BRUNO ARBOIT as Sole Liquidator of HIGHFIT DEVELOPMENT CO LTD v. KOO SIU YING AND ANOTHER

HCMP 2749/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO2749 OF 2012

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D E C I S I O N

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Index

A.. The application

B.. The defences

C.. The factual background

D.. Credibility of witnesses

E... Legal principles on contempt of court

F... The ignorance defence

G.. The lack of specificity defence

H.. The no possession defence

J... The no proof of existence defence

K.. Analyses by class of documents

L... The requisite state of mind

M.. Findings

N.. Sentence for contempt

O.. Costs

A. THE APPLICATION

1. This is an application by the plaintiff (“the Liquidator”) for an order of committal of the 1^st defendant (“Koo”) and the 2^nd defendant (“Ling”) for contempt of court in breaching 2 court orders.

2. The Liquidator[1] has been appointed under HCCW 61/2008 (“the winding-up proceedings”) in respect of Highfit Development Co Ltd (“the Company”).  In the winding-up proceedings, on the Liquidator’s application under s.221 of the Companies Ordinance (Cap 32) (“CO”), Poon J (as he then was) made the 1^st order relevant to the present application, namely, an order dated 26 August 2011 (“the 2011 Order”) requiring Koo and Ling:

“to produce all books, correspondence and documents in their custody or power relating to the business and affairs of the Company including the documents set out in Schedule 2 attached to the Summons [dated 11 February 2011].”

3. Schedule 2 (“Schedule 2”) to the summons dated 11 February 2011 (“the Summons”) set out various classes of documents (“the Documents”) of the Company and other companies (“the related companies”) which Koo and Ling were required to produce.

4. Poon J made another relevant order on 10 May 2012 (“the 2012 Order”), under which Koo and Ling were required to comply with the 2011 Order within 42 days, ie by 21 June 2012 (“the Deadline”).

5. Koo and Ling had produced none of the Documents by the Deadline.  The Liquidator contends that they were in contempt of court. He also contends that the contempt is continuing as Koo and Ling only produced some of the Documents post-Deadline, and in a piecemeal and inadequate fashion.

B.  THE DEFENCES

6. Koo and Ling contest the present proceedings on the following general grounds:

(1) That they knew nothing (“the Ignorance Defence”).  It is said that although Koo had been a director of the Company, she had not been handling or keeping the Company documents.  It was her late husband, Lim Por Yen (“Lim”) who had full control of the Company and its documents until he died in 2005.  Koo and Ling were not involved in daily operations of the Company and they were used to sign any documents handed to them by Lim or his agents and that they were never bothered what the documents were or kept copies.  The documents would have been returned to whoever asked them to sign. 

(2) That the 2011 Order was not defined with specificity and only required them to produce documents in their possession (“the Lack of Specificity Defence”);

(3) Koo and Ling did not have possession and if the Documents were in their possession, that they did not know about it (“the No Possession Defence”);

(4) There was no sufficient evidence that the Documents which Koo and Ling allegedly failed to produce were in existence at the time of the 2011 Order or the 2012 Order and if the Documents were in existence, that Koo and Ling knew about it or the whereabouts of the Documents (“the No Proof of Existence Defence”).

7. As confirmed by Mr Huggins SC, having used best endeavours to obtain the Documents is not part of the defence.  Rather, the defence is that the Liquidator has failed to prove contempt beyond reasonable doubt.

C.  THE FACTUAL BACKGROUND

C1.  History of the Company and its litigation

8. Koo was known as the “third wife” of Lim having established a relationship since 1956 (although it seems they were not legally married).  Lim and Koo had 2 children, one of whom was their daughter, Ling.

9. Lim was a wealthy and high-profile businessman who was involved with the Lai Sun group of companies.  He provided substantial financial support for Koo during the course of their relationship.

10. In the late 1980s and early 1990s, Koo developed an intention to leave Hong Kong due to the upcoming handover.  She was also unhappy about the “unequal” treatment accorded to Ling and herself when compared with Lim’s other family members (who, unlike Koo and her children, had all been given money to invest in overseas property and actively participated in Lim’s businesses, including the Lai Sun Group). 

11. The Company was incorporated in Hong Kong on 25 April 1991.  At that time, Lim and Koo were its only shareholders and directors.

12. The Company was the developer of a luxury commercial and residential project (“the Project”) at 41 Hengshan Road, Shanghai (“the Property”). The Project was substantially completed in 2000.

13. The Property was owned by Shanghai Huifa Property Company Limited (“Huifa”), a PRC company.  The Company owned the majority of the shares of Huifa.

14. Various other companies were later incorporated in relation to different aspects of the Project, including:

(1) KA Development (“KA”), a Hong Kong company which undertook advertising and marketing for the Project and for Gee’s Club (referred to below);

(2) Shanghai Gee Ming Club Co Ltd (“Gee Ming”) a PRC company, which operated Gee’s Club;

(3) Wise Talent Far East Limited (“Wise Talent”), which undertook purchasing for the Project and Gee’s Club;

(4) Highfit Property Company Ltd (“HPCL”), a Hong Kong company.

15. Both Koo and Ling admitted having involved in the Project, in particular:

(1) Koo claimed that after the failure by a Lai Sun Group director to successfully negotiate the sale of the land, she (being native Shanghainese) took over important negotiations with the vendor in 1992.  She made proposals to Shanghainese officials. Eventually there was increased plot ratio for the Project, and conversion of an adjacent recreational club into a “high class recreational club”, Gee’s Club.

(2) Ling was ordered by Lim to return to Hong Kong, saying, “This is your mother’s and you still refuse to help?”  Ling made instrumental designs for the façade of the Project and marketing, including recruiting and liaising with relevant architects and working as a project manager, giving them “the plan to acquire the land” for the creative process, and dealt with problems between architects.  Ling also confirmed that Koo used the Project as a reason to cause her (Ling) to return to Hong Kong, and that she ran Gee’s Club until at least 1998, as well as KA which did the advertising for the Project.  See transcript of Ling’s interview.

16. Since September 1992, the shareholding in the Company has been 949,990 shares held by Koo (some 95%); 50,000 shares held by Ling (some 5%) and 1 share held by Lim (now by Lim’s estate).

17. On 8 July 1994 Ling became the 3^rd director of the Company.

18. The Company therefore developed the Property for the benefit of Koo and Ling, as has been reflected by the directorship and shareholding of the Company.

19. Koo, Ling and Lim ceased to be directors in 2001, being replaced by a succession of corporate directors, most recently (as from 2008) Million Raise Limited.  Nevertheless, as appears below, the corporate directors were nominee directors, and management control of the Company continued to be retained, in Ling’s words, “by family members”, ie Koo, Ling and Lim.

20. About HK$730 million was invested into the Project, of which Lim provided about HK$573 million and acted as guarantor for the loans from Hang Seng Bank which turned out to be about HK$155 million.

21. After construction of the Property was completed, Lim sought repayment from the Company of the payments he had made to it, on the basis that they were loans repayable with interest on demand after completion of the construction. Koo asserted that the payments were not loans but gifts to her and were not repayable.  The Company neither made repayments to Lim nor to Hang Seng Bank.

22. In May 2002:

(1) Hang Seng Bank commenced HCA 1700/2002 against the Company to recover the loans it had made to the Company (“the Bank’s Action”).  The Company joined Lim as a third party, contending that he had agreed to be responsible for the repayment of the facility to Koo.

(2) Lim commenced HCA 1942/2002 against the Company and Koo claiming repayment of the monies he had paid to the Company (“Lim’s Action”).

23. Ling made an affirmation dated 23 August 2002 (“Ling- 2002”) in the Bank’s Action, which is heavily relied on by the Liquidator in the committal proceedings.  Though not a director of the Company, Ling claimed to be “duly authorized” on behalf of the Company to make that affirmation to resist the Bank’s claim.  That affirmation was telling.  She knew about Koo’s dissatisfaction as to “preferential treatment” of Lim to other family members. She knew about the Hang Seng Bank account being the vehicle through which Lim made a gift to Koo and that the operation of the account was a private family arrangement.  She confirmed what Koo said in previous affirmations particularizing those arrangements.  A Mr Ho (said to be Lim’s right hand man) explained to Ling before asking her to prepare and sign a letter to the Bank, which she did.  She knew about Koo asking Lim to arrange for repayment of the Company’s loan to the Bank.  She referred to sums of money that her mother had paid into the Company’s account and could produce copies of those cheques amounting to over $400m.  She knew about the renewal of overdraft facilities to the Company.  So the situation was not such that she was entirely ignorant as to what was going on in the Company. 

24. In §9 of Ling-2002, she went on to address the loan/gift issue and made it plain that when in 2001 she, Koo and Lim resigned as directors of the Company, it was

“not in an effort to ‘hive ourselves off’ from the management of the [Company] rather it came about as a consequence of us wishing to maintain our privacy. Unfortunately, my family regularly attracts press attention. Our resignation as directors was a consequence of us wishing to avoid publicity … However, the family retained management control of the [Company] by means of the appointment of corporate nominee directors controlled by family members”

25. The family members who then exercised such control must have been Koo and Ling, since the Company made Lim (still alive) a third party in the Bank’s action.  Ling-2002 was in flat contradiction to her present contentions that she was not involved in the Company’s affairs and that she simply signed what was put in front of her.  Lim having died in 2005, the only family members who could have had management control were irresistibly Koo and Ling.

26. The Bank eventually obtained summary judgment in February 2003 against the Company for the HK$155 million plus interest.  The Bank recovered the debt from Lim as guarantor and assigned its claim against the Company to Lim.  The Company’s third party claim against him was ordered to proceed as a counterclaim. Lim had undertaken not to enforce the judgment pending resolution of that counterclaim.

27. Lim died on 18 February 2005.  His executor obtained leave to carry on the proceedings in the Bank’s action and Lim’s Action.

C2.  Winding-up of the Company

28. On 10 September 2008 an order was made to wind up the Company on the ground of inability to pay its debts.

29. The Company and Ling (as shareholder) applied for an order rescinding the winding-up order, alternatively for an order that the winding-up order be permanently stayed. 

30. In support of that joint application, Ling made an affirmation dated 4 October 2008(“Ling-2008”), 7 years after she had ceased to be a director, on behalf of the Company.  This is another affirmation heavily relied on by the Liquidator in these contempt proceedings.  Ling deposed to the fact of management control of the Company being retained by family members even though a corporate director was appointed.  The Liquidator highlights the following paragraphs of Ling-2008:

“5. In my capacity as a contributory of the Company, I have been kept informed of matters concerning the Petition and have been giving instructions whether through myself or my subordinates as to the conduct of the proceedings therein. I therefore attain knowledge as regards matters concerning the Petition. Further, I have all along been involved in the affairs of the Company and acquired knowledge thereof as a result.

…

9. Immediately after the Winding-up Order was made and before the same is sealed and perfected, the Petitioner and the Company entered into discussions and were able to agree on the settlement of the outstanding debt and costs involved in the Petition.

…

14. The Company is in a healthy financial condition. As deposed to above, the Company did not settle the petitioning debt solely because of its view that the same was bona fide disputed on substantial grounds. …” (emphasis added)

31. Ling-2008 made it plain that Ling knew all about the Company’s affairs and its finances such as to be able to state those paragraphs on oath. 

32. The Company’s application to rescind or stay the said winding up order was dismissed.  Barma J (as he then was) stated that it was not possible for the Court to be satisfied that the Company was solvent.  Barma J also said that he was not satisfied that the Company’s affairs were not in need of investigation since matters raised “in relation to the circumstances of the disposal by the Company of its interest in Huifa to Highfit Holdings are such as would merit independent examination” (explained below).  See judgment dated 19 August 2009 in HCCW 61/2008, §§18 and 19.

33. After the Liquidators came onto the scene, they discovered what might have been misappropriation of assets of the Company by Koo and Ling.

34. Prior to 8 September 2000, the only significant asset of the Company was its 95% equity interest in Huifa.  By 4 documents set out in Table 1 below, such asset was transferred by the Company to Highfit Holdings Limited (“HHL”) for HK$192,369,835:

Table 1

Date	Company involved	Purpose of document	Signatory
31.08.2000	HHL	Koo and Ling were the only directors present at a board meeting.  Koo as chairman. Resolved to purchase the Company’s shareholding in Huifa for HK$192m.  Ling was granted authority to represent HHL to sign all relevant documents.	Koo and Ling
07.09.2000	The Company	EGM at which Koo and Ling were present.  Koo as chairman. Resolved to sell interest in Huifa for HK$192m.  Koo was granted authority to represent the Company to sign all relevant documents.	Koo and Ling
08.09.2000	The Company	Board of directors, including Koo, Ling, Eric Ling and Donald Suen, resolved to sell the Company’s shareholding in Huifa to HHL for HK$192m and that Koo be granted authority to represent the Company to sign all relevant documents	Koo as chairman
08.09.2000	The Company & HHL	Agreement for sale by the Company of its interest in Huifa to HHL	Koo for the Company; Ling for HHL

35. Thus the Company’s only significant asset, in which HK$730 million had been invested, was apparently sold at serious undervalue for HK$192 million. Lim was not present at any of the meetings in the table above. The Liquidator could not find any evidence that such sum had been paid to the Company.  The only participants in the transaction, on both sides, were Koo and Ling.

36. By reason of the foregoing matters, in 2006, Lim’s executor brought proceedings against the Company and HHL in HCA 1700/2006 (“the Executor’s Action”) claiming that the Company’s transfer of Huifa to HHL was a fraudulent conveyance. .

37. The defences of the Company and HHL condescended to some detail in denying the claim of fraudulent transfer.  Amongst others, there were positive assertions made by the Company that “the restructuring in respect of Huifa shares was undertaken with Lim’s knowledge for the primary purpose of facilitating, or assisting in raising external financing for the project”. These assertions appeared inconsistent with the Ignorance Defence.

38. In the period between May and December 2010, the Liquidators repeatedly sought explanations from Koo and Ling about the sale of Huifa and also sought the Company’s books, papers and records in their possession.  But Koo and Ling did not cooperate. 

C3.  The s.221 application

39. So the Liquidators took out a summons under s.221 CO.  In opposition, Ling has filed affirmations dated 25 March and 29 June 2011 on behalf of herself and Koo.  By the former affirmation, she said that after ceasing to be directors of the Company in 2001 she and her mother “have not been involved in the operation and business of the Company, and thus have no knowledge concerning the Company at all” (§4).  She also said, “Further, there are a number of changes of directorship of the Company after the resignation of my mother and me as directors.  It should be those subsequent directors that could answer those questions in relation to the matters after our resignation” (§13) and that, as to pre-2001 matters, she and Koo “do not recall much” (§12).  Ling also said that neither she nor Koo was in any position to provide any of the Documents requested (§12).

40. By her affirmation dated 29 June 2011, Ling continued to profess complete ignorance in respect of the Company’s affairs.  In attempting to explain away Ling-2008 quoted above, she claimed to be then focussing on whether the Company should be wound up and deposed based on her knowledge acquired during her directorship to the financial position of the Company. When the issue was whether she should be subjected to cross-examination she claimed not to have memory or knowledge of matters set out in the Schedule 2.

41. In his decision which gave rise to the 2011 Order, Poon J expressly relied on §5 of Ling-2008 above and criticized Koo and Ling as follows:

“So Ms Ling had in 2008 expressly stated on oath that she had knowledge of the Company’s affairs, although she had ceased to be a director back in 2001. I reject her allegation now that she and her mother had no knowledge of the Company’s affairs after 2001 or no recollection of the same before 2001 as recent fabrication. Ms Cruden submitted that in the 2008 affirmation, Ms Ling only expressed her view on the Company’s financial position and willingness to answer the statement of affairs of the Company. She was then doing her best to answer and comment on the then issue to the best of her knowledge. I do not think Ms Ling has so qualified her evidence in the 2008 affirmation. Any suggestion that Ms Ling could recall the Company’s affairs for the purpose of the application to rescind the winding-up order in 2008 but not now when she and her mother face the Liquidators’ application is simply disingenuous.” (HCCW 61/2008, 26 August 2011, §36)

Poon J even took the view that Koo and Ling were uncooperative (§37).

42. Ling’s present contention that she and her mother have not been involved in the operation and business of the Company and have no knowledge of the Company’s affairs after 2001, and do not recall much of the Company’s affairs before 2001, is untenable.

C4.  Events after the making of the 2011 order

43. Despite much correspondence commencing shortly after the making of the 2011 Order, Koo and Ling agreed to attend informal interviews only after the Liquidator intimated the intention to fix a date for oral examination on oath pursuant to that Order. 

44. In a letter to ONC (the Liquidator’s solicitors) dated 14 October 2011, LWT (Koo and Ling’s solicitors) stated:

“We are awaiting for our clients to deliver the documents pursuant to the Order of Poon J to us. We shall send you the said documents upon our receipt of the same.”

45. The Liquidator waited, only to be told something to the contrary a month later.  So ONC had to interview Koo and Ling individually.  Neither Koo nor Ling brought along the Documents despite ONC’s prior repeated requests to them to do so.

46. A summary of what Ling said in her interview on 18 November 2011 is as follows:

(a) Everything in relation to the Company was run by Lim;

(b) Ling was responsible for concept design and finding architects to design the external structure of the Property;

(c) She was not responsible for the day-to-day operation of the Company;

(d) She was responsible for the construction site, managing the workers at the construction site and handling problems with the creative or construction people (like architects).

(e) It was those people in the management of her father’s company who would advise her as to what to do in respect of project management, mechanical & electrical, and PDA;

(f) Those people and her father helped the Company arrange the financing of the Project;

(g) She did not care about and did not deal with the finance of the Company;

(h) It was only until after 2001 that she started to look at the finance matters of the Company;

(i) She forgot what she did back then in relation to the affairs of the Company;

(j) She did not know why her father did not cause the Company to produce audited accounts after 1995.

(k) Lim was released from prison in Taiwan in 1999.  He told Ling that she needed to set up HHL and use the Property as collateral to obtain financing.  He told Ling and her older brothers that if they were to continue with No. 41 they had to help out themselves to refinance and should not depend on him.  Lim at one time even wanted to give his 1% share to Koo and Ling and did not want his son Peter to “come in and fool them”.

47. Ling’s account of her ignorance of the Company’s affairs was flatly contrary to what she had earlier said in Ling-2002 and Ling‑2008.

48. At the interview, Ling promised to follow up on the following matters:

(a) whether she, Ling, was and is still a director of HHL;

(b) the present shareholding in HHL;

(c) how the HK$190 million transfer price for the sale of Huifa by the Company to HHL was arrived at;

(d) how much money was obtained from the refinancing exercise and from whom the money was borrowed;

(e) who presently was in control of HHL;

(f) whether Huifa was still held currently by HHL;

(g) who the directors and shareholders of HHL were;

(h) whether she, Ling, was a director of Huifa and played a role in Huifa.

49. Ling failed to provide the Liquidator with responses to any of the above matters after her interview. 

50. A summary of what Koo said in her interview on 22 February 2012 is:

(a) Everything in relation to the Company was run by Lim;

(b) She did not know how to run a business and was not involved in and did not care about the management of the Company;

(c) She never attended any meetings of the board of directors of the Company;

(d) She did not know how the Company operated as all were arranged by Lim;

(e) Lim was the person who knew most clearly about the operations and affairs of the Company;

(f) She signed documents relating to the Company when she was asked to do so by Lim or others;

(g) She did not know why Lim did not cause the Company to produce audited accounts after 1995.

51. Koo’s attempts now to distance herself from knowledge of the Company’s affairs are inconsistent with the role she played, eg when selecting and negotiating the purchase of the Property, and signing documents on behalf of the Company to transfer away the Huifa shares.

52. Koo and Ling failed to file affidavits confirming the contents of their respective interviews, until compelled to do so by the 2012 Order.

53. By the Deadline, none of the Documents were produced.  By Koo-2^nd [2] filed on behalf of Koo and Ling in the winding-up proceedings, Koo purported to raise the Ignorance Defence.  She said that after she ceased to be a director of the Company in 2001, she did not take away any of the documents with her and did not in any way take part in the management of the Company and its daily operations.  When Ling ceased to be a director, Ling stayed in Hong Kong for 2 months or less in a year. 

54. Koo and Ling had purportedly sought the assistance of their personal assistant, Agnes Tang, to find and produce the Documents.  Agnes Tang had tried to contact:

(a) Mr KW Liu (ex-CFO of the Company) who allegedly assisted Lim in respect of management and accounts of the Project until 2001 when the Project was completed and when Ling ceased to be a director of the Company;

(b) Ms Ho (assistant to Lim) who used to manage the accounts of HPCL and KA. However Ms Ho refused to help as she knew that the Company was in liquidation.

55. On 5 December 2012, these contempt proceedings were commenced, pursuant to leave granted on 21 November.

56. Ling and Koo each filed an affirmation on 1 March 2013 for these committal proceedings. The net effect was that they were not in possession of any of the Documents and had no means to identify their whereabouts.  Koo did not even know if the Documents existed at all.

57. In Ling’s affirmation filed on 1 March 2013, Ling tried to explain away Ling-2008:

“… When I said that I have been involved in the affairs of the Company (and therefore had knowledge thereof), I was actually referring to what I knew from my limited participation of the Company (as set out above) in trying my best to address the matters arising from the Winding-Up Proceedings. I regret that I have not made that clear even though the fact has always been that I have never been involved in the daily operations and management of the Company as confirmed above. I was at that time addressing my mind primarily to the matters regarding the Winding-Up Proceedings. I must admit that those statements have not been presented in a most precise manner. Further, I cannot recall if I was referred to any documents when I said that the Company was in a healthy financial condition. Most probably, I was not referred to any documents in that regard. However, given my experience in the project, I took the view that it would generate lucrative income and I might have stated my belief as a result.” (§23)

58. A month later, in April 2013, further affirmations were filed by Koo, Ling and Agnes Tang, in which they set out steps purportedly taken by them to try to obtain the Documents.  In summary, Agnes Tang had identified various persons whom she had approached with a view to obtaining the Documents.  However, for one reason or another (person could not be found, was too ill to help, could not give any assistance etc) none was able to assist in producing any of the Documents. LWT had written to the Company’s former secretary (“Good Venture”), and the registered agent (“OIL”) of Million Raise (corporate director of the Company).  Again, none of the Documents came out of it.

59. After much criticism from the Liquidator on the inadequacy of their disclosure, Koo, Ling and Agnes Tang filed yet another round of affirmations on 29 July 2013, this time producing some the Documents.  By then it was 3 years after the Liquidator had first asked for the same. 

60. In summary the July 2013 affirmations disclosed that:

(a) With the help of one Ritchie Chow, Agnes Tang had managed to contact a few more persons like Huang Fu Hua (cashier at the Shanghai Office), Chen Fu Jun (worked with Ritchie Chow but had emigrated to Australia), Xu Rong (Koo’s assistant in Shanghai). 

(b) At the Shanghai Office and unidentified warehouses, Agnes Tang obtained some documents, being financial statements of the Company, HPCL, KA and HHL, which fell within the terms of Schedule 2.

(c) Again with the help of Ritchie Chow, at the office at 16/F Jewellery Building (“the HK Office”), some correspondence with IRD and profits tax returns in relation to KA, HPCL and HHL were found.  They did not fall within Schedule 2.

(d) Ritchie Chow told Agnes Tang that Huifa and Gee Ming should have financial statements maintained every year but he did not have any idea of their whereabouts.  Agnes Tang contacted Simon Sung (working in Shanghai taking care of building management matters).  Some financial statements of Huifa and Gee Ming had been produced. 

(e) Agnes Tang had been a director of Huifa from about mid-2007 to late 2008.  It was Koo who mentioned to her that that post might need to be filled up by someone, and who realised subsequently that it was not necessary to do so. 

(f) Agnes Tang could not recall if she had held any position in Gee Ming.  However, she had not been involved in the daily operation or management of either Huifa or Gee Ming.

(g) LWT did a Company search and had written to Good Venture to ask if it still kept any documents relating to the Company.  There was no reply.

(h) LWT sent various letters to OIL after the Deadline but there was no substantive reply from OIL concerning the Company and Risehill Management Ltd (who signed annual returns for Million Raise).

(i) Cyberwise provided to LWT some annual return, written resolutions of shareholders of HHL, HPCL and KA; and some public records.

I shall refer to these documents produced as “the Post-Deadline Documents”).

61. Some of the Post-Deadline Documents had missing pages and some were simply public documents. Most of them did not reveal any useful information or shed no light on the transactions which the Liquidator has been investigating, but this was irrelevant to whether there had been conduct in contempt.

62. I place little weight on the contacts in paragraph 60(a), as nothing came out of them, even if made earlier by Agnes Tang. 

63. However, the July 2013 affirmations raised a lot of unanswered questions. For example, there was no explanation as to why the Shanghai Office (staffed) and unidentified warehouses had not been searched earlier for the Documents. It could not be the case that the Documents suddenly appeared from nowhere. 

64. Further, how come only part of the financial documents that should have been produced every year (according to Ritchie Chow) became piecemeal and incomplete? 

65. Ritchie Chow had apparently confirmed to Ling that Huifa and Gee Ming should have financial statements prepared every year.  However, there was no explanation as to why it was Simon Sung (Engineering Director rather than account/finance personnel) who obtained only some of the audited accounts via an unnamed management account clerk.  Nor was there any explanation why it was not Huifa and its staff, clearly managing the Property prior to 2010, who produced the documents.

66. Moreover, there did not appear to have been inquiries made of company secretaries of HPCL and KA that there were no further records apart from those produced.

C5.  Summary of position before and after commencement of the committal proceedings

67. Ling gave inconsistent evidence in her affirmations.

68. The Ignorance Defence made no sense for the period from 2003.  On Koo’s own evidence at her interview, “He (Lim) handled up to 2003 only.  … After that he hardly handled anything.  He said, you do it yourself.  Told my company’s staff to do it as usual.”.

69. Before application for leave to commit for contempt was made, Koo and Ling had been steadfastly uncooperative. They would not attend interviews until threatened with an order for oral examination.  They would not confirm the accuracy of the transcripts of the interviews until compelled by the 2012 Order.

70. Despite LWT’s letter promising to send documents to ONC upon receipt of the same from Koo and Ling, and Ling’s promise at the interview to follow up on matters, Koo and Ling never came back to the Liquidator with any of the Documents.

71. After the 2011 Order, limited efforts were made to try and seek assistance from people who might have knowledge about the Documents before Agnes Tang got in touch with Ritchie Chow.  There was no explanation as to why searches were not made earlier at the Shanghai Office and the warehouses with the then current staff, even without Ritchie Chow.

72. Koo and Ling’s production of the Documents had changed from nil before the committal proceedings started to woefully inadequate by July 2013.  That production raised a lot of unanswered questions.

D.  CREDIBILITY OF WITNESSES

73. With the matters in Section C in mind, I have assessed the credibility of the 3 witnesses – Koo, Ling and Agnes Tang.  Demeanour was not of great importance in this case.  It was the logicality and consistency in each witness’s evidence that mattered.

74. I have excluded from my mind the privileged materials on settlement exhibited to Ling-5^th when Koo and Ling made a last minute application before this trial. 

75. I remind myself that Koo and Ling would not want to risk the loss of their liberty by not producing documents which they really knew existed and where to obtain unless, of course, those documents contained materials against their interests or did not exist.

D1.  Ling’s credibility

76. Ling was aged 57 at the time of the trial (being born in 1958). Her claimed interest was in fashion and art and not her father’s business (whether before or after his death).  But she has a degree in accounting and financial management in the UK although she did not like the subject.  She accepted that she was “not entirely unfamiliar with financial matters and documents which involved money transactions and things of that nature.”

77. The only interest Ling and her mother allegedly had in the Company was in relation to the Project.  Ling claimed that she signed whatever documents her father asked her to sign, either directly or through his staff. She became a director of the Company but ceased to be so in 2001 on the wishes of her father.  It was allegedly her father who continued to manage the Company through an overseas corporate director.  She did not have contact with the corporate nominees and did not know the identity of any person therein.  She considered the change in corporate directorship “her parents’ thing”.

78. Whilst in the witness box, Ling was quick in response, direct and succinct.  She admitted being irresponsible in delegating the task of searching for documents to Agnes Tang. She claimed that the best of intentions had been misunderstood by the Liquidator. 

79. However, she was not entirely reliable.  Her current case is inconsistent with Ling-2002 which claimed that the family retained management control of the Company through corporate directors; and inconsistent with Ling-2008 which claimed that she had been involved in affairs of the Company and knew it to be in a healthy financial condition.

80. An example of Ling’s inconsistency in her evidence related to her knowledge/ignorance of the existence of HPCL. In her interview, Ling explained in detail to the Liquidators’ solicitor how it was that the family members resigned from directorship of the company as a result of adverse publicity engendered by the Bank of China’s proceedings against HPCL. And yet 15 months later, in her 1 March 2013 affirmation filed in these committal proceedings, she said at §32 that she was not aware of the existence of HPCL.  I do not consider this could be explained by her lack of interest in a company.  She was simply lying.

81. Ling’s claimed lack of knowledge of the premises in which the Documents might have been found was not reliable.  She had no idea what documents were kept at the HK Office. It was incredible that she knew nothing about size of the HK Office and the number of rooms it had.  The HK Office had been at that address for 7 years from 2008 until shortly before this trial.  Some 4 to 5 of Ling’s own design/gallery staff had worked there and yet Ling claimed never to have set foot there.

82. Clearly, Ling was trying to distance herself from anything which might have suggested that she was able to locate and produce the Documents.

83. I have alluded to Poon J’s criticism, in an interlocutory stage, of Ling’s professed ignorance of the Company’s affairs as “recent fabrication” and “disingenuous” (para 41 above).  Now that I have the full picture after hearing oral evidence, I share the views of Poon J.  Ling was not a reliable witness.  Unless otherwise specified, I do not accept her evidence.

D2.  Koo’s credibility

84. Koo was aged 78 at the time of the trial (being born in 1937). She was brought up in Shanghai with no formal education.  She neither speaks nor reads English.  She would not know how to read accounts. 

85. She was not involved in Lim’s business (apart from attending some meetings with Shanghai officials for the purpose of the Project), but Lim’s other wives and children were.  She had no idea about what duties directors owed or what corporate directors meant.  She was a housewife but had previously run a boutique.

86. There are several points to note about Koo’s credibility on her evidence:

87. Firstly, in the witness box, she pretended to be confused.  Koo maintained that she did not know about a lot of things and that it was all Lim’s idea.  She could remember companies like the Company, HHL or Huifa but she had forgotten what those companies did.  She would not even confirm that she knew the reason for making an affirmation in 2004[3] (“Koo-2004”).  With her admission that Lim hardly handled anything after 2003 and asked Koo to do it herself, the Liquidator challenged that Lim could not have supplied the information in that 2004 affirmation.  Thereupon Koo twisted the Liquidator’s question.  She said that when Mr Strachan SC mentioned 2004, she thought he wanted her to talk about 2002 because he mentioned the writ of Bank of China.  In fact, up to that point, Mr Strachan SC had not mentioned the year 2002.  She kept coming back to the year 2002 without prompting, deliberately to create an impression of being confused.

88. Secondly, like Ling, Koo also was prepared to say anything to support her position at different points in time.  For example, in Koo-2004 (§48(c)) filed as majority shareholder of HPCL, she made multiple references to HPCL to account for when and the circumstances in which the family members resigned from directorship owing to publicity.  She signed the annual returns of HPCL, as a director of HPCL, for (at least) the years 2006 to 2012, the last of which was signed by her on 17 June 2012.  Yet in affirmations filed in these committal proceedings, like Ling, Koo denied being aware of the existence of HPCL; and that if she had signed any documents of HPCL, they would have been given by and returned to Lim’s staff and she had no knowledge about the contents.  

89. Thirdly, in her oral evidence, Koo denied having said in her interview that after 2003 Lim hardly handled anything (because of his failing health).  She said, “To whom did I say this? …I did not.”.  When the passage in her interview record was put to her, she reversed her evidence and accepted that Lim had indeed hardly handled anything after 2003.

90. Fourthly, Koo was incapable of giving a clear and consistent answer to the question who had managed HPCL after Lim’s death.  Initially, she said “Mr Lim had employed some people to manage it”.  When it was pointed out that Lim was dead, Koo said “You have to ask Pearl (Ling)”.  Shortly thereafter she said first that HPCL was managed by “Just a few of us” and then she said HPCL was managed by herself (Koo) and her secretary.

91. In fact, Koo was most evasive when asked if family members still had control over the Company after they resigned.  She digressed, saying that as far as she knew, the Company had no business, when in fact the Company had a lot of business in developing the Project.

92. Fifthly, Koo’s knowledge of the interest on the bank loan for the Property threw her Ignorance Defence in doubt.  In her interview, Koo mentioned about some $2 million annual interest on the bank loan in respect of the Property. Yet in her oral evidence, she initially denied saying anything about the $2 million; and that she did not even know how much the interest was.  She claimed to have said it was a few million per year.  She even tried to query to which solicitors firm she had made such affirmation, when it was LWT, her own solicitors.  After many questions and answers, she ended up saying that she said it was 2-3 million a year, but did not say a precise figure.  She also agreed that she was the big boss to determine how much to borrow from the bank. The irresistible inference was that she was trying to hide her knowledge on financial affairs about the Property.

93. Sixthly, Koo’s evidence as to whether she needed to pay rent for the flat she occupied was inconsistent.  In her interview Koo said that that flat was in her name and that she did not pay rent.  Under cross-examination, however, she said it was “owned by the Company” and that she did pay less than usual rent for it.  She could give no satisfactory explanation for such contradictions in evidence.

94. Seventhly, Koo’s evidence on Superace Ltd (which owned 2/3 of the shares in KA) was telling.  Initially, she said she knew nothing of Superace.  Then in explaining why the documents showed her as a director of Superace, Koo said that Ling was often out of town and so Koo would sometimes sign on some documents “for Ling”.  When pressed further, Koo said, “I’ve heard of the name.  I know it’s [Ling’s].”  I find that Koo clearly knew that Ling owned Superace and was hiding that fact from the court.

95. I do not find Koo to be a truthful or reliable witness.  Unless otherwise specified, I reject her evidence.

96. The criticisms I make of Ling’s various affirmations bind Koo, as those affirmations were made on behalf of the Company (and hence Koo, the 95% owner) and/or Koo. 

D3.  Credibility of Agnes Tang

97. Agnes Tang claims to have worked for Koo and Ling for over 20 years.  She appears not to have any personal interest in the outcome of this case. 

98. She purports to corroborate, from her own observation, Koo’s version that Koo had never been involved in any business operations of the Company but only the public relations work in Shanghai.  She also corroborated Ling’s evidence that Ling’s passion was in art and not business operations of the Company and Ling’s alleged involvement in the Company.  She assisted Koo and Ling in seeking the Documents from people who might be in a position to help in gathering more information.  She tried to contact various persons, who turned out to be either not contactable or seriously ill.  She made a trip to Shanghai in April 2013, which led to disclosure of the Post-Deadline Documents.

99. Agnes Tang filed an affirmation on 11 December 2008 in the winding-up proceedings to support Koo and Ling’s application to rescind the winding-up order. At that time, she was in a position to state that “all debts and liabilities of the Company have been settled or provided for”.

100. When filing an affirmation on behalf of Koo and Ling in these contempt proceedings, Agnes Tang did not, initially, refer to her capacity as a former director of Huifa and Gee Ming but chose to describe her employment at KA and her employment by Koo and Ling as their personal assistant only.

101. The matters in the 2 preceding paragraphs did not sit well with Agnes Tang’s initial position that she did not know where the Documents were and whether they existed. 

102. Further, as disclosed in Agnes Tang-2^nd, it transpired that Agnes Tang’s appointment and cessation of appointment as director of Huifa was at the instigation of Koo.  In my view, this was an attempt to understate the control of Koo over Huifa.

103. There was a part of Agnes Tang’s evidence concerning the keeping of photocopies of documents.  This court asked whether Agnes Tang had kept photocopies of company documents which Koo and Ling were asked by Lim to sign. Agnes Tang’s answer was, “I think – I suppose that it should be yes.”

104. Likewise the Court asked her, “At Jardine House office which housed KA Development and Highfit Development, there were financial documents being kept at that office?”  The answer was “Yes, I suppose so.” 

105. No one sought to ask Agnes Tang what the bases for her suppositions were, who would have kept the photocopies and where.  I place no weight on her answer concerning photocopies.

106. I do not find Agnes Tang to be an entirely reliable witness.  Unless otherwise specified or where it was supported by documents, I do not accept her evidence.

E.  LEGAL PRINCIPLES ON CONTEMPT OF COURT

107. The following principles are not in dispute and are largely taken from the summary of principles in the skeleton submission of Mr Adrian Huggins SC (leading Mr Richard Khaw and Mr Lincoln Cheung).

108. A court order must be complied with strictly in accordance with its terms.

109. The burden is on the plaintiff to prove a defendant’s contempt beyond reasonable doubt: Kao, Lee & Yip v Koo Hoi Yan (2009) 12 HKCFAR 830,§§6 and 30.

110. The defendant does not have to prove anything affirmatively; at most, there is an evidential burden on him: Concorde Construction Co Ltd v Colgan Co Ltd & anor (No.2) [1984] HKC 253, Rhind J.  The learned Judge also said,

“Adopting the criminal standard and onus of proof means that there is no persuasive burden on the defendant to prove anything. If there is a hypothesis which might reasonably be consistent with the defendant’s innocence then he is entitled to be acquitted. That is what happened in the Bramblevale case … there is no onus on Colgan or its directors to prove anything affirmatively. At the most, there might be evidential burdens on them.” (at p.257 D-E)

111. It is necessary to (a) construe the court’s order to ascertain its meaning and operation; (b) determine whether the defendant has in fact complied with the order; and (c) consider whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt: Kao, Lee & Yip, §21; Liaoyang Shunfeng Iron and Steel Company Limited & anor v Sunny Growth Enterprises Group Ltd & anor, HCMP 667/2013, 15 May 2013, Au J, §16.

112. An order should be construed strictly because the court is concerned with an order which has a potentially draconian effect on the commercial and economic freedom of an individual.  What must be ascertained is the meaning which the document would convey to a reasonable person having all the background which would reasonably have been available at the time the order was made.  This includes the purpose for which the order was made: JSC BTA Bank v Mukhtar Ablyazov [2013] EWCA Civ 928, §§37, 64-65; Sino Wood, §§12-15; Kao, Lee & Yip, §§24-26.

113. The court will not enforce the order in contempt proceedings when it is ambiguous or unclear in a material respect.  Any ambiguity in the terms of the order must be resolved in favour of the alleged contemnor: Sino Wood Investment Ltd v Wong Kam Yin (2005) 8 HKCFAR 715, §§20-23; Haddonstone Ltd & anor v Sharp [1996] FSR 767,775; Dr Q v Health Committee of Medical Council of Hong Kong (No.2)[2014] 2 HKLRD 57, §36.

114. In a situation where it is said that the contemnor has failed to produce documents as ordered, it is crucial to determine that he did have the document in his possession, custody or power at the time of the order: Re Bramblevale Ltd [1969] 3 All ER 1062B-C, 1063H-I, 1064F-I.  A presumption of fact, ie that a state of things proved to exist at a certain date must be taken, in the absence of contrary evidence, to have continued to exist, will not be sufficient: Re Bramblevale Ltd, at 1064F-G.

115. Proving that the defendant has lied is not sufficient. There must be some further evidence to incriminate him than just lies.  Once some evidence is given, then his lies can be thrown into the scale against him:  Re Bramblevale. In that case,the appellant (H) admitted to the liquidator that the books of the company were in his possession but did not give them up to the liquidator. In answer to the liquidator’s summons for production of the company’s books, H said that they had been destroyed in a car accident.  H failed to comply with the registrar’s order to produce the cash books or creditors’ ledger.  He was committed to prison for contempt but the English Court of Appeal overturned the conviction.

116. It has to be proved that the failure to comply with the court order was contempt.  A defendant cannot be regarded as in contempt just because he did not have the means to comply with the court order: Concorde Construction v Colgan, at 258B; or it was impossible to comply: Kao, Lee & Yip at 858B §47 & p.860 §56; Sectorguard Plc v Dienne Plc [2009] EWHC 2693, at §33. 

117. It is not enough for a person who has breached a court order to say that he has tried his best unless the court order itself only orders the person concerned “to do his best”: Howitt Transport v Transport and General Workers’ Union [1973] ICR 1, 10, Sir John Donaldson.  It is the plain and unqualified obligation of every person against, or in respect of whom, an order is made by a court of competent jurisdiction, to obey it unless and until that order is discharged: Kao, Lee & Yip, §26, Sir Gerard Brennan NPJ.

118. The intention, efforts of the contemnor, the delay of the even a legal adviser and bona fide reliance on legal advice are only relevant to mitigation: Dr Q, at §66-67.

F.  THE IGNORANCE DEFENCE

119. Both Koo and Ling confirmed that Lim was in control of all the subject companies during his lifetime.  According to Ling, her father was the no.1 person to say yes, her mother no.2 and Ling would follow.  Whatever Lim said, Koo always agreed.

120. Koo and Ling ceased being directors in September 2001.  Who would have authorized Ling to make Ling-2002 (which she confirmed to be accurate) a year later on the Company’s behalf?  Precisely as Ling stated in Ling-2002, Koo, Ling and Lim had not hived themselves off but retained management control of the Company notwithstanding appointment of corporate nominee directors.

121. There was nothing to contradict Koo and Ling’s version for the period before 2003 and I accept the same. 

122. However, Lim could not have appointed Million Raise in 2008. Koo and Ling professed ignorance about Million Raise.  Ling alleged that after Lim’s death, she has never had any personal contact with the corporate nominees; and she did not even know the corporate nominees’ names until recently.

123. Ling said that it would be the subsequent directors who would answer questions in relation to the matters after Koo and Ling’s resignation, when the “subsequent directors” were merely “corporate nominee directors controlled by Koo and Ling as mentioned in Ling-2002.  Who could have authorized Ling to make Ling-2008?  Likewise, who could have appointed corporate directors for the Company?  There was nobody but Koo and Ling.

124. Koo may forget or do not care about details.  She may not remember which Highfit was which, since the names were so similar.  Ling may not have hands on knowledge on every aspect of the Company, despite any true intention to assist her mother.  But Ling knew that the Property was her mother’s, even on her own evidence.

125. Koo and Ling would hardly forget matters as important as ownership of the Property, whether it remained theirs or who was taking care of the Property for them.  The Property was an enormous gift made to Koo by Lim after she had complained of Lim’s unequal treatment to her and Ling compared with his other family members.  Lim told her that once the Project was completed and sold and the bank repaid, the remainder would provide for Koo for the rest of her life. She and Ling would get a flat to live in.  (See Koo’s Interview.) It defies logic to say that Koo and Ling would have left other unidentified “family” members to manage and control the valuable gift, especially in view of the many pieces of litigation aimed at depriving Koo of her gift.  And Ling has been assisting Koo all along in the litigation.

126. Koo knew about the Company selling Huifa to Highfit although she said she did not know which Highfit it was. Lim had got in a management company.  At present, Koo looks after the Property.  She knew that there were flats leased out, some were sold and that Huifa owes $30 million to the bank.  When things happened, the people would inform Koo.  She agreed that she was the big boss, the owner of the Property and the management company could not make the decision.  All of these pointed to the fact that she knew that the Property (whichever was the entity holding it) still remained “her” property and she knew something about its financial condition.

127. I reject the Ignorance Defence.  The irresistible inference is that it could only have been Koo and Ling who have had knowledge and control of the affairs and finance of the Company, latest since 2003 (on their own case). Ling-2002 and Ling-2008 did state the truth of Ling’s knowledge.  Ling merely professed ignorance of the Company’s affairs whenever it suited her and was unreliable.  As shall be demonstrated in Section H below, Koo and Ling were/are also in control of the related companies in this case. 

G.  THE LACK OF SPECIFICITY DEFENCE

G1.  Legal principles

128. There is a distinction between an order made under s.221 COand an order for committal of a defendant for contempt.

129. For a s.221 order, the court is conferred with the power to order production of documents in wide and general terms without the need for specificity as required for discovery orders or subpoenas.  The applicant liquidator does not have to establish that the documents existed and that they were in the possession, custody or power of the respondent.  The standard of proof is on balance of probabilities Joint and Several Liquidators of Akai Holdings Ltd v Grande Holdings Ltd (2006) 9 HKCFAR 766, at §§35-45.

130. On the other hand, for an order for committal for contempt, a defendant can only be found guilty if the documents which he has allegedly failed to produce:

(i) Have been identified with sufficient clarity and specificity;

(ii) Were in existence at the time the order for production was made; and

(iii) Were in the possession, custody or power of the defendant (depending on the terms of the order).

The standard of proof is beyond reasonable doubt.

131. Accordingly, it is unlikely for the court to find a defendant guilty of breach of an order for giving of information where that document had not been identified with sufficient particularity.   

G2.  Construction of the 2011 Order to see if there was ambiguity

132. The only paragraph of the 2011 Order which Koo and Ling are said to be in breach of is paragraph 2 (“the §2 Order”).  It requires them to produce documents in their custody or power relating to the business and affairs of the Company, including the Documents.  There are 2 points to note:

133. Firstly, the §2 order was an order to produce documents. Any part of Schedule 2 which required the giving of information or explanation would be outside the ambit of the §2 Order.  The Liquidator has fairly conceded this and no longer bases his case on Classes 3, part of 4(v), 4(vi) and 7(i)[4].

134. Secondly, there was difference in wording in that the §2 order required production of documents in Koo and Ling’s custody or power, whereas Class 2 (concerning the Company’s document) required those in Koo and Ling’s possession. 

135. Mr Huggins SC submits that the word “including” in the §2 order meant “in particular”.  Otherwise it would be completely void of any attempt at particularly as to what documents were required to be produced apart from those in Schedule 2 and there would be great uncertainty as to the scope of the documents required. 

136. He submits that the 2011 Order should not be construed more widely to cover any documents “relating to the business and affairs of the Company” but which were not identified in Schedule 2.  Accordingly, for classes 1 and 5 (also concerning the Company’s documents), it should only be construed in a way that Koo and Ling would not be held to be in contempt if they had documents of the Company in their custody and power at the time of the 2011 Order even though they did not have them in their possession.

137. Without disrespect, I reject the contentions.  I see no uncertainty in or tension between the §2 Order and Schedule 2.  The guiding test for production of the Documents was custody or power, even though they were not in Koo and Ling’s possession.  The word “including” in §2 Order merely meant that the various Classes were but examples of documents in the custody or power of Koo and Ling and were not exhaustive.  By way of example, “audited financial statements” in Class 1 were also “documents” of the Company referred to in §2 Order.  There might be overlap between the description in the §2 order and Schedule 2, but that did not mean those provisions are uncertain or lacked specificity.  If a document was in Koo and Ling’s custody or power though not in their possession, they would be guilty of contempt if they had not located it and produced it, subject to proof of existence.  I therefore reject the Lack of Specificity Defence.

H.  THE NO POSSESSION DEFENCE

H1.  Meaning of possession, custody or power

138. “Possession” means the right to possession of a document: B v B [1978] Fam 181 at 186D.  It does not require actual physical possession: The Securities and Futures Commission v Ernst & Young (a firm), HCMP 1818/2012, 23 May 2014, §84, per Ng J.  A person has possession of documents that are in the hands of his servant or agent: Malek, Disclosure, 4^th ed (2012) at §5.48.

139. The mere status as majority shareholder or director of a company does not necessarily give a person “control” of the company’s documents. 

140. In cases of a one man company, where the director owns all or substantially all the shares and any minority shareholders are not adverse to him, then the inference may be drawn that the company, although a separate legal entity, does not control him but he controls the company in such manner as to make it his other person or alter ego.  In such a case, where the director controls the company and nominates the other directors, all the documents of the company are within his power in the sense that in truth and in fact he is able to obtain control of them.  B v B, at 188G, Dunn J

141. In Re Tecnion Investments Ltd [1985] BCLC 434, at 439c-e, Dillon LJ made statements, to like effect where the company is under the unfettered control of a person so as to make the company that person’s alter ego.

142. Documents are in the “power” of a person only if that person has “some sufficient control … over the company”: Suen Yuet Tai Ltd v British American Tobacco Company (HK) Limited, CACV 95/1999, 4  June 1999, Rogers JA.

143. Contrary to Mr Huggins SC’s submission (which was not based on any authority), for the company’s documents to be in a person’s control, power or possession, there is no requirement that the person has to know that he has the right to obtain the documents from whoever holds them, or that he knows of the existence of the documents of the company.  Were it otherwise, the documents which that person does not have knowledge of would not be in the power of anyone.  This would be absurd.

144. In the context of knowledge, Mr Huggins SC refers to a situation when someone is not sure whether he is a shareholder or director of eg a BVI company and does not know the identity of that company’s registered agent.  In such a case he would not be in a position to know whom to contact in order to ascertain the whereabouts of a document. 

145. With respect to Mr Huggins SC, in that scenario, it would be the lack of knowledge of his status as shareholder or director (not the lack of knowledge of the right to obtain the documents from whoever holds them, or lack of knowledge of existence of the documents) that would prevent an act of contempt from arising.

146. I therefore reject the No Possession Defence to the extent that it requires the Liquidator to prove that Koo and Ling knew they had possession of the Documents.  The same will apply if the test for production is “custody or power” instead of “possession”.

H2.  Admission of possession, custody or power

147. Possession, power or control over a company and its documents is a question of fact: B v B, at 187H & 188G. There is dispute as to whether or not Koo and Ling had (through LWT) admitted to having possession, custody or power of the Documents by LWT’s letter dated 14 October 2011 but eventually failed to produce any after a month.

148. Koo and Ling may have caused the Liquidator to wait in vain but I am not satisfied beyond reasonable doubt that LWT’s letter contained the alleged admission.

H3. Company documents in custody or power of Koo and Ling

H3.1 The Company

149. Koo owns some 95% of the shares; Ling owns some 5% of the shares.  Lim/his estate owns 1 share out of 1,000,000.

150. In their oral evidence, both Koo and Ling accepted that both of them owned and controlled the Company. Ling also accepted that when there was something to be done in respect of the Company it was she and Koo who did it.  Having rejected the Ignorance Defence, I find that the Company was and is the alter ego of Koo and Ling and its documents were/are in their custody or power.

H3.2  HPCL

151. At least between 2006 and 2012 Koo has owned 998 and Ling has owned 1 out of the 999 voting shares in HPCL.  The Company owns all of the non-voting, non-participating shares.  In the same period, the only directors of HPCL have been Koo and Ling and Koo had signed all of HPCL’s Annual Returns.  Koo and Ling were the only directors. 

152. In their oral evidence, Koo and Ling respectively accepted that in terms of ownership and directorship they “completely controlled” HPCL and had “complete control” over the provision of its documents.

153. Koo stated in cross-examination that she now understood (but not before) that she had control over HPCL.  That was incredible given that she had been legally represented all along in various cases.

154. Ling accepted in cross-examination that the documents showed that she had some shares in HPCL and that she was a director but she insisted that she was not involved in the operations of HPCL and did not know about any of its documents: For reasons given in Section H1, such lack of knowledge was irrelevant. 

155. I find that HPCL was and is the alter ego of Koo and Ling and that its documents were/are in their custody or power.

H3.3  KA

156. Koo’s evidence on affirmation was that:

(1) KA was a company which only became activated after Koo commenced the Project and was used for various aspects of the development: Koo-2004, §26.

(2) Lim had full control of KA, including storage of its documents. His assistant, Ms Ho, refused to help now as to whether any of the KA documents sought existed or where they were.  See Koo-2^nd §10 in the winding-up proceedings. 

(3) After the writ was issued by the Bank of China in 2001, it was decided that Lim and other family members would resign as directors of companies, including KA. Koo resigned as director in September 2001. Koo-2004, §48(c).  

(4) The business of KA was one of the “family businesses under the control of the family”. 

157. On documents, the Company (ie Koo and Ling) owns 3,336 of the 10,000 shares of KA, and Superace Ltd the remaining 6,664 shares.  Superace’s shares were transferred by Ling to it on 24 March 2005.

158. From 2011 to 2013, Koo and the Company had been the only directors of KA.  Prior thereto, from 2006 to 2010, the directors of KA were Koo, the Company and Superace.  Koo had signed the Annual Returns for KA from 2009 to at least 2013.

159. In 2013, Superace and the Company appeared to own 2/3 and 1/3, respectively, of the shareholding in KA.

160. In her oral evidence Koo agreed that she and Ling had “full control” over KA.  When asked whether she (Koo) was a director of Superace, Koo offered the answer that Superace was Ling’s company and Koo signed documents when Ling was out of town.

161. Mr Huggins SC submits that Koo clearly did not intend to make any admission about knowledge of or control over the documents of KA Development, or about whether they even existed.  She recalled nothing about KA. If she signed documents relating to it in the past it must have been on the basis that she was requested to do so without knowing what the documents were about.  Koo was not aware of her directorship in Superace but accepted that a document put to her in cross-examination indicated that she was.

162. Without disrespect, I reject the submission. Koo’s answer was consistent with Ling’s admission in cross-examination that she should be “the power behind the throne” of KA even after the transfer of her shares in it to Superace in 2005.  It was she who owned and controlled KA and that if the Liquidator asked for KA’s documents there was no one to go to but Ling.

163. Ling believed she also owned Superace.  In the witness box, she still said she did not know if she was a director of Superace and she had to check, although she was not denying that she was in control.

164. Again without disrespect, I disagree with Mr Huggins SC that these were loose answers to a broad question, even taking into account Koo and Ling’s denial that they had documents in relation to KA.  For reasons given in Section H1 above, their lack of knowledge was irrelevant to the question of control or power.

165. I find that KA was and is the alter ego of Koo and Ling and that its documents were/are in their custody or power.  I also find that Superace belongs to and was/is in the control of Ling.

H3.4  Huifa

166. Since 2008, Koo has been the Chairman of Huifa and Ling has been its Vice Chairman. They were the directors of Huifa. Koo was also its legal representative.  They signed an application to change the directors and to amend the Memorandum and Articles of Association.

167. The sole investor or shareholder in Huifa is HHL.  Koo and Ling own HHL (see H3.6 below).

168. Huifa owns the Project.  Koo and Ling claim never to be involved in Huifa’s operations or management.  Koo had no documents of Huifa and did not know the whereabouts of any.  However, in the witness box, Koo and Ling respectively accepted that they together had “full control” of Huifa.

169. I find that Huifa was and is the alter ego of Koo and Ling and that its documents were/are in their custody or power. 

H3.5  Gee Ming

170. HHL is the sole “investor” of Gee Ming.  Koo and Ling own and control HHL (see H3.6 below).  Koo allegedly had no idea that HHL was the sole investor in Gee Ming, but she accepted that when shown the documents in cross-examination.

171. As to directorship, Koo is the Chairman and Ling is the Vice Managing Director.  Koo is also the legal representative.  They signed an application to change the directors and to amend the Memorandum and Articles of Association of Gee Ming.  

172. Koo allegedly was unaware that she had held any position in Gee Ming but now accepts that the documents show her to be legal representative or Chairman. She claims not to have documents and did not know the whereabouts of any in relation to Gee Ming.

173. In her oral evidence Koo accepted that she and Ling were “leading the board of directors in making decisions about Gee Ming’s circumstances and how it should conduct itself”. Koo also accepted that she was “the big boss making the big decisions.  Whatever important decisions that had to be made landed up on [her] desk…” and that she made them and is still making them.

174. Ling allegedly never controlled or managed Gee Ming, thought that she never held any position there, and had no idea at all about its financial status.  In cross-examination, she accepted that the records showed her as Vice-Chairman of Gee Ming but that was in name only.  She did not know the whereabouts of any of its documents.  She accepted, though, that she and Koo together had control of Gee Ming.

175. I find that Gee Ming was the alter ego of Koo and Ling and that its documents were/are in the custody or power of Koo and Ling. 

H3.6  HHL

176. There is dispute as to whether this is a Hong Kong company or BVI company.  The Liquidator’s case is that it is the latter.  He relies on the following references to a BVI company:

(a) §5 of the Statement made pursuant to O52 r2(2); §5 of the Amended Originating Summons; and the affirmations of the Liquidator in these proceedings;

(b) The admission in §7(2) of HHL’s Defence that HHL was a BVI company.  That was in the Executor’s action, in which the Executor claimed against the Company as D1 and HHL as D2, alleging that the Company’s transfer of Huifa to HHL constituted a fraudulent conveyance.   

(c) In the application for the 2011 Order, the Liquidator and Ling’s affirmations (filed on 11 February and 25 March 2011 respectively);

(d) Barma J’s judgment of 19 August 2009 in HCCW 61/2008, at §2.

177. There was no evidence as to who gave instructions to the pleader on behalf of ‘HHL’ which led to that admission. It was not known whether the Liquidator has ever asked the Executor why he pleaded HHL as a BVI company. Incidentally there was a Gee Ming document which referred to HHL as a BVI company, but no reference has been made by the Liquidator to that and there was no cross-examination on it of Koo or Ling.  The fact remained that HHL itself admitted being a BVI company.

178. On the other hand, HHL, a Hong Kong company, only came into existence in 2003, well after the transfer of Huifa to HHL in 2000.  Ling accepted that the Hong Kong company could not be relevant to that transfer. She could not tell what the use of that company was.  She was told by Agnes Tang that she (Ling) and Koo wanted it to be set up.

179. Applying JSC BTA Bank’s case (para 112 above), any reasonable person having all the background information which would reasonably have been available at the time the 2011 Order was made would be left in no doubt that it was a BVI company whose documents were sought. 

180. Lim was neither a director nor shareholder of HHL. But Koo and Ling were its directors.  Koo was the legal representative and authorized signatory of HHL, until at least the end of 2008.

181. Koo and Ling signed the 4 important documents in Table 1 above which led to the Company’s disposal of Huifa shares to HHL.

182. Koo said that she was not aware of the existence of HHL.  She said in cross-examination that she only understood that there was a transfer to a “Highfit” Company but did not know if it was HHL or if it was registered overseas, let alone in BVI. Those agreements, resolutions and minutes were all executed over 10 years before the 2011 Order. 

183. Koo’s evidence is that she did not know what she had signed, had not read it, and did not see anything about a transfer price of $192 million.  All these documents were prepared by Lim who arranged for a person to come over for Koo to sign.  On the face of it she was signing as Chairman but that was not the reality.

184. In her oral evidence Koo first accepted that she and Ling did have control of HHL; then she said “I don’t know”.

185. In her oral evidence Ling “presumed” that she and Koo were in control of HHL.  In §8 of her affirmation of 25 March 2011, Ling had stated unequivocally that “In September 2000 the Company duly transferred its shareholding in Huifa to [HHL] which was and still is under the control of my mother and me as its directors.

186. According to Ling, Lim had allegedly told Koo that he did not want to be a guarantor anymore and that Koo and Ling needed to stand on their own financing.  That was why he transferred Highfit out.  He did not have to be a guarantor for that transfer.  Ling had to get refinancing to finish off construction of Gee Club. These pointed to Koo and Ling retaining their rights in the Property notwithstanding any transfer.

187. I find that HHL was and is the alter ego of Koo and Ling and its documents were/are in their power or control. 

H4.  The minority shareholding of Ling

188. Mr Huggins SC submits that the Liquidator cannot establish Ling’s control of any company’s documents where she was a minority shareholder, with Koo holding the majority shares. He disagrees that because they together held all or most of the shares in the Company, therefore they both controlled the Company and its documents.  He submits that Koo and Ling must be viewed separately, and it cannot be assumed that they would always have agreed.  Any admissions in cross-examination that Koo and Ling controlled any of the companies were of limited weight and certainly not conclusive, so he submits.

189. Without disrespect, Mr Huggins SC has overlooked the fact that Koo and Ling have all along acted on the same front. Their affirmations were filed on behalf of each other. They were represented by the same lawyers.  They have used Agnes Tang for 20 years and have given her instructions to locate the Documents and contact witnesses.  If only Koo had been in control of the Company and related companies, Ling had certainly assisted her in compliance/breach of the 2011 Order.

190. Summarizing Section H, Koo and Ling have unfettered control of each of the Company, HPCL, KA, Huifa, Gee Ming and HHL, notwithstanding that Ling was a minority shareholder in some of these entities.  These companies were and are Koo and Ling’s alter egos.  It was plain that the Documents were and are in their power or control.  Their lack of knowledge that they were in custody, power or possession of the Documents was irrelevant.

J.  THE NO PROOF OF EXISTENCE DEFENCE

191. I agree with Mr Huggins SC that there is no room for a presumption that since Koo and Ling were likely to have custody or power of a company’s documents, or that documents were likely to have existed in a particular year, then that state of facts would have prevailed some years later when the 2011 Order was made.  The fact that Koo and Ling have lied or that the court rejects their versions is not in itself sufficient for the court to infer that the Documents were in existence: Re Bramblevale Ltd.

192. There needs to be proof beyond reasonable doubt that the Documents existed at the time of the 2011 order.  It is not enough, in my view, to show, as Mr Strachan SC did, that Koo and Ling have not asserted that the Documents have been destroyed or disposed of.  It is for the Liquidator to first prove the existence of the Documents.

193. In the following analyses Class by Class, I shall consider the state of compliance and the No Proof of Existence Defence.  The references to “existence” below are to existence as at the date of the 2011 Order or 2012 Order unless otherwise specified.  I have tabulated my findings in Table 2 (para 316 below).

K.  ANALYSES BY CLASS OF DOCUMENTS

Class 1 - All audited and management accounts prepared for the Company since 31 December 1995 to date

194. The Liquidator has conceded that asking Koo and Ling to provide details of the whereabouts of all the books and records of the Company not in Koo and Ling’s possession is a request for information and not documents.  He limits his case to the post-1995 auditted and management accounts of the Company. 

195. Koo and Ling have produced the following Post-Deadline Documents in respect of the Company:

(i) the Balance Sheet and Income Statement for 2003; 

(ii) the General Ledgers for the calendar years 2001 to 2003; each of these have missing pages, do not show any significant transaction records and provided no information on the Company’s transfer of the shares in Huifa to HHL; and

(iii) publicly available Company documents, obtained via Cyberwise Corporate Services Ltd.

These documents fell within Classes 1, 2, 3, 5(i) to (v) and 5(vii).

196. The Liquidator found that none of them shed any light on various transactions that he was investigating (see §22 of Schedule 1 to the Summons).  In my view, the usefulness of documents disclosed was irrelevant to the question of whether Koo and Ling had acted in contempt.

197. The Liquidator relies on the statutory duty on the Company to produce audited accounts until it was wound up in February 2008 and to have them preserved for 7 years: ss. 121(3A), 122, 141 and 129C of the then-applicable CO (“the statutory duty re audited accounts”). 

198. As was plain from the General Ledgers for the years ending 31 December 2001 and 2002, the Company was very active in the pre-2003 period. Some of the transactions were very substantial.

199. Furthermore, in and after 2002 the Company was engaged in much litigation (being Lim’s Action, the Bank’s Action and the appeal therefrom, and the Executor’s Action) and incurred a substantial debt (HK$1.4 million) to its lawyers, which was the petitioning debt. 

200. Koo and Ling’s position can be summarized as follows:

(a) That they were only required to produce what was in their possession.

(b) There was no evidence as to audit post December 1995.

(c) The statement in Ling-2008 was general and unspecific.

201. With regard to (a), I have ruled against Koo and Ling on the Lack of Specificity Defence. They had to produce documents in their custody or power.

202. With regard to (b), Ling denies possession or control of the documents in Classes 1.  She does not even know if such documents existed or, if they do, where they are.  Koo and Ling’s evidence was that they were not aware of any such accounts prepared post-1995.  The interviews of Koo and Ling proceeded on the basis that there were no audited accounts post-December 1995.

203. Further, as pointed out by Mr Huggins SC, §1 of Schedule 1 of the 2011 Order asked Koo and Ling to explain why the Company did not prepare audited accounts post-December 1995; and §2 of Schedule 1 asked Koo and Ling what financial records, books and accounts the Company had kept since 31 December 1995.  Mr Huggins SC’s submits that the Liquidator did notput his case on the basis that post-December 1995, the audited accounts or management accounts existed and there was no basis for the Liquidator to do so. 

204. In my view, the Liquidator was seeking explanation under Schedule 1 to the 2011 Order as to why audited accounts or management accounts were not prepared.  That was not equivalent to his accepting that those accounts did not exist.

205. What is more important, rather, was the hearsay evidence from Ritchie Chow.  He allegedly told Ling that he had kept some of the books and records of the Company and some other companies in the Shanghai Office when he worked for the Company until around 2008.  Allegedly based on his information, the Post-Deadline Documents under Class 1 were found in the Shanghai Office or warehouses. 

206. Such evidence from Ritchie Chow showed that the Post-Deadline Documents were in the custody or power of Koo and Ling, in possession through their servants or agents, and were in existence at the time of the 2011 Order.  Koo and Ling were indubitably in contempt of court in respect of these documents.

207. In respect of the balance of the documents under Class 1, Ritchie Chow allegedly also told Ling that the Company had no relevant accounting transactions after 1995 and had neither appointed an auditor nor performed any audit since then.  Since about early 2000, the Company has maintained no asset and has not conducted any substantial business.  As the IRD did not require filing of tax return of a dormant company, the Company did not spend money on auditing. Since 2003, the Company has not kept any accounts at all.  Ling claims that due to her limited involvement in the Company’s activity, she had no information to verify what Ritchie Chow said.  The Liquidator has no evidence to show existence of other Class 1 documents withheld from him and so there was a reasonable doubt as to their existence.

208. With regard to (c), Mr Huggins SC submits that the statements in Ling-2008 were general and unspecific and applied to a period of time up to 2008.  Ling explained in her oral evidence that she was told that the Company did not owed money to anybody.  To her, that meant the Company was in a healthy financial condition.

209. I reject Ling’s evidence, as did Poon J.  However, although the documents under Class 1 should have been in existence and should have been in the custody or power of Koo and Ling, those are not sufficient.  Koo and Ling are not charged with breach of statutory duty to prepare accounts but contempt.  Similarly, although Ling must have some documents in 2008 to enable her to come to a view that the Company was in a healthy financial condition and although Koo and Ling are unreliable witnesses, I am left with a reasonable doubt as to whether there were other documents under Class 1 in existence. 

Class 2 - All the books and records of the Company in the Defendants’ possession

210. Mr Huggins SC submits that there were no specific documents identified in class 2.  He suggests that “books and records of the Company” must be construed by reference to the background, context and purpose: JSC BTA Bank case (para 112 above).

211. The only purposes for which the 2011 Order was made, according to the Liquidator and Schedule 1 to the Summons, were:

(1) To determine whether the Company’s transfer of the shares in Huifa to HHL was a conveyance in fraud of creditors;

(2) To inquire into how an apparent debt of $18.5 million owed by Wise Talent (who undertook purchasing for the Project and Gee’s Club) to the Company was dealt with;

(3) To determine how an apparent debt of $12.2 m owed by KA to the Company was dealt with;

(4) To determine the relationship between Risehill (the corporate director of Million Raise) and the Company;

(5) To determine how the Company’s interest in Gee Ming Club Co Ltd was dealt with.

212. I do not agree with Mr Huggins SC’s construction. The term “books and records” must be given its ordinary, dictionary meaning.  The 2011 Order did not qualify the meaning of this term and so all books and records of the Company were covered.  That was not surprising since the Liquidator needed them to carry out financial investigation.

213. The fact that Class 3 asked for details of whereabouts of all books and records of the Company “not in their possession” merely meant that the Liquidator acknowledged that some of those documents might be in Koo and Ling’s possession, whilst others were not.

214. The analyses in respect of Class 1 apply here.  Even if Class 2 were limited to documents in the possession of Koo and Ling, the Post-Deadline Documents in respect of Class 1 indicated that books and records of the Company were in existence and were in Koo and Ling’s possession.  Koo and Ling were indubitably in contempt in respect of Class 2. 

Class 3 - Please provide details of the whereabouts of all the books and records of the Company not in the Defendants’ possession

215. The Liquidator does not pursue under this class, rightly in my view, as Class 3 was not asking for documents but information.

Class 4 – In relation to the related company HPCL, the Liquidator requests the following information:

§4(i): Latest available audited accounts and up to date management accounts of HPCL

§4(ii): Repayment of or documentary evidence of settlement of a debt of HK$29,468 owed by HPCL to the Company as at 31 December 1995

§4(iii): Inter-company ledger between HPCL and the Company from 1 January 2006 to date

§4(iv): Copy of sale and purchase agreement and any evidence of payment of the consideration of HK$48m by HPCL to the Company in respect of the disposal of the Company’s investment property to HPCL after 31 December 1995

§4(v): Confirmation of the current activities and status of HPCL and copies of all minutes of director and shareholder meetings from 1 January 1996 to date

§4(vi): Confirmation of HPCL’s relationship with Shanghai Huifa Property Co Ltd and Shanghai Gee Ming Club Co Ltd.]

216. The opening words of Class 4 referred to information, but it was quite clear that the Liquidator was asking for documents for some of the sub-classes.

217. Koo and Ling produced the following Post-Deadline Documents, which were incomplete:

(a) Reports and Financial Statements for the year ended 31 December 2002, which included the Income Statement, Balance Sheet, Statement of Changes in Equity and Notes to the Financial Statement (incomplete).

(b) Reports and Financial Statement for the year ended 31 December 2003; (incomplete)

(c) Income Statement for year ended 31 December 2003;

(d) Letter from IRD to HPCL dated 25 October 2004;

(e) Letter from IRD to HPCL dated 22 September 2006;

(f) Letter from IRD to HPCL dated 30 July 2010;

(g) Front page of the Profit Tax Return for the year 2009-2010, with other pages missing, including the signature page;

(h) The assignments dated 20 September 1991, 7 September 1996 and 10 July 2002.

218. The Liquidator points out that:

(a) No evidence has been produced with regard to the Company’s sale of 19 Perkins Road to HPCL for HK$48 million or in respect of HPCL’s payment of that sum to the Company;

(b) As to the subsequent disposal of 19 Perkins Road by HPCL in 2002, HPCL’s 2002 accounts which have been provided are missing the last page (ie notes 10 to 12).

219. The only other HPCL documents which have been provided were its Annual Return (2009 to 2012) and shareholders’ resolutions in 2008 and 2010.  But these were all publicly available documents.

220. Koo and Ling claim that they do not have other documents under Class 4 and do not know of their existence.  Koo claims not to know anything about the business operations of HPCL; she only had control over the house at Perkins Road and that was it.

221. In my view, the Liquidator’s case suffers from the lack of evidence of existence beyond those documents already produced.  I will explain under each sub-class.

222. In respect of Sub-Class 4(i), this was an order to produce documents. I do not agree with Mr Huggins SC that the term “up to date” created uncertainty.  It means “up to the date of the 2011 Order”.

223. It appears that the latest accounts available were for the year ending 31 December 2003.  Ritchie Chow told Ling that HPCL was a negative asset.  It was dormant when he worked for the Company; no accounts were prepared thereafter.  The IRD letters appeared to support the fact that HPCL had apparently ceased business activity by 2004 and would therefore not be required to submit annual profits tax returns.

224. For the same reasons given in respect of Class 1, the statutory duty re audited accounts was not enough to show that audited accounts beyond 2003 had ever existed or had existed at the time of the 2011 Order.  The criticism about a ‘missing last page’ does not add to the culpability of Koo and Ling as there was no evidence that this last page was deliberately held back from the Liquidator.  The IRD letters do not form part of this class.

225. I find that Koo and Ling were in contempt in respect of Sub‑Class 4(i) documents to the extent of the Post-Deadline Documents.

226. In respect of Sub-Class 4(ii), the debt owed by HPCL to the Company appeared in the Company’s audited financial statements for the year ended 31 December 1995, ie at a time when Lim was allegedly in control of the operations of HPCL.  Koo and Ling were then shareholders of HPCL.  They were on both sides of this transaction and are bound to have the documents sought.  Yet Ling claims that by reading the books and accounts available, she could not confirm whether HPCL had repaid/settled the debt of HK$29,486 owed to the Company. 

227. In my view, Sub-Class 4(ii) was seeking information.  In any case, there was no evidence of existence.

228. In respect of Sub-Class 4(iii), no complaint can be made as to clarity of terms.  HPCL was indebted to the Company as per the Company’s financial statements for the year ended 31 December 1995. There were also substantial ongoing transactions after that, as could be seen from the Company’s General Ledger for the year ended 31 December 2001 and the Company’s Balance Sheet for the year ended 31 December 2003.  Hence it was plain that there must have been an inter-company ledger between HPCL and the Company, yet Koo and Ling have not produced any.

229. However, there was no evidence of the existence. 

230. In respect of Sub-Class 4(iv), the investment property referred to was 19 Perkins Road.  It was plain that a sale and purchase agreement had existed in respect of the sale of 19 Perkins Road by the Company to HPCL for HK$48 million in September 1996.  However, there was no evidence that the sale and purchase agreement was still in existence at the time of the 2011 Order or that the Land Registry had a copy of it.

231. As for evidence of payment of the HK$48 million, this was a request for information and not documents.  Koo and Ling could not be held in contempt for having provided information in the form of the assignments.  In any case, there was no evidence of the existence.

232. In respect of Sub-Class 4(v), the Liquidator does not (correctly in my view) pursue the part that has been crossed out, as it was asking for information rather than documents.  

233. With regard to minutes of shareholders’ meetings, the Liquidator premises his case on the statutory duties of a company to hold annual general meetings (s.111(1) of the CO) and to cause minutes of all proceedings at general meetings to be entered into books kept for that purpose (see s.119(1) of the CO) (“the statutory duty re minutes”). Such books need to be kept indefinitely: see Butterworths Hong Kong Company Handbook,16^th ed,paragraph 481.03. 

234. Mr Huggins SC submits that the recent documents supplied by Cyberwise were not ‘minutes of any shareholders meeting’ but rather documents in lieu of a meeting. 

235. With respect, that was a play with words.  The title to these documents was “RESOLUTIONS IN WRITING SIGNED BY ALL SHAREHOLDERS OF THE ABOVE COMPANY FOR THE TIME BEING IN LIEU OF 2008 ANNUAL GENERAL MEETING PURSUANT TO SECTIONS 111(6) AND 116B OF THE COMPANIES ORDINANCE”.  S.111(6) dealt with special resolutions; and s.116B dealt with written resolutions without a meeting.  In truth and in substance, those documents were minutes of shareholders’ meetings. 

236. Accordingly, existence of minutes of shareholders meetings at the date of the 2011 Order is proved.  Koo and Ling breached the 2011 Order by producing only some of Sub-Class 4(v) documents after the Deadline.

237. With regard to directors’ meetings, there was a statutory duty to cause minutes of all proceedings at meetings of directors of a company to be entered into books kept for that purpose (s.119(1) of the CO) and such books need to be kept indefinitely (“the statutory duty re minutes”). 

238. The Liquidator contends that HPCL must have minutes of directors’ meetings.  For example, HPCL bought 19 Perkins Road on 7 September 1996 and Koo signed the assignment on behalf of HPCL as Chairman of HPCL’s board of directors.  HCPL sold 19 Perkins Road on 10 July 2002 and Koo signed the assignment on behalf of HPCL as director and a person “duly authorised by the Board of Directors”.  Accordingly, there must have been board meetings of HPCL in existence.

239. I find that there had been directors’ meetings held and there should have been minutes kept.  However, there is no evidence that minutes of directors’ meetings were still in existence.  It cannot be said that Koo and Ling failed to produce this Sub-Class 4(v) relating to minutes of directors’ meetings.

240. In respect of Sub-Class 4(vi) The Liquidator does not pursue this, rightly in my view, as it was a request for information and not documents.

241. In summary, there was breach of the 2011 Order, being late production in respect of Sub-Class 4(i) and part of Sub-Class 4(v) to the extent of the relevant Post-Deadline Documents.  Sub-Class 4(ii) and part of Sub-Class 4(iv) were requests for information.  Existence of the rest of the Documents in various Sub-Classes has not been proved.

Class 5:  Provide documents containing the following information about (i) Fixed Assets, (ii) Investment property, (iii)Properties under Development, (iv) Deferred Pre-operating Expenses, (v) Cash and Bank Balances, (vi) Interest in KA Development Ltd., (vi) Prepayment Deposits and Other Receivables.

242. Save for Sub-Class 5(v) which Mr Huggins SC concedes to be a request for documents, the rest of Class 5 was, in my view, a request for information.

243. In respect of Sub-Class 5(i), fixed assets were referred to in the Company’s Audited Financial Statements.  The Liquidator asked for “detailed breakdown of fixed assets including location of same and current status.  For motor vehicles please provide make, model and registration number.”  Koo and Ling provided nothing other than the Post-Deadline Documents under Class 1.

244. As to Sub-Class 5(ii), the investment property referred to was 19 Perkins Road.  The Liquidator asked for details of the investment property and its current status.  Koo and Ling have provided only the three assignments dated 20 September 1991, 7 September 1996 and 10 July 2002, post-Deadline. 

245. As to Sub-Class 5(iii), the Liquidator asked for full details of properties under development and current status.  Nothing was provided. 

246. In respect of Sub-Class 5(iv), the deferred pre-operating expenses were in the sum of HK$6,812,722, as stated in the company’s audited accounts.  The auditors must have had a document showing the breakdown of this figure and there must have been supporting documentation.   Koo and Ling provided nothing.

247. In respect of Sub-Class 5(v), the Liquidator asked for “details of all bank accounts maintained by the Company including bank name, account number and copies of bank statements.”  The Company’s Balance Sheet for 31 December 2003 showed that the Company had accounts with at least 6 banks at that time.  Koo and Ling’s evidence that they knew nothing about what bank accounts the Company had could not hold water.  They have not produced a single bank statement.

248. Koo and Ling may not have been in possession of the bank documents.  It may also be true that given the status of the Company in liquidation, the Liquidator could have asked for such statements from the banks.  However, recently the balance sheet as at 31 December 2003 obtained by Tang identified a number of bank accounts by acronym, currency denomination, account number and bank balance. Koo and Ling was indubitably in contempt in relation to Sub-Class 5(v).

249. Sub-Class 5(vi) was concerned with the Company’s interest in an associated company, KA.  The Liquidator required Koo and Ling to produce:

(1) Latest available audited accounts and up to date management accounts;

(2) Repayment of or documentary evidence of settlement of a debt of HK$12,202,392 owed by KA Development Ltd to the Company as at 31 December 1995;

(3) Inter-company ledger between KA and the Company from 1 January 2006 to date; and

(4) Copies of all minutes of director and shareholder meetings from 1 January 1996 to date.

250. The only documents of KA that Koo and Ling produced are:

(a) Reports and Financial Statements for the year ended 31 December 2005, which includes (i) the Income Statement (p.5); (ii) Balance Sheet (p.6); (iii) Statement of Changes in Equity (p.7); and (iv) cash flow Statement (p.8); 

(b) Letter from IRD to KA dated 15 May 2009; 

(c) Letter from IRD to KA dated 12 October 2012;

(d) Profit Tax Return for the year 2011 to 2012.  Only the front page has been provided.  The other pages are missing, including the signature page; and

(e) Annual Return for 2013, which was a publicly available document.

251. None of the documents referred to in Sub-Class 5(vi)(2) to (4) have been provided. 

252. Koo and Ling’s position is that: (a) KA had been dormant; and (b) they rely on the Existence Defence.

253. With regard to Sub-Class 5(vi)(1), based on the hearsay information of Ritchie Chow, KA had been dormant for more than 7 years (now more than 9).  It had no assets.  For the last 7 years it has not appointed an auditor or conducted audit.  The last financial statement prepared was for the year ended 31December 2005.  IRD’s letter dated 15 May 2009showed that KA had apparently ceased any business activities before May 2009 (at the latest) and was not required to submit any Profits Tax Return. 

254. The Liquidator’s case is again based on the statutory duty re audited accounts.  But there is no evidence to show that apart from the documents produced, there were other documents under Sub-Class 5(vi)(1)which existed.

255. Some of the Post-Deadline Documents (letters of IRD and annual return) were not the subject of the §2 Order and Schedule 2.  I agree with Mr Huggins SC that Koo and Ling cannot be criticized for not producing these particular documents earlier, nor for there being any missing pages in them. 

256. Overall, it was the production of the financial documents in paragraph 250(a) after the Deadline, that constituted breach of the 2011 Order in relation to Sub-Class 5(vi)(1).  I am not satisfied beyond reasonable doubt that Koo and Ling had failed to produce other documents within this sub-class.

257. With regard to Sub-Class 5(vi)(2), the Company’s audited accounts for the year ended 31 December 1995 showed that the sum of HK$12,202,392 was owed by KA to the Company.  The documents produced indicated that KA owed the Company at least HK$33,658,583.92 as at 1 January 2001, but that as at 31 December 2003 and 31 December 2005, the indebtedness had been expunged and the Company owed KA HK$20,057,428.28.  See the Company’s Balance Sheet for 31 December 2003 and KA’s Balance Sheet for 31 December 2005.  The indications were that the debt in the substantial sum of HK$12,202,392 was settled.  There must have been some documents in proof of the settlement.

258. In my view, Sub-Class 5(vi)(2) was seeking information.  Moreover, there was no evidence that any such document still existed at the time of the 2011 Order and 2012 Order.

259. With regard to Sub-Class 5(vi)(3), it was plain that there was an inter-company ledger between KA and the Company which would have recorded the state of indebtedness between them.  However, there is no evidence that any such ledger existed as at the date of the 2011 Order and 2012 Order.

260. As to Sub-Class 5(vi)(4), KA Development was engaged in substantial financial activities.  See, for example, the transactions referred to in the Company’s general ledger for the period ended 31 December 2001, the Company’s general ledger for the period ended 31 December 2002 and the Company’s balance sheet as at 31 December 2003.  Koo and Ling have produced no minutes of any directors or shareholders’ meetings. 

261. The Liquidator’s case is again premised on the statutory duty re minutes. However, there is no evidence that any such meetings did take place, or that any minutes still existed.

262. In respect of Sub-Class 5(vii), the 2011 Order required “a detailed breakdown of prepayment deposits and other receivables.”  The prepayment, deposits and other receivables set out in the Company’s audited accounts for the year ended 31 December 1995 were in the substantial sum of HK$33,252,670. As these accounts were audited, there must have been documents showing a detailed breakdown of the 3 categories of receivables.  Yet no document was produced.

263. This was not a request for documents but information.  Even if Koo and Ling could produce any document, they would have to work out the detailed breakdown if the document itself did not contain the breakdown.  There is also no evidence that this sub-class of documents existed.  I am not satisfied that there had been breach in relation to Sub-Class 5(vii).

Class 6 – Interest in subsidiaries

6(i) Financial statements for Huifa

264. The Post-Deadline Documents provided in respect of Huifa are its audited reports for the years ended 31 December 2010, 2011 and 2012.  But Huifa has been in existence since 1992.  It has been the corporate entity which, throughout, owned and operated the Property and still does.  It is not possible that the only financial statements for Huifa are those 3 audited reports and that others are no longer in existence. 

265. Koo and Ling were indubitably in contempt in relation to these Post-Deadline Documents.  However, there is no evidence to show that the other financial statements of Huifa did exist as at the date of the 2011 Order.

6(ii) Audited accounts of Gee Ming

266. The only documents produced are the audited reports for Gee Ming for the 3 years ended 31 December 2010, 2011 and 2012.  Gee Ming has been in existence since 1992, yet Koo and Ling have produced no audited reports for any other years.  As in the case of Huifa, it is inconceivable that there have been no audited reports or financial statements for any other years or that such other audited reports or financial statements were no longer in existence. 

267. Koo and Ling were indubitably in contempt in relation to these Post-Deadline Documents.  However, there is no evidence to show that the other financial statements of Gee Ming did exist as at the date of the 2011 Order and 2012 Order. 

Class 7(i) – Documents referred to in the above documents which are in the possession and control of the Defendants, their agents or servants

268. The Liquidator does not pursue this class of documents.

Class 7(ii) – Documents referred to or are in support of the answers of the Respondents to the questions in Schedule 1

269. The issues under this Sub-Class are:

(a) Whether the description was specific enough;

(b) Whether this provision referred to HHL and if so, whether it was a reference a Hong Kong company or BVI company;

(c) Whether this sub-class, in its terms, required Koo and Ling to cross-refer to other documents; and

(d) Whether Koo and Ling was in breach in failing to produce documents of this sub-class.

270. With regard to issue (a), Mr Huggins SC submits that this sub-class was too vague and unspecific as it simply failed to identify any particular documents in the Defendants’ possession and controlat the time of the 2011 Order.  Power alone would not suffice.

271. I agree.  Schedule 1 required the provision of information.  Sub-class 7(ii) meant was that Koo and Ling should not make bare assertions in their answers to Schedule 1 but should produce documents in support.  The way in which sub-class 7(ii) was framed showed that the Liquidator was not sure what documents were in existence.  Koo and Ling cannot be held liable for contempt in respect of sub-class 7(ii).

272. I deal with issues (b) to (d) only for completeness’ sake.

273.  With regard to issue (b), Mr Huggins SC submits that even if HHL had been referred to in this sub-class, any reader would have been entitled to infer that HHL referred to a Hong Kong company by the name of HHL, in view of the normal inference and presumption about the geographical scope of orders made by a Hong Kong court: Shell Electric MFG (Holdings)Co Ltd v Liu Chi Kuen Tony & anor [2003] 3 HKC 331, §7.

274. Shell Electric is also authority for the proposition that in the context of contempt proceedings the relevant order cannot be construed by reference to the evidence and materials used by the plaintiff in support of his case.  The Order should be able to stand on its own feet and be read by anyone and so understood clearly and that is how it should be interpreted and if there is room for ambiguity or doubt then it must be resolved in favour of the defendants: §§8 & 15.

275. I agree with Mr Strachan SC that Shell Electric was distinguishable on the facts.  It was not a case on production of documents, but involved proper construction of a prohibitory order which restrained the defendants from dealing in fans.  The order was silent as to the geographical scope of the prohibited conduct.  The court held that the prohibition was limited to Hong Kong.

276. In Section H3.6 above, I have already held that HHL meant a BVI company. This also accords with Ling’s subjective understanding in Ling-3^rd filed on 29 July 2013 in these committal proceedings:

“22. HHL was not covered specifically in any paragraphs of Schedule 2. However it appears to me that the documents of HHL are related to questions set out in Schedule 1, in particular, questions 5 to 20.”

277. However, the fact that Koo and Ling have tried to find and produce documents about any BVI and any HK company by the name of HHL would not change the nature of Sub-Class 7(ii).

278. With regard to issue (c), Mr Huggins SC submits that an order must be clear in terms and should not require the person to whom it is addressed to cross-refer to other materials in order to ascertain his precise obligation: Arlidge, Eady & Smith on Contempt 4^th ed para 12-58, citing Harris v Harris [2001] 2 FLR 895, §§289-295.Here, Sub-Class 7(ii) required Koo and Ling to “cross-refer” to other materials in view of its wording. 

279. I am unable to accept the submission.  In the present case, any cross-reference needed was made to another part of the same 2011 Order.  Harris v Harris was distinguishable on its facts, in that Mr Harris had to look at no fewer than 6 different court orders to work out the terms of the injunction originally imposed (§290). It was held to be “intolerable that a layman who risks imprisonment should be left to disentangle a series of orders so complicated that … even the legally qualified draftsman has slipped up in his understanding of the jigsaw (§292).

280. With regard to issue (d), no document had been produced with regard to HHL.  Allegedly, because Koo and Ling had insufficient information, in particular as to who the registered agent of HHL was, the searches by LWT on HHL were unfruitful.  Koo did not know how to obtain details of a BVI company.  Ling had not seen any document which indicated that HHL was a BVI company but assumed it was so because her father always used BVI companies.

281. I have found HHL to be the alter ego of Koo and Ling.  It owns a valuable property and it is hardly believable that they would have lost information that proves their ownership of HHL.  They must have the information on the registered agent and it must have been in existence at the time of the 2011 Order and 2012 Order.  I would no doubt have found their failure to produce documents of HHL on the identity of the registered agent alone (if there had been such an order) to be in contempt.

282. With regard to HHL, the HK company, a company search led to the obtaining of some documents:

(a) Profits tax return for the year 2010 to 2011;

(b) Reports and accounts for the year ended 30/3/2007;

(c) Annual Return, 2010-2012.

283. Koo and Ling instructed LWT to write to Cyberwise, which appeared to be the presentor of the annual returns of the Hong Kong HHL (and HPCL), asking for documents regarding those companies.

284. Those were all that Koo and Ling could find about any company with the name “HHL”. 

285. The Hong Kong HHL had not been mentioned in these proceedings prior to such production.  It was not incorporated until 3 years after the transfer of Huifa to HHL (BVI) in 2000.  Documents of the Hong Kong HHL were entirely irrelevant under the 2011 Order.  Koo and Ling were putting up a smoke screen.  However, that did not change the nature of Sub-Class 7(ii) and Koo and Ling’s obligation under the 2011 Order.

L.  THE REQUISITE STATE OF MIND

286. The Liquidator submits that Koo and Ling had the requisite state of mind as inferred from:

(a) The history of their persistent lack of cooperation with the Liquidator and refusal to provide information or documents sought by the Liquidator;

(b) The contradictions and inconsistencies in their evidence which rendered them unreliable.

L1.  Persistent lack of cooperation and refusal to provide information or documents

287. There was complete lack of cooperation on the part of Koo and Ling for more than 3 years.  See Section C5 above.

288. Koo and Ling claim not to be in possession of the Documents, have made efforts to numerous sources of possible assistance and produced all they had to the Liquidator.  Their attempts to contact people who might have knowledge of the Documents were to:

(1) Various company secretaries: Good Venture of the Company; OIL in relation to Million Raise, Risehill and Wise Talent; Cyberwise in relation to HHL, HPCL and KA;

(2) Various persons including Xie Wei Min, a director of Huifa (who retired in 2001 and who had worked in Shanghai office) in relation to HPCL, Huifa and Gee Ming; Chen Fuk Kwan, Simon Sung, and a Mr Fu; Ms Corina Ho, Tsang Fai Hoi, Bao Yifeng; Mr Liu Kwai Wah, ex-CFO in charge of the Project until about November 2001 and then left for Korea;

(3) Ritchie Chow who had been dealing with the annual returns of HHL, KA and HPCL together with Cyberwise; (Ritchie Chow took over as account officer in charge of the property project after Mr Liu KW resigned.  Ritchie Chow himself resigned in 2008.) By far, he had given the most useful information which led to disclosure of the Post-Deadline Documents.

289. The following events after the 2011 Order was telling:

290. Firstly, LWT was only instructed to and did write to company secretaries or former company secretaries only after the Deadline.

291. Secondly, Agnes Tang only went to Shanghai in April 2013 and obtained the Post-Deadline Documents.  There was no suggestion that the Post-Deadline Documents only first appeared at the Shanghai Office or unidentified warehouses after the Deadline.  The Shanghai Office has had staff.  There was no reason why searches of those locations and inquiries of staff could not have taken place earlier.

292. Thirdly, in respect of the assertion that Agnes Tang and LWT had been asked to “continue to contact the office of Huifa” to obtain documents, documentary evidence of such attempts to contact has not been revealed, nor was there any explanation as to why no one was identified and/or being contacted within the office.

293. Fourthly, Agnes Tang’s made belated alleged attempts to contact staff.  As pointed out by the Liquidator, if former staff had either died or was uncontactable, there must have been others running the daily operations of Huifa or HHL such that Koo and Ling would be in a position to have ongoing knowledge of the financial state of the Property, eg the bank loan and interest, rental income and management fees, and the need to sell flats from time to time to raise money as Koo said in her interview.  Such staff might have been able to access the past records of at least Huifa and/or HHL and other subject companies.

294. Koo, Ling and Agnes Tang had the means to contact the current staff of Huifa and/or HHL such as Simon Sung (Engineering Director of the Property), who could have provided the Documents to the Plaintiff or with whom Koo and Ling could have made enquiries.  Timely steps were not taken.

295. Fifthly, Ritchie Chow was contacted only after the Deadline.  Ling made no mention of him in her interview or her affirmation dated 5 February 2013.  In that affirmation, having referred to fruitless attempt to contact a Mr Liu, she expressly stated in §25: “Other than Liu, I do not know of any other person who handled the operations and accounts of the Company”. 

296. It was unclear when Agnes Tang was instructed by Koo and Ling to approach Ritchie Chow for his assistance or when Ritchie Chow was first contacted by Tang. The reply of Ritchie Chow was on 19 April 2013. 

297. It was in Ling-2^nd filed on 29 April 2013, that Ling referred to Ritchie Chow as a part-time accounting staff who continued to deal with things like annual returns of HHL and HPCL after he left. There was no mention that enquiries had been made with him regarding the Documents.

298. According to Ling-3^rd (filed on 29 July 2013), since the filing of her 2^nd affirmation (on 29 April 2013) she had personally contacted Ritchie Chow through his mobile phone to impress upon him to help.

299. Further, Ling and Agnes Tang’s version was inconsistent.  According to Ling, Ritchie Chow would “continue to liaise with a company secretary who would deal with things like the annual returns of HHL and HPCL” and the annual returns would be sent to Tang, who would ask Koo and Ling to sign them.  No information was provided as to who provided instructions to this unnamed company secretary and on what basis that secretary acted.  Tang’s original email to Ritchie Chow asking for information was not exhibited either.

300. Ling’s evidence in the preceding paragraph as regards Ritchie Chow was inconsistent with Agnes Tang’s.  According to Agnes Tang, when Ritchie Chow left the Company, he undertook to ask his friend to prepare annual returns for the Company and other companies.  Again, no information was provided as to who that friend was, from whom he took instructions to prepare annual returns, and whether he had any of the Documents.

301. It was unreal for Tang to suggest that she never thought of asking Ritchie Chow for information after the failure to make contact with Mr Liu, in light of her evidence that she knew or assumed that Ritchie Chow (whom she had worked with in the same office for several years) was Liu’s successor.  It was plain that Tang simply took no timely steps to seek Ritchie Chow’s assistance.

302. Most importantly, there has been no explanation why, at the Shanghai Office or warehouses, only financial statements of a company for a few years were kept but not other years, particularly with Huifa and HHL which still owns the Property.

303. Clearly, Koo and Ling had not even shown best endeavours in locating the Documents.  This was not relevant to whether there had been in breach of the 2011 Order.  Rather, it was their lax attitude in the face of the 2011 Order and 2012 Order that revealed their total disregard of those Orders, and hence guilty mind.

304. The Liquidator’s submission that there had been persistent lack of cooperation with him and refusal to provide information or documents sought was justified.

L2.  Contradictions and inconsistencies in Koo and Ling’s evidence which rendered them unreliable

305. Koo and Ling had given inconsistent evidence to suit their positions at different points in time.  However, that is not sufficient in itself to establish contempt.  Even lies in themselves are not sufficient to establish guilt, but if there is other substantial evidence to that effect (not least their belated production of some of the Documents), such lies can be thrown into the scale against them: Bramblevale, at 1063H-I. 

306. In my view, the matters in Section L do reflect a guilty mind necessary to establish punishable contempt.  They knew about the facts giving rise to the contempt.  The conduct of Koo and Ling was contumacious and intentional.  Their breach was not casual or accidental.  It was wholesale obstruction to the Liquidator’s proper investigation.

M.  FINDINGS

307. The facts set out in Section C form part of the findings I rely on in this case.

308. I reject the Ignorance Defence for the period after 2003.  I find that Koo and Ling had knowledge and control of the Company’s affairs and finance. Ling-2002 and Ling-2008 did state the truth of Ling’s knowledge.

309. I reject the Lack of Specificity Defence.  There was no uncertainty or tension in the 2011 Order and Schedule 2.  The guiding test was for Koo and Ling to produce the Documents in their custody or power, even though they were not in Koo and Ling’s possession.  The word “including” in §2 Order merely means that the various Classes were examples of documents in their possession and were not exclusive.

310. I reject the No Possession Defence.  Koo and Ling needed to produce documents in their custody or power. 

311. LWT’s letter dated 14 October 2011 did not contain an admission that Koo and Ling were in possession of the Documents. 

312. I find that Koo and Ling were and are in unfettered control of and the Company and the related companies, ie HPCL, KA, Huifa, Gee Ming and HHL, and they were/are the alter egos of Koo and Ling.  Superace belonged to and was or is controlled by Ling.  HHL was and is a BVI company.  The Hong Kong company HHL was irrelevant to the 2011 Order.  Koo and Ling knew all about these matters.

313. The documents of the Company and the related companies were and are in the custody or power of Koo and Ling, notwithstanding that Ling was a minority shareholder.  Their alleged lack of knowledge that they had possession, custody or power of the Documents was irrelevant.  The Liquidator is not required to prove the contrary, but I am nevertheless sure that Koo and Ling knew that they had documents relevant to the 2011 Order which they could have found at least at the Shanghai Office.

314. The Post-Deadline Documents showed that those documents were in the custody or power of Koo and Ling; and were in existence.  Koo and Ling were indubitably in contempt in failing to produce these documents before the Deadline.

315. In respect of the No Proof of Existence Defence, to the extent the Liquidator relies on statutory duties to show that audited accounts, minutes of meetings of shareholders and directors should have been kept, that is not sufficient to show that those documents existed at the time of the 2011 Order. There are also classes of documents that the Liquidator fails to prove existence beyond the Post-Deadline Documents.

316. I tabulate my findings as regards each class of documents:

Table 2

317. Considering the bigger picture, this was a wholesale failure to comply with the §2 order.

318. The Company and the related companies “coincidentally” did not have documents sought which would through light on the transfer of the Huifa shares. Even the Post-Deadline Documents were piecemeal and there was no explanation as to why some documents of the same class (eg audited accounts and minutes of meetings) were missing.

319. This calls to mind the words of Lord Phillips MR in Gulf Azoz Shipping Ltd & anor v Idis & ors [2001] EWCA Civ 21, §18,

“As to that exercise [of determining whether the criminal standard of proof had been applied to the individual heads of contempt], I would make this observation. It is not right to consider individual heads of contempt in isolation. They are details on a broad canvas. An important question when that canvas is considered is whether it portrays the picture of a Defendant seeking to comply with the orders of the Court or a Defendant bent on flouting them. It is right that the individual details of the canvas should be informed by the overall picture. But, having said that, each head of contempt that has been held proved must be established beyond reasonable doubt.”

320. The canvas in this case shows Koo and Ling to be bent on flouting the 2011 Order and 2012 Order.  “Catch me if you can” was their attitude.  However, the fact remains that the Liquidator failed to prove existence of the Documents in many classes to the requisite standard.  No compelling inference can be drawn that a certain document or class of documents must have existed or has been held back from the Liquidator.

321. Koo and Ling have a history of persistent lack of cooperation with the Liquidator.  They have given inconsistent evidence and told lies, to suit their positions at different points in time.  They have not even used their best endeavours to try and locate the Documents. They deliberately failed to provide assistance to the Liquidator in his investigation into the affairs of the Company.  Each of them had the guilty mind and knowledge of the facts giving rise to the contempt.  Their conduct was contumacious and intentional, not casual or accidental.

322. I find Koo and Ling each guilty of contempt for breach of the §2 of the 2011 Order, and the 2012 Order.

N.  SENTENCE FOR CONTEMPT

323. If the court finds that there is contempt of court, it should decide whether the conduct requires punishment and if so, what punishment.  For that purpose, the matter will be adjourned for the contemnor to address the court in mitigation: Citybase Property Management Ltd v Kam Kyun Tak & ors (No.1) (2003) 2 HKC 98 at §32.

324. Accordingly, I adjourn for Koo and Ling to address the court on any mitigating factors and the appropriate sentence.  The parties shall attend before the Listing Officer to fix a date as early as possible, for hearing within the next 4 months.  The parties shall give me a joint estimation as to time 14 days before the fixing of dates.

O.  COSTS

325. Although the Liquidator has succeeded only on some classes, his attempt was reasonable.  Koo and Ling brought the suspicion to bear upon themselves.  On the other hand, they have succeeded in defending the case in part.  There shall be an order nisi that costs of the contempt proceedings be to the Liquidator to be borne by the defendants on party and party basis, to be taxed if not agreed.

326. I thank counsel for their great assistance to the court and the enlightening arguments.