RE SEE WAH FAN

HCB8895/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY NO. 8895 OF2010

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JUDGMENT

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1.  This is the hearing of the Bankruptcy Petition dated 21 December 2010 (“Petition”) lodged by Madam Tam Kam Yuk (“Madam Tam”) in her capacity as a judgment creditor.  Madam See Wah Fan (“Madam See”) is the judgment debtor. 

Background

2.  Madam Tam is the registered owner of 1^st Floor, Block 5, Ki Tat Garden Phase 1, No. 11 Ping Tong Street West, Ping Shan, Yuen Long, New Territories (“Tam’s Premises”).  On the other hand, Madam See is the owner and occupier of the Ground Floor, Block 5, Ki Tat Garden Phase 1, No. 11 Ping Tong Street West, Ping Shan, Yuen Long, New Territories (“See’s Premises”).  Another protagonist is Mr Yuen Wai Noong (“Mr Yuen”), who claims to be the boyfriend of Madam Tam and an occupier of Tam’s Premises. 

3.  There have been various disputes between Madam Tam and Mr Yuen on the one hand and Madam See on the other hand.  These disputes, which concerned with matters relating to the use of their premises, led to previous litigations.  For the present purpose, it is not necessary to go into those previous disputes and litigations in any detail.  Suffice it to say that there were two previous appeals to the Court of Appeal, namely, CACV14/2006 and CACV362/2006.  Of particular relevance is the appeal in CACV14/2006, wherein Madam Tam obtained a costs order against Madam See.  The costs obtained in CACV14/2006 was eventually taxed at the amount of HK$71,086.00 and the relevant Allocatur was issued on 16 October 2007 (“the Allocatur”). 

4.  Based on the Allocatur, Madam Tam issued the Statutory Demand dated 25 October 2010 (“the S.D.”), claiming the total sum of HK$94,521.96 (being the said sum of HK$71,086.00 plus interest calculated up to 30 September 2010 in the amount of HK$23,435.96).  It is Madam Tam’s case that the S.D. was personally served on Madam See on 25 October 2010.  This is disputed by Madam See and I shall deal with this aspect in further detail below.  As Madam See did not pay the sum as demanded in the S.D., Madam Tam issued the Petition on 21 December 2010. 

5.  Madam See, who was not legally presented throughout this proceeding, opposed the Petition on a number of grounds.  Those grounds can be seen from: (1) the Affirmation of See Wah Fan affirmed on 19 February 2011; (2) the 2^nd Affirmation of See Wah Fan affirmed on 21 March 2011; and (3) the Skeleton Submissions dated 1 June 2011. 

6.  For the sake of completeness, I should add that Madam See’s Skeleton Submissions was submitted together with some additional documents (“Additional Documents”) (paginated as pp. 69 to 88, which followed the pagination of the hearing bundle comprising 68 pages) under cover of her letter dated 1 June 2011.  At the hearing, upon Madam See’s application and as there was no objection from counsel for Madam Tam, this court granted leave to Madam See to rely on the Additional Documents at this hearing.

7.  As Madam See was not legally represented throughout this proceeding, some of the grounds of opposition are (without disrespect) plainly irrelevant.  As far as I see, there are only three main grounds of opposition that merits discussion for the present purpose and each of them will be dealt with below.

Amount of costs

8.  One of the grounds relied on by Madam See is the amount of the costs payable to Madam Tam. 

9.  At the hearing, Madam See sought to query whether the amount of HK$71,086.00 was a fair amount of costs to be ordered by the Court.  By reference to some of the Additional Materials, Madam See queried whether there were duplicated or excessive claims for legal costs since CACV14/2006 was heard together with CACV362/2006.  Having considered the relevant materials and the submissions made by Madam See, I do not think this is a valid ground of opposition.

10.  Amongst the Additional Documents is an Appointment to Tax dated 6 July 2007.  On the face of it, this Appointment of Tax was sent to Madam See. There is no suggestion, let alone evidence, that Madam See did not receive this document.  Further, the Allocatur was sent to Madam See under cover of a letter dated 22 October 2007 from Messrs. Paul Kwong & Co. (solicitors acting for Madam Tam).  At the hearing, this court specifically asked Madam See whether she received this letter and the Allocatur.  Madam See only said that she could not be sure. Madam See did not positively challenge that she was not aware of the taxation process, nor did she positively assert that she was deprived of the chance to contest the amount of costs claimed in CACV14/2006.  As pointed out by counsel for Madam Tam, Madam See at one stage sought to challenge the costs in respect of CACV362/2006 but no attempt to challenge the costs in respect of CACV14/2006 was made by Madam See.

11.  In the circumstances, bearing in mind the fact that the costs had already been taxed (which means that the reasonableness of the amount of costs had already been considered by the Master who conducted the taxation) and that the Allocatur was issued as early as in October 2007, I do not think it is now open to Madam See to challenge the amount of the taxed costs.  Accordingly, I reject this ground of opposition.

Contents of the S.D. and petition

12.  Another ground relied on by Madam See concerns the alleged omissions or irregularities in respect of the contents of the S.D. and, in particular, the Petition.  Details of this ground can be seen from the 2^nd Affirmation of See Wah Fan mentioned above. 

13.  For the present purpose, I do not find it necessary to set out each and every heads of omissions or irregularities asserted or relied on by Madam See.  I agree with the submissions made by counsel for Madam Tam that the proper approach is the one laid down in Re Leung Hoi [2000] 1 HKC 276 (per Le Pichon J, as she then was, at p. 278C-E), viz., whether the omissions or irregularities have prejudiced Madam See.  (See also : Butterworths Hong Kong Bankruptcy Law Handbook, 3^rd edn, [6A.04] (last paragraph at p. 42).)

14.  Applying this approach in the present case, I do not think any of the complaints of omissions or irregularities in respect of the contents of the S.D. or the Petition have caused any prejudice to Madam See. Looking at the S.D. and the Petition, it is crystal clear that Madam Tam was seeking to rely on the costs taxed and allowed under the Allocatur.  The basis of the claim and the amount were clearly stated.  Madam Tam also stated that she would forego her security if a bankruptcy order is made.  Any reasonable person reading the S.D. or the Petition would not have any difficulty in understanding the demand by Madam Tam and the basis relied on.  Accordingly, I do not see how Madam See could possibly be prejudiced by any of the omissions or irregularities relied on by her.  In any event, Madam See has not pointed out any real prejudice as a result of the omissions or irregularities complained by her.  I therefore also reject this ground of opposition.

Service of the S.D.

15.  The third and last ground of opposition that merits consideration is Madam See’s challenge as to whether there was valid service of the S.D.

16.  As stated above, it is Madam Tam’s case that the S.D. was personally served on Madam See on 25 October 2010.  The relevant affirmations of service were made by Mr Yuen (who, as stated above, is the person who claimed to be the boyfriend of Madam Tam).

17.  The 1^st affirmation of service was affirmed on 25 November 2010 and filed on 21 December 2010, and the material parts read as follows :

“1. I did on 25^th October 2010 at about 7:00 p.m. at Ground Floor, Block 5, Ki tat Garden Phrase I, 11 Ping Tong Street West, Ping Shan, Yuen Long, New Territories, Hong Kong personally serve the Judgment Debtor with the statutory demand dated 25^thOctober 2010 (the ‘Statutory Demand’).

2. The Judgment Debtor, however, refused to acknowledge service. I therefore left the Statutory Demand with her and left.”

18.  There is a supplemental affirmation made by Mr Yuen, which was affirmed on 10 December 2010 and also filed on 21 December 2010.  This supplemental affirmation simply stated that Mr Yuen could identify Madam See as she lived at the flat below the one occupied by Mr Yuen. (See also paragraph 2 above.)  Madam See disputes the assertion that Mr Yuen resided at Tam’s Premises, but this dispute is neither here nor there for the present purpose.

19.  As noted above, Madam See disputes the service of the S.D. and asserts that she had no knowledge of the S.D. until after the Petition was presented.  According to paragraph 5 of her 1^st affirmation filed in this bankruptcy proceeding, Madam See only received a copy of the S.D. when she attended the office of Messrs Paul Kwong & Co. on 17 January 2011.  At the hearing, Madam See reiterated that was the position and also complained that, by then, the Petition has already been filed (i.e. Petition filed on 21 December 2010) and that she was deprived of the chance to apply to court to set aside the S.D.

20.  In answer to Madam See’s challenge of the validity of service, counsel for Madam Tam stressed that it was Madam See who refused to accept service of the S.D. Counsel for Madam Tam relied on the affirmation of service made by Mr Yuen (see paragraph 17 above).  Further, immediately after the hearing, counsel for Madam Tam wrote in and drew this court’s attention to Order 65, rule 2 (which states that personal service of a document is effected by leaving a copy of the document with the person to be served) and also Hong Kong Civil Procedure 2011, Vol. 1, paragraph 65/2/3 (at p. 1203), the relevant part of which reads as follows :

“To effect personal service the clerk or other person entrusted with the task should first satisfy himself that he has found the correct person. He should then hand to or leave with the person to be served a copy of the writ. If the person served will not take the copy, he should tell him what it contains and leave it as nearly in his possession or control as he can.

If the defendant refuses to take the copy writ it is not necessary to leave it in his actual corporeal possession, but it is sufficient to inform him of its nature and throw it down in his presence (per Patteson J in Thomson v Pheney (1832) 1 Dowl. 441); yet this must be done under such circumstances as to bring the case within the above rule. It is not sufficient to hand the defendant the copy writ enclosed in an envelope without informing him that it is a copy writ (Banque Russe v Clark [1984] W.N. 203).” [Emphasis added]

21.  Rule 46(2) of the Bankruptcy Rules states that the creditor shall do all that is reasonable for the purpose of bringing the statutory demand to the debtor’s attention and, if practicable in the particular circumstances, to cause personal service of the demand to be effected. 

22.  I agree with counsel for Madam Tam that the cases concerning personal service under Order 65, rule 2 provide useful guidance in determining whether a statutory demand has been validly served.  The essence is to bring to the statutory demand to the attention of the debtor. 

23.  Accordingly, when personal service is attempted and if a debtor refuses to take the document, it is necessary (as can be seen from the quotation from the Hong Kong Civil Procedure set out in the preceding paragraph) for the server to at least inform the person to be served that it is a court document or the nature of the document.  This is illustrated by the decision of Deputy High Court Judge Carlson in Dynasty Line Ltd v Sukamto SIA, unrep., HCA2057/2007 (13 June 2008) (at paragraph 13-19) (and on appeal, CACV180 & 184/2008[1], unrep., 25 May 2009, at paragraph 19-26).  Although a practical approach is to be adopted, the only concession to practicality where the person to be served refuses to accept the document is for the server to tell him what the document contains and leave it with or near him: Kenneth Allison Ltd v A.E. Limehouse & Co. (a firm) [1992] 2 AC 105, per Lord Goff of Chieveley (followed in Dynasty Line Ltd v Sukamto SIA, unrep. CACV180 & 184/2008, at paragraph 20).

24.  Applying these principles in the context of service of statutory demand, a creditor should do all that is reasonable for the purpose of informing the debtor that the document to be served on him or her is a statutory demand (or at least a document relating to intended bankruptcy proceeding).  Such an approach will be consistent with the rationale behind Rule 46(2) of the Bankruptcy Rules.

25.  In the present case, neither of the two affirmations of service made by Mr Yuen stated that he told Madam See what document he was attempting to serve on her.  The two affirmations of service concerning the service of the S.D. are completely silent on this aspect. There is also no suggestion, let alone evidence, that Madam Tam’s solicitors had written to Madam See or made other attempts to inform Madam See that they were about to serve a statutory demand on her. 

26.  The burden to prove valid service of the S.D. rests with Madam Tam as she is the petitioner seeking a bankruptcy order against Madam See.  From paragraphs 4 and 5 of Madam See’s Affirmation filed on 19 February 2011, it is clear that Madam See disputes service of the S.D.  Notwithstanding this, Mr Yuen did not make any further affirmation to address the issue.  In the circumstances, I do not think Madam Tam has discharged her burden of establishing valid service of the S.D. on Madam See.

27.  The question of whether there was valid service of the S.D. is not merely a technical one.  On the contrary, failure to serve a statutory demand properly is regarded as a serious matter.  See : Hong Kong Civil Procedure 2011, Vol. 2, paragraph I1/28 at p. 523. 

28.  In the present case, paragraph 4 of the Petition asserts that Madam See is unable to pay for the judgment costs in question.  Hence, Madam Tam is seeking to rely on section 6(2)(c) of the Bankruptcy Ordinance that the debtor appears to be unable to pay the debt (which is a crucial element that has to be established before a bankruptcy petition can be presented).  For such a purpose, section 6A(1)(a) of the Bankruptcy Ordinance requires, amongst others, the service of the statutory demand (and this must necessarily mean valid service).  Accordingly, unless and until there was a valid service of the S.D. on Madam See, the present Petition should not have been presented in the first place and no bankruptcy order should be made against Madam See on the Petition.  See also : Butterworths Hong Kong Bankruptcy Law Handbook, 3^rd edn, [6A.04] (second complete paragraph at p. 40) (which states that statutory demand must be served properly, and if not, all subsequent bankruptcy proceedings will b void) and also [BR(r) 46.03] at p. 451.

Conclusion

29.  Since Madam Tam fails to establish valid service of the S.D. on Madam See, no bankruptcy order should be made against Madam See and I dismiss the Petition. 

30.  I also make an order nisi that the costs of this Petition (including the hearing on 2 June 2011) be paid by Madam Tam to Madam See (to be taxed if not agreed).