Section 221 and “Private Papers”

Antony Sassi, Partner, Smyth & Co in association with RPC

Liquidators’ attempts to obtain wide-ranging production of documents from former officers of a company are common in Hong Kong and well-known to insolvency practitioners and those who represent respondents on the receiving end of such applications.

Section 221 of the Companies (Winding-up and Miscellaneous Provisions) Ordinance (the “Ordinance”) gives the court power to order persons who have information concerning (among other things) the “affairs, or property of the company” to be examined on oath (ss. 221(1) and (2)) and/or to produce documents “relating to the company” (s. 221(3)); namely, a power of examination and/or production.

In the recent case of Provisional Liquidators of China Medical Technologies Inc v Samson Tsang Tak Yung [2015] HKEC 224, HCCW No. 435 of 2012 (applying Re Weihong Petroleum Co Ltd (No. 2) [2003] 2 HKLRD 747), the liquidators sought wide ranging production of documents from the company’s former CFO (the “defendant”) on the basis that (among other things) he and his associates had allegedly been involved in the misappropriation of large sums of money from the company following its IPO and issuance of certain bonds. The documents sought also included certain of the defendant’s private papers eg, banks accounts and purported divorce documents.

In short (and without wishing to do disservice to the arguments) the liquidators sought to justify the production of the defendant’s private papers on the basis that:

  • the liquidators are responsible for the recovery of the company’s property and this included actual and contingent claims on behalf of the company (bearing in mind the defendant and/or his associates were alleged to have information concerning the whereabouts of the company’s assets);
  • similar (but not identical) powers in England & Wales and Australia were coextensive and, therefore, 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 the court granted wide orders for production against the defendant and orders for his examination, it refused to order production of the defendant’s private papers. In balancing the public duties of liquidators with the private interests of a defendant, the court usually considers s. 221(2) (power of examination) to be more oppressive than s. 221(3) (power of production), provided the latter does not relate to a defendant’s private papers.

The result is that while the defendant can be examined on oath about the company’s affairs and his financial circumstances (including those of his wife or ex-wife) and ordered to produce a wide range of documents, this does not justify the production of private papers in his custody or power.

As a matter of statutory interpretation, the judgment is difficult to fault. However, given the stakes involved, watch out for an appeal*.


* Application for leave to appeal appears to have been granted on 11 February 2015 (CACV No. 46 of 2015).