Otc International Ag v. Perfect Recovery Ltd and Another

HCCL 11/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 11 OF 2007

-------------------------

BETWEEN

----------------------

Before : Hon Stone J in Chambers (Open to Public)

Date of Hearing : 4 February 2009

Date of Judgment : 19 February 2009

------------------------

J U D G M E N T

----------------------

The application

1.This is a construction summons.

2.The statute to be construed is the Transfer of Businesses (Protection of Creditors) Ordinance, Cap 49, and the point at issue is the limitation period for the issuance of proceedings thereunder: is the time limit for instituting proceedings against a transferee of a business one month (as says the 2^nd defendant) or 1 year (as the plaintiff maintains)?

3.It strikes me as surprising that this practically significant point, which arises within the framework of an Ordinance which has been in operation for almost three decades – it was promulgated on 27 June 1980 – to-date appears not to have been subject to specific judicial consideration, although leading counsel on both sides tell me that their researches indicate this to be the case.

4.It may be that a ‘correct answer’ always has been assumed – indeed, I have been shown obiter dicta which tend to suggest that this is the position (see, for example, the assumption made by Madam Justice Kwan in paragraph 12 of her judgment on the application for approval of the 1^st defendant’s Scheme of Arrangement) and that it is not until now, and the particular factual matrix presented by this case, that the argument which this court has entertained has had any immediate relevance, albeit the point had attracted earlier academic comment: see the lucid and critical commentary upon the then newly-enacted Ordinance by Knight & Willoughby, Hong Kong Law Journal (1980) 10 HKLJ 348, at 353, who refer to the possibility of a “serious mistake” having been made in the drafting of the legislation.

5.Be that as it may.  It now falls to this court specifically to sound to the issue.

This litigation

6.First, some brief background as to how and why this limitation point has arisen.

7.This case, HCCL 11 of 2007, involves a claim by OTC International AG, a German company, by Points of Claim dated 28 June 2007, against the 1^st defendant, a Hong Kong company (formerly known as NICI Asia Ltd), which at all material times was a wholly-owned subsidiary of one NICI AG, a German company carrying on the business of manufacturing and distributing products under the trade name ‘NICI’.

8.The 2^nd defendant, Nici Asia Limited, is another Hong Kong company, which at the material time was a subsidiary of the 1^st defendant.

9.The basis of the plaintiff’s claim, as pleaded against the 1^st defendant, is that the plaintiff says that it is owed a sum of money by the 1^st defendant slightly in excess of Eur 5.4 million, and a separate amount of Eur 270,000; the causes of action prayed in aid are breach of contract and unjust enrichment.

10.The contingent claim against the 2^nd defendant in the like cumulative sum of approximately Eur 5.67 million is pleaded at paragraph 17 of the Points of Claim, which recite that on 26 October 2006, pursuant to a restructuring exercise, the 1^st defendant transferred to the 2^nd defendant the whole of its business as well as all of the 1^st defendant’s assets required for or in connection with the operation of the 1^st defendant under the trade name of ‘NICI’; as I understand the position, subsequent to such transfer, the 1^st defendant sold its shares in the 2^nd defendant to an independent 3^rd party purchaser, and the proceeds thereof were distributed in accordance with a Scheme of Arrangement approved by the Hong Kong court.

11.In any event, it is said at paragraph 17(1) that the 1^st defendant and the 2^nd defendant are respectively the ‘transferor’ and the ‘transferee’ of the business within the meaning of the Transfer of Businesses (Protection of Creditors) Ordinance, Cap 49 (hereinafter ‘the Ordinance’), and that pursuant to section 3 thereof, the 2^nd defendant thus has become liable for all the debts and obligations of the 1^st defendant.

The ‘forum non conveniens’ application/resultant Order

12.By summons dated 17 July 2007 the 1^st defendant moved an application that all further proceedings against it be stayed on the basis that the case against it was clearly or distinctly more appropriate for trial in Germany the Regional Court of Munich or Coburg.

13.This application resulted in a judgment of this court handed down on 19 June 2008, in which the court acceded to this application for a stay in favour of either of these German courts, to the jurisdiction of either the 1^st defendant undertook to submit.

14.This judgment speaks for itself, and so far as I am aware has not been the subject of appeal.

15.Suffice it to say that one of the matters which arose in evaluating the 1^st defendant’s application for a stay of proceedings against it in this action was the position of the 2^nd defendant (see paragraphs 63-68 of that judgment) in light of the principle that all disputes arising from the same factual matrix ought to be tried in the same action at the same time before the same court.

16.However, at the adjourned hearing of the fnc application, the court’s concern in this regard was alleviated by the submission by counsel for the 2^nd defendant, Mr William Wong, who told the court in terms the 2^nd defendant was entirely “neutral” about this application (para 66), and at the same time foreshadowed that it was his client’s intention to ask the court, pursuant to the provisions of Order 14A or Order 33, to judge the short point which concerned his client in this case, which was a discrete and ‘non-fact sensitive’ point of law pursuant to section 3 of the Ordinance, namely, whether the legal proceedings as had been issued against it in this action had been instituted in time.

17.This stance has resulted in the present summons dated 4 September 2008, which as matters have transpired is an application which has been issued not by the 2^nd defendant, but by the plaintiff – hence the current debate.

The terms of the summons

18.The application now before the court is framed thus:

1.  There be a determination of the following question of law pursuant to Order 14A or alternatively Order 33 rules 3 and 4(2) of the Rules of the High Court:

On the proper construction of sections 4(3), 4(5)(b) and 9 of the Transfer of Businesses (Protection of Creditors) Ordinance, Cap 49, whether a transferee is liable under section 3(1) for any liabilities incurred before the transfer of a business if an action was brought against the transferee more than 1 month after the publication of a notice of transfer given under section 4(3), but before the expiration of 1 year from the date of the transfer of the business.

Paragraphs 2 and 3 of the summons request the Court to make such Order or Judgment in light of its answer to the foregoing question of law as it thinks just, and that the costs of and occasioned by the application are to be to the plaintiff in any event.

19.The plaintiff invites the court to respond to this question posed in the affirmative, thereby retaining its contingent right of recourse against the 2^nd defendant if and in so far as the German court decides in its favour on the primary claim against the 1^st defendant.

20.To the contrary, the 2^nd defendant invites a judicial response in the negative, thereby immediately relieving the 2^nd defendant from any liability to the plaintiff in this action.

Agreed Statement of Facts

21.On 5 December 2008 the parties filed a set of Agreed Facts, signed by the solicitors for the plaintiff, Messrs Deacons, and the solicitors for the 2^nd defendant, Messrs Norton Rose Hong Kong, for use at the hearing of the plaintiff’s application.

22.This is a document of some 4 pages, but in substance 4 dates only are relevant for the purpose of this discussion:

(i)  26 October 2006, the date upon which the 1^st defendant and the 2^nd defendant entered into an Asset Sale and Purchase Agreement pursuant to which the 1^st defendant transferred to the 2^nd defendant certain of the 1^st defendant’s assets, comprising all of the 1^st defendant’s assets required for or in connection with the operation of the 1^st defendant under the trade name of “NICI”;

(ii)  27 October 2006, upon which date the 1^st and 2^nd defendants jointly published a Notice in the Hong Kong Government Gazette, the Standard, the Hong Kong Economic Journal and the Hong Kong Economic Times, which stated that the 1^st defendant would enter into the Scheme of Arrangement in respect of its debts and obligations and the transfer of the business, and which Notice was in the form prescribed by section 25 of the Ordinance;

(iii)  29 May 2007,which was the date the Hong Kong court sanctioned the Scheme of Arrangement;

(iv)  1 June 2007, which was the date when the plaintiff issued the present proceedings against the 1^st and 2^nd defendants, which proceedings were served on the same day on both defendants.

The ‘key’ fact

23.From the perspective of the question as now posed to the Court, and argument consequent thereon, the ‘key fact’ is that, as the foregoing dates disclose, during the month following the publication of the Notice in the Hong Kong Government Gazette and in the English and Chinese press, that is, in the period from 27 October – 26 November 2006, no proceedings were issued by the plaintiff against the 1^st defendant or the 2^nd defendant with respect to any debts or obligations of the 1^st defendant relating to the business (vide paragraph 11 of the Agreed Facts); indeed, as the chronology demonstrates, the proceedings herein were not issued until 1 June 2007.

24.It further is common ground (at paragraph 12) that neither the Notice, nor the content of the Notice, was published in any official German gazette or any German newspaper, and that the plaintiff was not served, nor was required to be served, with any notice or information as to the transfer of the 1^st defendant’s business to the 2^nd defendant, nor of the restructuring entered into between the two defendants.

25.It also is agreed (at paragraph 13) that the plaintiff discovered the existence of the Scheme of Arrangement through its own investigations, that its solicitors attended at the Scheme Sanction hearing before Kwan J on 29 May 2007, that it obtained a redacted version of the Scheme from the 1^st defendant’s solicitors on 31 May 2007, and that prior to the Order being sealed it did not raise any objection to the Scheme on the basis that its claim was excluded from the operation of the Scheme.

26.Given this agreed factual matrix, is the plaintiff now to be regarded as statute-barred as against the 2^nd defendant?

The Ordinance

27.The Ordinance is short, comprising 7 pages only, and at first blush its broad aim at least is tolerably clear; for present purposes I reproduce hereunder only those sections/subsections which have figured large in the argument.

28.Section 3 is entitled ‘Transferee of business to be liable for liabilities of transferor’, and subsection 3(1) reads thus:

“Subject to this Ordinance, whenever any business is transferred…the transferee shall, notwithstanding any agreement to the contrary, become liable for all the debts and obligations…arising out of the carrying on of the business by the transferor.”

Section 4 is entitled ‘Circumstances in which the transferee’s liability ceases’.

29.Subsection 4(1) reads:

“A transferee shall not become liable under section 3 if a notice of transfer has been given not more than 4 months, and not less than 1 month, before the date of transfer and has become complete at the date of transfer”

whilst subsection 4(2) is in the following terms:

“Where a notice of transfer has been given but the notice has not become complete at the date of transfer, the liability of the transferee under section 3 shall cease with effect from the date on which the notice of transfer becomes complete.”

30.Subsection 4(3), which represents the factual situation presently before this court, provides:

“Where a notice of transfer has not been given before or at the date of transfer, the liability of the transferee under section 3 shall cease with effect from the date on which a notice of transfer, which is given after the date of transfer becomes complete.”

Subsection 4(3) begs the question of when a ‘notice of transfer’ legally becomes ‘complete’; to this subsection 4(4) provides the answer:

“A notice of transfer shall, subject to subsections (5) and (6), become complete upon the expiration of 1 month after the date of the last publication of the notice in accordance with section 5.”

Section 4(5) reads, in material part:

“Subject to section 6, in the case of a notice of transfer referred to –

(a)  …; or

(b)  in subsection (2) or (3), if proceedings are instituted against the transferee in respect of any liability of the transferee under section 3 arising before such notice becomes complete,

the notice of transfer shall (for the purposes of such proceedings only) be deemed incomplete pending the final determination of such proceedings, including all possible appeals, and pending the expiration of all periods during which such appeals may be brought.”

Section 5 deals with the contents of a notice of transfer and the manner of giving notice; in particular, subsection 5(1)(f) reads:

“(1)  Except in the case of a transfer by way of sale under or pursuant to a charge, a notice of transfer shall contain the following particulars –

…

(f)  a statement that at the expiration of 1 month after the date of the last publication of the notice pursuant to subsection (3), the liability of the transferred for all the debts and obligations arising out of the carrying on of the business by the transferor shall cease by virtue of this Ordinance unless proceedings are instituted prior to such expiration.”

Finally, section 9 provides for ‘Limitation of time for institution of proceedings’, and reads:

“Subject to section 6, no action shall be instituted to recover any debt from or to enforce any obligation against any person liable therefor under this Ordinance, and for which he would not otherwise have been liable, more than 1 year after the date on which the transfer in respect of which the liability arose took effect.”

The parties’ respective positions

31.The court has been the recipient of detailed and useful written skeleton submissions from both leading counsel; at the end of the day, however, the point is short, and I mean no disrespect to the efforts of counsel if I sound only to the salient difference between them.

32.It is this.  In essence, the plaintiff contends that if proceedings are brought in relation to a liability under section 3 that arose before the notice of transfer was complete, then the notice will be deemed to be incomplete for the purpose of those proceedings.

33.To the contrary.  The 2^nd defendant’s position is that properly construed, if proceedings are brought before the notice of transfer was complete, in relation to liability arising under section 3, then the notice will be deemed to be incomplete for the purpose of those proceedings.

34.Mr Chua SC further says that, read largely and liberally, it is clear that the “dominant provision” within the Ordinance sounding to the issue of temporal limitation is that of section 9, and that provided his clients have issued proceedings (as presently is the case) within the 1 year time-limit expressly enshrined within section 9, then notwithstanding the apparent conflict between the 1 year limitation provision within section 9 and the 1 month time limit referred to in subsection 5(1)(f), his clients’ position nonetheless is secure, and that if and when the German court sounds to the liability of the 1^st defendant in terms favourable to the plaintiff, his clients are in position, by means of this non-time-barred action, contingently to proceed against the 2^nd defendant qua transferee of the 1^st defendant’s business.

35.However, Mr Sussex SC says that Mr Chua is wholly incorrect to ascribe such disproportionate importance to section 9, which is and can only be a procedural time bar, and that Mr Chua has misunderstood the true intent of the Ordinance; namely that in a situation wherein, as is the instant situation, a duly-published ‘notice of transfer’ has become “complete”, then unless proceedings have been issued against the transferee prior to such notice becoming “complete”, the plaintiff is out of court, and that in the circumstances the real problem in the drafting of this Ordinance lies in the tension between subsections 4(2) and 4(3) on the one hand and subsection 4(5)(b) on the other.

36.In terms of this debate, therefore, leading counsel agree that the Ordinance contains a drafting error, but they are unable to agree what form this takes.

37.Mr Chua suggests that the problem is to be found within subsection 5(1)(f), and as such may easily be rectified by the notional deletion of the final four words “prior to such expiration”, and the substitution therefor of the phrase “the expiration of the period referred to in section 9 below”. 

38.However, Mr Sussex submits that the difficulty lies in the ‘deemed incompleteness” provision within subsection 4(5)(b), which seems effectively to cancel out the otherwise crystal-clear effect of subsections 4(3) and 4(4), which subsections expressly provide that the liability of the transferee “shall cease” upon ‘completeness’ of the notice of transfer; at first blush, therefore, subsection 4(5)(b) renders these earlier subsections potentially redundant and ineffective, a situation further compounded, he says, by the terms of subsection 5(1)(f).

39.For his part Mr Sussex submitted that the way of resolving this construction conundrum would be for subsection 4(5)(b) notionally to be read thus:

“in subsection (2) or (3), if proceedings are instituted against the transferee (in respect of any liability of the transferee under section 3) before such notice becomes complete…”,

which would involve the notional deletion of the existing word ‘arising’ after ‘3’, and also the insertion of the brackets as indicated.

40.Each side maintains that if their analysis is correct, they win.

Principles of construction

41.It has been necessary to remind the court of the usual canons of construction, and once again I mean no disrespect if, for the purposes of this judgment, I do not refer in detail to the several pages of illuminating discourse on this topic, including extensive citation of disparate case-law, with which I have been provided.

42.Suffice it to say that I bear firmly in mind that the benchmark for the present exercise is provided by section 19 of the Interpretation and General Clauses Ordinance, Cap 1, which provides:

“An Ordinance shall be deemed to be remedial and shall receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Ordinance according to its true intent, meaning and spirit”.

43.I further bear in mind that the modern approach to statutory interpretation is essentially purposive, and that the court is permitted in appropriate instances to rectify obvious drafting errors by adding, omitting, or substituting words in an attempt to give effect to what has been divined as the legislature’s true intention.

44.Thus, in Inco Europe v First Choice Distribution [2000] 1 WLR 586, Lord Nicholls observed (at 592C-E):

“I freely acknowledge that this interpretation of section 18(1)(g) [of the Supreme Court Act, 1981] involves reading words into the paragraph.  It has long been established that the role of the courts in construing legislation is not confined to resolving ambiguities in statutory language.  The court must be able to correct obvious drafting errors.  In suitable cases, in discharging its interpretative function the court will add words, or omit words or substitute words.  Some notable instances are given in Professor Sir Rupert Cross’s admirable opuscule, Statutory Interpretation, 3^rd ed. (1995), pp. 93-105.  He comments, at p. 103:

‘In omitting or inserting words the judge is not really engaged in a hypothetical reconstruction of the intentions of the drafter or the legislature, but is simply making as much sense as he can of the text of the statutory provision read in its appropriate context and within the limits of the judicial role.’

This power is confined to plain cases of drafting mistakes.  The courts are ever mindful that their constitutional role in this field is interpretative.  They must abstain from any course which might have the appearance of judicial legislation.  A statute is expressed in language approved and enacted by the legislature.  So the courts exercise considerable caution before adding or omitting or substituting words.  Before interpreting a statute in this way the court must be abundantly sure of three matters: (1) the intended purpose of the statute or provision in question; (2) that by inadvertence the draftsman and Parliament failed to give effect to that purpose in the provision in question; and (3) the substance of the provision Parliament would have made, although not necessarily the precise words Parliament would have used, had the error in the Bill been noticed.  The third of these conditions is of crucial importance.  Otherwise any attempt to determine the meaning of the enactment would cross the boundary between construction and legislation: see per Lord Diplock in Jones v Wrotham Park Settled Estates [1980] AC 74, 105-106.  In the present case these three conditions are fulfilled.

Sometimes, even when these conditions are met, the court may find itself inhibited from interpreting the statutory provision in accordance with what it is satisfied was the underlying intention of Parliament.  The alteration in language may be too far-reaching.  In Western Bank Ltd v Schindler [1977] Ch 1, 18, Scarman LJ observed that the insertion must not be too big, or too much at variance with the language used by the legislature.  Or the subject matter may call for a strict interpretation of the statutory language, as in penal legislation.  None of these considerations apply in the present case.  Here the court is able to give effect to the construction of a statute which accords with the intention of the legislature…”

45.In terms of rectification of a draftsman’s mistake, there also is guidance from the Hong Kong Court of Final Appeal.

46.In Chan Pun Chung & anr v HKSAR [2000] 3 HKLRD 498, wherein Bokhary PJ, in considering section 159E of the Crimes Ordinance, expressed agreement with the speech of Lord Nicholls in Inco Europe Ltd, op cit., and observed (at 502I-503B):

“The draftsman must be taken to have included the s. 159E(7) transitional provisions thinking that they were necessary or at least avoided doubt.  But he cannot possibly be taken to have included them thinking that they could be said to operate so as to provide persons like these appellants with an immunity from prosecution.  I have no doubt, therefore, that the inclusion of sub-s.(7) of s.159E is plainly a drafting mistake.  And I am satisfied in all the circumstances that the conditions identified by Lord Nicholls of Birkenhead in Inco Europe Ltd v First Choice Distribution [2000] I WLR 586 obtain in the present case.  As to the fact that the statutory provisions in question are penal, I have already pointed out that, although they are penal, they do not create new criminal liability.  So the choice before the Court is a stark one.  One course is to permit an obvious drafting mistake to undo the intention obviously to be attributed to the Legislature.  The other one is to grasp the nettle of recognizing the draftsman’s obvious blunder for what it is and treating the product of such blunder as otiose thus preserving such intention.  In my judgment, our proper course in this day and age of purposive interpretation is undoubtedly the latter one…”

47.Lord Nicholls’ approach in Inco Europe, op cit., and its widespread adoption in the jurisprudence in this area, further can be demonstrated from the fact that his speech since has been cited and applied in recent cases in England: see, for example, R (on the application of Stellato) v Secretary of State for the Home Department [2007] 1 WLR 608, at 619-620 (CA), upheld in the House of Lords at [2007] 2 AC 70; R (on the application of Kelly and another) v Secretary of State for Justice, Re Gibson [2008] 3 All ER 844, at paras 12-25 (CA); and Lord Chancellor v Haggan [2007] EWHC 1212, at para 43 (QB).

48.Accordingly, this is the approach which I intend to apply in attempting to resolve the present issue before the court in terms of the application of that which the current editors of Bennion on Statutory Interpretation (3^rd ed), at 675 refer to as “a rectifying construction”. 

49.Regrettably, however, such construction as I now essay will satisfy one party only.

Provenance of the Ordinance

50.During the course of argument I have been taken to the predecessor of the Ordinance, the Fraudulent Transfers of Business Ordinance, Cap 49, the gravamen of which was the same, namely to transfer liability from the transferor to the transferee, and to provide a mechanism for terminating the liability of the transferee – in that case after the expiry of a period of one month from the date of publication of the notice of transfer, at which date such notice became ‘complete’ and the liability of the transferee was to cease unless proceedings had been commenced prior to the cessation of such liability. 

51.However, this earlier legislation apparently was deficient in that secured creditors would be unable to enjoy the protection offered by the legislation – see Emsworth v Howard William Burdett [1978] HKLR 506, at 507-509, per Huggins JA – and thus the current Ordinance was enacted to remove this deficiency.

52.The court also has been referred to Hong Kong Hansard, and has been shown the speech made by the then Law Draftsman, Mr Gerald Nazareth (later Nazareth JA) in moving the Bill before the Legislative Council.

53.Notwithstanding Mr Chua’s formal objection (“not remotely a Pepper v Hart situation”), I see no reason to make any formal admissibility ruling in this regard.  Suffice to observe merely that in terms of the point now requiring resolution I have not found the extract from Hansard to be illuminating; with respect, it does not come near to providing the “vital clue” to an intended meaning of an enactment, to which Lord Bridge made reference in his celebrated speech in Pepper v Hart [1993] AC 593, at 617C.

Decision

54.Notwithstanding the persuasiveness with which Mr Chua invested his argument, in construing this legislation I am unable to ascribe the overall primacy he seeks to the express time-bar within section 9 of the Ordinance. 

55.Nor, if I may respectfully say so, does banging the ‘merits drum’ – in the course of his persuasive address Mr Chua frequently emphasized the difficulties and potential unfairness which may be visited upon foreign creditors who may be wholly unaware of any gazetted notice of transfer – seem to me to be anything to the immediate point, which is purely that of the construction of a statute.

56.It is tolerably clear that the interpretation as now urged upon the court by the plaintiff does not ‘gel’ with the other sections of the Ordinance, in particular subsections 4(3), 4(4) and 5(1)(f); indeed it contradicts them, and so far as subsection 5(1)(f) is concerned, which forms part of the statutory requirement of that which is to be included in a notice of transfer, I take Mr Sussex’s point that it cannot reasonably be assumed that the legislature would wish to compel a transferee to issue a notice of transfer which includes an inaccurate statement as to the transferee’s liability.

57.I resist the notion that the legislature intended to create a situation in which a mechanism expressly is provided (within section 4) for extinction of a transferee’s section 3 liability for the liabilities of the transferor, only for this same liability effectively to ‘revive’ in every case by way of the ‘deeming’ provision in subsection 4(5)(b).  In this connection I note the Knight & Willoughby, op. cit., at 354, refer to the perspicacious comment of Megarry J (as he then was) in Murphy v Ingram [1973] 2 WLR 983, at 993, that “To deem, if I may say so, is usually perilous in that it is always difficult to foresee all the possible consequences of the artificial state of affairs that the deeming bring into being.”

58.I further accept the submission of Mr Sussex that section 9 of the Ordinance, upon which the plaintiff so heavily relies – a time-bar provision, I note, which was not contained within its legislative forerunner, the Fraudulent Transfers of Businesses Ordinance – is no more than a procedural time-bar, which serves to bar the remedy whilst leaving the claim extant, and does not serve to extinguish the transferee’s liability per se – a distinction which was emphasised by the House of Lords in Aries Tanker Transport v Total Transport Ltd [1977] 1 WLR 185, wherein their Lordships were considering the extinction of liability of charterers’ counterclaim against owners (for short delivery) by virtue of the contractual time-bar incorporated into the charterparty and arising from the application of Article III, rule 6 of the Hague Rules, holding that the charterers claim had “ceased to exist” and could not be introduced for any purpose into legal proceedings, whether by means of defence or set off, in response to owners’ claim for unpaid freight. 

59.This consideration alone, it seems to me, points to the fact that the provisions of subsections 4(2) and 4(3), which clearly are designed to extinguish liability on the part of the transferee, should not lightly be regarded as having been rendered nugatory by means of that which clearly is an oversight within the specific drafting of subsection 4(5), and a corresponding oversight by the Legislature in enacting the Ordinance without the obvious error being corrected.

60.Nor would such a construction mean that section 9 thereby is rendered meaningless; as a procedural time bar it would retain relevance and effect by in any event precluding the bringing of proceedings “more than one year after the date on which the transfer in respect of which the liability arose took effect” in situations in which no notice of transfer had been published, or wherein a notice of transfer had been published out of time.

61.In my judgment the legislative purpose of the Ordinance is clear in providing for the cessation of liability of the transferee upon a notice of transfer, duly drafted and served, becoming ‘complete’, as is specifically laid down in section 4(4), and in a situation such as this, wherein the literal effect of the Ordinance fails to give effect to that which I consider the obvious legislative purpose, the court must be empowered, as Lord Nicholls has pointed out, to construe the relevant sections so as to achieve such clear purpose.

62.Had the drafting error been noticed, then in my view the Legislative Council would have ensured that in its entirety section 4 properly would have reflected the obvious legislative intent.

63.Accordingly, I consider that the three criteria set out in Lord Nicholls’s speech in Inco Europe, op cit., have been fulfilled, that is, in terms of the identification of the intended purpose of the statute, the conclusion that due to inadvertence the draftsman and legislature failed to give effect to that purpose, and lastly, that had the legislature noticed the error, the identification of what the substance of the rectification (if not the precise words) would have been.

64.It follows that I have come to the view that there is nothing to prevent this court from adopting a ‘rectifying construction’, which I now do, by interpreting the Ordinance to have the effect of extinguishing the transferee’s liability under section 3(1) 1 month after the date of the last publication notice of transfer given under section 4(3), unless proceedings have been instituted against the transferee “before such notice becomes complete”.

Order

65.As earlier indicated (at paragraph 18) the court is seized with a precise question to be answered.

66.The appropriate Order, the form of which I ask that counsel agree, will therefore record that the court has answered the question posed in the negative.

Costs

67.I can see no reason why costs should not follow the event, and thus I make an Order nisi that the costs of and occasioned by this application be to the 2^nd defendant, such costs to be taxed if not agreed.

Consequential directions

68.Both plaintiff and 2^nd defendant ask, depending upon the view of the court on the construction issue, that consequential directions be made.

69.As matters presently state I am not minded to do so.

70.It seems to me that in light of the amount of money potentially involved in the plaintiff’s contingent claim against 2^nd defendant, the probability of an appeal is significant whichever side had turned out to be successful upon this initial hearing of this construction issue; indeed, in my view this matter usefully could admit of appellate consideration, and, as indicated to counsel, when regarded in that light the foregoing judgment is likely to be no more than the opening foray in a two (or possibly three) round forensic contest.

71.If this be correct, and I suspect that it is, any consequential directions necessarily would be the subject of an application for stay pending appeal.

72.Accordingly, if and when it transpires that no appeal is to be mounted against this judgment, or alternatively when such appeal(s) as are launched have been determined, then at that stage, and absent agreement on the issue between the parties thereon, this court will make such consequential directions as may be required in the plaintiff’s case against the 2^nd defendant in order to give practical effect either to this judgment, or to such decision as ultimately may be reached in a higher court.

Mr Chua Guan Hock SC and Mr Jose-Antonio Maurellet, instructed by Messrs Deacons, for the plaintiff

Mr Charles Sussex SC and Mr William Wong, instructed by Messrs Norton Rose Hong Kong, for the 2^nd defendant