RE WONG SHUI KEE ROGER

HCB5129/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDING NO.5129 OF 2004

---------------------

----------------------

-------------------------

J U D G M E N T

-------------------------

1. The debtor was the plaintiff in HCA5590/2000 in which he sued the petitioner for defamation. The claim was dismissed by Hartmann J on 19 September 2001 after trial of a preliminary issue which lasted two days. The defendant was ordered to pay the costs of that action. The costs eventually taxed by Master Au-Yeung on review amounted to $516,211.60. This petition is based on the taxed costs and interest, totalling $615,758.01.

2. At the review, the debtor alleged fraud and dishonesty against Gareth Huw Thomas ("Mr Thomas") of Herbert Smith.

3. Master Au-Yeung dealt at length with the debtor's allegation of fraud and dishonesty against Mr Thomas. The allegation involved :

"(1) the hourly rate of a fee-earner, Sammi Fang ("SF");

(2) items 204A to F relating to a fee-earner, Mr Thomas's time; and

(3) items relating to undue delay under Order 62, rule 22(3)."

In paragraph 17 of Master Au-Yeung's decision which was handed down on 30 January 2004, she said :

" The credibility of Mr. Thomas was in issue. The matters that aroused such an attack could be classified as:

(i) the erroneous representation at the Original Taxation that SF was a registered foreign lawyer ('the erroneous representation'); and

(ii) the erroneous attribution of time to Mr. Thomas for work not done by him ('the erroneous attribution')."

4. Mr Thomas gave evidence in the form of affidavits and orally under oath, and was cross-examined by the debtor. In relation to the erroneous representation point, namely, that SF, who was a qualified Australian lawyer, was employed as a registered foreign lawyer rather than as a paralegal, the learned Master concluded :

"24. Looking at all the circumstances, there was nothing which caused me to find that the erroneous representation was made out of a deliberate intention to lie to the court as opposed to carelessness. Suggestions put in cross-examination had been considered but they were not irresistible inferences that Mr. Thomas had been lying to the court. At best they were suspicions of Mr. Wong. There could be logical explanations consistent with innocence which I accepted. There was no independent evidence to contradict Mr. Thomas's version."

5. In relation to the erroneous attribution issue, the learned Maser held at paragraph 28 of her decision :

"... There was not enough material to create a doubt in my mind as to the credibility of Mr. Thomas when one viewed his explanation independently for the erroneous representation and erroneous attribution, whether jointly or severally. I found that Mr. Thomas had not lied but had made a careless mistake in approving the bill."

6. In relation to the delay point, the learned Master concluded at the end of paragraph 45 :

"... At the end of the Reviews, I confirmed my ruling that there had been no dishonesty on the part of Mr. Thomas and I did not see the need to reflect my disapproval by deducting globally Mr. Thomas's costs."

7. On 11 February 2004, the debtor applied under Order 62, rule 35 to a judge to review the taxation by Master Au-Yeung. However that application was dismissed by consent on 11 May 2004.

8. Meanwhile, a Statutory Demand was issued on 7 January 2004. On 20 January 2004 the debtor applied to set aside the Statutory Demand. That application was heard by Deputy Judge To on 30 March 2004. The learned deputy judge dismissed the application and authorised the petitioner to present a petition after 13 May 2004. On 15 April 2004, the Deputy Judge's order to dismiss the application to strike out the Statutory Demand was perfected. Under section 95(2) of the Bankruptcy Ordinance, any appeal from that order "shall be commenced within 21 days from the time when the decision appeal against is pronounced or made".

9. The petition was presented on 18 May 2004. It was amended and re-signed on 19 July 2004.

10. The defendant filed "Notice of Intent to oppose petition" on 30 June 2004.

11. At the heart of the defendant's complain is this statement in his Skeleton Submission dated 12 August 2004 :

"... The Petitioner by its solicitors Herbert Smith committed fraud and deceitful conduct in the course of obtaining the Allocatur which form the basis of the statutory demand and the present Petition. ..."

12. These were the complaints made before Master Au-Yeung. They were also the subject of subsequent proceedings brought by the debtor, namely, HCA2207/2003 and HCA27/2004. In both actions, the debtor was the plaintiff and Mr Thomas, 1st defendant and Herbert Smith, 2nd defendant.

13. HCA2207/2003 was struck out by Reyes J on 17 September 2003. I will refer to paragraphs 21 and 21 of his judgment :

"21. It is apparent that the crux of the SOC and AMSOC are the allegations that:-

(1) Mr Thomas deliberately misled the Master about Mr Fang's status; and,

(2) the presentation by Mr Thomas and Herbert Smith of an amended bill of costs constituted a fraudulent act and a conspiracy to defraud.

Unless Mr Wong can establish these allegations, his claims in SOC and AMSOC stand no prospect of success.

22. But these allegations are precisely those which Mr Wong exhaustively canvassed (including in cross-examination of Mr Thomas) before the Master and on which the Master conclusively and finally held against Mr Wong. It follows that Mr Wong's attempt to ventilate the same issues of alleged fraud in this action against Mr Thomas and Herbert Smith is precisely the abuse of collateral attack which Lord Diplock described as 'scandalous' in Hunter."

14. HCA27/2004 was commenced by the plaintiff on 6 January 2004. This is a basically a rehash of HCA2207/2003 and was struck out. In paragraph 13 of To DJ's judgment, he said :

" The same issues were before Reyes J on 17 September 2003 when he dismissed the Plaintiff's statement of claim High Court Action No 2207 of 2003 as frivolous, vexatious or otherwise an abuse of process. ..."

15. Since then, the debtor has commenced two further actions, namely, HCA1060/2004 which was commenced on 4 May 2004 and HCA1524/2004 on 29 June 2004. In these two actions, the creditor was added as the 3rd defendant.

16. In HCA1524/2004, the only new allegation is in paragraph 13 of the Statement of Claim :

"It has recently come to the attention of the Plaintiff that there is a express agreement on costs by the Defendants and the Hong Kong Indemnity Fund Ltd. that the amount of costs to be incurred by the Defendants is not to exceed the sum of HK$200,000.00. All the Defendants used their best endeavors to conceal this agreement in order to cheat and swindle money from the Plaintiff by way of a formal taxation hearing without submitting the agreement to the Court."

17. The debtor has told me that he does not rely on the relevant Solicitors (Professional Indemnity) Rules but what he has been told by other solicitors, including some on the panel of the Law Society dealing with such matters. But the burden is on the debtor to satisfy me that he has a bona fide dispute on substantial grounds regarding the debt in question. On the evidence before me, I am not satisfied that this raises a bona fide dispute. The allegation lacks particulars and I would say credibility.

18. There is also no explanation why it had not been raised previously. The bare assertion that the debtor claimed to have learned of it recently is not sufficient. This is a matter which ought to be raised in the taxation. This action was commenced on 29 June 2004. As late as 11 May 2004, the debtor consented to the dismissal of his application to review the taxation. I am not satisfied that this could not have been raised at the review by a judge.

19. The rest of the claim is a repetition of the allegation of fraud and dishonesty against Mr Thomas. However, in this action the plaintiff also claimed damages in the sum of $3,500,000 under particulars of fraud and deceipt. Essentially, the debtor alleged that he had been unable to concentrate on his law practice, had to turn away clients and lost revenue amounting to $3,000,000, and that he had to spend medical fees amounting to $500,000 because of insomnia and chronic depression syndrome. In my opinion, this claim is completely unfounded and the allegation of fraud and deceit had been adjudicated against him by Master Au-Yeung.

20. I turn to consider HCA1060/2004, this was commenced on 4 May 2004 and is a claim for $5,300,000 described as special damages. This is supposed to be based on the intimidation of the plaintiff's interior designer and personal financial adviser by a clerk employed by Herbert Smith This incident allegedly took place on 30 December 2003. I have to consider whether this claim raises any genuine cross claim. I do not believe the debtor has a genuine cross claim.

21. The debtor relies on the letter dated 9 January 2004 from Herbert Smith as an admission to support his allegation :

"...

(4) On a second thought, since there was no confirmation from the individual that he was Mr Wong, the clerk knocked on the door again for about a minute with an intention to obtain the envelope back from him. The individual then opened the door again and threw the envelope back to the clerk before the clerk had the chance to say anything. At the same time, the individual swore at the clerk in English, then closed the door in the clerk's face.

(5) With the door still closed, the clerk swore aloud in Cantonese. He then found that the envelope had been opened and knocked on the door again. The same individual opened the door. The clerk asked him in English, 'do you take out document?'. The individual answered in English, 'what document?' The clerk replied 'document inside envelope'. The individual did not answer but closed the door in the clerk's face once again. The clerk swore aloud again in Cantonese then left. Throughout the encounter the clerk remained outside the office premises, in the public area of the building."

22. In my opinion, this letter provides no support for the defendant's case. Apart from the letter, the debtor has nothing. Nor do I see any reason for holding the creditor vicariously liable to the debtor for its solicitors' employee's action. Moreover, the defendant could have relied on this claim on his application to set aside statutory demand. The alleged event occurred in December 2003 and the hearing to set aside the statutory demand took place on 30 March 2004. Whether one applies res judicata in its wider sense in its full rigour or not, (see the judgment of Kwan J in In re Choy Wai Bor, HCB8565/2001, 28 May 2002, paragraphs 33 to 35), I believe on the facts of this case, it is an abuse of process by the debtor not to have raised this compliant in his application to set aside the statutory demand. I add, for the avoidance of misunderstanding, I do not accept that there is any substance in this claim.

23. I turn now to consider the defendant's arguments. The first related to his intended appeal from the decision of To DJ. As I have said, time for appeal has already expired. But more importantly, the appeal is totally unmeritorious. It has no prospect of success.

24. The second ground relies on rule 48(5)(d) of the Bankruptcy Rule which gives the court a residual discretion to set aside a statutory demand. But rule 48(5) deals with the power of the court on the hearing the application to set aside the statutory demand and does not help the debtor. Leaving aside the question of res judicata, I see no ground for the setting aside of the statutory demand.

25. The debtor also contended that he was entitled to an indemnity in relation to the costs in HCA5590/2000 by the solicitors who acted for him in HCA5590/2000. But, as I understand from the debtor, his claim against his former solicitors for negligence is contested. This is not a good reason not to make a bankruptcy order.

26. Another ground that he relied on is a reiteration of his compliant against Mr Thomas and Herbert Smith which has been tried and determined by Master Au-Yeung.

27. The debtor referred me to In re a debtor (1928) Ch.155, in particular the judgment of Sargant LJ at page 209 where he said that misconduct of the petitioning creditor might disqualify him from being successful. But that was a case where misconduct was established. Here the allegation of misconduct has been rejected by Master Au-Yeung.

28. The debtor relied on paragraph 45 of Master Au-Yeung's judgment where she said :

"... Though the bill was chaotic and inconsistent, Mr. Thomas and the LCD had demonstrated to me their full preparation and sincerity in putting right what were once mistakes that had misled the Court. ...

They were best endeavours to come clean with what had been wrongly done."

It is said that this is a finding of misconduct against Mr Thomas. But this is a misunderstanding of the judgment. As I read Master Au-Yeung's judgment, she had expressly exonerated Mr Thomas of dishonesty. As I have said, the debtor's attempt to attack the probity of Mr Thomas and Herbert Smith in HCA2207/2003 had been struck out by Reyes J and in HCA27/2004 by To DJ. There the matter must rest.

29. I turn to the Notice by Debtor of Intention to Oppose Petition :

(1)	Paragraph 1 deals with the intended appeal from To DJ and it is said that one of the grounds of appeal is that the debtor was entitled to indemnity from the solicitors who acted for the debtor at one time in HCA5590/2000. I have already dealt with that. There is nothing in this ground.
(2)	He relies on HCA1524/2004. Paragraph 2 reads : "There is a current HCA1524/2004 filed into court on 29 June 2004 against the petitioner for insurance fraud acting in concept with others to obtain the Allocatur which form the basis of the present petition. I verily believe that the fraud is and could be established from the previous findings of Master Au-Yeung in her written judgment dated 30 January 2004".
	In relation to this the debtor relies on paragraph 45 of Master Au-Yeung which I have already dealt with. There is nothing in this ground. In any event, this is another collateral attack on the decision of Master Au-Yeung which has exonerated Mr Thomas and Herbert Smith.
(3)	This is a reliance on HCA1060/2004. For reasons I have already given, there is no merit in this ground at all.
(4)	"The present petition is in all the circumstances an abuse of process and is therefore liable to be dismissed with costs". For the reasons that I have given, I am of the opinion that a bankruptcy order should be issued.

30. I order therefore a bankruptcy order against the defendant.

31. The petitioner also asked for costs on an indemnity basis. I have given the matter careful consideration and decided against making an order for indemnity costs against the debtor.

32. Lastly, I should also mention that at one time the debtor has claimed that he has assets or means to pay off the debt. I suggested to him at the previous hearing on 2 August, that he should file an affidavit of means if that is indeed his case. He has chosen not to do so. Therefore I have no reason not to make the order that I have decided to make.