Chu Kong v Ocean Sino Ltd ((in Liquidation))
| Jurisdiction | British Virgin Islands |
| Judge | Wallbank, J. |
| Judgment Date | 24 November 2021 |
| Judgment citation (vLex) | [2021] ECSC J1124-5 |
| Docket Number | CLAIM NO. BVIHCM 2015/0065 |
| Court | High Court (British Virgin Islands) |
EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
COMMERCIAL DIVISION
CLAIM NO. BVIHCM 2015/0065
Mr. John Carrington, QC, with him Mr. Richard Hacker, QC, and Ms. Reisa Singh for the Applicant
Mr. Mark Phillips, QC, with him Mr. Peter Ferrer, Ms. Marcia McFarlane, Ms. Megan Elms and Mr. Richard Parchment for the Fourth and Fifth Respondents
Mr. Philip Jones, QC, with him Miss Rosalind Nicholson, Mr. Daniel Warents and Mr. Renell Benjamin for the Sixth Respondent
The Second and Third Respondents not appearing
Wallbank, J. (Ag.): This is the Court's judgment in respect of an application filed on 15 th March 2021 by Mr. Chu Kong (‘Mr. Chu’) as Applicant (‘the Application’). By this application, Mr. Chu seeks orders that the liquidators of a company called Ocean Sino Limited (in Liquidation) (‘OSL’) be removed from office and replaced with other liquidators. Mr. Chu also seeks an order that the liquidators should pay his costs of this application personally. Those liquidators are Respondents to the application, as is Mr. Lau Wing Yan (‘Mr. Lau’), who was the original petitioner in these long running proceedings.
The grounds for Mr. Chu's application were stated in his Notice of Application as being that:
“The Liquidators have displayed a total disregard of Mr. Chu's interests as: (i) a creditor (through his company CK Assets Limited) and (ii) an equal 50% contributory of OSL (and an indirect shareholder of PBM), by:
(1) Damaging his interest in the joint venture business of Beibu Gulf, which represents the only investment of PBM, by issuing the Statutory Demand against Beibu Gulf, and later commencing the Hong Kong Petition;
(2) Using his resources to deal with any unmeritorious accusations raised by Mr. Lau but objected by him, such as launching the Hong Kong Petition on the basis of Mr. Lau's preferred account of the treatment of the PBM Loan, even though it is directly contradicted by the 15/16 Dec 2015 Resolutions which Mr. Lau signed;
(3) Refusing to consider or pursue the Summary Disposal Proposal without any good reason, which would have brought the winding up of OSL to an immediate close without the need for further litigation and with a significant saving of time and cost.
Accordingly, the Liquidators have failed to act independently or properly discharge their duties as Liquidators and/or that their conduct is below the standard that may be expected of a reasonably competent liquidator; that they are unable to act independently given their siding with Mr. Lau's interests; and that as a result Mr. Chu as 50% contributory has completely loss [ sic] trust and confidence in the Liquidators.”
The Application was brought pursuant to section 187 of the Insolvency Act, 2003 1 (‘the Act’). This provides:
“187. Removal of liquidator.
(1) The Court may, on application by a person specified in subsection (2) or on its own motion, remove the liquidator of a company from office if
(a) the liquidator
(i) is not eligible to act as an insolvency practitioner in relation to the company,
(ii) breaches any duty or obligation imposed on him by or owed by him under this Act, the Rules or the Regulations made under section 486 or, in his capacity as liquidator, under 169 any other enactment or law in the Virgin Islands, or
(iii) fails to comply with any direction or order of the Court made in relation to the liquidation of the company; or
(b) the Court is satisfied that
(i) the liquidator's conduct of the liquidation is below the standard that may be expected of a reasonably competent liquidator,
(ii) the liquidator has an interest that conflicts with his role as liquidator, or
(iii) that for some other reason he should be removed as liquidator.
(2) An application to the Court to remove the liquidator of a company may be made by
(a) the creditors' committee;
(b) a creditor or member of the company; or
(c) the Official Receiver.
(3) Where the Court removes a liquidator from office under this section
(a) if, following his removal, there is at least one liquidator remaining in office, the Court may appoint an eligible insolvency practitioner as liquidator in his place; or
(b) if the liquidator removed was the sole liquidator of the company, the Court shall appoint the Official Receiver or an eligible insolvency practitioner as liquidator in his place.
(4) On the hearing of an application under this section, the Court may make any interim or other order it considers fit.”
In this case, Mr. Chu asserts standing to make this Application on the basis that he is a member of OSL, in accordance with to section 187(2)(b). All the Respondents accept that Mr. Chu has such standing. Mr. Chu appears to have dropped his initial reliance upon CK Assets Limited, which he appears to have done to be able to assert that he is a creditor.
Mr. Chu relies upon sections 187(1)(a)(ii) and 187(1)(b) to assert that the liquidators have breached their duties and that the liquidators' conduct of the liquidation is below the standard that may be expected of reasonably competent liquidators, and/or that the liquidators have an interest that conflicts with their role as liquidators, and/or that there is some other reason they should be removed as liquidators.
The Respondents oppose the Application. In the case of the liquidator Respondents, whilst they deny there are any grounds for their removal, they place themselves in the discretionary hands of the Court. Mr. Lau opposes the Application with no such impartial reserve.
Before considering the basis of Mr. Chu's Application, and the opposition thereto, it is apt to set out some of the background. At risk of including some repetition, I can do no better than refer to narrative explanations given in previous judgments, first of this Court, which made certain findings of fact after a plenary trial, and of the Judicial Committee of the Privy Council (the ‘Privy Council’) which reviewed and upheld that decision.
OSL was put into liquidation by an order of this Court dated 28 th July 2017, upon the application of Mr. Lau. Mr. Chu strongly resisted the winding up petition. The winding up petition was heard over six days in May and June 2017 before Justice Roger Kaye, QC (Ag.). Justice Kaye, QC (Ag.) introduced the Court's judgment as follows:
“[1] … OSL was incorporated as a BVI company on 6 November 2009 with an authorised share capital of 50,000 US$1.00 shares. The shares were allotted to the two individual parties to these proceedings, Mr. Lau Wing Yan (“Mr. Lau”) and Mr. Chu Kong (“Mr. Chu”) who were the sole shareholders and directors. The principal ground on which the application is based is that the company is deadlocked (as is common ground) at both shareholder and director level. Mr. Jones QC, on behalf of Mr. Lau, also however, relies on additional grounds of loss of trust and confidence in Mr. Chu. Dr Wong SC, on behalf of Mr. Chu opposes the application.
[2] The case has become a cause célèbre between these two individuals. OSL is the sole shareholder of PBM Asset Management Limited (“PBM”), a Hong Kong company incorporated in December 2009. Mr. Lau and Mr. Chu again are its sole directors. It is common ground that apart from owning PBM, and apart from PBM owning 49% of the shares in a ship operating group, as described below, neither company carries on any separate corporate activities or operations.
[3] The fundamental complaint of Mr. Lau is that he and Mr. Chu have fallen out, in the words of Mr. Jones QC on his behalf, “in a pretty spectacular way”, with the result that OSL (and consequently PBM) is deadlocked between him and Mr. Chu at both board and shareholder level. The two cannot possibly get on and the only reasonable outcome is to wind up the affairs of OSL.
[4] Dr Wong SC, on behalf of Mr. Chu, resists and actively opposes the application for a liquidation order. He (on behalf of Mr. Chu) blames Mr. Lau for the fall-out and, in any event, says no liquidation should be ordered on the grounds that alternative remedies exist (such as buy-out as well as other possibilities) which Mr. Lau is unreasonably refusing to pursue. Further he argues that the effects of a liquidation of OSL would filter down to and cause irreparable damage to an otherwise solvent operating large group of ship owning companies. (By the same token he submits it is not permissible either to look at the affairs of the subsidiaries or to take post application events into consideration, leastways not those adverse to the making of a liquidation order since that is a remedy of last resort.)
[5] Mr. Jones's riposte is that it is Mr. Chu who is guilty of misconduct and who ultimately caused the deadlock which is, in any event, amply demonstrated by the fact that by the time proceedings had commenced in May 2015 there were already 7 sets of proceedings between the parties (5 commenced by Mr. Chu, 2 by Mr. Lau) in either Hong Kong or the BVI. By the time of the hearing these appear to have increased to 15 (see below). The suggested alternative remedies are simply, in the circumstances, unreal, unreasonable, and impractical. Moreover, there is no proven likelihood of damage from the liquidation that is not experienced also by Mr. Lau as an equal shareholder in OSL. In any event, Mr. Chu's motive for resisting the liquidation of OSL is obvious: since these proceedings commenced Mr. Chu and, it appears, members of his family, have, since the commencement of proceedings, secured control of the ship operating group and excluded Mr. Lau. Attempts by the parties historically to resolve their differences by restructuring their affairs (all dealt with below) have also come to naught, due to Mr. Chu's obstructive tactics...
To continue reading
Request your trial