RE DAYS INTERNATIONAL LTD

HCCW 299/2011

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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D E C I S I O N

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1.  I have before me a summons issued by the Liquidators of Days International Limited (“Company”) pursuant to section 221(3) of the Companies (Winding-up and Miscellaneous Provisions) Ordinance, Cap 32, for an order for the production by the Bank of East Asia Limited (“Bank”) of:

“... monthly account statements of all accounts for the period from January 2004 (being the month of incorporation of Oscoda Electronics Limited (incorporated in the BVI)) until December 2011 (being the month of the Company’s winding up) which Oscoda Electronics Limited has with the Respondent that are in the Respondent’s possession, custody and control.”

2.  Oscoda Electronics Limited (“Oscoda”) is incorporated in the British Virgin Islands.  It has one director: Ms Wy‑yuen Sung. It is not known who the registered shareholder or shareholders are.

3.  The Liquidators seek production because it is believed, for credible reasons, that Oscoda was the conduit for a fraud perpetrated by the owners of the Company, which involved the drawing down of import loans by the Company pursuant to banking facilities granted to it, and the money drawn down then being circulated through Oscoda and back to the Company.  The owners of the Company, Nanik and Mahesh Dayaram, were convicted of nine counts of fraud arising from this scheme.

4.  I am satisfied that the Liquidators reasonably require the documents. The more difficult question is whether or not the documents that the Liquidators seek come within section 221(3) which provides that:

“(3) The court may require him to produce any books and papers in his custody or power relating to the company, but, where he claims any lien on books or papers produced by him, the production shall be without prejudice to that lien, and the court shall have jurisdiction in the winding up to determine all questions relating to that lien.”

5.  Section 221(3) is worded differently to section 221(1) that empowers the court to order the examination of officers and others “capable of giving information concerning the promotion, formation, trade, dealings, affairs, or property of the company”.  The impact of the difference in wording on the scope of what documents can be obtained is considered in detail in Kwan J’s judgment in Weihong Petroleum Co Ltd (No 2)[1] and my judgment in China Medical Technologies Inc[2].  I will not repeat what is said in those two judgments here.  I concluded in para 49 of China Medical Technologies that section 221(3) was narrower in scope than section 221(1) and that whether a document was “relating to a company” is to be determined using a common sense approach, which is essentially commercial and one that a layman will normally be able to understand[3].

6.  In the present case the Liquidators argue that the reality of the fraud perpetrated by the Dayarams means that the flow of money between the Company and Oscoda should be viewed as one matter and that viewing the factual components of the fraud as being in some way distinct is artificial.  Thus, so the argument develops, Oscoda’s bank statements recording receipts and payments forming part of the circulation of money from and back to the Company can properly be viewed as “relating to the Company”, which was the principal corporate vehicle used to perpetrate the fraud.  I agree.

7.  I will make an order that the Bank produces the documents sought. The Bank has quite properly pointed out that not all payments made by Oscoda were to the Company or those associated with the Dayarams and that some protocol is required for excluding unrelated documents or information in documents.  The precise terms of order should be agreed between the Liquidators and the Bank and failing agreement the matter can be referred back to me in writing.  The costs of the Liquidators and the Bank shall be paid out of the assets of the Company.