CHAN YUK LUN v. TSE YUEN MING TERESA

HCB 15125/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 15125 OF 2009

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D E C I S I O N

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1.  I have set out at the beginning of this hearing the background to it and I do not propose to repeat that again now. As I have said, the question that needs to be determined first is whether or not I should rescind the order that I made on 15 November dismissing the petition.

2.  On that occasion I gave a brief oral judgment.  In that judgment, I adverted to the fact that Mr Chan had indicated that he had, in fact, served a statutory demand some time ago against Madam Tse, in respect of the debts which he wished to raise by way of proposed amendments, which were not then yet formulated, to his bankruptcy petition in order to overcome the fact that the debt on which the petition was based was no longer available as the default judgment in question had been set aside after the presentation of the petition.

3.  That statutory demand and other documents which Mr Chan referred to were not before the court on that occasion, and the respondent, Madam Tse, the debtor, had suggested that she was unaware of those documents.  However, as I have said earlier, Mr Yu has very properly brought to the court’s attention after the hearing the fact that there were, in fact, such documents which had been, at some stage, received by the debtor or those representing her, and he thought it was right to bring that to the court’s attention.

4.  Those documents have now been put before the court and I have looked at them. There are two letters of 11 August and 15 October 2007 in which certain sums are demanded.  The second of those letters perhaps is more relevant for present purposes since it relates to a different sum from that which is demanded under the judgment debt which had now been set aside, that is the sum of some $74,000 in respect of commissions which Mr Chan says Madam Tse had wrongfully misappropriated from him and for which he alleges that she is personally liable.

5.  The difficulty with this document is that it is not, in fact, a statutory demand, something which Mr Chan frankly acknowledged in the hearing today.  I therefore do not think that that document provides any sound basis for Mr Chan to seek to amend his petition.

6.  As to the second document, that is a statutory demand dated 9 December 2009, and that document claims against Madam Tse personally, three sums: the first is a sum of $389,000-odd which is the amount of a judgment against Paragon Realty Limited, a company of which Madam Tse was the sole director and shareholder and which was, it seems, the employer of Mr Chan.

7.  I do not think that there is any dispute that Paragon Realty owes this amount to Mr Chan, but Madam Tse’s position, advanced through Mr Yu, is that that is a debt of Paragon Realty and not of Madam Tse personally.  Mr Chan suggests that it should be treated as a debt of Madam Tse personally on the basis of her admission that she is the sole shareholder and director of the company and of alleged admissions by her that she was Mr Chan’s employer in other context.

8.  There is also a claim for some HK$260,000 which is said by Mr Chan to represent his costs of the proceedings in the Labour Tribunal and on appeal which he was awarded by Yam J at the end of the proceedings.  As to these, Mr Chan again accepts quite readily that the costs have not in fact been assessed and that these are his calculation of the appropriate level of costs which he feels he should be entitled to recover.

9.  As to this, Mr Yu takes two points.  First, that, again, those costs must be a debt not of Madam Tse personally but of Paragon Realty which was the party opposed to Mr Chan in the Labour Tribunal proceedings and appeal.  Secondly, he says, that in any event that amount is not for a liquidated sum since no judgment or formal assessment of the costs has taken place but is simply based on a figure put forward by Mr Chan as what he claims to be his costs.

10.  The final sum, of $350, is accepted to be a personal liability of Madam Tse, but that sum on its own falls below the $10,000 minimum that is necessary for the presentation of a bankruptcy petition.

11.  In my judgment on 15 November, I had said that it seemed to me that it would not be right to allow Mr Chan to amend his petition at that very late stage to introduce the debts that were sought to be put forward, if in fact they were valid debts as against Madam Tse, and I took the view that if Mr Chan considered that he had a basis for presenting a petition in relation to those debts which had not previously appeared in the context of these proceedings, the more appropriate course would be to bring the existing proceedings to an end and to leave Mr Chan to decide whether or not to take out fresh proceedings.

12.  Having considered the submissions, both written and oral from both parties, I remain of that view.  It does seem to me that, in the first place, as far as the letters are concerned those are not, as Mr Chan accepts, statutory demands; and as far as the statutory demand is concerned, it is to be noted that the date of the demand, 9 December 2009, is the same as the date of the petition in these proceedings.  It would not ordinarily be open to Mr Chan to have presented a petition on the basis of that statutory demand until after the lapse of at least three weeks from the service of it.

13.  Leaving aside questions as to whether or not proper service was effected, it does seem to me that as at the date that this petition was presented, that statutory demand would not have formed a basis for this petition. 

14.  That, it seems to me, is a further factor which indicates that if that statutory demand is to be pursued, it not having been sought to be introduced into these proceedings in the approximately 10 months since they were started, it would not be appropriate to exercise my discretion to allow the matter to be stood over pending a further adjournment to introduce this new material at this late stage.

15.  It therefore seems to me that the position today remains as it was on 15 November, and that the appropriate course would still be to dismiss the existing petition, leaving Mr Chan to decide whether or not he wishes to pursue the debts that he considers he has against Madam Tse by a fresh petition.

16.  However, I would indicate to Mr Chan that as the High Court action is still a proceeding in which he claims a sum of, I think, some $1.5 million against Madam Tse, it may be a more economical use of his time and resources to focus on those proceedings, introducing into them, if he wishes, such other claims as he may think he has against Madam Tse so that the matter can be resolved once and for all before he embarks on fresh bankruptcy proceedings. 

17.  It does seem to me that there is at least, to put it no higher, a risk that if fresh bankruptcy proceedings were to be issued they might, at the end of the day, be unsuccessful having regard to the nature of the debts claimed and the fact that Madam Tse may well have some at least arguable grounds for disputing her liability in respect of them.  But that is a matter for Mr Chan to decide for himself.

18.  In the circumstances, I do no more than to say that having considered the matter, I do not think that there is any basis on which I should rescind the decision and order that I made on 15 November.  This petition, therefore, stands dismissed and the application for leave to amend must necessarily be dismissed along with it.

19.  I think that on balance the appropriate decision would be to make no order as to the costs after 15 November.

20.  I would also add, just for completeness, as I have said, Mr Chan’s summons for leave to amend the petition which had been adjourned by the Master to me should be dismissed, but as to that summons also, I propose to make no order as to costs in relates to that summons either.