CHANG HYUN CHI v. OFFICIAL RECEIVER AND ANOTHER

CACV 110/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 110 OF 2013

(ON APPEAL FROM HCB NO. 5227 OF 2006)

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JUDGMENT

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1.  This is an application by the trustees in bankruptcy of Chang Hyun CHI (“the bankrupt”) for security for costs of the bankrupt’s appeal from a judgment of Chung J given on 2 May 2013.

2.  Very briefly, the background of the matter is as follows. 

3.  In July 2003 the bankrupt (a Korean national) was held liable in a default judgment made against him. 

4.1   The next month he left Hong Kong and did not enter Hong Kong again until April 2006, when he transited through Hong Kong. 

4.2   He transited through Hong Kong on various occasions between April 2006 and November 2006.

5.1   On 3 July 2006 a petition for his bankruptcy was presented. 

5.2   On 20 December 2006, a Bankruptcy Order was made against him.   

6.  On 15 April 2011, the trustees in bankruptcy issued a summons under s.29 Bankruptcy Ordinance, Cap. 6 (“BO”) to inquire into his conduct, dealings and property.

7.  On 26 July 2012, the bankrupt issued a summons asking for the following orders:

(1) that by virtue of the expiry of 4 years after the bankruptcy order, he was “automatically” discharged from bankruptcy under s.30A(1) and s.30A(2)(a) BO on 21 December 2010;

(2) alternatively, if s.30A(10)(a) BO applied (i.e. as he was not in Hong Kong before the bankruptcy order was made, the period of 4 years did not begin to run until he returned to Hong Kong and notified the trustee in bankruptcy of his return), that provision was unconstitutional as it affected his freedom to travel under Art.31 of the Basic Law;

(3) further or alternatively, if he had been “automatically” discharged from bankruptcy under s.30A(1) and s.30A(2)(a) BO, s.29 BO did not apply to him.

8.  On 18 April 2013, the summons was heard before Chung J. 

9.1   On 2 May 2013 the judge handed down a judgment, the crux of which was that s.30A(10)(a) BO was Basic Law-compliant. 

9.2   In so holding, the learned judge distinguished this section from s.30A(10)(b)(i) BO which had been held by a majority of the Court of Final Appeal in Official Receiver & Trustee in Bankruptcy of Chan Wing Hing & anor v Chan Wing Hing and Anor and Secretary for Justice (2006) 9 HKCFAR 545to be unconstitutional. 

9.3   Section 30A(10)(b)(i) BO provided that where the bankrupt leaves Hong Kong after the bankruptcy order was made without notifying the trustee and providing him with his itinerary, the period of 4 years would not run until he returned to Hong Kong and notified the trustee in bankruptcy of his return.

9.4   The judge distinguished s.30A(10)(a) from s.30A(10)(b)(i) on essentially two grounds: first, that the former was of more limited application (being capable of being invoked once only), and secondly, that the adverse effect of the bankrupt’s absence before the bankruptcy order is made is more profound as it would affect the commencement of administration work. 

10.1   Bearing in mind the discussion of proportionality aspects set out in the CFA judgment in Chan Wing Hing, some of which apply to s.30A(10)(a) as well (such as the lack of discretion given to the court, the wide range of possible circumstances giving rise to the absence of a bankrupt from Hong Kong, as well as the wide-ranging extent of prejudice that may be suffered by trustees), I think the bankrupt has substantial merits on appeal.  It is not necessary or desirable to say any more at this stage. 

10.2   Accordingly even though the bankrupt is clearly impecunious, in the special circumstances of this case, I do not consider it just to order security which would have the effect of stultifying his appeal. 

10.3  I do not think that it matters that there is another issue on which the bankrupt has failed.  The effect of an order for security would be to stultify the appeal.   

10.4  The summons for security for costs is dismissed. 

(After arguments on costs)

11.  In the special circumstances, in the exercise of my discretion, I would make no order as to costs. 

12.1   I would also say I find it surprising that the Director of Legal Aid has rejected the bankrupt’s application for legal aid.  It is hoped that he would reconsider his decision so that proper legal arguments could be presented to this court on appeal. 

12.2   The trustees may also find it appropriate to consider inviting the Secretary for Justice to intervene in the appeal, as was the case in Chan Wing Hing.