THE JOINT AND SEVERAL TRUSTEES OF THE PROPERTY OF LAI KWOK YING (A BANKRUPT) formerly t/a GOOD VIEW ENGINEERING MANAGEMENT CO v. SHUN YUEN CONSTRUCTION CO LTD AND ANOTHER

HCB 8750/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCYPROCEEDINGS NO. 8750 OF 2007

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BETWEEN

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D E C I S I O N

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1.   This is an application by the trustees of a bankrupt, Lai Kwok Ying, under section 29 of the Bankruptcy Ordinance, Cap. 6. The respondents to the application are Shun Yuen Construction Company Limited (“Shun Yuen”) and Bestkind International Construction Company Limited (“Bestkind”).

2.   Under section 29(1), the court may, on the application of a trustee, at any time after a bankruptcy order is made, summon before it any person whom the court may deem capable of giving information respecting the bankrupt, his dealings or property, and the court may require such person to produce any documents in his custody or power relating to the bankrupt, his dealings or property. Under section 29(1A), the court may require a person referred to in subsection (1), other than the bankrupt, to submit an affidavit to the court containing an account of his dealings with the bankrupt or to produce any documents in his possession or under his control relating to the bankrupt’s dealings, affairs or property.

3.   The trustees seek orders that the respondents provide to them the documents requested in the schedule to the summons, and where any of the documents are not in the possession, custody, or power of the respondents, they are to state on oath when such documents were removed from their possession, custody, or power and the present whereabouts of the same. They also seek an order that each of the respondents do state on oath an account of its dealings with the bankrupt. Consequential directions regarding inspection and safe custody of the documents are sought.

4.   The bankrupt had carried on business as a construction sub‑contractor under the trading names of Good View Engineering Management Company (“Good View”) and Linkman Engineering Consultants (“Linkman”). The documents sought in the schedule to the summons relate to construction works that had been carried out by the bankrupt for the respondents or their sub-contractors.

5.   The legal principles are not in dispute. The power of the court under section 29 to order an examination and production of documents is to be exercised in the same way as an application for private examination and production of documents under section 221 of the Companies Ordinance, Cap. 32 (Re Hau Po Man Stanley, HCB No. 924 of 2002, Poon J, 26 June 2007, para. 39; upheld on appeal in CACV No. 211 of 2007, 17 December 2007). As stated in paragraph 21 of the judgment of the Court of Appeal, the approach in an application of this kind is as follows:

“(a) the applicant must satisfy the court the essential condition that the provision of information or documents is reasonably required for him to carry out his functions;

(b) the applicant must also establish a prima facie case that the respondent is able to provide such information or documents;

(c) if the above criteria are met, the court must carefully strike a balance between the applicant’s reasonable requirements and the need to avoid making an order which is wholly unreasonable, unnecessary or oppressive to the person concerned. The burden is on the applicant to satisfy the court, after balancing all the relevant factors, there is a proper case for such an order to be made.”

6.   In considering if the information or document is reasonably required to enable the trustees to carry out their functions, great weight would be given to the views of the trustees. A production order is not necessarily oppressive merely because it is inconvenient for the party subject to it or would cause him a lot of work or make him vulnerable to future claims (Re Kong Wah Holdings Limited (2006) 9 HKCFAR 766, paras. 27 and 30).

7.   A bankruptcy order was made against the bankrupt on 19 December 2007, and the trustees were appointed on 18 March 2008. All along, the bankrupt was not cooperative with the trustees. The trustees received no documents from him, and had not been able to meet with him. They had only received a few e-mail from the bankrupt. To the trustees’ understanding, the bankrupt is now in Dubai.

8.   From piecemeal documents and information provided by the petitioning creditor, the trustees gathered that the bankrupt through Good View was a sub-contractor to Shun Yuen prior to his bankruptcy in certain construction works in Hong Kong. The trustees wrote to Shun Yuen on 21 May 2008 asking for documents and information. They received a reply from a firm of solicitors, Fong Chan & Lee (“FCL”) acting for Shun Yuen and Bestkind on 26 May 2008. It was acknowledged by FCL that the bankrupt was a sub-contractor of two contracts - No. 22/HK/2003 (through Good View) and P303 (through Linkman), where Shun Yuen was the principal contractor and Bestkind, the first sub-contractor.

9.   Much correspondence was exchanged between the trustees, their solicitors Messrs Wilkinson & Grist and FCL from May to December 2008 and thereafter.

10.   It was only in December 2008that over 200 pages of documents were provided by FCL to the trustees, consisting of interim payment certificates, statements of account and letters regarding the two contracts. The trustees noticed from these documents very substantial contra charges were deducted from the contract sum payable to Good View and Linkman in respect of the two contracts. However, no breakdown and no supporting documents of contra charges were provided to the trustees. They requested for the relevant documents and information from FCL, and the request was turned down by FCL claiming that the request was “vexatious, oppressive and harassing”. FCL took the stance that the trustees should provide them with “costs on account” for the respondents to consent to the request.

11.   This summons was issued on 13 July 2009. In the schedule to the summons, it was listed in items (a) to (d) the documents for which production is sought, including documents in electronic form.

12.   I am satisfied at the time the summons was issued, the trustees have discharged the burden of establishing that the information and documents sought are reasonably required for them to carry out their functions and that the respondents are plainly capable of giving information respecting the bankrupt, his dealings or property. I am also satisfied that a prima facie case has been made out by the trustees that the respondents are able to provide the documents and information sought.

13.   Two days before the hearing, FCL wrote to Wilkinson & Grist enclosing a CD-Rom containing more than 2,700 files of documents relating to construction projects. The trustees understandably have not had time to go through the documents and are uncertain if the CD-Rom contains all the documents sought in this application. Mr Vincent Lam for the respondents asserted in his submission that the respondents have provided all the documents and information sought in items (a) and (b) of the schedule to the summons among the documents in the CD-Rom. However, it is not apparent from the covering letter of FCL that is the case.

14.   I propose to make an order for production of documents sought in items (a) and (b) of the schedule any way. If all the documents in respect of these items have been produced in the CD-Rom, there is no need for the respondents to do more. If they have not produced all these documents, they are either to produce them pursuant to the order in terms of paragraph 1 of the summons, or make an affirmation as per the order in terms of paragraph 2 of the summons, assuming they had at one time possession of these documents and have parted with possession of the same.

15.   Paragraphs 3 and 4 of the summons, relating to inspection and safe custody of the documents, are not contested. There will be an order in terms as well.

16.   Paragraph 5 of the summons seeks an order that each of the respondents, acting by a proper officer, do state on oath an account of its dealings with the bankrupt within 28 days hereof. Mr Lam informed the court there is no objection to this. I will make an order in terms. I will also give liberty to apply for further or consequential directions as per paragraph 6 of the summons.

17.   The only opposition raised is to production of documents in items (c) and (d) in the schedule to the summons.

18.   Mr Jonathan Chang for the trustees informed the court that the trustees are not pursuing item (c).

19.   Item (d) is a catch-all provision and this reads: “All documents (including in electronic form) in the 1^st and/or 2^nd respondents’ possession, custody, power and/or control relating to any of the dealings, affairs or property of the bankrupt, including but not limited to those relating to (a) to (c) above, other than those already provided to the applicants under cover letter dated 24 December 2008of MessrsFong Chan & Lee.”

20.   Mr Lam submitted item (d) is too broadly framed. The wide scope of this item would mean that a lot of documents unhelpful to the trustees, such as maps of construction and drawings of engineers would be required to be produced and this would be a waste of time and costs for everyone. Further, as the respondents would be giving an affidavit to provide an account of their dealings with the bankrupt, after considering the affidavit, the trustees should be able to specify with some particularity what further documents they would need from the respondents, if any further information or documents are required. The trustees have been given liberty to apply in the order made today.

21.   I think the position of the respondents is a reasonable one. I am mindful of the passages in Re Kong Wah Holdings Limited, paras. 40, 41 and 43, referred to by Mr Chang, but each case would have to be decided according to its particular circumstances.

22.   Mr Chang informed the court that the trustees would not be pursuing item (d) for the time being. So I make no order in respect of item (d).

23.   That leaves the question of costs.

24.   Here, I think Mr Lam’s submissions are untenable.

25.   There is no reason why the respondents should not pay the trustees’ costs of this summons, in view of the manner they had responded to the request of the trustees for information and documents. There is no need to say more.

26.   I order the respondents to pay the trustees’ costs of this application.

27.   I make an order for gross sum assessment. Having considered the statement of costs submitted by Wilkinson & Grist, I am of the view that on a party and party basis, it would be reasonable and proper to allow the work done only by one solicitor. So I do not propose to allow the fees incurred in respect of the work done by the partner and a second solicitor. I will also deduct $10,000 from counsel’s fee. The amount I arrive at as reasonable and proper charges for the trustees’ costs is $113,432.