RE WONG LEI KWAN JOANNE also known as WONG LEI KWAN JOANNA

HCB 2837/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 2837 OF 2007

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J U D G M E N T

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1.  This was an application by the Bankrupt, Joanne Wong Lei Kwan (“Ms Wong”), seeking the annulment of the bankruptcy order made against her pursuant to section 33(1)(a) of the Bankruptcy Ordinance (Cap. 6) (“the Ordinance”).  Ms Wong was made bankrupt on 6 June 2007, when the bankruptcy order was made by Master Ho, she having failed to appear at the hearing of the bankruptcy petition presented against her by the Petitioner, the Bank of China (Hong Kong) Limited (“the Bank”).

2.  The petition was based on judgment debts under three default judgments that the Bank had obtained against the Ms Wong, as follows:-

3.  Ms Wong did not give notice of intention to defend in any of the actions, and default judgments were entered against her on 16 January 2004 (in HCA 4517/2003 and HCA 4518/2003) and 20 October 2004 (in HCA 465/2004).

4.  All World, Link Regent and Regal Link were all companies of which Ms Wong and her husband were officers and shareholders.  It would appear that they were used for the purpose of investment in property, such investment being financed by mortgage loans from the Bank.  Ms Wong says that she did not know much about the affairs of the companies, these being handled by her husband.  She says that she signed guarantees in respect of the companies at her husband’s request.

5.  On 7 March 2006, the Bank issued a statutory demand against Ms Wong in respect of the judgment debts in the three actions.  Attempts to serve her personally having proved unsuccessful, substituted service by advertisement was effected on 7 August 2006.  Thereafter, the petition was issued on 15 March 2007.  As it was not possible to serve Ms Wong with the petition personally, an order for substituted service was obtained on 15 May 2007, and substituted service was subsequently effected in accordance with that order.

6.  As I have already noted, Ms Wong having failed to attend at the hearing of the petition on 6 June 2007, a bankruptcy order was made against her.

7.  Ms Wong says that she learnt about the bankruptcy order in September 2007 from a friend who had received notice of a meeting of creditors in the bankruptcy.  She thereupon sought legal advice, and made this application on 8 October 2007.

8.  Section 33(1)(a) of the Ordinance provides:-

9.  Ms Wong contends that the bankruptcy order should not have been made against her for three reasons:-

10.  Section 4(1) of the Ordinance sets out certain conditions in relation to the debtor that must be satisfied before a bankruptcy petition can be presented.  It provides as follows:-

11.  It is not suggested that Ms Wong was domiciled in Hong Kong, or that she was personally present in Hong Kong on 15 March 2007, the day on which the petition was presented, or that she had a place of business or had carried on business in Hong Kong in the three years prior to the presentation of the petition.  The Bank contends, however, that Ms Wong was ordinarily resident in Hong Kong within that period.

12.  Ms Wong says that she left Hong Kong permanently in 2000, when she took moved from Hong Kong to reside in Toronto with her young daughter, with a view to acquiring Canadian citizenship.  She remained in Toronto until 2006, when, having become a Canadian citizen, she moved to Shenzhen, where she has lived since.  She accepts that, during the time when she was living in Canada, she visited Hong Kong in 2004, but only for a short period, and that since moving to Shenzhen, she has visited Hong Kong on a number of occasions, but rarely stayed overnight.

13.  In support of this evidence, Ms Wong produced a statement of her travel records supplied by the Immigration Department.  This shows that:-

14.  Thus, in the three years prior to the presentation of the petition, Ms Wong was in Hong Kong 19 times, staying for two nights on one occasion, one night on two trips and otherwise making day trips only.  She has stated that until sometime in 2006, she was living in Toronto, and thereafter in Shenzhen.  On this material, it would seem difficult to suggest that she was, at any time in the three years prior to the presentation of the petition, ordinarily resident in Hong Kong.

15.  The Bank, however, contends that she should nonetheless be regarded as being ordinarily resident in Hong Kong.

16.  It was, I think, common ground that the test of ordinary residence established in Levene v Inland Revenue Commissioners [1928] AC 217, Inland Revenue Commissioners v Lysaght [1928] AC 234 and R v Barnet L.B.C. ex parte Shah [1983] 2 AC 309 was accurately summarised by Cheung J (as he then was) in Lau San Ching v Apollonia Liu (1995) 5 HKPLR 23, in the following terms:-

17.  The Bank also relied on the provisions of section 2(6) of the Immigration Ordinance (Cap. 115), which provides:-

18.  In applying these criteria to the present case, the Bank relies on the following matters in support of its contention that, notwithstanding having moved to Canada and thereafter having visited Hong Kong only infrequently and only briefly on each visit, Ms Wong should be regarded as having been ordinarily resident in Hong Kong at some point during the three years prior to the presentation of the petition:-

19.  With all respect to Ms Sit, who argued the point with tenacity for the Bank, it seems to me to be impossible to conclude that on the facts of this case, Ms Wong could have been ordinarily resident in Hong Kong at any time during the three years prior to the petition being presented.

20.  In my view, the fact that she was in Hong Kong for just over 20 days in those three years provides the strongest possible evidence that she was not resident, let alone ordinarily resident, here.  In order to be ordinarily resident here, there must first, I think, be some element of actual residence.  In the three years with which we are concerned, Ms Wong remained overnight in Hong Kong on no more than three occasions, for a total of four nights.  I do not see how it could realistically be suggested that this could be regarded constituting residence in Hong Kong.  This is not a case in which Ms Wong was detained against her will elsewhere, so that she had no real opportunity to return to Hong Kong, or that she had no real choice in the matter.  Whatever restrictions might have existed on her ability to spend unlimited time in Hong Kong while seeking to acquire Canadian citizenship (which is in any case very different from the examples given in the Lau San Ching case of imprisonment, kidnapping or being marooned on a desert island in that the involuntary nature of the stay elsewhere in those cases is absent), they are unlikely to have meant that she was not free to be in Hong Kong for considerably more than the 20 odd days that she did spend here.

21.  Having regard to the purpose for which she moved to Canada, it seems to me that the very limited time that she spent in Hong Kong thereafter is consistent only with her no longer being ordinarily resident here.

22.  Although I would accept that the fact that Ms Wong holds a Hong Kong identity card and has a residential address recorded at the Companies Registry provides prima facie evidence that she is resident, and perhaps ordinarily resident, here, as was held by Deputy Judge L. Chan in Re Shum Fong Chung (unreported, HCB 5782/2006, 15 March 2007), I am satisfied that the evidence which she has adduced, in the form of the Immigration Department records and her own affidavit, are more than sufficient to rebut such a prima facie case.  The position here is quite different from Re Shum Fong Chung, where no travel records or other documents were produced by the debtor to back up his bare assertions of non-residence in Hong Kong.

23.  For the reasons I have already explained, the purpose of Ms Wong’s living in Canada shows a voluntary intention on her part to be resident there.  The same would appear to be the case in relation to the time since 2006 when she has been living in Shenzhen.  It cannot be said that her absence from Hong Kong was in any way involuntary.  Nor can it be said to be a mere temporary absence (even of long duration), given that since her departure from Hong Kong in 2000, Ms Wong has not returned to reside here at all.

24.  It is true that Ms Wong has not given details of the reasons for her brief visits to Hong Kong since 2006.  However, given the number of such visits, and their uniformly brief duration (none lasting for more than two nights), I do not see that these are sufficient to amount in any real sense to residence here.

25.  Indeed, adopting the approach set out in section 2(6) of the Immigration Ordinance would seem to me to lead inescapably to the conclusion that Ms Wong was not resident in Hong Kong during the three years in question:  her absence from Hong Kong was not temporary – having left, she has not returned for any appreciable length of time; the reason and duration of the absence are, to my mind, inconsistent with her being ordinarily resident here; and there is no evidence to suggest that she has any habitual residence here, or that she is employed by a company based here, or that any of her principal family members are (or were during the period in question) here.

26.  I am therefore satisfied that Ms Wong has established that she was not ordinarily resident here during the three years prior to the presentation of the petition against her.  That being so, it follows that the Bank was not entitled to present the petition against her.  Had that fact been known to the court when the bankruptcy order was made, I have no doubt that it would not have made that order.  It is therefore open to me to annul the bankruptcy order pursuant to section 33(1)(a) of the Ordinance.

27.  Ms Sit submits, however, that I nonetheless have a discretion whether or not to grant the annulment sought, and suggests that I should not exercise my discretion in favour of doing so, on the grounds that Ms Wong must have been aware of the judgments against her, and had taken no steps to deal with them in the long period that they had been outstanding.

28.  As to this, I do not think that there is any real evidence for thinking that Ms Wong was aware of the claims or judgments against her.  The only matters that the Bank could point to were the fact that Ms Wong’s husband, having executed Deeds of Release in relation to the properties owned by the companies, must have been aware that there would be a shortfall between the sale proceeds and the amounts owed by the companies to the Bank, and that it was likely that he had communicated this fact to her.  There is, however, no evidence that he had done so, and I do not think that it would be right to assume that this had happened.  Even if it had, there is no reason to suppose that she would have been aware of the actions or default judgments obtained in them.

29.  In any case, given that the effect of Ms Wong not being ordinarily resident in Hong Kong in the three years prior to the presentation of the petition is a matter which goes to the Bank’s entitlement to present a bankruptcy petition against her, and thus to the court’s jurisdiction to make the bankruptcy order which it did, I do not think that it would be an appropriate exercise of my discretion to withhold the order of annulment that is sought.

30.  I therefore conclude that on this ground, Ms Wong is entitled to have the bankruptcy order against her annulled.

31.  For completeness, I shall deal briefly with the other two grounds for annulment advanced on behalf of Ms Wong.

32.  So far as the allegedly defective service of the statutory demand is concerned, I would not have been inclined to annul the bankruptcy order on this ground.  Rule 46(2) of the Bankruptcy Rules requires personal service of the statutory demand where that is practicable.  Where it is not, the creditor must do all that is reasonable for the purpose of bringing the statutory demand to the debtor’s attention.  For this purpose, what is reasonable is to be judged objectively, in the light of the information actually or constructively available to the creditor at the time of the service of the statutory demand (see Re Lam Lai Wah Susanna [2002] 4 HKC 334 at 341H-I).  In Re Pang Mei Lan May [2005] 1 HKC 319, I concluded (at 332D-333B) that it was for the debtor to show that the steps taken by the creditor were not all the steps that could reasonably have been taken by him, but that even if this was shown, the creditor could, if he was able, show that the steps suggested would not have resulted in the debtor becoming aware of the statutory demand, and so should not be considered to be steps that he ought reasonably be required to have taken.

33.  In this case, Ms Wong did not inform the Bank that she had left Hong Kong.  Nor did she ever provide the Bank with up to date addresses at which she could be reached.  That being so, the steps which the Bank took to serve her with the statutory demand, i.e. by service at the registered office of the companies, at an address given for Ms Wong in the companies’ latest annual returns and at a further address stated in the Regal Link guarantees would appear to have been reasonable.  Further, none of the additional steps suggested by Ms Wong would appear to be steps which would have taken matters any further, so far as bringing the statutory demand to her attention is concerned.  Writing to the companies would have achieved nothing, as they were no longer to be found at their registered address, which was the only address which the Bank had for them.  Enquiries could not have been made of Ms Wong’s husband, since he was not traceable when the time came for legal proceedings to be brought against the him, the companies and Ms Wong.  There being no other sources of information open to the Bank, it seems to me that they did do all that was reasonably practicable, given the information available to them, to bring the statutory demand to Ms Wong’s attention.

34.  However, the position is different in relation to Ms Wong’s last ground.  It seems to me that given that the writs issued against her in the High Court Actions were not valid only for service in Hong Kong, the fact that she was not in Hong Kong at the time of service means that she was never validly served with them, and that the default judgment entered against her was accordingly irregular.  It would therefore be liable to be set aside as of right, subject only to the residual discretion not to set aside that was recognised in Po Kwong Marble Factory Limited v Wah Yee Decoration Company Limited [1996] 4 HKC 157 (at 161C-D).  Although Ms Sit submitted that this was a case in which that discretion would be exercised against Ms Wong, I do not see that this would be the case.  I have already dealt with the suggestion that Ms Wong was probably aware through her husband of the legal proceedings against her.  I do not think that this is an inference that can properly be drawn, particularly as her husband did not take part in the actions (a default judgment having been entered against him as well, as he too had failed to give notice of intention to defend).  Moreover, as I have already indicated, I do not think that it would be right to assume that he would have communicated to her the fact that there was a shortfall between the sale proceeds of the properties and the companies’ indebtedness to the banks.

35.  Thus, until such time as Ms Wong became aware of the default judgments against her, which would have been some time after she became aware of the bankruptcy order in September 2007, I do not think that she can be criticised for having failed to take steps to have them set aside.  However, criticism was also made of Ms Wong for her failure to have taken steps to do so thereafter.  In my view, such criticism is misplaced, as she would not be able to do so herself so long as she remains a bankrupt, with the consequence that her affairs are in the hands of the Official Receiver.  I do not think that there is anything unreasonable in her seeking first to have the bankruptcy order against her annulled, so as to put herself in a position to seek to have the default judgments set aside.

36.  As the default judgments against Ms Wong are, on the face of it, susceptible to being set aside as of right, this provides a further basis for saying that the bankruptcy order ought not to have been made against her, and should be annulled pursuant to section 33(1)(a) of the Ordinance.  For the reasons set out in paragraphs 34 and 35 above, I do not think that it would have been appropriate to exercise my discretion so as to refuse an annulment under this ground either.

37.  Mr Chu, appearing for Ms Wong, also took the point that, insofar as necessary, Ms Wong would contend that she had a good defence on the merits to the actions against her, on the ground of undue influence.  Given the views I have expressed as to the irregular nature of the default judgments that were obtained, it is not necessary to consider this ground, and as it may be the subject of argument elsewhere, I do not propose to express any views on it.

38.  I shall therefore order that the bankruptcy order granted against Ms Wong on 6 June 2007 is to be annulled.  So far as costs are concerned, there will be an order nisi that the Bank is to pay Ms Wong’s costs of this application, to be taxed on the party and party basis if not agreed, and to pay the Official Receiver’s costs of this application, assessed in the sum of HK$5,000.

39.  Having annulled the bankruptcy order, it seems to me that the petition against Ms Wong should, in consequence, be dismissed, with a costs order nisi against the Bank, in respect of any costs which Ms Wong may have incurred (although as she took no part in relation to the hearing of the petition, it seems unlikely that she will have incurred any costs in relation to it) and also in respect of the costs of the Official Receiver.