LAU WU KWAI KING, LAUREN AND ANOTHER v. MA KAM FOOK ROBERT AND ANOTHER

HCMP 799/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 799 OF 2005

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D E C I S I O N

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1.  I have three applications before me.  They are as follows:

(1)	an originating summons issued on 20 April 2005 by the liquidators of Central Pacific Enterprises Limited (in members’ voluntary liquidation) (“the Company”) under sections 221 and 255(1) of the Companies Ordinance, Cap.32, seeking an order to examine orally Mr Ma Kam Fook Robert (“Mr Ma”) and orders against Mr Ma and Trident (Asia) Limited (“Trident Asia”) (collectively “the Respondents”) for production of documents relating to the Company;
(2)	a summons issued by the liquidators in these proceedings on 20 April 2005 for an order that an Anton Piller order I granted on the liquidators’ ex parte application on 18 April 2005 and amended on the following day (“the Anton Piller Order”) be continued until further order; and
(3)	a summons issued by the Respondents on 5 May 2005 for an order that the Anton Piller Order be discharged or varied.

2.  The Anton Piller Order was granted on 18 April 2005, shortly after the private examination of Amy Lui Pui Wing (“Ms Lui”) had taken place before me on 14 and 15 April 2005.  Ms Lui was a director of the Company at the time it went into voluntary liquidation and a former employee of Trident Asia.  The Anton Piller Order is in aid of the relief sought in the originating summons to be issued under section 221.  I am satisfied that I have the jurisdiction to do so in this situation, having been referred to Re Oriental Credit Ltd [1988] Ch 204; Morris v. Murjani [1996] 1 WLR 848; and Practice and Procedure of the Companies Court by Boyle & Marshall, 1997 ed, para. 15.3.3.  No suggestion was made at the inter partes hearing today that there is any lack of jurisdiction to grant an Anton Piller order in this kind of situation.

3.  The Company is a subsidiary of Pacific Electric Wire & Cable Co Ltd  (“PEWC”), the latter was one of the largest listed companies in Taiwan.  PEWC became de-listed in about April 2004, when it was unable to satisfy the regulatory authorities in Taiwan that the writing off of an unsubstantiated US$266 million was properly classified as investment losses.  In 2004, two of the former directors of PEWC and of the Company were indicted in Taiwan for fraud.

4.  On 4 November 2003, I made an order on the application of PEWC to declare the dissolution of the Company void.  The object of that exercise was to enable the Company to take steps to reconstruct its books and records by recovering them from banks and other third parties and to investigate what had happened to funds transferred through the Company.  By the same order, I appointed professionals from PricewaterhouseCoopers as liquidators to investigate numerous transactions and transfers of funds between the Company, PEWC and the affiliated companies.  The present liquidators were appointed by an order made on 27 August 2004.

5.  The documents covered by the Anton Piller Order were set out in Scheduled 2 thereto.  They are the books, papers, writings, documents, computer discs and other articles and property relating to the Company or its subsidiaries, affiliated and/or connected companies, or to companies in the PEWC group or having dealings with the Company or the PEWC group, including but not limited to the 38 companies listed in that schedule.

6.  The Anton Piller Order was executed on 19 April 2005 and execution was completed 10 days later on 29 April 2005.  During that period, a substantial volume of documents in 42 boxes were removed from the premises after going through an agreed procedure and returned to the Respondents within 2 days after copies were made.  In addition, 10,041 data files were retrieved from the Respondents’ file server.  As the Respondents have not had opportunity to review and raise objection to removal of these data files, a procedure was agreed by which all the data files were saved onto a computer disc, one copy of which was provided to the Respondents to allow them to identify which files they would agree to removal of and which files they would object, a second copy of the computer disc was sealed in an envelope and delivered to the liquidators’ solicitors for safekeeping, pending further order of the court.

7.  I am informed by Mr Mak who appeared for the Respondents that the Respondents have not as yet completed their review of the data files as of today.  So the liquidators’ application for continuation of the Anton Piller Order in respect of such data files would have to be adjourned for future consideration.

8.  I turn to consider the Respondent’s application for discharge of the Anton Piller Order and the liquidators’ summons for continuation of that order.  The Respondents seek a discharge of the Anton Piller Order on the basis of material non-disclosure.  Specifically, they complained of non-disclosure of the following:

(1)	a letter of the 2nd Respondent’s solicitors to the liquidators’ solicitors dated 23 March 2005; and
(2)	a writ issued by PEWC, the parent company of the Company, against 15 defendants, one of them being Mr Ma, in HCA No. 2203 of 2004 (“the High Court Action”) on 23 September 2004.

9.  The letter dated 23 March 2005 was not exhibited to the liquidators’ affirmation in support of the ex parte application, although it was included in the bundles for hearing in the private examination of Ms Lui.

10.  I have reviewed the correspondence between the liquidators, the Respondents and their respective solicitors from November 2003 to March 2005.  The letter dated 23 March 2005 was the last in a series of letters from the liquidators seeking documents and information from the Respondents and requesting a meeting.  In this letter, the 2^nd Respondent sought to answer the queries raised by the liquidators’ solicitors regarding an earlier letter of the 2^nd Respondent’s solicitors dated 18 February 2005.

11.  It is better that this letter should have been exhibited to the liquidators’ affirmation in support of the ex parte application.

12.  However, I do not see this letter as having the sort of importance now sought to be placed by the Respondents, and I do not think this letter has shown any real co-operation on the part of the Respondents.

13.  The letter has no bearing to the material issue if the 2^nd Respondent’s denial that it has possession, power or custody of the Company’s documents has been rendered doubtful by Ms Lui’s evidence in the private examination.  I do not think it material to the exercise of my discretion if the Anton Piller Order should be granted.  I hold there is no material non-disclosure in this instance, and I do not agree that the failure to mention this letter would have given a misleading picture to the court of the steps hitherto taken by the 2^nd Respondent to respond to the liquidators’ requests for documents and information.

14.  As for the writ in the High Court Action, it was not issued by the Company, which is not a party in that action.  The liquidators did not deny knowledge of the writ, they only asserted they had no knowledge that the writ had been served on Mr Ma.  The liquidators have also asserted that they had not liaised with the management of PEWC its claim against Mr Ma in the High Court Action, nor had they taken instructions from PEWC before they decided to embark on the present application against the Respondents for an order of examination and production of documents under section 221.  I see no reason to doubt that assertion.

15.  The claim in the High Court Action is in respect of shares in PacMOS Technologies Holdings Ltd  (“PacMOS”), allegedly acquired with funds provided by the PEWC group but these shares were registered in the name of another entity and did not feature in the assets of the consolidated balanced sheet of PEWC.

16.  The PacMOS investment is one of the matters that the liquidators would wish to investigate.  The existence of the High Court Action might have some bearing on the exercise of my discretion whether to order a private examination of Mr Ma, as I will consider in due course.  But it has no bearing on the material issues in granting the Anton Piller Order, and that is whether there is a strong prima facie case of possession of documents by the Respondents and a real likelihood of destruction of documents by the Respondents.  The existence of this writ would not have affected the exercise of my discretion in granting the Anton Piller Order.  So for that reason, I also find there is no material non-disclosure.

17.  The Respondents have also complained of delay in seeking an Anton Piller order.  I am quite unable to see any delay on the part of the liquidators.  The application was taken out on the Monday after the private examination of Ms Lui was adjourned the previous Friday.  In the course of that examination, the liquidators obtained useful information to cast doubt on the assertion repeatedly made by the Respondents’ solicitors that the Respondents did not have in their possession, power or custody documents relating to the affairs of the Company.  It was also during the examination that it became apparent the Respondents might have a much greater degree of involvement in the affairs of the Company than what was previously asserted in the letters of their solicitors.  I do not think the liquidators could be criticised for making the application for an Anton Piller order only after they had assessed the situation as a result of Ms Lui’s private examination.

18.  The liquidators seek a continuation of paragraphs 5 and 4 of the Anton Piller Order.  By paragraph 5, the Respondents are required to inform the liquidators’ solicitors immediately the whereabouts of all the items covered by the order and within 7 days after service of the order, Mr Ma is required to swear an affidavit confirming the information given.  By paragraph 4, the Respondents are required to deliver immediately to the liquidators’ solicitors any of the items covered by the order in their possession, power or custody and give access to computers.

19.  Pursuant to paragraph 5 of the Anton Piller Order, Mr Ma has made 2 affirmations on his own behalf and on behalf of Trident Asia on 26 April 2005, stating that to the best of his recollection, the items covered by the order, if any are in existence, are situated at 4 premises, to which the liquidators have gained access.

20.  The liquidators say that notwithstanding these 2 affirmations, there is no proper compliance with paragraph 5 of the Anton Piller Order and pointed to the incident relating to an index of the Company’s documents which they discovered in the execution of the order.  I have considered the correspondence between the parties on this.  I consider the response from the Respondents somewhat perfunctory.

21.  I accept the liquidators’ submission that it is appropriate that paragraphs 5 and 4 of the Anton Piller Order should be continued.  It is, however, not necessary for me to make an order in that respect because Mr Mak has given an undertaking on behalf on the Respondents in the event that the application for discharge of the Anton Piller Order is unsuccessful.  The 1^st and 2^nd Respondents have undertaken by counsel to do the following:

(1)	to file and serve an affirmation within 14 days hereof stating:
	(a)	whether he or it is now in possession, custody and/or control of any of the documents identified in the index exhibited to the 1st affidavit of Yeung Ka Wing filed on 7 May 2005 as “YKW-4”;
	(b)	if he or it does not now have possession, custody and /or control of any such documents, whether any of them had been in his or its possession, custody and/or control and if so, what had become of them; and
	(c)	what steps and what inquiries had been made by him or it to ensure that his or its answers to (a) and (b) above are truthful, accurate and reliable; and
(2)	to comply with paragraph 4 of the Anton Piller Order in respect of the documents in paragraph (1) of the undertaking.

22.  I accept the undertakings given on behalf of the Respondents. On that basis, I would not make any order on the liquidators’ summons for continuation of the Anton Piller Order save as follows: the liquidator’s summons is to be adjourned sine die with liberty to restore as regards the data files retrieved from the Respondents’ file server and stored in a compact disc as mentioned earlier.  I further direct that the party seeking to restore this application is to serve on the other party the evidence relied on 7 days before the restored hearing.

23.  I turn to consider the originating summons.  The focus of the liquidators’ current investigation is on a series of transactions entered into by the Company prior to its voluntary liquidation under which the Company’s debts totalling US$267 million, with receivables of some US$187 million, were purportedly transferred to Mae Sai Enterprises Ltd (“Mae Sai”).  After the purported transfer, Mae Sai purported to extinguish the receivables by setting them off against the debts and then waived the net balance of indebtedness of the Company of US$80 million.  This enabled the Company’s directors to make a declaration of solvency and for the Company to go into voluntary liquidation.

24.  At least 8 other areas of investigation were mentioned in the liquidators’ supporting affirmation:

(1)	the general conduct of the Company’s business including the role or function of the Company within the PEWC group and transactions with other companies in the group including but not limited to 161 companies listed in exhibit 15 to the affidavit of the former liquidator Mr. Rainier Lam;
(2)	payments out of the Company’s bank accounts in excess of US$60 million from January 1996 to December 1996, all of which were authorised by Mr Ma, an authorised signatory of the Company’s bank accounts;
(3)	deposits into the Company’s bank accounts totalling US$95 million on the instructions from Trident Asia, of which Mr Ma acted as managing director at the material time, from January 1996 to May 1997;
(4)	the specific purpose and terms of a bank loan of US$12.5 million provided to the Company in June 1994;
(5)	the precise relationship between the Company and Trident Asia, including the nature of the management and other services provided by Trident Asia to the Company, the remuneration paid to Trident Asia, and the purpose of the Company’s nominal share holding in Trident Asia at one time;
(6)	the background and basis for the purported transfer in 1998 by the Company to Mae Sai of, inter alia, US$183 million of the Company’s receivables and the prospects of recovery of the same;
(7)	the projects set out in paragraphs 26 to 38 of the affidavit of Mr Rainier Lam and the transactions listed in the Company’s management accounts for the period ended December 1998; and
(8)	the circumstances which led to the appointment of 2 employees of Trident Asia as directors of the Company in October 1999, shortly before the Company was put into voluntary liquidation.

25.  Mr Ma was apparently involved in the affairs of the Company during 1994 to 1999.  Although he was not a director or officer, he was an authorised signatory of the bank accounts of the Company.  He acted for the Company in issuing instructions to the banks.  He issued instructions for the transfer of substantial funds out of the accounts, and issued instructions to the Company’s auditors.  Also, he appeared to have participated in the day-to-day affairs of the Company, signing correspondence on the letter paper of the Company.  There was evidence that he had advised PEWC on the latter’s corporate structure, and he would appear to have participated in the maintenance of the Company’s books and records through Trident Asia; the latter had taken on the role as bookkeeper and manager of the account records of the Company, its subsidiaries and affiliated companies.

26.  Mr Ma was a director of NM Bank Ltd (“NM Bank”), a company incorporated in Vanuatu and formerly known as Central Pacific Bank Limited and Trident Bank Limited.  In March 1997, the Company had advanced US$61.5 million to NM Bank, not recorded in the books of the Company as receivable or in the books of NM Bank as payable, but recorded in the books of PEWC as debts owed by PEWC to the Company.  These debts were lost or extinguished in the course of the Mae Sai transfer.

27.  Mr Ma is clearly a person who could and should assist the liquidators in their inquiries.  I am satisfied that reasonable requirements are made out for the private examination of Mr Ma.

28.  The submission that was made on his behalf was to adjourn the application for private examination until after the conclusion of the High Court Action, so as not to put the liquidators in a better position than an ordinary litigant.  As I have mentioned, the Company is not a party to the High Court Action.  A statement of claim has not been served on Mr Ma and for that he has obtained an unless order against PEWC that if the statement of claim is not served by 13 May 2005, the claim against him will be struck out.

29.  I see no reason to postpone the private examination.  The High Court Action may not come on for trial until a long time.  The investment in the PacMOS shares being the subject of that action is but one of the many areas of investigation of the liquidators.  Very substantial sums are involved in the transactions to be investigated.

30.  Although Mr Ma was not a director or officer of the Company, he apparently had substantial involvement with the Company and its affairs, and is not an ordinary third party.  Providing assistance by answering written questions does not seem to me the way to take matters forward, having regard to the past correspondence and the complexity of the transactions under investigation.

31.  I have had regard to the guidance in various authorities cited by Mr Mak on possible oppression where civil proceedings have been commenced, in particular, Shierson v. Rastogi  [2003] BPIR 148 at paras 48, 57 to 62.  I reject the submission this is not a case in which the liquidators seek to reconstruct the knowledge of the affairs of the Company and to enable them to recover assets, and that the application was made for the collateral purpose of improving the position of the parent company in the High Court Action.  I am firmly of the view that my discretion should be exercised in favour of the liquidators.

32.  I am informed by Mr Pow that the liquidators would not proceed with paragraphs 3 and 4 of the originating summons for the production of documents, in view of the undertakings given by the Respondents mentioned earlier.

33.  I make the following orders and directions on the originating summons : 

(1)	Mr. Ma be summoned to attend before a Master in Chambers at a time to be fixed to be examined on the part of the liquidators in relation to the affairs of the Company;
(2)	the liquidators be at liberty to examine Mr Ma both in his personal capacity and in his capacity as managing director of Trident Asia, under section 221 of Cap 32 as extended by section 255(1), in relation to the affairs of the Company as more particularly set out in the affirmation of the liquidators dated 18 April 2005;
(3)	the parties are to seek directions from a Master by letter or otherwise, as to the estimated length of hearing; and
(4)	the liquidators do provide to the Master and the Respondents an outline of the major areas intended to be covered in the examination of Mr Ma when they seek directions as to the estimated length of hearing.

34.  I make the following orders as to costs:

(1)	In respect of the liquidators’ summons for continuation of the Anton Piller Order and the Respondents’ summons for discharge, I award the costs of these two summonses to the liquidators against the Respondents, save and accept the costs of copying the documents in bundles (B) to (D) to be served on the Respondents, as I do not think it necessary to include these documents in the supporting affirmation in the ex parte application.
(2)	For the costs of the ex parte application on 18 April 2005 which I have reserved, I order costs to be in the cause of the examination hearing.
(3)	For the costs of the originating summons, I also order costs to be in the cause of the examination hearing.