RE: YEUNG SIU FUN JOSEPHINE

HCB 10766/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 10766 OF 2003

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DECISION

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1.  This is the application of Madam Yeung Siu Fun, Josephine (“the bankrupt”) by summons issued on 20 November 2003 to rescind the Bankruptcy Order made against her on 30 July 2003 on the ground that she had no notice of the statutory demand and the bankruptcy petition and that she is not indebted to the petitioning creditor, Mr Lau Wai Kwong (“the petitioner”).

Background

2.  The bankrupt is a shareholder and director of a company called Avion Pemas Access Equipment Ltd (“the Company”).  On 5^th August         2000, the debtor petitioned for the winding-up of the Company in Companies Winding-up Proceedings No. 708 of 2000 (“HCCW 708/2000”).  The petition was opposed by the petitioner in his capacity as a contributory of the Company.

3.  The trial of the petition commenced on 18 December 2001.  On 2 January 2002, the bankrupt and the petitioner agreed to compromise the proceedings and the terms of their agreement were set out in a consent order dated 2 January 2002 (“the Consent Order”).  

4.  Paragraph 14 of the Consent Order states:

“The Petition[sic] herein be dismissed and the Petitioner do pay the costs of the Opposing Contributory in these proceedings to be taxed if not agreed, save and except that there shall be no order as to the costs of and incidental to the hearing commencing on 18 December 2001.” 

(The references to “Petition”, “Petitioner” and “Opposing Contributory” are references to the winding-up petition in HCCW 708/2000, and the bankrupt and the petitioner herein respectively.)

5.  The petitioner’s costs in HCCW708/2000 were subsequently taxed at $385,400.90.  The Allocatur was sealed on 12 July 2002.  The bankrupt had not paid the taxed costs as certified by the Allocatur.

6.  On 28 October 2002, the petitioner issued a statutory demand on the amount of the taxed costs.  Attempts at personal service of the statutory demand were unsuccessful.  On 12 November 2002, the petitioner’s solicitors caused a notice of the statutory demand to be advertised in the Oriental Daily News.

7. Having received no payment under the statutory demand, the petitioner presented a bankruptcy petition on 3 June 2003.  The petition was served by leaving at Unit 12 14^th Floor, Telford House, 10 Wang Hoi Road, Kowloon Bay, Kowloon (“Telford House address”), and a Chinese notice of the proceeding was advertised in the Oriental Daily News on 16 July 2003.  It is the petitioner’s case that the Telford House address is the bankrupt’s last known address.  On 9 July 2003, Master Ho granted leave for the bankruptcy petition to be served by way of substituted service and the service as mentioned above was deemed good sufficient service of the petition on the bankrupt.

8. The bankruptcy petition was heard on 30 July 2003.  The bankrupt did not appear and the Bankruptcy Order was made.  On 18 November 2003, a Summary Procedure Order was made and the Official Receiver (“OR”) was appointed trustee of the property of the Bankrupt.

9.  On 20 November 2003, the bankrupt issued the present summons seeking to rescind the Bankruptcy Order.

The Official Receiver’s Reports

10.  On 10 March and 28 May 2004, the OR filed two Reports. The Reports make the following points:

(1)        The bankrupt attended the OR Office on 4 August 2003,

(2)        The bankrupt submitted a preliminary questionnaire on her assets and liabilities on 22 October 2003, in which she stated she had assets of HK$52,440,463 and an unspecified amount of liability owed to American Express Co. Ltd.

(3)        The bankrupt has not submitted a statement of affairs.  She explained that she has been unable to do so by reason of her poor mental health.

(4)        The OR had realised assets in the amount of HK$3,251. In addition, a sum of $103,190.48 had been paid into court, being the bankrupt’s entitlement under a retirement policy.

(5)        The OR had received proofs of debt totalling HK$4,238,447.29 and RMB 164,3309.20. They have yet to be adjudicated.

(6)        The OR is of the view that the bankrupt appears to be insolvent.

The application

11.  The principal grounds on which the Bankrupt makes her application are as follows:

(1)        She did not receive the Statutory Demand and the Petition and had no knowledge of these proceedings;

(2)        The taxed costs were owed to the Company and not to the petitioner; and

(3)        The Company is indebted to her.  

Delay

12.  Before dealing with the grounds raised by the bankrupt, it is to be noted that there had been substantial delay in making the present application.  From the fact that the bankrupt attended the OR’s office on 4 August 2003, it can be inferred that she had notice of the Bankruptcy Order latest by early August 2003.  In her oral submissions, the bankrupt stated that she was informed by her bank of the Bankruptcy Order on 30 July 2003.  The bankrupt, however, only issued the summons in question on 20 November 2003, some three months later.  No explanation had been given for the delay.

Service of the statutory demand and the petition

13.  The relevant provisions in Rule 46(2) and (3) of the Bankruptcy Rules (“the Rules”), dealing with the service of statutory demand provide as follows:

“46(2)        The creditor shall do all that is reasonable for the purpose of bringing the statutory demand to the debtor's attention and, if practicable in the particular circumstances, to cause personal service of the demand to be effected.
     (3)         Where the statutory demand is for payment of a sum due under a judgment or order of any court and the creditor knows, or believes with reasonable cause-

(a)    that the debtor has absconded or is keeping out of the way with a view to avoiding service; and

(b)   there is no real prospect of the sum due being recovered by execution or other process,

the demand may be advertised in one or more newspapers; and the time limited for compliance with the demand runs from the date of the advertisement's appearance or (as the case may be) its first appearance.”

14.  Service of the bankruptcy petition is governed by Rule 59 of the Rules, which provides as follows:

“59(1)     Service of a creditor's petition shall be effected by the creditor or his solicitor, or a person in their employment, delivering a sealed copy of the petition to the debtor.
    (2)       If the court is satisfied by affidavit or other evidence on oath that prompt personal service cannot be effected because the debtor is evading service of the petition or any other legal process, or for any other cause, it may order substituted service to be effected in such manner as it thinks fit.
    (3)       Where an order under paragraph (2) has been carried out, the petition shall be deemed to have been duly served on the debtor.”

15.  In the present case, the bankrupt was legally represented in HCCW708/2000 and at the time when the Consent Order was made.  On 11 April 2002, her former solicitors informed the petitioner’s solicitors in HCCW708/2000 that they no longer had instructions to act for the bankrupt.  Later on 29 May 2002, the bankrupt wrote to the petitioner’s solicitors informing them that her mailing address was the Telford House address.  In that letter, she also requested for any query to be directed to the Telford House address.

16.  According to the three affirmations made by the petitioner’s process server, Mr Leung Chi Shing, he had visited the Telford House address three times on 28 and 29 October and 5 November 2002 for the purpose of effecting personal service of the Statutory Demand, but there was nobody at the premises.  An appointment letter had also been sent to the Telford House by ordinary mail and by inserting it in the mailbox of the Telford House address. The letter had not been returned through the post.  However, when he attended the premises on 5 November 2002, there was again nobody to answer the door.  The caretaker informed him that the bankrupt had already moved out of the premises.  Consequently, the petitioner’s solicitors arranged for the statutory demand to be advertised in the Oriental Daily News on 12 November 2002.

17.  In his second affirmation, Mr Leung exhibited an article that appeared on the 17 December 2002 issue of the Oriental Daily News, reporting on a complaint the bankrupt made against the Mandatory Provident Fund Authority.  Mr Leung deposed in his affirmation that he believed the bankrupt was in Hong Kong and the statutory demand, as advertised in the Oriental Daily News, would have come to the knowledge of the bankrupt.

18.  Being satisfied that the statutory demand had been duly served in accordance with the Rules, Master Ho gave leave for the bankruptcy petition to be issued.       

18.               Another process server of the petitioner’s solicitors, Mr Ko Po Tung, attempted to effect personal service of the bankruptcy petition at the Telford House address on 7 and 27 June 2003, but without success.  The petition was eventually served by leaving at the Telford House address, being the last known address of the bankrupt and by advertising the proceeding once in the Oriental Daily News.  Pursuant to Master Ho’s order of 9 July 2003, this is deemed to be good and sufficient service of the petition on the bankrupt.

19.   The bankrupt however maintains that she did not have notice or knowledge of either the statutory demand or the bankruptcy petition.  She says that she has been suffering from poor health and has been receiving medical treatment, including psychiatric treatment.  The bankrupt states that the Telford House address was a business address, which she had stopped using in about August 2002.  She admitted that she had omitted to inform the petitioner or his solicitors of her new correspondence address.

20.  The bankrupt further states that she had not read the advertisement in the Oriental Daily News because she only read the Ming Pao and the Hong Kong Economic Journal, and she was unwell at the time.  She accepts that she had made complaint to the Oriental Daily News against the Mandatory Provident Fund Authority, but maintains that she never purchases or reads Oriental Daily News.  The bankrupt also says that the petitioner could have sent the papers to her parents’ address, but chose not to.  She had however not elaborated on the basis for so saying.

21.  There is no dispute that the bankrupt had requested the petitioner and his legal representatives to contact or correspond with her at the Telford House address.  On the bankrupt’s own case, she had not informed the petitioner of her new contact address after she no longer used the Telford House address. 

22.  I observe further from the affidavit of Woo Yuet Ngo, Theresa, the secretary of the Company, that although the bankrupt had been in contact with the Mandatory Provident Fund Authority and Manulife (international) Limited in around February 2003, the petitioner was unable to obtain the contact information of the bankrupt because the bankrupt had instructed them not to divulge the contact information to anyone and also because of the restrictions associated with the Personal Data (Privacy) Ordinance.  The petitioner’s request to hold a meeting with the bankrupt made through the Mandatory Provident Fund Authority also did not meet with success. 

23.  In the circumstances, the Telford House address is plainly the last known address of the bankrupt.  The petitioner cannot be criticised for attempting to effect service of the statutory demand at the Telford House address. 

24.  As to the advertisement inserted in the Oriental Daily News, I have considerable reservation about the bankrupt’s assertion that she never purchases or reads this newspaper.  The assertion does not sit well with the fact that, among the many widely circulated Chinese newspapers in Hong Kong, she had chosen to contact Oriental Daily News for the purpose of lodging her complaint.

25.  In my view, the petitioner had, on the evidence, taken reasonable steps to bring the statutory demand to the knowledge of the bankrupt, and accordingly had complied with the requirements of R.46 of the Rules and the Practice Direction.

26.  As to the service of the petition, given that the Telford House address is the usual and last known address of the bankrupt, when personal service could not be effected there, the petitioner was entitled to apply for and the Master was correct to make the order for substituted service on 9 July 2003.  Under R.59 of the Rules, the petition is deemed to have been duly served on the bankrupt.

27.  There is in short no irregularity in the service of the statutory demand and the petition.  The burden is therefore on the bankrupt to prove that she indeed had no notice of the proceedings.  As noted, I have reservations about her assertion that she did not learn of the bankruptcy proceedings from the newspapers because she never reads Oriental Daily News.  But even accepting that she in fact did not have knowledge of the proceedings, in dealing with the present application to rescind the Bankruptcy Order, the court must still consider whether she has any ground to dispute the debt.  It is to these considerations that I now turn.  

Disputes as to the debt

28.  The bankrupt’s first dispute on the debt is that the costs were owed to the Company and not to the petitioner.  She claims she did not know the petitioner and had never met or even spoken to him.  She further asserts that paragraph 14 of the Consent Order is to the effect that she will pay the costs of the Company.  Whatever may be her belief, the petitioner’s assertion with regard to paragraph 14 of the Consent Order is contrary to the express terms of the Consent Order and the Allocatur.  The term “Opposing Contributory” could not have meant and be understood to mean the Company.  I note that apart from being legally represented at the time, the bankrupt can read and write English.  Her letter to the petitioner’s solicitors in HCCW 708/2000 on her contact address was written in English.

29.  The authorities have also established that the court hearing a bankruptcy petition would not normally go behind a judgment debt unless there was sufficient reason to do so: see, for example, Re Yu Tat Yum Robert, ex p Fortune Retail Holdings (Beijing) Ltd [1999] 2 HKC 799, and the obiter remarks of Yuen J (as she then was) in Re Damnerncharnwanit [2000] 1 HKC 579 at 580.

30.  As to the bankrupt’s other dispute that she had been owed substantial sums of money by the Company, this cannot amount to either a cross claim or a set-off against the debt in question.  This is because the debt on which the statutory demand and the petition are based is owed to the petitioner whereas, on the bankrupt’s assertions, it is the Company that owes her salaries and other money.  The various proceedings that the bankrupt had instituted in the High Court and the Labour Tribunal (which had now been transferred to the High Court) are all against the Company.   Accordingly, even if the bankrupt has a good claim against the Company, this does not afford her with a defence to the bankruptcy petition presented by the petitioner.

31.  In the premises, the bankrupt does not have any valid or arguable ground to oppose the bankruptcy petition.

Other matters

32.  As to the bankrupt’s health condition and her claim that she had been subjected to threat and intimidation, they do not amount to grounds for annulling the bankruptcy order, as the bankrupt has failed to show that there are substantial grounds to dispute the debt owed to the petitioner.  At any rate, it would appear from the bankrupt’s evidence that a report had been made to the police about the threat and intimidation. 

33.  Additionally, the OR’s Reports show that as matter now stands, the bankrupt appears to be insolvent.  Although the bankrupt disputes the proofs of debt put in by the Company and the petitioner, there are other proofs of debts lodged by other creditors, including banks.

Conclusions

34.  Having regard to all the circumstances of the case, there is no merit in the application to annul the bankruptcy order.  Accordingly, the bankrupt’s summons is dismissed. 

35.  Applying the normal rule of costs follows event, the petitioner’s and the OR’s costs of the application should be borne by the bankrupt.  The OR had by letter dated 31 May 2004 gave notice to the petitioner and the bankrupt that the OR seeks costs in the amount of $16,275 or such other sum as the court thinks fit.  A breakdown of the costs was also given in the letter.  I accept that the costs are properly and reasonably incurred.  Accordingly, I make an order nisi that the bankrupt pays the costs of the OR assessed at HK$16,275 and the costs of the petitioner, to be taxed if not agreed.