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China Fishery: Hong Kong Court refuses to assist Chapter 11 Trustee

On 14 January 2019, Mr. Justice Jonathan Harris of the High Court of Hong Kong (the HK Court) published reasons for his decision to refuse leave for the Chapter 11 trustee (the Trustee) of CFG Peru Investment Pte. Ltd to use a HK Court decision dated 5 January 2016 (the Decision) in the US Bankruptcy Court.

By way of background, the Decision discharged the joint provisional liquidators appointed over the China Fishery Group and China Fisheries International Limited (the Companies). HSBC initially filed a Notice of Appeal but withdrew it after the parties entered into a Deed of Undertaking (the Deed) in January 2016. Pursuant to the Deed, in return for HSBC withdrawing from the Hong Kong and the Cayman Islands proceedings, the Companies provided certain undertakings to HSBC and the HK Court, including consenting to the immediate re-appointment of provisional liquidators in the Cayman Islands if the sale of the Peruvian business and repayment of HSBC’s debt has not occurred by 20 July 2016. The Deed contains an exclusive governing law clause in favour of Hong Kong.

The Trustee sought to rely on the Decision to determine whether the Companies have any claims against HSBC or whether HSBC’s conduct gave rise to any defence by the Companies. Leave is required from the HK Court because neither the hearing of nor the Decision itself are open to public.

Counsel for the Trustee argued that the Trustee’s office justified the HK Court assessing the application according to the common law principles governing judicial assistance.

Counsel for HSBC argued that the Companies breached its undertakings under the Deed and filed Chapter 11 proceedings for the purpose of preventing HSBC from enforcing the Deed. The HK Court should not allow the Companies to benefit from their egregious conduct.

Mr. Justice Harris agreed with HSBC and held as follows:

  • It is “self-evidently objectionable and an affront” to the HK Court for the Companies to have submitted to the Hong Kong jurisdiction under the Deed and to commence proceedings in another jurisdiction with a view to hindering enforcement of the Deed.
  • The Chapter 11 proceedings and the Trustee’s appointment are the consequence of “conscious fraud” on the part of the Companies on HSBC and the HK Court.
  • The Trustee did not satisfy the criteria for assistance or recognition but in any event, public policy considerations weigh heavily in favor of declining to provide any form of assistance and outweigh the more general public policy reasons that underpin the principle of open justice.

Harneys’ longstanding involvement with the Pacific Andes Group includes acting for certain lenders and liquidators over certain group entities.

China Fishery: Hong Kong Court refuses to assist Chapter 11 Trustee

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