Cai Shuyi v. The Joint and Several Liquidators of Blockchain Group Co Ltd (in Liquidation)
Read the full judgment text of HCCW 118/2019 on BabelCite. This High Court CFI judgment was delivered on 4 June 2019.
1. By a summons dated 16 January 2019 (the “Summons”), Cai Shuyi (the “Applicant”), applied for, inter alia , the following orders:
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HCCW 118/2019 [2019] HKCFI 1522 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES (WINDING-UP) PROCEEDINGS NO 118 OF 2019 _______________
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_______________ Before: Deputy High Court Judge William Wong SC in Chambers Date of Hearing: 4 June 2019 Date of Decision: 4 June 2019 Date of Reasons for Decision: 12 June 2019 ______________________________ REASONS FOR DECISION ______________________________ Application 1.By a summons dated 16 January 2019 (the “Summons”), Cai Shuyi (the “Applicant”), applied for, inter alia, the following orders:
2.The Summons was first heard by Deputy High Court Judge Maurellet SC on 27 February 2019. The learned Judge made the following orders:
3.From the Second Report filed by the current liquidators dated 23 April 2019, it can be seen that:
4.The current liquidators take a neutral position to this application. 5.It is important to note that although the current liquidators raised some concerns about some of the known creditors’ entitlement to vote,they did not determine that any of the known creditors are definitively not entitled to vote. I am of the view that it is not appropriate for this Court to disenfranchise or discount any of the votes on the evidence before this Court. 6.In any event, in the 4th Affirmation filed by the Applicant, it shows that if one were to calculate just the written confirmations, at least a total number of 88 bondholder creditors of the Company who represent 54.09% ofthe total debts owed by the Company to its creditors, support an application to court for appointing new liquidators in place of the Respondents. I accept Mr Ho’s submission that, from the existing evidence, the views of the majority creditors are clear. 7.In paragraph 85 of the Second Report of the current liquidators, it is stated that:
Applicable legal principles 8.Section 194(1)(c) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) (the “Ordinance”) provides:
9.The principles governing the Court’s discretion under section 194(1)(c) are well established. They are in summary as follows:
(See Re Luen Yick Water & Drainage Works Ltd HCCW 209/2002, unreported, 9 January 2003 at §§18 – 20, per Kwan J (as she then was); Stanley International Betting Ltd v Stanleybet UK Investments Ltd [2011] BCC 691 at §§35 – 36, per Stuart Isaacs QC sitting as a deputy judge of the High Court and Re Cumulus Eastern European Property Fund Ltd [2018] SC (Bda) 31 Com, 5 April 2018 at §§17 – 18, per Kawaley CJ) Analysis 10.This is, at the end of day, a dispute as to which set of liquidators should be appointed into the Company. There is no dispute that both sets of liquidators are competent and professional. The cardinal principle that this Court follows is the principle of creditors’ democracy. In the case of an insolvent liquidation, it is the interests of creditors that are of paramount importance and their views should carry weight. 11.There are disputes as to the effect of Deputy High Court Judge Maurellet SC’s Orders, namely, whether it is a mere ascertainment of the creditors’ indicative voting intention as submitted by Ms Chan for the Respondents, or a paper meeting under section 194(1) of the Ordinance as submitted by Mr Ho for the Applicant. In my judgment, Deputy High Court Judge Maurellet SC’s Orders were not made just for the purpose of ascertaining an indicative voting intention as first, the said orders refer to (i) the Resolutions and (ii) the entitlement of those known creditors and contributories to vote on the Resolutions. 12.Secondly, what is important is that the known creditors have actually, by correspondence, voted on the Resolutions and the voting results are ascertained. The objective of the exercise is to ascertain the majority creditors’ views and that has been done. Deputy High Court Judge Maurellet SC must have intended that his orders were to achieve some useful purposes and not a mere academic exercise. The purpose of an order under section 227C of the Ordinance has been achieved. 13.As far as entitlement to vote is concerned, as I set out above, albeit that the current liquidators have some concerns or reservations over some of the known creditors’ entitlement to vote, in the Second Report, they did not go so far as to suggest that any of them should be disallowed from voting and their votes were duly counted in the Second Report. 14.Further, even if one were to discount some of the votes, some 54.09% of all known creditors still support an application to court for appointing new liquidators in place of the Respondents. 15.Mr Lee for the Official Receiver very fairly pointed out that this Court could give effect to the wishes of the majority creditors under section 194(1) of the Ordinance. He very responsibly pointed out that the Court may like to consider:
16.I am of the view that the choice of liquidators is a matter of commercial decision of the creditors of the Company. The creditors of the Company have full knowledge of the matters as set out in paragraph 15(1) and (2) above and they still voted for a new set of liquidators. This is a matter entirely for the creditors. 17.Further, I do not think that a change of liquidators at the present stage will affect whether the Company will or will not lose its listing status on 19 May 2020. I am sure the newly appointed liquidators will do what is in the best interests of the Company, including preserving its listing status. 18.Importantly, I am of the view that liquidators of a company needto enjoy the support of its majority creditors. For example, any restructuring plan will need the support of its majority creditors. With the backing of its majority creditors, the liquidation and/or restructuring of the Company can then move on smoothly without any unnecessary disputes. 19.Finally, I would stress that there is no misconduct on the part of the current liquidators. It is entirely a result of the democratic decision of the majority creditors. I have pointed out during the hearing that the creditors are at liberty to convene further creditors meetings to change liquidators again if they so wish. Disposition 20.For the reason stated above, I make the following orders:
21.Finally, it remains for this Court to thank Mr Ho for the Applicant, Mr Lee of the Official Receiver’s Office and Ms Chan for the Respondents for their helpful assistance to this Court.
Mr Look Chan Ho, instructed by Sit, Fung, Kwong & Shum, for the applicant Ms Melody Chan, of White & Case, for the respondents Mr Wilson Lee, Senior Solicitor of the Official Receiver’s Office, for the Official Receiver | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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