CHEN YUNG NGAI KENNETH AND ANOTHER v. THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD

HCB 3819/2011

[2023] HKCFI 1429

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

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Re: HO YUK WAH DAVID (the “Discharged Bankrupt”)

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D E C I S I O N

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A.  Introduction

1.  This is the hearing of a summons filed on 28 March 2023 by the Trustees in Bankruptcy (“Trustees”) of David Ho under section 29 of the Bankruptcy Ordinance (“BO”) for an order requiring the Respondent (“HSBC”) to produce documents relating to a specified bank account. HSBC has been served with the application papers and remains neutral to the application.

2.  The Court may, on the application of the trustee, order production of documents under section 29 BO against any person whom the Court may deem capable of giving information respecting the bankrupt, his dealings or property. The legal principles have been summarized in the decision of this Court in Re Ho Yuk Wah David (Bankrupt) (No. 5) [2020] 2 HKLRD 608 at §§22, 31 and 47, Au-Yeung J; affirmed on appeal in Chen Yung Ngai Kenneth v. Alan Chung Wah Tang, CACV 83/2020, 19 January 2022 at §12.

3.  In gist, the Trustees must satisfy the Court that the information or documents “relate to the bankrupt, his dealings or property”; that the provision of information or documents is reasonably required for them to carry out the Trustees’ functions; and that the respondent is able to provide such information or documents. The standard of proof is reasonable suspicion.

B.  Circumstances Leading to Reasonable Suspicion

4.  On 13 January 2023, this Court gave an order in this case requiring 2 firms of solicitors, Hugil & Ip (“HIP”) and Odham, Li & Nie (“OLN”) to produce various classes of documents pursuant to section 29 BO (“HIP/OLN Order”). Those documents were said to relate to the funding provided by D2 to D5, D8 and D9 (“971 Defendants”, all corporations) of HCA 971/2012 (“971 Action”). HIP and OLN had, one after another, been the legal representatives for the 971 Defendants at the material times.

5.  In the Decision ([2023] HKCFI 151, 13 January 2023, Au‑Yeung J) which led to the HIP/OLN Order, the bases of the Trustees’ application against HIP and OLN were that:

(1)  The 971 Defendants have been found in the 971 Judgment to be nominees of David Ho and hence belong beneficially to David Ho. The Trustees have stepped into the shoes of David Ho;

(2)  Yu Yang (the former brother-in-law of David Ho) and Liu Shu (a person closely associated with David Ho by reason of her association with Yu Yang) were found to be nominees of David Ho (§§25 & 26);

(3)  Yu Yang and Liu Shu essentially controlled the 971 Defendants at the material time of the 971 Action, when HIP or OLN were the instructing solicitors for the 971 Defendants (§§25 & 26); and

(4)  the Trustees have always suspected that David Ho was involved in funding arrangements for various actions and took the view that those nominees’ litigation expenses for the trial of the 971 Action must have been funded or at least related to David Ho, given that the 971 Defendants, Yu Yang and Liu Shu were found to be his nominees (§30).

6.  Pursuant to the HIP/OLN Order, OLN produced documents to the Trustees which showed, amongst others, that a total of HK$4.8 million was remitted to OLN. Out of that, HK$1.5 million were remitted by one Shang Jinglin on 16 July 2019; and a total of HK$3.3 million was remitted from an account in HSBC no. 718-5xx5xx-888 (“Unidentified Account”) to OLN 2019 and 2020.

7.  The HK$3.3 million were costs on account (“COA”) to OLN, with specific instructions to allocate HK$120,000 for Gladius (a 971 Defendant), and the rest in relation to Grassmere (a defendant in HCA 2587/2017 and/or HCA 2507/2017).

8.  It was apparent that:

(1)  Although all such funds came under OLN’s file for the 971 Action, the 971 Defendants were not parties to HCA 2587/2017 and/or HCA 2507/2017;

(2)  None of the funding came from the 971 Defendants themselves, or the bank accounts of Yu Yang or Liu Shu, who were shareholders/directors of the 971 Defendants;

(3)  Alison Sun Li Hua (“Sun”) was a PRC individual whom the Trustees alleged to be a nominee of David Ho ([2023] HKCLC 135, Au-Yeung J, §§25(5), 26). She gave instructions to HIP and OLN on behalf of the 971 Defendants to make remittances to the client accounts of OLN from the Unidentified Account. Sun was neither a director nor shareholder of any of the 971 Defendants at the material time of the 971 Action. OLN alleged that they have documentary proof that Sun had authority to represent the 971 Defendants but that was not produced to the Trustees because it was not covered by the HIP/OLN Order.

9.  The Unidentified Account has probably been closed by its account holder. The Trustees asked OLN for details of the account holder of the Unidentified Account but OLN declined, saying that it was not covered by the HIP/OLN Order. Hence the Trustees took out the present Summons, asking HSBC to produce to them:

(1)  the details, records and/or documents in connection with the opening and closing of the Unidentified Account (including the bank account for any remittances made for the purposes of account closure); and

(2)  the details and/or records of all transactions in the account or accounts including, without limitation, bank statements, bank vouchers, forms, instructions, transaction advices, cheques and correspondence;

from the account opening date to account closing date of the Unidentified Account, and the bank accounts and other bank accounts also held by the account holder of the Unidentified Account.

10.  The Trustees have by letter dated 25 May 2023 clarified that they only seek the consolidated accounts under the Unidentified Accounts.

11.  In the light of §§6-8 above, I find that the disclosure by OLN did confirm the Trustees’ reasonable suspicion which led to the HIP/OLN Order. The Trustees now also have reasonable suspicion that the remittances from the Unidentified Account to OLN as COA for the 971 Action represented that the account holder was related to David Ho, as that person was funding the defence to that action for the benefit of David Ho. The documents sought do relate to the bankrupt, his dealings or property.

C.  Necessity for the Documents

12.  The Trustees seek the documents to ascertain:

(1)  the account holder of the Unidentified Account;

(2)  the amount of funding remitted to, and out of, the Unidentified Account;

(3)  the person who remitted funds into the Unidentified Account;

(4)  what other matters the Unidentified Account was funding; and

(5)  whether any of the account holders, the remitters to the Unidentified Account, or the recipients of funds of the Unidentified Account is related to David Ho or his nominees.

13.  The scope of documents is limited. I accept that the Trustees reasonably require the documents sought in order to trace and collect in assets of David Ho and pay his creditors.

D.  Ability of HSBC to Provide the Documents

14.  In response to the letter of the Trustees’ solicitors dated 21 March 2023 requesting for production, HSBC informed the Trustees that they have no objection to the granting of an order in the terms set out in the draft order attached to that letter. I am satisfied that the documents sought are within the custody or power of HSBC.

E.  Exercise of Discretion

15.  The Trustees have made reasonable efforts to try and seek the documents before taking out the present summons:

(1)  They have requested for the documents from OLN, who have refused the request.

(2)  Even if the Trustees were to issue another section 29 BO application against OLN, OLN would not be able to provide all or part of the information now sought by the Trustees.

(3)  The Trustees have tried to ascertain the identity of the account holder of the Unidentified Account at the ATM machine but the name of the account holder could not be ascertained.

(4)  The Trustees have written to HSBC to see if the latter would agree to disclose the documents sought but HSBC reasonably asked for a court order to be able to make the disclosure.

16.  The source of the information is in any event with HSBC. Confidentiality is not bar to an order for disclosure: Re Ho Yuk Wah David [2023] HKCLC 135 at §19.

17.  The Trustees have exhausted all reasonable avenue to obtain the documents. It is thus most cost-effective for the Trustees to investigate the Unidentified Account by this Summons against HSBC directly.

F.  Conclusion

18.  The Trustees have made out a case under section 29 BO. The threshold test of reasonable suspicion has been met. I exercise my discretion to grant an order in terms of the Summons. HSBC shall have 42 days from the date of service of the order on them to comply. There be no order as to costs of the Summons.