THE JOINT & SEVERAL LIQUIDATORS OF KONG WAH HOLDINGS LTD (IN COMPULSORY LIQUIDATION) v. THE GRANDE HOLDINGS LTD AND OTHERS

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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BETWEEN

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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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(Heard together)

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D E C I S I O N

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1.  I have before me a summons issued in each of the proceedings on 12 January 2007 by the 1^st to 3^rd respondents – The Grande Holdings Limited, The Grande Group Limited, and The Grande (Nominees) Limited.  These respondents seek an order that they be granted an extension of time to comply with the order in each of the proceedings I made on 4 August 2005, as varied by the Court of Appeal in the judgment dated 26 April 2006 in CACV Nos. 306 and 307 of 2005 (“the Orders”), for three months from the date of the order in this application.

2.  I will first set out the history of the matters leading to the present applications.  The liquidators first made a request of the relevant documents from these respondents in March 2002.  In February 2005, they issued their summonses under section 221 of the Companies Ordinance, Cap. 32.  The summonses were heard in July 2005 and I gave a decision on 4 August 2005, ordering production of documents.  On 23 September 2005, these respondents issued a summons for stay of execution of my order pending appeal to the Court of Appeal.  I granted a stay of execution on 7 October 2005.  The appeal was heard in March 2006 and the Court of Appeal dismissed the appeal on 26 April 2006.  The respondents issued an application for leave to appeal to the Court of Final Appeal.  This application was heard by the Court of Appeal on 24 May 2006 and was refused on 2 June 2006.  The Court of Appeal declined to stay execution of the Orders.  On the application of the respondents to the Court of Final Appeal, an interim stay of the Orders was granted by Ribeiro PJ on 16 June 2006.  On 30 June 2006, the Appeals Committee of the Court of Final Appeal granted leave to appeal and a stay of execution pending appeal.  Judgment of the Court of Final Appeal was given on 15 December 2006 dismissing the appeal.

3.  From the above history, it would seem that the respondents have had since August 2005, some 18 months, to comply with the Orders.  Five years have lapsed since the liquidators first sought the relevant documents from them and it has been 20 months since the respondents started to search for the documents.

4.  Following judgment of the Court of Final Appeal, further correspondence was exchanged between solicitors for both parties.  On 20 December 2006, solicitors for the respondents wrote to solicitors for the liquidators stating that the time to comply with the Orders should start to run from the date of handing down of the judgment by the Court of Final Appeal on 15 December 2006, so they would have 28 days to comply, i.e. by 12 January 2007.  The liquidators took issue with this on 9 January 2007, but stated that they would withhold taking steps to enforce the Orders pending full and proper compliance on or before 12 January 2007.

5.  On the same day, 9 January 2007, the respondents’ solicitors wrote to the liquidators’ solicitors, stating that the respondents have located numerous documents, which were put into about 260 files and that the search for documents was continuing.  They sought the liquidators’ consent to a general extension of time to complete the ongoing search of documents and to file and serve the affidavit required by paragraph 2 of the Orders.  By paragraph 2 of the Orders, the respondents are required to state on oath by a proper officer, where documentation covered by paragraph 1 of the Orders is no longer within their possession, custody or control, the nature and extent of such documentation; the date or dates when such documentation was removed from their possession, custody or control; the identity of persons to whom the documentation was given; and the present whereabouts of the same.

6.  On 10 January 2007, the liquidators’ solicitors replied stating that they could not agree to a general, open-ended extension of time.  They required by 12 January 2007 a detailed affidavit from the officer of each of the respondents deposing to the steps taken and the enquiries made with third parties; the searches the respondents considered outstanding and how such searches are being progressed and by whom; the reasons why the outstanding searches are not completed and the time frame within which they would be completed.  The liquidators’ solicitors stated that they see no reason why the respondents are not able to provide an affidavit in compliance with paragraph 2 of the Orders.

7.  On 12 January 2007, the respondents’ solicitors sent 291 lever arch files to the liquidators, in partial compliance with the Orders.  The summons for an extension of time for three months was issued on the same day, but the supporting affidavit was not filed until yesterday.  This is the 4^th affidavit of Ruby Lee Yen Kee, the Director of Legal for the Grande Group.

8.  A number of criticisms were made by the liquidators of Miss Lee’s affidavit, in particular, that no specific details were given of the work undertaken, when documents were retrieved by the respondents, the details of enquiries made with third parties, what searches and enquiries are outstanding, and how such outstanding searches are to be progressed.  I think these criticisms are largely justified.  A number of loose ends were not satisfactorily addressed in the affidavit.  Other than four named third parties that the respondents had written to recently to inform them the respondents have in their possession documents belonging to or relating to the third parties, the respondents did not say in Miss Lee’s affidavit what other third parties they had written to or made enquiries with so far, in order to produce the relevant documents in their possession, custody or control as required by the Orders.

9.  Mr Carolan submitted on the respondents’ behalf there is substantial compliance with the Orders.  I doubt if that is the case, if only 291 files have been produced so far, and 400 files have been identified but not yet reviewed and not yet produced.

10.  Mr Carolan submitted that an extension of time is required for reviewing the 400 files identified and as the liquidators’ resources to review the documents are limited, and that they will need further time to go through the documents already supplied, no prejudice would be occasioned to the liquidators in granting an extension of time.  I do not accept this.  The resources of the liquidators are not relevant to the indulgence sought for complying with the Orders made 18 months ago.  The resources of the respondents in complying with the Orders are relevant.  I note that the 1^st respondent is a substantial company, its shares are listed in the Hong Kong Stock Exchange.  It seems to me that an extension of three months is far too long.  Besides, there is no mention in Miss Lee’s 4^th affidavit when the respondents have identified the 400 files.  I am not going to assume that the respondents have only managed to do so recently, nor will I assume that the respondents do not have a filing system to assist them in reviewing the documents kept in their records.

11.  Mr Carolan has drawn my attention to Re Bank of Credit and Commerce International SA, Morris and Others v Bank of America National Trust and Savings Association and Others [1997] BCC 561.  In that case, Robert Walker J adopted a staged approach for the production of a very substantial volume of documents by members of the Bank of America Group in different countries.  Mr Carolan submitted I should use a similar approach and the staged approach he suggested is like this.  The respondents are to produce within 14 days hereof documents in their possession that have not been produced; these are the documents in paragraphs 3(xv), (xvi) and (xix) of Miss Lee’s 4^th affidavit.  Within two months hereof, the respondents are to produce such of the documents in the 400 files in their possession, when they should have completed review of such documents.  There is to be a long stop date of three months, by which time the respondents are to produce any further relevant documents they have been able to obtain, such as the documents in the Zhongshan factories mentioned in paragraph 3(xvii) of Miss Lee’s 4^th affidavit, for which the respondents have sought access from the joint venture companies in China.

12.  I agree with Miss Linda Chan for the liquidators that the circumstances in Bank of Credit and Commerce were different.  The scale of production there was far more extensive.  Of the 291 files produced so far, the liquidators have deposed that from their review to date, at least 170 folders relate to documents associated with trademark registration, infringements and valuations in various countries after 2000.  Few of the documents produced fall directly within the categories of documents required to be produced and are at the heart of the investigations.  I accept that any further delay is prejudicial to the discharge of the liquidators’ duties.  This would add to the difficulties of the liquidators to pursue recovery action, and causes of action may become time-barred.

13.  I take into account the history of the matter, the resources at the respondents’ disposal, and that the respondents have not completed their review of the 400 files located.  I would only be prepared to grant a relatively short extension of time to comply with paragraph 1 of the Orders.

14.  Miss Chan has sought an order as a condition for granting an extension of time to the respondents, leave should be given to the liquidators to apply to commit the respondents for contempt if there should be failure to comply.  It does not seem to me appropriate to grant leave to commit for contempt as a condition for giving time to comply with the court order.

15.  Miss Chan also submitted that any extension should be given on the respondents’ undertaking not to take any limitation point regarding any claim which may be made by Akai Holdings Limited, Kong Wah Holdings Limited and any company in the Akai Group against the respondents from 2 February 2005, being the date the summonses were issued under section 221, to the date of full compliance with the Orders.

16.  I decline to require such an undertaking from the respondents, as the extension I am going to grant is a short one.  The liquidators could issue a protective writ to protect their position against the time bar of any potential claim.

17.  Miss Chan sought an order that the respondents are to provide to the liquidators within 7 days hereof letters of authorisation from the respondents to various third parties for relevant documents in the possession or custody of these third parties.  In view of the unsatisfactory evidence from the respondents as to the efforts on their part to seek relevant documents from third parties, I think it is appropriate to order them to provide these authorisation letters.  I will delete the parts in the liquidators’ sample letter asking the third parties to hand over the documents to the liquidators direct, as I agree with Mr Carolan that the respondents should have an opportunity of reviewing the documents to satisfy themselves that the documents produced by the third parties are within the scope of the Orders.  I will not order authorisation letters be written to those to whom the respondents have already written; they are the 4^th respondent, Tremendous Springs Limited and Alpha Capital Group Limited.

18.  I make an order in these terms:

(1) within 7 days hereof, the 1^st to 3^rd respondents do provide or otherwise supply to the liquidators:

(a) the documents mentioned in paragraphs 3(xv), (xvi) and (xix) of Miss Lee’s 4^th affidavit;

(b) an index of the 291 files supplied to the liquidators on 12 January 2007; and

(c) letters of authorisation in the form of the sample letter submitted by the liquidators as amended in the way indicated above signed by the directors or authorised representatives of the respondents, addressed to the entities mentioned in the submissions of counsel except for the three entities stated earlier;

(2) all other documents within paragraph 1 of the Orders are to be supplied to the liquidators within 42 days hereof.

19.  As for the extension of time to comply with paragraph 2 of the Orders in making an affidavit to depose to any relevant documents not in the possession, custody or control of the respondents, I agree with the liquidators there should be no further delay about this and that this should be complied with within 7 days hereof.  If in the course of further searches and enquiries, the respondents should come to know of any further relevant documents not within their possession, custody or control, they could file a supplemental affidavit.

20.  I make an order in these terms:

(3) there be an extension of time to comply with paragraph 2 of the Orders within 7 days hereof;

(4) in the event any further documents within paragraph 1 of the Orders should come to be identified by the respondents as not within their possession, custody or control, leave to the respondents to file and serve a supplemental affidavit in further compliance with paragraph 2 of the Orders within 42 days hereof.

21.  I will give liberty to apply on this order.  For the costs of this application, I decline to order costs on an indemnity basis.  I order the respondents to pay the liquidators’ costs of this application and of this hearing forthwith on a party and party basis, to be taxed if not agreed.