RE IP PUI MAN NINA

HCB 309 / 2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 309 OF 2010

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J U D G M E N T

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A. Introduction

1.  By way of the Petition dated 13 January 2010, the Petitioner (the Hong Kong and Shanghai Banking Corporation Limited) asks to bankrupt Ms Ip Pui Man Nina (the “Debtor”) based on a debt which is not satisfied under a statutory demand dated 4 August 2009 (the “Statutory Demand”).

2.  The Debtor opposes the Petition.  The principal bases of the opposition can be summarized as follows:-

(1) The presentation of the Petition is invalid pursuant to section 4(1) of the Bankruptcy Ordinance (Cap 6) (“BO”), as the Debtor is not domiciled in Hong Kong, nor was she ordinarily resident in Hong Kong at any time in the period of three years ending with the day when the Petition was presented to the Court.

(2) The Statutory Demand and the Petition had not been validly served on her.

(3) There are bona fide disputes on substantial grounds as to the debt upon which the Petition is premised upon, given that:-

(i) the claim for various amounts under the debt is statute-barred; and

(ii) the transaction upon which the debt was incurred had been procured by undue influence and misrepresentation of the Debtor’s former boyfriend.

3.  In order to properly understand these grounds of opposition, it is necessary to set out the background leading to the Petition.

B.   Background

The Mortgage

4.  On 19 September 1996, the Debtor, together with Hui Tsz Leung, Henry (“Henry Hui”, the Debtor’s former boyfriend) and Chan Sau Chun (“Madam Chan”, mother of Henry Hui) entered into a facility letter (the “Facility Letter”) issued by the Petitioner for a 23-year home loan granted to them for an amount of HK$1,085,000 (the “Mortgage Loan”).  I would refer to the three of them collectively as “the Borrowers”.

5.  As security for the due payment of all monies payable by the Borrowers, a deed of mortgage (the “Mortgage”) was entered into on 9 October 1996 between the Borrowers and the Petitioner, and was executed under seal by the Borrowers.

6.  Under the Mortgage, the Debtor covenanted to the Petitioner, inter alia, that:-

(1) The ground floor of the building executed on Lots Nos 1022A and 1022B in Demarcation District No. 165, Tai Po, New Territories, Hong Kong (the “Mortgaged Property”) was charged to the Petitioner as security for all moneys due from the Borrowers to the Petitioner;

(2) All term loans and other moneys, obligations and liabilities secured under the Mortgage shall become repayable on demand upon the occurrence of an event of default;

(3) The Debtor is jointly and severally liable for the liabilities of the Borrowers.

7.  In the Mortgage, the Debtor’s address was stated to be the address of the Mortgaged Property.

The Debtor’s other accounts held with the Petitioner

8.  According to the Petitioner’s records, the Debtor applied for the opening of a saving account (the “Vantage Account”) by way of an application form dated 26 May 1998^[1], and the Vantage Account was opened in or about May 1998. 

9.  The Debtor’s addresses as stated in the application form for the Vantage Account included the address of the Mortgaged Property and her office address at Room A, 17/F, Wing Hang Insurance Building, 111 Wing Kut Street, Central, Hong Kong (the “Wing Hang Insurance Building Address”).

10.  Besides the Vantage Account, the Debtor held also the following credit card accounts (collectively

(1) The Gold Master Card Account; and

(2) The Visa Gold Card Account.

11.  In her application for the credit card, the Debtor stated in an application form dated 4 January 1996 (the “Gold Card Application Form”) that her residential address was Flat 1, 10/F, Hung Fuk Building, 48 Kam Ping Street, Hong Kong (the “Hung Fuk Building Address”) and office address was the Wing Hang Insurance Building Address respectively.

The default in repayment and the Statutory Demand

12.  By August 2002, the Debtor and the Borrowers had been in default in making repayments under the home loan and the various bank accounts held by them. 

13.  By a demand letter dated 10 August 2002 (the “Demand Letter”), the Petitioner exercised its rights under the Mortgage and demanded the Debtor (together with the other Borrowers) for full and immediate repayment of the total amount outstanding under various accounts including the Mortgage Loan account.

14.  Apparently, no repayments were made despite the demand.

15.  The Debtor last defaulted in repayment in or about early March 2003.  The Petitioner then started to charge default interest on the Mortgage Loan for the first time on 10 March 2003.  The Petitioner also exercised its right of sale under the Mortgage to sell the Mortgaged Property in late March 2003. 

16.  On 4 August 2009, the Petitioner issued the Statutory Demand against the Debtor for the total sum of HK$1,327,362.31, which covers the following:-

(1) The Mortgage Loan and its overdraft together with interest accrued thereunder totaling some HK$975,000.00 odd;

(2) The outstanding amount under the Vantage Account and the Credit Card Accounts in the total sum of HK$250,536.95;

(3) The outstanding amount under the credit card accounts and bank account held in the name of Henry Hui in the total sum of HK$100,032.47.

Attempts to serve the Statutory Demand

17.  Personal service of the Statutory Demand was attempted by the Petitioner’s solicitors on a number of occasions at two addresses, namely, Flat B, 31^st Floor, Floral Tower, 22 Robinson Road, Hong Kong (the “Floral Tower Address”), and Rooms 1801-1813, 18^th Floor, Pacific  Century Insurance Building, 193 Prince Edward Road West, Kowloon, Hong Kong (the “Pacific Century Insurance Building Address”) respectively. 

18.  It is the Petitioner’s case that the Pacific Century Insurance Building Address was the last known non-residential address of the Debtor.  Originally the Petitioner asserted that the Pacific Century Insurance Building Address was stated as one of the Debtor’s addresses in the Gold Card Application Form, which assertion turns out to be incorrect (see paragraph 11 hereinabove).  The Petitioner subsequently corrected itself in its supplemental affirmation that that the Pacific Century Insurance Building Address was in fact obtained through a credit check on the Debtor performed by a third party on the instructions of the Petitioner, from which it revealed an address of Room B, 18^th Floor, Pacific Century Insurance Building, 193 Prince Edward Road West, Kowloon, Hong Kong.  Apparently this is a different address from the Pacific Century Insurance Building Address to which visits were made, where the “Room B” unit was found to be non-existent.

19.  Regarding the Floral Tower Address, the Petitioner asserts that this was the last known residential address of the Debtor.  The Petitioner alleges that it obtained this address based on the records filed at the Companies Registry which show that the Debtor has been a director of a company called Endless International Limited (“Endless International”), of which Ms Tse Lai-king (“Madam Tse”), mother of the Debtor, is the sole shareholder.  The Petitioner also produces two Annual Returns of Endless International dated 30 May 2009 and 30 May 2010 respectively, from which the Floral Tower Address is stated as Madam Tse’s address.  It is noted that only in the Annual Return dated 30 May 2010 is the Debtor (known as Yip, Yau Nina) stated as a director of Endless International and is the Floral Tower Address stated as her residential address.  There is also no evidence that the Petitioner knew about the relation between Madam Tse and the Debtor at the times of attempting to serve the Statutory Demand.

20.  The Petitioner further refers to the records obtained at the Land Registry, which show that the Debtor was once a co-owner of the Floral Tower Address, and she disposed of her interest in the Floral Tower Address by way of sale in April 2009.  It is the Petitioner’s evidence that in the relevant sale and purchase agreement and assignment in respect of the said sale respectively (both dated 23 April 2009), the Debtor gave the Floral Tower Address as her address[2].

21.  Insofar as the attempts to serve the Statutory Demand at the above two addresses are concerned, the position can be summarized as follows.

22.  The first attempt to serve the Statutory Demand was made on 7 August 2009 when one Mr Ip Pui Chung (“Ip”), a clerk employed by the Petitioner’s solicitors, went to the Pacific Century Insurance Building based on the address obtained from the credit check.  Ip states in his affirmation dated 1 December 2009 that he could not find “Room B” on the 18^th floor, but found instead three premises owned by different companies.  Enquiries from the occupants of these three premises as well as the caretaker of the building were fruitless as none of them had knowledge of the Debtor.  An appointment letter was subsequently sent to the Pacific Century Insurance Building Address (i.e., all these three premises located on the 18^th floor) on 12 August 2009, which was eventually returned by the Post Office and marked “moved”.  Ip made subsequent visits to the Pacific Century Insurance Building Address on 27 August 2009 and 3 September 2009 respectively, and similar enquiries with the occupants and caretakers were made as to the whereabouts of the Debtor, again with no result.

23.  Attempt to serve the Statutory Demand at the Floral Tower Address was made on 10 August 2009 by Mr Kam Chak Wing (“Kam”), a clerk employed by the Petitioner’s solicitors.  Kam states in his affirmation dated 1 December 2009 that while he could not serve the Statutory Demand to the Debtor on that visit, he was told by a caretaker at the lobby on the ground floor of the building that an Ip family lived there and they might be out. Appointment letters were sent to the Floral Tower Address by registered and ordinary post on 11 August 2009, which were eventually returned and marked “unclaimed return to sender” and “addressee unknown” respectively.  Kam made further visits to the Floral Tower Address on 20 August 2009 and 25 August 2009 respectively.  While he could not locate the Debtor in the visits, he was told by the caretaker at the lobby on the ground floor in both occasions that an Ip family was residing there.  On his visit on 20 August 2009, he was informed by the caretaker that Debtor had come back.  The caretaker had however told Kam that he did not know the full name of the Debtor.

24.  After the above unsuccessful attempts to serve the Statutory Demand personally on the Debtor at the Floral Tower Address and the Pacific Century Insurance Building Address, notice of the Statutory Demand was advertised in Sing Tao Daily by the Petitioner, and copies of the Statutory Demand were sent through ordinary post to the above two addresses on 15 September 2009.

Service of the Petition

25.  As mentioned above, the Statutory Demand was not satisfied or responded to.  The Petition was then presented to the Court on 13 January 2010, and attempts were made to serve the Petition personally on the Debtor at the Floral Tower Address and the Pacific Century Insurance Building Address respectively, which were unsuccessful. 

26.  Having disposed that the Petitioner was not aware of any addresses of the Debtor other than the Floral Tower Address and the Pacific Century Insurance Building Address, the Petitioner applied for an order for substituted service of the Petition, which was granted by Master Hui on 17 February 2010.  A notice of the Petition proceedings was advertised in Sing Tao Daily on 26 February 2010, and copies of the Petition were sent through ordinary post to the above two addresses on the same day.

27.  The Debtor gave notice of intention to oppose the Petition on 13 March 2010.

C.   Grounds of opposition

C1.  The Petition was invalidly presented

28.  Section 4(1) of the BO provides certain alternative conditions that must be satisfied in respect of a debtor before a bankruptcy petition can be presented:-

“(1) A bankruptcy petition shall not be presented to the court under s.3(1)(a) or (b) [which deal with debtor’s and creditor’s petitions] unless the debtor:

(a) is domiciled in Hong Kong;

(b) is personally present in Hong Kong on the day on which the petition is presented; or

(c) at any time in the period of 3 years ending with that day:

(i) has been ordinarily resident, or has had a place of business in Hong Kong; or

(ii) has carried on business in Hong Kong.”

29.  It is not disputed that the Debtor was not personally present in Hong Kong on 13 January 2010 when the Petition was presented to the Court.  The Debtor now further contends that she is neither domiciled in Hong Kong, nor was she ordinarily resident in Hong Kong in the three years prior to the presentation of the Petition.  The presentation of the Petition (says the Debtor) is therefore invalid under s. 4(1) of the BO.

C1.1.  Is the Debtor domiciled in Hong Kong

30.  Both parties in the present case accept that the applicable principles of domicile are summarized by Deputy Judge L. Chan in Re Ku Chu Keung (a debtor) [2007] 2 HKLRD 292 (English translation version unreported, HCB 3394/2005, 12 June 2006).  They are in gist as follows:-

(1) “Domicile” is a legal concept distinct from “permanent home”.  The requirements of domicile go beyond those of permanent home.  A person who desires to acquire a domicile in a country must intend to reside in it permanently or indefinitely (para 24).

(2) An independent person can acquire a domicile of a place by, and only by, residing there with the intention to reside there permanently or indefinitely (para 29).

(3) In determining whether a person has the intention to reside permanently or indefinitely in a country, the court must have regard to the motive for which he has taken up residence there.  To acquire a domicile in a country, a person must freely choose to reside there and must not reside there because he is prescribed or dictated by external factors such as the duties of office, the demands of creditors or the need to seek medical treatment.  If a person has a special purpose for going to and staying in a country and he will leave that country once the purpose is achieved, then he lacks the intention to stay in that country as required by law and hence cannot acquire a domicile in that country (para 33).

(4) The existing domicile of a person is deemed to continue until it is proved that he has acquired a new domicile; and he who asserts a change of domicile bears the burden of proving the truth of the assertion (para 37).

(5) An abandonment or change of domicile is a very serious issue and satisfactory evidence is needed to prove an intention to change a domicile (para 40, citing the House of Lords decision in Marchioness of Huntly and Anor v. Gaskell and Ors [1906] AC 56, at 66-67).

31.  Mr Poon, counsel for the Debtor, submits that the Debtor is not domiciled in Hong Kong but in Singapore. 

32.  The burden is on the Debtor to prove by satisfactory evidence that she has abandoned her domicile of origin and adopted a new domicile of choice.

33.  Her evidence in support of a change of domicile is brief and vague, and is essentially contained at paragraphs 4 to 10 of her 2^nd affirmation dated 20 May 2010 as follows:

“4. Since my heart breaking up with my intimate boyfriend [Henry Hui] sometime in 2007, I suffered an emotional breakdown and serious mental distress.

5. As a result, I decided to leave Hong Kong which I believed is a place of traumatic experience and agonizing memory for me.

6. I went to Singapore in early 2008 and came to get acquainted with a few friends living in Singapore. I became much happier when staying with my friends in Singapore, and hence I decided to stay there for time to come.

7. I stayed in Singapore for more than two-third of the time in a year.

8. In Singapore I took up part-time study to upgrade myself so that I could keep my mind busy.

9. In Singapore, I stayed with my friend in her resident at 4 Jalan Lada Puteh, Singapore.

10. Since 2008, I was not and still not domiciled in Hong Kong.”

34.  It is noted that other than copies of pages of the Debtor’s passport which show the Debtor’s entry into Japan on 23 February 2010, no other travel records were produced by the Debtor in support of her claim that she has been spending two-third of her time in Singapore since early 2008.

35.  In my view, the mere staying in Singapore by the Debtor and residing with her friends there does not imply a domiciliary intention on the part of the Debtor.  The allegation that she resided at her friend’s residence does not suggest her residence in Singapore is intended to be permanent or indefinite, but is rather seen as a factor to the contrary.  Taking the Debtor’s evidence to the highest, what she is saying is that she wants to spend more time in Singapore and to take up part time study there so that she could get over from the emotional upset she has had in breaking up with Henry Hui.  

36.  Looking at the Debtor’s evidence quoted above and in the round, I am far from satisfied that it amounts to satisfactory and sufficient evidence to prove, on balance of probabilities, any intention to stay in Singapore permanently or indefinitely and thus her change of domicile from Hong Kong to Singapore.

37.  I therefore hold that the Debtor is domiciled in Hong Kong for the purpose of section 4(1) of the BO in relation to the Petition.

C 1.2  Was the Debtor ordinarily resident in Hong Kong at any time in the past three years

38.  Having concluded that Petition was properly presented as the Debtor is domiciled in Hong Kong, this would have disposed of the Debtor’s first ground of opposition.  However, for completeness, I would also deal with this issue briefly.

39.  The Debtor contends that her staying in Singapore and absence in Hong Kong for more than two-third of time in a year since early 2008 shows that she was not ordinarily resident[3] in Hong Kong for that period of time.  Mr Poon for the Debtor submits that she had been residing with a friend at an identified Singapore address, as set out on all of her affirmations.  Madam Tse in her affirmation also confirms that commencing from early 2008, the Debtor would also spend time elsewhere abroad when she was not in Singapore, and that she had only seen the Debtor during Chinese New Year celebration.  It is thus submitted (by Mr Poon) that the evidence shows that the Debtor has been embarking on a habitual mode of life in Singapore.

40.  For the present purpose, the consideration under section 4(1)(c)(i) of BO is whether the Debtor was ordinarily resident in Hong Kong at any time during the period of three years preceding the presentation of the Petition on 13 January 2010.  That is a period (“the Relevant Period”) between January 2007 and January 2010. 

41.  Thus, even taking the Debtor’s evidence to the highest, it only shows that the Debtor was not ordinarily resident in Hong Kong since early 2008.  In other words, she was at least ordinarily resident in Hong Kong before early 2008, which falls within part of the Relevant Period.  It must be noted that there is no suggestion that she was ordinarily resident elsewhere other than in Hong Kong before early 2008, in particular as the Debtor is a Hong Kong permanent resident holding a Hong Kong permanent ID card and a HKSAR passport[4].

42.  I am therefore further satisfied that the Debtor was ordinarily resident in Hong Kong at some time in the period of three years preceding the presentation of the Petition.  

C1.3  Conclusion on the 1^st ground of opposition

43.  For the above reasons, I reject the Debtor’s first ground of opposition and conclude that the Petition was validly presented under s. 4(1) of the BO.

C2.  Defective service of the Statutory Demand and the Petition

C2.1  The applicable principles on service of the Statutory Demand

44.  The requirements as to the service of a statutory demand are set out in Rules 46 and 49 of the Bankruptcy Rules (the “Rules”).  Rule 46 provides that:-

“(1) Rule 49 has effect as regards service of the statutory demand, and proof of that service by affidavit to be filed with a bankruptcy petition.

(2) The creditor shall do all that is reasonable for the purpose of bringing the statutory demand to the debtor's attention and, if practicable in the particular circumstances, to cause personal service of the demand to be effected.”

45.  Rule 46(3) concerns with the service on a judgment debtor who is known or believed to have absconded or to be evading service, in which case service of the statutory demand by advertisement is expressly permitted.  While the present case does not concern with service against a judgment debtor, service by advertisement can be sufficient for the purpose of Rule 46(2) where personal service cannot be effected if all other reasonable means of bringing the statutory demand to the debtor’s attention have been attempted: Re Pang Mei Lan May [2005] 1 HKC 319 at p.328C-E.

46.  Rule 49 also provides:

“(1) Where under section 6A of the Ordinance the petition must have been preceded by a statutory demand, there must be filed in court, with the petition, an affidavit proving service of the demand.

(2) …

(3) …

(4) …

(5) If neither paragraph (3) nor (4) applies, the affidavit must be made by a person having direct personal knowledge of the means adopted for serving the statutory demand, and must-

(a) give particulars of the steps which have been taken with a view to serving the demand personally;

(b) state the means whereby (those steps having been ineffective) it was sought to bring the demand to the debtor's attention; and

(c) specify a date by which, to the best of the knowledge, information and belief of the person making the affidavit, the demand will have come to the debtor's attention.

(6) The steps of which particulars are given for the purposes of paragraph (5)(a) must be such as would have sufficed to justify an order for substituted service of a petition.

(7) If the affidavit specifies a date for the purposes of compliance with paragraph (5)(c), then unless the court otherwise orders, that date is deemed for the purposes of these rules to have been the date on which the statutory demand was served on the debtor.

(8) …

(9) The court may decline to file the petition if not satisfied that the creditor has discharged the obligation imposed on him by rule 46(2).”

47.  Proper service of the statutory demand on the debtor is a pre-requisite for the commencement of bankruptcy proceedings under section 6A of the Ordinance.  The requirements as to service must be strictly adhered to given the importance of establishing with certainty the period within which a debtor has to comply with the statutory demand: Re Lam Lai Wah Susanna [2002] 4 HKC 334 at p.339I-340C, p.341F-G. 

48.  It was said that non-compliance of a statutory demand gives rise to consequences which go far beyond those that would follow from ordinary action, and that if the statutory requirements were not compiled with, it was insufficient that the statutory demand somehow came to the notice of the debtor: Re Cheung Hoi Chu, ex parte International Bank of Asia Ltd (A Creditor) (unreported, HCB 865-868/1998, 24 December 1998) per Le Pichon J (as she then was) at p. 10.   Thus, it was also held that the failure to serve the statutory demand in accordance with the statutory requirements is not just a formal defect or irregularity, but it renders defective the petition founded on the demand: Re Lam Chik Sing, ex parte Hong Kong Chinese Textile Mills Association [2009] 2 HKLRD 107 at p.112 (para 17) per Kwan J (as she then was).

49.  Rule 46(2) specifies the steps which the creditor must take in serving the statutory demand to the debtor.  The creditor is required to do “all that is reasonable” for the purpose of bringing the statutory demand to the debtor’s attention. 

50.  The extent of this duty was discussed by Barma J in Re Pang Mei Lan May, supra, at p.329B-H (paras 25-26) as follows:-

“25. … But the steps to be taken by the creditor must, I think, also include doing all that is reasonable to effect personal service, such as the taking of reasonable steps to obtain an address at which personal service might be affected … If a creditor has not been able to serve the debtor at the address or addresses which he has in his records but has other information or other means available which might enable him to obtain an address for service, it seems to me that he should make use of him, where it is reasonable to expect him to do so, with a view to bringing the statutory demand to the attention of the debtor.

26. Thus, where a creditor has one or more addresses for a debtor, personal service should ordinarily be effected at each of those addresses.  Where a creditor has one or more avenues by which an address for service might be obtained, he should, if it is reasonable for him to do so, follow up those avenues so as to obtain, if possible, an address for service.  Whether or not it will reasonable to expect him to do so will depend on the particular circumstances of the case, including the ease with which the step in question can be taken, and the likelihood of obtaining information which might enable personal service to be effected.  If an enquiry can be made without much difficulty or effort, it will generally be reasonable to make it even if the chances of obtaining information are not particularly high.  On the other hand, where the chances of obtaining information that might enable personal service to be effected are good, it may be reasonable to take steps which are more onerous or involve the expenditure of greater time or effort …”

51.  As Yuen J (as she then was) pointed out in Re Li Wai Man (unreported, HCB 211/1999, 1 November 1999) at page 8 (and adopted in Re Pang Mei Lan May, at para 27), what is reasonable is to be judged objectively in light of the information actually or constructively available to the creditor at the time.

52.  Where personal service has failed, and reasonable enquires have led nowhere, it will always be open to the creditor to take such other steps as may be reasonable to bring the statutory demand to the debtor’s attention, which in many cases will consist of an advertisement of the statutory demand in a newspaper circulating in Hong Kong: Re Pang Mei Lan May, supra, at p. 330A-B.

53.  There may however be situation where the creditor did not take all reasonable steps in bringing the statutory demand to the debtor’s attention, nevertheless such steps, even were taken by the creditor, could not or would not have resulted in the statutory demand coming to the attention of the debtor.  In such case, where the debtor has shown that the steps taken by the creditor were not all the steps that could reasonably have been taken by him, the creditor could 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.  Re Pang Mei Lan May, supra, at p.332I-333B (para 37); Re Wong Lei Kwan Joanne, ex parte Bank of China (Hong Kong) Ltd [2009] 3 HKLRD 173 at p.183-184 (para 32); Re Lam Chik Sing, supra, at p.112 (para 18).

54.  Where however the evidence leaves it uncertain as to whether or not such a step would have been of utility, the debtor would be given the benefit of doubt: Re Pang Mei Lan May, supra, at p.332H (para 36).

55.  Bearing these principles in mind, I now turn to consider the present case.

C2.2  The service of the Statutory Demand in the present case

56.  The Debtor contends that the Petitioner had failed to do all that is reasonable and practicable to effect service.  The main complaint is that the Petitioner failed to attempt personal service at the Hung Fuk Building Address and the Wing Hang Insurance Building Address, which were the addresses of the Debtor as stated in the Gold Card Application Form supplied to the Petitioner.  Mr Poon submits that since these two addresses were in the Petitioner’s records, the Petitioner should have attempted personal service at these addresses at the outset.  He also submits that the Pacific Century Insurance Building Address as revealed from the credit search is wrong and does not relate to the Debtor at all, such that various attempts to effect service of the Statutory Demand at this address were misconceived. 

57.  It is also contended that despite the Debtor was once a co-owner of the Floral Tower Address, she was not residing there at times of the Petitioner’s attempts to personal service.  It is also her evidence that she had ceased to reside in the Floral Tower Address since some time before mid of 2009.

58.  Mr Pao, for the Petitioner, submits that the Gold Card Application Form was submitted in 1996, which is more than 10 years ago.  He submits that it was reasonable for the Petitioner to look for more recent information of the Debtor’s addresses from the record at the Companies Registry and through basic credit check on the Debtor. 

59.  Applying the principles set out above, and looking at the evidence of the present case, I am of the view that the Petitioner had taken all reasonable steps it ought to have taken to attempt personal service of the Statutory Demand on the Debtor in the way as it had done.  My reasons are as follows:

(1) From the evidence, I accept the Debtor has shown that prima facie, it would be reasonable for the Petitioner to have also attempted service of the Statutory Demand at the Hang Fuk Building and the Wing Hang Insurance Building Addresses.

(2) However, the Debtor’s evidence in her affirmation dated 30 June 2010 is that she moved back to the Hung Fuk Building Address after breaking up with Henry Hui, but then she went aboard to Singapore in or about 2008.   Similarly, Madam Tse’s evidence is also that the Debtor left Hong Kong in early 2008 and has since stayed in Singapore with her friends.  There is no suggestion that at any time when the Statutory Demand was being served, either the Hung Fuk Building Address or the Wing Hang Insurance Building Address was occupied by the Debtor herself. 

(3) In the circumstances, even the Debtor’s own evidence does not show or suggest that had the Statutory Demand been served on the Hung Fuk Building Address or the Wing Hang Insurance Building Address, she would have knowledge of it.  In this respect, it is pertinent to note that (a) the Debtor has never said in any of her opposing affirmations that if the Statutory Demand had been served on these addresses, she would have knowledge of it, and why so, and (b) the Wing Hang Insurance Building Address was the office address stated by the Debtor on the Gold Card Application Form more than 10 years ago, while it must also be the Debtor’s case is that since early 2008, she has not been working in Hong Kong as she has spent most of her time in Singapore.

(4) In light of the above, and coupled with the fact that the Hung Fuk Building Address and the Wing Hang Insurance Building Address were provided to the Petitioner in the respective account opening records more than 10 years ago, I am satisfied that the Petitioner has discharged the burden in showing that any attempts to serve the Statutory Demand at the Hung Fuk Building and the Wing Hang Insurance Building Address would not have resulted in bringing the Statutory Demand to the Debtor’s attention.  Such steps are not therefore to be regarded as steps which the Petitioner ought reasonably to be required to have taken for the purpose of the Rules.

60.  For these reasons, I accept that the Petitioner had done all that is reasonable to bring the Statutory Demand to the Debtor’s attention as required by Rule 46(2) of the Rules.  Service of the Statutory Demand was therefore validly effected on 15 September 2009 when notice of the Statutory Demand was advertised in Sing Tao Daily.  There was good service of the Statutory Demand.

C2.3  Service of the Petition

61.  The Debtor contends that service of the Petition was defective as personal service was not attempted at the usual or last known address of the Debtor at the Hung Fuk Building Address or the Wing Hang Insurance Building Address.  Further it was argued that substituted service of the Petition is invalid, since the order for substituted service was sought on the misrepresentation that the Petitioner had no information or knowledge that the Debtor has any address other than the last known addresses of the Floral Tower Address and the Pacific Century Insurance Building Address.  It is contended that the Master would not have granted the order had he been apprised of all the relevant circumstances.

62.  Requirement for service of the Petition is governed by Rule 59 of the Rules:

“Service of creditor's petition

(1) Service of a creditor's petition shall be effected by the creditor or his solicitor, or a person in their employment, delivering a sealed copy of the petition to the debtor.

(2) If the court is satisfied by affidavit or other evidence on oath that prompt personal service cannot be effected because the debtor is evading service of the petition or any other legal process, or for any other cause, it may order substituted service to be effected in such manner as it thinks fit.

(3) Where an order under paragraph (2) has been carried out, the petition shall be deemed to have been duly served on the debtor.”

63.  As held above in relation to the service of the Statutory Demand, I am similarly satisfied that the evidence shows that personal service of the Petition at the Hung Fuk Building Address or the Wang Hang Insurance Building Address would not have been effective in bringing it to the knowledge of the Debtor.  I therefore accept that the circumstances of the case justifies an order for substituted service of the Petition by advertising a notice of the Petition in Sing Tao Daily and by sending sealed copies of the Petition by ordinary post to the Floral Tower Address and Pacific Century Insurance Building Address.

64.  I therefore also conclude that the Petition has been validly and properly served on the Debtor. 

C2.4  Conclusion of the 2^nd ground of opposition

65.  For the above reasons, I am satisfied that both the Statutory Demand and the Petition have been properly served on the Debtor. The Debtor’s second ground of opposition therefore also fails.

C3.   Bona fide disputes on substantial grounds as to the debt

C3.1  The legal principle

66.  A bona fide dispute is not a trivial or insubstantial dispute but one based on solid grounds disputable both in law and on the facts of the case.  In Re ICS Computer Distribution Limited [1996] 3 HKC 440, the test of bona fide dispute in company winding up cases was set out by Rogers J (as he then was) at p.443C-444A as follows:-

“Importantly for this case there is a distinction between a consideration of whether the Company has established a defence on substantial grounds and a consideration of whether the evidence is believable. Taken to the ultimate, the difference is between whether there is evidence and whether that evidence is believable. It seems to me that the onus must be on the company against which a petition is presented to adduce sufficiently precise factual evidence to satisfy the Court that it has a bona fide dispute on substantial grounds. This seems to me to be the proper approach which emerges both from the cases where the petition has been struck out and those for example as the Great Britain Mutual Life to which I have referred and the Janeash Ltd [1990] BCC 250. In that case Browne-Wilkinson V-C said at 252 “That huge weight of material has remained unanswered”. He went on to doubt the truth of such material as had been put in by the company, but that does not, in my view, detract from the basic point that the company's evidence must establish a substantial case. If the evidence fails to establish that case the company cannot satisfy the test by arguing hypotheses of fact on which it is said that such a case exists or could exist.”

67.  This is a higher standard than that required of a defendant in resisting an application for summary judgment under Order 14. The burden is on the debtor to show not only that his case is believable but also that there is precise factual evidence in support of his case, which are not just mere assertions.  The court will look at the debtor’s evidence against so much of the background and incontrovertible evidence that is not disputed or not capable of being disputed.  An honest belief on the part of the debtor that he has a substantial ground of defence is not sufficient to avoid a bankruptcy order: Re Malcolm Westley Casselle (a debtor) (unreported, HCB 1698/2010, 24 January 2011) per To J at para 24.

C3.2  The contention that certain sums claimed by the Petitioner are statute-barred

68.  The Debtor contends that the Petitioner’s claim under the Statutory Demand for interest accrued under the Mortgage Loan is statute-barred pursuant to section 19(5) of the Limitation Ordinance (Cap. 347), which provides that any claim for interest payable in respect of any sum of money secured by a mortgage shall not be brought after the expiration of 6 years from the date on which the interest became due.  Further, it is argued that the claims for indebtedness under the Vantage Account and the Credit Card Accounts are also statute-barred, for the liability under these accounts is unrelated to the Mortgage such that the limitation period of 6 years as simple contract claims ought to apply.

69.  It is common ground that a period of more than 6 years had elapsed as on the date of the Statutory Demand since the issue of the Demand Letter on 10 August 2002 and the date when the Debtor last defaulted repayments in March 2003.

70.  Mr Pao submits that there are divergent views on the law as to the limitation period for the claim of mortgage interest.  One view is that such claim is not one for monies secured by the mortgage for purpose of section 19(5) of the Limitation Ordinance (Cap. 347) since the property subject to the mortgage has already been sold: Nang Yang Commercial Bank v. Chan Hon Keung and Anor (unreported, HCMP 1500/2001, 19 January 2010, Deputy High Court Judge L Chan) at paras 33-34.  Another view is that section 19(5) does not cease to apply merely because security has been realized, such that the 6-year limitation period would apply to claim for mortgage interest:  Wilkinson v. West Bromwich B.S. [2005] 1 WLR 2303 (HL) at para 10 per Lord Hoffmann.  However, to avoid unnecessary arguments and to save time and costs solely for the purpose of the present hearing, counsel confirms that the Petitioner is prepared not to insist on its claim for interest on the Mortgage as constituting part of the indebtedness on which the Statutory Demand is based. 

71.  Mr Pao further submits that there is no limitation issue on the claims for indebtedness under the Vantage Account and the Credit Card Accounts.  Since the Mortgage is an “all moneys” mortgage, the indebtedness under the said accounts constituted a principal sum of money secured by the Mortgage such that the limitation period of 12 years should apply pursuant to section 4(3) of the Limitation Ordinance.  As the Demand Letter was issued on 10 August 2002, the limitation period of 12 years had not yet expired.

72.  Although the Mortgage is an “all moneys” mortgage, I believe it is at least arguable for the present purpose whether the liabilities to pay under the Vantage Account and the Credit Card Accounts, which are otherwise pursuant to simple contracts and are subject to limitation period of 6 years, could be transformed to liabilities pursuant to a contract under seal and be subjected to the 12-year limitation period based on a cause of action under the Mortgage.

73.  However, both parties agree that the principal sum of the Mortgage Loan of HK$655,725.34 (the “Principal Sum”) is certain and not disputable, and is well in excess of the statutory minimum of HK$10,000 prescribed under the BO.  There is also no dispute that the claim for the Principal Sum pursuant to the Mortgage is subject to the limitation period of 12 years.  Mr Poon fairly accepts that the Debtor has no defence to her liability for the Principal Sum, and this part of the debt under the Statutory Demand cannot be open to any challenge. 

74.  This leaves the question of whether the arguable overstatement of the debt (which has included the interest under the Mortgage Loan and the outstanding sums under the Vantage and Credit Card Accounts) in the Statutory Demand would render the Statutory Demand and thus the Petition operatively defective and liable to be set aside.

75.  An overstatement of the indebtedness in the statutory demand will not automatically entitle the debtor to have the demand set aside.  The relevant question is whether injustice would be caused to the debtor by allowing the particular demand to stand: Re Kwok Chok Yee [2000] 2 HKC 543 at p.548G; In re A Debtor (No. 1 of 1987) [1989] 1 WLR 271 at p.276C-E and p.279F-G. 

76.  In the present case, I am satisfied that no injustice is caused to the Debtor by including in the Statutory Demand claims for interest on the Mortgage Loan as well as the indebtedness under the Vantage Account and the Card Credit Accounts.  As Mr Pao submits, to which Mr Poon rightly concedes, there is no evidence that the Debtor would have been in a position or would have been prepared to pay and settle the debt in the Statutory Demand had it covered only the Principal Sum. As such, the Statutory Demand is not thereby rendered defective by the arguable overstatement of the disputable parts of the stated debt.

C3.2  Undue influence and misrepresentation

77.  The Debtor alleges that the Facility Letter and the Mortgage were entered into as a result of undue influence and misrepresentation practiced by Henry Hui on her.  The Mortgage (she further contends) is thus liable to be set aside and her liability to pay the debt under the Statutory Demand is therefore subject to bona fide dispute on substantial grounds. 

78.  The alleged misrepresentation made by Henry Hui to pursaude her to sign the Mortgage was that her liability under it was only limited to her contribution to the down payment made to purchase the Mortgaged Property.  The Debtor also says she agreed to do so as she had full faith and trust in Henry Hui at that time given their relationship as boyfriend and girlfriend.

79.  I do not find the evidence put forward by the Debtor (and supported by Henry Hui’s affirmation) raises a substantial disputable issue to set aside the Mortgage against the Petitioner.  My reasons are as follows:

(1)   The relationship between the Debtor and Henry Hui was not one of the well-established Class 2A categories which would lead the Court to presume that undue influence had been exerted. 

(2)   The Petitioner as the lender was also not put on any enquiry for the Debtor to enter into the Mortgage because:

(a)    the Debtor herself was one of the borrowers, not a surety.  She was one of the registered owners of the Mortgaged Property.

(b)   There is no evidence and no suggestion that the Petitioner was aware of the relationship between the Debtor and Henry Hui at that time.

(3)   Given that the Petitioner was not put on enquiry, any alleged misrepresentation made by Henry Hui on the Debtor, could not have impugned on the validity of the Mortgage itself between the Debtor and the Petitioner.

(4)   There is thus no triable defence in law by the Debtor to set aside the Mortgage.

(5)   In any event, the Debtor’s allegation is in my view not believable. She has never raised any question of misrepresentation after she received the Demand Letter in August 2002.  The first time she set forward the allegation of misrepresentation was only when she filed her affirmation to oppose the Petition in 2010.  It is not worthy of belief that if the allegation of misrepresentation bears any truth, the Debtor would have waited for more than 7 years after the receipt of the Demand Letter to raise the objection with the Petitioner for the first time.

80.  For the foregoing reasons, I am not satisfied that the Debtor has discharged the burden in showing that there is a genuine dispute on substantial grounds in relation to the Debtor’s liability to pay the debt on the grounds of undue influence and misrepresentation. 

81.  The Debtor’s third ground of opposition must also fail.

D.    Conclusion

82.  The Petitioner has proved the debt to the extent of the Principal Sum and there are no good reasons to oppose the Petition. 

83.  I therefore grant the usual bankruptcy order against the Debtor with costs.  The costs order nisi will be made absolute 14 days from today unless any of the parties applies to vary it.