Re Chan Wai Man Anthony

HCB 4957/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS NO. 4957 OF 2010

____________

____________

Before: Mr Recorder A Chow, SC in Court

Date of Hearing: 13 April 2011

Date of Judgment: 26 April 2011

_______________

J U D G M E N T

_______________

1.This is a creditor’s petition for a bankruptcy order again Chan Wai Man Anthony (“the Debtor”).

The Judgment debt

2.The Petitioner, ACE Life Insurance Company Ltd, formerly known as New York Life Insurance Worldwide Ltd, is an insurance company carrying on business in Hong Kong.  The Debtor was formerly an agent engaged by the Petitioner to market and sell insurance policies for the Petitioner pursuant to a series of written agreements made in June and July 2006.

3.Following the termination of said agreements effective on 6 April 2008, the Petitioner commenced an action in the District Court of Hong Kong (DCCJ 3843/2008) against the Debtor for repayment of certain special allowances and confirmation bonus, in the net amount of HK$143,955.67, advanced to the Debtor by the Petitioner.

4.On 24 October 2008, the Petitioner obtained default judgment (“the Judgment”) against the Debtor in DCCJ 3843/2008 for the principal amount of HK$143,955.67 plus interest thereon and costs of the action.

The Settlement Agreement

5.A partial repayment of the judgment debt in the amount of HK1,300.00 was made by the Debtor to the Petitioner on 12 March 2009.

6.On 21 April 2009, the Petitioner and the Debtor entered into a written Settlement Agreement (subsequently supplemented by a letter dated 29 June 2009), under which the Debtor agreed to pay to the Petitioner the total amount of HK$189,524.68 (inclusive of interest on the principal debt calculated up to 31 December 2011) by a series of 40 instalments (excluding the partial payment of HK$1,300.00 made on 12 March 2009) on dates between 21 April 2009 and 30 June 2012 specified in Clause (2) of the Settlement Agreement in satisfaction of the outstanding balance of the judgment debt.

7.It is expressly provided in Clause (3) of the Settlement Agreement that if the Debtor fails to pay or pay in full any of the instalments on the respective due dates, the Petitioner shall be entitled to enforce the Judgment forthwith for the recovery of all outstanding amounts then due and owing in a lump sum without further notice.

8.After payment of the instalment due on 30 May 2009, the Debtor has defaulted in paying any further instalments under the Settlement Agreement.

The Statutory Demand and Bankruptcy Petition

9.The Debtor’s default led to a statutory demand (“the Statutory Demand”) being issued by the Petitioner dated 10 February 2010.  The Statutory Demand was served on the Debtor personally on 2 March 2010.

10.The Statutory Demand is for the amount of HK$164,671.94, made up of (i) the balance of the principal debt in the sum of HK$143,869.33, (ii) the balance of fixed costs in the sum of HK$1,367.51, and (iii) the legal costs and disbursement agreed under the Settlement Agreement in the sum of HK$19,435.10.  The Statutory Demand has neither been complied with nor set aside.

11.On 7 July 2010, the Petitioner presented the Bankruptcy Petition herein against the Debtor.  The Bankruptcy Petition was served on the Debtor personally on 21 July 2010.

The Debtor failed to set aside the Judgment

12.On 21 January 2011, the Debtor made an application in the District Court to set aside the default Judgment.

13.The Debtor’s application was dismissed by Master G Own on 3 March 2011.  The Debtor’s further appeal against the decision of Master G Own was dismissed by Deputy Judge Wilson Chan on 29 March 2011.  I am told that the Debtor has not applied for leave to appeal against the decision of the learned Deputy Judge to the Court of Appeal.

14.Therefore, the position at present is that the Judgment is valid and binding on the Debtor.

Petitioner has failed to prove the debt

15.At the hearing of the Petition, Miss Minhao for the Petitioner made it clear that the Petition is based on an amount outstanding under the Settlement Agreement and not under the Judgment.  That this is so is clear on the face of the Statutory Demand and the Bankruptcy Petition.

16.However, there is nothing in the Settlement Agreement which provides that, upon default in payment of any instalment on the due date by the Debtor, the whole amount of the outstanding indebtedness under the Settlement Agreement shall immediately become due and payable.  When this was point out to Miss Minhao, she responded by relying upon Clause (5) of the Settlement Agreement, which states as follows: “The granting of indulgence of time will not in any way affect the rights of the Creditor to take immediate action against the Debtor for the recovery of the Debt then due and owing to the Creditor”.  It seems to me obvious that this clause only means that the right (if any) of the Petitioner to take action against the Debtor to recover the “Debt” (defined in Clause (2) of the Settlement Agreement to mean the sum of HK$189,524.68 more particularly set out in Schedule A to the Settlement Agreement) would not be affected by any granting of time by the Petitioner to the Debtor to make payment of any instalment, but does not give the Petitioner a right to treat the whole outstanding indebtedness under the Settlement Agreement as immediately due and payable upon default by the Debtor in making payment of any instalment on the due date.

17.Miss Minhao did not refer the Court to any other basis to support the Petitioner’s argument that, in the circumstances which have occurred, the whole amount of the outstanding indebtedness under the Settlement Agreement has become immediately due and payable by the Debtor to the Petitioner.

18.I have considered whether the Petitioner can rely upon Clause (3) of the Settlement Agreement, which as earlier mentioned provides that the Petitioner shall be entitled to enforce the Judgment forthwith for the recovery of all outstanding amounts due and owing in a lump sum upon the Debtor’s failure to pay or pay in full any of the instalments on the respective due dates.  However, Miss Minaho for the Petitioner has maintained that the Statutory Demand and the Bankruptcy Petition are not based on the Judgment.  It is also clear that the amounts mentioned in the Statutory Demand and the Bankruptcy Petition include what is described as the “Agreed Legal Costs and Disbursement” in the sum of HK$19,435.10, which is not something provided for in the Judgment.

19.In all the circumstances, I am not satisfied with the proof of the debt relied upon by the Petitioner as the basis of the Bankruptcy Petition.

20.It may be that the Petitioner is able to proceed with another statutory demand based on the Judgment, but that is another matter.

The Debtor’s opposition to the Petition

21.The above conclusion makes it unnecessary for me to consider the validity of the Debtor’s grounds of opposition to the Petition.  For the sake of completeness, I shall deal with them briefly.

22.The Debtor filed an affirmation on 10 January 2010 in opposition to the Petition and has made further submissions at the hearing of the Petition to oppose the Petition.

23.Essentially, three points have been raised by the Debtor in opposition to the Petition, namely, that:-

(1)   the default Judgment was improperly obtained by the Petitioner;

(2)   the termination of the his agency agreement by the Petitioner was wrongful;

(3)   it was a condition of the Settlement Agreement that the Petitioner would carry out investigation or inquiry into the Petitioner’s claim of wrongful termination of his agency but the Petitioner has failed to perform such condition.

24.In respect of (1) and (2), the Debtor’s arguments have been rejected by Master G Own and Deputy Judge Wilson Chan in the District Court.  In any event, the Judgment is at present valid and binding on the Debtor.

25.In respect of (3), the Debtor’s allegation is not supported by his affirmation filed on 10 January 2010.  In that affirmation, the Debtor alleged instead that he entered into the Settlement Agreement because the Petitioner had told him that if he did not repay the outstanding debt the Petitioner would apply for a bankruptcy order against him.  Further, the alleged condition is not referred to in the Settlement Agreement, or mentioned in the correspondence leading up to the Settlement Agreement.

26.Overall, had I been satisfied with the Petitioner’s proof of the debt relied upon as the basis of the Bankruptcy Petition, I would not have considered that the Debtor has shown that there is a bona fide dispute on substantial grounds of the debt.

Conclusion

27.I dismiss the Bankruptcy Petition with costs to the Debtor.

Miss Liao Minhao, of Messrs Kennedys, for the Petitioner

The Debtor, in person

The Officer Receiver be excused