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

BETWEEN

BETWEEN

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(Heard together)

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D E C I S I O N

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The summonses in each of the proceedings

1.  I have before me a summons issued by The Grande Holdings Limited, The Grande Group Limited and The Grande (Nominees) Limited, the 1^st to 3^rd respondents herein, on 7 March 2007, in each of the proceedings, seeking inter alia these orders:

(1)	save as provided in paragraphs (2) and (3), the time allowed to the 1st to 3rd respondents to comply with paragraph 1 of the Orders I made on 4 August 2005 (as varied by the Court of Appeal on 26 April 2006; “the Production Order”) and as extended by my order on 23 January 2007 be further extended to 6 June 2007;
(2)	the time allowed to the 1st to 3rd respondents to comply with paragraph 1C(i)(d) of the Production Order (which relates to the factories in Zhongshan), as extended by my order dated 23 January 2007, be extended generally; and
(3)	the court is to make further directions as appropriate to facilitate the production of documents from HSBC and for the six Zhongshan companies.

2.  For the previous application for extension of time and the history of the matter, I refer to the decision I gave on 23 January 2007.  On that occasion, the 1^st to 3^rd respondents sought an extension of time for three months.  For the reasons in the decision, I refused that application and granted a shorter extension of six weeks for documents to be produced to the liquidators.  The last date by which all the documents should have been supplied was 6 March 2007.  The present summonses were issued on 7 March 2007.

3.  On 30 January 2007, Ruby Lee, the Director of Legal for the Grande group, filed her 5^th affidavit (“the Disclosure Affidavit”) to comply with paragraph 2 of the Production Order, by which the 1^st to 3^rd respondents are required to state on oath by a proper officer, where documentation covered by paragraph 1 of the Production Order is no longer in their possession, custody or control, the nature and extent of such documents, the dates when such documents were removed and to whom, and the present whereabouts of such documents.  The liquidators are of the view that the Disclosure Affidavit was “woefully inadequate”.  In their letter to the respondents’ solicitors dated 8 February 2007, the liquidators’ solicitors pointed out the deficiencies in the Disclosure Affidavit and requested a supplemental affidavit in compliance with the order to be filed within seven days.  Other than a holding reply from the respondents’ solicitors on the same date, nothing further was heard from them.

4.  The respondents’ summonses for time were opposed by the liquidators in their entirety.  The liquidators asked for dismissal of the summonses with costs on a solicitor and own client basis.  On 23 March 2007, the liquidators issued their own summons in each of the proceedings asking for these orders in addition:

(1)	the 1st to 3rd respondents are to file and serve an affidavit which complies with paragraph 2 of the Production Order within 7 days hereof;
(2)	Ho Wing On Christopher and Ruby Lee, the 5th and 6th respondents herein, are to file and serve an affidavit within 14 days hereof to explain various matters relating to the documents contained in exhibit “RL-25” to Ruby Lee’s 6th affidavit, various parts of her affidavit, and various matters relating to the Management Agreement dated 12 November 1999;
(3)	the 1st to 3rd respondents are to produce within 7 days hereof:
	(a)	the originals of the documents in “RL-25” including the original folders in which they were found;
	(b)	the 1st page of the 4-page fax dated 13 December 1999 in “RL-25”;
	(c)	the floppy disks and CD ROMs identified in paragraph 5 of Ruby Lee’s 6th affidavit;
	(d)	all e-mails and other electronically stored data of each of the officers and personnel of the 1st to 3rd respondents relating to the Akai group falling within the terms of the Production Order;
(4)	the 1st to 3rd respondents are to produce within 7 days hereof:
	(a)	a list of all documents for which they claim legal professional privilege to the liquidators and to the court; and
	(b)	all documents which they claim legal professional privilege to the court.

5.  At the commencement of this hearing, I have identified to counsel a total of seven topics covered by the various summonses, and they have addressed me on each of them.  This is my ruling on each of these topics.

(I) Production of documents other than the documents relating to the Zhongshan factories

6.  I have considered the reasons advanced by the respondents why they sought an extension of another three months from 6 March 2007 to comply with the order to produce documents.  They had been conveniently summarised in the submissions of counsel on both sides and I do not propose to repeat them.  I have also taken into account what Mr Carolan for the respondents has told me today and the subsequent letters from the respondents’ solicitors to the liquidators.

7.  I agree with Miss Chan for the liquidators that none of the reasons advanced could be regarded as additional or unforeseen problems.

8.  The application for extension of time must be viewed against the history and the substantial time the respondents had already been given to produce documents, as set out in the decision of 23 January 2007.

9.  The vague assertions in the supporting affidavit, being Ruby Lee’s 6^th affidavit, do not inspire confidence.  I agree with the liquidators there is lack of particularity in the work undertaken to retrieve documents and how the outstanding work is to be progressed with.  It is incumbent on the party seeking indulgence from the court to provide adequate information, if the applicant hopes that the court should take his circumstances fully into account.  I would also mention this is not the first time that criticism was made of vague assertions in the affidavit put forward by the respondents on their alleged efforts towards the production of documents, see paragraph 8 of the decision on 23 January 2007.  So I do not think the respondents can really complain if their application is not favourably entertained, in view of what they chose to place before the court to justify their application that further time should be granted.

10.  Last but not least, the liquidators have drawn the court’s attention to previous assertions made by the respondents in letters and affidavits which the liquidators categorised as evasive or misleading.  There has been a drastic shift in their position.  In the past, in resisting an order for production of documents, the respondents had asserted that they were not in possession of documents relevant to the liquidators’ investigations, and that all relevant books and records had already been delivered up.  Now they claim that documents to be produced are close to 700 lever arch files, and only part of which they have reviewed and delivered.

11.  Miss Chan submitted that Ruby Lee’s 6^th affidavit should be viewed with circumspection, and urged the court not to grant any extension at all.

12.  I will grant a further extension in the exercise of my discretion.  I emphasise this is likely to be the last.  I order that there is to be an extension of 28 days from today to comply with paragraph 1 of the Production Order, other than paragraph 1C(i)(d) of the Production Order (which relates to the factories in Zhongshan).  I have in effect given the respondents seven weeks from the date of their summons to comply with the order, which in the circumstances is a generous extension.

(II) Production of documents relating to the Zhongshan factories

13.  The respondents sought an open-ended extension to produce documents relating to the Zhongshan factories.  I have considered the letters from the Zhongshan joint venture companies and the PRC lawyer.  This kind of extension is not acceptable on the basis of the available information.

14.  As pointed out by Miss Chan, in the earlier affidavits filed by the respondents, no suggestion was made that they have no control over the six joint venture companies in Zhongshan, in each of which a company in the Grande group is a joint venture partner.

15.  It is only in the recent affidavits that the respondents stated they must seek agreement of their joint venture partner before they can provide the documents required by the liquidators.

16.  In the 6^th affidavit of Ruby Lee, she did not specify what equity interest the Grande group has in each of the joint venture companies, or how many directors in the board of each were nominated by the respondents.  Without such information, I shall not assume that the respondents would encounter difficulty or that it would not be within the power and control of the respondents to arrange for documents to be produced in an expeditious manner.

17.  I do not have sufficient information to grant an extension of time, let alone a general extension sought by the respondents.  As I have mentioned, the obligation is on the party seeking an indulgence from the court to provide all necessary information to the court.  The respondents have failed to do so, despite the correspondence exchanged, and the affidavits filed.

18.  I can refuse the application outright, or direct an extension of time for four weeks as for the other documents.  I am concerned if any extension of time is to be given, this should be a period that the party concerned could realistically be expected to comply with.

19.  I will give one last opportunity to the respondents.  I direct the respondents to file and serve a further affidavit in support of their application for extension of time to produce documents relating to the Zhongshan factories by 30 March 2007, 4 p.m.  The liquidators would have leave to file and serve evidence in answer by 2 April 2007, 4 p.m.  I will deal with this part of the summons on paper, without a further hearing.

(III) Production of documents held by other third parties

20.  The liquidators have indicated they will make separate applications against third parties who have relevant documents in their possession, such as the HSBC.  So it is not necessary to address this part of the respondents’ summons.

(IV) Legal professional privilege

21.  Legal professional privilege was claimed by the respondents in a letter of their solicitors to the liquidators’ solicitors dated 12 February 2007 for these two types of documents:

(1)	a correspondence file consisting of correspondence exchanged between RSM Nelson Wheeler Corporate Advisory Services Limited (“RSMNW”) and The Alpha Capital Group Limited,  between RSMNW and the Grande group, between Kenneth Tan Partnership, RSMNW and the Grande group; and
(2)	a communications file entitled “Akai Holdings Limited – HCCW 49 and 50/2000” relating to legal advice to the 4th respondent and others during March to October 2000, when they were represented by Stephenson Harwood and Lo.

22.  This matter was the subject of correspondence in February 2007.  The last letter I have seen is a letter from Stephenson Harwood Lo to the respondents’ solicitors dated 14 March 2007 claiming privilege of nine documents as listed.

23.  The liquidators sought an order from the court to ensure progress is made about this.  I give the following directions:

(1)	the 1st to 3rd respondents are to produce a list of all documents over which they claim legal professional privilege within 14 days hereof, with a letter from the respondents’ solicitors setting out the basis on which legal professional privilege for each of the documents is claimed; and
(2)	in the event the liquidators should notify the respondents’ solicitors that the claim of legal professional privilege is challenged for any of the documents in the list provided in paragraph (1), the respondents are to issue a summons seeking the determination of the claim for privilege within seven days thereafter.

(V) The Disclosure Affidavit – if in compliance with the Production Order

24.  I agree with the liquidators that the Disclosure Affidavit is not in compliance with paragraph 2 of the Production Order.  They have set out in some detail the deficiencies in the letter of their solicitors dated 8 February 2007.

25.  It was asserted in the Disclosure Affidavit that the 1^st to 3^rd respondents are “now not in a position to ascertain whether the documents previously handed over to the liquidators are indeed covered by [the Production Orders]”.  Such vague and equivocal statements in the Disclosure Affidavit are not acceptable.

26.  According to the 1^st affidavit of Ruby Lee, there was a comprehensive tabulation, collation and organisation of the books and records of the Akai group brought to their Singapore office which took them six months to complete, from January to June 2000.  The files were then handed over to an officer in Singapore in June 2000, and he in turn brought them to the liquidators in June and August 2000.

27.  Ruby Lee also alluded to comprehensive lists in support of her assertion that all books and records of Akai had been delivered to the liquidators.

28.  I do not agree with Mr Carolan that the respondents are not now in a position to ascertain the documents which were previously handed over to the liquidators or that they are not able to do so until they have delivered up all the documents as required by the Production Order.  I do not consider the respondents have, in the 6^th affidavit of Ruby Lee, dealt with or answered the liquidators’ complaints of deficiency.  I order the 1^st to 3^rd respondents to file and serve an affidavit which complies with paragraph 2 of the Production Order within seven days hereof.

(VI) Affidavits from the 5^th and 6^th respondents

29.  The liquidators sought further affidavits from the 5^th and 6^th respondents to explain matters relating to the Management Agreement and documents relating to the document production.  These affidavits were sought under section 221.  The liquidators accepted that this is not a usual course.

30.  Mr Carolan submitted that the matters requiring further investigation should be taken up with the 5^th and 6^th respondents when their oral examinations are to resume.  I understand for the 6^th respondent, that is Ruby Lee, her oral examination is to resume on 21 and 22 May 2007.  I have no idea when the oral examination of the 5^th respondent, Christopher Ho, is to resume.

31.  The liquidators’ enquiries are justified in the circumstances.  I do not propose to set out what they are or the reason for them.

32.  If questions are bound to be taken up at the resumption of the oral examinations, it seems to me there is no reason why the 5^th and 6^th respondents should not each provide an affidavit on the enquiries in advance.  This would assist the oral examinations, shorten the time and speed up the process.

33.  I make the following order:

The 5^th and 6^th respondents are each to provide an affidavit in terms of paragraph 4 of the liquidators’ summons, within 14 days hereof.

(VII) Production of other documents sought in the liquidators’ summons

34.  This relates to paragraphs 5 to 8 of the liquidators’ summons.

35.  I think justification for production is made out for the documents in paragraphs 5 and 6, so I order the 1^st to 3^rd respondents to produce, within 7 days hereof, the documents in paragraphs 5 and 6 of the liquidators’ summons.

36.  In the event the respondents are unable to produce any of the documents, as such documents are no longer in their possession, custody or control, this should be dealt with in the Disclosure Affidavit required to be made under paragraph 2 of the Production Order.

37.  I decline to make an order relating to paragraphs 7 and 8 of the summons, covering the floppy disks, CD ROMs, e-mails and other electronically stored data, to give the respondents an opportunity to review them before production, within the extension of time I have granted.

Costs

38.  The liquidators asked for costs on a higher basis for two reasons.  Firstly, the application was for a further indulgence of time.  Secondly, they have criticized the affidavits filed on behalf of the respondents for evasive and misleading statements. 

39.  I agree a case is made out in this situation for ordering costs on a higher scale.  I order the costs of both summonses to be paid by the 1^st to 3^rd respondents to the liquidators forthwith and be taxed on a solicitor and own client basis.