RE CHAN KONG AND OTHERS

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J U D G M E N T

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1.  This was the hearing of a bankruptcy petition presented by the Petitioners against Mr Chan Kong (“the Debtor”) on 15 January 2009.  The petition is based on a debt of HK$72,500, arising from a costs order made by the Court of Appeal on 12 June 2008 in CACV 161 of 2006, by which the Debtor was ordered to pay the Petitioners’ costs of and occasioned by two adjournments of the appeal on 14 September 2007 and 12 June 2008 forthwith, such costs having been assessed by the Court of Appeal on a gross sum basis in the amount of HK$72,500.

2.  The petition is opposed by the Debtor, who has represented himself in these proceedings.  His grounds of opposition are set out in two Notices of Grounds for opposing the petition, dated 13 March 2009 (“the First Notice”) and 23 April 2009 (“the Second Notice”) respectively, an affirmation filed on 13 May 2009 (“the First Affirmation”), and a further affirmation filed without leave shortly before this hearing, on 2 October 2009 (“the Second Affirmation”).  Although the Petitioner, through its counsel Mr Chang, objected to the filing of the Second Affirmation, I decided to allow it to be referred to de bene esse.

3.  The Second Affirmation was filed in support of a summons taken out by the Debtor on the same date, which asked for the making of a number of orders.  The first two orders sought are the dismissal of the petition and costs in the Debtor’s favour, which would be the outcome if his resistance to the petition were successful.  To this extent, the summons is unnecessary. The remaining orders sought involve the setting aside of orders made in other proceedings which have already concluded and the making of orders different to those made therein, the granting of relief which had been sought unsuccessfully in those other proceedings, and the referral of the Debtor’s complaints against the Petitioners to the police for further investigation.  None of these are matters which the court, exercising its bankruptcy jurisdiction can or should deal with.  I therefore dismiss the summons.

4.  In order to understand the Debtors’ grounds of opposition, it is necessary to set out the background to the debt and to the petition.  This can be summarised as follows:-

(1) The Debtor was the Plaintiff in HCA 4101 of 2001, in which the Petitioners were 17 of the 30 persons named as Defendants.  The basis of the his claim was that he was a member of a tong known as the Chan Him Muk Tong, or of the Chan Li Chai partnership, which was a partnership between the Chan Him Muk Tong and another tong known as the Li King Sun Tong, and as such was entitled to an interest in the assets of the two tongs and/or the partnership, which he alleged had been misapplied in various respects by the Petitioners and their co-Defendants.  He sought various declarations, accounts and inquiries, and orders for payment by way of relief.

(2) The Debtor’s Statement of Claim was amended in August 2002, and re-amended in November 2005.  Shortly afterwards, the Petitioners applied to strike out the Re-Amended Statement of Claim.  On 10 March 2006, Deputy Judge Saunders (as he then was) struck out the Re-Amended Statement of Claim on the ground that it disclosed no reasonable cause of action.  It is pertinent to note that no evidence was filed in support of the application to strike out, and that the argument proceeded on the basis only that the pleading disclosed no reasonable cause of action (see paragraph 7 of the judgment of Deputy Judge Saunders and the recitals to the order made by him).  The point on which the Petitioners succeeded was that as tongs could only have interests in New Territories land, the Debtor’s claim, which related to property on Hong Kong Island, and to an interest in a partnership, was bound to fail.

(3) Up to this point, the Debtor was legally aided and had been represented by solicitors and counsel assigned by the Director of Legal Aid.  Thereafter, he acted in person.

(4) The Debtor appealed to the Court of Appeal (CACV 161 of 2006).  On 14 September 2007, the Court of Appeal (Yuen JA and Waung J) adjourned the hearing of the appeal to give the Debtor an opportunity to formulate a draft Re-Re-Amended Statement of Claim, so as to put forward a possible basis for claim that might arise from his allegation that the asserted partnership between the tongs had been registered under the Chinese Partnerships Ordinance  (Ordinance No. 53 of 1911), which permitted tongs to be registered as partners in a registered partnership.  The Court of Appeal indicated, however, that it would be necessary for the Debtor to put forward a pleading which, apart from referring to the Chinese Partnerships Ordinance, should set out the impact of that ordinance on his claim so as to explain how it gave rise to a claim on his part (see paragraph 25 of the Court of Appeal’s Reasons for Decision dated 19 September 2007).

(5) The appeal was restored for hearing on 12 June 2008, at which time the Debtor had put forward a draft Re-Re-Amended Statement of Claim.  The draft was found to be seriously deficient by a differently constituted Court of Appeal (Yuen JA and Lam J, Waung J having retired), but the court allowed the Debtor a final opportunity to lodge a viable pleading, by further adjourning the appeal on his undertaking to lodge a further re-draft by 12 August 2008, failing which the appeal would be dismissed without further order.  It was on this occasion that the Court of Appeal ordered that the costs of and occasioned by the two adjournments (on 14 September 2007 and 12 June 2008) should forthwith be paid by the Debtor to the Petitioner, and assessed such costs in the amount of HK$72,500. This was the debt on which the petition was based.

(6) The Debtor failed to lodge a re-draft of the Re-Re-Amended Statement of Claim within the time allowed.  Accordingly, on 15 August 2008, Yuen JA ordered that his appeal be dismissed.

(7) On 20 August 2008, the Debtor applied for leave to appeal to the Court of Final Appeal against the Court of Appeal’s order of 12 June 2008.  The following day, he applied for a stay of execution of the order (in particular the part requiring him to pay the Petitioners’ costs forthwith) pending the hearing of his appeal to the Court of Final Appeal.

(8) The application for a stay of execution was dismissed by the Court of Appeal on 4 September 2008.

(9) The application for leave to appeal to the Court of Final Appeal was dismissed by the Court of Appeal on 12 November 2008.

(10)   The Debtor then sought leave to appeal from the Court of Final Appeal by a Notice of Motion issued on 8 December 2008, but leave was refused by the Court of Final Appeal (without a hearing) on 6 April 2009.

(11)   Meanwhile, following the dismissal of the Debtor’s appeal to the Court of Appeal in CACV 161 of 2006 by reason of his failure to lodge a re-drafted Re-Re-Amended Statement of Claim, on 1 September 2008, the Petitioners caused a statutory demand to be served on the Debtor in respect of the costs payable to them under the Court of Appeal’s order of 12 June 2008.  The Debtor made an unsuccessful application to have the statutory demand set aside.  As the Debtor did not then pay the debt, the petition was presented against him on 15 January 2009.

5.  It should also be noted that after the commencement of these bankruptcy proceedings, the Debtor brought another action, HCA 1186 of 2009, against the defendants in HCA 4101 of 2001 (adding one additional defendant, a solicitor who had acted for the Petitioners).  A Statement of Claim was served on 13 May 2009.  An examination of the Statement of Claim shows that it is virtually identical to the Re-Amended Statement of Claim in HCA 4101 of 2001, which had been struck out by Deputy Judge Saunders.  Apart from a few minor changes, which do not appear to be particularly material, the only changes of any substance appear to be the introduction of three paragraphs (paragraphs 4, 5 and 6 of the pleading) which allege that the two tongs were registered under the Chinese Partnership Ordinance and appointed representatives in Hong Kong in 1922, were re-registered, along with the Chan Li Chai partnership, under the same ordinance and the Business Regulation Ordinance (Ordinance No. 14 of 1952) in 1952, at which time other persons were appointed as representatives of the tongs, and that, as a result the two tongs and the Chan Li Chai partnership were governed by the Chinese Partnership Ordinance and the Business Regulation Ordinance.  Nothing appears to have been pleaded as to the consequences of these matters for any of the claims made by the Debtor.  Nor is it readily apparent what (if any) allegations were made, or relief claimed, against the solicitor who was added as the 31^st Defendant.

6.  In order to resist the making of a bankruptcy order, it is necessary for the Debtor to establish the existence of a bona fide dispute of substance in respect of the debt, or the existence of a bona fide and substantial cross-claim against the Petitioners that exceeds the amount of the debt.

7.  In the First Notice, the Debtor raised three points.  The second and third of these sought adjournments of the petition pending the resolution of the Debtor’s application for legal aid and his application made to the Court of Final Appeal for leave to appeal, and are now no longer relevant, as both of those applications have by now been refused.  The only point of substance raised by the Debtor in the First Notice was a contention that the costs order made by the Court of Appeal was in favour of all 30 defendants in HCA 4101 of 2001, whereas the Petitioners in these proceedings were only 17 of those defendants.  However, it is clear from the judgment of Deputy Judge Saunders that the striking out application in was made by 17 defendants who are now the Petitioners, and that none of the other 13 defendants participated in the application.  It is equally clear from the judgments of the Court of Appeal that only the same 17 defendants were parties to the appeal.  The costs order of the Court of Appeal on which the petition is based can therefore only have been made in favour of the Petitioners, and not in favour of any other persons.  This point therefore fails.

8.  In the Second Notice, the Debtor raised three further points, as follows:-

(1) He claimed that the Petitioners were trustees or constructive trustees of his property (being his interest in the Chan Li Chai business and two properties acquired using monies from the tongs, or their proceeds of sale, and that it was therefore for the Petitioners to show that such property was of a value less than the amount of the petitioning debt if they were to succeed in these proceedings.  He also appeared to suggest that the value of his and his family’s interest in such property should be in the region of HK$9 million, on the basis that another branch of the family with fewer members had apparently been given a sum of HK$5 million by way of a distribution in 1995.

(2) He suggested that the amount of the debt was incorrect, and that a further sum of HK$872,433 under an estimated bill of costs (in respect of the striking out application) sent to him in February 2007 should also be included.

(3) He suggested that the petition should be adjourned pending the assessment of his liability to other creditors allegedly affected by the same decision of the Court of Appeal.  This appears to relate to a notice by the 14^th Defendant in HCA 4101 of 2001 (who was not a party to the striking out application or the appeal) from which it would appear that the 14^th Defendant proposed to proceed to have his own costs of that action taxed against the Debtor.

9.  In my view, none of these points assist the Debtor.

10.  As to the first point (which was later repeated in the First Affirmation), the allegation that the Petitioners are trustees or constructive trustees of the Debtor’s property is in essence a repetition of his claim in HCA 4101 of 2001.  That claim has already been struck out, and it is not therefore a matter that can be relied upon by him in opposition to the petition.  Further, even if it were possible for the Debtor to rely on this allegation, it is for the Debtor to show that the value of his claim exceeds the amount of the debt by adducing sufficiently precise evidence.  This the Debtor has failed to do – the valuation that he has placed upon his supposed interest is not based on any evidence, and appears to be no more than speculation.

11.  As to the second point, the fact that the Petitioners may have further debts owing to them from the Debtor (although it should be said that it seems that the costs referred to in the estimated bill of costs to which the Debtor has referred have not yet been taxed and so may not yet be payable), does not assist the Debtor in establishing that the debt on which the petition is based is capable of being disputed.  If anything, it might give rise to a reverse cross-claim that the Petitioners could rely on in answer to the Debtor’s cross-claim if necessary.

12.  As to the third point, the fact that the Debtor may owe (or may in due course owe) another of the defendants in HCA 4104 of 2001 an amount by way of costs does not have any impact on the existence or enforceability of the petitioning debt.

13.  In the First Affirmation, apart from in substance repeating the first of the points made in the Second Notice, which I have dealt with above, the Debtor also alleged that he had a claim against the Petitioners in HCA 1186 of 2009, which should be taken into account by way of set off or cross-claim against the petitioning debt.

14.  However, the claim in HCA 1186 of 2009 is, apart from the references to the Chinese Partnership Ordinance and the Business Regulation Ordinance that I have mentioned above, for all intents and purposes identical to the Debtors’ claim in HCA 4101 of 2001, which has been struck out.  It is, to my mind, questionable (to put it no higher) whether or not the addition of the matters pleaded in paragraphs 4, 5 and 6 of the Statement of Claim in HCA 1186 of 2009 would have sufficed to cure the defects in the Re-Amended Statement of Claim in the earlier proceedings, as they consist only of references to the statutes and an assertion that the tongs and/or the Chan Li Chai partnership were registered under those statutes.  They do not appear to plead how those matters gave rise to a claim on the Debtor’s part, or how they otherwise impact on his claim.  But be that as it may, the fact is that these were amendments that the Debtor could and should have put forward in the context of HCA 4101 of 2001 and CACV 161 of 2006.  No explanation has been vouchsafed as to why this was not done then, or indeed, at any time prior to the presentation of this petition.

15.  In these circumstances, it is clear that the claim advanced by the Debtor in HCA 1186 of 2009, consisting as it does of an attempt to litigate matters which either were litigated in the earlier proceedings, or could and should have been litigated in those proceedings, would be bound to fail as an abuse of the court’s process.  That being so, the cross-claim which the Debtor seeks to set up is neither one which isbona fide, nor one which has any substance to it.  It therefore does not provide a basis for resisting the petition.

16.  This leaves the matters raised in the Second Affirmation.  This alleges that the order of the Court of Appeal under which the Debtor was required to pay the sum of HK$72,500 to the Petitioners was obtained by fraud.  In support of the allegation, the Debtor has simply set out extracts from a range of affidavits and affirmations filed in other proceedings without explanation of how or in what respects these amounted to misrepresentations or fraud.  In his oral submissions, the Debtor claimed that these extracts contradicted the evidence that the Petitioners had relied upon to obtain the striking out order from Deputy Judge Saunders and the dismissal of his appeal from that order.  But it is clear from the judgment and order of Deputy Judge Saunders that the striking out was on the basis that there was no reasonable cause of action disclosed in the Re-Amended Statement of Claim in HCA 4101 of 2001, and that no evidence was placed before the court in connection with that application.  It is equally clear from the order of the Court of Appeal of 12 June 2008 that the only evidence considered by the court was an affirmation by the Debtor exhibiting the draft Re-Re-Amended Statement of Claim that the Court of Appeal had found to be inadequate.  Thus, there was no evidence put before either court by the Petitioners which could have been falsified by the matters referred to in the Second Affirmation.  In these circumstances, the Second Affirmation provides no basis for resisting the petition either.

17.  For all of the foregoing reasons, I am satisfied that the Debtor has failed to establish the existence of any bona fide and substantial dispute as to the debt, or any bona fide and substantial cross-claim for any amount greater than the debt.  His resistance to the petition therefore fails, and I make the usual bankruptcy order, with costs, against him, such costs to include any costs that the Petitioners may have incurred in dealing with the Debtors summons dated 2 October 2009, and any previously reserved costs.