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CACV 20/2009
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 20 OF 2009
(ON APPEAL FROM HCSD NO. 31 OF 2006)
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BETWEEN
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SY CHIN MONG, STEPHEN |
Applicant |
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and |
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XIAN KARKIU ELECTRIC POWER LIMITED COMPANY |
Respondent |
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Before: Hon Rogers VP and Le Pichon JA in Court
Date of Hearing: 7 July 2009
Date of Judgment: 7 July 2009
Date of Handing Down Reasons for Judgment: 14 July 2009
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REASONS FOR JUDGMENT
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Hon Rogers VP:
1. I agree with the reasons given by Le Pichon JA.
Hon Le Pichon JA:
2. This was an application for leave to appeal to the Court of Final Appeal from a judgment of this court of 1 April 2009 allowing an appeal by Sy Chin Mong, Stephen (“Mr Sy”) (the respondent to this application) and setting aside the statutory demand served on him by the applicant, Karkiu Electric Power Ltd Company (“Karkiu”). At the conclusion of the hearing leave was refused with written reasons to be handed down which we now do.
Background
3. The full background is set out in §§ 3 to 14 of the judgment of this court to which reference should be made. In outline, Mr Sy was the chairman and legal representative of BT China which had a subsidiary, BT Wuhan, the owner of a land development project in Wuhan. BT China and Karkiu entered into agreements under which Karkiu would acquire 50% of the shares in BT Wuhan at a consideration of RMB 2.5 million and the remaining 50% upon certain conditions. Disputes arose with the parties accusing each other of breach of the agreements. Those disputes were resolved by arbitration in Xian.
4. The award dated 29 December 2004 ordered, inter alia, the parties to continue to perform the agreements, BT China to pay Karkiu 80% of the amount Karkiu had by then injected into the Wuhan project, namely, the sum of RMB 3,587,267.20 (“the Sum”) and Mr Sy to be jointly and severally liable with BT China for the Sum.
5. Karkiu sought to enforce the award in Hong Kong and issued an ex parte summons for that purpose. Before the summons was heard, in early July 2005, BT China transferred 50% of the shares in BT Wuhan to Karkiu pursuant to the award. Karkiu, however, did not pay the RMB 2.5 million due for the shares. Rather, it proceeded with its application to enforce the award other than the transfer of the BT Wuhan shares and obtained a judgment dated 12 July 2005 which, inter alia, ordered Mr Sy to pay the Sum to Karkiu “provided that Mr Sy be credited with any payment by BT China to Karkiu of the Sum …”.
6. On 3 August 2006, BT China went into liquidation. As at that date, Karkiu had not paid any part of the RMB 2.5 million to BT China. The liquidators of BT China have stated that under BVI law (which is the applicable law governing BT China’s liquidation), an automatic set-off of RMB 2.5 million against the Sum arose upon BT China’s liquidation on 3 August 2006, the effect was to reduce BT China’s indebtedness to Karkiu by that amount.
7. Karkiu issued the statutory demand on 27 October 2006, the indebtedness being the Sum.
8. The question on the appeal was whether Mr Sy was indebted to Karkiu in the amount of the Sum at the date of the statutory demand. This turned on whether the automatic insolvency set-off on BT China’s liquidation had the effect of bringing about a pro tanto reduction in the joint and several debt. This court held that it had that effect and the statutory demand was set aside.
9. At the appeal hearing, it was this court’s understanding that Karkiu’s case was that it was not under any obligation to make the RMB 2.5 million payment to BT China for the 50% shares in BT Wuhan transferred to it under the award and that therefore Mr Sy remained indebted to it for the Sum. At the hearing of the leave application, counsel for Karkiu changed his position: he accepted that under the award Karkiu was obligated to pay for the BT Wuhan shares upon transfer but contended that subsequent events had negatived or cancelled that liability. There was some attempted reference to events that occurred in September 2006 which never featured during the appeal hearing. Then it was suggested that whether or not there was any set-off was governed by the law of the PRC when plainly the issue is not what law applies.
10. The questions said to be of great general or public importance set out in Karkiu’s notice of motion were:
“(1) Whether a statutory demand for a judgment debt can be set aside under either rule 48(5)(a), (b) or (d) of the Bankruptcy Rules, Cap. 6A, by reason of the existence of a cross-claim, set-off which lacks mutuality between the parties.
(2) If the answer to question 2(1) above is “yes”, whether the Court can set aside a statutory demand for a judgment debt on the basis of such a cross-claim, set-off where the proper jurisdiction governing and to decide that cross-claim, set-off is not the jurisdiction of the Hong Kong courts.”
11. Given the issue for decision on appeal, the questions framed are inapposite and, on the facts of the case, do not arise. Accordingly, leave was refused.
(Anthony Rogers)
Vice-President |
(Doreen Le Pichon)
Justice of Appeal |
Mr Anthony Chan SC, instructed by Messrs Stephen Mok & Co., for the Applicant/Respondent
Mr Kelvin K H Liu, instructed by Messrs Eddie P.L. Law & Co., for the Respondent/Applicant
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