The Hong Kong Court of First Instance (the Court) has examined the issue of the scope of information required to be disclosed by liquidators to creditors and whether the Court should exercise its discretion to order discovery if it is just and beneficial to do so.
The Plaintiff (China City Construction Holding Group Co Ltd or CCCH) initially wrote to the Liquidators of China City Construction (International) Co Ltd (CCCI) for Litigation Information and Fees Information relating to the Other Actions (as defined below). The Liquidators refused to disclose all of the Information requested by CCCH and the Court subsequently held that the information already supplied by the Liquidators to the Committee of Inspection (COI) was reasonable in the circumstances and that it reflected a reasonable stance taken by the Liquidators.
Background
The underlying dispute in the case concerned the disposal of a valuable piece of land by the China City Group in March 2021. The land was partly or indirectly owned by CCCI before it was put into creditors’ voluntary liquidation due to financial difficulties in January 2019. During the material period, suspicious transactions and agreements were made among the members of the China City Group, resulting in a change of ownership of the land and the sale proceeds.
As a result, a number of actions were commenced against various members of China City Group and the alleged conspirators arising from the improper change of ownership and to recover the sale proceeds, including HCCW 30/2022, which was an action commenced by the Liquidators (together, Other Actions).
Request for information
CCCH (the sole shareholder, the largest creditor and a member of the COI of CCCI), requested that the Liquidators disclose information in relation to:
- the Liquidators’ plans, strategy, and views on merits as regards HCCW 30/2022 and the Other Actions in relation to the potential recovery of loss and damage suffered by CCCI and/or reliefs (the Litigation Information); and
- the actual and estimated future legal costs and the funding arrangements and terms in connection with HCCW 30/2022 and the Other Actions (Fees Information, together the Information). Importantly, CCCH was not a party to the Other Actions
Liquidators’ refusal
The Liquidators essentially refused the request by CCCH for the Information on the basis that they had formed the view that CCCH was connected with the defendants in the Other Actions as there were and continued to be overlapping management personnel between them. Additionally, the Liquidators contended that they had already disclosed sufficient information to the COI, further that CCCH had been unable to provide a satisfactory explanation as to why it needed the Information.
