In R. (on the Application of PACCAR Inc) v Competition Appeal Tribunal  UKSC 28 (judgment handed down on 26 July 2023), the UK Supreme Court held that litigation funding agreements with third parties who play no part in the conduct of litigation, but who are to be paid a share of any damages recovered by the claimant, are “damages-based agreements” (or “DBAs”) within the meaning of the relevant UK legislation which regulates such agreements. Such agreements must therefore comply with the relevant regulatory regime and, if they do not, they are unenforceable under English law.
The likely effect of the UK Supreme Court’s decision is that most English law-governed third-party litigation funding agreements currently in place will be unenforceable, since participants in the litigation funding market have generally assumed that their agreements are not DBAs and therefore do not have to comply with the relevant regulatory regime. For an in depth coverage of the ruling see a full article by our London team. There is also an episode on this issue on our Commercial Litigation podcast. Continue reading
When a company is in the so-called “twilight zone” approaching insolvency, it is well-established that the directors’ fiduciary duties require them to take into account interest of creditors (the so-called “creditor duty”). In the recent decision of Stephen John Hunt v Jagtar Singh  EWHC 1784 (Ch), the English High Court examined whether it is necessary to establish some form of knowledge (actual or constructive) of insolvency on the part of the directors for the creditor duty to arise, or whether the fact of insolvency is sufficient to trigger the duty.
The creditor duty was recently considered by the UK Supreme Court (“UKSC”) in BTI v Sequana  UKSC 25 (see our previous update here). In that case, the UKSC confirmed the existence of the creditor duty and gave important guidance on the scope of a director’s duty to have regard to the interests of creditors. The UKSC nonetheless did not reach consensus on whether knowledge of the directors that the company is insolvent or bordering on insolvency is an essential element for creditor duty to arise. Continue reading
Following the Court of Final Appeal’s landmark decision in Guy Lam, Hong Kong’s Court of First Instance (the “Court”) considers that winding-up petitions can be stayed by reason of ongoing cross-claims that are the subject of an arbitration clause
Recently, the Court of Final Appeal confirmed that a Hong Kong bankruptcy petition should generally be stayed or dismissed if the debt in question is subject to a non-Hong Kong exclusive jurisdiction clause. Our discussion on this landmark decision of Guy Kwok-Hung Lam v Tor Asia Credit Master Fund LP  HKCFA 9 can be found here.
Since then, the application of the principles Guy Lam has been considered by the Court of First Instance in the context of a winding up petition, which we have written about here. In that case Linda Chan J took the view that the approach in Guy Lam did not apply where, instead of a non-Hong Kong exclusive jurisdiction clause, there is an arbitration clause. Continue reading
In two remarkably similar cases, Re Peking University Founder Group Company Limited  HKCFI 1350 (the “Peking University Case”) and Re Tsinghua Unigroup Co., Ltd  HKCFI 1572 (the “Tsinghua Case”), the Hong Kong Court affirmed the enforceability of keepwell deeds entered into by PRC companies as credit enhancement for bonds issued by their respective offshore subsidiaries. The Court recognised that although keepwell deeds are not guarantees, they are still enforceable contractual obligations that provide additional security to bondholders. However, both cases illustrate that keepwell deeds are sensitive to supervening events and subject to approval from relevant PRC authorities, particularly where the keepwell provider enters into reorganisation proceedings in the PRC.
In Re Leading Holdings Group Limited  HKCFI 1770, the Hong Kong Court has made it clear for the first time that, based on a construction of the contractual documentation, investors with an indirect participation in notes issued by a company have no standing to petition for winding up of the issuer, despite their obvious commercial interest in the credit of the issuer. Continue reading
Valuable lessons can be learnt from the Hong Kong Court of First Instance’s (“CFI“) recent decision in Bei Ni Ltd v Cornwell (Hong Kong) Limited  HKCFI 1799. The CFI was confronted with the question of whether a charge over shares in a margin account was a fixed charge or a floating charge.
The CFI held that the key question was whether the proceeds were held for the benefit of the chargee.
Section 633(1) of the Companies Ordinance allows a person or a member of the company to apply to the Court to request a rectification of the register of members if a name is entered or omitted from the register without sufficient cause or where a person ceases to be a member. The Companies Court (“Court“) in Shi Jiu Xing v Hong Kong A-Sun Group Co Ltd and Others  HKCFI 1852 held that a rectification application under section 633(1) of the Companies Ordinance was subject to the Court’s discretion. The Court also confirmed that, in Hong Kong, the Court continues not to treat the register of members as conclusive evidence and is entitled to consider all relevant facts and circumstances.
Earlier this month, the UK Supreme Court in Philipp v Barclays Bank UK plc  UKSC 25 addressed the scope of the Quincecare duty in the context of an “authorised push payment” (APP) fraud, where the victim was tricked into willingly authorising the bank to transfer funds into an account controlled by the fraudster. Continue reading
Two recent cases, Re Guangdong Overseas Construction Corporation  HKCFI 1340 (the “GOCC Case“) and Re Trinity International Brands Limited  HKCFI 1581 (the “Trinity Case“), reaffirm the commitment of the Hong Kong Court to cooperating with the Mainland Court in terms of mutual recognition and assistance of insolvency proceedings.
These cases show that the Hong Kong Court will look at the Mainland-Hong Kong mutual recognition arrangement for insolvency proceedings (the “Cooperation Mechanism“, which we summarised here), regardless of whether the case falls within its scope (as in the Trinity Case) or outside its scope (as in the GOCC Case). Continue reading
In Simplicity & Vogue Retailing (HK) Co., Limited  HKCFI 1443, the Hong Kong Companies Court (the “Court“) made a winding up order against the Company on the basis that it failed to pay security in time. In considering the Company’s opposition grounds, the Court commented that it retains discretion to wind up a company in cases involving an arbitration clause.
Herbert Smith Freehills’ Jojo Fan, Trevor Ho and Jody Luk represented the successful Petitioner.
This is the first case considering the Court of Final Appeal’s (“CFA“) landmark decision in Re Guy Kwok Hung Lam  HKCFA 9 (“Guy Lam“; which we blogged here), which was handed down recently in May 2023 and involved a winding up petition based on a debt subject to a foreign exclusive jurisdiction clause. Continue reading