Smart Marine Co Ltd v. Wong Chung Fai t/a Chung Fai Trading Co.
|
HCSD 42/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE APPLICATION TO SET ASIDE A STATUTORY DEMAND NO 42 OF 2013 ____________
___________________________________ J U D G M E N T 1.There are 3 applications before the court:
A. EXTENSION OF TIME FOR APPLYING TO SET ASIDE A STATUTORY DEMAND 2.This is not opposed. I grant the extension of time sought. B. LEAVE TO FILE THE 2ND AFFIRMATION OF THE APPLICANT 3.I believe the applicant meant the 3rd affirmation as he has filed 2 previously. The 3rd affirmation of the applicant was sworn on 13 February 2015, 4 days before this hearing. The explanation given by the applicant was that because of his financial situation, he was not able to instruct lawyers until 10 February 2015. His 2nd affirmation affirmed on 26 August 2014 was prepared without legal advice and admittedly did not address the issues raised by the respondent. 4.The sheer lateness in seeking to adduce affirmation evidence is enough for the court to reject its filing. 5.The applicant was represented between December 2013 and 14 July 2014. He has got the bulk of the documents relied on by the respondent by 17 January 2014. He has been told by me to seek legal advice as soon as I became aware that he was acting in person. 6.The 3rd affirmation purports to respond, 7 months later, to the issues raised in the respondent’s affirmation dated 8 July 2014 and introduced new evidence which he could have told his then solicitors. Matters like the applicant’s language ability, his business with various vessels including the one in question (Green Cypress), how he handled the emails and the potential counterclaim could even have been included in his 1st affirmation. 7.The 3rd affirmation was served on the respondent just the day before the hearing, leaving it with no reasonable time to respond to it. 8.There is no reasonable explanation for the delay and I dismiss the application for filing the 3rd affirmation. C. SETTING ASIDE THE STATUTORY DEMAND DATED 27 NOVEMBER 2013 9.The applicant was trading as Chung Fai Trading Company. The respondent alleges that the applicant had entered into a Ship Management Agreement dated 3 September 2009 with the respondent (“the agreement”) for the respondent to manage his vessel called “Green Cypress”. Such services included the safety and security of the vessel, provision of a competent crew, repair and general maintenance of the vessel and taking out insurance. The respondent alleges that the applicant has failed to settle the monthly invoices due under the agreement. For the period of 3 September 2009 to 17 March 2010, the total due was US$289,466.99. At that time, the applicant used the excuse of the vessel not having left the port to decline payment. 10.The respondent issued a statutory demand dated 27 November 2013 and the applicant’s solicitors received the same 2 days later. The application to set aside the statutory demand was issued on 23 December 2013. 11.The court may set aside a statutory demand pursuant to rule 48(5) of the Bankruptcy Rules. The applicant relies on the following sub-rules:
Ground (b): the debt is disputed on substantial grounds 12.For ground (b), the burden is on the applicant to put forward his defence with sufficient clarity and to adduce sufficiently precise factual evidence to satisfy the court that he has a bona fide dispute on substantial grounds. Once the court finds some substance in the defence, it shall set aside the statutory demand. It would not undertake a trial during this summary procedure. The party claiming to be the creditor has to establish its claim to the alleged debt by instituting a proper action for determination of that claim. Usually the court will not embark on an inquiry as to the validity of the debt unless the dispute is capable of summary disposal, for example, that the facts are not in dispute or indisputable in the light of incontrovertible evidence. See Andrew Wyles Waters v. Malahon Credit Company Limited, HCSD24/2001, 27 February 2003, §§6-7, 11, Deputy Judge To (as he then was). 13.The applicant alleges that the signature on the agreement was not his or of anybody authorized by him. He has never hired the respondent to provide ship management services. This is the only ground relied on in his 1st affirmation in support, filed at a time when he was represented. 14.The applicant has exhibited a sample of his true signature which did not bear resemblance to that on the agreement. It was not clear under what circumstances this sample signature was prepared. There was no other document executed at or about the time of the agreement that was exhibited. One single sample of signature can hardly satisfy the court that the applicant’s signature on the agreement was not his. 15.To refute the applicant’s assertions, the respondent stated that the agreement was signed at Port Ningde in Fujian. A few days before the signing, the respondent received copies of the applicant’s ID card, business registration certificate and his name card (“the applicant’s documents”). The following documents also came into existence at the time of execution of the agreement:
16.The respondent relies on the similarity of the applicant’s signatures on the agreement and item (iv) in the preceding paragraph. I am mindful that there is no expert evidence on signature. I will not, on the similarity in signatures alone, find against the applicant. 17.What I find to be more important is that the applicant never explained why the chop of Chung Fai Trading Company appeared on the agreement. He could not explain why the respondent has got a copy of his documents set out in paragraph 15 above. 18.Mr Kim of the respondent used to liaise with the applicant through his email stated on the applicant’s name card. Mr Kim was not conversant with Chinese. He engaged a Mr Sim as agent who would translate the contents of the emails into Korean and Chinese to make them comprehensible to Mr Kim and the applicant. The respondent relies on 2 emails as the applicant’s admission of liability.
19.In my view, these emails contradicted the applicant’s averment that he has never hired the respondent to provide ship management services, although it was not clear from the 2 emails the amount due from him. 20.Further, in the pre-hearing correspondence of January and April 2014 and his affirmation, the applicant has never denied ever receiving the invoices or disputed the amounts stated therein. 21.In his 2nd affirmation, the applicant complains that the respondent has failed to handle the matter with the Chinese Embassy, report to the police or follow the international maritime procedure (國際海事船級社). However, he has not explained the impact of such failure. 22.The applicant has only raised a cloud of objections without substance. Ground (b) is not established. Ground (a): the appearance of the existence of a counterclaim 23.The applicant claims that as owner, he was entitled to possess Green Cypress. The respondent should have been in possession of the vessel as it has been managing the vessel for the applicant. However, since occurrence of the dispute, the respondent had never offered a return of the vessel in question, nor has the respondent provided information as to the whereabouts of the vessel. Since the value of the vessel far exceeds the amount stated in the statutory demand, the applicant would have a counterclaim or set-off in relation to the vessel and arguably the vessel provides a security over the debt. 24.This ground only features in his counsel’s submission and is only raised in the 3rd affirmation of the applicant of which filing has been refused. In any case, disregarding the admission that the respondent manages the vessel for the applicant, there is no evidence that the respondent is still in possession of the vessel, 5 years since the debt fell due. There is no evidence that the applicant has ever asked the respondent to return the vessel to him or provide information as to its whereabouts. There is also no evidence of the value of the vessel. The counterclaim appears to be an afterthought. Ground (a) fails. Ground (d): other grounds on which the statutory demand ought to be set aside 25.There must be circumstances which would make it unjust for the statutory demand to give rise to those consequences in the particular case and the court's intervention is called for to prevent that injustice: in Re A Debtor [1989] 1 WLR 271, 276, Nicholls LJ (as he then was). 26.Ms Chung submits that the statutory demand circumvented the arbitration clause in clause 10 of the agreement. She contends that, pursuant to section 20 of the Arbitration Ordinance, Cap 609, the court should stay the proceedings when there is an enforceableagreement to arbitrate: Guangdong Agriculture Co Ltd v Conagra International (Far East) Ltd [1993] 1 HKLR 113. 27.Again this is a ground that only features in counsel’s submission. The applicant has not even relied on clause 10 in his 3rd affirmation. In any case, assuming Hong Kong law applies, as a matter of law, he is not entitled to rely on the arbitration clause for 2 reasons. 28.Firstly, this reliance on the arbitration clause was not requested for “when submitting his first statement on the substance of the dispute”: section 20(1) of the Arbitration Ordinance. 29.Secondly, the applicant challenges the validity of the agreement. Under section 34 of the Arbitration Ordinance (containing Article 16(1) of UNCITRAL Model Law), “an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.” 30.In Fiona Trust & Holding Corporation and others v Privalov and others [2007] 4 All ER 951, the House of Lords interpreted a similar provision under the Arbitration Act 1996 and held that the arbitration agreement could be invalidated only on a ground which related directly to the arbitration agreement. An example is where a party to a document containing both the main contract and the arbitration clause alleges forgery. The ground of attack is not that the main agreement is invalid, but that the signature to the arbitration agreement, as a ‘distinct agreement’, is forged. (at §§17, 34, 35) 31.The present case falls within the example given by the House of Lords. On the applicant’s case, there is simply no enforceable agreement to arbitrate within the meaning of the Guangdong Agriculture case and there is no justification to stay any proceedings. 32.There is nothing unjust in allowing the statutory demand to stand. CONCLUSION 33.None of the grounds have been made out. I dismiss the application to set aside the statutory demand. I make an order authorizing the creditor to present a bankruptcy petition forthwith. 34.On a nisi basis, I order the applicant to pay the costs of the respondent, which I summarily assess and allow at $80,000. 35.I thank counsel for their assistance.
Ms Katy Chung, instructed by Maurice W M Lee Solicitors, for the applicant Mr Arthur Redisall Lee, instructed by Joseph S C Chan & Co, for the respondent | ||||||||||||||||||||||
Cases cited in this judgment
Other judgments that cite this case