RE CHIN KAM CHIU

HCB1043/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 1043 OF 2006

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REASONS FOR DECISION

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1. This is the Bankrupt’s application for an annulment of the bankruptcy order made against him on 19 April 2006.  On 8 April 2008, after hearing counsel, I dismissed the application with costs.  I indicated that I would give my reasons in writing, which I now do.

A.      The main issue

2. The main issue raised by this application is whether the substituted service of the statutory demand and the petition was good on the Bankrupt who was, at all material times, serving his sentence in prison after being convicted of the offence of conspiracy to defraud in HCCC158/2003.

B.      Background circumstances

B.1.   Service of the statutory demand

3. On 14 March 2005, the Petitioner obtained judgment in HCA8971/2000 against the bankrupt for HK$6,651,796.24 and US$3,747,668.14 with interest and costs.  He appealed against the judgment.  But on 11 November 2005, his appeal was dismissed when he failed to pay the security for costs as ordered by the Court of Appeal.

4. On 18 November 2005, the Petitioner issued a statutory demand for the said judgment debt.  On 21 November 2005, Mr Eric Ma Chun Ki of Deacons (“Mr Ma”) attended Stanley Prison to try to serve the statutory demand on the Bankrupt without success because the Bankrupt refused to see him or to accept personal service of any document by him.

5. On 22 November 2005, Deacons then sent an appointment letter (“the 1^st Appointment Letter”) for service of the statutory demand (with Chinese translation) to the Bankrupt as to the next appointment obtained from Stanley Prison, that is, 30 November 2005.

6. On 30 November 2005, Mr Ma attended Stanley Prison to serve the statutory demand on the Bankrupt.  That was unsuccessful because again the Bankrupt refused to come out of his cell to accept personal service of any document.

7. Having failed twice to effect personal service of the statutory demand on the Bankrupt, Deacons resorted to substituted service.  It was effected on 1 December 2005 by :

(a)      ordinary post to the Bankrupt at Stanley Prison; and

(b)     advertisement in Singtao Daily (a paper circulated in the prisons and in Hong Kong).

8. On 3 December 2005, the 1^st Appointment Letter was returned to Deacons marked “Prisoner refused to accept”.  Likewise, on 15 December 2005, the statutory demand sent by ordinary post to the Bankrupt was returned to Deacons marked “Refused to accept”.

B.2.   Service of the petition

9. Deacons then took steps to issue the bankruptcy petition.  On 7 February 2006, the master granted leave to file and serve the petition.  The petition was issued on 14 February 2006, which was then widely reported in various major Chinese newspaper.

10. On 20 February 2006, Mr Ma attended Pik Uk Prison (the Bankrupt having been transferred from Stanley Prison on 5 December 2005) to try to personally serve the petition on the Bankrupt but without success.  For the Bankrupt refused to see him or to accept any personal service of document.

11. On 25 February 2006, the Bankrupt appeared before the master for oral examination under Order 49B, Rules of the High Court.  At the hearing, the Bankrupt told the master that he was aware of the present bankruptcy proceedings.  Mr Colemen, SC, counsel for the Petitioner, who also appeared at that hearing, told the Bankrupt that the petition would be heard on 19 April 2006.

12. On 28 February 2006, Deacons sent an appointment letter to the Bankrupt with a copy of the petition (with Chinese translation) (“the 2^nd Appointment Letter”), informing him that the next appointment, that is, 9 March 2006.

13. However, by letter dated 2 March 2006, the Correctional Service Department informed Deacons that the Bankrupt refused to accept the 2^nd Appointment Letter and the same was returned to Deacons.

14. On 6 March 2006, at the adjourned hearing of the Order 49B examination, the Bankrupt told the master that he knew that there would be a hearing on the petition on 19 April 2006.  He further said that he would instruct Messrs Waller Ma Huang & Yeung (“WMHY”) to accept service of the petition.  Mr Coleman told him that an appointment had been made to see him on 9 March 2006 at Pik Uk Prison to serve the petition on him.

15. On 6 March 2006, Deacons wrote to WMHY asking them if they had instruction to accept service of the petition.  WMHY replied on 8 March 2006 that they did not.

16. On 9 March 2006, Mr Ma went to Pik Uk Prison to try to serve the petition on the Bankrupt personally.  But the Bankrupt refused to see him or to accept service.

17. On 15 March 2006, Deacons applied for an order for substituted service of the petition, which application was subsequently granted by the master.

18. Then on 29 March 2006, Deacons effected substituted service of the petition by :

(a)      ordinary post to the Bankrupt at Pik Uk Prison; and

(b)     by advertisement in Singtao Daily.

B.3.   Application for a body order and the master’s direction

19. Also on 29 March 2006, Deacons made an application to the master for a body order to facilitate the Bankrupt’s appearance at the hearing of the petition on 19 April 2006.

20. Upon requisitions as to the legal basis upon which the court should issue a body order to compel the Bankrupt to attend the hearing if he did not wish to do so, Deacons withdrew the application on 4 April 2006.  The master then directed Deacons to inform the Bankrupt that he should apply for a body order as soon as possible if he wished to attend the hearing on 19 April 2006.

21. On 10 April 2006, Mr Ma went to Pik Uk Prison with a view to serving personally on the Bankrupt a letter informing him that he should apply for a body order if he wished to attend the coming hearing.  However, an officer told Mr Ma that that was not the proper procedure and asked him to send the letter to the Bankrupt by ordinary post instead, which Mr Ma did.  Deacons then informed the court of the same by letter dated 11 April 2006.

B.4.   Hearing on 19 April 2006

22. As it turned out, the Bankrupt was absent at the hearing on 19 April 2006.  The master then made the bankruptcy order against him.

C.      Discussion

23. Under section 33(1)(a) of the Bankruptcy Ordinance, the court may annul a bankruptcy order if it any time appears to the court that on any ground existing at the time the order was made, the order ought not to have been made.

24. The Bankrupt relied on two grounds :

(1)     procedural defects in the service of the statutory demand and the petition;

(2)     lack of opportunity for him to be heard before the bankruptcy order, which is draconian in nature, was made.

I will consider them in turn.

C.1.   Defects in service

C.1.(a)  Of the statutory demand

25. I first look at the service of the statutory demand.

26. Rule 46 of the Bankruptcy Rules provides :

“(1)    Rule 49 has effect as regards service of the statutory demand, and proof of that service by affidavit to be filed with a bankruptcy petition.

(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.

…”

27. Rule 46(2) requires a creditor to do all that is reasonable for the purpose of bringing the statutory demand to the debtor’s attention depends on the circumstances of the case.  Whether a creditor has done all that is reasonable must be judged objectively but in the light of the information actually or constructively available to the creditor at the time of the service : see Re Li Wai Man, ex parte Hang Tung Securities Limited [1999] HKCU 1310, per Yuen J (as she then was).  The rule clearly envisages personal service if practicable in the particular circumstances.  If personal service is impracticable (and there must be good reasons to demonstrate that that is the case), other modes of service are permissible provided that they are reasonable within the meaning of the rule.”  See Re Lam Wai Wah Susanna [2002] 4 HKC 334, para. 22 at p. 341H-I.

28. Here, Mr Ma attended Stanley Prison twice on 21 and 30 November 2005 respectively to try to effect personal service of the statutory demand on the Bankrupt.  Both attempts failed because the Bankrupt refused to see him or to accept any documents from him.

29. The Bankrupt’s evidence is that he was not aware of the contents of the 1^st Appointment Letter; that the prison officer did not tell him that Mr Ma was to serve the statutory demand on him; and that since he thought the documents that Mr Ma sought to serve on him related to HCA1299/2004, he asked the officer to tell Mr Ma to send the documents to the legal representative of KLG, presumably the plaintiff in that High Court Action.

30. The Bankrupt’s excuse why he refused to see Mr Ma or to accept service of the statutory demand rests on his allegedly mistaken belief that the documents to be served on him were about HCA1299/2004.  This is simply unbelievable.

31. HCA1299/2004 was an action begun by Keen Lloyd Energy Limited against the Bank of China (Hong Kong) Limited.  The Bankrupt was not even a party.  Ever since the issue of the writ of summons on 1 June 2004, Keen Lloyd’s solicitors had taken no steps in that action other than filing of two notices of change of solicitors in March and July 2005.  WMHY, Keen Lloyd’s latest solicitors on record, then filed a notice to proceed on 6 October 2005.  Then on 12 December 2005, WMHY issued a summons for amending the writ.

32. In the circumstances, there is no reason why Deacons would seek to serve any documents on the Bankrupt in November or December 2005 relating to HCA1299/2004 when :

(a)      he was a non-party;

(b)     no documents needed to be served by Deacons in that action; and

(c)     in any event, any documents that needed to be served in that action would be served on WMHY, Keen Lloyd’s legal representative and not on the Bankrupt.

33. In my view, the Bankrupt made the deliberate decision not to see Mr Ma plainly with a view to evading personal service of the statutory demand.  It does not now lie in his mouth to complain that the Petitioner had not done all that is reasonably practicable to effect personal service of the same on him.

34. Mr Maurellet, counsel for the Bankrupt, submitted that when the Bankrupt refused to see Mr Ma, he should have asked the prison officer to take him to the cell to see the Bankrupt.  He referred to Rundle v. Black, 22 May 2001, an unreported decision of the English Chancery Division as an example showing that the process server was brought to the cell to serve documents personally on an inmate.

35. I have not been referred to the prison rules and practice of serving documents on an inmate in England.  But it can be seen from the transcript of the judgment of Rundle v. Black that the process server was in fact escorted to the cell to effect service.  That appeared to be the practice in England.

36. I have not been cited the applicable prison rules and practice of serving documents on an inmate in Hong Kong either.  But it would appear from the undisputed evidence of Mr Ma that :

(1)     an appointment has first to be made to the prison to see the inmate;

(2)     the process server then attends the prison pursuant to the appointment;

(3)     the prison officer receiving the process server will then make enquiry with the inmate to see if he wishes to see the process server; and

(4)     if the inmate refuses to see him, that is the end of the visit.

There is nothing in the evidence to suggest that the process server can then request to be escorted to the cell to see the inmate for serving the documents on him or that such request, if made, will be acceded to against the inmate’s wish.

37. Mr Maurellet’s submission must be rejected.

38. In my view, the Petitioner had done all that is reasonable for the purpose of brining the statutory demand to the Bankrupt’s attention.  When two attempts of personal service failed, the Petitioner was entitled to proceed with the substituted service by post and by advertisement.  The Bankrupt’s complaint that the service of the statutory demand was defective fails.

C.1.(b)  Of the petition

39. I next come to the service of the petition.

40. The Bankrupt’s evidence is similar.  He said he was not aware of the contents of the 2^nd Appointment Letter.  He did not accept service of the petition because he thought the documents that Mr Ma sought to serve on him related to HCA1299/2004.

41. The Bankrupt’s allegation that he thought the documents that Mr Ma sought to serve on him related to HCA1299/2004 is again unbelievable.  As noted, he was not a party and there is no reason why Deacons would serve the documents in that action on him and not WMHY.  Further, he was expressly told by counsel at the Order 49B examination hearing on 6 March 2006 that the process server would come to visit him on 9 March 2006 for serving the petition on him.  When Mr Ma did come to Pik Uk Prison on 9 March 2006, the Bankrupt knew perfectly well why he came.  Mr Ma could not have come to serve documents in HCA1299/2004.  In my view, the Bankrupt was simply evading personal service of the petition.

42. His attempt to evade service also explains why he told the master at the hearing on 6 March 2006 that he would instruct WMHY to accept service of the petition when in fact WMHY did not have such instruction.

43. Mr Maurellet relied on the same argument that the process server should be escorted to the cell to serve the petition on the Bankrupt.  For the reasons stated in paragraph 36 above, this argument must be rejected.

44. The Petitioner was plainly entitled to proceed by way of substituted service.  The Bankrupt’s complaint that there was defective service of the petition must fail as well.

C.2.   Lack of opportunity to be heard

45. Mr Maurellet submitted that the bankruptcy order is draconian.  Before the court made the order, either the Petitioner should apply for a body order or the court should on its own motion issue such order to bring up the Bankrupt to attend the hearing on 19 April 2006.  He relied on section 81 of the Evidence Ordinance, Cap. 8 and the fact that the court had in fact issued a body order to bring up the Bankrupt to attend the Order 49B examination hearings.

46. Under section 81, the court may, on application or on its own motion, issue a warrant or order for bringing up any person in lawful custody before any court to enable such person to prosecute, pursue, defend or be examined as a witness in, any proceedings, either criminal or civil, before such court.

47. However, Mr Maurellet has not cited any authority to show how the court should exercise that power.  In the absence of well-considered submissions, I will only limit myself to the circumstances of the present case and say no more than necessary to disposing of counsel’s submission.

48. Generally speaking, whether a party to civil proceedings should appear at a hearing is a matter for him entirely.  The other party is not obliged to procure his attendance.  Good service of the hearing will suffice.  Nor is the court under any duty to ensure his appearance.  Upon proof of good service, the court may proceed in his absence.  Section 81 should only be invoked in special cases for good reasons.  Here, the facts clearly show that the Bankrupt had tried to evade personal service of the petition.  But he was fully aware of the hearing on 19 April 2006.  From his experience in the Order 49B examination, he must know that a body order could be issued to bring him up, if he wished to attend the hearing.  Yet he chose not to appear.  That must be a conscious decision on his part.  He must then take all the consequences.  It is not open to him to complain now that the Petitioner had not applied for or the court had not issued a body order to compel his attendance.

49. The reliance on the fact that at the Order 49B examination, a body order had in fact been made is misplaced.  Pursuant to Order 49B rule 1(1), the court made an order that the Bankrupt should be examined and for the purpose of securing his attendance made the body order.  The issue of the body order compelling the Bankrupt’s attendance is to facilitate the examination as ordered by the court.  It is wholly different from the bankruptcy proceedings where the court had not made any order that the Bankrupt must appear.  The Bankrupt who knew when the hearing would take place was free to decide whether to attend or not.  The court would not compel his attendance by issuing a body order.

50. Mr Maurellet’s submission is rejected.

D.      Conclusion

51. For the above reasons, I dismissed the Bankrupt’s application with costs.