THE JOINT & SEVERAL LIQUIDATORS OF KONG WAH HOLDINGS LIMITED (In Compulsory Liquidation) v. THE GRANDE HOLDINGS LTD AND OTHERS

cacv 306/2005 AND CACV 307/2005

in the high court of the

hong kong special administrative region

court of appeal

civil appeal noS. 306 of 2005 AND 307 OF 2005

(on appeal from HCCW NOS. 49 of 2000 AND 50 OF 2000)

HCCW 49/2000

IN THE HIGH COURT OF THE

HONG KONG special administrative region

court of first instance

COMPANIES (WINDING-UP) NO. 49 OF 2000

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BETWEEN

HCCW 50/2000

IN THE HIGH COURT OF THE

HONG KONG special administrative region

court of first instance

COMPANIES (WINDING-UP) NO. 50 OF 2000

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J U D G M E N T

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Hon Rogers VP:

1.  These were applications for leave to appeal to the Court of Final Appeal as well as applications for a stay of execution pending appeal, if leave were granted, and pending any further application to the Court of Final Appeal, if leave were not granted.  At the conclusion of the hearing of these applications this court reserved its decision which we now give.

2.  The background to these cases can be gleaned from the judgment of this court dated 26 April 2006.  By that judgment this court affirmed the order made in the court below, save for an amendment to the wording of one of the paragraphs.  The order made in the court below was for production of documents and in the absence of documents information relating to any missing documents.

3.  The questions which are said to be of great general and public importance are as follows:

1. Whether the Court’s jurisdiction to order production of documents under s. 221 of the Companies Ordinance can be exercised to require a person to state whether he has a certain category of documents in his possession custody or control, or to provide information;

2. What are the necessary conditions which must be satisfied before the Court can exercise its power under s. 221 of the Companies Ordinance to order production of documents; in particular, is there a requirement that there is evidence that the specific document sought exists and that the document is in the possession custody or power of the person;

3. Whether the Court’s jurisdiction to order production of documents under the s. 221 of the Companies Ordinance can be exercised to require a person to search for documents and exercise a judgment as to whether the document relates to certain matters.

4.  Although the applicants acknowledged that the powers of the court under section 221 are important, it was contended that the precise nature of the section has yet to be clearly addressed by the highest courts.

5.  Quite apart from the fact that the matters sought to be raised have been dealt with by this court in the judgment, in my view, the answers to the questions raised flow directly from the wording of the first three sub-sections of section 221.  Subsection (1) includes the power of the court to summon before it not only an officer of the company but persons known or suspected to have in their possession any property of the company and any person whom the court deems capable of giving information concerning, amongst other things, the dealings, affairs or property of the company.  Subsection (2) includes the power of the court to examine the person on oath concerning those matters.  That can be done either orally or in writing.  Subsection (3) gives the court power to require the person to produce any books or papers in his custody or power relating to the company.

6.  Nothing that has been ordered by the court below, with the wording modified by the order of this court, can be said to go any further than those powers.  For the reasons given this court considered that the judge below had correctly exercised the discretion to make the relevant orders.  In those circumstances, I consider that leave should not be given.

Stay

7.  As was pointed out by Ms Chan, who appeared on behalf of the liquidators, section 26 of the Hong Kong Court of Final Appeal Ordinance Cap. 484 confers power on this court to direct that the judgment shall not be carried into execution or that execution shall be suspended pending an appeal “when granting leave to appeal or subsequently”.  There is no specific power in this court to grant a stay where leave to appeal has been refused by this court.  This court’s attention was drawn to the judgment of Ma CJHC in the case of The World Food Fair Ltd and The World Enterprises Holdings Ltd v Hong Kong Island Development Ltd, unreported, 30 August 2005 where it was said:

“On the whole, I think the same principles apply to an application for a stay pending an application for leave to appeal to the Court of Final Appeal.  The Ordinance is silent on the powers of the Court of Appeal regarding the granting of a stay of execution in such a situation but there must be an inherent jurisdiction to do so.”

8.  Whilst I depart from the judgment of Ma CJHC with diffidence, I consider that there is no direct power for the court to grant a stay where it has refused leave to appeal.  The power to grant a stay in circumstances where leave to appeal has been given is something that would be expected to be inherent and yet it has been made the subject of a specific statutory provision.  On the other hand, the statute gives no power to grant a stay where no leave has been given and the conclusion to be derived from that, taking the wording of the section into consideration, is that omission must have been deliberate.  In so saying, I do not rule out the possibility of this court so framing its order that execution on a judgment may, in fact, not take place before an application has been made before the Court of Final Appeal.

9.  In the present circumstances, however, even if this court did have power to grant a stay in circumstances where it had refused an application for leave to appeal, I do not consider that grounds have been made out for any such stay.  Given the importance of the these liquidations, as already referred to in the judgments of this court and the court below, any further delay can only be prejudicial to the proper conduct of the liquidations.

10.  When Mr Carolan, who appeared for the applicants, was asked what prejudice the applicants would suffer if no stay were granted, it appeared that they relied on two matters.  The first was that if documents were handed over to the liquidators, their contents would have been revealed and any successful appeal to the Court of Final Appeal would be rendered nugatory.  Since this court was at pains to try to limit the documents required to documents of the companies, the suggestion that there would be any prejudice to the applicants by reason of disclosure of any such documents must fail.  The other matter relied upon by the applicants was the time, trouble and expense to which the applicants would be put by having to locate and disclose the documents required.  That is a matter of balance, but in view of the size of the applicants it would be quite clear that any inconvenience or expense in complying with the order would not be unduly onerous to the applicants.

11.  For these reasons, in my view, a stay must be refused.  The applications should therefore be refused with an order nisi of costs in favour of the liquidators

Hon Le Pichon JA:

12.  I agree.