RE CHEN CHERYL DEANNA

HCB 3082/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3082 OF 2016

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DECISION ON COSTS

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1.  On 26 September 2016 I dismissed the bankruptcy petition because, after certain repayments made, the outstanding indebtedness of the debtor to the petitioner had fallen below the statutory threshold of $10,000 specified in s 6(2)(a) of the Bankruptcy Ordinance (Cap 6).

2.  I adjourned the question of costs because the debtor contended that the statutory demand had not in fact been personally served on her on 18 March 2016 as averred in the petition.  If service of the statutory demand was defective, then it would generally be a ground for dismissing a petition founded on that demand: see eg Re Lam Chik Sing, ex parte Hong Kong Chinese Textile Mills Association [2009] 2 HKLRD 107 at §17.  I also directed a hearing to be held with a view to having cross‑examination on that question. 

3.  It is perhaps a reflection of the deep animosity between these two sisters that there was a dispute even about the service of the affirmations pursuant to my directions for this hearing.  The petitioner said that the affirmation made by the debtor’s son dated 14 October 2016 was filed but not served on her.  Although she knew there was a copy on the court file, she did not think it fair for her to have to spend money to conduct a search and make a copy of the affirmation for herself from the court file. She therefore withheld making an affirmation in reply on the basis that the time for her to do so was 21 days after the debtor served on her the son’s affirmation.  As the hearing drew near, she did eventually obtain a copy and prepare a reply affidavit (her 4^th affidavit) which she allegedly sent to the debtor by ordinary post on 23 February 2016.  The debtor in turn said she had not received it.

4.  As it turned out, the debtor’s son did not appear for cross‑examination at the hearing.  The debtor produced a letter from her son stating that as he had to sit for a mock DSE examination he could not attend the hearing.  I had previously directed that no affirmation may be relied upon without the maker being tendered for cross‑examination.  I see no reason why this consequence should not follow.  The hearing date had been fixed a long time ago.  No advance notice was given to the court or the petitioner that the debtor’s son would not be available.  In any event, even if I allowed the affirmation to be used, in the absence of cross‑examination I would have placed no weight on it.

5.  On this basis, I need not take into account the petitioner’s 4^th affidavit which was made in reply to the debtor’s son’s affirmation, and need not determine whether the son’s affirmation had properly been served on the petitioner or whether the debtor had received the petitioner’s 4^th affidavit in reply.  At the hearing I further ordered the 6^th, 7^th and 8^th affidavits of the petitioner to be expunged for they did not relate to the question of service of the statutory demand and were filed without leave of the court.

6.  The debtor tried to adduce records of her son’s Octopus card transactions at the hearing.  The covering letter from Octopus Cards Limited showed that he had had those records since October 2016. There was therefore inordinate delay for the debtor to seek to produce them only at the hearing, with no advance notice to anyone.  I refuse leave to adduce such evidence.  In any event I do not think the records were of significant probative value.

7.  The petitioner’s case on service of the statutory demand is based primarily on the evidence of the process‑server Mr Wai Kwok Leung, a clerk in the employ of the solicitors firm who represented the petitioner at the time.[1] He gave his evidence in a straightforward manner.  Mr Wai had been in the job for over 10 years.  He had received instructions generally from his firm on how to serve documents.  He was instructed to serve the statutory demand on the debtor personally on that date.  He said that on 18 March 2016, outside the entrance to the High Court Building at Lower Ground 4^th Floor, the petitioner who was with him identified the debtor to him when she came out pushing her son in a wheelchair.  The debtor asked him if he knew the petitioner but he did not answer her.  When he saw the debtor and her son take a lift to go down the government offices building, he took the stairs down to the street level to follow them.  A few minutes later Mr Wai went up to the debtor on the pavement of Queensway near the entrance of Pacific Place.  Her son was at her side.  He told her the purpose of his visit and the nature of the document (ie the statutory demand), and warned her that the petitioner could present a bankruptcy petition if she failed to satisfy the statutory demand.  When the debtor said she would not accept the document, he left it on the ground in front of her.[2]

8.  In contrast, the debtor said that on 18 March 2016, she saw a man outside the High Court Building at LG4 floor.  This man took a picture of her and her disabled son outside Pacific Place when they were going to the bus stop outside.[3] While they were waiting for the bus, the man waved some sheets of paper and asked the debtor to get them.  The debtor and her son felt suspicious and walked away to a further place to wait for the bus.  The debtor asked the man to send a letter to her residential address instead.  Soon afterwards the debtor and her son boarded a bus.[4]  The debtor denied that she had been served with the statutory demand on 18 March 2016 at Pacific Place or that Wai informed her of its nature.[5]

9.  I prefer Wai’s testimony of the events and do not accept the debtor’s evidence.  Wai’s account was inherently probable while the debtor’s was not.  The petitioner’s solicitors were clearly trying to serve the statutory demand on the debtor around that period of time.  They tried service on 10 March 2016 at her residential address but she was not available.  They wrote her a letter dated 11 March 2016[6] asking for an appointment for service on 24 March 2016.  The whole purpose for Wai to go to the area that morning was to effect personal service of the statutory demand on the debtor.  In the photograph the debtor took[7], Wai was standing with his hand holding a document and stretched out towards the debtor.  It made no sense for Wai just to stand there motionless when the debtor refused to accept service, as she alleged. 

10.  The debtor was inconsistent in her own evidence about what happened outside the High Court Building at LG4 floor.  She initially said that she asked Wai what he had said to the petitioner and Wai did not answer.  Later she changed her evidence to say that Wai said he did not know the petitioner — an answer inherently improbable in itself as there was no reason for Wai to deny he was from the petitioner’s solicitors’ firm.

11.  I also find it hard to believe the debtor’s statement that Wai did not explain to her what the document was at all and told her if she agreed to accept the document, then he would tell her who he was. It is inherently improbable that Wai did not explain to her the nature of the document, or why he was there, before asking her to accept it.

12.  The debtor said that it was only when the bus arrived that Wai said he was from a solicitors’ firm.  She then told him that he should send her a letter and make an appointment for service.  She denied that Wai put the document on the ground in front of her.  Here again I prefer Wai’s evidence that he did put the document on the ground.  It would be senseless for him to do so other than in front of her.  It also made no sense for Wai to say he was from a solicitors’ firm only at the last moment before the debtor and her son left.

13.  The debtor said if she had been informed by Wai that the document was a statutory demand, she would not have refused to accept it because of the consequences of a bankruptcy petition being filed against her.  This argument has little force in light of the evidence of the difficulties encountered in serving the petition on the debtor, including the evidence from the Bailiff of the High Court[8] that when he tried to serve the petition on the debtor on 29 June 2016 she ignored him and walked away.

14.  The requirements for personal service in a situation such as the present are well established; see eg Dynasty Line Ltd v Sukamto Sia [2009] 4 HKLRD 454 (CA), at §§19–26.  They are conveniently set out in the following summary accepted by Deputy District Judge Wilson Chan (as he then was) in Cheung Ping v Cheung Wai Kit (unrep, DCCJ 3618/2010, 29 June 2012) at §13:

“(1) the process server should first satisfy himself that he has found the correct person on whom a copy of the writ is to be served;

(2) he should then hand to or leave with that person a copy of the writ;

(3) if that person will not take the copy, it is not necessary to leave it in his actual corporeal possession;

(4) it is sufficient for the process server to inform the person to be served of the nature of the document and throw it down in his presence in such a case;

(5) it is also sufficient for the process server to inform the defendant that the package to be served on him contained ‘court documents’ without necessarily specifying that it is a ‘writ’;

(6) it is however not sufficient for the process server to hand to the defendant the copy writ in an envelope without informing him that it is a copy writ/court document.”

15.  On the basis of the evidence I find that the requirements were met and that the statutory demand had been personally served on the defendant. 

16.  Other than the part payments the debtor had made, it does not seem to me that she had raised any valid defence to the petition.

17.  The petition was presented on 29 April 2016 in respect of a debt of HK$60,873.39, representing unpaid sums of costs under orders of the court on which the statutory demand and the petition were based, including interest up to the date of the statutory demand.  Those orders were still partly unsatisfied as at the time of the petition.  The debtor said that she had paid the petitioner HK$27,000 on about 28 October 2015.  But this did not extinguish the debt or bring it below $10,000.  All the other payments she subsequently made were made between May and August 2016, ie after the presentation of the petition.  The last payment made on 23 August 2016 brought the indebtedness down to below $10,000.

18.  Accordingly it seems to me that the petitioner would have been successful in the petition had no belated repayment been made, and should prima facie have the costs of the proceedings up to and including 23 August 2016. 

19.  There was a suggestion in Williams and Muir Hunter on Bankruptcy (19^th ed), p. 57 that where, without any request on the part of the creditor, tender is made of a part of the debt so as to reduce it below the statutory minimum and to deprive the creditor of his remedy in bankruptcy, the creditor may refuse to accept the part repayment tendered.  Here, the petitioner did not refuse to accept the part payment and the petition eventually failed.  However, although no bankruptcy order was ultimately made, the debtor had failed to discharge the whole debt arising from the court’s costs orders.  For the period between 24 August 2016 and 26 September 2016, I consider that the appropriate course is to make no order as to costs.

20.  The amendment and re‑amendment of the petition were made to take account of the repayment made by the debtor on 29 October 2015 and the consequential change to the indebtedness.  The costs of these amendments are covered by previous orders and not to be imposed on the debtor.[9]

21.  In the result, I decide that costs should be ordered as follows:

(1)   The costs of the proceedings up to and including 23 August 2016 be paid by the debtor to the petitioner, to be taxed if not agreed.

(2)   There be no order as to the costs of the proceedings after 23 August 2016, up to 26 September 2016.

22.  It seems to me the petitioner is substantially the successful party in the outcome of the argument on costs.  I would therefore make an order nisi that the debtor do pay the petitioner her costs of these proceedings after 26 September 2016, excluding the costs of and relating to the 4^th, 5^th, 6^th, 7^th and 8^th affidavits of the petitioner.