GENERAL NICE RESOURCES (HONG KONG) LTD v. NINGBO IRON AND STEEL CO., LTD

HCMP 1949/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1949 OF 2016

(ON AN INTENDED APPEAL FROM HCA NO. 854 OF 2015)

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J U D G M E N T

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Hon Kwan JA (giving the judgment of the Court):

1.  This is the defendant’s application for leave to appeal to the Court of Appeal against the dismissal of its summons to strike out the plaintiff’s claim for malicious prosecution in presenting a creditor’s petition to wind up the plaintiff. The decision was given by Deputy High Court Judge Kent Yee on 17 May 2016 (“the Decision”). He refused leave to appeal on 15 July 2016 (“the Leave Decision”).

2.  The defendant renewed its leave application to the Court of Appeal by a summons issued in these proceedings on 29 June 2016.  Having considered the submissions filed by the parties, we exercise our power under Order 59 rule 2A(5) to determine it without a hearing on the basis of the written submissions only.

3.  The applicable test for granting leave to appeal is well established and has been set out in the Leave Decision at §4.  Essentially, the defendant repeated the grounds of appeal advanced before the judge.

4.  A plaintiff in a claim for malicious prosecution has the onus to establish each of four essential elements (Jae Hoon Oh v Richdale [2005] 2 HKLRD 285 at §12; Clerk & Lindsell on Torts (21^st ed) at §16-09).  What is in issue here is whether the plaintiff can establish each of these three elements, namely: (a) that the proceedings which afford the ground of complaint (the winding-up petition in this instance) terminated favourably to the plaintiff; (b) that the winding-up petition was without reasonable and probable cause; and (c) that the winding-up petition was malicious.

5.  In summary, we agree with the judge that the court cannot be satisfied at this stage it is plain and obvious that one or more of the essential elements cannot be established and the claim is unarguably bad.  Here, the legal viability of the cause of action is sensitive to the facts, which are in dispute. So we do not think the plaintiff’s claim ought to be struck out.

Whether the winding-up petition terminated favourably to the plaintiff

6.  Where a creditor’s petition to wind up a company is dismissed by the court on the ground there is a bona fide dispute of the debt on substantial grounds, there is clearly a determination of the petition in favour of the company for it to bring a claim for malicious prosecution against the creditor.  Examples are found in these cases cited by the defendant: Partizan Ltd v O J Kilkenny & Co Ltd [1998] BCC 912 at 914E to E and 922H; Jacob v Vockrodt [2007] BPIR 1568 at [30] and [44].

7.  What happened here was different.  Pursuant to a consent summons, Harris J made an order by consent on 24 April 2015 giving leave to the defendant to withdraw its winding-up petition forthwith and ordering costs of the winding-up proceedings including the summonses taken out by the plaintiff on 13 April 2015 (for striking out of the petition on the ground it is frivolous, vexatious or an abuse of the process of the court) and on 22 April 2015 (for dismissal or discontinuance of the petition) be in the cause of the plaintiff’s action against the defendant for malicious prosecution.  There was no adjudication of the merits of the petition by the court.

8.  The plaintiff contended that the winding-up petition was terminated in its favour in that the defendant was unsuccessful in obtaining the relief sought in the petition.  The defendant argued to the contrary and submitted that it should be treated as the winner in the winding-up proceedings because the defendant only agreed to the consent summons and the withdrawal of the petition when the plaintiff made full payment of the entire outstanding sum on 23 April 2015.  The plaintiff’s answer was that it had no alternative but to settle the alleged debt forthwith because of the presentation of the petition so that it could apply to court for the discontinuation or withdrawal of the petition[1].

9.  The judge took the view the outcome of the winding-up proceedings is arguably in favour of the plaintiff[2].  He referred to Craig  v Hasell (1843) 4 QB 481 at 492[3] for the proposition that this element would be satisfied if the proceedings were brought to an end and on terms.  Having regard to the full circumstances under which the outstanding sum was paid, the judge was of the view that in paying the said sum, the plaintiff could not be taken to have accepted the discontinuance of the petition would mean that the winding-up proceedings were determined in favour of the defendant[4].

10.  We have also considered all the other authorities cited at footnote 265 of §16-60 in Clerk & Lindsell: Whitworth v Hall (1831) 2 B & Ad 695; Metropolitan Bank v Pooley (1885) 10 App Cas 210; Beechey  v William Hill (Park Lane) Ltd [1956] CLY 5442; and Tibbs v Islington LBC [2003] BPIR 743.  The last mentioned case was cited by the defendant to the judge in the leave application.

11.  None of the above cases are sufficiently comparable to the facts in the present situation.  The closest may be Tibbs v Islington LBC in which the English Court of Appeal held that this element was not satisfied because the defendant, who was a supporting creditor in the bankruptcy, still succeeded in recovering a significant sum by way of the bankruptcy proceedings (paid by the plaintiff under protest to annul the bankruptcy), although it was substantially less than the original claim.

12.  The question here is whether the result of the winding-up petition by the consent order may be translated to a determination in favour of the plaintiff.  Put in another way, in bringing the action for malicious prosecution, is the plaintiff seeking to mount a collateral challenge to the correctness of the outcome of the underlying proceedings being the winding-up petition?

13.  We do not think there is a clear and obvious answer to these questions.

14.  The defendant also prayed in aid the dicta of Harris J in Re HNA Group Co Ltd [2014] 4 HKLRD 463 at §21 in which he said:

“Generally, if a petitioner is successful in recovering the debt which is the foundation for the petition the court will not be interested in an investigation into the underlying merits of the claim or the way in which the proceedings have been concluded. The petitioner will have his costs of the proceedings.”

15.  We agree with the judge that the above dicta do not assist the defendant’s arguments[5].  The context in which the statements were made was different.

Whether the winding-up petition was without reasonable and probable cause

16.  The plaintiff relied on an agreement for a varied payment schedule (“the VPSA”), which it alleged was made on 26 March 2015 and was made partly orally and partly in writing, by which the payment schedule of the outstanding sum was varied such that the first instalment of US$300,000 would be payable on 15 April 2015 and three subsequent instalments would be payable on 30 April 2015, 15 May 2015 and 31 May 2015.  By virtue of the VPSA, the plaintiff contended that the debt was not due when the petition was presented on 2 April 2015 and the defendant was fully aware of this, having entered into the VPSA just a week ago, and could not have a genuine belief of the insolvency of the plaintiff when it petitioned for winding up[6].

17.  There is a dispute of fact whether the VPSA was made, and a dispute in law whether the VPSA is sustainable as supported by valid consideration.

18.  On the facts, the judge did not find it able to say it is plain and obvious that the VPSA cannot be established.  He was aware of the inconsistencies between the plaintiff’s pleaded case and the affirmation evidence[7].

19.  On the law, the judge did not think it appropriate to decide summarily on the validity of the pleaded consideration.  And even if the VPSA is not sustainable in law for want of consideration, the judge thought it at least arguable that the defendant could not reasonably and properly rely on the non-compliance of the statutory demand to present the petition when the VPSA had been purportedly made before the deadline to comply with the statutory demand[8].

20.  As stated in Jacob v Vockrodt at [38], the authorities made it clear that the issue as to whether there was reasonable and probable cause is a question of fact and not a question of law and will depend on the information and belief of the party who presented the petition.

21.  We are not persuaded the judge was in error in holding that the threshold for striking out has not been met in respect of this element.

Whether the winding-up petition was malicious

22.  The element of malice has been taken to include not only spite or ill will but improper motive in the presentation of the petition (Radivojevic v L R Industries Ltd, 22 November 1984, per Slade LJ, cited in Partizan Ltd v O J Kilkenny & Co Ltd at 922E to F).  A conclusion that a petitioner was guilty of malice must be dependent upon the findings of fact made by the court concerning the petitioner’s motives, statement and conduct (Jacob v Vockrodt at [72]).  Malice “can be inferred from a lack of reasonable and probable cause”, but the finding of malice is always dependent on the facts of the individual case and it is for the tribunal of fact to make the finding according to its assessment of the evidence (Williamson v Attorney General of Trinidad and Tobago [2014] UKPC 29 at [13]).

23.  The plaintiff’s case on malice[9] is that the defendant well knew that the first instalment under the VPSA was not due when it filed the petition and could not have an honest belief in the alleged insolvency of the plaintiff.  The judge could not rule out the existence of the VPSA at this stage and found it at least arguable that the defendant harboured an improper motive in commencing the petition shortly after it agreed to the VPSA and when the first instalment was not yet due and payable.  He was unable to come to a clear conclusion that the plea of malice is bound to be rejected and declined to strike out the claim[10].

24.  We do not think the judge’s approach could be faulted.

25.  We do not find it necessary to deal with the other arguments raised on behalf of the defendant, such as the submission that the judge should not have allowed the application to amend the statement of claim.

Conclusion and costs

26.  We dismiss the leave application as the intended appeal does not have reasonable prospects of success, nor is there any other reason why in the interests of justice the appeal should be heard.

27.  We make a further order pursuant to Order 59 rule 2A(8) that no party may under rule 2A(7) request the determination to be reconsidered at an oral hearing inter partes.

28.  Costs of this application should follow the event.  The plaintiff submitted a statement of costs for summary assessment in the net total sum of $120,694 (minus the brief fee of counsel in case an oral hearing is ordered).  We have regard to the fact that the grounds of appeal are substantially the same as those argued before the judge.  We therefore reduce time spent by the solicitor and counsel’s fee for preparation of the skeleton submission.  We make an order nisi that the defendant is to pay the plaintiff the costs of this application, assessed on a gross sum basis at $72,694.  Any party who seeks to vary the costs order nisi shall lodge a written submission within 7 days hereof.