The Court of First Instance ("CFI") has recently recognised two sets of Singaporean bankruptcy proceedings, granting the trustees appointed by the Singapore Courts specific powers to assist their investigations in Hong Kong into the affairs of the bankrupt individuals. See the CFI's decision here. This decision highlights the Hong Kong Court's authority, under common law, to recognise and give effect to foreign bankruptcy proceedings, enabling trustees to obtain information from banks in Hong Kong relating to the bankrupt individuals and to secure assets within the jurisdiction.
Background
The Singaporean bankruptcy proceedings involve two Singapore citizens, an oil trading tycoon and a member of his family, who were unable to pay their debts, amounting to SGD 6.07 billion and SGD 6.06 billion respectively, under the Insolvency, Restructuring and Dissolution Act 2018 of Singapore ("IRDA"). As both individuals held bank accounts in Hong Kong, the trustees applied to the Hong Kong Courts for recognition and assistance to make further inquiries regarding the bank accounts, which held more than HKD 56 million (approximately SGD 9 million).
Discussion
Relying on the principles for recognition and assistance of foreign bankruptcy proceedings laid down in Re Phillip James Kingston (Bankrupt) [2024] 5 HKLRD 788, the CFI was satisfied that the trustees in this case established the requisite conditions:
- The bankruptcy proceedings in the Singapore Court are collective in nature. The collective nature is evidenced by section 327(1) of the IRDA (materially the same as sections 12 and 58 of the Hong Kong Bankruptcy Ordinance) which states that (i) the bankrupt's property shall automatically vest in the trustee, (ii) the property becomes divisible among creditors, (iii) the trustee becomes the receiver of the property and holds the property for the benefit of the creditors as a whole, (iv) no creditor in respect of a provable debt in bankruptcy has any remedy against the bankrupt or his property, and (v) no action may be instituted against the bankrupt regarding that debt except with the court's permission.
- The bankruptcy proceedings are conducted in the Singapore Court, where the two individuals are domiciled, and they have submitted to that jurisdiction.
- The assistance sought by the trustees is necessary for the performance of their function. The Hong Kong banks in this case were unable to share any account information with the trustees without a valid Hong Kong court order. The trustees therefore applied for recognition and assistance in order to pursue investigations in Hong Kong, including identifying what assets the individuals held in the Hong Kong bank accounts and whether there are further assets located in Hong Kong belonging to the individuals.
- The assistance sought, which if granted would enable the individuals' assets in Hong Kong to be properly dealt with by the trustees, is consistent with Hong Kong law and public policy.
During the hearing, the CFI suggested that the trustees should have also sought an order directing the Hong Kong banks to transfer all the funds in the relevant bank accounts to them. This is because these funds are vested in the trustees by virtue of section 327(1) of the IRDA, and the trustees are entitled to request the transfer.
The CFI also recommends that foreign trustees (or foreign liquidators in winding up proceedings) should first ascertain the stance of third parties, such as banks in Hong Kong, who are known to have possession of documents or assets belonging to the bankrupt individuals (or to the company being wound up), before applying to the Hong Kong Courts for an order for recognition and assistance. This would ensure that the order sought satisfies the requirement of necessity described in 3 above and avoids the need to make successive applications to the Court. Indeed, this approach is consistent with the Court's previous decision that it is not necessary for a foreign liquidator to seek a recognition order first in Hong Kong before seeking information concerning the estate's assets from institutions such as banks in Hong Kong.
Comments
This decision provides helpful insight for foreign bankruptcy trustees and liquidators seeking recognition and assistance order from the Hong Kong Courts. The Court specifically recommends ascertaining the stance of third parties such as banks in Hong Kong who are holding relevant assets, before applying for such orders. This includes determining whether these third parties would be willing to comply with requests, such as transferring assets to the trustee or liquidator in the event there are valid grounds to make such requests. In view of the Court's guidance, it is expected that there would be more foreign office holders seeking to ascertain stances from institutions such as banks in Hong Kong before taking out application for any necessary recognition order.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
