Re Ma On Shan Whitehead Golf Centre Ltd.

HCMP 1363/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1363 OF 2001

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D E C I S I O N

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1. This application is taken out by the petitioner, Wandex Limited, for an order for leave to serve interrogatories on Mr Lam Wai Leung, the 2nd respondent herein and that the 2nd respondent be required to answer interrogatories on affidavit within 7 days from the date of service. The application arose in this manner.

2. The proceedings in which the application is taken out are brought by a petition made under s.168A of the Companies Ordinance, Cap. 32, seeking an order that Summit Victory (HK) Limited, the 1st respondent herein, be required to sell to the petitioner its shares in Ma On Shan Whitehead Golf Centre Limited ("the Company"), alternatively, that the Company be wound up on the ground of insolvency.

3. It is alleged by the petitioner that the Company was run as a quasi partnership on the basis of a Joint Venture Agreement between two families, surnamed Lai and Lam, and that there was complete loss of mutual trust and confidence because of unfairly prejudicial conduct on the part of the Lam family who had the day-to-day management of the Company.

4. On 19 March 2001, Yuen J (as she then was) made an order on the petitioner's application that PricewaterhouseCoopers ("PwC") be appointed to prepare and audit the accounts of the Company up to 31 August 2000 and to complete the Company's tax returns. Draft accounts were prepared by the auditors dated 23 May 2001. However, up to today, the draft accounts have not been signed because the two directors cannot agree on the qualifications to the draft accounts made by PwC.

5. On 13 September 2001, there was a joint meeting in the offices of PwC attended by the legal representatives of the petitioner, the legal representatives of the respondents and the representatives of the auditors. There was discussion on outstanding information of some current accounts.

6. It would appear from the correspondence exhibited by the respondents that on 21 September 2001, PwC wrote to the respondents' solicitors seeking such outstanding information and stating that if the information was not provided by 24 September 2001, PwC would finalize the draft accounts based on the available information because the tax deadline was on 30 September 2001.

7. The respondents' solicitors replied on 24 September 2001 stating, inter alia, that the supporting documents of all items listed in appendix B of the draft accounts, regarding expenditure incurred by the Company of over HK$4,000,000.00 towards the costs of construction of the golf centre, were all along kept at the registered office of the Company and that the respondents would try their best to obtain all copies of supporting documents from the suppliers and contractors concerned to enable PwC to complete the audited accounts.

8. By letter dated 12 October 2001 from the respondents' solicitors to PwC, the respondents' solicitors supplied a bundle of copy documents in respect of the items in appendix B of the draft accounts to the auditors. By letter dated 3 November 2001, the respondents' solicitors supplied a set of these copy documents to the petitioner's solicitors as well as correspondence exchanged between them and PwC. On 22 January 2002, the respondents' solicitors sent PwC a set of "certified copies of supporting documents" in respect of the items in appendix B.

9. The petitioner is concerned about the genuineness of these copy documents supplied by the respondents' solicitors in respect of the expenses in appendix B, owing to the lateness and the circumstances under which they were supplied to the auditors. On 21 February 2002, the petitioner's solicitors wrote to the respondents' solicitors seeking an indication whether the 2nd respondent would answer the interrogatories enclosed with that letter, failing which an application would be made to the Court. As the 2nd respondent has refused to comply with that request, the present summons was issued on 3 April 2002 and adjourned on 18 April 2002 for argument to today.

10. The summons was issued by the petitioner under the inherent jurisdiction of the Court. It was submitted by the 2nd respondent that it is doubtful whether the application should be made under the inherent jurisdiction. I was referred by Mr Matthew Chong who appeared for the petitioner to Rules 1 and 210 of the Companies (Winding-up) Rules. In view of these provisions, Mr Chong submitted that Order 26 of the Rules of the High Court should apply to his summons. This is not disputed by Mr Harold Ng who appeared for the 2nd respondent.

11. Under Order 26, the Court should only order interrogatories if they are necessary for disposing fairly of the cause or matter or for saving costs. In that respect, I was also referred by Mr Ng to a decision of the English Court of Appeal reported in the Times on 27 March 1996, Hall v. Sevalco Limited in which Sir Thomas Bingham, MR stated as follows:-

"The interrogator had to be able to show that his interrogatories, if answered when served, would serve a clear litigious purpose by saving costs or promoting the fair and efficient conduct of the action."

12. I turn to the interrogatories proposed to be served by the petitioner. It was submitted on behalf of the 2nd respondent that Interrogatories numbered (1) to (5) should not be ordered. These interrogatories relate to who had provided the copy documents in respect of the items in appendix B to the auditors, when they were provided and the circumstances in which they were provided.

13. It was submitted that all these matters are already apparent from the correspondence exhibited to the affirmation of the respondents' solicitors which I have mentioned above. I agree with that submission. It does not appear to me appropriate to order the 2nd respondent to answer Interrogatories numbered (1) to (5).

14. As for the Interrogatories numbered (6) to (10), they relate to whether these documents are true; if they are the only supporting documents that the 2nd respondent is able to find; the full particulars of the makers of these documents; if the amounts invoiced in these documents have been settled and if so settled, who had settled these amounts and how.

15. Mr Ng submitted that the 2nd respondent should not be ordered to answer these interrogatories because the information to be elicited would come within the work undertaken by PwC in auditing the Company's accounts. The petitioner should not "usurp" the function of PwC in requiring the 2nd respondent to answer these interrogatories. There is no reason to take the matter out of the hands of PwC who were appointed by the Court to prepare and audit the Company's accounts up to 31 August 2000.

16. According to the affirmation of the respondents' solicitors filed on 5 September 2002, neither the respondents nor their solicitors have received any comment from PwC concerning the certified copy supporting documents supplied by the respondents' solicitors on 22 January 2002. It would appear from that statement that PwC had not sought from the respondents information similar to that sought in the interrogatories and it would follow that no such information has been supplied by the respondents to the auditors in that regard. I have asked Mr Ng in the course of his submission if my understanding is correct and he has confirmed to me that that is indeed the position.

17. I do not see how it could be regarded as usurping the function of PwC if the 2nd respondent is ordered to answer the interrogatories sought by the petitioner in this situation.

18. I am of the view that the Interrogatories numbered (6) to (10) are necessary for disposing fairly of the cause or matter and not just for impugning the credibility of the 2nd respondent, as these interrogatories may go to show whether the Lam family had indeed invested into the Company the amount they claimed to have invested by virtue of the expenses in appendix B to the draft accounts of HK$4 million odd, or whether such expenses, if incurred, were incurred for the benefit of companies associated with the respondents.

19. I also reject the submission of Mr Ng that some of these interrogatories may be oppressive. The width of Interrogatory numbered (8) has been cut down in that the petitioner no longer requires the 2nd respondent to provide information on the identity card numbers of the makers of the documents or the business registration certificate numbers of these makers.

20. For the above reasons, I am satisfied that Interrogatories numbered (6) to (10) varied in the way that I have indicated should be answered. I therefore make an order in terms of the summons with regard to Interrogatories numbered (6) to (10) as amended. I would hear the parties on costs.