Sacmi Cooperative Meccanici Imola v. Gabriel Chi Kok Tam and Another

HCMP001942/2002

HCMP 1942/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1942 OF 2002

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Coram: Deputy High Court Judge To in Chambers

Date of Hearing: 24 July 2003

Date of Decision: 24 July 2003

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D E C I S I O N

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Background

1.This is an application by the Applicant for leave to amend its Notice of Appeal dated 17 May 2002, against the decision of the Respondents, the joint and several liquidators of Guandong International Trust & Investment Corporation Hong Kong (Holdings) Limited (in creditors' voluntary liquidation) ("GITIC HK"), in rejecting the Applicant's amended proof of debt submitted on 11 February 2002 (the "Amended Proof").

2.The Applicant filed a Form 63A Creditors' Claim Form (the "Proof of Debt") with the Respondents claiming US$21,894,720 pursuant to an alleged guarantee given by GITIC HK on two bills of exchange issued to the Applicant. On 11 February 2002, the Applicant lodged the Amended Proof with the Respondents, which included additional claims by the Applicant for damages/equitable compensation in the sum of US$20,086,900. The Amended Proof was rejected by the Respondents in writing in accordance with Rule 94 of the Companies (Winding-up) Rules. The Applicant then filed a Notice of Appeal under Rule 95 of the Companies (Winding-up) Rules, seeking to reverse or vary the Respondents' decision. On 28 May 2003, the Applicant, through its solicitors, informed the Respondents that it intended to file a re-amended proof of debt and enclosed a copy of a draft re-amended proof of debt (the "Draft Re-amended Proof"). There was no response from the Respondents and the Applicant took out the present application seeking leave to amend its Notice of Appeal.

The grounds of opposition

3.Ms Wacker opposed the application on the ground that the Draft Re-amended Proof introduced new claims and the Respondents were entitled to have an opportunity to require the Applicant to provide them with further supporting evidence in order that they may be in a position to consider the claim and make a decision. She submitted it was not until the Respondents had decided on the new claims that there was a decision for the Applicant to appeal against. She argued that whilst a creditor may adduce new evidence in support of claims, he should have included all such claims in its proof of debt upon which the liquidator should already have made a decision and it was this decision which was either reversed or varied by the Court in an appeal pursuant to Rule 95. The appeal should not be a forum where the Court should hear new claims from a creditor upon which the liquidator had not been given an opportunity to adjudicate. She suggested that the Applicant should file the Draft Re-amended Proof, the Respondents should be given an opportunity to decide on the new claims, and in the event that the new claims are rejected, the Respondents would undertake not to oppose the application to amend the Notice of Appeal.

The claim or claims

4.In the Amended Proof the Applicant claimed the followings:

(1) damages/equitable compensation in the sum of US$20,086,900; or alternatively

(2) US$21,894,720 in respect of the guarantee of two bills of exchange dated 18 May 1998.

The detailed grounds upon which the Applicant's claim is based were set out in an appendix to the Amended Proof.

5.The amendments to the Notice of Appeal seek to introduce:

(1) a claim for an equitable charge upon the assets of GITIC HK;

(2) a further ground of claim based on GITIC HK's liability as accessory to a breach of trust;

(3) a further ground of claim against GITIC HK as trustee for the sum of US$20,086,900; and

(4) a further ground of claim under the bill of exchange on the basis that GITIC HK was a prior endorser of the same to the Applicant.

The facts relied upon for all these claims were originally set out in the Applicant's proof of debt and in the affidavit evidence already filed herein.

6.I think the Respondents' stand arose out of a misapprehension of the meaning of the word "claim" as used in the Companies (Winding-up) Rules and in particular Rule 82. Under these rules, a creditor is required to prove his debts by delivering or sending through the post a proof of debt in the prescribed form to the Official Receiver or the liquidator as appropriate. Rule 82 which specifies the contents of proof provides:

(1) The creditor or the person authorized by or on behalf of the creditor shall declare in the proof of debt -

(a) the creditor's name and address;

(b) the total amount of his claim as at the date of the winding up order;

(c) whether or not that amount includes outstanding uncapitalised interest;

(d) particulars of how and when the debt was incurred by the debtors;

(e) particulars of any security held, the date when it was given and the value which the creditor puts upon it; and

(f) the name and the authority of the person signing the proof (if other than the creditor himself) and means of knowledge of the facts.

(2) There shall be specified in the proof any documents by reference to which the debt can be substantiated and such documents or a copy of such documents shall be submitted together with the proof.

(3) The Official Receiver or the liquidator to whom the proof is sent may call for any document, which has not already been submitted, or other evidence to be produced to him, where he thinks it necessary for the purpose of substantiating the whole or any part of the claim made in the proof.

7.The word "claim" is used in sub-rule (1)(b) in the context of "amount of claim" and in sub-rule (3) in the context of "the whole or any part of the claim". In this context, the word "claim" clearly means a provable debt that is being claimed and not a cause of action. As was held by Devlin J in West Wake Price & Co. v. Ching [1957] 1 WLR 45 and approved by the Privy Council in Haydon v. Lo & Lo [1997] 1 WLR 198, the primary meaning of the word "claim" is "such as to attach it to the object that is claimed; and is not the same thing as the cause of action by which the claim may be supported or as the grounds on which it may be based."

8.The provable debt that is being claimed is and was all along US$20,086,900 or alternatively, US$21,894,720 as stated in the Amended Proof. In my view, the amendment does not introduce any new claims at all. Amendment (1) seeks an additional remedy, namely an equitable charge. Amendments (2) to (4) are simply additional legal grounds in support of the claim. What these amendments seek to achieve is to clarify the issues for the purpose of determining the real question and controversy between the parties and to avoid surprise at the hearing of the appeal.

The nature of the appeal

9.An appeal to the court against a liquidator's rejection of a proof of debt is a rehearing de novo: see Re Kentwood Constructions Ltd [1960] 1 WLR 646. As a general rule, either party is entitled to adduce fresh evidence in support of his or her contention. Determining whether a person has the right to prove and hence the right to receive a dividend out of the assets of a company is one of the most important duties of a liquidator. When discharging that duty, the liquidator acts in a quasi-judicial capacity. He considers the proof and evidence submitted to him and makes a determination. Any creditor whose proof has been rejected may appeal to the court to reverse or vary the decision of the liquidator. When that happens, the function of the liquidator changes. He steps into the shoes of the company and defends the decision he made earlier in his quasi-judicial capacity, this time, as an adversary. His function is to protect the asset of the company available for distribution to creditors and contributories against a claim which he considered unfounded. He becomes a party litigant. He may raise any defence which would have been available to the company had the company been sued by the creditor. The issue to be determined at the hearing of the appeal is whether the liability referred to in the proof of debt is a true liability of the company enforceable against it and not whether the liquidator was right in rejecting the proof based on the information available to him at the time he considered the claim. The issue is contested by the putative creditor on the one hand and the liquidator on behalf of the company on the other as if the notice of appeal were a civil action begun by writ. When the nature of the appeal is understood in this light and given that the appeal is by way of a hearing de novo, it is only appropriate that the parties should be allowed to put their entire and best case forward. Thus the putative creditor should be allowed to identify the issues and to plead in the Notice of Appeal whatever cause of action and seek whatever remedy as is available so that the real controversy between the parties could be justly and fairly determined. The only rider is that the putative creditor may not by means of an appeal put in a new claim which had not been presented to the liquidator. Likewise, the liquidator may raise any defence including one which he had not taken into account when rejecting the claim.

Conclusion

10.I do not think the appeal proceedings under Rule 95 are any different from general civil proceedings. The guiding principle applicable to general civil proceedings that all amendments for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings shall be allowed is equally applicable to appeals under Rule 95. I am satisfied that the Applicant is not seeking to introduce any new claims by means of the amendment. I am also satisfied that the amendment clarifies the issues in dispute so that there will be no surprise at the hearing of the appeal so that the real question in controversy between the parties could be justly and fairly determined.

11.I note the Respondents' concern that they may be criticised and penalised in costs if the appeal is allowed on the amended grounds which they did not have an opportunity to adjudicate on. This concern could be addressed when dealing with the issue of costs at the conclusion of the appeal. Furthermore, it is always open to the Respondents to concede the appeal, if upon a mature consideration of the amended Notice of Appeal and the additional evidence filed they consider the debt proved.

12.Accordingly, I grant leave to the Applicant to amend the Notice of Appeal with costs reserved. I give the consequential directions sought for filing of affidavits and setting down for trial.

Representation:

Mr Scott of Messrs Allen & Overy, for the Applicant

Ms Donna Wacker of Messrs Clifford Chance, for the Respondents