Introduction

In our October 2016 Insolvency and Restructuring newsletter, we wrote about the court’s recognition of foreign liquidators’ appointment and powers as seen in the case of Rennie Produce (Aust) Pty Ltd [2016] HKEC 2012. The Court of First Instance (”Court”) has maintained a consistent approach with other recent cases since then and has further extended the power of liquidators in the present case of Re the Joint and Several Liquidators of Pacific Andes Enterprises (BVI) Ltd [2017] HKCU 245.

Facts

In November 2016, four companies incorporated in the British Virgin Islands were wound up by the Eastern Caribbean Supreme Court (the “Supreme Court”). All four companies are held by an ultimate holding company named Pacific Andes Resources Development Limited, which is approximately 66% owned by Pacific Andes International Holdings Limited (“PAIH”). PAIH is listed on the Main Board of The Stock Exchange of Hong Kong Limited. The Supreme Court subsequently appointed three joint and several liquidators (“Liquidators”). As the Liquidators’ investigations have identified a number of parties in Hong Kong which may hold assets and records belonging to the companies that would be useful to the Liquidators in the furtherance of the liquidations, the Liquidators applied to the Supreme Court to issue a letter of request to the Hong Kong Court for recognition of the Liquidators appointment on terms that would allow them to advance their investigations.

Decision

The Court reiterated how, in recent cases, it has been providing assistance and recognition to a liquidator of a foreign incorporated company appointed by the court of the company’s place of incorporation if the insolvency laws of the place of incorporation grant similar powers to a liquidator. Therefore, similar orders sought by the Liquidators in the present case were also granted.

Third parties documents

The reason why the case is noteworthy is that the form of order differs in one respect from the orders granted in other recent cases. Based on the letter of request, one of the paragraphs reads:

“The Liquidators have and may exercise such powers… for the following purposes: (a) to obtain from third parties such documents and information as concern the Company, including its promotion, formation, business dealings, accounts, assets, liabilities or affairs in order to facilitate the Liquidators investigations into the assets and affairs of the Company and the circumstances which gave rise to its insolvency…”.

Such extension of powers under the letter of request distinguishes the case from the others. The judge was of the view that such wording gives them a right to obtain from third parties documents that the Liquidators are not entitled to without an order of the Court under section 221(3) Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap. 32 (the “Ordinance”). Also, the section provides that a liquidator only has the right to obtain documents “relating to the company”, but not documents that concern its promotion, formation, trade, dealings, affairs or property. Hence, the judge granted the following order:

“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”.

Given the differences between the terms of the letter of request and the Ordinance, the judge granted an order with language that would avoid giving an impression that it places a third party under a compulsion to provide documents or information, as this would require a further order of the Court in an inter partes application. Hence, there is a stark difference in the use of diction between the letter of request, where the phrase “to obtain” is used, and the order, where the phrase “to request and receive” is used.

Conclusion

While the handful of cases that have granted orders confirm the court’s willingness to grant similar orders, the judge reminded lawyers of the importance to comply with the procedural requirements under Practice Direction 3.5 and be accompanied by a paginated and indexed hearing bundle to assist the court to process them quickly.

The corollary of the Court’s order in the case also means that the Court is now ready for liquidators to seek documents and information from third parties in Hong Kong by request, as long as it is covered in its letter of request. However, this must not be confused as the Court’s readiness to grant any order as it is in the letter of request. The Court is likely to balance any power stated under the letter of request with the current statutory and common law in Hong Kong before granting an order.