13 May 2015

Application by foreign administrators

Linkedin

The Joint Administrators of African Minerals Limited (in administration) v Madison Pacific Trust Limited and others – HCMP 865 of 2015 (date of judgment 16 April 2015)

On 16 April 2015, Harris J considered an urgent ex parte application on notice (initially by way of a letter of request issued by the English High Court) made by the Administrators of African Minerals Limited (the “Company”). The order sought was to restrain the enforcement of security over certain shares owned by the Company pending the final determination of whether the moratorium of the administration applies extra-territorially.

This was the second reported case in Hong Kong in which the Companies Court considered an application pursuant to a letter of request issued by a foreign Court. The first reported case in Hong Kong was Joint Official Liquidators of A Co v B [ 2014 ] 4 HKLRD 374.

The Company was incorporated in Canada and was involved in mineral exploration and development in Sierra Leone through a number of Bermudian subsidiaries. The Company was the guarantor under a finance facility and in compliance with the facility charged its shares in two of the Bermudian companies in favour of the facility lenders. The agents and security agents of the facility were later changed to a Hong Kong incorporated company Madison Pacific Trust Limited (“Madison”).

The Company subsequently encountered financial difficulties and eventually the Administrators were appointed by the High Court of England over the Company. A moratorium (meaning a “standstill”) was imposed which provided that “no step may be taken to enforce security over the Company’s property except (a) with the consent of the administrator or (b) with the permission of the court.” The Administrators were concerned that Madison was selling the charged shares at an undervalue which could eventually prejudice the interest of unsecured creditors and possibly shareholders.

Harris J refused the Administrators’ application on the ground that the Court’s power to assist a foreign liquidation process was limited to the type of order that was available to a liquidator in Hong Kong either under our insolvency regime or in accordance with common law and equitable principles (citing Joint Official Liquidators of A Co v B [ 2014 ] 4 HKLRD 374 and UK Privy Council’s judgment in Singularis Holdings Limited v PricewaterhouseCoopers [ 2014 ] UKPC 597). At present, Hong Kong does not have any equivalent mechanism to administration and in particular there is no statutory provision which provides for a moratorium on the enforcement of a secured debt.

Harris J pointed out that relief which would achieve the same effect as recognising the administration order may be sought by way of injunction in the Hong Kong Court if for instance it could be demonstrated that the proposed enforcement would improperly prejudice the equity of redemption. However, the application before the Court was not made on that basis.

The issue of whether the Hong Kong Court should recognise a liquidator (or person exercising similar powers) appointed in a jurisdiction other than the place of incorporation was not considered in this case. As explained by Harris J, this issue is yet to be conclusively decided by the English (or Hong Kong) courts.   

Linkedin

KEY CONTACT

Jamie Stranger

Jamie Stranger
Partner

T:  +852 2533 2780 M:  +852 9354 4481 Email Jamie | Vcard Office:  Hong Kong

Alexander Tang

Alexander Tang
Senior associate

T:  +852 2533 2881 M:  Email Alexander | Vcard Office:  Hong Kong

  • Related Locations