THE JOINT & SEVERAL LIQUIDATORS OF RENNIE PRODUCE (AUST) PTY LTD v. CHEUNG FONG CHAU ALAN AND OTHERS

HCMP 1640/2016

[2020] HKCFI 1500

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1640 OF 2016

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REASONS FOR DECISION

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1.  There is before me the application of Mr Andrew Yeo and Gess Rambaldi in their capacity as Joint and Several Liquidators (“the Liquidators”) of Rennie Produce (Aust) PTY (“the Company”) for production of documents and examination of Mr Alan Cheung, Ms Fung Hung Chun and Ms Rebecca Chong (“the Respondents”).

2.  The Company was incorporated in Australia and is being liquidated there.

3.  The application is thus made pursuant to the Court’s common law power to provide recognition and assistance to a foreign Court.

4.  The Liquidators were appointed on 9 August 2010.

5.  Pursuant to a Deed of Settlement dated 3 October 2012 (“the Deed”) the Company and another company belonging to the same group, Rennie Produce Property Ltd (“RP”) through their liquidators (being also the same individuals as the Liquidators) settled a dispute between the companies and what is termed the “Rennie Parties”.

6.  These include Mr Paul Rennie and Ms Bridgit Rennie as well as a number of corporate entities.  It appears from the recitals to the Deed that the Liquidators and the Rennie Parties were parties to some proceedings which also entailed a freezing of assets order.

7.  As a result of the Deed, assets held offshore by or for the benefit of the Rennie Parties are thus now the property of the Company.  While the Company could point to a clear interest in the offshore assets after the Deed was executed, those assets could not be said to clearly belong to the Company as at the date of the commencement of the liquidation.

8.  I should also mention that there was a dispute between the Rennie Parties and the Australian tax authorities which led to a separate ATO Settlement Deed.

Liquidators position in summary

9.  Mr Wood who appeared for the Liquidators and made persuasive submissions on their behalf, summarized the position in the executive summary part of his helpful skeleton.

10.  It was submitted and explained that the Liquidators reasonably believed that Mr Rennie had not repatriated his overseas assets as he was required to do pursuant to the Deed, and instead he appeared to have used various offshore transactions to move his assets beyond the reach of his creditors.  

11.  This is reflected in the wording of the summons which require inter alia the Respondents to produce communications between Paul Rennie and them, documents which relate to any funds or assets held or previously held outside Australia not just for the benefit of the Company but also the Rennie Parties, which include Paul Rennie.

12.  Mr Yeo in his 2^nd affidavit explains as follows:

“ 12. On 28 February 2011, I commenced proceeding VID 159 of 2011 in the Federal Court of Australia, seeking to recover monies paid by the Company to various related parties of the Rennie Group by reason of the transactions. On 3 October 2012, in settlement of that proceeding, Mr Rennie and some of the entities that formed the Rennie Group (the “Rennie Parties”) entered into Deed of Settlement with the Liquidators (“Liquidators’ Deed of Settlement”). A true copy of the Liquidators’ Deed of Settlement is at Tab 2.

13. Pursuant to the Liquidators’ Deed of Settlement, Mr Rennie agreed he would repatriate to an Australian bank account under my control, all offshore assets held by or to the benefit of the Rennie Group. If such assets were not repatriated within the prescribed six-month period of 5 October 2012 to 4 April 2013 (the “Repatriation Period”), they were assigned to me as Liquidator of the Company. I set out in detail the obligations assumed by the Rennie Parties under the Deed of Settlement in paragraphs 13 to 25 of an affidavit sworn by me on 11 December 2013 in proceedings in the Federal Court of Australia. A true copy of the affidavit sworn 11 December 2013, excluding its exhibits, appears at Tab 12 to the First Affidavit.

16. The Liquidators are of the view that there is a strong prima facie case that not all of the offshore assets have been repatriated and that there are funds held in offshore bank accounts by or for the benefit of the Rennie Group, which pursuant to the Liquidators’ Deed of Settlement, are now the property of the Company in liquidation. The offshore bank accounts I am investigating are in various jurisdictions around the world including Hong Kong, Switzerland, Israel and the United States of America.

31. On the basis of the above information, and as outlined in further detail below, I believe that Mr Cheung is capable of providing information relevant to the circumstances and nature of the transfers to and from the Peng Fu Account, whether funds held to the benefit of Mr Rennie were retained, and if so, the whereabouts of those funds that have now vested in me (as liquidator of the Company in liquidation).

R’s threshold objection

13.  The Respondents were ably represented by Mr Toby Brown appearing together with Mr. Jeremy Yau.

14.  In their skeleton it was submitted that the Liquidators' application must fail, not least because it was contended that the Liquidators had not produced expert evidence to demonstrate that the Australian Courts would have made an order like the order currently been sought before me and therefore that the application was bound to fail.

15.  He points to the fact the only evidence which suggests that an order would have been made by the Australian court is at paragraph 8 of Yeo’s 2^nd affidavit.

“8. Pursuant to section 596B of the Corporations Act, an Australian liquidator may apply to an Australian Court for the issue of a summons to a person to attend an examination about a corporation’s examinable affairs, if the Court is satisfied that the person may be able to give information about examinable affairs of the corporation.”

16.  As I understand it, what Mr Brown is suggesting is that the parties should have filed expert evidence dealing with both the statutory jurisdiction and also the applicable case law which would identify factors considered to be relevant in the Australian Court’s exercise of discretion which may differ from those factors which are considered to be relevant under the Hong Kong equivalent.

17.  I indicated to him during the hearing that it seemed to me that on its face, the Australian provision for examination and production was at least as extensive if not more extensive than the Hong Kong equivalent.  I however noted that what was less clear, was what I referred to the “settled practice” of the Australian Courts in applications of the present kind.

The Recognition Order (“R.O”) and the Applicable Legal Principles

18.  The law concerning the ability of the Hong Kong Courts to recognize and provide assistance to foreign liquidators using its common law powers has developed incrementally and has grown particularly in recent times.

19.  On 26 August 2016 the Companies Judge, Harris J granted a recognition Order:

“ 1. The appointment by the Federal Court of Australia of Mr Andrew Reginald Yeo and Mr Gess Michael Rambaldi as the Joint and Several Official Liquidators (“Liquidators”) of Rennie Produce (Aust) Pty Ltd (In Liquidaton in Australia) (“Company”) be recognized by this Court.

2. The Liquidators have and may exercise such powers as are available to them as a matter of Australian law and would be available to them under the laws of Hong Kong as if they had been appointed liquidators of the Company under the laws of Hong Kong and in particular, but without prejudice to the generality of the foregoing, for the following purposes: …

2.4 so far as may be necessary to supplement and to effect the powers set out at paragraphs 2.1 and 2.2 above, to bring legal proceedings and make all such applications to this Court, whether in their own names or in the name of the Company, on behalf of or for the benefit of the Company including any applications for ancillary relief such as freezing orders, search and seizure orders in any legal proceedings commenced, and/or for orders for disclosure, the production of documents and/or examination of third parties which it is anticipated may be made by the Liquidators to facilitate their ongoing investigations into the assets and affairs of the Company and the circumstances which gave rise to its insolvency.

20.  That application which led to the R.O as is conventionally done was made ex parte.

21.  It is important to note that paragraph 2.4 is subject to paragraph 2 which required that the Liquidators “may exercise such powers are as available to them as a matter of Australian law and would be available to them under the laws of Hong Kong as if they had been appointed liquidators of the Company under the laws of Hong Kong”.

22.  These twin requirements reflect the dicta of the Privy Council’s advice in Singularis Holdings Ltd v PricewaterhouseCoopers [2015] AC 1675, see in particular paras 25,29-30 per Lord Sumption JSC.

“ 25. In the Board’s opinion, there is a power at common law to assist a foreign court of insolvency jurisdiction by ordering the production of information in oral or in documentary form which is necessary for the administration of a foreign winding up. In recognising the existence of such a power, the Board would not wish to encourage the promiscuous creation of other common law powers to compel the production of information. The limits of this power are implicit in the reasons for recognising its existence. In the first place, it is available only to assist the officers of a foreign court of insolvency jurisdiction or equivalent public officers. It would not, for example, be available to assist a voluntary winding up, which is essentially a private arrangement and although subject to the directions of the court is not conducted by or on behalf of an officer of the court. Secondly, it is a power of assistance. It exists for the purpose of enabling those courts to surmount the problems posed for a world-wide winding up of the company’s affairs by the territorial limits of each court’s powers. It is not therefore available to enable them to do something which they could not do even under the law by which they were appointed. Thirdly, it is available only when it is necessary for the performance of the office-holder’s functions. Fourth, the power is subject to the limitation in In re African Farms Ltd and in HIH and Rubin, that such an order must be consistent with the substantive law and public policy of the assisting court, in this case that of Bermuda. It follows that it is not available for purposes which are properly the subject of other schemes for the compulsory provision of information. In particular, as the reasoning in Norwich Pharmacal and R (Omar) v Secretary of State for Foreign and Commonwealth Affairs (at both levels) shows, common law powers of this kind are not a permissible mode of obtaining material for use in actual or anticipated litigation. That field is covered by rules of forensic procedure and statutory provisions for obtaining evidence in foreign jurisdictions which liquidators, like other litigants or potential litigants, must accept with all their limitations. Moreover, in some jurisdictions, it may well be contrary to domestic public policy to make an order which there would be no power to make in a domestic insolvency. Finally, as with other powers of compulsion exercisable against an innocent third party, its exercise is conditional on the applicant being prepared to pay the third party's reasonable costs of compliance.

29. The second limitation which is relevant presents more formidable problems for the joint liquidators. The material which they seek in Bermuda would not be obtainable under the law of the Cayman Islands pursuant to which the winding up is being carried out there. Where a domestic court has a power to grant ancillary relief in support of the proceedings of a foreign court, it is not necessarily an objection to its exercise that the foreign court had no power to make a corresponding order itself. Thus in Credit Suisse Fides Trust SA v Cuoghi [1998] QB 818, the English court made a world-wide Mareva injunction in support of Swiss proceedings against Mr Cuoghi in circumstances where the Swiss court could not have made such an order. But that decision cannot be taken to reflect a universal principle. The critical factors which justified the order in that case were that there was an unqualified statutory power to give ancillary relief and that the Swiss court’s inability to make the order was due to the fact that Mr Cuoghi was not resident in Switzerland whereas he was resident in England. Rather different considerations apply to the common law power with which the Board is presently concerned. Its whole juridical basis is the right and duty of the Bermuda court to assist the Cayman court so far as it properly can. It is right for the Bermuda court, within the limits of its own inherent powers, to assist the officers of the Cayman court to transcend the territorial limits of that court’s jurisdiction by enabling them to do in Bermuda that which they could do in the Cayman Islands. But the order sought would not constitute assistance, because it is not just the limits of the territorial reach of the Cayman court’s powers which impede the liquidators’ work, but the limited nature of the powers themselves. The Cayman court has no power to require third parties to provide to its office-holders anything other than information belonging to the company. It does not appear to the Board to be a proper use of the power of assistance to make good a limitation on the powers of a foreign court of insolvency jurisdiction under its own law. This was in substance the ground on which the liquidators failed in the Court of Appeal when they characterised the present application as “forum-shopping”. In the opinion of the Board it is correct.

30. The liquidators have not contended at any stage of this litigation that the order which they seek can be justified at common law independently of the power of the Bermuda court to assist a foreign court of insolvency jurisdiction. Moreover, they have accepted before the Board that the information which they seek belongs to PwC and was therefore properly excluded from the order made by the Grand Court of the Cayman Islands. Whether this was correct was not therefore a point argued before the Board. Nonetheless, the Board would not wish to part with this case without expressing their doubts about whether information which PwC acquired solely in their capacity as the company’s auditors can be regarded as belonging exclusively to them simply because the documents in which they recorded that information are their working papers and as such their property.”

23.  There has been a small number of reasoned judgments dealing with the Court’s power to order production and examination of parties pursuant to its common law powers of recognition and assistance.

24.  In some of these cases the respondent was bank or financial institution which took a neutral stance.  Entirely understandably some of the practical issues have thus not been examined with perhaps the usual vigour which contested litigation would have entailed.

25.  In The Joint and Liquidators of BJB Career Education Company Ltd v Xu Zhendong [2017] 1 HKLRD  113, the Court exercised its common law power of assistance and ordered an oral examination of the respondent there, noting that s103 of the Cayman Islands Companies Law was similar to the s221 of the Companies Ordinance (Cap. 32) powers in Hong Kong. 

26.  Harris J explained at paragraph 7 that:

“The decision in Singularis establishes what was implicit in various paragraphs of Lord Collins judgment in Rubin v Eurofinance SA,[1] namely, that the common law power of assistance extends to ordering an oral examination if such a power (a) exists in the jurisdiction of liquidation and that is the jurisdiction of the place of incorporation and (b) the power exists in the assisting jurisdiction; as is the case in Hong Kong. Section 103 of the Companies Law in the Cayman Islands grants the Court similar powers to order the production of documents by a director of the company and an oral examination of a director as are contained in s221. It follows that in the exercise of its common law powers the Hong Kong Companies Court can order the oral examination of a director of a Cayman Island company in liquidation in the Cayman Islands if satisfied that it is necessary and that it would not infringe the established limitations on the exercise of power conferred by s221.”

27.  It should be noted that as observed in paragraph 2 of that judgment, the respondent’s counsel in that case had at the first hearing of the application indicated the respondent did not object to the orders sought.

28.  The Court of Appeal in Penta Investment Advisers Ltd v Allied Weli Development Ltd (formerly known as Hennabun Capital Group Limited) (unrep judgment dated 18 July 2017) when positing whether the company there should have been wound up in the Marshall Islands instead of in Hong Kong, and then seek an examination in Hong Kong pursuant to the Court’s common law power of assistance had this to say

“7.5 Further, in order for this point to be taken, expert evidence would be required on the law of insolvency in the Marshall Islands and Hong Kong because the power to render assistance is limited to rendering assistance in respect of matters which could be done under the relevant domestic law : see the Privy Council decision of Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36 where it is held that the power at common law to assist the officers of a foreign court of insolvency jurisdiction or equivalent public officers by ordering the production of information in oral or documentary form which was necessary for the administration of a foreign winding up is not available to enable them to do something which they could not do under the law by which they had been appointed.” (my emphasis)

29.  The question of whether the liquidators could have or could not have done something under the law in which they were appointed is a matter of fact here in Hong Kong, unless of course an application is made in the place of liquidation.

30.  What then is meant by “the power exists in the place of jurisdiction of the liquidation”? Obviously if there is no similar statutory power in the place of liquidation that is the end of the matter.

31.  What if the place of liquidation had such a statutory jurisdictional power? Does the Hong Kong Court then proceed to exercise its discretion as if the company were a Hong Kong incorporated company?

32.  In The Joint and Liquidators of Kong Wah Holdings Ltd (In compulsory liquidation) v Grande Holdings Ltd (2006) 9 HKCFAR 766, Lord Millet NPJ held that :

“4. These are conjoined appeals from orders of the Court of Appeal (Rogers VP and Le Pichon JA) dismissing the appeals from two orders of Kwan J made on 4 August 2005. They are concerned with the scope of the Court’s powers under s221 of the Companies Ordinance (the Ordinance). Both in the Court of Appeal and before this Court the argument has been confined to jurisdiction, including jurisdiction in a secondary sense where it refers not to the court’s powers but to its settled practice: see Guaranty Trust Co of New York v Hannay & Co [1915] 2 KB 536 and Garthwaite v Garthwaite [1964] P 356. There has been no appeal against the judge’s findings of fact or the way in which she exercised her discretion. The question is whether the court can, in a proper case, make orders of the kind which the judge made, not whether, in the particular circumstances of the present case, they were proper orders for her to make.”

33.  In Garthwaite , Diplock LJ (as he then was) held :

“In its narrow and strict scene, the ‘jurisdiction’ of a validly constituted court connotes the limits which are imposed upon its power to hear and determine issues between persons seeking to avail themselves of its process by reference (1) to the subject-matter of the issue or (2) to the persons between whom the issue is joined or (3) to the kind of relief sought, or to any combination of these factors. In its wider sense it embraces also the settled practice of the court as to the way in which it will exercise its power to hear and determine issues which fall within its ‘jurisdiction’ (in the strict sense) or as to the circumstances in which it will grant a particular kind of relief which it has ‘jurisdiction’ (in the strict sense) to grant, including its settled practice to refuse to exercise such powers, or to grant such relief in particular circumstances.”

Discussion

34.  In the present case, while the Court can be reasonably confident that the Australian Courts would have the statutory jurisdiction to make the order now sought in Hong Kong, it is not entirely clear whether it would exercise that jurisdiction in the sense that it would be the “settled practice” of the Courts there to make an order such as the one sought in the present circumstances of the case.

35.  The orders here are primarily sought as is apparent from the evidence filed by the Liquidators as a result of the Deed which was entered into after the Company was liquidated against certain parties including Paul Rennie.

36.  Effectively the Respondents are sought to be examined and documents are sought from them, to largely identify whether the Rennie Parties has maintained or kept offshore assets.

37.  This is quite different from the more typical case where it is being said that a respondent who was a director, auditor or provided services to a company prior to liquidation which then led to a chain of enquiry by reason of his or her dealings with the company pre liquidation.

38.  I am aware that in the present case it is being suggested that the Respondents had dealings with either Paul Rennie or related companies prior to liquidation, so it could not be said that they are complete outsiders who had no dealings whatsoever with the Company, its sole director or its related group prior to liquidation. However, it is plain that the main purpose here is to identify the offshore assets which have “now” become assets of the Company by reason of executing the Deed.

39.  I recognize that as a matter of at least Hong Kong or indeed English law, it is now established that the purpose of the examination is “not limited to reconstituting the state of the Company’s knowledge even tough that may be one of its purposes most clearly justifying the making of an order” (see paragraph 26 of Lord Millett NPJ in Kong Wah Holdings Ltd (supra)).

40.  For the reasons further set out below, I do not think it is the appropriate juncture to consider whether an order would be made against the respondents if the application were made in Hong Kong and the company were liquidated in Hong Kong.

41.  I am obviously not favourably impressed by the fact that the Respondents did not identify this issue prior to the filing of their skeleton submissions on their behalves, shortly prior to the hearing.

42.  I am inclined to think that this is probably not a point which dawned on then when the affirmation was prepared in opposition to the present application, and that this was a finer legal point which was identified after counsel was instructed to prepare for the present hearing.

43.  I am however not inclined to proceed on the assumption that Australian law is the same as Hong Kong law for present purposes.

44.  I am aware that Harris J had previously made production orders against some banks in these proceedings.  I understand that these were not opposed and therefore the issue faced before this Court was not one which his Lordship was faced with.

45.  It should be remembered that while the Liquidators are the applicants, the Court is effectively rendering assistance to the Courts of another jurisdiction.  It must be satisfied that it is not going beyond what would have been allowed in the home jurisdiction, in the present case the Australian Courts. To go beyond what the Australian Courts would allow would not be to assist. 

46.  The considerations are thus different from those cases where there is adversarial litigation and the fact one side didn’t raise the “foreign law point” by way of pleading or otherwise simply meant that that side has to bear the consequences of that failure. In the present case, it seems to me that the failure to have taken the point earlier is one that can if it need be to be reflected in costs and also by the Hong Kong Court taking active case management steps to assist the Australian Courts should they make an order against the Respondents.  I will deal with these shortly today.

47.  I accept in some cases, perhaps many, it will be possible and appropriate for the Hong Kong Courts to proceed to deal with applications for examination and production of documents without having first applied and obtained an order in the “home” court. 

48.  Here having regard to the evidence before me and based on these special facts as set out above, I am not satisfied that I should proceed on the assumption that the “settled practice” of the Australian Courts would necessarily result in an order being made.

49.  Where the respondents take such a point and where it cannot be easily dismissed, it may be more appropriate for the Hong Kong Courts being the Courts rendering assistance to wait for the courts of the place of liquidation to make an order.

50.  I understand it to be the position of the Liquidators that they can seek such an order in Australia notwithstanding that the respondents are out of the jurisdiction.

51.  The Hong Kong Court would then have the benefit of the reasoned judgment of the court of the place of liquidation, and subject to it being satisfied that a Hong Kong Court would also have power to make the same order in the circumstances, an Order would then be made quite promptly.

52.  For the avoidance of doubt, I have not determined whether this application would have succeeded had the company been wound up here and the application been made under the Hong Kong statutory regime.

53.  Given that I believe it would be more appropriate in the present circumstances for the liquidators to first seek an order in Australia I have refrained expressing any views on the merits of the application.  I imagine that once such a process is commenced the evidence which will be filed there will be to a considerable extent the same evidence which was filed in the present proceedings.

Conclusion

54.  I will therefore adjourn the present application sine die with liberty to restore and hear the parties on costs and consequential directions.