The Joint and Several Provisional Liquidators of Pioneer Iron and Steel Group Coy Ltd (in Provisional Liquidation) v. Chen Ningning

HCMP 1362/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1362 OF 2011

(ON AN INTENDED APPEAL FROM HCCW NO. 322 OF 2010)

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BETWEEN

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Before: Hon Fok JA and Sakhrani J in Court

Date of Hearing: 15 December 2011

Date of Judgment: 15 December 2011

Date of Handing Down Reasons for Judgment: 21 December 2011

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REASONS FOR JUDGMENT

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Hon Fok JA (giving the Reasons for Judgment of the Court):

1.By a Decision dated 16 June 2011, Harris J acceded to an application by the provisional liquidators of Pioneer Iron and Steel Group Company Limited (“the Company”) for an order under s. 221 of the Companies Ordinance, Cap. 32, against Madam Chen Ningning.

2.Madam Chen wishes to appeal against the ensuing order.  She first sought leave to appeal from the Judge but this was refused on 18 July 2011 although he did grant an interim stay of execution of the order pending the determination of a renewed application for leave to appeal to this court.

3.At the conclusion of the hearing before us, we dismissed the renewed application for leave to appeal with costs (which will include the costs of the application for leave to appeal below) indicating that we would hand down our reasons later, which we now do.

4.Under s. 14AA(4) of the High Court Ordinance, Cap. 4, leave to appeal will only be granted where the court is satisfied that:

(1) the appeal has a reasonable prospect of success; or

(2) there is some other reason in the interests of justice why the appeal should be heard.

5.Skeleton submissions were served on behalf of Madam Chen in support of the application to this court for leave to appeal.  Although they were signed by different leading counsel then acting for Madam Chen, Mr Winston Poon SC, leading counsel for Madam Chen, confirmed that he adopted those submissions in which six main grounds were relied upon.  In his oral submissions, Mr Poon expanded upon those six main grounds and took us to specific documents and references by way of examples of those grounds.

6.We did not consider that those grounds disclosed an appeal with reasonable prospects of success or any other reason in the interests of justice why the appeal should be heard.  I shall briefly state the reasons which led us to this conclusion.

7.First, it was contended that the order for production was one of extraordinary width including all documents concerning the dealings of not just the Company but also “companies in which the Company has/had an interest” and was beyond the scope of s. 221.

8.We are satisfied that there is no substance in this complaint.  We do not consider the width of the order to be contrary to principle.  As a matter of fact, the Judge was alive to the width of the order being sought but it is clear that he found that the provisional liquidators were behaving reasonably in seeking information about the disposal of the Company’s interests in various companies between 2007 and 2009 (Judgment §§28-30).  In any event, the Judge’s directions dated 27 June 2011 provide for the respondent to be provided with a list of topics upon which the provisional liquidators wish to examine her and she is given the opportunity to raise objections to any item in that list.

9.Secondly, it was contended that the proposed appeal raises the question of the court’s approach to the “reasonable requirement” limb of s. 221 and that the Judge in effect reversed the burden of proof in this case.

10.This point is without substance.  A fair reading of the Judgment discloses that the Judge did not reverse the burden of proof and had it well in mind that the burden of proof rested on the provisional liquidators.  His observations about the weight to be accorded to the views of the provisional liquidators were wholly appropriate and consonant with authority.

11.Thirdly, it was contended that the Judge’s finding that the provisional liquidators had discharged the burden of demonstrating a reasonable requirement for the examination ordered was contrary to the undisputed facts and was without any factual basis.

12.There is no substance in this point.  As is clear from the Judgment, the Judge carefully assessed the evidence before him in reaching his decision in this regard.  The particular findings relied upon by Madam Chen in support of this contention and the examples which Mr Poon took us to during the hearing in amplifying this contention were but part of the totality of the evidence and we are satisfied that, notwithstanding those matters, the Judge was entitled to exercise his discretion as he did given the other evidence before him.

13.Fourthly, it was contended that the examination order granted is oppressive and unjustified.

14.We do not agree.  It is quite apparent from the Judgment that this was an argument the Judge had well in mind when carrying out the balancing exercise he was called upon to perform and, in our view, the Judge properly and adequately considered the question of potential oppression to Madam Chen.

15.Fifthly, it was contended that the court should review the application of the principle in Re Ezcom Holdings Ltd. [2008] 1 HKLRD 1 in the interests of justice.

16.We do not accept that the principle in Re Ezcom Holdings Ltd. is one of general application in all cases.  Instead, its application must be fact sensitive.  In any event, the Judge was clearly aware of Re Ezcom Holdings Ltd. but considered that its factual circumstances were different to those in the present case.  We see no basis for interfering with his conclusion in this regard.

17.Sixthly, it was contended that the Judge’s exercise of discretion was vitiated by his failure to take into account Madam Chen’s previous statement on oath that she did not have certain original trust documents, the provisional liquidators not having suggested the existence of the trusts was disputed, and also the fact the provisional liquidators reneged on an agreement with Madam Chen that she should attend an interview to answer questions after they had considered the answers she provided previously.

18.This complaint appears to ignore the abundant evidence supporting the Judge’s view that Madam Chen had demonstrated a lack of willingness to cooperate with the provisional liquidators and to be forthcoming.  Instead, the Judge noted that the history of the proceedings showed she wished to avoid an investigation of the affairs of the Company and that her responses to previous questions were woefully inadequate, vague and less than candid.  In short, we do not consider that the Judge’s discretion was vitiated in the manner suggested.

19.In conclusion, we were satisfied that, in substance, the present application for leave to appeal was merely an attempt to dress up a challenge to the Judge’s exercise of discretion as a legal challenge and was without merit.

Mr Charles Manzoni & Ms Rachel Lam, instructed by Messrs Clifford Chance, for the Applicants/Respondents

Mr Winston Poon SC & Ms Eva Sit, instructed by Messrs Tang & So, for the Respondent/Applicant

The Official Receiver (attendance excused)