NUOXI CAPITAL LTD (IN LIQUIDATION IN THE BRITISH VIRGIN ISLANDS) v. PEKING UNIVERSITY FOUNDER GROUP CO LTD

HCA 778/2021, HCA 798/2021, HCA 1418/2021,
HCA 1442/2021 and HCMP 1831/2021
(HEARD TOGETHER)

[2022] HKCFI 635

HCA 778/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 778 OF 2021

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 798 OF 2021

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1418 OF 2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1442 OF 2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1831 OF 2021

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REASONS FOR DECISION

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1.  On 17 December 2021 I handed down my decision in respect of five proceedings: HCA 778, 798, 1418 and 1442 of 2021 (“Actions”) and HCMP 1831 of 2021 (“HCMP 1831”). The applications in the Actions were for stays of the Actions for the reasons explained in my Decision. The application in HCMP 1831 sought recognition and assistance of the Administrators of Peking University Founder Group Company Limited (“Administrators” and “Company” respectively).

2.  I dismissed the applications for a stay in all four writ Actions.  I granted an order in terms of [1]–[3], [5] and [6] of the Originating Summons in HCMP 1831 and substantially in the terms of [4].  However, I also added five paragraphs, which provide a preliminary procedure for cooperation between the Beijing No.1 Intermediate People’s Court (“Beijing Court”) in the further conduct of the Actions.  I could have simply granted an order in terms of the Originating Summons and then dealt with the question of the stay in the Actions.

3.  The Administrators now wish to appeal my decisions in the Actions and HCMP 1831.  There is no dispute that the decisions in the Actions are interlocutory and that leave is necessary.  In the case of HCMP 1831 the Administrators argue that the decision is final and that they are entitled to appeal it as of right and, consequently, they argue that leave should be given to appeal the decisions in the Actions because they give rise to the same issue.  As I have explained I could have made an order in the terms of the Originating Summons thus giving the Administrators nothing to appeal.  The argument I have just summarised smacks of intellectual slight of hand rather than being a point of substance.  For reasons I explain in [7]–[10] in my view it is wrong.

4.  The application gives rise to a number of issues:

(1)             The consequences, if any, of the application being made out of time.

(2)             Whether leave is necessary to appeal the decision in HCMP 1831.

(3)             Whether leave should be given to appeal my decisions in the Actions and, if it is interlocutory, HCMP 1831.

5.  The applications for leave to appeal should have been issued on Friday 31 December 2021.  They were issued on Monday 3 January 2022.  The reason for the delay was, apparently, Freshfields litigation clerk thinking that the Registry closed later than it does.

Leave to appeal out of time

6.  Once an application for leave is made out of time the criteria for determining leave change.  As I explain in [4]–[5] of The German Swiss International School Association Limited v Horst Geicke[1] if a delay is short and not the responsibility of the party the court is likely to grant an extension. If the court takes the view that the reason for the delay does not excuse the failure to commence an appeal within the material time it is necessary for the party seeking an extension to show that the appeal has a real prospect of success.  Mr Ho, on behalf of the Plaintiffs, argued that the failure to issue the appeal out of time continued a history of delay by the Company in these proceedings and invited me to assess the application on the basis that it was necessary for the Company to demonstrate a real prospect of success.  It seems to me that as Freshfields have gone on oath and deposed that it was their mistake that the application was issued slightly out of time, the application should be assessed on the basis that the delay is excusable and I will grant the necessary extension of time.  The delay, therefore, makes no difference to the criteria for assessing leave.

HCMP 1831

7.  As I have already explained I granted an order for recognition largely in the terms of the originating summons.  The form of [4] of the originating summons which sought a general stay of all proceedings against the Company was not in accordance with the current practice, which is explained in [7] of my decision in Re FDG Electric Vehicles Ltd[2]:

“The recognition orders that have until recently been granted have contained a paragraph in the following terms: ‘For so long as the Company remains in liquidation in [relevant jurisdiction], no action or proceedings shall be proceeded with or commenced against the Company or its assets or affairs, or their property within the jurisdiction of this Honourable Court, except with the leave of this Honourable Court and subject to such terms as this Honourable Court may impose’. This was intended to be in the nature of a case management provision, which would ensure that action would not take place in Hong Kong without the relevant parties being aware of the impact of the foreign insolvency proceedings and, if appropriate, a stay granted. However, I recognise that there are a number of questions that the order so worded gives rise to. First, that if (which was not the case with the initial orders that were granted) there are already proceedings on foot in Hong Kong, one would expect an application for a stay to be made in those proceedings. Secondly, whether or not it is appropriate to grant a stay in respect of unidentified prospective proceedings about which, necessarily, nothing is known. Both Mr Ng and Mr Ho agreed that the paragraph was more appropriately drafted in terms, which did not purport to impose a stay, but required appropriate applications in High Court proceedings to be issued and returnable before the judge granting the recognition order. The order that I will grant in the present case, and be amenable to granting in the future, is as follows:

‘If the Provisional Liquidators wish to apply for a stay or other directions in respect of proceedings in the High Court of any sort as a consequence of the recognition of their appointment by this order such application shall be listed before the Honourable Mr. Justice Harris or such other judge as he shall direct. The Provisional Liquidators shall write to the clerk to the Honourable Mr. Justice Harris seeking case management directions for the determination of any application that they wish to make pursuant to this order’.

I note in passing that in a recent recognition and assistance decision in the Cayman Islands, Mr Justice Segal granted a similar order [3].”

If [4] had been in the standard form I would have granted an order in terms and the question of appealing the recognition order would probably not have arisen.

8.  Mr Maurellet on behalf of the Administrators argued that the recognition order is a final order and, therefore, could be appealed as of right.  It is, so Mr Maurellet reasoned, final because it determined the substantive question of whether or not the Actions should be stayed.  In my view this is wrong.

9.  An application to stay an action has long been recognised as interlocutory in nature and requiring leave if an appeal is to be pursued[4]. This is because the substantive relief that is sought in the proceedings is something else.  In that regard the position is different from that when an anti-suit injunction is sought.

10.  Mr Maurellet argued that as HCMP 1831 was made by originating summons and resulted in a final determination of HCMP 1831, that determination is final.  The argument is based on an observation of the Court of Appeal in [9] of Re LehmanBrown Ltd[5], which Mr Maurellet argued establishes that an order made on an originating summons, which disposes of the application is final.  I disagree.  It seems to me clear from [16] of LehmanBrown that the Court of Appeal is not suggesting that the form of the application is of itself determinative, what is relevant is whether or not the application determines the substantive rights of the parties.  This is consistent with Bright Shipping[6]and Cheung JA in [7.8] of Re Grande Holdings Ltd[7].  What determines whether or not an order is interlocutory or final for the purposes of section 14AA of the High Court Ordinance, Cap 4, and RHC O59 r21 is not the form of the originating process, but the character of the decision.  As I have already explained stay applications are treated as interlocutory because they do not determine substantive rights.  In the present case the stay applications do not inhibit either party’s freedom to prosecute or defend the substantive claims.  In my view the decision is interlocutory and leave is necessary if the Administrators wish to appeal the decision.

Should leave be granted?

11.  Section 14AA(4) of the Ordinance provides that:

“Leave to appeal for the purpose of subsection (1) shall not be granted unless the court hearing the application for leave is satisfied that—

(a) The appeal has a reasonable prospect of success; or

(b) There is some other reason in the interests of justice why the appeal should be heard.”

12.  In the present case the Administrators wish to appeal the exercise of my discretion in both the Actions and HCMP 1831.   In the case of “an appeal against the exercise of discretion of the judge.  The appeal court is not to exercise an independent discretion of its own but rather review the decision of the judge.  It may set aside the judge’s exercise of discretion if it can be shown that the judge did so under a mistake of law or in disregard of principle, or under a misunderstanding of the evidence, or had taken into account irrelevant matters, or failed to take into account relevant ones, or that the conclusion reached in the exercise of discretion is outside the generous ambit within which reasonable disagreement is possible.  It is only if the appeal court has reached the conclusion that the judge’s exercise of discretion must be set aside for one or more of these reasons that it becomes entitled to exercise a discretion of its own[8].”

13.  The applications involved a consideration of legal principles concerning three matters: exclusive jurisdiction clauses, submission to insolvency jurisdiction and management of cross-border insolvency.  The law in relation to all three is clear.  The notices of appeal focus on the way in which I dealt with the Administrators’ argument that the Actions should be stayed because judgments in the Actions would serve no purpose, because the Beijing Court would, or at least might, give no weight to them.  Although in the domestic Mainland context it may well be the case that the Beijing Court would ignore a decision by another Mainland court because of Article 21 of the Enterprise Bankruptcy Law, the fact is that there is no guidance from a Mainland court, and in particular no guidance from the Supreme People’s Court, about the evidential weight to be given to a foreign judgment in a creditor’s favour if an administrator rejects a claim and the creditor appeals that decision.  If the claim is governed by foreign law, as the Administrators’ expert explains, the law and its application has to be proved.  In my view there are clearly reasons to expect that the Beijing Court would attach considerable weight to a decision of the Hong Kong court and, in practice, considerably more weight than it would to an expert opinion.  I can see no reason to think that the Court of Appeal would think that my decision in this regard was so clearly wrong it should interfere with it.

14.  Mr Maurellet argued that if I take the view, as I do, that the Applicants have not demonstrated a reasonable prospect of the Court of Appeal interfering in my decision for conventional reasons I should grant leave on the grounds that it is in the interests of justice that the appeal is heard.  I disagree.  There is no important legal issue that requires reconsideration by an appellate court.  I do not think that the interests of justice require that the Applicants are given the opportunity to re-argue the weight that the Beijing Court is likely to give to a Hong Kong judgment—an issue on which, in my view, the Administrators’ argument is both unpersuasive and unattractive.

15.  I, therefore, dismiss the leave applications and will order that the Applicants in HCMP and Defendant in the Actions pay the costs of the Respondent in HCMP and Plaintiffs in the Actions forthwith such costs to be taxed if not agreed.