RE LAI KA HING FANCO

HCB5750/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS NO.5750 OF 2007

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J U D G M E N T

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A.  Introduction

1. The parties entered into a mortgage dated 14 August 2000 in respect of Flat H, 8/F, Tower 10, Island Harbourview, 11 Hoi Fai Road, Kowloon (“the Property”).  The debtor had defaulted since March 2003.  The petitioner then commenced HCMP1788/2004 against him in July 2004.

2. On 28 September 2004, the master entered judgment in favour of the petitioner (“the Order”) against the debtor for HK$2,802,521.93 with interest.  The debtor was further ordered to deliver vacant possession of the Property within 28 days after service of the Order.

3. The Order was served on the debtor on 28 October 2004.  However, the debtor did not deliver vacant possession of the Property as ordered.  He wanted to sell the Property by himself but that was unsuccessful.  Subsequently, the petitioner issued a writ of possession on 30 June 2005 and with the assistance of the bailiff, obtained vacant possession of the Property on 3 October 2005.

4. Eventually, the petitioner sold the Property by auction held on 14 November 2006 for HK$2,650,000.  After deducting the net sale proceeds, the principal sum remained outstanding under the Order was HK$853,135.24 as at 19 December 2006.

5. The debtor did not settle the outstanding sum.  The petitioner then commenced the present bankruptcy proceedings, which is opposed by the debtor.

B.  Discussion

6. The burden rests squarely on the debtor to demonstrate that the debt is disputed bona fide on substantial grounds by sufficiently precise and believable evidence : Re Leung Siu Nang, Wilson, HCB915/2006, unreported, 21 July 2006.

7. The debtor’s main contention is that but for the petitioner’s negligence, the Property could and would have been sold in March 2005 for a better price so that the outstanding debt would have been significantly reduced.

8. This contention does not bear a closer scrutiny.  The debtor did not deliver vacant possession to the petitioner under the Order.  Instead, he made two proposals before July 2005 to sell the Property by himself.  Accordingly, the petitioner withheld action to repossess the Property for the time being.  In the circumstances, it does not now lie in the debtor’s mouth to say that the petitioner had been negligent in not re-possessing and selling the Property earlier or before March 2005.

9. It is trite that when a mortgagee exercised a power of sale under a mortgage, he only owes, among other things, the mortgagor a duty to take reasonable care to obtain a proper price or the true market value for the mortgaged property at the date on which he decides to see it : Cuckmere Brick Co. Ltd v. Mutual Finance Ltd [1971] 1 Ch 949, per Salmon LJ and pp.965G-969A; Michael v. Miller [2004] EWCA Civ. Appeal 282, per Jonathan Parker LJ at para.131-135. 

10. Here, the undisputed evidence shows that the petitioner had followed its standard procedure to sell the Property by auction.  There were four auctions and valuation from independent surveyors had been obtained for each of them for the purpose of ascertaining the market price and fixing the reserved price accordingly.  No bid was made in the first three auctions.  The Property was eventually sold at the last auction held in November 2006 at the best market price as valued by the surveyor.  The debtor had adduced nothing to show that the price was not a reasonable and proper one or did not represent the true market value of the Property at the time.

11. The debtor alleged that in one of the valuation reports for the first auction, the surveyor had wrongly stated the completion date of the Property was in 1996.  He thus disputed the accuracy of the price as estimated by that surveyor.  But the fact is the petitioner did not use that valuation report to fix the reserved price for the first auction.  The debtor then alleged that the same surveyor was charged with the conduct of the fourth auction.  Given the mistake in their valuation report for the first auction, they could have make mistake for the fourth auction.  This is a bare allegation without substance, which must be rejected.

12. The debtor further took the point that the petitioner did not consult him or advise him as to the sale of the Property.  However, the petitioner is simply under no such duty at all : see G Merel & Co. Ltd v. Barclays Bank (1963) 107 Sol Jo 542 (on consultation) and Morgan v. Lloyds Bank plc [1998] Lloyd’s Rep 73 (on advice).

13. In short, none of the points taken by the debtor to dispute his liability on the debt is meritorious.  He has failed to raise any bona fide dispute on substantial grounds.

14. Finally, the debtor invoked section 6D(3) of the Bankruptcy Ordinance, Cap. 6 by relying on an offer that he made to the petitioner on 22 September 2008 to settle the debt by paying HK$420,000 within 30 days which, he said, was unreasonably rejected by the petitioner. 

15. Under section 6D(3), the court may dismiss the petition if it is satisfied that the debtor had made an offer to settle the debt which has been unreasonably refused by the petitioner.  In order to determine if the petitioner’s refusal was unreasonable, the court has to be satisfied that no reasonable hypothetical creditor in the position of the petitioner and in the light of the actual history as disclosed to the court, would have refused the offer and that the refusal was therefore beyond the range of possible reasonable actions in the circumstances : Re a debtor [1995] 1 All ER 628 at pp.639-640; see also Re Man Kwok Shing & Others [2003] 1 HKC 208, at para.18.

16. Here, the debtor’s offer was well below the outstanding amount.  Further, there is nothing in the evidence to show that the debtor would be able to pay as offered.  That being the case and in light of his past payment records, the petitioner is well justified to have refused his offer.

17. The debtor can derive no assistance from section 6D(3).

C.  Conclusion

18. For the above reasons, I will allow the petition and make a usual bankruptcy order against the debtor. 

19. The parties had already made their submissions on costs.  In my view, costs should follow the event.  As to quantum, Mr Chan, for the petitioner, asked for a gross sum order.  I have carefully considered the skeleton bill submitted by him.  Taking the matter in the round, I will fix the petitioner’s costs at $80,000.  I therefore make an orderthat the debtor do pay the petitioner costs of these proceedings, including all costs reserved, assessed at $80,000 forthwith.