RE KE JUN XIANG

HCB 5753/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 5753 OF 2012

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D E C I S I O N

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1.  I have before me a petition presented on 3 September 2012.  It is based on a default judgment of the Court of First Instance in High Court Action No 1168/2009, dated 10 June 2009.

2.  The statutory demand was served by advertisement in a Chinese newspaper in Hong Kong on 15 November 2010.  However, the judgment was set aside by a master unconditionally on 20 April 2011.  The Master’s order was upheld by a deputy judge on 30 June 2011.

3.  On 17 April 2012, the Court of Appeal allowed the creditor’s appeal to the extent of imposing a condition for setting aside the default judgment requiring the debtor to pay HK$25 million into court.  The debtor not having complied with the condition, the creditor presented the bankruptcy petition in these proceedings.  It appears that the petition had been adjourned more than once pending the debtor’s application for leave to appeal to the Court of Final Appeal.  Eventually, on 12 July 2013, the Appeal Committee of the Court of Final Appeal refused the debtor’s application for leave to appeal against the decision of the Court of Appeal.

4.  The parties swiftly arrived at a compromise thereafter.  The terms of compromise are set out in the schedule to the consent summons dated 16 July 2013 in these proceedings.

5.  In summary, the debtor, by the compromise, agrees to pay the creditor a total sum of HK$33 million in full and final settlement of all of the creditor’s claims including the petition herein, and the claims in the High Court action and the appeals, inclusive of all costs.  The agreed sum is to be paid by nine instalments with the last one being in the sum of HK$12 million to be paid by the end of April 2014.  I am told that nine post‑dated cheques have indeed been issued by the debtor in accordance with the terms of the compromise.

6.  A consent summons was then filed, as I have mentioned, dated 16 July 2013, in these proceedings in the form of a Tomlin order asking for all further proceedings in the petition to be stayed except for the purpose of carrying out the order to be made on that summons and the terms set out in the schedule attached thereto.  An order was also sought for the petition to be adjourned to a date in mid‑May 2014 to be appointed by the court.  The order sought by the consent summons was not, at that time, granted by the Master.

7.  The creditor and the debtor then issued another summons dated 30 July 2013 for the adjournment of the petition for three months.  That was not granted by the court either.

8.  On 31 July 2013, the Master adjourned the petition to 21 August 2013.  In August the petition was further adjourned to a master on 2 October 2013.  On 2 October 2013 the petitioner asked for an adjournment of the petition for four weeks to allow the debtor time to pay the outstanding instalment due at the end of September.  That was refused and the petition came before Mr Justice Ng on 7 October 2013, the debtor having by then paid the outstanding instalment.  Mr Justice Ng adjourned the matter to today for argument if the petitioner wished to insist on an adjournment of the petition to May 2014.

9.  So far as the compromise is concerned, the debtor has, to date, I am told, complied with the conditions, having paid the fourth instalment due at the end of October 2013, except for being a little late in respect of the instalment payable at the end of September 2013.

10.  Mr Ernest Ng, who appears for the petitioner, submits that there are reasonable prospects of the debt being paid in full in accordance with the settlement agreement.  He submits, however, that the court should grant a stay and an adjournment of the petition because, first, the petitioner would have to incur extra costs in issuing a new petition if the debtor subsequently fails to pay any part of the settlement sum.  In this sense, the costs of the current petition would have been wasted if the petition was not stayed and adjourned.  Secondly, he submits that the petitioner had encountered difficulty in serving the statutory demand and in relation to the service of the petition. 

11.  Mr Yan, on behalf of the debtor, takes a neutral position whereas Ms Carman Chan, of the Official Receiver’s Office, submits that the court should not grant such a lengthy adjournment of the petition or stay the proceedings herein.

12.  It is important, in my view, to recognise that there is a public interest in bankruptcy proceedings because such proceedings concern matters of status affecting third parties.  As the Court of Appeal stated in Ho Ying Pat, Bobby v Overseas Way (China) Limited [2011] 2 HKLRD 837 at paragraph 13:

“... it is in the public interest that those matters should be processed quickly ... A lengthy adjournment of a petition would be at odds with those considerations.”

13.  One of the ways in which third parties may be affected by bankruptcy proceedings is of course through the avoidance provisions.  The longer a petition is adjourned the more transactions may be potentially affected by those provisions.  It is true that the cases that have been decided by the courts in relation to whether lengthy adjournments should be granted are mostly cases concerning applications for adjournment by the debtor which were opposed by the petitioner.  Here it is the petitioner himself who seeks a lengthy adjournment of the petition.  But the public interest in seeing bankruptcy proceedings expeditiously dealt with, in my opinion, remains the same.  That is not to say that the court will never grant a stay or an adjournment of bankruptcy proceedings if there are special circumstances that warrant such a course.

14.  In the present case, however, I am not satisfied that the points about costs being wasted potentially, and difficulty of service, are sufficient to justify a stay of these proceedings and an adjournment of the petition to May 2014.

15.  In addition, I have been informed by Ms Chan that there is indeed another petition in HCB 5542/2013 presented against the same debtor.  That petition was listed before Mr Justice Ng on 7 October 2013 and has been adjourned for argument.

16.  In my judgment, the petitioner having come to terms with the debtor in the circumstances I have described, the petition ought either to be withdrawn or dismissed.

(Discussion re withdrawal or dismissal of petition and costs)

17.  Accordingly, the petition is dismissed.  The costs of the Official Receiver be paid out of the deposit in the sum of $6,500.

18.  There will be no order as to costs as between the petitioner and the debtor.