THE JOINT AND SEVERAL LIQUIDATORS OF THE NEW CHINA HONG KONG GROUP LTD AND OTHERS v. ERNST & YOUNG AND OTHERS

THE JOINT AND SEVERAL LIQUIDATORS OF THE NEW CHINA HONG KONG GROUP LTD AND OTHERS v. ERNST & YOUNG AND OTHERS

The court held that the liquidators had shown a reasonable requirement to inspect E&Y's audit working papers and to orally examine Mr Wu and Miss Yen; E&Y, as auditors and long-standing advisers, fall within the category of officers for s221 purposes; on balancing investigative necessity against oppression the public interest and the liquidators' need prevailed. Production was ordered (limited to available files 1995-1997) and oral examinations ordered before a Master, with costs directions and an undertaking as to reasonable production costs.

Citation
THE JOINT AND SEVERAL LIQUIDATORS OF THE NEW CHINA HONG KONG GROUP LTD AND OTHERS v. ERNST & YOUNG AND OTHERS
Parties
Applicants (liquidators): The Joint and Several Liquidators of The New China Hong Kong Group Limited, The New China Hong Kong Capital Limited and The New China Hong Kong Finance Limited; 1st Respondent (auditor / Professional Firm): Ernst & Young; 2nd Respondent (individual, Former Director/financial Adviser and E&y Partner): Anthony Wu Ting Yuk; 3rd Respondent (individual, Audit Partner): Catherine Yen
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
28 April 2003
Case Number
HCMP3891/2002
Procedural Posture
Originating Summons Under Companies Ordinance (s221 and S255) / Chambers Judgment on Originating Summons (decision Handed Down 28 April 2003)
Outcome
Application granted in part with modifications
Legal Topics
Liquidators' Investigatory Powers Under S221, Production of Audit Working Papers, Oral Examination of Officers, Conflict of Interest of Auditor/financial Adviser, Balancing Reasonable Requirement Against Oppression
Source Language
EN
Company Law Insolvency Civil Procedure Disclosure and Examination Professional Duties of Auditors Liquidators' Investigatory Powers Under S221 Production of Audit Working Papers Oral Examination of Officers Conflict of Interest of Auditor/financial Adviser +1 more

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Parties

The Joint and Several Liquidators of The New China Hong Kong Group Limited, The New China Hong Kong Capital Limited and The New China Hong Kong Finance Limited

Applicants (liquidators)

Ernst & Young

1st Respondent (auditor / Professional Firm)

Anthony Wu Ting Yuk

2nd Respondent (individual, Former Director/financial Adviser and E&y Partner)

Catherine Yen

3rd Respondent (individual, Audit Partner)

Procedural Posture

Originating Summons Under Companies Ordinance (s221 and S255) / Chambers Judgment on Originating Summons (decision Handed Down 28 April 2003)

Legal Issues

  1. 1 Whether E&Y, as auditors, are 'officers' for the purpose of s221
  2. 2 Whether the liquidators demonstrated that the documents and oral examinations were 'reasonably required' to perform their functions
  3. 3 Whether the request for wide-ranging audit working papers was an impermissible fishing expedition

Ratio Decidendi

The court held that the liquidators had shown a reasonable requirement to inspect E&Y's audit working papers and to orally examine Mr Wu and Miss Yen; E&Y, as auditors and long-standing advisers, fall within the category of officers for s221 purposes; on balancing investigative necessity against oppression the public interest and the liquidators' need prevailed. Production was ordered (limited to available files 1995-1997) and oral examinations ordered before a Master, with costs directions and an undertaking as to reasonable production costs.

Court Disposition

Application granted in part with modifications

Orders

  • Ernst & Young ordered to make available to the liquidators all working papers and supporting documents relating to the audits of the Companies for the years ended 31 December 1995 to 31 December 1997 inclusive
  • Ernst & Young ordered to make available to the liquidators all documents relating to the provision of financial advice by E&Y and/or Mr Anthony Wu to the Companies and related documents created in that capacity