Re The Joint Liquidators Of Nuoxi Capital Ltd (In Liquidation In The British Virgin Islands)

Judgment Date24 February 2021
Neutral Citation[2021] HKCFI 572
Year2021
Judgement NumberHCMP219/2021
Subject MatterMiscellaneous Proceedings
CourtCourt of First Instance (Hong Kong)
HCMP219/2021 RE THE JOINT LIQUIDATORS OF NUOXI CAPITAL LTD (IN LIQUIDATION IN THE BRITISH VIRGIN ISLANDS)

HCMP 219/2021

[2021] HKCFI 572

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 219 OF 2021

________________

IN THE MATTER OF Nuoxi Capital Limited (In Liquidation in the British Virgin Islands)

and

IN THE MATTER OF the inherent jurisdiction of the Court

________________

BY

THE JOINT LIQUIDATORS OF NUOXI CAPITAL LIMITED
(IN LIQUIDATION IN THE BRITISH VIRGIN ISLANDS)
Applicants

________________

Before: Hon Harris J in Chambers

Date of Hearing: 24 February 2021

Date of Decision: 24 February 2021

_________________

D E C I S I O N

_________________


1. The Liquidators of Nuoxi Capital Limited (“Company”), which is incorporated in the British Virgin Islands (“BVI”), have issued an originating summons for recognition of their appointment in the BVI and additional orders providing assistance for the steps that they anticipate they will have to undertake in Hong Kong to progress the liquidation.

2. The Court has developed a standard procedure and orders for such applications, which have become increasingly common for reasons explained in other decisions [1]. This is the 19th that I have dealt with since May 2020 when the general adjourned period necessitated by COVID-19 ended. Nearly all applications involve Mainland business groups listed on the Main Board of the Hong Kong Stock Exchange. Many are straightforward although their number is illustrative both of the financial problems caused by the pandemic and the strain put on judicial resources by a significant increase in restructuring cases.

3. This application has some novel components and requires amendment to the standard forms, which I explain. The form of order I have granted is appended to these reasons.

4. The application is necessary because the Company has claims against various companies incorporated in Hong Kong including Founder Group (Hong Kong) Limited (“FGHK”). In particular, the Liquidators intend to issue a petition to wind-up FGHK, which is insolvent, in order to protect claims FGHK has in the Mainland administration of the Peking University Founder Group Company Limited (“Peking Founder Group”). The Company itself is an indirect subsidiary of Peking Founder Group. It was a fund raising entity for the Peking Founder Group and the debt, which led to its liquidation arose from its issue and non-performance of bonds in respect of which Peking Founder Group and an associated company have issued keepwell deeds and undertakings. It is enforcement of rights under those agreements in Hong Kong that is the catalyst for this application.

5. In the normal way the application is supported by a letter of request from the BVI Court. It is well-established that the Hong Kong Court will recognise liquidators appointed in a company’s place of incorporation and provide assistance consistent with Hong Kong insolvency law and practice. In the case of applications from jurisdictions with similar insolvency law such applications are normally straightforward. There are two particular matters, which were drawn to my attention during the application, which require modification to the standard form.

6. The first is that the Liquidators’ powers should include presentation of a winding-up petition against FGHK once the necessary sanction is obtained from the BVI court. The second is contemplated action in Hong Kong to enforce rights under keepwell deeds, which are governed by Hong Kong law. The relevant paragraphs of the order appended to this decision are [2(g)(iii) & (iv)].

7. As I explain in FDG Electric Vehicles [2] any order can only be granted to assist action taken to progress a liquidation within the jurisdiction of the Hong Kong Court. It follows that this Court should only grant powers in respect of enforcement rights against assets that are situated in Hong Kong. The principles of private international law, which determine the situs of assets for the purpose of determining whether or not Hong Kong is the jurisdiction in which enforcement action should be taken are clear. It will suffice to refer to two authorities to demonstrate the principles relevant to the action the Liquidators contemplate taking in Hong Kong.

8. Generally, a claim against a Hong Kong incorporated debtor should be regarded as an asset situated in Hong Kong and, therefore, action intended to realise the value of that asset to satisfy a claim will generally be properly commenced in Hong Kong. The relevant principles are explained by Peter MacDonald Eggers QC sitting as a Deputy High Court Judge in Hardy Exploration & Production (India) Inc v Government of India [3] at [82(4) & (5)]:

“(4) The principle determining the situs of the debt or other chose in action is ‘that debts or choses in action are generally to be looked upon as situate in the country where they are properly recoverable or can be enforced’: Martin v Nadel [1906] 2 KB 26, 31; see also Swiss Bank Corpn v Boehmische Industrial Bank [1923] 1 KB 673, 678-679; Richardson v Richardson [1927] P 228, 235-236; Kwok v Comr of Estate Duty, pp 1040-1041; Hillside (New Media) Ltd v Baasland [2010] 2 CLC 986, para 33; the Taurus Petroleum case, paras 30, 35-36, 124; ...

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