LI NGAN SHUI, BRUMEN v. A.R. HEARDER

Headnote

The Official Receiver when acting as trustee in bankruptcy under the Bankruptcy Ordinance is an officer of the court (a fortiori when acting under a specific order of the Court) and as such is entitled to absolute privilege from action in libel.

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J U D G M E N T

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Nazareth, V.-P. (giving the judgment of the Court):

1. This is an appeal against the order of Mayo J made on 11th May 1994 by which he dismissed the appellant's appeal against an order made by Master O'Donnell on 17th March 1994 striking out the appellant's statement of claim.

2. Those matters came about in the following way. The appellant was a creditor in bankruptcy proceedings conducted by the respondent against one Ng Yat-chi ("Chi"). He had moreover been the chief executive officer of Chi's business corporations and had been Chi's attorney under a general power of attorney when the latter absconded to the People's Republic of China on the collapse of his group of companies. For some 5 1/2 months he had been a member of the Committee of Inspection. He was highly dissatisfied with the way the respondent conducted those proceedings and the action the latter took or failed to take to recover Chi's assets in favour of the creditors.

3. As the former chief executive officer and attorney, he had very considerable knowledge of preceding events pertinent to the bankruptcy proceedings. He bombarded the respondent with information, suggestions, demands for information and documents, demands for action, complaints and unrestrained criticism, copying the latter to the respondent's superiors and others. All these took a heavy toll of the respondent's time and that of his staff and their resources. It resulted in strained relations between the appellant and the respondent and his staff. Ultimately, in December 1993 the respondent applied to the High Court for an order to convene a meeting of creditors to remove the appellant from the Committee of Inspection. Rogers J granted the order sought and it led to the removal of the appellant. In calling the meeting of creditors and explaining his objective of the removal of the appellant, the respondent circulated a report containing statements and references to the difficulties he claimed were caused by the appellant. The appellant regards some of those statements as defamatory.

4. On 20th December 1993 he issued a writ against the respondent with a statement of claim endorsed, which runs to some 12 pages of typescript and which, manifestly, he had prepared himself. It contains two causes of action. First, that the respondent is in breach of statutory duties under the Bankruptcy Ordinance, and in that respect seeks a declaration "that the defendant [respondent] has been guilty of administrative misconduct". Second, that the respondent and his staff have defamed the appellant and in this regard he claims damages and exemplary damages.

5. On 5th January 1994 the respondent took out a summons to strike out the statement of claim upon all three grounds in O.18 r.19 of the Rules of the Supreme Court, i.e. (a) that it discloses no reasonable cause of action, (b) it is frivolous and vexatious; and (c) that it is an abuse of the process. The summons came before Master O'Donnell on 7th March 1994. He struck out the statement of claim with costs to the respondent. The appellant appealed against that decision and his appeal was heard by Mayo J with the result mentioned. He now appeals to this Court against the order of Mayo J, seeking to have that order set aside and his statement of claim restored.

6. It is convenient to turn first to the judgment of Mayo J. He began with the first cause of action, i.e. breach of statutory duty and accepted as an authoritative statement of law the following passage at para.1279 of Vol. 45 of Halsbury's Laws of England:

"-... In order to succeed in an action for damages for breach of statutory duty the plaintiff must establish a breach of a statutory obligation which, on the proper construction of the statute, was intended to be a ground of civil liability to a class of persons of whom he is one; he must establish an injury or damage of a kind against which the statute was designed to give protection; and he must establish that the breach of statutory obligation caused, or materially contributed to that injury or damage."

He then went on to say this:

"Section 83 of the Bankruptcy Ordinance Cap. 6 provides a remedy for the mischief complained of in the Statement of Claim. I have no doubt whatever that the correct course for the Plaintiff to adopt would be for him to make an application to the company's judge to obtain a determination as to whether the Defendant or any of his officers had been derelict in their duties. This is not just a procedural matter. The advantage of the application being made pursuant to the said section is that all of the conduct of the Bankruptcy proceedings could be considered in their proper context and the issues could be ventilated in a satisfactory manner. It would be wholly unsatisfactory to attempt to deal with these matters in separate and distinct proceedings which would also involve the claim for defamation which I will be commenting upon shortly.

So far as this cause of action is concerned I am satisfied that it would be an abuse of the process of the Court for this cause of action to be proceeded with in the manner proposed."

7. The appellant contends that he is entitled to bring his action in any manner he deems most advantageous. That may well be so if there is no reason or authority requiring it to be brought under s.83; none was drawn to our attention. The judge mentions only the advantages of proceeding under s.83, which alone, do not appear to us to be sufficient reason. In relying upon the abuse of process, he failed to resolve the question whether the particular breaches of statutory duty are actionable.

8. To satisfactorily resolve the matter, it seems to us that in the circumstances of this case, that separate, though here associated, question whether the particular breaches of statutory duty are actionable should first be addressed. The judge, in our judgment, correctly stated the law applicable by reference to the passage he quoted from para.1279 of Halsbury's Laws of England. It can be seen that the matter is one of the proper construction of the statute. In that regard, the Editors of Halsbury's Laws go on to state in para.1282:

"... Whether or not an individual can bring a common law action in respect of a breach of a duty imposed by a statute depends upon whether the intention of the statute, considered as a whole and in the circumstances in which it was made and to which it relates, was to impose a duty enforceable by an aggrieved individual. No universal rule can be formulated which will answer the question whether in any given case an individual can sue. In answering the question it is, however, relevant to consider whether the statute was intended to protect a limited class of persons or the public as a whole, whether the damage suffered by the person seeking to sue was of the kind which the statute was intended to prevent, whether a special statutory remedy by way of penalty or otherwise is prescribed for breach of the statute, the nature of the obligation imposed, and the general purview and intendment of the statute."

9. The appellant relied upon the following breaches of statutory duty, by reference to the specific provisions of the Bankruptcy Ordinance mentioned:

(a) Failure to hold any meeting of a Committee of Inspection during the period 17th August 1992 to 18th June 1993 contrary to s.24(3).

Mr S.H. Kwok for the respondent pointed out (rightly) that the obligation was on the Committee rather than the Official Receiver as trustee.

(b) Failure to pay dividends with all convenient speed contrary to s.67.

Mr Kwok told us that, as a matter of fact, there was, for the most part, no dividend to be paid. Moreover, as a matter of law, s.73 expressly provides that no action for a dividend shall lie against the trustee, and if the trustee refuses to pay any dividend the court may order him to pay it together with interest.

(c) Appointment of private counsel without the permission of the Committee of Inspection contrary to s.61(c), and payment to counsel without proof of the taxation of his fees by the Registrar contrary to s.86(3).

Mr Kwok explained that counsel's fees were in fact paid out in the particular circumstances of public monies by the Official Receiver.

(d) Allowing a group of dominant creditors to prove without deducting the value of their securities contrary to the Proof of Debt Rules.

It is, however, apparent from the Rules that it is for such creditors to elect how they should proceed and to bear the consequences of not deducting the value of their secured debts.

10. Mr Kwok submits, by and large with justification, that the appellant has not suffered any damage or prejudice in the respects specified, and that no damage or causation has been pleaded as is necessary. We do not find it necessary to canvass those matters. While such deficiencies in the appellant's pleadings would have been significant, we likewise do not find it necessary to address the pleadings for the purpose of determining the actionability of the breaches in question. Suffice it to say that we are content to assume without deciding that the relevant duties were intended to protect the creditors of whom the appellant was one. It does not, however, necessarily follow that he has a right of action. In Cutler v Wandsworth Stadium Ltd [1949] AC 398 at 407 Lord Simonds said this:

"It is, I think, true that it is often a difficult question whether, where a statutory obligation is placed on A., B. who conceives himself to be damnified by A.'s breach of it has a right of action against him. But on the present case I cannot entertain any doubt. I do not propose to try to formulate any rules by reference to which such a question can infallibly be answered. The only rule which in all circumstances is valid is that the answer must depend on a consideration of the whole Act and the circumstances, including the pre-existing law, in which it was enacted. But that there are indications which point with more or less force to the one answer or the other is clear from authorities which, even where they do not bind, will have great weight with the House. For instance, if a statutory duty is prescribed but no remedy by way of penalty or otherwise for its breach is imposed, it can be assumed that a right of civil action accrues to the person who is damnified by the breach. For, if it were not so, the statute would be but a pious aspiration. But 'where "an Act" (I cite now from the judgment of Lord Tenterden C.J. in Doe v Bridges I B. & Ad. 847, 859) 'creates an obligation, and enforces 'the performance in a specified manner, we take it to be a "general rule that performance cannot be enforced in any 'other manner.' " This passage was cited with approval by the Earl of Halsbury L.C. in Pasmore v Oswaldtwistle Urban District Council [1898] AC 387, 394. But this general rule is subject to exceptions."

Lord Simonds concluded at p.408:

"... I see neither in this Act nor in its attendant circumstances any element which takes this case out of the general rule which I have taken from Lord Tenterden's judgment in Doe v Bridges."

11. We can find nothing, nor is it suggested that there is anything in the Bankruptcy Ordinance that implies a right of civil action. On the contrary, in creating the various duties and obligations of a trustee in bankruptcy, the Ordinance provides a correlative remedy in s.83, possibly wider than a right of civil action, and must, in our judgment, have intended it as the only remedy. That conclusion is strongly reinforced by the thrust of s.73 in precluding action against a trustee for dividends and instead empowering the High Court sitting in its bankruptcy jurisdiction to order a trustee to pay any dividend and interest.

12. We conclude, therefore, that upon a proper construction of the Bankruptcy Ordinance, there is no right of action for breach of statutory duty by a trustee in bankruptcy, and that claims for damage in respect of such breach must be brought under s.83 of the Ordinance.

13. We turn then to the issue that arose from the second cause of action, i.e. whether the statements made by the Official Receiver were the subject of absolute privilege. The judge dealt with the matter of absolute privilege in the following way:

"The rationale for this was given by Fletcher Moulton L.J. at p.311 of Burr v. Smith [1909] 2 KB 306.

'I have no doubt that official receivers are officers of the Court which has to deal with the liquidation of companies, that is to say, of the Court, and that, in cases of the compulsory liquidation of a company, as these were, the official receiver is acting as an officer of the court in performing the statutory duty imposed upon him by s.3 of the first Schedule. It would be perilous duty, if the contention for the plaintiff were well founded, because it necessitates his stating with the greatest frankness all the matters which he may have ascertained of the kind referred to by the section. In doing that he is performing his duty as an officer of the Court in connection with an inquiry which may, in my opinion, rightly be termed a judicial inquiry for the purposes of the law of libel. I have no doubt that the performance of such a duty is a matter which is absolutely privileged. Where an officer of the Court is placed, in the performance of his official duty, in the difficult position of having to draw up and circulate such a report as is provided for in s.3, it appears to me to be clear that he is entitled to the same amount of protection as is extended to a judge who, after a judicial inquiry, performs his duty by fearlessly pronouncing his judgment as to the matters brought before him, and therefore his report is absolutely privileged. The results would be most unfortunate if the same privilege did not apply to such a report as to all other judicial proceedings, and if the official receiver could only perform his duty under the section at the peril of having an action brought against him. This point was decided by a court of first instance in Bottomley v. Brougham, and the reasons for his judgment there given by Channell J. appear to me to be most admirably expressed and perfectly accurate ...'

There can be no doubt in my mind that this privilege extends to the Defendant. This being the case the claims as presently constituted have no prospect whatever of success and must be dismissed as disclosing no reasonable cause of action."

14. The appellant complains first of all that the respondent, when making the statements, was acting as a trustee in bankruptcy and not as Official Receiver and therefore could not have been an officer of the court under the express terms of s.75(6) which provides that "the Official Receiver shall act under the general authority and direction of the Governor and shall also be an officer of court". He very ably demonstrated that numerous provisions of the Bankruptcy Ordinance do indeed differentiate between the respondent's role as Official Receiver and as trustee in bankruptcy. We have no difficulty in concluding that the statements in the report sent to the members of the Committee of Inspection, were made and circulated by the respondent acting in his capacity as trustee in bankruptcy.

15. However, Mr Kwok submits that in calling the meeting, the respondent had to inform the members why he was seeking the removal of the appellant from the Committee of Inspection. Therefore, in preparing and circulating the report, he was doing no more than carrying out the order of Rogers J to convene a meeting to consider the removal of the appellant. Those submissions, we think, must be accepted.

16. Mr Kwok goes on to submit upon the authority of Bottomley v Brougham [1908]1 KB 584 and Burr v Smith [1909]2 KB 306 that absolute privilege attaches to the statements of judicial officers in judicial proceedings.

17. In Bottomley v Brougham Channell J held that:

"The real doctrine of what is called 'absolute privilege' is that in the public interest it is not desirable to inquire whether the word or acts of certain persons are malicious or not ... the reason being that it is desirable that persons who occupy certain positions as judges, as advocates, or as litigants should be perfectly free and independent, and, to secure their independence, that their acts and words should not be brought before tribunals for inquiry into them merely on the allegation that they are malicious."

He went on to hold that the official receiver in that case had a statutory duty to inquire in a judicial way into certain matters, and that in performing that duty he was acting in a judicial capacity. He held further that a report made by the official receiver in that process was to be considered absolutely privileged on the footing of its being the judgment of a judicial officer upon a matter entrusted to him for inquiry. He went on to say at p.589:

"In presenting this report the official receiver is informing the Court of alleged matters for inquiry ... it was done in the course of the performance of a duty imposed upon him in his position of officer of the Court. It is much like the report of an official referee, or some one of that sort, to whom matters are referred to report to the Court. I suppose no one would doubt that those reports were privileged."

18. Likewise, Burr v Smith was concerned with an action for libel in respect of observations made by an official receiver on the affairs of a company in liquidation published by him to the creditors and contributories in performance of his duty under the Companies (Winding Up) Act 1890. We have already set out the helpful passage from the judgment of Fletcher Moulton L.J. at p.311, cited by the judge.

19. Farwell L.J. like Fletcher Moulton L.J., also approved Bottomley v Brougham. At p.316, he considered the words of Fry L.J. in Munster v Lamb (1883)11 QBD 588 at 607 to be relevant to an Official Receiver and Inspector General, quoting the following:

"The rule of law exists, not because the conduct of those persons ought not of itself to be actionable, but because, if their conduct was actionable, actions would be brought against judges and witnesses in cases in which they had not spoken with malice, in which they had not spoken with falsehood. It is not a desire to prevent actions from being brought in cases where they ought to be maintained that has led to the adoption of the present rule of law; but it is the fear that if the rule were otherwise, numerous actions would be brought against persons who were merely discharging their duty.... Nothing could be more inconvenient than to allow actions of this description to be brought ... If such actions were allowed, persons performing their duty would be constantly in fear of actions."

20. The principle applies equally to a trustee in bankruptcy making a report in the circumstances of this case.

21. As trustee in bankruptcy, the respondent was at all times subject to the control of the Court (see ss.82-96 of the Bankruptcy Ordinance), notwithstanding that he does not at all times act under the direct orders of the Court, but always may seek directions from the Court (see s.82(3)). When so acting as a trustee in bankruptcy, the trustee is acting as an officer of the court. Here, in addition, the respondent in calling the meeting of creditors was acting under the order made Rogers J. And in circulating the report complained of he was likewise acting in pursuance of the order of Rogers J even though the report was not referred to in the order itself. It was a necessary ancillary step. Therefore he was acting as an officer of the Court and entitled to absolute privilege from any action for libel.

22. For the reasons we have endeavoured to give, in our opinion, the judge was quite right in dismissing the appellant's appeal, and we likewise dismiss his appeal to this Court.

23. As to costs, we indicated to the parties that we would deal with these by order nisi. The costs of counsel engaged on behalf of the respondent in this matter, as we have already mentioned, has been met out of public funds. We would add that the consideration by this Court of the matters canvassed in this appeal will certainly be of assistance to the Official Receiver. In these circumstances it seems to us that no order should be made as to costs and we make an order nisi to that effect.