Tang Wai Yee, Sylvia v. He Shimeng and Another

HCSD000024/2002

HCSD 24/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY DEMAND
NO. 24 OF 2002

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Coram: Deputy High Court Judge To in Chambers

Date of Hearing: 27 March 2003

Date of Decision: 27 March 2003

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D E C I S I O N

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Background

1.This is an application by the Applicant to set aside the Statutory Demand served on her by the 1st and 2nd Respondents on 26 June 2002. The debt arose out of an unpaid judgment debt under HCA 1261 of 2002 in which the Applicant was sued as the 2nd Defendant and her employer as the 1st Defendant (the "1st Defendant"). Judgment was entered against both the Applicant and the 1st Defendant in default of acknowledgement of service on 21 May 2002. The plaintiffs in that action, i.e. the Respondents, then served a Statutory Demand on the Applicant on 25 June 2002.

2.The Applicant and the 1st Defendant applied to set aside the default judgment on 16 July 2002. At about the same time, the Applicant also applied to set aside the Statutory Demand. Their application to set aside the default judgment was dismissed by Master de Souza on 20 September 2002. They appealed. On 29 January 2003, in dismissing their appeal, Deputy High Court Judge Fung also refused their application for stay of execution. On 5 March 2003, they appealed to the Court of Appeal under CACV No. 53 of 2003. The present application relates to the Applicant's application to set aside the Statutory Demand. Her grounds are that the judgment was obtained by default and she does not admit the debt.

Applicant's application for adjournment

3.Before the hearing began, the Applicant applied for an adjournment pending the determination of her appeal against the decision of Deputy High Court Judge Fung in CACV No. 53 of 2003. In effect, the application for adjournment would operate as a stay of execution of the judgment obtained in HCA 1261 of 2002. The Respondents have obtained a default judgment, that judgment has been confirmed on appeal. Her application for stay of execution has also been refused by Deputy High Court Judge Fung. Order 59, rule 13(1) of the Rules of the High Court provides that except as otherwise directed by the court below or the Court of Appeal or a single judge of the Court of Appeal, an appeal shall not operate as a stay of execution. Her application for stay of execution having been dismissed by Deputy High Court Judge Fung, should she wish to have a stay of execution pending appeal, she should apply to the Court of Appeal or to a single judge of that Court. While she appealed against the decision of Deputy High Court Judge Fung, she took no steps to apply to the Court of Appeal for stay of execution. It would be an abuse of proceedings by seeking an adjournment of these proceedings thereby in effect obtaining a stay in the other proceedings when her application for stay of the proceedings had been dismissed. This offends the principle that a successful litigant should not be deprived of the fruits of his litigation: Winchester Cigarette Machinery v Payne (No.2), (unreported, 15 December 1993, English Court of Appeal).

4.Another reason advanced by the Applicant for the adjournment is to enable her to seek legal representation. Since the commencement of HCA 1261 of 2002 by the Respondents and her present application, the Applicant has had five changes of solicitors. In respect of the present proceedings, she was last represented by Messrs Herman Hui & Co who filed a Notice to Act on 24 October 2002. But just three weeks later, she filed a Notice to Act in Person on 15 November 2002. On the other hand, she instructed Messrs Chan and Cheng to represent her in HCA 1261 of 2002 and to file a Notice of Appeal in the subsequent appeal in CACV 53 of 2003 on 5 March 2003, about two weeks before this hearing. But she did not instruct Messrs Chan and Cheng to represent her in the present application. She said she did not have sufficient funds to instruct Messrs Chan and Cheng to represent her in both matters but will soon have funds to enable her to be legally represented. Hence, she asked for an adjournment.

5.The Applicant has a history of delaying the Respondents' claim. As observed by Deputy High Court Judge Fung, the Applicant had five changes of solicitors, had applied for legal aid and obtained the usual stay of proceedings pending her application and had been granted further time for filing affirmations but have failed to do so. All these are hallmarks of a delaying tactic aimed at delaying the Respondents from recovering their money. I refused her application for adjournment as not being made bona fide.

Triable issue

6.Rule 48(5)(b) of the Bankruptcy Rules made under the Bankruptcy Ordinance, Cap 6, provides that the court may set aside a Statutory Demand if the debt is disputed on grounds which appear to the court to be substantial. The issue is whether the Applicant has discharged the burden of demonstrating by evidence that there is a genuine triable issue.

7.The Applicant was a consultant employed by the 1st Defendant, which carried on business as a US immigration consultant. On 8 January 1998, the Respondents entered into a standard term agreement with the 1st Defendant. Under the terms of the agreement, each of the Respondents shall transfer US$120,000 to the 1st Defendant and if the 1st Defendant could not obtain the Green Card for them from the US Immigration Department within 9 months of the transfer of the above sum, the 1st Defendant shall refund the said sum transferred together with the attorney fee of US$10,000 to the Respondents. The agreement contained the following declaration:

"This contract is signed by myself on behalf of my company. I pledged my reputation to guarantee to be responsible for the joint and several obligations under this contract. If there is any change in the company, I shall perform this contract unconditionally".

The 1st Defendant failed to obtain the Green Card within 9 months of the Respondents' transfer of their funds to the 1st Defendant. The Respondents sued both the 1st Defendant and the Applicant for the return of US$130,000.

8.The defence are as follows. In respect of the 1st Respondent, the agreement was terminated in July 1998 with his wife being nominated as the applicant, hence the 1st Respondent's application was not proceeded with. In respect of the 2nd Respondent, she failed to provide the necessary documentation and that her US$120,000 had been paid to the US attorney and had nothing to do with the 1st Defendant or the Applicant. The Applicant's additional defence is that she only pledged her reputation and in accordance with the declaration, she was not to be personally liable unless there were substantial changes in the 1st Defendant, as to which none was shown.

9.Mr Yip, on behalf of the Respondents, referred me to Lee Tak Wan v Chekiang First Bank Ltd HCSD 14 of 2000 and submitted that the existence and validity of the debt cannot be a subject matter of dispute as this Court cannot go behind the judgment of Deputy High Court Judge Fung. I think the facts in Lee Tak Wan v Chekiang First Bank Ltd are distinguishable from those in the present case. In that case, there was a final judgment and the judgment debtor sold the mortgaged property in satisfaction of the judgment debt leaving a balance, which formed the subject matter of the Statutory Demand. Under those circumstances, the judgment debtor cannot dispute the existence and validity of the debt and the court cannot go behind the judgment. However, in the present case, the judgment was a default judgment against which the Applicant is appealing . In my view, for the purpose of the present application, the Applicant is not precluded from demonstrating by evidence that despite that judgment, there is a genuine triable issue. She has to discharge the same burden of proof as has an applicant seeking to set aside a default judgment.

10.The evidence contained in her affirmation in support of this application, which was prepared by her then solicitors in July 2002, as well as what she submitted today had effectively been considered by Deputy High Court Judge Fung when dismissing her appeal to set aside the default judgment. I can see no reason for departing from the well considered opinion of Deputy High Court Judge Fung who had the additional benefit of seeing the documentary exhibits which I have not. Putting it very briefly, her allegation that the 1st Respondent had terminated the agreement was contradicted by documents, including her own letter in response to the 1st Respondent's solicitor's letter demanding return of the US$130,000 in which she confirmed that the 1st Respondent's application was pending approval. Her allegation against the 2nd Respondent is also contradicted by a number of her own documents requesting the 2nd Respondent for extension of time. In none of those requests did she complain of insufficient documentation from the 2nd Respondent or of her failure to put in the funds of US$120,000.

11.As for the guarantee, it is not open to her to argue by relying on the last sentence of the declaration that she would only be responsible if there be any change in the 1st Defendant. In my view, that sentence was to give the Respondents an assurance that she will provide her personal service if there be any change in the 1st Defendant. That does not relieve her of any liability for the 1st Defendant's monetary obligation under the agreement. Her intention that she will be jointly and severally liable with the 1st Defendant under the contract is unequivocal and unconditional. She is personally liable as the named contracting party and as an agent signing for and on behalf of the 1st Defendant with no express exclusion of any liability as an agent.

12.Thus, apart from repeating her defence, the Applicant was unable to refer me to any new grounds or evidence which would support a finding of a genuine triable issue. She said she has documents in support of her defence but was unable to produce them as they were in the possession of her solicitors, Messrs Chan and Cheng, for the purpose of preparing her appeal. Messrs Chan and Cheng had knowledge of this application and had requested the Respondents' solicitors for an adjournment pending the appeal. I am surprised if they would withhold those documents from the Applicant, even though they are not acting for her in the present application. Her allegations are just bald assertions, unsupported by evidence. Despite my ruling in her favour that she was entitled to argue afresh that there was a genuine triable issue and that the judgment of Deputy High Court Judge Fung should be set aside, she has utterly failed to discharge that burden. In fact, she impressed me with a total lack of bona fide in her application which was just part of her delaying tactic to deprive the Respondents of the fruits of their successful litigation. I find that she has no bona fide dispute to the judgment debt.

Conclusion

13.Accordingly, I dismiss the Applicant's application to set aside the Statutory Demand and grant leave to the Respondents to present bankruptcy petition forthwith. The Respondents shall have costs of this application against the Applicant, such costs are to be taxed if not agreed.

Representation:

Applicant appeared in person

Mr Francis Yip, instructed by Messrs Ko & Chow, for the Respondents