BANK OF CHINA (HONG KONG) LTD v. NEW NONGKAI GLOBAL INVESTMENTS LTD

HCA2062/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2062 OF 2003

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D E C I S I O N

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THE COMPANIES

1. New Nongkai Global Investments Limited ("NNG") was incorporated under the laws of the British Virgin Islands on 21 January 2002 and was registered as an overseas company under Part XI of the Companies Ordinance on 6 August 2002. It is and was at all material times wholly owned by Chau Ching Ngai ("Chau"), who is also its sole director. NNG is the parent company of a substantial property development group based in Hong Kong and Shanghai.

2. NNG holds 75% shareholding of Shanghai Land Holdings Limited ("SHL"). For the purpose of financing the acquisition by NNG of SHL's shares in or about 2002, Bank of China (Hong Kong) Limited ("BOC") granted to NNG a demand land facility of up to HK$2,107,000,000.00 pursuant to a loan agreement dated 23 April 2002 as supplemented by a supplemental agreement dated 3 May 2002 and a second supplemental agreement dated 12 June 2002 ("the Facility"). The actual amount drawn down was HK$1,777,122,079.94. As part of the security for the Facility, NNG executed a share mortgage dated 13 June 2002 in respect of its shares in SHL in favour of BOC. The shares were then transferred to Bank of China (Nominees) Limited. It is NNG's case that it remains the nominee shareholder of those shares.

3. SHL was incorporated under the laws of Hong Kong. Its shares are listed on the Hong Kong Stock Exchange with stock code 0067. It is the holding company for a group of property holding and development companies operating in Shanghai. SHL's board of directors comprises the following members :

Executive Directors

Chau (Chairman)
Gong Bei Ying
Jiang Dong Liang
Mao Wei Ping
Shan Zhenglin
Koo Hoi Yan, Donald

Non-executive Directors

Tan Lim Heng
Fan Cho Man

Independent Non-executive Directors

Mok Chiu Kuen
Liu Lit Man

Madam Mao Yuk Ping ("Mao"), Chau's wife, is the general manager of the SHL group of companies and a director of many of the subsidiaries.

APPOINTMENT OF RECEIVERS

4. On or about 28 May 2003, it was widely reported in the media here and in Shanghai that Chau had been put in custody by the Mainland authorities in connection with alleged irregular activities relating to loans of over RMB$10 billion and non-payment of land use fees. The news adversely affected the share price of SHL, which plummeted throughout the week of 28 May 2003. Eventually, trading of SHL's shares was suspended on 2 June 2003.

5. On or about 1 June 2003, Mao was arrested by the ICAC and was later released on bail of HK$10 million. At the same time, the ICAC searched the office of SHL at The Center, No.99 Queen's Road Central, (also then the registered office of NNG) and removed documents relating to both SHL and NNG.

6. The above events then triggered legal proceedings.

7. On 6 June, BOC commenced the present proceedings, that is, HCA2062/2003 claiming against NNG for the sum of HK$746,445,419.77 being the balance of the loan due under the Facility. On 13 June, BOC obtained an order from Sakhrani J appointing Kennic Lui and Ruby Leung as interim receivers and managers for NNG ("the NNG Receivers"). In the affirmation of Fred Kwok Chak Wah filed on 7 June 2003 in support of the appointment of NNG Receivers, a number of transactions were described as "intrigue movements of funds" which were intended to circumvent certain controls agreed upon when the Facility was granted. BOC applied for the appointment of the NNG Receivers to preserve NNG's assets and to preserve and safeguard the assets of SHL, including a deposit of about HK$1.2 billion.

8. Earlier on 7 June, SHL applied to court by an ex parte originating summons in HCMP2414/2003 for an order appointing Stephen Liu and Yeo Boon Ann as its receivers ("the SHL Receivers"). In the affirmation of Donald Koo (one of the executive directors) filed on 7 June, he described certain unorthodox loan transactions concerning SHL's subsidiaries which had come to light recently. Those unauthorised and suspicious transactions concerned 25% of the net asset value of SHL. Sums in the order of RMB$650 million from the transactions appeared to be in the hands of third parties. Only two of the six executive directors were in Hong Kong. All the independent and non-executive directors sought the appointment of the receivers to protect the assets of SHL. It is Koo's view that there was no real governing body of executive directors of SHL or, alternatively, that the board of directors was not managing SHL's business. The application was allowed by Sakhrani J on the same date.

NNG RECEIVERS' APPLICATION

9. On 13 June, by an ex parte application on notice, the NNG Receivers applied for an order that :

"1. [The NNG Receivers] do take such steps as are necessary to obtain from [SHL] (whether acting by Mr. Stephen Liu and Mr. Kenneth Yeo of Ernst & Young Transactions Limited as [the SHL Receivers] or otherwise) access to such books, records and information relating to the assets, liabilities and affairs of SHL and its subsidiaries and access to such premises of SHL and its subsidiaries as [the NNG Receivers] may request for the purpose of enabling them to carryout their duties.

2. Mr. Stephen Liu and Mr. Kenneth Yeo (as [the SHL Receivers]) do provide to [the NNG Receivers] co-operation and assistance by complying with all reasonable requests made pursuant to paragraph 1 of this Order, subject to such confidentiality or other terms as may be reasonable.

3. [The NNG Receivers] do take such steps as are necessary to access how [NNG's] assets, including its shares in [SHL], should be dealt with, in particular to assess whether a sale of such assets may be in the interests of [NNG], including obtaining such valuation or other advice as [the NNG Receivers] may deem necessary.

4. For the purposes of the assessment referred to in paragraph 3 of this Order, [the NNG Receivers] be authorised to enter into discussions with any potential purchasers of any assets of [NNG], to provide any relevant information to potential purchasers (subject to such confidentiality, exclusivity or other terms as may be reasonable), accept deposits (refundable or otherwise) from potential purchases and to enter into agreements to sell any of [NNG's] assets provided that any such agreement will be subject to and conditional upon [the NNG Receivers] obtaining sanction of the Court before the agreement can be completed.

5. [The NNG Receivers] be authorised to take any other steps which may be necessary to assist them in the exercise of their powers and duties."

10. The events that led to the application was put forward in the First Report of the NNG's Receivers thus :

"9. On 10th June 2003, [the NNG Receivers] received an unsolicited offer from a well-known and substantial party, subject to contract and due diligence, to purchase [NNG's] shares in [SHL] for HK$750 million. For confidentiality reasons (related to the Takeovers Code and otherwise) the details of this offer are not disclosed in this report. [The NNG Receivers] propose to produce to the Court a copy of the solicitors' letter by which the offer was made at the hearing of the proposed application for further directions. The offer is expressed to be open until 21st June 2003, following which the offeror may at any time withdraw the offer. [The NNG Receivers] believe that the offer is genuine and made by a party capable of paying the proposed price.

10. As would be expected, the offeror and its appointed representatives and professional advisors wished to be given the opportunity to review the books and documents (including all security, mortgage and/or pledge documents), to visit the facilities and properties (if any) of [SHL], including subsidiaries and associates, and to review its operations, business and prospects.

11. Without access to the books and records (and premises) of [SHL] and its subsidiaries, the Receivers would be unable to facilitate the due diligence which has been requested. [The NNG Receivers] have written to Ernst & Young to ask whether [SHL] will co-operate (see Appendix D). No response has been received to that letter (but see the response from Wilkinson & Grist referred to at paragraph 7 above).

...

14. [The NNG Receivers] respectfully request directions from this Honourable Court for the purpose of obtaining access to the books and records and premises of [SHL] and its subsidiaries. [The NNG Receivers] also respectfully request directions empowering them to take such steps as may be necessary to explore whether an immediate sale of the shares in [SHL] would be in the interest of [NNG].

15. [The NNG Receivers] would not wish to complete any sale without seeking the Court's sanction, having placed before the Court evidence upon the basis of which the Court can be satisfied whether or not a sale is in the interests of all interested parties. In the meantime, however, it is respectfully submitted that [the NNG Receivers] need the widest possible powers (short of completing a sale) for the purpose of being able properly and thoroughly to assess [NNG's] options."

The offer described in paragraph 9 of the First Report will be referred to as "the Offer" below.

11. At the hearing before me on 13 June, the NNG Receivers were represented by Mr Leong, SC. The SHL Receivers did appear by Mr Fung, SC, but effectively refused to submit to the jurisdiction of this court. Submissions on certain procedural and preliminary matters were then made. Mr Fung did not make any submissions on paragraphs 1, 3 to 5 of the proposed orders as he took the view that they did not concern the SHL Receivers. I then made an order in terms of paragraph 1, 3 to 5 and adjourned paragraph 2 (which affects the SHL Receivers) to 18 June 2003 (which was subsequently vacated). I also directed that a copy of the letter containing the Offer be disclosed to the SHL Receivers upon an undertaking, inter alia, not to disclose the same to persons other than those identified in the undertaking. The matter eventually came back before me on 12 and 14 July.

EVENTS AFTER THE HEARING ON 13 JUNE 2003

12. The matters had developed further since the last hearing on 13 June. The following events gathered from the further reports filed by the NNG Receivers and the affirmations filed by the SHL Receivers are pertinent :

(1) Meetings of the Receivers

13. The two sets of receivers met on 14 June. A schedule of information requested by the NNG Receivers was given to the SHL Receivers at that meeting. The NNG Receivers were told that the SHL Receivers would consider their position further and that meanwhile they intended to make an announcement of all SHL shareholders providing information concerning SHL's assets and liabilities. In the end, the parties were unable to resolve the difference.

(2) Application before Deputy Judge Lam

14. On 17 June, the SHL Receivers applied ex parte to Deputy Judge Lam for leave to, inter alia, take all reasonable steps as may be reasonably necessary to resist NNG Receivers' outstanding application. In the First Report filed by the SHL Receivers dated 17 June 2003 in support of the ex parte application before Deputy Judge Lam, they referred to the comments of the financial advisor on the aforesaid offer and indicated that they would not accede to the NNG Receivers' request. In particular, they were very concerned with the following matters :

(1) Most of the books, records and documents of SHL have been seized by the ICAC on June 2003.

(2) The SHL Receivers do not have the original of the books, records and documents of the subsidiaries of the group. Verification of the copy documents is yet to be carried out. Arrangements have been made the SHL Receivers and their solicitors to visit Shanghai shortly for the purposes of ascertaining the whereabouts of the originals of the relevant documents, meeting the relevant personnel of the Shanghai subsidiaries and/or their related companies.

(3) It is the intention of the SHL Receivers to consult the SHL board about the details of the Offer. However, due to the confidentiality undertakings, the SHL Receivers have been unable to communicate to the board of directors on this manner.

(4) According to newspaper reports, there are at least four to five investors which have indicated an interest to the BOC to purchase NNG's 75% shareholding in SHL. It is not clear whether all these parties are serious buyers. However, by virtue of Rule 6 of the Code on Takeovers and Mergers, if the SHL Receivers have provided information to one offeror or potential offeror, they should, on request, furnish equally such information to any other offeror or potential offeror who may not be serious offeror or potential offeror.

The application was allowed by the deputy judge.

(3) Announcement of the Offer

15. On 23 June, the solicitors acting for the SHL Receivers ("WG") wrote to the solicitors for the NNG Receivers ("AO") requesting for details of the developments of AO's discussion with the SFC. On 24 June, AO replied that they had submitted a written submission to the Takeovers Executive seeking a ruling on whether either NNG or SHL would be required to make an announcement in respect of the Offer. On 25 June, WG requested a copy of the written submission, which was refused by AO. On 26 June, NNG Receivers published an announcement relating to the Offer.

16. On 26 June, presumably responding to the said announcement, the solicitors representing the SHL's board of directors wrote to AO expressing the concern of the SHL directors that they were asked to be involved in a transaction which they knew nothing. The directors took the stance that NNG Receivers had no separate interest or right greater than NNG to demand information or action from SHL.

17. The SHL Receivers were also concerned about the announcement. In the letter WG wrote to AO on 26 June, WG expressed their worry over the discharge of their duties because of the announcement and the confidentiality undertaking given to court on 13 June. They invited the NNG Receivers to discharge the undertaking. No favourable reply was however forthcoming.

(4) Lapse of the Offer

18. The NNG Receivers have retained Somerley Limited ("Somerley") as financial advisers to advise upon the options available in dealing with the NNG's shareholding in SHL. As part of their investigation of the options, Somerley had to test the market to ascertain what interested parties might be willing to pay. Somerley had advised the NNG Receivers that this process could only be undertaken successfully if the latter had access to adequate reliable information on SHL. It is Somerley's opinion that no interested party will put forward an attractive proposal if he was not able to receive and examine up-to-date financial information on SHL and that without such information, an interested party, if willing to proceed at all, would likely to discount the price offered to take account of the risks, so that the offer would be of little value, if any.

According to the NNG Receivers, 21 parties have expressed an interest in the possible purchase of NNG's shareholding in SHL. The NNG Receivers understand from Somerley that it is the normal practice in similar transactions in Hong Kong for interested parties to be supplied with a "confidential information memorandum" or in some instances with access to a more elaborate "data room". The NNG Receivers emphasised that they would prefer the process of disclosure of information to interested parties to be formulated in cooperation with the SHL Receivers and directors. At present, the NNG Receivers are able only to provide little current information concerning SHL's assets and liabilities. Somerley expected that interested parties would be very disappointed by the inability of the NNG's Receivers' to provide information. The NNG Receivers therefore complain that there is a real risk that they will face difficulty in discharging their duties, being deprived of the opportunity to properly assess whether a sale of the NNG's shareholding is necessary to preserve their value and if so, upon what terms.

19. The NNG Receivers did follow up on the Offer. They entered into negotiations with the interested party. But they complain that their ability to conduct such negotiation was severely hampered by the lack of information regarding the assets, liabilities and affairs of SHL. In the event, the Offer lapsed.

20. On 17 June, the SHL Receivers obtained leave from the deputy judge to apply to me for permission to disclose the letter containing the Offer to the directors of SHL and the executive director of the corporate finance. Now that the Offer has already lapsed, this intended application has become academic and does not require my determination.

(5) Announcement by SHL's Receivers

21. The SHL Receivers had previously published an announcement on 10 June 2003 regarding the assets and liabilities of SHL. It is the case of the SHL Receivers that they do not have many documents or information on hand. For the information that they have been able to verify and to which SHL shareholders are entitled, they have already disclosed the same in the said announcement. As at 12 July, they were still working on the draft of another public announcement which contained more financial information of SHL. The same had been submitted to SFC for clearance and SFC had raised a number of requisitions on the information contained.

22. It was not until 17 July (that is, after the hearing on 12 July) when the SHL Receivers published the further announcement. According to this announcement, as at 8 July 2003, SHL had remaining cash and bank balances of approximately HK$1.205 billion, which have been secured by the SHL Receivers; that the SHL Receivers will continue to endeavour to obtain information relating to the purported loan transactions identified in the announcement which had not been approved by SHL's board; that the SHL Receivers have recently arranged with the ICAC to make photocopies of the relevant records and vouchers seized by the ICAC on 1 June; and that the information stated in the announcement was preliminary on SHL's affairs and might be subject to change when further information became available. I invited further submissions from the parties on this announcement. While WG has no further submission to make, AO commented that the information disclosed in the announcement does not assist the NNG Receivers in discharge of their duties.

GROUNDS OF OPPOSITION

23. In the 1st affirmation of Stephen Liu filed on 11 July 2003, the SHL Receivers cited the following grounds of opposition in paragraph 6 :

"6. I have been advised by the legal advisors of [the SHL Receivers] and I verily believe that [the SHL Receivers] should continue to oppose [the NNG Receivers'] application for the following reasons:

6.1 Order of Deputy High Court Judge Lam

Deputy High Court Judge Lam has granted an Order in HCMP 2414 directing [the SHL Receivers] to take all steps as may be reasonably necessary to resist the application by [the NNG Receivers] in the present action.

6.2 Wrong procedure in wrong proceedings

The application made by [the NNG Receivers] against [the SHL Receivers] under the present action is misconceived because neither SHL nor [the SHL Receivers] are parties in the present action.

6.3 Articles of Association

Article 177 of the Articles of Association of [SHL] contains express provisions against discovery of company information sought by any shareholder who is not a director of the company.

6.4 Majority shareholder has no greater right

The legal principle is that the rights of a majority shareholder are the same as that of a minority shareholder. There is no greater right in a majority shareholder or his receiver.

6.5 Documents / information not available / ready

Prior to the appointment of receivers on 7 June 2003, [SHL] conducted frequent business transactions involving huge sums of money, and [SHL] has a large number of subsidiaries and associated company including those incorporated in BVI or the PRC. [The SHL Receivers] have not finished their investigation yet. The fact has already been clearly stated in paragraph 10.2 of [the SHL Receivers'] Report. To update the Court of the latest position, [the SHL Receivers] went to Shanghai three times on 17 June 2003, 3 July 2003 and 10 July 2003 but only with very limited success for the following reasons:-

(a) Most of the documents in Shanghai have been seized by the Chinese officials. The amount of written information in Shanghai available to [the SHL Receivers] is scanty.

(b) Shanghai officials are generally not helpful to [the SHL Receivers] in their investigation work.

As a result, [the SHL Receivers] do not have many documents and/or much information in their possession. In respect of those documents and/or information which are now in their possession, they have not yet been able to verify and establish their truthfulness and reliability so far. In these circumstances, it would be highly undesirable for [the SHL Receivers] to be required to disclose these unverified documents and/or information to any outsiders, particularly potential or prospective buyers of the shares in [SHL], who might be misled by these documents and/or information. Apart from this, [the SHL Receivers] have provided and will provide information relating to [SHL] by way of public announcements to all shareholders as and when complete and correct information is available rather than just privately providing to [the NNG Receivers]. Such announcements must be cleared and/or approved by the Securities and Futures Commission of Hong Kong ('SFC') and/or the Hong Kong Stock Exchange. In so doing, [the SHL Receivers] avoid not only confusion but also criticism that they prefer [NNG] or [BOC] which is now holding [NNG's] 75% shareholding in [SHL].

6.6 Offeror may not be serious

According to newspaper reports, there are at least 5 investors which have indicated an interest to [BOC] to purchase [NNG's] 75% shareholding in [SHL]. It is not clear whether all these parties are serious buyers. However, by virtue of Rule 6 of the Code on Takeovers and Mergers ('Takeovers Code'), if [the SHL Receivers] have provided information to one offeror or potential offeror, they should, on request, furnish equally such information to any other offeror or potential offeror who may not even be a serious offeror or potential offeror."

WHETHER THE SHL RECEIVERS ARE SUBJECT TO THE JURISDICTION OF THIS COURT

24. At the hearing on 13 June, Mr Fung took the preliminary objection that the application by NNG Receivers against the SHL Receivers was misconceived because neither SHL nor SHL Receivers were parties in the present action, namely HCA2062/2003. See also paragraph 6.2 of Stephen Liu's 1st affirmation cited in paragraph 23 above. At the resumed hearing, Mr Fung maintained that any directions to be given to the SHL Receivers could only be given in HCMP2414/2003 in which proceedings they were appointed. To answer that point but without prejudice to counsel's primary submission that this court has jurisdiction over the SHL Receivers, AO took out a summons in HCMP2414/2003 in the afternoon on 14 July (when Mr Leong was making his reply submissions), seeking substantially the same relief prayed for in the present application in these proceedings. Mr Fung complained that the NNG Receivers do not have the locus to take out the summons because they are not even a party to HCMP2414/2003. Mr Leong submitted that NNG is beneficially interested in the shares of SHL. As shareholder whose interest is affected by the unreasonable conduct of court appointed receivers, they ought to have their grievance ventilated in court. The court should be concerned to do justice in the circumstances and procedural challenge should not be an obstacle in the court's way.

25. The question whether the SHL Receivers are subject to this court's jurisdiction for the purpose of the present application in these proceedings may be considered by reference to (1) the conduct of the SHL Receivers; (2) the Rules of the High Court; (3) the case law relied on by Mr Leong in respect of discovery and interference with receivers appointed by the court; and (4) the general supervisory jurisdiction over court-appointed receivers as officers of the court. I will deal with these matters in turn.

(1) Conduct of the SHL Receivers

26. The SHL Receivers applied for and obtained leave from Deputy Judge Lam on 17 June to take all reasonably necessary steps to resist the present application. Armed with the order, they appeared before me on 12 and 14 July and argued the matter fully through senior counsel. Though not expressly stated so by Mr Fung, his submissions on the merits on the application must have been made without prejudice to his preliminary objection on jurisdiction. Mr Leong did not seek to argue that the SHL Receivers have by conduct submitted to the jurisdiction of this court. This point must rest there. I venture to add that for my part, I doubt if it is even open to argument that without a joinder, a non-party to a proceeding can by conduct alone be said to have submitted to jurisdiction of the court for the purpose of that proceeding.

(2) Rules of the High Court

27. This is essentially an application for discovery of documents. Mr Leong has not referred to any provisions in the High Court Rules that confer jurisdiction on this court over the SHL Receivers. This is not surprising as there is simply none. Order 24, rule 7A, which enables a party to apply against a non-party for discovery of documents, does not apply here because it is not an action for personal injuries or death.

28. Under Order 30, rule 8, the NNG Receivers may apply to court for directions. But neither Order 30 nor rule 8 in particular confers on this court jurisdiction over the SHL Receivers, a non-party to the present proceedings.

29. Taking out the aforesaid summons in HCMP2414/2003 does not take the matter any further. In my view, the NNG Receivers clearly do not have any locus to issue that summons. Mr Leong's submissions are not supported by any authority. Indeed, if his submissions were to be accepted, then any party claiming to be a beneficial owner of any corporate party to the proceedings or having a beneficial interest in such a party could take part in the proceedings without a joinder. It is contrary to well established principles and practice. That cannot be right. I therefore dismiss that summons in limine with costs.

(3) Case law

30. In the course of his submissions, Mr Leong relied on two lines of cases. First, he referred to the Norwich Pharmacal line of cases. See Norwich Pharmacal Co. v. Customs and Excise Commissioners [1974] AC 133 and Bankers Trust Co. v. Shapira and others [1980] 1 WLR 1274. Pursuant to those authorities, the court has the power to order an innocent non-party to make discovery in aid of and so as to give effect to an earlier injunction order. The basis for making the ancillary discovery order is that the non-party was bound up with the wrong committed by the defendant on the plaintiff. Mr Leong asked me to extend the Norwich Pharmacal principle to the present circumstances. He was not suggesting that the SHL Receivers was guilty of any wrongful act or had been bound up with any wrongful act of anybody. But he submitted that the order appointing the NNG Receivers not being based on any wrong committed by anybody, the prerequisite for making of ancillary orders for discovery should be amended to read "non-parties so bound up with the effective execution of the order of the court appointing the NNG Receivers".

31. Although the cases referred to non-parties, that phrase must be understood in context. The non-party is not a party to the wrong committed by the defendant. It is, however, a proper party in the proceedings in which discovery is sought. In Norwich Pharmacal Co., the action was specifically brought against innocent party for discovery. In Banker Trust Co., the innocent party against whom discovery was sought was made a defendant to the main action against the wrongdoers. Thus, the innocent party must be a proper party to the proceeding, whether it is an action for discovery or the main action against the wrongdoer. In my view, this line of cases does not support the proposition that without a proper joinder, the court can assume jurisdiction over a non-party to the proceedings for the purpose of ordering that party to make discovery in aid of an earlier order.

32. The second line of cases relied on by Mr Leong relates to interference with duties of receivers appointed by the court : see Picarda, The Law Relating to Receivers, Managers and Administrators (3rd Edn) at pp.456-460. Where there is interference, an action lies against the interferer for contempt. Initially, Mr Leong submitted that the SHL's insistence not to provide the necessary information constitutes with NNG's property over which the NNG Receivers were appointed. In his reply, he tuned down his submissions and argued that though the non-disclosure may not be "contempt" in the classis sense, it had certainly interfered with the NNG Receivers' ability to discharge their duty.

33. Assuming but without deciding that the SHL Receivers have by conduct interfered with the NNG Receivers, they need to bring a fresh action in order to invoke the principles derived from the cases on interference with court-appointed receivers. The steps taken by the NNG Receivers thus far are procedurally deficient.

(4) The general supervisory jurisdiction of the court

34. Both the SHL Receivers and NNG Receivers are appointed by the court. Both senior counsel agreed that the receivers, as officers of the court, are subject to the general supervisory jurisdiction of the court. They are obliged not only to act lawfully but fairly and honourably : see Ex parte James, In re Condon (1874) LR 9 Ch App 609; Lightman & Moss, The Law of Receivers and Administrators of Companies (3rd Edn) para.5-002 at p.115. The court is rightly sensitive about the conduct of its officers and requires of them strict standards. It requires any receiver appointed by the court to observe a high degree of equitable conduct. There are examples to be found in the cases in which the court has granted relief against its own appointed receivers which would not have been obtained against a private litigant : see Picarda, The Law Relating to Receivers, Managers and Administrators (3rd Edn) at p.421. See also Re Opera Ltd [1981] 2 Ch 154 and Re Atlantic Computer Systems Plc [1992] Ch 505.

35. The difficulty does not lie with the court possessing the supervisory jurisdiction and dealing with the court-appointed receivers accordingly. It lies with how to bring the SHL Receivers under that jurisdiction. In all the cases cited to me, the receivers were properly joined as parties to the proceedings in which relief against the receivers were sought. If, on their own motion, the SHL Receivers apply to court under Order 30, rule 8 in HCMP2414/2003, the jurisdiction can certainly be invoked over them. But that did not happen here. I have already ruled that the NNG Receivers do not have locus to issue the summons in HCMP2414/2003 on 12 July 2003. That summons therefore does not take the matter any further.

36. In my view, the NNG Receivers should have issued fresh proceedings against the SHL Receivers seeking discovery of the documents in question. The SHL Receivers would then become a proper party to the proceedings in which the relief is sought. If satisfied, the court may then exercise its supervisory jurisdiction over them and proceed to make any order as necessary. (I would, however, emphasis that whether the NNG Receivers are entitled to the relief sought remains to be decided in those proceedings.) In my view, the ex parte application on notice taken in the present proceedings is procedurally misconceived. This is not the correct way to bring the SHL Receivers to the court for the relief sought against them.

37. Under Article 177 of SHL's Articles of Association, NNG, though a majority shareholder, does not have any right to the information sought. It would appear that what NNG can do is to convene a special general meeting and pass all necessary resolutions to achieve what they want. Mr Leong submitted that the NNG Receivers have given consideration to that option but have for the time being decided against it because it might turn out to be a recipe of delay and further dispute. That may or may not be the case. But in the absence of any validly constituted application before the court, it would appear to be the only option available to the NNG Receivers. (If this option turns out to be unsuccessful, then depending on the circumstances, the NNG Receivers may have a valid complaint against SHL or the SHL Receivers. It may then bring the question of discovery against the SHL Receivers properly before the court.)

CONCLUSION

38. Thus far, I have only ruled on the points relating to the question of jurisdiction. I have not made any determination on the merits of the application. I do not consider it desirable to express any views on the merits in light of my ruling on jurisdiction. If need be, they will be visited in a properly constituted application. I should not pre-empt any ruling which may be made in that application.

39. For the above reasons, I will dismiss the NNNG Receivers' application as per the second paragraph of the ex parte summons dated 13 June 2003. I will make an order nisi that the NNG Receivers do pay the SHL Receivers costs, to be taxed if not agreed.