Re Li Shu Chung

Recognition of a foreign insolvency proceeding under the Cross-Border Insolvency Regulations 2006 is ordinarily a jurisdictional exercise. The receiving court should not re-examine the foreign court’s findings or the correctness of commencement, unless recognition would be manifestly contrary to public policy.

The debtor’s centre of main interests is determined at the date the foreign proceedings commenced. The inquiry is objective and focuses on facts ascertainable by creditors, including whether an apparent relocation is substantive and sufficiently permanent. A foreign non-main proceeding requires an establishment involving a place of operations where sufficient economic activity of sufficient quality occurs.

Joint trustees in bankruptcy applied for recognition in England of bankruptcy proceedings commenced in Hong Kong against Li Shu Chung. The Hong Kong court had made a bankruptcy order on 11 October 2019. The trustees relied principally on recognition as a foreign main proceeding and, alternatively, as a foreign non-main proceeding.

The central issues were whether the Hong Kong proceedings satisfied the Model Law requirements, whether Hong Kong was Mr Li’s centre of main interests at the relevant date, whether he had an establishment there, and whether recognition would be manifestly contrary to public policy because of alleged errors in the Hong Kong proceedings.

1. Recognition. The court recognised the Hong Kong Bankruptcy Proceedings as a foreign main proceeding under the Model Law. The statutory conditions in Article 17(1) were satisfied: the proceedings were a foreign proceeding, the trustees were foreign representatives, the application complied with Article 15, and it was made to the Chancery Division.
2. Under regulation 2(2) of the Cross-Border Insolvency Regulations 2006, the Guide could be considered in construing the Model Law. The court adopted its guidance that recognition should follow once the jurisdictional requirements were met and Article 6 was not engaged. The receiving court should not investigate whether the foreign proceeding was correctly commenced or re-try the foreign court’s findings.
3. The relevant date for determining COMI was the date of commencement of the foreign proceedings, namely the date of the Hong Kong Bankruptcy Order. The court followed the approach in Re Stanford International Bank Ltd and Re Videology Ltd, rather than the filing date of the recognition application.
4. Although Mr Li’s habitual residence was in England by the relevant date, the objective evidence showed that Hong Kong remained his COMI. His residence, litigation, business interests, addresses and financial connections had made Hong Kong ascertainable to creditors as the place from which he administered his interests. His later assertions of English residence were inconsistent and could not establish a permanent and substantive relocation.
5. The alternative establishment ground was not made out. Conducting litigation could constitute economic and non-transitory activity, but the trustees failed to prove a place of operations in Hong Kong. The test required a place where things happened, sufficient things, and things of sufficient quality.
6. Recognition was not manifestly contrary to public policy. The alleged errors in the Hong Kong Bankruptcy Judgment did not disclose any obvious defect, and the judge had recorded that the Petition was served on Mr Li’s solicitors after they came on the record.
7. Recognition relief was granted in principle. Further discretionary relief and the section 426 applications were adjourned for further hearing, together with outstanding costs issues.

First-instance recognition application concerning bankruptcy proceedings commenced in Hong Kong. The judgment records the Hong Kong Bankruptcy Order dated 11 October 2019 and subsequent procedural applications, but no appeal from the present decision.