RE PEREGRINE INVESTMENTS HOLDINGS LTD.

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

1998,CWU NO. 20

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Reasons for approval of sale of assets

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Rogers, J.A. :

1. On 2nd March 1998, I formally approved the contracts of sale entered into by Peregrine Investment Holdings Ltd and various other Peregrine companies and the liquidators whereby various assets of Peregrine were sold to BNP PrimeEast Securities Ltd., which I shall refer to as BNP. Normally, such matters would not require anything other than the Court's approval noted in an order but several matters arise out of this which require the reasons to be made public.

2. Provisional Liquidators were appointed in respect of Peregrine Investment Holdings Ltd on 13th January 1998. This was the holding company of a large group of companies. The group together operated as bankers and an investment house. The holding company was insolvent and liquidation appeared inevitable. Clearly, in such a situation a fast sale of the assets was desirable if for no other reason this would lead to a maximisation of the value of the assets. The order appointing the provisional liquidators provided that the liquidators could sell or dispose of any of the assets by way of private treaty, tender or auction upon such terms as the provisional liquidators may deem appropriate subject only in the case of sales of subsidiaries or entire business divisions to the liquidators obtaining leave to do so from the Court.

3. The first application for leave for sale of assets was made on 16th January. On 19th January, the Companies Judge sanctioned payment of salaries to employees. A further application for sanction of sale of certain shares was made on 2nd February, the first working day after Chinese New Year. That application had to be adjourned to 2:30 p.m. on the following day.

The sale to BNP

4. On 3rd February, newspaper reports appeared indicating that there had been a sale of what was termed the Peregrine "Greater China equity products business". This was generally regarded as being a prime asset of the Peregrine group and hence likely to be the source from which creditors could expect some significant asset recovery. The reports disclosed that BNP had conducted a press conference on 2nd February announcing the sale. Mr. Francis Leung, a former very senior executive of Peregrine also apparently took a prominent part at the press conference.

5. When those appearing on behalf of the provisional liquidators came before the Companies Judge on 3rd February, the Judge raised the matter as to whether there had indeed been a sale of assets to BNP. It was confirmed that an agreement for the sale of some assets to BNP had been entered into but that was subject to Court approval which the liquidators intended to apply for shortly. It was conceded that in conducting a press conference those responsible had not respected the confidentiality that was expected or indeed required under Clause 20 of the agreement which had been signed on the 27th January. That clause reads :

"20.1 Subject to Clause 20.2, neither the Purchaser nor any of the Vendors or the Liquidators may, before or after First Completion, make or issue a public announcement, communication or circular in respect of the subject matter of this Agreement, unless it has first obtained the written consent of each of the other parties to this Agreement, which may not be unreasonably withheld or delayed.

20.2 Clause 20.1 does not apply to a public announcement, communication or circular which is made in the form of an oral statement or a letter to the Transferred Employees or is required by law or a regulation of a stock exchange, if the party required to make or send it has, if practicable, first consulted and taken into account the reasonable requirements of the other parties."

6. Although one of the conditions for completion of the agreement was that it required approval for the Court, nevertheless in the meantime a number of provisions of the agreement took effect. In particular, the Peregrine employees in the Greater China equity business save and except for those who were termed key employees were to be transferred to BNP as soon as practicable. The agreement is silent as to how key employees were to be transferred but the Court has subsequently been told that they had resigned prior to the agreement being signed and had been employed by BNP.

7. Despite the fact that on 3rd February, counsel who appeared on behalf of the liquidators who is not the same counsel who appeared on 2nd March indicated that application would be made to sanction the Agreement, it was not until after normal Court hours on 9th February 1998 that that application to Court was first made. That application was based upon the 4th Affidavit of David Richard Hague. Because of acquaintance with one party who was connected with the transaction, the Companies Judge found it necessary to disqualify herself from hearing the application. At the hearing on the 9th February however the Companies Judge raised a number of matters she saw gave considerable cause for concern. She indicated that explanations would be expected in respect of them.

8. A further hearing was held before myself on 11th February 1998 when I indicated to the provisional liquidators that in view of a number of matters which caused concern, I would wish to have the views of the creditors ascertained. It was indicated on behalf of the liquidators that in any event a further affidavit would be filed dealing with questions which had been raised and the matter was adjourned until 23rd February.

9. On 23rd February, the matter was restored and heard in chambers both in the morning and in the afternoon. As I will refer to below, in the afternoon the Court held chambers in the offices where the Provisional Liquidators were carrying out their tasks to facilitate the availability of documents and information which could be gathered much more easily since those who held the information could be available immediately with access to their own records.

10. Prior to the hearing on 23rd February, further evidence had been filed by the Provisional Liquidators. Amongst that was a substantial body of evidence which showed that it would be impossible within the time available, namely the next 6 weeks for the creditors to be ascertained and their views taken. In the light of that, the Court abandoned any attempt to have the creditors' views ascertained. At the hearing on 23rd February, Mr. Poon S.C. appeared as counsel. He was instructed for the first time specifically to deal with the question of whether there should be a creditors' meeting. That matter having been decided the Court then went on to deal with the question of approval of the agreement about which Mr. Poon had not been instructed, nevertheless in view of the court's willingness to proceed, he agreed to assist the Court as best he could in the circumstances.

11. On the 23rd February, the matter was adjourned again primarily so that finalised agreements could be prepared for the Court's approval. As it transpired, a number of amendments had to be made to the agreements. Further evidence was also filed in relation to further questions raised by the Court.

The Agreement

12. As I have already said, the agreement which the Court was asked to sanction was dated 27th January. The liquidators have told the Court that the agreement was concluded prior to the Chinese New Year because it was feared that if no deal had been concluded by then, a number of what might be termed "critical" employees may have left the Peregrine group and may have taken employment elsewhere. The Peregrine business being what is termed a "people" business, the major assets were its employees, the organisation which the employees represented and the attractive force which in particular the critical employees had. If the employees left and the organisation disintegrated, the business as such would have little or no value to a prospective purchaser and the value would be dissipated. It was said that the proximity of the time when the business collapsed to the Chinese New Year made the matter very difficult for the provisional liquidators. In the circumstances, the liquidators had entered the agreement and in effect transferred all relevant employees to BNP employment.

13. Not unnaturally, concern arose that the Court was being presented with a deal which had been completed and which the Court had little alternative but to approve but that the deal might not have been the best that could have been achieved in the creditors' interest.

14. The contract which the Court was being asked to approve had been concluded after a notably short period during which offers had been invited. Offers had been apparently invited on Friday, 16th January with the closing date of noon on the 20th January. The negotiations had then dragged on until the 27th January. The arrangements which were the subject of the contract involved, as I have indicated, the transfer of non-key employees to BNP as soon as that could be achieved and the side arrangement entailed the departure of the key employees. In effect therefore long before the matter was brought to Court the Provisional Liquidators had let go of the key assets of a people business. In the interim, the arrangements under the agreement which had been signed were that the costs and expenses were to be borne by BNP. In the face of that alone, it would appear that notwithstanding the fact that the agreement provided that it was subject to Court approval, it would have been difficult to unravel.

15. Furthermore, even by the 11th February but certainly by the 23rd February, it was becoming increasingly apparent from reports in the press that BNP was undertaking business, specifically underwriting, on the strength of taking over the Peregrine greater China equity business. In this respect, I would draw attention to reports in respect of underwriting activities in relation to the International Bank of Asia (IBA) and in respect of placements in relation to China Merchants Holdings (International) Limited shares. In an affidavit filed by Francis Leung on the 2nd March and in evidence he gave to the Court that day, it was clear that he was the attractive force which bought in the IBA underwriting business to BNP, whilst the China Merchants business had yet to be completed.

Matters of concern on the initial evidence filed on the Application

16. The matters which gave cause for concern initially included the fact that it was apparent from the Provisional Liquidators' evidence that senior employees of Peregrine had "met with" BNP both prior to and subsequent to the appointment of Provisional Liquidators and at the time when the agreement was negotiated were close to making their own arrangements. In view of the expected very high remuneration based partly on a system of bonuses and other incentives of the senior employees, or some of them at any rate, the question obviously arose as to whether the creditors' interest had been properly looked after in the negotiations. In this respect, I would note the material produced to the Court on the 23rd February revealed that the contractual bonuses due to those employees of Peregrine Brokerage Limited who were entitled to them, were part of the liabilities assumed by BNP as part of the deal. These amounted to HK$18m. Had there been no insolvency the bulk of bonuses likely to be paid were discretionary bonuses. Mr. Hague's 4th affidavit discloses that Peregrine Management had calculated the discretionary bonuses for the whole of Peregrine organisation at US$25m.

17. Considerable doubt was generated by the manner in which the evidence on behalf of the Provisional Liquidators had been originally prepared. In the fourth affidavit of David Richard Hague, the following appears at paragraph 24 :-

"24. Summary of the BNP deal

In summary, Peregrine will, subject to Court sanction, sell to BNP the assets, liabilities and shares in the following companies :

Vendor Company	Description of what is to be Sold	Consideration to be Received
Peregrine Investments Holdings Limited	Peregrine trademarks for the Peregrine name to be used in the PRC and Hong Kong	US$129,199
Peregrine Futures Hong Kong Limited	Assets (net of Assumed) Liabilities) as per Schedule III (basically all of the business)1	US$1,171,001
	One share in Hong Kong Futures Exchange Limited	US$471,220
Peregrine Capital Limited	Assets as per Schedule I (basically the trading assets of the business)	US$717,544
Peregrine Brokerage Limited	Assets (net of Assumed) Liabilities) as per Schedule II (most of the assets and liabilities relating to the Greater China Team Business)1	US$1
	Three "A" shares in The Stock Exchange of Hong Kong Limited	US$1,937,985
Peregrine Management Limited	Assets and liabilities as per Schedule IV (the fixed assets used by the Greater China Team in Hong Kong)	US$2,500,000
Peregrine Nominees Limited	Shares in Peregrine Nominees Limited	US$1 _____________
		US$6,926,951

Add: Approximate amount of liabilities as assumed by BNP2	US$32,732,016
Total value of all consideration received3	US$39,658,967" ==============

18. On the face of this paragraph the reader would suppose that the Provisional Liquidators were to receive US39,658,967 on behalf of the creditors from the sale. Since only US$6,926,951 was to be in cash it was not at all obvious where the remainder of the consideration was going and whether it was going in an illegitimate direction perhaps to cover discretionary bonuses.

19. There then followed the notes :-

"Notes

1. The cash consideration payable for the assets of Peregrine Futures Hong Kong Limited and Peregrine Brokerage Limited is stated after subtracting therefrom the amount of the liabilities of those companies agreed to be assumed (and discharged) by BNP (see Note 2).

2. These liabilities agreed to be assumed (and discharged) by BNP are liabilities of Peregrine Futures Hong Kong Limited and Peregrine Brokerage Limited, and amounted to approximately US$261,868 and US$32,470,148 respectively. Many of these liabilities are liabilities to customers, clients or counterparties which BNP wishes to settle itself, as any failure to settle them by Peregrine could adversely affect the relevant relationships, which BNP wishes to continue in the future for its benefit. In addition the liabilities include approximately US$2,438,000 in respect of liabilities due to employees of Peregrine Brokerage who are transferring to BNP.

3. The total value of the consideration received is the sum of the consideration payable for the assets acquired and the value of the liabilities assumed (and agreed to be discharged) by BNP. The assets sold include deposits and cash balances of approximately US$20,459,000, and the value of the consideration received, net of the reduction in deposits and cash balances of the Vendor companies resulting from the sale thereof, is approximately US$19,200,000."

20. Note 3 is hardly a model of clarity. It would however leave the na?ve reader under the delusion that the value of consideration to be received was still US$19,200,000.

21. A close scrutiny of the agreement revealed that Schedule II showed that BNP was acquiring "accounts receivable from clients as at 19th January 1998 as set out in Appendix II A (save from those detailed in Appendix II B)". What that entailed could not be gathered from any of the affidavits nor from any material supplied to the Companies Judge. The Appendices were only supplied after a specific request from the Companies Judge.

22. The immediate concern was that there had been no apparent explanation of the difference between the cash sum to be received by the Provisional Liquidators, namely US$6.9m plus expenses and the US$19m. The short answer however has turned out to be that the consideration given by BNP was substantially less than US$19m by a figure of approximately US$10,677,104.81 which was the value of other assets of Peregrine Brokerage other than the cash balance of US$20m referred to in note 3. The unparticularised reference in note 2 to liabilities to Peregrine Brokerage employees did nothing to instil confidence.

23. Not only was the information in the notes to paragraph 24 therefore difficult to understand but the information supplied to the Court was lacking in important matters relating to the agreement.

24. Note 1 is also misleading in that there was no other "cash" consideration in respect of Peregrine Brokerage other than the US$1 the other consideration was a set-off of liabilities against receivables.

25. As a result, the deal appeared at first glance attractive but the more the inadequate explanation was considered, the more difficult it was to fathom the true effect. This is not surprising because the agreement is by no means as beneficial as the "first glance" would give the impression.

26. In respect of Peregrine Brokerage Ltd., BNP is assuming all liabilities to clients. On the other hand, it is taking the benefit of only a limited amount of account receivables. There must be the gravest suspicion that in selecting particular account receivables of which it wished to take the benefit BNP may have received confidential information from employees or executives of Peregrine in relation thereto. Clearly, confidential information should not have been given by any employee or executive of Peregrine but if it were to be divulged it should have been divulged by the Provisional Liquidators alone. I have taken this matter into account in deciding whether to approve the agreement.

27. Amongst the changes made to the original agreement since 23rd February has been the separation of the purchase of the stock exchange seats into a separate contract and the deduction of one item of previously supposed guaranteed bonus which I shall refer to below. The figure of US$19,200,000 in paragraph 24 of Mr. Hague's 4th Affidavit have therefore been changed to US$17,260,000.

28. The attention of BNP and Mr Francis Leung was drawn to the fact that the Court considered that the conduct of BNP PrimeEast Securities Limited and Mr Leung in holding the press conference of the 2nd February without written consent was a prima facie breach of the 27th January agreement. They were invited to make representations. The Court was concerned that the parties having solemnly made an agreement on the 27th January and that having been broken on the very next working day with the assistance of one who was clearly a key figure at Peregrine and no doubt the most important person acquired by BNP, the interests of the creditors were not being looked after. This concern was only enhanced by the fact that these events were followed by the carrying on of business by BNP in a manner which indicated that the deal was a fait accompli irrespective of the fact that the Court's approval had not yet been obtained. Affidavits were filed both by Mr Balme, the Chief Executive of Banque Nationale de Paris in Hong Kong, on behalf of BNP and by Mr Leung. Both also gave evidence to answer questions from the Court.

29. Mr. Balme was under the impression that the Press conference was little more than an extension of the Press announcement which had been approved by the Provisional Liquidators. He was anxious to make clear that his calling a Press Conference in response to what he said had been intense press speculation was not a symptom of a lack of commercial morality because he had not fully appreciated the effect of the agreement. Mr Leung had not been aware of the terms of the agreement until after the Press conference. I am prepared to accept that the holding of the press conference was a matter which Mr Balme thought was insignificant in relation to the press announcement, nevertheless it does indicate to me an enthusiasm in putting the agreement into effect that is difficult to reconcile with waiting for the Court's approval. The fact that there had been press speculation can be no excuse for breaching an agreement as to confidentiality.

30. Mr Balme said he was unaware of the details of the arrangements in relation to remuneration of the former Peregrine employees. However, Mr Leung was far more forthcoming. Mr Leung was to be the Vice Chairman and Chief Executive of the new entity to be set up after the agreement to be called BNP Prime Peregrine. As such he was told that he had a pool of US$7 million which he could use as bonuses to be paid to those former Peregrine employees who would be transferred following the agreement and who had not been entitled to guaranteed bonuses. It was up to Mr Leung to decide how the bonus money would be allotted to the various employees. Those employees numbering some 150 were to receive remuneration at the same rate as they had been paid at Peregrine.

31. As regards Mr Leung's own package, first he was to subscribe to 8% of BNP Prime Peregrine at the same rate as BNP itself was to take up its interest; then there would be a further 4% of the shares of that company held for him for which he would not pay but to which he would become entitled progressively over the next 3 to 10 years. His monthly pay was to be $300,000 plus $50,000 housing allowance. This was an increase over the $167,500 plus $50,000 which he had been paid at Peregrine, although apparently there have been an increase to $300,000 plus $50,000. In addition there were what Mr Leung referred to as other side benefits namely medical and pension schemes.

32. 4 senior executives at Peregrine like the 150 transferred employees were to receive the same the remuneration packages at the new company as they had received at Peregrine but in their cases they would subscribe to 0.25% of the new company and have 0.125% of the shares held for them to which they would become progressively entitled in a similar manner to Mr Leung. One other executive had similar arrangements but at half that amount of shares.

33. One further matter of some importance occurred just prior to the hearing on the 2nd March. In order to make sure that it could not be said that there had been any reason to question the integrity of the Provisional Liquidators the Court requested confirmation from the Liquidators that there was no client relationship between themselves and BNP. To the Court's dismay it was then revealed for the first time in Mr Hague's 13th Affidavit that not only did the Provisional Liquidator's firm Price Waterhouse undertake auditing work for various Banque National de Paris companies around the world but specifically Price Waterhouse had been appointed auditors of BNP PrimeEast Securities Limited for the financial year ending 31st December 1997 and that work is not surprisingly still in progress This matter will be considered more fully later.

34. Having heard the evidence and explanations on behalf of the Provisional Liquidators which has been confirmed in sworn testimony, I am satisfied that the consideration given by BNP should be looked at as being no more than approximately US$6.5m when the stock exchange seats are not included or about US$8.4m if they are included. The Provisional Liquidators are obtaining no more than the value of the assets which are being transferred and a small premium.

35. In contrast, the former Peregrine employees are receiving US$7m in bonuses directly from BNP - quite apart from the value of the "packages" for Mr. Leung and the senior executives. The need to pay such hefty bonuses or signing on fees is not apparent to me. The employees certainly were not being enticed away from a going concern still less a thriving business. Nor if the reports of redundancies in the industry are correct was the job market particularly optimistic for prospective employees. The basis on which the total consideration paid by BNP could be in effect divided with 50% going to pay for assets sold on behalf of creditors and 50% going to employees with little bargaining power seems to me to be wrong but it is too late to correct it.

36. I approved the agreement on behalf of the Provisional Liquidators for the following reasons :-

1. There were only 2 other parties who came anywhere near to making offers which included the assets covered by the agreement. One of those dropped out of the picture for wholly extraneous reasons. The other did not pursue the matter after it became clear to them that they would not be able to secure the staff they required. Potential interest expressed by one other party was so tentative that I am satisfied that the Liquidators could not wait to see whether any firm offer would materialise.

2. In my view, it would not now be possible to arrive at a better deal between the Provisional Liquidators, the companies and BNP than that which is represented in the agreement which I have approved.

3. Should I not have approved the deal, I consider that it is unlikely that a sale to others would be achieved. Almost certainly the critical employees who probably number about 6 and who form the attractive force for the purchaser would either remain with BNP or find other and separate employment, no doubt with the benefit of substantial bonus payments.

37. In view of the evidence from the Provisional Liquidators as to information which they received both before and after the 27th January, it would appear that the critical employees would very likely have found alternative employment had they not been employed by BNP. Hence, short though the time were for submission of the offers, that shortness of time was necessary.

4. The arrangements with BNP relate to the acquisition of assets and not the purchase of the entire companies. In view of the likelihood of there being hidden liabilities, it is unlikely that any purchaser would have emerged who would have been prepared to take over the companies as opposed to the assets. In this respect, I note that the Provisional Liquidators have formed the view that the problems with the Indonesian Steady Safe loan which were thought to have caused the collapse of the Peregrine businesses was probably only just the straw that broke the camel's back. Considerable exposures had built up in the fixed income business and in the derivative business and there was substantial exposure to clients where currencies moved against the clients.

5. I examined the accounts as best I could with the assistance of the Provisional Liquidators' staff, in particular, on the 23rd February whilst at the offices where the Provisional Liquidators were working, I called for and scrutinised all contractual documents relating to guaranteed bonuses contracted to be paid to Peregrine Brokerage employees. There was one missing which was to be provided to me on the 2nd March. In the event, the Provisional Liquidators have now come to the conclusion that is not a contractual bonus and have reduced the figure for contractual bonuses to HK$17,662,440. The liability for these contractual bonuses are being taken over by BNP as part of the liabilities of Peregrine Brokerage Limited which are being taken over under the contract. Other than that, I have found nothing to suggest that any liabilities are being taken on by BNP other than genuine and legitimate liabilities.

6. It is speculative as to whether the Provisional Liquidators would have arrived at any deal which was more beneficial to the creditors had any outside party such as a merchant bank been involved in the negotiations or in the search for a potential purchaser. The size of Peregrine coupled with the notoriety of its collapse would have attracted the attention of any potential purchaser. The need for speed was, as I have indicated, important. In the light of the prima facie conflict of interest of the Liquidators it would have been preferable for an outside party to have been involved.

7. I have already expressed my views as to the balance between the bonuses received by the employees and the payment for assets. It is now clearly too late to undo that, whether a better deal could have been achieved for the creditors is again speculative, but in my estimation that is quite possibly so.

8. Although I was concerned that Peregrine employees who transferred to BNP may have been involved in the arrangements and negotiations of the sale, I am satisfied on Mr. Leung's evidence that whilst he took part in due diligence meetings with BNP that was in the presence of the Provisional Liquidators or their staff and that it was the Provisional Liquidators who negotiated the agreement I have approved.

38. Looked at from the point of view of the possibility of the BNP deal not being sanctioned, I am satisfied that the creditors would suffer a loss of some benefit. First and foremost, there would be increased liabilities because of redundancies. Secondly, clearly some of the assets in particular the trademarks which have been sold might not be sold at the price achieved in this sale. As I have indicated, BNP is providing funding in the period following signing of the agreement. Moreover, the costs of liquidation are reduced by the reduction in the work of the liquidators consequent upon the reduction in the amount of assets which the Liquidators will need to recover. Further, recovery of assets such as accounts receivable may not have been full. The Provisional Liquidators have attempted to assess the difference in the proceeds if the deal does not go ahead and if it does go ahead. They put that difference at HK$54m. A considerable part of that must be estimation. Whilst I am by no means sure that may not be an overestimation, overall I am satisfied that it is indeed creditors' interest that this deal should go ahead.

39. As a side note, I would mention that my examination of the material produced by the Provisional Liquidator has revealed matters which require further investigation and possible action by the Provisional Liquidators. This was made clear in the course of the hearing on the 23rd February.

Other matters

40. Finally, I wish to say something further as to some of the matters which have arisen in this application.

Conflict of interest of Provisional Liquidators

41. It is the task of the Provisional Liquidators to get in the assets on behalf the creditors and shareholders. They stand in the position of trustees. They may make application to the Court for directions as to how to carry out their task. Often this entails the approval of transactions. This is at least partly for their own protection. Whenever any such application is made to Court ex parte it is made uberrimae fide. That means that everything that is relevant must be disclosed to the Court. This is all the more important because the Court does not have investigative powers. Neither is it the Court's function to take an adversarial role. The fact that Price Waterhouse were the auditors of BNP meant that there was an on-going client relationship. The Provisional Liquidators therefore were in a position of having a conflict of interest. Trustees are never permitted to be or remain in a situation where they have a conflict of interest. That rule is crucial to the proper administration of the relevant trust. The dual role of the Liquidators' firm should have been disclosed to the Court at the earliest opportunity. Directions could then have been given. That the individuals acting as Liquidators and working under their direction may not have been involved in other work for BNP or its related companies would have been a factor which the Court would have taken into consideration. Safeguards could have been built in to any internal arrangements within the Liquidator's firm. The Court could also have given directions that outside parties be brought in for the purpose of negotiations. But the failure to disclose that conflict is inexcusable and a blot on the conduct of the Provisional Liquidators and their advisers. The seriousness of the situation is in my view exacerbated by the fact that in Mr Hague's 13th Affidavit having disclosed the client relationship which his firm had with BNP, he seeks to justify that fact by relying on the "nature of the accounting profession and the size of the large accountancy firms". This no doubt does cause problems but it does not justify silence. No word of apology for not informing the Court earlier was offered in the Affidavit. That was left to counsel in Court. The fact that the Provisional Liquidators and their advisers were not at once alive to the fact that a serious lapse had been committed shows to me a fundamental misunderstanding of the duties and obligations of the Liquidators.

Timing of application

42. As has been demonstrated in relation to other applications in relation to the Peregrine businesses with which I have not been concerned, the Companies Court is able to deal with applications swiftly and promptly. In relation to this application, as indicated, where necessary and if circumstances require it, the Court is willing to accommodate the parties and in particular the Provisional Liquidators by holding hearings in chambers outside the Court building if that is necessary to facilitate the provision of information and evidence to the Court.

43. It is regrettable that the Court was not approached for sanction of the agreement before it was concluded. This gave the impression that the Court was being asked to sanction a deal in circumstances where it could do nothing but give its approval. The difficulties which such course gives rise to are exemplified by the conduct of BNP and others in announcing the deal in the most public manner a week prior to the Court's approval being sought.

Manner of Application

44. Furthermore, it is necessary to comment not only on the dilatory manner in which the Court's approval was sought after 27th January, namely 13 days thereafter but on the apparently less than candid description of the effect of the agreement contained in the fourth affidavit of Mr. Hague. This not only in itself caused further delay and what should have been unnecessary Court hearings but did not rise to the level of expectation which this Court has of Provisional Liquidators.

45. Affidavits filed on ex parte application, and in this category I include an application by liquidators for approval and directions, are not the place for persuasive advocacy. The facts and all the facts must be set out clearly and accurately in a form that is easily comprehensible. I acquit the Liquidators of any deliberate intention to mislead but, in my view, Mr Hague's 4th Affidavit did not meet the required standards.

46. Whether the Provisional Liquidators' remuneration during the period and for the work prior to the disclosure in Mr. Hague's 13th Affidavit and particularly in respect of the preparation of the 4th Affidavit will be affected and what costs will be recoverable will be left to be determined at the time when they seek payment of their costs and fees.

Availability of Documentation

47. I consider that it would be entirely appropriate that creditors of Peregrine Holdings Limited should at a suitable time have access to the Court files relating to this application. Premature disclosure of information might prejudice the Liquidators' efforts to realise assets and to carry out investigations that I have indicated to them should be carried out. Nevertheless, at the time of making the order, I indicated that at a suitable time creditors should be able to make application to the Companies Judge for access to the Court file subject to proper safeguards against misuse of information.