The importance of doing pre-appointment checks and doing them right—Pui-Kwan v Kam-Ho

The importance of doing pre-appointment checks and doing them right—Pui-Kwan v Kam-Ho

John McDonnell QC at 13 Old Square Chambers discusses the judgment in Pui-Kwan v Kam-Ho and its implications for insolvency practitioners who agree to be appointed administrators out of court by a company or its directors.

Original news

Pui-Kwan v Kam-Ho and others [2015] EWHC 621 (Ch), [2015] All ER (D) 133 (Mar)

The Companies Court held that a company had never been placed in administration where a meeting of its directors, purporting to enter it into administration, pursuant to the Insolvency Act 1986 (IA 1986), Sch B1, para 22(2), had been inquorate.

What was the background to the application?

The application concerned a BVI company (Melodious Corporation) which the parties, who were both from Hong Kong, acquired in 1995 to hold their intended matrimonial home in England. They separated in 1998 which resulted in litigation reported as Chan v Leung [2001] All ER (D) 455 (Nov) and [2002] EWCA Civ 1075 where the full history can be found. Mr Leung (who held 49% of Melodious) sought to have it wound up and Miss Chan (who held 51%) sought to establish a beneficial interest in the house and the right to remain there until she finished a course of studies. Miss Chan was successful and the court held:

  • that Melodious held the house in trust for the parties, and
  • so far as its own assets and liabilities were concerned (which were the result of some investments in English properties for letting), there was no need for the expense of compulsory winding-up since the company was solvent and any issues could be resolved by the taking of an account

Six years after the conclusion of that litigation Mr Leung had returned to Hong Kong and become bankrupt, the house was still unsold and Miss Chan was advised to consult an insolvency practitioner. He advised her to register Melodious as an overseas company with a

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.