LAM CHING SHEUNG v. THE OFFICIAL RECEIVER

[English Translation – 英譯本]
HCA 2628/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2628 OF 2007

_________________

_________________

JUDGMENT

1.  This is a claim by the plaintiff against the Official Receiver for damages in the total sum of $117,669,937.41 and damages for mental distress, the amount of which is to be assessed. This action stems from a bankruptcy order made against the plaintiff in High Court Bankruptcy Proceedings No. 4060 of 2000 (hereinafter “HCB 4060/2000”) and proceedings which resulted from that order.

Factual background

2.  The factual background to this action, which is not subject to serious dispute, can be summarized as follows.

3.  On 16 October 2000, Wah Yung Engineering and Development Company Limited (transliteration)（華榕工程開發有限公司）(hereinafter “Wah Yung”) presented the bankruptcy petition in HCB 4060/2000. Wah Yung’s case was that pursuant to a loan agreement dated 10 January 1994, the plaintiff was indebted to Wah Yung for $6,012,000 and interest, and that the plaintiff failed to pay the debt in accordance with a statutory demand, hence Wah Yung’s application for a bankruptcy order against the plaintiff.

4.  Having heard the petition, Kwan J made a bankruptcy order against the plaintiff (hereinafter “bankruptcy order”) on 22 May 2001. Notice of the bankruptcy order was gazetted on 1 June 2001. On 12 July 2001, a Master of the High Court made an order pursuant to section 112A of the Bankruptcy Ordinance that the plaintiff’s estate be administered in a summary manner, that the Official Receiver be appointed as trustee of the plaintiff’s estate, and that there was to be no creditors’ committee. Notice of this order for summary procedure was gazetted on 27 July 2001.

5.  Subsequently, the plaintiff resigned as director from several companies. On 6 September 2001 she submitted a Statement of Affairs to the Official Receiver, in which she claimed that she had 3 items of receivable debts, including a debt of $21,309,937.41 owed by Wah Yung. On the basis of the information provided in the Statement, the Official Receiver issued notices of payment-in to Wah Yung and the two other debtors.

6.  On the other hand, on 17 July 2001 the plaintiff was granted leave by Woo JA (as he then was) to appeal out of time against the bankruptcy order. The plaintiff then instituted Civil Appeal No. 1712 of 2001 (hereinafter “CACV 1712/2001”).

7.  The plaintiff’s case in the appeal proceedings was that the loan alleged by Wah Yung was in fact joint investment; that one Global More Limited (hereinafter “Global More”), in which she held half of the shareholding, had already paid off the debt for her; and that it was Wah Yung which owed her money. She also sought leave to adduce new evidence to support her appeal.

8.  By a judgment handed down on 5 March 2002, the Court of Appeal granted leave to the plaintiff to adduce new evidence and also allowed her appeal. The Court of Appeal’s decision and the reasons therefor were set out in paragraph 19 of the judgment, which is reproduced below:

“19. The law governing bankruptcy cases is that where the debtor is able to raise substantial disputes or arguable issues in respect of the debt in question and those disputes or issues are genuine, then he has valid grounds for opposing the bankruptcy petition. In our judgment, the evidence relating to the cheques which Madam Lam intends to adduce can prove that there is a genuine and arguable issue in respect of the debt in question, namely the loan from Wah Yung which has not been repaid. She has grounds for opposing the bankruptcy petition. We therefore grant leave to Madam Lam to adduce the evidence relating to the cheques. We also allow the appeal and set aside (擱置) the bankruptcy order.”

9.  The sealed order of the Court of Appeal reads as follows:

“1. The Respondent’s appeal is allowed and the bankruptcy order made by Kwan J on 22 May 2001 is set aside (擱置);

2. Leave is granted to the Respondent to adduce evidence relating to the cheques;

3. There shall be a costs order nisi that the Petitioner Wah Yung Engineering and Development Company Limited shall pay costs of the appeal.”

10.  At that time, none of the parties, i.e. the plaintiff, Wah Yung and the Official Receiver, asked the Court of Appeal to explain or clarify whether the term “set aside” used in the judgment and the order meant “quashing” the bankruptcy order or “temporarily staying” the bankruptcy order. The Official Receiver took the view that as the Court of Appeal had merely stayed the bankruptcy order and had not annulled it, the plaintiff was still a bankrupt and HCB 4060/2000 still subsisted; but that on the other hand, as the bankruptcy order was stayed, the Official Receiver in the capacity of a trustee merely had to do the minimum amount of work as required by the circumstances. The Official Receiver’s view and position can be gleaned from his letter dated 13 June 2005 to Master Kwang of the High Court and from his report dated 24 October 2007.

11.  After the Court of Appeal gave its judgment, on 7 March 2002 the Official Receiver wrote to Messrs. Koo and Partners, solicitors for Wah Yung, with a view to ascertaining how Wah Yung intended to deal with the bankruptcy petition in HCB 4060/2000. Wah Yung and its solicitors did not reply, but on 26 March 2002 they issued a Notice of Intended Application for Leave to Appeal to indicate Wah Yung’s intention to appeal to the Court of Final Appeal. On 25 April 2002, the Official Receiver wrote again to enquire whether Wah Yung had formally applied for leave to appeal. Messrs. Koo and Partners replied on 28 May 2002, saying that they had received no instruction from their client to pursue the application for leave to appeal to the Court of Final Appeal.

12.  In the meantime, on 25 March 2002 the plaintiff commenced High Court Civil Action No. 1157 of 2002 (hereinafter “HCA 1157/2002”) against Wah Yung, seeking recovery of the debt of $21,309,937.41 referred to in the Statement of Affairs. In that case Wah Yung filed a counterclaim against the plaintiff and Global More in respect of the debt involved in the bankruptcy petition in HCB 4060/2000. On 15 July 2004 the plaintiff obtained leave from a Master to represent Global More in her capacity as a director to conduct the defence to the counterclaim in HCA 1157/2002. The plaintiff claimed that the Official Receiver had consented to her instituting HCA 1157/2002 and representing Global More in her capacity as a director. However, the Official Receiver called two staff members of his Office to give evidence, and they indicated that there was no record at the Office regarding the alleged consent.

13.  The Official Receiver wrote to the plaintiff on 21 January 2003.  The relevant content reads as follows:

“With reference to the telephone enquiry about whether the petitioner in the abovementioned bankruptcy case has taken any action to set aside the bankruptcy petition and discharge the bankruptcy order, our records indicate that the petitioner has not taken any legal action in respect of this case.

As more than 10 months has elapsed since the appellate court delivered the judgment, you may like to instruct a lawyer to have a [hearing] date fixed again for the purpose of an application for setting aside the bankruptcy petition and bankruptcy order in this case.”

14. On 19 July 2004, the plaintiff issued a summons in HCB 4060/2000 to apply for an order setting aside the bankruptcy order. Wah Yung opposed the application. On 26 July 2004, Cheung J dismissed the plaintiff’s application. Cheung J was of the view that the Court of Appeal had only stayed the bankruptcy order and that, as HCA 1157/2002 was still in progress and the dispute between the plaintiff and Wah Yung had not yet been adjudicated upon, the circumstances were not materially different from those at the time of the Court of Appeal’s judgment, and therefore the Court of First Instance should not exercise its power to set aside the bankruptcy order.

15. On 12 February 2005, the plaintiff wrote to the Official Receiver to enquire whether the bankruptcy order could be discharged after 4 years and also enquire about the relevant legal procedures. The Official Receiver replied in writing on 2 March 2005, stating that only the Court had the power to approve the annulment of bankruptcy orders and urging the plaintiff to seek independent legal advice.

16. On 19 June 2005, the Official Receiver wrote to the plaintiff, requesting her to submit an Annual Statement of Earnings and Property Acquired for the period from 22 May 2001 to 21 May 2005. In fact, the Official Receiver had written to the plaintiff in 2002, 2003 and 2004 with the same request, but as the letters had been sent to a wrong address, it was only in 2005 that the plaintiff received the request. Shortly after she received the request, the plaintiff completed the document and sent it to the Official Receiver.

17. Subsequently, on 24 May 2005 the plaintiff applied to the High Court for a Certificate of Discharge. On the same day, the Official Receiver informed the Court that he did not object to the issue of a Certificate of Discharge to the Plaintiff. In respect of the plaintiff’s application, Master Kwang requested the Official Receiver to clarify whether section 30A of the Bankruptcy Ordinance and Rule 92 of the Bankruptcy Rules were applicable when the Court of Appeal had stayed the bankruptcy order. Master Kwang pointed out that, judging from paragraph 19 of the Court of Appeal’s judgment, the Court of Appeal’s order should be construed as an order quashing the bankruptcy order (see the letter dated 10 June 2005 from the Court to the Official Receiver). In his letter of reply dated 13 June 2005, the Official Receiver expressed his view that the bankruptcy order had not been annulled and that the order and the bankruptcy petition in question were still valid.

18. On 9 July 2005 Master Kwang heard the application for the discharge of the bankruptcy order. The legal representative of the Official Receiver’s Office reiterated that the Court of Appeal had only stayed the bankruptcy order and submitted that, with the bankruptcy order being stayed, the powers of the Official Receiver as the receiver were also stayed. Master Kwang raised questions as to whether a bankruptcy order could be stayed and the legal implications of the stay. While noting that the situation was far from satisfactory, the Master agreed that a Certificate of Discharge should be issued in order to reduce the impact of the bankruptcy order, which was made 4 years ago, on the plaintiff.

19. The trial of HCA 1157/2002 took place on 20 September 2005. Wah Yung was absent. Deputy Judge To gave judgment in favour of the plaintiff and ordered Wah Yung to repay to her $21,259,937.41 together with interest. Deputy Judge To also dismissed Wah Yung’s counterclaim against the plaintiff and Global More.

20. On 20 January 2006, Messrs. Peter K.S. Chan & Co. informed the Official Receiver by letter of the issue of a summons in HCA 1157/2002 by the plaintiff to one Mr. Ha Wan Yick with a view to examining him for the purpose of enforcing the judgment in that case. Messrs. Peter K.S. Chan & Co. inquired of the Official Receiver about whether the plaintiff had obtained the Official Receiver’s approval to act and whether the Official Receiver knew that the plaintiff owned half of the shareholding of Global More.

21. On 26 January 2006 the Official Receiver wrote to the plaintiff, requesting her to confirm whether she had been a director of Global More since 23 January 2004 and whether she owned any part of the shareholding of the company. In the letter the Official Receiver also pointed out that a bankrupt could not act as a company director in the absence of leave from the court, and he requested the plaintiff to state whether she had obtained leave from the court in respect of her directorship with Global More and to provide evidence in that connection.

22. On 16 February 2006, the plaintiff replied by letter that, as Wah Yung put forward a counterclaim against Global More in HCA 1157/2002, the plaintiff’s directorship was restored after she obtained leave from the court.

23. Messrs. Ko & Chow, acting for the 1^st and 3^rd defendants in another case, namely High Court Civil Action No. 2203 of 2006 (hereinafter “HCA 2203/2006”), wrote to the Official Receiver on 23 December 2006 and 24 January 2007 respectively, in order to ascertain whether the plaintiff was still under bankruptcy. HCA 2203/2006 concerned an action by the plaintiff in her personal capacity against three defendants for recovery of debts in the region of $4,000,000.

24. On 20 March 2007 the Official Receiver wrote to the plaintiff, requesting her to state whether HCA 2203/2006 involved the plaintiff’s assets or liabilities prior to the making of the bankruptcy order and to provide details thereof. On 6 April 2007 the plaintiff replied by letter that HCA 2203/2006 originated from matters which happened prior to her bankruptcy.

25. On 13 April 2007, HCA 2203/2006 came before Master Hui in connection with an interlocutory application. Master Hui raised questions about whether the action should have been instituted by the plaintiff herself or by her company (Ho King Investment Company Limited (transliteration) (好景投資有限公司)) and whether the plaintiff was a bankrupt when she instituted the action. Accordingly, the plaintiff wrote to the Official Receiver on 22 April 2007 to seek clarification on whether she was still a bankrupt after the Court of Appeal made the order on 5 March 2002 in CACV 1712/2001. On 30 April 2007, the Official Receiver replied in writing that the plaintiff remained a bankrupt after the order was made.

26. On 20 September 2007, the plaintiff wrote to the Official Receiver, requesting him to put forward a satisfactory proposal within 14 days in order to resolve problems regarding her status and compensation. On 8 October 2007, the Official Receiver sent her a letter of reply, in which he reiterated that the Court of Appeal had not set aside the bankruptcy order and hence she was still a bankrupt after the Court of Appeal gave its judgment. Furthermore, Master Kwang merely confirmed that from 22 May 2005 onwards the plaintiff was automatically discharged from bankruptcy, but the bankruptcy order had not been set aside, and therefore the plaintiff’s estate in bankruptcy was still vested in the trustee. In the final paragraph of the letter, the Official Receiver wrote:

            “According to the documents which you previously supplied to us, in respect of the dispute between you and the petitioner over debts, the Court on 20 September 2005 gave judgment in your favour as regards your claim against the petitioner for HK$21,000,000. You may therefore seek independent legal advice and consider whether you can, on the basis of the said judgment in your favour, apply to the High Court to rectify the ‘stay’ order made by the Court of Appeal. Only the Court is entitled to decide whether to set aside the bankruptcy petition and bankruptcy order against you, and only after the bankruptcy order is set aside can the estate in bankruptcy be vested in you.”

27. In her letter of reply of 9 October 2007, the plaintiff refuted various points in the Official Receiver’s letter and demanded compensation from the Official Receiver’s Office for the losses that she allegedly suffered as a result of alleged professional misconduct and administrative error on the part of the Office. The Official Receiver responded to the plaintiff’s accusations in his letter of reply of 24 October 2007. The plaintiff sent him another letter on 5 November 2007 to refute his statements.

28. In the meantime, on 15 October 2007, the plaintiff issued a summons in respect of CACV 1712/2001, applying to the Court of Appeal to rectify the order of 5 March 2002. The Official Receiver opposed the application. Wah Yung was absent during the hearing. In the Reasons for Decision handed down on 17 December 2007, the Court of Appeal clarified that the term “set aside” in the judgment dated 5 March 2002 meant that the bankruptcy order was to be quashed. That being the case, the Court of Appeal considered it unnecessary for Master Kwang to discharge the bankruptcy order and therefore set aside that order. The bankruptcy petition in HCB 4060/2000 was also dismissed. Paragraphs 6 and 9 of the Reasons for Decision of the Court of Appeal reads as follows:

“6.        On the face of it, the term ‘set aside’ carries two meanings: first, quashing the order in question; second, temporarily staying it. The order must be construed in light of the facts of the case. By ‘setting aside’ the bankruptcy order, the Court of Appeal intended to ‘quash’ it rather than ‘temporarily staying’ it. This meaning was in fact apparent from this Court’s Judgment as a whole.

…

9.         In his supplementary report of 29 November 2007, the Official Receiver requested this Court to award him the sum of $6,000 being costs of this application. We do not think the Official Receiver should be awarded such costs. He should have made an early request to this Court to clarify the actual meaning of the term ‘set aside’ but he failed to do so. …”

The plaintiff’s claim

29. The plaintiff commenced the present action on 20 December 2007.

30. According to paragraph 11 of the Statement of Claim, the plaintiff’s cause of action is that the Official Receiver mistakenly held the view that the plaintiff was a bankrupt throughout the period from 22 May 2001 (when the bankruptcy order was made) to 22 May 2005 (when the bankruptcy order was automatically discharged upon expiry of the 4-year period), whereas in fact she ceased to be a bankrupt on 5 March 2002 (when the Court of Appeal allowed the plaintiff’s appeal). The plaintiff alleges that she has suffered serious losses as a result of the Official Receiver mistakenly treating her as a bankrupt.

31. It appears from paragraph 12 of the Statement of Claim that the plaintiff’s claim comprises three areas:

(1)     Loss suffered as a result of the Official Receiver’s failure as a trustee to perform the duty of recovering debts from the plaintiff’s debtors, such loss being $21,259,937.41 together with interest, in respect of which judgment has been given in favour of the plaintiff in HCA 1157/2002;

(2)     As a result of the Official Receiver’s mistaken view that the plaintiff was a bankrupt, the plaintiff was unable to do business or earn any income for several years and has thereby suffered loss; and

(3)     Loss suffered by the plaintiff in terms of personal reputation, business goodwill, appreciation in value of assets and mental distress as a result of the above mistakes on the part of the Official Receiver.

32. On 3 September 2007 the plaintiff filed a Statement of Claim Supplementary Report（申索陳述書補充報告）which quantifies the plaintiff’s claims under the said items (2) and (3), as follows:

(A)     Loss of income after 5 March 2002 until 2008:

          The average value of the plaintiff’s assets in Hong Kong was $3,000,000-odd per year, and the loss incurred over 6 years is $3,000,000 x 6, i.e. $18,000,000.

(B1)   Personal reputation, business goodwill:

          In September 2001 the plaintiff owned an unsecured debt of the amount of $11,910,000. In addition, her bankruptcy prevented her from recouping an investment in the sum of $5,500,000-odd (i.e. the principal sums claimed in HCA 2203/2006 and DCCJ 333/2007). The loss under this head totals approximately $17,410,000.

(B2)   Appreciation in value of assets:

          The plaintiff has invested in landed properties and shares since 1997.  The value of the landed properties that she bought and sold between 1984 and 1993 appreciated 1.6 times to 4.27 times, while the Hang Seng Index rallied 2.22 times between 5 March 2002 and 6 June 2008, and therefore the total value of the plaintiff’s assets should be multiplied by 2.22. The plaintiff adjusted the figure to 1.22 in the course of giving evidence at trial. On the basis of a total asset value of $50,000,000, the amount claimed under this head is $61,000,000.

(B3)   Mental distress:

          The plaintiff invites the Court to assess compensation under this head.

The Official Receiver’s defence

33. As stated above, the Official Receiver does not dispute the essential factual background to the present case. However, he states in his Defence that the Official Receiver’s Office had neither received any application from the plaintiff for consent to institute HCA 1157/2002 nor consented to the plaintiff’s instituting that action against Wah Yung. The Official Receiver also pointed out that as the Court of Appeal ordered that the bankruptcy order be stayed, he did not take any action in relation to the plaintiff’s request for opening and using her safe deposit box, but he did inform her over the telephone and in writing that it was open to her to seek directions from the court in respect of her case or to instruct a lawyer to apply to set aside the bankruptcy petition and bankruptcy order.

34. In paragraph 21 of the Defence, the Official Receiver specifically denied that he owed to the plaintiff a duty of care in the following respects:

“(1)      To advise the plaintiff or to seek clarification on her behalf in relation to the meaning of the order made by the Court of Appeal on 5 March 2002.

(2)        To prevent the plaintiff from suffering any loss in respect of her income, personal reputation, business goodwill, appreciation in value of assets and her mental health as a result of misunderstanding the order of the Court of Appeal.”

The plaintiff’s causes of action

35. According to the clarification made by the Court of Appeal on 17 December 2007, the order of 5 March 2002 in effect served to quash the bankruptcy order. Even though the bankruptcy petition in HCB 4060/2000 was not dismissed at that time, the plaintiff in fact ceased to be a bankrupt from 5 March 2002 onwards. This being the case, The Official Receiver’s and his Office’s understanding of the order of 5 March 2002, namely that the bankruptcy order subsisted although it was stayed and that the plaintiff was still a bankrupt, was incorrect.

36. Having said that, in order to make out a civil claim against the Official Receiver, the plaintiff must establish one or more causes of action recognized in law. The plaintiff is required to specify in her Statement of Claim the cause(s) of action on which her claim is based and adduce relevant evidence at trial to establish the legal elements requisite to the cause(s) of action.

37. However, as the plaintiff was not legally represented, her Statement of Claim did not spell out the cause(s) of action. Nor did she provide any clarification or additional information in that respect in the Statement of Claim Supplementary Report which she filed subsequently. It appears from her written opening submission, in which she alleged that the Official Receiver had been grossly negligent and irresponsible and had failed to perform his duties, that the causes of action which the plaintiff relies on are the common law torts of negligence and breach of statutory duty.

38. As appears from her submission, the plaintiff’s case is that the Official Receiver had been negligent or in breach of his duties in the following three respects:

(1)     He had not requested the Court of Appeal to clarify the meaning of setting aside the bankruptcy order in the order of 5 March 2002;

(2)     He had not convened a meeting of creditors; and

(3)     He had not instituted legal proceedings against the plaintiff’s debtors for the purpose of recovering relevant debts.

The claim based on negligence

39. As a matter of legal principle, a claim based on negligence in tort must satisfy the following four requirements:

(1)     The law recognizes that the defendant owed a duty of care to the plaintiff;

(2)     The defendant acted in breach of the duty of care;

(3)     The plaintiff suffered loss as a result of the defendant’s negligent act; and

(4)     The loss suffered by the plaintiff is reasonably foreseeable and actionable.

     Clerk & Lindsell on Torts (26th edition, 2006), para. 8-04.

40. In the present case, the plaintiff is claiming damages for alleged pure financial or economic loss. In a claim of this nature, the plaintiff has to show that she and the defendant were in a special relationship so that the defendant owed her a duty of care: Hedley Bryne & Co. Ltd v Heller & Partners Ltd [1964] AC 465; Clerk & Lindsell on Torts (26^th edition, 2006), para. 8-85.

41. One of the factors which the Court will consider is whether there was voluntary assumption or undertaking of responsibility by the defendant towards the plaintiff, so that a special relationship was created between them: Hedley Bryne & Co. Ltd v Heller & Partners Ltd, 528; and Henderson v Merrett Syndicates Ltd [1995] 2 AC 145. In considering this question, the Court applies an objective test which focuses on things said or done by or on behalf of the defendant in his dealings with the plaintiff and considers whether, in all the circumstances of the case, such things said or done demonstrate that the defendant had assumed a duty of care towards the plaintiff: Williams v National Life Foods Ltd [1998] 1 WLR 830, 835. The Court will also consider whether the loss suffered by the plaintiff is reasonably foreseeable, how proximate the relationship between the plaintiff and the defendant was, and whether, as a matter of public policy, it is fair, just and reasonable to impose a duty of care on the defendant: Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 180-181.

42. As far as the legal principles relating to negligence in tort are concerned, the plaintiff’s claim herein has to overcome four major hurdles.

43. The first hurdle is that the plaintiff has to establish that in law the Official Receiver owed a duty of care to her. The relationship between the plaintiff and the Official Receiver came into being with the order made by the Master on 12 July 2001, under which the Official Receiver became the trustee of the plaintiff’s estate in bankruptcy. It is true that, as a trustee, the Official Receiver was subjected to statutory duties under the Bankruptcy Ordinance and the Bankruptcy Rules. This, however, does not necessarily mean that the Official Receiver owed a common law duty of care to the plaintiff as a bankrupt. In Commissioners of Customs and Excise v Barclays Bank Plc [2007] 1 AC 181, at paras. 14, 38 and 39, the House of Lords pointed out that a duty of care usually arises from the defendant’s acts. The defendant bank in that case was held not to have owed a common law duty of care to the plaintiff, the reason being that the bank had not voluntarily or on its own initiative assumed any responsibility towards the plaintiff. The relationship and dealings between the bank and the plaintiff were solely the result of a freezing order made by the court, and the plaintiff had never placed reliance on the bank. The Official Receiver in the present case is in the same situation as that of the bank.

44. Furthermore, pursuant to the order of the Court of Appeal on 13 December 2007, the bankruptcy order against the plaintiff ceased to be effective from 5 March 2002. From that day onwards, therefore, the Official Receiver was in fact no longer the trustee of the plaintiff’s estate.

45. On the other hand, in his letter of 21 January 2003, the Official Receiver had expressly informed the plaintiff that she could instruct a lawyer and apply to set aside the bankruptcy petition. After Cheung J delivered judgment dismissing the plaintiff’s application to set aside the bankruptcy order, the Official Receiver reiterated in his letter of 2 March 2005 that the plaintiff should seek legal advice in respect of the annulment of the bankruptcy order. This was highlighted again in the Official Receiver’s letter of 8 October 2007.

46. As a matter of fact, according to paragraph 4 of the Statement of Claim, the plaintiff did consult a lawyer on her case (including the meaning of the order of 5 March 2002 and the steps to be taken) and, accepting the relevant legal advice, she decided not to make other applications or take other steps in respect of the bankruptcy petition or, at that time, to apply to the Court of Appeal for clarification. In the present case, the plaintiff did not submit any witness statement, and at trial she adopted the statements of fact in her Statement of Claim and Statement of Claim Supplementary Report as her evidence in chief. Therefore, the statements of fact contained in paragraph 4 of the Statement of Claim stand as evidence in the present case. The plaintiff also admitted under cross-examination that she had approached a lawyer to ascertain whether the bankruptcy order had been stayed.

47. Accordingly, in the circumstances of the case, there is no evidence to show that the Official Receiver had assumed any duty of care towards the plaintiff. On the contrary, by his letters to the plaintiff, in which he expressly advised her to seek independent legal advice and assistance in respect of her case and the order of 5 March 2002, the Official Receiver had effectively disclaimed any duty that he might owe to the plaintiff. Furthermore, as regards her legal position and matters such as her estate and creditor’s rights, the plaintiff had placed no reliance on the Official Receiver’s opinions or statements. For these reasons, the plaintiff has failed to prove that there was a special relationship between her and the Official Receiver so that at law the Official Receiver was taken to be under a duty of care towards the plaintiff.

48. The second hurdle which the plaintiff faces is the need for her to prove that the Official Receiver had committed the negligent acts that she alleges. Her first allegation is that the Official Receiver had not requested the Court of Appeal to clarify the order of 5 March 2002. While it is true that the Official Receiver had misunderstood the order, that understanding ― which Cheung J expressly shared in his judgment of 26 July 2004 ―was not wholly unreasonable. In view of Cheung J’s judgment, the Official Receiver’s failure to seek clarification from the Court of Appeal on the meaning of the order was not so wholly unreasonable as to constitute negligence or a breach of any duty of care.

49. As for the alleged failure to convene a meeting of creditors, the plaintiff says that she wrote to the Official Receiver on 6 September and 10 September 2001 requesting him to convene a meeting of creditors but he failed to do so. However, according to the order made by the Master on 12 July 2001, the Official Receiver was to administer the plaintiff’s estate in a summary manner and he was not required to establish a creditors’ committee or convene a meeting of creditors. This being the case, the Official Receiver’s failure to convene a meeting of creditors cannot be regarded as negligence or breach of any duty of care.

50. The plaintiff alleges that the Official Receiver had not taken any legal action to recover debts from the plaintiff’s debtors. As regards Wah Yung’s debt, as the plaintiff herself instituted HCA 1157/2002 on 25 March 2002, the Official Receiver could not possibly commence another litigation over the same matter. As for the remaining two debts, the Official Receiver’s view at that time was that, the bankruptcy order having been stayed, he only had to do the minimum amount of work. As explained above, his understanding now appears to be mistaken, but at the material time it cannot be said to be so wholly unreasonable as to constitute negligence or breach of any duty of care.

51. The third hurdle against the plaintiff relates to whether there was a causal connection between the losses which she allegedly suffered and the Official Receiver’s alleged negligence. First, as regards HCA 1157/2002, in which judgment was given in the plaintiff’s favour on her claim against Wah Yung, the plaintiff’s evidence is that she was unable to enforce the judgment against Wah Yung because that company had been reorganized, the directors concerned had been summoned back to Fuzhou, China and Wah Yung had not attended trial: see paragraph 8 of the Statement of Claim. The plaintiff contends that had the Official Receiver acceded to her request and convened a meeting of creditors, her creditors would have requested the Official Receiver to follow up the debts by taking legal action and the plaintiff would not have lost her rights over those debts.

52. As stated above, the plaintiff’s estate in bankruptcy was to be administered in a summary manner and, as the Court ordered that there was to be no creditors’ committee, the Official Receiver did not have to convene a meeting of creditors to deal with their rights against the plaintiff. Furthermore, in the present case there is no clear evidence that if the Official Receiver had taken steps to recover the debts, Wah Yung would not have carried out reorganization and the directors concerned would not have been transferred away from Hong Kong, or that such things would not have happened before the conclusion of the trial. Put another way, there is no evidence which serves to prove on a balance of probabilities that the Official Receiver would have successfully recovered the debt from Wah Yung. For this reason, there was no causal connection between the plaintiff’s failure in enforcing the judgment in HCA 1157/2002 and the fact that the Official Receiver did not convene a meeting of creditors and institute legal proceedings against Wah Yung.

53. As far as loss of income is concerned, the evidence adduced by the plaintiff cannot establish that, by reason of her having been mistakenly treated as a bankrupt, she suffered losses in relation to means of livelihood and accumulation of wealth. The plaintiff disclosed in her Statement of Affairs dated 10 September 2001 that she had rights over debts of a total amount of approximately $11,910,000, whereas her liabilities totalled $23,259,937.41. Under cross-examination, the plaintiff did not deny that in September 2001 she did not have sufficient capital in hand; nor did she deny that even if she had not been adjudged bankrupt, she would still not be able to run any business. The plaintiff’s case is that her private limited companies owned assets which, although lent to others, she could try to recover; and that the bankruptcy order had prevented her from borrowing money from the banks in order to engage in speculation in land and shares. However, on the available evidence and viewing the matter objectively, it is by no means certain what assets the private limited companies which the plaintiff mentioned actually owned, whether they could successfully recover the debts owed to them, and whether the plaintiff could successfully borrow money from the banks in order to engage in speculation. Therefore, even if the Official Receiver correctly understood the order of 5 March 2002, it does not necessarily mean that the plaintiff would accumulate wealth as alleged.

54. In her closing submission, the plaintiff also mentioned that as a result of the Official Receiver’s mistake she lost the qualification to become a real estate agent. The evidence adduced by the plaintiff shows that she held a real estate agent licence in 2001, which was valid until 31 December 2001. The plaintiff says that after 2001, she could obtain a licence only upon passing the relevant examination, and there was a further requirement that a licence holder had to be at least a Form 5 graduate. The plaintiff concedes that as she does not possess the requisite academic qualification, to date she has not taken the relevant examination. It is clear that her being unable to be a real estate agent after 2001 is neither necessarily related to her having been mistakenly treated as a bankrupt nor the result of any fault on the part of the Official Receiver.

55. The fourth hurdle lying in the way of the plaintiff’s claim against the Official Receiver in negligence relates to proof of the alleged losses. The evidence on the plaintiff’s assets at the material times is flimsy. As mentioned above, the evidence before me does not indicate that she had any substantial assets at the time of the bankruptcy order being made against her. The plaintiff says that she had assets with a total value of $50,000,000 and in her testimony she stressed that her companies owned assets, but there is no other evidence which can support these allegations. In fact, on the plaintiff’s case, these assets were essentially debts as opposed to cash or immovable property such as land.

56. On the other hand, the plaintiff’s approach in calculating losses in terms of her personal reputation, business goodwill and appreciation in value of assets is inappropriate. And there is no evidence in the present case which enables the court to make a proper assessment of these items.

57. As regards the claim for mental distress, the law of the tort of negligence does not allow damages to be awarded under this head. It has been held that, in a claim for negligence, no damages can be awarded for mental distress which falls short of psychiatric illness: see Wain Wright v Home Office [2004] 2 AC 406, para. 47 and Mbasogo v Logo Ltd [2007] QB 846, para. 98.

58. In short, the plaintiff’s claim on the basis of negligence does not meet the requisite legal requirements. The claim in this respect is dismissed.

The claim based on breach of statutory duty

59. In respect of a claim for breach of statutory duty, the core issue is: judging from the provisions and scheme of the relevant legislation, whether the legislature intended to give the plaintiff a right to make a civil claim: Gorringe v Calderdale MBC [2004] 1 WLR 1057, para. 3. The plaintiff must therefore show that the defendant’s duty under the law is to protect the general public of which the plaintiff is a member, and that it is the intention of the legislature to confer upon the public the right to make a civil claim against the defendant in respect of conduct in breach of that duty.

60. In the present case, the Official Receiver, as the trustee of an estate in bankruptcy, had to perform a number of duties under the Bankruptcy Ordinance and the Bankruptcy Rules. For present purposes, the relevant duties include:

          (1)     Section 82(3) of the Bankruptcy Ordinance:

The trustee may apply to the court for directions in relation to any matter arising from the bankruptcy.

          (2)     Section 84(1) of the Bankruptcy Ordinance:

The trustee shall deal with property under his control honestly, in good faith, with proper skill and competence and in a reasonable manner.

          (3)     Rule 158 of the Bankruptcy Ordinance [sic]:

In any case of doubt or difficulty relating to any legal proceeding, the Official Receiver may apply to the court for directions.

61. The above provisions undoubtedly empower the Official Receiver to apply to the court for directions when it is necessary to do so. Looking at it from another angle, if the Official Receiver, in the course of performing his duties as a trustee, encounters any doubt or difficulty or if it is necessary to do so, he should apply to the court for directions so that he can efficiently and properly perform his duties under the legislation. It was for this reason that the Court of Appeal pointed out in paragraph 9 of its Reasons for Decision of 13 December 2007 that the Official Receiver “should have made an early request to this Court to clarify the actual meaning of the term ‘set aside’ ”, and that Master Kwang held the same view at the hearing on 9 July 2005.

62. Nevertheless, neither the Bankruptcy Ordinance nor the Bankruptcy Rules expressly stipulate that the Official Receiver or the trustee has a statutory duty to apply to the court for directions for the purpose of clarifying a bankruptcy order or the legal status of a bankrupt. Nor do the above Ordinance and Rules provide that a bankrupt is entitled to make a civil claim by reason of the trustee’s failure to perform his statutory duty. On the contrary, sections 83 and 84 of the Bankruptcy Ordinance provide that a bankrupt who is aggrieved by any act or omission of the trustee should, pursuant to those provisions, complain to the court in charge of bankruptcy cases and seek remedy accordingly. Apart from this, he has no right to make any civil claim: Li Ngan Shui Brumen v Official Receiver [1995] 1 HKC 133, 138F-H.

63. On the other hand, section 75(6) of the Bankruptcy Ordinance provides that the Official Receiver is an officer of the court. As such, his first and foremost duty is owed to the court. And the duties that the Official Receiver as a trustee mainly performs are those towards the creditors as a whole: Re Ng [1997] BCC 507, 509.

64. It follows from the foregoing analysis and observations that, even where a trustee is in breach of a statutory duty under the Bankruptcy Ordinance or the Bankruptcy Rules, those affected by the breach do not have a right to take civil action.

65. For the above reasons, the plaintiff’s claim against the Official Receiver for breach of statutory duty, on the basis that he was in breach of the duties of a trustee, must fail. Furthermore, quite apart from the question of whether the plaintiff is entitled to take civil action, by reason of the foregoing discussions and conclusions as to whether the Officer Receiver had breached any duty, whether his acts or omissions had resulted in the losses alleged by the plaintiff, and whether the plaintiff has established the losses which she allegedly suffered, the plaintiff’s claim for breach of statutory duty must fail.

Misfeasance in public office

66. Given that the plaintiff is not legally represented and that her Statement of Claim does not specifically plead a cause of action, at the stage of closing submissions I invited Mr. Ling of Counsel to make submissions on whether misfeasance in public office is an appropriate cause of action in the present case.

67. The legal principles governing misfeasance in public office, as well as the essential elements of this tort, were explained in Three Rivers DC v Bank of England (No. 3) [2003] 1 AC 1, 191-196. These principles were adopted and approved by the Hong Kong Court of Appeal in Tang Nin Mun v Secretary for Justice [2000] 2 HKLRD 324. In a claim based on misfeasance in public office, the core requirement is to prove that the public officer in question dishonestly and maliciously abused his powers as a public officer, with intent to injure the plaintiff or knowledge that the plaintiff would be injured or recklessness as to whether the plaintiff would be injured.

68. As Mr. Ling has emphasized, neither in her pleadings nor in her testimony did the plaintiff mention that throughout the incident the Official Receiver or the staff members of the Official Receiver’s Office had done anything dishonest or out of malice, and with intent to injure the plaintiff or knowledge that she would be injured or recklessness as to whether she would be injured. Viewing the circumstances as a whole, although the Official Receiver had misinterpreted the Court of Appeal’s order of 5 March 2002, it did not involve malice or dishonesty; rather, in light of Cheung J’s judgment of 26 July 2004, the Official Receiver should be taken to have honestly believed that his interpretation was correct. In addition, the Official Receiver has been made the defendant to the present case, and if the plaintiff relies on misfeasance in public office as a cause of action, she must prove that the acts or omissions complained of were those of the Official Receiver himself. However, there is no such allegation or evidence in the present case.

69. Having thoroughly considered the evidence before me and the relevant legal principles, I agree with Mr. Ling’s submission that misfeasance in public office is not an appropriate cause of action in the present case.

Conclusion

70. Based on the aforesaid analysis and reasons, the plaintiff’s claim against the Official Receiver cannot be sustained and is dismissed accordingly.

Costs

71. On the question of costs, I am of the view that the circumstances of the present case justify a departure from the usual practice in civil proceedings that costs are to follow the event. This is because the plaintiff’s claim, although unsustainable at law, is within the bounds of reason. As a matter of legal principle, it cannot be considered wholly unreasonable for the Official Receiver not to request the Court of Appeal to clarify its order of 5 March 2002. However, as a matter of the proper and efficient discharge of his duties as a trustee, the Official Receiver should have appreciated that it was unsatisfactory merely to “stay” the bankruptcy order and hence should have applied to the Court as soon as possible for directions on the further conduct of the bankruptcy case. However, the Official Receiver had adopted a passive attitude and allowed the bankruptcy order to be stayed sine die and the bankruptcy proceedings to come to a standstill. On the other hand, subsequent to the plaintiff’s discharge from bankruptcy in 2005, the Official Receiver, in the capacity of trustee and in response to enquiries by third parties, requested the plaintiff to explain her conduct and her estate. And when the plaintiff made the application on 15 October 2007 to the Court of Appeal, the Official Receiver merely opposed the application and did not take the opportunity and initiative to seek clarification from the Court. In these circumstances, it was difficult for the plaintiff not to be upset and feel aggrieved. Although I have held that the plaintiff has failed to prove the losses that she allegedly suffered, I believe that this unfortunate incident must have caused her considerable inconvenience and difficulties. That the plaintiff eventually resorted to court proceedings to redress her grievances is understandable.

72. For these reasons, I make a costs order nisi that there be no order as to costs in the present case. If neither party applies to vary the order nisi within 14 days from the day of the handing down of this judgment, the order shall become absolute.