Re: TSE MEE SHUEN WILSON and Ex parte: M & R MARKING SYSTEMS,INC.

HCB 9287/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPCTY PROCEEDINGS NO. 9287 OF 2001

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J U D G M E N T

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1. This is a petition based on a judgment debt in the sum of US$919,624.48 with interest thereon in HCA No. 1598 of 2001. The High Court action was brought by the petitioner against the debtor Tse Mee Shuen Wilson and three companies, of which the debtor is a director and shareholder. The debtor was the 1st defendant in that action. Judgment in default of giving notice of intention to defend was entered against the debtor on 29 June 2001. On 30 August 2001, the statutory demand was served by the petitioner on the debtor's solicitors who were authorised to accept service. The petition herein was filed on 23 October 2001 and an order for substituted service was obtained on 4 January 2002. That order has been complied with.

2. The debtor seeks to stay the bankruptcy proceedings pending the outcome of his appeal against the decision of Chu J on 13 December 2001 which arose in the following circumstances.

3. On 13 July 2001, the debtor issued a summons to set aside the default judgment on the ground that it was irregular ("the 1st summons"). No particulars of regularity were stated in the 1st summons, which was heard and dismissed by Master Au Yeung on 27 July 2001. On the day that the 1st summons was dismissed, the debtor issued another summons to set aside the default judgment, stating this time that it was irregular in that it was entered prematurely ("the 2nd summons"). The 2nd summons was dismissed by Master Ho on 7 September 2001. The debtor appealed against the order of Master Ho and this was heard by Chu J on 13 December 2001. Chu J dismissed the appeal and as she was of the view that it was "wholly devoid of merits", she awarded the costs of the appeal to the petitioner to be taxed on an indemnity basis.

4. The debtor has filed a Notice of Appeal against the order of Chu J on 22 January 2002 and seeks to stay the bankruptcy proceedings pending the outcome of his appeal in CACV No. 132 of 2002. In deciding whether to exercise my discretion to stay the petition pending the outcome of the appeal, I would need to be satisfied that the appeal is a bona fide appeal in the sense that the grounds of appeal are not unarguable (see Re A Debtor (799 of 1994), ex p. Cobbs Property Services Ltd [1995] 1 WLR 467).

5. I have before me the Reasons for Decision of Chu J handed down on 20 December 2001 in which the judge set out in some detail the background of the case with a full synopsis of the evidence. It was not suggested by the debtor that the Judge's account is in any way incomplete. The debtor has not placed before me any additional material from the documents filed in the High Court action and I do not see any need to call for the court file in that action, in view of the full account given by Chu J in her Reasons for Decision.

6. In summary, Chu J dismissed the debtor's appeal and refused to set aside the default judgment on the following grounds:

(1) The 2nd summons of the debtor was an abuse of process and was rightly dismissed by Master Ho. Chu J was of the view that by the issue of the 2nd summons, the debtor was attempting to re-litigate a matter that had already been disposed of by Master Au Yeung who dismissed the 1st summons on the merits. The doctrine of res judicata applied and the 2nd summons was liable to be struck out for abuse of process. It had been argued for the debtor that the 1st summons was dismissed by Master Au Yeung only on a technical ground, namely, that the 1st summons was defective. That argument was rejected by the judge.

(2) There is no jurisdiction to entertain the 2nd summons because there is no provision in Order 13 rule 9 of the Rules of the High Court to enable a party to apply for a second time after an earlier application to set aside a default judgment has been dismissed. The judge held that the only way of challenging the decision on the 1st summons was by way of appeal and not to issue another summons seeking the same relief.

(3) In any event, if the merits of the debtor's application ought to be considered, the judge was of the view that the debtor's assertion that he only came to have knowledge of the writ in June 2001 was incredible and his assertion that the judgment was entered prematurely could not be maintained.

7. In the Notice of Appeal, only broad grounds are given for challenging the judge's decision. As I have indicated to Mr Stock, who appeared for the debtor on this hearing, these broad grounds are not of much assistance to me if he should seek to persuade the court that the appeal is not unarguable. I was told by Mr Stock that essentially, two points would be raised on appeal. Firstly, the debtor would seek to contend that the judge had erred in holding that the doctrine of res judicata applied to the application to set aside a default judgment and that the judge had misunderstood the decision of the Court of Appeal in Chu Hung Ching v. Chan Kam Ming and Ors [2001] HKC 396 and the decision referred to by Mayo VP at 401, being the decision of the Alberta Court of Appeal in Pocklington Foods Inc v. R in right of Alberta (1995) 123 DLR (4th) 141. Secondly, it would be argued on appeal that the judge had erred in holding that the debtor's assertion of having no knowledge of the proceedings at the material time was incredible. In support of this, Mr Stock has referred me to a passage in the Hong Kong Civil Procedure 2002 at para. 13/9/5.

8. I am not persuaded that the judge has in any way misconstrued or misapplied the law when she referred to Chu Hung Ching. What the judge has ruled is that the 1st summons was dismissed not on a technicality but on the merits and that the debtor had chosen not to adduce evidence in his affirmation in support of the 1st summons regarding the service of the writ effected on 31 May 2001, even though his solicitors were fully aware that the judgment was entered in reliance on the service effected on that date. In this context, the judge referred to the judgment of Mayo VP in Chu Hung Ching at 401 and to the Canadian decision cited and came to the view that the doctrine of res judicata should be applied in these circumstances. I am not persuaded there are arguable grounds of any error in law in that regard.

9. As for the second ground in attacking the Judge's decision, I am of the view that it is equally without merit. As recognised by Mr Stock, the court is not obliged to accept the assertion of a defendant that he has not received the writ. The judge has reviewed the evidence thoroughly in her decision and it has not been demonstrated to me that there is insufficient material to cast doubt on the debtor's credibility regarding his assertion of lack of knowledge of the writ at the material time.

10. As the debtor has failed to satisfy me that the grounds of appeal advanced in the pending appeal are not unarguable, I refuse to order a stay of the petition. I make a bankruptcy order against the debtor and an order nisi that the petitioner is to have its costs of the petition.