THE JOINT & SEVERAL LIQUIDATORS OF KONG WAH HOLDINGS LTD (IN LIQUIDATION) v. ERNST & YOUNG (A FIRM) AND ANOTHER

HCCW 49/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 49 OF 2000

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AND

HCCW 50/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 50 OF 2000

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BETWEEN

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(Heard together)

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D E C I S I O N

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1.  I am going to grant these applications brought by the liquidators of Akai Holdings Limited (“Akai”) and Kong Wah Holdings Limited (collectively “the Companies”).  These applications are made under section 221 of the Companies Ordinance, Cap. 32 and the provision for liberty to apply under the orders I made on 23 October 2003.  These are very straightforward applications.  I really cannot see how the applications are capable of being resolved any other way.  So I do not propose to give lengthy reasons for my decision and I do not propose to deal with every point taken by Mr Manzoni for Ernst & Young, the 1^st respondent herein, in his 9-page submissions and his verbal submissions today, save to say that I have considered them and I do not agree with them.  I fail to see any issue of principle involved as contended by Mr Manzoni.

2.  The 1^st respondent has an obligation to render assistance to the liquidators by making production of documents as ordered by the court.  It does not appear to me that it has rendered proper assistance.  I have taken note of the matters leading to the present applications set out comprehensively in Miss Chan’s submissions at paragraphs 3 to 28 and of the manner chosen by the 1^st respondent to make production to comply with the orders on 23 October 2003.  I have considered the protracted correspondence exchanged between the liquidators, the 1^st respondent and their respective solicitors, which took up an entire box file.

3.  Two types of documents are sought in these applications.  The first type is what is called the “Audit Planning Documents” and the second type is what is called the “File List”.  In respect of the first type, it is not disputed by the 1^st respondent that they do come within the scope of my orders on 23 October 2003.  Under the orders, the 1^st respondent is required to supply or otherwise make available to the liquidators the documents specified therein and to permit copies to be taken by the liquidators.

4.  The liquidators say they have not been provided with copies of the Audit Planning Documents, save for the Audit Strategies Memorandum relating to Akai’s 1998 audit, which was only provided when exhibited to an affidavit filed on behalf of the 1^st respondent after the present summonses were issued. 

5.  The 1^st respondent says its obligation under the orders is to disclose all documents being the subject matter of the orders and claimed it had done so by 4 June 2004.  It had photocopied the documents as requested by the liquidators.  If the liquidators say any particular document has not been photocopied, it is for the liquidators to search for the original document by conducting a further inspection themselves on reasonable notice and make a request for such original document identified on the search to be photocopied.  The 1^st respondent says it is not obliged under the orders to search for the original document and to order them to do so would be oppressive. 

6.  I am satisfied the 1^st respondent had not disclosed all the documents being the subject of the orders by 4 June 2004, further documents were provided by the 1^st respondent to the liquidators as late as 12 April 2005.  I am also satisfied that the 1^st respondent has greatly exaggerated the time and efforts that would be required to locate the missing documents in its own files.

7.  The 1^st respondent should have greater knowledge of its own files than anyone else.  It is quite inconceivable that an established organisation like the 1^st respondent would not have maintained a proper filing system that would facilitate the retrieval of documents.  And I fail to understand if documents required to be photocopied by the 1^st respondent were not supplied to the liquidators, as in the case of the Audit Strategies Memorandum relating to Akai’s 1998 audit and the 16 documents as identified by the liquidators when their staff re-inspected 6 selected audit files earlier this month, this would not have been the responsibility of the 1^st respondent.

8.  I make an order that the 1^st respondent do provide copies of the Audit Planning Documents as sought, save for the Audit Strategies Memorandum relating to Akai’s 1998 audit. 

9.  For the second type of documents being the File List, I reject the contention that this is not within the scope of the orders on 23 October 2003.  I also reject the claim of privilege to this document or these documents.  There is no basis for claiming privilege at all. 

10.  I order a copy of the File List be supplied as sought in the summonses, with leave to the 1^st respondent to redact any parts of the document or documents that relate to clients other than the Companies, their subsidiaries or associates, and to redact any subsequent markings made by its staff in the course of obtaining legal advice.

11.  I also give liberty to apply on this order.  I should say that in making the orders on the present applications, the court expects reasonable efforts to be made by the 1^st respondent to comply with them, but if genuine difficulties should be encountered in complying with the orders or if for any good reason the 1^st respondent is unable to supply copies of the documents sought, it would have leave to apply to the court.

12.  I make an order that the costs of the liquidators in these applications be paid by the 1^st respondent.