Noblegain Ltd v. Mak Shu Sun also known as Raymond Mak and Others

HCA 7865/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 7865 OF 2000

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BETWEEN

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HCA 5207/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 5207 OF 1999

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BETWEEN

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Before: Hon To J in Chambers (Open to Public)

Date of Hearing: 12 July 2011

Date of Decision: 23 August 2011

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D E C I S I O N

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INTRODUCTION

General background

1.I have before me two applications by Noblegain Limited (“Noblegain”) for specific discovery, pursuant to Order 24 rules 3 and 7 of the Rules of the High Court.  The parties are involved in three actions: HCA 5207/1999, HCA 7865/2000 and HCA 2277/2000 with HCA 7865/2000 as the leading action, to be tried by the same judge immediately one after the other. I shall refer to Noblegain as the Plaintiff and the other parties as Defendants in the same order as they appear in HCA 7865/2000.

2.The parties are divided into two camps: (1) Noblegain’s camp comprising of Noblegain and its two directors and major shareholders, Andrew Lee and Florence Kwok; and (2) Raymond Mak’s camp comprising of Raymond Mak (1^st Defendant), a former director, shareholder and chief executive officer of Noblegain and all the other parties. Those other parties are the former general manager (2^nd Defendant) and financial controller (3^rd Defendant) of Noblegain; Raymond Mak’s company, Success On Enterprises Limited (“Success On”) (4^th Defendant); an outside party, Chan Man Wong (5^th Defendant) and his company, Fullhouse Trading Company Limited (“Fullhouse”) (6^th Defendant).

3.Until March 1999, Noblegain was a very profitable garment manufacturer and exporter making an annual profit of $9.6 million in the year ending 31 December 1998 and was on its way to making more profits.  It had two factories in Dongguan and Shenzhen in the People’s Republic of China (“PRC”), namely: 東莞萬江納寶製衣廠 (“Dongguan Noblegain”) and 深圳納寶服裝有限公司 (“Shenzhen Noblegain”).

4.Success On was set up by Raymond Mak and his wife, Kerry Chan.  It shared its registered office with Fullhouse until 1 June 1999.  On 19 April 1999, it established a factory in Dongguan known as 東莞萬江成安製衣廠 (“Dongguan Success On”) and obtained a licence to operate until 9 April 2007.  Dongguan Success On employed Sun Hao-yu, the  ex-factory manager of Dongguan Noblegain, as its factory manager.  

5.Fullhouse is owned and controlled by the 5^th Defendant.  It has a knitting factory, Lap Tai Knitting Company Limited.  It was a supplier of Noblegain.  It was deregistered and voluntarily dissolved on or about 30 September 2005 upon the application of the 5^th Defendant.  Its registration was reinstated after Noblegain’s discovery of its deregistration and complaint on or about 7 November 2007.

6.On 29 March 1999, Fullhouse commenced proceedings in HCA 5207/1999 against Noblegain for non-payment of goods sold and delivered in the amount of $5,140,391.33.

7.In HCA 2277/2000, Raymond Mak sued Noblegain and Andrew Lee in defamation.

8.In HCA 7865/2000, Noblegain sued all the Defendants for breach of fiduciary duties and conspiracy to injure.  Shortly stated, HCA 7865/2000 is about poaching of Noblegain’s staff, property, business and customers by its then director, Raymond Mak, together with the other Defendants in March 1999.

The applicable legal principles

9.The legal principles applicable to specific discovery are well settled; see Hong Kong Civil Procedure 2011, Vol 1, para 24/7/1. 

10.Basically, a party seeking an order for discovery must make out a prima facie case that: (1) a specified document or class of documents exists; (2) the party against whom the order is sought has or had the documents in his possession, custody or power; (3) the documents relate to a matter in question in the action; and (4) discovery is necessary either for disposing fairly of the cause or matter or for saving costs. 

11.In considering an application for discovery, I shall take an overall view of the case and adopt a broad brush approach.  The discovery is ordered after having regard to the applicable legal principles and the underlying objective of the Civil Justice Reform to increase the cost effectiveness of any practice and procedure and to promote a sense of reasonable proportionality and procedural economy in the conduct of proceedings.

12.The burden is on the party seeking discovery to prove existence of the document, the other party’s possession, custody or power over the document and relevance.  Once a prima facie case is made out,  the court has discretion to order disclosure: Berkeley Administration Inc & Others v McCllland & Others [1990] FSR 381 (CA) at 382 per Mustill LJ, as he then was.  A prima facie case may be based on the probability arising from the surrounding circumstances, or in part on the specific facts deposed to. 

13.The Peruvian Guano test remains the test of relevance: see  The Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 (CA), per Brett LJ.  A document is relevant if “it is reasonable  to suppose, contains information which may – not which must – either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary, … if it is a document which may fairly lead him to a train of inquiry, which may have either of these two consequences.”  For the present purpose, documents shedding light on the amount of damages where quantum is in issue are normally disclosable: Mega Yield International Holdings Ltd v Fonfair Co Ltd (unreported, HCA 948/2009, 12 May 2011, per Deputy High Court Judge Au-Yeung, quoting Matthew & Malek, Disclosure, 3^rd ed, at para 5.21.

14.Confidentiality as such is no bar to disclosure unless the information sought is privileged.

DISCOVERY SOUGHT UNDER HCA 7865/2000

Causes of action

15.Noblegain’s causes of action in HCA 7865/2000 are: (1) breach of fiduciary duties as director against Raymond Mak; (2) breach of fiduciary duties as employee against the 2^nd and 3^rd Defendants; and (3) procuring breach of contract, unlawful interference and conspiracy to injure against all the Defendants.  Noblegain seeks common law damages and equitable relief in the form of an account for profits.

Earlier application for discovery: 2003 Summons and Noblegain’s delay

16.On 2 May 2003, Noblegain had taken out a summons for specific discovery in HCA 7865/2000 (“2003 Summons”) but did not proceed.  At the case management conference on 25 May 2011, Mr Wong, counsel for Noblegain, sought discovery of certain classes of documents.  When objection that the application was not made by summons was raised, Mr Wong sought to argue that the Court could in the discharge of  its case management function order specific discovery in the absence of any summons.  However, as the application was not supported by the necessary affidavit under Order 24 rule 7(3), Noblegain was directed to issue a summons for specific discovery with supporting affirmation.   The application was set down for argument on 12 July 2011.

17.At the hearing of the present summons for discovery, at the suggestion of the Court, Mr Wong adopted a more pragmatic approach and substantially reduced the scope of discovery.  He abandoned the discovery sought against the 1^st, 2^nd, 3^rd and 5^th Defendants.  The applications were reduced to two classes of documents, namely: (1) financial statements and auditors’ reports and (2) tax returns of Success On and Fullhouse, including their subsidiaries or affiliates, for the period from 1998/1999 to 2003/2004 filed in Hong Kong and the PRC.

18.Mr Siu, counsel for the 1^st to 4^th Defendants, raised the issue  of Noblegain’s delay and inaction in pursuing the 2003 Summons.  He argued that in the exercise of its discretion whether to order discovery, the Court is entitled to consider, inter alia, the length of the delay, reasons for the delay and prejudice to the Defendants. 

19.Mr Siu submitted that despite the fact that Florence Kwok  filed her 6^th affirmation of 33 pages, she never informed the Court about  the existence of the 2003 Summons and Noblegain’s explanation for  the delay in prosecuting that summons.  She avoided the issue by saying that due to the recent admissions made by Raymond Mak’s camp, it was clear that discovery would be relevant and necessary.  Mr Siu argued that Mr Wong’s attempt to seek discovery without a summons at the case management conference on 25 May 2011 was to cover up the nature of the double application and to conceal Noblegain’s delay in prosecuting the 2003 Summons.

20.Mr Wong replied that Noblegain was in tremendous difficulties as the Defendants took away most of the documents and Noblegain had to concentrate its resources and time in collecting evidence.  That reason was insufficient to explain a delay of eight years.  I do not think the recent admissions by the Defendants has enhanced Noblegain’s grounds for seeking discovery. 

21.Mr Wong also built on Florence Kwok’s explanation and submitted that the discovery now sought was much more extensive.   Mr Siu replied that in that case the proper course would have been for Noblegain to take out a fresh summons for the additional documents sought or to amend the 2003 Summons.  Mr Wong’s argument based on what Florence Kwok said in her affirmation could not really stand up to scrutiny, especially in view of the very much reduced scope of discovery Noblegain now sought.  Indeed, classes (1), (2), (4) to (7) of documents sought by Noblegain under the 2003 Summons formed classes (C), (D), (E) and (F)  of the present summons.   Thus, the position today is just as it was eight years ago.

22.It was a substantial delay of eight years.  However, neither Mr Bok, counsel for the 5^th Defendant and Fullhouse, nor Mr Siu advanced any argument as to the prejudice such delay had caused to the Defendants.  Bearing in mind the underlying objective of the Civil Justice Reform, particularly the just and expeditious disposal of disputes, I can see nothing to be gained in the circumstances of the present case in indulging in technicalities which have no bearing on resolving the matter in dispute, especially when the Defendants were not arguing that they were being prejudiced by the delay.  I allowed the present application to proceed on counsel’s undertaking to discontinue the 2003 Summons.

The parties’ case

23.Noblegain’s case was that Raymond Mak and fourteen of Noblegain’s fifteen staff members abruptly left Noblegain on 25 March 1999 and Fullhouse moved into the factory premises of Dongguan Noblegain; employed the fourteen ex-staff of Noblegain; paid off some of Noblegain’s creditors; and produced goods for Success On to deliver to the customers of Success On, who were formerly customers of Noblegain.  Success On is a company owned and controlled by Raymond Mak and his wife.  Mr Wong described the incident of 25 March 1999 a coup on Noblegain. 

24.In a nut shell, Raymond Mak’s explanation was that all happened because Noblegain was in financial difficulties and could not honour its contractual obligation owed to its Japanese customers who then enlisted his assistance. 

25.The 5^th Defendant’s explanation was that Noblegain was Fullhouse’s major customer accounting for 85% of Fullhouse’s source of income.  Due to its financial difficulties, Noblegain was unable to pay Fullhouse $5.1 million for goods and services rendered.  In order to struggle for survival, Fullhouse had to diversify into garment business.  It was under those circumstances that Fullhouse rented the factory  premises of Dongguan Noblegain and absorbed its staff.  That garment business only had a brief existence.  Fullhouse did not participate in any conspiracy with the other Defendants.

26.Since the end of 1998, Raymond Mak had been negotiating with Andrew Lee for the acquisition of Andrew Lee’s 50% shareholding in Noblegain.  He had some grievances against Andrew Lee and  Florence Kwok for their alleged wrongful withdrawal of monies from Noblegain through companies under their control.  On 19 March 1999, Raymond Mak instructed his solicitors to call off the negotiation.

27.Prior to that, Raymond Mak had orchestrated a series of  events in preparation for the coup on Noblegain on 25 March 1999. On 10 March 1999, Raymond Mak on behalf of Noblegain reached an agreement with Sun Hao-yu to rent out the factory premises and machinery of Dongguan Noblegain.  On 15 March 1999, Sun Hao-yu on behalf of Dongguan Noblegain entered a rental agreement of the factory premises and machinery of Dongguan Noblegain with the 5^th Defendant on behalf of Fullhouse.  

28.On the other hand, it so happened, by design or by accident, that on or around 9 March 1999, Fullhouse and two other dyeing contractors instructed the same firm of solicitors who previously acted for Raymond Mak’s camp in this litigation to issued letters of demand for payment to Nobelgain.  With this triggering event, the pieces of jigsaw fell into their proper places: Raymond Mak’s agreement with Sun Hao-yu to rent out the factory premises and machinery of Dongguan Noblegain on 10 March 1999 and signing of the rental agreement with Fullhouse on 15 March 1999.  All these preparatory acts paved the way for Fullhouse to move into the factory premises of Dongguan Noblegain on 25 March 1999.  Then, on that day, the coup took place with the mass resignation of Noblegain’s ex-staff to join Fullhouse and Fullhouse moving into the factory premises of Dongguan Noblegain, paying off some of Dongguan Noblegain’s creditors and producing garment to meet the orders of Noblegain’s Japanese customers.  The inference may readily be drawn that those acts were concerted actions pursuant to a common design among the Defendants.

29.Furthermore, on 29 March 1999, Noblegain received resignation letters from the said fourteen ex-staff transmitted to Noblegain from the fax machine of Fullhouse.  The letters were all written in the  same pattern dated 1 March 1999 and acknowledged by Raymond Mak with an endorsement that the resignation were to take effect from 26 March 1999.  Apparently, those letters were backdated.  Raymond Mak had never alerted his co-directors of this important event, catching Andrew Lee and Florence Kwok by surprise.  The intention to injure Noblegain was obvious.

30.Raymond Mak was the chief executive officer of Noblegain who had control of its operation.  At a board of directors meeting on 30 November 1998, he told the board that Noblegain’s financial position was healthy with sales order placed up to February 1999 approaching US$20 million.  On 12 February 1999, Raymond Mak issued a letter to Andrew Lee and Florence Kwok saying that Noblegain’s annual profit for the year ending 31 December 1998 was HK$9.6 million.  During all that time, Raymond Mak was negotiating with Andrew Lee for the purchase of Andrew Lee’s shares in Noblegain.  All was well with Noblegain.  He told the staff of Noblegain that he would start a new business if his acquisition of Andrew Lee’s shares was unsuccessful.  It was in that context that Raymond Mak now alleged that Noblegain was in financial difficulties resulting in Fullhouse renting and moving into the factory premises of Dongguan Noblegain and taking over the orders from Noblegain’s Japanese customers.

31.Between 8 and 17 March 1999, while the 2^nd Defendant and the production manager were still in the employ of Noblegain, they used Fullhouse’s letterheads to order supplies from Noblegain’s suppliers for Noblegain’s purchase orders, in particular PO S365A, PO S365B, PO S365C, PO S365D.  The addresses for delivery were the office of Fullhouse in Hong Kong or Shenzhen Noblegain or Dongguan Noblegain.  Their conduct should be seen in the context of Raymond Mak’s allegation that Noblegain’s agent, T.M.W. Co. Ltd, had by a letter dated 29 January 1999 informed Noblegain that its Japanese customers had decided to terminate the business relationship with Noblegain and to cancel the “proposed” sales confirmation numbers S364 and S365.  These showed that Raymond Mak’s camp was working closely in poaching Noblegain’s business even before the coup on Noblegain on 25 March 1999.

32.Mr Wong submitted that Fullhouse’s taking over of Dongguan Noblegain’s factory premises, employment of Noblegain’s ex-staff and manufacturing of garments to meet the order of Noblegain’s Japanese customers was just a smokescreen.  He argued that Fullhouse’s alleged diversification into garment manufacturing was but a sham and was contradicted by the packing lists and Hong Kong Import and Export Manifest from 10 April 1999 to 23 June 1999 which stated Dongguan Noblegain as consignor and Success On as consignee of the manufactured garments.

33.It almost never happens that parties to a conspiracy, particularly one of the nature alleged in here, would enter into a written contract to spell out the nature and scope of the conspiracy and damage to be caused to another.  It is more often the case that conspirators would conceal than disclose their intention.  Invariably, such intention has to be inferred from what the parties said or did and all the surrounding circumstances. In my view, all the incidents mentioned above point to a series concerted action by the Defendants pursuant to a common conspiracy involving breach of fiduciary duties on the part of Raymond Mak as director and the 2^nd and 3^rd Defendants as employees with the 5^th Defendant and Fullhouse as accessories, procuring breach of contract, unlawful interference and conspiracy to injure Noblegain.  Noblegain has made out a prima facie case of breach of fiduciary duty and conspiracy.  If successful in establishing liability against the Defendants, Noblegain would be entitled to damages or equitable relief for an account of profits made by  the Defendants.  

Disclosure sought against Success On

34.Noblegain sought financial statements, auditors’ reports and tax returns of Success On and all its subsidiaries and affiliates for the period from 1998/1999 to 2003/2004.  The wrongful acts complained of commenced in March 1999.  Mr Wong submitted that the wrongful acts extended at least until mid 2003 when Dongguan Noblegain’s licence was terminated.  Hence, Noblegain sought disclosure of documents for this period.  Noblegain is contented to limit discovery to documents filed  in Hong Kong and the PRC.  Until March 1999, Noblegain was a very profitable garment manufacturer.  Its profit for the year ending 1998 was HK$9.6 million.  Raymond Mak informed the board of directors on   30 November 1998 that the orders placed with Noblegain had filled up the production schedule to October 1999, the monthly production volume was 40,000 dozen pieces of garment and export value ranked top three in Dongguan.  If Success On and Fullhouse poached the business of Noblegain, Noblegain is entitled to an account of profits made by Success On, Fullhouse and their subsidiaries, particularly Dongguan Success On.  On the basis of what Raymond Mak told the board of directors, the business of Noblegain had great potential.  Damages based on past performance may not provide an adequate measure of damages.  Noblegain is entitled to have the option of claiming an account for profits.  Mr Wong submitted that the documents sought to be disclosed will show how much business the Defendants had taken away from Noblegain’s Japanese customers.  The documents were sought for the purpose of enabling Noblegain to make an informed election as to the kind of relief to claim against the Defendants and as to whether there should be a full trial or split trial.

35.The documents sought are documents which are usually maintained by any operating company.  It is reasonable to expect these documents existed.  Success On did not argue otherwise or that they  were not in its possession, custody or power.  Mr Siu, with whom Mr Bok also agreed, argued that Noblegain failed to establish the nexus between  the documents sought to be discovered and the issue of the case.  Mr Siu argued that the financial statements and auditors’ reports would not record any specific transaction.  They only showed the financial status of the company during a particular year.  Likewise, the tax returns only showed a calculation of all the business gains less all operational expenses of the company during a particular year of assessment.  He submitted that Noblegain’s application was a fishing exercise as in Paul’s Model Art GmbH & Co. KG v UT Ltd & Ors [2006] 1 HKC 238, in which the discovery has the effect as Cheung JA put it at page 249 as saying to the defendants ‘show me your records so that I may check if what you  said was correct’.

36.With respect, Mr Siu failed to appreciate that the documents were sought for the purpose of establishing quantum.  Paul’s Model Art GmbH & Co. KG v UT Ltd & Ors is readily distinguishable in that the discovery sought in that case was for the purpose of establishing liability and not quantum.  Documents shedding light on the amount of damages where quantum is in issue are normally disclosable.  Dongguan Success On was incorporated on 19 April 1999.  It allegedly took over Noblegain’s business with the Japanese customers.  The documents sought will show whether there were profits made by Success On’s group.  If there were, Success On would have to explain with documents the source of such profits.  If the profits came mainly from Noblegain’s Japanese customers, then Success On will have to account to Noblegain for the profits made.  The documents sought are clearly relevant as to the issue of quantum.  They are clearly documents which may fairly lead Noblegain to a train of enquiry, which may have the effect of advancing its own case or to damage the case of the Defendants.  The documents sought are therefore disclosable.  As a matter of practice, such documents are usually disclosed where quantum is in issue. 

37.The burden, then, is on Success On to show that the disclosure is unnecessary.  No argument has been advanced as to why the disclosure  is unnecessary. Accordingly, I order discovery of the documents sought against Success On, including in particular, financial statements, auditors’ reports and tax returns from Dongguan Success On.

Disclosure sought against Fullhouse

38.What I have said about Success On applies equally to Fullhouse, if it was a party to the conspiracy.  Noblegain has made out  a prima facie case that it was.  Fullhouse participation was to a much lesser extent as apparently its involvement ceased soon after Dongguan Success On was incorporated and started production, but it was not known when that was.  That does not matter.  Insofar as discovery is concerned, the same principles apply.

39.The documents sought against Fullhouse are relevant and disclosable.  However, the 5^th Defendant said that those documents ceased to exist.  He said that Fullhouse ceased business and trading in about 2002.  He did not wish to incur the professional costs in maintaining Fullhouse.  On 25 May 2005, he applied to have Fullhouse deregistered. He did not keep any of the Fullhouse’s documents, including the documents sought, since Fullhouse ceased business in 2002, except those involved in  HCA 5207/1999 which are still being kept by his solicitors.  He said that neither Noblegain nor its solicitors had informed him to keep the documents for the purpose of the present litigation.

40.I have to accept what the 5^th Defendant said on its face value.  Fullhouse must still have the documents in 2005 before it applied for deregistration.  Noblegain had not actively pursued this litigation at that time.  Of course, it would have been to the 5^th Defendant’s and Fullhouse’s advantage to disclose the documents sought, otherwise there is a likelihood that they might be found liable to the like extent as Success On.  But, if Fullhouse no longer had the documents, it would be futile to order disclosure.  Accordingly, I make no order of disclosure against Fullhouse.

41.As Noblegain had abandoned its application for specific discovery against the 1^st, 2^nd, 3^rd and 5^th Defendants, Mr Siu and Mr Bok indicated that these Defendants would seek costs against Noblegain.  The 1^st to 4^th Defendants are represented by the same legal team.  The issues involving the 1^st to 3^rd Defendants are substantially the same as those involving the 4^th Defendant.  This is especially so for the 1^st Defendant as the 4^th Defendant is his alter ego.  As among the 1^st to 4^th Defendants, it is appropriate that the costs of the 1^st to 3^rd Defendants should be absorbed   by the 4^th Defendant.  As between Noblegain and the 4^th Defendant, the 4^th Defendant should pay Noblegain’s costs as it should not have contested the application.  The 5^th and 6^th Defendants are also represented by the same legal team.  The 6^th Defendant is the alter ego of the 5^th Defendant.  The issues involving them are substantially the same.  The 5^th Defendant’s costs should be absorbed by the 6^th Defendant.  Discovery of some of the documents sought were not ordered because the 5^th Defendant said that they are no longer in the possession, custody or power of the 5^th or 6^th Defendant and not because they are not disclosable.  The 6^th Defendant should not have contested the application.  It is therefore appropriate that  as between Noblegain and the 6^th Defendant, the 6^th Defendant should pay Noblegain’s costs.  As a further protection to the 1^st, 2^nd, 3^rd and 5^th Defendants, they should be awarded their costs against Noblegain in the event that they are successful in HCA 7865/2000.

DISCOVERY SOUGHT UNDER HCA 5207/1999

Background

42.In HCA 5207/1999, Fullhouse sued Noblegain to recover non-payment for goods sold and services rendered and dishonoured cheques in the amount HK$5,140,391.33.  Fullhouse’s case is that between September and December 1998, it had completed about sixty transactions with Noblegain in the above-mentioned amount.  The amount due and owing was witnessed by an IOU note issued by Dongguan Noblegain on  18 January 1999.  It commenced action in Hong Kong on 29 March 1999 and in the PRC on 6 May 1999. The action in the PRC was discontinued in favour of Hong Kong forum.  However, there was no progress in the litigation in Hong Kong.  Then, Fullhouse ceased business in 2002 and the 5^th Defendant had it deregistered in May 2005.  It was reinstated for the purpose of the present litigation.

43.Noblegain disputed the Fullhouse’s claim and the IOU note as bogus.  Noblegain has made out a prima facie case of conspiracy  against Fullhouse in HCA 7865/2000.  The making of the claim, its timing and Fullhouse retaining the same firm of solicitors as Raymond Mak’s, the rental agreement and its timing evinced concerted action to bring down Noblegain and to pave the way for Fullhouse to take over the factory premises of Dongguan Noblegain.  Neither Fullhouse nor the  5^th Defendant had informed Noblegain of discontinuation of its claim or of such deregistration.  Its registration was restored only upon Noblegain’s complaint on or about 7 November 2007.  Mr Wong submitted that the deregistration reflected that Fullhouse’s claim against Noblegain in HCA 5207/1999 was without substance and was part of a scheme used to, inter alia, bring down Noblegain’s business, obtain control of Dongguan Noblegain and create an adverse image of Noblegain’s financial position  in the various lawsuits against Noblegain in the PRC.  He further argued that the 5^th Defendant must have ignored the contingent liability of Fullhouse in HCA 7865/2000 and confirmed in its application for deregistration that Fullhouse had no outstanding liabilities.

44.The documents sought by Noblegain are documents relating to Fullhouse’s application for deregistration on or about 25 May 2005 and documents relating to its application for reinstatement or restoration after deregistration.  Mr Bok argued that the deregistration and reinstatement of Fullhouse are not relevant to Noblegain’s defence and that had there been any factual disputes, namely existence of assets and/or liabilities in the book of accounts or that Fullhouse was still actively operating, the Registrar of Companies would not have deregistered Fullhouse.

45.Mr Wong submitted that the documents filed by Fullhouse relating to its application for deregistration and reinstatement after deregistration were expected to include financial statements and tax returns of Fullhouse, which would show the accounting treatment Fullhouse had accorded to the claim against Noblegain in HCA 5207/1999.  The 5^th Defendant did not argue otherwise.  He put forward no evidence as to what documents had been filed with the Companies Registry or that the documents did not include financial statements and tax returns.  In  the circumstances, it is reasonable to expect that the documents included financial statements and tax returns.

46.Mr Wong argued that the documents filed with the Companies Registry are properties of Fullhouse.  Even if Fullhouse did not keep its own copy of the documents, the copies filed with the Companies Registry are in the possession, custody and power of Fullhouse.  He submitted that they are relevant as they would show the accounting treatment Fullhouse had accorded to the claim against Noblegain in HCA 5207/1999.

47.With due respect to Mr Bok, while deregistration and reinstatement of Fullhouse as such are not relevant to Noblegain’s defence, the documents in support of Fullhouse’s application for deregistration  and reinstatement would show Fullhouse’s own treatment of the debt and whether it was genuine.  Those documents are clearly related to the matters in question in these two actions and it is reasonable to suppose that they contain information which may either directly or indirectly  enable Noblegain to advance its case or damage the case of Fullhouse.   The documents meet the Peruvian Guano test.  It is likely that copies are still being kept in the Companies Registry from which Fullhouse can obtain copies.  The documents exist and are in the possession, custody or power of Fullhouse.  The documents sought must therefore be disclosed.  Fullhouse should pay Noblegain’s costs of this application.

CONCLUSION

48.In HCA 7865/2000, I order Success On Enterprises Limited to disclose to Noblegain Limited:

(1) all financial statements and auditors’ reports of Success On Enterprises Limited and all its subsidiaries or affiliates including Dongguan Success On (東莞萬江成安製衣廠) for the period from 1998/1999 to 2003/2004 filed in Hong Kong and in the PRC; and

(2) all tax returns of Success On Enterprises Limited and all its subsidiaries or affiliates including Dongguan Success On (東莞萬江成安製衣廠) for the period from 1998/1999 to 2003/2004 filed in Hong Kong and in the PRC.

I make a costs order nisi that as between Noblegain and the 4^th and 6^th Defendants, the 4^th and 6^th Defendants shall pay Noblegain’s costs, while as between Noblegain and the 1^st, 2^nd, 3^rd and 5^th Defendants, these Defendants shall have their costs in the cause.

49.In HCA 5207/1999, I order Fullhouse Trading Company Limited to disclose to Noblegain Limited:

(1) all documents in relation to Fullhouse Trading Company Limited’s application for deregistration on or about 25 May 2005; and

(2) all documents in relation to Fullhouse Trading Company Limited’s application for reinstatement or restoration after deregistration.

I make a costs order nisi that Fullhouse Trading Company Limited shall pay Noblegain’s costs.

HCA 7865/2000

Mr Arthur Wong, instructed by Messrs Cheung, Tong & Rosa, for the Plaintiff

Mr Stanley C K Siu, instructed by Messrs K.B. Chau & Co., for the 1^st - 4^th Defendants

Mr T Y Bok, instructed by Messrs Fung, Wong, Ng & Lam, for the 5^th and 6^th Defendants

HCA 5207/1999

Mr T Y Bok, instructed by Messrs Fung, Wong, Ng & Lam for the Plaintiff

Ms Arthur Wong, instructed by Messrs Cheung, Tong & Rosa for the Defendant