Re Primlaks (H.K.) Ltd (in Liquidation)

HCCW 258/2018

[2026] HKCFI 3222

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO. 258 OF 2018

_______________________

______________________

______________________

DECISION

______________________

1.This is the application of Oriental Properties LLC (“OPLLC”) by summons dated 23 June 2023 (the “Summons”) to reverse the decision of the Joint and Several Liquidators (the “Liquidators”) of Primlaks (H.K.) Limited (In Liquidation) (the “Company”) in Notices of Adjudication of Proof of Debt both dated 2 June 2023 (“Adjudication Notices”). The Liquidators rejected OPLLC’s claims of US$2,128,446.54 and US$52,938,226.11 which OPLLC sought to prove (respectively, the “1^st POD” and the “2^nd POD”, collectively, the “Proofs”).

Factual background

2.The Company is part of the Primlaks Group of companies established by the Hemnani family (the “Primlaks Group”). Ashok Kodumal Hemnani (“Ashok”) was one of two directors of the Company from about 1977 to 2019.

3.On 4 May 1990, the Group, including the Company and its holding company (“Primlaks Panama”) entered into a restructuring agreement (“Restructuring Agreement”) with a consortium of Scheme Banks to restructure the debt owed to these banks (“Scheme Bank Debt”), with HSBC acting as the coordinator bank. The Company was named a primary debtor, 2 properties (“Properties”) were charged as security under a 1^st legal charge (the “Charge”) and 3 brothers in the Hemnani family provided personal guarantees.

4.After the Restructuring Agreement, the Group borrowed from a smaller number of banks willing to extend further credit (“Trade Banks” and “Trade Bank Debt”). There was a restructuring of the Trade Bank Debt in July 1997. In November 1999, it was agreed that Credit Agricole Indosuez (“CAI”) would act as agent for the Trade Banks to receive irrevocable instructions for (i) the transfer of title deeds of the Properties to CAI after the Scheme Bank Debt was settled, or (ii) the transfer of any surplus proceeds out of the sale of the Properties to CAI if such Properties were sold. Primlaks Panama and the Company signed 2 undated letters addressed to HSBC containing those irrevocable instructions for CAI (the “Undated Letters”).

5.On 5 February 2001, CAI dated the Undated Letters and delivered them to HSBC upon discovering the Scheme Banks’ intention to enforce the Charge. On 13 June 2002, solicitors for the Trade Banks demanded US$24,058,063.51 from Primlaks Panama and the Company and indicated they intend to enforce the rights of the Trade Banks (“13 June 2002 Letter”).

6.By letter dated 15 March 2004, HSBC terminated the Restructuring Agreement (“HSBC Termination Letter”) causing the Scheme Bank Debt to become immediately due and payable.

7.To avoid liquidation of any Group company and the enforcement of personal guarantees while keeping the Properties within the family’s control, certain members of the Hemnani family incorporated OPLLC in July 2004.

8.On 24 and 25 February 2005, OPLLC completed the purchase and received assignments of both the Scheme Bank Debt and the Trade Bank Debt (collectively the “Debts”), together with the associated charges over the Properties (respectively, the “Scheme Bank Assignment” and “Trade Bank Assignment”, collectively, the “Assignments”).

9.By letter to the Company and Primlaks Panama dated 25 February 2005, HSBC resigned as coordinator of the Scheme Banks with immediate effect (the “Resignation Letter”). By signing that letter, Company and Primlaks Panama not only acknowledged HSBC’s resignation but also ‘agreed and consented’ to the appointment of OPLLC as successor coordinator and to pay a monthly coordinating fee of HK$20,000 to HSBC up to the date of the Resignation Letter and thereafter to OPLLC.

10.Also on 25 February 2005, this Company signed an acknowledgement of the Scheme Bank Assignment (“Scheme Bank Acknowledgement”).

11.On 26 March 2016, Ashok obtained leave to commence a derivative action on behalf of the Company against members of the Hemnani family, OPLLC, and Primlaks Panama in HCA 768/2016 (the “derivative action”). It alleged a conspiracy to injure the Company in that the entry into the Assignments prevented the Company from honouring an agreement that Ashok had reached with the Scheme Banks and Trade Banks to settle the Debts for discounted sums described in §52 below.

12.On 12 August 2019 the Company was wound up and as a result, did not attend the PTR on 4 September 2019, resulting in the Company’s claim being provisionally struck out.

13.OPLLC submitted the Proofs to the Liquidators. By the Adjudication Notices, the Liquidators rejected both Proofs on the primary basis that the claims are time-barred. The Summons challenges the rejection of the Proofs pursuant to Rule 95 of the Companies Winding Up Rules (“CWUR”).

Applicable principles

14.It is common ground that the applicable principles are summarised by Coleman J in Re Fortune King Trading Limited [2020] HKCFI 353 at §20:

(1) An appeal under Rule 95 against a liquidator’s adjudication is a hearing de novo, at which the Court may confirm, reverse or vary the liquidator’s decision.

(2) The purpose of the hearing is for the Court to determine to what extent the applicant should be allowed to rank as a proving creditor. Therefore, the Court is bound to decide the rights of the applicant in the light of all of the evidence which is before the Court, and not merely to express a view as to whether the liquidator was right or wrong in rejecting the proof on the evidence then available to the liquidator at the time he rejected it.

(3) A liquidator who defends his decision to reject a proof is no longer acting in a quasi-judicial capacity, but is cast in the role of an adversary.

(4) The onus of proof is on the applicant to show on a balance of probabilities that a real debt is due to him.

(5) The requirement for a liquidator or trustee in bankruptcy in admitting or rejecting a proof is to require some satisfactory evidence that the debt on which the proof is founded is a real debt, and this is a relatively low threshold. Nevertheless, the liquidator or trustee is entitled to go behind mere form so as to get at the truth.

(6) On an appeal against the rejection of a proof, the applicant’s burden is to prove a real debt, to be established by credible evidence.

(7) Hence, there may be cases, for example where probative evidence is scarce, where the incidence and standard of proof has some significance. The burden remains with the applicant to establish proof of the claim on the balance of probabilities on whatever evidence is produced.

(8) The applicant is not entitled to say that his claim should be admitted because this is all the evidence that he has and because the best evidence has been lost or destroyed. Even in such a situation, the burden remains with the applicant to prove his claim on the balance of probabilities on the evidence as is produced.

(9) But the Court is not bound to accept at face value any accounts of a company previously prepared, and is entitled to go behind them to form its own conclusion as to the truth. Even if the accounts in question have been audited, where there is evidence to show that the accounts are or may be inaccurate, or to cast doubt on the way in which the auditor carried out his duties, this will be a factor to take into account.

The Proofs

15.OPLLC’s claim in the 1^st POD concerns debts the Company owed pursuant to the Restructuring Agreement of US$2,128,446.54 made up of the following items:

(1) Principal amount of Scheme Bank Debts	US$830,944.18
(2) Interest thereon until 12 /8/ 2019	US$695,493.60
(3) HSBC’s fees as coordinator	US$446,490.60
(4) Interest on Coordinator’s fees until 12 /8/ 2019	US$144,421.60
(5) Insurance charges for the Properties	US $11,096.56

16.It is common ground that following the issuance of the Termination Notice, the whole of the Scheme Bank Debt became immediately due and payable. The limitation period for bringing a claim against the Company to enforce payment of the outstanding Scheme Bank Debt secured by the Deed of Charge is 12 years[1] from the date when the indebtedness became immediately due and payable. Thus, prima facie, the right to bring a claim expired on 14 March 2016.

17.In the 2^nd POD, OPLLC claims the Trade Bank Debt owed by the Company of US$52,938,226.11 as at 12 August 2019, comprising the following items:

(1) Trade Bank Debts totalling US$28,818,170.38; and

(2) Interest thereon up until 12 August 2019 of US$24,120,055.73.

18.For the Trade Bank Debt, the limitation period for a simple debt is 6 years[2]. The 13 June 2002 Letter from the solicitors for the Trade Banks demanded, inter alia, payment of the debts due and owing to the Trade Banks by 25 June 2002. Prima facie, the claim would have been time-barred by 25 June 2008 at the latest.

19.It is also common ground that the limitation period may be extended by the Company’s acknowledgement of the debt.

20.The applicable principles are to be found in §§23(3) and 24 of the LO:

“23 Fresh accrual of action on acknowledgement or part payment

…

(3) Where any right of action has accrued to recover any debt or other liquidated pecuniary claim, or any claim to the personal estate of a deceased person or to any share or interest therein, and the person liable or accountable therefor acknowledges the claim or makes any payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment:

Provided that …”

24. Formal provisions as to acknowledgments and part payments

(1) Every such acknowledgment as aforesaid shall be in writing and signed by the person making the acknowledgment.

(2) Any such acknowledgment or payment as aforesaid may be made by the agent of the person by whom it is required to be made under section 23, and shall be made to the person, or to an agent of the person, whose title or claim is being acknowledged or, as the case may be, in respect of whose claim the payment is being made.

21.An acknowledgement or part payment may cause a right of action to accrue afresh, even though the acknowledgement of payment is made after the prescribed period of limitation has expired: see sections 25 (5) and (6) of the LO and Halsbury’s Laws of Hong Kong, Vol 37 at 245.153.

22.The principles applicable to §23(3) are set out in the CFA’s decision in New World Development Co Ltd v Sun Hung Kai Securities Limited [2006] 3 HKLRD 345 which are conveniently set out in 2026 Hong Kong Civil Procedure, Vol. 2 at F1/23/1 as follows[3]:

(1) Section 24 imposes formal requirements for an acknowledgement under s.23(3).

(2) Assuming the formal requirements are met, the question is whether there is a sufficient acknowledgement for the purposes of s.23(3).

(3) The question is one of construction.

(4) Arguments based on the words used in particular reported cases are of little relevance.

(5) In construing the document relied on, the court will look at connected documents (not necessarily expressly referred to in the document relied on) to ascertain its proper meaning, as where, for instance, an acknowledgment emerges from reading together two or more letters written by the debtor in response to letters from the creditor…

(6) The object of the construction exercise is to decide whether, fairly read, the document relied on constitutes an acknowledgment by the debtor of a liability to pay outstanding amounts to the creditor. There is no need for the document to specify the amount of the debt so long as it can be ascertained by other means, including resort to extrinsic evidence, without requiring the parties' further agreement…

(7) …The debtor must, however, acknowledge his indebtedness and legal liability to pay the claim in question. If a debtor denies liability, whether on the ground of “avoidance” or an alleged set-off or cross-claim, then his statement cannot amount to an acknowledgement of the creditors' claim. The contention that some existing set-off or cross-claim reduces the creditor's claim in part, the statement will amount to an acknowledgement of indebtedness for the balance… After the liquidation of a company, a Statement of Affairs in relation to its affairs was prepared and signed by its directors. The Statement of Affairs confirmed a debt owed by one of the directors to the company. The signature by the director in question of the Statement of Affairs was sufficient to amount to an acknowledgement of the debt by the director for the purposes of s.23(3).

Whether limitation period extended

23.The principal issue between the parties is whether the limitation period has been extended beyond the date of the Company’s winding up by the accrual of a fresh cause of action upon the Company’s acknowledgement of the debts. It is OPLLC’s contention that the Statement of Affairs (“SOA”) and/or Ashok’s witness statement in the derivative action was an acknowledgement by the Company of its debts that gave rise to a fresh cause of action.

24.Pausing here, in the event of the matters OPLLC rely on establish an acknowledgement by the Company to extend the limitation period, issues relating to quantum of the 1^st POD would arise. They relate to the principal amount of Scheme Bank Debts shown in §15(1) above which is made up of 2 sums, namely, US$636,632.80 and HK$1,513,297.

25.The calculation of the latter sum is explained in Oriental Properties LLC v Johnson Stokes & Master, unrep, HCMP 1281/2005, 15 May 2006 at §10. That sum has 3 components: (i) coordinating fees of HK$660,000 for the period 2 February 2005, (b) legal fees of HK$821,695 and (c) receivers’ fees of HK$31,602. It is the Liquidators’ position that there is no basis for the Company to be liable for the legal fees, or the coordinating fees from 15 March 2004 to February 2005 at HK$20,000 per month.

26.If necessary, I will deal with the quantum issue later.

(A) The SOA

27.The SOA which is dated 11 December 2019 was affirmed by Ashok. Annexed to the SOA were management accounts (signed by Ashok qua director) on 23 September 2019, together with “DOC A1/A2/B/C1/D1 and List A to J”. The management accounts state the Company’s financial position as at 31 August 2019.

28.List C concerns secured creditors. The second row of that list refers to “Scheme Banks”.

29.List G concerns “Unsecured Creditors and Other Liabilities”. The second row in that list refers to “Scheme Banks, Attached Document B” which is surprising given that the Scheme Banks are secured creditors. Document B contains a note to the effect that all balances are brought forward from 30 September 2008.

30.Document B is headed “Breakdown of the Current Liabilities, Interest bearing loans and overdraft” as at 31 August 2019. The list of banks named therein in fact correspond to the Trade Banks named in the 13 June 2002 Letter[4]. In the circumstances, it would appear that the Trade Bank Debt was mislabelled as the Scheme Bank Debt in List G.

31.OPLLC extrapolated from the note mentioned in §29 above, submitting that the Trade Bank Debt was “consistently recorded” in the Company’s internal books and records and so was not a one-off act but a consistent recognition of pre-existing liability. However, no other document was adduced in support of the pre-existing liability.

32.Ms Esther Mak, counsel for OPLLC, submitted that the SOA was provided to the Liquidators to represent the state of financial affairs and assets and liabilities of the Company as at 12 August 2019 and through them, to the body of creditors. Ashok and, through him, the Company recognised the Debts as owing and did so in a manner reasonably understood as an acknowledgement of debt.

33.Mr Justin Lam, counsel for the Liquidators, submitted that the SOA cannot extend the limitation period because it was not made by the Company or its agents as required by sections 23(3) and 24 of the LO. It was prepared by Ashok for submission to the provisional liquidators (“PLs”) after the winding up of the Company and the appointment of PLs on 12 August 2019.

34.The issue between the parties is whether a director who files a SOA as mandated by section 190 (2) of the Companies Winding Up and Miscellaneous Provisions Ordinance (“CWUMP”) has authority to act for and bind the Company. In this case, appended to the SOA were management accounts signed by Ashok as director.

35.The Liquidators referred to Shun Kai Finance Company Limited (In Compulsory Liquidation) v Wong Shun, unrep., HCB 1166/2006, 6 October 2006, where Barma J (as he then was) held as follows:

“21. … the obligation to provide a Statement of Affairs is one that is personal to the former directors of the company so that, in making it, they are acting for themselves and discharging their obligations under the Companies Ordinance and are not acting on behalf of the company in liquidation.

…

24. … It is well-established that, on the appointment of a liquidator to a company when it goes into liquidation or indeed on the earlier appointment of provisional liquidator, the directors are ousted from office and they have no longer any role to play in the management of the company or its affairs and their authority to act on behalf of the company ceases.”

36.In Re Grand Peace Group Holdings Limited [2021] 6 HKC 486 at §11, Harris J (adopting the established English position[5]) similarly held that the powers of the persons who had been directors cease once the company has been ordered to be wound up and the liquidator appointed.

37.Ms Mak sought to distinguish Shun Kai on the following grounds: (i) Ashok signed the management accounts as “director” on 23 September 2019, representing that he acted as an officer of the Company; and (ii) the note in Document B mentioned in §29 above shows that the debts were consistently recorded in the Company’s internal books and records and the acknowledgement in the SOA was not a one-off act.

38.She submitted that Shun Kai is clearly wrong in holding that a director is “ousted from office” after a winding-up order is made and has no authority to act in any way because Section 190 itself refers to a SOA being made, submitted and verified, inter alia, by one or more of the persons “who are at the relevant date the directors”.

39.If Shun Kai is correct, OPLLC submitted that (i) there could be no such thing as any person is “who are” directors on the appointment of a provisional liquidator or liquidator, or at the date of the winding up order; and (ii) as section 190 relates to a “statement of the company’s affairs” that could not be a statement of affairs of the company which binds the company.

40.OPLLC referred to Re Union Accident Insurance Co [1972] 1 WLR 640 where it was suggested that in deciding the board’s residuary powers, “it may be helpful” to enquire whether the power the board is said to have lost is one which can be said to have been assumed by the liquidator. Applying the Union Accident test, OPLLC submitted that the power and duty to prepare the company’s SOA is not one which can be passed to the liquidator and is a role which a director retains post-winding up.

41.As the statutory obligation to make and verify a statement of affairs imposed by section 190 is a personal one, I do not see the relevance of the ‘test’ OPLLC sought to apply based on Union Accident. In any event, the ‘test’ mentioned was not intended to be definitive but that it “may be helpful”. The fact that a director has residual powers and duties after a winding up order has been made, for example, the power to appeal against the winding up order[6], and the power to seek a discharge of the appointment of the liquidators[7] does not provide an answer to the question as to whether he has authority to acknowledge a debt so as to bind the Company after its winding up.

42.OPLLC also relied on Re ICS Computer Distribution Ltd (formerly known as Cheflink Limited), unrep., CACV 95/1996, 8 November 1996, for the proposition that the admission of debt in the SOA was an admission by the company.

43.That case was an appeal by ICS against a winding up order which the Court of Appeal dismissed. The issue to be determined was whether there was a bone fide dispute on substantial grounds as to the debt. One piece of evidence submitted by the petitioner was the SOA signed by a director. It showed that ICS owed the petitioning creditor a substantial sum of money. It revealed no cross-claim and a massive deficiency of liabilities over assets. The SOA (which was signed by the person who wished to dispute the debt) admitted the debt which formed the basis of the petition and thus was a crucial piece of evidence to show that there is no dispute on the debt.

44.Mr Lam highlighted the fact that (i) there was no discussion or even finding to the effect that the SOA was binding on the Company as a binding obligation. It was examined as part of the evidence to show whether there was an undisputed debt which supported the petition; and (ii) OPLLC is not named as the creditor in the parts of the SOA relied on.

45.The Liquidators’ response to OPLLC’s submissions is that Ashok had no authority to make the acknowledgement on the Company’s behalf. While he signed the management accounts on 23 September 2019 as director, the Company had gone into liquidation on 12 August 2019 when, as a matter of law, he did not have authority to act on its behalf.

46.Section 190 casts the statutory duty, inter alia, on persons who on the relevant date are the directors. The phrase ‘on the relevant date’ is the date of the appointment of a provisional liquidator or the date of the winding up order[8]. It serves to identify the persons on whom the statutory duty is imposed.

47.In the present case, the relevant date is the date of the winding up order. It goes no further than that. Nothing in that the phrase confers power on those persons to continue to exercise their power to act on behalf of the Company or to bind it in any way.

48.In conclusion, I am of the view that the SOA is not an acknowledgement of the Debts within sections 23(3) and 24 of the LO.

(B) The Derivative Action and Ashok’s witness statement

49.The derivative action (mentioned in §11 above) was brought on behalf of the Company. The Statement of Claim (“SOC”) was filed on 24 May 2016. Ashok’s witness statement is dated 14 February 2017.

50.The Company claimed damages arising from the assignment of the Debts to OPLLC. Its allegations are summarised in OPLLC’s skeleton at §30.1 which reads as follows:

Ҥ30.1:

(a) The Hemnani brothers had agreed to make repayments of the Scheme Bank Debts and the Trade Bank Debts to the Scheme Banks and Trade Banks, primarily using funds from Primlaks Africa S A (“Primlaks Africa”) which was the Group entity utilising the funds that gave rise to such Debts (SOC §43).

(b) Contrary to such agreement, the brothers unlawfully conspired together with an intention to injure the Company by causing Primlaks Africa to transfer funds to OPLLC, enabling OPLLC to purchase the Debts at a discounted sum[9] (SOC §44, 44 (c)-(d)).

(c) The Company would not have been liable to OPLLC (or to the original banks) for the Scheme Bank Debts or Trade Bank Debts if the funds transferred to OPLLC had instead been used as originally agreed to discharge the debts[10] (SOC §44 (e)).

(d) But for the conspiracy, and had the brothers honoured the aforesaid agreement, the Company would not have become balance-sheet insolvent as a result of the purported debt to OPLLC (SOC §46). The Hemnani brothers’ breach of fiduciary duties to the Company also caused loss to the Company (SOC §48).”

51.Ms Mak submitted that the entire premise of the derivative action was the loss caused to the Company by virtue of it losing its opportunity to settle the Trade Bank Debt and the Scheme Bank Debt at a discount to par and, instead, being liable to OPLLC for the full amount. She submitted that the entire derivative action would be devoid of purpose if the Debts were not acknowledged by the Company.

52.Ashok’s witness statement aligned with the allegations in the SOC. He affirmed OPLLC’s purchase of the Debts at the discounted sum, the assignments to OPLLC of debt from both the Trade Banks and the Scheme Banks as well as an assignment of the charges on the Properties[11]. §55(e) of his witness statement went on to state that

“Thereafter, OPLLC demanded from [the Company] full payment of the indebtedness assigned under the [Restructuring Agreement] and the entire Trade Bank Debt plus interest.”

53.Ms Mak further submitted that by stating OPLLC’s demand for payment without challenge, Ashok acknowledged on the Company’s behalf that the Debts remained due and payable.

54.In any event, the Liquidators are estopped from relying on the limitation defence. They cannot rely on the existence of the Debts to the banks and say that the loss of the opportunity to settle them caused loss to the Company and when OPLLC stepped into the shoes of the banks, to say that the debts are time-barred.

55.OPLLC relied on both estoppel by convention and estoppel by representation. The former bars reliance on the limitation defence with the common assumption of fact being that the parties would not rely on the limitation period. It submitted that when the Company commenced the derivative action and relied on the existing Debts to found their claim for a loss, the assumed conventional basis on that point was that the parties would not be relying on the limitation defence for the purposes of those debts. As regards estoppel by representation, reference was made to the case of Ambu Nair v Kelu Nair (1933) LR 60 Ind. App. 266 at 271 discussed in Handley on Estoppel by Conduct and Election, 3^rd edn., at §15-015.

56.Mr Lam referred to the principles applicable on limitation acknowledgement stated in New World Development Co Ltd v Son Hung Kai Securities Limited [2006] 3 HKLRD 345 at §§91 and 93:

(a) in construing the document relied on, the court will look at connected documents (not necessarily expressly referred to in the document relied on) to ascertain its proper meaning, as where, for instance, an acknowledgement emerges from reading together two or more letters written by the debtor in response to letters from the creditor; (§91)

(b) even if the document relied on acknowledges a debt, it is not a sufficient acknowledgement for the purposes of the section if it is accompanied by words which nullify or materially qualify that acknowledgement, for instance by confessing and avoiding the debt or asserting a set-off or cross-claim which renders the document in effect a denial of liability; (§93)”

57.As regards (a) above, Mr Lam did not identify documents he considered relevant. Rather, he invited the Court to read all of the documents in the derivative action.

58.As regards (b) above, he relied on a passage in Shenzhen Tian He Jian Sang Electronics Holdings Co Ltd v Hong Kong Jian Sang Electronics (Group) Limited [2008] 4 HKLRD 314 at §24(7)[12] as well as an extract from Chitty on Contracts set out in Shenzhen at §25 as follows:

“… Under the present law, all that is needed is an admission by the debtor that there is a debt or other liquidated pecuniary claim outstanding, and of his legal liability to pay it. It is not necessary that the acknowledgement should specify the amount of the debt if it can be ascertained by other means. But it must acknowledge a claim … and it must further acknowledge that the claim exists at the date of the acknowledgement … A mere acknowledgement of certain facts which, if taken in isolation, would give rise to liability, but which are alleged by the person who is said to have given acknowledgement not to give rise to liability by reason of other surrounding circumstances, is not sufficient. Thus, a ‘confession and avoidance’ denying liability on the ground of any alleged set off or cross-claim does not constitute an acknowledgement. The statement relied upon as an acknowledgement must be taken as a whole; the creditor is not entitled to pick up parts and ignore others.

59.The derivative action is a claim for conspiracy to injure the Company by effecting assignments of the Trade Bank Debt and the Scheme Bank Debt to OPLLC. The wrong done were the Assignments. In the derivative action, the Company is claiming damages for that wrongful conduct. The gist of the cause of action was that the Assignments caused significant loss to the Company because the Company is now required to pay the full sum. But for the conspiracy, and had the Conspirators honoured the ‘final repayment agreement[13]’, the Company would not otherwise have been allegedly liable to OPLLC[14] and have become balance-sheet insolvent as a result of the purported debt to OPLLC[15] and the Properties would have been released from their respective charges.

60.In other words, if not for the conspiracy, there would not have been the Assignments nor liability to pay the full amount of the Debts. As a result of the conspiracy, the Company has suffered loss which it seeks to recover from OPLLC.

61.The fact that the derivative action is premised on the Company being liable for the Debts under the Assignments is not determinative of an acknowledgement for the purposes of limitation. The Assignments obviously form part of the factual matrix but the gravamen of the derivative action is the Company’s claim for damages caused by the Conspirators’ wrongdoing in depriving the Company of the opportunity to settle the Debt at the discounted sum and, instead, having to meet OPLLC’s claim on the Assignments for the full amount.

62.The passage from Chitty[16] to the effect that

“a mere acknowledgement of certain facts which, if taken in isolation, would give rise to liability but which are alleged by the person who is said to have given acknowledgement not to give rise to liability by reason of other surrounding circumstances, is not sufficient”

is apt to describe the present situation. While the Company acknowledges liability under the Assignments, it is the Company’s case that it has a cross-claim and would not have been liable but for the conspiracy. In my view, it is a “confession and avoidance” situation such that there is no acknowledgement of the underlying debt for limitation purposes.

63.Accordingly, I do not consider that the derivative action and Ashok’s witness statement amount to an acknowledgement for limitation purposes.

64.In view of my conclusions on the SOA and the derivative action/Ashok’s witness statement, it becomes unnecessary to address the quantum objections and I do not propose to do so.

Disposition

65.I order that the Summons be dismissed.

66.I also order nisi that the costs of the Summons be to the Liquidators with certificate for counsel such costs to be summarily assessed payable forthwith.

67.I direct that (i) the Liquidators do lodge their statement of costs within 7 days of this Decision; (ii) OPLLC do lodge its list of objections (limited to 3 pages) within 14 days thereafter; and (iii) Liquidators do lodge their reply (limited to 2 pages) within 7 days thereafter.

Ms Esther Mak, instructed by Messrs. Tanner De Witt, for the Creditor

Mr Justin Lam, instructed by Messrs. J. Chan, Yip, So & Partners, for the Liquidators

Attendance of the Official Receiver was excused