FDG Electric Vehicles Ltd

• Jurisdiction: Bermuda
• Judge: Shade Subair Williams J
• Judgment Date: 20 December 2024
• Neutral Citation: [2024] SC Bda 78 civ
• Court: Supreme Court (Bermuda)
• Docket Number: 2020 No: 118

In the Matter of FDG Electric Vehicles Limited

In the Matter of the Companies Act 1981

[2024] SC (Bda) 78 civ. (20 December 2024)

2020 No: 118

In The Supreme Court of Bermuda

Joint Liquidators application for sanction of a settlement agreement — Creditor's objections

Advanced Lithium Electrochemistry (Cayman) Co. Limited (“Aleees”): Mr. Kim White ( Cox Hallet Wilkson Limited) (Creditor and Member of Committee of Inspection)

Joint Liquidators: Mr. Matthew Mason and Ms. Kehinde George ( ASW Law Limited)

RULING

(Reasons)

RULING of Shade Subair Williams J

Shade Subair Williams J

Introduction

1 On 20 March 2024 this Court sanctioned a confidential global settlement agreement (the “Settlement Agreement”) between the FDG Electric Vehicles Limited (the “Company”), SHK Finance, the FDGK Receivers and Managers, Mr. Jamie Che, Sinopoly Strategic Investment Limited (“Sinopoly”) and Union Grace Holdings Limited (“Union Grace”).

2 Mr. Che was the Company's Chief Executive Officer (“CEO”) immediately prior to its winding up. He was also the CEO of FDG Kinetic Limited (“FDG Kinetic”) and a director of various other subsidiaries of the Company. Sinopoly and Union Grace, both being companies incorporated in the British Virgin Islands, were subsidiaries of the Company and the subjects of a security charge held by the Petitioner, Sino Power Resources Inc. (“Sino Power”). (See In the Matter of FDG Electric Vehicles Limited [2020] SC (Bda) 32 Com (20 July 2020), per Subair Williams J).

3 This Ruling concerns the Court's sanction of proposed amendments to the Settlement Agreement (the “Amended Settlement Agreement”) on the 25 April 2024 summons application of the Joint Liquidators, Ms. Wing Sze Tiffany Wong and Ms. Yeung Mei Lee of Alvarez & Marsal Asia Limited (“Alvarez”) and Mr. Clive Fortis of Begbies Traynor Group 1 (the “JLs”). That summons application was supported by the Third Affirmation of Ms. Yeung Mei Lee.

4 The hearing of the JLs' summons was originally listed for 29 May 2024. This was to be heard at the same time as an application by Advanced Lithium Electrochemistry (Cayman) Co. Limited (“Aleees”) on a summons dated 26 April 2024 for the discharge of the Sanction Order. Aleees also objected to the JLs' 25 April 2024 summons application for this Court's sanction of the proposed amendments. Aleees is a minority creditor of the Company and one of four members of its Committee of Inspection. The evidence in support of its application was in the form of an affidavit sworn by Ms. Yu Mei Lee. In answer to that evidence, Ms. Yeung Mei Lee swore a Fourth Affirmation.

5 At the request of Aleees' Counsel, the 29 May 2024 hearing was subsequently relisted and proceeded on 18 July 2018. At the close of the hearing on 18 July 2018, I granted the JLs' application, thereby refusing the discharge application brought by Aleees.

6 These are the reasons for my decision.

Background

The Company

7 The Company was a Bermuda exempt company which operated from Hong Kong as an investment holding company. It had numerous subsidiaries (the Company and its subsidiaries being the “Company Group”), and its shares were publicly traded on the Hong Kong Stock Exchange. The principal business of the Company Group was the manufacturing and sale of pure electric vehicles and lithium-ion battery and related cathode products.

8 By way of procedural background, the Petition for the winding up of the Company was filed on 5 March 2020 under section 161(e) of the Companies Act 1981. On 12 March 2020 this Court appointed provisional liquidators on a ‘light touch’ or ‘soft touch’ basis. However, on 1 February 2022, despite efforts to rescue the Company via a restructuring, this Court made a winding up order.

The Hong Kong Proceedings 785/2022

9 In June 2022, legal proceedings commenced in Hong Kong (the “Hong Kong proceedings”) in the High Court of the Hong Kong Special Administrative Region (the “Hong Kong Court”). In the Hong Kong proceedings the JLs competed against others in their claim to recover HK$28,748,084.71 and CNY139.73 (hereinafter referred to in the sum of HK$28,000,000.00) on behalf of the Company's estate. The claim sum, which was held as a payment into the Hong Kong Court, was said to represent the available portion of the Company's advancement of a HK$30,000,000.00 interest free loan to FDG Kinetic Limited (“FDG Kinetic”), a non-wholly and indirectly owned Hong-Kong incorporated subsidiary of the Company. Controversially, that loan was made after the Petition against the Company was filed. Section 166(1) Companies Act 1981 prohibits post-petition asset disposals. It provides:

“ In a winding-up by the Court, any disposition of the property of the company, including things in action, and any transfer of shares, or alteration in the status of the members of the company, made after the commencement of the winding-up, shall, unless the Court otherwise orders, be void.”

10 FDG Kinetic was indebted to SHK Finance Limited (“SHK Finance”) which enjoyed security in the form of a charge over the assets of FDG Kinetic. FDG Kinetic, as the charger entered into a Hong Kong law Debenture dated 5 September 2019 with SHK Finance as the Lender. Exercising its lender entitlements, on 29 April 2020 SHK Finance appointed Hong Kong based Receivers and Managers (the “FDGK Receivers and Managers”) over FDG Kinetic's undertaking, property and assets. On 14 May 2020 a winding-up petition was presented against FDG Kinetic and on 6 September 2021, FDG Kinetic was wound up by the Hong Kong Court.

11 DBS Bank (Hong Kong) Limited was the Applicant in the Hong Kong proceedings. In addition to the JLs on behalf of the Company, the claimants were SHK Finance (1 ^st Claimant) and the FDGK Receivers and Managers in their own right. (The FDGK Receivers and Managers had no authority under Hong Kong law to act on behalf of FDG Kinetic once liquidators were appointed.)

The Hong Kong Recognition Proceedings 2184/2022

12 On 22 December 2022 the JLs commenced proceedings in the Hong Kong Court for an order confirming their recognition by the Hong Kong Court (the “Recognition proceedings”).

The Bermuda COA Proceedings 6/2021

13 On 12 March 2021 Sinopoly commenced proceedings in the Hong Kong Court against FDG Kinetic in respect of its rights as a shareholder of FDG Kinetic to nominate candidates for appointment as directors at FDG Kinetic's Annual General Meeting (“AGM”)

14 On 1 April 2021, a Court of this same jurisdiction ordered that Sinopoly's nominations for directors were to be included in the AGM agenda. This culminated in the FDGK Receivers and Managers' filing of appeal proceedings on 12 May 2021 in the Bermuda Court of Appeal (the “COA proceedings”).

The British Virgin Islands Proceedings 2021/0074

15 Mr. Jamie Che commenced proceedings in the British Virgin Islands (“BVI”) against Union Grace and Sinopoly (the “BVI proceedings”) in respect of the composition and powers of the board of directors of Union Grace and Sinopoly and the rectification of their corporate records. On 16 February 2022, the BVI High Court made an order by consent dismissing claims with costs payable by Mr. Che. Those costs are said to have been settled in full.

The Settlement Agreement

16 There are 4 Schedules to the Settlement Agreement which respectively provide for the settlement of the Hong Kong proceedings, the COA proceedings, the Recognition proceedings and the BVI proceedings.

17 In its most material part, the Settlement Agreement disposed of the Hong Kong proceedings. This was to be executed by a Consent Summons under Schedule 1 by which the JLs agreed to withdraw the Company's claims in consideration of payment out of Court to the Company in the sum of HK$12,000,000.00. The residual sum of HK$16,000,000.00 with interest accrued was to be paid to the Solicitors of SHK Finance Limited.

18 The other aspect of the Settlement Agreement, which was of significance to Aleees in these proceedings, was a Mutual Release clause whereby the Company waived all of its current and future litigation rights against the parties to the Settlement Agreement.

The 20 March 2024 Sanction Order

19 On 20 March 2024 this Court sanctioned the Settlement Agreement (the “Sanction Order”).

20 The Sanction Order was granted in the terms prayed on the JLs' summons of even date. That summons was determined on the papers, meaning it was determined administratively without the convening a formal Court hearing.

21 The Sanction Order was the subject of bitter complaint by Aleees.

The JLs' Application for Sanction of the Amended Settlement Agreement

22 The JLs filed a further summons dated 25 April 2024 for this Court's sanction of the Amended Settlement Order. Ms. Yeung Mei Lee's Third Affirmation was filed in support of the JLs' application.

23 The proposed amendments did not alter the ultimate controversial effect of the Settlement Agreement which brought an end to the Hong Kong and other proceedings. In the objections made by Aleees, no issue was taken with any specific amendment proposed by the JLs.

24 Aleees overriding position is that neither the Settlement Agreement nor the Amended Settlement Agreement should have been made in the substantive terms which appear in both versions.

Aleees' Objections

25 By summons dated 26 April 2024 and by a letter to this Court dated 28 May 2024, Aleees, sought to challenge the Sanction Order in hopes of persuading this Court to set it aside. The following relief was sought on Aleees' summons:

“ An Order pursuant to Order 32/6 of the Rules of the Supreme Court that the Order made ex-parte by the learned Chief Justice on March 20 2024 be set aside.

Directions as to the further conduct of the application of the Joint Provisional Liquidators.”

26 Aleees' 26 April summons was supported by the evidence of Ms. Yu Mei Lee. The 28 May 2024 letter of “Disagreement” which...