GREATER BEIJING FIRST EXPRESSWAYS LTD. (IN LIQUIDATION)

HCCW 338/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 338 OF 2000

______________________

	IN THE MATTER of GREATER BEIJING FIRST EXPRESSWAYS LIMITED (In Liquidation)
	and
	IN THE MATTER of the Companies Ordinance, Cap. 32 of the Laws of The Hong Kong Special Administrative Region

______________________

 

Before : Hon Kwan J in Chambers

Date of Hearing : 14 March 2006

Date of Decision : 14 March 2006

 

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D E C I S I O N

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1.  I have two summonses before me.

2.  The summons issued first in time on 3 December 2005 was by the liquidators of Greater Beijing First Expressways Limited (“GBFE”), under section 205 of the Companies Ordinance, Cap. 32 and rules 189 and 190 of the Companies (Winding-up) Rules.  I shall call this “the Release Summons”.  The liquidators seek an order that they be released as liquidators, they be authorised to destroy the books and records of GBFE 18 months from the date of dissolution, and that Greater Beijing Region Expressways Ltd (“GBRE”), a subordinated creditor and contributory of GBFE, would have liberty to apply to inspect the books and records of GBFE during the 18-month period.

3.  The other summons was issued by GBRE on 15 December 2005, under sections 199(3) and 200(5) of Cap. 32.  GBRE seeks an order that the liquidators be directed to sell to it, by way of legal assignment, the various causes of action held by GBFE, on the principal terms as described in the letter of its solicitors’ dated 22 November 2005 (“the Letter”), or on such other terms as the court thinks fit.  I shall call this “the Assignment Summons”.

4.  I will deal with the Assignment Summons first.

5.  The locus of GBRE to make the application under sections 199(3) and 200(5) is not challenged by the liquidators.  I am satisfied GBRE does have locus.  It is the sole shareholder of GBFE, and a subordinated creditor to the extent of US$110 million odd.  GBRE’s claims are subordinated to a group of holders of notes issued by GBFE (“the Noteholders”), who represent 99.9% in value of GBFE’s unsubordinated debt.  After payment of dividends to the unsubordinated creditors, the estimated shortfall in the liquidation is approximately US$98 million.  GBFE has no funds.  GBRE will be receiving nothing out of the winding up of GBFE and will stand to lose all its investments, whether by way of equity or subordinated debt.  It would appear that the only way GBRE can recoup its loss is to pursue the claims in the various causes of action it has asked the liquidators to assign.  The liquidators have turned down that request, GBRE is clearly a person aggrieved within section 200(5).

6.  The Assignment Summons is opposed by the liquidators.

7.  JP Morgan Chase Bank, as the indenture trustee for the Noteholders, indicated that the Noteholders essentially adopt a non-adversarial stance to the Release Summons and the Assignment Summons.  They express the wish that the winding-up process be concluded as swiftly as possible without cost to the creditors.  They also think it imperative that GBRE should bear all the costs and fees involved in the purchase of the causes of action, otherwise the estate may be prejudiced.  The Noteholders have not taken part in the hearing.

8.  Section 200(5) provides that if any person is aggrieved by any act or decision of the liquidator, that person may apply to the court, and the court may confirm, reverse, or modify the act or decision complained of, and make such order in the premises as it thinks just.

9.  For the court to interfere with the exercise of the liquidator’s power, it must be shown that the liquidator has not exercised his power in good faith, or has acted in a way in which no reasonable liquidator could have acted, or that in the course of administration, when he is called upon to give a ruling which directly affects a party’s right, the liquidator has not acted even-handedly as an impartial neutral (Eagle Queen Co Ltd v. First Bangkok City Finance Ltd [1989] 2 HKLR 71 at 74B to D; Re CA Pacific Securities Ltd [2002] 3 HKLRD 586 at 590G to H).

10.  Here, what I am concerned with is whether the liquidators’ decision not to assign causes of action to GBRE could be characterised as one which no reasonable liquidator could have made. 

11.  Mr Aiken, SC for GBRE cited Hamilton v. The Official Receiver [1998] BPIR 602 as an example.  In that case, Laddie J in an application made under a provision equivalent to our section 200(5) granted the application and directed the Official Receiver as liquidator to assign a potential cause of action that might be proved to be worth £500,000.00 to the applicant for £1,000.00.  The judge held at 605H to 606A that the refusal to accept a reasonable and indeed the only offer on the table for an asset which the receiver has no interest now in realising is perverse.

12.  Mr Harris for the liquidators sought to distinguish the case on a number of grounds, but I do not think the situation I am concerned with is so very different, granted that the request to assign the causes of action was made extremely late in the day, even after an order was made in the court in the British Virgin Islands (“the BVI”) to dissolve GBFE on 10 June 2005.

13.  It seems to me that the liquidators fell into error in applying the same test in considering if they should sell the causes of action to GBRE as when they had considered whether GBFE itself should pursue those causes of action.  I can well understand why the liquidators and the committee of inspection should decide against pursuing the causes of action, in view of the legal advice received on the prospects of success and the strength of the available evidence.  This does not mean that the liquidators should decline to sell the causes of action which GBFE is not minded to pursue, provided that the estate does not end up out of pocket and some consideration is received that may be distributed to creditors.  The fact that the consideration on offer, being US$25,000.00, would only yield a small dividend to unsubordinated creditors is not a sufficient reason for refusing to sell. Nor do I think the liquidators should speculate on the motive of GBRE in seeking to acquire the causes of action or whether GBRE is genuinely serious in pursuing the potential claims.

14.  I disagree with Mr Aiken that the liquidators should assign all the causes of action as identified in the Letter to GBRE, regardless of whether they are assignable owing to a sale and purchase agreement made between GBFE and Smart Watch Assets Limited on 16 December 2002.  The liquidators should be directed to assign only those causes of action that would appear to be assignable.  Mr Aiken has submitted a revised schedule setting out the causes of action that would appear assignable.  He has also confirmed that GBRE would offer the same consideration as in the Letter, even though some of the causes of action mentioned in the Letter would not be assigned. 

15.  I note that it has now been accepted by GBRE that steps must be taken in the BVI court to declare the dissolution void for the liquidators to effect the assignment of the causes of action.  So any order directing the liquidators to assign would be conditional upon an order from the BVI court that the dissolution of GBFE be declared void.

16.  As for the necessity to hold an auction, Mr Harris submitted that there is one other party who might be interested in purchasing the causes of action, and that is the COSCO group.  It is possible that they may offer a price higher than what is offered by GBRE to purchase the causes of action so as to stop GBRE from pursuing any claim against that group.  I would agree with the liquidators that at the very least the COSCO group should be sounded out whether they would be interested in purchasing the causes of action.

17.  In the event that an order is made to direct the liquidators to assign the causes of action, I do not think it is necessary for the liquidators to seek approval from the committee of inspection on the assignment and for the liquidators to take steps to re-activate the committee of inspection.

18.  I also see nothing objectionable for GBRE to resign as a member of the committee of inspection to simplify matters, if it were to take an assignment of the claims.

19.  Subject to the terms to be imposed to see to it that the estate should not be out of pocket as a result of all the steps taken to assign the assignable causes of action or as necessitated by such an assignment, I will make an order directing the liquidators to assign to GBRE, unless a better offer can be obtained within 14 days.

20.  I have also indicated that provision should be made by GBRE to provide security for the costs of the liquidators to be incurred.

21.  I have considered the estimate of the costs of the liquidators.  This comes up to approximately US$380,000.00 odd.  I will fix the amount of security to be provided with regard to the amount of costs that would be recovered after taxation.

22.  I make the following orders:

(1)	Unless the liquidators should receive a higher offer within 14 days hereof, and upon GBRE paying into court US$250,000.00 within 7 days hereof as security for the liquidators’ costs that have been and are to be incurred in respect of and arising from the proposed assignment, the liquidators are directed to assign to GBRE the various causes of action in the revised schedule submitted by Mr Aiken on the principal terms as set out in the Letter.
(2)	The liquidators’ obligation to assign is conditional on an order being made by the court in the BVI declaring the dissolution of GBFE to be void.
(3)	Leave to GBRE to withdraw the amount paid into court pursuant to paragraph (1) hereof if there is no assignment of the causes of action to it.
(4)	Costs of the Assignment Summons be to the liquidators.
(5)	The Release Summons is adjourned sine die with liberty to restore.

(S. Kwan) Judge of the Court of First Instance, High Court

 

Mr Nigel Aiken, SC & Ms Winnie Tsui, instructed by Ms Allen & Overy, for the Applicant, GBRE

Mr Jonathan Harris, instructed by Messrs Lovells, for the Joint & Several Liquidators of GBFE

Messrs Laracy Gall, for the indenture trustee, JP Morgan Chase Bank, attendance excused

 

HCCW000338A/2000

HCCW 338/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO. 338 OF 2000

____________

IN THE MATTER of GREATER BEIJING FIRST EXPRESSWAYS LIMITED (IN LIQUIDATION) and IN THE MATTER of the Companies Ordinance, Chapter 32 of the Laws of the Hong Kong Special Administrative Region

____________

Coram: Hon Chu J in Chambers

Date of Hearing: 24 October 2000

Date of Decision: 24 October 2000

Date of Reasons for Decision: 30 October 2000

 

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REASONS FOR DECISION

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1. By summons filed on 25 August 2000, the Joint and Several Provisional Liquidators ("PL") of Greater Beijing First Expressways Limited ("the Company"), Ms Oswin and Mr Hague, both of Price Waterhouse, apply for orders that they be appointed the Joint and Several Liquidators ("the Liquidators") of the Company and for a Committee of Inspection ("the COI") be appointed to act with the Liquidators. The application is supported by the Petitioner, but opposed by the sole contributory and parent company of the Company, Greater Beijing Region Expressways Limited ("GBRE"), and 2 creditors, Tianjin Tian Ang Expressway Co. Ltd and Tianjin Tian Yong Expressway Co. Ltd ("collectively "the Opposing Creditors"). After hearing submissions, I ordered that the PL be appointed the Liquidators of the Company. I also appointed a COI comprising the members set out in the PL's summons and other ancillary reliefs. My reasons appear below.

Background

2. The Company is a BVI company. The Petitioner is the trustee for Noteholders under 2 series of Notes totalling US$288 million under an Indenture dated 17 June 1997 ("the Indenture"). On 13 April 2000, upon the Petitioner's application, the PL were appointed. On 12 June 2000, the Company was ordered to be compulsorily wound up. The winding up order is currently under appeal, but there is no stay of the winding up proceedings. On 12 July 2000, another winding up order was made against the Company by the BVI Court. The BVI Court on 20 September 2000 appointed the PL as the official liquidators in the BVI winding up proceedings.

3. On 12 July 2000, the PL convened separate meetings of contributories and creditors to consider the appointment of liquidators and committee of inspection. At the contributories' meeting, GBRE nominated Mr Gabriel Tam and Mr Alan Tang of KPMG to act as the Liquidators and a resolution to that effect was passed. GBRE also resolved in favour of the appointment of a COI with itself as one of the members. The creditors' meeting, however, resolved that the PL be appointed as the Liquidators, and that a COI comprising representatives from the Petitioner, GBRE, American Express Financial Corporation, Dupont Capital Management and Ernst & Young be appointed. The 5 members appointed by the creditors' meeting are the same members proposed by the PL in their summons. As a result of the differences, it is incumbent upon the Court to decide the differences pursuant to section 194(c) and section 206(2) of the Companies Ordinance.

Appointment of Liquidators

4. One day before the hearing of the PL's summons, GBRE by its director, Mr Alan Lau, made an affirmation dealing with a wide range of matters. No reason had been advanced for the late introduction of evidence. Indeed there is no apparent reason why the affirmation could not have been filed earlier when the matters referred therein were events which had been in existence and facts known to GBRE for a considerable period of time. Notwithstanding the late arrival of this affirmation, no objection to its admission was made and the Petitioner and the PL had managed to compile affirmations in answer thereto.

5. In this last minute affirmation, GBRE mounted a number of objections to the appointment of the PL as the Liquidators. The objections range from the suitability of the PL to procedural irregularity in the meeting of creditors leading to the resolution to appoint the PL as the Liquidators. At the hearing of the summons, senior counsel for GBRE and the Opposing Creditors only rely on one argument, namely, that Mr Tam and Mr Tang are more appropriate and suitable than the PL to be the Liquidators. It was argued that as the asset value of the Company derives from its interests in toll roads in the Mainland, it is paramount that the Liquidators should have experience of working with Mainland parties and should be able to communicate effectively as well as to maintain a good working relationship with the Mainland joint venture partners. It was submitted that Mr Tam and Mr Tang were to be preferred to the PL by virtue of their experience, contacts and language ability.

6. Senior Counsel for the Petitioner referred me to the old authorities as establishing the rule that where the party who has the carriage of the winding up order proposes a fit and proper person, that person shall be appointed as liquidator without reference to the fitness of any other person proposed by other parties: Re General Provident Assurance Company (1868) 19 LT45 and Re Albert Average Assurance Company (1870) LR 5 Ch App 597. The modern trend, however, is that the Court has a wide discretion in these matters, although the discretion has to be exercised judicially and in accordance with settled principles: Re Dunquil Pty Ltd (1985) 9 ACLR 950 and Re Australian National Finance Ltd (1992) 7 ACSR 697. An important consideration for the Court in the exercise of its discretion is the wishes of the major creditors: section 287(1) and (2) of Companies Ordinance, see also Re Goldcone Properties Ltd [1999] 4 HKC 602.

7. In the present case, the Noteholders on whose behalf the Petitioner acts constitute the major creditors of the Company. The evidence before the Court shows that the PL receive the support of an overwhelming majority of the creditors.

8. In my view, no useful purpose can be served by embarking upon a comparison of the skill and ability enjoyed by the PL and that possessed by Mr Tam and Mr Tang. They are all professional and experienced insolvency practitioners. No objection had been taken by GBRE and the Opposing Creditors to the competence and ability of the PL. Although Mr Alan Lau had suggested in his affirmation in opposition that the PL had lost the trust and confidence of both the Noteholders and the majority creditors, that suggestion is refuted by the Petitioner and the point was not pursued at the hearing.

9. I consider that the question of the choice of liquidators should be approached by asking whether there is any good and compelling reason for not acceding to the wishes of the majority creditors. The PL enjoy the support of an overwhelming majority of the creditors. They have since April 2000 been working closely with the Mainland joint venture parties and the affidavit of Ms Oswin indicates that a relationship of trust and confidence has gradually been established. Prima facie, the PL are the appropriate persons to be appointed as the Liquidators.

10. Both GBRE and the PL recognised that a relationship of trust and confidence is vital in gaining the support and co-operation of the Mainland joint venture parties. This in turn has a significant impact on the possibility of finding potential buyers for the assets of the Company and on the chances of the creditors achieving any return for their investment. Accordingly, the fear on the part of the Petitioner that a change in the identity of the liquidators may jeopardise the progress of liquidation is entirely justified and well founded.

11. At the same time, considering that the PL had been appointed the liquidators in the BVI winding up proceedings, the liquidation of the Company will be rendered more efficient, effective and economical by having the same liquidators in the 2 jurisdictions.

12. The evidence before me does not afford any good reason for suggesting that the PL should not be appointed as the Liquidators. There is nothing to suggest, and it is not suggested by Senior Counsel for GBRE and the Opposing Creditors, that the PL are not fit and proper persons to act. All that GBRE and the Opposing Creditors are saying is that Mr Tam and Mr Tang are more suitable candidates. I had indicated that it is not appropriate to embark upon a comparison exercise. Even if I were to accept that Mr Tam and Tang may enjoy some advantage in terms of their language ability and contacts, that would have been countered by the fact that the PL have been working on the affairs of the Company for nearly 6 months and they are working on the liquidation of the Company in the BVI. Mr Tam and Mr Tang, on the other hand, will have to start afresh. There is thus no distinct and obvious advantage to be gained by the appointment of Mr Tam and Mr Tang.

13. Having regard to all the matters aforesaid, I am of the view that the PL should be appointed as the Liquidators, and I so order.

Appointment of Committee of Inspection

14. The objection of GBRE and the Opposing Creditors is that the resolution appointing the COI passed at the creditors' meeting is defective in that the vote of the Petitioner is a nullity. It is submitted that the more preferred course is for the Court to direct for another meeting to be convened to consider the matter.

15. The argument of GBRE and the Opposing Creditors evolves around the construction of sections 6.5 and 6.11 of the Indenture. In this regard, I agree with Senior Counsel for GBRE and the Opposing Creditors that the expert opinions before the Court do not reveal any peculiar principle or rule of construction under New York law, which is the governing law under the Indenture.

16. I accept that section 6.5(b) whether read alone or read in conjunction with section 6.11, does not empower the Petitioner to vote on behalf of the Noteholders on the appointment and/or the composition of a COI. Accordingly, the Petitioner could only have done so at the creditors' meeting by acting as the proxy for the Noteholders, who are creditors of the Company, under Rule 131 of the Companies (Winding Up) Rules. The letters of consent and direction given by the Noteholders to the Petitioner are not in the form prescribed in the Companies (Winding Up) Rules as required by Rule 132 thereof. Not only that, they specifically direct the Petitioner to vote at the Creditors Meeting in favour of, inter alia, "an application be made to the Hong Kong court for the appointment of a Committee of Inspection to act with the Joint & Several Liquidators and for the trustee" (i.e. the Petitioner) "to be on the Committee of Inspection". The letters of consent and direction do contain specific instructions on the question of appointment of a COI. In the circumstances, the Petitioner when sub-delegating the authority to Mr Nee of Coudert Brothers, who represented the Petitioner at the Creditors meeting, could only do so by means of a special proxy. Yet Mr Nee was only appointed by the Petitioner under a general proxy, which is in the prescribed form. The vote casted by Mr Nee on behalf of the Petitioner is therefore invalid.

17. This procedural defect or irregularity is however immaterial in deciding whether to grant the order sought in the PL's summons. It is common ground that the Court can either determine the composition of the COI or order that another meeting of creditors be called. Section 287 of the Companies Ordinance does not oblige the Court to direct for meetings of creditors or contributories to be called. The Court may, however, direct for such meetings to be convened for the purpose of ascertaining the wishes of the creditors or contributories. Where the wishes of the creditors can be readily ascertained such that it would be virtually certain that a resolution would be carried, it will be unnecessary to hold a meeting of creditors for the purpose of voting on the resolution: Re Manmac Farmers Ltd [1968] 1 WLR 572. It follows that no useful purpose can be served by the Court directing for a meeting of the creditors to be convened when there is sufficient evidence before the Court as to the wishes of the majority creditors.

18. In the present case, the views and wishes of the majority creditors are already before the Court. It is almost certain that the same resolution would be passed if a creditors' meeting were to be re-convened. There is therefore no need to hold another creditors' meeting. The Court can simply on the basis of the material now before it decide the composition of the COI. In this regard, GBRE and the Opposing Creditors had argued that it is unfair and inappropriate for American Express Financing Corporation and Dupont Capital Management to have separate seats on the COI since they are minority creditors. They proposed that the COI should comprise the Petitioner, GBRE and Ernst & Young. I do not agree that American Express Financing Corporation and Dupont Capital Management can be regarded as minority creditors. Although they are assignees of debts of modest amounts, they are also Noteholders holding substantial amounts of debt. At the same time, it is to be noted that the debt held by Ernst and Young is of a modest amount.

19. For the above reasons, I am of the view that a COI with the composition set out in the PL's summons should be appointed without having to resort to another creditors' meeting, and I so order.

Costs

20. The Petitioner applied for costs against GBRE and the Opposing Creditors. The PL also applied for part of the costs of this application to be borne by GBRE and the Opposing Creditors.

21. I accept the submissions advanced by GBRE and the Opposing Creditors that an application to the Court is inevitable irrespective of the differences between the parties. However, I note that the application has been complicated by the stance taken by GBRE, which was supported by the Opposing Creditors, and more significantly by the late affirmation of Mr Alan Lau. The affirmation raises a wide range of matters, much of which had not been relied upon or pursued at the hearing.

22. But for the stance taken and this affirmation, the hearing would have been much shorter and the appearance by leading counsel in the case of the Petitioner would not have been necessary. The wasted aspect of the costs of the application should therefore be borne by GBRE and the Opposing Creditors. Accordingly, I order that the costs of the application to be costs of the liquidation, save that the costs of and incidental to and occasioned by the 2nd affirmation of Mr Alan Lau filed on 23 October 2000 and the hearing be borne by GBRE and the Opposing Creditors, to be taxed if not agreed.

 

 

 

Representation:

Miss Jennifer Tsang, instructed by Messrs Lovells, for the Joint and Several Provisional Liquidators

Mr Benjamin Yu, SC instructed by Messrs Coudert Brothers, for the Petitioner

Mr Charles Sussex, SC instructed by Messrs Allen & Overy, for the Contributory and Opposing Creditors

Official Receiver not attending

HCCW000338/2000

HCCW338/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO.338 OF 2000

-------------------

IN THE MATTER OF GREATER BEIJING FIRST EXPRESSWAYS LIMITED (Provisional Liquidators Appointed) and IN THE MATTER OF the Companies Ordinance, Cap.32

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Coram: Hon Le Pichon J in Court

Date of Hearing: 12 June 2000

Date of Order: 12 June 2000

Reasons Handed Down: 14 June 2000

 

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R E A S O N S

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1. This is a creditor's petition presented under section 327 of the Companies Ordinance. Greater Beijing First Expressways Limited ("the Company") is a BVI company. The petitioner is Chase Manhattan Bank, trustee for Noteholders under two series of Notes totalling US$288 million. The petitioner represents the interests of all the Noteholders pursuant to the terms of the Indenture governing the Notes.

2. The petition was opposed by the Company. At the hearing, a winding-up order was made. The reasons appear below.

3. As noted above, this is a creditors' petition. It would appear from the evidence filed in opposition that the debt is not disputed. Further, the Company is not in a position to repay the debt. It has put forward a proposal for refinancing the debt and for that purpose, a three-month adjournment was sought. The evidence filed also sought to respond to the allegations of misconduct which had led the court to appoint provisional liquidators on 13 April 2000, the date the petition was presented. According to the preliminary report filed by the provisional liquidators, the Company is insolvent both on a cash-flow as well as on a balance sheet basis. At the hearing, when it became evident that the petitioner was pressing for a winding-up order, leading counsel for the Company sought a much shorter adjournment, namely, a period of 21 days within which to file evidence relating to the law and procedure of the BVI.

4. Before turning to the reasons proffered for seeking that adjournment, I would briefly outline the refinancing proposal. The Company has obtained a commitment letter from CITIC Industrial Bank of Tianjin to lend the Company RMB1.5 billion (equivalent approximately to US$180 million), but the terms of the loan require negotiation which, it was anticipated, would take at least two months to complete. There are also exchange control issues which need to be resolved. Although the loan was the major component of the refinancing proposal, the other components, namely, the release of US$33 million of dividends which have been declared but withheld and a further US$63 million or so of future income from the toll roads would depend on the co-operation of the Hebei Provincial Government.

5. Having considered the refinancing proposal which was set out in considerable detail in the affirmation filed on behalf of the Company, the petitioner decided that it was not prepared to wait for three months and opposed the application for an adjournment on the grounds, inter alia, that -

(1) the proposal is highly contingent;

(2) there is no assurance that the matter would be finalized within three-months;

(3) there is no offer of undertaking, suitably fortified, to protect the interests of the Noteholders in the event of their interests being prejudiced as a result of the adjournment;

(4) the refinancing proposal has come very late and no effort has been made to discuss it with the petitioner or the committee; and

(5) the committee does not trust the Company's management and has no confidence that the proposal could be implemented in three months or that matters would be further advanced after three-months.

Possessing as it does a blocking vote for any restructuring of the Company under section 166 of the Companies Ordinance, the petitioner's rejection of the refinancing proposal meant that it was doomed : it is acknowledged by the Company that a restructuring cannot get off the ground without the petitioner's co-operation.

6. Faced with that difficulty, the Company changed tack and raised a number of new matters (set out below) not dealt with in the affirmations filed in opposition to the petition in support of his application for three weeks within which to adduce evidence on the law and procedure in the BVI.

BVI proceedings

7. It was submitted that as there are parallel winding-up proceedings in the BVI commenced by the petitioner and as BVI is the country of incorporation, the Hong Kong court should defer to the BVI court. The BVI petition was heard on 8 June 2000 and has been adjourned for a month. It was submitted that a Hong Kong liquidation would not have extraterritorial effect and therefore its effect would be circumscribed. Moreover, the bulk of the Company's assets within Hong Kong, namely, US$12.9 million out of US$16 million odd, is already under the control of the provisional liquidators. Leading counsel for the Company stated :

"Hong Kong is a minor theatre in this war. The major battle is in the BVI."

But those submissions were directly contrary to what the Company's stance was on 19 May 2000 when its solicitors wrote to the petitioner's solicitors in the following terms :

"There are, of course, also the parallel proceedings to wind up the Company in the BVI. We understand that the hearing of the petition in the BVI has now been listed for 6th June, 2000, whilst the petition in Hong Kong is listed for 12th June, 2000. It seems to be common ground between all the parties (not least from the affidavit of Mr Grippo) that the substantive proceedings are those in Hong Kong. This is where the significant issues are being determined and the BVI is, in reality, no more than the Company's place of incorporation. Indeed, the petitioner itself appears to have decided that Hong Kong is the appropriate forum for determining the substantive issues in dispute. In light of this, it would be sensible if agreement could be reached between us for an application by consent to adjourn the hearing of the BVI petition until the first available and convenient date for the parties after the determination of the Hong Kong petition.

We have confirmed with our lawyers in the BVI that this is an appropriate procedure, which in all the circumstances is likely to meet with the approval of the Court. This course of action will also avoid significant additional costs by the parties, as well as the prospect of having inconsistent or contradictory decisions in two jurisdictions."

This apart, it is not the case that the Company's business was being conducted in the BVI. Other than being its place of incorporation and the place of incorporation of its subsidiaries, there is little connection with the BVI.

8. The Company acknowledges that the Hong Kong court does have jurisdiction to make a winding-up order. In exercising the court's discretion, it is necessary to put the Company's current stance in its proper context, namely, its previous stance as reflected in the letter of 19 May 2000 and the evidence that has so far been filed in opposition to the winding-up. It is nothing more than a ploy to gain further time in light of the petitioner's rejection of the refinancing proposal. The suggestion that the Hong Kong courts should be a spectator of the developments in the BVI winding-up proceedings and not to be seen as acting 'out-of-step' with the BVI court as it was put has no valid basis.

Evidence on BVI law

9. The ostensible purpose of the adjournment sought was to adduce evidence of the law and procedure of the BVI. To what end would such evidence serve? If no case has been made out for deferring to the BVI court, in what way can evidence of its law and procedure be relevant? That remained unexplained.

Evidence on New York law

10. It was then suggested that the petitioner has no locus to present the petition. It was submitted that New York law was the governing law of the Indenture from which the petitioner derives its authority and that an adjournment was necessary to put evidence of New York law before the court. That may be so, but quite what question of construction could arise from the Indenture was not shown.

11. Voluminous evidence has been filed in opposition to the petition. Yet, there is not the slightest hint that the petitioner's locus was a problem. Leading counsel for the Company appeared to suggest that the point first arose at the hearing in the BVI on 8 June 2000 and that further time was required to develop it. However, leading counsel for the petitioner referred the court to the affirmation of Alan Tak Chak Lau filed in the BVI proceedings on 5 June 2000 where, in paragraph 4, he dealt with the locus standi point. That affirmation is in substance similar to the affirmation filed by Mr Lau on 6 June 2000 in these proceedings. It is significant that the locus point was omitted from his later affirmation. In the circumstances, the omission could not have been an oversight : it must have been deliberate. This suggests that the locus point was not one of any substance but was conveniently resurrected in order to gain further time.

12. Be that as it may, whether or not the petitioner has locus is a question of Hong Kong law. The relevance of New York law on this issue is obscure. But the point is so fundamental that if it had any substance, it would have been raised long before now and been the basis of an application to strike out the petition which has not happened.

Further evidence in relation to the refinancing proposal

13. Mr Lau's affirmation goes into considerable detail over the refinancing proposal. The matters remaining to be resolved (e.g. negotiation of the loan terms, exchange control etc.) have been referred to above. What has not been suggested is the need to adduce further evidence within 21 days to supplement any particular aspect of this refinancing proposal. I therefore reject this as a reason for the adjournment now being sought.

A winding-up order will not serve any useful purpose

14. The point made here was that the bulk of the Hong Kong assets is already in the hands of the provisional liquidators. A winding-up order would accordingly not achieve a great deal more. Reference was made to In re The Standard Contract and Debenture Corporation (1891-2) 8 TLR 485 where the Court of Appeal upheld the decision of Kekewich J in refusing to make a winding-up order in England of a company incorporated in the Isle of Man where liquidators had already been appointed. The assets in England were so small that a double winding-up with two sets of liquidators would only result in a waste of money and for that reason, the court declined to make the order. I do not see how that decision assists the Company.

15. As leading counsel for the petitioner pointed out, in the present case, apart from the US16 million that is within the jurisdiction, the directors have executed an undertaking in favour of the Company acting by the provisional liquidators. As part of that undertaking, mandates have already been signed by the directors which the provisional liquidators can complete to effect a change of directorships of the BVI companies. Personam jurisdiction against the directors rests with this court. In the circumstances, the submission that a winding-up order would not serve any useful purpose is misconceived.

CONCLUSION

16. To sum up, no valid reasons have been advanced to support an adjournment. Little purpose would be served in granting an adjournment for the filing of evidence, the relevance of which was obscure. In all the circumstances, the only appropriate exercise of my discretion was to refuse the application and, instead, to wind up the Company.

 

 

 

Representation:

Mr Benjamin Yu, SC, instructed by Messrs Coudert Brothers, for the Petitioner

Mr Sussex, SC, instructed by Messrs Allen & Overy, for the Company

Messrs Herbert Smith, for the Directors (Not attending)

Messrs Lovells, for the Joint & Several Liquidators (Not attending)

Mr Alfred Chan, for the Official Receiver