In a significant ruling demonstrating Hong Kong’s commitment to cross-border insolvency cooperation, the Court of First Instance granted recognition to a trustee-in-bankruptcy appointed by the Federal Court of Australia to enable investigation to be carried out into the bankrupt’s affairs in Hong Kong. The decision in Robert Scott Woods v Industrial and Commercial Bank of China (Asia) Limited [2024] HKCFI 3311 (“Decision”) confirms the application of modified universalism in cross-border corporate and personal insolvency matters.
The Factual Background
The plaintiff was appointed trustee-in-bankruptcy of the bankrupt by the Federal Court of Australia.
The bankrupt, an Australian citizen, had entered into loan agreements with a Hong Kong lender and defaulted, leading to a judgment debt of over HK$796 million. After leaving Australia in August 2022, the bankrupt worked in Ukraine and United Arab Emirates.
The trustee sought recognition of his appointment in Hong Kong to investigate transactions in the bankrupt’s accounts with the defendant bank totaling over HK$85 million. The bank took a neutral position but required a court order due to customer confidentiality obligations.
The Decision
In the Decision, Linda Chan J held that the doctrine of “modified universalism” provides “a common basis for recognition and assistance” of both personal bankruptcy and corporate insolvency proceedings (at 19 of the Decision).
Having said that, her ladyship recognised that while recognition and assistance in the corporate insolvency context rely on the concept of “Centre of Main Interests” (COMI), recognition and assistance in the personal bankruptcy context traditionally turns on either domicile or submission to jurisdiction; this important distinction reflects the personal nature of bankruptcy proceedings, with domicile serving as the traditional common law basis for establishing jurisdiction over an individual’s status and property (see 25 of the Decision).
Thus, drawing on the principles for recognition and assistance of foreign insolvency proceedings laid down in Re Guangdong Overseas Construction Corporation [2023] 3 HKLRD 262 whilst acknowledging the differences between foreign personal bankruptcy and corporate insolvency proceedings, Linda Chan J held or concluded at §18 to 20 of the Decision that:
- The Hong Kong Courts have a common law power to recognize foreign bankruptcy proceedings, even if they differ from local proceedings;
- Recognition and assistance will be granted where:
- The proceedings are collective in nature;
- The bankrupt has submitted to the jurisdiction of the adjudicating foreign court or was domiciled there; and
- The assistance sought is necessary and consistent with Hong Kong law and public policy
- The doctrine of “modified universalism” applies equally to corporate insolvency and personal bankruptcy cases.
A crucial limitation of cross-border bankruptcy recognition, as reflected in 18(3) of the Decision, is that it only extends to moveable property. The Court’s order carefully respected this distinction, focusing on moveable assets within Hong Kong (such as bank accounts and related documents) and did not purport to affect any immovable property. This aligns with the traditional common law principle that the lex situs governs immovable property rights.
Finally, in the Decision, the Court also provided detailed analysis of the case law on submission to jurisdiction and domicile, which provides valuable guidance for future cases (at §24 to 26; §§31 to 33 of the Decision). Importantly, the Decision confirms that submission can occur through conduct rather than formal court appearance, a principle that will be particularly relevant in international bankruptcies where debtors may be physically absent from the jurisdiction.
On the facts of the case, the Court held that this is an appropriate case for recognition and assistance to be granted, and made an order, enabling the trustee to obtain and gather information and documents relating to the bankrupt from the bank.
Conclusion
This Decision demonstrates Hong Kong Courts’ continued commitment to cross-border insolvency cooperation in both corporate and personal contexts. It provides a welcome confirmation that trustees-in-bankruptcy appointed by a foreign court can obtain recognition and practical assistance to investigate assets and transactions in Hong Kong.
The full judgment is available at: https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=164347&currpage=T
Mr Lai Chun Ho acted for trustee-in-bankruptcy.
