Re: Chu Hing Fook, Morris, the Judgment Debtor and Ex parte: Shen Gang Finance Co. Ltd., the Judgment Creditor

HCB 1265/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS

NO. 1265 OF 1998

____________________

_________________

J U D G M E N T

_________________

1. Two petitions were listed today for hearing together. The first concerns Mr Morris Chu Hing Fook, a judgment debtor liable for the sum of $882,666.58 by virtue of a judgment entered on 21 January 1997 in HCA A10104 of 1996. This was a judgment entered in respect of the loan made by the petitioner in May 1994. The second petition concerns Mr Lai Siu Wing, who also became a judgment debtor as a result of the same High Court Action, his liability being as guarantor of Mr Chu's debt.

2. Only Mr Chu was present and acting in person. I was told that at the previous hearing of the petition, Le Pichon J indicated to Mr Lai that his attendance was not required as he was a guarantor. Mr Chu informed me that Mr Lai was aware of the hearing but that he had an important engagement and so would not be attending. As I was not entirely clear as to the basis upon which Mr Lai's attendance was dispensed with today, I adjourned the hearing of the petition against him sine die with liberty to restore and proceeded separately on the hearing of the petition against Mr Chu.

3. Mr Chu himself sought an adjournment, saying that he wanted to instruct counsel. I rejected that application in the light of the history of these proceedings which, in my view, makes it abundantly clear that he has had every opportunity to instruct counsel in good time if that was what he truly wished to do and that his present application was no more than a delaying tactic. I will set out the chronology which is relevant to my decision to refuse the adjournment and also relevant to my decision on the substantive issue.

The history of the proceedings

4. As I have mentioned, judgment was entered against him on 15 January 1997. Thereafter, proceedings leading to a prohibition order took place in February 1997.

5. The petition which I am now dealing with was presented almost exactly a year ago on 10 November 1998. It is based on the abovementioned judgment debt, a statutory demand having been made without payment.

6. On 26 January 1999, a day before the amended petition was due to be heard, Mr Chu applied for legal aid. This got him his first adjournment. Legal aid was refused on 25 February 1999 and the petition was re-listed for hearing on 10 March. On 9 March, again on the eve of the hearing, Mr Chu made a second application for legal aid. This was again refused on 8 April. This, however, succeeded in gaining for Mr Chu a further adjournment.

7. For one reason or another, further adjournments were obtained until, on 26 April 1999, at the 5th hearing of the petition, Mr Chu, acting in person, told Le Pichon J that he wished to raise by way of defence the allegation that he had made partial re-payment in the amount of $400,000 to a member of the petitioner's staff. This gained him a further adjournment to file evidence in support.

8. On 21 June 1999, at the 6th hearing of the petition, he managed to obtain yet a further adjournment, as appears from the court file, it is largely because Mr Lai was saying that he was willing to pay off the debt by instalments. Mr Chu also obtained leave to file evidence out of time. That evidence was filed on the next day, 22 June. It consists of a pro forma affirmation which merely invites the reader to see "the attached". "The attached" is a handwritten letter in Chinese dated 5 June 1999 and purporting to be signed by one Ko Fei ("the Chinese letter").

9. On 7 July 1999, at the 7th hearing of the petition, Mr Chu handed to the petitioner's solicitors a cashier order in the sum of $548,187.95 intended to represent the balance of the amount owed, leaving in issue the question whether he had in fact already discharged the rest of the relevant debt by having paid $400,000 to the petitioner via Ko Fei as alleged.

10. On 6 September, the petition was listed on the Monday List for its 8th hearing. The court's records show that Mr Chu again suggested that he might be able to persuade Ko Fei to come to Hong Kong to give evidence. It was adjourned until today, which is its 9th hearing, to enable cross-examination of Mr Chu and, presumably, to see if Ko Fei could come to Hong Kong.

11. I am satisfied from this chronology that Mr Chu knew full well what was to take place at this hearing and had ample time to instruct solicitors if that was something he genuinely desired. Indeed, his applications for legal aid, made as long ago as in January and March 1999, indicate an appreciation on his part that legal representation was desirable and he could, if he had wished, take steps to secure representation, after legal aid was refused. At the very latest, by 6 September, he knew that the petition was being adjourned by cross-examination. If he had genuinely wanted to instruct lawyers for today's purposes, he could easily have taken steps to instruct them two months ago. I am therefore satisfied that no basis exists for any adjournment.

12. I turn then to the substantive question.

The evidence relied on by the judgment debtor

13. Mr Chu does not dispute having borrowed the money. His case is that he has repaid it.

14. The petitioner acknowledges the abovementioned partial repayment of $548,179,95. However, it denies that it ever received the $400,000 allegedly paid to it via Ko Fei. The petitioner alleges that the sum of $445,521.20 plus interest in the amount of $92,658.75 remains owing.

15. The issue which I have to decide is whether Mr Chu paid $400,000 to Ko Fei and, just as importantly, whether, if he did make such a payment, the petitioner received, or must be treated as having received, the money.

16. Mr Chu gave evidence and was cross-examined by Mr Thomson Mo on behalf of the petitioner.

17. Mr Chu agreed that he had signed a letter dated 4 May 1994 from the petitioner to himself setting out the terms of a personal loan, which was a loan made to him for $800,000 repayable after eight months, guaranteed by Mr Lai Siu Wing and subject to interest at 10% per annum and with an application fee of 0.5% payable before the grant of the loan. It is on the letter paper of the petitioner and with its full name both in English and Chinese, on the letterhead.

18. Mr Chu gave evidence that he had initially not made any repayments of principal but had made several interest payments. Then, he alleges, he personally handed $400,000 as a partial repayment of the loan, in cash to Ko Fei at a branch of the Hongkong and Shanghai Banking Corporation ("HSBC") in Central District on 16 March 1996. He received no receipt for this payment but was told by Ko Fei that the balance of the debt would be waived. He testified that he thought Ko Fei was the "boss" of the petitioning creditor and therefore he did not ask for a receipt.

19. Mr Chu said that Ko Fei subsequently ran into some unspecified trouble in Hong Kong and left for the Mainland, being unable to return. As the proceedings developed against him, Mr Chu went to Shenzhen where, he says, he met Ko Fei and obtained from him the Chinese letter. This purports to have been signed by Ko Fei and, in the version approved by the Court Translator, states as follows:

"I, Ko Fei, on 16 March 1996 in Hong Kong received from Chu Kwong Fook cash of $400,000 being partial repayment of the loan of $800,000 obtained from Xin Gang Finance Company. The balance of the debt Chu Kwong Fook has to go on to repay to Xin Gang Finance Company. This is to be treated as evidence of receipt. Since I am not able to return to Hong Kong within a short period of time to contact Xin Gang Finance Company, therefore, I specifically set out the explanation herein. If it is necessary for me personally to return to Hong Kong or inform Xin Gang Finance Company, please contact Chu Kwong Fook within approximately 2 months' time 'so that it will be learnt' . (sic)

	Shenzhen 5 June 1999
	Ko Fei (sd.)"

This is the only evidence relied on by Mr Chu to corroborate his version of events. The petitioner disputes the authenticity of the document and has called expert evidence in support of its submission that it is a forgery and not signed by Ko Fei at all.

20. Leaving aside for the moment its authenticity, I have to say at once that on its face, the Chinese letter poses considerable difficulties for Mr Chu:

(1) In the first place, it refers to "Chu Kwong Fook" as the person from whom the money has been received. The second character "Kwong" differs from the character "Hing", which is the second character in Mr Chu's name.

(2) Secondly, it says that Ko Fei thereby received the money on behalf of a company called "Xin Gang" instead of the petitioner, "Shen Gang".

The evidence, from documents filed in the Companies Registry, shows that there is in Hong Kong a company incorporated on 6 September 1994 as Xin Gang Financial Company Ltd (新港財務有限公司). This is a name which is obviously very similar to the name of the petitioner.

21. A difference in pronunciation of the first character of each name is evident in Potunghua. This is reflected in the Pin Yin romanisation as "shen" (申) for the petitioner and "xin" (新）for the other company. However, in Cantonese, it appears that both characters have the same sound, namely "sàn".

22. Ko Fei was a director of the petitioner until 30 April 1996, about six weeks after he was allegedly given the $400,000 by Mr Chu. Ko Fei was also a director of Xin Gang since its incorporation and apparently remained in that position at all material times.

23. Mr Chu said in evidence that he did not notice the difference between Xin Gang and Shen Gang and so did not query the Chinese letter. However, I find that hard to believe. He accepts that he retained a copy of the letter from the petitioner confirming the loan. That clearly states its name as Shen Gang and not Xin Gang, both in Chinese and in English. Moreover, Mr Chu said that he was a close friend of Ko Fei who was then a director of the petitioner and had carried very large sums of cash for him. I therefore find it very hard to accept that he would not have noticed that the letter he produced referred to Xin Gang instead. If, as he testified, he had gone specially to Shenzhen to collect the letter from Ko Fei, he would surely have taken care to ensure that it properly served its intended evidential purpose.

24. Moreover, and more importantly, if the story told by Mr Chu is correct, namely, that Ko Fei arranged the whole loan from the petitioner and had even forgiven the balance after receiving the $400,000, then there is no reason for Ko Fei to have written down the wrong lending company. This is especially so since, according to Mr Chu, Ko Fei took the trouble of looking up the date of his receiving the $400,000 in a small diary or notebook before writing the Chinese letter.

25. Another unsatisfactory feature of the Chinese letter, from Mr Chu's point of view, is that contrary to his evidence about the balance of the debt being waived, the letter expressly states that he is to pay the balance. That is perhaps not surprising as it was apparently only at the hearing today that Mr Chu alleged for the first time that there had been such a "waiver".

26. To add to the difficulties appearing on the face of the Chinese letter are the problems arising from the discrepancy between the signature on the Chinese letter and the known signatures of Ko Fei taken from the petitioner's company records, such as resolutions signed by Ko Fei at board meetings.

27. Professor Cheung Kwong Yue of the Department of Chinese Language and Literature at the Chinese University gave evidence for the petitioner. He has on a number of occasions been accepted in our courts as an expert document examiner specialising in Chinese handwriting. For compelling reasons which were effectively not challenged, he concluded that the signature on the Chinese letter obviously differs from that on the documents known to have been signed by Ko Fei. I accept Professor Cheung's evidence entirely.

28. In the light of the evidence which I have outlined, I have firmly come to the conclusion that I cannot accept Mr Chu's evidence that he in fact repaid $400,000 to the petitioner by giving this sum to Ko Fei in the circumstances he alleges. If he was for any reason paying that sum to Ko Fei personally, one might be prepared to accept that he may have made such payment in cash to Ko Fei at the premises of HSBC without receiving a receipt. However, I think it extremely implausible that Mr Chu would have made payment in such a manner if he was intending to repay the loan which he admits taking from the petitioner.

29. This implausibility is not at all reduced by the Chinese letter. It does not on its face relate either to the judgment debtor or the petitioning creditor, but refers to a person with a similar name to Mr Chu returning money to a company with a similar name to the petitioner.

30. More damagingly for Mr Chu, I have found that the signature is a forgery. I therefore reject his evidence about seeing Ko Fei and obtaining the Chinese letter from him in Shenzhen and I find that he was not a witness of truth.

31. One further feature of the evidence Mr Chu gave is important. He was asked why, if, as he had alleged, the balance of the debt had been waived after his repayment of $400,000, the Chinese letter stated to the contrary that the balance had to be paid. His reply was that this was so because Ko Fei did not want the petitioner to know of the agreement between them. When asked why not, Mr Chu replied that this was because "to his [Mr Chu's] knowledge he [Ko Fei] had not given the money to the bank, that is, because he had taken the $400,000 for himself". I pointed out to him that the effect of this evidence was that he was accepting that even if he had given the money to Ko Fei, that money had never found its way to the petitioner so that the debt remained outstanding. Mr Chu tried to resile from his evidence which I have described above and which was clearly given. In the end, he accepted that he inferred that Ko Fei had not handed on the money to the petitioner "because if he had done so, there would not be this case".

32. Accordingly, I find that, on the evidence, Mr Chu did not give $400,000 to Ko Fei by way of partial repayment of the debt owing to the petitioner. I also find that even if such sum was paid to Ko Fei by Mr Chu, it was not paid by way of repaying the outstanding debt and, in any event, that the petitioner has not received repayment of that amount.

33. I therefore find the outstanding debt proved and that no grounds exist for refusing the petitioning creditor its remedy of a bankruptcy order. I therefore make the usual bankruptcy order.