THE JOINT & SEVERAL LIQUIDATORS OF KONG WAH HOLDINGS LTD (IN LIQUIDATION) v. HERBERT TSOI & PARTNERS (a firm) AND OTHERS

HCCW 50/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 50 OF 2000

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D E C I S I O N

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1.  On 19 November 2004, I gave leave to the applicants, the liquidators of Akai Holdings Limited (“Akai”), to amend their summons under section 221 of the Companies Ordinance, Cap. 32 by adding three respondents, Akai Electric Company Limited (“AECo”), Sansui Acoustic Research Corporation (“Sansui Acoustic”) and Guestlink International Limited (“Guestlink”), as the 3^rd to 5^th respondents in this application and leave to serve the amended summons on AECo and Sansui Acoustic out of the jurisdiction.  The reasons appear in my decision at paragraphs 28 to 36.

2.  The liquidators have filed further evidence in support of their amended summons.

3.  The amended summons was served on each of the 3^rd to 5^th respondents on 22 November 2004 and correspondence has been exchanged between them and the liquidators’ solicitors, so they all have notice of the hearing.  None of these respondents have appeared today.  I have been provided with the letters they wrote to the liquidators’ solicitors on 6 and 7 December 2004, stating that they do not agree to their former solicitors, Messrs Herbert Tsoi and Partners, the 1^st respondent herein, to provide to the liquidators for inspection the documents sought in the amended summons.  Each has contended that the liquidators have not established the relevance of the documents sought to their investigations.

4.  I do not propose to set out the background to the present application, as this has been set out at some length in my previous decisions on 11 November 2003 and 19 November 2004.  For present purpose, I would like to mention the following.

5.  One of the matters the liquidators would wish to investigate in this complex litigation is a series of transactions which took place not long before the liquidation of Akai, by which valuable assets of the Akai group ended up in the control of companies of the Grande group.  These transactions include a management agreement entered into in November 1999 and a series of share mortgages and assignments in December 1999.  As a result of the enforcement of the share mortgages, Akai lost its indirectly held majority interest in AECo.

6.  In January 2000, AECo entered into a loan agreement with Toyo Holdings Limited (“Toyo”), by which Toyo obtained security over some valuable trademarks being the “Akai”, “Sansui” and “Kawa” trademarks.  Toyo took control of these trademarks on AECo’s default under the loan agreement and the trademarks were subsequently re-assigned to AECo by Toyo via another company, as part of a civil rehabilitation scheme in Japan in April 2001, under which 32 million shares in AECo were issued to a “Grande Group Company”. 

7.  Although the work done and services provided by the 1^st respondent to the 3^rd, 4^th and 5^th respondents were at a time when these companies have apparently ceased to be part of the Akai group, the liquidators say that these documents are reasonably necessary to enable them to advance their investigations, for the reasons mentioned below.  On 2 December 2004, the 1^st respondent, with the consent of the 3^rd to 5^th respondents, voluntarily provided to the liquidators a summary of the relevant files in which they had acted for the 3^rd to 5^th respondents.  These files include trademark applications for the trademarks of “Akai” and “Sansui” as well as litigation in various matters.

8.  The liquidators say that the documents in these files held by the 1^st respondent would assist them to understand at least the following matters and help to advance their investigations: 

(1)    the identity of those controlling or representing the 3^rd, 4^th and 5^th respondents;

(2)    Akai’s interest in these respondents;

(3)    the circumstances under which these respondents and/or their assets were purportedly removed from the Akai group;

(4)    the identification of what, if any, assets are realisable for the benefit of creditors;

(5)    the identification of other advisers to entities within the Akai group of companies who may have pertinent information relating to the various transactions discussed in the latest affidavit of the liquidators;

(6)    the role, if any, of Mr James Ting and/or other members of Akai’s management with the 3^rd, 4^th and 5^th respondents; and

(7)    other transactions or involvement of the 3^rd, 4^th and 5^th respondents which the liquidators are at present unaware.

9.  I am satisfied that the liquidators have made out a case of reasonable requirement for the documents they seek in the amended summons. 

10.  I therefore grant the relief sought in paragraphs 1, 2 and 3 of the amended summons.  I will give liberty to apply.  There will be no order as to the costs of the amended summons.