PALLISER INVESTMENTS LTD v. MAN CHI CHUEN

HCB3633/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY

NO. 3633 OF 2005

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D E C I S I O N

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1. In these bankruptcy proceedings, the Petitioner seeks a bankruptcy order against the Debtor on the basis of the Debtor’s inability to pay his debts.  The petition was originally based on a statutory demand issued against the Debtor which the Petitioner says was served personally on the Debtor.  A dispute has arisen as to whether or not personal service was, in fact, effected.  The Petitioner has therefore sought to invoke an alternative means of showing that the Debtor is unable to pay his debts.  It had done so by causing to be executed a writ of fi fa which was issued prior to the presentation of the petition but not executed against either the Debtor or the company whose debts he was guaranteeing until after presentation of the petition. 

2. Execution against the company was returned only partially satisfied some two or three weeks after the presentation of the petition.  Execution against the Debtor did not take place until relatively recently – towards the end of September.  At that time, an attempt was made by a bailiff to execute the writ of fi fa against the Debtor at premises which were stated by the Debtor to be his address in the course of these proceedings.  That execution was returned, as I understand it, wholly unsatisfied. 

3. Mr Chang, who appears for the Petitioner has applied for leave to re-amend the petition to refer to the unsuccessful execution against the Debtor at the end of last month.

4. It seems to me, however, that even if I were to permit the amendment to be made, it would be useless and of no effect and would therefore be an immaterial amendment.  The reason I say this is because under section 6(2), and in particular section 6(2)(c) of the Bankruptcy Ordinance, it is expressly provided that a creditor’s petition may be presented to the court in respect of a debt or debts if, but only if, at the time the present petition is presented:

“The debt or each of the debts is a debt which the debtor appears either to be unable to pay or to have no reasonable prospect of being able to pay.”

5. As I read that section, it requires the court to consider whether or not the Debtor is unable to pay or has no reasonable prospect of paying the debt in question at the time that the petition is presented. 

6. Section 6A of the Ordinance defines what is meant by “inability to pay” and, in effect, deems a debtor to be unable to pay a debt in certain circumstances.  One of those circumstances relates to a situation in which a statutory demand has been served and is not complied with.  The second of those circumstances is described in section 6A(1)(b), which provides, reading it together with section 6A(1) that:

“For the purposes of section 6(2)(c), the Debtor appears to be unable to pay a debt if, but only if, the debt is payable immediately; and

 (b)     Execution or other process issued in respect of the debt on a judgment or order of any court in favour of the petitioning creditor, or one or more of the petitioning creditors to whom the debt is owed, has been returned unsatisfied in whole or in part.”

7. It seems to me to be quite impossible to read this deeming provision as having any effect on the requirement that the debtor must be unable to pay his debts at the time the petition is presented.  The deeming provision merely provides a way in which that conclusion can be reached, but it seems to me that if no execution has been levied at the time that a petition has been presented, it is difficult, if not impossible, to see how a subsequent post-petition attempt to execute the judgment debt in question can give rise to a conclusion that the debtor was, at the time the petition presented, unable to pay his debts. 

8. It seems to me that if a creditor wishes to take advantage of the deeming provisions in Section 6A, it is necessary for him to have taken the necessary steps to bring those provisions into effect prior to the presentation of the petition.  Were that not the case, it would seem open to a creditor to seek to have the debtor deemed unable to pay his debts on the basis of matters which take place after the presentation of a petition, which would, to my mind, be inconsistent with the express words of section 6(2) of the Ordinance.

9. In those circumstances, I do not see that the amendment that is sought would have any real prospect of providing the Petitioner with an alternative basis of succeeding in this petition and therefore I consider the amendment to be one that would be of no effect and one which should not be allowed in the circumstances of this case.

10. I would therefore dismiss the application to amend.  Insofar as there are any costs of the unsuccessful application to amend, they are to be paid by the Petitioner to the Debtor in any event.