Read the full judgment text of FACV 000011/2001 on BabelCite. This FACV judgment was delivered on 3 December 2001 before Chief Justice Li, Mr Justice Bokhary PJ, Mr Justice Chan PJ, Mr Justice Ribeiro PJ and Lord Millett NPJ.
Company law – schemes of arrangement – Companies Ordinance (Cap. 32) s.166 – constitution of classes for meeting of creditors – whether separate class meetings required for preferential creditors – whether separate class meetings required for internal creditors of corporate group – UDL Group of more than 100 companies rendered insolvent by Asian financial crisis – 25 interdependent schemes of arrangement providing for pooling of uncharged assets and moratorium on enforcement – single composite meeting of all creditors of each company held – approval by statutory majorities ranging from 75.8% to 99.78% – former employees with preferential claims for unpaid wages and other group companies objecting that separate class meetings should have been held – whether separate meetings required for preferential creditors whose preferential status was preserved and who were treated like other unsecured creditors for the balance – whether separate meetings required for internal creditors having a special interest in promoting the scheme – Principles: it is for the company proposing the scheme to decide whether to convene one or more meetings, with objection taken on the application for sanction; the test for constituting classes depends on the similarity or dissimilarity of the creditors' legal rights against the company and the way in which the scheme affects them, not on private or extraneous interests – authority from England, Hong Kong, Australia, New Zealand and South Africa reviewed including Sovereign Life Assurance Company v. Dodd [1892] 2 QB 573, Re Hellenic & General Trust Ltd [1976] 1 WLR 123, Re BTR plc [2000] 1 BCLC 740, Re Hawk Insurance Company Ltd [2001] EWCA Civ 241, Re Industrial Equity (Pacific) Limited [1991] 2 HKLR 614, Re Jax Marine Pty Ltd [1967] 1 NSWR 145, Re Landmark Corporation Ltd [1968] 1 NSWR 759, Re Chevron (Sydney) Ltd [1963] VR 249 and Re English, Scottish & Australian Chartered Bank [1893] 3 Ch 385 – application of principles to the facts – preferential creditors' concerns about delay and about ex gratia payments from the Protection of Wages on Insolvency Fund under the Protection of Wages on Insolvency Ordinance (Cap. 380) s.16(1)(b) were private interests not derived from their legal rights and did not warrant separate meetings – internal creditors and participating subsidiaries did not have to be separated into distinct classes – Court of First Instance had jurisdiction to sanction the schemes and properly exercised its discretion – appeals dismissed – order nisi for costs of the appeals in favour of respondents against appellants, with liberty to challenge by written submissions within 21 days – appellants' own costs to be taxed in accordance with the legal aid regulations.
Legal issues: Whether separate class meetings required for preferential creditors in schemes of arrangement · Whether separate class meetings required for internal creditors (group companies) in schemes of arrangement · Court's jurisdiction to sanction schemes where single composite meeting held
Outcome: Appeals unanimously dismissed.
Cited by 2 cases