Re The Joint and Several Liquidators of Cefc Shanghai International Group Limited (in Liquidation in the Mainland of the People’s Republic of China)

HCMP 2295/2019

[2020] HKCFI 167

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2295 OF 2019

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D E C I S I O N

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The Application 

1.CEFC Shanghai International Group Limited (“Company”) is in insolvent liquidation in the Mainland and has substantial assets  in Hong Kong which are subject to pending creditor’s enforcement.   The Company’s Mainland [1] administrators — (i) King & Wood Mallesons (Shanghai Office) (北京市金杜律师事务所上海分所),  (ii) Shanghai Fangda Partners (上海市方达律师事务所) and  (iii) Shanghai AllBright Law Offices (上海市锦天城律师事务所) (“Administrators”)[2], who were appointed by the Shanghai No 3 Intermediate People’s Court (“Shanghai Court”), seek recognition and assistance in Hong Kong in order to perform their functions and in particular to protect the Company’s Hong Kong assets from pending creditor’s enforcement.  The Administrators have the function played by liquidators in the Hong Kong system.  I discuss their powers in detail in [23]–[24].

2.Although, the Hong Kong Court routinely grants orders of recognition and assistance to liquidators of companies incorporated in other jurisdictions appointed by the court of those jurisdictions, this is the first application, of which I am aware, for an order by administrators of a company in liquidation in the Mainland for recognition of their appointment and judicial assistance at common law.  It is certainly the first such case in Hong Kong.  It is not, however, the first case of recognition of Mainland insolvency proceedings overseas.  I am aware of two cases of recognition under Chapter 15 of the United States Bankruptcy Code. The first in 2014 concerned Zhejiang Topoint Photovoltaic Co, Ltd, in respect of which the United States Bankruptcy Court, District of New Jersey, granted recognition on 12 August 2014 [3].  More recently in October 2019, and in the face of creditor objection, the United States Bankruptcy Court, Southern District of New York, granted Chapter 15 recognition of the Mainland liquidation of Re Reward Science and Technology Industry Group Co, Ltd [4].

3.Given the size of the Mainland economy and the financial problems increasingly experienced by Mainland businesses, which increasingly have assets located overseas, this is an application of considerable importance and it is necessary to consider in some detail the relevant principles, which this Court has developed in recent years and how they apply to a company incorporated in the Mainland, which as will be appreciated operates in many respects a significantly different economic and legal model to that in Hong Kong.  It is also an opportunity to consider whether in the light of the House of Lords’ decision in Galbraith v Grimshaw [5] a garnishee order nisi should be made absolute if, after the service of the garnishee order nisi, a foreign bankruptcy order   is made.  This I do in [16]–[21].

Background

4.The Company is a Mainland-incorporated investment holding company and is part of a conglomerate whose business  includes capital financing, petroleum refining and infrastructure. On 15 November 2019, pursuant to the Shanghai Court’s order under the Enterprise Bankruptcy Law (“EBL”), the Company went into insolvent liquidation.  On 24 November 2019, the Shanghai Court appointed the Administrators.

5.The Company’s assets in Hong Kong include a claim  against its Hong Kong subsidiary, Shanghai Huaxin Group (Hong Kong) Limited (“HK Subsidiary”), amounting to some HK$7.2 billion (“HK Receivable”). As the HK Subsidiary is in liquidation in Hong Kong, the Company has submitted a proof of debt in respect  of the HK Receivable in the HK Subsidiary’s liquidation.  After  their appointment, the Administrators discovered the following. On 24 August 2018, Right Time Global Investment SPC-Right Time  Value Investment Fund SP (“Right Time Fund”) obtained a default  judgment against the Company in Hong Kong for some €29 million (“Default Judgment”).  On 12 August 2019, in order to enforce the Default Judgment, Right Time Fund obtained a garnishee order nisi in respect of the HK Receivable. The hearing to show cause for the garnishee order was scheduled for 11 December 2019 before a Master.

6.In order to prevent Right Time Fund from obtaining a garnishee order absolute, the Administrators made an urgent application to me for recognition and assistance, and requested the Master to adjourn the garnishee proceedings until after the determination of the Administrators’ recognition application.  On 11 December 2019, the Master adjourned the garnishee proceedings to 8 January 2020.

7.In view of the urgency of the matter, on 10 December 2019, the Shanghai Court issued a letter of request to facilitate the  Administrators’ recognition application, which I heard in the afternoon of 18 December 2019 [6].  I granted an order in the terms appended to  these reasons for that decision.

The principles of recognition of foreign insolvency proceedings relevant to this application

8.As I have already mentioned in recent years this Court has dealt with a large number of applications for recognition and assistance from various jurisdictions.  These have principally been common law jurisdictions such as the Cayman Islands, Bermuda and the British Virgin Islands reflecting the fact that many Hong Kong listed companies are incorporated in one or other of those jurisdictions.  One application has been granted in respect of a Japanese trustee in bankruptcy appointed by a Japanese court over a company incorporated in Japan, which is a civil law jurisdiction (eg Re Takamatsu [7]).  From these decisions the following criteria emerge, which must be satisfied before recognition and assistance will be granted.

(a) the foreign insolvency proceedings are collective insolvency proceedings: Re Joint Provisional Liquidators of China Lumena New Materials Corp [8]; and

(b)     the foreign insolvency proceedings are opened in the company’s country of incorporation: Re Joint Liquidators of Supreme Tycoon Ltd [9].

9.Provided the above criteria are satisfied, the Court may recognise insolvency proceedings opened in a civil law jurisdiction  (Re Takamatsu [10]).

10.Upon the foreign insolvency proceedings being recognised, the Court will grant assistance to the foreign officeholders by applying Hong Kong insolvency law.  The reasons for so doing are explained in the judgment of the Privy Council delivered by Lord Hoffmann in Cambridge Gas Transportation Corpn v Official Committee of Unsecured Creditors of Navigator Holdings plc [11]:

11.The Companies Court does not, however, grant a foreign liquidator, whose appointment it has recognised all the powers available to a liquidator appointed by it pursuant to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 (“Ordinance”). The principles that circumscribe the limits of the common law power of assistance are explained by Lord Sumption in Singularis Holdings Ltd v PricewaterhouseCoopers [12]:

(a) The power of assistance exists for the purpose of enabling foreign courts to surmount the problems posed for a  world-wide winding up of the company’s affairs by the territorial limits of each court’s powers.  Therefore, the power of assistance is not available to enable foreign officeholders to do something which they could not do even under the law by which they were appointed.

(b) The power of assistance is available only when it is necessary for the performance of the foreign officeholder’s functions.

(c) An order granting assistance must be consistent with the substantive law and public policy of the assisting court.

12.Accordingly, in Re Joint Liquidators of Supreme Tycoon Ltd [13] I held that “[i]n the case of liquidators appointed in jurisdictions with similar insolvency regimes to Hong Kong, the assistance may extend to granting orders that give the foreign liquidators substantially similar powers”.

13.As the principles are now well-settled in Hong Kong,  the Court has provided a standard-form recognition order to guide applicants, as set out in Re Joint and Several Liquidators of Pacific Andes Enterprises (BVI) Ltd [14], which was revised by me in Re Joint Provisional Liquidators of Hsin Chong Group Holdings Ltd [15] to grant powers, which allowed soft-touch provisional liquidators appointed by the Bermuda Court over a company incorporated in Bermuda and listed on the Main Board of The Stock Exchange of Hong Kong Limited to progress a restructuring of the Company’s debt through a scheme of arrangement in Hong Kong.

14.The applications are now normally made in writing.  It is common for them to be made in circumstances, which require them to be dealt with promptly.  This is not unusual and examples of foreign insolvency officeholder applying for urgent recognition and assistance, such as a stay on enforcement proceedings, can be found in other jurisdictions [16].

Specific assistance — stay of proceedings

15.The Court’s standard-form order imposes a stay on proceedings against the debtor in Hong Kong, as if the debtor were in liquidation in Hong Kong, which a creditor is given leave in the order to apply to have lifted.  At the time of writing these reasons no such application has been made, although the Court has granted a considerable number of recognition and assistance orders,  most commonly in recent years to facilitate debt restructuring of Hong Kong listed companies incorporated in an off-shore jurisdiction [17]. The purpose of the stay is largely to provide a mechanism, which allows the Court to oversee creditor action in Hong Kong with a view to promoting an orderly liquidation or restructuring as is achieved in the case of a domestic liquidation by s186 of the Ordinance.

16.As this application is made because a garnishee order has been applied for it will be helpful to consider the impact the order has on the garnishee proceedings.  If the debtor were in liquidation in  Hong Kong, no garnishee proceedings in respect of the debtor’s receivables could continue, regardless of whether the creditor had obtained a garnishee order nisi before or after the liquidation [18].  In my view it is clearly consistent with the principles that underlie the recognition of foreign insolvency proceedings that if a creditor commences garnishee proceedings in Hong Kong after the commencement of the foreign insolvency proceedings, the garnishee proceedings should be terminated.  This has been the law of England for nearly 250 years.  Lord Hoffmann explains in Cambridge Gas [19]:

“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. For example, in Solomons v Ross (1764) 1 H Bl 131n a firm in Amsterdam was declared bankrupt and assignees were appointed. An English creditor brought garnishee proceedings in London to attach £1200 owing to the Dutch firm but Bathurst J, sitting for the Lord Chancellor, decreed that the bankruptcy had vested all the firm's moveable assets, including debts owed by English debtors, in the Dutch assignees. The English creditor had to surrender the fruits of the garnishee proceedings and prove in the Dutch bankruptcy.”

Even if a creditor has obtained a garnishee order nisi in Hong Kong before the commencement of the foreign insolvency proceedings,  the Court retains a discretion to decline to make a garnishee order absolute and generally it will be consistent with the principles that I have discussed that the Court does so.  This was the approach taken by Brereton J in the Supreme Court of New South Wales in ML Ubase Holdings Co v Trigem Computer [20].  The judge’s reasoning illustrates why it will generally be desirable that all debtor’s assets are taken into the control of the foreign liquidators and administered by the foreign liquidators in accordance with the process that the local court has recognised.

17.Mr Ho reminded me that the alternative argument, namely, that if a creditor had obtained a garnishee order nisi in Hong Kong   before the commencement of the foreign insolvency proceedings the garnishee proceedings should be permitted to proceed, gained support from the decision of the House of Lords in the early 20^th century in Galbraith v Grimshaw [21].

18.In Galbraith v Grimshaw [22], a creditor obtained a monetary judgment against the debtor in Scotland, and the judgment was extended to England under the Judgments Extension Act 1868.  The creditor then served a garnishee order nisi on a firm who owed a debt in England to the judgment debtor. After the service of the garnishee order nisi, the judgment debtor was adjudicated bankrupt in Scotland, resulting in his estate being sequestered and transferred to the Scottish trustee in bankruptcy.  The Scottish trustee in bankruptcy then brought interpleader proceedings in England to determine his rights and that of the judgment creditor with respect to the garnished debt.  The House of Lords decided that where a Scottish sequestration (that is, bankruptcy) occurred about a fortnight after an English garnishee order nisi, the judgment creditor prevailed over the Scottish trustee in bankruptcy. Lord Loreburn LC reasoned as follows:

“The attachment in England will not prevail against a claim of a foreign trustee in bankruptcy which is prior in date, provided that the effect of the bankruptcy is to vest in the trustee the assets in question. If the attachment is prior in date, then I do not think it will be affected by the title of the trustee in a foreign bankruptcy; and the reason is that a foreign law making the title of the trustee relate back to transactions which the debtor himself could not have disturbed has no operation in England, while the English law as to relation back applies only to cases of English bankruptcy, and therefore the trustee may find himself (as in this case) falling between two stools.” [23]

19.It seems to me that this analysis is inconsistent with contemporary cross-border insolvency law and its reasoning is inapplicable to modern common law cross-border insolvency assistance.  The decision in Galbraith v Grimshaw was considered by the Privy Council in Al Sabah v Grupo Torras SA [24]in a judgment delivered on behalf of the Court by Lord Walker.  As Lord Walker notes in [40], Galbraith v Grimshaw was primarily concerned with s117 (and to a lesser extent s118) of the Bankruptcy Act 1883, which concerned enforcement of orders in bankruptcies throughout the United Kingdom.  There is no relevant equivalent section in Hong Kong, there currently being no legislation or protocol between Hong Kong and the Mainland dealing with mutual recognition of bankruptcy orders made by courts in different parts of the People’s Republic of China.

20.The decision in Galbraith v Grimshaw has been subject to much academic criticism, which is explained by Lord Walker at [41] and [45] and acknowledged by their Lordships to have some force.  The criticisms of Galbraith v Grimshaw led to the present approach  to common-law cross-border insolvency assistance developed in Cambridge Gas [25] and endorsed by the Court of Appeal in Rubin v Eurofinance SA [26] as noted by Norris J in Re Atlas Bulk Shipping A/S [27].

21.The reasoning in Galbraith v Grimshaw was in fact narrow and concerned only the rules of relation-back as the Scottish trustee in bankruptcy sought to rely in England on provisions of Scottish insolvency law which retrospectively avoided attachments over property within the estate.  I agree with Brereton J in ML Ubase Holdings that the decision in Galbraith v Grimshaw stands merely for the proposition that “while local courts recognise foreign bankruptcies (and similar administrations), they do not recognise foreign rules of relation-back” [28].  At the time Galbraith v Grimshaw was determined cross-border insolvency assistance as we now understand it had not evolved.  Just as Brereton J concluded that Galbraith v Grimshaw did not preclude  the court from assisting Korean insolvency proceedings and thus refused  to make a garnishee order absolute, even though the creditor had     obtained a garnishee order nisi before the Korean insolvency  proceedings commenced, it seems to me the decision does not preclude the Hong Kong Court assisting Mainland insolvency proceedings by declining to make absolute a garnishee order nisi obtained before the commencement of the Mainland insolvency proceedings.

Is the Order sought consistent with the principles of recognition and assistance?

22.I have explained the relevant principles in [8]–[11].  Are they satisfied in the present case?

23.The Company’s Mainland liquidation is undoubtedly a collective insolvency proceeding.  This is demonstrated by the fact  that the liquidation proceeding encompasses all of the debtor’s assets (Article 30 of the EBL).  Indeed, the Administrators made this recognition application, supported by the Shanghai Court’s letter of request, to maintain the principle of collectively and the principle of pari passu distribution.  Therefore, recognising the Company’s Mainland liquidation is consistent with the Court’s existing practice.

24.The powers sought by the Administrators are consistent with Mainland insolvency law and the standard recognition order set out  in Re Joint and Several Liquidators of Pacific Andes Enterprises and  Re Joint Provisional Liquidators of Hsin Chong Group Holdings Ltd. In particular, the following provisions of the EBL show the correspondence between Mainland insolvency law and Hong Kong insolvency law:

(a) Article 25 [29] sets out the Administrators’ powers and duties which correspond to a Hong Kong liquidator’s powers and duties.

(b) Article 19[30] imposes a stay which corresponds to the     Hong Kong liquidation stay.

(c)  Article 113[31] sets out the requirement of pari passu distribution of the debtor’s assets.

25.The principles that govern common law recognition  and assistance do not require reciprocity to be demonstrated [32];  although I understand that in the case of the Mainland it is generally  a prerequisite of recognition of any foreign court order that there is reciprocity with the relevant foreign jurisdiction.  The underlying  reason for this is explained by Lord Hoffmann in the passage from  his judgment in Cambridge Gas that I have quoted in [16].  The    purpose of recognising and assisting a foreign liquidation is to make  it possible for there to be one bankruptcy and for the debtor’s assets to be realised, creditors’ claims determined and a distribution of available assets to creditors on a pari passu basis under the control of insolvency practitioners appointed and supervised in accordance with one    insolvency regime. It follows that the foreign jurisdiction under consideration would not only have to operate an insolvency regime, which is similar to that in Hong Kong, but also that if faced with  the insolvency of a company with assets and creditors in jurisdictions other than its own it will also aim to promote a single bankruptcy.   If it did not do so with the result that separate liquidations would need to be undertaken in more than one jurisdiction this would undermine  the underlying rational for providing recognition and assistance.  It is  unclear at present what attitude the Mainland courts will take under  the EBL to liquidations of foreign companies, which have assets  and creditors in the Mainland, which are in liquidation in the  company’s place of incorporation or another jurisdiction with which the company has a strong enough connection to justify it having been put into liquidation in a jurisdiction other than that of its place of incorporation [33].

26.I did not have adduced before me any evidence from Mainland legal experts on this issue, although I have when dealing with previous cases.  The one matter, which normally proves uncontroversial in the evidence of Mainland experts is the absence of any statutory provision or decision of the Supreme People’s Court, which explains with any certainty whether or not the Mainland system favours and promotes there being one bankruptcy in a transnational context and how in practice such cases would be approached.  The nearest that we come to it is Article 5 of the EBL [34], which provides:

“The bankruptcy proceedings initiated in accordance with the provisions of this Law shall have an effect on the debtor’s property beyond the territory of the People’s Republic of China.

Where an application or request is made to the people’s court for recognition or enforcement of a legally effective judgment or written order of a bankruptcy case made by a foreign court, in which the debtor’s property within the territory of the People’s Republic of China is involved, the people’s court shall, in accordance with the international treaties concluded or acceded to by the People’s Republic of China or with the principle of reciprocity, examine the judgment or written order and make an order to recognize and enforce it, provided that the said judgment or written order does not contradict the  basic principles of the law of the People’s Republic of China, nor violates Sate sovereignty, security and social and public interests of country, and nor infringes upon the lawful rights and interests of the creditor within the territory of the  People’s Republic of China.”

27.As far as I am aware a Mainland court has not yet recognised a foreign insolvency proceeding pursuant to Article 5.  There have been a number of cases of which I am aware, which have an element of recognition, but my understanding is that they are not viewed  by Mainland judges as involving a formal recognition of a foreign insolvency proceeding in the way, which the order in the present application explicitly does.  I describe these cases in [29]–[32].

28.The Mainland did not establish a centralised case reporting system until 2014 [35].  This means that in practice most information about decisions prior to 2014 is gleaned from articles and commentaries written by lawyers interested in this area.  Consequently, the information about the cases to which I refer in the following paragraphs may not be entirely accurate.

29.In 2001 the Guangdong Foshan Intermediate People’s Court was required to determine whether B&T Ceramic Group had become a shareholder of Nassetti Ettore as a result of a decision in September 1999 by a Milan Court that all the property of the E N Group, which had been put into liquidation in October 1997, had been sold to B&T Ceramic Group.  The Foshan Court recognised as effective the Milan Court’s September 1999 judgment pursuant to the Sino-Italy Mutual Civil Judicial Assistance Treaty.  This was not an application by the insolvency practitioners responsible for the liquidation of the E N Group for recognition.

30.In July 2012 the trustee, Sascha Seehaus, of the bankrupt SP Management GmbH, applied for recognition by the Wuhan Intermediate People’s Court of a bankruptcy judgment delivered by the Montabaur Regional Court in 2009, which authorised the trustee to take control  of the bankrupt’s estate and administer the bankruptcy proceedings.      The Wuhan Court determined, with limited reasons, that it could recognise the German order.  However, it is unclear what, if any, substantive relief was granted or why the application was made in the first place.

31.In June 2014 the 4^th Division of the Supreme People’s Court held a hearing in the case of Sino-Environmental Technology Group v Thumb Environmental Technology Group (“Thumb Environmental”). Sino-Environmental was a Singaporean company in liquidation in Singapore. Its liquidators wished to take control of its subsidiary,     Thumb Environmental. The existing management of Thumb Environmental refused to recognise the liquidators right to take control  of Thumb Environmental and commenced litigation against the parent company seeking payment of a capital contribution of RMB45,000,000.  They succeeded at first instance before the Fujian Higher People’s Court.   The Supreme Court, whilst recognising the existing management’s right as registered directors and holders of the company chop to file a suit concluded that when it came to the substantive issues the Court should have regard to the real situation and recognised that the Singaporean liquidator had the right to represent the parent company.  The decision did not involve a general recognition of the liquidator or the provision of assistance by granting the type of powers to be found in the order I have granted.

32.These decisions provide little guidance as to the way in which the Mainland courts will respond to an application for recognition under Article 5 of the EBL.  It is, however, clear that Article 5 of the EBL envisages that there will be recognition of foreign liquidators as one would expect to be the case given the transnational business conducted by many Mainland businesses.

Conclusion

33.In my view the application, therefore, satisfies the relevant principles and justifies making an order of recognition and assistance in the conventional terms appearing in the Appendix to these reasons.   The extent to which greater assistance should be provided to Mainland administrators in the future will have to be decided on a case by case basis and the development of recognition is likely to be influenced by the extent to which the court is satisfied that the Mainland, like Hong Kong, promotes a unitary approach to transnational insolvencies.

Mr Look Chan Ho and Mr Tommy Cheung, instructed by Sit, Fung, Kwong & Shum, for the applicant

Appendix

Order

1. The liquidation of CEFC Shanghai International Group Limited (上海华信国际集团有限公司) (in Liquidation in the Mainland of the People’s Republic of China) (the “Company”) and the appointment of (i) King & Wood Mallesons (Shanghai Office) (北京市金杜律师事务所上海分所) of 17^th Floor, One ICC, Shanghai ICC, 999 Middle Huai Hai Road, Xuhui District, Shanghai 200031, PRC, (ii) Fangda Partners (上海市方达律师事务所) of 24/F, HKRI Centre Two, HKRI Taikoo Hui, 288 Shi Men Yi Road, Shanghai 200041, PRC and     (iii) AllBright Law Offices (上海市锦天城律师事务所) of 9, 11, 12/F, Shanghai Tower No. 501, Yincheng Middle Road, Pudong New Area Shanghai 200120, PRC as the joint and several liquidators of the Company (“JLs”)    (with Mr Hao Zhaohui, Mr Li Kai, and Mr Zhu Linhai being the authorised representatives) be recognised by this Court;

2. The JLs have and may exercise in the Hong Kong Special Administrative Region the following powers:

(i) To request and receive from third parties documents and information concerning the Company and its promotion, formation, business dealings, accounts, assets, liabilities or affairs including the cause of its insolvency;

(ii) To locate, protect, secure and take into their possession and control all assets and property within the jurisdiction of this Court to which the Company is or appears to be entitled;

(iii) To locate, protect, secure and take into their possession and control the books, papers, and records of the Company including the accountancy and statutory records within the jurisdiction of the Court and to investigate the assets and affairs of the Company and the circumstances which gave rise to its insolvency.  The books, records and documents of the Company include:

(a) Emails exchanged and other correspondence between the Company and its auditors, and the Company and other third parties; and

(b) Documents and information provided by the Company to its auditors and provided by the auditors to the Company in relation to the audit work;

(iv) To take all necessary steps to prevent any disposal of the Company’s assets and, in particular, to secure any credit balances in any bank accounts in the name or under the control of the Company within this jurisdiction;

(v) To operate and open or close any bank accounts in the name and on behalf of the Company for the purpose of collecting the assets and paying the costs and expenses of the JLs;

(vi) To retain and employ barristers, solicitors or attorneys and/or such other agents or professional persons as the JLs consider appropriate for the purpose of advising or assisting in the execution of their powers and duties under this Order; and

(vii) So far as may be necessary to supplement and to effect the powers set out herein, to bring legal proceedings and make all such applications to this Court, whether in their own names or in the name of the Company, on behalf of and for the benefit of the Company, including any applications for:

(a) Orders for disclosure, the production of documents and/or examination of third parties which may be made by the JLs to facilitate their investigations into the assets and affairs of the Company and the circumstances which gave rise to its insolvency; and/or

(b) Ancillary relief such as freezing orders, search and seizure orders in any legal proceedings commenced;

3. Anything that is authorised or required to be done by the JLs may be done by all or anyone or more of the authorised representative(s) and the application of the common chop of the JLs entitled “上海华信国际集团有限公司管理人”;

4. For so long as the Company remains in liquidation in the Mainland of the People’s Republic of China, no action or proceeding by any party other than the JLs shall be proceeded with or commenced against the Company or its affairs, property or assets within the jurisdiction of this Court, save with the leave of this Court and subject to such terms as this Court may impose.  Any such application for leave shall in the first instance be made in writing to the Companies Judge, or another Judge if the Companies Judge is unavailable;

5. The JLs do have liberty to apply; and

6. The costs of this application be paid out of the assets of the Company as an expense of the liquidation.