Introduction

In Lau Chun Ming v Deloitte Touche Tohmatsu the appeal committee of the Court of Final Appeal recently refused the plaintiff's application for permission to appeal the Court of Appeal's judgment. The Court of Appeal had struck out the plaintiff's claim in negligence against the defendant firm on the basis that it disclosed no reasonable cause of action, because the release of two trustees in bankruptcy (partners of the firm) from all liability, pursuant to Section 94(3) of the Bankruptcy Ordinance (Cap 6), also operated to extinguish the firm's liability. The grounds for the plaintiff's application appear to have been as creative as they were fanciful.

Application for permission to appeal

The background of the case is set out in a previous update.(1)

In his application for permission to appeal to the Court of Final Appeal, the plaintiff argued (among other things) that the effect of a trustee in bankruptcy's statutory release was inconsistent with Article 35 of Hong Kong's Basic Law – namely, access to the courts (particularly when compared with, for example, equivalent provisions in English law).(2)

This argument was considered to be misconceived by the appeal committee (consisting of three permanent judges of the Court of Final Appeal).(3) In particular, Section 94(3) of the Bankruptcy Ordinance and Rule 169 of the Bankruptcy Rules (Cap 6A) did not provide for an automatic release of a trustee in bankruptcy – rather, the trustee had to apply for release and there was an inbuilt mechanism for the official receiver or creditors to object. Further, even if granted, a court could revoke an order for release in instances of certain egregious behaviour by a trustee in bankruptcy.(4)

Therefore, Article 35 of the Basic Law was not engaged in these circumstances and the plaintiff's application was dismissed.

Comment

While not all professional defendants will have the benefit of a statutory release, the appeal committee's confirmation that Article 35 was not engaged will be welcomed in the industry.

Of particular note is that the plaintiff had not availed himself of the right to object to the release, despite having had approximately five months' notice of the trustees' intention to seek such a release (back in 2009).

In the circumstances, the plaintiff's application for permission to appeal may fairly be described as optimistic and it raised no issues of great general or public importance.(5)

Notably, the defendant's application to strike out was limited to the plaintiff's claim in negligence. The plaintiff also failed in an apparent attempt, in his application for permission to appeal, to raise certain issues in connection with an alleged agreement with the defendant firm. Nonetheless, his claim for alleged breach of contract remains (at least in theory).

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

For further information on this topic please contact David Smyth or Amy Chung at Smyth & Co in association with RPC by telephone (+852 2216 7000) or email (david.smyth@rpc.com.hk or amy.chung@rpc.com.hk). The RPC website can be accessed at www.rpc.co.uk.

Endnotes

(1) [2016] HKEC 2185, FAMV 23/2016. For further details please see "Accountant-trustees 'released' on appeal".

(2) Reference was made to Sections 299 and 304(1) of the UK Insolvency Act.

(3) The permanent judge giving the judgment is well versed in bankruptcy and trustee matters.

(4) Section 94(3) of the Bankruptcy Ordinance. There was no suggestion of any such behaviour.

(5) Section 22(1)(b) of the Court of Final Appeal Ordinance (Cap 484). The Court of Appeal had already refused permission to appeal (CACV 22/2015, April 12 2016 – another example of one of Hong Kong's growing band of 'solicitor advocates' appearing).