RE JOY RICH DEVELOPMENT LTD

HCCW 146/2013

[2022] HKCFI 2584

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 146 OF 2013

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D E C I S I O N

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Introduction

1.  I have before me two applications:

(1) A summons dated 12 August 2021 issued by the Liquidators of the Company pursuant to section 200(3) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap. 32 (“Ordinance”) seeking an order they take over the defence of a mortgage action (“Liquidators’ summons”) brought by Revelry Gains Limited (“RG”);

(2) A summons dated 5 January 2022 brought by the 1^st Applicant, Chen Muhua (“Winky Chan”) and the 2^nd Applicant, her sister Chan Yuen Wa (“CYW”) appealing a rejection by the Liquidators of their proofs of debt (“Proof summons”). Winky Chan and CYW are respectively the 1^st and 2^nd Respondents to the Liquidators’ summons. I shall refer to them collectively as the “Chen sisters”.

2.  The Company was wound up on 7 August 2013 on the petition of CYW. Lui Chau Yuet and James Wardell (“Previous Liquidators”) were appointed as liquidators. They were removed by me on 25 February 2019 on the application of two creditors: Chinese Strategic Holdings Ltd (“Chinese Strategic”) and Fameway Finance Ltd (“Fameway”). My Reasons dated 3 June 2019 sets out in detail the background to the liquidation and its progress up to February 2019. It is not necessary to repeat what is said in my earlier Reasons. I would, however, emphasis the following matters.

3.  The Company has one asset, a valuable house at 28 Middle Gap Road (“House”), which increased substantially in value between the date of the winding up and 2019. In my Reasons of 3 June 2019 I state that the evidence before me at that time suggested it was worth HK$750 million the House having been purchased in 2008 for HK$110 million. The Previous Liquidators had not sold it. I was critical of the Previous Liquidators’ failure to do so and their conduct generally of the liquidation, which appeared to have been conducted in a way conducive to increasing costs rather than concluding the liquidation. On 29 May 2017 DHCJ Kent Yee made an order allowing the Chen sisters to defend the mortgage action brought by RG in HCMP 430/2013. The order was in the following terms:

“(a) The Applicants be solely responsible for their costs and any adverse costs orders for defending the Action in the name of the Company.

(b) A deed duly executed by the Applicants be provided to the Liquidators within seven days indemnifying the Company against:

(i) any future costs, charges and expenses in connection with or arising out of the Action, to be taxed in the liquidation if not agreed;

(ii) any post-liquidation interest on the debt secured by the Deed of Charge dated 26 January 2011 for such period as the court may deem just and appropriate.”

4.  The Previous Liquidators had chosen not to defend the mortgage action due, they said, to lack of funds and the failure of the Chen sisters to provide them with documents that they needed to deal with it. Although it is not entirely clear from the Deputy Judge’s decision it appears that the Previous Liquidators whilst opposing the application were not vigorous in their opposition to the Chen sisters taking over the mortgage action. I have during previous case management hearings expressed some reservations about the principles that the Deputy Judge considered were relevant to the application, and the potential complications that might be caused to the conduct of the liquidation as a consequence of allowing some creditors to have conduct of proceedings brought by other creditors of the Company. That having been said the order that was made, although uncommon, and one I think that needs to be granted with caution given that it puts a creditor in charge of one component of a liquidation and creates a risk that this interferes with the general conduct and management of the liquidation, is one that is on occasions made. This is explained in McPherson’s Law of Company Liquidation (5^th ed.) at [7-083].

“If a liquidator either believes that an action is too risky to pursue or he or she does not have sufficient funds, then despite the fact that the general principle is that when a company is in liquidation the person in whom the authority to bring proceedings on the part of the company is vested is the liquidator, a creditor or member who thinks that the action has merit and should be prosecuted, may apply to the court and seek either permission to proceed on behalf of the company or an order directing the liquidator to proceed. The courts have power to accede to the former type of application under their general powers, the use of such power having a long lineage and being supported by high authority. If the former application is made then the applicant must be ready to accept all of the risks connected with the action. If this is the case then it is of no moment that the action would not be beneficial for the creditors and members of the company. The only real barrier to proceeding is, as with all actions, namely that the action must not be vexatious or oppressive.”

5.  The House has still not been sold, although the Chen sisters have agreed that the Liquidators should do so. The mortgage action is still not ready for trial. The Chen sisters intend, apparently, to add as parties Ben Lau and Daniel So in order that the dispute between the creditors can be decided in one go. The Company’s creditors consist of two camps: (A) the Chen sisters and (B) Fameway Finance Limited (“Fameway”), RG and Chinese Strategic Holdings. The second camp is associated with Ben Lau. Winky Chan and Mr Lau had a romantic relationship at the time the House was purchased and it was their intention to live there. The relationship ended about the end 2011. The disputes between the two camps are central to the progress of the liquidation. It is a creditor, whose name had not been provided to the Chen sisters prior to the hearing (Mr Wong told me at the hearing that it is Chinese Strategic), from the camp associated with Mr Lau who is financing the Liquidators.

6.  As I have said the Company owns one asset: the House. The disputes concern the funding of its acquisition. Their resolution will determine the amount available for unsecured creditors and its sole shareholder, CYW, and explains the Chen sisters’ interest in contesting RG’s claim. Although more relevant to the Proof summons it is helpful in understanding the commercial dynamics of the disputes I refer to in this decision, to understand the financial implications of acceptance or rejection of the different camps’ claims. The following tables are taken from the Chen sisters’ skeleton. The figures may prove not to be accurate, and turn on the sale price of the House, but they vividly illustrate the reasons for the disputes:

The debts of Ben Lau’s Camp are upheld, and the debts of the Chen sisters are rejected

	Creditors’ Claims	Recovery on pro rata basis
Revelry Gains (on its case, as at 10.12.2021, including post-liquidation interest[1])	HK$528,332,898.21	HK$528,332,898.21 (as secured creditor)	Ben Lau’s Camp’s share: HK$697,694,612.6
Fameway (on its case, as at 10.12.2021, including post-liquidation interest)	HK$149,350,669.42	HK$149,350,669.42 (as secured creditor)
Chinese Strategic	HK$20,011,045	HK$20,011,045
Winky Chan	N/A	N/A	Chen Sisters’ share:  HK$52,305,387.37
YW Chan	N/A	Dividend of $52,305,387.37 as sole contributory
Total		HK$750,000,000

The debts of Ben Lau’s Camp and debts of the Chen sisters are both upheld

	Creditors’ Claims	Recovery on pro rata basis
Revelry Gains (on its case, as at 10.12.2021, including post-liquidation interest)	HK$528,332,898.21	HK$528,332,898.21 (as secured creditor)	Ben Lau’s Camp’s share: HK$689,480,653.8
Fameway (on its case, as at 10.12.2021, including post-liquidation interest)	HK$149,350,669.42	HK$149,350,669.42 (as secured creditor)
Chinese Strategic	HK$20,011,045	HK$11,797,086.15
Winky Chan	HK$101,647,589.04	HK$59,924,175.12	Chen Sisters’ share:  HK$60,519,346.24
YW Chan	HK$1,009,571	HK$595,171.12
Total	HK$800,351,772.7 (exceeds HK$750,000,000)	HK$750,000,000

The debts of Ben Lau’s Camp are rejected, and the debts of the Chen sisters are upheld

	Creditors’ Claims	Recovery (full)
Revelry Gains	N/A	N/A	Ben Lau’s Camp’s share: HK$20,011,045
Fameway	N/A	N/A
Chinese Strategic[2]	HK$20,011,045	HK$20,011,045
Winky Chan	HK$101,647,589.04	HK$101,647,589.04	Chen Sisters’ share:  HK$729,988,955
YW Chan	HK$1,009,571	HK$1,009,571, plus dividend of $627,331,895 as sole contributory
Total		HK$750,000,000

7.  Self-evidently, if the House is worth substantially less than HK$750 million it makes a considerable difference to the Chen sisters and the other creditors. Fameway has agreed with the Liquidators that the House be marketed at HK$450 million. Understandably given the earlier valuation of HK$750 million, the Chen sisters are concerned at the prospect of the House being sold at that price at which the Liquidators propose to market it.

The Liquidators’ Summons

8.  The Liquidators’ summons seeks directions under section 200(3). The Liquidators argue that the Deputy Judge’s order was made on the basis that the Liquidators could not, or were not able to, carry out their function in respect of the mortgage action. This situation has now changed and, therefore, the Liquidators should be given conduct of the mortgage action, because it is they who are responsible for the conduct of the liquidation and having reached the view that they should defend the mortgage action, the court should accept their view and accede to their application.

9.  It is trite that liquidation is a class remedy and is to be conducted in the best interests of the general body of creditors[3]. The powers of a liquidator include, subject to the sanction of the court or the committee of inspection, commencing or defending proceedings brought in the name of the company[4]. The court will only interfere with a liquidators’ decision in limited circumstances.

10.  In [21] of Re A Company (Liquidators: Cowley and Lui)[5] I explain the role of liquidators in modern common law insolvency regimes:

“The extent to which it is the intention of modern common law insolvency regimes that liquidators are so far as possible left to conduct liquidations without close supervision by the court is demonstrated by the court’s approach to attempts to interfere with a liquidator’s decision. The court will not do so unless it can be demonstrated that the liquidator has not acted in good faith, made an error of law or principle or the decision is perverse in the sense of falling outside the range of decisions a liquidator having proper regard to the relevant principles might make [6]. A liquidator’s decision is broad and intentionally so. It follows from this that a decision which comes within this broad discretion, particularly if the decision is commercial in character, not only does not require the approval of the court, but also generally will not be amenable to a direction approving it.”

11.  The court is slow to interfere with a liquidator’s decision. In [11]–[12] of Re Hong Kong Universal Jewellery Limited[7] I explain:

“11. The other principle that is relevant is that the court is slow to interfere with a liquidator’s decision. This is referred to in [21] of the above quote from Re A Company. Additional local authority is to be found in the judgment of Cheung JA in Allied Ever Holdings Limited v Li Shu Chung[8]:

‘5.2(4) In reviewing the liquidators’ exercise of their discretion under section 200(5) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32), the court will interfere only in two categories of case. “[First] to bring itself within this sub-section, an applicant has to show exceptional behaviour e.g. that the liquidator ‘has not exercised his powers in good faith or has acted in a way in which no reasonable liquidator could have acted’ … The second category arises when in the course of his administration the liquidator is called upon to give a ruling or to make a decision which directly affects a party’s rights. … They include such matters as decisions upon the voting rights of creditors or contributories and upon the admission and rejection of proofs. It is significant that when considering and ruling upon such matters the liquidator must act even-handedly as an impartial neutral” (Eagle Queen Co Ltd v First Bangkok City Finance Ltd [1989] 2 HKLR 71 (CA), per Hunter JA [74]). In considering whether to review a decision of a liquidator a court must bear in mind the fact that it is well established that the commercial decisions of liquidators are accorded great weight (McPherson & Keay, [9-115, 9-116]; Judd v Brown [1999] 1 FLR 1191 (CA), 1198).’

12. I note that section 200(5), which allows a person with adequate interest to apply to court to reverse a decision made by a liquidator, is in Division 2 of Part 5 of the Ordinance, which applies to a winding up by the court. However, these principles are of general application to any consideration of a liquidator’s decision or conduct. It follows that a contributory cannot interfere with a bona fide decision, which falls within the range of decisions that a liquidator might make. The fact that the contributory thinks there is a better decision that might be made is not a ground for challenging a liquidator’s decision.”

12.  The Liquidators submit that consistent with these principles the Court should accede to their application and make a direction in these proceedings that they take over conduct of these proceedings.

13.  The Liquidators make a number of specific points about the mortgage action itself and the position of the Chen sisters. My understanding is that the Liquidators are sceptical of the Company’s defence to the claim, but it does not seem to me that the merits are in themselves relevant to the application and it is not necessary to explore RG’s claim and the Company’s defence. What is more relevant is the consequences of the Liquidators’ rejection of the Chen sisters’ proof of debt. If I uphold the Liquidators’ decision it follows that they are no longer creditors. However, for reasons I explain later in this decision I will admit their proofs and the issue falls away. In any event it does not seem to me that rejection would necessarily be fatal as the 1^st Respondent (Winky Chan) is the sole shareholder of the Company and, therefore, has sufficient interest in the liquidation to continue to represent the Company[9]. The position would have been different I apprehend if she had not.

14.  The Chen sisters’ principal ground of opposition to the Liquidators’ application is that it is an abuse of process as it involves setting aside an order made by a judge of co-ordinate jurisdiction on the merits. The following principles are relevant:

(1) As a general rule, except by way of appeal, no court, judge or master has power to re-hear, review, alter or vary any judgment or order after it has been entered either in an application in the original action or matter or in a fresh action brought to review the judgment or order. The object of the rule is to bring litigation to finality. See Sanyo Electric Trading Co Ltd v Leung Kwok Hing[10].

(2) If a party seeks to re-litigate a matter which has been determined in a previous interlocutory decision by taking out a second application, the second application is liable to be dismissed by the court, on the ground that it constitutes an abuse of process. However, the court may conclude that there is no abuse of process and it will not be unjust or unreasonable to allow the second application to be heard:

(i) if the ruling on the first application was not based on the merits of the issue but on a technical objection;

(ii) if upon the first application the applicant had failed to prove essential facts by mistake or inadvertence;

(iii) if there is new evidence that seriously justifies reconsideration of the issue; and

(iv) if there is a material change of circumstances of a non-evidentiary nature.

See Chu Hung Ching v Chan Kam Ming[11].

(3) The Previous Liquidators and the Liquidators are privies in title and interest, both acting in the capacity of liquidators of the Company. Privity can involve a relationship of “blood, title or interest”: see China North Industries v Ronald R.C. Chum[12].

15.  It is clear from the Deputy Judge’s decision that the application was opposed and that he made a decision on the merits. It seems to me that it is now too late to ask the court to overturn that decision unless it can be shown that there is a material change of circumstances that justifies it. In my view there is not. The fact that there has been a change of liquidators is not of itself a justification. It is difficult to discern a specific reason advanced for overturning the Deputy Judge’s decision other than the change in identity of the liquidators and also a desire on the part of the new Liquidators to assess the merits of the Company’s defence and decide whether or not to withdraw it. I do not see this as sufficient reason, particularly as the implication of the Liquidators’ evidence and the arguments advanced on their behalf by Mr Wong is that the Liquidators’ concerns about the merits of the Company’s Defence are similar to those advanced before the Deputy Judge.

16.  In the circumstances I do not think that there is a legitimate basis to overturn the Deputy Judge’s decision and I will dismiss the Liquidators’ application. That takes me to the Chen sisters’ application to overturn the Liquidators rejection of their proofs of debt.

Proof of Debt

17.  It is the Chen sisters’ case that the House was financed by Winky Chan. In [39]–[41] of her witness statement filed in the mortgage action and dated 18 November 2021, she explains how she says she financed the purchase of the House.

“39. In or about October 2008, at the introduction of a property consultant of FPP Savills (Hong Kong) Limited called David So (who is the nephew of So Chi Ming, Stephen (‘Stephen So’), a close business partner of B Lau as further explained below), B Lau became aware of the intended sale of the Property. He wanted to purchase the Property for us to live together. He however suggested that the Property be purchased through a corporate vehicle instead of under our own names.

40. As such, by a formal sale and purchase agreement dated 22 December 2008 and an assignment dated 6 March 2009, Joy Rich purchased the Property at a consideration of HK$110,000,000. I financed the purchase of the Property by paying the initial deposit of HK$10,000,000 through Upper Run, and by injecting money into Joy Rich for the purpose of paying off the mortgage loan of HK$100,000,000 from Eternal Rich China Limited (‘Eternal Rich’) taken out on 6 March 2009. Eternal Rich is a company set up by a lawyer called So Hop Shing. The mortgage loan was repayable by 3 instalments: (1) HK$10,000,000 by 6 September 2009; (2) HK$10,000,000 by 6 March 2010; and (3) HK$80,000,000 by 6 September 2010 (the deadline for the last instalment was subsequently extended to January 2011 by agreement, which was paid on 21 January 2011).

41. As a matter of fact, according to the ledger account ‘CURRENT ACCOUNT—Winky Chan’ with Account Code 3007 (‘my Current Account’) produced by the Former Liquidators in the Winding Up Proceedings, I injected; (1) HK$14,000,000 on or before 31 March 2009; (2) HK$55,800,000 from 30 April 2009 to 31 March 2010; and (3) HK$21,000,000 from 29 April 2010 to 7 July 2010, and (4) HK$25,817,589.04 from 11 April 2011 to 26 August 2011 into Joy Rich for the purpose of repaying the mortgage loan owed to Eternal Rich.”

18.  It is for these sums that Winky Chan has submitted a proof for HK$131,956,197.06, which was rejected by the Liquidators on 17 December 2021. On the same day the Liquidators also rejected the proof of her sister, CYW, which is for the more modest sum of HK$1,009,571.28. The Previous Liquidators had accepted that the Chen sisters were owed substantial sums and admitted the proofs for voting purposes at the first meeting of creditors. They had not, however, ascertained the precise sums that they were willing to accept were due to them. Mr Wardell, one of the Previous Liquidators, says this in [8] and [13] of his 6^th affidavit:

“8. At the time of the first creditors meeting dated 29^th October 2013 (the ‘First Creditors’ Meeting’), the proof of debt of Madam CMH for voting purposes was admitted in full. The claim of Madam CMH has been the subject of considerable investigation by the Liquidators since, and whereas I would state that Madam CMH is unlikely to have her full claim for HK$131,956,197.06 admitted, I can state with certainty that she would certainly have a valid proof of debt for a considerable sum.

…

13. The Liquidators have been investigating the proof of debt of Madam CYW, and again, although the Liquidators have not adjudicated on the proofs of debt, I can say that although the claim for HK$1,009,571.28 is unlikely to be maintained, Madam CYW will certainly be entitled to claim in the Company’s liquidation for an amount, the exact sum being uncertain.”

Relevant legal principles

19.  Under rule 95 of the Companies (Winding-up) Rules (Cap 32H), a dissatisfied creditor can apply to vary or reverse the decision of a liquidator in respect of a proof. The relevant principles were summarised by Coleman J in Re Fortune King Trading Ltd[13] at [20]:

“(1) An appeal under r.95 against a liquidator’s adjudication is a hearing de novo, at which the Court may confirm, reverse or vary the liquidator’s decision.

(2) The purpose of the hearing is for the Court to determine to what extent the applicant should be allowed to rank as a proving creditor. Therefore, the Court is bound to decide the rights of the applicant in the light of all of the evidence which is before the Court, and not merely to express a view as to whether the liquidator was right or wrong in rejecting the proof on the evidence then available to the liquidator at the time he rejected it.

(3) A liquidator who defends his decision to reject a proof is no longer acting in a quasi-judicial capacity, but is cast in the role of an adversary.

(4) The onus of proof is on the applicant to show on a balance of probabilities that a real debt is due to him.

(5) The requirement for a liquidator or trustee in bankruptcy in admitting or rejecting a proof is to require some satisfactory evidence that the debt on which the proof is founded is a real debt, and this is a relatively low threshold. Nevertheless, the liquidator or trustee is entitled to go behind mere form so as to get at the truth.

(6) On an appeal against the rejection of a proof, the applicant’s burden is to prove a real debt, to be established by credible evidence.

(7) Hence, there may be cases, for example where probative evidence is scarce, where the incidence and standard of proof has some significance. The burden remains with the applicant to establish proof of the claim on the balance of probabilities on whatever evidence is produced.

(8) The applicant is not entitled to say that his claim should be admitted because this is all the evidence that he has and because the best evidence has been lost or destroyed. Even in such a situation, the burden remains with the applicant to prove his claim on the balance of probabilities on the evidence as is produced.

(9) But the Court is not bound to accept at face value any accounts of a company previously prepared, and is entitled to go behind them to form its own conclusion as to the truth. Even if the accounts in question have been audited, where there is evidence to show that the accounts are or may be inaccurate, or to cast doubt on the way in which the auditor carried out his duties, this will be a factor to take into account.”

20.  As the hearing is de novo, either party is entitled to adduce fresh evidence in support of his case: McPherson & Keay, the Law of Company Liquidation (5^th ed.) at [12-066]. If a liquidator contends that the evidence on oath of a proving creditor on an important factual dispute should be disbelieved, they ought to apply to cross-examine the creditors. If a liquidator decides not to do so, the liquidator is not entitled to invite the Court to disbelieve the creditor’s evidence unless the evidence is of “an incredible or romancing character”: see Fielding V Hunt[14].

Winky Chan’s Proof

21.  The original amount claimed by Winky Chan was HK$131,956,197.06, (which was included in the balance sheet for the year ending 31 March 2012 under “current liabilities” as “Mortgage loans and other creditors”), but which in the light of queries raised by the Previous Liquidators she accepts, for reasons she explains in her 10^th affirmation filed in these proceedings, should be reduced to HK$101,647,589.04. The large number of individual payments that make up this sum were made by six companies. Winky Chan explains in [17] and [18] of her 10^th affirmation why these payments were made:

“17. As can be seen from the documentary records, the monies I injected into Joy Rich (as loans) were paid via the following companies:-

(1) Upper Run Investments Limited (‘Upper Run’);

(2) Rose Bay Group Limited (‘Rose Bay’);

(3) Gorgeous Overseas Limited (‘GOL’);

(4) Famous Lion Group Limited (‘Famous Lion’);

(5) Wisdom First Limited (‘Wisdom First’); and

(6) Star Business Investment Limited (‘Star Business’).

18. As stated in paragraph 14 of my Witness Statement filed in the Mortgagee Action (see exhibit ‘CMH-32’), Upper Run and GOL were gifted by B Lau to me and were legally and beneficially owned by me; and hence they made payments on my behalf. Rose Bay, Wisdom First, Star Business and Famous Lion were companies owned and/or controlled by B Lau (as mentioned in paragraphs 15(5), 15(8), 18(11) and 105(2) of the said Witness Statement), but given my intimate relationship with B Lau at the material time, these companies also made payments to Joy Rich on my behalf. The important point is that none of Upper Run, GOL, Rose Bay, Wisdom First, Star Business, Famous Lion or even B Lau has ever filed any proof of debt against Joy Rich. Further, given the private arrangements between B Lau and me, I verily believe that none of Rose Bay, Wisdom First, Star Business, Famous Lion or even B Lau (not to say Upper Run and GOL) would file any proof of debt at all in any event against Joy Rich.”

22.  The Liquidators take the view that the Company’s audited financial statement is qualified to such an extent that it cannot be relied on as substantiating the amounts owed to Winky Chan. However, as I understand their evidence they accept that the Company received HK$101,647,589.04 and that the underlying evidence demonstrates that of that sum HK$65,710,859.04 came from the six companies. The Liquidators say that they have no evidence connecting Winky Chan with those companies or the balance of HK$35,936,730; although neither the companies nor anybody else have submitted proofs of debt or communicated with the Liquidators in respect of these sums. The Company’s own journal vouchers and the cheque deposit advice show the names of five of these companies (in the case of the journal vouchers) or abbreviations consistent with four of these companies being the payor and also bank statements of GOL and Famous Lion evidencing two payments to the Company totalling HK$5.5 million.

23.  The Liquidators note that a number of the companies are not registered in Hong Kong, but given the prevalence in Hong Kong of using offshore companies it seems to me that this is unremarkable.

24.  The Liquidators have not applied to cross-examine Winky Chan on her evidence.

25.  Winky Chan has been able to produce a significant quantity of documents from a number of the companies (Famous Lion, Rose Bay, Star Business and Wisdom First), which one would not expect her to have unless she had some involvement with them. It seems to me that the circumstances and the evidence adduced by Winky Chan establishes on the balance of probabilities that she is owed HK$101,647,589.04 by the Company. I will make an order in the terms of [1] of the Proof Summons.

CYW’s Proof

26.  The Company’s shareholder’s current account ledger for CYW (“ledger”) opens on 5 December 2008 with a balance owed by CYW in respect of 1 share, namely, HK$1. The final item in the ledger is dated 31 March 2012 and is a repayment to the shareholder and shows a balance owed to CYW at 31 March 2012 of HK$1,009,571.28. This is the amount for which CYW has submitted the proof of debt that has been rejected by the Liquidators.

27.  The Liquidators have produced an account, which adjusts the entries in the ledger. There are two categories of adjustments. The first are reversals (totalling HK$4,716,180) in respect of amounts treated in the ledger as paid by CYW on the Company’s behalf for which they say they have not found sufficient documentary proof substantiating the payments. The second category (totalling HK$3,671,608) are debits in the ledger in respect of sums paid to CYW or for her benefit for which the Liquidators consider there to be insufficient documentary proof that the monies were paid to CYW or for her benefit. This adjustment operates in CYW’s favour. The adjustments result in a balance in the Company’s favour of HK$35,001.

28.  CYW relies on the ledger, which was audited. She says, correctly, that the auditor’s qualification dated 20 February 2013 in respect of the financial statement for the year ending 31 March 2013 only referred to uncertainty about the amount shown in the balance sheet, which was claimed by her sister Winky Chan. The item she claims appears under “current liabilities” for “Amount due to a shareholder” and was not the subject of the auditor’s qualification.

29.  The Liquidators’ reasons for questioning many of the items shown in the ledger are explained in [31.2]–[31.7] of the 3^rd affirmation of Chan Leung Lee. Winky Chan in her 12^th affirmation confirms the accuracy of the ledger, but states in [12] that two items HK$94,300 and HK$800,000 should not have been credited to her sister’s current account, which is why they have not been claimed. It seems to me that the position in respect of CYW’s proof is the same as that in respect of Winky Chan. It is necessary for CYW to prove on the balance of probabilities that the Company owes her the amount claimed. Although, the most straightforward way of doing so is to produce a complete paper trail this is not, as the Liquidators appear to have assumed, essential. If it is probable, as would appear to be the case, that the payments were made for the Company’s benefit and the Company’s sole director is confirming that they should be treated as sums owed to CYW and nobody else is claiming the sums are owed to them, it seems to me that this is sufficient to establish that the amounts claimed are probably due to CYW.

30.  The only other ground of objection to CYW’s claim is reference by DHCJ Le Pichon in a judgment in HCMP 1857/2012 dated 11 September 2014 to which the Chen sisters were not parties to draft management accounts for the Company produced by Daniel So, who is associated with Ben Lau’s camp and had no role in the Company, purporting to show a shareholder owing the Company HK$83 million. The Previous Liquidators concluded the Chen sisters did not owe the Company this sum and I can see no credible evidence for concluding that they do. I will, therefore, make an order in the terms of [2] of the Proof summons.

Costs

31.  I will make a costs order nisi that the Liquidators pay the costs of both summonses forthwith with a certificate for two counsel, such costs to be taxed if not agreed.