China Medical Technologies, Inc. (In Official Liquation) v Kpmg (A Firm

CourtHigh Court (Hong Kong)
Judgment Date08 August 2017
Citation[2017] 5 HKLRD 476
Judgement NumberHCA1138/2014
Subject MatterCivil Action
HCA1822/2013 CHINA MEDICAL TECHNOLOGIES, INC. (IN OFFICIAL LIQUATION) v. KPMG (A FIRM)

HCA 1822/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1822 OF 2013

____________

BETWEEN
CHINA MEDICAL TECHNOLOGIES, INC.
(IN OFFICIAL LIQUATION)
Plaintiff
and
KPMG (A FIRM) Defendant

____________

HCA 1138/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1138 OF 2014

____________

BETWEEN
CHINA MEDICAL TECHNOLOGIES, INC.
(IN OFFICIAL LIQUATION)
Plaintiff
and
KPMG (A FIRM) Defendant

____________

HCA 2276/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2276 OF 2016

____________

BETWEEN
CHINA MEDICAL TECHNOLOGIES, INC.
(IN OFFICIAL LIQUATION)
Plaintiff
and
KPMG (A FIRM) Defendant

____________

(Heard Together)


Before: Hon Lok J in Chambers

Date of Hearing: 8 August 2017

Date of Decision: 8 August 2017

_____________

D E C I S I O N

_____________


1. There are three matters before me, namely summonses in respect of three protective writs issued by the Plaintiff, being a company in liquidation (“CMED”) against the Defendant, KPMG Hong Kong (“KPMG”), in HCA 1822/2013 (“the 1st KPMG Protective Writ”), HCA 1138/2014 (“the 2nd KPMG Protective Writ”) and HCA 2276/2016 (“the 3rd KPMG Protective Writ”) (collectively, “the Protective Writs”). KPMG was the former auditor of CMED. The Protective Writs seek to preserve possible claims against KPMG with respect to services that it provided to CMED during the period from 2004 to 2012.

2. At present, the 1st KPMG Protective Writ is valid only to 25 September 2017, and the 2nd and 3rd KPMG Protective Writs are valid to 1 September 2017. The three summonses seek to extend the validity of each of the Protective Writs to 19 June 2018 (collectively, “the Extension Applications”).

3. For the 1st KPMG Protective Writ, the validity of the writ has been extended three times by the court. For the 2nd KPMG Protective Writ, the validity of the writ has been extended twice by the court. For the 3rd KPMG Protective Writ, this is the first application.

4. The Extension Applications are supported by the 3rd Affidavit of Mr Cosimo Borrelli sworn on 2 June 2017 (“Borrelli 3”) and his 4th Affidavit sworn on 1 August 2017 (“Borrelli 4”). Mr Borrelli is one of CMED’s joint and several liquidators (“the Liquidators”).

5. Notwithstanding that the Extension Applications are made on an ex parte basis, the Liquidators have given notice of the same to KPMG, so that it may intervene in the Extension Applications and provide responding evidence to the court if it sees fit. KPMG considers that it does not have standing to seek to intervene or make submissions in these proceedings. Obviously, KPMG also wants to preserve its position so that it can perhaps make an application to set aside the order for the extension of the validity of the writ in due course.

6. According to the Liquidators’ investigations, CMED’s former senior management stole at least US$355.50 million from CMED, through two major transactions that it entered into in February 2007 and October 2008. KPMG was CMED’s auditor at the time of the transactions and issued unqualified audit opinions in respect of the financial years ended 31 March 2006 to 31 March 2008.

7. The Liquidators have identified potential claims that CMED may have against KPMG which include, inter alia, losses and damages for breach of contract, tortious and equitable...

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