Re David C. Buxbaum

HCB 7637/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 7637 OF 2004

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Before: Hon Kwan J in Court

Date of Hearing: 12 April 2005

Date of Judgment: 12 April 2005

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J U D G M E N T

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1.This is a bankruptcy petition against David C Buxbaum (“the debtor”) presented by Samuel-Rozenbaum HK Ltd (“the petitioner”), a judgment creditor.

2.The petitioning debt is in the sum of HK$792,894.30.  This arose out of various costs orders made in favour of the petitioner as a claimant in interpleader proceedings in HCA No. 5191 of 1998 (“the High Court Action”) between 4 July 2002 and 14 May 2003.  The bills of the petitioner’s solicitors have been taxed and various allocaturs were issued between August 2003 and February 2004.  Details of the various costs orders and allocaturs were given in the statutory demand and the petition.  I do not propose to set out the details as the amount of the petitioning debt is not in dispute.

3.The costs orders in the High Court Action made in the petitioner’s favour were against the plaintiff in that action.  The plaintiff is a legal consultancy firm known as Brand Farrar Buxbaum LLP (“BFB”).  The debtor was and is a partner of BFB.

4.In July 2003, the petitioner issued a summons under Order 81 rules 5(4) and (2) of the Rules of the High Court for leave to issue execution against the debtor, as a partner of BFB at all material times, on the various costs orders.  That application was heard by Chung J who gave his decision on 8 June 2004 in favour of the petitioner.  The judge ruled that the petitioner did not need  leave to enforce the costs orders against the debtor under Order 81 rule 5(2).  He further found that insofar as leave may be necessary, there is good reason to exercise his discretion to grant leave under Order 81 rule 5(4).  The debtor lodged an appeal against the decision of Chung J.  This was dismissed by the Court of Appeal on 15 March 2005 and Reasons for Judgement in CACV No. 272 of 2004 were handed down on 24 March 2005.

5.On 9 June 2004, the petitioner issued a statutory demand against the debtor for the debt.  This petition was presented on 30 July 2004.

6.The debtor filed an amended notice by debtor of intention to oppose the petition on 19 October 2004, giving 5 grounds to oppose the petition.  The 4^th and 5^th grounds have been abandoned for some time.  At the hearing today, Mr Simon Woo for the debtor did not pursue the 3^rd ground, as the Court of Appeal has dismissed the debtor’s appeal against the decision of Chung J.  Thus we are concerned only with the first 2 grounds which are as follows.

7.Firstly, it was contended that service of the statutory demand and the petition on the debtor was irregular and that the purported service had failed to bring the same to the attention of the debtor.

8.Secondly, the debtor sought to rely on an outstanding undetermined application taken out in the High Court Action by BFB against Ilan Samuel who is president of the Samuel-Rozenbaum group of companies and contended that if this application is successful, the debtor would have reasonable prospect of being able to pay the petitioning debt and would not be liable to be made bankrupt.

9.I would first deal with the second ground before I consider the allegation of defective service.

10.The outstanding application of BFB in the High Court Action was issued on 11 October 2003 and amended on 7 January 2004.  The application was for leave to substitute Ilan Samuel as a defendant in lieu of Samuel-Rozenbaum Diamond Limited, alternatively for leave to add Ilan Samuel trading as Samuel-Rozenbaum Diamond Limited as a defendant, and in the further alternative to add Ilan Samuel as a defendant.  The application was dismissed by a Master on 1 April 2004.  BFB appealed against the order, this was heard in July 2004.  I understand a decision has not been given in the appeal.

11.The petitioner is not a party to that application.  The possibility that BFB might succeed in its appeal and as a result the debtor might be able to recover something from Ilan Samuel, let alone what amount, is neither here nor there.  This certainly does not constitute a valid ground that the court should refuse to make a bankruptcy order against the debtor in respect of the judgment debt which he at present is unable to pay.  The debtor can always apply to annul the bankruptcy order if he should come into funds subsequently and is able to discharge his liabilities in full.

12.This leaves the ground of alleged defective service of the statutory demand and petition.  In the debtor’s application to set aside the statutory demand, he had also relied on defective service as one of the grounds, alleging that the service was not in compliance with rule 46(2) of the Bankruptcy Rules.  This application to set aside the demand was dismissed by Tang J on paper without a hearing on 9 November 2004, under the powers of the court in rule 48(1).  In view of the fact that the application was dismissed without a hearing, and the arguments of the debtor were not fully ventilated, I do not think the debtor would be precluded from raising the same point in the hearing of the petition (see my judgment in Re Choy Wai Bor, HCB No. 8565 of 2001, 28 May 2002, paragraphs 4, 21, 24 to 35).

13.The requirement under the law for service of a statutory demand is provided in rule 46(2).  It is not a must that personal service should be effected in each and every instance.  What is required of a creditor under rule 46(2) is to do all that is reasonable for the purpose of bringing the demand to the debtor’s attention, and if practicable in the particular circumstances, to cause personal service to be effected.

14.As to the manner of effecting personal service, if the person sought to be served refuses to take the document, it is sufficient for the process server to inform him of the nature of it and leave it as nearly as could be done in his possession or control (Hong Kong Civil Procedure 2004, Vol 1, para 65/2/3; Thomson v Pheney (1832) 1 Dowl. 441 at 443).

15.Order 65 rule 10 of the Rules of the High Court provides that no process is to be served on a Sunday except, in case of urgency, with the leave of the court.  This rule does not extend to a Jewish Sabbath, which is from sundown on Friday to sundown on Saturday.  The Rules of the High Court permits service of legal process on any day other than Sunday.

16.With the above, I turn to consider the evidence relating to service of the statutory demand and petition.

17.Two different process servers effected service of these documents.  Each has filed two affirmations.  The debtor has also filed evidence on his allegation of how the statutory demand and petition were purportedly served.  As there is conflict in their respective versions, Suffiad J has ruled on 18 October 2004 that the deponents on this issue should attend for cross-examination.  I further directed on 3 March 2005 that the 3 witnesses in question should attend for cross-examination, failing which the relevant evidence in their affirmations may not be relied upon.  All 3 has attended court today and were cross-examined on their affirmations.

18.Yuen Man Yung has filed 2 affirmations on 30 July 2004 and 15 October 2004 regarding the service of the statutory demand on 2 July 2004 at 7:50 pm outside No. 70 Robinson Road, Hong Kong.  Miss Yuen Yin Wa filed 2 affirmations on 20 August 2004 and 15 October 2004, on the service of the petition on 13 August 2004 at 7:38 pm outside No. 70 Robinson Road.  She was also present when the statutory demand was served by Mr Yuen on 2 July 2004.  Both are private investigators in the employ of a firm known as Black & White Investigation, one was employed for 5 years and the other for 4 years and both have experience in serving legal documents.

19.Mr Yuen had previously effected service on the debtor on 24 July 2003 in the High Court Action of the summons of the petitioner for leave to issue execution against the debtor with the petitioner’s supporting affirmation.  On that occasion the debtor refused to take the documents when he was served whilst he was boarding a taxi and twice threw the documents out of the car.  This incident was not denied by the debtor in any of his affirmations filed, whether in the High Court Action or in the application to set aside the statutory demand or in the present proceedings, until he was cross-examined today.  The debtor claimed he did not read the affirmation as to service made by Mr Yuen in the High Court Action on 26 July 2003, as he had discussed with his solicitors and they formed the view that the service on 24 July 2003 was proper and decided not to challenge the validity of service of documents on the earlier occasion.  I note that Mr Yuen’s affirmation of 26 July 2003 was mentioned in some detail in his 2^nd affirmation filed in these proceedings and exhibited thereto.  I fail to see any good reason why the debtor should fail to respond to this at all well before today, in view of his serious challenge to the account given.

20.I have grave doubts as to the debtor’s version of the incident on 24 July 2003.  I do not believe him when he said Mr Yuen did not tell him the papers to be served were legal papers and that if he had been told, he would have accepted service.  I reject his evidence that he threw the papers out of the taxi not knowing what they were and simply because Mr Yuen was rude in not giving an answer to his enquiry.  The fact that the debtor had thrown the papers out of the car twice (he accepted he did throw the documents out of the car once, if not twice) clearly showed his unwillingness to be served with legal documents.

21.On 9 June 2004, Mr Yuen received instructions to serve the statutory demand and waited for 3 hours outside the building in which the debtor lived at No. 10 Robinson Road and to no avail.  On the instructions of the petitioner’s solicitors, he waited outside Ohel Leah Synagogue at No. 70 Robinson Road on 25 June 2004 and again on 2 July 2004.  On the latter occasion, he was with Ms Yuen.  At 7:50 pm, he saw the debtor coming out of the Synagogue and walking in the direction of the building he resided in.  According to Mr Yuen, he immediately approached the debtor from behind and handed the statutory demand to the debtor, the debtor refused to take the document.  He said to the debtor in English: “Mr Buxbaum, this is a statutory demand for you”.  He then put the demand against the debtor’s chest, the debtor continued to walk, Mr Yuen held the document against the debtor’s chest for a few seconds and let go.  The demand fell to the ground and the debtor kicked it away.

22.Ms Yuen was with Mr Yuen on 2 July 2004.  She corroborated Mr Yuen as to the exact location when Mr Yuen managed to approach the debtor, but as she was about 10 odd steps behind, she could not hear what if anything Mr Yuen had said to the debtor.

23.On 13 August 2004, Ms Yuen received instructions to serve the petition and on the instructions of the petitioner’s solicitors, she waited outside the Synagogue.  At 6:29 pm, a taxi stopped in front, and she saw the debtor getting off and entering the Synagogue.  At 7:38 pm, the debtor came out with a man and both walked along Robinson Road.  According to Ms Yuen, she immediately approached and handed over the petition to the debtor.  The debtor continued to walk and refused to take the document.  She said to the debtor in English: “Mr Buxbaum, this is a bankruptcy petition for you”.  She held the document against his chest, and walked with him in this manner for a few seconds.  Eventually she let go of the document and the debtor allowed the document to fall to the ground and he walked away.

24.In each instance, after the process server had effected service in the manner as described, the petitioner’s solicitors wrote to Weir & Associates, the solicitors acting for the debtor in the High Court Action, informing them of the date, time and place of the service effected and enclosing a copy of the document in question.  The letters from the petitioner’s solicitors were dated 9 July 2004 and 14 August 2004.  There was no response from Weir & Associates to any of these letters.

25.The debtor admitted that he had an encounter with these process servers on both occasions which fell on a Jewish Sabbath.  As he is subject to very strict protocol according to his religion, he is not permitted to carry anything on a Sabbath, he is not allow to take any part in secular matters, he asserted that it is inconceivable he would accept service and he did not accept service of legal process on a Sabbath.

26.Regarding the incident on 2 July 2004, the debtor claimed that as he was walking home from the Synagogue, someone ran up behind him to his side, and suddenly hit him on his lower ribs with the back of the hand.  He thought that was a young man, although he was not sure as it was dark.  He heard something dropped to the ground.  The debtor did not stop and continued to walk.  In a later affirmation, he added that that person had said two words “Bun Dan” meaning idiot in Chinese, that person then ran away and the debtor did not hear any one say anything of the contents of what was dropped on the ground.

27.The letter of the petitioner’s solicitors dated 9 July 2004 had clearly come to the notice of the debtor, as that letter was passed on by him to 2 rabbis who wrote letters of complaint dated 27 July 2004 and 3 August 2004 to the Law Society against the petitioner’s solicitors in effecting service on a Jewish Sabbath outside the Synagogue.

28.As for the incident on 13 August 2004, the debtor claimed that as he was walking home from the Synagogue, a young lady yelled out: “Here are your bankruptcy papers”.  She made no attempt to hand him anything but threw something on to the road and he just continued on his way.

29.On the debtor’s account, the process servers did not attempt to serve him with the documents at all on either occasion.

30.I have no hesitation in rejecting the debtor’s version insofar as this differs from the evidence of Mr Yuen and Ms Yuen.  Their evidence was not shaken in cross-examination, they have not hesitated in giving answers which may not appear favourable to them.  I found it inherently unlikely that Mr Yuen would have acted on 2 July 2004 in the manner as described by the debtor.  I do not accept the debtor’s suggestion that Mr Yuen might have been casual about his work.

31.It was submitted on behalf of the debtor that whilst there is no legal prohibition against serving legal documents on him on a Jewish Sabbath under the laws of Hong Kong, the petitioner knew or ought to have known that the debtor cannot accept service on a Jewish Sabbath and to effect service on the debtor in such circumstances is to deny the debtor’s right to practise his religion.  It was suggested that this may have a bearing on the finding if the process server had brought the nature of the document sought to be served to the debtor’s notice, as there may be a doubt if the nature of the documents sought to be served had come to the debtor’s notice as the debtor’s mind would not be occupied with secular matters on a Sabbath day.

32.I am unable to see any connection whatsoever between the two.  Besides, on the debtor’s evidence, far from not being occupied with secular thoughts on 2 July 2004, the debtor said he was concerned and very alert when he came out of the Synagogue that evening, as it was unusual to see someone standing outside the Synagogue at that hour.  I also fail to see what Article 18 or Article 27 of the International Covenant on Civil and Political Rights, or Article 23 of the Hong Kong Bill of Rights, which provide that every one shall have the right to freedom of religion and to manifest in public his religion, would have anything to do with the present case.

33.I find that the petitioner had done all that was reasonable to bring the statutory demand to the debtor’s attention, by effecting service of this document on the debtor on 2 July 2004 in the manner as described by the process servers and by writing to the debtor’s solicitors on 9 July 2004.  The fact that the debtor had refused to accept service of the demand is not relevant.

34.As for service of the petition, I am satisfied on the evidence of Ms Yuen that she had told the debtor of the nature of the document she wished to serve on him, that the debtor had refused to accept service, and that she had left it as nearly in his possession or control as she could.

35.The objection raised by the debtor on defective service of the statutory demand and petition fails.  I make a bankruptcy order against him.  The petitioner’s costs in the petition including the costs reserved on 15 September 2004, 15 November 2004 and 6 December 2004 are to be paid out of the debtor’s estate.

Mr Francis Chong of Messrs Tai, Tang & Chong, for the Petitioner

Mr Simon Woo, instructed by Messrs Weir & Associates, for the Debtor

The Official Receiver, attendance excused

Appeal by the debtor to Court of Appeal dismissed. Please refer to CACV14/2005 dated 10 May 2006