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China Metal Recycling (Holdings) Ltd (In Liquidation) And Another v Ubs Ag And Another

Judgment Cited authorities 9 Cited in Precedent Map Related
Vincent
Judgment Date08 June 2023
Neutral Citation[2023] HKCA 738
Subject MatterCivil Appeal
Judgement NumberCACV384/2022
CourtCourt of Appeal (Hong Kong)
CACV384A/2022 CHINA METAL RECYCLING (HOLDINGS) LTD (IN LIQUIDATION) AND ANOTHER v. UBS AG AND ANOTHER

CACV 384/2022, [2023] HKCA 738

On Appeal From [2023] HKCA 409

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 384 OF 2022

(ON APPEAL FROM HCA NO 1348 OF 2019)

________________________

BETWEEN

CHINA METAL RECYCLING (HOLDINGS)
LIMITED (IN LIQUIDATION)		 1st Plaintiff
COSIMO BORRELLI AND CHI LAI MAN
JOCELYN IN THEIR CAPACITY AS THE JOINT
AND SEVERAL LIQUIDATORS OF CHINA
METAL RECYCLING (HOLDINGS) LIMITED		 2nd Plaintiff
and
UBS AG 1st Defendant
UBS EUROPE SE (FORMERLY TRADING AS UBS LIMITED) 2nd Defendant

________________________

Before: Hon G Lam and Chow JJA and S T Poon J in Court
Date of Written Submissions: 13 and 27 April and 9 May 2023
Date of Judgment: 8 June 2023

________________________

J U D G M E N T

________________________

Hon G Lam JA (giving the Judgment of the Court):

1. At the end of the hearing of the appeal, we allowed the plaintiffs’ appeal and dismissed the strike-out summons of the 1st defendant (UBS) for the reasons handed down in writing subsequently on 17 March 2023: [2023] HKCA 409 (“Reasons”). UBS now applies to this court for leave to appeal from our judgment to the Court of Final Appeal. This is our judgment on the application, which should be read in conjunction with the Reasons.

2. The questions said to be questions of great general or public importance for the purposes of section 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance (Cap 484) are set out in UBS’s notice of motion as follows:

Question 1

Whether a purported claim for fraudulent trading pursuant to s.275 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 (“Ordinance”) brought by writ of summons in deliberate and knowing breach of rule 58(1) of the Companies (Winding Up) Rules, Cap 32H (“WU Rules”) is or can be regarded as “proceedings under the Ordinance” within the meaning of rule 209 of the WU Rules (Judgment §22), or is it a nullity by reason of the breach of the mandatory provision of rule 58(1) (i.e., the position adopted by Anthony Chan J in the CFI Judgment dated 20.7.2022)?

Question 2

Does rule 209, being a provision in subsidiary legislation, empower the Court to deprive a defendant of an accrued substantive right to rely on a valid limitation defence under the Limitation Ordinance, Cap 347?

Question 3

In the alternative to Question 2, does “substantial injustice” within rule 209 include the deprivation of a valid limitation defence?

3. Insofar as Question 1 seeks to contend that rule 209 does not apply because the section 275 claim as brought by writ is a nullity, this was not an argument raised before. At first instance, UBS’s argument was that the defect could not be cured because the claim was time-barred, not because the claim as brought by writ was a nullity.[1] The judge held that the defect could not be cured by rule 209 because the plaintiffs had relied upon the inapplicable regime under the RHC to make the section 275 claim.[2] The judge did at the end state that the section 275 claim was a “nullity” by reason of the breach of rule 58,[3] but as Mr Manzoni SC submits on behalf of the plaintiffs, this was a conclusion after the judge’s ruling that no remedial mechanisms applied in respect of the non-compliance with rule 58, not a reason why no remedial mechanisms applied. No respondent’s notice was filed by UBS, and no submission was made on appeal in this court that rule 209 does not avail the plaintiffs because the claim is a “nullity”.[4] None of the cases of In re Euromaster Ltd [2013] Bus LR 466, Ma Wing Michael v Fong Sze-ming [1988] 1 HKLR 354, and In re Pritchard (deceased) [1963] Ch 502, relied upon by UBS in the present application, was cited to the judge or to this court.

4. This circumstance militates against granting UBS leave to appeal to the Court of Final Appeal in relation to this question: Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd (CACV 227/2005, 26 June 2007), §4; The Law Society of Hong Kong v A Solicitor (CACV 78/2014, 10 July 2015), at §6; see also Pillai v Comptroller of Income Tax [1970] AC 1124, 1130F.

5. In any event, the plaintiffs do not dispute that rule 209 draws a distinction between a defect that renders the proceedings a nullity even though no substantial and irremediable injustice has been caused and a “formal defect or irregularity”: Pillai, p 1135E. It is clear from our Reasons that we took the view that the defect in this case is nothing more than a “formal defect or irregularity” and not a matter of “substance” that takes the claim outside the scope of proceedings under the Ordinance: see §§21-23 of the Reasons. In particular, as stated in §21:

“ China Metal is being wound up by the court under the Ordinance, as pleaded in the statement of claim. The fraudulent trading claim is one by which the power under section 275 of the Ordinance – available only in the winding up of a company – is expressly invoked to make UBS liable. The claim is brought in the correct court, i.e. the Court of First Instance, which is the ‘court’ within the meaning of section 275. The liquidators who have standing to apply for an order under section 275 have from the outset been joined as the 2nd plaintiffs, apparently solely for the purpose of this claim. There is no suggestion that any essential averment is missing. The relevant remedy sought is a declaration that UBS is liable for the specified debts or other liabilities of China Metal – a distinctive remedy available only under section 275. There is no apparent...

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