hearing of the O14 application, namely that on 30 June 2005, Mr Hu had tendered his resignation as a director of both companies, and that on the same day Goldkey and Dunsmore were appointed sole directors of Blinco BVI and Patagonia respectively. 27.There is nothing before the court to indicate in any way who the shareholders of Goldkey and Dunsmore are, or whether or not those persons, be they human or corporate, have any legitimate connection with the property at issue in these proceedings. The affidavits are silent as to the means by which Goldkey and Dunsmore were appointed. 28.The overwhelming inference that arises from both the circumstances of the appointment, and the fact of the appointment, as directors of BVI companies, of Seychellois companies whose human directors are individuals living in Panama, is that both Goldkey and Dunsmore are mere nominees, whose Panamanian directors act upon the instructions of some other individual or individuals, who wish, for reasons that are probably obvious, to conceal their involvement in the direction of the proceedings by Blinco BVI and Patagonia. 29.Ms Wong said that PEWC intends to serve notice of the appeals that are under way on those directors of the appellant companies who are not already defendants in the proceedings. The purpose of this is so that they may be fixed with potential liability for the cost of the appeal should the corporate defendants fail in the appeals. The concern held by PEWC is that, unless there is an order requiring the Blinco BVI and Patagonia to notify PEWC of any change in directorship, the directorship may change, and PEWC may have difficulty in pursuing appropriate persons and companies in respect of costs on the appeals. 30.The essence of Ms Boreham’s submission in opposition was that the director companies are not parties to the litigation and the litigation should not be extended to orders against them. The submission failed to take into account the power of the court to make orders against directors of companies who are parties to litigation. That power plainly arises from s52A(2) High Court Ordinance. The submission also failed to take into account the fact that, to the extent that the two Seychellois companies are directors of companies which are a party to the litigation, then they, like any human directors of a company which is a party to litigation, must fall within the scope of orders which the court may make against the corporate party of which they are directors. 31.If legislation has given to a party to proceedings a right to pursue a director of a company for costs in respect of that company’s conduct of litigation, then there must be a corresponding right in the party who may be entitled costs to know who the identity of the director of the opposing company. 32.I am accordingly satisfied that it is fair, appropriate, and just, that both Blinco BVI and Patagonia should be required to notify PEWC of any change that may occur in future in the directorships of those two companies. I note that both companies, consented to orders made on 23 June 2008, that they should file affidavits setting out what had taken place in respect of the directorships of the companies in the past. That they did so without demur is a further reason for making the order now, in the absence of any good reason why the information should not be supplied. 33.PEWC is accordingly entitled to an order that Blinco BVI and Patagonia must serve on PEWC notice regarding any change in the directorship of those two companies in the future. The request for annual reports and accounts: 34.Each of the relevant companies will be required by law to file an annual return. That document is required to be filed in the Companies Registry and is a public document, consequently no order is required to enable PEWC to inspect it. 35.The current management of the companies is in the hands of the Receivers, and from the quarterly accounts filed by the receivers PEWC has a comprehensive knowledge of the financial affairs of each of the companies at the present time. As control of the company has effectively been taken out of the hands of the directors and placed in the hands of the Receivers it seems to me that there is nothing useful that current directors could provide by way of any report. 36.There is no suggestion that there is any other property, other than that presently in the hands of the Receivers. 37.In the whole of the circumstances I was not satisfied that there was any justification to impose any further obligation upon anyone to supply further information in relation to these companies to PEWC. I accordingly declined the application set out at para 1(b)(iii) above. 38.Ms Boreham’s clients were not involved in that part of the application. Notice of shareholders meetings: 39.In relation to this application (para 1 (b)(iv) above), both Ms Wong and Mr Hingorani accepted my suggestion that there should be an order that none of the relevant defendant companies should call any shareholders meeting without the leave of the court. 40.Ms Boreham’s clients were not involved in that part of the application. Costs: 41.PEWC failed in its application that the Receivers should be required to file a report. The question of changes in directorship, (with the exception of Ms Boreham’s clients, the 18th & 19th defendants in HCA 2763/2004), was compromised. PEWC’s request for requirement for the delivery of annual returns and the annual accounts was refused. PEWC’s application in relation to shareholders meetings was compromised. 42.In all of those circumstances, having heard counsel, I made an order in relation to Mr Hingorani’s lay clients that costs on PEWC’s summons should be defendants’ costs in the cause. 43.As to Ms Boreham’s clients, Blinco BVI and Patagonia, having failed in their opposition to PEWC’s application, they must pay costs. I invite the parties to agree gross sum costs, payable forthwith, failing which the matter is to be set down before me at either 9:30 a.m. or 2:30 p.m. for a short argument to resolve costs.
Ms Barbara Wong, instructed by Messrs W K To & Co., for the Plaintiff in all actions Mr Jeevan Hingorani, instructed by Messrs Laracy Gall, for the 1st, 3rd, 4th, 5th, & 7th Defendants in HCA 2203/2004; and the 1st, 2nd, 3rd, 12th, 13th, 14th, 15th, 16th, and 17th Defendants in HCA 2763/2004; and the 1st, 2nd, 3rd, and 8th Defendants in HCA 2746/2004 Ms Kim Boreham of Messrs Tanner De Witt, for the 18th and 19th Defendants in HCA 2763/2004 Mr Edward Alder, instructed by Messrs Kennedys, for the Joint and Several Receivers Please refer to HCCL16/2009, HCCL17/2009 & HCCL18/2009 for the relevant appeal(s) to the Court of First Instance Please refer to HCCL16/2009, HCCL17/2009 & HCCL18/2009 for the relevant appeal(s) to the Court of First Instance Please refer to HCCL16/2009, HCCL17/2009 & HCCL18/2009 for the relevant appeal(s) to the Court of First Instance |
Cases cited in this judgment
Other judgments that cite this case
Further hearings and rulings under HCA 2203/2004