Chu Kong v Ocean Sino Ltd et Al
| Jurisdiction | British Virgin Islands |
| Judge | Ellis JA |
| Judgment Date | 03 July 2023 |
| Judgment citation (vLex) | [2023] ECSC J0703-1 |
| Docket Number | BVIHCMAP2021/0048 |
| Court | Court of Appeal (British Virgin Islands) |
The Hon. Mde. Vicki Ann Ellis Justice of Appeal
The Hon. Mr. Trevor Ward Justice of Appeal
The Hon. Mr. Gerard St. C Farara Justice of Appeal [Ag.]
BVIHCMAP2021/0048
THE EASTERN CARIBBEAN SUPREME COURT
IN THE COURT OF APPEAL
Commercial appeal — Removal of Liquidator — Voluntary Liquidation — Findings of Fact — Whether due cause shown — Exercise of discretion to remove the Liquidators — Costs — Successful party to be awarded costs — Whether the costs order made by the learned judge was reasonable — Application to adduce fresh evidence — Ladd v Marshall — Whether the application to adduce further evidence on the appeal should be granted.
Ocean Sino Limited (“OSL”) is an asset holding vehicle incorporated in the Territory of the Virgin Islands, (“BVI”) which held shares in a Hong Kong company named PBM Management Limited (“PBM”), which in turn held a minority stake in BGA Holdings Limited (“BGAH”). OSL's shareholders were Mr. Chu Kong (“Mr. Chu”), the Appellant and Mr. Lau Wing Yan (“Mr. Lau”), the 6 th respondent, who were also directors of the company. In May 2015, Mr. Lau initiated proceedings to have OSL wound up, and in July 2017 the 2 nd, 3 rd, 4 th and 5 th respondents were appointed as liquidators of OSL (“the Liquidators”). Both Mr. Chu and Mr. Lau had an equal say in the choice of liquidators, to ensure that the interests of both parties would be fairly protected. As such two liquidators from Hong Kong (“HK Liquidators”) and two liquidators from the BVI (“BVI Liquidators”) were appointed. In August 2017, Mr. Chu appealed the order to wind up OSL and in January 2020, the Court of Appeal discharged the said order. However, in October 2020, the winding up order was reinstated by the Judicial Committee of the Privy Council.
Throughout the legal proceedings disagreements arose regarding the conduct of the liquidation, and various challenges were raised and filed by Mr. Chu, including applications for directions to further the liquidation process. Mr. Chu argued that the liquidators exceeded their duties and acted in a biased manner, favoring Mr. Lau and that they pursued a course of action that prolonged the liquidation process. To assist with this, he proposed an alternative distribution proposal (“Summary Disposition Proposal”) which he believed would facilitate a more efficient and cost-effective liquidation process. However, this was not adopted. Mr. Chu also took issue with the purported resignation of the HK Liquidators as he claimed their resignation was not properly communicated to him or addressed by the HK Liquidators or remaining BVI liquidators. Mr. Chu claimed that the liquidators failed to keep him, and the court, informed of significant developments in the liquidation and have behaved perversely in certain instances.
Therefore, in March 2021, Mr. Chu filed an application for removal of the 2nd, 3 rd, 4 th and 5 th respondents as liquidators of OSL (“Removal Application”). In the Removal Application Mr. Chu alleged that the liquidators acted beyond the scope of their duties and were biased against him, and the liquidators were intent on using the winding up of OSL as a means of investigating and pursuing potential claims against him in relation to historic events occurring in BGAH. He also criticised their delay in acting and their failure to consider his Summary Disposition Proposal.
The Removal Application was heard before the learned judge who, on 24 th November 2021, dismissed it, finding that Mr. Chu failed to show due cause such as to engage the court's discretion to remove the liquidators and as a result awarded costs on the application to Mr. Lau (“Dismissal Order”). Dissatisfied with paragraphs 1 and 2 of the Dismissal Order, Mr. Chu appealed to this Court, challenging the learned judge's findings on due cause and the costs order by which the learned judge ordered Mr. Chu to pay Mr. Lau's, costs of the Removal Application. The appeal was heard by this Court on 3 rd October 2022 and on 26 th April 2023, Mr. Chu filed an application in which he sought permission to adduce further evidence, relating to the liquidator's conduct, on the appeal. The main issues to be determined before this Court are therefore: (i) whether the learned judge erred in law and/or in fact in holding that his discretion to remove the liquidators was not engaged because Mr. Chu had failed to show any (or any sufficient) due cause; (ii) whether the costs order made by the learned judge was reasonable; and (iii) whether the application to adduce further evidence on the appeal should be granted.
Held: dismissing the appeal; affirming the judgment and order of the court below made on 24 th November 2021; awarding costs to the respondents on this appeal to be assessed if not agreed within 21 days; and dismissing the application to adduce further evidence on appeal; that:
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1. It is readily apparent that the appeal against the learned judge's decision that no due cause has been shown for the removal of the liquidators is a challenge to the learned judge's findings of primary fact and/or his evaluation of primary fact. As such, the Court is only empowered to interfere with such conclusions of the judge that (i) fail to take relevant evidence into account; (ii) rely on irrelevant evidence or (iii) are unreasonably or insensibly arrived at. Further, the Court cannot substitute its own decision for that of the court below but can determine whether the correct legal principles were applied and whether on the evidence, the decision of the judge can be justified.
Joint Stock Asset Management Company Ingosstrakh Investments v BNP Paribas SA [2012] EWCA Civ 644 applied; Assicurazioni Generali SpA v Arab Insurance Group (BSC) [2003] 1 WLR 577 applied; JSC BTA Bank v Ablyazov and another [2018] EWCA Civ 1176 applied.
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2. The court has a wide discretion as to the circumstances in which it may remove a liquidator and it is not confined to or dependent on proof of misconduct, personal unfitness or any breach of their statutory obligations. An applicant who seeks the removal of a liquidator must show sufficient good cause or due cause before a judge can consider and determine whether he can exercise his discretion to remove the liquidator. Whether good cause has been shown is to be determined on a case-by-case basis and measured by reference to the real and substantial interests of the liquidation and the purpose for which a liquidator is appointed. The court is required to make an evaluative finding that there was due cause to remove the liquidators from office. In making that assessment the court is required to engage in a balancing exercise that is to (i) ensure that the liquidators carry out their duties competently and impartially, so that the liquidation achieves the purposes for which it was commenced; and (ii) is to discourage unmeritorious applications for the liquidator's removal by disgruntled creditors or members.
Petroships Investment Pte Ltd v Wealthplus Pte Ltd (in members' voluntary liquidation) (Koh Brothers Building & Civil Engineering Contractor (Pte) Ltd and another, interveners) and another [2018] 3 SLR 687 applied; AMP Enterprises Ltd v Hoffman and another [2003] 1 BCLC 319 applied; Andrew R Keay, McPherson's Law of Company Liquidation (Sweet & Maxwell, 3 rd Ed., 2013) page 486 at paragraph 1–005 applied; re Sir John Moore Gold Mining Company (1879) 12 Ch D 325 applied; Re Edennote Ltd; Tottenham Hotspur plc and others v Ryman and another [1996] 2 BCLC 389 applied.
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3. In this case, it is clear that the learned judge fully considered the conduct of the liquidators, the question of the liquidators' apparent and perceived bias, loss of confidence, whether the liquidators failed to act jointly and all other matters raised in the Removal Application. The learned judge correctly applied the relevant legal principles and made appropriate findings that: given the liquidators' statutory duties, the liquidators were obliged to take reasonable steps to rehabilitate their value so that each of OSL's members could receive due value upon a distribution; that the liquidators' decision to investigate and Mr. Lau's funding of the liquidation in the circumstances cannot be regarded as evidence of bias and that their refusal to adopt his Summary Disposition Proposal was not unreasonable; and that there was doubt as to the authenticity or reasonableness of Mr. Chu's purported loss of confidence. The evidence advanced by Mr. Chu did not support nor constitute grounds for the removal of the liquidators and when taken together the learned judge was entitled to find that there was no due cause shown. The learned judge was therefore correct in not considering and determining whether he should exercise his discretion to remove the liquidators. The learned judge's decisions on due cause and whether to exercise his discretion are therefore not open to review by this Court.
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4. Mr. Lau was rightfully joined as a party and had a direct interest in the proceedings, so it was appropriate for him to participate and have separate legal representation. Given that Mr. Lau successfully defended the proceedings, it was reasonable that the general rule be applied — that the unsuccessful party is ordered to pay the costs of the successful party. While the learned judge should have invited the parties to address the issue of costs before making the order, Mr. Chu had ample opportunity to raise the issue earlier but failed to do so. The learned judge's order was therefore well grounded considering the circumstances, and there is no basis for the Court to interfere with the costs order made by the learned judge.
Rampersad and another v Ramlal and others [2022] UKPC 50 applied; English v Emery Reimbold & Strick...
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