RE HAU TUNG KONG JOSEPH

HCB 11438/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCYPROCEEDINGS NO. 11438 OF 2004

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J U D G M E N T

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1.  This bankruptcy petition was presented by the Bank of China (Hong Kong) Limited as the successor corporation of Po Sang Bank Limited (“Po Sang Bank”).

2.  By a judgment in HCA No.10698 of 2000 made on 17 August 2001, the debtor Hau Tung Kong Joseph was ordered to pay to Po Sang Bank HK$3,189,623.69 with interests and fixed costs of HK$1,550.00.

3.  After realisation of the security held by Po Sang Bank on 14 April 2003, the judgment debt was reduced to HK$1,669,707.63.  On 9 February 2004, the petitioner served a statutory demand on the debtor personally for the outstanding judgment debt.

4.  This petition was presented on 27 November 2004 and was served on the debtor personally on 6 December 2004.

5.  The debtor filed a notice of intention to oppose the petition on 12 March 2005.  In that notice, he contended that the guarantee entered into by him in favour of Po Sang Bank, upon which the default judgment was based, should be set aside because the bank did not explain the meaning and effect of the guarantee to him or point out to him the risks that he would be running.

6.  At the hearing of the petition on 14 March 2005, directions were given for the debtor to file evidence in opposition and the petitioner to file evidence in reply.  It was further directed that no further evidence should be filed without leave of the Court and the petition was adjourned to today.

7.  The debtor filed his affirmation in opposition on 24 March 2005.  In his affirmation, he stated that he did not execute the guarantee “under free will”.  He further stated that the borrower and the bank officers did not explain the contents of the guarantee to him at all and that he had executed the guarantee “under undue influence of the borrower”.  He did not go into any particulars at all as to how it is alleged that he had executed the guarantee under the undue influence of the borrower, nor did he explain why the bank should not be entitled to enforce the guarantee even assuming there were undue influence of the borrower as alleged.  The debtor also stated that he would file a summons to set aside the default judgment entered without his knowledge.  He explained that he had delayed in making the application to set aside the default judgment when the statutory demand was served on him in February last year, as he had relied on the promise of the borrower that the borrower would settle the matter with the petitioner.

8.  The evidence in reply of the petitioner was made by Tong Wing Sing, the Branch Operation Manager of the To Kwa Wan Branch of the petitioner.  He was at the material time the senior officer of the To Kwa Wan Branch of Po Sang Bank.  He exhibited the guarantee dated 27 April 2000 executed by the debtor.  He stated that he had handled the loan application by one Ho Man Lun, who was the borrower, on 17 March 2000 and that the debtor had attended the To Kwa Wan Branch on 27 April 2000 to execute the guarantee and had informed the bank that he was a friend of the borrower.  Mr Tong said that it was his practice as an officer of the bank to explain the contents of the bank’s guarantee to the person executing the document and the extent of the guarantor’s liability and that there was no reason why he should depart from his practice on the occasion in question. 

9.  The guarantee executed by the debtor was headed in bold in English “Deed of Guarantee” and in Chinese “擔保書”.  The first schedule to the guarantee indicated in Chinese that that the debtor was to execute the document as the guarantor.  The debtor knew or must have known that the document he executed was a guarantee.  He only made a bare assertion that the bank officers did not explain the contents to him.  He did not say if he had asked for an explanation of the contents or if the bank officers had refused to give an explanation upon his asking.  In any event, the bank officers had no obligation to explain the terms of the document to the debtor. 

10.  As for the bare allegation that the guarantee was executed due to the undue influence of the borrower, what the undue influence was wholly unexplained.  Counsel appearing for the debtor sought an adjournment at the hearing today for the debtor to file further evidence on the allegation of undue influence.  I have rejected that application for an adjournment as counsel was not even able to satisfy me what was the basis for alleging undue influence in the existing affirmation professionally prepared on behalf of the debtor.  Nor was counsel able to explain any ground or basis why the bank should not be entitled to enforce the guarantee executed in its favour.

11.  I am given to understand that the debtor had taken out a summons belatedly on 8 April 2005 to set aside the default judgment in the High Court Action.  It does not appear from the submissions made to me that any additional materials were placed before the court in the High Court Action in support of that application.  I decline to adjourn the bankruptcy petition until the application to set aside the default judgment is disposed of.  In my view, the debtor has failed to demonstrate there is a bona fide dispute of the judgment debt on substantial grounds.  I see no or no sufficient reason to go behind the default judgment.

12.  I make a bankruptcy order against the debtor.  The petitioner’s costs are to be paid out of the debtor’s estate.