LI TAT KONG, a Bankrupt v. THE OFFICIAL RECEIVER AND ANOTHER

CACV 220/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 220 OF 2000

(ON APPEAL FROM HCB NO. 741 OF 1995)

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J U D G M E N T

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Hon Rogers VP:

1. This was an application for leave to appeal to the Court of Final Appeal from a judgment of this court, differently constituted, handed down on 11 January 2001.

2. The order in the court below was that the relevant period for the purposes of section 30A of the Bankruptcy Ordinance, Cap. 6 ("the Ordinance") shall cease to run for three years from 22 November 1999 such that the appellant shall be discharged on 22 November 2002. This court upheld the judgment of the court below and dismissed the appeal.

3. The appellant seeks leave to appeal to the Court of Final Appeal on the basis that the matter involves two questions of great or general public importance namely:

(1) whether time under section 30A of the Bankruptcy Ordinance ceases to run upon the making of an order adjourning an application made under that section; and

(2) whether a person in respect of whom -

(i) a bankruptcy order had been made; and

(ii) the prescribed period under section 30A of the Bankruptcy Ordinance had elapsed since the date of the order,

has an accrued right which cannot be defeated by the operation of the slip rule.

4. The application for leave to appeal was also initially made upon the basis that the appeal should be submitted to the Court of Final Appeal insofar as the Court of Appeal proceeded to determine the merits of the appeal on what was termed the discretion point without having afforded an opportunity to the appellant to make oral submissions thereon, or had otherwise led the appellant to believe that such an opportunity would be given before passing judgment.

5. This matter first came before this court on 8 March. The matter on that occasion was adjourned in order to enable the court which had originally heard the appeal to be reconstituted. During the course of the hearing of the appeal in December 2000 the submission on behalf of the appellant on the construction of the Ordinance was concluded after half past twelve. Since the estimated time given for the hearing had been one day, the court indicated that it would be better to hear submissions from the Official Receiver and the 2nd respondent immediately. The hearing of the appeal proceeded and ended at approximately 4:45 pm. It was clearly then too late to give or prepare the judgment that day. In the circumstances the court indicated that it would reserve judgment. Unfortunately, due to pressure of court work, the judgment was not ready to be handed down until 11 January 2001.

6. Passing reference had, of course, been made to some of the matters relevant as to the exercise of the judge's discretion as to whether an order should be made that time should cease to run. Full skeleton arguments had been given to the court prior to the hearing. Naturally, these had been read and understood. Unfortunately when the judgment was prepared, it was overlooked that oral submissions had not been made on the merits of the application as opposed to the statutory construction. The appellant served formal notice of intention to appeal to the Court of Final Appeal on 1 February 2001. At that stage the formal order had not been drawn up. Hence, it would have been open to the appellant to draw the court's intention to the fact that oral submissions had not been made in respect of the discretion point but that was not done. Instead, immediately after the formal order had been drawn up and served the application for leave to appeal was filed. This court, therefore, considered that it was appropriate that oral submissions in respect of the merits of the discretion point should be made in addition to the submissions in the skeleton argument and adjourned the matter accordingly.

7. On 14 March the solicitors for the applicant wrote to the court indicating that they did not wish to pursue the second ground of appeal but invited the court to proceed only on the first ground. The court was requested to reconvene as presently constituted. Clarification was given by letter of 28 March that the applicant did not intend to apply to the Court of Final Appeal for leave to appeal on the second ground nor to argue before that court that the Court of Appeal should have heard counsel on the discretion point. Through a misunderstanding that the court was to be reconvened to complete hearing the remainder of the application no steps were taken. However, upon enquiries, the parties have now indicated that their submissions have been concluded and that they do not wish the court to be reconvened. Unfortunately the matter has been further delayed due to pressure of work upon the members of the court.

8. The provisions of Section 30A of the Bankruptcy Ordinance are of comparatively recent origin in Hong Kong. Their operation has not been the subject of judicial consideration, at least not to any notable extent. The authorities in England on the similarly worded legislation are, to a certain extent, conflicting. On the other hand because of the new provisions as to discharge and the increasing amount of consumer debt, the numbers of bankruptcies generally are increasing. The question of the operation of the automatic discharge provisions is therefore a matter of general importance.

9. If the arguments that have been advanced on behalf of the bankrupt, when taken together, are correct it would mean that if an application under Section 30A(3) were made shortly before the expiry of the 14 day period provided by Section 30A(6), it would be unlikely that any order could be made suspending the running of the period under Sub-section (2). It has been argued on behalf of the bankrupt that once the 4 (or 5) year period under sub-section (2) has elapsed no order can be made, and also that no interim order can be made pending the Court having the opportunity to consider the application to suspend the running of the period.

10. Section 30A(1) provides that "subject to this section, a bankrupt is discharged by the expiration of the relevant period under this section" (emphasis added). The discharge is thus not "automatic" in the sense of being "inexorable". It is "subject to this section", and as seen above, the section provides for suspension of the relevant period.

11. It may be argued that so long as the court is seized of an application made before the expiry of the relevant period, an order suspending the running of the relevant period made after full adjudication (even though determined after the end of the 4-year period) would relate back to the date of the application. The doctrine of relation back is well known to the law: before parties' rights are finally determined, they are in a "period of limbo" (see Liverpool Properties v Oldbridge Investments [1985] 2 EGLR 111, quoted in Wong Wan Leung v Secretary for Transport [2001] 1 HKLRD, 427 436). If an order is made after adjudication, that would relate back to the date of the application and the running of the relevant period is suspended by the intervention of the court. If no order is made after adjudication, then the bankrupt would have been discharged at the expiry of the relevant period of 4 years, as he should have been.

12. If the doctrine of relation back is applicable it would render unnecessary the making of interim orders, which we are told have been made routinely since January 2000. In Robert Walker J's judgment in Hardy v Focus Insurance Co Ltd [1997] BPIR 77, the judge considered that the making of an application would be sufficient (p81D). No interim order was made in that case.

13. The making of an "interim order" was approved by Deputy Judge Burton (as he then was) in In re Jacobs (A Bankrupt) [1999] 1 WLR 619, a case referred to in the judgment in the present appeal.

14. The question has been raised as to whether judicial consideration and determination of the merits of the application is necessary before an order (whether permanent or "interim") can be made to suspend the running of the relevant period.

15. Turning to the questions which are framed on behalf of the bankrupt for argument before the Court of Final Appeal it would appear that, primarily, they turn upon the meaning and effect of the order which was made by the master on 17 November 1999.

16. The matter sought to be raised in sub-paragraph 3(1) is a matter of practice and the proper construction of the order of the master of 17 November 1999. In those circumstances it does not raise a matter of great general or public importance. The matter sought to be raised in sub-paragraph 3(2) is a misconstruction of the effect of the slip rule. The application of the slip rule in this instance was to rectify an order by including in the written order an order which the court made.

17. During the course of hearing the application, the court raised suggestions as to the possible way in which questions might be framed.

18. In the circumstances we consider that the questions which arise can be summarised as follows:

(1) Whether Section 30A of the Bankruptcy Ordinance requires that any order under Subsection (3) that time shall cease to run has to be made prior to the date when the relevant period would have expired in accordance with Subsection (2) had no order been made or whether such an order can be made subsequent to that date and would relate back to that date.

(2) Whether the Court has power to make an interim Order under Section 30A(3) of the Bankruptcy Ordinance that time should cease to run and whether such an order can be prior to the time when the merits of the application have been considered.

19. We would give leave to appeal to the Court of Final Appeal, accordingly. This would be subject to the usual conditions, including the provision of security in the amount of $400,000.

20. There will be liberty to apply for the purposes of working out the order.