BANK OF CHINA (HONG KONG) LTD v. WINKO METAL LTD

BANK OF CHINA (HONG KONG) LTD v. WINKO METAL LTD

The court struck out the pleaded illegality and mistake defences because (1) the facility agreements are governed by Hong Kong law and any alleged contravention of PRC CBL art 39(4) is irrelevant to enforcement in Hong Kong, and (2) the enforceability issue was already determined or should have been litigated earlier so it was barred by issue estoppel or amounted to an abuse of process; the mistake defence was parasitic on illegality and therefore unsustainable; consequently the challenged paragraphs disclosed no reasonable defence and were struck out, and the Company has no bona fide defence to the winding-up petition given the debenture's indemnity/protective clauses.

Citation
BANK OF CHINA (HONG KONG) LTD v. WINKO METAL LTD
Parties
Plaintiff/petitioner: Bank of China (Hong Kong) Limited (formerly Sin Hua Bank Limited); 1st Defendant: Keen Lloyd Energy Limited (formerly Keen Lloyd Investments Limited); 2nd Defendant: Keen Lloyd Resources Limited (formerly Keen Lloyd (Holdings) Limited); Respondent/chargor (in Winding Up Petition): Winko Metal Limited (formerly Vast Income Industries Limited)
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
27 June 2011
Case Number
HCCW493/2009
Procedural Posture
High Court Action for Recovery of Banking Facilities and Concurrent Winding Up Petition / Interlocutory Strike Out Application (o18 R19) in the High Court; Winding Up Petition Relisted for Hearing
Outcome
The court struck out specified paragraphs of the 1st Defendant's Re-Amended Defence and Counterclaim and directed the winding-up petition be relisted for hearing
Legal Topics
Illegality, Mistake, Issue Estoppel, Abuse of Process, Enforcement of Securities (charges/debenture), Winding Up
Source Language
EN
Banking Contract Insolvency Civil Procedure Conflict of Laws Illegality Mistake Issue Estoppel +3 more

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Parties

Bank of China (Hong Kong) Limited (formerly Sin Hua Bank Limited)

Plaintiff/petitioner

Keen Lloyd Energy Limited (formerly Keen Lloyd Investments Limited)

1st Defendant

Keen Lloyd Resources Limited (formerly Keen Lloyd (Holdings) Limited)

2nd Defendant

Winko Metal Limited (formerly Vast Income Industries Limited)

Respondent/chargor (in Winding Up Petition)

Procedural Posture

High Court Action for Recovery of Banking Facilities and Concurrent Winding Up Petition / Interlocutory Strike Out Application (o18 R19) in the High Court; Winding Up Petition Relisted for Hearing

Legal Issues

  1. 1 Whether the 1st Defendant may resist enforcement of Hong Kong governed facility agreements on basis they were void for illegality under PRC law (CBL art 39(4))
  2. 2 Whether issue estoppel or abuse of process bars the 1st Defendant from raising the illegality/mistake defences
  3. 3 Whether mistake defence is sustainable independent of illegality

Ratio Decidendi

The court struck out the pleaded illegality and mistake defences because (1) the facility agreements are governed by Hong Kong law and any alleged contravention of PRC CBL art 39(4) is irrelevant to enforcement in Hong Kong, and (2) the enforceability issue was already determined or should have been litigated earlier so it was barred by issue estoppel or amounted to an abuse of process; the mistake defence was parasitic on illegality and therefore unsustainable; consequently the challenged paragraphs disclosed no reasonable defence and were struck out, and the Company has no bona fide defence to the winding-up petition given the debenture's indemnity/protective clauses.

Court Disposition

The court struck out specified paragraphs of the 1st Defendant's Re-Amended Defence and Counterclaim and directed the winding-up petition be relisted for hearing

Orders

  • Paragraphs 3 to 32, 47 to 49 and prayer (1) of the 1st Defendant's Re-Amended Defence and Counterclaim struck out
  • Costs of the strike-out application to the Plaintiff (Bank)