RE HOI KUK FA WINNIE

1997, No. B802

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. This is an application by the Debtor, Choi Kuk Fa Winnie, to set aside the Bankruptcy Order that was made by Master Kwan on 24 December 1997.

2. On the last occasion when the parties appeared before me, i.e. 26 January, I indicated to the Debtor that the appropriate step for her to take would be to take legal advice, if so advised, and to seek to set aside the order of Master Jennings which is dated 15 November 1995 since there was an affidavit from the Debtor suggesting that she had no notice of the proceedings before Master Jennings and of the judgment entered in default.

3. Affidavits have since been filed by both the Debtor and the Bank and it really comes down to this. The Debtor says that she never received any of the papers relating to the proceedings taken in mid 1995 culminating in the November order. She is a guarantor in respect of monies advanced by the Bank to Treasure Industries Company Limited, a company of which she was effectively the beneficial owner.

4. The Bank has filed evidence to the effect that it has attempted to serve the Debtor at four addresses, being the addresses which were in its records. The first is the address stated in the guarantee, the second is the address for the Debtor to be found in the annual return of Treasure Industries Co. Ltd., the third is a new address that had been given to the Bank by Treasure Industries Co. Ltd. in 1995 and finally the fourth address was at Sheung Hei Industrial Building, Sanpokong, which is the registered office of, inter alia, Fairlane Enterprise Ltd., at which the Debtor worked.

5. The Bank having no success in serving the Debtor personally, obtained orders for substituted service which were granted and the appropriate advertisement duly appeared in a Chinese newspaper. For present purposes, whether or not I accept the Debtor's assertion that she never received the papers is not the material consideration.

6. The Debtor accepts that in October 1995, she was liaising with the Bank and formulating proposals to repay by instalments. She does not dispute her obligations under the guarantee. She appears to take objection to the amounts found by Master Jennings to be owing. The judgment amounts appearing in the order of Master Jennings attracted interest as from certain dates in 1995 and different portions of that judgment attracted different rates of interest.

7. For my part, I should say that I have considerable reservations as to whether she was telling the truth when she said that none of the documents reached her. Certainly the documents served at the Sheung Hei Industrial Building address should have reached her. Be that as it may, even assuming that she never received the papers, they were served and properly served in accordance with the Rules. Further, she accepts that she knew about the proceedings and that the Bank was seeking to recover the monies from her. So this is not a case where a debtor is completely oblivious of the claim or the nature of the claim, or that the debtor is seriously disputing her indebtedness to the Bank.

8. Her complaint relates to the two properties over which the Bank has security. The order of November 1995 provided for delivery of possession of those properties within 28 days.

9. It would appear that certainly by May 1996, on the Debtor's evidence, the keys and therefore possession to the two properties were delivered to the Bank. The Debtor maintains that in January 1996, she had a prospective purchaser for one of the properties for $1.5 million. There is a conflicting account of her conversation with Mr Lam of the Bank. Mr Lam recalls such a conversation. He said that he told the Debtor that a contract had to be produced before the Bank would take it seriously. He said matters were left at that and that there was never any follow-up on the part of the Debtor. The Debtor, on the other hand, in her affidavit and in her oral evidence suggested that she was told by Mr Lam that the Bank would not consider the sale for $1.5 million because that would not be sufficient to repay the debts and that both properties had to be sold together.

10. Mr Lam attended for cross-examination. This matter was not put to him by the Debtor. As the Debtor is a litigant in person, I attach little significance to that failure. Nonetheless, it must be apparent to any debtor who is aware that the Bank is seeking to recover monies and to enforce its security that simply informing the Bank of the existence of a prospective purchaser cannot be sufficient.

11. In any event the Debtor took no further steps relating to the prospective sale. Meanwhile the Bank obtained valuations of the properties in early June 1996 and shortly thereafter both properties were auctioned at prices that reflected more the market value of the properties at the date of the valuation rather than on a forced sale basis. In my view, any suggestion that the auction was not above board is unsustainable.

12. The Debtor candidly accepts that she is indebted to the Bank, although perhaps she would seek to challenge the precise amount. Nonetheless, she accepts that she is not in a financial position to repay the Bank here and now what according to her is now outstanding. She has offered to repay over a period of two years and that offer has been rejected by the Bank.

13. A creditor cannot be compelled to accept repayment by instalments unless the contract between the parties so provides. The Bank is acting within its rights in seeking to be repaid all the monies that were outstanding and owing under the guarantee. Even assuming that the Debtor never received notice of the proceedings in 1995, this does not alter the critical fact that she does not have a meritorious defence. Where the debtor has no meritorious defence, he or she is not in a position to ask this court to set aside an order of the court which has been properly obtained. In these circumstances, treating her application as an application to set aside the order of Master Jennings of 15 November 1995, the application is dismissed. Costs will follow the event.