Phoon Lee Piling Co Ltd (in Liquidation) and Another v. The Hong Kong Housing Authority

CACV 303/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

civil APPEAL NO. 303 OF 2002

(ON APPEAL FROM HCA 119 of 2001)

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Before: Hon Yeung JA and Yam J in Court

Date of Hearing: 2 April 2004

Date of Judgment: 2 April 2004

Date of handing down Reasons for Judgment: 22 April 2004

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REASONS FOR JUDGMENT

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Hon Yeung JA (giving reasons for judgment of the Court): 

1.By a Notice of Motion dated 18 November 2003, the defendant applied for a dismissal of the plaintiffs’ claim and their application for leave to appeal against the decision of Court of Appeal dated 2 May 2003; or alternatively, for an order that security for costs be provided by the plaintiffs.

2.On 2 April 2004, having heard submissions from the defendant and the Official Receiver only, as the plaintiffs were absent, we dismissed the 1^st plaintiff’s (Phoon Lee Piling Co. Ltd) application for leave to appeal to the Court of Final Appeal and its action against the defendant.  We also ordered the 2^nd plaintiff (Chung Kau) to provide security for the defendant’s costs in the sum of $110,000 by payment into court.  We indicated that we would give our reasons in writing.  These are the reasons.

3.The plaintiffs claimed against the defendant in HCA 119 of 2001 (the action) for damages for defamation.  Mr Choy, a director of the 1^st plaintiff, acted for the plaintiffs.

4.On 17 April 2002, Master HC Wong struck out part of the plaintiffs’ claim and part of the answers to request for further and better particulars of the statement of claim.

5.On 11 July 2002, Deputy Judge A Cheung (as he then was) dismissed the plaintiffs’ appeal against Master Wong’s decision.

6.The plaintiffs then took the matter to the Court of Appeal.  The hearing of the appeal was listed before Rogers VP and Le Pichon JA on 2 May 2003. As part of the appeal, the plaintiffs applied by Notice of Motion to have Rogers VP “disqualified” from hearing the appeal.

7.The plaintiffs suggested that Rogers VP had, in other cases involving Mr Choy, ruled against him and another and that in so doing, Rogers VP had been acting “dishonestly”.

8.The motion to disqualify Rogers VP was dismissed.  Mr Choy then, instead of arguing the appeal, made vulgar abuse against the court, particularly against Rogers VP.  In the end, Mr Choy did not make any submission on the appeal and in fact left the court without notice.

9.The Court of Appeal decided that there was no grounds for disturbing the decisions of Master HC Wong and Deputy Judge A Cheung and dismissed the appeal.  The Court of Appeal also decided to refer the matter to the Secretary for Justice for possible contempt proceedings in relation to Mr Choy’s conducts.

10.On 20 May 2003, the plaintiffs filed a notice of intended application for leave to appeal against the judgment of the Court of Appeal.

11.By a Notice of Motion dated 29 May 2003, the plaintiffs sought leave from the Court of Appeal to appeal to the Court of Final Appeal (the application) on the basis that the questions involved in the appeal were of great general and public importance.

12.In the meantime on 8 January 2003, Kwan J in HCCW 564 of 2002 ordered the winding up of the 1^st plaintiff.  Messrs Kenny Tam and Shum Lap Chi of Kenny Tam & Co. (the liquidators) were appointed as Provisional Liquidators and then as Joint and Several Liquidators.

13.The 1^st plaintiff appealed against the winding up order in CACV 22 of 2003.  On 24 June 2003, the Court of Appeal ordered the payment of security for costs within 28 days, failing which the appeal would be dismissed.  The 1^st plaintiff did not comply with the order of security for costs.

14.On 5 May 2003, Deputy Judge Poon in HCB 581 of 2003 also declared the 2^nd plaintiff a bankrupt.  The 2^nd plaintiff then filed an appeal against the bankruptcy order.  However, the appeal has not been proceeded with.

15.The application was therefore, made subsequent to the winding up order against the 1^st plaintiff and the bankruptcy order against the 2^nd plaintiff.

16.The liquidators and the Official Receiver both confirmed that they were not aware of and did not authorize anyone to initiate the application or continue with the action.

17.The defendant’s attempts to find out if the 2^nd plaintiff intended to pursue the application and if so, whether he was prepared to furnish security for costs were met with contemptuous response.

18.On the aforesaid factual background, which is a matter of record and not challenged, the defendant sought an order dismissing the application and the action.  Alternatively, the defendant sought the payment of security for its costs.

19.Since the 1^st plaintiff and the 2^nd plaintiff have been wound up and declared a bankrupt respectively, they no longer have the independent right to pursue or continue with the action and/or proceedings relating thereto, including the application.

20.It is primarily for the liquidators and the Official Receiver to decide what step to take with regard to the action and/or proceedings relating thereto unless the action related to a personal claim of the 2^nd plaintiff (see Heath v Tang [1993] 1 WLR 1421).

21.Section 197 of the Companies Ordinance Cap. 32 provides:

“Where a winding-up order has been made or where a provisional liquidator has been appointed, the liquidator, or the provisional liquidator, as the case may be, shall take into his custody, or under his control, all the property and things in action to which the company is or appeared to be entitled.”

By virtue of ss 186 and 199(1) of the Companies Ordinance, only the liquidators may continue with the action and its directors cannot do so.

22.Under the Bankruptcy Ordinance, on the making of a bankruptcy order, the Official Receiver shall thereby be constituted receiver of the property of the bankrupt (ss 12, 58 and 61(b)) and property includes money, goods, things in action, land and every description of property, whether legal or personal and whether situate in Hong Kong or elsewhere, also obligations, easements and every description of estate, interest and profit, present or future…(section 2).

23.As property does not include rights of action in connection with the bankrupt’s person or reputation, the 2^nd plaintiff’s claim does not vest in the Official Receiver as a result of the bankruptcy order against him (see also Nelson v Nelson [1997] 1 All ER 970 and Ord v Upton [2000] 1 All ER 193).

24.However, it is important to ensure that the trustee in bankruptcy would not be adversely affected where the bankrupt is permitted to use the name of the trustee to sue.  In Kok Kee Suan Andrew v Ip Kay Lo Vincent [2001] 2 HKC 161, Rogers VP made the comments at pp. 165 and 166:

“That there should be a full indemnity is only natural.  Once it s appreciated that the estate of any bankrupt is held by the trustee on trust for the creditors, it follows that it is the creditors’ interests and wishes which have to be considered.  It would be wrong in principle if an appeal were pursued which would incur a liability for costs which would have to be borne out of the funds available to the creditors. The only basis for supposing that the creditors’ concerns and interests were considered when the order of the Deputy Judge was made is that the Official Receiver voiced his objection…

That there must be an indemnity when the bankrupt is permitted to use the name of the trustee to bring proceedings seems to me to be essential.  In the case of a creditor, it might even be said that he had an interest in the assets of a bankrupt.  But a bankrupt has none.  Without such an indemnity the rights of the creditors, for whose benefit of the assets of the bankrupt have been assigned to the trustee, would be overridden.  There would be a liability imposed on such assets to satisfy any award of costs in the proceedings which the bankrupt were authorized to take in the name of the trustee. It would  in effect be affecting a right of property held for the sole benefit of the creditors. It would certainly be encumbering assets which had been assigned to the trustee for the benefit of the creditors absolutely.”

25.The liquidators and the Official Receiver had indicated that they had no intention to proceed with the action and/or the application.  They had not authorized the application and/or the continuation of the action.  They in fact supported the defendant’s application.

26.In the circumstances, we acceded to the defendant’s application and made the following orders against the 1^st plaintiff.

27.The application for leave to appeal to the Court of Appeal and the action were dismissed as against the 1^st plaintiff.  As the defendant did not seek costs, we therefore made no order as to costs as between the 1^st plaintiff and the defendant.

28.It was not disputed that the action, being one based on allegation of defamation, was a personal claim and that the 2^nd plaintiff should be allowed to continue with it.  The Official Receiver (through Miss Elsie Yiu) did not seek to argue otherwise.

29.However, the trustee in bankruptcy should not be adversely affected by any possible costs order.  We took the view that an order of security for costs would adequately safeguard the trustee’s position.  Having considered the defendant’s skeleton bill of estimated costs, we were of the view that a sum of $110,000 would be appropriate.

30.We therefore made the following order against the 2^nd plaintiff:

1. the 2^nd plaintiff was to provide security for the defendant’s costs in the sum of $110,000 by payment into court within 28 days;

2. until such security was furnished, the 2^nd plaintiff’s application for leave to appeal to the Court of Final Appeal be stayed;

3. in default of the payment of the security for costs aforesaid, the application for leave to appeal to the Court of Final Appeal and the action do stand dismissed without further order with costs to the defendant as against the 2^nd plaintiff to be taxed , if not agreed; and

4. if the 2^nd plaintiff complied with the order for security of costs, costs of this application to be in the cause of the appeal.

1^st and 2^nd Plaintiffs in person, absent.

Mr Jonathan Harris, instructed by Messrs Denton Wilde Sapte, for the Defendant.

Ms Elsie Yiu for the Official Receiver.