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CAMP 114/2021
[2021] HKCA 1126
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
MISCELLANEOUS PROCEEDINGS NO 114 OF 2021
(ON AN INTENDED APPEAL FROM HCA NO 57 OF 2018)
________________________
BETWEEN
ALLIED WELI DEVELOPMENT LIMITED
(In Liquidation) |
1st Plaintiff |
JOHN HOWARD BATCHELOR and
KENNETH FUNG as Joint and Several Liquidators of Allied Weli
Development Limited (In Liquidation) |
2nd Plaintiff |
| and |
| CHUANG YUE CHIEN, EUGENE (莊友堅) |
1st Defendant |
| And the 65 parties listed as the 2nd to 66th Defendants in Schedule 1 to the Writ herein |
2nd – 66th
Defendants |
Before: Hon Yuen and Chow JJA in Court
Dates of the 1st Defendant’s Submissions: 13 April 2021 and 4 May 2021
Date of the Plaintiffs’ Submissions: 27 April 2021
Date of Judgment: 4 August 2021
________________________
J U D G M E N T
________________________
Hon Yuen JA:
1.1. This is an application by the 1st defendant in HCA57/2018 for leave to appeal the decision of DHCJ Le Pichon (“the judge”) given on 27 October 2020 (“the Decision”) dismissing his application filed on 29 July 2019 for an order setting aside Master G Chan’s order made on 31 December 2018 renewing the validity of the writ in the above action[1] until 8 January 2020.
1.2 On 30 March 2021, the judge refused leave to appeal for reasons given in a written decision (“the Leave Decision”).
1.3 On 13 April 2021, the 1st defendant made an application to the Court of Appeal for leave to appeal. Written submissions were filed. Pursuant to Order 59 rule 14A Rules of the High Court, this court considered it appropriate to determine the application without a hearing on the basis of written submissions only.
Background
2. Very briefly, the background to this application is as follows.
3.1. Allied Weli Development Ltd (“the Company”) was incorporated in the BVI and registered as a non-Hong Kong company in Hong Kong[2]. It was part of a group of companies (some of which were listed) which provided securities brokerage, fund management, property holding, investment advisory and consultancy services in Hong Kong. From 1996 to 2009, the 1st defendant was its permanent managing director. He was beneficially interested in it for a period of time[3] after he ceased to be a director.
3.2. In June 2011, a company called Penta Investment Advisers Ltd (“Penta”) subscribed for new shares offered by a company in the Company’s group in an IPO underwritten by another company in the group. The Company signed a Deed of Guarantee in favour of Penta.
Demand by Penta against the Company
4.1. In January 2012, Penta made a demand on the Company for a sum under the Deed of Guarantee. The Company however denied that it was bound by the Deed.
4.2. Shortly thereafter, between March and May 2012, the Company participated in a group reorganization, and the Company apparently divested itself of its assets by means of (a) in specie distribution of dividend, (b) transfer of assets including property, plant and equipment, and deposits, and (c) assignments of receivables due to it.
4.3. It is alleged by the liquidators of the Company that as a result, the Company reduced its total equity from net assets of $2.86 billion as at 31 March 2012 to net liabilities of $156,436 as at 31 March 2013[4].
Proceedings by Penta
5.1. In September 2012, Penta issued proceedings against the Company in HCA1656/2012.
5.2. On 14 October 2014, Penta obtained judgment against the Company. On 21 January 2015, damages were assessed at around $210 million.
5.3. On 23 July 2015, the Company’s appeals against liability and quantum (CACV222/2014 and CACV35/2015) were dismissed by the Court of Appeal[5]. Reasons were given on 18 August 2015. The court refused leave to appeal to the Court of Final Appeal on 11 December 2015.
6.1. On 24 July 2015, Penta issued a statutory demand against the Company in the sum of around $234 million being the judgment debt together with interest. The statutory demand was not satisfied.
6.2. On 29 October 2015, Penta presented a petition to wind-up the Company in HCCW337/2015.
7. In the meantime (in August 2015), the Company moved its place of registration to the Marshall Islands, and the conduct of the Company’s management and business was moved to Taiwan and/or the Marshall Islands[6].
Winding-up Order
8.1. On 22 February 2016, Harris J wound up the Company for reasons set out in a Decision of the same date.
8.2. On 11 July 2017, the Company’s appeal from the winding-up order (CACV58/2016) was dismissed by the Court of Appeal[7].
Appointment of Liquidators
9.1. In the meantime, on 8 July 2016, liquidators were appointed. However, they were not provided with any books or records of the Company. When their staff visited the Company’s principal place of business, the staff there claimed that the Company had never operated from that address, and the liquidators’ staff were escorted out by security personnel[8].
9.2. The liquidators had to seek information about the Company and its activities from public records and the media. They also wrote to a number of former directors of the Company (including the 1st defendant) asking for books and records of the Company in their custody. They also asked them to provide statements of affairs, and sought responses to questionnaires prepared by the liquidators. The liquidators also requested interviews with the former directors. However, assistance was not forthcoming[9].
9.3. In April 2017 however, the Company’s former auditors Jonten Hopkins (“JH”) did provide the liquidators with the audited accounts and audit papers of the Company from 2011 to 2014[10].
Protective Writ
10.1. At the end of 2017, the liquidators filed two writs (HCA2995/2017 and HCA2996/2017) “to preserve potentially valuable claims while their investigations continued”[11].
10.2. On 9 January 2018, the liquidators filed another writ in HCA57/2018 (“the Protective Writ”) which consolidated further claims and defendants[12] with those in the 2017 writs.
10.3. The Indorsement of Claim in the Protective Writ includes claims for loss and damages, equitable compensation, accounts or inquiries, and restitution against the 1st - 16th defendants for breach of contract, breach of fiduciary duty (among other duties), and conspiracy etc, arising out of the execution and non-performance of the Deed of Guarantee, the reorganization and the apparent divesting of assets by the Company shortly after Penta’s demand under the Deed of Guarantee, the preparation of the Company’s financial statements for the years ended 31 March 2012-2014, fraudulent preference, and breach of statute etc.
10.4. The claims against the other defendants were similar, except that they did not include claims relating to the preparation of the Company’s financial statements.
10.5. The Protective Writ was intentionally not served on any defendants.
Application under s.286B etc
11.1. A few months later on 29 June 2018, the liquidators issued an application under s.286B[13] and s.286C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance Cap.32, against eight individuals (including the 1st defendant) and a firm of solicitors, for an order for examination and provision of information. This application was opposed.
11.2. It was heard by Recorder Jason Pow SC between March and September 2019.
11.3. According to the court file, the Recorder handed down judgment on 12 May 2021, and orders were made against all respondents (except for one who died during the period between hearing and judgment).
Orders extending validity of the writ
12.1. On 31 December 2018, on the liquidators’ ex parte application, Master G Chan gave an order renewing the writ for 12 months from 9 January 2019 (“the 1st extension order”). This was the order which the 1st defendant sought to set aside in the summons referred to in para. 13 below.
12.2. With the passage of time, two further extension orders were made, one on 31 December 2019 by Master D Ho renewing the writ for 12 months from 9 January 2020 (“the 2nd extension order”), and the other on 25 January 2021 by Master J Wong further renewing the writ for 12 months from 9 January 2021 (“the 3rd extension order”).
1st defendant’s application to set aside
13. Meanwhile on 29 July 2019, the 1st defendant applied by summons for an order to set aside the 1st extension order. The following grounds were set out in the summons:
“(1) As at 31 December 2018, the Plaintiffs had failed to provide good reasons for the Court to extend the validity of the Writ until 8 January 2020[14].
(2) The plaintiffs’ ex parte application for the Order incorporated material falsehoods and/or material non-disclosures concerning the 1st Defendant”.
(Emphasis added).
The judge’s Decision
14. The judge rejected both grounds advanced by the 1st defendant. She first set out[15], and then addressed, the ground that no good reasons had been provided for the grant of the 1st and/or 2nd extension orders[16], and secondly, the ground of material non-disclosure[17].
Application for leave to appeal
15.1. The 1st defendant first applied to the judge for leave to appeal. This was refused for the reasons given in the Leave Decision.
15.2. The 1st defendant then applied to the Court of Appeal for leave to appeal.
Discussion
The Law
16.1. It is well-established that leave to appeal may be granted if the court is satisfied that (a) the appeal has a reasonable prospect of success, or (b) there is some other reason in the interests of justice why the appeal should be heard.
16.2. As for (a), it is not enough that the appeal is arguable or not fanciful, as the applicant must show that he has reasonable (though not necessarily probable) prospects of success. As...
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