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Bloomsbury International Ltd v Nouvelle Foods (Hong Kong) Ltd

Judgment Cited authorities 5 Cited in 2 Precedent Map Related
Vincent
Judgment Date16 November 2004
Year2004
Citation[2005] 2 HKLRD 64
Judgement NumberHCCT109/2002
Subject MatterConstruction and Arbitration Proceedings
CourtHigh Court (Hong Kong)
HCCT000109/2002 BLOOMSBURY INTERNATIONAL LTD v. NOUVELLE FOODS (HONG KONG) LTD

HCCT 109/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO.109 OF 2002

_________________________

　 IN THE MATTER of the Arbitration Ordinance (Cap.341), s.2GG on the enforcement of an award and Order 73, Rule 10 of the Rules of the High Court
　 and
　 IN THE MATTER of the Arbitration Act (UK) 1996
　 and
　 IN THE MATTER of an Arbitration

_________________________

BETWEEN

　 BLOOMSBURY INTERNATIONAL LIMITED　 Plaintiff　
　 and　 　
　 NOUVELLE FOODS　 Defendant　
(HONG KONG) LIMITED

_________________________

Before: Hon. Reyes J in Chambers

Date of Hearing: 4 November 2004

Date of Judgment: 16 November 2004

______________

J U D G M E N T

______________

I. Introduction

1. Nouvelle owes Bloomsbury some £162,216 under an arbitration award dated 5 December 2002. Nouvelle having failed to pay, Bloomsbury applied for Mr. Ng Joo Siang (NJS) and Mr. Ng Joo Puay (NJP), former directors of Nouvelle, to be examined before the master pursuant to Order 48 Rule 1.

2. During the hearing by the master, a dispute arose over the scope of the examination. That dispute has been referred to me for determination under Order 48, Rule 1(3).

3. The debate between the parties concerns the following general issues:-

(1) Whether Bloomsbury can only ask questions about debts, property or means which are currently owing or available to Nouvelle.

(2) Whether Bloomsbury can ask questions about Nouvelle's rights of action against third parties.

(3) Whether Bloomsbury can ask questions with a view to assessing whether it can personally bring proceedings against NJS, NJP or any other directors of Nouvelle.

(4) Whether NJS or NJP can be compelled to disclose information which they acquired in their capacity as directors or officers of companies other than Nouvelle.

II. Background

4. Nouvelle originally formed part of the Pacific Andes group. The Group's parent company is Pacific Andes International Holdings Ltd. (PAIHL), a Bermuda company.

5. Nouvelle was described in PAIHL's Annual Report for the financial year ended 31 March 2001 as a principal subsidiary of the Group. When it belonged to the Group, Nouvelle's shares were held by Nouvelle Foods International Ltd. (NFIL) and Pacific Andes International Holdings (BVI) Ltd. (PAIBV). Both NFIL and PAIBV are BVI companies.

6. On 27 March 2001 NFIL and PAIBV sold their shareholdings in Nouvelle to Westerham Trading Ltd. and Best Target Development Ltd. respectively. Both Westerham and Best Target are BVI companies. The consideration for the share sales to Westerham and Best Target was $1 each.

7. Nouvelle's balance sheet as at 27 March 2001 disclosed $276,419 of current assets: tax recoverable $26,103; bank balance and cash $250,316.

8. Nouvelle's income statement for the period from 1 April 2000 to 27 March 2001 showed that the company had incurred certain expenses ("the expenses"): agency fee $1,231,028.65; administration fee $1,651,516.

9. NJS and NJP resigned as Nouvelle's directors on 27 March 2001. They continue to be directors of PAIHL.

10. Nouvelle's new directors are Westerham and Cheng Po Ming. Nouvelle's address and that of Cheng, as supplied to the Companies Registry, is 3rd Floor, 63 Shek Pan Wan Road, Aberdeen. That address does not seem to exist.

11. Westerham has been struck off the BVI register of international business companies. Attempts to contact Best Target have met with no success.

12. Nouvelle initially participated in the arbitration brought by Bloomsbury. By letter dated 27 August 2001 Nouvelle's solicitors at the time when the arbitration commenced told Bloomsbury that the shareholders from whom instructions had previously been received no longer owned the company. From then on, Nouvelle ceased to play any part in the arbitration.

13. Bloomsbury has been granted leave to enforce the arbitration award as a judgment of the Court.

III. Discussion

14. Order 48, Rule 1 provides:-

"(1) Where a person has obtained a judgment or order for the payment by some other person (hereinafter referred to as 'the judgment debtor') of money, the Court may, on an application made ex parte by the person entitled to enforce the judgment or order, order the judgment debtor or, if the judgment debtor is a body corporate, an officer thereof, to attend before the Registrar or such officer as the Court may appoint and be orally examined on the questions:-

(a) whether any and, if so, what debts are owing to the judgment debtor, and

(b) whether the judgment debtor has any and, if so, what other property or means of satisfying the judgment or order;

and the Court may also order the judgment debtor or officer to produce any books or documents in the possession of the judgment debtor relevant to the questions aforesaid at the time and place appointed for the examination.

....

(3) Any difficulty arising in the course of an examination under this rule before the Registrar or officer, including any dispute with respect to the obligation of the person being examined to answer any question put to him, may be referred to a judge and he may determine it or give such directions for determining it as he thinks fit."

15. The starting point to understanding what Bloomsbury can or cannot do in the course of examination must be the proper construction of Order 48.

16. Both counsel before me (Mr. Duncan SC for Bloomsbury and Mr. Burns for Nouvelle) agree that Order 48 must be construed against the touchstone of its purpose. That purpose (both counsel accept) is "to enable a judgment creditor to come to an informed decision as to how best to enforce the judgment which he has obtained".

17. I shall initially deal with the general issues which have been identified in Section I of this Judgment.

18. The parties further wish me to comment specifically on whether Bloomsbury can ask questions on the following topics:-

(1) Were the agreements of 27 March 2001 to transfer Nouvelle's shares bona fide arms-length transactions?

(2) What were the circumstances surrounding the sale of the shares to Westerham and Best Target? In particular:-

(a) What was the purpose of the share transfer?

(b) What relationships (if any) did Nouvelle's former directors have with Westerham and Best Target?

(c) What do Nouvelle's former directors know of the ownership and control of Westerham and Best Target?

(3) Were PAIHL and its principal subsidiaries directed and managed by the same person(s) as at 26 March 2001?

(4) What happened to Nouvelle's current assets (in particular, tax recoverable and bank balance) shown on the 27 March 2001 balance sheet?

(5) What happened to Nouvelle's other assets (in particular, goodwill and customer/supplier lists) as around 27 March 2001?

(6) Whether payment of the expenses were bona fide payments and (if so) to whom and for what consideration were the expenses paid?

19. Having determined broad principles in my discussion of the general issues, I shall accordingly conclude by commenting on the specific topics put forward.

A. Issue 1: Whether Bloomsbury can only examine on Nouvelle's current debts, property or means narrowly defined

A.1 The proper construction of Rule 1(1)(b)

20. Mr. Burns submits that, on its plain construction, Order 48 only allows a creditor to ask about debts, property or means currently available for enforcement of a judgment debt. This means (Mr. Burns says) that one cannot examine on claims which a debtor might be able to bring in the future against others for the recovery of property or unliquidated amounts.

21. Mr. Burns accepts that under Rule 1(1)(a) Bloomsbury might ask about debts which have fallen due to Nouvelle and for which Nouvelle can (if those debts remain unpaid) sue. But, where a claim by Nouvelle would not involve payment of a debt, Mr. Burns is adamant that Rule 1(1)(b) does not permit examination on such claim.

22. I disagree with Mr. Burns.

23. Rule 1(1)(a) allows a debtor to be examined on "what debts are owing". That plainly means claims for liquidated sums which are presently due and owing from others.

24. Rule 1(1)(b), on the other hand, refers to "any and, if so, what other property or means of satisfying the judgment or order". This second limb is broadly worded. I do not see why the expression "property" should be read narrowly as excluding claims for unliquidated damages or for restitution of property of whatever nature. Such claims would be choses in action and, although intangible, would still constitute "property" in law.

25. My reading of Rule 1(1)(b) is reinforced by the word "means" in the provision. That word obviously has a broad scope. It must refer to something more than just property rights. Otherwise its inclusion in Rule 1(1)(b) would be otiose. A creditor must thereby be entitled to explore in examination whether a debtor has "any means" whatsoever of satisfying the judgment debt.

26. If "property" did not include rights of action as Mr. Burns contends, the pursuit of a claim for unliquidated damages or for money's worth would still be a "means" by which the debtor could raise cash to satisfy a debt.

A.2 Whether Bloomsbury's construction of Rule 1(1)(b) is practical

27. Mr. Burns argues that Bloomsbury's wide reading of "property" to include rights of action other than for debts, does not make practical sense.

28. First, a debtor (Mr. Burns argues) may decide not to commence any necessary proceedings and cannot be forced to do so.

29. Second, even where proceedings are started, they may not (Mr. Burns submits) bear fruit.

30. Third, if a creditor decides to petition for...

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