Let's be civil: Hong Kong court recognises non-common law Japanese insolvency proceeding

In Re Kaoru Takamatsu [2019] HKCFI 802, [2019] HKEC 906, the Hong Kong Court of First Instance has recognised Japanese insolvency proceedings and granted assistance to a trustee in bankruptcy appointed by the Japanese Court.

Mr Justice Harris commented that this was the first application of its kind from Japan. He held that it is consistent with conventional practice in Hong Kong, developed in relation to common law bankruptcy proceedings, provided that the foreign officeholder has similar powers to a Hong Kong officeholder.

Background

Japan Life Co, Ltd (the "Company") was incorporated in Japan and had been ordered to be wound up by the District Court of Tokyo, Twentieth Civil Division ("Tokyo Court"). The Tokyo Court appointed Kaoru Takamatsu, a lawyer admitted to practice in Japan, as trustee in bankruptcy.

The Company had accounts with the Hong Kong branches of Mizuho Bank and HSBC. Mr Takamatsu sought access to the Hong Kong bank account records, as well as recognition of foreign insolvency proceedings and assistance from the Hong Kong court.

Decision

Harris J recognised the Japanese insolvency proceedings and conferred on Mr Takamatsu the powers in the standard-form order for foreign liquidators (set out in Re Joint and Several Liquidators of Pacific Andes Enterprises (BVI) Ltd HCMP 3560/2016), including the right to administer the bankrupt estate's assets and powers to seek documents.

Harris J referred to the well-settled principle of recognising foreign insolvency proceedings which

• are collective insolvency proceedings; and
• have been opened in the company's country of incorporation.

Foreign officeholders with "similar insolvency regimes" to Hong Kong will be granted assistance (Re Joint Liquidators of Supreme Tycoon Ltd [2018] 1 HKLRD 1120; [2018] HKCFI 277 3).

Harris J concluded the proceedings should be recognised on the basis of evidence that the proceedings were collective and opened in Japan.

He then went on to consider the similarities between Mr Takamatsu's powers in Japan and a Hong Kong appointed liquidator and concluded that the Japanese regime confers similar (though not identical) rights of administering a company's assets and powers to seek documents and information. He granted the standard form order.

However, Harris J emphasised that the trustee in bankruptcy's right to apply to the court for orders of disclosure and ancillary relief was a right to apply. It is incumbent on a foreign officeholder to show that a similar right is available in the jurisdiction in which they have been appointed.

Comments

This judgment demonstrates the Hong Kong court's pragmatic approach to the international nature of insolvency proceedings where companies have assets in multiple jurisdictions, and recognises the need for the court to assist liquidators. However, it is clear that in order for civil law officeholders to be granted assistance by the Hong Kong courts, it will be necessary for them to demonstrate that a like power exists under their own regime.