RE FOUNDER INFORMATION (HONG KONG) LTD

HCCW 350/2020

[2021] HKCFI 1508

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 350 OF 2020

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D E C I S I O N

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1.  I have before me an application by the Liquidators of Founder Information (Hong Kong) Limited (the “Company”) for leave to issue and serve a High Court Action against Peking University Founder Group Company Limited 北大方正集團有限公司 (“PUFG”) in respect of PUFG’s obligations to the Company under the following agreements:

“1a. the Keepwell Deed, the Trust Deed, and the Deed of Equity Interest Purchase Undertaking, each of which was made between Kunzhi Limited, the Company, PUFG and The Bank of New York Mellon, London Branch dated 21 May 2018 in respect of the US$310,000,000 Floating Rate Guaranteed Bonds due 2021 issued by Kunzhi Limited;

1b. the Keepwell Deed, the Trust Deed, and the Deed of Equity Interest Purchase Undertaking, each of which was made between Kunzhi Limited, the Company, PUFG and The Bank of New York Mellon, London Branch and/or the Deed of Equity dated 17 April 2018 for the US$490,000,000 Floating Rate Guaranteed Bonds due 2020 issued by Kunzhi Limited.”

2.  It is not necessary for the purposes of this application for me to explore the nature of those claims.  The application before me is necessary because there is no committee of inspection to approve the commencement of the legal proceedings.  Essentially the Liquidators are concerned that claims that they believe the Company has arising as a consequence of PUFG’s failure to honour its obligations to take steps to ensure that Kunzhi Limited’s obligations under trust deeds could be met, the Company having guaranteed Kunzhi’s obligations, give rise to claims for effectively an indemnity from PUFG.  I would note in passing that it is not being contended that the suite of agreements to which I have referred earlier constitute a guarantee given by PUFG to the Company.

3.  The decision, whether or not it is in the best interests of the unsecured creditors that the proceedings are issued, is a matter for the Liquidators themselves.  The court would normally approve an application of this sort unless it is concerned that either the application is not brought in good faith or that it involves a perverse commercial decision. Neither of those circumstances apply in the present case.  I will, therefore, grant the Liquidators the leave that they seek.

4.  As I am familiar with the restructuring of the Founder Group, PUFG is currently in administration in Beijing, I think it is sensible if I hear the High Court Action that I am giving leave to be commenced.  I will, therefore, direct in these proceedings that all applications in the High Court Action are listed before me or such other judge as the court directs.  A similar direction will have to be made in the High Court Action once it is issued.

5.  As PUFG, is in administration in Beijing, it will be necessary for the administrators, if they wish to defend the proceedings on PUFG’s behalf, to file documents which demonstrate that they are the duly authorised agent of PUFG.  This can be done in one of two ways; either they can make an application for formal recognition and assistance (see my decisions in CEFC Shanghai International Group Limited [1] and Shenzhen Everich Supply Chain Co, Ltd [2]), alternatively, they can simply defend the High Court Action on the basis that they are the duly authorised agent and prove that to the extent necessary by filing evidence in the High Court Action itself.

6.  The attempts to restructure the debts of the PUFG Group in Beijing I understand to be added an advance stage.  I am, therefore, in principle, willing to attempt to determine the issues in the prospective High Court Action, which seem to be largely ones of construction, as soon as is reasonably practicable.