LAU SIU HUNG AND ANOTHER v. P & T INTERNATIONAL INC.

HCCW 216/2018

[2021] HKCFI 2850

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP)  PROCEEDINGS NO 216 OF 2018

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REASONS FOR DECISION

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1.  The Applicants, by their Re-Amended Summons dated 5 January 2021 (“Leave Summons”), apply for leave to appeal against this Court’s Order dated 23 December 2020 dismissing the Applicants’ summons dated 24 July 2020 (“2020 Summons”), on the grounds as set out in their draft Notice of Appeal.

2.  Mr Yung for the Applicants submitted that an appeal will generally be granted where there is a reasonable prospect of success or some other reason in the interest of justice for permitting an appeal is demonstrated. The Court of Appeal will not disturb a judge’s exercise of discretion in making an order unless it is demonstrated that the judge misunderstood the law or evidence; or that the exercise of his discretion was plainly wrong such that it was outside the generous ambit within which a reasonable disagreement is possible.

3.  In Wong Kar Yee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 at §§29 -30, Kwan JA (as she then was)  said:

“29. The principles on granting leave to appeal are well established. Leave can be granted if the court is satisfied that: (a)  the appeal has a reasonable prospect of success; or (b)  there is some other reason in the interests of justice why the appeal should be heard. Reasonable prospect of success involve the notion that the prospects of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”. As the leave requirement was introduced largely to address satellite litigation on interlocutory issues which almost invariably gives rise to major delay and expense, so for the court to be satisfied that the appeal does have “reasonable prospects of success”, merely showing that the appeal is “arguable” and “not fanciful” would not be sufficient.

30. Even if the threshold test of reasonable prospect of success is satisfied, the court still retains a discretion whether to grant leave, although the fact there is, ex hypothesi, a reasonable prospect of success would heavily influence the court’s exercise of discretion. The court may refuse leave to appeal in the interests of procedural economy and proportionality.”

ANALYSIS

4.  This Court has received comprehensive submissions from Mr Yung for the Applicants and Mr Lam for the Respondent. Having carefully considered both parties’ submissions including oral submissions in court, this Court dismissed the application. Here are the reasons.

5.  First, I do not consider that the Applicants have satisfied the test that there is a reasonable prospect of success in their intended appeal. Mr Lam for the Respondent is right that the Applicants cannot escape the fact that the 2020 Summons only sought an order under Section 286B(1)(c)  of the Companies (Winding Up and Miscellaneous Provisions)  Ordinance, Cap.32 (“the Ordinance”). Paragraph 1 of the 2020 Summons specifically sought an order that “the Respondent do submit to the court an affidavit containing information as set out in the schedules…”. It is not an application under Section 286(B)(1)(d)  for an order to “produce any books and papers in the person’s custody or power relating to the company or the promotion, formation, trade, dealings, affairs or property of the company.”

6.  Insofar as information is concerned, as I set out in my Reasons for Decision dated 11 January 2021, the Respondent had already filed an affirmation to depose that it does not have any further information or documents to provide other than those already provided (§11)  and if this Court were to order the Respondent to file an affirmation, the Respondent would file an affirmation to say exactly what it had deposed (§§18, 24).

7.  Further, in paragraph 21 of my Reasons for Decision, I stated:

“On the facts of the present case, as confirmed by Mr Lau, the Applicants’ case is not that the ex-directors are still in possession of some documents of the Respondent. There is no evidence to that effect. Indeed, Mr Lau relies on Section 286B(1)(c)(ii)  of the Ordinance and not section 286B(1)(d)  of the Ordinance to seek information and/or explanations about the transactions that the Applicants are investigating.” (Emphasis added.)

8.  Hence, Mr Lam for the Respondent is definitely right that the Applicants cannot, now at the leave application stage, seek to rely on a ground that they chose not to rely on in the 2020 Summons and at the substantive hearing. Mr Lam has a point that this has never been the basis of the 2020 Summons or the case which the Respondent had to meet. The Respondent prepared its affirmations in opposition solely in response to the Applicants’ request for an affidavit containing the requested information. Had the Applicants mounted their application on this alternative basis, the Respondent’s affirmations would have been prepared differently.

9.  I also agree with Mr Lam that insofar as the reference to documents in Schedule B of the 2020 Summons is concerned, they should be read with paragraph 1 of the 2020 Summons to mean that it is an application for information as contained in the documents but not for an order under Section 286B(1)(d)  of the Ordinance. In fact, the Respondent had by oath stated that they had produced all the documents that they had had to the Applicants.

10.  Further, I am of the view that it is, in any event, not open to the Applicants to run this new ground at the appeal as the Applicants have clearly not run the point before this Court. (See Flywin Co Ltd v Strong & Associates Ltd (2002)  5 HKCFAR 356 at §38 per Bokhary PJ.)

11.  Secondly, Mr Yung for the Applicants submitted that the Respondent could obtain “better information” from its ex-directors and if the Court made such an order, the Respondent would obtain such “better information”. It is not entirely clear what is the factual basis. In any event, Mr Yung has not cited any case or authority to support the proposition that for an application under Section 286B(1)(c)  of the Ordinance, the Court can order the Respondent to take the extra step of obtaining “better information” from its ex-directors.

12.  Thirdly, as a matter of discretion, what puzzles this Court is that if the Applicants took the view that the Respondent’s ex-directors have in their possession better information or documents, why is it that the Applicant chose not to take out any applications against the ex-directors? About eight months have passed since my Reasons for Decision and the Applicants took no action to seek information or documents from the ex-directors. Yet, it chooses to engage in these interlocutory applications to argue that under the 2020 Summons, the Court should order the Respondent to obtain better information or documents from its ex-directors.

13.  Finally, I should deal with the grounds as stated in the draft Notice of Appeal. In §1(2)(a)  of the draft Notice of Appeal, the Applicants relied on the case of Re Richbell Strategic Holdings Ltd [2001] BCC 409 at 419H for the proposition that a respondent is required “to give the best answers that it is able to give and to provide information and/or documents requested to the best of its ability”. I agree with Mr Lam for the Respondent that this case is not applicable. The case concerned a public examination of a witness. The legal principles set out there could apply if the Applicants obtain an order for examination of the Respondent’s representative under Sections 286B(1)(b)  and 286C of Ordinance.  However, they do not apply in the present situation where the Applicants are effectively asking the Court to disbelieve the Respondent’s affirmation evidence stating that it is “unable to provide any further documents or information”. The 2020 Summons is not the appropriate avenue for the Applicants to challenge the Respondent’s evidence on oath.

14.  Insofar as the Applicants’ reliance on Joint & Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings (2006)  9 HKCFAR 766 for the proposition that the Court should “give sufficient weight, to the Applicants’ views (as liquidators as to the inadequacy of the Respondents’ explanation in the affidavit evidence filed”. I am of the view that the said proposition of law is not entirely accurate.

15.  In §27, Lord Millett NPJ said:

“The liquidator must satisfy the court that the information or documents sought are reasonably required to enable him to carry out his functions. In considering this question, the authorities establish that great weight should be given to the views of the liquidator, for he is an officer of the court and alone has the necessary knowledge of the problems facing him in understanding the affairs of the company and his reasons for seeking production of documents in the terms proposed…” (Emphasis added.)

16.  Hence, I agree with Mr Lam for the Respondent that the “great weight” placed on the liquidators’ views only relates to the formulation of the scope of information and documents required to enable them to carry out their functions. There is no basis to extend this principle to cover the liquidators’ views as to whether a respondent has provided sufficient answers under a court application or order. This is plainly a matter within the exclusive purview of the Court to decide.

17.  In any event, I am of the view that this issue is not entirely relevant. Whether the Court should place any weight on the views of the liquidators must depend on the nature of the application. The Court cannot abdicate its responsibility by simply endorsing the views of the liquidators. The liquidators have not even stated on what basis they take the view that the Respondent’s ex-directors are still in possession of corporate documents of the Respondent. For the reasons set out above, this Court cannot see how it can agree with the liquidators and to order the Respondent to file yet another affidavit when it has already filed one or to order the Respondent to seek for better information from its ex-directors under Section 286B(1)(c)  of the Ordinance.

18.  Further, this Court did not reverse the burden of proof to require the Applicants to prove the existence of documents. The Court merely held that, as a matter of reality, the order sought would serve no purpose as the Respondent has already provided affirmation evidence stating that it was unable to provide any further documents or information. The Court did not (and did not need to)  rule on whether the Respondent’s explanation was adequate or satisfactory (see §17 of the Reasons for Decision)

19.  Mr Lam for the Respondent is right that the only way for the Applicants to challenge the veracity of the contents of an affirmation is to cite the Respondent for contempt or, alternatively, subject the Respondent’s representative to a private examination. This is the necessary consequence of the Applicants’ decision to pursue an application under Section 286B(1)(c)  of the Ordinance.

DISPOSITION

20.  For the reasons stated above, I dismiss the Leave Summons.

21.  I also summarily assess the costs at HK$200,000. The same is to be paid by the Applicants to the Respondent forthwith.

22.  Finally, it remains for me to thank Mr Yung for the Applicants and Mr Lam for the Respondent for their helpful assistance.