RE SHUM FONG CHUNG

HCB 5782/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO.5782 OF 2006

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J U D G M E N T

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1.  The Petitioner petitions for the bankruptcy of the Debtor on the ground that the Debtor has failed to comply with or apply to set aside a statutory demand for $7,270,709.30. 

2.  The Debtor used to be represented by Messrs Wilson Yeung & Co.  The Registrar on 14 March 2007 made an order declaring that this firm had ceased to act for the Debtor.  A copy of the Registrar’s order has been filed with the Registry yesterday afternoon, but no certificate under O.67 r.6(1)(c) has been filed by this firm.  It is therefore not known if the Registrar’s order has also been served on the Debtor.  In any case, neither the solicitors for the Debtor nor the Debtor himself has turned up this morning.  The hearing thus proceeded in their absence.

3.  The statutory demand was dated 30 March 2006.  The Petitioner’s solicitors tried to effect personal service of this demand on the Debtor.  However, despite repeated attempts on 30 March, 6 April, 8 April, 18 April, 20 April, 28 April, 4 May, 10 May and 11 May 2006, the process server still could not serve the demand on the Debtor personally.  Eventually, service of the demand was effected pursuant to Rule 46 of the Bankruptcy Rules by an advertisement published in Ming Pao Daily News on 12 May 2006.

4.  Wilson Yeung & Co. then made enquiry on behalf of the Debtor.  The enquiry letter was dated 2 June 2006 and it quoted the file reference of the statutory demand of the solicitors for the Petitioner.  The Debtor therefore had knowledge of the demand. 

5.  The evidence of the above matters on service is contained in two affirmations of a Mr Yuen Wai-keung filed on 21 June 2006 and 21 July 2006 pursuant to Rule 49 of the Bankruptcy Rules.

6.  On 18 July, Master Hui granted leave for the Petitioner to file the petition for bankruptcy within 28 days.  The petition was filed on 21 July 2006.

7.  The Petitioner’s solicitors again encountered difficulties in effecting personal service of the petition on the Debtor.  On 7 September 2006, Master Hui made an order for substituted service of the petition by the posting of a copy of the same to the Debtor’s home and a copy to his office and by advertising the same in a Chinese newspaper published and widely circulated in Hong Kong.  Service of the petition on the Debtor was duly effected on 15 September 2006.

8.  The Petitioner has called two witnesses this morning.  The first witness is a Mr Chung Wing-ki, Francis, a senior vice president of the Petitioner.  He referred to the Petitioner’s grant of credit facilities to one Creative Eco-Energy Investment Group Limited (“the Borrower”) in March and May 2003.  By 25 February 2005, the Borrower was indebted to the Petitioner in the sum of $18,438,125.68.  A letter of demand was issued on that day by the Petitioner to the Borrower. 

9.  The Borrower was owned by a listed company, Creative Energy Solutions Holdings Limited (“the Holding Company”), and the Debtor.  The Debtor also owned about 56% of the shares of the Holding Company.

10.  After the letter of demand was issued to the Borrower, the Debtor negotiated with the Petitioner for a settlement of the debt.  As part of the terms of settlement, the Debtor signed a guarantee and indemnity dated 16 March 2005 (“the Guarantee”) in favour of the Petitioner guaranteeing the repayment of the Borrower’s debt.  Before the signing of the Guarantee, the Petitioner’s solicitors had provided the Debtor with a letter and a memorandum in Chinese and English explaining that the Guarantee was to cover the whole of the Borrower’s indebtedness.  The letter from the solicitors also advised the Debtor to seek independent legal advice before signing the Guarantee.

11.  Mr Chung’s evidence on the negotiation with the Debtor and the Debtor’s agreement to provide the Guarantee was corroborated by the evidence of a Miss Chan Mee-ying, an assistant vice president of the Petitioner.  I accept the evidence of both Mr Chung and Miss Chan as the evidence appears to me to be reasonable.

12.  The Debtor has filed an affirmation to oppose the petition when he was still represented by solicitors.  He said in the affirmation that Mr Chung had told him that he would not attract personal liability by signing the Guarantee.  At worst, he would only lose the 56% shares of the Holding Company and the Petitioner would only sue him after the Borrower had defaulted and had been wound up.  He further said that since the Borrower had not been wound up, the petition against him should be dismissed.

13.  He further alleged in the affirmation that he was not domiciled in Hong Kong, was not present in Hong Kong on 21 July 2006 when the petition was presented and had not been ordinarily resident in Hong Kong within the three years before 21 July 2006 when the petition was presented.  He appeared to rely on section 4 of the Bankruptcy Ordinance.

14.  These are, however, mere allegations as he has not exhibited any document to back them up.  No record of his entry into and departure from Hong Kong has been exhibited either.  In any event, as he has not appeared at the hearing, I will not consider these bald allegations.

15.  Furthermore, the Petitioner has produced copies of some documents of the Borrower which have been filed with the Companies Registry.  These copy documents show that the Debtor has a residential address in Convention Plaza, Harbour Road, Wan Chai, Hong Kong.  The Petitioner has also produced an annual report of the Holding Company which stated that the Debtor was the chairman of the Holding Company which was a listed company.  These are evidence that can satisfy section 4 of the Bankruptcy Ordinance even if the Debtor can prove his case under this section.

16.  Since the statutory demand and the petition have been properly served and there is no evidence to rebut the Petitioner’s case of indebtedness, I make a bankruptcy order against the Debtor with costs of the proceedings be to the Petitioner to be taxed.