RE DAYS IMPEX LTD (In Liquidation)

HCCW 298/2011 & HCCW 299/2011
(HEARD TOGETHER)

[2023] HKCFI 726

HCCW 298/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 298 OF 2011

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 299 OF 2011

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(HEARD TOGETHER)

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D E C I S I O N

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1.  The Liquidators of the two companies, the subject of the two winding up proceedings, have issued summonses in both proceedings under section 275 of the Companies (Winding-Up and Miscellaneous Provisions) Ordinance, Cap 32, against Mahesh Nanik Dayaram and Pitty Kwok Kwai Wah for their involvement in alleged frauds of the companies’ creditors. I have two summonses before me issued in both proceedings by Mr Dayaram. The first seeks to strike out the 4^th affirmation of Foreky Wong (“Wong (4)”) filed on behalf of the Liquidators in both proceedings (“Strike Out Summonses”). The second seeks certain records of computer forensic work carried out by the Liquidators.

Strike out application

2.  The 4^th affirmation of Mr Wong deals with four matters. First, the background to the proceedings including the successful prosecutions of Mr Dayaram and his Father for fraud. The matters that constitute the fraud also form the basis for the Liquidators’ applications, which are explained in earlier decisions ([6]–[14]). The second concerns an alternative way of quantifying the adverse financial consequences for creditors of Mr Dayaram’s and Ms Kwok’s alleged breaches of duty as a shadow director of the companies, namely, the increase in net deficiency ([16]–[22]). Thirdly, quantification of the sums which Mr Dayaram and Ms Kwok allowed the Companies to be paid in breach of the pari passu principle ([23]–[33]). Fourthly, the final paragraph, which contains some evidence about interests, but is mainly submission ([36]).

3.  The criticism of the affirmation divides into two types. First, [16]–[22] and [36] consist of either submission or summaries of evidence in earlier affirmations. Secondly, [16]–[22] consist of figures, which the Liquidators having read Mr Dayaram’s evidence in support of his strike out application concede are not accurate. It might be thought even if Mr Dayaram’s complaints are factually correct they did not justify the applications as it is common for affirmations to contain summaries of previous evidence and submissions and if anything it is to Mr Dayaram’s tactical advantage to be able to rely on Wong (4) as demonstrating that the Liquidators’ figures are not reliable. It would appear that the catalyst for the applications is partly at least that Wong (4) was framed as it was in order that it could be relied on in an application for a Mareva injunction in Canada to freeze certain assets of Mr Dayaram’s Wife. Mr Dayaram takes the view that this was improper and in the case of the IND claim prejudiced his and his Wife’s ability to defend the application in Canada.

4.  It is correct that an affirmation or witness statement should contain only matters of which the witness is able to give admissible evidence relevant to either the interlocutory application before the court or at a trial. It is not the purpose of either an affirmation or witness statement to make submissions or argue a party’s case. I have commented previously on the increasing frequency of the court being presented with affirmations, particularly, from solicitors, which contain little admissible probative evidence, but are long on the solicitor’s views on an aspect of the case.

5.  Wong (4) is a little different from the common example of what might be called commentary by affirmation as Mr Wong is part of the Liquidators’ team and he is explaining a case, which is not derived from any witnesses’ first-hand knowledge of relevant contemporaneous events, but the forensic process which the Liquidators rely on in support of their application. It is also relevant that the Liquidators’ application has moved slowly in no small part because Mr Dayaram has been in prison until August of last year and this has hampered the application proceeding expeditiously. That and Mr Dayaram taking issue with many aspects of the application and its conduct has resulted in the proliferation of affirmations, which might have been thought to justify introducing the calculations with a section summarising the claim and its genesis. I would note that Mr Dayaram has been representing himself until very recently. Mr Brown who appeared for him had only been instructed shortly before the hearing. Be that as it may [16]–[22] and parts of [36] are not strictly admissible evidence that Mr Wong can give.

6.  The application to strike out Wong (4) is brought under Order 41, rule 6 of the Rules of the High Court (“RHC”) on the grounds that it is scandalous, irrelevant or otherwise oppressive. The relevant principles were summarised by Barma J in Re Linea Trading Company Limited[1] as follows:

“4. …

(1) Scandalous has the same meaning in Order 41 rule 6 as it does in Order 18 rule 19 dealing with the striking out of pleadings. Thus, degrading, indecent and offensive charges made in an affidavit will be regarded as scandalous if they are irrelevant or inadmissible in evidence to prove any material allegation in the petition (see e.g. Cashin v Cradock (1877) 3 Ch 376; Christie v Christie (1873) LR 8 Ch App 499, in the context of striking out a pleading);

(2) Matters which are material will not generally be struck out even if they are offensive, although where unnecessary detail is given, that may be susceptible to being struck out (see e.g. Blake v Albion Assurance Society (1846) 45 LJCP 663, also in the context of striking out of pleadings).

(3) Irrelevant matter may be struck out even if not scandalous (Re J (An Infant) [1960] 1 All ER 603).

(4) It is wrong to include argumentative material in affidavits and such material may be struck out (see e.g. Deak v Deak Perera Far East Limited [1991] 1 HKLR 551).

(5) The court may take one of three approaches to an affidavit in which there is scandalous, irrelevant or oppressive matter:-

(a) It may decline to strike the matter out, on the basis that it is capable of excluding such material from its mind when deciding the issues which arise for decision; or

(b) It may think it appropriate to strike out some or all of the material complained of; or

(c) It may, in an extreme case, order the entire affidavit to be taken off the court file.

Which of these courses is adopted will depend on the circumstances of the case, regard being had to the nature and extent of the objectionable material.”

7.  In my view whilst a large part of [6]–[14] and [36] are not probative of a fact which has to be determined in order to adjudicate the case it cannot be said that they are irrelevant because they do explain the background to the claims against Mr Dayaram and the circumstances in which they have come to be brought. It would be unusual for a party not to introduce its case by reference to facts that set the scene and explain how the parties come to find themselves in court. It is correct that [6]–[14] are repetitive of other evidence that has been filed, but that hardly makes it oppressive as it avoids the necessity of going back to other affirmations for the same information. As I have already mentioned the decision to apply for Wong (4) to be struck is partly at least motivated by Mr Dayaram’s belief that the affirmation was framed with a view to it being shown to the court in Canada and influencing their determination of the application for a Mareva injunction. For example, the description of the criminal proceedings, complains Mr Dayaram, is not evidence admissible in the current proceedings to prove the alleged wrongs. Mr Dayaram suspects the description was included simply as prejudice designed to influence the Canadian court’s deliberations. It is correct that the findings in the criminal proceedings cannot be relied on to prove the factual case advanced by the Liquidators in the present proceedings. However, they are relevant to explain the circumstances in which the Liquidators have come to make the applications; in other words they are relevant background.

8.  Mr Dayaram’s objection to [16]–[22] is also partly driven by what he believes was misleading evidence formulated to aid the application in Canada. He believes this because in his evidence he demonstrates, which the Liquidators in response have accepted, that a number of the figures in these paragraphs are wrong and when corrected a small net surplus rather than deficiency is demonstrated. Mr Brown in his submissions on behalf of Mr Dayaram argued that if the evidence is admitted to be wrong it should be struck out. He contended that the correct way to look at the matter was to ask whether if Mr Dayaram had had the opportunity to contest the evidence’s admission (which I accept in practice he was not) and he had demonstrated that the figures contain material mistakes, which called into question the conclusion that the matters complained of produced an increase in net deficiency would the Court have allowed the evidence to be admitted? This is not a case in which the Court is being asked to adjudicate a dispute on figures in advance of the trial he argued, the Liquidators accept that the figures are wrong and, therefore, the evidence is objectionable. I accept that there is force in the argument, however, Mr Brown accepted that there was nothing to prevent the Liquidators recasting the figures and calculations and seeking leave to file a new affirmation. As I suggested to Mr Brown I would have thought that Mr Dayaram might be better having the evidence on the court file so he can refer to the mistakes in the future. I will, however, strike out [16]–[22] as I accept that if they had been objected to when the Liquidators sought to introduce it, I would probably have required the mistakes to be corrected before admitting the new affirmation.

9.  I understood Mr Brown to tacitly accept that [22]–[33] maybe considered by Mr Dayaram to be wrong, but this is not accepted by the Liquidators and the resolution of that dispute is a matter for trial not a strike out application.

10.  In conclusion I will strike out [16]–[22]. I will make a costs order nisi that the costs are Mr Dayaram’s costs in the Liquidators’ Summonses dated 9 March 2017 in HCCW 298/2011 and 8 March 2017 in HCCW 299/2011 (“Liquidators’ Summonses”). Although he has been partly successful it does not seem to me that the application has served much by way of useful purpose and this in my view is the appropriate costs order in the circumstances.

Discovery application

11.  Mr Dayaram’s discovery applications in both proceedings (“Discovery Summonses”) are more straightforward. Of the three categories of documents sought, the banking documents have been provided and the images of the data on the hard disks of 20 computers have been lost. The only remaining category are records of the Liquidators’ computer forensics. Mr Dayaram’s Discovery Summonses sought extensive discovery of this latter category:

“Any documents (including letters, faxes, email communications, file notes, meeting attendance notes and phone call records) in respect to the computer forensics work performed by Patrick Ma, Leslie Leong and Josh Wan (or other individuals) of the Respondents [Liquidators], including but not limited to:

(i) Previous versions of ‘File Note dated 7 March 2013 (revised)’ with reference ‘File Note-Cargo-PM-07Mar13’;

(ii) Individual source documentation prepared when each device was forensically imaged which recorded the ‘Computer Image ID’, ‘Custodian’s Name’, ‘Computer Type’, ‘Computer Description’ and ‘Staff responsible for imaging, i.e. Acquired by’ information; and

(iii) Any working papers or notes used or created contemporaneously while computer forensics work was being performed.”

12.  As it transpired what Mr Dayaram was interested in obtaining was the contemporaneous notes which record the information which was then summarised in the File Note referred to in the paragraph of his summonses which I have quoted. This is relevant says Mr Dayaram because he disputes that, as he understood the Liquidators to allege, one of the notebooks they found at the companies’ offices, which contains data, which supports their application, was his. Essentially what he wishes to ascertain is what records were made when the Liquidators’ staff entered the companies’ offices and identified the personal computers and notebooks in the office from which they subsequently copied the data on their hard drives. Once it became clear that this is what was sought (following receipt of Mr Brown’s skeleton argument and the exchanges before me) the Liquidators agreed to provide them as well as undertaking that they will notify Mr Dayaram’s legal team if they locate the computer images that appear to be have been lost during a move of office.

13.  I will, therefore, order that the Liquidators provide by 4:30pm on 17 March 2023 or such other time as the parties agree a list of the documents in their possession, custody of power relating to the identification and recording by the Liquidators or their staff of the computers in the offices of Days Impex Limited and/or Days International Limited in or about 2011 and 2012 and copying of the data on the hard disks of such computers. I will make a costs order nisi that the Liquidators pay Mr Dayaram’s costs of the Discovery Summonses dated 11 March 2022 in any event.

Case Management Directions

14.  I made the following directions on 19 December 2022:

(1)  The Respondent, Mahesh Nanik Dayaram, has leave to file evidence in opposition to the Liquidators’ Summonses of 9 March 2017 by 4:30pm on 17 March 2023.

(2)  The Respondent, Pitty Kwok, has leave to file further evidence in opposition to the Liquidators’ Summonses of 8 March 2017 by 4:30 pm on 17 March 2023.

(3)  There be a CMC at 10am on 31 March 2023.

(4)  If the Respondents wish to apply for an extension of time for filing of evidence they must file a summons and supporting evidence by 21 March 2023 and a skeleton argument by 24 March 2023. The Liquidators should file any skeleton in response by 28 March 2023.

(5)  Liberty to Pitty Kwok to apply.

(6)  Costs in the cause.

15.  I would note that Ms Kwok, who has had to date a relatively passive role in the proceedings and was acquitted at the criminal trial indicated that she may wish to apply to strike out the claim against her on the grounds that the delay in proceeding with this matter has prejudiced her. Ms Kwok is not legally represented and I suggested to her that if she wishes to make such an application she should contact the Office for unrepresented litigants, who hopefully could provide her with some assistance.