Re Man Po International Holdings Ltd

HCCW 14/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO 14 OF 2012

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Before: Hon Harris J in Court

Date of Hearing: 6 July 2012

Date of Judgment: 16 August 2012

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J U D G M E N T

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1.On 17 January 2012 the Petitioner issued a Petition for the winding up of the Company on the grounds of insolvency. The Petitioner relies on a judgment in its favour dated 28 July 1998 for HK$16,165,339.28 plus interest including interest at the judgment rate from the date of judgment. I gave leave to the Petitioner to amend the Petition at trial to add an additional paragraph expressly quantifying and relying on statutory interest. By the time the Petition came on for trial the only issue between the Parties was a legal one: Does section 4(4) of the Limitation Ordinance, Cap 343 (“Ordinance”), bar the bringing of the present Petition.

2.Section 4(4) of the Ordinance is in the following terms:

“An action shall not be brought upon any judgment after the expiration of the 12 years from the date on which the judgment became enforceable, and no arrears of interest in respect of any judgment debt shall be recovered after the expiration of 6 years from the date on which the interest became due.”

3.The issue divides into 2 parts.  First, is the Petition an action brought upon the judgment and as a consequence any claim for the principal sum adjudged payable barred by section 4(4)?  Secondly, even if any attempt to recover the principal is barred does the Petitioner remain entitled to recover interest on the principal for the last 6 years?  If the answer is yes, it is accepted that interest greater than HK$10,000 is due and payable and is, therefore, sufficient to support the Petition.

4.The first issue turns on the meaning of “action  …… upon a judgment”.  In the context of section 4(4) does it refer only to a new set of proceedings commenced to enforce a judgment or is it to be given a wider meaning and cover all procedures to enforce a judgment?  If it is the former it does not apply to the Petition.  Conversely, if does apply to the Petition it is accepted by the Petitioner that it cannot rely on the principal sum adjudged payable to prove insolvency.

5.The Limitation Ordinance was enacted in 1965.  At first blush it seems odd that the section refers to enforcing a judgment by action at all as by 1965 that was rare method to enforce a judgment.  In order to understand the reason this wording was adopted it is first necessary to understand how the same wording came to be adopted in the Limitation Act 1939 on which our Ordinance is based. The history of the development of the statutes concerned with limitation is explained in the judgment of Lord Lloyd in Lowsley v Forbes [1999] 1 AC 329 at pages 334 to 342 with which the other law Lords agreed.  This judgment repays reading in full.  The relevant conclusions are as follows.

(1)  The Limitation Act 1939 was an Act to consolidate previous Acts with amendments.  Section 2(4) provides:

“An action shall not be brought upon any judgment after the expiration of 12 years from the date on which the judgment became enforceable, and no arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years from the date on which the interest became due.”

(2)  The 1939 Act was not intended to make any changes to the existing substantive law.  The position under the Acts of 1833 and 1874 was that a judgment could not be enforced by action, suit or other proceedings after 12 years.  Despite the reference to “action ….upon any judgment” in section 2(4), the sub‑section cannot have been intended to change, and should not be read as changing, the existing position.

(3)  The Court of Appeal in W T Lamb & Sons v Rider [1948] 2 KB 331 held, wrongly, that section 2(4) did not apply to proceedings by way of execution.  However, the Court of Appeal’s reasoning has been treated as correct in subsequent cases.

(4)  More importantly the Law Reform Committee on Limitations of Actions assumed, as is clear from its Final Report, in considering the revision to the law that resulted in the Limitation Act 1980, that section 2(4) was only concerned with limitations of actions not rules in relation to execution.  As is apparent from the Report this assumption was based in part on the decision in W T Lamb which was assumed to correctly state the law.  As a consequence what was proposed was a statutory compromise.  “All forms of execution were to be removed from the sphere of limitation and instead made subject to a discretionary bar after six years”: 340E.

(5)  “It has long been a rule of construction that when Parliament uses a word or term, the meaning of which has been the subject of judicial ruling in the same or similar context, then it may be presumed that the word or term was intended to bear the same meaning:” 340F.  The rule is an aid to construction.  It is not conclusive.  However, the Final Report is entitled to great weight and Parliament in enacting the Limitation Act 1980 must be presumed to have given effect to the package of recommendations in the Final Report.

(6)  The fact that the House of Lords concluded that Parliament has misunderstood the law was not of itself a reason to construe section 24(1) of the Limitation Act 1980 as having a meaning different to that intended by Parliament: 342B.

(7)  The House of Lords held that “action” in section 24(1) means a fresh action and does not include proceedings by way of execution.

6.Mr Kenneth Lee, who appeared for the Petitioner, accepted that Lowsley was correctly decided.  He does not suggest that the provisions of RHC O46 r2 which deals with when leave is required to issue a writ of execution has any bearing on the matter.  He submitted, however, that the same construction should be placed on “action” in section 4(4) as was given to it in section 24(1) of the Limitation Act 1980 for the reasons explained in Lowsley with the consequence that the judgment is still enforceable and thus provides a basis for the statutory demand, which in turn is relied on as proving insolvency. 

7.The Company’s submission is this.  There is no authority in Hong Kong, which considers the meaning of “action ….. upon a judgment”.  Hansard shows that at the time the Limitation bill was introduced in the Legislative Council no reference was made to the kind of considerations referred to in the Law Reform Committee Final Report in 1979 in England.  There is nothing to suggest that the Legislature in Hong Kong had in mind a particular meaning of “action” at the time the Ordinance was introduced.  The Legislature simply adopted section 2(4) of the Limitation Act 1939, which Lowsley establishes properly understood bars enforcement of a judgment after 12 years.  The fact that 15 years later Parliament made a mistaken assumption when introducing the Limitation Act 1980 is not a reason for the Courts of Hong Kong to give section 4(4) an erroneous construction.  I agree.  If there were authority in Hong Kong, which demonstrated that W T Lamb had long been accepted as correct law in our Courts I might, depending on their reasoning, have taken a different view.  However, if it is accepted that Lowsley was correctly decided, it seems to me that in the absence of established authority to the contrary in Hong Kong the correct approach is to give section 4(4) the construction found by the House of Lords in Lowsley to be the correct one.

8.It follows that the judgment relied on by the Petitioner is no longer enforceable and, therefore, it cannot be said that a debt in respect of the principal sum adjudged due is presently owed to it.  If the principal is not payable the statutory demand is defective and does not prove insolvency.

9.The second issue is interest.  Mr Lee took me to Limitation Periods, 6^th ed, by Andrew McGee as demonstrating that section 4(4) provides separate rules for interest and principal sums.  It may be that in so reading the English equivalent of section 4(4) the author was influenced by the decision in W T Lamb.  However, if section 4(4) is read as applying to all means of enforcement of judgments it becomes difficult to see why, as Mr Lee submits, a judgment creditor can recover interest after recovery of the principal sum has become time barred.  It seems to me that if section 4(4) applies to all forms of enforcement it follows that the sub‑section should be read as providing that during the period a judgment remains enforceable, namely 12 years, interest can be recovered for 6 years from the date on which it became due.  It seems to me that this is a perfectly sensible reading of the sub‑section. Statutory interest is intended to compensate a judgment creditor for being kept out of money.  If he delays in enforcing judgment for an extended period his right to interest ceases.

10.The Petitioner is not entitled to recover interest from the Company.  The Petition fails and is dismissed.  Mr Lee argued that if this was my conclusion I should apportion the costs of the proceedings to reflect that early in the proceedings the Company has suggested that it had not been properly served with the proceedings leading to the judgment and that the sum might not have been properly payable.  As a consequence the Petitioner filed evidence and incurred costs that proved unnecessary.  In my view an apportionment is not appropriate.  I think it reasonable to assume that the Petitioner’s delay in issuing the Petition is at least in part responsible for the Company taking the initial position that it did as its current management may genuinely not have been sure what the position was.  I therefore order that the Petitioner pay the Company’s costs of these proceedings.

Mr Kenneth Lee, instructed by Edmund W H Chow & Co, for the petitioner

Mr Vincent Lam, instructed by Cham & Co, for the respondent

Attendance of the Official Receiver was excused