Cosimo Borelli (as liquidator of AKAI Holdings Ltd) and Others v Mr James Henry Ting and Others

JurisdictionUK Non-devolved
CourtPrivy Council
JudgeLORD SAVILLE OF NEWDIGATE,SIR JONATHAN PARKER
Judgment Date29 July 2010
Neutral Citation[2010] UKPC 3,[2010] UKPC 21
Docket NumberAppeal No 2009 of 0024,Appeal No 0049 of 2009

[2010] UKPC 21

Privy Council

before

Lord Phillips

Lord Saville

Lord Clarke

Dame Mary Arden

Lord Eassie

Appeal No 0049 of 2009
Cosimo Borelli (as liquidator of AKAI Holdings Limited)
Nicholas Timothy Cornforth Hill
R Craig Christensen now replaced by G Jacqueline Fangonil Walsh (as liquidator of AKAI Holdings Limited)
AKAI Holdings Limited (in compulsory liquidation)
and
Mr James Henry Ting
Blossom Assets Limited
Costner Holdings Limited

Appellant

Leslie Kosmin QC

Ben Griffiths

(Instructed by Withers LLP)

Respondent

Alun Jones QC

Mark Diel (Bermuda Bar)

Rebecca Hill

(Instructed by Keystone Law Limited, Marshall, Diel and Myers, Bermuda)

LORD SAVILLE OF NEWDIGATE
1

James Henry Ting was formerly the Chairman and Chief Executive Officer of Akai Holdings Ltd, a Bermudan company originally incorporated in Hong Kong. Akai Holdings Ltd controlled a multinational group of companies specializing in electronics. The assets of the Akai group of companies were reported in January 1999 to exceed US$2 billion. However, in late 1999 Akai Holdings Ltd collapsed with an estimated net asset deficiency of over US$1 billion. On 23 August 2000 in Hong Kong, and on 29 September 2000 in Bermuda, Akai Holdings Ltd was ordered to be wound up.

2

The Liquidators of Akai Holdings were hampered in their investigation of the affairs of Akai Holdings Ltd by the absence of books and records; by the failure of James Henry Ting, despite many requests by the Liquidators, to provide them with any assistance; and by the fact that there were scant resources to fund the liquidation.

3

In order to raise funds, the Liquidators wished to realize the value of Akai Holdings Ltd's listing on the Hong Kong Stock Exchange. To this end the Liquidators proposed a scheme of arrangement under section 99 of the Bermuda Companies Act 1981, whereby the shares of Akai Holdings Ltd, and thus its listing status, would be transferred to a third party, Hang Ten Group Holdings Ltd. Such a scheme would raise approximately HK$46.6 million, but required the approval of a majority in number representing three quarters in value of the shareholders present and voting at a meeting convened for that purpose; and thereafter the sanction of the Court.

4

The scheme meeting was convened in Hong Kong on 25 November 2002.

5

James Henry Ting controlled two companies, Blossom Assets Ltd and Costner Holdings Ltd, who together held 5.2% of the issued share capital of Akai Holdings Ltd. The Liquidators took the view that James Henry Ting was likely to oppose the scheme for no good reason and in advance of the meeting obtained ex parte an order from the Bermuda Court that they could mark the votes of Blossom Assets Ltd and Costner Holdings Ltd as objected to, with a view to their validity being determined at a subsequent court hearing.

6

At the scheme meeting Blossom Assets Ltd and Costner Holdings Ltd were represented by attorneys, who purported to act as proxies on behalf of these companies. However, the Chairman at the meeting rejected the authority of the proxies on the ground that their appointments as such were simply signed by James Henry Ting on behalf of the companies, whereas they should have been executed under the seal of the respective companies or under the hand of an " officer or attorney duly authorized".

7

James Henry Ting was not at the meeting but in Shanghai. On being telephoned by one of the attorneys and informed of the objection to the proxies, he arranged for someone in Hong Kong to type up purported board resolutions dated 14 November 2002 appointing the attorneys as corporate representatives of Blossom Assets Ltd and Costner Holdings Ltd; and to forge his signature on those purported resolutions.

8

The purported resolutions bearing James Henry Ting's forged signature were delivered to the scheme meeting, which was still in progress, and through the attorneys Blossom Assets Ltd and Costner Holdings Ltd voted against the scheme. Had these votes been accepted and stood they would have been sufficient to defeat the scheme, with the result that the Liquidators would have run out of money and the liquidation would effectively have come to an end. However, the Chairman marked these votes as objected to on the grounds that Blossom Assets Ltd and Costner Holdings Ltd had voted against the scheme for improper motives and that the purported signature of James Henry Ting was suspected to be forged.

9

By summons dated 2 December 2002 the Liquidators applied to the Bermuda Court to disallow the votes of Blossom Assets Ltd and Costner Holdings Ltd cast at the scheme meeting. The summons was opposed by these companies.

10

By this stage time was running short. Hang Ten Group Holdings Ltd had the right to withdraw from the scheme if it was not approved by the shareholders of Akai Holdings Ltd by 31 December 2002; and the Hong Kong Stock Exchange would not allow the substitution of another buyer of the Akai Holdings Ltd shares. Thus it was likely that if this deadline of 31 December 2002 was not met, the scheme could not be implemented.

11

Although by this stage the Liquidators had evidence that the signatures on the Board resolutions were forgeries, in order to facilitate an early hearing of the summons they agreed to confine the issue to the question whether the votes of Blossom Assets Ltd and Costner Holdings Ltd against the scheme had been cast for an improper purpose. However, in the meantime James Henry Ting continued to oppose the scheme. He denied that his signatures were forged and to that end procured his messenger in Hong Kong to swear an affidavit falsely asserting that the resolutions and signatures were genuine.

12

The judge first assigned to hear the summons recused himself after objection by James Henry Ting and the two companies. The replacement judge then broke her arm and was unable to hear the case; while the acting judge found to replace her also recused himself after further objections by James Henry Ting and his companies. The upshot was that the Liquidators were faced with the fact that they were unable to obtain a judicial determination of the validity of the challenged votes by 31 December 2002; and so stood to lose the value of the Hong Kong Stock Exchange listing of Akai Holdings Ltd and thus funds to continue the liquidation.

13

It was in these circumstances that the Liquidators, Akai Holdings Ltd, James Henry Ting, Blossom Assets Ltd, Costner Holdings Ltd and another company in liquidation (Kong Wah Holdings Ltd) entered into what was called a Settlement Agreement dated 30 December 2002.

14

Under the terms of this agreement James Henry Ting and his two companies agreed to withdraw their opposition to the scheme and so to advise the Bermuda Court, while the Liquidators agreed, among other things, as follows:

"3. Akai, Kong Wah and the Liquidators shall irrevocably covenant not to sue or otherwise pursue any claims against Mr Ting, Blossom and Costner from any and all past, present and future rights, claims, demands, debts, causes of action and suits at law or in equity of any kind or nature whatsoever whether presently known or unknown howsoever or wheresoever (including any rights and claims in but not limited to Hong Kong, Bermuda, PRC and any other competent jurisdiction) arising out of and or in connection with Akai and/or Kong Wah and/or their respective Liquidators.

9. Akai, Kong Wah and the Liquidators shall immediately cease all further investigations with a view to or in connection with issuing legal proceedings and/or making claims against Mr Ting."

15

On the same day James Henry Ting and his two companies withdrew their objections to the scheme and signed a consent order disallowing their votes against the scheme, which was then sanctioned by the Supreme Court of Bermuda. On the following day the scheme was completed and the Liquidators received payment.

16

In 2003 the Liquidators sought orders to examine James Henry Ting in Hong Kong pursuant to section 221 of the Hong Kong Companies Ordinance. James Henry Ting commenced proceedings in Bermuda seeking to restrain the Liquidators from examining him, on the grounds that any such examination was contrary to the Settlement Agreement. Both Kawaley J and the Bermuda Court of Appeal rejected this argument, holding that such an examination was not a claim within the meaning of that agreement.

17

In the summer of 2005, the Liquidators obtained access to material that had been seized by the Commercial Crime Bureau of the Hong Kong Police in the course of their investigations into the affairs of Akai Holdings Ltd. The Liquidators formed the view that this material revealed substantial misappropriation by James Henry Ting of funds of Akai Holdings Ltd.

18

On 16 February 2006 solicitors acting on behalf of the Liquidators wrote to James Henry Ting asserting that the Settlement Agreement or the Liquidators' undertaking under that agreement not to make claims against him was unenforceable or voidable.

19

In this letter the Liquidators put forward a number of grounds in support of this assertion. They contended that there was no consideration for the Settlement Agreement, since the opposition to the scheme by James Henry Ting through his two companies was not put forward in good faith, but was motivated solely by his desire to obtain a release from claims against him personally; that on its true construction the Settlement Agreement did not cover claims relating to or arising out of his positions and conduct as Chairman, Chief Executive Officer or director of the Akai group of companies; that his failure to make full and frank disclosure to the Liquidators of numerous breaches of his fiduciary duties as a director, including " massive" misappropriations of property belonging to the Akai group of companies for his own benefit and that of his associates, rendered...

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