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

HCB 211/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 211 OF 1999

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D E C I S I O N

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1. On 23 November 1998, Hang Tung Securities Ltd ("the Creditor") obtained judgment against Li Wai Man ("the Debtor") in the sum of $1.4m. odd together with interest and costs.

2. On 18 December 1998, the Creditor issued a Statutory Demand against the Debtor. Attempts were made by the solicitors for the Creditor to serve the Statutory Demand on the Debtor personally on two occasions at each of two locations. It is common ground that personal service was not successfully effected.

3. What is in dispute is whether the Creditor has acted reasonably for the purpose of bringing the Statutory Demand to the Debtor's attention. (I should add that since 8 February 1999, a system has been introduced in the High Court Registry whereby the master in charge of the Bankruptcy List vets the affirmation of service of the Statutory Demand for compliance with R.46 and R.49 prior to the filing of the Petition. The Petition here was filed before this system was put in place).

4. On 30 December 1998, the Creditor advertised the Statutory Demand in the business page of the Ming Pao, a newspaper widely circulating in Hong Kong.

5. On 26 January 1999, the Petition was verified on affirmation by an officer of the Creditor.

6. The next day 27 January 1999 the Petition was filed, together with an Affirmation of Mr Tony Ho Kin Hung ("the service clerk") who deposed to his attempts to effect personal service of the Statutory Demand on the Debtor, and to the subsequent advertisement of the Statutory Demand in the newspaper.

7. As for the Petition, the service clerk also attempted to effect personal service of it on the Debtor, but he was again unsuccessful. An order was sought in March 1999 for substituted service.

8. Before the order was made, however, the Debtor issued the present application to set aside the Statutory Demand and the Petition on the following grounds:-

1. irregularity of service of the Statutory Demand;

2. irregularity of the Affirmation of Service of the Statutory Demand;

3. irregularity of the Petition;

4. irregularity of the Affirmation verifying the Petition.

(1) IRREGULARITY OF SERVICE OF THE STATUTORY DEMAND

The Affirmation accompanying the filing of the Petition

9. The 1st Affirmation of the service clerk filed with the Petition shows that on 18 December 1998 (a Friday), he went (i) to 1014A on the 10th Floor of Tsim Sha Tsui Centre ("the Office Unit") and (ii) to Flat A, 16th Floor, Block 3, Cavendish Heights, Perkins Road ("the Apartment"), being the usual and last known addresses of the Debtor, with a view to effecting personal service on the Debtor.

10. The service clerk went to (i) the Office Unit at about 2:00 pm. He says he rang the doorbell for a "long time", but no-one responded to it. He then enquired with the watchman, but was told that there was no person "living" there by the name of the Debtor.

11. He then left a copy of the Statutory Demand at the main entrance of the "1st Premises", which had been defined in his Affirmation as the Office Unit.

12. He also left a letter from the Creditor's solicitors, addressed to the Debtor at the Office Unit, which stated that the clerk would call upon the Debtor again at the same address on Monday 21 December 1998 at 3:00 pm to effect service of, amongst other things, the Statutory Demand. If that was inconvenient, the Debtor was asked to let the Creditor's solicitors know, so as to fix a mutually convenient appointment.

13. He went to (ii) the Apartment at about 7:00 pm. He rang the doorbell for a few minutes, but no-one responded to it. He enquired with the watchman whether the Debtor was living there, but the watchman's response was that he had no idea.

14. The service clerk then left a copy of the Statutory Demand at the main entrance of the "2nd Premises", which had been defined in his Affirmation as the Apartment.

15. He also left a letter from the Creditor's solicitors, addressed to the Debtor at the Apartment, which stated that the clerk would call upon the Debtor again at the same address on Monday 21 December 1998 at 4:00 pm to effect service of, amongst other things, the Statutory Demand. If that was inconvenient, the Debtor was asked to let the Creditor's solicitors know, so as to fix a mutually convenient appointment

16. On 21 December 1998, the service clerk went to both premises again - the Office Unit at 3:00 pm and the Apartment at 4:00 pm. The service clerk rang the doorbell of the Office Unit "for a long time", and rang the doorbell of the Apartment "for a few minutes", but at neither place did anyone respond.

17. On the basis of the above facts, as deposed to in his 1st Affirmation, the service clerk affirmed that he had made all reasonable and practicable efforts to effect personal service of the Statutory Demand on the Debtor, but had been unable to do so.

18. Accordingly, on 30 December 1998, an advertisement of the Statutory Demand was inserted in the Ming Pao, and that was the date taken as the commencement of the period for compliance with the Statutory Demand.

The Supplemental Affirmation

19. The contents of that 1st Affirmation were supplemented by a later affirmation made by the service clerk after the Petition was filed. In that supplemental affirmation, the service clerk deposed, amongst other things, that the letters that he had left at the Office Unit and the Apartment had been contained and sealed in envelopes addressed to the Debtor. He also deposed to the leaving of letters at the Office Unit and the Apartment on 30 December 1998 and the sending of correspondence by post to the Debtor at those two places, and that no letters had been returned.

20. The Debtor has disputed the Creditor's right to supplement the 1st Affirmation, on the basis that under Rule 49(1) Bankruptcy Rules, where the petition must have been preceded by a statutory demand, there must be filed in court, with the petition, an affirmation proving service of the demand.

21. The Debtor has also noted that this supplemental affirmation was filed only after his solicitors had informed the Creditor's solicitors of his position in challenging the Petition. In turn, the Creditor's solicitors have explained by affirmation how the supplemental affirmation had been prepared earlier, but that the service clerk (who had left their employment) had not been available to make the supplemental affirmation until 16 April 1999.

22. In my view, there can be no hard and fast rule as to whether a supplemental affirmation in respect of service of the Statutory Demand can be made after the filing of the Petition. It must depend on the contents of the supplemental affirmation.

23. If the supplemental affirmation merely clarified a matter which was already contained in the affirmation of service which accompanied the filing of the Petition, then I do not see any objection to it. Thus, in the present case, if all that the service clerk said in his supplemental affirmation was that the letters left on 18 December had been contained and sealed in envelopes addressed to the Debtor, that would have been unobjectionable, because he had already deposed to the leaving of those letters at those locations on that date in his 1st Affirmation.

24. However, if the supplemental affirmation contained new material on service of the Statutory Demand, such as the posting of the letters to the Debtor, that should not, in my view, be considered by the Court, as that affirmation has not been filed with the Petition, R.49(1) being in mandatory terms.

25. Accordingly, in the present case, I have not taken into account the parts of the service clerk's supplemental affirmation dealing with the leaving of letters on 30 December or the posting of letters to the Debtor.

Not a Rule 46(3) situation

26. The main issue in the present case is whether, on the strength of the service clerk's 1st Affirmation, there has been proper service of the Statutory Demand.

27. It is clear that notwithstanding the fact that the Creditor is a Judgment Creditor, and that an advertisement of the Statutory Demand has been inserted, the present case is not one where R.46(3) applies. Rule 46(3) provides :-

"Where the statutory demand is for payment of a sum due under a judgment or order of any court and the creditor knows, or believes with reasonable cause -

(a) that the debtor has absconded or is keeping put of the way with a view to avoiding service; and

(b) there is no real prospect of the sum due being recovered by execution or other process,

the demand may be advertised in one or more newspapers; and the time limited for compliance with the demand runs from the date of the advertisement's appearance or (as the case may be) its first appearance."

28. In the present case, R.46(3) does not apply because there is no evidence of the matters required under (a) and (b).

Rule 46(2) and Rules 49(5)-(7)

29. The applicable rules here are R.46(2) and R.49(5)-(7). Rule 46(2) sets out the requirements as to service of the Statutory Demand, and R.49(5)-(7) make provision for proof of its service, where service has not been personally effected or been acknowledged.

30. Rule 46(2) provides:-

"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".

31. It is clear from that sub-rule that where personal service is impracticable, the Creditor's obligation is to do what is reasonable for the purpose of bringing the Statutory Demand to the Debtor's attention. What is reasonable must be judged objectively, but in the light of the information actually or constructively available to the Creditor at the time.

32. Rule 49(5) provides :-

" ... the Affidavit [proving service of the Statutory Demand] must be made by a person having direct personal knowledge of the means adopted for serving the statutory demand, and must -

(a) give particulars of the steps which have been taken with a view to serving the demand personally;

(b) state the means whereby (those steps having been ineffective) it was sought to bring the demand to the debtor's attention; and

(c) specify a date by which, to the best of the knowledge, information and belief of the person making the affidavit, the demand will have come to the debtor's attention."

33. Rule 49(6) expands on R.49(5)(a) thus :-

"The steps of which particulars are given for the purposes of paragraph 5(a) must be such as would have sufficed to justify an order for substituted service of a petition".

34. Rule 49(7) provides :-

"If the affidavit specifies a date for the purposes of compliance with paragraph 5(c), then unless the court otherwise orders, that date is deemed for the purposes of these rules to have been the date on which the statutory demand was served on the debtor".

35. In the present case, I find that personal service was impracticable, and that the Creditor has discharged its obligation is to do what is reasonable for the purpose of bringing the Statutory Demand to the Debtor's attention.

36. The service clerk had visited the Office Unit twice during office hours. He was unable to gain access. He had left a letter from the Creditor's solicitors at the Office Unit on the first occasion, stating to the hour the time of his next visit, and inviting the Debtor to re-fix the appointment should it be inconvenient.

37. The Debtor acknowledges that he used to carry on business at that Office Unit, but he says in his Affirmation before this court that he had vacated it since early August 1998. He says that from the service clerk's 1st Affirmation, he (the service clerk) should have appreciated that it was vacant, and that that would have been ascertained by making proper inquiries to the Management Office or by going through the directory of the offices in the building.

38. However, in my view, the fact that the Debtor had vacated the Office Unit since August 1998 is not to the point. There is no evidence that he had ever informed the Creditor of that fact, or that the Creditor otherwise knew or should have known that fact. It would have been a different matter if, for instance, there had been a notice of removal at the Office Unit giving a new office address for the Debtor. In that case, the service clerk should of course have visited the new office address.

39. The fact that no-one responded to the doorbell at the two visits does not mean that the Office Unit had been vacated. It is not strange for a business operating from a unit in an office tower to lock its door during office hours for security reasons. There is no evidence that the entrance door was transparent, or that the clerk would somehow have been able to see inside the unit, so as to discover that it had been vacated.

40. I agree that the service clerk's inquiry and the watchman's information that the Debtor did not "live" there were pointless, seeing that it was an office building, but the fact remains that there was no information available to the Creditor that the Debtor had actually vacated the Office Unit. Certainly there was no evidence that the watchman had told the service clerk so.

41. As for the Debtor's contention regarding the directories of the offices in the building, it is not alleged by the Debtor that the directories actually stated that Unit 1014A was "vacant". It is not alleged that previously the directories had shown his name, and that it no longer appeared. Absent these facts, there is nothing in the point.

42. I now come to the attempts at service at the Apartment. It is common ground that the Debtor has been residing at the Apartment. Indeed, and this is important, the Debtor accepts in his Affirmation that "there is no reason that I would not have received documents left at the said address".

43. The Debtor simply asserts now that he had not received the documents. But, as I have said, that is not the point.

44. The point is that so long as the Creditor has done all that is reasonable (within the limits of his knowledge, actual and constructive) to bring the Statutory Demand to the Debtor's attention, that is all the law requires. Here, the service clerk had twice visited the place which was, to the Creditor's knowledge at the time, the Debtor's place of business. He had also twice visited the Debtor's residence, once in the evening and once in the afternoon. The Debtor had been given prior notice of the second visits. An offer had been made in documents left at the Debtor's last-known place of business and his residence to re-fix the appointment.

45. Those attempts at personal service having failed, I find that the leaving of copies of the Statutory Demand at the Office Unit and the Apartment, together with the advertisement of the Statutory Demand in the business page of a widely-circulated newspaper, satisfied the requirements of service under R.46(2), and the 1st Affirmation of the service clerk satisfied the required proof of service under R.49(5)-(7). As the Debtor's place of business and residence were both in Hong Kong, and there was no evidence that he was out of the jurisdiction at the time, there was reason to believe that the advertisement would have been seen by him.

46. I would conclude my decision on this aspect of the proceedings by addressing the point raised by Mr Mak, counsel for the Debtor, that advertisement was "reserved" for R.46(3) situations and should not be allowed in other situations. In my view, what R.46(3) permits is advertisement immediately the two requirements in paragraphs (a) and (b) of that sub-rule are satisfied. In other words, the Creditor would not need to first attempt personal service at all under R.46(3). There is nothing in the rules, however, which precludes advertisement as a means of service in other situations where the circumstances warrant it, so long as R.46(2) and R.49(5)-(7) are satisfied, as they are in this case.

(2) IRREGULARITY OF THE AFFIRMATION OF SERVICE OF THE STATUTORY DEMAND

47. The Debtor's contention is that there has been failure on the part of the Creditor in complying with the requirements of R.49(5) and (6). It is clear from my analysis of the evidence above that the 1st Affirmation was sufficient compliance with those rules, and I do not wish to repeat it here. It should of course be noted that R.49(5) specifically requires that the affirmation proving service should be made by the person having direct personal knowledge of the means adopted, viz. the service clerk, and that has been done in this case.

(3) IRREGULARITY OF THE PETITION

48. The irregularity relied upon by the Debtor is that his identity card number has not been specified in the Petition. Rule 50(3) provides that a petitioner who is not the debtor shall state the debtor's Hong Kong Identity Card number or passport number in the petition unless he does not have such information and cannot reasonably obtain it.

49. It is correct that the petitioner here has not shown that it did not have the Debtor's Hong Kong Identity Card number or that it could not reasonably have obtained it.

50. However, R.203 gives the Court a wide discretion to deal with non-compliance with rules in such manner and upon such terms as it thinks fit.

51. Here, the lack of an identity card number has not caused the Debtor any prejudice. The Petition identifies him by both his English and Chinese names, his last-known place of business and his residential address. There can be no question of confusion of identity, and none is alleged.

52. In the circumstances, I would give leave to the Petitioner to amend the Petition by adding the Debtor's identity card number to it.

(4) IRREGULARITY OF THE AFFIRMATION VERIFYING THE PETITION

53. The Debtor has also taken the point that there is no proper affirmation verifying the Petition because Mr Goh Chee Liong's affirmation was made on 26 January 1999, whereas the Petition was filed on 27 January 1999.

54. It should however be noted that the Petition was actually dated 26 January 1999, so clearly it was in existence when the Affirmation verifying it was made.

ORDER

55. For the above reasons, I would therefore dismiss the Debtor's application to set aside the Statutory Demand and the Petition. For the avoidance of doubt, I should note that no order for substituted service of the Petition has yet been made by the master.

56. I would make an order nisi that the Debtor pay the Petitioner's costs of the application, to be taxed if not agreed.