China Agrotech Holdings Ltd

JurisdictionCayman Islands
Judge(Segal, J.)
Judgment Date19 September 2017
CourtGrand Court (Cayman Islands)
Date19 September 2017
Grand Court, Financial Services Division

(Segal, J.)

IN THE MATTER OF CHINA AGROTECH HOLDINGS LIMITED

C. Stanley, Q.C. and S. Maloney for the liquidators.

Cases cited:

(1) African Minerals Ltd. (Joint Administrators) v. Madison Pacific Trust Ltd., HCMP 865/2015; [2015] HKEC 641, referred to.

(2) Anderson, In re, [1911] 1 K.B. 896, dicta of Phillimore, J. considered.

(3) BCCI (Overseas) Ltd. v. BCCI (Overseas) Ltd. (Macau Branch), [1997] HKLRD 304, considered.

(4) Basis Yield Alpha Fund (Master), In re, 2008 CILR 50, referred to.

(5) Cambridge Gas Transp. Corp. v. Navigator Holdings plc (Creditors’ Cttee.), 2005–06 MLR 297; [2006] UKPC 26; [2007] 1 A.C. 508; [2006] 3 W.L.R. 689; [2006] 3 All E.R. 829; [2006] 2 All E.R. (Comm) 695; [2006] BCC 962; [2007] 2 BCLC 141, considered.

(6) Davidson’s Settlement Trusts, In re (1873), L.R. 15 Eq. 383; 37 J.P. 484; 42 L.J. Ch. 347; 21 W.R. 454, considered.

(7) Dickson Group Holdings Ltd., Re, [2008] Bda LR 34, followed.

(8) Employers’ Liability Assur. Corp. v. Sedgwick, Collins & Co. Ltd., [1927] A.C. 95, considered.

(9) Felixstowe Dock & Ry. Co. v. U.S. Lines Inc., [1989] Q.B. 360; [1989] 2 W.L.R. 109; [1988] 2 All E.R. 77; [1987] 2 Lloyd’s Rep. 76, referred to.

(10) Fu Ji Food & Catering Servs. Holdings Ltd., In re, Grand Ct., FSD Cause No. 222 of 2010, unreported, followed.

(11) HIH Casualty & Gen. Ins. Ltd., In re, [2008] UKHL 21; [2008] 1 W.L.R. 852; [2008] 3 All E.R. 869; [2008] Bus. L.R. 905; [2008] BCC 349; [2012] 2 BCLC 655; [2008] BPIR 581; [2008] Lloyd’s Rep. I.R. 756, considered,

(12) Hooley Ltd., Re, [2016] CSOH 141; 2017 SLT 58; [2016] BCC 826, distinguished.

(13) International Tin Council, In re, [1987] Ch. 419; [1987] 2 W.L.R. 1229; [1987] 1 All E.R. 890; (1987), 3 BCC 103; [1987] BCLC 272, referred to.

(14) Kilderkin Invs. Grand Cayman v. Player, 1984–85 CILR 63, referred to.

(15) Lee Wah Bank Ltd., Re, [1926] 2 M.C. 81, considered.

(16) Norwich Pharmacal Co. v. Customs & Excise Commrs., [1974] A.C. 133; [1973] 2 All E.R. 943; [1973] F.S.R. 365; [1974] R.P.C. 101; (1973), 117 Sol. Jo. 567, referred to.

(17) Opti-Medix Ltd., Re, [2016] 4 SLR 312; [2016] SGHC 108, considered.

(18) Picard v. Primeo Fund, 2013 (1) CILR 164, considered.

(19) Queensland Mercantile & Agency Co. Ltd. v. Australasian Inv. Co. Ltd. (1888), 15 R. 935, considered.

(20) Rome v. Punjab National Bank (No. 2), [1989] 1 W.L.R. 1211; [1990] 1 All E.R. 58; [1989] 2 Lloyd’s Rep. 354; (1989), 5 BCC 785; [1990] BCLC 20, considered.

(21) Rubin v. Eurofinance SA, [2012] UKSC 46; [2013] 1 A.C. 236; [2012] 3 W.L.R. 1019; [2013] 1 All E.R. 521; [2013] 1 All E.R. (Comm) 513; [2013] Bus. L.R. 1; [2012] 2 Lloyd’s Rep. 615; [2013] BCC 1; [2012] 2 BCLC 682, followed.

(22) Singularis Holdings Ltd. v. PricewaterhouseCoopers, [2014] UKPC 36; [2015] A.C. 1675; [2015] 2 W.L.R. 971; [2015] BCC 66; [2014] 2 BCLC 597, followed.

(23) Stewart & Matthews Ltd., Re (1916), 10 WWR 154; 26 Man. R. 277, considered.

(24) Stichting Shell Pensioenfonds v. Krys, [2014] UKPC 41; [2015] A.C. 616; [2015] 2 W.L.R. 289; [2015] 2 All E.R. (Comm) 97; [2015] BCC 205; [2015] 1 BCLC 597, followed.

Legislation construed:

Companies Law (2016 Revision), s.86(1): The relevant terms of this sub-section are set out at para. 27.

Companies — liquidators — recognition of foreign liquidator — court has common law power to recognize and assist foreign liquidator appointed in jurisdiction other than that in which insolvent company incorporated — court to apply principle of modified universalism — foreign liquidators not to be given powers “as if” appointed as provisional liquidators by domestic court

Companies — liquidators — recognition of foreign liquidator — foreign-appointed liquidators of Cayman incorporated company authorized to apply under Companies Law (2016 Revision), s.86(1) for meeting of creditors to consider proposed scheme (parallel to foreign scheme), and to consent to scheme on company’s behalf — company had substantial connection with overseas jurisdiction — no likelihood of Cayman winding up

Foreign liquidators applied for recognition and assistance.

The company was incorporated in the Cayman Islands but had very significant connections to Hong Kong where its shares had been listed on the Hong Kong Stock Exchange and where it was administered and registered. In 2014, a creditor of the company had presented a winding-up petition in Hong Kong on the ground that the company was insolvent and unable to pay its debts. In 2015, the High Court of the Hong Kong Administrative Region had granted a winding-up order and appointed liquidators.

The liquidators considered that the best option for maximizing recoveries for the company’s creditors was to reorganize the company and give effect to a resumption proposal in order to allow the company’s shares to be relisted on the HKSE. Pursuant to the resumption proposal, a capital reorganization of the company’s share capital would take place so as to facilitate the issue of new shares in the company. Funds raised would be used to fund a settlement for the company’s creditors under the proposed schemes of arrangement.

In order to give effect to the resumption proposal and to satisfy the HKSE’s resumption conditions, the liquidators would apply on behalf of the company to the Hong Kong court for the approval and sanctioning of a scheme of arrangement. In addition, they deemed it necessary for a parallel scheme to be implemented in the Cayman Islands, being the place of the company’s incorporation. They considered it undesirable for a winding-up petition to be presented in this jurisdiction and for an application then to be made for the appointment of provisional liquidators who could promote the Cayman scheme.

On the liquidators’ application, the Hong Kong court issued a letter of request seeking an order that the liquidators be recognized by the Grand Court and treated in all respects as if they had been appointed in this jurisdiction. The liquidators wished to be able to promote the Cayman scheme and to apply to the court for an order under s.86(1) of the Companies Law (2016 Revision) convening a meeting of creditors. An order was also sought that s.97 of the Law applied so that no action could be proceeded with or commenced against the company except with the leave of the court and on such terms as might be imposed. The liquidators applied ex parte for the orders sought.

The liquidators submitted inter alia that (a) the court had an inherent jurisdiction to recognize the powers given to, and to grant assistance to, foreign liquidators appointed in a country other than that in which the company was incorporated; and (b) such jurisdiction could and should be exercised at least where there would not be, or was unlikely to be, a winding up in the country of incorporation; probably also in any case in which the relief sought by the foreign liquidator would also be available to a Cayman official liquidator if appointed and there was no reason why, having regard to the company’s creditors and members and applicable policy considerations, the foreign liquidator should be required to commence or procure the commencement of a domestic winding up; and where the company had submitted to the jurisdiction of the relevant foreign court.

Held, ruling as follows:

(1) Under Part XVII of the Companies Law, the court had a statutory jurisdiction to recognize and assist foreign representatives appointed in the place of a company’s incorporation. In addition, the court had a common law power to recognize and assist foreign court appointed representatives. If the circumstances justified the use of that common law power, and subject to the limitations on its use, the power could be exercised by making suitable orders for the purpose of enabling the foreign court and its officeholders to surmount the problems posed for a worldwide winding up of a company’s affairs by the territorial limits of its powers. In deciding whether and if so how to exercise the power, the court would have regard to and apply the approach known as the principle of modified universalism. Suitable orders included any order that the court could make in the circumstances based on and by applying the applicable domestic substantive or procedural law (including orders in the exercise of its case management powers with respect to the proceedings before it). The court would use and rely on domestic law to fashion and find a form of relief for the foreign liquidator that achieved the purpose for which the power could be exercised. But the domestic substantive or procedural law must be applicable to the particular case before the court. Therefore, the court could not grant relief by making an order that could only be made in reliance on a domestic statutory power which, by its terms, did not apply in the circumstances (e.g. by making an order that could only be made if a domestic scheme of arrangement had been applied for and approved but where there was no such scheme). Nor could the court make an order that granted relief to the foreign liquidator that depended on there being a domestic law right which did not exist in the circumstances. In each case the court must start by considering the nature and form of relief sought by the foreign liquidator. Sometimes the foreign liquidator would be asking the requested court only to apply its rules of private international law so as to permit the foreign liquidator to act in the name and on behalf of the company and to deal with its assets and rights. There might well be no need to rely on the common law power in such a case. Sometimes, the liquidator would be asking the requested court to exercise its case management powers in proceedings before it by adjourning or staying them or the execution of a domestic judgment arising therefrom (the exercise of such case management powers could be said to involve an exercise of the common law power). Sometimes, the foreign liquidator would...

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