RE SYED ATHER ALI

HCB 6314/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 6314 OF 2016

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JUDGMENT

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1.  This is the hearing of the bankruptcy petition (“the Petition”) presented by Habib Bank Zurich (Hong Kong) Limited (“the Petitioner”) on 2 September 2016 against Mr Ali Ather Syed (“the Debtor”).

2.  The Petition is based on the Debtor’s non-compliance with a statutory demand dated 17 March 2016 (“Statutory Demand”) for the sum of HK$222,070.20 (“the Petitioning Debt”).  The Statutory Demand is in turn founded on a judgment entered in default of defence on 26 February 2016 (“the Judgment”) in the District Court Civil Action No 5161/2015 (“the DCCJ Proceedings”). 

3.  There is no dispute that the Petitioning Debt remains outstanding.  On 9 January 2017, the matter came before Mr Justice Ng for call-over hearing. 

4.  There is a recent development.  By a letter dated 9 August 2017, the solicitors acting for the Petitioner, Messrs Wilkinson & Grist, wrote to inform the Court that since the last hearing in January 2017, the Debtor has made a partial repayment of HK$150,000 by selling of his vehicle with car registration no SM8506 (“the Vehicle”).  This means that the outstanding debt is HK$72,070.20.  By the said sale, the Petitioner also no longer holds any security over the Debtor’s assets. 

5.  On 10 August 2017, the Debtor wrote to the court and stated that:

“ I am currently out of Hong Kong and had planned to be back for the hearing on the 17^th August 2017. Unfortunately due to my younger brother’s sudden diagnose of stage 4 cancer in Pakistan, I will not be able to come back to Hong Kong on time to attend the current hearing and in this respect I humbly request you to reschedule the hearing to December 15^th to 31^st to your convenience.”

6.  As far as the Debtor’s application for an adjournment is concerned, I do not think that this Petition should be adjourned. The hearing of this Petition has been adjourned from January to August 2017.  The Debtor has knowledge of this hearing well in advance and there is no reason why this hearing should be adjourned to suit the convenience of the Debtor.  As far as his younger brother’s sudden diagnose of stage 4 cancer is concerned, the Debtor has not provided any evidence or details in relation to the same.  In any event, depending on circumstances, family members’ illness may or may not be a good reason for an adjournment, it all depends on whether an applicant can provide cogent evidence and good reasons to justify an adjournment.  A family member’s illness, by itself, cannot warrant an automatic adjournment of a court hearing.  This court also has to take into the consideration that bankruptcy petitions are to be heard and determined expeditiously. 

7.  Mr Lok, for the Petitioner, referred this court to Rule 69 of the Bankruptcy Rules (Cap 4A) which provides that:

“ If the debtor does not appear at the hearing, the court may on hearing the petitioning creditor and the Official Receiver either dismiss the petition or make a bankruptcy order on such proof of the statements in the petition and of the amount of assets and liabilities as the court thinks sufficient.”

8.  In the circumstances, this court on 15 August 2017, informed the parties that the application for adjournment was refused and would determine the Petition on the evidence and submissions before it.

Background

9.  The Debtor is a former employee of the Petitioner (from about 24 July 1996 to 12 November 2014).  His employment was summarily terminated for reasons this court need not go into and are irrelevant for this court’s determination on the Petition.  During his employment with the Petitioner, an interest-free loan in the sum of HK$300,000 (“Car Loan”) was granted by the Petitioner to the Debtor for the purpose of acquiring the vehicle.  This is documented by a letter dated 2 July 2014 as signed by the Debtor (“the 2 July 2014 Letter”). 

10.  Following the termination of his employment, in the DCCJ Proceedings, the Petitioner claimed against the Debtor for:

(a) HK$197,728.82, being the outstanding balance of the Car Loan; and

(b) HK$17,000.00, being the settlement sum paid by the Petitioner to a third party whose vehicle suffered damage as a result of an accident, of which the Debtor was convicted of careless driving.

11.  The Judgment was entered in default, as the Debtor failed to file a defence, despite having earlier acknowledged service and indicating an intention to oppose the DCCJ Proceedings. 

12.  The Debtor was ordered to pay the Petitioner (i) the sum of HK$214,728.92 together with interest; and (ii) HK$6,400.00 as fixed costs.  There is no application to set aside the Judgment. 

13.  The petitioner previously held a lien over the Vehicle.  However, since the Vehicle has been sold, the Petitioner no longer holds any security over the Debtor’s assets which could be used to set-off against the outstanding indebtedness, namely, HK$72,070.20.

Legal Principles

14.  The relevant legal principles are set out in the judgment of Mr Justice Ng in Re Shang Lili (unreported, HCB 5329/2014, 25 January 2015) at paragraphs 10 – 11:

“ 10. In order to successfully oppose a petition, a debtor has to show a bona fide dispute on substantial grounds, by sufficiently precise evidence which is believable, and must establish that he actually has a defence of substance, not just a fair opportunity of one: ICS Computer Distribution Ltd [1996] 1 HKLR 181; Re Tam Mei Kam unrep.; HCB 3777 of 2011; 25 April 2012; Barma J (as he then was); Re Yuen Mun Wa (a debtor) [2012] 5 HKLRD 108.

11. Where the underlying debt is based on a judgment, the court hearing the bankruptcy petition will treat the judgment as prima facie evidence that the debtor is indebted to the petitioner. In appropriate circumstances, the court may “go behind” the judgment – what is normally required is some “fraud”, “collusion” or “miscarriage of justice” which impinges on the validity of the judgment, the latter phrase being clearly capable of wide application according to the particular circumstances of the case: Dawodu v American Express Bank [2001] BPIR 983; Re Tam Mei Kam unrep.; CACV of 2012; 8 May 2013; Cheung, Yuen & Lam JJA.”

15.  In Re Tam Mei Kam (supra), Yuen JA at paragraph 26.1 said:

“ 26.1 Where the debtor has not lodged an application to set aside or an appeal by the time of the petition hearing but intends to do so (probably out of time), he must, in addition to satisfying the bankruptcy court of the reasonable prospect of success in his application or appeal, also provide a reasonable explanation why he has failed to act in time. If he can do so, the bankruptcy court may adjourn the hearing of the petition to enable him to commence an application to set aside or appeal, giving appropriate directions to ensure that it is concluded expeditiously, with liberty to apply so that either party may apply to restore or dismiss the petition as appropriate.”

The Outstanding Debt

16.  Applying the above legal principles to the facts of the present case, the Judgment stands and is valid and binding on this court unless and until the same is set aside or appealed against.  There is no indication from the Debtor that he intends to apply to set it aside or to appeal against it.  There is no basis for this court to go behind the Judgment. Mr Lok, for the Petitioner, reminded this court that the Debtor did acknowledge service but decided, for whatever reason, not to proceed with his defence in the DCCJ Proceedings. 

17.  In the circumstances, this court finds that the Debtor fails to discharge his burden of showing that the Petitioning Debt is subject to a bona fide dispute on substantial grounds.  On this ground alone, this court will make a bankruptcy order against the Debtor. 

18.  Out of abundance of caution, this court also deals the Debtor’s argument in his affirmations that the Car Loan was not in fact a loan, but that the Vehicle was gifted to him as an “entitlement/perk”.  The Debtor also suggested that the value of the Vehicle exceeds the Petitioning Debt.  The latter argument can be dealt with easily as the Vehicle was actually sold for HK$150,000 which is below the amount of the Petitioning Debt.

19.  As to the former argument, first, this flatly contradicts the 2 July 2014 Letter which makes clear the nature of the Car Loan. Secondly, I also note that in the Debtor’s submissions filed for the hearing on 9 January 2017, at page 4, he specifically stated he was not making any allegation about sham transaction.  As Harris J said in Re China Shanshui Investment Co Ltd (unreported, HCCW 398/2015, 28 September 2016) at paragraph 6:

“ As Au-Yeung J notes in H v W & others the court does not lightly find a transaction to be a sham. There is a strong presumption that documents record genuine transactions. To rebut this presumption requires cogent evidence. If the court is invited to draw inferences these must be drawn from factual findings, which are supported by evidence.”

20.  Thirdly, the Debtor referred to previous financing taken out by himself from other banks to acquire a car and that he was previously given the use of two cars owned by the Petitioner.  I do not see the relevance of such incidents.  They do not affect the validity of the Car Loan as recorded in the 2 July 2014 Letter.  The Petitioner’s case is that it never ever had any “car policy” and the Car was a one-off loan extended to the Debtor.

21.  Likewise, it is irrelevant that the Debtor was provided with a monthly allowance towards his car expenditure, which was used to repay the Car Loan.  The Debtor was paid HK$4,600 per month for maintenance etc, but such loan was repaid by way of monthly debit from the Debtor’s account in the sum of HK$4,200.

22.  Finally, this court also notes that the assertion that there was no genuine loan is also contradicted by the Debtor’s own stance in previous correspondence.

(a) In a letter dated 7 July 2014, the Debtor requested for the Car Loan to be debited from his account and paid to William Motor Limited;

(b) In a letter dated 25 August 2016 the Debtor stated that he paid HK$50,000 towards the purchase of the Vehicle.  I agree with Mr Lok that there is no reason for the Debtor to pay for the Vehicle if it did not, in truth, belonged to himself.  The implication is that the Car Loan was a genuine loan extended to assist him in his acquisition; and

(c) In a letter dated 18 May 2016, the Debtor offered to “settle the subject loan matter” and there was then no suggestion that there was, in fact, no “loan” as such.

Disposition

23.  For the above reasons, the Debtor’s opposition to the Petition fails.  This court makes a usual bankruptcy order against the Debtor, Mr Ali Ather Syed and an order nisi that costs be to the Petitioner, to be taxed if not agreed, with certificate for counsel.

24.  Finally, it remains for me to thank Mr Lok for his very able and helpful assistance rendered to the court.