The Provisional Liquidators of BJB Career Education Company Limited v Xu Zhendong

The Hong Kong courts will grant assistance to foreign liquidators under its common law powers

Corporate insolvency – Hong Kong – provisional liquidators – recognition overseas – cross-border assistance – orders for oral examination

Provisional liquidators were appointed by the Grand Court of the Cayman Islands over a Cayman company engaged in the provision of technology education in mainland China. The Grand Court issued a letter of request to the Hong Kong courts to make orders pursuant to its common law powers to require the respondent, Mr Xu, the former chairman and director of the company, to attend for oral examination in Hong Kong, to provide information and to supply documents.

The provisional liquidators issued an originating summons in Hong Kong seeking recognition of their appointment. Mr Xu was represented and did not, in fact, object to the orders. Whilst the Hong Kong court was content to recognise the provisional liquidators, and could see the justification for the orders, the court asked for full submissions; first, on whether the mandatory orders sought could be made at common law (as opposed to under the relevant Hong Kong Ordinances); and second whether such an order would infringe article 96 of the Basic Law, which requires the “assistance or authorisation” of the central PRC government for the Hong Kong SAR government to “make appropriate arrangements with foreign states for reciprocal juridical assistance.”

Harris J noted that whilst the Hong Kong courts had developed a practice of granting recognition to foreign liquidators and empowering them to take control of a company’s property, investigate its affairs, and bring any necessary proceedings on paper (which broadly replicate the impact of a local winding up order), the courts had never decided whether an oral examination could be ordered at common law in support of a foreign liquidation.

Applying Singularis Holdings v PricewaterhouseCoopers  [2014] 2 BCLC 597 and Rubin v Eurofinance [2013] 1 AC 236, the Hong Kong court concluded it had the power to grant orders if: (i) the power to make those orders existed in the jurisdiction of the liquidations; and (ii) the power existed in the assisting jurisdiction. The court was prima facie content to make the orders, given the necessary powers existed both under Cayman and Hong Kong law; the orders were necessary and would not infringe the limitations of the exercise of the power under Hong Kong law.

Considering the constitutional issue, Harris J did not consider that the common law power of assistance had “reciprocity” as a necessary component, and that therefore the orders sought did not constitute an “arrangement for reciprocal juridical assistance” falling within article 96. The Basic Law was therefore no impediment to the granting of assistance.

This decision is welcome and consistent with the attitude of many other common law jurisdictions. It is particularly significant for the judge’s conclusions that Hong Kong’s unusual constitutional arrangement does not prevent the application of common law principles of recognition.