Re Choy Chi Fung Orpheus
Read the full judgment text of HCB 1930/2023 on BabelCite. This HCB judgment was delivered on 3 April 2024.
1. The following matters are before the Court:
Cited by 1 case · Cites 3 cases
|
HCB 1930/2023 & HCB 1932/2023 [2024] HKCFI 956 HCB 1930/2023 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO 1930 OF 2023 _______________
_______________ AND HCB 1932/2023 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO 1932 OF 2023 _______________
_______________
________________ J U D G M E N T ________________ 1.The following matters are before the Court:
2.At the conclusion of the hearing judgment was reserved which I now give. Pre-hearing developments 3.On 27 February 2024, 6 working days prior to the substantive hearing of the Petitions, solicitors for R1 and R2 (“the Respondents”) filed summonses for an order to set aside (i) the statutory demand dated 19 May 2022; (ii) the order of Master Dick Ho dated 23 May 2023 for substituted service of the Bankruptcy Petition; and (iii) service of the Petition by Lam Hon Chung (“the service clerk”) pursuant to the order for substituted service (collectively “the setting aside summonses”). 4.The setting aside summonses were filed without leave and without any supporting affidavit. 5.On 6 March 2024, the day prior to the substantive hearing, (Messrs Hart Giles (“HG”), solicitors for the Respondents), filed and served a letter with attachments of acknowledgements of service in HCMP 2089/2019 (“HCMP 2089”) (“the new materials”). 6.The Petitioner’s solicitors (Messrs Tsang, Chan & Wong (“TCW”) made known their objection to the last minute filings in their letter of even date sent in response. In anticipation of the Respondents’ reliance on the new materials, TCW attached affirmations dated 13 July 2020 filed by the Respondents in HCMP 2089 (“the 2020 affirmations”) to their letter. 7.Later in the afternoon of 6 March 2024, HG lodged a supplemental skeleton on behalf of the Respondents. Procedural background 8.The Petitions are based on statutory demands (“SDs”) for outstanding liquidated debts of approximately HK$1 million payable by the Respondents under the order made by Master Lai on 11 November 2020 (the judgment debt”) in HCMP 2089, a mortgage action pursuant to O 88. 9.On 19 May 2022, the Petitioner issued two SDs against the Respondents based on the judgment debt. 10.The Petitioner attempted to personally serve the statutory demands on the Respondents at the two last known addresses on 20, 23, 27 and 30 May 2022 but was unsuccessful. 11.Meanwhile, on 26 May 2022, DBS presented its petition against R1 under HCB 2797/2022 (“the DBS petition”). 12.Notice of the Petitioner’s SDs were advertised in the Hong Kong Economic Times on 8 July 2022. 13.On 1 August 2022, R1 (represented by HG) opposed the DBS petition and applied to set aside the default judgment[1] on which the DBS petition was based. When the DBS petition came before Linda Chan J on 15 August 2022, she ordered that it be adjourned to the first Monday after determination of R1’s setting aside application. 14.On 6 April 2023, the Petitioner filed the Petitions against the Respondents and, on 12 and 19 April 2023, the Petitioner attempted, unsuccessfully, to personally serve the Respondents at the 2 last known addresses. 15.The Petitioner obtained an order for substituted service of the Petitions on 23 May 2023 and pursuant thereto served the Petitions on the Respondents by ordinary post to those addresses. 16.Notice of the bankruptcy proceedings was advertised in Hong Kong Economic Times on 7 June 2023. 17.By letter dated 14 June 2023, the Court informed the Petitioner and the Respondents of the parallel petitions and the order made on 13 June 2023 which, inter alia, adjourned the Petitions for hearing to 4 July 2023. 18.On 19 June 2023, HG acknowledged receipt of a copy of the R1 Petition from TCW. The letter stated that based on their previous instructions, neither of the 2 addresses referred to in the Petition are the current addresses of R1, and that HG were giving further consideration as to whether to challenge the grounds on which the order for substituted service was obtained, adding that “[i]f necessary, our client will make an Affidavit to cover these issues”. 19.On 27 June 2023, HG filed a ‘notice of debtor of intention to oppose petition’ on behalf of each of the Respondents. 20.On the following day, HG filed (1) Rs’ summonses subsequently amended for, inter alia, dismissal of the Petitions; and (2) affidavits of Andrew Nicholas Hart (“Mr Hart”) in support of Rs’ summonses. 21.On 11 August 2023, by consent, Anthony Chan J gave directions regarding the conduct of the proceedings. The Petitions 22.The last-minute flurry of papers filed or lodged with the Court commencing with the setting aside summons is deprecated. It was caused by the highly unorthodox manner in which the Respondents’ legal representatives chose to conduct Respondents’ opposition to the Petitions. 23.Under the guise of a ‘Supplemental Skeleton’, ostensibly in response to 3 authorities[2] the Petitioner added to its list of authorities earlier the same day, the Respondents did not address those authorities at all and, instead, raised an entirely new challenge to the quantum of the debt stated in the SDs when this point had not seen the light of day in any of their earlier filings. 24.At the outset of the hearing, the Court disallowed the lodging/filing of the ‘Supplemental Skeleton’ including its attachments in no uncertain terms. 25.Mr Adrian CK Wong, counsel for the Petitioner, referred to rule 68 of the Bankruptcy Rules (“BR”)[3] which requires the debtor intending to show cause against the petition to post a notice to the Petitioner specifying all grounds upon which the debtor opposes the petition at least 3 days before the day on which the petition is to be heard. The only notices of intention to oppose are those that filed on 27 June 2023 in which no grounds were stated. 26.The Court may not allow a debtor to raise an objection for which notice has not been given: Re Maydwell ex p WFM Motors Pty Limited (a creditor) [1999] 3 HKLRD 325 at 345E-I; and Hong Kong Civil Procedure 2024, Vol 2, at I1/62. 27.On the authority of Re Maydwell, the Rs’ summonses could have been dismissed in limine. 28.Given the chaotic state of the Respondents’ various summonses and grounds of opposition, Mr Hart was invited to state the Respondents’ case. 29.In the present case, 6 days before the hearing, the Respondents filed the setting aside summons without leave and without any supporting affirmation. 30.The only affidavits filed by the Respondents are those filed on 13 September 2023 which raised only two grounds in opposition to the Petitions, namely, (i) a dispute as to service of the Petitions; and (ii) the duplicate petition point[4]. 31.The affidavit in support of the Respondents’ summonses taken out on 28 June 2023 was not made by the Respondents as one would expect but by Mr Hart. No satisfactory explanation was given for this unusual state of affairs. The fact that Mr Hart had to travel at about the time he made the affidavit is neither here nor there since there is no evidence that the Respondents were not in Hong Kong and unavailable at that time. 32.Mr Hart referred to the Court’s letter dated 14 June 2023, stating that at the time of the notice of opposition[5], the Respondents did not have a copy of the Petitions and were completely in the dark as to the grounds for them. 33.The Petitioner relies on the order for substituted service for due service of the Petitions. The Respondents’ position is that the order for substituted service has to be considered in the context of what had happened in the proceedings before that. Specifically, the question now raised in support of the setting aside summons is whether the addresses for the service and the appointment were the correct addresses. In other words, that challenge goes to the proper service not only of the SDs but also of order for substituted service and for the Petitions. 34.The Official Receiver’s letter of 4 March 2024 to the Court invited attention to BR 47(4)[6] which provides that the debtor applying to set aside the SD must state the grounds on which he claims that the SD be set aside in the supporting affidavit. The burden is on the debtor to satisfy the court that sufficient cause is shown for the demand to be set aside: BR 48(1). It is apparent that the Respondents acted in flagrant breach of BR 47(4) when they took out the setting aside summonses 35.Mr Hart stated that based on the information R1 has given him, R1 does not reside or carry business at the 2 addresses in Causeway Bay (“the Causeway Bay addresses”) [7] stated in the R1 Petition and has not done so since mid-2022. R1 did not receive service of any of the papers in these proceedings until he saw the Court’s letter of 14 June 2023. 36.The SDs are based on a judgment debt of approximately HK$1 million representing the shortfall between the net proceeds of sale of the mortgaged property and the amount due to the Petitioner. The mortgage action i.e. HCMP 2089 commenced in 2019. 37.In the Respondents’ acknowledgements of service filed on 20 December 2019, each of them gave a PO Box number as his/her address for service (“the PO Box addresses”). 38.According to the affirmation of the service clerk, he made several attempts to personally serve the statutory demands on the Respondents at the Causeway Bay addresses during the last 10 days of May 2022. 39.It will be noted that R1 is alleged to have ceased residing or carrying on business at the Causeway Bay addresses since “mid 2022”. However, no date was specified and the attempts made to effect personal service occurred prior to mid-2022. 40.The Petitioner submitted that the suggestion that service of the statutory demands and thus the order for substituted service and service of the petitions were defective is grossly misleading. As earlier noted, following HG’s letter of 6 March 2024 (with attachments)[8], in anticipation of a submission based on the PO Box addresses, TCW lodged the 2020 affirmations filed in HCMP 2089 together with TCW’s letter of 6 March 2024 which, justifiably, was critical of HG’s conduct. 41.In the 2020 affirmations (which postdate the acknowledgements of service), the Respondents used the Causeway Bay addresses as the their addresses. It is clear that the PO Box addresses were no longer the Respondents’ addresses by July 2020. In my view, this suggests that the Respondents’ manoeuvres on the eve of the hearing is unlikely to have been made in good faith. 42.Given that response, Mr Hart focused his attack to the substituted service order for the Petitions. He intimated that the Respondents were somehow surprised by the Petitioners’ reliance on the substituted service order and sought to justify the Respondents’ failure to file affirmations in their notice of opposition on that point because the Respondents did not know about it until they received the Petitioners’ written submissions. 43.The affirmation dated 25 August 2023 from the Petitioner’s solicitor, Siu Wan Yee Sam[9], confirmed that the Petitions had been duly served pursuant to the orders of Master Dick Ho providing for substituted service. In fact, the Petitions had been sent to HG on 15 June 2023, receipt of which HG had acknowledged in its letter of 19 June 2023[10]. 44.It is clear that the Respondents had actual knowledge regarding the order for substituted service and also service of the statutory demand by advertisement. However, there is no affidavit from the Respondents challenging the order for substituted service. Mr Wong submitted that it was a conscious decision by the Respondents to not challenge the substituted service order until shortly before this hearing. I agree. 45.On the issue of service of the Petitions, Mr Wong referred to the decision of Yuen J in Li Wai Man ex p Hang Tung Securities Limited, HCB 211/99, unrep., 1 November 1999 which considered the applicable rules, namely BR 46 (2) and 49 (5)-(7)[11]. 46.In Li Wai Man, relevantly, it was held (at pp 9 and 11) that
47.Applying those principles to the facts of the present case, there is no evidence that the Respondents ever informed the Petitioner of their vacating the Causeway Bay addresses. I am satisfied from the service clerk’s affirmations of service that the Petitions were duly served on the Respondents. 48.The only other point made concerns the duplicate petition that only relates to the R1 Petition. It was submitted that the DBS petition and the R1 Petition should be consolidated, the DBS petition being the first in time. Moreover, when the R1 Petition was issued, the Petitioner did not check if there were other petitions already on foot. 49.There is no evidence that R1 has somehow been prejudiced by the R1 Petition. The existence of an earlier bankruptcy petition does not constitute a ground for dismissal of a later petition. In Pan Sutong v Bank of China Limited [2022] HKCFI 1450 (“the BOC Judgment”), the debtor applied to set aside a statutory demand served against him arguing that the right to present a petition for bankruptcy is a class right and it is an abuse of process for the creditor to have intended to present a 2nd petition against the same debtor. 50.Linda Chan J held that bankruptcy proceedings in Hong Kong does not allow for a supporting creditor to appear to support a petition, and with substitution of a petitioner limited to where the original petitioner does not proceed with intelligence. Thus, bankruptcy proceedings in Hong Kong cannot be equated with winding up proceedings in Hong Kong bankruptcy proceedings in the UK. Further, §101 of the BO envisages there being more than one petition presented against the same debtor. 51.Shortly after the BOC Judgment, in Re Pan Sutong, ex p Xinhua Financial Network Ltd [2022] HKCFI 1896, DHCJ Simon Leung also rejected a similar argument. He traced the development of the law regarding multiple bankruptcy petitions in the UK and in Hong Kong and noted differences in the 2 regimes. 52.Plainly, there is no legal impediment to the making of a bankruptcy order against R1, notwithstanding the DBS petition. The R1 Petition is based on a judgment debt in contrast to the DBS petition which is based on a default judgment that R1 sought to challenge by taking out a summons to set aside the default judgment. However, the court files reveal that the application to set aside appears to have gone to sleep as no further steps to set aside the default judgment have been taken since 22 November 2022. 53.In those circumstances, consolidation of the DBS petition and that R1 Petition would mean an indefinite delay. That would be contrary to and undermine the underlying objectives of the CJR and must be rejected. 54.Since all the grounds advanced by the Respondents have been rejected, there is no reason why bankruptcy orders should not be made. Order HCB 1930 55.R1 is adjudged bankrupt. R1’s summons and R1’s setting aside summons are dismissed. HCB 1932 56.R2 is adjudged bankrupt. R2’s summons and R2’s setting aside summons are dismissed. Costs 57.The Petitioner having succeeded in obtaining bankruptcy orders would be entitled to the costs of and occasioned by the Petitions, with certificate for counsel. 58.The Respondents’ conduct in the week preceding the substantive hearing and the manner in which their opposition to the Petitions have been conducted is disgraceful and brings the law into disrepute. As a mark of the Court’s disapproval of such conduct, the costs awarded to the Petitioner are to be on an indemnity basis. 59.Accordingly, it is ordered nisi that the costs of and occasioned by the R1 Petition and the R2 Petition, Rs’ summonses and the setting aside summonses be to the Petitioner, with certificate for counsel, such costs to be summarily assessed on an indemnity basis and payable forthwith. 60.It is further directed that (1) the Petitioner do lodge its statements of costs within 14 days in the R1 Petition and R2 Petition respectively; (2) R1 and R2 do lodge their respective lists of objections (not exceeding 2 pages) within 14 days thereafter; and (3) the Petitioner do lodge its replies (not exceeding 2 pages, if any) in the R1 Petition and R2 Petition respectively within 7 days thereafter.
Mr Adrian CK Wong, instructed by Tsang, Chan & Wong, for the Petitioner in both Petitions Mr Andrew Hart, of Hart Giles, for the Debtors (Respondents) in both Petitions The Official Receiver, attendance was excused. [1] In HCA 1925/2019. [2] The additional authorities were an anticipatory response to the Respondents' setting aside summons mentioned in §3 above. [3] 68. Debtor intending to show cause
[4] This only relates to the R1 Petition. See §48 below. [5] 27 June 2023. [6] 47. Application to set aside statutory demand
[7] Those addresses are in Great George Building and Hang Seng Building, Causeway Bay. [8] See §5 above. [9] See §4 (a) and (b). [10] In pertinent part, that letter reads:
[11] 46. Requirements as to service
49. Proof of service of statutory demand
|
Cases cited in this judgment
Other judgments that cite this case
Further hearings and rulings under HCB 1930/2023