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Modified Universalism – Privy to Singular Clarification

20 January 2015. Published by Rebecca Wong, Senior Associate

While most jurisdictions provide liquidators with wide investigative powers to locate and realise assets locally, the exercise of such powers becomes more complicated when the assets are situated overseas.


While most jurisdictions provide liquidators with wide investigative powers to locate and realise assets locally, the exercise of such powers becomes more complicated when the assets are situated overseas. As more and more businesses expand globally and corporate structures become equally more complex, the liquidators' task becomes more problematic in winding up such companies.

Unlike the United Kingdom(1), Hong Kong does not have a statutory mechanism to enable courts to assist foreign office holders in cross-border insolvency. To locate and identify assets of an insolvent debtor in Hong Kong, foreign liquidators must therefore apply to the Hong Kong Court for an ancillary winding up of the insolvent company in Hong Kong and/or make a request to the court for assistance at common law. Absent such orders compelling assistance, individuals and companies in Hong Kong will often resist any request from foreign liquidators. The issue is particularly topical in Hong Kong where the majority of companies listed on the Stock Exchange of Hong Kong are incorporated overseas, often in Bermuda or the Cayman Islands. 

Recent decisions on cross-border insolvency by the Privy Council in Singularis Holdings Limited v PricewaterhouseCoopers(2)("Singularis"), and the Hong Kong High Court in The Joint Official Liquidators of A Company(3) ("JOLAC") are particularly topical. This article will discuss the impact these cases will likely have on the conduct of liquidations in Hong Kong as well as the jurisdiction of the Hong Kong Courts when asked to provide assistance to foreign liquidations.

Ancillary Winding Up in Hong Kong

Hong Kong Courts have a discretionary jurisdiction to wind-up an unregistered company (such as a company incorporated overseas) under s. 327(1) of the Companies (Winding Up & Miscellaneous Provisions) Ordinance (Cap. 32) ("Cap. 32"). Once an ancillary winding-up order is made, the Hong Kong insolvency regime prescribed in Cap. 32 is engaged. The circumstances in which a Hong Kong Court will grant such an order, however, are restrictive and require petitioners to establish that:

(i)         there is a sufficient connection with Hong Kong;

(ii)        there is a reasonable possibility that the winding-up order would benefit those applying for it; and

(iii)       the Court must be able to exercise jurisdiction over one or more persons interested in the distribution of the company's assets,

(together, the "Three Requirements")(4).

A discussion of the Three Requirements is beyond the scope of this article save to note that there is a strict onus on petitioners to prove the existence of each limb. The difficulties of proving these limbs are clear, as demonstrated by a recent line of Hong Kong cases in which the Court has declined to grant an ancillary winding-up order, usually for want of sufficient connection with Hong Kong (5). 

Hong Kong does not have a statutory mechanism for the courts to assist foreign liquidators, nor is it a signatory to the UNCITRAL Model Law on Cross-Border Insolvency (the "Model Law"). It has specifically been noted, however, that either mechanism would enable the Hong Kong Court to make an ancillary winding-up order to assist foreign liquidators, even if the Three Requirements were not satisfied(6).

Common law and the principle of "Modified Universalism"

"Modified Universalism" refers to the principle that a court has a common law power to recognise and grant assistance to foreign insolvency proceedings so far as it properly can(7). Where cases fall outside the scope of the Three Requirements in Hong Kong, liquidators have turned to this common law principle for assistance.

The Joint Official Liquidators of A Company

In JOLAC, the Grand Court of the Cayman Islands sent a letter of request (on application by liquidators appointed in the Cayman Islands) to the High Court of Hong Kong seeking orders for both the recognition of the Cayman Islands liquidation and the appointment of liquidators, and an order for certain Hong Kong respondents to produce documents for the purposes of the liquidators' investigation of an alleged fraudulent scheme (an order based, in substance, on s. 221 of Cap. 32).

Harris J granted the orders sought, on the basis that foreign liquidators should be empowered to assert in Hong Kong whatever claims that are available to them under their jurisdiction of appointment, without having to commence ancillary winding up proceedings, provided that: (i) the foreign substantive law to be applied is broadly similar to Hong Kong insolvency law, and (ii) the specific relief which is sought is available under Hong Kong law.

A few months after Harris J delivered this judgment, however, the Privy Council delivered its judgment in Singularis, which places some doubt as to the extent to which JOLAC will be followed in future in Hong Kong.

Singularis Holdings Limited v PricewaterhouseCoopers

In Singularis, the liquidators of Singularis Holdings Limited (a Cayman Islands company, "SHL") obtained orders from the Supreme Court of Bermuda for recognition of their appointment as liquidators in Bermuda, and orders against PwC for disclosure of a wide range of information and documentation to assist their investigations. In granting this order, the Court applied its "common law power" to apply s. 195 of the Bermuda Companies Act 1981 by analogy. That provision was wide enough to compel the disclosure requested from PwC unlike under the relevant (and more restrictive) Cayman Islands provision. This order was overturned on appeal.

The Liquidators then appealed to the Privy Council, whichunanimously dismissed the appeal. Their Lordships recognised that although the principle of 'modified universalism' exists, its application does not extend to recognise the foreign liquidator "as if" he has been appointed as a liquidator domestically(8). As the Liquidators did not have the power to require PwC to produce the documents sought under the Cayman Islands law, they could not then "forum shop" and turn to the Bermuda law which did have such power.

In terms of the more targeted question as to whether the Courts have a general common law power of assistance to order the provision of documents and information (and questioning of persons) in cross-border insolvencies, the majority decision (Lords Sumption, Collins and Clarke) considered that such power exists but:

(i)   is available only to assist officers of a foreign court of insolvency jurisdiction and not, for example, in situations of voluntary winding-up and other matters conducted outside of the Court;

(ii)     is a power of assistance and is therefore not available to enable foreign courts to do something which they could not do under the law by which they were appointed (in this case, the Cayman Islands);

(iii)   is available only where it is necessary for the performance of the office-holder's functions; and

(iv)      can only be exercised consistently with the substantive law and public policy of the assisting court (i.e. Bermuda).

Any recognition of a common law power of assistance to apply local insolvency legislation by analogy "as if" it applied would "go so far beyond the traditional judicial development of the common law as to be a plain usurpation of the legislative function"(9). While the minority (Lords Neuberger and Mance) agreed with this statement, their Lordships expressed concern at extending the general common law assistance in the first place to:

"haul anyone before the court (to use Dillon LJ's word in Ex P Tucker), to be interrogated and to produce documentation on pain of being in contempt, simply because it would be useful for the foreign liquidator to be able to do so and might enable him to locate some assets (or better understand the company's affairs)"(10).

Their Lordships considered such an extension to be a "step leap" from a general power of assistance that went beyond any categories that have been recognised in current law, including, for example, under a Norwich Pharmacal order(11). Developing the common law in this way may lead to all sorts of problems and uncertainties, such as potentially opening the flood gates to ordinary litigants making similar applications to gather information to assist their claims, notwithstanding any intention to confine the power to foreign insolvencies. Their Lordships preferred to leave any extensive debate on this matter, however, to be decided in the appropriate case(12).


Singularis is perhaps an unsurprising decision given that it concerned an application whereby the sole tactic of the liquidators was to free themselves from the confines of Cayman Islands law by seeking to rely upon the wider investigative powers afforded under Bermuda Law in order to obtain information from PwC – this, as correctly identified by the Privy Council and the Court of Appeal for Bermuda, was a prime example of 'forum shopping'; a practice that the Privy Council was keen not to encourage.

The minority's obiter statements in Singularis leave open, for future debate in an appropriate case, whether the principle of 'modified universalism' should be even further restricted to prevent orders compelling anyone to be questioned before the Court simply to assist the foreign liquidator to locate assets. JOLAC indicates that, for now, the Hong Kong Companies Court is generally in favour of the recognition of a common law power to assist a foreign liquidator as "a mechanism available to foreign liquidators for obtaining information and documents without having to wind up a company"(13), provided the foreign jurisdiction has a broadly similar substantive insolvency law. Accordingly there seems some doubt that Hong Kong will endorse such a debate.

In our opinion, an appeal court in Hong Kong is more likely to follow the majority decision in Singularis to rein in the common law power, recognised in Cambridge Gas, to that of assistance only to the extent permitted in the foreign liquidators' jurisdiction of appointment, and provided that it is also consistent with Hong Kong law.

As the Hong Kong Companies Court continues to see an increasing number of applications which have a cross-border dimension, the development of the Court's common law power to meet these changing circumstances will be both interesting and topical in circumstances where there are no provisions dealing with cross-border insolvency and where applications for ancillary winding up under s. 327 of Cap. 32 remain consistently difficult(14).

A PDF version of the article can be found here.


(1) ss. 236 and 426 of the Insolvency Act 1986 (UK).

(2) Singularis Holdings Limited v PricewaterhouseCoopers [2014] UKPC 36. It is worth noting that each Justice of the Judicial Committee of the Privy Council gave a substantive judgment in this case.

(3) The Joint Official Liquidators of A Company v B and Anor [2014] 4 HKLRD 374.

(4) Re Yung Kee Holdings Limited [2012] 6 HKC 246, affirmed in Re Pioneer Iron and Steel Group (HCCW 322/2010) and Re China Medical Technologies [2014] 2 HKLRD 997.

(5) See, for example, Insigma Technology Co. Ltd [2014] HKEC 1685 and Re China Medical Technologies [2014] 2 HKLRD 997.

(6) Re Pioneer Iron and Steel Group (HCCW 322/2010) per Harris J at paragraph 44.

(7) Cambridge Gas v Navigator [2007] 1 AC 508.

(8) This was the Liquidators' argument, on the authority of Cambridge Gas.

(9) Per Lord Collins at paragraph 64.

(10) Per Lord Mance at paragraph 135.

(11) Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133, where pre-action discovery (of limited amounts of information) to assist a victim is permitted against persons innocently mixed up in wrongdoing.   See also Lord Mance at paragraph 147 in Singularis

(12) Per Lord Mance at 155

(13) JOLAC at paragraph 7.

(14) See the consultation and conclusions on "Legislative Proposals on Improvement of Corporate Insolvency Law" (April 2013 to May 2014), accessible at http://www.fstb.gov.hk/fsb/ppr/consult/impcill.htm

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