TANG TIM CHUE v. TANG KA HUNG ROBERT

[English Translation - 英譯本]
CACV 21/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 21 OF 2013

(ON APPEAL FROM HCB 6075/2012)

_______________________________

JUDGMENT

Hon Chu JA (giving the judgment of the court):

1. Mr Tang Ka Hung Robert, the creditor, commenced the case of HCB 6075/2012 on 14 September 2012 in the Court of First Instance to petition for the bankruptcy of Mr Tang Tim Chue. On 7 January 2013, after a hearing, To J (“the trial judge”) ordered that the debtor be adjudged bankrupt. The debtor now appeals to the Court of Appeal against this bankruptcy order.

HCB 6075/2012

2. The bankruptcy petition presented by the creditor was based on a judgment debt in the case of HCAP 7/2006.

3. The creditor and the debtor are half brothers and their father Tang Sum On (鄧心安) passed away on 7 November 2005.  The creditor and Madam Tang Mei Sze (鄧美施) are the executors of the will of Tang Sum On.  Since the debtor had entered a Caveat and an Appearance to Warning at the Probate Registry of the High Court to oppose the grant of probate of the estate of Tang Sum On to the creditor and Tang Mei Sze, the creditor and Tang Mei Sze commenced the action HCAP 7/2006, seeking an order to have the Caveat and the Warning withdrawn and the probate granted to them.  On 19 September 2007, with no opposition from the debtor, the Court of First Instance ordered that the defence and counterclaim of the debtor be dismissed, the Caveat and Warning entered by the debtor be withdrawn and the probate be granted to the creditor and Tang Mei Sze.  The court also ordered that costs be paid by the debtor to the creditor and Tang Mei Sze, which were taxed at $305,953 in September 2008.

4. Since the debtor failed to pay the said taxed costs, the creditor served on him a Statutory Demand on 24 August 2012, requesting him to settle the debt within three weeks.  The debtor did not pay the said debt or apply for setting aside the Statutory Demand.  Hence the creditor filed a petition on 14 September 2012 to apply for a bankruptcy order against the debtor.

5. At trial, the debtor did not dispute the receipt of the Statutory Demand or deny the failure of paying the debt.  Two grounds were put forward to defend the bankruptcy petition. Firstly, he stated that the creditor had undertaken not to recover the costs from him, which meant that he had give up the claim of the said debt. Secondly, he asserted that actions in respect of matters concerning the estate of Tang Sum On and the sale of Tso land were proceeding, in which compensation in the amount of tens of millions of dollars was involved, and hence the court should not adjudge him bankrupt, otherwise he would lose a huge amount of compensation, and it would be unjust.

6. For the first defence, the trial judge found the debtor’s assertion not credible and did not accept that the creditor had undertaken not to recover the costs from him.  The trial judge further said that even if the court was satisfied with the debtor’s assertion, in view of the fact that he had not given anything in consideration of the purported undertaking, such undertaking would not be binding in law and did not constitute a ground to defend against bankruptcy.

7. As to the second defence, the trial judge, having thoroughly considered and analysed those various actions referred to by the debtor, came to the view that the debtor would not have any chance of success in those actions and a bankruptcy order would not cause any injustice to him.

8. The trial judge therefore made a bankruptcy order against the debtor.

Grounds of appeal

9. The debtor in the notice of appeal has put forward his grounds of appeal: he is entitled to interests in both the estate of his father Tang Sum On and the Tso Tong of the Tang Family (鄧氏家族祖堂) and he is not insolvent, and thus he should not be adjudged bankrupt.  The debtor also alleged that the creditor just made use of the bankruptcy order to try to prevent him from recovering his interests.

Application for adducing new evidence

10. On 3 July 2014, the debtor took out a summons to seek leave to adduce new evidence in this appeal, namely the 19 documents in Part F of the appeal bundle.  The Item 17 among them is in fact the letter sent to the trial judge by the debtor after lodging this appeal.  This document is only a statement of the debtor and does not amount to evidence.  The rest of the documents are related to the actions in which the debtor claimed his interests in the Tso Tong of the Tang Family and the estate of his father Tang Sum On.

11. In our view, the debtor’s application does not fulfil the legal requirements for adducing new evidence at the appeal stage: see Ladd v Marshall [1954] 1 WLR 1489.  First, save and except Item 16 (a letter sent from Leung Kin & Co to the debtor and Madam Liu Chuen Mui (廖泉妹) on 25 November 2013), Item 17 and Item 18 (a letter sent from Tang Dip Kam (transliteration of 鄧叠錦) to the Tso Tong Registry of the New Territories District Office on 19 May 2014), the other documents were already in existence before the bankruptcy hearing.  The debtor explained that those documents were not produced during the bankruptcy proceedings in the Court of First Instance because the other actions were then proceeding and he did not foresee that the case would come to the present stage.  We do not find this a good reason.  The debtor has failed to satisfy the legal requirement that he could not adduce such evidence at trial even with reasonable diligence.  Moreover, in view of the analysis below, these new evidence cannot help defending the bankruptcy petition, and hence another condition which requires the new evidence to have an important influence on the result of the bankruptcy petition is also not met.  Furthermore, Items 5 to 8 and Item 18 are additional statements of witnesses who have never made any affidavit or given evidence in the bankruptcy proceedings, and the truthfulness and credibility of these statements are yet to be established.

12. In view of the above reasons, the debtor’s application for adducing new evidence is refused.

Reasons for decision in the present case

13. The arguments put forward by the debtor in this appeal are the same as those he raised before the trial judge.  Firstly, he submitted that the said debt in the petition was a result of the dispute on the probate of the estate of Tang Sum On, and it was because the creditor had persistently failed to show him the will that the dispute arose.  In our view, this argument is irrelevant because the debtor has already been ordered in the case of HCAP 7/2006 to pay the costs and the debt in question is a judgment debt.  The debtor has also stated that the creditor had on many occasions indicated that the said costs would not be pursued.  The trial judge in paragraphs 15 and 16 of his judgment made a ruling in respect of this dispute on the facts and gave his reasons.  He said as follows:

“ 16. I do not believe the debtor’s allegation.  He is just unable to give the reasons for which the creditor gave up the debt.  Since 2006, the debtor has initiated a number of actions against the creditor in respect of his father’s estate and the occupancy of Tso land. Again and again, he failed and initiated new actions, which has caused disturbances and waste of legal costs to the creditor.  If the creditor had given up that debt, why would he have spent money and time on the taxation of costs?  In such a case, no matter it was in the costs taxation in October 2008 or during the appeal hearing in 2010, it absolutely did not make any sense that the creditor would give up this debt of over $300,000 without any reason.  In my view, the debtor only tries to get out of the debt by making an excuse, and he is not able to produce any credible evidence to prove that the creditor has given up the said debt.  In addition, even if I were satisfied with his evidence, it remains the fact that he has given nothing in consideration of the undertaking that he has alleged.  In law, such an undertaking is not binding. Hence, the creditor has successfully demonstrated that this petition does fulfil the requirements for making a bankruptcy order.”

We find nothing that deserve criticism in this finding of the trial judge.

14. Secondly, the debtor said that he was entitled to the interests in Tang Leuk Tso (鄧畧祖), Tang Kui Yik Tso (transliteration of 鄧居易祖) and Tang Fook Chuen Tong (鄧福全堂) of the Tang Family and the estate of his father Tang Sum On, and therefore he was not a bankrupt.  He alleged that the creditor made use of the bankruptcy order to prevent him from proceeding with the actions related to the abovementioned interests, and therefore the bankruptcy order was unjust to him.

15. In our view, it is undisputable fact that, after the creditor had issued a Statutory Demand to him, the debtor failed to pay the judgment debt in question in the bankruptcy petition, hence the conditions for making a bankruptcy order under section 6 of the Bankruptcy Ordinance have been met.  If the debtor suggests that he is able to settle the debt and so no bankruptcy order should be made against him, he has to provide concrete and specific evidence to prove that he is at present in fact able to pay the debt owed to the creditor.  A general claim of the entitlement to the interests in Tso Tong and the estate of his father with no concrete and specific proof of his ability to pay the debt is not sufficient to defend against the bankruptcy petition.

16. In addition, in respect of the debtor’s arguments that he was not bankrupt because of the entitlement to the interests and that the bankruptcy order would cause him injustice, the trial judge has analyzed them in detail in paragraphs 17 to 30 of the judgment.  The trial judge pointed out that in HCA 1944/2077 and in CACV 196/2010 derived therefrom, the Court of First Instance and the Court of Appeal had already ruled that the interests of the 23 shares of Tang Leuk Tso owned by Tang Kap Wing Tso (鄧甲榮祖) to which the debtor belongs had already been transferred through the debtor to Tang Sum On and the said transfer was made with the unanimous consent of all members of Tang Kap Wing Tso (ie the debtor and his sons and grandsons), which was binding in law.  Therefore the debtor was no longer entitled to any interests in Tang Leuk Tso through Tang Kap Wing Tso.  In such circumstances, the debtor simply had no locus standi to bring any action in respect of issues such as the legal status of the managers of Tang Leuk Tso and the appropriation of the interests of the Tso land.

17. We agree with the analysis and conclusion made by the trial judge.  The debtor is a party to HCA 1944/2007 and CACV 196/2010, the fact that Tang Kap Wing Tso had already transferred and no longer owned 23 shares of Tang Leuk Tso has been adjudicated and the adjudication is binding on him.  Moreover, the debtor said on the one hand that the provisional sale and purchase agreement executed between Tang Leuk Tso and Strong Cheer Limited on 2 August 2007 was invalid because the three persons who signed the agreement on behalf of Tang Leuk Tso were not lawful managers, and that the creditor petitioned for his bankruptcy with the aim of preventing him from pursuing the unauthorised sale of Tso land.  Yet, on the other hand, the debtor has also alleged that his mother Madam Liu Chuen Mui had signed an agreement with Strong Cheer Limited, agreeing to assist Strong Cheer Limited for an award of $1,000,000 to fight for the consent from the Tuen Mun District Office in respect of the sale of land involved in the above sale and purchase agreement dated 2 August 2007.  The debtor further said that Madam Liu had agreed to let him receive this award of $1,000,000, and hence he was able to pay the debt in question in the bankruptcy petition.  Obviously, what the debtor said and his stance are self-contradictory.  This also shows that the debtor’s complaint of the bankruptcy order causing him injustice and his ability to pay the debt owed to the creditor is not really convincing.

18. As to the interests in Tang Kui Yik Tso and Tang Fook Chuen Tong, the debtor has not provided any specific details to show his entitlement to the interests of these Tso Tong and the specific value of the interests that he alleged.

19. On the other hand, the creditor has told this court that the interests of Tang Kap Wing Tso in Tang Chik Fook Tso (鄧藉福祖) and Tang Fook Chuen Tong have already been transferred by the debtor and Madam Liu Chuen Mui (in the capacity of manager) to Tang Ying Hei (鄧英喜), and hence the debtor had no more interests in Tang Chik Fook Tso and Tang Fook Chuen Tong.  The creditor also challenged the debtor’s assertion that since Tang Kang Cheung (鄧庚祥) was his grandfather by blood, he was entitled to the interests in Tang Chik Fook Tso and Tang Fook Chuen Tong after the death of Tang Sum On.  The creditor contended that Tang Kap Wing Tso and Tang Kang Cheung Tso were two streams, and the debtor could not inherit both at the same time.  The debtor, upon accepting the appointment as the manager and the sole beneficiary of Tang Kap Wing Tso, automatically lost the interests in Tang Kang Cheung Tso.  The creditor also pointed out that in the last few years, the money distributed to members by Tang Kui Yik Tso was no more than $1,000 each year.

20. In our view, under these various substantial challenges raised by the creditor, the debtor’s mere assertion of entitlement to the interests in these Tso Tong without any concrete details is not sufficient for the court to accept that he really has such interests in them as he has claimed such that the debt could be paid forthwith or shortly or that the bankruptcy order would cause him injustice.

21. As to the debtor’s claim that he was entitled to half of the estate of his father Tang Sum On based on a “light-the-lantern agreement” (點燈儀式合約) executed in 1963, the debtor had already commenced an action HCMP 1705/2012 against the creditor and Tang Mei Sze.  On 15 May 2013, Recorder Shieh SC dismissed the debtor’s claim pursuant to the Limitation Ordinance.

22. The debtor also suggested that according to an agreement for division of household signed by Tang Sum On in 1964, Tang Sum On was required to pay a monthly rent of $600, and hence he was entitled to recover the rent unpaid over all these years from the estate of Tang Sum On.  However, this sum of $600 had been expressly specified as “regarded as the common proceeds” and not personal interests given to the debtor.  Furthermore, the debtor was not a party to the agreement and hence not entitled to claim in pursuance of the agreement.  In summary, the debtor’s claim of interests in the estate of his father does not have a real basis.

23. The debtor also said that after he had gone bankrupt, he could not proceed with the litigations to claim for his interests in the Tso Tong of the Tang Family and the estate of his father because the Official Receiver represented the creditor and would not pursue the creditor or deal with the litigations concerned.  It is completely incorrect for the debtor to say so.  Although the bankruptcy order has been made on the basis of the petition presented by the creditor, the Official Receiver or trustee is not the agent of the creditor, but an independent third party who in pursuance of the law takes possession of the bankrupt’s assets (including the right of litigation) and uses them to repay the debts of the bankrupt.  As the trial judge has pointed out in paragraph 30 of his judgment, the Official Receiver or the trustee would assess the strength of the arguments of the debtor’s ongoing actions independently and professionally and deal with them properly.  Not only would no injustice be caused to the debtor, but it would also be fairer to the parties of the litigations.

Conclusion

24. In light of the above reasons and analyses, none of the grounds of appeal advanced by the debtor is made out.  The appeal is dismissed accordingly.

25. It is the usual rule that costs should follow the event.  There will accordingly be a costs order nisi: the creditor’s costs of this appeal, which is assessed at $1,000, be paid out of the debtor’s assets.  If no application for varying the costs order nisi is made by any party within 14 days after this judgment is handed down, the same shall then become absolute automatically.