Introduction

Is leave required to appeal against a decision in relation to the appointment of liquidator of a company in winding-up? In the recent judgment in Re BGA Holdings Limited [2024] HKCFI 51 and [2024] HKCFI 592, the Court of First Instance dismissed the contributories’ appeal against the decision to appoint the liquidators of the company, and held that leave is required for the contributories to further appeal the Court’s decision to affirm the appointment of the liquidators.

Background

BGA Holdings Limited (the “Company”) was ordered to be wound up in December 2021, based on the Amended Petition of PBM Asset Management Ltd (the “Petitioner”), a creditor of the Company.

Subsequently in January 2021, a meeting of creditors and meeting of contributories were held.

During the meeting of creditors, the Petitioner was the only creditor whose debt was admitted for voting purposes. It was unanimously resolved that Mr John Nicholas Greenwood (“Greenwood”) and Mr Roy Bailey (“Bailey”) be appointed as joint and several liquidators of the Company.

During the meeting of contributories, it was resolved that two other individuals be appointed as liquidators of the Company.

Subsequently, the Official Receiver took out an ex parte Summons seeking the Court’s directions on the resolutions and determinations of the creditors’ meeting and contributories’ meeting in relation to the appointment of liquidators.

In January 2023, Master Rita So ordered that Greenwood and Bailey be appointed as joint and several liquidators of the Company.

Two of the contributories appealed against the Court’s decision in relation to the appointment of Greenwood and Bailey as liquidators of the Company.

The appellants relied on allegations over the suitability or integrity of Greenwood and Bailey for their appeal. In summary, the appellants claimed that Greenwood and Bailey are not suitable as they lack Hong Kong insolvency experience.

Applicable principles

The Court set out the following principles on appointment of liquidator which are not controversial:

1.       When a company is insolvent, the majority votes of the creditors will in the normal course prevail because they have the primary interest in the outcome of the liquidation;

 

2.       However, creditors holding the majority vote do not have an absolute right as to choice of liquidator because the appointment has to be conducive to both (i) the proper operation of the process of liquidation; and (ii) justice as between all those interested in the liquidation;

 

3.       The office-holder needs to both act and be seen to act in the best interests of creditors and to properly investigate all claims. A liquidator should not be a person nor be the choice of a person who has a duty or purpose which conflicts with the duties of the liquidator;

 

4.       By contrast, it is not an objection to a liquidator that he is allied to or the choice of a person who is concerned to pursue the claims of the company through the liquidator;

 

5.       In deciding the appropriate candidates to be appointed as liquidators, the Court will take into account the benefits that the candidates have acquired knowledge and familiarity with the company’s affairs by reason of their overseas appointment, and that time and costs would be saved as a result thereof;

 

6.       It is prima facie in the interests of the general body of creditors to appoint a common liquidator for the companies in the group; and possible conflicts between companies in the group may be effectively managed by appropriate measures such as obtaining independent legal advice, appointing another liquidator from the same or another firm.

Ruling

In relation to the ground that Greenwood and Bailey lack Hong Kong insolvency experience, the Court viewed that it is overplayed because both Greenwood and Bailey are experienced international insolvency practitioners from two of the biggest international accounting practices.

In addition, the Court stated that it should bear in mind that Greenwood and Bailey are the choice of the Petitioner, whose view should normally prevail in the circumstances where the company is insolvent.

In view of the above, the Court upheld Master’s decision to appoint Greenwood and Bailey as liquidators of the Company and dismissed the appellants’ appeal (the “Decision”).[1]

Is leave required for an appeal against the Decision

The appellants further applied for leave to appeal (insofar as necessary) against the Decision.

The first issue is whether the appellants are entitled to appeal as of right.

According to sections 13(2)(a), 14(1) and 14AA(1) of the High Court Ordinance (Cap 4), leave to appeal is generally required for an appeal against an interlocutory judgment or order. There are also cases which demonstrate that leave to appeal against interlocutory decision on winding up matters was required. In light of the above, the Court held that leave is required for the appellants’ appeal if it is one against an interlocutory decision.

The second issue is whether the Decision is an interlocutory decision.

The Court held that the Decision is an interlocutory decision, on the ground that the appointment of liquidators did not finally dispose of the winding up proceedings. Despite the appointment of the liquidators by the Court, they may be removed in the future. Further, their decisions may be subject to challenge. There is thus no real finality.

In view of the above, the Court held that leave to appeal is required for the appellants’ appeal of the Decision.

Upon considering the appellants’ grounds of appeal, the Court dismissed the appellant’s application for leave to appeal as there is little merit in the appellants’ grounds.[2]

Takeaway

This case illustrates that a contributory of a company in winding-up cannot appeal against a decision in relation to the appointment of liquidator of the company without leave from the Court. Contributories should bear in mind that they should apply for leave from the Court before they may appeal against such decision, and cost consequences may follow should their application to appeal fail.

 

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2024