RE NG SHUI CHEONG

HCB 6985/2020

[2021] HKCFI 703

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 6985 OF 2020

_________________

_________________

________________

J U D G M E N T

________________

Introduction

1.  There is before this court a bankruptcy petition (“Petition”) by Hao Tian International Securities Limited (“Petitioner”) against Ng Shui Cheong (“Ng”) presented on 19 October 2020.  The Petition was based on the non-compliance with a statutory demand dated 21 September 2020 (“Statutory demand”), personally served on Ng on 25 September 2020, in respect of a debt of over HK$5.85 million (“Debt”). The Debt is based on (i) a summary judgment granted by Master Jack Wong on 25 October 2019 for HK$5,303,361.31 together with interest in HCA2487 of 2018 (“Summary Judgment”) which judgment was upheld on appeal by DHCJ Rachel Lam SC on 24 July 2020 (“Appeal Judgment”), and (ii) a cost order made by DHCJ Rachel Lam SC on 3 September 2020 in HCA2487 of 2018 for HK$160,000 (“Costs Order”).

2.  By a notice of appeal dated 21 August 2020 in CACV401 of 2020, Ng is appealing against the Appeal Judgment on the ground that inter alia DHCJ Rachel Lam SC was wrong in fact and in law in holding there was no triable issue.  No hearing date of his appeal has yet been fixed - it would appear that Ng has not even taken steps to set down the appeal.

3.  On 1 March 2021, this court handed down a judgment dismissing Ng’s application dated 20 October 2020 to set aside the Statutory demand (“SD Judgment”).  According to Mr Ching’s skeleton, Ng has decided to appeal against the SD Judgment although no notice of appeal has been served on the Petitioner.

Background

4.  The background facts leading to the grant of the Summary Judgment has been set out in full in the Appeal Judgment and shall not be repeated here.  This court will however highlight some of the salient points from the Appeal Judgment:

a. Ng is part of the Hao Tian group of companies, which carries on business inter alia dealing in securities.

b. Ng has signed an Account Executive Agreement dated 1 March 2018 (“AEA”) with the Petitioner which was the subject matter of HCA2487 of 2018.  It is this AEA which forms the basis of the Petitioner’s claim against Ng.  The Petitioner’s case is that pursuant to the AEA, Ng is liable to indemnify them for liabilities owed by a particular client which he had introduced to the Petitioner.

c. Mr Ching, on behalf of Ng, sought to put forward a total of 4 possible defences which DHCJ Rachel Lam SC described as (i) “Construction of the AEA” point, (ii) “Unconscionable Bargain” point, (iii) “Undue Influence” point, and (iv) “M[oney] L[enders] O[rdinance]” point.

d. In the end, the learned Deputy Judge dismissed all 4 defences as not credible and did not raise any triable issues.

Deliberation

5.  In order to successfully oppose the petition, a debtor has to show a bona fide dispute on substantial grounds, by sufficiently precise evidence which is believable, and must establish that he actually has a defence of substance, not just a fair probability of one: Re Tam Mei Kam unrep, HCB 3777/2011, 25 April 2012, Barma J (as he then was); Re Yuen Mun Wa (a debtor) [2012] 5 HKLRD 108 (Recorder A Chan SC, as he then was); Re Chan Hon Kwong unrep, HCB 6548 of 2016, 27 April 2017, Ng J.

6.  Where an issue has been properly ventilated at the stage of an application to set aside a statutory demand, and has been determined by the court at that hearing, a res judicata operates to preclude a debtor from raising, at the hearing of the petition, the same argument which has been determined against him, in the absence of any change of circumstances: Re Choy Wai Bor unrep, HCB 8565/2001, 28 May 2002, Kwan J (as she then was); Re Sy Chin Mong, Stephen unrep, HCB 5784/2013, 9 May 2014, Ng J.

7.  Unless a material change of circumstances has occurred since the dismissal of the application to set aside the statutory demand, all that the petitioning creditor has to do at the hearing of the bankruptcy petition is to show that he has made a statutory demand and that the amount of the debt has neither been paid nor secured nor compounded for: Brillouet v Hachette Magazine Ltd [1996] BPIR 518, 520, cited with approval by Kwan J (as she then was) in Re Choy Wai Bor, supra.

8.  Where the underlying debt is based on a judgment, the court hearing the bankruptcy petition will treat the judgment as prima facie evidence that the judgment debtor is indebted to the judgment creditor.  In appropriate circumstances, the court may “go behind” the judgment — what is normally required is some “fraud”, “collusion” or “miscarriage of justice” which impinges on the validity of the judgment, the latter phrase being clearly capable of wide application according to the particular circumstances of the case: Dawodu v American Express Bank [2001] BPIR 983; Re Tam Mei Kam unrep, CACV 87/2012, 8 May 2013, Cheung, Yuen & Lam JJA.

9.  In Re Tam Mei Kam, supra, Yuen JA made the following observations on the principles to be applied where a petition is based on a judgment debt or court order:

“22.1 The bankruptcy court will treat a judgment for a sum of money as prima facie evidence that the judgment debtor is indebted to the judgment creditor for that sum.

22.2 As prima facie evidence of indebtedness, it may be rebutted and that is what is meant by ‘going behind’ the judgment. …

23. … However that is not to say that in every case the bankruptcy court should exercise its powers of inquiry simply for a judgment debtor to get a second bite of the cherry and conduct parallel proceedings to review a judgment which he has lost or to avoid its execution.

24. The rationale discussed above should guide the approach to be taken by the bankruptcy court when a judgment debtor opposes a petition on the ground that he challenges the judgment debt.

25.1 If the judgment debtor has lodged either an application to set aside the judgment (in a case where the judgment did not require a decision on the merits) or an appeal, the bankruptcy court may stay the hearing of the petition to await the result of the application or appeal.

25.2 However, the bankruptcy court need not do so in every case.  It may refuse to stay the petition and may proceed to make a bankruptcy order if the judgment debtor fails to satisfy the court that he has a reasonable prospect of succeeding in the application to set aside or the appeal (Watts v London Borough of Newham [2009] EWHC 377 at [53]).  Put another way, an application to set aside or an appeal falling short of that standard would not be a viable or bona fide one, and the judgment debtor would have failed to rebut the prima facie evidence of indebtedness. …”

10.  In his skeleton, Mr Ching opposes the Petition on 2 grounds:

a. There was an oral settlement agreement reached between the Petitioner and Ng that the former had agreed to take a lesser sum of HK$3,600,000 to be paid by 240 monthly instalments of HK$15,000 each in complete settlement of Ng’s indebtedness.  In other words, the underlying debt has ceased to be repayable. (“Oral Settlement Ground”)

b. The Statutory demand did not comply with the requirement under Rule 48(5) (sic)[1] of the Bankruptcy Rules, Cap 6A (“BR”).  Thus, the non-compliance with the Statutory demand did not have the legal effect of deeming the debtor’s inability to pay his debts under section 6A of the Bankruptcy Ordinance, Cap 6 (“BO”). (“Defective SD Ground”)

11.  First, since the Debt is based on a Judgment and a Costs Order, this court will treat them as prima facie evidence that Ng is indebted to the Petitioner.  It is true that in appropriate circumstances, this court may “go behind” the Judgment and Order if “fraud”, “collusion” or “miscarriage of justice” can be shown.  However, no allegation of fraud, collusion or miscarriage of justice has ever been raised by Ng.  There is thus no basis for this court to “go behind” the Summary Judgment, the Appeal Judgment or the Costs Order.

12.  While it is true that Ng has lodged an appeal against the Appeal Judgment, he must satisfy this court that he has reasonable prospects of success in the appeal before this court would even consider staying the Petition to await the result of his appeal: Re Tam Mei Kam, supra at [25.1] and [25.2]. On the materials before this court, including Ng’s notice of appeal in CACV401 of 2020, this court is not so satisfied.

13.  Second, as acknowledged by Mr Ching at para 8 of his skeleton, both grounds have been considered and decided against Ng in the SD Judgment.  Since the 2 grounds have already been properly ventilated at the stage of Ng’s application to set aside the Statutory demand, and has been determined by the court, a res judicata operates to preclude him from raising, at the present hearing, the same argument in the absence of any change of circumstances.  No such change of circumstances has been put forward by Mr Ching.

14.  Lastly, in any event, the merits of the 2 grounds raised by Mr Ching have been comprehensively dealt with in the SD Judgment. For reasons stated in [33] to [39] of the SD Judgment, this court had held the Oral Settlement Ground was simply not believable.  For reasons stated in [25] to [31] of the SD Judgment, this court had also rejected the Defective SD Ground as unmeritorious.  In these circumstances, this court is not satisfied that Ng has shown a bona fide dispute to the Debt on substantial grounds, by sufficiently precise evidence which is believable.

15.  For these reasons, Ng’s opposition to the Petition must fail.

16.  For completeness, it is stated in Mr Ching’s skeleton that Ng intends to appeal against the SD Judgment and put forward 2 main grounds of appeal at paras 11 and 12 of his skeleton.  In this court’s view, this intended appeal is irrelevant to the Petition.

17.  It was held by Recorder Eugene Fung SC in Jeanny Helena Frankslay v SY Wai Shan Sandy [2020] HKCFI 2616 at [22(6)] that an appeal against the refusal to set aside a statutory demand does not constitute a challenge to the judgment giving rise to the judgment debt and therefore does not strictly amount to an attempt to rebut the prima facie evidence of indebtedness.  Further, having considered the 2 grounds put forward by Mr Ching, this court is not satisfied that Ng’s intended appeal has any reasonable prospects of success so as to justify adjourning the Petition pending the determination of his appeal, as requested by him.  In particular, even assuming in his favour that Ng had paid the Petitioner a total of HK$45,000 out of a debt of over HK$5.85 million, that in itself would not vitiate the Statutory demand or preclude the Petitioner from presenting the Petition based on the non-compliance with it: Re SY Chin Mong, Stephen, supra at [11].

Disposition and costs

18.  For the above reasons, Ng’s opposition to the Petition fails.

19.  There shall be a usual bankruptcy order against Ng Shui Cheong. Further, since the parties have already made submissions on costs at the hearing, there shall be an order that costs be to the Petitioner, to be taxed if not agreed, and paid forthwith, with certificate for counsel.