RE SUNNI INTERNATIONAL LTD (In Liquidation)

HCCW 121/2013

[2025] HKCFI 2925

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 121 OF 2013

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D E C I S I O N

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I.  INTRODUCTION

1.  By Summons (the “Summons”) filed by the liquidator (the “Liquidator”) of Sunni International Limited (in liquidation) (the “Company”) on 4 July 2024, pursuant to sections 286B and 286C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32) (the “Ordinance”), the Liquidator seeks, against Mr Ip Wai Ching (“Ip”) as the respondent herein:-

“1. By virtue of section 286B of… the Ordinance, IP WAI CHING… (“Ip”), a person known or suspected to have in the person’s possession any property of the Company, do attend before the Court and be examined under section 286C of [the] Ordinance;

2. Ip is required to submit to the Court an affidavit containing an account of his dealings with the Company and information concerning the promotion, formation, trade, dealings, affairs or property of the Company, including but not limited to the followings:-

(a) A A. Lange 18K Gold Watch [the “A Lang Watch”] which was sold to him at a consideration of HK$610,000 pursuant to [the Big Plan Contract as defined below];

(b) A HM1, 18ct Red Gold Watch [the “HM1 Watch”]” which was sold to him at a consideration of HK$1,216,585 pursuant to the Big Plan Contract;

(c) A HM2-CTi Watch [the “HM2 Watch”] which was sold to him at a consideration of HK$506,101 pursuant to the Big Plan Contract;

(d) A sales order of the P&L Club (#0378) which was sold to him at a consideration of HK$378,840 pursuant to the Big Plan Contract;

(e) A motor vehicle being Toyota Alphard 350S Black [the “Toyota Alphard”]… which was sold to him at a consideration of HK$474,565 pursuant to [the Win Harvest Contract as defined below]; and

(f) A motor vehicle Mercedes Benz CL63 AMG Black [the “Mercedes Benz”]… which was sold to him at a consideration of HK$300,000 pursuant to the Win Harvest Contract;

3. Ip is also required to produce any books and papers in his custody or power relating to the Company of the promotion, formation, trade, dealings, affairs or property of the Company and relating to the assets as identified in paragraph 2 hereinabove”.

2.  For convenience, I shall refer to the assets listed out in §2(a)-(f) of the Summons collectively as the “Assets”.

II.  BACKGROUND

3.  The Company was a British Virgin Islands company incorporated as an investment vehicle for four families, namely:-

(1)  The Kao’s family, represented by Mr Kao Cheung Chong Michael (“Michael Kao”) and his son Mr Kao Wai Ho Francis (“Francis Kao”). The Kao family held shares in the Company via Happy Nation Limited (“HNL”), which was held by Asia Pacific Glory Limited (“APGL”);

(2)  The Cheng’s family;

(3)  The Law’s family; and

(4)  The Kui’s family.

4.  The Company held shares in a Hong Kong public listed company named Imagi International holdings Ltd (“Imgai”). The last known sole director of the Company was Francis Kao, who, according to records, resigned on 30 March 2011 and was replaced by Mr Shinichi Kobayashi, deceased (“Kobayashi”). However, Kobayahsi was never made a signatory to the Company’s account maintained with HSBC (the “Company’s HSBC Account”) and its securities accounts while Francis Kao remained one of the signatories, and for the Company’s HSBC Account, he was the only signatory until the winding up of the Company on 15 April 2015.

5.  On 27 July 2015, the Liquidator was appointed.

6.  Upon investigation, the Liquidator discovered evidence that tends to show that Francis Kao and his associates, namely:-

(1)  Win Harvest Enterprises Limited (“Win Harvest”);

(2)  Big Plan Holdings Limited (“Big Plan”);

(3)  Unicorn Animation Studios Ltd (“Unicorn”);

(4)  Famewell Ltd;

(5)  Alex Lo; and

(6)  Michael Kao;

misappropriated substantial assets of the Company involving payments totalling more than HK$345million out of the Company’s bank accounts (the “HK$345 Million Payments”). The apparent misappropriation was the subject of HCA 1884/2018 and HCA 2380/2018 (collectively, the “Misappropriation Lawsuit”). The trial of both actions took place in March 2024 and the judgment is pending.

7.  In the course of the discovery during the Misappropriation Lawsuit, various documents regarding the Company’s HSBC Account were disclosed. From such documents (the “HSBC Documents”), the Liquidator discovered that the HK$345 Million Payment appeared to be related to the purchases of the Watches. In particular:-

(1)  Payment of HK$610,000 by the Company to Right Watch Co Ltd by way of Company cheque jointly signed by Francis Kao and Alex Lo for the A. Lange Watch on or about 4 August 2019;

(2)  Payment of CHF162,000 (approximately HK$1,216,584.60) to MB&F SA by remittance from the Company’s account on 21 September 2009 for the HM1 Watch;

(3)  Payment of CHF66,000 (approximately HK$505,810.80) to MB&F SA by remittance from the Company’s account on 17 November 2009 for the HM2 Watch.

8.  In the Re-Re-Amended Defence of Francis Kao in HCA 1884, in relation to the Watches, he pleaded that:-

“(1) Paragraph 44(a) is admitted. It is averred that:-

(a) The Watches were purchased as items of investment and/or corporate gifts to potential investors and were later transferred to Big Plan (D5) as intra-group transfers as part of the Restructuring Scheme pleaded hereinabove.

(b) The Watches were sold to one Ip Wai Ching on 13^th August 2010. It is averred that the Watches were in the custody or possession of Big Plan (D5) and the control of the Company prior to the aforesaid sale.”

9.  The purported sale of the Watches by Big Plan (an associate of Francis Kao) to Ip was by way of the Big Plan Contract, which was also disclosed in the Misappropriation Lawsuit. It provided:-

“CONTRACT FOR SALE OF GOODS

Agreement made and entered into this 13^th August 2010, by and between [Big Plan]… herein referred to as ‘Seller’, and [Ip]… herein referred to as ‘Buyer’.

Seller hereby agrees to transfer and deliver to buyer, on or before 17^th August 2010, the following goods:

Details per attached Schedule I

[Schedule I
Item Description Unit
(1)	[A Lange Watch] ($610,000.00)	One
(2)	[HM1 Watch] ($1,216,585.00)	One
(3)	[HM2 Watch] ($506,010.00)	One
(4)	Sales Order of The P&L Club #0378 ($378,840.00)	One]

Buyer agrees to accept the goods and pay HK$2,711,435.00 for them in accordance with the terms of the contract.

…

Signed by

(signed)

Big Plan Holdings Limited

(signed)

Mr. Ip Wai Ching”

10.  Besides the transaction in relation to the Watches, the Liquidator discovered from the HSBC Documents that the Company made 11 payments totalling more than HK$6,600,000 to Francis Kao, among which there was a payment of HK$378,840 by cheque (the Subject Payment to Francis Kao), jointly signed by Francis Kao and Alex Lo and cleared on 10 November 2009.

11.  In §38(2) of his Re-Re-Amended Defence in HCA 1884, Francis Kao pleaded:-

“The payment… was used for purchasing the club membership of P&L Club for Big Plan (D5). It is averred that on around 13 August 2010, Big Plan sold the P&L Club membership to [Ip] for HK$378,840, and that Win Harvest (D3) received the sale proceeds and used the same to repay the Company’s shareholder’s loan to it.”

12.  This is Item (4) under Schedule I to the Big Plan Contract.

13.  Despite the above being their defence, neither Francis Lao nor Big Plan gave evidence in support at the trial of the Misappropriation Lawsuit. There is no evidence of any payment by Ip of the amount under the Big Plan Contract, but there is evidence that on 18 August 2010, Win Harvest deposited HK$2,711,435.40 by cheque to the Company, and on the same day, the Company issued a cheque to Unicorn (as mentioned above, an associate of Francis Kao) for the sum of HK$2,700,000.00.

14.  In addition to the Big Plan Contract, on 13 August 2010, Ip also entered into a contract for sale of goods with Win Harvest. The terms were similar, though with respect to different goods:-

“CONTRACT FOR SALE OF GOODS

Agreement made and entered into this 13^th August 2010, by and between [Win Harvest]… herein referred to as ‘Seller’, and [Ip]… herein referred to as ‘Buyer’.

Seller hereby agrees to transfer and deliver to buyer, on or before 17^th August 2010, the following goods:

Details per attached Schedule I

[Schedule I
Item Description Unit
(1)	[Toyota Alphard] ($474,565.00)	One
(2)	[Mercedes Benz] ($300,000)	One]

Buyer agrees to accept the goods and pay HK$774,565.00 for them in accordance with the terms of the contract.

…

Signed by

(signed)

Win Harvest Enterprises Limited

(signed)

Mr. Ip Wai Ching”

15.  In relation to the Toyota Alphard, the documentary evidence discovered by the Liquidator suggests that it is likely that it was with the Company’s funds that Win Harvest (an associate of Francis Kao) acquired Toyota Alphard (HK$402,975) and the Richburg VIP Club Owners Club Membership (HK$212,025), or at least part of them. In relation to the sale to Ip, there is no evidence of payment by Ip to Win Harvest or the Company, although there is evidence of deposit of HK$300,000 by Win Harvest to the Company in September 2010. There is no evidence of transfer of the ownership of the Toyota Alphard. After the Win Harvest Contract, the Mercedes Benz was registered in the name of Cheerco Enterprise Ltd, a company that appeared to be controlled by the Kao.

16.  In relation to the Mercedes Benz, the documentary evidence discovered by the Liquidator suggests that it is like that it was with the Company’s funds that Win Harvest acquired the Mercedes Benz, or at least part of it, and the fund seemed to come from the Restructuring Scheme pleaded in Francis Kao’s Re-Re-Amended Defence but as mentioned above, no evidence was adduced at trial to prove it. It also happened that the vendor from whom Win Harvest acquired the Mercedes Benz was Imagi Animation Studios Ltd, which is a subsidiary of Imagi. In relation to the sale to Ip, there is no evidence of payment by Ip to Win Harvest or the Company. There is no evidence of transfer of the ownership of the Mercedes Benz. At least as at 9 October 2013, the vehicle was registered in the name of Beauty Bloom Limited (“Beauty Bloom”), which shared one of the residential addresses of Francis Kao and under the control of Francis Kao and/or his wife.

III.  IP

17.  Ip graduated from the Hong Kong Polytechnic University with a Bachelor’s Degree in Graphic Design. In 2000, he joined Imagi, whose chairman was Michael Kao. In 2003, the Annual Report of Imagi described Ip as a senior manager, and the President of the Creative & Art Department. At that time, Michael Kao was still the Chairman, and Francis Koa had been the Chief Executive Officer of Imagi Animation Studios Ltd, which, as mentioned above, is a subsidiary of Imagi and from which Win Harvest acquired the Mercedes Benz. Ip’s name did not appear in Imagi’s Annual Reports 2005 and 2006, and re-appeared in 2007 named as the Creative Director of Imagi. At that time, Michael Kao remained as the Chairman and Francis Kao was the Deputy Chairman and the Co-Chief Executive Officer and Chief Creative Officer of Imagi. Ip continued to be part of the senior management of Imagi until 2009, when Francis Kao resigned. The evidence suggests that he joined Unicorn, which was under Francis Kao’s control and a defendant to the Misappropriation Lawsuit. Further, between 2010 and 2015, Ip was the sole director of a limited company called Well Money Limited, whose sole shareholder was Francis Kao.

18.  The long and short of all these is that Ip has worked with and for Francis Kao for a long time, and judging from Ip’s various positions, it is fair to say that there exists a degree of trust between Ip and Francis Kao.

IV.  IP’S CASE IN RELATION TO THE CONTRACTS

19.  Ip’s evidence in relation to the two Contracts is contained in the following six paragraphs of his affirmation in opposition:-

“19. In or around August 2010, Francis extended to me an opportunity to purchase the Assets under the Big Plan Contract and the Win Harvest Contract.

(1) A point for clarification: the P&L Club Sales Order is referred to in the Liquidator’s 9^th Affirmation as an acquisition of a cigar club membership. This is incorrect. The P&L Club Sales Order was in fact a purchase of cigars.

20. In the heat of the moment, I decided to sign these two contracts with Francis to purchase the Assets.

21. Shortly after, however, I began having second thoughts on the purchases. I had concerns, especially since the purchase price of the respective contracts was not a small figure. In addition to the hefty purchase price, I would have to maintain the assets, particularly the Vehicles. Though I did wish to own a few of the Assets, it was excessive to own them all.

22. I then decided to back out of both the Big Plan Contract and Win Harvest Contract.

23. I thus went and spoke to Francis about terminating the two contracts. He was gracious enough to overlook my buyer’s remorse and agreed to cancel both contracts I had signed. Given our long-standing working relationship, we merely had an oral conversation on this and did not see the need to officiate this termination of contract with further documentation. We simply did not carry out the contracts.

24. I never received the Assets or had them in my possession.”

20.  There is no evidence of the circumstances leading to the Contracts, for example, when the discussion started, how the prices were reached, and so on. There is no evidence of how Ip made the decision “[i]n the heat of the moment” (for example, was he persuaded? Was there a bargaining process on the prices), and why Ip would, “[s]hortly after”, have second thoughts (for example, why did he “shortly after” come to realise that it was not a small figure and he had to spend on maintenance?). There is no evidence to explain why while they thought fit to have written contracts, they thought it unnecessary to cancel the written contracts in writing.

V.  LEGAL PRINCIPLES

21.  The legal principles are trite. For the present purpose, I only need to highlight the following:-

(1)  “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”: see Re Allied Weli Development Ltd (formerly known as Hennabun Capital Group Limited) [2022] HKCA 664 at §22 per Kwan VP and Yuen JA;

(2)  “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”: see Re Allied Weli Development Ltd (formerly known as Hennabun Capital Group Limited), supra at §23;

(3)  “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”: see Re Allied Weli Development Ltd (formerly known as Hennabun Capital Group Limited), supra at §24; and

(4)  The Court would not grant an order of examination or producing affirmation and documents if no useful purpose could be served by such an order: see Re Tom Ip & Partners, Architects, Engineers & Development Consultants Ltd (in liquidation) [2021] HKCFI 105 at §12 per DHCJ William Wong SC (as he then was).

VI.  ANALYSIS

22.  At the outset of the hearing, Mr Lawrence Cheung (leading Ms Ann Lee) confirmed, rightly, that the present hearing should be focused only on paragraph 1 of the Summons, given that Ip’s affirmation filed in opposition essentially is an affirmation sought under paragraphs 2 and 3 of the Summons.

23.  Subject to the submissions made in her valiant efforts by Ms Elizabeth Lee, counsel for Ip, which I shall deal with later, I think that the information sought by way of examination of Ip in relation to the two Contracts and the Assets would be necessary for the Liquidator to carry out his functions, and would be reasonable, necessary and not oppressive. This is because Ip’s evidence that he entered into the Contracts “in the heat of the moment” and “shortly after” cancelled the written Contracts orally is, without any details as pointed out above, very suspicious, to put mildly, without any oral evidence from the examination. It is particularly so given that Ip’s such version of event surfaced for the first time only in his affirmation (while in his solicitors’ letter dated 20 May 2024 in reply to the Liquidator’s demand for document and information in relation to the Assets, Ip only stated that the records sought are no longer available). In such circumstances, the oral evidence would be useful in the following manner:-

(1)  Ip’s oral evidence may dispel the suspicion and if so, the Liquidator may confront Francis Kao in the account processes that may be ordered in the Misappropriation Lawsuit and tell him that Ip has been unshakeable as to the cancellation of the Contracts and thus the Assets are still owned by Big Plan, Win Harvest and/or indirectly by him.

(2)  Ip’s oral evidence may reinforce the suspicion of Ip’s such evidence such that there were the Contracts but the Contracts were not cancelled. In this scenario, the Liquidator would go along with Francis Kao’s version and may there and then decide whether he should go after Ip, considering, among others, whether any action against Ip has been time-barred. This would still be useful for the Liquidator’s collection of assets in the sense that the Liquidator could decide whether to spend resources on the Assets in the overall scheme of things.

(3)  Ip’s oral evidence may reinforce the suspicion of Ip’s such evidence such that there were no Contracts or such Contracts were sham. In this scenario, the Liquidator may confront Francis Kao in the account process that may be ordered in the Misappropriation Lawsuit.

(4)  In the event that no order of account would be ordered in the Misappropriation Lawsuit and/or Francis Kao successfully defends the Misappropriation Lawsuit, the likelihood would be that the trial court there accepted Francis Kao’s version that the Assets were sold to Ip. That judgment would not bind Ip. To go after Ip, examination would therefore be necessary for evidence that the Assets were indeed owned by Ip, and for that purpose, evidence about the suspicious Contracts would be useful.

24.  Ms Lee, for Ip, makes the following submissions in opposition to the Summons.

25.  First, she submits that it is the Liquidator’s own belief that “it is more likely” that the Assets are “probably” not in Ip’s possession, custody or power. Therefore, there is no point examining Ip, because Ip has also deposed in his affirmation that the Assets are not in his possession, custody or power. However, in my view, that is merely the Liquidator’s belief of a likelihood or a probability. It is because of such uncertainty that examination is needed. Further and in any event, there would also be issue of the ownership of the Assets in the Liquidator’s collection of the Assets. I note that Ip has been careful in his affirmation to say that the Assets have never been in his possession, custody or power. However, he has not deposed positively about the ownership. In the light of the suspicious evidence about the Contracts and the cancellation thereof, the Liquidator’s mere belief is not a ground for opposing the Summons.

26.  Second, Ms Lee submits that the Misappropriation Lawsuit covers the Assets, and if an order of account would be ordered, the Liquidator could ask Francis Kao about the Assets in the accounting process. However, I cannot see why Francis Kao, in the accounting process, would change his story to make it consistent with Ip’s. Therefore, evidence from Ip’s examination may be useful in the accounting process.

27.  Third, Ms Lee submits that if no order of account would be granted, there is no point examining Ip given that Ip already deposes that the Contracts were cancelled, and the Assets were not in his possession, custody or power, consistent with the Liquidator’s (mere) belief as mentioned above. However, as I pointed out above, the ownership of the Assets would be an issue. In any event, Ip’s evidence that the Assets are not in his possession, custody or power, in the light of his suspicious evidence about the Contracts, warrants examination.

28.  Fourth, Ms Lee submits that there can be no proprietary claim against Ip given Ip’s evidence that the Assets have not been his possession, custody or power. To deal with this submissions, I repeat the preceding paragraph.

29.  Fifth, Ms Lee submits that any claim against Ip has been time-barred. That may or may be correct depending on how the evidence would come out, but even if any action against Ip has been time-barred, I bear in mind that the purpose of examination of Ip would not be solely for the purpose of commencing an action against Ip. For example, other purposes include to decide whether there is any claim against Francis Kao, to decide whether to spend more resources on collecting the Assets, as clear from my analysis above.

30.  Sixth, Ms Lee submits that an order of examination would be oppressive in that Ip is a third-party and the Liquidator has recourse in the Misappropriation Lawsuit. However, as I analyse above, even in the accounting process that may be ordered in the Misappropriation Lawsuit, Ip’s evidence would still be useful. A mere recourse against Francis Kao without Ip’s evidence may not be facilitative enough or at all for the Liquidator’s collection of the Assets.

31.  Seventh, Ms Lee submits that it would be wasteful to examine Ip given that he has already deposed in relation to the Contracts and the Assets. Nevertheless, as I analyse above, the evidence he deposed in relation to the Contracts and the Assets is, put mildly, very suspicious, and examination would be necessary in the circumstances.

32.  Eighth, Ms Lee submits that Ip should have examined in the Misappropriation Lawsuit, and ordering examination here would effectively allow the Liquidator to re-open the matter. Ms Lee may be correct that Ip could have been subpoenaed, but Francis Kao raised the allegation mentioning Ip, and I can see why the Liquidator in the Misappropriation Lawsuit had no incentive to subpoena Ip. Absent any suggestion that there is any abuse of process (for which I see no evidence before me), Ms Lee such submissions carry her nowhere.

33.  Ninth, Ms Lee submits that the Liquidator seems to want to examine Ip on his financial capability at the time of the Contracts, and examination for such information is impermissible as examination for private information. She refers me to McPherson & Keay The Law of Company Liquidation (5^th ed), §15-057:-

“In Finnigan v Ellis, the New Zealand Court of Appeal said that an order could not require a former director of the company in liquidation to provide personal financial information to a liquidator under the New Zealand equivalent of s.236. In this case liquidators wanted to know whether it was economically worth suing a director and so they wanted to ascertain what his financial situation was. It is submitted that an English court is likely to take the same view as its New Zealand counterpart on the basis that in such circumstances the application would be oppressive. The English courts have always been more conservative about the breadth of examinations when compared with Australian courts, and this is likely to be the case here with private information.” (emphasis added)

34.  Mr Cheung submits that this passage has to be read in the context of the Liquidators’ desire to know the financial worth of the potential defendant. I agree – this submission is in line with the general guidance that the discretion should be exercised with the specific context and facts of the particular case: see §21(3) above. In the present case, the context is that Ip “in the heat of the moment” entered into the Contracts for a substantial amount of money, and shortly after, he realised he had financial concern. Therefore, his financial capability at that time would be relevant to the credibility of his own story. For example, if Ip were very wealthy, then his alleged concern that allegedly led to the cancellation of the Contracts would not be well-founded, and this would undermine the credibility of his story. This is relevant to the central issue, as opposed to the “judgment worth” of a potential defendant irrespective of the merits of the central issue.

35.  Lastly, Mr Cheung lists out questions that may be asked during the examination. Ms Lee submits that some questions are not relevant and oppressive. Ms Lee’s concern can be readily dealt with by making it clear that the order of examination would be limited to the circumstances leading to the entering into the Contract, circumstances leading to the alleged cancellation of the Contracts, and the ownership and whereabouts of the Assets. For the avoidance of doubt, any order I am going to make should not be taken as endorsement of the questions listed by Mr Cheung or as disagreement therewith. The relevance of the questions to be asked would be determined with reference to the scope in the context. One cannot limit the questions in advance, given that a question may become relevant or irrelevant depending on the evidence already given in the examination.

36.  Having considered the above, I am satisfied that in the present case, the information sought by way of examination of Ip is reasonably required by the Liquidator to carry out his functions, and that the examination sought are is reasonable, necessary and not oppressive.

VII. CONCLUSION

37.  In the circumstances, I make the following order:-

(1)  Ip do attend before the Court and be examined under section 286C of the Ordinance in relation to (1) the circumstances leading to the entering into the Contracts; (2) the circumstances leading to the alleged cancellation of the Contracts; and (3) the ownership and whereabouts of the Assets; and

(2)  Costs of and occasioned by this application and examination thereunder be determined by the Master before whom the examination shall take place.

38.  It remains for me to thank Mr Lawrence Cheung and Ms Ann Lee (for the Liquidator) and Ms Elizabeth Lee (for Ip) for their assistance.