RE CHUNG KAU

HCB581/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS NO.581 OF 2003

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REASONS FOR DECISION

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1. This is an application by the Bankrupt to reverse a decision of the Official Receiver, his trustee in bankruptcy, under section 83 of the Bankruptcy Ordinance, Cap. 6 of the Laws of Hong Kong.

Disqualification Application

2. At the commencement of today's hearing, the Bankrupt asked me to disqualify myself on the ground that I am biased. He refers to my handling of the bankruptcy petition hearing on 5 May 2003 when I made a bankruptcy order against him. His allegations can be found in a letter dated 3 February 2004, addressed to the Chief Judge of High Court and copied to me. In paragraph 2 of this letter, he had this to say :

"DJ Poon disclosed in paragraph 5 of the said judgment one side of the story and did not give a true picture to the problems I had to oppose the bankruptcy petition by HKHA. In regard to the perjured affidavits made by Mr Ho of HKHA and the costs involved, I could have never been able to deal with legal issues without the immediate advice from Mr B.W. Choy beside me to reply to submissions and questions. He did not allow me to seek assistance from Mr B.W. Choy by stopping me in the hearing to obtain immediate advice from Mr B.W. Choy in response to the submissions made by HKHA and to the questions raised by DJ Poon as a '傳聲筒' of Mr B.W. Choy, I could not handle the legal issues and there was none in the words uttered before DJ Poon by me."

3. In the judgment that I handed down on 15 May 2003, I dealt with the Bankrupt's application for Mr Choy Bing Wing to represent him in those proceedings. In paragraph 5 of the judgment I said :

"At the hearing before me on 5 May 2003, Mr Chung applied to be represented by Mr Choy Bing Wing ('Mr Choy'). He wanted Mr Choy to address me on his behalf. Mr Choy was authorized to represent Phoon Lee in the proceedings in HCA 119/2001. He filed an application for Mr Chung to oppose the present bankruptcy petition on 12 March 2003. Mr Chung was acting in person. Although he had no apparent difficulty in addressing me on his own, he was entitled to the help of McKenzie friend who could advise him quietly and help him with the presentation of his case. But it was still Mr Chung who had to present the case to the court. The McKenzie friend did not have any right of audience in the High Court (see Lobo v. Kripalani [1998] 2 HKLRD 325, per Godfrey JA at page 328). Mr Choy did advise Mr Chung from time to time and at one stage of the proceedings, for convenience, I invited Mr Chung to seek Mr Choy's advice quietly outside the courtroom, which he did. Throughout the proceedings, Mr Chung addressed me on his own with no difficulties."

4. In an application of this sort, the court applies the reasonable apprehension of bias test. The test can be formulated thus. The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. He must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal was biased.

5. Applying this test to the Bankrupt's application, I do not consider that any fair minded and informed observer would conclude from what transpired at the hearing on 5 May 2003 that there was a real possibility that I was biased against him. At that hearing, the Bankrupt was given ample opportunity to and he did take advice from Mr Choy. He had no difficulty to address me on his own. The petition was decided on its merits and the bankruptcy order was made on the basis that the Bankrupt had simply failed to show any bona fide dispute on substantial grounds on the Petitioner's debts.

6. I therefore refuse the application to disqualify myself from hearing the section 83 application.

7. I will now invite the parties to make submissions on that application.

[Submissions by parties]

Section 83 Application

8. I now turn to the section 83 application. Before I deal with the substance of the application, I would like to make one observation on the procedure. The Bankrupt brought this application by way of a notice of motion filed with on 2 January 2004. In the usual circumstances, an application brought under section 83 should be by way of summons in chambers. I appreciate that the Bankrupt is acting in person. He may not have the requisite knowledge on procedural matters. But I wish to make it clear that in the future, applications of the sort should be by way of summons in chambers.

9. I now turn to the substance of the application. The circumstances leading to this application may be gathered from the Official Receiver's report filed with the court on 2 February 2004, and I quote :

"1. A bankruptcy petition was presented against the Bankrupt on 10 January 2003 and a bankruptcy order was made on 5 May 2003 by Deputy High Court Judge Poon. Annexed hereto and marked 'OR-1' is a copy of the Reasons for Judgment handed down on 15 May 2003.

2. Notice of Appeal was filed by the Bankrupt on 29 May 2003 appealing against the making of the Bankruptcy Order ('the Bankruptcy Appeal'). Annexed hereto and marked 'OR-2' is a copy of the Notice of Appeal. Registrar Levy made an Order on 9 December 2003 that no action can be taken in respect of the Bankruptcy Appeal until and unless leave of appeal out of time is obtained. No such leave application has been taken. Annexed hereto and marked 'OR-3' is copy of the Order.

3. An order for the estate to be administered in a summary manner was made on 11 August 2003. The Official Receiver became the trustee of the Bankrupt's estate.

4. A Statement of Affairs has not been submitted by the Bankrupt despite the Official Receiver's request to do so. The Official Receiver has therefore been unable to carry out any meaningful investigation work.

5. As far as the Official Receiver is aware, there are four outstanding Court of Appeal applications by the Bankrupt made up as follows :-

(a) CACV303/2002 ('the Main Action') : This is the Bankrupt's appeal against a cost order made by Master H.C. Wong and affirmed by Deputy High Court Judge A. Chung in HCA 119/2001. That costs order formed the basis of the SD Appeal referred to in (b) below.

(b) CACV353/2002 ('the SD Appeal') : This is appeal against Madam Justice S. Kwan's refusal on 9 September 2002 to set aside the statutory demand based on the costs order obtained in the Main Action upon which the present bankruptcy proceedings was issued.

(c) CACV136/2003 : The Bankruptcy Appeal mentioned in paragraph 2 above.

(d) CACV 122/2003 ('the Alleged Fraud Action') : This is an appeal by the Bankrupt against the decision of Recorder Chan striking out his claim in HCA3397/2002 against the Hong Kong Housing Authority (HKHA), a Ho Shu Hee and Messrs Denton Wilde Sapte. The Bankrupt's claim is that HKHA obtained an order to strike out the claim in above mentioned HCA119/2001 by cheating and that the other defendants assisted HKHA by making inaccurate affirmations and submissions. Registrar Levy has ordered that no action in respect of this appeal is to be taken until disposal of the Notice of Motion mentioned in paragraph 6 below. Annexed hereto and marked 'OR-4' is a copy of that Order.

6. Notice of Motion to dismiss the appeal in the Alleged Fraud Action and the Main Action was issued on 18 November 2003 by the Defendant, due to be heard on 2 April 2004. As these appeals have been vested in the Official Receiver by virtue of being the Trustee of the Bankrupt's estate, the Official Receiver decided that the best course action would be to agree to the dismissal of both appeals to save costs. The Official Receiver wrote to the Bankrupt on 31 December 2003 advising him of the decision and inviting him to review the decision under Section 83 of the Bankruptcy Ordinance, if he felt aggrieved. As a result, the present application was made by the Bankrupt.

7. The Official Receiver's refusal to allow the Bankrupt to continue the Main Action and the Alleged Fraud Action came as no surprise to the Bankrupt. As early as 25 July 2003, the Bankrupt was aware that apart from satisfying the Official Receiver on merits, sufficient indemnity has to be paid to the Official Receiver to cover costs and potential adverse costs. Annexed and marked 'OR-5' are copies of the letters from the Official Receiver and the Bankrupt's (and a Mr B.W. Choy's) response. Annexed hereto and marked 'OR-6' is Dr Vincent Kay Lo Ip v. Dr Andrew Kee Suan Koh (FAMV No.8 of 2001), a decision of the Court of Final Appeal requiring full and effective indemnity, to be paid to the trustee therein.

8. As the SD Appeal and the Bankruptcy Appeal are concerned, the Official Receiver has no objection for the Bankrupt continuing these appeals.

9. The Official Receiver's primary concern is the risk of costs and adverse costs being awarded against the estate and the Official Receiver being personally (in effect Government) if the appeals were to be unsuccessful. According to Messrs Denton Wilde Sapte, the solicitors for the respondents, their costs is $140,900 for the hearing of each appeal. Annexed marked 'OR-7' is copy of Messrs Denton Wilde Sapte's letter dated 7 November 2003.

10. The total estimated costs of $281,800 only covers one hearing excluding Official Receiver's costs and adverse costs of the proceedings below, in the event that the Bankrupt were to be unsuccessful in both appeals. Even if the bankrupt were to be successful, there is risk of the Respondents appealing. Those costs would have to be covered as well.

11. The Bankrupt does not appear to have any intention of providing the necessary indemnity. Even assuming that sufficient indemnity is eventually provided the merits of both appeals would still have to be considered.

12. In the circumstances, the Official Receiver opposes the Bankrupt's application."

10. The Bankrupt confirms at the hearing before me that he has no means to give any meaningful indemnity to the Official Receiver as requested.

11. The grounds in support of this application are set out in the notice of motion. There are two grounds. Firstly, the cases CACV303/2002 and CACV122/2003 involve perjury and judicial fraud committed by HKSAR Government and therefore justice demands both cases be heard. Secondly, the trustee refused to follow equity and rules of justice to clear perjury and fraud by asserting the question of cost and his decision was against principles and proper policy, hurting public interest.

12. The question for my determination is this : whether the Bankrupt is entitled to prosecute the proceedings in question without giving any indemnity to the Official Receiver. The applicable principle has already been authoritatively stated by the Appeal Committee of the Court of Final Appeal in Dr Vincent Kay Lo Ip v. Dr Andrew Kee Suan Koh FAMV8/2001 where Bokhary PJ said :

"Even assuming that it can sometimes be appropriate to permit a Bankrupt to proceed in this as a Trustee in Bankruptcy's name when a Trustee in Bankruptcy does not favour an appeal, and whatever may be the true legal analysis as to with whom any right of appeal lies, such permission could only be given on condition of a full and effective indemnity."

In light of that authority, the Bankrupt must give a full and effective indemnity as to costs to the Official Receiver before he can proceed with those proceedings in question.

13. When an application is brought under section 83, it would be inappropriate and unjust for the court to interfere with the decision of the Trustee unless it is shown that the Trustee's actual decision was perverse or clearly wrong. In other words, unless the Trustee's act or petition was utterly unreasonable and absurd and that no reasonable Trustee would so act, the court would not interfere. Having considered all the evidence before me, I am not satisfied that the Bankrupt has shown that the Official Receiver is caught by section 83. The Bankrupt is unable to give any meaningful, effective and full indemnity as to costs of the Official Receiver as required by the law. He cannot possibly have any complaint against the Official Receiver under section 83. His application must fail and I dismiss it accordingly.