Bank of China (Hong Kong) Ltd v. Keen Lloyd Energy Ltd and Another

CACV 132/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 132 OF 2011

(On Appeal from HCA No. 9309 of 2000)

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BETWEEN

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CACV 133/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 133 OF 2011

(On Appeal from HCCW No. 493 of 2009)

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BETWEEN

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Before : Hon Cheung, Yuen and Chu JJA in Court

Date of Hearing : 7 March 2012

Date of Judgment : 23 March 2012

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J U D G M E N T

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Hon Cheung JA:

Appeal against striking out (CACV 132/2011)

1.In High Court Action No. 9309/2000 (‘HCA 9309/2000’) the plaintiff claims against the 1^st defendant as borrower and the 2^nd defendant as mortgagor, outstanding banking facilities and interest totalling HK$564,896,223.78 as at 9 June 2009 together with further interest accruing since that date.

2.The 1^st defendant pleaded that the plaintiff is not entitled to enforce the facilities agreements because the facility agreements were tainted with illegality and were void by reason of an alleged contravention of Article 39(4) of the Commercial Banking Law (‘CBL’) of the People’s Republic of China, which states that the ratio of the loan to a single borrower and the capital base of a commercial bank shall not exceed 10%, and the Hong Kong court should not enforce them: re-amended defence and counterclaim, paragraphs 16, 19(2), 20-22. 

3.It also pleaded an alternative defence that by reason of these matters, the facility agreements and the facilities and the securities provided in relation thereto were void for mistake, and the 1^st defendant is entitled to such ‘restitutionary relief as this Court may deem just to grant in accordance with the applicable principles’: re-amended defence and counterclaim, paragraphs 25 to 26, 47 to 49.

4.The plaintiff contended that these defences of illegality and mistake should be struck out because they had been raised and adjudicated in previous proceedings between the plaintiff and the 1^st defendant and as such issue estoppel applies, alternatively the two defences amount to an abuse of process for them to be litigated again.  Further the defences were unsustainable on their merits.

5.Harris J struck out the two defences on the grounds relied upon by the plaintiff.  In respect of the merits of the two defences the Judge held that the defence of illegality is not sustainable because the facilities agreements were governed by Hong Kong law and were to be performed in Hong Kong.  In respect of mistake, as it hinges on the illegality defence, it fails together with it.  The 1^st defendant now appeals against the striking out of the plea on mistake and its claim for relief set out in paragraphs 3 to 32, 47 to 49 and prayer (1) of its re-amended defence and counterclaim.

Appeal against winding up order (CACV 133/2011)

6.Before the Judge was also a winding-up petition in which the petitioner, who is the plaintiff in this action, sought a winding-up order against Winko Metal Limited (formerly known as Vast Income Industries Limited) (‘Winko’) which is not one of the defendants, but had granted a legal charge over its properties in respect of the debt claimed in this action.

7.The Judge held that Winko has shown no defence to the debt and the plaintiff is entitled to a winding-up order in the petition which is ordered to be relisted for hearing.  Winko also appeals against that order.

Factual Background

8.I will respectfully adopt the Judge’s summary of the factual background of the case.

9.The plaintiff is the successor-in-title to Sin Hua Bank Hong Kong Branch (‘Sin Hua HK’).  Sin Hua Bank was incorporated in the Mainland.  Sin Hua HK was registered in Hong Kong under Part XI of the Companies Ordinance, carried on banking and was subject to the supervision of the Hong Kong Monetary Authority (‘HKMA’).

10.Sin Hua HK had been doing business with Mr Chin Kam-chiu (‘Mr Chin’ who is also sometimes referred to as ‘Mr. Chun’) who controlled the 1^st defendant and companies in the Keen Lloyd group of companies (‘Keen Lloyd group’) since about 1993.  Sin Hua HK had advanced significant sums until late 1998 at which time the Keen Lloyd group ran into financial difficulties.  Between November 1998 and April 1999, Mr Chin conspired with others to defraud Sin Hua HK by applying for and negotiating letters of credit when there was no underlying commercial transaction behind them.  Mr Chin was convicted of conspiracy in a criminal trial on 24 March 2004 and was sentenced to 6½ years’ imprisonment, which he has served.

11.From March 2000, the Keen Lloyd group was in default in making repayments to Sin Hua HK.  When Sin Hua HK threatened to sue, the parties agreed a debt restructuring between Sin Hua HK, the 1^st defendant and the 2^nd defendant.  Under the agreement dated 14 April 2000 Sin Hua HK agreed to withhold proceedings and the 2^nd defendant agreed to sell or surrender their mortgaged properties and repay part of the debt.  The defendants defaulted on the agreement and Sin Hua HK commenced, amongst other proceedings, this action to recover the indebtedness.  Receivers were also appointed to take enforcement action against the security held by Sin Hua HK.

12.The defendants commenced HCA 1319/2001 on 23 March 2001 against Sin Hua HK and the receivers alleging breach of the agreement and obtaining an interim injunction to prevent further enforcement against Sin Hua HK’s security.  An injunction was initially granted and then discharged on 16 April 2004 by which time Mr Chin had been convicted and the 2^nd defendant wound up.  The receivers sought to enforce the security and Mr Chin procured his companies to resist the possession actions, which led to a series of new High Court Actions: 926, 928, 929/2004 (‘receivers’ actions’).

13.In the receiver’s actions the defendant alleged that Sin Hua HK had fraudulently misrepresented to the Keen Lloyd group that it would grant further facilities to it.  This allegation was dismissed by Chu J on 17 December 2004 as ‘incredible and untenable’.  The plaintiff says that Mr Chin and the 1^st defendant have been recycling this allegation with slight variations to commence proceeding against the plaintiff for unparticularised losses.  Each of these actions has been struck out.  The plaintiff says that the defendants now seek to rely on essentially the same allegations to resist the plaintiff’s claims in the present action.

14.In the receivers’ actions the 1^st defendant alleged that a fraudulent misrepresentation made in mid-1997 was in relation to an agreement to increase facilities from HK$1.827 billion to HK$2.3 billion, and the falsity was based on restrictions imposed by the HKMA.  Chu J dismissed this defence and entered summary judgment in favour of the receivers in December 2004.

15.On 1 June 2004 the 1^st defendant commenced HCA 1299/2004 (‘2004 Action’) with an indorsement alleging fraudulent misrepresentation in December 1997 that Sin Hua HK could and subsequently had increased facilities from HK$1.8 billion to HK$2.3 billion. The 1^st defendant sought damages of HK$5 billion.

16.On 21 December 2005 the 1^st defendant amended its writ in the 2004 Action and filed a statement of claim (‘1^st 2004 SOC’) in which it made a number of new allegations.  First, that there was a misrepresentation from July to December 1997 that Sin Hua HK would increase the facilities from HK$l.656 billion to HK$2.4 billion.  Secondly, that there was a 2^nd misrepresentation from early to late 1998 that the facilities would be further increased to $3.08 billion.  Thirdly, that there was a contract between Sin Hua HK and the 1^st defendant that Sin Hua HK would further increase the facilities to HK$3.08 billion.  The 1^st 2004 SOC was struck out by Deputy High Court Judge L Chan on 12 April 2006 on the grounds that the 2^nd misrepresentation and the contract claims were time-barred and the 1^st and 2^nd misrepresentations were promises and not actionable.

17.On 22 May 2006 the 1^st defendant commenced High Court Action 1092/2006 (‘2006 Action’) and filed a statement of claim (‘2006 SOC’).  The 1^st defendant made the following allegations.  First, that there had been a misrepresentation from early to late 1998 that Sin Hua HK and Sin Hua Bank Shenzhen Branch (‘Sin Hua SZ’) could and would jointly further increase the facilities to HK$3.1 billion. Secondly, that there was a contract between Sin Hua HK, Sin Hua SZ and the 1^st defendant, that Sin Hua HK and Sin Hua SZ would increae the facilities to HK$3.1 billion. The ground on which the alleged representation was alleged to be false was that Sin Hua HK and Sin Hua SZ could not lawfully or properly increase the facilities to HK$3.1 billion for that would be in excess of 10% of Sin Hua HK’s capital base and contrary to the CBL.

18.At the same time, the 1^st defendant amended its writ in the 2004 Action and filed a new statement of claim (‘2^nd 2004 SOC’) alleging a misrepresentation from July to December 1997 that Sin Hua HK could and would increase the facilities from HK$1.656 billion to HK$2.6 billion, which was subsequently reduced to HK$2.4 billion.  The reason that the representation was said to be false was that Sin Hua HK could not lawfully increase the facilities to HK$2.4 billion without exceeding the 10% capital to loan ratio.

19.The 2^nd 2004 SOC, the 2006 SOC, the 2004 Action and the 2006 Action were struck out and dismissed by Poon J on 11 January 2008 on a number of grounds.  The 1^st defendant appealed the judgment.  The appeal was dismissed by the Court of Appeal on 23 September 2009.  The Court of Appeal held that under the terms of the facility agreements between Sin Hua HK and the 1^st defendant, Sin Hua HK was entitled to withdraw the facilities and call in any loan or overdraft at any time, and any representation that it would allow further facilities was not a commitment which could be said to have extended over any specific period of time.  Leave to appeal was refused by the Court of Appeal and the Appeal Committee of the Court of Final Appeal.

20.Winko had, pursuant to legal charges dated 18 July 1996 and 15 November 1996 and a debenture dated 17 October 1998, agreed to charge its properties and assets to secure the 1^st defendant’s debts and be liable as primary debtor for all of the 1^st defendant’s debts.  The plaintiff’s solicitors demanded repayment and then issued a statutory demand on 21 July 2009.  The petition was presented on 17 August 2009.

21.The plaintiff obtained leave to lift the stay in the present action and to amend its statement of claim to update the amount of the outstanding indebtedness.  In the order giving leave to amend, the 1^st defendant was given leave to make consequential amendments.  The plaintiff says that in breach of that order the defendants are trying by their amendments to the re-amended defence and counterclaim to resurrect the complaints that have already been dismissed to resist the bank’s recovery in the present action and the petition to wind up Winko.

The granting of facilities

22.The relevant facilities granted by the plaintiff to the 1^st defendant are pursuant to the terms of a facility letter dated 21 November 1995 in which the plaintiff agreed to grant various facilities of an amount of HK$1,000 million and also another facility letter dated 20 March 1997 in which the plaintiff agreed to extend to the 1^st defendant an installment loan of HK$1,800 million.

23.The 1^st defendant contended that the contract relating to the facilities agreements became void when the contract was signed in 1995.  The re-amended defence and counterclaim pleaded that Mr Chin first became aware in his criminal trial which commenced on 3 February 2004 that the HKMA had issued a letter dated 16 April 1998 to the plaintiff stating, among other things, that as at 28 February 1998, the total credit facilities granted to his group of companies had reached HK$1,827 million, which was about 25% of the capital base of the plaintiff.  The capital base of the plaintiff as at 28 February 1998 would have been in the region of about $7,500 million (based on HKMA’s figure that $1,827 million was ‘about 25% of the capital base of the bank’).

CBL

24.The followings are two further relevant provisions of the CBL

‘ Article 75 The People’s Bank of China shall order a commercial bank to correct one of the cases stated in Article 73 of this law or one of the following cases, and confiscates its illegal earnings if any and impose a fine which is one to three times the illegal earnings, or impose a fine between RMB 50,000 yuan and 300,000 yuan if no illegal earnings:

(2)  The bank does not operate with the set ratios in concern of capital, deposits and loans, fluid of assets, loans to the same borrower, and balance sheet as set by the People’s Bank of China;

Article 76 Disciplinary actions shall be taken against the leading and other personnel of a commercial bank who have direct responsibilities for the cases in the preceding three articles; criminal responsibilities shall be affixed if the case is so serious to constitute a crime.’

The defendants’ case on mistake

25.In respect of mistake, Mr Horace Wong SC and Mr Kenneth Lee, counsel for the 1^st defendant, relied on common mistake.  It was not a mistake in respect of the subject matter of the contract but rather on the quality of the subject matter.

26.The subject matter of the contract between the parties is the banking facilities granted by the plaintiff to the 1^st defendant. There is no allegation of mistake against it.  The ‘quality’ of the subject matter or ‘state of affairs’ which is said to be a vital attribute of the contract is that the ratio of the loan from the plaintiff to the 1^st defendant should not exceed 10% of its capital base.

Common Mistake: Principles

27.In Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 at 703, the English Court of Appeal referred to Blakeley v. Muller & Co 19 TLR 186 which identified the following five elements which must be present in a plea of common mistake:

(1)   there must be a common assumption as to the existence of a state of affairs;

(2)   there must be no warranty by either party that that state of affairs exists;

(3)   the non-existence of the state of affairs must not be attributable to the fault of either party;

(4)   the non-existence of the state of affairs must render performance of the contract impossible;

(5)   the state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible.

28.The distinction between the subject matter and the quality of the subject matter is described by Lord Phillips of Worth Matravers MR in Great Peace Shipping Ltd as follows:

‘ 55. Where that which is expressly identified as the subject of a contract does not exist, the contract will necessarily be one which cannot be performed. Such a situation can readily be identified. The position is very different where there is “a mistake as to the existence of some quality of the subject matter which makes the thing without the quality essentially different from the thing as it was believed to be.” In such a situation it may be possible to perform the letter of the contract.’

29.Lord Phillips further stated that:

‘   74      In considering whether performance of the contract is impossible, it is necessary to identify what it is that the parties agreed would be performed.  This involves looking not only at the express terms, but at any implications that may arise out of the surrounding circumstances.  In some cases it will be possible to identify details of the ‘contractual adventure’ which go beyond the terms that are expressly spelt out, in others it will not.’

My view

30.It is only in plain and obvious cases that the Court will strike out a defence.  However, in this case, I am of the firm view that the plea on mistake is plainly unsustainable and should have been struck out on its merits.

Positive belief and previous inconsistent plea

1)   It is important to understand the meaning of a ‘mistake’.  A useful exposition can be found in Cartwright on Misrepresentation, Mistake and Non-Disclosure 3^rd Edition at the following paragraphs:

‘ 12-02 Different meanings of “mistake”. A mistake is a misunderstanding, a misapprehension, a misconception, an erroneous belief. The word “mistake” is in everyday use, and it is important to understand the legal significance of the term. Certain points should be noted from the outset: a mistake requires a positive state of mind, and can be only of the present, not the future; and risk-taking excludes mistake about the subject-matter of the risk.

12-03  A positive state of mind.  In order to succeed in a claim based on mistake, the claimant must show that, at the moment when he entered into the contract, he held a belief, or understanding, which was incorrect.  He “mis-understood” something: that is, he had an understanding about something which was (a) legally relevant to the validity of the contract or the terms on which it was concluded, and (b) in fact relevant to his decision to enter into the contract; and this understanding was incorrect. Such a misunderstanding is a positive state of mind: ignorance and forgetfulness, if they are not reflected in a positive erroneous belief, do not constitute mistake.’

2)   Chitty on Contracts 30^th Ed, Vol 1, paragraph 5—006 cited Cartwright and stated that:

‘ “Mistake” implies a positive belief. Further, it seems that relief will only be granted under the doctrine of mistake if one or both parties entered the contract under a positive belief which was incorrect, rather than merely not having thought about a particular issue. Thus in all the cases in which a contract has been held to be void for common mistake, it seems that the parties had a positive belief that X was the case when it was not, rather than merely making no assumptions about whether X was so or not……...’

3)   In the re-amended defence and counterclaim, the 1^st defendant pleaded that the mistake that the 1^st defendant relied upon was one by Mr Chin acting on behalf the borrowers and shared by the plaintiff in that,

‘ 14(1)(a) …. the terms of the GBF [i.e. the facilities] were offered by SHHK [i.e. Sin Hua HK] on the condition and basis that it was lawful and proper for SHHK to do so under the laws governing SHHK, such condition to be implied by law on the ground that it was a fundamental and necessary implication thereof by reason of the very nature of the transaction, or was so required in order to give business efficacy to the transaction or to give effect to the common intention of the parties.

15(1)    As regards the GBF already made available by SHHK and utilized by the Borrowers, if Mr. Chun (on behalf of the Borrowers) had known that the said GBF (or any part thereof) were in fact unlawful and improper, Mr. Chun (on behalf of the Borrowers) indeed would have refused to accept or utilize any such unlawful and improper credit arrangements nor to provide securities therefor to SHHK.

(2)   As regards the increased GBF promised by Mr. Wu as aforesaid, if Mr. Chun (on behalf of the Borrowers) had known that the said increased GBF (or any part thereof) were in fact unlawful and improper, Mr. Chun (on behalf of the Borrowers) indeed would have refused to accept or utilize any such unlawful and improper credit arrangements nor to provide securities therefor.’

See also paragraph 25.  The pleadings then referred to HKMA letter and the provisions of the CBL.

4)   Hence the common mistake is a belief by both parties that the terms of the facilities were offered by the plaintiff on the basis that it was lawful and proper for the plaintiff to do so.  This stand is different and totally inconsistent with the stand taken by the 1^st defendant in the 2004 Action and the 2006 Action. 

5)   In the 2004 Action, the 1^st defendant pleaded in the statement of claim that the plaintiff through its general manager Mr Wu had made reckless, alternatively negligent representations that the plaintiff could and would increase the facilities from HK$1,656 million to HK$2,400 million (paragraph 11(2)).  It pleaded that

‘11(2) In particular, Mr. Wu at all material times knew that the granting of credit facilities (whether a fresh facilities or an increase of existing facilities) was subject to a three-tier control system within SHHK and also the approval of HKMRO as well as the provisions in Article 39(4) of the CBL. (paragraph 11)’ (emphasis added)

6)   In the 2006 Action, the 1^st defendant, apart from repeating the plea on reckless or negligent misrepresentations, further pleaded at paragraph 12 fraudulent misrepresentation by Mr Wu:

‘ 12. The Representation was made fraudulently by Mr. Wu on behalf of SHHK and SHSZ knowing it to be false in that Mr. Wu at all material times knew full well that SHHK and SHSZ could not lawfully or properly increase and in any event did not and could not have the requisite approvals to increase the GBF to the said level of HK$3,100 million. (emphasis added)’

7)   It is plain that the plea of the alleged fraudulent, reckless and negligent misrepresentations on the part of the plaintiff are totally inconsistent with the latest plea of a common belief that the terms of the facilities were offered on the basis that it was lawful and proper for the plaintiff to do so.  Fraudulent misrepresentation involved actual knowledge on the part of the plaintiff that the granting of facilities which exceeded the prescribed ratio was unlawful and improper.  This was inconsistent with the common mistake now relied upon by the defendants i.e. a positive belief by both parties that the granting of facilities was lawful and proper.  In terms of reckless misrepresentation it was pleaded that the plaintiff made the representation not caring whether the plaintiff could lawfully increase the banking facilities and not caring whether the plaintiff had or could have obtained the approval for the increase.  The same formulae were pleaded in relation to negligent misrepresentation save that the negligence was in the form of ‘without taking due care’.  These two allegations were also inconsistent with a positive belief that it was lawful and proper for the plaintiff to grant facilities.

8)   Mr Horace Wong SC seemed to argue that the alternative plea of negligent misrepresentation is not inconsistent with the present plea of mistake.  I disagree.  If the plaintiff had not taken due care to ascertain whether it could increase the facilities and whether approval could be obtained, how could it be said now that it also had a positive belief that it was lawful and proper for it to grant the facilities.  The two are inherently contrary. 

9)   Further, the plea on misrepresentation is inconsistent with the requirement for common mistake that ‘there must be no warranty by either party that that state of affairs exists’.

10)   The plea of mistake is very much an afterthought. It was only raised nine years after the statement of claim was first served in the present action.  Bearing in mind the cause of action pleaded by the defendants in the previous actions, this Court is entitled to make a close scrutiny of this plea.  The plea of mistake is plainly unsustainable in the light of the previous inconsistent stand taken by the 1^st defendant.

Non-existence due to the fault of plaintiff

11)   Further the 1^st defendant is unable to satisfy on the pleadings the requirement that the ‘non-existence of the state of affairs must not be attributable to the fault of either party’ because according to the 1^st defendant, it was the plaintiff’s lending which breached the prescribed ratio.  Hence the non-existence of the state of affairs was attributable to the fault of the plaintiff.

Contractual performance not impossible

12)   Further the 1^st defendant said that, if successful on the plea of mistake, it is entitled to avoid the contract and have restitutional relief.  The 1^st defendant only relied on mistake 14 years after the facilities were granted and after it had enjoyed the benefit of millions of dollars of facilities.  This only shows that the 1^st defendant is unable to fulfill another essential requirement of common mistake, namely, that the non-existence of the state of affairs must render contractual performance impossible.  In this case there was performance of the contract. 

13)   Furthermore, in the 1^st defendant’s previous failed actions, this Court had already commented that the plaintiff could withdraw the facilities at any time.  Rogers VP stated that

‘ 17. In my view, the first difficulty which the plaintiff must face is that whatever agreement or promise might have been made to provide general banking facilities it is quite clear that those facilities could have been withdrawn at any time. The bank documentation in this case was no different from any other bank documentation and provided for the bank to be able to call in any loan or overdraft. Hence any representation that the bank would allow general banking facilities was not a commitment which could, in any event, be said to have extended over any specific period of time.

18.    That matter is a fundamental difficulty which exists in addition to the fact that the statements relied upon were promises and not statements of fact.  The approach of the judge that there was no actionable loss pleaded is, in my view, correct.  Indeed it is said that following investigations by the HKMA, SHHK had to take measures to reduce the general banking facilities granted to the group.  This highlights the point that general banking facilities are not something which would exist in perpetuity.  It is not suggested that the HKMA could by itself legislate or create a law by any other means, nor could it alter a contract between a bank and its client.  All it could do would be to give advice to a bank.  Technically, a bank was free to accept and act on that advice or take other action as it deemed fit.’

14)   In view of the overriding right of the plaintiff to withdraw the facilities, the contract is not affected by mistake (assuming it existed).

Evidential gap

15)   Another factor which showed that the plea is unsustainable is that on the facts pleaded, the 1^st defendant could only show a possible breach of the ratio of the loan and capital in February 1998 and not earlier in November 1995 when the facilities were granted. 

Abuse of process

31.In any event, I am of the view that it is an abuse of process for the 1^st defendant to plead mistake in the present action.  Irrespective of whether issue estoppel is engaged or not, there is a clear breach of the principle of res judicata in the wider sense because the defence of mistake could and should have been raised in the previous actions: see Johnson v. Gore Wood & Co (a firm) [2002] 2 AC 1 at 31 A-E, Ngai Few Fung v. Cheung Kwai Heung [2008] 2 HKC 111 (paragraph 16), Chiang Lily v. Secretary for Justice [2009] HKC 234 (paragraph 57) and Healthy Living Products International Ltd v. Murray [2012] 1 HKLRD 49 (paragraph 40).

32.The 1^st defendant had in the previous actions pleaded misrepresentation based on the same facts as it now relied upon on mistake.  That the plea of mistake could and should have been raised in the earlier actions is beyond question.  The argument that in the previous actions the 1^st defendant was only claiming damages and not the current restitutional relief is disingenuous.  As apparent from the previous actions, the loss and damage claim included the following:

(1)    loss suffered as a result of the forced sale of the properties (i.e, the difference between the prevailing market value of the properties and the price fetched from their forced sales);

(2)    loss of the security deposits;

(3)    loss as a result of the forced disposal of properties and securities that were charged in favour of the Other Banks;

(4)    loss of business and/or loss of profits and/or loss of business opportunities.

33.In the prayer for the restitutionary relief in the present re-amended defence and counterclaim, it is pleaded that had Mr Chin (on behalf of the borrowers) known of the true facts he on behalf of them ‘would never have agreed ….. to provide securities thereof in the first place.’  The damage claim clearly embraced at least some of the subject matter of the present claim.

Conclusion

34.Accordingly I will dismiss the appeal on the striking out.  Likewise, as no separate arguments were relied upon, the appeal on the winding-up order will also be dismissed.

Costs

35.The plaintiff is entitled to the costs of the appeal with certificate for two counsel.

Hon Yuen JA:

36.I agree.

Hon Chu JA:

37.I agree with the judgment of Cheung JA and the orders proposed.

Mr Anderson Chow SC and Ms Eva Sit, instructed by Deacons for the Plaintiff (CACV 132/2011) and the Petitioner (CACV 133/2011)

Mr Horace Wong SC and Mr Kenneth K H Lee, instructed by Waller Ma Huang & Yeung for the 1^st Defendant (CACV 132/2011) and the Respondent (CACV 133/2011)