HRA INVESTMENTS LTD v. LEE YIK KWONG

DCCJ1291/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1291 OF 2005

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REASONS FOR DECISION

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1.  This is the application by Summons dated 17^th May 2007 (“Appeal Summons”) by the Defendant Mr Lee for leave to appeal against my Judgment dated 14^th May 2007. For convenience, I shall adopt the abbreviations in my Judgment.

2.  Mr Lee was previously legally represented, but now acts in person. He was absent at the hearing of the Appeal Summons yesterday.

3.  By my Judgment, I dismissed the Defendant’s appeal against the order of Master Lai dated 7^th March 2007 and refused to set aside the DC Judgment. Since handing down the Judgment, Mr Lee was adjudged bankrupt by Kwan J on 18^th May 2007 in the HCB Action. The Bankruptcy Order was made pursuant to a creditor’s petition by the Plaintiff herein based on the DC and HC Judgments.

4.  In her judgment dated 18^th May 2007 (“HCB Judgment”), Kwan J noted that the Defendant’s application to set aside the HC Judgment was adjourned pending determination of the Defendant’s application to set aside the DC Judgment and that execution of the HC Judgment was stayed pending determination of such application in the District Court or of the HCB Action, whichever was earlier.

5.  In respect of the DC Judgment, Kwan J held there was no reason to go behind or impugn my Judgment in refusing to set aside the DC Judgment. She found that the Plaintiff had established valid judgment debts on which the petition was founded and that there was proper service of the statutory demand. In the circumstances, she granted the Bankruptcy Order.

6.  Pursuant to the Bankruptcy Order, the Official Receiver was constituted receiver of the estate of the Defendant. The Official Receiver did not appear at the hearing of the Appeal Summons. In the circumstances, the first issue was whether the Defendant who had been adjudged bankrupt could still proceed with the application.

7.  Section 12 of the Bankruptcy Ordinance Cap.6 provides inter alia that :

“On the making of a bankruptcy order the Official Receiver shall be thereby constituted receiver of the property of the bankrupt, and thereafter, except as directed by this Ordinance, no creditor to whom the bankrupt is indebted in respect of any debt provable in bankruptcy shall have any remedy against the property or person of the bankrupt in respect of the debt, nor shall proceed with or commence any action or other legal proceedings, unless with the leave of the court and on such terms as the court may impose.” (my emphasis)

8.  However, the present application for leave to appeal against the Judgment was not an attempt by the Plaintiff creditor to proceed with “any action or other legal proceedings”. Rather, it was an attempt by the Defendant bankrupt to seek relief from the court vis-à-vis his creditor (ie the Plaintiff).

9.  Under Order 15 rule 7(1) of the RDC, the Defendant’s application did not abate upon his bankruptcy, but his rights would have vested in the trustee in bankruptcy. Section 58(1) and (2) of the Bankruptcy Ordinance Cap.6 provide as follows :

“(1) Until a trustee is appointed the Official Receiver shall be the trustee for the purposes of this Ordinance, and immediately on a debtor being adjudged bankrupt the property of the bankrupt shall vest in the trustee.

(2) On the appointment of a trustee the property shall forthwith pass to and vest in the trustee appointed.”

10.  In Halsbury’s Laws of Hong Kong Vol.2 (2006) para.[45.302] at p.608, it was said as follows :

“…… If the right of action which a bankrupt is enforcing is one which vests in his trustee, or is one which the trustee is entitled to enforce for the benefit of the creditors, the trustee may, on an application made by himself without notice being served on any other party, or by any party to the action, to the court in which the action is pending, alleging the devolution of the right of action, become a party to the action in place of the bankrupt or as co-claimant; but the bankrupt cannot himself continue the action alone.” (my emphasis)

11.  In Selig v Lion [1891] 1 QB 513, 515, Wright J said “[the] cause of action passed to the trustee in bankruptcy; after it so passed the trustee alone had the right of action in him ……”

12.  In Jackson v North Eastern Railway Company (1877) 5 Ch D 844, the plaintiff commenced legal proceedings against the defendant and two others. After the defendant put in the answer, the plaintiff became bankrupt and trustees were appointed in respect of his estate. He applied to proceed with the action and gave notice of trial to the defendant. The defendant moved to discharge the same. The English Court of Appeal held that the bankrupt could not continue the suit as plaintiff.

13.  A similar conclusion was reached by Fry J in Eldridge v Burgess (1878) 7 Ch D 411. In that case after issue had been joined and notice of trial given by the sole plaintiff in an action, he became bankrupt and a trustee of his property was appointed. When the action came on for trial no one appeared for the plaintiff or for the trustee. There was no evidence that any notice of the action had been served on the trustee. Fry J held that in the absence of the trustee he could only order the action to be struck out of the list.

14.  In my view, the Defendant’s rights in respect of the application under the Appeal Summons vested in his trustee in bankruptcy and it would be up to such trustee to elect whether or not to avail himself of such rights and to go on with the application. Since the trustee was not before the court, the Appeal Summons fell to be dismissed and I so dismissed the application at the hearing.

15.  The above conclusion is sufficient to dispose of this matter. Even if I am wrong, the Defendant did not attend the hearing yesterday to pursue his application under the Appeal Summons, which must therefore be dismissed in any event.

16.  I referred Mr Jojo, solicitor for the Plaintiff, to section 12 of the Bankruptcy Ordinance Cap.6. He confirmed that the Plaintiff would not seek costs against the Defendant in respect of the Appeal Summons. I have therefore at the hearing directed that there be no order as to costs of the Appeal Summons.