Ip Pui Lam Arthur And Another v Alan Chung Wah Tang And Others

Judgment Date31 May 2019
Neutral Citation[2019] HKCFI 1398
Year2019
Judgement NumberHCB3819/2011
Subject MatterBankruptcy Proceedings
CourtCourt of First Instance (Hong Kong)
HCB3819E/2011 IP PUI LAM ARTHUR AND ANOTHER v. ALAN CHUNG WAH TANG AND OTHERS

HCB 3819/2011

[2019] HKCFI 1398

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

____________

RE : HO YUK WAH DAVID, a bankrupt

BETWEEN
IP PUI LAM ARTHUR and IP PUI SUM Joint and Several Trustees in Bankruptcy Applicants
and
ALAN CHUNG WAH TANG and ALISON WONG LEE FUNG YING 1st Respondents
ALAN CHUNG WAH TANG and HOU CHUNG MAN, Joint and Several Trustees in Bankruptcy of the Estate of LEE SIU FUNG, SIEGFRIED, the Bankrupt 2nd Respondents

____________

Before: Madam Recorder Linda Chan SC in Chambers

Date of Hearing: 15 May 2019

Date of Decision: 31 May 2019

_____________

D E C I S I O N

_____________

1. By summons dated 27 April 2018, the applicants (“Trustees”), the joint and several trustees of the estate of Ho Yuk Wah David (“Bankrupt”), applies for an order under Order 45, rule 6(1) to enforce the order made by Au-Yeung J on 7 April 2017 against the 1st and 2nd respondents for production of various documents relating to the Bankrupt or his dealings, affairs or property (“Production Order”).

2. The 1st respondents, Mr Tang and Mrs Wong, are the joint and several liquidators of CWT Textile Supplies Company Limited (“CWT”). The 2nd respondents, Mr Tang and Ms Hou, are the joint and several trustees in the bankruptcy of Lee Siu Fung Siegfried (“LSF”). Mr Tang, Mrs Wong and Ms Hou became partners of Shinewing Specialist Advisory Services Limited (“Shinewing”) in 2011. Mrs Wong retired as a partner on 30 June 2014 although she remains a liquidator of CWT.

3. The Production Order was the fourth order obtained by the Trustees under section 29 of the Bankruptcy Ordinance (Cap 6) against the 1st and 2nd respondents for production of documents relating to the affairs of the Bankrupt.

Background

4. The background fact has been set out in the judgment of To J in Re Ho Yuk Wah David (bankrupt) [2015] 2 HKLRD 603 at 606 – 608 and the judgment of Recorder Eugene Fung SC in Ip Pui Lam & anor v Alan Chung Wah Tang& anor [2019] HKCFI 149 at §§1 – 11, 17 – 19. The salient fact relevant to the present application is as follows.

5. On 2 August 2011, a bankruptcy order was made under a petition presented by the Bankrupt himself. The Trustees were appointed on 30 September 2011. The Trustees are of the view that the Bankrupt has been operating a complex scheme using about 30 offshore companies and nominees to carry on business ventures and litigations, conceal his assets and pay his personal and family expenses. The offshore companies include Topmark Asia Ltd (“Topmark”), Sun Ascent International Ltd (“Sun Ascent”), Keentrade Investments Ltd (“Keentrade”) and Sinowood International Ltd (“Sinowood”), all of which were incorporated in the British Virgin Islands (collectively “BVI Companies”).

6. Amongst the documents obtained by the Trustees pursuant to previous production orders, there was a consultancy agreement between the 1st respondents and Topmark and a funding agreement between the 1st respondents and Sun Ascent, both of which relate to CWT’s claim against its former auditors for alleged professional negligence. After the claim had been settled, a sum of HK$45 million was paid to the 1st respondents who, in turn, caused payments to be made to Topmark and Sun Ascent. According to the 1st respondents, the CWT liquidation was completed by 2009.

7. Similarly, there was an agreement between the 2nd respondents and Keentrade in respect of funding for litigations arising from the bankruptcy of LSF, and a consultancy agreement for providing service in respect of such litigations. No recovery, payment or refund was made to Keentrade or Sinowood. The agreements were terminated in March 2013. Since then, the funder of LSF bankruptcy has changed a number of times.

8. As recorded in the Decision of Au-Yeung J dated 7 April 2017, the Production Order was made without any opposition from the 1st and 2nd respondents. The only points raised on behalf of the 1st and 2nd respondents were the time limit for production of documents and costs. Under the Production Order, the 1st and 2nd respondents were ordered to produce, by 6 June 2017, copies of the following three categories of documents:

(1) documents in connection with 10 payments made between 28 November 2003 and 25 March 2008 in the aggregate sum of HK$4,198,240.30 set out in a document entitled “CWT Textiles Supplies Company Limited (in creditors’ voluntary liquidation) Interest calculation on Fundings [sic] (excluding HK$920,000 security for costs)”;

(2) the supporting documents in connection with the amount of HK$1,560,200 set out in a document entitled “Distribution schedule for settlement sum of HK$45 million”; and

(3) the documents in connection with a funding agreement dated 4 August 2005 made between Keentrade and the 2nd respondents.

9. In relation to these three categories of documents, it was expressly stated in the Production Order that they included, but not limited to, the agreement(s), correspondence, minutes of meeting(s) / written resolution(s) of the creditors / committee of inspection / court order(s), cheque(s), bank draft(s), cashier order(s), invoice(s), receipt(s) and any other accounting documents in relation thereto.

10. Under §2 of the Production Order, if any of the documents falling within the three categories “had never been or is no longer in his/her custody and/or power, the 1st Respondents and/or the 2nd Respondents (where applicable) do by 6 June 2017 file an affidavit/affirmation in respect of each document whether it had been in his/her custody and/or power, and if it had been, when it was last in his/her custody and/or power, and the reason it is now no longer in his/her custody and/or power”.

11. It is common ground that the Production Order covers the documents falling within the scope of the three categories, whether they were stored in electronic or physical form.

12. The 1st and 2nd respondents through their solicitors provided the Trustees with 151 items consisting of 835 pages of documents on 6 June 2017, 7 August 2017 and 11 December 2017. They considered thatthey had complied with the Production Order. This is despite the fact that they have not filed any affirmation as required by §2 of the Production Order.

13. Although Mrs Wong retired from Shinewing in June 2014 and has since then spent most of her time looking after her family members, she accepts that as a liquidator of CWT, she was (and still is) under an obligation to comply with the Production Order. The only steps taken by her in compliance with the Production Order were:

(1) to request for a list of books and records concerning CWT from Ms Hou on 28 February 2018, which was provided to her on 2 March 2018. Thereafter, Mrs Wong inspected five box files of documents and was satisfied that they relate to litigation funding; and

(2) to invite the Trustees’ solicitors to attend the office of Shinewing for the purpose of inspecting the files of CWT (approximately 250 box files) on 13 March 2018. However, the Trustees declined to take up the invitation on the basis that it was the responsibility of the 1st respondents to go through the files and identify the documents which fall within the scope of the Production Order and produce them to the Trustees.

14. The Trustees were dissatisfied with the extent of the documents produced by the 1st and 2nd respondents and their failure to file the requisite affirmation and issued the summons to secure compliance with the Production Order.

Applicable principles

15. Order 45, rule 6(1) provides that:

“ Notwithstanding that a judgment or order requiring a person to do an act specifies a time within which the act is to be done, the Court shall, without prejudice to Order 3, rule 5, have power to make an order requiring the act to be done within another time, being such time after service of that order, or such other time, as may be specified therein.”

16. In Re Ho Yuk Wah David (bankrupt) [2015] 2 HKLRD 603, To J stated (at §19 [1]) the principle governing an application made under Order 45, rule 6(1) in this way:

“ This jurisdiction is an absolute one. The rule enables the court to give the respondent one last chance to comply with its order before the applicant may invoke the penal sanctions available in the court’s armory. The burden is on the applicant to prove that an order had been made requiring the respondent to perform an act within a specified time and the respondent failed to do so. Once that is proved, the burden is then shifted to the respondent to show why he should not be required to comply with the order to perform the act, upon being given a second chance. The obligation to perform the act required had been determined and made an order of the court. Thus, in considering whether to exercise the discretion under this rule, there is no need for the court to revisit the appropriateness or otherwise of its previous order. The question is simply whether in all the circumstances the respondent should be excused from performing the act underits previous order. As the court’s orders are made to be complied with, such...

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