Re Value Food Supply Ltd (“Company”)
Read the full judgment text of HCCW 149/2020 on BabelCite. This High Court CFI judgment was delivered on 29 September 2021.
1. On 5 November 2020, the Company was wound up on the grounds of insolvency on the petition of two creditors, Shanghai Win-Chain Supply Chain Management Co., Ltd and Win-Chain (Hongkong) Co., Ltd. The Official Receiver became the first provisional liquidator pursuant to section 194(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance , Cap 32 (“ Ordinance ”). As is normal the Official Receiver pursuant to section 194(1A ) of the Ordinance , appointed private practitioners to
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HCCW 149/2020 [2021] HKCFI 2975 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES WINDING‑UP PROCEEDINGS NO 149 OF 2020 ________________
________________ Before: Hon Harris J in Chambers Date of Hearing: 29 September 2021 Date of Decision: 29 September 2021 ________________ D E C I S I O N ________________ 1.On 5 November 2020, the Company was wound up on the grounds of insolvency on the petition of two creditors, Shanghai Win-Chain Supply Chain Management Co., Ltd and Win-Chain (Hongkong) Co., Ltd. The Official Receiver became the first provisional liquidator pursuant to section 194(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 (“Ordinance”). As is normal the Official Receiver pursuant to section 194(1A) of the Ordinance, appointed private practitioners to replace her. She did this by a letter of 5 November 2020 appointing Tsui Mei Yuk, Janice and Wong Sun Keung of Vision AS Limited (“JPLs”). 2.The capital of the Company consists of two shares held by Ng Joo Puay Frank and Ng Puay Yee Annie. The first meeting of contributories took place on 3 February 2021 and it resolved that the JPLs be appointed as joint and several liquidators of the Company and that there be no Committee of Inspection. 3.The first meeting of creditors also took place on 3 February 2021. The creditors divided into two groups. Four who the Petitioners believed are associated with the owners of the Company: Ocean Incorporation Limited (“Ocean”), PAE Limited (“PAE”), Pacific Andes International Holdings (BVI) Limited (“PA”) and Meridian Investment Group Pte Limited (“Meridian”), who I shall refer to collectively as the supporting creditors. The Petitioners, who I shall refer to collectively as “Win-Chain”. Win-Chain proposed that insolvency practitioners from Borrelli Walsh Limited (“Borrelli Walsh”) be appointed as liquidators. The supporting creditors, though a proxy, Geoffrey Allan Walsh, for PA, pointed out, and I quote from [10] of the JPLs’ report (“Report”) to the court:
4.The Report goes on to record:
5.It seems to me that on the face of the matter Borrelli Walsh did have a conflict as they acted for the Ng Family and it was responsible for PA to bring it to the meeting’s attention. It seems to me that in the circumstances one might have expected Win-Chain themselves to have thought Borrelli Walsh were unsuitable particularly if they were concerned about the liquidators being independent. However, when votes for the resolution appointing the liquidators came to be passed Win-Chain voted for Borrelli Walsh’s nominees and the supporting creditors for the JPLs, who by a small margin came to be appointed. Largely because the schedule recording the voting also shows the value for which the relevant proofs were admitted for voting purposes, I set out the details of the voting below: Nomination of Mr. Wong Sun Keung and Ms. Tsui Mei Yuk Janice of Vision A.S. Limited
Nomination of Mr. Chan Ho Yin and Ms. Li Chung Ngai of Borrelli Walsh Limited
6.On 9 March 2021 the JPLs issued an ex parte summons seeking an order from the court, amongst other things, confirming that their appointment be confirmed and that there be no Committee of Inspection. Win-Chain oppose this application. They wish liquidators to be appointed from Briscoe Wong Advisory Ltd (“Briscoe Wong”), although they have also proposed an alternative if the court is not amenable to appointing Briscoe Wong: liquidators from Grant Thornton Recovery & Reorganisation Limited (“Grant Thornton”), who the supporting creditors are prepared agree. Win-Chain initially justified their opposition on the grounds that the supporting creditors’ proofs should only have been admitted for a nominal amount for voting purposes. Win-Chain have issued an amended summons seeking:
7.I would note at this point that Win-Chain’s approach to the identity of the liquidators is odd. In [52] of the 5th Affirmation of Zhang Ye (“Zhang (5)”) in support of Win-Chain’s application, it is suggested that Win-Chain has concerns about there being a real risk that the PLs, particularly Mr Wong, would see fit to compromise their independence and professionalism to serve the interests of those who appointed them, namely, the supporting creditors. This concern seems to be based on certain observations made by DHCJ Linda Chan in an application in 2013, in which Mr Wong represented himself, although Mr Zhang does not say whether he was aware of this at the time of the first creditors meeting. However, the JPLs were nominated by the Official Receiver and on a fair reading of the evidence contained in the Report it would appear that the supporting creditors were behaving appropriately in bringing Borrelli Walsh’s conflict of interest to the attention of the meeting and not voting for insolvency practitioners from a firm the Ng Family were using. I can see no sensible basis for suggesting that there is a real risk the JPLs would compromise their independence. 8.Win-Chain’s approach to the identity of the prospective liquidators seems all the more curious given their initial preference for Borrelli Walsh, which is not explained in their evidence. The liquidation of the China Fishery Group, of which PA forms parts, has been a major transnational insolvency, which has resulted in many cases in different jurisdictions including Hong Kong. I have dealt with two matters arising from it including that brought by the Group’s trustee in New York, Re China Fishery Group Ltd[1]. I will not repeat the details of the decision here as they do not matter. It will suffice to say that in [16] and [34] I explain that Judge James Garrity in Chapter 11 proceedings in the US Bankruptcy Court of the Southern District of New York, found that the Ng Family, in particular Annie Ng who is one of the shareholders of the Company, consciously gave undertakings to this court, which she did not intend to honour. Zhang Ye, who made an affirmation on behalf of Win-Chain in support of their application goes into some detail about the criticisms of the Ng Family’s conduct in various others judgment in [14]–[16] of Zhang (5). It is surprising that in these circumstances if Win-Chain were concerned about impartiality they would have chosen candidates from a firm, who acted for the Ng Family. 9.I would also note that the supporting creditors had also indicated to Win-Chain in May 2021 that they were content for the Official Receiver to nominate another firm from the Panel A list, which they would agree to being appointed as liquidators. I can see no sensible reason, therefore, to think that the supporting creditors are trying to engineer their preferred candidate. It is Win-Chain, who seem to be more concerned with the identity of the liquidators. 10.As it transpired when the matter came on before me Ms Lam did not press the application to overturn the JPLs’ decision to admit the proofs of the supporting creditors in the light of evidence filed by the JPLs explaining their reasoning and the material they rely on. Ms Lam submitted that the supporting creditors are associated with the Company and the authorities demonstrate that in these circumstances more weight should be given to the views of independent creditors. 11.The general principles that guide the court in determining disputes as to the identity of liquidators is summarised in the recent judgment of DHCJ William Wong in [8]–[9] in Cai Shuyi v The Joint and Several Liquidators of Blockchain Group Co Ltd (In Liquidation)[2]:
12.The application of these principles does not involve simply determining arithmetically which of competing candidates has got the most votes. The court can have regard to the characteristics of each creditor, which may be relevant to an assessment of the weight to be given to their views[3]. Generally more weight will be given to the views of creditors who are independent of the ownership of the Company than those who are associated with it, because their circumstances may reasonably be thought to suggest that they will be influenced by considerations other than simply maximising the recovery for unsecured creditors. In my view this is such a case, because of the unsatisfactory behaviour of the Ng Family to which I have referred earlier. 13.There is no dispute that PAE, PA and Meridian are associated with the Company. Mr Wood on behalf of PAE and PA did not dispute, at least not seriously, that there had been unsatisfactory features in the Ng Family’s behaviour in the China Fishery Group case. Ocean dispute it is associated with the Ng Family. I proceed on the basis that Ocean is independent, although little turns on this as it is clear that the majority of the debt held by creditors, who are independent favour appointing Briscoe Wong. It was submitted on behalf of the supporting creditors that the court should appoint Grant Thornton as they were acceptable to all creditors. It was also argued, principally on behalf of PAE and PA by Mr Wood that Win-Chain had been pressing the appointment of Briscoe Wong with unusual vigour, which gave rise to understandable concern about their independence and in these circumstances Grant Thronton were the appropriate appointment. I disagree. Briscoe Wong are simply Win-Chain’s first choice. There is nothing in the slightest bit unusual about the way in which Win-Chain have approached the application to appoint them. In my view the opinions of the majority of independent creditors should guide the court and I will appoint the nominees from Briscoe Wong. 14.So far as the remainder of the Order is concerned, I will appoint a Committee of Inspection that consists of Win-Chain, 山東同興有限公司 and Pacific Andes, which should in my view give a sufficient cross-representation of creditors with there being no dispute that the majority in number are independent. 15.I will make an order that the costs of all the creditors be paid out of the assets of the Company. I accept that the JPLs’ costs have been increased as a result of Win-Chain challenging their decision under Rule 128. In the circumstances I think it is fair that 50% of their costs of and occasioned by the two summonses before me and this hearing be paid out of the assets of the Company and 50% by Win-Chain such costs to be taxed if not agreed and paid forthwith.
Ms Rachel Lam SC and Ms Jasmine Cheung, instructed by Lo Lau Lawyers, for the applicants (Win-Chain (Hongkong) Co Limited and Shanghai Win-Chain Supply Chain Management Co Ltd.) Mr Eric Tsoi, instructed by Crump & Co, for the creditor (Ocean Incorporation Ltd.) Mr James Wood, instructed by Boase Cohen & Collins, for the creditors (PAE Limited & Pacific Andes International Holdings (BVI) Limited) Ms Cindy Kong, instructed by Fongs, for the creditor (Meridian Investment Group Pte Ltd) |
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