Gti Holdings Ltd
| Jurisdiction | Cayman Islands |
| Judge | (Doyle, J.) |
| Judgment Date | 15 March 2022 |
| Court | Grand Court (Cayman Islands) |
(Doyle, J.)
Conflict of Laws — companies — place of incorporation — Hong Kong court made winding up order in respect of Cayman incorporated company — Grand Court subsequently made winding up order and appointed joint official liquidators — Grand Court took account of views of company’s stakeholders, primacy of place of company’s incorporation and interests of comity
Held, ruling as follows:
(1) The court made a winding up order because the company was unable to pay its debts. The court appointed the JPLs as JOLs because they were best placed to take matters forward in the best interests of the company, its creditors and other relevant stakeholders. The court took into account the views of the company’s stakeholders and, in the interests of comity, the views expressed by the Hong Kong court and the Hong Kong Official Receiver. The directors of the company, a substantial group of creditors and the investor were supportive of a winding up order being made in the Cayman Islands and of the JPLs being appointed JOLs. The court noted carefully the orders made and judgments issued by the Hong Kong court and noted that the Hong Kong Official Receiver did not express a view other than to say that the proceedings in Hong Kong and the Cayman Islands were separate and distinct. The court also took into account the fact that a winding up order made by the Hong Kong court would have limited effect on subsidiaries outside Hong Kong and that an order made by a court in the place of incorporation of the company should be more effective internationally in accordance with well-established principles of private international law. The judge did not want to place the Grand Court in potential conflict with the Hong Kong court. Having considered the position in detail, he concluded, taking into account all relevant factors including the primacy of the place of incorporation, comity concerns, the views of stakeholders and the lack of opposition, that it was just and appropriate to make the orders. The court expressed the wish that the Hong Kong court would give the JOLs recognition and assistance (paras. 54–58; paras. 65–66).
(2) It was a very serious step for a foreign court to make a winding up order against a company incorporated under the laws of another jurisdiction. Usually the best and most appropriate way forward was to leave it to the courts of the place of incorporation of the company to deal with winding up applications and to be treated as the courts with primary jurisdiction. In international insolvency cases, the common law and the principles of private international law all emphasized the importance and primacy of the place of a company’s incorporation. England and Wales and the Cayman Islands were not alone in respecting the primacy of the law of the place of a company’s incorporation. Other sophisticated common law jurisdictions (including Bermuda and Hong Kong) had also delivered judgments that generally respected the primacy of the place of the company’s incorporation. A winding up in the place of incorporation would normally be given priority, whereas a foreign winding up had only local operation. In the present case it was to be hoped that the Hong Kong court would strive to avoid unnecessary conflict and ensure that the Hong Kong winding up was conducted as ancillary to the principal liquidation of the company which was incorporated in the Cayman Islands (paras. 29–53).
(1)Altair Asia Invs. Ltd., In re, Cause No. FSD 200 of 2019, Grand Ct., March 16th, 2020, unreported, considered.
(2)Bank of Credit & Comm. Intl. S.A. (No. 10), In re, [1997] Ch. 213; [1996] 4 All E.R. 796, considered.
(3)China Agrotech Hldgs. Ltd., In re, 2019 (2) CILR 302, considered.
(4)China Huiyuan Juice Group Ltd., Re, [2020] HKCFI 2940, referred to.
(5)Drax Holdings Ltd., In re, [2003] EWHC 2743 (Ch); [2004] 1 W.L.R. 1049; [2004] 1 All E.R. 903, considered.
(6)Founding Partners Global Fund Ltd., Re, [2011] Bda LR 22, referred to.
(7)Global Fidelity Bank Ltd., In re, 2021 (2) CILR 361, referred to.
(8)Grand TG Gold Holdings Ltd., In re, Cause No. FSD 84 of 2016, Grand Ct., August 29th, 2016, unreported, considered.
(9)Guoan Intl. Ltd., In re, 2021 (2) CILR 625, considered.
(10)Hunt v. Transworld Payment Solutions U.K. Ltd., [2020] SC (Bda) 14 Com, considered.
(11)Impex Ltd., In re, 2003–05 MLR 115, referred to.
(12)International Tin Council, Re, [1987] Ch. 219; [1987] 2 W.L.R. 1229; [1987] 1 All E.R. 890, considered.
(13)Joint Official Liquidators of A Co. v. B & C, [2014] 5 HKC 152, considered.
(14)Kam Leung Siu Kwan v. Kan Kwan Lai (2015), 18 HKCFAR 501, considered.
(15)Li Yiqing v. Lamtex Holdings Ltd., [2021] HKCFI 622, considered.
(16)Moody Technology Holdings Ltd., In re, [2020] HKCFI 416, considered.
(17)Silver Base Group Holdings Ltd., In re, Cause No. FSD 329 of 2021, Grand Ct., December 8th, 2021, unreported, considered.
(18)Singularis Holdings Ltd. v. PricewaterhouseCoopers, [2014] UKPC 36; [2015] 1 A.C. 1675; [2015] 2 W.L.R. 971; [2015] BCC 66; [2014] 2 BCLC 597, considered.
(19)Sun Cheong Creative Dev. Holdings Ltd., In re, 2020 (2) CILR 942, considered.
(20)UCF Fund Ltd., In re, 2011 (1) CILR 305, referred to.
(21)Z-Obee Holdings Ltd., Re, [2018] 1 HKLRD 165, referred to.
A company sought a winding up order.
GTI Holdings Ltd. (“the company”) was incorporated in the Cayman Islands. It was the holding company of an international group. In May 2020, it presented a petition for an order that it be wound up on the ground of its inability to pay its debts. It sought the appointment of three individuals as joint official liquidators. It subsequently sought an order that the three individuals be appointed as joint provisional liquidators to review the feasibility of a debt restructuring plan. Parker, J. appointed the JPLs for restructuring purposes. The JPLs applied for and were granted, from time to time, various orders from the court pending the progression of the restructuring proposal.
In Hong Kong, a winding up petition (HCCW 51 of 2020) was first heard before Harris, J. in July 2020, and after several adjournments it was last listed before Harris, J. in November 2021. In September 2020, Harris, J. recognized the JPLs’ appointment as JPLs for restructuring purposes and allowed them to exercise certain powers in Hong Kong. In December 2020, the company applied to the Hong Kong court for an order that it be at liberty to convene a meeting of the creditors of the company for the purpose of considering and, if thought fit, approving a proposed scheme of arrangement. After a delay, in November 2021, Harris, J. directed that a fresh application to convene the scheme meeting be re-fixed for March 2022.
An adjourned hearing of the only remaining winding up petition in HCCW 51 of 2020 was listed for November 22nd, 2021 in Hong Kong. The company reached an agreement with the petitioner to further adjourn the hearing of the petition. However, on November 15th, 2021, Linda Chan, J. of the Hong Kong court considered that the hearing should take place because there were other supporting creditors of the petition and their agreement to the proposed adjournment had not been sought or obtained. Linda Chan, J., in face of opposition from the company, made a windingup order against the company on November 22nd, 2021. The JPLs claimed that Linda Chan, J. was aware that the hearing in respect of convening a meeting in respect of the scheme was due to be held in March 2022. Linda Chan, J. could see no proper basis for the company to seek a further adjournment of the petition. She did not consider the proposed scheme to be feasible. She considered it highly undesirable for the company with a substantial net deficit to remain in operation as a going concern. She considered that the unsecured creditors were entitled to ask the court to put the company into liquidation without further delay. There was no appeal against the winding up order in Hong Kong. The Hong Kong Official Receiver appeared to be the provisional liquidator of the company in Hong Kong.
The JPLs wished to coordinate and collaborate with the Official Receiver in Hong Kong to ensure a cost-effective and sensible outcome for the company’s stakeholders. Despite the Hong Kong winding up order, the directors of the company and the investor remained confident that the restructuring proposal was still viable.
The JPLs applied to the Grand Court for a winding up order and their appointment as JOLs in the jurisdiction of the Cayman Islands. The JPLs submitted that a winding up order was appropriate and necessary in the Cayman Islands for the following reasons: (i) although the company had some subsidiaries in Hong Kong, it had many subsidiaries in other places and the appointment of JOLs in the company’s place of incorporation would be more effective than the appointment of the Hong Kong Official Receiver as provisional liquidator; (ii) with their knowledge of the group, the JOLs would be much better placed to bring forward the restructuring plan in the best interests of all creditors; (iii) creditors representing 48% of the value of the total debt indicated willingness to consider a scheme of arrangement, 6.4% in value expressly objected to the restructuring proposal, leaving 45.6% who had not yet expressed a view in respect of the scheme of arrangement; (iv) for the scheme to be passed, the relevant number would be in respect of those present and voting within the relevant class, not a percentage of all creditors; (v) the best way forward was to make a winding up order in this jurisdiction and appoint the JPLs as JOLs, as there were unattractive alternatives, namely (a) the JPLs were discharged from office but there was still a foreign winding up on foot where a Cayman company was unable to pay its debts, or (b) the JPLs were still in place despite the Hong Kong winding up order...
To continue reading
Request your trial