#6760 - Borelli V. Ting - Restitution of Unjust Enrichment BCL

Borelli v. Ting

Facts

James Henry Ting was formerly the Chairman and Chief Executive Officer of Akai Holdings Ltd, a Bermudan company originally incorporated in Hong Kong. On 23 August 2000 in Hong Kong, and on 29 September 2000 in Bermuda, Akai Holdings Ltd was ordered to be wound up… 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 require 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.

Proceedings at the meeting: 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".

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.

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… 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.

Proceedings before the Bermuda Court: 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… 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. 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.

Settlement Agreement: 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.

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 “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.”

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.

Proceedings against Mr. Ting by the liquidators: 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. 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.

Holding

The situation facing the Liquidators in late December 2002 was that without realizing funds through the scheme there was unlikely to be any prospect of continuing to investigate the failure of Akai Holdings Ltd. The Chief Justice found that the Liquidators believed that James Henry Ting had resorted to false accounting in order to make Akai Holdings Ltd appear solvent; and also had suspicions that James Henry Ting might have misappropriated some of Akai's assets, but that the Liquidators had no evidence that this was the case, and neither believed nor had any grounds for believing that James Henry Ting had misappropriated assets on a massive scale. The Liquidators did believe (correctly) that James Henry Ting had resorted to forgery and the provision of false evidence in an attempt to defeat the proposed scheme. But since it became impossible to obtain the sanction of the Court for the scheme before the deadline of 31 December 2002, the Liquidators were faced with the stark choice of either giving up the scheme and thus, in all probability, the liquidation and any chance of recouping money for the creditors, or making a deal with James Henry Ting in order to obtain the withdrawal of his companies' opposition to the scheme.

Thus the choice facing the Liquidators was between two evils, either to abandon the scheme and thus any real prospect...