11 May 2015

Application to produce “private papers” under insolvency proceedings being rejected

In the recent case Provisional Liquidators of China Medical Technologies Inc v Samson Tsang Tak Yung [2015] HKEC 224, HCCW No.435 of 2012, the liquidators’ application to produce the “private papers” (such as bank statements and purported divorce documents) of the company’s former CFO was rejected by the Court.

Under section 221 of the Companies (Winding-up and Miscellaneous Provisions) Ordinance, Cap.32 of the Laws of Hong Kong (the “Ordinance”), the Court is empowered to order persons who have information relating to the “affairs, or property of the company” to be examined on oath (section 221 (1) and (2)) or to produce documents “relating to the company” (section 221(3)).

The liquidators in the case sought production of a wide-ranging of documents from the former CFO on the basis that he and his associates had allegedly been misappropriating the funds of the company following its IPO and issuance of bonds. In essence, the justifications for the production of the “private papers” put forward by the liquidators were that (1) the liquidators are responsible for the recovery of the company’s property and this included contingent claims on behalf of the company and (2) with reference to the similar powers in other common law jurisdictions the power of production should not be limited to documents “relating to the company” but included documents relating to the “affairs, or property” of the company”.

While granting wide orders for production against the CFO and orders for his examination, the Court refused to order production of the his private papers, considering that the power of production under section 221(3) of the Ordinance does not cover a defendant’s private papers and that “an order for production of private papers is more intrusive than an examination at which [the defendant] can be asked questions about his financial circumstances”.

It has been reported that leave to appeal against the decision has been granted. It remains to be seen whether the decision will be upheld in the appellate court.