RE: LI WAI MAN and EX PARTE: HANG TUNG SECURITIES LTD.

HCB 211/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 211 OF 1999

____________

_______________

D E C I S I O N

_______________

1. This is a summons for an order that the Debtor have leave to apply to set aside the Statutory Demand notwithstanding that the time limited for his doing so has expired. This application has been issued under rule 204 of the Bankruptcy Rules which provides as follows:-

"The court may under special circumstances and for good cause shown extend the time appointed by these rules or fixed by any order of the court for doing any act or taking any proceedings."

2. The petition in this case is based on a judgment. The action had been instituted by the Petitioner against the Debtor in August 1998. In November 1998, the Petitioner obtained summary judgment against the Debtor. There has been no appeal from that judgment, nor has there been any application to set aside that judgment.

3. In December 1998, the Petitioner issued a Statutory Demand. There has been some dispute as to whether there has been valid service of the Statutory Demand which I will deal with later. No payment was made by the Debtor and in January 1999, the present petition was filed.

4. The Debtor then issued a notice of his intention to oppose the petition. This was done in April 1999 and the grounds on which the Debtor relied were as follows:

(1) irregularity of service of the Statutory Demand dated 18 December 1998;

(2) irregularity of Affirmation of Service of the Statutory Demand filed on 27 January 1999;

(3) irregularity of the Bankruptcy Petition dated 26 January 1999 and presented on 27 January 1999;

(4) irregularity of the affirmation of Goh Chee Liong affirmed on 26 January 1999 and filed on 27 January 1999.

5. I note that no other grounds had been put forward then in the Debtor's application to oppose the petition.

6. The Debtor's application to set aside the Statutory Demand was then heard and I gave a decision in November 1999 dismissing the Debtor's application to set aside the Statutory Demand and the Petition. I understand this has now gone on appeal and that the appeal has recently been set down. Thereafter an amended petition was filed and service was accepted and today 29 May 2000 the Petition for bankruptcy will be heard.

7. However, last Friday on 26 May 2000 the Debtor filed the present summons for leave to set aside the Statutory Demand out of time. In his affirmation, he says for the first time that he has a genuine cross claim against the Petitioner that equals or exceeds the judgment sum on which the petition was based. I have seen the affirmation. In this affirmation, the Debtor says briefly that he had an oral agreement with a broker of the Petitioner, the oral agreement being that if the Debtor deposited $1 million by a post-dated cheque dated 31 January 1998, the Petitioner would withhold the sale of stocks until 31 January 1998. The Debtor says that he did give the Petitioner a post-dated cheque for that amount on 29 December 1997 which cheque had been collected by the broker's wife. But, the Debtor says, in breach of that agreement the Petitioner sold his stocks in mid-January. If the agreement had been complied with, the debt would not have been incurred because there was subsequently a rise in the value of the stocks after the sale in mid-January.

8. I note that this cross-claim had not been raised in the action which judgment the present petition is based on. More importantly, I note that this had not been raised in the Debtor's previous application to set aside the Statutory Demand.

9. In my view, it is an abuse of the process of the Court if this Court were to give leave to the Debtor to raise this matter which could and should have been raised in that previous application to set aside the Statutory Demand. Under the wider principle of res judicata set out in Dao Heng Bank v. Yat Tung Investment and indeed as a matter of the due administration of justice, I think the Court should discourage such piece-meal attempts to oppose the petition. If there is any truth in the Debtor's affirmation as to his previous solicitor's mistaken advice to him, no doubt he may pursue such avenues of redress as he may be advised.

10. Even if the wider principle of res judicata does not apply, the point remains that rule 204 provides that the Court may exercise its discretion to extend time only under special circumstances and for good cause shown.

11. Mr William Wong, counsel for the Petitioner has referred me to a number of cases on the application of the principles which guide the court in applications for extension of time under similar provisions in the Bankruptcy Act. It has been held in cases such as in Re Vitoria [1894] 1 QB 259 that it would be wrong to extend time when all that the litigant could say was that his solicitor had made a blunder. It was also held in Re A Debtor No. 692 of 1910 [1910] WN 24 that again the mistake of legal advisors would not be regarded as "special circumstances" for the purposes of that rule. Again, in Re Coles and Ravenshear [1907] 1 KB 1 it was held by the Court of Appeal that a mistake made by a solicitor's clerk would not amount to "special circumstances" to extend time. More recently, in Re A Debtor No. 36 of 1952, [1953] 1 All ER 776, Harman J also held that the mistake made by the Debtor's solicitors would not be regarded or would not amount to the "good cause shown" which fetter the words "special circumstances".

12. Accordingly, in the exercise of my discretion, in view of the fact that the present ground of a cross-claim has not been previously alleged notwithstanding the previous opportunity to do so in the Debtor's previous application to set aside the Statutory Demand, and in view of the time that the present application has taken, in my view, the Court ought not to exercise its discretion to extend time under rule 204 as I do not think that the Debtor has made out any special circumstances nor has he shown any good cause why the Court should extend the time. Accordingly, the summons is dismissed.

__________________

13. As far as the petition is concerned, I note that there is an appeal against the decision in November 1999 but the appeal does not operate as a stay. I see no other grounds on which the petition has been opposed or can be opposed, and I would accordingly, make the usual bankruptcy order.