Penta Investment Advisers Ltd v. Allied Weli Development Ltd (Formerly Known As Hennabun Capital Group Ltd)
Read the full judgment text of CACV 58/2016 on BabelCite. This Court of Appeal judgment was delivered on 11 July 2017.
1. Harris J ordered the winding up of Allied Weli Development Limited (formerly known as Hennabun Capital Group Limited) (‘the Company’) based on the petition of the Petitioner pursuant to section 327 of the Companies (Winding Up And Miscellaneous Provisions) Ordinance , Cap 32 (‘the Ordinance ’). The Company appealed. We dismissed the appeal at the conclusion of the hearing. I now give reasons for our judgment.
Cited by 3 cases · Cites 10 cases
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CACV 58/2016 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 58 OF 2016 (ON APPEAL FROM HCCW NO. 337 OF 2015) ________________________
________________________ BETWEEN
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________________________ REASONS FOR JUDGMENT ________________________ Hon Cheung JA : 1.Harris J ordered the winding up of Allied Weli Development Limited (formerly known as Hennabun Capital Group Limited) (‘the Company’) based on the petition of the Petitioner pursuant to section 327 of the Companies (Winding Up And Miscellaneous Provisions) Ordinance, Cap 32 (‘the Ordinance’). The Company appealed. We dismissed the appeal at the conclusion of the hearing. I now give reasons for our judgment. Background 2.1The Company is registered in Hong Kong as a registered non-Hong Kong company under the Companies Ordinance (Cap 32)on 5 December 2002 with its principal place of business in Hong Kong. The Company was incorporated in the British Virgin Islands. The Company stated it changed its management on 6 August 2015, moved its place of registration to the Marshall Islands and the Company’s management and business are being conducted in Taiwan and/or the Marshall Islands. 2.2The events leading to the petition for winding up took place before the Company’s move to the Marshall Islands and they are stated in the re-amended petition as follows :
2.3On 11 September 2012, the Petitioner commenced proceedings against the Company under High Court Action number 1656 of 2012, claiming for the guaranteed amount due under the Deed or, alternatively, damages for the Company’s breach of the Deed (‘the Proceedings’). 2.4On 14 October 2014, Chow J found for the Petitioner on liability and on 21 January 2015, he assessed the damages that the Company has to pay the Petitioner at HK$210,366,488 together with interest. The Company’s appeal against the judgments was dismissed by this Court on 23 July 2015. Application for leave to appeal to the Court of Final Appeal was dismissed by this Court on 11 December 2015. The Company renewed its leave application before the Court of Final Appeal and the Court was informed by Mr Manzoni SC for the Petitioner that it was later withdrawn. 2.5On 24 July 2015, the Petitioner issued a statutory demand to the Company to repay the judgment sum and interest at HK$225,927,801.69 together with post judgment interest up to the date of the statutory demand at HK$9,111,389.70 (‘the judgment debt’). 2.6The Company failed to pay the judgment debt and the Petitioner presented the petition on 29 October 2015 which was subsequently amended and later re-amended on 5 and 6 January 2016. Section 327 3.1The relevant parts of section 327 are as follows :
3.2The Court of Final Appeal in Kam Leung Sui Kwan v Kam Kwan Lai (2015) 18 HKCFAR 501 (the ‘Yung Kee case’) at paragraph 19 recognized that in respect of unregistered foreign companies, the most appropriate jurisdiction in which to wind up a company is the jurisdiction where it is incorporated. However, it held that the jurisdiction to wind up the foreign company by the Hong Kong Court under section 327(1) can be founded where the three core requirements summarised by Susan Kwan J (as she then was) in Re Beauty China Holdings Ltd [2009] 6 HKC 351, 355-6, are satisfied :
Connection with Hong Kong 4.The only issue before Harris J was on the connection of the Company with Hong Kong. As apparent from the decision of the Judge, it was argued that the Court should not exercise its discretion to wind up the Company because the matters relied on as demonstrating a substantial connection with Hong Kong, whilst being capable of constituting a substantial connection, appear on the face of the petition to have occurred between about 2012 and 2014. Counsel who appeared for the Company (not Mr Tom Ng who only appeared in this appeal) argued that it is necessary to show a current connection with Hong Kong and the matters relied on being historical in nature are not capable of doing so. Harris J was not impressed with the argument. He held that :
The grounds of appeal 5.The three grounds of appeal are :
First ground 1) Substantial connection 6.1I will deal with the issue of substantial connection first. 6.2In my view Harris J is clearly right on this issue, otherwise the statutory scheme would be totally unworkable if shortly before the presentation of the petition, a foreign company would decamp from Hong Kong (like the Company in this case) despite its previous substantial connection and plead the lack of connection at the time of petition for the Hong Kong Court to found its discretionary jurisdiction. As Mr Manzoni submitted, it is not necessary to have the matters which give rise to the connection present at the time of the petition. In other words, the connection once established, remains even after the matters giving rise to that original connection have ceased to exist. In this case, the substantial connection is demonstrated by the following :
6.3As demonstrated by Re Eloc Electro-Optieck and Communicatie BV [1982] Ch 43, where the company had once traded in the United Kingdom, but had ceased to do so, the Court still made an order winding up the company on the ground that the existence of its prior trading gave rise to a sufficient current connection to the United Kingdom to justify the insolvency regime being engaged. Nourse J at page 48 C to D found jurisdiction on, among other things, ‘that the company did carry on business in England and Wales’. 6.4It is not necessary to address the issue of the Company further submitting to jurisdiction after its change of management and domicile by its application for leave to appeal to the Court of Final Appeal. 2) Matter to investigate 6.5There is a preliminary matter I would address first. The Company’s own case before Harris J was that the management and business changed in August 2015 and this happened after the Proceedings that took place before Chow J and the appeal before this Court. Harris J was not accurate on the timing in that regard. But nothing turns on the issue of timing. 6.6Despite the rather cryptic wording of the first ground of appeal, Mr Ng confirmed that the only point he wished to take was that Harris J had erred to order winding up solely on the need to investigate. 6.7Mr Ng referred to Re China Medical Technologies, Inc [2014] 2 HKLRD 997 in which the Court observed that the benefits of investigation in that case ‘are not of themselves a reason for the Court to exercise its discretionary jurisdiction to grant a winding‑up order’. Mr Ng also referred to Re Insigma Technology Co Ltd(HCCW 224/2013, 15 October 2015) where the suggestion that ‘another benefit of a winding‑up order would be a liquidator’s ability to investigate the Company’s activities’ was found to be speculative on the facts of that case and submitted that in the present case the alleged benefits to be derived from investigation are also speculative because the alleged benefits are particularly immaterial when, on the Company’s case, the management and business of the Company had been conducted from Taiwan and/or the Marshall Islands since 6 August 2015 and there were no assets within the jurisdiction. 6.8I disagree with Mr Ng. The Company has never properly explained why there should be a sudden change of management and domicile after this Court dismissed its appeal in July 2015. The Company is part of a large group of companies with substantial operation in Hong Kong. The Court of Final Appeal has authoritatively stated that the presence of assets within the jurisdiction is not necessary. In any event, there is evidence which suggests dissipation of the assets of the Company. It was stated in the Company’s 2009 Audited Accounts the Company had total net assets of HK$800,879,210 for the financial year ended 31 December 2009 and paid Hong Kong profits tax for the financial years ended 31 December 2008 and 31 December 2009. Yet, the Company said it has no assets in Hong Kong. The Liquidators’ report of 2016/2017 further showed that on 3 October 2016, the Liquidators were provided with the past financial statements of the Company by its former Hong Kong auditors, Jonten Hopkins CPA Limited (the ‘former Auditors’). Contained within the records was the 2014 Financial Statements. The 2014 Financial Statements disclosed HK$909,260 of current liabilities/creditors of the Company as at 31 March 2014. This huge change within the course of five years called for investigation as to the whereabouts of the assets. In my view there clearly is a proper basis to investigate the affairs of the Company. 6.9Mr Ng argued that the second core requirement of benefit to the petitioner creditor is absent. In my view the investigation is tied up with the issue of benefit to the Petitioner. The test is whether there is a reasonable prospect of benefit. As the Court of Final Appeal had made clear in the Yung Kee case that :
6.10Earlier the Court held that :
6.11In my view where there is proper basis to investigate, then one can safely say that the second core requirement of benefit to the petitioner creditor can also be satisfied. 6.12It is of note that Harris J had not really gone into the issues (which were never argued before him) whether despite the change, there was ground to investigate and whether it would benefit the Petitioner. To argue in an appeal from a discretion that Harris J had erred on these matters when they were not even raised before, does not accord with the principles on how such appeals are to be conducted. It is necessary to state once again that when this Court is hearing an appeal on discretion, it is not the duty of this Court to exercise the discretion afresh. Rather this Court will only interfere if the discretion was wrongly exercised in the first place such as the discretion was made contrary to principle, or relevant matters had been ignored or irrelevant matters had been taken into account. If an important point had not even been argued before, then it cannot be said that Harris J had ignored this factor and had wrongly exercised his discretion. 6.13Mr Ng further argued that what the Petitioner was essentially trying to achieve is to indirectly enforce the judgment debt and to indirectly conduct debtor’s examination, after referring to the Petitioner’s attempt to conduct debtor’s examination under Order 48, rule 1. This is also not a point relied upon below. In any event this is a bad point as the Court of Final Appeal pointed out in the Yung Kee case at paragraph 26 that ‘creditors seek a winding‑up order against their debtor in order to obtain payment in or towards satisfaction of their debts’. It is a legitimate interest to do so. Second ground Alternative forum 7.1Mr Ng referred to Applications To Wind Up Companies 3rd Edition by Derek French, paragraph 1.210 which states :
and also Dicey, Morris and Collins on The Conflict of Laws Fifteenth Edition Volume 2 at paragraph 30−055 which states :
7.2Mr Ng argued that in view of the Hong Kong Court’s jurisdiction to give assistance to foreign liquidators, there is simply no necessity for the Hong Kong Court to wind up the foreign company. Instead, the Petitioner should have petitioned in the place of incorporation. The provision of assistance by Hong Kong to foreign liquidation order can be gathered from cases such as Re Rennie Produce (Aust) Pty Ltd (HCMP 1640/2016, 26 August 2016); The Joint Official Liquidators of A Co v B [2014] 4 HKLRD 374; Bay Capital Asia Fund, LP v DBS Bank (Hong Kong) Ltd (HCMP 3104/2015, 11 May 2016), at paragraph 4; The Joint Provisional Liquidators of BJB Career Education Company Limited v Xu Zhendong [2017] 1 HKLRD 113 and Re G Ltd [2016] 1 HKLRD 167. 7.3Accordingly, Mr Ng argued that the petition should have been presented in the Marshall Islands and if liquidators are appointed in the Marshall Islands, they can then seek recognition and assistance in Hong Kong. Indeed, while the Marshall Islands liquidators may seek a winding‑up order in Hong Kong if necessary and appropriate, it appears that the mere need to seek information in Hong Kong per se would not justify such a winding‑up order. 7.4Again this is not a point taken before. The presence of substantial connection with Hong Kong clearly displaces the factor of alternative forum for the purpose of winding up of a foreign company. None of the cases cited by Mr Ng showed that the Hong Kong Court should defer exercising its power of winding up and should only assume a secondary role of assisting foreign liquidation. The cases cited by Mr Ng only showed how the Hong Kong Court should respond when request for assistance was made when a foreign liquidation was in place. Any contrary view will undermine the statutory scheme of winding up foreign companies under section 327 of the Ordinance which received the sanction of the Court of Final Appeal in the Yung Kee case. 7.5Further, in order for this point to be taken, expert evidence would be required on the law of insolvency in the Marshall Islands and Hong Kong because the power to render assistance is limited to rendering assistance in respect of matters which could be done under the relevant domestic law : see the Privy Council decision of Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36 where it is held that the power at common law to assist the officers of a foreign court of insolvency jurisdiction or equivalent public officers by ordering the production of information in oral or documentary form which was necessary for the administration of a foreign winding up is not available to enable them to do something which they could not do under the law by which they had been appointed. Third ground Benefit to other creditors 8.1Mr Ng argued in his written submission that it is not sufficient if the Petitioner is the only creditor to benefit from the winding‑up order. He relied on Re Insigma Technology Co Ltd (HCCW 224/2013, 15 October 2015) where Harris J at paragraph 22 said :
8.2He now accepts that there are other creditors of the Company. 8.3Again this point was not raised below. In any event, this is a point without substance. I have already referred to paragraphs 22 and 24 of the Yung Kee case where the Court of Final Appeal addressed the benefit to the Petitioner creditor. There is no authority that more than one creditor is needed in the jurisdiction. The only restraint imposed by the Courts is that in the context of the third core requirement, namely, ‘the Court must be able to exercise jurisdiction over one or more persons in the distribution of the company’s assets’ is in situations where a foreign creditor submits to Hong Kong jurisdiction and presents the petition. Harris J in Re China Medical Technologies Inc [2014] 2 HKLRD 997 stated that :
8.4Mr Ng’s reliance on Re Insigma Technology Co Ltd is misplaced. The Petitioner there submitted to the Hong Kong jurisdiction to present the petition. That was the only connection shown which was held to be insufficient for the third core requirement. 8.5Mr Manzoni had submitted that on a proper reading of the Court of Final Appeal judgment in Yung Kee case, even that would not necessarily make it inappropriate to wind up the company, as the Yung Kee case identifies that the only relevant question is the statutory question of whether there is a sufficient connection. The three core requirements are just discretionary matters, and no individual one of them is mandatory. To construe the position otherwise is to render the three core requirements as jurisdictional and not discretionary and this would be contrary to Yung Kee case. But as he had submitted that he did not need to go that far for the purpose of this appeal, it is not necessary for me to address this argument. Conclusion 9.Accordingly the appeal was dismissed. DECISION ON COSTS 1) Indemnity costs 10.1The Petitioner asks for costs of the appeal to be borne by the Company to be taxed on an indemnity basis. In In the matter of S Y Engineering Company Limited CACV 1896/2001, Le Pichon JA stated at paragraph 20 that indemnity costs are appropriate where a company unsuccessfully appeals from a winding‑up order. 10.2In my view the case justified the making of an indemnity costs order. I will order the Company to bear the costs of the appeal to be taxed on an indemnity basis. 2) Payment of costs by funder of the appeal 10.3Mr Manzoni also submitted that the Company’s appeal must have been funded by a non party and asks for costs against the funder. 10.4Section 52A(2) of the High Court Ordinance (Cap 4)(‘the Ordinance’) empowers the Court to order a non party to pay costs :
10.5The Court has the ancillary power to order a party to proceedings, or the solicitors who had been on the record for that party, to disclose to the other party the names of those who have financed the litigation. Where a power exists to grant a remedy there must be, inherent in that power, the power to make ancillary orders to make the remedy effective (see Abraham v. Thompson [1997] 4 All E.R. 362, CA): Raiffeisenzentralbank Osterreich AG v. Crossseas Shipping Ltd [2003] EWHC 1381 (Comm), Morrison J. (paragraph 62/6A/10 of Hong Kong Civil Procedure 2017, Vol 1. 10.6I will order the Company and the Company’s solicitor (and the Company’s solicitor is willing to do so) to provide the name and address of the party who instigated the appeal on behalf of the Company (‘the funder’) within three days of this day. Upon the information being provided, the funder will be joined, without further order, as a party to the proceedings for the purposes of costs only and that person be at liberty to attend a hearing at which the Court shall consider the matter further. 10.7I will further order the Petitioner to file and serve a statement of costs on the Company and the funder within seven days from the date of this order; and the Company and the funder are to file and serve a statement of objections, if any, within seven days thereafter. Hon Kwan JA : 11.I agree with the Reasons for Judgment and Decision on Costs of Cheung JA. Hon McWalters JA : 12.I agree with the judgment of Cheung JA.
Mr Charles Manzoni SC, instructed by Linklaters, for the Petitioner Mr Tom Ng, instructed by Lam & Co, for the Respondent Kirkland & Ellis, for the Liquidators, absent |
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