XCHRX Re : Tang Wai Yee Sylvia and Ex-parte : Maxco Garments Ltd.

1996, No. B1262

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY

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J U D G M E N T

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1. On 10th September 1996 the Petitioner (Maxco Garments Limited) obtained a judgment in the District Court against the Debtor (Tang Wai Yee, Sylvia) on the ground that she had failed to file her Defence. The judgment recovered was $68,522.50. Pursuant to the judgment, a Bankruptcy Notice was served on the Debtor. This was followed by a Bankruptcy Petition. A Receiving Order was made against the Debtor on 26th February 1997 and the Bankruptcy Order was made on 29th May 1997.

2. The Debtor on 31st July 1997 issued a summons seeking, among other things, a stay of the bankruptcy proceedings "pending the outcome of the hearing of the proposed application by the Debtor for setting aside the default judgment dated 10th September 1996 under District Court Civil Jurisdiction Action No. 17720 of 1996 on the ground of irregularity in that the writ therein had never been validly served on the Debtor."

3. The Debtor complained that she had not been served with any of the court papers in the District Court action. Mr Chan, Counsel for the Debtor, submitted that no one is to be liable for an order of the tribunal unless she has fair notice of the proceedings to enable her to appear and defend the action. The case of Fok Chun Hung v. Lo Yuk Shi [1995] 2 HKC 648 was relied upon.

4. The writ in the District Court action was served by ordinary post on 14th August 1996 at No. 98-100, UG/F, 33 Canton Road, Tsim Sha Shiu. This was the last known address of the Debtor. The information was obtained by the Petitioner of a search of the particulars of company of which the Debtor was a director. That address was the business address of the Debtor. She said that the business was at a loss and the landlord recovered the premises in March 1996. She moved out from that premises in March 1996 and had not returned since. She was notified by the Official Receiver of the Receiving Order in March 1997.

5. In Hong Kong, it is clear that under s.22 (1) of the Bankruptcy Ordinance that upon the adjudication of a bankrupt, her property became vested in her trustees in bankruptcy. The summons referred to a proposed application by the Debtor to set aside the default judgment. This is clearly misconceived. In Boaler v. Power [1910] 2 KB 229 C.A. Farwell LJ held that:

"It is open to the Court in bankruptcy, if it thinks fit, to allow the debtor to contest in the Bankruptcy Court the validity of the petitioning creditor's judgment on the ground of fraud, collusion, or for any other sufficient reason: In re Flatau. But this is the only way in which the bankrupt can contest it: the adjudication, while it stands, is conclusively binding on him: he cannot contest it in any other Court on the ground of fraud or on any other ground. The right to continue these three actions is a chose in action vested in the trustee, and the bankrupt has no locus standi ..."

This principle is reaffirmed in Heath v. Tang and Another [1993] 1 WLR 1421 where Hoffmann LJ at page 1425H, dealing with the situation of a bankrupt as a debtor stated that:

"These authories in my judgment demonstrate that in principle a bankrupt cannot in his own name appeal from a judgment against him which is enforceable only against the estate vested in his trustee.

Is there anything different about the judgment upon which the bankruptcy petition was founded? It is submitted that the difference is that in such a case the bankrupt does have an interest, because if he can get rid of the judgment, he may be able to have the bankruptcy order annulled on the ground that it should never have been made. Whether it is set aside or not will depend upon whether apart from the judgment the bankrupt would have been solvent or whether an order would in any event have been made on the application of supporting creditors: see In re Noble (A Bankrupt) [1965] Ch. 129."

6. According to the Official Receiver's report dated 20th February 1998, the Official Receiver had requested the Debtor to submit her statement of affairs which she had not complied with. She did not deny to the Official Receiver that the debt was due and owing. Apart from stating that she had a good defence to the Petitioner's claim which was based on five cheques drawn by her and dishonoured on presentation, she had not in any way shown why she was not liable to the Petitioner. There were five other creditors who had filed their proof of debts against the Debtor. The Official Receiver had refused the Debtor's request for leave to set aside the District Court action. The Official Receiver informed the Court that it is unlikely that the Official Officer would challenge the debt.

7. The summons is totally misconceived and has to be dismissed with costs to the Petitioner and the Official Receiver.

(P. Cheung)

Judge of the Court of First Instance,
High Court