JOHN HOWARD BATCHELOR AND KENNETH FUNG AS JOINT AND SEVERAL LIQUIDATORS OF ALLIED WELI DEVELOPMENT LTD v. LAM & CO (A FIRM) AND OTHERS

CAMP 473, 474 & 475/2021
(Heard together)

[2022] HKCA 664

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NOS 473, 474 AND 475 OF 2021

(ON AN INTENDED APPEAL FROM HCCW NO 337 OF 2015)

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(Heard together)

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.  There are three applications before this court, being the applications of the 3^rd to 5^th respondents, the 6^th to 7^th respondents, and the 8^th respondent (“R3 to R8”) respectively for: (1) leave to appeal against the judgment of Recorder Jason Pow, SC (“the Judge”) handed down on 12 May 2021 (“the Judgment”)[1] and the order under the Judgment for production of documents and private examination filed on 1 June 2021 (“the Order”); and (ii) stay of the examination of the respondents under §2 of the Order pending the determination of the leave application and, if leave to appeal is granted, until the final determination of the appeal.

2.  Leave to appeal was refused by the Judge in a decision handed down on 6 October 2021 (“the Leave Decision”)[2].

3.  Having considered the papers, we are of the view that it is appropriate to determine the applications without an oral hearing on the basis of written submissions only pursuant to Order 59 rule 2A(5)(a) of the Rules of the High Court, Cap 4A.

A.  Background

4.  The relevant background can be found in §§2-34 of the Judgment[3]. For present purposes, a brief summary will suffice.

5.  Allied Weli Development Limited (“the Company”) was a company incorporated in the British Virgin Islands and was registered as a non-Hong Kong Company. It was an investment holding company which held as at 31 March 2021 some 29 direct and indirect subsidiaries[4].

6.  On 24 June 2011, the Company entered into a deed of guarantee (“the Guarantee”) with Penta Investment Advisers Limited (“Penta”), guaranteeing Penta’s investment in Mascotte Holdings Limited (“Mascotte”), a company listed on the Stock Exchange of Hong Kong Limited and one of the Company’s indirect shareholders at the time[5].

7.  On 11 September 2012, Penta commenced an action in HCA 1656 of 2012 against the Company based on the Guarantee (“Guarantee Proceedings”). Chow J (as he then was) gave judgment on 14 October 2014 in favour of Penta with quantum subsequently assessed at HK$225,927,801.69 (“Judgment Debt”). The judgment was upheld on appeal on 18 August 2015[6].

8.  On 24 July 2015, Penta issued a statutory demand against the Company based on the Judgment Debt and post-judgment interest. Penta later presented a winding-up petition based on the same debt on 29 October 2015. Harris J wound up the Company on 22 February 2016. The applicants were appointed as the liquidators of the Company on 8 July 2016 (“the Liquidators”)[7].

9.  Based on the Liquidators’ investigation, it transpires that (1) the Company’s shareholding was “re-organized” in March and April 2012 (“the Re-organization”) such that the Company’s entire shareholding became held through a Cayman Islands company (ie HEC Capital Limited, “HEC Capital”)[8]; and (2) the Company underwent a series of transactions whereby virtually all of its assets were divested to HEC Capital in May 2012 (“the Divesting Transactions”)[9].

10.  The upshot of all of this is that even though the Company had reported a net asset value of HK$2,855,074,048 as at 31 March 2012 in its audited financial statements[10], the Liquidators could not locate any assets of the Company which may be realized for the benefit of the Company’s creditors (other than potential claims and/or recoveries relating to the Re-organization and/or the Divesting Transactions; collectively “the Impugned Transactions”).

11.  The Liquidators were not able to obtain any books and records of the Company and could not obtain any information or documents about the Company’s collapse, the Re-organization or the Divesting Transactions from any of the former directors of the Company or those who had or appeared to have substantial interests in the Company, including the respondents[11].

12.  The respondents are the persons whom the Liquidators believe are most likely to have information and documents which would shed light on whether the Company has any realisable assets[12]. Specifically, R3 to R8 were former directors of the Company and/or companies which were associated with the Company and/or were individuals whom the Liquidators believe were involved in the affairs of the Company[13].

13.  The Liquidators issued two protective writs in HCA 2995 and 2996 of 2017 on 22 December 2017 to prevent potential claims relating to the Impugned Transactions from becoming time-barred. The Liquidators issued a further writ in HCA 57 of 2018 on 9 January 2018 which identified other potential claims and consolidated the claims in the two earlier writs into one writ (“the Protective Writ”)[14].

14.  On 29 June 2018, the Liquidators applied under ss.286B and 286C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance(Cap 32) (“Cap 32”) by summons for orders for production of documents and/or private examination against the respondents. The hearing before the Judge took up five days.

B.  The Judgment and the Leave Decision

15.  The Judge granted, with certain modifications, the orders that were sought by the Liquidators against the respondents, save for the 1^st and 9^th respondents (“R1 and R9”). His reasons for doing so may be broadly summarised as follows.

16.  The Judge looked at the circumstances facing the Liquidators and also the information or documents that were already available to the Liquidators when examining the issue of “reasonable requirement”[15]. He considered the Liquidators’ explanation why they still need additional information and documents, despite being in possession of information and documents they have so far obtained. The Judge ultimately accepted the reasons put forward by the Liquidators and was satisfied that the information or documents sought are reasonably required to enable the Liquidators to discharge their functions[16].

17.  The Judge rejected the argument of R3 to R5 that the applications were “impermissible fishing expeditions”[17]. He considered the evidence filed by R3 to R5 and was of the view that the explanations provided by them should not be taken at face value. He concluded that there are well-founded grounds to believe that R3 to R5 are capable of providing the information and documents sought.

18.  The Judge then identified the nature and extent of oppression[18] that each of the respondents may face if ordered to provide the information and documents sought (including the possibility that they, especially those respondents the Liquidators intend to sue, may be forced to expose themselves to liabilities) and balanced this against the Liquidators’ reasonable requirements[19]. He concluded that the balance should come down in favour of the Liquidators, save and except in the case of R1[20]. No orders were made against R9 as she had passed away before the handing down of the Judgment[21].

19.  The Judge rejected the argument that the issuance of the Protective Writ was an abuse of process[22]. He held that it was understandable and legitimate to issue the writ to prevent the expiry of limitation periods before the Liquidators could have an adequate and well-informed opportunity to assess the viability of the Company’s claims against each potential defendant[23].

20.  As for the terms of the Order, it is sufficient to state that R2 to R8 were ordered to set out certain information and provide documents in their possession, custody or power which related to the Company and associated companies and/or the Impugned Transactions. Where documents were at one time but no longer within their possession, custody or power, R2 to R8 were ordered to state on oath what became of those documents. R2 to R8 were also ordered to be examined on oath concerning the matters set out in the 2^nd schedule to the Order.

21.  R3 to R8 applied to the Judge for leave to appeal against the Judgment and Order and for stay pending the determination of the leave application, and if leave was granted, the determination of the appeal. By the Leave Decision, the Judge dismissed the applications on the basis that the proposed grounds of appeal have no reasonable prospect of success. R3 to R8 renewed their applications before this court[24].

C.  Applicable principles

22.  It is well established that a decision whether to order an examination under section 286B[25] of Cap 32 or to make any other order under that provision is a matter of discretion for the judge hearing the application: Re China Medical Technologies, Inc, HCMP 576/2016, 3 November 2016, at §12 per Barma JA; Re B+B Construction Co Ltd [2005] 2 HKLRD 478, at §17 per Rogers VP. The key issue arising from an application of this nature is whether the information or documents sought by way of examination or production of documents are reasonably required by the liquidators to carry out their functions, and that the orders sought are not unreasonable, unnecessary or oppressive: Joint & Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd (2006) 9 HKCFAR 766, at §29.

23.  The discretion to order an examination or make other relevant orders is one that has been described as “general” and “unfettered”, even though well-established principles have been laid down to guide the exercise of that discretion: Cloverbay Ltd (Joint Administrators) v Bank of Credit and Commerce International SA [1991] Ch 90, 99B, 105B-D, 106E per Sir Nicolas Browne-Wilkinson VC and Nourse LJ.

24.  Whether and if so how that discretion should be exercised in any given case would depend on the circumstances of the case, and the question of whether that discretion was properly exercised is a question that must be considered in the context and the facts of the case: Joint and Several Trustees of the Property of So Ching Wan v Assen Ltd (In Liquidation) [2020] HKCA 1081 at §§8.10-8.11 per Cheung JA.

25.  An appellate court will not lightly interfere with a judge’s exercise of discretion; it will only do so if it can be demonstrated that the judge has proceeded on wrong principles or the exercise of discretion has been plainly wrong. If the grounds for reviewing the exercise of discretion do not exist, this court should not exercise any discretion itself or otherwise usurp the function of the judge: Alan Chung Wah Tang v Lee Siu Fong [2020] HKCA 482 at §§28-29 per Kwan VP.

26.  As explained by Barma JA in Re China Medical Technologies (supra) at §12:

“It is well established that the exercise of the powers under section 221 is a matter for the court’s discretion. As such, the liquidators face a substantial hurdle in seeking to overcome the judge’s exercise of his discretion. It is not enough to suggest that the judge assigned inappropriate weight to one (or several factors) in the balancing exercise that led him to exercise his discretion as he did. It is trite that questions of the weight to be given to particular factors in that process are for the judge hearing the application to determine, and an appellate court will not interfere simply because it might take a different view from the judge as to the weight to be assigned to any given factor. Absent a relevant error of law, or a demonstrated misunderstanding of the evidence, or it being shown that the judge failed to have regard to relevant factors or took into account irrelevant matters, the court will only intervene in the exercise of discretion if it is satisfied that the judge’s decision was plainly wrong that it fell outside the generous ambit within which reasonable disagreement is possible.”

D.  Whether to grant leave to appeal

D1.  Intended appeals by R3 to R5

27.  R3 to R5 are represented by Mr Barrie Barlow, SC leading Mr Chan Pat Lun. This renewed application for leave to appeal and stay is based on the same draft notices of appeal (“DNOA”) placed before the Judge. As he had done before the Judge, Mr Barlow grouped the intended grounds of appeal of R3 to R5 as set out in the DNOA into three main grounds in his skeleton arguments. We will address them in turn.

28.  Under the first broad ground, Mr Barlow submitted that the Liquidators had framed their application on the basis that “[the Liquidators] had ‘reasonable ground for suspicion’ that [R3 to R5] may be capable of giving information concerning [the Impugned Transactions]”[26]. He contended that the judge erred in proceeding on the basis as if the Liquidators were arguing that there were well-founded grounds for believing that R3 to R5 were capable of providing the information/documents sought, and accepting, contrary to the evidence, that there were such grounds. As such, Mr Barlow argued that the Judge lacked jurisdiction to make the Order against R3 to R5.

29.  The first broad ground is a repetition of Mr Barlow’s arguments before the Judge on “futility” and “impermissible fishing expedition”.

30.  It is clear from §37 of the Judgment and §§15, 15(b)-15(d), 100, 121-134, 152-153, 160-166 of Batchelor 2^nd that the Liquidators’ application against R3 to R5 was made on the basis of section 286B(4)(d) of Cap 32, ie that each of R3, R4 and R5 is “a person whom the court thinks capable of giving information concerning the promotion, formation, trade, dealings, affairs or property of the company”.

31.  Thus, one of the issues, which the Judge plainly appreciated[27], was whether the Liquidators could demonstrate well-founded grounds upon which R4 to R5 could be considered to be prima facie capable of giving those information/documents sought. The Judge was aware that if the Liquidators were unable to discharge that burden, the application falls to be dismissed on the basis that it amounts to impermissible fishing.

32.  In respect of R3, the Judge considered the submissions of the Liquidators at §78 of the Judgment and was satisfied, for the reasons he gave at §82, there are well-founded grounds upon which R3 can be considered to be prima facie capable of giving the information/documents sought.

33.  As regards R4, the Judge concluded there are well-founded grounds upon which she can be considered to be prima facie capable of giving the information/documents sought, as analysed in §§89 to 91 of the Judgment.

34.  Turning to R5, the Judge’s reasons for concluding that the Liquidators have well-founded grounds to believe that he is prima facie capable of providing the documents and information sought are set out in §85 of the Judgment.

35.  The Judge was entitled to reach the above conclusions based on the matters he had considered.

36.  As stated in Alan Chung Wah Tang v Lee Siu Fong [2020] HKCA 482 at §36, the submission that there was “suspicion” but no evidential basis in respect of certain matters is misconceived. In an application of this nature, the court need not come to any finding or concluded view on the matters canvassed. The issue is whether the Liquidators should be allowed to probe or probe further in all the circumstances, and it is not necessary for the Liquidators to establish a prima facie case that R3 to R5 committed wrongdoings against the Company.

37.  We reject the argument that the Liquidators had framed their case on the basis they had“reasonable ground for suspicion” that R3 to R5 were capable of providing the information or documents sought. The Judgment must be read fairly as a whole. The attempt at nit-picking by singling out the word “suspect” in various parts of the Judgment is to no avail. We also reject the so-called “bootstrap” argument[28] that “the [Liquidators contended] that the Sections do not require the Liquidators to establish jurisdiction, but merely to show that, if Orders are granted, then the subsequent documents production and/or examination might uncover materials whereby the Liquidators would be able to establish jurisdiction”. Both arguments are wholly unmeritorious and are based on an unfair misrepresentation of the Liquidators’ contentions, in particular, the basis upon which the application was framed, and the reasoning of the Judge.

38.  We agree with the submissions of Mr Douglas Lam, SC and Ms Jacqueline Law for the Liquidators that this ground is falsely dressed up as an issue involving the Court’s jurisdiction. R3 to R5 are plainly challenging the Judge’s exercise of discretion based on his evaluation of the evidence. We do not see how it could be said that the Judge’s decision was plainly wrong or fell outside the generous ambit within which reasonable disagreement is possible. We reject the first broad ground of appeal.

39.  Under the second broad ground, Mr Barlow submitted that the Judge did not have jurisdiction to make the Orders against R3 to R5 because, “on the Liquidators’ own case, (namely that they sought the Orders against [R3 to R5] in order to try to find ‘viable claims’ against [them] for the purpose of their 2018 Writ Action against [R3 to R5]), they were acting outside their lawful statutory function and abusing both the Sections and the Court’s processes by using the Sections in order to gain an illicit litigation advantage ‘which other litigants lack’ namely the chance to search for a conjectural case of fraud or dishonesty not presently known to exist in order to try to ‘legitimise’ or justify their conjectural 2018 Writ Action against [R3 to R5] (which the Liquidators had also been abusively ‘warehousing’ in further abuse of the Court’s processes for 3 years”[29].

40.  This ground is a repetition of the arguments on the Liquidators’ alleged lack of “reasonable requirement”, “fishing” and “abuse of process”.

41.  Contrary to Mr Barlow’s submissions, this is not a challenge based on jurisdiction but is again one that is directed against the Judge’s exercise of discretion.

42.  The Judge had set out the stated purpose of the application[30]. He also considered the Liquidator’s evidence[31] as well as the information and documents already available to the Liquidators to assess whether they reasonably required any more information and documents. It was open to the Judge based on his evaluation of the evidence to conclude that there was no abuse on the part of the Liquidators[32]. Specifically, the Judge also found that the issuance of the Protective Writ was understandable and a legitimate step taken to prevent the expiry of the relevant limitation periods before the Liquidators have an adequate and well-informed opportunity to assess the viability of each potential cause of action against each potential defendant[33]. This was a conclusion that the Judge was entitled to reach based on his evaluation of the evidence.

43.  We reject also the implicit argument that it was necessary for the Liquidators to establish a prima facie claim before an order for production of documents and/or private examination can be made. The Liquidators, as strangers to the Company, are necessarily engaged in a speculative exercise to find out more about the Company as well as the facts and documents relating to any potential claims which it may have. It is wrong to suggest that the Liquidators can only make an application against a specific respondent under ss.286B and 286C of the CO if they are able to establish a prima facie claim against that respondent.

44.  As for the allegation of abuse with regard to the Protective Writ, as pointed out by Mr Lam, this allegation was repeatedly made and rejected on no less than eight occasions by different Masters, DHCJ Le Pichon in HCA 57 of 2018 and the Court of Appeal[34]. It is wholly without merit.

45.  Under the third broad ground, Mr Barlow submitted that the Judge had mis-exercised his discretion “due to his erroneous construction of the Sections or of the settled practice of the Court, but in any event in a manner that was ‘plainly wrong’ ”[35].

46.  Mr Barlow has not explained how the Judge erred in construing sections 286B and 286C of Cap 32 or how the Judge had misunderstood the settled practice of the court. There was no attempt to explain why the Judge was plainly wrong or how the Judge has failed to take into account relevant factors or has taken into account irrelevant factors in the exercise of his discretion.

47.  The Judge correctly identified the oppression (if any) which R3 to R5 may suffer. He then weighed this against the reasonable requirements of the Liquidators and ultimately concluded that the balance comes down in favour of the Liquidators and provided the reasons for so concluding[36]. We are unable to see any error in the Judge’s approach. We also do not see how it could seriously be suggested that the Judge had not provided reasons in making the Orders against R3 to R5[37].

48.  It appears to us that the grounds raised in the DNOA of these respondents are essentially attempts on their part to reargue their contentions on appeal and the exercise is nothing more than an impermissible challenge against the weight given by the Judge to various factors he has considered in the balancing exercise that led him to exercise his discretion in the way he did. R3 to R5 have simply failed to identify any valid grounds to challenge the Judge’s exercise of discretion.

49.  For completeness, Mr Barlow relied on section 14AA(4)(b) and argued that it is in the interest of justice for the proposed appeal of R3 to R5 to be heard. However, the respective skeleton arguments of R3 to R5 have not explained why that is the case. Accordingly, we refuse to grant leave on the alternative basis of s.14AA(4)(b).

50.  For the above reasons, we do not consider that any of the intended grounds of appeal advanced by R3 to R5 disclose any grounds with reasonable prospects of success or that there are any other reasons in the interest of justice why the appeal should be heard.

51.  All of the proposed grounds of appeal have been considered by the Judge. In this renewed application, Mr Barlow did not engage with the reasons given in the Leave Decision for rejecting the proposed grounds of appeal.

D2.  Intended appeals by R6 and R7

52.  R6 and R7 are represented by Mr Toby Brown and Mr Jeremy Yau. They advanced two proposed grounds of appeal before this court[38].

53.  The first ground of appeal is that the Judge had failed to consider the effect of the orders made against the other respondents when conducting the balancing exercise in respect of R6 and R7[39]. This argument was only raised for the first time before the Judge when R6 and R7 sought leave to appeal[40].

54.  The crux of Mr Brown’s argument is that, in making the orders against the other respondents (in particular R2, who has not appealed against the Order), the Liquidators have an alternative source to obtain the information and documents they need, and this is a matter that the Judge should have taken into account in exercising his discretion in determining whether any orders should be made against R6 and R7[41].

55.  The Judge has dealt with a similar argument raised by R1, R2 and R8. R1, R2 and R8 argued before the Judge that R6 and R7, as the ex-directors of the Company, should be best placed to provide the information and documents sought and they should be the “first port of call”[42].

56.  In rejecting that argument, the Judge adopted the following dicta of Slade J in In re Castle New Homes Ltd [1979] 1 WLR 1075 at 1093 in determining how the availability of alternative sources of information or documents would affect his exercise of discretion:

“The second principal reason advanced by the banks as to why the court should not exercise its discretion by making an order pursuant to section 268, at least at the present time, is that the liquidator has not yet exhausted all the possible alternative sources of information available to him in relation to the principal questions which concern him. While not contending that there is any obligation in law on the liquidator to exhaust alternative sources, the banks have submitted that failure to do so is material to the exercise of the court’s discretion and that, where there is a possibility of oppression, the section should not be invoked unnecessarily before all the other ordinary means of obtaining information have been deployed. The examination, therefore, it is said, should at least be postponed until these alternative sources have been fully tapped. I do not think that any authority was cited to me which specifically establishes the proposition that the court will be less willing to make an order under section 268 when it is aware of the alternative sources of information available to a liquidator which he has not entirely exhausted. Nevertheless, I accept that this could be a relevant factor, at least in a case where the person against whom the order was sought demonstrated to the court that (a) there existed alternative sources available to the liquidator, which would afford the information which he sought; (b) he could readily obtain all such information from these sources, without incurring trouble or expense appreciably greater than would be incurred in the desired examination; (c) he had not chosen to avail himself of such alternative sources.”

57.  Mr Brown submitted that the Judge did not characterise this ground of appeal accurately in calling it a “first port of call” argument. His contention is not about whether the Liquidators must exhaust all avenues of information first, but rather it is about the reasonable needs of the Liquidators. So once the court determined that the information the Liquidators seek can be provided by R2, it would be unnecessary for them to seek the same information from “multiple sources”. He contended it is a question of general importance how the reasonable requirements are impacted by “multiple examinees”.

58.  As we see it, the fact that there may be alternative sources of information does not necessarily mean that the court should be less willing to make an order against a particular respondent in circumstances where it could not be demonstrated that the Liquidators could readily obtain all the documents and information they reasonably require through these alternative sources, without incurring trouble or expense appreciably greater than would be incurred.

59.  There is force in Mr Lam’s submission that R6 and R7’s argument necessarily involves a number of speculations including speculations on (1) the extent of information the Liquidators would have gathered from their investigations by an unknown future point in time; (2) what questions the Liquidators would ask each respondent; (3) what answers that other respondents may give in those future examinations. All this goes to show it is by no means clear that the Liquidators could readily obtain the information they reasonably require through alternative sources. And given the respondents’ lack of co-operation to date, there is no or little room for assuming that the Liquidators’ reasonable need for information or documents from R6 and R7 would significantly change.

60.  Further, as the Judge had rightly observed, the submission of R6 and R7 is incompatible with the undisputed principle that the case for making an order against a former officer is usually stronger than in respect of a stranger who owes no fiduciary duties to the Company: Re Kong Wah Holdings Ltd (2006) 9 HKCFAR 766 at §30 per Lord Millett NPJ. It is wrong in principle to suggest that no order should be made against the former directors of the Company simply because there are alternative sources of information which may potentially enable the Liquidators to obtain the information they reasonably require.

61.  The Judge is right in observing that it would be difficult and not practicable to draw qualitative distinctions between the different respondents (R1, R6, R7 and R8 are all defendants in HCA 57 of 2018)[43], and to do so would be inconsistent with the summary nature of the power which the court exercises under section 286B of Cap 32: In re British & Commonwealth Holdings No. 2 [1992] Ch 342, at 392H-393B; In re New China Hong Kong Group Ltd [2005] HKCFI 34 at §5.

62.  For the above reasons, we do not see any merit in the first proposed ground of appeal, which is a challenge to the Judge’s exercise of discretion.

63.  The second proposed ground of appeal is that the Judge failed to limit the scope of questioning to areas which would not expose R6 and R7 to liability. Mr Brown criticised the Judge for failing to give sufficient regard to how the scope of the Order could be limited as against R6 and R7 to the extent possible, and/or how safeguards could be put in place to minimise the oppression to them[44].

64.  This is essentially a challenge to the Judge’s exercise of discretion based on his conclusion that any oppression which may be caused to R6 and R7 was outweighed by the reasonable needs of the Liquidators[45]. The Judge had considered the question of oppression in exercising his discretion in granting the Orders, it is not for us to interfere even if we may take a different view as to the weight to be assigned to the oppression which may be caused to R6 and R7. There is no merit in the second ground of appeal.

65.  For the above reasons, we do not consider the proposed grounds of appeal advanced by R6 and R7 have any reasonable prospects of success, nor do we think there is any other reason in the interest of justice why the appeal should be heard.

D3.  Intended appeal by R8

66.  R8 is represented by Mr Victor Dawes, SC and Mr Danny Tang. Mr Dawes has put forward five proposed grounds of appeal before this court[46].

67.  Under the first ground, Mr Dawes submitted that the Judge erred in accepting the Liquidators’ evidence that they were still under an open mind/in the dark as to (1) whether the Impugned Transactions were wrongdoings against the Company; (2) what the viable claims are; (3) against whom the claims should be brought; and (4) who were the controlling minds behind the Impugned Transactions[47].

68.  As to (1), the Liquidators do not have the books and records of the Company, and are unable to understand the commercial rationale (if any), the mechanics and the persons involved in the Impugned Transactions[48]. It is open to the Judge to accept that, whilst the Liquidators are able to come to certain preliminary views about the Impugned Transactions[49], the Liquidators are still under an open mind as to whether the Impugned Transactions constituted wrongdoings against the Company, and who should be liable even if the transactions were wrongdoings.

69.  As to (2), in view of the paucity of documents and information available, the Liquidators have included all plausible causes of action and named 66 defendants in the Protective Writ to prevent the Company’s claims from become time-barred, precisely because the Liquidators are not in a position to come to an informed decision as to what causes of action should be vigorously pursued and against whom[50]. The Judge was entitled to accept the Liquidators’ evidence that they consider themselves in the dark as to what are the viable claims that should be pursued and against whom. We note that similar views were expressed by DHCJ Le Pichon and the Court of Appeal in dismissing R3’s application to set aside the Protective Writ[51].

70.  As to (3) and (4), Mr Dawes does not suggest that the Liquidators have sufficient information to determine those questions and we do not see how it could be said that the Judge erred in accepting the Liquidators’ evidence in this regard.

71.  To the extent it is argued that (3) and (4) are not information that the Company (if not wound up) would normally have and that this should be taken into account, we fail to see how this could be a significant factor that would affect the analysis or the balancing exercise. Simply put, this case is not one where the Liquidators already have as much information as the Company would have had (if it had not become insolvent), but rather one where the Liquidators are faced with a paucity of documents and information by reason of the removal of the Company’s books, accounts and records away from Hong Kong. It is difficult to see how this argument could affect the conclusion reached by the Judge at §130 of the Judgment that the balance comes down in favour of the Liquidators.

72.  Mr Dawes seeks to draw an analogy of the present case with Re China Medical Technologies Inc. [2016] 2 HKLRD 962[52]. The question in that case was whether the liquidators had sufficient information to decide whether to proceed against specific banks after investigations by the liquidators suggested that the company’s management had misappropriated the company’s assets by transferring away sums in excess of US$355 million purportedly in exchange for the acquisition of medical technology. Harris J refused the liquidators’ application as he found that the liquidators had enough materials from the bank to make an informed decision whether to proceed with their claims against the banks and that to allow the application would allow the liquidators to assess in a very direct way the strength of the banks’ defence.

73.  In our view, the analogy which Mr Dawes seeks to draw is not apt because the facts of the two cases are materially different. The liquidators in Re China Medical Technologies Inc. had already been provided with considerable information by the banks which would allow them to assess whether or not to proceed, and weigh up any claim asserted by the banks that they took reasonable steps to comply with the regulatory guidelines and their own internal protocols to ensure that so far as possible the banks were not used as conduits for unlawful money transfers. It was in that context that Harris J concluded that the liquidators had enough materials to bring a claim against the banks. The present case is a far cry from Re China Medical Technologies Inc. The Liquidators would need to reconstitute the knowledge of the Company as they were not provided with the books and records of the Company and the Company’s former officers and other persons previously involved in the Company’s affairs have not provided any meaningful assistance to them.

74.  All in all, we do not see any sufficient basis to interfere with the Judge’s evaluation of the evidence. He had taken into account all the legal and factual points of R8 on the alleged sufficiency of the Liquidators’ knowledge and information about the Impugned Transactions. No error has been identified. The Judge was entitled to take those views expressed by him at §§102(1) and (2) of the Judgment.

75.  Under the second ground, Mr Dawes submitted that the Judge erred in finding that the Liquidators have not settled upon suing R8 for accessory liability. He criticised this as being “unrealistic” given the Judge’s finding that (1) the Liquidators had committed to sue the Company’s directors; and (2) HEC Capital and HIGL were likely to have been involved in the same scheme. This is another challenge to the Judge’s evaluation of the evidence[53].

76.  The relevant part of the Judgment is at §102(5), which reads as follows:

“… I certainly accept that R8 is a person on the Liquidators’ radar and through the production/examination orders, the Liquidators may gain knowledge about R8’s involvement. This is an element of oppression that I have to place in the weighing balance. On the other hand, I do not think that the Liquidators can readily infer from the materials so far available that R8 must have actively participated in the Impugned Transactions. In other words, I cannot conclude that the Liquidators have settled to sue R8 for accessory liability of ‘fraud or dishonest assistance’. Furthermore, there a [sic] simply no basis to sue R8 for ‘knowing receipt’ as there is no evidence or allegation of R8 personally receiving any of the Dividend, Asset Transfer and Receivable Assignments.”

77.  As explained by the Judge, the Liquidators are still in the dark as to who were the controlling minds behind the Impugned Transactions and who actually participated in the planning and the execution of the scheme. The extent and degree of R8’s involvement and knowledge in relation to the Impugned Transactions is also unclear. As such, we think that the Judge was entitled to come to the view that the Liquidators cannot readily infer from the materials so far available that R8 must have actively participated in the Impugned Transactions or that the Liquidators have settled upon suing R8 for accessory liability of “fraud or dishonest assistance”. This is not a valid ground of appeal.

78.  Under the third ground, which should be considered with the second ground, Mr Dawes submitted that the Judge erred in refusing to treat R8 as a “third party” when assessing the issue of oppression[54].

79.  With respect, we are unable to accept this submission.

80.  Having concluded that HEC Capital and HIGL were intricately connected to the Impugned Transactions and that R8 was a director of HIGL (prior to the Reorganisation) and a director of HEC Capital (after the Reorganisation), the Judge stated at §130(4) of the Judgment that he does not regard R8 as a “third party”. We think that he was right to do so.

81.  The Judge plainly appreciated that R8, though a former director of the Company, was not a director of the Company at the relevant time of the Impugned Transactions. He refused to refer to R8 as a “third party” to highlight the fact that R8 should not be so regarded “insofar as the events in question are concerned”[55]. This is a view that the Judge was entitled to take based on his evaluation of the evidence, and he was entitled to conduct the balancing exercise on that basis.

82.  Under the fourth ground, Mr Dawes submitted that the Judge erred in principle by holding that the various alternative means of information were not less oppressive means and consequently giving little weight to this factor. He argued that the alternative means of information are less oppressive because they involve (1) the Company’s fiduciaries (as opposed to third parties) which should be the first port of call; or (2) the production of documents (as opposed to private examination) which is less oppressive. This is essentially a rerun of the “alternative source”/ “first port of call” argument advanced by R8 before the Judge[56].

83.  Dealing with point (2) first, the Judge rightly considered and applied the test in In re Castle New Homes Ltd (supra) at 1093 in determining how the availability of alternative sources of information should affect his exercise of discretion[57]. The Judge considered those alternative means of information put forward by R8 and did not regard this to be a weighty factor, for the detailed reasons set out in §124 of the Judgment. He was not satisfied that those alternative means of information would readily enable the Liquidators to obtain such information they would reasonably require and therefore decided to place little weight on these matters[58]. We do not see any error in the Judge’s approach or in his evaluation of the evidence.

84.  As to point (1), the Judge observed at §124(7) of the Judgment that:

“… R6, R7, R9 and Enerchina are all defendants in HCA 57 of 2018. Seeking production/examination orders against one or the other would inevitably involve some element of oppression. Although the nature and degree of oppression may differ, it is in my view difficult and not practicable to draw qualitative distinctions between them. Suffice to say that I am far from being satisfied that these so-called alternative means of information are necessarily less oppressive.”

85.  We do not think the Judge can be faulted for stating that he was “far from being satisfied that these so-called alternative means of information are necessarily less oppressive”. As stated above, the Judge observed that R8 should not be treated as a “third party”, given that R8 was a director of a number of entities which were related to the Company and were intricately connected to the Impugned Transactions. The Judge also observed that R8 is roughly in a similar position as R6 and R7 given that R6, R7 and R8 all “held different positions in companies within the Group as well as acted as the Company’s directors during different periods”[59]. He was entitled to come to this view.

86.  As such, we fail to see how the Judge’s observation that it would be quite difficult and not practicable to draw qualitative distinctions between R6, R7, and R8 could be said to be wrong. For the same reason, and in view of the position assumed by R8, it would be too simplistic and wrong to say that it is necessarily more oppressive for an order to be made in respect of R8 simply because he was not a director of the Company when the Impugned Transactions took place.

87.  It seems to us that this proposed ground of appeal is nothing more than a challenge to the weight the Judge has given to the factors he had considered in the balancing exercise. It has not been demonstrated that his exercise of discretion was plainly wrong or that it fell outside the generous ambit of reasonable disagreement. There is no merit in this ground.

88.  Under the fifth ground, Mr Dawes submitted that the Judge erred in ordering production of documents even though R8 had already sworn on oath he does not possess the relevant documents. This is, in essence, a repetition of the futility argument which the Judge had rejected[60].

89.  When the courts consider whether an order for production of documents should be made, it is for the respondent to satisfy the court that the documents do not exist; it is not enough that the documents may not exist, or even that they probably do not exist: Kong Wah Holdings Ltd at §§59-61, per Lord Millett NPJ.

90.  It was open to the Judge to examine the reasons given by R8 to see whether or not ordering production against him is necessarily futile. We agree with Mr Lam’s submissions that the potential examinee’s affidavit evidence is not conclusive and that the Judge did not have to accept R8’s affidavit evidence at face value.

91.  The Judge rejected R8’s explanation and held that he was not satisfied that ordering production against him is necessarily futile for the reasons set out at §126 of the Judgment. We do not see any basis to interfere with the Judge’s evaluation of the evidence or his conclusion.

92.  For the above reasons, we do not consider any of the proposed grounds of appeal advanced by R8 would have any reasonable prospect of success. We also do not see any other reason in the interest of justice that the appeal should be heard, nor did Mr Dawes attempt to argue otherwise.

E.  Disposition

93.  In conclusion, we do not find any of the proposed grounds of appeal advanced by R3 to R5, R6 to R7, and R8 to be reasonably arguable. We refuse to grant leave to appeal against the Judgment and the Order. We make a further order under Order 59 rule 2A(8) that no party may under rule 2A(7) request the determination of this court to be reconsidered at an oral hearing inter partes, as these applications are wholly without merit.

94.  In light of our refusal to grant leave to appeal, we also dismiss the applications of R3 to R8 for stay of the examination of the respondents under §2 of the Order.

95.  We order R3 to R8 to pay the Liquidators’ costs of their respective applications. We have considered the Liquidators’ statements of costs for summary assessment. The hourly rates of the fee earners of the Liquidators’ solicitors are excessive, and we reduce them to HK$5,800, HK$4,500 and HK$3,200 respectively. Otherwise, we make no deduction for the time spent and counsel fees.

96.  The costs order and summary assessment are orders nisi. Any application for variation must be made within 14 days of the handing down of this judgment.