RE WOO KOO PING

HCB 2808/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 2808 OF 2016

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J U D G M E N T

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1.  The petition by the bank for bankruptcy of the debtor was filed on 21 April 2016.  The petition was served on the debtor’s solicitors on 21 June 2016.  It is based on a judgment debt in HCA 2377/2014 dated 27 January 2016 for the sums of HK$5,597,969.83 and US$173,827.05 with interest at judgment rate from 28 January 2016 until payment.  Credit in the sum of HK$7,642.22 should be given to the debtor as from 22 March 2016 as the bank has recovered this sum from another debtor in HCA 2378/2014 by garnishee proceedings.

2.  A statutory demand had been served on the debtor personally on 21 March 2016.  There has been no application to set aside the demand. The debtor filed a Notice by Debtor of Intention to Oppose Petition on 24 June 2016 indicating that he would oppose the petition.  But he has not provided any ground to show cause.  The debtor’s application in HCA 2377/2014 to stay the execution of the judgment against him was dismissed on 20 July 2016 by Deputy High Court Judge Saunders.

3.  The history of the action culminating in the dismissal of the application to stay execution on 20 July 2016 has been set forth neatly in a decision of Deputy Judge Saunders of the same date.

4.  The bank started HCA 2377/2014 on 21 November 2014. The debtor was the 1st defendant in the action.  He was sued on the basis of his guarantee to the bank for the repayment of debts due to the bank from KCK Garment Factory Ltd.

5.  His defence was that he had signed the guarantee in the capacity of a director of the company and not in personal capacity and that the guarantee breached the equitable principle.  He gave no particulars of the alleged breach.

6.  The bank applied for summary judgment on 22 May 2015 against the debtor and some other defendants in the action.  Summary judgment was given against the debtor and others on 27 January 2016 for the sums above-mentioned.

7.  The debtor and the others filed a notice of appeal on 11 February 2016.  But no attempt was made to fix a hearing date until 30 May 2016 when 2 November 2016 was fixed for the hearing.

8.  An application for stay of execution of the judgment was filed on 30 June 2016.  This petition was heard on 4 July 2016 and the debtor undertook to the court to file an affidavit in HCA 2377/2014 no later than 11 July 2016 to support the application to stay.  On the strength of the undertaking, the petition was adjourned to Monday, 25 July 2016.

9.  However, the debtor breached the undertaking and did not file the affidavit in time.  The hearing of the petition was then brought forward to 21 July 2016 because of the breach of undertaking.  The debtor then filed an affirmation on 15 July 2016 to support the application to stay.

10.  The debtor said in his affirmation that his legal advisers had advised him that he had reasonable grounds to appeal against the summary judgment given by the Master.  But he did not elaborate on what grounds he was given.

11.  He further said that he and his son had substantial assets which were tied up in companies that were the subject of liquidation proceedings in HCCW 297-301/2014.  He expected that the companies could be restructured soon in which case, if his appeal should fail, the judgment could be satisfied.

12.  He further said that the five companies owned a piece of land that had a worth of RMB267 million.  There was a potential buyer Lei Shing Hong which was interested in buying it at HK$240 million.

13.  He also said that Deloitte had advised that the restructuring would result in a surplus of HK$11 million.  But Deputy Judge Saunders noted that there was no evidence from Deloitte as to the progress or likelihood of success of the alleged restructuring.  There was no account or other proceedings exhibited or any statement from the provisional liquidators of the five companies.

14.  The debtor further filed a 2nd affirmation on 19 July 2016 to support the application to stay.  This affirmation produced an exchange of correspondence between the provisional liquidators of the debtor’s companies and Lei Shing Hong.  The correspondence dealt with a meeting of various parties including the provisional liquidators and Lei Shing Hong on 23 June.  The correspondence also showed their desire to have a site visit to the factory of the debtor’s companies standing on the piece of land in question and to have a further meeting.  If anything, the correspondence shows that the success of the restructuring was not in sight.

15.  Deputy Judge Saunders also considered the grounds of defence advanced by the debtor to oppose summary judgment before the Master. The deputy judge considered the unparticularized breach of equitable principle as something that provided no basis for leave to defend or to appeal the summary judgment.

16.  The debtor also argued that the bank should sue the borrower KCK Garment first.  But the guarantee signed by the debtor contained a usual waiver by the debtor of the right to require the bank to sue the borrower first.

17.  The debtor also challenged the amount of indebtedness and pointed out an error of US$1,098.80.  The deputy judge, however, referred to a conclusive evidence clause in the guarantee which operated in favour of the bank except for manifest error.  The US$1,098.90 was certainly not a manifest error in the context of a debt of HK$5.5 million and US$170,000.  Hence, this ground of defence also failed.

18.  Deputy Judge Saunders concluded that there was no arguable basis for the appeal.  The suggestion of a future ability to pay was also so vague that it was quite unable to justify staying the bank’s right to execute the judgment.  The deputy judge thus dismissed the application to stay.

19.  I agree with the reasoning of the deputy judge. Since the application to stay execution of the judgment has been dismissed, I would allow the petition and adjudge the debtor a bankrupt.  I further make a costs order nisi that the costs of the petitioner and the Official Receiver be paid out of the assets of the bankrupt.