RE TRINITY INTERNATIONAL BRANDS LTD

HCMP 480/2023

[2023] HKCFI 1581

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 480 OF 2023

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REASONS FOR JUDGMENT

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1.  There is before the court an ex parte originating summons filed on 27 March 2023 by the joint and several liquidators[1] (“Liquidators”) of Trinity International Brands Limited (利邦國際品牌有限公司) (in creditors’ voluntary liquidation) (“Company”) for an order that a letter of request in the form annexed thereto be issued (“Letter of Request”) to the Shanghai No. 3 Intermediate People’s Court (上海市第三中級人民法院) (“Shanghai Court”) seeking recognition and assistance of the Company’s liquidation and the Liquidators.

2.  The Liquidators say that they require recognition and assistance of the Shanghai Court to facilitate performance of their functions in taking possession and control of the Company’s assets in the Mainland in particular, the 100% equity in 利邦(上海)服裝貿易有限公司 (translated as Trinity Distributions & Retails (Shanghai) Limited) (“Trinity Shanghai”), a company established in Shanghai registered in the name of the Company. 

Background

3.  The Company was incorporated on 18 May 2006 under the former Companies Ordinance (Cap. 32).  The Company owns various famous brands including Kent & Curwen, Gieves & Hawkes, Cerruti 1881 and D’URBAN.  Its principal asset is the 100% equity in Trinity Shanghai.

4.  On 2 December 2022, a resolution was passed by the sole member to put the Company into voluntary liquidation.  At the time of its liquidation, the Company had 2 directors, Ms Qiu Chenran (邱晨冉) (“Ms Qiu”) and Ms Su Xiao.  At the meeting of the creditors held on 13 December 2022, the appointment of the Liquidators was confirmed. 

5.  The Company is an indirect wholly owned subsidiary of Trinity Limited (利邦控股有限公司) (“Trinity”), a company incorporated in Bermuda whose shares were listed on The Stock Exchange of Hong Kong Limited (“HKEx”).

(1)  Until its demise, Trinity through its subsidiaries (together “Group”) engaged in the business of retailing and wholesaling of premium menswear business and operated 107 retail stores of which 74 were located in the Mainland. 

(2)  Mr Qiu Yufu (邱亞夫) controlled 51% of Trinity’s issued shares.  His daughter, Ms Qiu, was an Executive Director and Vice President of the board of Trinity, and Executive President of the  Group.   She was responsible for the Group’s new retail business development including e-commerce, online and offline operations and related investments and acquisitions.

(3)  On 13 August 2021, Trinity was wound up by the court in Bermuda on insolvency ground.  The Liquidators and a practitioner in Bermuda[2] were appointed as liquidators of Trinity.  An order recognising the winding-up order and the appointment of liquidators was made by Harris J on 23 February 2022[3]. 

(4)  Trading in Trinity’s shares had since 1 April 2021 been suspended and its listing status was cancelled by HKEx with effect from 31 October 2022. 

6.  Trinity Shanghai is the operating arm of the Group, and carries on business in Shanghai.  It is one of the licencees of the Company and sold products bearing the brand names Kent & Curwen, Gieves & Hawkes and Cerruti 1881.  Apart from operating retail stores, Trinity Shanghai also operates online stores at Tmall and JingDong, which are e-commerce platforms operating in the Mainland.  Ms Qiu is its legal representative of Trinity Shanghai.

7.  The Liquidators have since their appointment been investigating the Company’s affairs.  Although Trinity Shanghai had in the past provided regular updates on its financial and operational information to Trinity, since January 2023, no further information has been provided to the Liquidators despite repeated requests made to the management of Trinity Shanghai (“Management”). The Liquidators’ letter dated 10 February 2023 to Ms Qiu (in her capacity as legal representative of Trinity Shanghai) requiring her to provide information in relation to the financial state and the operation of Trinity Shanghai remains unanswered. 

8.  According to the Liquidators’ investigation, the Management (including Ms Qiu) has been taking steps to transfer the business and assets of Trinity Shanghai to another entity related to Ms Qiu namely, Trinity (Shandong) Brands Garments Ltd (“Trinity Shandong”).  These include:

(1)   The attempts made by Ms Qiu, with the assistance of Trinity Shanghai’s staff, to replace Trinity Shanghai with Trinity Shangdong as the trading entity at Tmall and JingDong;

(2)  In February 2023, Trinity Shandong procured the sales management agreements in relation to the retail stores of Kent & Curwen at Wunan Changsha Friendship Shopping Mall and SASSEUR (Changsha) Shopping Mall to be transferred from Trinity Shanghai to itself;

(3)  In early February 2023, Trinity Shandong attempted to change the owner of the Weibo accounts of Cerruti 1881, Kent & Curwen, and Gieves & Hawkes from Trinity Shanghai to itself;

(4)  In early February 2023, Trinity Shandong attempted to change the owner of WeChat accounts owned and operated by Trinity Shanghai to itself;

(5)  On or about 1 February 2023, Trinity Shanghai’s office address was changed to Trinity Shandong’s office address;

(6)  Trinity Shandong informed the vendors and service providers  that the existing contracts made between Trinity Shanghai and them would be transferred to Trinity Shandong;

(7)  The employees of Trinity Shanghai have been transferred to Trinity Shandong; and

(8)  Trinity Shandong has been using the brand names of Cerruti 1881 and Kent & Curwen without the authorisation of the Liquidators and hence the Company.

9.  Against the above background, the Liquidators say that they require recognition and assistance from the Shanghai Court so as to take possession of and deal with the Company’s assets in the Mainland in particular, Trinity Shanghai. 

Applicable Principles

10.  The court has power under common law to issue a letter of request to facilitate the liquidator in seeking recognition and assistance from another court in order to perform his duties in the jurisdiction of that court.  In so far as mutual recognition and assistance of insolvency proceedings between the courts of the Mainland and of Hong Kong is concerned, a consensus was reached on 14 May 2021 between the Supreme People’s Court (“SPC”) and the Government of Hong Kong which has been described as the “Cooperation Mechanism”. 

11.  For the purpose of the Cooperation Mechanism, the following documents are published:

(1)  The “Record of Meeting of the Supreme People’s Court and the Government of th eHong Kong Special Administrative Regionon Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings between the Courts of the Mainland and of the Hong Kong Special Administrative Region” signed by the Secretary for Justice and the SPC on 14 May 2021 (“Record of Meeting”).   

(2)  The “Procedures for a Mainland Administrator’s Application to the Hong Kong SAR Court for Recognition and Assistance - Practical Guide” issued by the Department of Justice.

(3)  “The Supreme People’s Court’s Opinion on Taking Forward a Pilot Measure in relation to the Recognition of and Assistance to Insolvency Proceedings in the Hong Kong Special Administrative Region” (“SPC’s Opinion”).

12.  The Record of Meeting and the SPC Opinion apply to an application made by a Hong Kong liquidator for recognition and assistance from a Mainland court.  In considering such application, the liquidators[4] have to satisfy the court that:

(1)  the requirements stipulated in the “Cooperation Mechanism” are complied with; and

(2)  the recognition and assistance sought is necessary to enable them to carry out their functions as liquidators of the company in the Mainland.  This requirement is obvious, as it would not be in the interests of the company for the liquidators to incur costs in making the application unless there is a need to do so.  A common example is where the liquidators are not able to take control of the company’s assets located in the Mainland.  

13.  Under the Cooperation Mechanism, an application for recognition and assistance from a Mainland court has to meet the following criteria:

(1)  The application is made by a liquidator[5] in insolvency proceedings in Hong Kong (“HK liquidator”). This includes compulsory winding up, voluntary winding up and scheme of arrangement promoted by a liquidator or provisional liquidator and sanctioned by the Hong Kong court (collectively “HK Insolvency Proceedings”) (§2 of Record of Meeting; §§2-3 of SPC’s Opinion).

(2)  The recognition and assistance is sought from a court at a pilot area in the Mainland namely, the People’s Courts in Shanghai Municipality, Xiamen Municipality in Fujian Province and Shenzhen Municipality in Guangdong Province (§2 of Record of Meeting; §1 of SPC’s Opinion). 

(3)  The order sought is for recognition of the HK liquidator’s office, and grant of assistance for discharge of his duties as liquidator or provisional liquidator (§2 of Record of Meeting).

(4)  Hong Kong has been the centre of main interests (“COMI”) of the company in liquidation continuously for at least 6 months (§4 of SPC’s Opinion).

(5)  The company’s principal assets in the Mainland are in a pilot area, or it has a place of business or a representative office in a pilot area (§5 of SPC’s Opinion).

14.  Further, §14 of the SPC’s Opinion states that after recognising the HK Insolvency Proceedings, the Mainland court may, upon application:

“decide to allow the [HK liquidator] to perform the following duties in the Mainland:

(1) taking over the property, seals, account books, documents and other data of the debtor;

(2) investigating into the financial position of the debtor and preparing a report on such position;

(3) deciding on the matters of the debtor’s internal management;

(4) deciding on day-to-day expenses and other necessary expenditures;

(5) before the holding of the first creditors’ meeting, deciding whether to continue or suspend the business of the debtor;

(6) managing and disposing of the debtor’s property;

(7) participating in legal actions, arbitrations or any other legal proceedings on behalf of the debtor;

(8) accepting declaration of claims by creditors in the Mainland and examining them;

(9) performing other duties that the people’s court considers that he may be so allowed.

If the [HK liquidator] performs any of the abovementioned duties that involves waiver of property rights, creation of security on property, loan, transfer of property out of the Mainland and other acts for disposing of the property that has a major impact on the creditors’ interest, it requires separate approval by the people’s court.

  The [HK liquidator] shall not perform his duties beyond the scope provided by the Enterprise Bankruptcy Law of the People’s Republic of China and by the law of the Hong Kong Special Administrative Region.”

15.  The duties specified in §14 of the SPC’s Opinion are relevant to the court’s consideration of the application in 2 respects:

(1)  It informs the court the scope of the duties a Mainland court may allow a HK liquidator to perform in the Mainland.  The court would not approve the issue of a letter of request which goes beyond such duties, as the court does not act in vain and would not make a request which goes beyond what would be allowed by a Mainland court. 

(2)  It reinforces the need for the letter of request (and the Decision if one is given by the court) to spell out the duties of the HK liquidator under Hong Kong laws, as the Mainland court would need to be satisfied that such duties are provided by the laws of Hong Kong. 

16.  Mr Look Chan Ho, counsel for the Liquidators, draw to the court’s attention that since the Cooperation Mechanism come into place, the court has acceded to the following applications and issued letters of request to the relevant courts in the Mainland:

(1)   In Re Samson Paper Co Ltd [2021] 3 HKLRD 727, the court approved the issue of a letter of request to the Shenzhen court in respect of a Hong Kong company which had been in voluntary liquidation;

(2)  In Re Zhaoheng Hydropower (Hong Kong) Ltd [2022] HKCFI 248, the court issued a letter of request to the Shenzhen court in respect of a Hong Kong company which had been wound up by the court in Hong Kong;

(3)  In Re Ozner Water International Holding Ltd [2022] HKCFI 363, the court issued a letter of request to the Shenzhen court in respect of a company incorporated in the Cayman Islands and registered as a non-Hong Kong company which had been wound up by the court in Hong Kong; and

(4)  In Re Hong Kong Fresh Water International Group Ltd [2022] HKCFI 924, the court issued a letter of request to the Shanghai Court in respect of a Hong Kong company which had been wound up by the court in Hong Kong.

17.  Mr Ho informs the court that as far as he is aware:

(1)  the Shenzhen court recognised the HK liquidators in Re Samson Paper Co Ltd in proceedings intitled ˂ (2021) 粤03认港破1号˃; and

(2)  the Shanghai Court recently recognised the HK liquidators in Re Hong Kong Fresh Water International Group Ltd.

Discussion

18.  For the reasons explained below, I am satisfied that this is an appropriate case for the court to approve the issue of a letter of request to the Shanghai Court in the terms set out in Appendix A.  The letter of request is issued in simplified Chinese as it is issued to the Shanghai Court. 

19.  The requirements stipulated in the Cooperation Mechanism are satisfied in that:

(1)  The application is made by the Liquidators of the Company, and the Company is under voluntary winding up in Hong Kong. 

(2)  The recognition and assistance is sought from the Shanghai Court, which is a court at a pilot area.

(3)  The order sought is for recognition of the Liquidators’ office, and grant of assistance for discharge of their duties as liquidators of the Company.

(4)  Hong Kong has been the COMI of the Company in that the Company was incorporated in Hong Kong, had carried on its business in Hong Kong and the liquidation has been conducted here. 

(5)  The Company’s principal asset, that is the 100% equity in Trinity Shanghai, is located in Shanghai.

20.  At the request of this Court, the Liquidators have modified the terms of the letter of request so that it contains (1) a description of the duties of the Liquidators under the relevant provisions of the Companies (Winding up and Miscellaneous Provisions) Ordinance (Cap. 32) (“Ordinance”); (2) the recognition and assistance sought from the Shanghai Court to facilitate the discharge of their duties as liquidators of the Company in the Mainland; and (3) the specific reference to the Liquidators’ need to take control of Trinity Shanghai.  A table summarising the powers stated in the letter of request and the relevant provisions under the Ordinance is included in Appendix B.

21.  It is necessary for the Liquidators to seek recognition and assistance from the Shanghai Court so that they can take control over Trinity Shanghai, having regard to the following facts and matters:

(1)  The principal, if not the most valuable, asset of the Company is the 100% equity in Trinity Shanghai registered in its name;

(2)  There appears to be an ongoing assets-striping exercise undertaken by the  Management which, if allowed to continue, would result in the business and assets belonging to Trinity Shanghai to be transferred to Trinity Shandong for no consideration;

(3)  the Management continued to ignore the Liquidators’ requests for provision of information concerning Trinity Shanghai;

(4)  the Management refused to hand over the licences, chops and seals of Trinity Shanghai to the Liquidators and even refused to allow the Liquidators to have access to the office of Trinity Shanghai; and

(5)  the Management failed to cooperate with the Liquidators in taking control over Trinity Shanghai when they knew full well that the Liquidators are the only persons having authority to act on behalf of the Company, and are entitled to exercise the Company’s right as holder of the 100% equity in Trinity Shanghai to replace the legal representative and directors of Trinity Shanghai and take control over its assets, seals, chops and documents.

22.  The letter of request is to be signed by the Registrar of the High Court.  This accords with the practice of the court approving the issue of the letter of request for other purposes (see for eg., the practice discussed in Hong Kong Civil Procedure 2023, §39/3/5, p. 976). 

23.  The letter of request, once signed, will be returned to the Liquidators so that they can include it in the materials required to be submitted to the Shanghai Court. 

24.  As for costs, the Liquidators submitted a statement of costs for gross sum assessment claiming a very substantial amount including a total of 142.5 hours charged by 3 fee earners at the rates of HK$5,800, HK$5,200 and HK$3,200 respectively.  It is difficult to see how the Liquidators could allow the Company to incur legal costs of this magnitude in circumstances where (1) the application is uncontested and does not involve any complicated facts or arguments; (2) the applicable principles can readily be discerned from the Cooperation Mechanism and the cases cited by Mr Ho; and (3) counsel has been instructed to comment on and settle the application papers and prepared both sets of submissions.  I would only allow 50% of the total costs claimed on the basis that the disbursements are allowed in full.  This is a very generous amount taking into account the relatively novel nature of the application such that solicitors might have taken more time than usual in obtaining instructions from the Liquidators.  In future, unless the application involves any complicated facts or law, the HK liquidator should not expect the court to allow them to recover their legal costs of such magnitude.

Appendix A

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根据认可和协助香港特别行政区破产程序试点方案发出的司法协助
请求函

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致：上海市第三中级人民法院（“上海法院”）

鉴于：

1.  本法庭是对香港特别行政区（“香港”）的公司法和破产法行使管辖权的法庭。

2.  利邦国际品牌有限公司（“该公司”）是一家于2006年5月18日根据香港法注册成立的公司。

3.  2022年12月2日，该公司唯一成员通过了一份公司自动清盘的书面决议。

4.  2022年12月13日，该公司举行债权人会议，且债权人已在会议中决议委任富事高咨询(香港)有限公司 (FTI Consulting (Hong Kong) Limited) 的周伟成先生和霍羲禹先生为该公司的共同及个别清盘人（“清盘人”）。

5.  根据香港法（包括《公司 (清盘及杂项条文) 条例》（第32章）第199(2) 和 (3) 条、243A(2) 条和251(1)(b) 条），清盘人已获授权共同及个别地作出（除其他外的）以下行为：

(a)  将该公司有权享有或看似有权享有的所有财产及据法权产，收归该清盘人保管或控制（第243A(2)条）；

(b)  藉公开拍卖或私人合约，出售该公司的土地财产、非土地财产及据法权产，并有权将该等财产及权产全盘转让予任何人或任何公司，或将它们分拆出售（附表25第3部第1项）；

(c)  以该公司名义和代表该公司作出所有作为及签立所有契据、收据及其他文件，并可为该目的而在有需要时，使用该公司印章（附表25第3部第2项）；

(d)  以该公司名义和代表该公司提起任何诉讼或其他法律程序，或以该公司名义和代表该公司在任何诉讼或其他法律程序中答辩（附表25第2部第1项）；

(e)  调查该公司失败的因由及在其交易及事务中就此作出的处理；及

(f)  作出为结束该公司事务及派发该公司资产而需要作出的所有其他事情（附表25第3部第9项）。

6.  由于该公司在内地的主要资产是其全资子公司–利邦(上海)服装贸易有限公司（“利邦上海”），清盘人认为为了有效地行使其在香港法项下的权力，须由上海法院认可对他们的委任。

7.  因此，清盘人认为，根据香港法律，向上海法院寻求济助属适当行为，以便（特别及最重要的是）该法院能认可清盘人及其权力，从而允许他们：

(a)  索取并从第三方，包括利邦上海法定代表人、董事和高管（及曾经担任此等职位的人员）收到与利邦上海及其发起、组成、业务交易、账目、资产、债务或事务有关的文件和信息；

(b)  找到、保护、取得及管有和控制利邦上海有权或看似有权在中华人民共和国（“中国”）内地法院管辖权内拥有的一切资产和财产；

(c)  找到、保护、取得及管有和控制利邦上海在中国内地法院管辖区内的账簿、文件和记录，包括会计和法定记录；

(d)  调查利邦上海的事务，并在可能必要的范围内针对利邦上海法定代表人、董事或高管（及曾经担任此等职位的人员）对利邦上海实施的不当行为，向中国内地法院提起法律程序和作出一切申请，当中不论是以其自身名义或以公司或利邦上海名义; 及

(e)  行使其作为利邦上海的唯一股东的一切权利，包括但不限于通过股东决议对利邦上海进行更改、罢免及任命其法定代表人、董事或高管或进行自愿清盘。

8.  本案所提交的证据已证明并令本法庭信纳，向上海法院提出协助请求符合正义。为使清盘人能够履行其职责，谨请上海法院协助本法庭，在其认为适当的范围内，授权清盘人根据适用的内地法律在内地行使香港法律赋予他们的所有权力、职责和酌情权。

9.  本法庭谨请上海法院为清盘程序及清盘人提供协助，签发命令并指示：

(a)  该公司的清盘程序和清盘人的委任均得上海法院的认可；及

(b)  清盘人拥有并可行使香港法赋予他们的权力（如上文第5段所载），并可在内地法律允许的最大范围内行使，从而允许清盘人（包括但不限于）：

i. 从第三方，包括但不限于利邦上海的法定代表人邱晨冉及高管/前高管人员顾风美、苏晓、鱼建华、陈良光、杜元姝（统称 “有关人员”）索取并接收一切与利邦上海及其发起、组成、业务交易、账目、资产、债务或事务有关的文件（包括但不限于外商投资企业批准证书（正副本）、营业执照（正副本）、公章、法人章、银行预留印鉴、财务专用章、合同专用章、发票专用章）和信息（包括但不限于自利邦上海成立以来的财务报表、审计报告、会计账簿、原始会计凭证）；

ii. 找到、保护、取得及管有和控制利邦上海有权或看似有权在中国内地法院管辖权内拥有的一切资产和财产；

iii. 找到、保护、取得及管有和控制利邦上海在中国内地法院管辖区内的账簿、文件和记录，包括会计和法定记录；

iv. 调查利邦上海的事务，并在可能必要的范围内针对利邦上海有关人员对利邦上海实施的不当行为，向中国内地法院提起法律程序和作出一切申请，当中不论是否以其自身名义或以该公司或利邦上海名义；及

v. 行使该公司其作为利邦上海的唯一股东的权利，包括但不限于通过股东决议对利邦上海进行更改、罢免及任命其法定代表人、董事或高管或进行自愿清盘。

10.  本法庭确认，已根据香港的程序和法律发出本请求函及作出相关申请。

11.  为免产生疑问，寻求该协助旨在获得与本法庭因该公司资产专属于本法庭的管辖范围内所授予的济助大致相符的济助。

12.  本法庭进一步确认，香港法院将在类似情况下，并在行使其固有管辖权时，认可上海法院的请求函，并就该请求函提供可能需要的协助（受香港法律的适用限制约束）。

日期：2023年           月        日

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邝卓宏

香港特别行政区

高等法院司法常务官

Appendix B