Re Quang Xin Lee

HCB 3769/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3769 OF 2016

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D E C I S I O N

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Introduction

1.On 8 August 2016, I made a bankruptcy order against the debtor, Mr Lee. Mr Lee now seeks a stay of the bankruptcy order pending his appeal to the Court of Appeal (“the Appeal”) against the underlying decision which gave rise to the debt that supported the petition.

2.The Petitioners and the Trustees in Bankruptcy (“the Trustees”) oppose the application.

Legal principles

3.Under section 104 of the Bankruptcy Ordinance, Cap 6 (“the Ordinance”), the court may at any time, for sufficient reason, make an order staying the proceedings under a bankruptcy petition, either altogether or for a limited time, or subject to terms.

4.It is undesirable to grant a general stay of a bankruptcy order pursuant to section 104.  The reasons have been summarized by Au J in Re Tsang Wing Lam, HCB 1203/2013, 3 December 2013, §4:

(1) This is because of the prejudice that might be caused to creditors and the administration of the estate of a bankrupt by a general stay.  Rather, even if warranted by the circumstances of the case, the stay should be limited to certain steps or consequences, such as the gazetting or advertising of the bankruptcy order, and on the condition that the bankrupt should attend the OR’s office and give an account of his assets and liabilities;

(2) A general stay would not only release the bankrupt from all his statutory obligations and duties under the Ordinance but would also seriously hamper the ability of the OR (or the trustee in bankruptcy) to have control over the bankrupt and his property.  Further, in the interest of the creditors, it was vital that there should be no undue delay in ensuring that the OR (or the trustee in bankruptcy) was put in a position in which he could ascertain the assets of the estate and take appropriate steps to preserve them.

(3) Furthermore, the mere fact that there is a pending appeal is usually not a sufficient ground to stay a bankruptcy order.  A stay pending appeal should be granted with circumspection, and only when the appeal is shown to be a bona fide one and the grounds of appeal are sufficiently arguable.

5.The court is even more adverse to the grant of a stay where there is no pending appeal against the bankruptcy order itself: Re Zulifqar Ali, HCB 6146/2011, 15 October 2013, Ng J, §13.

6.The court may, however, grant a stay of steps in the proceedings such as gazetting of a bankruptcy order.  Generally, the court will not stay those parts of the bankruptcy process which protect the interests of creditors: Re Ho Ying Pat Bobby, HCB 1946/2009, 7 January 2010, Harris J.

Application of the legal principles

7.The fact that Mr Lee has been acting in person and has failed to take the right application at the right time is irrelevant.

8.The fact remains that there has been no appeal against the bankruptcy order and the 28 days for him to do so has expired: Order 59, rule 4(1)(b) of the Rules of the High Court, Cap 4A.  The principle in Re Zulifqar Ali applies.

9.Mr Lee has provided security for costs of the Appeal as ordered by the Court of Appeal before the bankruptcy order was issued on 8 August 2016.  However, on 12 August, he was informed by the Registrar of Civil Appeals that the Appeal has been stayed by operation of law under sections 12 and 58 of the Ordinance.

10.It is not for this court to usurp the function of the Trustees to decide whether or not the appeal should proceed.  As Mr Jacky Lee acting for them has pointed out, the Trustees have only been appointed for about a month.  They require time to consider the appeal, the funding for it and the interest of the creditors.

11.Mr Lee relies on merits in the Appeal.  His grounds for appeal are in fact a re-run of the arguments before the Court of Appeal (when it considered security for costs on appeal) and me (when I considered whether to stay the petition for bankruptcy pending the Appeal), this time with 22 pages of transcripts of the trial to support his arguments. 

12.The 22 pages of transcripts are extracted from 632 pages.  It is difficult to see the context.  Doing my best in going through the 22 pages, I am not satisfied that the grounds are so sufficiently arguable as would persuade me to change my view on the merits of the Appeal. 

13.Further, trustees in bankruptcy have been appointed.  The bankruptcy order has been gazetted and advertised.  The bankrupt has no landed properties and there is no issue of registration of the bankruptcy order at the Land Registry.  There is no specific step to stay and in any case no reason to grant general stay or a stay pending the already stayed Appeal.

14.This application is wholly unmeritorious.  I therefore dismiss it.

15.Costs shall be paid to the Petitioners and the Trustees.  This application has no complexity and the Trustees’ costs are grossly excessive.  I summarily assess costs of the Petitioners at $35,000, the Trustees at $35,000 and the Trustees’ solicitors at $20,000.

16.I thank Mr Tang and Mr Jacky Lee for their assistance.

Mr Alexander Tang, instructed by Anthony Siu & Co, for the petitioners

The debtor appeared in person

Mr Lee Hung Sang Jacky, of Johnnie Yam, Jacky Lee & Co, for the Joint and Several Trustees