Robert Scott Woods, The Trustee-in-bankruptcy of Phillip James Kingston v. Industrial and Commercial Bank of China (Asia) Ltd

HCMP 1789/2024

[2024] HKCFI 3311

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1789 OF 2024

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BETWEEN

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REASONS FOR JUDGMENT

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1.By Originating Summons dated 16 September 2024 (“OS”)Mr Robert Scott Woods, the trustee-in-bankruptcy of the property of Philip James Kingston (“Bankrupt”)  appointed pursuant to the Order of the Federal Court of Australia (“Federal Court”)  dated 14 December 2023 (“Trustee”), seeks an order for recognition of his appointment with powers to assist him in the investigation of the Bankrupt’s affairs. After hearing the submissions, I made an order in the terms set out in §44 below. These are the reasons for my judgment.

A.  FACTUAL BACKGROUND

2.The Bankrupt was born in Australia and is an Australian citizen.  He holds an Australian passport. 

3.Between 28 November 2017 and 28 September 2018, the Bankrupt entered into 5 loan agreements (“Loan Agreements”)  with China Insurance Group Finance Company Limited (“CIG”)  pursuant to which HK$653 million was advanced to him.  The loans were advanced in connection with the business of the Bankrupt’s companies in Australia.

4.In September 2019, the Bankrupt was in default of his obligations under the Loan Agreements.  This led to appointment of receivers over the companies whose shares had been pledged by the Bankrupt as security for the obligations under the Loan Agreements.

5.In August 2020, CIG commenced proceedings in the Supreme Court of Victoria against the Bankrupt to seek repayment under the Loan Agreements.  The trial took place before Delany J over 9 days in May to July 2022.   

6.In August 2022, the Bankrupt left Australia and has not returned since.  It appears that his current residence varies and that he is working in both Ukraine and the United Arab Emirates[1].   

7.On 19 January 2023, Delany J handed down a 139-page judgment in favour of CIG and dismissed the Bankrupt’s counterclaim (“Judgment”).  In the order dated 14 February 2023, the Bankrupt was ordered to pay HK$664,900,126.57 together with interest in the sum of HK$131,524,242.64 and costs (“Judgment Debt”). The Bankrupt did not make any payment.

8.On 20 September 2023, CIG filed a creditor’s petition in the Federal Court seeking a sequestration order against the estate of the Bankrupt on the ground that he had failed to pay the Judgment Debt which then stood in the amount of AUD154,364,350.25.

9.On 14 December 2023, the Federal Court made a sequestration order against the Bankrupt and held that the date of commission of the act of bankruptcy is 17 August 2023.  The Trustee was appointed as the trustee of the property of the Bankrupt in the same order.

10.Following his appointment, the Trustee carried out investigation into the Bankrupt’s affairs (with some assistance from the Bankrupt)  which revealed that:

(1)  At the time the Loan Agreements were signed and thereafter, the Bankrupt held a number of bank accounts with Commercial Bank of China (Asia)  Limited (“ICBC”)  and the loan proceeds obtained from CIG were deposited into these accounts (“Accounts”).  The Bankrupt also held 2 credit cards issued by ICBC.

(2)  The Bankrupt provided the Trustee with various bank statements and information concerning the usage of the funds in the Accounts.  On the basis of such materials and the further inquiries made, the Trustee was able to identify (a)  to whom some of the payments were made from the Accounts and (b)from whom some of the monies were deposited into the Accounts.

11.To-date, there are withdrawals from the Accounts totaling HK$85,745,395.29 and deposits into the Accounts totaling HK$1,109,673.09 which remain unaccounted for, the particulars of which are set out in the spreadsheets prepared by the Trustee (collectively “Unexplained Transactions”).

12.By letter dated 2 July 2024, the Trustee’s solicitors requested ICBC to provide details and documents relating to the destinations or sources of the Unexplained Transactions.

13.On 9 July 2024, ICBC through its solicitors stated that it owed a duty of confidentiality to the customer and, therefore, was not in a position to consent to the Trustee’s request without a court order, presumably because the Trustee was not appointed by an order of the Hong Kong court.  I say this because if a person is adjudged bankrupt by an order of the Hong Kong court, by virtue of s.58 of the Bankruptcy Ordinance (Cap. 6)  (“BO”), the property of the bankrupt shall vest in the Official Receiver or any provisional trustee and trustee thereafter appointed over the bankrupt’s estate.  The Official Receiver/trustee would be able to assert any rights (including any amounts owed by any third parties arising out of such rights)  in respect of the property of the Bankrupt against any third party including the bank.  

14.On 22 July 2024, the Trustee applied to the Federal Court for a letter of request.  The Bankrupt had been notified of the application, and stated that he did “not intend to appear” and did “not have the funds for legal representation”.

15.On 21 August 2024, O’Callaghan J of the Federal Court ordered the issue of a letter of request pursuant to s.29(4)  of the Bankruptcy Act (1966)  (Cth)  requesting the Hong Kong court to act in aid of and be auxiliary to its bankruptcy proceedings in the manner set out in the Letter of Request (“LOR”).  As stated in the LOR, the Trustee requires the statements and information concerning the Unexplained Transactions to assist his investigations and realisation of the Bankrupt’s property for the benefit of the creditors.

16.On 16 September 2024, the Trustee issued the present application against ICBC.  On 20 September 2024, the Trustee informed the Bankrupt about the application and inquired whether he intends to oppose it.  By an e-mail of the same day, the Bankrupt “acknowledged receipt” of the application papers and stated that he was not in a “financial position to do anything about this petition”.

17.By letter dated 15 October 2024, ICBC informed the Trustee that it would adopt a neutral position in respect of the present application, subject to certain proposed changes to the draft order concerning the time limit and costs for compliance with the order.

B.  APPLICABLE PRINCIPLES

18.The relevant principles governing an application for recognition of foreign bankruptcy proceedings have been comprehensively set out in the skeleton submissions of Mr Lai Chun Ho, counsel for the Trustee, and may be summarised as follows:

(1)  The court has power under common law to recognise and give effect to foreign bankruptcy proceedings, notwithstanding the foreign insolvency proceedings may be of a very different nature from ours (Chen Li Hung v Ting Lei Miao [1999] 1 HKLRD 123, 136F-H, per Godfrey JA).

(2)  The effect of foreign personal bankruptcies declared under the law of domicile has long been recognised (Rubin v Eurofinance SA [2013] 1 AC 236, §§11-13, 46, per Lord Collins).  The court from which assistance is sought acts on the principle that there should only be one universal process of the distribution of a bankrupt’s property, and the court should not allow steps to be taken in its jurisdiction which would interfere with that process (Rubin §§11-13, 46, applied in Li Yiqing v Lamtex Holdings Ltd [2021] 2 HKLRD 177, §14, per Harris J).

(3)  Provided that the debtor is domiciled in or has submitted to the jurisdiction of the adjudicating court, the court will recognise a foreign bankruptcy adjudication as vesting the moveable property of the debtor in the foreign trustee (Totty, Moss & Segal: Insolvency,§E1-12; Muir Hunter on Personal Insolvency, §3-3002; Dicey, Morris and Collins on the Conflict of Laws, 16^th ed., Rule 206, §31R-074; Chen Li Hung v Ting Lei Miao(2000)  3 HKCFAR 9, 16G-17F, per Bokhary PJ).

19.The approach of the court in considering an application for recognition and assistance of foreign bankruptcy proceedings is materially the same as recognition of foreign insolvency proceedings.  The doctrine of “modified universalism” provides a common basis for recognition and assistance of both types of proceedings (Re HIH Casualty and General Insurance Ltd [2008] 1 WLR 852, §6, per Lord Hoffmann; Rubin, §§16-19, per Lord Collins; Singularis Holdings Ltd v PricewaterhouseCoopers [2015] AC 1675, §16, per Lord Sumption). 

20.The principles governing an application for recognition and assistance of foreign insolvency proceedings may be summarised as follows (Re Guangdong Overseas Construction Corporation [2023] 3 HKLRD 262, §17):

(1)  The power at common law to recognize and assist a foreign office-holder does not depend on winding up proceedings having been commenced against the company in the assisting court, as the court is asked to recognize the office-holder appointed in the place of incorporation as the lawful agent in accordance with principle of private international law (see also Bridge Global, §15(1)).

(2)  The applicant has to satisfy the court that:-

(a)  The foreign insolvency proceedings are collective insolvency proceedings (see also Bridge Global, §15(2)(a));

(b)  The foreign insolvency proceedings are conducted in the jurisdiction in which the company’s centre of main interest is located (see also Bridge Global, §15(2)(b)).  In the context of recognition of foreign bankruptcy proceedings, the court would be looking at the place where the debtor is domiciled in or has submitted to the jurisdiction of the adjudicating court (see §18(3)  above).

(c)  The assistance is necessary for the administration of a foreign winding up or performance of the office-holder’s functions, and the order is consistent with the substantive law and public policy of the assisting court so it is not available for purposes which are properly the subject of other schemes (see also Bridge Global, §15(2)(c)).

(3)  As to the extent and terms of assistance to be provided to the office-holder, the authorities show that the court has granted assistance to a foreign office-holder to, inter alia, obtain and gather information and documents relating to the company from third parties (see also Bridge Global, §15(3)).

C.  DISCUSSION

C1.  Bankruptcy proceedings collective in nature

21.The bankruptcy proceedings in the Federal Court are materially the same as bankruptcy proceedings under the BO, which are collective in nature, with the Trustee being appointed to take charge of the collection and realisation of the Bankrupt’s property and investigation of his affairs for the benefit of the general body of creditors.

22.As explained in Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd [2015] WASCA 95, §§205 to 206, 210 to 215, per Newnes and Murphy JJA, a sequestration order (once made)  provides a statutory scheme under the Bankruptcy Act 1966 by which individual rights of creditors are replaced by rights to prove their debt in “collective proceedings” against the bankrupt’s estate; and creditors are not competent to enforce remedies against the person or property of the bankrupt in respect of a provable debt.

23.This is reinforced by the LOR, which states that pursuant to ss.58(1)  and 116 of the Bankruptcy Act 1966, if a person becomes bankrupt in Australia, his real and personal property vests in the trustee who is authorised to sell that property and distribute the proceeds of sale amongst the bankrupt’s creditors.

C2.  Submission to jurisdiction of Federal Court

24.The question whether there has been submission to jurisdiction is a question of Hong Kong law to be inferred from all the facts, having regard (where appropriate)  to the contents and impact of the foreign procedural rules (Rubin, §161, per Lord Collins).

25.Apart from express submission, a party may submit to jurisdiction by way of waiver when it has “taken some step which is only necessary or only useful if” an objection to jurisdiction “has been actually waived, or if the objection has never been entertained at all” (Rubin, §159). 

26.The general approach on submission to jurisdiction has been applied in foreign bankruptcy context. See for eg., Kireeva v Bedzhamov [2021] BPIR 1465, §118, per Snowden J (as he then was).

27.Although the Bankrupt did not personally appear in the Federal Court to contest CIG’s petition, he has submitted to its jurisdiction at least by way of waiver by reason of the following facts and matters:

(1)  The Bankrupt had notice of the bankruptcy proceedings commenced by CIG prior to the grant of the sequestration order.  

(2)  After the sequestration order had been made against him, the Bankrupt expressly and without any reservation acknowledged his bankruptcy and the legal consequences following from it in that:

(a)  On 15 December 2023, the Trustee wrote a letter to the Bankrupt, informing the Bankrupt of the grant of the sequestration order against him;

(b)  By email dated 24 December 2023, the Bankrupt acknowledged receipt of the Trustee’s letter dated 15 December 2023.  In the same e-mail, the Bankrupt requested a Statement of Affairs (“SOA”)  from the Trustee on the basis that he did not want the filing of the SOA to delay the commencement of the statutory period for his discharge from bankruptcy.   

(3)  The Bankrupt has acted in a way and taken steps which shows that he had waived any objection to the jurisdiction of the Federal Court over his bankruptcy.  These include:

(a)  The Bankrupt has not challenged the bankruptcy proceedings after having been told about the sequestration order made against him.

(b)  The Bankrupt complied with his obligations as a bankrupt by (i)completing and submitting the SOA; (ii)  providing and confirming his personal circumstances under the Trustee’s directions; and (iii)  assisting the Trustee’s investigation by providing details in respect of the Unexplained Transactions.

C3.  Bankrupt’s domicile

28.As the Bankrupt has submitted to the jurisdiction of the Federal Court, it is not necessary to consider whether his domicile was in Australia at the time the bankruptcy proceedings were commenced.  Nevertheless, in deference to counsel, who has made extensive submissions on the question of domicile, I would set out my view on the issue. 

29.The rationale for placing emphasis on the bankrupt’s domicile has been explained by Professor Fletcher in Insolvency in Private International Law, 2^nd ed, Section 2.6.1, §2.108 in this way:

“The early point of departure was the proposition that, since bankruptcy is a matter bearing upon personal status and capacity, and on the transmission of the debtor’s property, the law of the debtor’s domicile is the competent system to determine such fundamental matters, and hence the courts of the domicile are the competent jurisdiction in which such proceedings should take place. English law therefore chose the domicile of the debtor—in the special sense employed by English law itself—as its test for establishing the jurisdictional competence of the foreign court.”

30.The relevant time of assessing the debtor’s domicile is the time of the presentation of the petition (Muir Hunter on Personal Insolvency, §3-3002).

31.The question of domicile is determined by the Domicile Ordinance (Cap. 596)  (“DO”).  In particular, s.3(3)  of the DO provides that “where the domicile of an individual is in issue before any court in Hong Kong, that court shall determine the issue in accordance with the law of Hong Kong”.  The following provisions under the DO are relevant:

(1)  Every individual has a domicile.  No individual has, at the same time and for the same purpose, more than one domicile (s.3(1)-(2)).

(2)  A child is domiciled in the country or territory with which he is for the time being most closely connected.  On becoming an adult, an individual retains the domicile that he had immediately before he becomes an adult (ss.4(1), 5(1)).

(3)  An adult acquires a new domicile in a country or territory if (i)  he is present there; and (ii)  he intends to make a home there for an indefinite period (s.5(2)).

(4)  Where an individual is domiciled in a country or territory as determined in accordance with the DO, the individual continues to be so domiciled until he or she acquires another domicile (s.9).

32.In ascertaining whether a person intends to make a home for an indefinite period, the court will take into all relevant circumstances (Zeng Lifan v Zeng Xingguo [2019] HKCFI 144, §§17-18, per DHCJ Douglas Lam SC).

33.Cases decided prior to the coming into effect of the DO still have guidance value although they are now subject to the express provisions of the DO (Re Estate of Kwok Leung Lam[2019] HKCFI 2856, §31, per DHCJ Leung).  The following pre-DO cases are of relevance to the present case:

(1)  To acquire a domicile in a country, a person must freely choose to reside there and must not reside there because he is prescribed or dictated by external factors such as the duties of office, the demands of creditors or the need to seek medical treatment (Re Ku Chu Keung [2007] 2 HKLRD 292, §33, per DHCJ L. Chan).

(2)  A person does not abandon his domicile simply by changing residence (Re Ku Chu Keung, §40).

(3)  Change of domicile is not to be lightly inferred from casual language or even long period of residence (Re Chow Kam Fai [2004] 1 HKLRD 161,§17, per DHCJ Anthony To (as he then was)).

(4)  The existing domicile of a person is deemed to continue until it is proved that he has acquired a new domicile; he who asserts a change of domicile bears the burden of proving the truth of the assertion (Re Cao Zhong [2021] HKCFI 3143, §52(6), per Recorder William Wong SC).

34.In my view, the Bankrupt was domiciled in Australia at the time the petition was filed at the Federal Court having regard to the following facts and matters.

35.First, the evidence shows that the Bankrupt was domiciled in Australia until at least August 2022:

(1)  The Bankrupt was born in Australia in 1980s.  He completed all his advanced education in various Australian tertiary institutions in his mid-20s towards the late 2000s.  In his SOA, the Bankrupt stated that he held an Australian passport (alongside with another passport). 

(2)  The Bankrupt carried on business in Australia through various companies incorporated therein:

(a)  According to public records, he was a shareholder, director or secretary of many companies in Australia before he was adjudged bankrupt.

(b)  As stated in the Judgment (§60), from 2017 to 2020, the Bankrupt was the CEO of and personally steered the business of an Australian company, Sargon Capital Pty Ltd, which owned substantial assets and engaged in sizeable acquisitions in Australia.

(3)  In response to the Trustee’s inquiries as to the use of the funds in the Accounts, the Bankrupt stated that he “had an apartment” and “spent the majority of [his] time” in Hong Kong between 2017 to 2020.[2]  This at most amounts to a “long period of residence” and cannot be taken as a change of domicile to Hong Kong.   

36.Second, although the Bankrupt left Australia in August 2022 and has not returned since, there is no evidence to show that he has abandoned Australia as his domicile.  To the contrary, the evidence shows that his domicile remains in Australia:

(1)  The Bankrupt renewed his Australian passport which was issued in mid-2023, after he had left Australia.

(2)  The Bankrupt electronically signed and submitted an Individual Tax Return to the Australian Taxation Office on 2 May 2024 for the period from 1 July 2022 to 30 June 2023. In this Return, the Bankrupt stated that he is “an Australian resident” and provided an address in Australia as his “home address”.  He answered the question as to whether this is his “final” tax return in the negative.

(3)  The Bankrupt remains registered on the Commonwealth and Victorian Electoral Roll, and the address appearing in the register is the same address stated in the Tax Return.

(4)  In his SOA, the Bankrupt stated that he would not want to delay “the commencement of [his] statutory three (3)  year period”.  This shows that he has at least an intention to return to Australia after his discharge from bankruptcy.

37.The above facts and matters are sufficient for the court to conclude that the Bankrupt’s domicile has always been and remains in Australia.  For completeness, I deal with 2 other matters.

38.After the hearing, by email dated 29 October 2024 to the Trustee[3], the Bankrupt complains that the Trustee has made “numerous errors” in the skeleton submissions in that (1)  he is not on the Electoral Roll and attaches a letter from the Australian Electoral Commission (“AEC”)  dated 17 April 2023 which stated that the AEC would remove him from the Electoral Roll; and (2)  he has acquired “Ukrainian residency” and attaches copy of a Temporary Residence Permit issued to him. 

39.I do not think that the complaints are justified.  As stated by the Trustee:

(1)  Despite the letter issued by the AEC, according to the search conducted by the Trustee on 7 July 2024, the Bankrupt remains on the Electoral Roll and his address is the same address stated in his Tax Return.

(2)  The Temporary Residence Permit issued to him shows that he was only granted permission to remain in Ukraine for 90 days.

40.In his correspondence with the Trustee and his SOA, the Bankrupt asserts that he left Australia due to limited opportunities and safety concerns and provided other correspondence addresses in Ukraine and United Arab Emirates to the Trustee.  On 19 January 2024, the Australian Financial Security Authority directed that certain of the Bankrupt’s personal particulars be suppressed on the National Personal Insolvency Index on the basis that the publication of such particulars would jeopardise, or is likely to jeopardise his safety.  This at most only goes to  show that the Bankrupt’s departure from Australia was partly the result of “external factors” or “demands of creditors”, rather than an intention to abandon Australia as his domicile. 

C3.  Recognition and assistance sought is necessary

41.As stated in the LOR, pursuant to ss.58(1)  and 116 of the Bankruptcy Act 1966, if a person becomes bankrupt in Australia, his real and personal property vests in the trustee who is authorised to sell the property and distribute the proceeds of sale amongst the bankrupt’s creditors.

42.The order sought is necessary to facilitate the Trustee in carrying out his functions as trustee of the Bankrupt’s property including taking control over his property, commencing proceedings in the name of the Bankrupt[4] and investigating his affairs in Hong Kong.  The assistance sought includes an order requiring ICBC to produce documents relating to the Accounts. 

(1)  This is permissible as the court has power under common law to order a third party subject to in personam jurisdiction of the court to produce documents and information relating to a company in liquidation in another jurisdiction so as to assist the performance of the office-holder’s functions (Bridge Global, §§15(3), 22).

(2)  The Trustee requires the documents sought from ICBC to assist and complete his investigations into the Bankrupt’s affairs in particular the Unexplained Transactions.   

(3)  Similar powers of investigation are available under s.77C of the Bankruptcy Act 1966.[5]

(4)  The terms of the order tracks the order for recognition and assistance granted in Bridge Global.

43.For the above reasons, this Court made an order in the following terms:

(1)  The appointment of the Trustee of the Bankrupt pursuant to the order of the Federal Court dated 14 December 2023 be recognised by the High Court of the Hong Kong Special Administrative Region.

(2)  The Trustee has and may exercise in the Hong Kong Special Administrative Region the following powers for the purpose of carrying out his functions as trustee of the Bankrupt:

(a)  To request and receive from third parties documents and information belonging to the Bankrupt or to which the Bankrupt is otherwise entitled, including his business dealings, accounts, assets, liabilities and financial affairs;

(b)  To locate, protect, secure and take into his possession and control all moveable assets within the jurisdiction of this Court to which the Bankrupt is or appears to be entitled;

(c)  To locate, protect, secure and take into his possession and control the books, papers, and records belonging to the Bankrupt or to which the Bankrupt is otherwise entitled including the accountancy and statutory records within the jurisdiction of this Court and to investigate the assets and affairs of the Bankrupt;

(d)  To bring legal proceedings and make applications to this Court, whether in his own name or as trustee of the property of the Bankrupt;

(e)  To retain and employ barristers, solicitors or attorneys, accountants and/or such other agents or professional persons as the Trustee considers appropriate for the purpose of advising or assisting in the execution of his powers and duties under the Order.

(3)  ICBC do produce by electronic means to the Trustee’s solicitors within 42 days from the date of service of the Order or by such time and date as may be agreed in writing between the Trustee and ICBC:-

(a)  All documents evidencing to whom each of the withdrawals from the Accounts set out in the Annexure to the Order, in relation to the period from 6 December 2017 to the date of the Order, including in respect of each payment:-

(i)  all payment advices;

(ii)  details of to whom the payment was made and their address and contact details;

(iii)  all instructions or directions received for such payment;

(iv)  all documents evidencing any transfer between bank accounts or interbank transfers;

(v)  all acknowledgements of receipt of funds received in respect of each payment;

(b)  All documents evidencing from whom each of the deposits from the Accounts set out in the Annexure to the Order, in relation to the period from 6 December 2017 to the date of the Order:-

(i)  all receipt / remittance advices;

(ii)  details of from whom the deposit was received and their address and contact details;

(iii)  all instructions or directions received for such deposit;

(iv)  all documents evidencing any transfer between bank accounts or interbank transfers;

(v)  all acknowledgements of receipt of funds paid in respect of each deposit;

(c)  All statements relating to the Bankrupt’s integrated account numbered [redacted] in relation to the period from 2 February 2020 to 1 July 2020;

(d)  All statements relating to the Bankrupt’s credit card account numbered [redacted] in relation to the period from 6 December 2017 to 12 May 2020 and 13 November 2020 to the date of the Order;

(e)  All statements relating to the Bankrupt’s credit card account numbered [redacted] in relation to the period from 6 December 2017 to 6 July 2020 and 7 December 2020 to the date of the Order; and

(f)  All correspondence issued to and received from, or on behalf of, the Bankrupt with respect to his accounts and credit card accounts held with ICBC in relation to the period from 6 December 2017 to the date of the Order.

(4)  The Trustee’s costs of this application be paid out of the assets of the Bankrupt as an expense of the bankruptcy.

(5)  The Trustee do pay ICBC its reasonable costs and expenses of and incurred by it in complying with the Order (including ICBC’s bank charges at the standard rates stipulated by ICBC upon its production of the documents and information pursuant to the Order)  on a party-and-party basis, to be summarily assessed if not agreed.

(6)  There be liberty to apply, including such other orders on the application of the Trustee as may be necessary and proper for the purposes of implementing the above requests or ancillary thereto.

Mr Lai Chun Ho, instructed by Baker & McKenzie, for the Plaintiff

Attendance of Stevenson, Wong & Co. for the Defendant is excused