HCCW 67/2022
[2023] HKCFI 2346
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMPANIES (WINDING-UP) PROCEEDINGS NO 67 OF 2022
______________
| | IN THE MATTER of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) |
| | and |
| | IN THE MATTER OF CHINA PROPERTIES GROUP LIMITED (IN LIQUIDATION) |
______________
| BETWEEN | | |
| | WING SZE TIFFANY WONG AND EDWARD SIMON
MIDDLETON IN THEIR CAPACITY AS THE JOINT AND SEVERAL LIQUIDATORS OF CHINA PROPERTIES GROUP LIMITED (IN LIQUIDATION) | Applicants |
| | AND | |
| | WONG SAI CHUNG (汪世忠) | Respondent |
______________
| Before: | Mr Recorder William Wong SC in Chambers |
| Date of Hearing: | 11 September 2023 |
| Date of Decision: | 15 September 2023 |
____________________
DECISION
____________________
THE APPLICATION
1. By a summons dated 4 September 2023 (the “Summons”), the liquidators (“the Liquidators”) of China Properties Group Limited (in liquidation) (“the Company”) apply for urgent interim reliefs against the Respondent, Mr Wong Sai Chung, an ex-director of the company, for, in particular, a mandatory order that the Respondent do, within 3 calendar days, duly acknowledge and irrevocably ratify, by written resolutions substantially in the form attached at Schedule 1 to the draft order (collectively, the “Resolutions”), the appointment of Ms Wing Tsz Tiffany Wong (“Ms Wong”) as the sole director of the four BVI subsidiaries of the Company in place of the Respondent himself.
2. This matter was listed for substantive hearing on 8 September 2023, which could not take place due to the extreme weather conditions on that day. It was thus adjourned to 11 September 2023.
3. One of the Respondent’s main submissions is that there is no extreme urgency and therefore this application should be dismissed on the ground of lack of extreme urgency alone.
4. However, as discussed below, this case does raise an important legal issue concerning insolvency legal regime in Hong Kong, which deserves and requires clarification by the Court.
FACTUAL BACKGROUND
5. The Company was incorporated in the Cayman Islands and listed on the Main Board of the Hong Kong Stock Exchange.
6. It is the holding company of a group of companies comprising numerous subsidiaries incorporated in the British Virgin Islands (the “BVI”), Hong Kong and the Mainland.
7. The Company is the registered shareholder of four wholly and directly owned BVI subsidiaries. The BVI subsidiaries in turn hold various Hong Kong subsidiaries, which then directly hold the Mainland subsidiaries that own substantive assets and operations of the Company. This is a typical corporate structure for most listed companies in Hong Kong with substantive business operations in the Mainland.
8. On 28 February 2022, JIC Trust Company Limited presented a winding up petition against the Company based on a judgment debt.
9. On 31 May 2023, a winding-up order was made against the Company. It is to be noted that at the hearing of the Petition, the Company did not contest Hong Kong Court’s jurisdiction to wind it up. This is right as Hong Kong is definitely the Company’s centre of main interest (COMI): it being listed on the Hong Kong Stock Exchange and subject to the legal and regulatory regimes under Hong Kong laws.
10. On 28 June 2023, the Respondent filed a Notice of Appeal and Notice of Setting Down an Appeal (CACV 197/2023) seeking, inter alia,that the winding-up order made against the Company be set aside. However, I am told that no further steps have been taken to proceed with the appeal. There is no application to stay the present liquidation pursuant to Section 209 of the Companies (Winding-Up and Miscellaneous Provisions) Ordinance, Cap 32 (the “Ordinance’). This Court will thus proceed on the basis that the winding-up order is valid and binding on this Court.
11. On 29 June 2023, the Respondent and subsidiaries of the Company commenced HCMP 1015/2023 against the Liquidators personally by filing an Originating Summons, seeking orders to restrain the Liquidators from accessing or inspecting any documents or assets not within the scope of the Liquidators’ power of access and/or seizure. I am told that the Respondent has not proceeded with the Originating Summons despite prompts by the Liquidators.
12. Mr Wilson Lee, for the Official Receiver’s Office, appeared before this Court and expressed, on behalf of the Official Receiver, a genuine concern that no progress has been made in relation to the present liquidation for about three months. It is the Liquidators’ complaints that:-
(1) None of the directors has filed a statement of affairs and the Respondent has refused to meet with the Liquidators and support his claim of being a creditor (viz,section 190(7) of the Ordinance);
(2) On 27 June 2023, the Liquidators were prevented from accessing the Company’s books and records, and the former officers of the Company called the Police when the Liquidators attempted to obtain books and records of the Company. The Police rightfully did not seek to interfere with the Liquidators and advised the former officers to comply with the winding-up order;
(3) In late July and early August 2023, attempts were made by the Company and its affiliates (who are co-tenants at the same premises) to evict the Liquidators from the Company’s premises where they were attempting to collect the Company’s books and records;
(4) The former principal officers of the Company have failed to produce information, books and records despite written requests; and
(5) The former principal officers of the Company have raised wide-ranging claims of legal professional privilege and refused to progress any joint inspection of the Company’s premises and review of the Company’s information, books and records pursuant to the undertakings given to this Court.
13. The Liquidators managed to change the directors of the BVI subsidiaries, as the Registered Agent of the BVI subsidiaries agreed to the Liquidators’ request and updated the registers of each of the BVI subsidiaries by removing the Respondent as the sole director and registering Ms Wong as sole director in his place. This change has been recorded in the updated stamped register of directors of each of the BVI subsidiaries.
14. As the appointment of Ms Wong as the sole director of the BVI subsidiaries is challenged by the Respondent, and the Liquidators are not able to get access to the books and records of the Company, on 24 August 2023, the Liquidators took out an inter-partes summons, seeking orders against various directors, officers and associates of the Company including the Respondent, so as to give effect to the winding-up order (the “Omnibus Summons”). The Omnibus Summons is returnable on 10 October 2023 before the Hon. Anthony Chan J.
15. On 30 August 2023, the Respondent commenced proceedings in the BVI against the Liquidators seeking, inter alia, (i) declaratory relief that the Respondent is the sole director of the BVI subsidiaries, and (ii) injunctive relief to restrain the Liquidators from acting in contravention of the directors’ rights over the BVI subsidiaries, unless and until they have obtained orders of recognition and assistance from the BVI Courts (the “BVI Proceeding”).
16. The Liquidators were only informed in a Certificate of Urgency served on them on 5 September 2023 (after the Summons was issued) that the hearing is due to take place on 18 September 2023.
17. The present Summons was taken out urgently as the Liquidators cannot wait until the hearing of the Omnibus Summons on 10 October 2023. It was submitted that if they were to do so, the assets of the Company may be at risk having regard to the BVI Proceeding and the uncertain outcome that it may give rise to.
18. In the event that Mr Wong is successful in the BVI Proceedings, he would then have the power under Art.13.5 of the Memorandum and Articles of Association of the BVI subsidiaries to appoint further directors to the boards of the BVI subsidiaries, which would make it difficult, if not impossible, for the Liquidators to take control of the BVI subsidiaries and their assets, potentially rendering the hearing of the Omnibus Summons futile and nugatory.
THE ROLE OF THE COURT
19. I am of the view that, first, it is important to appreciate that Hong Kong Courts not only have a supervisory jurisdiction over liquidations in Hong Kong and, within the four corners of the law, render assistance to cross-border insolvencies worldwide, they also have a duty to assist liquidators appointed by Hong Kong Courts to effectively and efficiently discharge their professional duties in the best interest of the general body of creditors. Hong Kong Courts will render every assistance to the Liquidators to address their and the Official Receiver’s concerns in this liquidation.
20. It is of paramount importance to Hong Kong to befit its status as an international financial centre and insolvency hub that its liquidators be given all statutory armory to facilitate an orderly, speedy and cost effective liquidation for the best interest of all stakeholders.
21. Secondly, as the Court of Appeal in Kam Leung Sui Kwan v Kam Kwan Lai (2015) 18 HKCFAR 501 at §39 stated:
“Every court, however, has an implied jurisdiction to make whatever orders are necessary to give effect to its own judgments. In the present case all the individual respondents reside in Hong Kong and are subject to the in personam jurisdiction of the Hong Kong court. Accordingly were this Court to be of the view pursuant to the discussion which follows that a winding up order ought to be made, we would propose to give leave to the petitioner or the liquidator to apply to the Court of First Instance for such further orders whether by way of injunctions or otherwise as may be necessary to make the underlying assets of the Company available to the liquidator.” (Emphasis added.)
22. In Re Victor River[2021] HKCFI 886, this Court at §§70-72 said:
“70. Mr Wong for the Company submitted that the second core requirement has not been satisfied because:
(1) The liquidators appointed by Hong Kong Courts will not be recognised by the Cayman Court.
(2) There is no real and discernable benefit in winding up the Company since the listing status of Haitian Energy has already been cancelled.
71. I disagree. In the present case, the benefits to be derived from a winding-up in Hong Kong are not dependent upon the Hong Kong liquidators being recognised by the BVI courts or the Cayman courts.
72. As observed by Ma CJ and Lord Millet NPJ in §39 of Kam Leung Sui Kwan v Kam Kwan Lai (supra), every court has an implied jurisdiction to make whatever orders that are necessary to give effect to its own judgments. Where (1) a company has representatives and officers who reside in Hong Kong and (2) such representatives and officers are subject to the in personam jurisdiction of the Hong Kong Courts, a Hong Kong liquidator will be able to apply for court orders to facilitate the exercise of its powers.”
23. In the present case, there is no dispute that the Respondent is subject to the in personam jurisdiction of Hong Kong Courts. Hong Kong Courts can properly order the Respondent to perform the acts as set out in paragraph 1 of the draft Order as submitted by the Liquidators to facilitate the effective administration of the liquidation.
24. In fact, it must be remembered that it is a basic principle that upon the pronouncement of a winding up order against a company, its directors’ powers would be taken over by the liquidators save and except a reserve power to conduct an appeal. This is the default position.
25. Insofar as necessary, a petitioner and/or a liquidator can, out of abundance of caution, apply for and add a term to the standard orders appointing liquidators to the effect that a company’s incumbent directors do sign a letter of resignation and a resolution to appoint the nominees proposed by the liquidators in question as new directors of the company that was ordered to be wound up. This is nothing spectacular or oppressive as directors of a company in liquidation are meant to render assistance to liquidators.
26. In my view, this has nothing to do with recognition by courts of the place of incorporation. In fact, in the spirit of comity and judicial co-operation in cross-border insolvency matters, one would expect that courts of competent jurisdictions would, within the four corners of their laws, give assistance to liquidators appointed by the courts of a company’s COMI.
27. I am of the view that it is more reasonable to expect that the BVI Courts will not disturb the orders made by Hong Kong Courts to assist the Liquidators to conduct the present liquidation effectively.
28. Thirdly, whilst the Respondent relies heavily on Re Grand Peace Group Holdings Ltd [2021] 4 HKLRD 230 at §§4 and 6, I am of the view that it must be noted that Mr Justice Harris has since insightfully ruled in Re Lamtex Holdings Ltd [2021] 2 HKLRD 177 at §§16-24:
“16. These decisions establish that so far as the common law in England is concerned recognition is limited to liquidators appointed in a company’s place of incorporation. This is consistent, in my view, with the principles I have described in [7]–[13] and the significance they give to a collective insolvency process commenced in a company’s place of incorporation. However, not all jurisdictions adopt the same approach to recognition as the English courts and are willing to countenance recognition of liquidations commenced in jurisdictions other than that of the place of incorporation. This is a consequence of local statutory provisions, in particular the incorporation of the UNCITRAL Model Law on Cross-Border Insolvency (“Model Law”) into the law of the local jurisdiction, and partly the common law developing differently: in particular in Singapore.
17. Prior to Singapore adopting the Model Law, which generally treats a company’s centre of main interest (“COMI”) as the determinant of whether or not a liquidation should be recognised as the relevant foreign main proceedings for the purposes of recognition and enforcement, the courts of Singapore had to rely on the common law in order to grant orders assisting foreign liquidators. In Opti-Medix Limited,Abdullah JC considered whether the court’s recognition and assistance of foreign liquidators should be limited to office holders appointed in a company’s place of incorporation. Abdullah JC acknowledges that the English position limits recognition to liquidators appointed in the place of incorporation. However, the Judge goes on to suggest in the following paragraphs that this approach does not sit well with the common commercial practice in jurisdictions like Hong Kong and Singapore of using companies incorporated in jurisdictions other than their COMI citing Lord Hoffmann in Re HIH Casualty and General Insurance Ltd, whose views were later rejected in Rubin v Eurofinance.
[19] In HIH [2008] 1 WLR 852, para 30, Lord Hoffmann said:
‘The primary rule of private international law which seems to me applicable to this case is the principle of (modified) universalism, which has been the golden thread running through English cross-border insolvency law since the 18th century. That principle requires that English courts should, so far as is consistent with justice and UK public policy, co-operate with the courts in the country of the principal liquidation to ensure that all the company’s assets are distributed to its creditors under a single system of distribution.’
And in Cambridge Gas Transportation Corporation v Official Committee of Unsecured Creditors of Navigator Holdings plc(‘Cambridge Gas’) [2007] 1 AC 508, para 16 he said, speaking for the Privy Council:
‘The English common law has traditionally taken the view that fairness between creditors requires that, ideally, bankruptcy proceedings should have universal application. There should be a single bankruptcy in which all creditors are entitled and required to prove. No one should have an advantage because he happens to live in a jurisdiction where more of the assets or fewer of the creditors are situated.’
[20] The US Bankruptcy Court accepted in In re Maxwell Communication Corpn (1994) 170 BR 800 (Bankr SDNY) that the United States courts have adopted modified universalism as the approach to international insolvency:
‘The United States in ancillary bankruptcy cases has embraced an approach to international insolvency which is a modified form of universalism accepting the central premise of universalism, that is, that assets should be collected and distributed on a worldwide basis, but reserving to local courts discretion to evaluate the fairness of home country procedures and to protect the interests of local creditors.’
18. Abdullah Jagreed with passages from Cross-Border Insolvency by Tom Smith QC that the authorities do not support the restrictive approach to development of the common law to permit recognition of insolvency proceedings taking place in jurisdictions other than the place of incorporation and concluded that in Singapore the common law did permit recognition of insolvency proceedings in a company’s COMI, if it is different from the place of itsincorporation.
19. As the increasing number of applications in Hong Kong for recognition and assistance illustrate it is common for business people in Hong Kong to use offshore companies. The owners of such companies and the businesses they operate have no connection with the offshore jurisdiction. Their COMI is likely to be in Hong Kong or in the Mainland. In my view it is becoming increasingly clear that the restricted view of recognition and assistance explained in the judgments of Lord Sumption and Lord Collins does not serve Hong Kong well. It is a common feature of the corporate structure of Hong Kong and Mainland business groups that their holding companies are incorporated in an offshore jurisdiction with whom they have no connection other than registration. These jurisdictions have been described by various courts as "letterbox” jurisdictions reflecting the common absence of any connection other than registration with the offshore jurisdiction. As far as I am aware the term was first used by the European Court of Justice in In re EurofoodIFSC Ltd in the context of an assessment of whether or not the presumption in the Community legislation that COMI is in the location of registration had been rebutted and also the process of determining COMI under the EU Insolvency Regulation. The relevant passages are at page[34]-[35]:
‘It follows that, in determining the centre of the main interests of a debtor company, the simple presumption laid down by the Community legislature in favour of the registered office of that company can be rebutted only if factors which are both objective and ascertainable by third parties enable it to be established that an actual situation exists which is different from that which locating it at that registered office is deemed to reflect. That could be so in particular in the case of a ‘letterbox’ company not carrying out any business in the territory of the member state in which its registered office issituated.’
20. We find a similar characterisation of an offshore company by the US Bankruptcy Court in the context of determining COMI under Chapter 15 of the US Bankruptcy Code. In Creative Finance Ltd Judge Gerber of the United States Bankruptcy Court for the Southern District of New York refers to the British Virgin Islands as a “letterbox jurisdiction”, and consequently not normally eligible for recognition under Chapter 15. The relevant passages are at page 5:
‘And while a COMI can (and not infrequently does) change from the jurisdiction in which a foreign debtor actually did business to a ‘letterbox’ jurisdiction, it can do so only where material activities have been undertaken in the jurisdiction in which the foreign proceeding was filed—thus providing a meaningful basis for the expectations of third parties …….. Though they did most of their business in the U.K. and suffered entry of a judgment there, and though their operations were directed out of Spain and Dubai, the Debtors were organized under the law of a letterbox jurisdiction—the British Virgin Islands—though they did not do business there...’
21. In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd Judge Lifland denied recognition because the insolvency practitioners of the company, which was incorporated in the Cayman Islands by whose court they were appointed, failed to demonstrate that the company’s COMI was located there. Subsequent to Bear Stearns, in re Basis Yield Alpha Fund (Master), Gerber J similarly rejected an application for recognition by insolvency practitioners appointed in Cayman where the company was incorporated, finding material issues of fact as to the propriety of foreign “main” recognition (notwithstanding the section 1516 presumption) with respect to Cayman liquidation proceedings where recognition was sought virtually immediately after the filing of the proceedings in the Cayman Islands. In each of these cases, the Cayman Islands is characterised as a letterbox jurisdiction. The evidence showed (or at least strongly suggested) that the foreign debtors had been organized under Cayman law for tax or regulatory reasons, had principal places of business elsewhere in the world before their Cayman filings and had done little or no business in the Cayman Islands before U.S. recognition was sought thus impairing the U.S. courts’ ability to find that the debtors’ COMIs had shifted from the nations where they previously did business to the Cayman Islands. I understand that since Bear Stearns and Basis Yield were decided, foreign representatives from jurisdictions such as the Cayman Islands and BVI have increasingly frequently filed their U.S. chapter 15 cases only after they have undertaken substantial work in the offshore jurisdictions in order to address this problem.
22. Itis becoming increasingly apparent that it is desirable, and it might reasonably be suggested essential, that the Hong Kong courts are able to deal with recognition and assistance using methods that are consistent with commercial practice in the SAR and theMainland. In response to suggestions for legislation to address this subject, it has been the Government’s position that for the time being it is a matter for the courts of Hong Kong to address using the techniques available at common law. The current position in Hong Kong is that the court recognises only insolvency practitioners appointed in the place of incorporation. In my view we have reached the stage at which this question needs to be reconsidered at there is much in my view to be said in support of Abdullah J’s conclusion that the common law in this area contains sufficient flexibility to develop so as to be consistent with commercial practice and there is nothing in principle preventing recognition of liquidators appointed in a company’s COMI or a jurisdiction with which it has a sufficiently strong connection to justify recognition, just as the Hong Kong court will exercise its discretion to wind up a foreign incorporated company if the connection between it and Hong Kong is substantial and the other core requirements are satisfied. It might, I appreciate, be objected that there is a material difference in the case of the jurisdiction to wind up a foreign incorporated company, namely, the power is expressly conferred by statute. This takes me back to Singularis.
23. In Singularis, the Privy Council considered the limits on the proper development of the common law to address issues arising in cross-border insolvency. As Lord Sumption states in [19] ‘The question how far it is appropriate to develop the common law so as to recognise an equivalent power does not admit of a single, universal answer. It depends on the nature of the power that the court is being asked to exercise.’”
29. I am of the view that the observations in Re Grand Peace Group Holdings Ltd (supra) have to be analysed in view of the stage we have reached, at which this question needs to be reconsidered in favour of the view that the common law in this area contains sufficient flexibility to develop so as to be consistent with commercial practice. There is nothing in principle preventing recognition of liquidators appointed in a company’s COMI or a jurisdiction with which it has a sufficiently strong connection to justify recognition, just as the Hong Kong court will exercise its discretion to wind up a foreign incorporated company if the connection between it and Hong Kong is substantial and the other core requirements are satisfied.
ANALYSIS AND DETERMINATION
30. I am of the firm view that both as a matter of legal analysis and as matter of legal policy, there is no discernable reason as to why this Court should not render assistance to the Liquidators and direct the Respondent to sign the Resolutions so that they can get on with their jobs. I am satisfied that in view of the various steps and proceedings taken out by the Respondent, there is a necessity to make the orders in terms of paragraphs 1 and 2 of the draft Order against the Respondent.
31. Ms Eu SC for the Respondent submitted that there is no extreme urgency on this matter as a hearing of the Omnibus Summons is scheduled to be heard on 15 October 2023. She rightly referred this Court to cases of Re Pacific Bulk Shipping Limited HCMP 1244/2015 (22 May 2015) at §10; Smart Edge Limited v. Lun Hau Mun[2020] HKCFI 1900 at §§10 to 12; Tang Sang Feeds Company Limited and Ors v. Sharply Development Ltd[2020] HKCFI 2106 at §§1 to 3.
32. I agree with Ms Eu SC that there is no extreme urgency on this matter. However, in my view, in the process of liquidation, it is the duty of the Courts in Hong Kong, to facilitate its liquidators to conduct liquidations effectively. The Liquidators have taken out the Summons. Insofar as the Resolutions as defined in the draft Order, I see no prejudice and no reason as to why the Respondent, as an ex-director, should not be ordered to execute the same. In fact, the same should be executed as soon as possible. This Court is seized of the matter. It should do the right thing.
33. Of course, I have not overlooked the importance of due process, which is an important pillar in our judicial system. If and insofar as the Liquidators seek to rely on factual matters which are in dispute, it is only right that the Respondent, as a litigant, should be given the opportunity to put in evidence to contest the same.
34. However, for the purpose of this application, I have not taken into account any factual allegations against the Respondent as a basis for making my judicial determination. For the avoidance of doubt, I have not taken into account the expert evidence relied on by the Liquidators. This matter is capable of being resolved as a matter of law. The Respondent is represented by a very competent and learned team of legal professionals and all possible legal points have been taken and ventilated at the hearing to which I have fully considered.
35. As I said earlier, had the petitioner or the liquidators, out of abundance of caution, requested for the Resolutions to be signed by the Respondent, I would have thought that the hearing judge giving the winding-up order would have granted such orders in any event.
36. Secondly, Ms Eu SC for the Respondent submitted that the Summons is an abusive attempt to usurp the BVI Proceedings. I disagree. The Respondent is entitled to take out whatever proceedings he thinks fit, whether in Hong Kong or in the BVI. This has nothing to do with what orders this Court can and will grant to the Liquidators to facilitate the effective and efficient conduct of the present liquidation.
37. In fact, as a matter of public record, the Respondent has been removed as a director from the registers of each of the BVI subsidiaries. Nonetheless, the Respondent is acting on behalf of the BVI subsidiaries to commence the BVI Proceedings on the basis that, short of a formal recognition order from the BVI Courts, the Liquidators’ act to remove the Respondent and put Ms Wong in place as the sole director of the BVI subsidiaries is invalid.
38. It is an elementary principle of company law that shareholders of a company (here the BVI subsidiaries) can by proper resolutions remove and appoint new directors. The shareholder of the BVI subsidiaries is the Company (in liquidation). From the perspective of Hong Kong Courts, the Liquidators are entitled to act on behalf of the Company and to effect change of directorship in the BVI subsidiaries. Given the Respondent is challenging the validity of the Liquidators in the BVI Courts, it is only natural that the Liquidators see it necessary to come to this Court to obtain an order that, additionally, the Respondent, qua director (albeit ex-director) be ordered to execute the Resolutions. I am of the view that the Liquidators were forced by the Respondent to make this application purely because of the stance taken by the Respondent. In normal cases, one would expect ex-directors to co-operate with the Liquidators.
39. I am of the view that the facilitative orders to be made by this Court do not in any way usurp the jurisdiction of the BVI Courts. Indeed, given the stance taken by the Respondent, it will not surprise this Court that he would seek further declarations from the BVI Courts that the orders made by this Court are invalid and not binding on him unless there is a formal order of recognition of the Liquidators by the BVI Courts.
40. It is paramount that this Court discharges its own facilitative duties to promote the effectiveness and efficiency of liquidations in this jurisdiction. I am of the view that it is not right for this Court to stand by and simply pass on the burden to the BVI Courts.
41. Thirdly, I am of the view that it is not right that the Liquidators should be ordered to apply for fresh winding up orders in the BVI Courts. In these days of cross-border insolvency co-operation, in particular, in view of the commercial practice and the corporate structure of listed companies in Hong Kong, it will not be cost effective that, in every case, the liquidators have to apply for a winding up order against the subject company in the place of incorporation and ask that court to appoint them (and a practitioner from that jurisdiction) to be liquidators.
42. I am of the view that judicial comity dictates that within the four corners of local laws, courts should offer mutual assistance to each other so that orders of courts (whether onshore or offshore) can be given their full effects in the best interest of cross-border liquidations.
43. In Credit Suisse Fides Trust v Cuoghi [1998] QB 818 at 827, Millett LJ (as he then was) said:
“In other area of law, such as cross-border insolvency, commercial necessity has encouraged national courts to provide assistance to each other without waiting for such co-operation to be sanctioned by international convention… It is becoming widely accepted that comity between the courts of different countries requires mutual respect for the territorial integrity of each other’s jurisdiction, but that this should not inhibit a court in one jurisdiction from rendering whatever assistance it properly can to a court in another in respect of assets located or persons resident within the territory of the former.”
44. In the present case, the Respondent is resident within the territory and this Court has an in personam jurisdiction over him. It is only right that this Court makes suitable orders to both give effect to the liquidation and to assist the BVI Courts in resolving related litigation.
ANTI-SUIT INJUNCTION AND VESTING ORDER
45. For the reasons set out above, I do not find it necessary to make any anti-suit injunction against the Respondent. On the facts of the present case, comity dictates that insofar as the BVI Proceedings are concerned, this Court will defer to the judgment of the BVI Courts.
46. The Respondent, not being a vexatious litigant, under our laws, is entitled to take out whatever proceedings he sees fit with the ensuing costs consequences.
47. As far as a vesting order is concerned, first, it is only an alternative relief sought by the Liquidators. I am of the view that there is no need to make such an order. Importantly, Ms Eu SC for the Respondent is definitely correct that, as a matter of law, the Court’s power to make such order under section 198 of the Ordinance is confined to “property… belonging to the company or held by trustees on its behalf”. It is an elementary principle of law that the share capital of the HK subsidiaries does not belong to the Company, but it is instead owned by the BVI subsidiaries.
48. I agree that the Liquidators’ application for a vesting order “ignores one of the most fundamental principles of company law ie a shareholder of a company has no legal or beneficial interests in the company’s assets”: Re Pacific Bulk Investment Limited[2020] HKCFI 769 at §30 per Ng J. It also ignores that a subsidiary company has different assets, liabilities, and indeed creditors from its parent company: Re Minloy Limited[2020] HKCFI 2215 at §4, per Linda Chan J.
STATEMENT OF AFFAIRS
49. Paragraphs 6 and 7 of the Summons seek an order for the Respondent to provide a Statement of Affairs (“the Statement”) pursuant to section 190 of the Ordinance and to file affidavit/affirmation setting out his complete dealings with the Company and its subsidiaries. Rightly, this is not seriously contested by Ms Eu SC for the Respondent.
50. Under section 190(3), the Statement must be submitted to the Liquidators within 28 days of the appointment of Liquidators, i.e. 28 days from 23 June 2023. That deadline has long passed. I agree that the Respondent should be ordered to comply with the statutory requirement. There is no reasonable excuse for not complying with section 190 failing which he is liable to a fine under section 190(5).
51. I also agree that due to the lapse of time since the appointment of Liquidators, the lack of statement of affairs, and the impossibility of the Liquidators to get the books and records of the Company, the Liquidators are entitled to ask for an affidavit/affirmation from the Respondent setting out his complete dealings with the Company and its subsidiaries, including the list of subsidiaries listed in Schedule 2 to the Summons.
52. Finally, I should say that I have duly considered all of the Respondent’s submissions including the very helpful, clear and comprehensive written submissions filed by Ms Eu SC. I have taken into consideration , inter alia, the mandatory nature of the orders and the fact that a hearing is scheduled to take place in October this year. I am of the view that the Court should do what is right and do it at the right time.
DISPOSITION
53. For all the reasons stated above, I make an order in terms of Paragraphs 1, 2, 4 and 5 of the draft Order as annexed to the Liquidators’ written submissions save and except that the time to comply with Paragraph 1 be revised to two (2) calendar days and the time to comply with Paragraphs 4 and 5 be revised to 21 days.
54. I also make a costs order nisi that the costs of the Summons be paid by the Respondent to the Liquidators and the Official Receiver, such costs to be taxed on a party to party basis with a certificate for two counsel, if not agreed. The costs order nisi will be made absolute unless an application is made to vary the same within 14 days from the date of this Order.
55. The Liquidators’ costs incurred in respect of the Summons be an expense of the liquidation and be paid out of the assets of the Company.
56. Finally, it remains for me to thank the legal team of the Liquidators and the Respondent for their very helpful and able assistance rendered to this Court.
| (William Wong SC)
Recorder of the High Court |
Mr Laurence Li SC, Mr James Wood and Ms Emily Ting, instructed by YTL LLP, for the Applicants
Ms Audrey Eu SC and Mr Martin Kok instructed by Kobre & Kim, for the Respondant
Mr Wilson Lee of the Official Receiver’s Office