Re Comsec Travel Ltd
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HCCW 467/2005 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES (WINDING-UP) NO. 467 OF 2005 ----------------------
---------------------- Before: Hon Kwan J in Chambers Date of Hearing: 12 March 2009 Date of Decision: 12 March 2009 ------------------------ D E C I S I O N ---------------------- 1.There are 3 summonses before me in these misfeasance proceedings brought by the judgment creditors of Comsec Travel Limited (“the Company”) against five former directors of the Company. The Company was ordered to be wound up on a creditor’s petition on 17 August 2005. 2.The 1st summons, issued by the applicants on 10 October 2008 against the respondents, is for an unless order. They seek an order that unless the respondents file and serve their expert evidence and report by a forensic accountant pursuant to the order I made on 10 July 2008 within fourteen days hereof, the respondents are to be debarred from adducing expert evidence in these misfeasance proceedings. 3.The 2nd summons, issued by the respondents against the applicants on 14 October 2008, is for specific discovery of the documents of the Company. The respondents seek an order in these terms:
4.The 3rd summons was issued by the applicants )against the liquidator on 2 March 2009. It was stated to be issued pursuant to section 219 of the Companies Ordinance, Cap. 32, and an order of Master J Wong dated 15 December 2005, by which the Master gave leave to the applicants to inspect the books and papers of the Company and to take copies thereof. This summons required the liquidator to attend the hearing today of the respondents' summons for specific discovery against the applicants. It did not appear to seek any substantive relief against the liquidator. 5.Three things are clear to me from the outset. 6.Firstly, if there is power to order discovery, the respondents should be given some time, after they have been given discovery of the documents sought, for their forensic expert to go through these documents before the expert is to produce his report. The period of one month as sought in the 2nd summons would seem to me to be reasonable. This is not an appropriate case to make an unless order against the respondents, as sought in the 1st summons. 7.Secondly, I am satisfied a prima facie case is made out of the relevance of the documents sought to the misfeasance proceedings. I do not understand the applicants to have contended otherwise. 8.Thirdly, the applicants do not have in their possession the documents sought. The liquidator has in his possession all except one of the documents sought. He has listed them out in some detail item by item in his letter to the applicants' solicitors dated 10 February 2009, which was copied to the respondents' solicitors and he has located further documents, as set out in the letter of his solicitors to the applicants and the respondents dated 11 March 2009. 9.The liquidator has taken the stance that under section 219, inspection of documents could be allowed to support the misfeasance proceedings against the Company’s officers but has reservation if the former officers should be allowed to obtain inspection for defending the misfeasance proceedings. Because of this, the respondents have not been able to obtain inspection of documents from the liquidator directly. Hence, the respondents turned to the applicants asking the latter to obtain them from the liquidator, as the applicants were empowered by the order of the Master on 15 December 2005 under section 219 to inspect the books and papers of the Company and to take copies thereof. When the applicants refused, the respondents took out the 2nd summons, contending that the documents sought, although not in the possession or custody of the applicants, are within the power of the applicants. Mr Coleman, SC submitted the court should order the applicants to provide the discovery sought, alternatively to order the liquidator to provide copies of the requested documents directly to the respondents. 10.The liquidator has now indicated through his solicitors he is most willing to assist the court in the misfeasance proceedings and will comply with the orders and directions of the court, notwithstanding the Company is not a party thereto. So all that is required is an order from the court for the liquidator to produce the documents sought and provide copies of the same. 11.Mr Frederick Chan submitted on behalf of the applicants there are jurisdictional obstacles for the court to make an order for inspection as sought in the 2nd summons. 12.Firstly, he drew the attention of the court to an Australian decision in IACS Pty Limited v Australian Flower Exports Pty Limited (1993) 10 ACSR 769, in support of the proposition that a liquidator has no statutory or residual power to permit inspection of documents by a creditor or contributory. The statutory power to inspection is a power conferred on the court and the court alone, under the provision equivalent to our section 219. 13.He then submitted that for an order of discovery to be made against the applicants, the court must be satisfied the documents sought are within their power. In this context, “power” means “a presently enforceable legal right to obtain from whoever actually holds the document inspection of it without the need to obtain the consent of anyone else” (Lonrho Limited v Shell Petroleum [1980] 1 WLR 627 at 635H, per Lord Diplock). He relied on Re Lombard Shipping and Forwarding Limited [1992] BCC 700 at 706B to D as a most pertinent case. In that case, the party against whom documents were sought could request the administrative receiver for the documents. If the receiver should refuse to comply, that party could apply to court for an order to permit inspection of the books and papers of the company. The court would have a discretion whether to grant the application and was not bound to do so. Vinelott J held that in those circumstances, it could not be said that the party concerned had a presently enforceable legal right to obtain the documents sought in the summons and refused the application under Order 24 of the Rules of the Supreme Court, as the documents were not within the power of the respondent. 14.It seems to me the present situation is distinguishable. Unlike Re Lombard Shipping where no court order for inspection had been made against the receiver, the applicants here have obtained an order under section 219 in 2005 against the liquidator. Pursuant to that order, they had requested the liquidator for inspection of documents and to take copies in mid 2006 and early 2008 for the purpose of these misfeasance proceedings and the liquidator had acceded to the requests in compliance with the court order. The liquidator has confirmed to the court through his solicitor if the applicants are to request him for documents sought in the respondents’ summons, he would likewise comply with the request. I hold that in this situation, the documents sought are within the power of the applicants. 15.I am satisfied I have jurisdiction to make an order for discovery under Order 24 rule 7 of the Rules of the High Court. The order is made against the applicants who are the parties to the misfeasance proceedings. It is not necessary to join the Company as a respondent in the proceedings for the purpose of giving discovery. As the documents sought are within the power of the applicants, they are to make a request to the liquidator for the documents in compliance with the order for discovery herein. Mr Chan informed the court at this hearing that the applicants will make the request. 16.It does not appear to me necessary for an affidavit to be made to give discovery, as sought in the summons. The liquidator has clearly stated he has in possession all the documents sought with the exception of one invoice. 17.I make these orders on the 2nd summons:
18.The 1st summons is dismissed. No order is made on the 3rd summons. 19.I now turn to the question of costs on each of the summonses. Mr Coleman, SC and Miss Leong sought costs in these applications from the applicants forthwith and assessment on a gross sum basis. Mr Chan did not resist the liability to pay costs but submitted that costs should be in any event, not forthwith. 20.I have been taken through the correspondence in September and October last year and in February and March this year. This application for discovery was necessitated because of the unfortunate stance of the applicants’ solicitors not to make a request to the liquidator for the documents sought by the respondents, notwithstanding that the applicants have obtained an order from the court earlier and had themselves made two requests under that order to the liquidator for documents to assist them in the preparation of their case. The applicants’ solicitors took the view that they had no duty to help the other side. This position is quite wrong and cannot be supported in law. Because of this, the 2nd summons was taken out and the applicants took out a third summons. Much costs and time had been wasted on account of this. It seems appropriate to make an order for costs to be paid forthwith. I will order accordingly. 21.I make an order for gross sum assessment in respect of the liquidators’ costs at $50,000 and the costs of the respondents at $150,000.
Mr Frederick H.F. Chan, instructed by Messrs Anthony Siu & Co., for the Applicants Mr Russell Coleman, S.C., instructed by Messrs Robertsons, for the Respondents Miss Leong Wai Sum, instructed by Messrs ONC Lawyers, for the Liquidator of the Company |
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