Re Chan Yiu Yam
Read the full judgment text of HCB 108/1980 on BabelCite. This HCB judgment.
1. This is an application by the petitioning creditor for an amendment to the petition. The application was necessitated by Mr. Woollard's reference to s.6 of the Bankruptcy Ordinance. In substance, s.6(2) lays down as a prerequisite that the petitioning creditor must either abandon his security for the benefit of the creditors or give an estimate of the value of his security and, circumstances permitting, proceed against the debtor on only so much of the debt in excess of his security as if he
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HCB000108/1980 Bankruptcy Petition presented by a secured creditor alleging his inability to estimate the value of security - omission, by inadvertence, to state in the petition his election of giving up his security for the benefit of the creditors as required by s.6(2) of the Bankruptcy Ordinance - statement made at the hearing that the secured creditor was willing so to give up his security - leave granted to amend the petition to reflect such willingness of the petitioner to give up his security in compliance with s.6(2). IN THE SUPREME COURT OF HONG KONG IN BANKRUPTCY NO. 108 OF 1980
----------------- Coram: LiU, J. in Court. Date of Judgment: 31st January, 1981 ----------------- RULING ----------------- 1. This is an application by the petitioning creditor for an amendment to the petition. The application was necessitated by Mr. Woollard's reference to s.6 of the Bankruptcy Ordinance. In substance, s.6(2) lays down as a prerequisite that the petitioning creditor must either abandon his security for the benefit of the creditors or give an estimate of the value of his security and, circumstances permitting, proceed against the debtor on only so much of the debt in excess of his security as if he were an unsecured creditor. Naturally, such balance must not be, by virtue of s.6(1)(a), less than $5,000. S.6(2) further requires that the petitioning creditor must select and state in the petition one of these two alternatives, as a pre-condition to presenting a bankruptcy petition. 2. S.6(2) reads as follows:
3. When the parties came before me on the last occasion, the 27th January, 1981, non-observance of s.6(2) passed unnoticed. No sooner had s.6(2) of the Bankruptcy Ordinance been given its deserving attention at to-day's hearing than the secured petitioning creditor applied for an amendment, with promptitude, in terms adopting the alternative of waiving his security for the benefit of the creditors at large. The Official Receiver took a neutral stand, but the application of the petitioning creditor was not favourably received by the debtor, whose counsel, Mr. Tong, took the strongest possible exception. 4. In support of the application, Mr. Allman-Brown explained that non-compliance was due to an inadvertence on the part of legal advisers. Counsel readily attributed causation to his inexperience. It is perhaps not impertinent to note that Mr. Allman-Brown's personal concession on s.6(2) must be, in all fairness, viewed in the light of our constant need for expertise in more fields than one. I make this observation in anticipation of my approach to costs. Counsel added that the petitioning creditor was perfectly willing to surrender his security for the benefit of all the creditors, as expected of him by s.6(2). Counsel's statements were not challenged, and I am prepared to, and do accept them. 5. In paragraph 3 of the petition, the petitioning creditor maintained that he was unable to value the security with any precision or at all or to verify the declared value thereof given by the debtor. The readiness of the petitioning creditor to surrender that security for the benefit of the creditors in the event of the debtor being adjudged bankrupt has, to a degree, reflected the bona fide of such of his assertion in that paragraph. Counsel for the debtor criticized the alleged inability of the petitioning creditor so to value the security or verify the value as declared by his client. Mr. Tong pressed upon me that in all the circumstances, it would be wrong to allow the amendments sought and that these proceedings should best be stayed so as to provide a further opportunity for seriously attempted valuation or verification. 6. Counsel commended for my consideration the case of In re Small(1), where a passage in the judgment of Farwell, J. was said to lend support to the proposition that unless the debt far exceeded the possible value of the security, an application to amend for removing an irregularity brought about by a non-compliance of the statutory requirement such as that in s.6(2) of our Bankruptcy Ordinance ought not be entertained or granted. In my view, In re Small was decided in circumstances which are wholly dissimilar. In that case, the petitioning bank were desirous of reasserting their right to a security. The petition, as presented, contained an allegation that the bank were unsecured creditors. The error came to light after an order for the administration of the debtor's estate had been made. The bank successfully applied to restore their status of secured creditors by an amendment. At p.548, Farwell, J. concluded:
7. At p.545, Farwell, J. observed that the court would refuse to delete, by amendment, an allegation of the creditors holding no security "unless it was completely satisfied that at the time when the petition was presented the security was of no importance in this sense, that whatever the value of the security the amount of the debt was so much greater as to leave no possible doubt but that there was a petitioning creditor's debt." The obvious was stated by the learned judge as that "in that case, no petition could be presented." 8. In re Small is clearly distinguishable. It was concerned with a bank which had petitioned as unsecured creditors but thereafter sought to as well retain their security as preserve the validity of the bankruptcy order obtained. The right to security of a bank petitioning as unsecured creditors was reinstated in the justice of the case. S.6(2) of the Bankruptcy Ordinance does not seek to deprive a secured creditor of all his right to petition in bankruptcy except as and in his capacity of a secured creditor. It does not prevent a secured creditor from presenting a bankruptcy petition as an unsecured creditor by giving up his security for the benefit of all the creditors in the event of the debtor being adjudged bankrupt. In fact, s.6(2) expressly permits that course of conduct. The petitioning creditor here has intimated his willingness to surrender his security in terms of that sub-section. The crux of the matter seems to be whether he should be permitted to waive his right to security at the hearing and seek an amendment in terms of s.6(2). Inadvertence is not in issue. No conceivable injustice can be done to the debtor. The creditor is entitled to present his petition in total disregard of his security. Nor has the petitioning creditor an unfair advantage to gain. If, indeed, an authority need be cited, the case of In re Pogose Ex parte Vanderlinden(2) would afford a good precedent for sanctioning a similar amendment on a like assurance given at the hearing. 9. The able submissions of Mr. Tong have not, I am afraid, succeeded in dissuading me from acceding to the application. I order that the petitioning creditor do have leave to amend the petition in terms surrendering his security as required by s.6(2). 10. Omission in this case does not seem to be a matter wholly unforgivable. The debtor was virtually armed to the teeth in his resistance to the bankruptcy petition for a receiving order. Apparently, such a statutory prerequisite was likewise undetected by those who have been advising the debtor. In all the circumstances, I can find little real justification for making an unusual order for costs. I order that costs on the 27th January, 1981 and costs up to this moment, 11 o'clock in the morning, for both the Official Receiver and the debtor be paid by the petitioning creditor.
Representation: Mr. Woollard for Official Receiver. Mr. A. Allman-Brown instructed by Deacons for Petitioner. Mr. R. Tong instructed by J.S.M. for Debtor Chan Yiu Yam. (1) [1934] 1 Ch. D. 541 (2) [1882] 20 Ch. D. 289 |