RE CHU JIARU

HCB 8394/2020

[2024] HKCFI 2662

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 8394 OF 2020

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D E C I S I O N

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Introduction

1.  Before me this morning is the trustees’ summons filed on 24 July 2024 against the bankrupt, seeking an unless order under Order 1B, rule 1 of the Rules of the High Court and the inherent jurisdiction of the court.

2.  The trustees are present today. Also present is the petitioner, who supports the trustees’ summons. On the other hand, the bankrupt is absent.

Service on the bankrupt

3.  I shall first deal with service of the summons on the bankrupt.

4.  According to the affidavit of service, the trustees sought to serve the summons together with the supporting affidavit on the bankrupt by two means:

(1)  by delivery by courier at an address in Reading in the UK. The delivery was accepted at that address by a person whose full name is not known;

(2)  by email to an email address (which I will not spell out here). The delivery status was “complete”.

5.  The trustees have obtained the Reading address and the email address from an affidavit of service previously filed by the bankrupt’s former solicitors on 14 February 2024.

6.  Service of petition, orders and summons in bankruptcy proceedings are governed by rule 31 of the Bankruptcy Rules, Cap 6A.

7.  The trustees have not, prior to this hearing, obtained leave to serve their summons on the bankrupt (1) out of jurisdiction, and (2) by an email. However, if they had made the application, I would have granted leave as both addresses are the last known addresses of the bankrupt according to documents filed with the court, and service at such addresses would appear to be effective for bringing the summons to the notice of the bankrupt.

8.  The trustees now apply for retrospective leave under rule 31. I am prepared to grant it. As the two deliveries appear to be successful, I see no good reason why I should give prospective leave today and require the trustees to serve once again by the same two methods.

The unless order

9.  Having considered the submissions of the trustees and the petitioner, I grant the following orders:

(1)  Unless the bankrupt answers the question set out in para (2) below on affidavit, which should be filed and served within 21 days of service of this order,

(a)  the summons issued by her dated 18 August 2023 under section 83 of the Bankruptcy Ordinance, Cap 6 (“the section 83 application”) be dismissed.

(b)  The trustees do have costs of the section 83 application which are to be summarily assessed. Such costs shall be first paid out from the bankrupt’s estate, but the bankrupt shall reimburse all such costs after all her unsecured creditors have been fully repaid or upon her discharge from bankruptcy, whichever is earlier.

(c)  The petitioner shall have costs of the section 83 application, which costs shall be borne by the bankrupt personally.[1]

(d)  The hearing scheduled for 14 November 2024 at 10 am be vacated.

(2)  The question referred to in para (1) is as follows:

“Does the bankrupt intend to pursue the section 83 application and attend the hearing for substantive argument on 14 November 2024?”

(3)  Retrospective leave be granted to the trustees to serve their summons on the bankrupt by delivery to the Reading address and by email to [email address redacted], pursuant to rule 31 of the Bankruptcy Rules.

(4)  Leave be granted to the trustees to serve this order and any subsequent order or other notice in relation to their summons by the above two modes.

(5)  The trustees do file an affidavit deposing to (a) the service of this order on the bankrupt, and (b) where applicable, the non-compliance of the unless order, failing which any order for the dismissal of the section 83 application (where applicable) will not be sealed.

Reasons

10.  I make the above orders pursuant to the case management powers conferred on the court under Order 1B, rule 1(2)(l) and (3)(b). And I exercise such powers to further the underlying objectives set out in Order 1A, rule 1(b), (c) and (f).

11.  Order 1A, rule 1 provides as follows:

“The underlying objectives of these rules are –

…

(b) to ensure that a case is dealt with as expeditiously as is reasonably practicable;

(c) to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings;

…

(f) to ensure that the resources of the Court are distributed fairly.”

12.  Order 1B, rule 1(2)(l) provides as follows:

“Except where these rules provide otherwise, the Court may by order –

…

(l) take any other step or make any other order for the purpose of managing the case and furthering the underlying objectives set out in Order 1A.”

13.  Order 1B, rule 1(3)(b) provides as follows:

“When the Court makes an order, it may –

…

(b) specify the consequences of failure to comply with the order or a condition.”

14.  The bankrupt took out the section 83 application in August 2023. Before me, there is sufficient objective evidence showing that there is a real likelihood that she no longer intends to pursue that application.

15.  I refer to the following chronology of events.

16.  Pursuant to the order of Mr Justice Ng made on 10 October 2023, on 12 October 2023 the bankrupt filed her 3^rd affirmation in support of her application. Also in October 2023, the date of the hearing for substantive argument was fixed for November this year.

17.  On 14 February 2024, the petitioner filed an affirmation in opposition. That was followed by the trustees’ opposing affirmation filed on 28 February 2024.

18.  In late February 2024, the same month, the bankrupt’s former solicitors obtained a cease to act order from master. Upon filing the certificate pursuant to Order 67, rule 5, the firm came off the record as the bankrupt’s solicitors. Notwithstanding that, the bankrupt did not appoint a new firm of solicitors to represent her. Nor did she file a notice to act in person.

19.  Meanwhile, the deadline for the bankrupt to file her reply affirmation fell on 10 and 24 April 2024. No reply affirmation was filed by her.

20.  Lastly, on 6 and 23 May 2024, the trustees issued two letters to her requesting her to confirm that she intends to continue with the section 83 application and appear at the hearing for substantive argument. The trustees received no response.

21.  As submitted by the trustees, there has been a period of sustained silence on the bankrupt’s part since she filed her supporting affirmation back in October last year. That is really the last “contact” which she had made with the trustees in these proceedings. And that was already 11 months ago. The silence itself does raise doubt in one’s mind as to whether she intends to prosecute her section 83 application.

22.  But I should say here that it is within her right not to file a reply affirmation. So the absence of a reply affirmation by itself may not be indicative of anything. However, what causes more concern, in my view, is her failure to file a notice to act in person. Of course, it is her choice to appoint a new solicitor to represent her in the section 83 application or to act in person. So far, no notice to act by solicitors has been filed on her behalf. Hence, she is in effect acting in person.

23.  In this regard, our rules require that she files a notice to act in person. The significance of this is that in the notice, she must state an address in Hong Kong to be her address for service in these proceedings. See Order 67, rule 4 and the commentary in the White Book at 67/4/1. By failing to comply with that rule, the bankrupt has effectively made herself “uncontactable” within the jurisdiction.

24.  It should also be pointed out that in the previous affirmations filed on her behalf in relation to the section 83 application, she had at different times stated two addresses to be her address, one in England (not the Reading address) and one in mainland China. However, the letters sent by the trustees to her in May this year at these addresses were both returned. All these are potential signs of a litigant abandoning her case in the litigation.

25.  In my view, all of the above objective facts, namely silence and inaction on the part of the bankrupt since October 2023, her failure to appoint a new solicitor or to file a notice to act in person, and her failure to disclose an address for service or communication when the substantive hearing in November is fast approaching indicate a real possibility that she no longer wishes to further pursue the section 83 application.

26.  As things presently stand and if nothing is being done, the substantive hearing will take place on 14 November this year, with one day reserved. The trustees and the petitioner will have to prepare for that hearing, as it is their intention to oppose the application. They will incur costs in terms of solicitors’ fees and counsel’s fees. I have been told today that the trustees intend to instruct a senior junior counsel, and the petitioner intends to instruct a senior counsel and a junior counsel at the hearing.

27.  If it is indeed the case that the bankrupt no longer has the intention to follow through with her application to the end, that application will be dismissed for want of prosecution at the hearing. Nevertheless, the trustees and the petitioner will have already incurred the full costs of defending the application, and such costs will no doubt be considerable. Here, we are talking about two sets of sizable legal costs, which may end up being incurred for no good reason and hence wasted. In the trustees’ case, such costs will have to come out from money which could be used to pay creditors.

28.  In the circumstances, the court should consider what can be done to further the underlying objectives as set out above. I consider that this is a suitable case to make an order to compel the bankrupt to indicate her position as to whether she really wants to pursue her own application.

29.  In this regard, I also draw support from Order 1A, rule 3 which provides that:

“The parties to any proceedings and their legal representatives shall assist the Court to further the underlying objectives of these rules.”

30.  Similar orders have been made in the context of writ actions. See the line of cases in Aqua-Leisure Industries Inc v Aqua Splash Ltd (No 2) [1999] 3 HKC 343; Fila Marketing (Hong Kong) Ltd v Faithful Properties Ltd HCCL 66/1997, 23 August 1999; Asiam Holdings Ltd v Shin Kai Lok [2024] HKCFI 375; and, Kristen Lee v Santa Fe Transport International Ltd [2020] HKDC 79.

31.  I do acknowledge that an unless order is a drastic order because non-compliance would result in the dismissal of the section 83 application. However, in the present case, given the long period of silence on the bankrupt’s part and her failure to comply with the rules under Order 67, rule 4 when she is in effect acting in person presently, I consider that it is a proper exercise of my case management discretion to make an unless order.

32.  I should also highlight that what the bankrupt is now asked to do is not onerous at all. She is simply to state her intention with respect to her own application. To ask her to do so would be in line with her duty to assist the court under Order 1A, rule 3.

33.  On this, I should put on record that I refuse to accede to the trustees’ request to compel the bankrupt to answer the further questions, such as whether the bankrupt intends to instruct lawyers or to act in person, and which firm of solicitors and which barrister she will instruct. I consider the critical question at this moment is whether the bankrupt will go ahead with her application. The purpose of asking that question is so that the trustees and the petitioner will know whether they need to expend legal costs to prepare their opposition at the upcoming hearing. The purpose is not to inform them how they should do so.

34.  In any event, it is always up to a party who is an individual to decide whether to engage lawyers or not, and she is generally able to change her mind about this. That is why I do not find it appropriate to compel the bankrupt to answer the other questions proposed by the trustees.

35.  I also consider that I should give the bankrupt more time than the proposed seven days after service of the order to answer the question. I consider that the proper cut-off time is the time by which the trustees and the petitioner would reasonably be expected to brief counsel for the hearing.

Conclusion

36.  For the above reasons, I make the orders set out above.

37.  As to costs, one cannot say for sure that the bankrupt will not respond. To cater for the possibility that she may, a proper costs order for the trustees’ summons would be costs be in the cause of the section 83 application.