RE FAN VIRGINIA

HCB 4195/2020

[2021] HKCFI 1037

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4195 OF 2020

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D E C I S I O N

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1.  On 1 March 2021, I made a usual bankruptcy order (“Order”) against Ms Fan Virginia (“debtor”), with Reasons for Judgment handed down on 3 March 2021[1]. By summons issued on 1 March 2021, the debtor seeks to “set aside the default judgment” and to “put a stay order on judgment made”.

2.  It is not clear what order the debtor intends to seek under the summons.  Nevertheless, I will treat the summons as an application to review, rescind or vary the Order under s 98(1) of the Bankruptcy Ordinance (Cap 6) (“BO”) or, alternatively, an application for stay of execution of the Order.

3.  The power given by s 98(1) of the BO to review, rescind or vary a bankruptcy order is, in a proper case, almost without limit (Wing Lung Bank Ltd v Ho Shiu Sun & anor [1986] HKLR 1134 (CA), at 1140 I-J, per Clough J (as he then was); Cheung Wah v China State Bank Ltd [1999] 4 HKC 185, at 191I-192A, per Ribeiro J (as he then was)).  The power is designed to enable the Court to review or revisit an order made under the bankruptcy jurisdiction.  Such power is necessary given that in most cases, the bankruptcy of a debtor would last for at least 4 years such that there are bound to be changes in the personal circumstances of the debtor or the estate which render it necessary or appropriate to revisit the order made in the past. A common example is an income payment order made under s 43E of the BO, which enables the Court to take into account the changes in the earnings or domestic needs of the bankrupt and his family and decide the appropriate amount of payment to be made by the bankrupt. 

4.  Given the nature of the power, it is incumbent upon the applicant to satisfy the Court by cogent evidence that there are valid grounds to review or vary the order in question.  Where, as here, the order which a debtor seeks to rescind is a bankruptcy order, I would expect the debtor to adduce new evidence or grounds to demonstrate that the order ought not to have been made at the time it was made.  This requirement is implicit in the provision and is necessary to avoid any improper use of the review procedure, given that there are other avenues available to a debtor to challenge a bankruptcy order.  These include:

(1)  A debtor may seek to annul a bankruptcy order under s 33 of the BO, which empowers the Court to annul the order “on any grounds existing at the time the order was made”.  This section has since the enactment of the Bankruptcy (Amendment) Ordinance 1996 in April 1998 been used to annul a bankruptcy order which ought not to have been made at the time it was made, and it provides the consequences of the annulment of the order (see s 33(4)).   

(2)  A debtor may appeal against the order under s 98(2) of the BO by relying on the same evidence which had already been considered by the Court at the time the order was made on the basis that the order was wrongly made. 

5.  Mr Alvin Sin, solicitor for the Official Receiver, refers this Court to Zhang Sabine Soi Fan v The Official Receiver, HCB 472/1989, 25 May 1999 and Re Yuan Yiqiang [2020] HKCFI 259, where the applicants asked the Court to review or rescind the earlier orders under s 98(1) of the BO.  In both cases, the Court applied the principles expounded in Re A Debtor [1993] 2 All ER 991, which concerned an application under the English equivalence of our s 98(1), where Millett J (as he then was) said (at 995b-h) this:

“It follows, in my judgment, that there is jurisdiction in the court to review and rescind or vary an order dismissing an application to set aside a statutory demand, and the contrary was not contended before me. As a matter of discretion I have no doubt that the jurisdiction ought to be rarely exercised, since the effect of doing so would be to allow what would amount to a renewed application to set aside a statutory demand after the period limited for making the application. It is clear from the time limit for making the application that Parliament envisaged that such applications should be made speedily, and any attack upon the validity of the debt on which the petitioning creditor intends to proceed should either be made within 18 days by the adoption of the statutory procedure or should be raised at the hearing of the bankruptcy petition. Counsel submitted that great caution must be exercised in dealing with applications of the present kind, since the result would be to lead to an absence of finality, and he drew an alarming picture of the floodgates which would be opened if I were to allow this appeal, I will deal with the floodgates argument in a moment.

The second question is whether fresh evidence is admissible upon an application under s 375, that is to say evidence which could with due diligence have been obtained in time for the original hearing. In my judgment there is a significant distinction between an application under s 375 of the Insolvency Act 1986 and an appeal. When an appeal is brought from the making of an order the appellant must persuade the appellate court that the original order should not have been made on the material then before it or upon fresh material adduced in the appellate court in accordance with the rule in Ladd v Marshall [1954] 3 All ER 745, [1954] 1 WLR 1489. Where an application is made to the original tribunal to review, rescind or vary an order of its own, however, the question is not whether the original order ought to have been made upon the material then before it but whether that order ought to remain in force in the light either of changed circumstances or in the light of fresh evidence, whether or not it might have been obtained at the time of the original hearing. The matter is one of discretion, and where the evidence might and should have been obtained at the original hearing that will be a factor for the court to take into account; but the rationale for the rule in Ladd v Marshall that there should be an end to litigation and that a litigant is not to be deprived of the fruits of a judgment except on substantial grounds has no bearing in the bankruptcy jurisdiction. …” (underlined added)

6.  Mr Sin also refers the Court to Re Yuan Yiqiang where Au-Yeung J held (at §15):

“However, the court is not to review its order simply on the basis that the applicant wants to present essentially the same facts and the same arguments but more forcefully or attractively: Ross v the Commissioners to Her Majesty’s Revenue & Custom [2012] EWHC 1054 (Ch), 19 March 2012, at §§11-12, Norris J; Papanicola v Humphreys [2005] 2 All ER 418, at §§ 25-26, 34, Laddie J.”

7.  In her affirmation filed on 1 March 2021, the debtor raises the following grounds in support of the summons:

(1)  she went to the wrong court room by mistake on the day the Order was made;

(2)  by the time she reached the correct court room, the Order had already been made against her; and

(3)  she had already prepared for the hearing, reliance was placed on her affirmations dated 29 December 2020, 24 February 2021 and 26 February 2021 filed in opposition to the petition.

8.  Both Mr Sin and Ms Stephanie Cheung, solicitor for the petitioner, submit that the debtor has not raised any valid ground to demonstrate that the Order ought not to have been made at the time it was made.  Nor has the debtor adduced any cogent evidence to show that there was no debt or that there is a bona fide dispute on substantial ground in respect of the Debts.   

9.  In my view, the first 2 matters raised by the debtor only go to explain why she did not attend the hearing on 1 March 2021.  They are not valid grounds to impugn the Order. 

10.  As for the third matter, it is a wholesale repetition of the 3 affirmations filed by the debtor in opposition to the petition.  As is clear from §§11-20 of the Reasons for Judgment, although the debtor did not attend the hearing on 1 March 2021, this Court had considered all the facts and matters raised in her affirmations and held that none of the matters relied on by the debtor constituted a valid ground in opposition to the petition.   

11.  In the absence of any new evidence, much less cogent evidence to show that the Order ought not to have been made at the time it was made, there is no basis to ask the Court to review or rescind the Order.

12.  As for the application for a stay of execution of the Order, it does not get off the ground in the absence of any appeal against the Order.  In any event, even if the debtor has appealed against the Order, she has to demonstrate that there are good reasons to justify a stay of execution (Star Play Development Ltd v Bess Fashion Management Co Ltd, [2007] 5 HKC 84, §§6-8, per Ma J (as he then was)).  The debtor has not articulated any basis, let alone good reason to justify a stay of the Order. 

13.  I should add that at the hearing, the debtor says that she wishes to settle the dispute with the petitioner and has recently sent emails to the petitioner for that purpose.  In response, Ms Cheung informs the Court that the petitioner will only settle with the debtor if she is able to pay the Debts in full together with interest and costs.  The petitioner has the right to insist on getting paid in full and I do not see any ground for the Court to require the petitioner to settle the matter with the debtor in any other way, which seems to be what the debtor asks the Court to do.  Obviously, if the debtor is able to pay the Debts in full together with interest accrued to-date and the costs of these proceedings, it is open to the debtor to apply for an order to annul the Order under s 33 of the BO.  This is a course which is open to the debtor to take in future, should she want to do so. 

14.  The summons is dismissed with costs to be paid by the debtor.  The Official Receiver does not seek costs in respect of the summons.  On the basis of the statements of costs submitted by the petitioner, I assessed the costs of the petitioner at $13,000.