RE COMSEC TRAVEL LTD

HCCW 467/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 467 OF 2005

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D E C I S I O N

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1.  This is a summons for leave to the applicants in misfeasance proceedings to adduce expert evidence from a forensic accountant.  The respondents are former directors of the company in liquidation.

2.  The parties are in agreement that expert evidence should be allowed.  They have also agreed that the expert’s report should deal with these issues:

“(1)   to identify and explain the procedure of sales of air tickets, the accounting system of the Company and how they were implemented;

   (2)     how Yen Lok perpetrated her wrongful and/or fraudulent acts through the system of the Company.”

3.  The applicants propose that the expert should deal with a third issue, which reads:

“what system should be put in place in respect of sales of air tickets by the Company.”

4.  This is opposed by the respondents, on the ground that the expert evidence on the third issue is inadmissible as it trespasses on the central issue in the misfeasance proceedings and would usurp the function of the court, or is irrelevant.

5.  Mr Coleman, SC submitted on behalf of the respondents that such expert evidence relates to the commercial running of a company and is entirely within the competence of the court.  I do not agree with his submission.

6.  In my view, the expert evidence on the third issue is admissible, relevant and it does not usurp the court’s function in trying one of the central issues in the misfeasance proceedings, which is whether the respondents were in breach of their duty of care and skill to the Company.

7.  It would be of assistance to the court to consider what system should be put in place in respect of the sales of air tickets by the Company, as this would afford a measure by which the conduct in question may be gauged.  As stated in Phipson on Evidence, 16^th ed, para 7-29:

“such evidence does not, of course, bind the trier of fact as a fixed legal standard; it is merely one, amongst other circumstances, by which they may be guided.”

8.  The respondents seek costs incurred by them concerning a previous expert report obtained by the applicants from another forensic expert in May 2008 on the basis that this would be superseded by the report now called for.

9.  Mr Man submitted for the applicants that it is too early to say if the respondents’ costs in that regard have been thrown away, as it remains to be seen whether the new expert’s report will be substantially similar to the previous report.  He suggests it would be more appropriate to reserve the question of costs in that regard.  I am inclined to agree.

10.  I give leave to the applicants to adduce expert evidence from the forensic accountant and a report is to be filed and served by such expert within 21 days hereof to deal with the three issues mentioned above.

11.  I make an order in terms of paragraphs 2 and 3 of the summons.  The question of costs incurred by the respondents in respect of the previous report is reserved and the misfeasance summons is to be restored for a further directions hearing on compliance with the orders I make today on the exchange of expert evidence.

12.  I make an order that the costs of this application be in the cause of the misfeasance summons.