RE DAVID C. BUXBAUM

HCB 7637/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 7637 OF 2004

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D E C I S I O N

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1.  This is a summons issued by David C Buxbaum on 26 May 2005.  It was first heard on 29 June 2005 and was adjourned sine die with liberty to restore, for Mr Buxbaum to consider his position and to file further evidence if he should wish to proceed.

2.  In his summons, Mr Buxbaum seeks an order that the bankruptcy order made against him on 12 April 2005 be stayed pending the determination of his appeal against the bankruptcy order in CACV No. 141 of 2005.  The Notice of Appeal was filed on 21 April 2005, no date has yet been set down for the hearing of this appeal.

3.  After the adjournment of the summons on 29 June 2005, Mr Buxbaum filed three further affirmations on 28 July 2005.

4.  On 2 August 2005, I gave directions by letter for the Official Receiver and the petitioning creditor, Samuel-Rozenbaum (HK) Ltd, to file a further report and evidence in response to Mr Buxbaum’s further affirmations.  I also provided that no further evidence is to be filed without leave.

5.  The Official Receiver made a further report in response to Mr Buxbaum’s further affirmations on 9 August 2005.

6.  Without leave of the court, Mr Buxbaum filed further evidence on 30 August 2005, being an affirmation of Ng Loi Ping and an affirmation of Kenneth Y Choy, and on 12 September 2005, being two affirmations made by him.

7.  As no point was taken by the Official Receiver and the petitioning creditor on these further affirmations filed without leave, I have taken them into consideration.

8.  Much of the evidence put in by Mr Buxbaum is of little or no relevance to the present application.  Suffice it to say that in his evidence, he is raising arguments in other proceedings which had been rejected: by Sakhrani J in the interpleader proceedings in HCA No. 5191 of 1998 in December 2002; by Chung J in the decision on 8 June 2004, when leave was given to the petitioning creditor to enforce various costs orders against Mr Buxbaum; and by the Court of Appeal in CACV No. 272 of 2004, in dismissing Mr Buxbaum’s appeal against the decision of Chung J.

9.  In his first supporting affirmation made on 26 May 2005 and his second affirmation filed on 28 July 2005, Mr Buxbaum seeks a stay of the bankruptcy proceedings “pending various appeals, including the appeal of this bankruptcy, that is now before the Court of Hong Kong”.  Other than CACV No. 141 of 2005, the only other “appeal” mentioned in Mr Buxbaum’s evidence is an application for leave to appeal to the Court of Final Appeal from the judgment in CACV No. 272 of 2004.  His application for leave will be heard on 28 September 2005.

10.  Mr Buxbaum’s summons is opposed by both the petitioning creditor and the Official Receiver.

11.  By virtue of section 12(1) of the Bankruptcy Ordinance, Cap. 6, the property of Mr Buxbaum has vested in the Official Receiver on the making of the bankruptcy order.  The bankruptcy order has been gazetted and advertised in two newspapers on 22 April 2005.  Mr Buxbaum attended the Official Receiver’s office for an interview on 9 May 2005 and was served with a preliminary examination questionnaire and two blank forms of statement of affairs for completion and return to the Official Receiver.  It was only on 29 June 2005 that Mr Buxbaum provided a signed statement of affairs.

12.  The jurisdiction of the court to stay a bankruptcy order is under section 104, Cap. 6, which provides as follows:

“The court may at any time, for sufficient reason, make an order staying the proceedings under a bankruptcy petition, either altogether or for a limited time, on such terms and subject to such conditions as the court may think just.”

13.  I wish to say two things on the exercise of the discretion to stay a bankruptcy order pending appeal.

14.  Firstly, the mere fact that there is a pending appeal is not a sufficient ground to stay a bankruptcy order.  A stay pending appeal should be granted with circumspection, and only when the appeal is shown to be a bona fide appeal and the grounds of appeal are sufficiently arguable.

15.  Secondly, as stated in another decision I gave on 10 June 2005 in Re Chow Shun Yung, HCB No. 5334 of 2004, even if a stay of the bankruptcy order is to be granted, this should not be a general stay without conditions, see paragraphs 20 to 24 of the decision.  Because of the prejudice that may be caused to creditors and the administration of the estate of the bankrupt in the stay of a bankruptcy order, it is desirable that the stay should be limited to certain steps or consequences, such as the gazetting or advertising of the bankruptcy order, and on condition that the bankrupt is to attend the Official Receiver and give an account of his assets and liabilities.  This mirrors the situation where the court does not, as a matter of practice, grant a stay of a winding-up order pending an appeal, but may order a stay of the advertisement of the winding-up order pending appeal.

16.  As submitted by the Official Receiver, a general stay would not only release the bankrupt from all his statutory obligations and duties under Cap. 6, but would seriously hamper the Official Receiver’s ability of control over the bankrupt and his property.  In the interests of creditors, it is vital that there should be no undue delay in ensuring that the Official Receiver is put in a position in which he could ascertain the assets of the estate and take appropriate steps to preserve assets.

17.  I have considered the grounds of appeal in the Notice of Appeal filed in CACV No. 141 of 2005.  I do not think there are sufficiently arguable grounds of appeal against the finding the fact I made regarding the service of the statutory demand and the petition, which was the main ground of opposition advanced by Mr Buxbaum at the hearing of the bankruptcy petition.  Other matters raised in the Notice of Appeal and in Mr Buxbaum’s evidence are of little substance or relevance.

18.  As for Mr Buxbaum’s application for leave to appeal to the Court of Final Appeal in CACV No. 272 of 2004, in which the Court of Appeal held against his contention that various costs orders should not be enforced against him, I do not propose to take this into account.  This is not the subject of the present summons.  Besides, it does not appear to me that Mr Buxbaum has provided adequate basis to indicate reasonable prospects of obtaining leave to appeal to the Court of Final Appeal, notwithstanding the further evidence he has filed in these proceedings, belatedly and without leave, on 30 August 2005 and 12 September 2005.

19.  Further, the application for leave to appeal to the Court of Final Appeal taken out on 12 April 2005 was made without the consent of the Official Receiver.  On 4 May 2005, the Official Receiver informed Mr Buxbaum that the cause of action has been vested in the Official Receiver and before the Official Receiver would agree to proceed with it, he has to be satisfied there is sufficient indemnity given to cover his costs and any adverse costs order which might be made against him, and he must also be satisfied with the merits of the proposed appeal to the Court of Final Appeal.  There was no response from Mr Buxbaum up to the time of the Official Receiver’s second report on 9 August 2005.  Having considered the reasons for judgment in CACV No. 272 of 2004, the Official Receiver does not consider there are any real prospects of success in the proposed appeal and it is not the intention of the Official Receiver to proceed with the proposed application for leave to appeal to the Court of Final Appeal.  I am informed by the Official Receiver’s counsel at the hearing today that the views of the Official Receiver on the prospects in the proposed appeal remain unchanged, notwithstanding the further evidence filed by Mr Buxbaum after the Official Receiver’s second report.  Furthermore, Mr Buxbaum has still not made any arrangement for indemnity for the Official Receiver’s costs.

20.  I note that no steps have been taken by Mr Buxbaum to progress with his appeal in CACV No. 141 of 2005, apart from filing a notice of setting down the appeal on 25 April 2005.

21.  I accept the Official Receiver’s submission that the appeal against the bankruptcy order would not be rendered nugatory if no stay pending appeal were granted.

22.  For the above reasons, I am not inclined to grant a general stay of the bankruptcy order at all.

23.  Mr Buxbaum seeks a “limited” stay of the bankruptcy order pending appeal so as to allow him to continue to practise as a registered foreign lawyer in Hong Kong, to permit him to continue to use his credit card within the limit of HK$10,000.00 a month, and to continue to maintain his bank account.

24.  Mr Buxbaum’s registration as a foreign lawyer has been cancelled automatically upon the making of the bankruptcy order by virtue of the Legal Practitioners Ordinance, Cap. 159, section 39A(3).  The Official Receiver submitted that a stay of the bankruptcy order would not have the effect of reviving the registration of Mr Buxbaum as a foreign lawyer, or avail him of the qualification to renew the registration, as an order for a stay of the bankruptcy proceedings would only put a stop on further conduct of the bankruptcy proceedings and the bankruptcy order still subsists.  This seems to me to be right.

25.  As for the use of a credit card, under section 131(a) of Cap. 6, it is provided that any undischarged bankrupt shall be guilty of an offence if either alone or jointly with any other person he obtains credit to the extent of HK$100.00 or upwards from any person without first informing that person he is an undischarged bankrupt.  This provision does not prohibit the use of a credit card by Mr Buxbaum, provided he should first disclose to the relevant financial institution he is an undischarged bankrupt.  It is up to the financial institution to decide whether to allow him to continue to use his credit card.  This is to protect persons from whom Mr Buxbaum seeks to obtain credit, since anyone who becomes his creditor after the making of the bankruptcy order would be excluded from participation in the assets distributed in this bankruptcy administration, so disclosure is required and should not be dispensed with.  I agree with the Official Receiver that it is quite inappropriate to address the issue of maintaining a credit card by a stay of the bankruptcy proceedings.

26.  As regards Mr Buxbaum’s intention to maintain and operate a bank account, the Official Receiver refers to section 52(2) of Cap. 6, which imposes an obligation on any person to inform the Official Receiver and trustee in bankruptcy of any account which a bankrupt may have with him after he has ascertained that the account holder is an undischarged bankrupt;  thereafter, no payments can be made out of the bankrupt’s account without a court order or consent of the Official Receiver or trustee in bankruptcy.  Mr Buxbaum may apply to the Official Receiver if he wishes to maintain and operate a separate account with a bank.  If his application is justified, the Official Receiver would give consent and give instructions to the relevant bank.  It would be a commercial decision for the bank if they would allow Mr Buxbaum to maintain and operate an account on the terms of the Official Receiver.  Again, I do not think it is appropriate that this should be dealt with by a stay of the bankruptcy proceedings.

27.  Lastly, I am mindful of what Mr Buxbaum said in his affirmation that he should not suffer the ignominy of bankruptcy proceedings when an appeal against the bankruptcy order is pending, but publicity has already been given to the bankruptcy order as it has been gazetted and advertised.

28.  I see no ground for granting a “limited” stay.  I will therefore dismiss the summons of Mr Buxbaum.

29.    There is no reason why costs of this application should not follow the event.  I order the Official Receiver’s costs and the petitioning creditor’s costs of this application, including the costs reserved on 29 June 2005, be paid out of Mr Buxbaum’s estate.  The petitioning creditor’s costs are to be taxed on the standard basis if not agreed.  The Official Receiver’s costs are assessed on a gross sum basis at HK$24,000.00.