BRILLIANT GAIN INTERNATIONAL LTD v. FU KEE AND OTHERS

HCA1064/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1064 OF 2009

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DECISION

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1.  By summons filed on 9 November 2009 (“the Summons”), the defendants apply to vary the judgment entered against them on 18 September 2009 as amended on 7 December 2009 (“the Judgment”).  In substance, the defendants seek an extension of time to comply with paragraphs 1 and 2 of the Judgment.

2.  At the hearing on 13 November 2009, the application relating to paragraph 2 of the Judgment was disposed of, but that relating to paragraph 1 of the Judgment was adjourned to enable the defendants to file evidence on the time needed for preparing the accounts as estimated by the auditor that they were going to retain.

3.  Paragraph 1 of the Judgment obliges the 1^st to 3^rd defendants to specifically perform clause 9.5 of the Subscription Agreement dated 5 December 2006 made between the plaintiff and the 1^st to 3^rd defendants as amended by a Supplemental Agreement dated 9 February 2007 made between the plaintiff and the 4^th defendant (“the Agreement”) by procuring the provision of the 2006 Accounts and the 2007 Accounts (as defined in the Agreement).  

4.  At the time of the hearing of the Summons, the defendants had not decided on the auditor to retain for preparing the 2006 Accounts and 2007 Accounts in compliance with paragraph 9.5 of the Agreement and also paragraph (1) of the Judgment.  Nevertheless, the defendants’ summons sought an extension of 90 days. I took the view that no meaningful extension can be granted without evidence of a realistic estimate given by the very auditor who was to prepare the accounts.  Hence, I directed the defendants to file the relevant evidence, to be followed by written submissions from both sides.

5.  The defendants had since filed the 3^rd and 4^th affirmations of the 2^nd defendant and also the 1^st affirmation of the 1^st defendant.  The parties’ legal representatives had also lodged written submissions on the application.

6.  The latest position of the defendants as revealed in the further affirmations filed, is that of the four big audit firms, Ernst & Young and PricewaterhouseCoopers had declined while Deloitte Touche Tohmatsu had not responded.  As for KPMG, it had given a quote of about $4.5 million for its fees.  The 1^st and 2^nd defendants say the defendants are financially unable to afford the fees of KPMG.  They have given some information about their means in the affirmations.  In short, the defendants have not appointed any auditor to prepare the 2006 Accounts and the 2007 Accounts.  They have not put forward any proposal as to how they intend to deal with their obligation under the Agreement and the Judgment.

7.  The plaintiff had in the written submissions criticized the defendants’ evidence as to their efforts and attempts to procure the 2006 Accounts and 2007 Accounts, including to appoint the auditor and to find funding for the appointment.  I am in agreement that the defendants’ evidence is sketchy and unsatisfactory.  For example, the only document showing his “bank accounts” is a one-page statement of a joint-name current account for the month of 9 May to 8 June 2009.  Among other matters, this statement relates to a period some six months ago and hardly demonstrates the 1^st defendant’s current or latest financial position.  In my view, the affirmations filed on behalf of the defendants do not show any committed intention to specifically perform clause 9.5 of the Agreement or to comply with paragraph (1) the Judgment. 

8.  The plaintiff proposes that the Court directs the 3^rd defendant to engage KPMG to prepare the accounts and on this basis to grant a two-month time extension, and, for the purpose of ascertaining the defendants’ financial position, to further order the 1^st and 2^nd defendants to make disclosure as to their means.  I do not consider this is appropriate. 

9.  This is an application taken out by the defendants.  It is for them to make good their case for being given further time to comply with the Judgment, apart from justifying the length of the extension sought.  Despite being afforded the opportunity to adduce further affirmations, the evidence provides no proper basis on which the court can exercise its discretion of granting a further time extension.  In the circumstances, the only alternative open to the Court is to dismiss the application.

10.  Accordingly, I dismiss the application under paragraph 1(1) of the Summons with costs (other than the costs of the hearing on 13 November 2009 that had already been dealt with) to be paid by the defendants to the plaintiff.

11.  For the purpose of gross sum assessment, the plaintiff shall lodge with the Court and serve on the defendants a statement of costs by 4 February 2010 and the defendants shall lodge with the Court and serve on the plaintiff their comments/ objections by 11 February 2010.