Comity Gold – the Hong Kong Court emphasizes the spirit of comity in resolving cross-border insolvency matters
In the Hong Kong case of Wing Sze Tiffany Wong v Wong Sai Chung, the Hong Kong Court relied on the spirit of comity between courts in cross-border insolvency matters to order a Hong Kong-based ex-director of a foreign-incorporated company to cooperate with Hong Kong-appointed liquidators.
China Properties Group Limited was incorporated in the Cayman Islands and listed in Hong Kong. It held BVI and Hong Kong subsidiaries, which in turn held the Mainland operations.
Following their appointment, the Liquidators complained about obstruction by the ex-director, including his commencement of BVI proceedings seeking declaratory relief that he was the sole director of the BVI subsidiaries. The Liquidators, in turn, sought an order from the Hong Kong Court for the ex-director to pass resolutions appointing the liquidator as the sole director of the BVI subsidiaries and also applied for an anti-suit injunction restraining the ex-director from continuing the BVI proceedings.
In ordering the ex-director to pass the requested resolutions, the Hong Kong Court stated that “in the spirit of comity and judicial co-operation in cross-border insolvency matters, one would expect that courts of competent jurisdictions would, within the four corners of their laws, give assistance to liquidators appointed by the courts of a company’s COMI… the [ex-director] is resident within the territory and this Court has an in personam jurisdiction over him. It is only right that this Court makes suitable orders to both give effect to the liquidation and to assist the BVI Courts in resolving related litigation.”
- Applying Re Lamtex Holdings Ltd and Re Global Brands Group Holdings Ltd, the Hong Kong Court recognised the Company’s centre of main interest (COMI) as being Hong Kong. Therefore, its assistance to the Liquidators was entirely justified and consistent with commercial practice.
- Pursuant to the Hong Kong Court’s appointment of the Liquidators, it was paramount that it discharges its facilitative duties to promote the effectiveness and efficiency of its liquidators in Hong Kong. It did not sit right for the Hong Kong Court to stand idle and pass the burden to the BVI Courts.
- The principle of comity between courts dictates that courts should offer mutual assistance to each other in cross-border liquidations within its local laws so that orders from both domestic and offshore courts can be fully effective. Liquidators should not have to repeatedly apply for fresh winding-up orders in the place of incorporation as this would not be cost-effective, especially for listed companies with offshore corporate structures but its COMI onshore.
On the other hand, the Hong Kong Court chose not to order any anti-suit injunction against the ex-director exactly because comity dictates that insofar as BVI proceedings are concerned, the Hong Kong Court would defer to the judgment of the BVI Courts.
This case confirms that where a Hong Kong Court has personal jurisdiction, and the company’s COMI is Hong Kong, it stands ready to lend assistance to locally-appointed liquidators of an overseas company. This means making appropriate orders both enforcing the liquidation and aiding foreign courts in resolving related litigation.