THE JOINT & SEVERAL LIQUIDATORS OF AKAI HOLDINGS LTD. v. THE GRANDE HOLDINGS LTD. AND OTHERS

Between :

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J U D G M E N T

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Chief Justice Li :

1.  I agree with the judgment of Lord Millett NPJ and also with the observations of Mr Justice Bokhary PJ and Mr Justice Chan PJ.

Mr Justice Bokhary PJ and Mr Justice Chan PJ :

2.  We entirely agree with the judgment of Lord Millett NPJ.  All that we wish to emphasise in our own words is this.  The broad purpose of provisions like s.221 of the Companies Ordinance, Cap.32, is plain.  Quite simply, it is to help liquidators to carry out their duties as effectively, quickly and economically as possible.  To that end, liquidators need to identify, at an early stage, what promising paths they can pursue and, let it never be forgotten, what blind alleys they had best avoid so as not to throw good money after bad.  It can be seen – perhaps even more clearly nowadays than in the past – that the section’s language and its purpose combine to call for a wide interpretation of the court’s powers thereunder.  Whether and if so how those powers ought to be exercised in any given case will depend on all the circumstances of the case.  The court must exercise its powers effectively but of course not so as to support over-zealousness or cause oppression.  The court must do what, all things considered, appears at the time to be just and proper.

Mr Justice Ribeiro PJ :

3.  I agree with the judgment of Lord Millett NPJ and also with the observations of Mr Justice Bokhary PJ and Mr Justice Chan PJ.

Lord Millett NPJ :

4.  These are conjoined appeals from orders of the Court of Appeal (Rogers VP and Le Pichon JA) dismissing the appeals from two orders of Kwan J made on 4 August 2005.  They are concerned with the scope of the Court’s powers under s.221 of the Companies Ordinance, Cap.32 (“the Ordinance”).  Both in the Court of Appeal and before this Court the argument has been confined to jurisdiction, including jurisdiction in a secondary sense where it refers not to the court’s powers but to its settled practice: see Guaranty Trust Co. of New York v. Hannay & Co. [1915] 2 KB 536 and Garthwaite v. Garthwaite[1964] P 356.  There has been no appeal against the judge’s findings of fact or the way in which she exercised her discretion.  The question is whether the court can, in a proper case, make orders of the kind which the judge made, not whether, in the particular circumstances of the present case, they were proper orders for her to make.

Section 221

5.  Section 221 reads as follows:

“(1) The court may, at any time after the appointment of a provisional liquidator or the making of a winding-up order, summon before it any officer of the company or person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or any person whom the court deems capable of giving information concerning the promotion, formation, trade, dealings, affairs, or property of the company.

(2) The court may examine him on oath concerning the matters aforesaid, either by word of mouth or on written interrogatories, and may reduce his answers to writing and require him to sign them.

(3) The court may require him to produce any books and papers in his custody or power relating to the company, but, where he claims any lien on books or papers produced by him, the production shall be without prejudice to that lien, and the court shall have jurisdiction in the winding up to determine all questions relating to that lien.

(4) If any person so summoned, after being tendered a reasonable sum for his expenses, refuses to come before the court at the time appointed, not having a lawful impediment (made known to the court at the time of its sitting, and allowed by it), the court may cause him to be apprehended and brought before the court for examination.”

The facts

6.  The background facts are recounted in detail in the judgment of Kwan J and summarised in the judgment of the Court of Appeal.  It is not necessary to set them out again at length.  They can be shortly stated as follows.

7.  The 1^st appellant is a company incorporated in the Cayman Islands.  Its shares are listed on the Hong Kong Stock Exchange.  The 2^nd and 3^rd appellants are companies incorporated overseas and are wholly owned subsidiaries of the 1^st appellant. The respondents (“the Liquidators”) are the liquidators of Kong Wah Holdings Limited and Akai Holdings Limited (“the Companies”), which are both in compulsory liquidation.  Petitions were presented for the winding up of the Companies in January 2000 and they were ordered to be compulsorily wound up in August 2000.

8.  The Companies were both listed on the Hong Kong Stock Exchange and were formerly part of the same group with nearly 300 subsidiary and associated companies (“the Akai Group”).  The Group’s collapse produced what the judge described as the largest corporate insolvency in the history of Hong Kong.  The Liquidators have been faced with a massive insolvency and the apparent disappearance of substantial assets in a relatively short time in suspicious circumstances.  The judge found that most of the key directors and executives of companies in the Akai Group had left Hong Kong or were uncooperative with the Liquidators and had failed to meet their requests for assistance.

9.  In the months immediately preceding the presentation of the petitions, the affairs of the Akai Group were managed pursuant to a Management Agreement dated 12 November 1999 and made between Akai Holdings Limited (“Akai”) and the 2^nd appellant.  It was signed on behalf of the 2^nd appellant by Mr Christopher Ho (“Mr Ho”), who was an executive director as well as the president and group chief executive and chairman of the 1^st appellant.

10.  The judge described the effect of the Management Agreement as startling.  It transferred the management of all Akai’s affairs to the 2^nd appellant and placed the finances of the entire Akai Group under its control.  Mr Ho became an authorised signatory of all the bank accounts of the companies in the Akai Group.  Only directors and other employees of the 2^nd appellant and Omnicorp Limited (the 4^th respondent in the proceedings at first instance) were signatories to the bank accounts to the exclusion of employees of the Akai Group.

11.  Despite its obvious significance, the Management Agreement was not disclosed to the shareholders of Akai, the steering committee representing the bank creditors of the Companies, the Hong Kong Stock Exchange, the Securities and Futures Commission, or, it seems, to the court hearing the petitions for the winding up of the Companies.

The proceedings

(1)  The Liquidators’ applications

12.  On 2 February 2005, the Liquidators applied under s.221 of the Companies Ordinance by separate but identical summonses in each liquidation for orders for the production of documents against four companies, viz. the three appellants and Omnicorp Limited.  The summonses were subsequently amended by adding Mr Ho and two other individuals as respondents (the 5^th to 7^th respondents at first instance) for orders for their examination on oath under s.221.

13.  In relation to the four corporate respondents, the Liquidators confined their application to the production of documents (and information designed to elicit the whereabouts of missing documents) which related to the Companies and companies which they alleged to be current or former subsidiaries and associated companies whose names were contained in a list which they put before the judge.  They also confined their application to documents in respect of five specified matters which they were currently investigating, as follows:

(1) the Management Agreement and transactions undertaken pursuant thereto;

(2) the engagement of a member of the appellants’ group as the financial adviser of Akai and transactions undertaken pursuant thereto;

(3) assets of the Akai Group including trademarks, shares in various companies, and factories in Zhongshan, all of which were specifically identified;

(4)  payments made and sums received by the appellants on behalf of or at the direction of or relating to the Akai Group; and

(5)  a loan facility which was entered into in November 1999 between Akai and Omnicorp Limited and any security provided in respect of the loan.

(2)  The judge’s findings

14.  Kwan J described the affairs of the Companies as very complex and substantial, involving as they did a multitude of subsidiaries and associated companies.  There was a difficulty in identifying all the companies that were, or at one time had been, the subsidiaries and associated companies of the Companies.  The Liquidators could not be certain of the exact group structure.  During the course of their investigation, they had uncovered new entities which had had dealings with the Companies or their subsidiaries and which further investigation had shown to be current or former subsidiaries or associated companies.

15.  As Rogers VP observed in the Court of Appeal, the Liquidators were not only justified but bound to investigate the matters which they had identified.  It was their duty to ascertain the reasons for the collapse of the Akai Group and the apparent disappearance of most of its assets.  The judge was satisfied that the Liquidators had made out a case that the documents which they sought were reasonably required to enable them to carry out their investigations.  She was also satisfied that the appellants, and those officers or employees of the appellants and Omnicorp who had had substantial involvement in carrying out the management of the Companies, such as Mr Ho and the other individual respondents, could properly be regarded as former officers of the Companies for the purpose of s.221.  They were certainly capable of giving information concerning the affairs of the Companies.  Each of the matters which they were investigating was one in which the corporate respondents were substantially involved.  There has been no appeal from these findings.

(3)  The orders

16.  On 4 August 2005, after considering and rejecting various objections to the form of the proposed orders, repeated before the Court of Appeal and this Court, Kwan J granted them.  She made separate orders in similar terms in each of the liquidations.  Their terms are set out in full in her judgments and it is not necessary to repeat them.  It is sufficient to state that in each case the order required the appellants and Omnicorp to produce documents and information within their possession, custody or control which related over a relatively short time-frame to the company in question and current and former subsidiaries and associated companies identified in the Liquidators’ list in respect of the five matters which they were investigating.  Where documents were no longer within their possession, custody or control, the appellants and Omnicorp, in each case acting by a proper officer, were ordered to state on oath (a) the nature and contents of the missing documents; (b) the dates on which the documents ceased to be in their possession, custody or control; and (c) the identity of the persons to whom they had given the documents and their present whereabouts.  Each of the orders was indorsed with a penal notice.  The judge also made orders against the individual respondents to attend before a Master of the High Court to be examined on oath concerning the affairs of the Companies.

(4)  The Court of Appeal

17.  Neither Mr Ho nor Miss Lee appealed the orders for oral examination.  The appellants and Omnicorp Limited appealed the orders for production to the Court of Appeal, which on 26 April 2006 dismissed the various objections to the orders.  It made some minor variations to their wording, which limited the scope of the orders but only as they affected Omnicorp, and subject thereto dismissed the appeals.

18.  Omnicorp has not appealed the orders as varied by the Court of Appeal.  With our leave the appellants now appeal to us.  We gave leave so that the extent of the court’s jurisdiction (in either of the two senses mentioned above) under s.221 can be determined at the highest level in Hong Kong as a matter of principle.  We have not been invited, and would not be prepared, to consider whether, if the orders were within the judge’s jurisdiction to make, she was right in the particular circumstances of the present case to exercise her discretion to make them.

The objections to the orders

19.  The appellants have raised five objections to the judge’s jurisdiction to make the orders.  They are as follows:

(1)  they amount in practice to orders for discovery;

(2)  the documents to be produced have not been specified with sufficient particularity or certainty to leave no doubt in the mind of a party subject to the orders what documents it is required to produce;

(3)  they require a body corporate to provide information;

(4)  they are not supported by evidence that the documents in question actually exist and are in the possession, custody or power of the party ordered to produce them; and

(5)  they assume without evidence that documents which “relate to” the current and former subsidiaries of a company in liquidation are ipso facto documents which “relate to” the company in liquidation.   

The legislative history of Section 221

20.  Section 221 of the Ordinance is in the same terms as those of s.206 of the Companies Ordinance 1932, which in turn is in the same terms as s.268 of the English Companies Act 1948 re-enacting s.214 of the English Companies Act 1929.  The Section is ultimately derived from the Companies Ordinance 1865, which was modelled on the English Companies Act 1862.  Its terms have changed little in more than 140 years.

21.  Legislation corresponding to s.221 may be found in Australia, Singapore, Canada and New Zealand.  All these enactments derive their origins from the English Companies Act 1862 and form an integral part of the insolvency regime in each of those countries.  There is a wealth of authority in this and other jurisdictions, sometimes at the highest level, on the scope and purpose of the section or its overseas equivalents.

The scope and purpose of Section 221

22.  The appellants rightly submit that the construction of the section is an exercise which must be undertaken with an “informed mind”, that is to say a mind informed by the relevant case law.  By this, however, they appear to mean informed by the scope of the court’s jurisdiction to make an order to “produce” documents under other statutes enacted for different purposes.  But there is no magic in the word “produce”; it simply means “hand over” or at least “make available for inspection”.  What is in issue is not the meaning of the word “produce” but the nature and description of the documents which may be required to be produced.  While it is not unhelpful to consider the scope of the court’s jurisdiction to order the production of documents in statutes enacted for other purposes, even if only by way of contrast, the overriding requirement is to construe the words of s.221 in the light of its own legislative purpose.

23.  Section 221 and corresponding provisions overseas are designed to enable a liquidator to carry out his functions.  These are twofold: (i) to collect the assets of the company, settle its liabilities and distribute its surplus funds amongst its creditors; and (ii) to investigate the causes of the company’s failure and the conduct of those concerned in its dealings and affairs: see Re Pantmaenog Timber Co. Ltd[2004] 1 AC 158 at pp 164, 172-3, 177.  The first of these functions is primarily of concern to the company’s creditors and shareholders; the second serves a wider public interest in enabling the authorities to take appropriate action against those guilty of misconduct in relation to the company.  The appellants have never challenged the bona fides of the Liquidators in making the present applications or alleged that they have done so for an ulterior purpose.

24.  Section 221 has often been described as a section which confers extraordinary powers on the court: see for example British & Commonwealth Holdings Plc v. Spicer and Oppenheim [1993] AC 426 at pp 437-440, per Lord Slynn; Joint Liquidators of Chark Fung Securities Co. Ltd & Others v. Chan Kwong Hung [2001] 1 HKLRD 772 at p.775 per Rogers VP.

25.  The section is a vital part of the statutory insolvency regime.  It is designed to meet the difficulties faced by liquidators in finding out what has happened to the company’s assets and what has caused the failure of the company.  It has often been observed that a liquidator is usually a stranger to the affairs of the company.  He relies on orders for examination and production to reconstitute the knowledge of the company, in circumstances where the records are often inadequate, in order to be able to perform his duties in recovering the company’s assets and generally to enable him to carry out his functions effectively and with as little expense and as expediently as possible.

26.  The section’s purpose, however, is not limited to reconstituting the state of the company’s knowledge, even though that may be one of the purposes most clearly justifying the making of an order: see British & Commonwealth Holdings Plc v. Spicer and Oppenheim (supra)at p.439.  It may be used to discover facts and documents relating to potential claims by the liquidator against third parties or to enable him to report to the authorities with a view to taking action against those responsible for the company’s failure: see Re Pantmaenog Timber Co. Ltd (supra), where it was used to enable disqualification proceedings to be taken against former directors.  There is an important public interest ensuring that the liquidator should obtain the information needed to understand the company’s affairs and the reasons for its failure; and to report to the authorities to enable them to take appropriate action against those guilty of misconduct in relation to the company’s affairs.

27.  It has been repeatedly stated, and the legislative purpose demands, that the powers conferred on the court by the section or its overseas equivalents are wide, general and unlimited.  The liquidator must satisfy the court that the information or documents sought are reasonably required to enable him to carry out his functions.  In considering this question, the authorities establish that great weight should be given to the views of the liquidator, for he is an officer of the court and alone has the necessary knowledge of the problems facing him in understanding the affairs of the company and his reasons for seeking production of documents in the terms proposed; moreover, there are often great difficulties in seeing how the terms of the order can be cut down and remain effective: see In re Rolls Razor Ltd (No.2) [1970] Ch 576 at p.592 per Megarry J; In re Castle New Homes Ltd [1979] 1 WLR 1075at 1092, per Slade J; Cloverbay Ltd (Joint Administrators) v. Bank of Credit and Commerce International SA [1991] Ch 90 perSir Nicolas Browne-Wilkinson V.-C. at p.104; and British & Commonwealth Holdings Plc v. Spicer and Oppenheim (supra).

28.  The jurisdiction conferred on the court by the section is necessarily wide, and being of an inquisitorial nature it is capable of working with great severity against third parties: see Re North Australian Territory Co. (1890) 45 Ch D 87 at p.93 per Bowen LJ.  The width and potentially oppressive nature of the jurisdiction, however, is tempered by the fact that it does not follow that the court is bound to make an order merely because it has jurisdiction to do so.  It has a discretion to make or refuse the order sought or to modify or limit its terms.  As Lord Hope observed in Re Pantmaenog Timber Co. Ltd (supra) at p.163:

“There may be a question as to how the court should exercise its discretion when it is making an order under this section. But the jurisdiction which the court is given is expressed in the widest terms.”

It was the fact that the decision whether to make an order and the limits of such an order are within the discretion of the court that persuaded Bowen LJ that the courts should not attempt beforehand to attempt to classify all the occasions on which it may be proper to make an order within the section: see Re North Australian Territory Co. (supra)at p.92.

The balancing exercise

29.  In exercising its discretion, the court must endeavour to strike a balance between the liquidator’s reasonable requirements and the need to avoid making an order that is unreasonable, unnecessary or oppressive to the party from whom the documents or information are sought: see for example In re British & Commonwealth Holdings Plc (Nos 1 and 2) [1992] Ch 342 at p.370 perRalph Gibson LJ, and at p.384 per Woolf LJ; British & Commonwealth Holdings Plc v. Spicer and Oppenheim (supra)at p.439; Re BCCI (No.12)[1997] 1 BCLC 526 at p.537 perRobert Walker J.  These cases have been consistently followed in Hong Kong: see for example the Chark Fungcase (supra).

30.  Over the years the courts have laid down general principles governing the balancing exercise which the court is called upon to undertake.  They are conveniently set out in the Cloverbay case (supra) at pp 102-103 per Sir Nicolas Browne-Wilkinson V.-C. and In re British & Commonwealth Holdings Plc (Nos 1 and 2) [1992] Ch 342 at p.372 per Ralph Gibson LJ and at p.392 per Woolf LJ.  They can be summarised as follows:

(1)  The liquidator must show that the documents are reasonably required to enable him to carry out his functions, not that they are necessary to enable him to do so;  

(2)  the case for making an order under the section in respect of a former officer is usually stronger than in respect of a stranger who owes no fiduciary duties to the company and who is not under a statutory duty to assist the liquidator;

(3)  there is an element of oppression in requiring a party to provide information which exposes him to potential liability;

(4)  an order for oral examination is likely to be more oppressive than an order to produce documents;

(5)  it is oppressive to require a person suspected of wrongdoing to prove the case against himself on oath prior to proceedings being brought;

(6)  an order is not necessarily oppressive because it is inconvenient for the party subject to it or causes him a lot of work or may make him vulnerable to future claims;

(7)  in the light of the summary nature of the procedure and the need for expedition, the court cannot be expected to indulge in fine judgments as to the precise width of the order which should be made; and

(8) the court must take care not to cut down the width of the order sought by the liquidator in a way which would risk making it ineffective.

The nature of the appellants’ case

31.  The appellants have not challenged the way in which Kwan J exercised her discretion to order production, and there is no evidence that compliance with the orders would be oppressive or unduly burdensome.  They allege that in various respects the orders were made without jurisdiction.  Their contentions draw heavily on authorities relating to discovery, subpoenas duces tecum or witness summonses and letters of request.  These are all concerned with adversarial litigation or arbitration, and are designed to ensure that the court or tribunal is seized of all relevant material to enable it to determine the dispute which has been referred to it for decision.  They are concerned with obtaining evidence for resolving an existing dispute, not with the gathering of information as part of a continuing process of investigation.  They fall to be narrowly construed, whereas the authorities on s.221 show that it is to be given a broad and generous interpretation.  The fact that the examination of a person is not a proceeding inter partes has been held by the Queensland Court of Appeal to be a circumstance in favour of a broad and generous construction to the corresponding section: see Grosvenor Hill (Queensland) Pty Ltd v. Barber and Another(1994) 120 ALR 262 at p.269. 

The appellants’ objections

32.  It is now possible to deal with the objections which the appellants have raised which, they say, take the orders which the judge made outside her power to make them.

(1)  The section does not permit the court to order discovery

33.  This is plainly right, but does not help the appellants.  The power of a court or arbitral tribunal to order discovery is very narrow, and narrower than the powers of the court under s.221 in at least two respects. First, discovery is limited to documents which “relate to any matter in question in the action” in circumstances where there are existing proceedings in which the issues have been defined by the pleadings.  Section 221 by contrast is concerned with documents “relating to the company” in circumstances where there is no dispute and there are no existing proceedings or issues defined by pleadings.  Secondly, a party seeking discovery is not entitled to the production of documents which may help him discover whether he has other claims not covered by the pleadings; he must not be engaged on a “fishing” or speculative expedition.  The liquidator, by contrast, is necessarily engaged in just such an expedition and the purpose of s.221 is to enable him to carry it out effectively.

34.  In no decided case under s.221 or the corresponding provisions overseas has a court restricted the scope of the order by reference to the rules of practice and procedure relating to discovery and production in inter partes litigation.  Rather the courts have emphasised the extraordinary and sui generis nature of the power conferred by s.221.

(2) The documents have not been identified with sufficient particularity

35.  The appellants’ objections under this heading are based on cases on discovery, subpoenas or witness summonses and letters of request.  In such cases the courts have insisted that an order for production, backed by a penal notice, must identify the documents to be produced with sufficient certainty to leave the person subject to the order in no doubt which documents he is to produce.

36.  The appellants’ principal contention is that the word “produce” necessarily involves the precise definition of what is to be produced.  The word itself, however, carries no such implication.  What matters is the context in which production is ordered and the legislative purpose of the relevant statute.

37.  The cases on discovery, properly considered, do not help the appellants.  As under s.221, the potentially burdensome task of going through the documents and identifying those which must be disclosed falls on the party who is in possession of the documents, not on the party who seeks their production.  In the case of discovery the task may not be an easy one, since it calls for an analysis of the issues in the action and consideration of the relevance of documents to the issues.  Both require a legal judgment to be formed and may well require the assistance of a lawyer.  The identification of the documents to be produced pursuant to an order under s.221, on the other hand, though often burdensome because of the sheer quantity of the documentation to be considered, rarely calls for the exercise of a legal judgment.  There are no issues to be analysed and no questions of relevance arise.  If a document relates to the company in liquidation and is within any narrower definition in the order it must be produced.  The test is essentially a commercial one, which a layman will normally be able to understand.

38.  Nor can the appellants derive assistance from the cases on subpoenas, witness summonses or letters of request.  These are designed to enable a party to litigation or arbitration to obtain evidence for use in existing proceedings from a person who is not a party to them.  It has been repeatedly held that the documents whose production is sought must be specified and be relevant and admissible evidence in the proceedings; and that the application must not amount to an application for discovery against a third party, something which is permitted only in very special circumstances where the conduct of the third party makes it appropriate.

39.  The process of discovery and the procedure under s.221 are so different that authorities on the one provide no guidance to the other.  Likewise, the object of a subpoena, witness summons or letter of request is so different from the object of the section that the cases on the former provide no guidance to the latter.  Not surprisingly there is no case under s.221 or the corresponding provisions overseas in which a court has construed the section by reference to these other processes.  As I have observed above, their function is to obtain evidence for use in existing proceedings: see for example Panayiotou v. Sony Music Ltd[1994] Ch 142 at p.151 (letter of request).  The liquidator, by contrast, does not seek evidence for use in existing proceedings, for there are none, but information to enable him to carry out his functions.  The production of documents pursuant to an order under the section does not itself make them evidence, and they do not become evidence unless and until the liquidator puts them in evidence in proceedings.  What use the liquidator makes of the information is a matter for him, so long as he uses it solely for the purpose of carrying out his duties.

40.  By contrast with the authorities on these processes those on s.221 and the corresponding provisions overseas show that the courts have consistently made orders which describe the documents to be produced in very general terms.  They usually adopt the formula used in the section itself and require the production of documents “relating to the company” in liquidation.  This is often though not always subject to some limitation in order to meet the legitimate concerns of the party from whom production is sought where this can be done without making the order ineffective.  Although the orders in the present case are in wide terms, requiring the appellants to produce documents “relating to the Companies” and their current and former subsidiary and associated companies, they are limited both as to time and as to the transactions and matters in respect of which production is sought.

41.  It must be remembered that the liquidator is normally a stranger to the affairs of the company.  To require him to specify in advance the documents whose production he seeks would impose a burden on him which it would often be impossible for him to discharge.  Take the present case.  The Liquidators are investigating (inter alia) the Management Agreement and the transactions carried out pursuant thereto.  They are entitled and bound to investigate such transactions and to satisfy themselves that they were at arms’ length and proper in every respect.  To do so they need to have access to the relevant documents.  But they do not know what transactions have been carried out nor what documents were employed to carry them out.

42.  In Re Cloverbay Ltd(1989) 5 BCC 732, administrators were seeking access to the company’s banking records.  Vinelott J was required to consider a contention that a production order under the corresponding section in England which required the company’s bankers to produce “books, papers and records relating to” the company in administration was too wide and oppressive and ought to be limited to specific categories of documents.  Vinelott J rejected the contention.  He observed at p.737 that an order cannot be restricted to specific categories without giving rise to a risk that administrators or liquidators will fail to learn of a transaction previously unsuspected which would have founded a claim, whether against the party subject to the order or someone else.

43.  The contention that the documents production of which is sought must be described with sufficient “specificity” was advanced and rejected by the House of Lords in British & Commonwealth Holdings Plc v. Spicer and Oppenheim (supra).  The order in that case was made in wide terms, which Woolf LJ in the Court of Appeal and Lord Slynn in the House of Lords did not find themselves able to cut down without making the order ineffective.  In Re BCCI (No.12) [1997] 1 BCLC 526 the court ordered production of documents identified in 12 categories over 13 years of dealings and requiring production of over 4,250 banker’s boxes and over 250 container-size boxes held in 6 locations in 6 countries.

44.  In Re Mid East Trading Ltd [1998] 1 BCLC 240 the liquidators sought an order to produce documents concerning “the promotion, formation, business, dealings, affairs and property” of the company in liquidation and two other companies.  Chadwick LJ held that the powers conferred by the corresponding English section could only be used to order production of documents relating to the company in liquidation and that the evidence before him did not establish that all the documents in the respondents’ possession which related to the two other companies also related to the company in liquidation.  On the other hand he recognized that it might be impossible for the liquidators to identify the documents in their possession which did relate to the company in liquidation without a fuller understanding of the relationship of the company in liquidation and the other entities than they presently had.  Saying at p.254 that:

“The court must do what it can, in the light of the material before it, to define the categories of document which are to be produced with sufficient precision [for the respondents] and those advising them, to know what is required.”

he made an order in the terms sought in respect of documents relating to the company in liquidation and “without prejudice to the generality” of those words added further specific categories of documents to be produced which related to the dealings of the other companies.  It is to be observed that so far as documents relating to the company itself were concerned, the order was in the widest possible terms.

45.  These and other cases on the section and the corresponding provisions overseas show that the need to identify the documents to be produced with sufficient particularity is not a jurisdictional requirement, but rather an aspect of the balancing exercise and so a matter of discretion.  The liquidator must show that he is reasonably entitled to require production of the documents in the terms by which he describes them; the court must “do what it can” to define them as closely as possible consistently with making the order effective.

(3)  The order requires corporate respondents to provide information

46.  Three things should be noticed at the outset.  First, the information sought in the present case is confined to information as to the whereabouts of missing documents.  Secondly, individuals may be ordered to attend and be examined on oath, so that the present objection is necessarily limited to the case where the order is made against a body corporate.  Thirdly, it is conceded that the court may order a body corporate to produce documents, even though it can only act by a proper officer.

47.  Once again the appellants’ contentions draw heavily on cases concerned with subpoenas, witness summonses and letters of request.  Their purpose is a narrow one; to enable the applicant to obtain evidence for use in existing proceedings.  In Penn-Texas Corporation v. Murat Anstalt [1964] 1 QB 40 the English Court of Appeal considered the extent of the court’s jurisdiction under the Foreign Tribunals Evidence Act 1856 to order a body corporate to give evidence in England for use in proceedings pending before a court in New York.  It had been previously held that such evidence meant evidence taken by the English mode, that is to say orally in the witness box and on oath.  The English Court of Appeal held that such an order could not be made against a body corporate.  At p.53 it upheld the reasoning of the Master that:

“          A corporate body cannot enter the witness-box; it cannot take the oath, for it cannot be held capable of holding a religious belief, nor can it affirm, for it cannot on conscientious ground have no religious belief. It cannot hear questions that may be put to it, nor can it answer them by word of mouth. The attribute of a witness is a human attribute, not capable of belonging to a legal person.”

48.  The Court rejected a submission that the respondent’s evidence could be given by a proper officer.  Willmer LJ observed at p.56 that:

“If the proper officer attends for examination, it is he who goes into the witness-box; it is he who takes the oath; it is he who is liable to be prosecuted for perjury; it is he, in short, who is the witness. I do not think it helps to say that when interrogatories are answered by the proper officer of a company, his answers are the company’s answers and bind the company. I do not think that touches the question whether an officer can go into the witness-box and give oral evidence which can be said to be that of the company. The answers given by him would be his answers, based upon his own memory and knowledge; and though any admission by him would no doubt be binding on the company, the evidence would still be his evidence and not that of the company.”

49.  In Penn-Texas Corporation v. Murat Anstalt (No.2)[1964] 2 QB 647, which was concerned with a renewed application in the same case, the English Court of Appeal held that a body corporate could be ordered to attend by its proper officer and produce documents.  Hence the appellants’ concession in the present case.  But the decision went further than this.  The court confirmed the practice whereby a body company can answer interrogatories by its proper officer or make an affidavit of documents.  Such an affidavit helps to ensure that the list of documents in the possession of the party giving discovery is complete and enables the other party to ascertain the whereabouts of any relevant documents which are no longer in his possession.  But it is not evidence in the proceedings, since it is irrelevant to any issue arising in them.

50.  The analogy with the information which the orders require the appellants to give is compelling.  The information is not evidence in any proceedings, for there are none, nor would it ever be relevant evidence in any future proceedings (save for perjury).  But the Liquidators need the information to enable them to discover the whereabouts of any missing documents so that they can seek their production from those now in possession of them, if necessary by applying to the court for orders under the section.

51.  This is sufficient for us to dismiss the objection to the orders on the present ground.  But I think that I should take this opportunity to state my view that the information which may be sought from a corporate respondent by application under the section is not limited to information concerning the whereabouts of missing documents.

52.  This must be so as a matter of principle.  The information must of course be given by a proper officer, but it is not evidence sought for use in existing proceedings, and the objection laid down by the cases on subpoenas, witness summonses and letters of request is not relevant.  Any objection must be based on textual grounds.

53.  In construing the section, I would begin by observing that it is in the highest degree unlikely that the legislature intended the section to have a more limited effect in obtaining information from a body corporate than from an individual.  Wherever possible, therefore, I would construe the word “person” wherever it appears as including a body corporate and the words “him” and “his” wherever they appear as including “it” and “its” as well as “her” and “hers”.

54.  Section 221(1) gives the court power to summon persons to attend before it.  The words are not strictly appropriate to a body corporate, and I am willing to assume, without deciding, that the power to order attendance before the court is not exercisable against an artificial person.  But that is no reason to cut down the meaning of the word “person” in the subsection, where it is used to describe not only a party who may be ordered to attend before the court (prima facie an individual) but also a party deemed capable of giving information (which may be a body corporate).

55.  Section 221(2) confers a power on the court to examine “him” on oath either by word of mouth or on written interrogatories.  It is not necessary to consider whether this includes a power to examine a body corporate, attending by its proper officer; though it may well do so, since as I have already explained the witness is not called to give evidence but to provide information.  But I am satisfied that a body corporate can be required to provide information by its proper officer by way of sworn answers to interrogatories.  In my opinion the word “him” in s.221(2) does not refer to the person who has been summoned to attend for examination, but to the officer of the company or other person deemed capable of giving information, and includes a body corporate.

56.  This is clearly the meaning of the word “him” in s.221(3). The courts have never limited an order for production of documents to persons who have been ordered to attend before the court to be examined, and there are countless cases of where orders to produce documents have been made against bodies corporate.  The power to do so is conceded before us, and even if it were not it is far too late to suggest that the power to order production of documents is dependent on the power to order attendance.

(4)  The order has been made without evidence that the documents exist

57.  The appellants submit that an applicant who seeks an order for the production of documents must establish affirmatively that the documents do exist and are in the possession, custody or power of the party ordered to produce them.  They rely on two cases: Re Asbestos Insurance[1985] 1 WLR 331, where Lord Fraser said at p.338 that he would not sanction an order which required production of documents which “may or may not exist”; and The Lorenzo Halcoussi[1988] 1 Lloyd’s Rep 180, where Steyn J said at p.184 that the burden was on the party requiring production to show that the documents were “likely to exist”.

58.  Neither case assists the appellants.  The former was concerned with a statutory provision which authorised the court to order the production of “particular documents specified in the order as being documents appearing to the court … to be, or likely to be, in his possession …”.  The latter was concerned with a subpoena.

59.  The courts have never made it a condition of granting an order for production under s.221 that the liquidator should establish that the documents actually exist.  Nor would it be sensible to do so.  It is the respondent who knows what documents exist; the liquidator does not.

60.  In Joint Liquidators of Sasea Finance Ltd v. KPMG [1998] BCC 216, Robert Walker J ordered the production of a category of documents, even though he recognised that there would “probably [be] no documents”, in case “any such documents should turn up”. In Re New China Hong Kong Group Ltd [2003] 3 HKLRD 799, Kwan J accepted evidence from the respondents that some of the documents whose production was sought had been destroyed in accordance with their normal practice of destroying files after six years, and excluded such documents from the scope of the order.

61.  In my opinion this is the right approach.  It is for the respondent to satisfy the court that the documents do not exist.  It is not enough that they may not exist, or even that they probably do not exist.

(5)  The order assumed without evidence that documents which relate to current and former subsidiaries and associated companies of a company in liquidation ipso facto relate to the company in liquidation

62.  The jurisdiction of the court under s.221 is limited to the production of documents which relate to the company in liquidation and does not extend to documents which relate to its current or former subsidiary or associated companies unless they also relate to the company itself, and this cannot be assumed: see Re Mid East Trading Ltd (supra).  But in the present case the orders were limited to the production of documents in respect of five specified matters.  The judge was entitled to take the view that each of those matters related to the Companies, and that accordingly any document in respect of them related to the Companies, whether or not they also related to other entities.

Conclusion

63.  I would reject all the appellants’ objections to the orders, confirm that the judge had jurisdiction to make them, and dismiss the appeals with costs. 

Chief Justice Li :

64.  The Court unanimously dismisses the appeals with costs.