ING FINANCIAL PLANNING LTD v. CHONG YU ON

HCB 985/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY NO. 985 OF 2006

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J U D G M E N T

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The Amended Bankruptcy Petition

1.  By its Bankruptcy Petition presented on 10^th February 2006, the Petitioner petitioned for a bankruptcy order against the Respondent.  The same was subsequently amended by an order of the Master and the Amended Bankruptcy Petition (“the Petition”) was filed on 18^th May 2006.

2.  The Petition refers to a Statutory Demand dated 20^th December 2005 (“the Statutory Demand”) which was served on the Respondent on 6^th January 2006.

The Statutory Demand and The Judgment

3.  The Statutory Demand was based on a Default Judgment dated 9^th November 2005 (“the Default Judgment”) obtained by the Petitioner in a District Court Action No. DCCJ 4884/2005 (“the Action”).

4.  In the Action, the Petitioner is the Plaintiff.  There are three Defendants :

(i)	Whole Winner (Euro-Asia) Investment Limited (“Whole Winner”) (1st Defendant);
(ii)	The Respondent (2nd Defendant);
(iii)	Chan How Kong (3rd Defendant).

5.  None of the three Defendants in the Action filed a notice of intention to defend.  As a result, on 9^th November 2005, the Petitioner (the Plaintiff therein) entered the Default Judgment against them for the following : -

“	(i)	the sum of HK$537,660.00;
	(ii)	interest on the sum of HK$537,660.00 at the rate of 9.234% per annum from 3rd October 2005 to the date hereof and thereafter at judgment rate until payment; and
	(iii)	HK$1,460.00 fixed costs”.

6.  By the Statutory Demand, the Petitioner made a demand on the Respondent to pay the sum of $549,865.63 particularised therein as follows : -

“PARTICULARS
THE JUDGMENT dated 9th November 2005
Judgment sum		HK$537,660.00
Interest on the sum of HK$537,660.00 for:
(i)	03/10/05 to 20/12/05 (79 days):
	$537,660.00 x 9.234% x 79/365 days	HK$10,745.63
Fixed costs		HK$1,460.00
		HK$549,865.63	”

7.  The Respondent failed or refused to make payment to the Petitioner as demanded or at all.

8.  Hence, the presentation of the Petition and this hearing.

The History of the Action

9.  Briefly, on the facts, the Petitioner is in the insurance broker business. It had entered into a Servicing Agreement dated 16^th August 2004 with Whole Winner.  The Respondent and Chan How Kong had each separately executed a Deed of Guarantee in favour of the Petitioner guaranteeing any indebtedness by Whole Winner to the Petitioner.  Sums were allegedly due from Whole Winner to the Petitioner based on the terms of the said Servicing Agreement.  None of Whole Winner, the Respondent and Chan How Kong made any payment of such sums to the Petitioner.  Hence, the Action was instituted by the Petitioner and the Default Judgment was obtained in the circumstances set out above.

10.  After the Default Judgment was entered, the Respondent made an application to set it aside.  His application was dismissed by Master Tracy Chan of the District Court on 2^nd February 2006.

11.  The Respondent then appealed against the said dismissal by Master Tracy Chan.  The appeal was heard by His Honour Judge Chow of the District Court over 4 days on 16^th February 2006, 3^rd and 17^th March 2006 and 21^st April 2006.  On 2^nd May 2006, the learned Judge delivered or handed down his detailed judgment and dismissed the Respondent’s appeal.  He decided that the Default Judgment was a “regular judgment” and that the Respondent had not shown any defence to the Action.

12.  The Respondent then made an application to the learned Judge for leave to appeal to the Court of Appeal which application was dismissed on 26^th May 2006.

13.  The Respondent next made an application to the Court of Appeal for leave to appeal against the judgment and order of His Honour Judge Chow dated 2^nd May 2006.  Such application was again dismissed by the Honourable Mr. Justice Cheung, J. A. on 26^th June 2006.

The Law

14.  It is trite law that a statutory demand and a bankruptcy petition based on a subsisting judgment are valid and it is not for the bankruptcy court to go behind such judgment to see whether it is right or wrong.  In the case of Re Maydwell, ex p WFM Motors Pty Ltd., a creditor [1999] 3 HKLRD 325, Le Pichon J.A. said at 334G – 335A as follows : -

“	Substantial dispute as to the debt
	As I understand it, Mr. Maydwell’s case is that he is in a position to dispute the judgment debt because of a large amount of “new” evidence uncovered after the judgment was obtained by WFM in October 1993.  Mr. Maydwell referred the Court to the “new” evidence and made extensive submissions in writing to that end.  Nevertheless Mr. Maydwell did concede that where there is a judgment, the court should not at the stage of the statutory demand, go behind the judgment.
	In England, there is a practice note to the following effect :
	3.	Where the statutory demand is based on a judgment or order, the court will not at this stage go behind the judgment or order and inquire into the validity of the debt nor, as a general rule, will it adjourn the application to await the result of an application to set aside the judgment or order.
	See Practice Note (Ch D) (Bankruptcy : Statutory Demand : Setting Aside) (No 1/87) [1987] 1 WLR 119 applied in Re A Debtor (No 657/SD/1991) ex p IRC v The Debtor [1993] BCLC 180.  Although no parallel direction exists in Hong Kong, that practice is obviously sound and ought to be followed.”

The Court’s Finding

15.  By his application made herein on 21^st July 2006 in opposition to the Petition, the Respondent has basically attacked a number of points made in the said judgment of His Honour Judge Chow.  I do not propose to go into the details for the simple reason as indicated above that it is not for this court to look into the merits of that judgment which confirmed the validity of the Default Judgment, otherwise this court would be acting as the court of appeal in relation to that judgment.

16.  Suffice it to say that I do not find anything in the evidence adduced and the submissions made by the Respondent to persuade me that a bankruptcy order based on the Default Judgment, the Statutory Demand and the Petition should not be made against him.

Conclusion

17.  On the evidence, I find that the Respondent is unable to pay his debt.

18.  The Official Receiver did not attend at the hearing but submitted that a gross sum costs order for the sum of $11,300.00 should be made in his favour.  From the particulars supplied, that appears to me to be reasonable.

19.  Accordingly, I make the following orders : -

(i)	the Respondent be adjudged bankrupt;
(ii)	the Official Receiver be appointed the trustee in bankruptcy of the Respondent;
(iii)	an order nisi that the costs of the Official Receiver in the sum of $11,300.00 and of the Petitioner to be taxed be paid out of the estate of the Respondent.

20.  The Petitioner should submit a draft formal order for the above and all other incidental directions, if any, for the consideration and approval of the Court.