CHAN CHI LOI v. TIU MING KAM, the personal representative of TIU PUI KWONG, deceased

[English Translation ― 英譯本]

CACV 164/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL APPEAL NO 164 OF 2014

(ON APPEAL FROM HCB NO 8632 OF 2006)

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JUDGMENT

Hon Poon J (giving the judgment of the Court):

Introduction

1.  On 13 July 2007 the appellant was adjudged bankrupt.

2.  The appellant subsequently applied for a stay of execution of/setting aside of the bankruptcy order. The application was, however, refused by Hon Chu J (as she then was) on 24 August 2007.  The appellant lodged an appeal against Chu J’s order.  His appeal was dismissed by the Court of Appeal on 2 November 2007.  Furthermore, the appellant lodged an appeal against the bankruptcy order.  The appeal was also dismissed by the Court of Appeal on 17 January 2008.  The appellant later applied for leave to appeal to the Court of Final Appeal.  The application was refused by the Court of Appeal and then the Court of Final Appeal.

3.  On 3 February 2009 the appellant made an application for annulment of the bankruptcy order pursuant to section 33(1)(a) of the Bankruptcy Ordinance.  The application was dismissed by Chu J on 2 March.  On 23 March the same year the appellant applied for leave to appeal out of time.  The application was refused by Chu J on 9 April.  The appellant later applied to the Court of Appeal for leave to appeal out of time.  His application was also refused by the Court of Appeal on 23 October.  The appellant went on to apply for leave to appeal to the Court of Final Appeal.  The application was refused by the Court of Appeal and then the Court of Final Appeal.

4.  On 24 January 2014 the appellant applied again for annulment of the bankruptcy order pursuant to section 33(1)(a) of the Bankruptcy Ordinance.  His main grounds were:

(1)  the Statutory Demand was defective;

(2)  when the bankruptcy order was made, he was able to settle the debt; and

(3)  at the hearing of the bankruptcy petition, he was unrepresented.

5.  On 14 July 2014, Master H Au-Yeung dismissed the application.In the reasons for judgment handed down on 22 July, he pointed out that section 33 of the Bankruptcy Ordinance did not permit an appellant to make more than one application for annulment of a bankruptcy order.  In any event, the appellant’s application went against the legal principle of “res judicata” and was thus an abuse of the judicial process.  In any case, his grounds of application had no merits.

6.  The appellant appeals to us against Master Au-Yeung’s order.

Discussion

7.  We first deal with a point of law concerning section 33(1) of the Bankruptcy Ordinance.  Thesection provides that:

“(1)  The court may annul a bankruptcy order if it at any time appears to the court that –

(a)  on any grounds existing at the time the order was made, the order ought not to have been made; or

(b)  to the extent required by the rules, the provable debts and the expenses of the bankruptcy have all, since the making of the order, been either paid or secured to the satisfaction of the court.”

8.  In paragraph 12 of his reasons for judgment, Master Au-Yeung said that section 33(1) only permitted a debtor to make an application for annulment of a bankruptcy order once.  In our view, Master Au-Yeung is wrong.

9.  Undersection 33(1), the court may at any time exercise its discretion to annul a bankruptcy order.  In other words, a debtor may at any time make an application for annulment of a bankruptcy order and the number of applications which may be made is not expressly provided.

10.  Section 33(1) not only does not expressly limit the number of applications, but it effectively, as can be seen from the intent of paragraphs (a) and (b), permits a debtor to make more than one applications:

(1)  Paragraph (a) concerns the position at the time the bankruptcy order is made.  After his first failed application for annulment, a debtor normally cannot make a further application for annulment on the same factual basis, the same grounds, or grounds which could have been advanced on the same factual basis but had not been advanced because it goes against the legal principle of “res judicata” and constitutes the improper conduct of an abuse of the judicial process.  However, in the very exceptional case where the debtor finds that there were in fact other grounds existing at the time the order was made for annulment of the order, the legal principle of “res judicata” is not applicable and his conduct is not an abuse of the judicial process.  He should be entitled to make an application for annulment again. The court will then decide whether his application is accepted on an exercise of discretion.

(2)  Paragraph (b) concerns the position after the bankruptcy order is made and its applicability depends on the actual circumstances at the time the application is made.  As the actual circumstances are changeable, even if the debtor’s first application fails, when paragraph (b) becomes applicable by reason of a change in the actual circumstances, he should be entitled to make an application again.

11.  In our judgment, section 33(1) of the Bankruptcy Ordinance does not limit the number of applications for annulment that can be made.  Our view has support in an English case.  In Re Taylor [1901] 1 KB 744, the English court held that in the circumstances of that case, even if his first application for annulment failed, the debtor may still make a second application for annulment after a reasonable length of time.

12.  We must point out that although section 33(1)(a) of the Bankruptcy Ordinance does not limit the number of applications for annulment that can be made, it does not follow that the debtor may make such applications repeatedly without any limit.  After his first application is dismissed, the debtor must have a good reason before he can make another application.  It is necessary for us to reiterate that when the debtor relies on paragraph (a), he cannot make a further application for annulment on the same factual basis, the same grounds or grounds which could have been advanced on the same factual basis but had not been advanced because it, as we mentioned earlier, goes against the legal principle of “res judicata” and constitutes the improper conduct of abuse of the judicial process.

13.  In the present case, although the appellant can make a second application for annulment, the grounds of appeal on which he relies are all a repeat of the arguments he had put forward before different courts.  These propositions had, however, been rejected by the courts.  The appellant’s conduct goes exactly against the legal principle of “res judicata” and constitutes the improper conduct of abuse of the judicial process.  We agree with Master Au-Yeung’s ruling in this regard which is correct.

Conclusion

14.  For the above reasons, we dismiss the appellant’s appeal.

15.  Costs of the appeal are to be dealt with pursuant to the usual principle, namely the appellant is to pay the respondent’s costs of the appeal including the respondent’s costs of the application for security for costs of the appeal.

16.  As regards the amount of costs, the respondent asked for summary assessment by this court in the sum of HK$225,810.00, see the bill of costs submitted on 27 May 2015.  Although we had given directions in respect of the amount of costs, the appellant did not respond to them.  Having considered the bill of costs, we are of the view that what the respondent asked for is manifestly excessive.

17.  Of the security for costs of the appeal in the sum of HK$180,000.00 to be provided by the appellant pursuant to our order dated 4 December 2014, HK$130,000.00 was for costs of the appeal and HK$50,000.00 costs of the application for security for costs of the appeal.  We still take the view that the reasonable amount of costs of the appeal and application for security for costs of the appeal in total is HK$180,000.00.

18.  Hence, we order the appellant to pay the respondent’s costs of the appeal including the respondent’s costs of the application for security for costs of the appeal which are assessed at HK$180,000.00.  We also order that the security for costs of the appeal in the sum of HK$180,000.00 paid into court by the appellant on 31 December 2014 be immediately released to the respondent for payment of costs. Solicitors for the respondent may apply to the court for the release of that sum.

Translated by the Judgment Translation Unit of the Judiciary and vetted by Mr. P. Y. Lo, Barrister-at-law.