Dbs Bank (Hong Kong) Ltd v. Ng Hi Yin Hydi
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HCB 15655, 15656/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO. 15655 OF 2009 ------------------------ BETWEEN
Before: Deputy High Court Judge Pow, SC in Court Date of Hearing: 2 May 2012 Date of Judgment: 2 May 2012 Date of Reasons for Judgment: 11 May 2012 ----------------------------------------- REASONS FOR JUDGMENT ----------------------------------------- BACKGROUND 1.By way of 4 separate Petitions dated 29 December 2009 which are to be heard together, the Petitioner (DBS Bank (Hong Kong) Limited) now seeks to bankrupt the following 4 debtors:
2.On 1 December 2003, the Petitioner granted banking facilities to two Hong Kong companies, namely, Diorva Knitters Limited (“Diorva HK”) and Golden Magnificent Garments Limited (“Golden”). This facility was granted under a facility letter dated 1 December 2003 (the “2003 Facility Letter”) which has not been produced in evidence. At the material times, these two Hong Kong companies had/have the following shareholders and directors:-
3.On 4 December 2003, pursuant to the 2003 Facility Letter, Ng and Lam executed 2 “all-monies” guarantees in favour of the Petitioner, by which they both guaranteed the indebtedness that would become owing by Diorva HK and Golden to the Petitioner (the “2003 Guarantees”). According to public records, Hydi and Lee were, at the material times, the only two shareholders and directors of Golden. However, for reasons not explained by the Petitioner in evidence, Hydi and Lee were not required to act as guarantors for the debts of Golden. On the contrary, Ng and Lam were requested to and did act as guarantors for debts of Golden when neither of them were shareholders or directors of Golden. 4.At the time of execution of the 2003 Guarantees, Ng and Lam were each given a “Notice to individual third party security provider” written in both English and Chinese (the “Third Party Notices”). Each of them also signed on a bilingual Confirmation and Acknowledgement to signify their knowledge and acceptance (the “Confirmations”). 5.In June 2008, the Petitioner again agreed to grant banking facilities to Diorva HK and Golden. The nature and terms upon which such banking facilities were granted had been set out in facility letter dated 12 June 2008 (the “2008 Facility Letter”). This 2008 Facility Letter has been adduced in evidence which contains the following salient points:-
6.Pursuant to the 2008 Facility Letter:
7.The Petitions against Hydi and Lee are based on their liability as guarantors for Golden under the 2008 Guarantees, Golden having default in making full repayment to the Petitioner in respect of the banking facilities granted under the 2008 Facility Letter. The debt due and remained outstanding as at the date of the Statutory Demands (28 October 2009) comprised of HK$12,563,007.06 and US$213,777.65 with further interest accruing thereafter. 8.The Petitions against Ng and Lam are based on their liability as guarantors for both Diorva HK and Golden under the 2003 Guarantees, both companies having defaulted in making full repayment to the Petitioner in respect of the banking facilities granted under the 2008 Facility Letter. The debt due and remained outstanding as at the date of the Statutory Demands (28 October 2009) comprised of HK$13,593,078.84 and US$213,777.65 with further interest accruing thereafter. 9.Counsel for the Petitioner and the debtors agreed that the existence, nature and quantum of the outstanding indebtedness of Golden and Diorva HK (in their capacities as principal debtors) towards the Petitioner are not in dispute. 10.Basing on the evidence and skeleton arguments filed by the parties, the debtors’ opposition to the Petition can be summarized as follows:-
11.At the hearing, Counsel for the Petitioner and Counsel for the debtors agreed that if the Court is not satisfied with the propriety of the services of the various Statutory Demands, the Petitions would have to be dismissed following the decision of Re Lam Lai Wah Susanna [2002] 4 HKC 334, at paragraphs 17 to 21. In the end, I ruled that services of the Statutory Demands on the debtors were defective and accordingly I dismissed all four Petitions. I now give written reasons for my decision. I would add that consequent upon my ruling on service, parties agreed that I need not deal with the arguments on “bona fide dispute on substantial grounds”. I would also add that Counsel for the debtors informed the Court that in any event, he did not wish to argue the “secured indebtedness ” point. APPLICABLE LEGAL PRINCIPLES 12.There is no disagreement between the parties on the applicable legal principles. In relation to the service of a Statutory Demand, the requirements and the proof of service of the Statutory Demand are provided for in rr.46 and 49 of the Bankruptcy Rules, Cap 6A. 13.Pursuant to r.46(2) of the Bankruptcy Rules, there should be personal service of the Statutory Demand where that is practicable. Where it is not, the Petitioner must do all that is reasonable for the purpose of bringing the Statutory Demand to the debtor’s attention. What is reasonable must be adjudged objectively in the light of the information actually or constructively available to the creditor at the time (Re Wong Lei Kwan Joanne [2009] 3 HKLRD 173 at para. 32; and Re Lam Lai Wah Susanna, ibid, at para. 22). 14.Service of a Statutory Demand by advertisement can be sufficient for the purposes of r.46(2) where personal service cannot be effected. In such a case, if all other reasonable means of bringing the Statutory Demand to the debtor’s attention have been attempted, such an advertisement will satisfy the requirements of r.46(2) (Re Pang Mei Lan May [2005] 1 HKC 319 at para. 23). 15.Further, as observed by Barma J in the judgment of Re Pang Mei Lan May, at paras. 25 to 26, the extent of a petitioning creditor’s duty to do all that is reasonable for the purpose of bring the Statutory Demand to the debtor’s attention would entail the following:-
16.Furthermore, on the burden of proof, Barma J (at paras. 35 to 37) explained the approach to be adopted as follows:-
STEPS UNDERTAKEN BY THE PETITIONER 17.According to the affirmations of service filed by the Petitioner, attempts to personally serve the Statutory Demands and/or to bring the Statutory Demands to the attention of the debtor were effected in the following ways:- HCB 15655/2009 (re Hydi) and HCB 15656/2009 (re Lee)
HCB 15657/2009 (re Ng) and HCB 15658/2009 (re Lam)
18.In the affirmations filed by the debtors in opposition of the Petitions, it has been revealed that in fact, the Petitioner and the Diorva Group and DBS Bank (China) were engaged in a debt restructuring scheme in 2009. During the negotiations, the Petitioner and DBS Bank (China) were represented by the same team of officers and led by Mr Wayne Yuk Wing Cheung (the Petitioner’s deponent in these proceedings). These negotiations resulted in a Facility Letter dated 11 May 2009 being issued in respect of banking facilities granted by the Petitioner to Diorva HK and Golden (“2009 Facility Letter”). The Petitioner did not dispute the above facts. Unfortunately, the 2009 Facility Letter has not been included in the evidence. The Petitioner also admitted that pursuant to the 2009 Facility Letter, a total of 6 guarantees were executed by 3 Chinese companies particularized hereunder in respect of the banking facilities granted to Diorva HK and Golden. These 3 Chinese companies were:-
19.The 2 Chinese guarantees executed by Xinfeng Fengfu stated Lee as its legal representative“法定代表人”. Lee executed the 2 guarantees given by Xingfeng Fengfu over the indebtedness of Diorva HK and Golden respectively in her capacity as a legal representative of Xingfeng Fengfu. In respect of the guarantee given by Xingfeng Fengfu for Golden’s indebtedness, Lee also executed it in her capacity as an authorized signatory of Golden. 20.The 2 Chinese guarantees executed by Shenzhen Diye stated Ng as its legal representative and he executed them in that capacity. For the guarantee given in respect of Golden’s indebtedness, Lee executed it in her capacity as an authorized signatory of Golden. For the guarantee given in respect of Diorva HK’s indebtedness, Ng also executed it in his capacity as an authorized signatory of Diorva HK. 21.The 2 guarantees executed by Diorva Shenzhen stated Ng as its legal representative and he executed them in that capacity. For the guarantee given in respect of Golden’s indebtedness, Lee executed it in her capacity as an authorized signatory of Golden. For the guarantee given in respect of Diorva HK’s indebtedness, Ng also executed it in his capacity as an authorized signatory of Diorva HK. 22.The stance taken by the Petitioner is that said 6 guarantees are irrelevant to the Petitioner’s claims under the 2003 and 2008 Guarantees as they relate only to the 2009 Facility Letter. The Petitioner further argued that although it knew of the addresses of the Baoon Premises, the Futian Premises, the Shanghe Premises and the Xingfeng Premises, these addresses should not be taken as the last known addresses of the debtors. In my judgment, these arguments completely missed the point. The evidence of this debt restructuring exercise in 2009 and the resultant acceptance of these 3 PRC companies as guarantors for the banking facilities granted to Golden and Diorva HK indicate that the Petitioner was fully conversant with the inter-relationship between the debtors, Golden; Diorva HK and the 3 PRC companies. After failing to reach the debtors at their respective usual /last known addresses in Hong Kong, it was only reasonable to expect the Petitioner to make enquiries with these 3 PRC companies with a view to contacting the debtors. I am not suggesting that the Petitioner should go all the way to these addresses in the PRC to effect personal services of the Statutory Demands on the debtors. That would, in my view be unreasonable and impracticable. It might also involve a game of “cat and mouse”, not knowing when a particular debtor could be reached at one of those 4 PRC addresses at any given date or time. In any event, I do not think the Petitioner should be expected to effect personal service outside the jurisdiction. However, the Petitioner could send letters, faxes or make telephone calls to these premises with a view to contacting the debtors and making appointments with them for effecting personal service when they should return to Hong Kong. I can readily infer that apart from knowing the addresses of these 4 premises (which the Petitioner admitted), the Petitioner would also have knowledge of their telephone numbers, fax numbers or even email addresses in the course of the debt restructuring exercise. Such attempts to contact the debtors at the PRC premises would not involve any great efforts and would not be unduly burdensome, given the serious consequences to the debtors for failing to comply with the Statutory Demands. There was also a real possibility, to say the least, that the debtors could be contacted and the Statutory Demands be brought to their attention. The Petitioner wholly failed to explain why such relatively simple steps were not undertaken. Neither has the Petitioner attempted to establish that these steps, even if taken, could not or would not have led to the Statutory Demands being brought to the debtors’ attention. I would also add that in fact, soon after the advertisements of the Petitions in newspapers were brought to the attention of the debtors they promptly intervened in these proceedings. 23.Counsel for the debtors also made another point which I think is of merits. He referred me to an “Admissions of Facts Pursuant to Notice” filed by the Petitioner pursuant to Order 27, rule 2. In this document, the Petitioner admitted knowledge of the fact that Diorva HK was wound up on 26 August 2009 and that liquidators were appointed. In other words, at least in relation to Ng and Lam, the Petitioner should have known that the liquidators of Diorva HK was a possible source of information as to their whereabouts or contact details. Again, no explanation whatsoever has been provided by the Petitioner for their failure to make enquiries with the liquidators of Diorva HK. 24.In the circumstances, I am satisfied that the Petitioner has failed to comply with Rule 46(2) of the Bankruptcy Rules and I accordingly dismiss all four Petitions with costs to each of the debtors (Respondents) to be taxed if not agreed. Counsel for the debtors referred me to a without prejudice letter written by the solicitors representing Hydi and Lee to the Petitioner’s solicitors with a view to arguing for a taxation basis more favourable than party-and-party basis. The said letter merely threatened that if their offer were not accepted, they would invite the Court to make an order for summary assessment. At the end of the hearing, I asked Counsel for the debtors whether he was ready for summary assessment and he answered in the negative. In my view, the said letter do not constitute a valid reason for changing the basis of taxation. I therefore ordered that costs be taxed on party-and-party basis.
Mr Poon Siu Bunn, instructed by Siao, Wen & Leung, for the creditor Mr Jenkin Suen, instructed by Louis K Y Pau & Co., for the debtors Official Receiver’s attendance excused | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
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Further hearings and rulings under HCB 15655/2009