RANI VARSHA BHUPENDRA Also known as PATEL VARSHA BHUPENDRA v. KBC BANK (formerly known as ANTWERP DIAMOND BANK (NV))

HCMP 1835/2017

[2018] HKCFI 2071

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1835 OF 2017

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J U D G M E N T

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Introduction

1.  By Originating Summons filed herein on 29 August 2017, the Plaintiff claims against the Defendant for a declaration that the Plaintiff is released from all bankruptcy debts including the Plaintiff’s liability as one of the guarantors in respect of:

(1) A Guarantee entered into between, inter alia, Sugem (HK) Limited (“Borrower”), the Defendant[1] and the Plaintiff dated 24 January 2003 (“Guarantee”) in respect of all monies owed by the Borrower to the Defendant;

(2) All loans granted by the Defendant to the Borrower pursuant to the Letter of Credit Facility issued by the Defendant dated 6 February 2008 and accepted by the Borrower

by virtue of the statutory discharge of the Bankruptcy Order (“Order”) dated 23 February 2011 in HCB 8778/2010 upon the expiration of 4 years pursuant to sections 30, 30A, 32 and 34[2] of the Bankruptcy Ordinance, Cap 6 (“BO”).

Background

2.  The following is a brief chronology of HCB 8778/2010:

(1) On 15 December 2010, DBS Bank (Hong Kong) Limited presented a bankruptcy petition against the Plaintiff.

(2) The petition was served by way of substituted service pursuant to the Order of Master Hui dated 19 January 2011.

(3) On 23 February 2011, Master Hui granted the Order against the Plaintiff in her absence and the Official Receiver (“OR”) became the provisional trustee.

(4) The Defendant’s predecessor ADB did not take part in the bankruptcy proceedings and had not filed any proof of debt with the OR.

(5) On 9 June 2011, the OR filed his report to Court in support of an application for summary procedure on the grounds inter alia that the OR had not been able to locate and interview the Plaintiff and the OR believed that the property of the Plaintiff was unlikely to exceed HK$200,000.

(6) On 21 October 2011, Registrar Lung granted the OR’s application and the OR became the trustee in bankruptcy of the Plaintiff.

(7) On 23 February 2015, the Plaintiff was discharged from bankruptcy upon the expiration of 4 years from the date of the Order by virtue of sections 30 and 30A of the BO.  Upon the Plaintiff’s discharge, she is released from all her bankruptcy debts by virtue of section 32 of the BO.

(8) On 20 June 2016, the OR and Trustee applied for an order for his release.

(9) On 24 June 2016, Registrar Lung granted an Order that the OR and Trustee be released.

3.  As stated in paragraph 2 of Mr Leung’s skeleton submissions, the Plaintiff admits she was indebted to ADB in the sum of over HK$232 million as one of the guarantors in respect of the debt owed to ADB by the Borrower (“Debt”). On 20 January 2010, ADB issued a demand letter to the Borrower.[3] The Plaintiff admits the Debt was due as from the date stated in the demand letter which was prior to the presentation of the Bankruptcy Petition.

4.  Sometime in 2013, ADB found out the Plaintiff was staying in Dubai which raised the likelihood that she might have assets there.

5.  In October 2014, ADB commenced legal proceedings against the Plaintiff in the Dubai Court of First Instance (“Dubai Court”) for repayment of the Debt.

6.  On 23 February 2015, while the Dubai proceedings were still on‑going, the Plaintiff was discharged from her bankruptcy and her bankruptcy debts were released.

7.  In November 2015, the Plaintiff’s Dubai lawyers submitted her plea of defence (or its equivalent) to the Dubai Court.  In her defence, the Plaintiff did not rely on or refer to her discharge from bankruptcy or the release of her bankruptcy debts under Hong Kong law.  Instead, the Plaintiff only argued that the Dubai Court lacked jurisdiction because of the existence of bankruptcy proceedings in Hong Kong.[4]

8.  On 28 March 2016, the Dubai Court gave judgment in favour of the Defendant for the sum of HK$232,101,341.57 (“Dubai Judgment”).  Obviously, the Dubai Court rejected the Plaintiff’s argument that it lacked jurisdiction.

9.  There is a dispute on the affidavit evidence whether the Plaintiff is appealing or can now still appeal against or overturn the Dubai Judgment but it is not necessary for this court to resolve that dispute for the purpose of the present application.

Deliberation

10.  It is trite law that the grant of a declaration is a discretionary remedy.  As the learned editors of Zamir & Woolf, The Declaratory Judgment, 4^th Ed observed at para 4‑35, the primary role of the courts is, and always has been, to resolve existing disputes between the parties where the courts’ decisions will have immediate and practical consequences for at least one of the parties.  There are more than enough cases of this sort fully to occupy the time of the courts and, not unnaturally, the judges have vigorously objected to attempts made from time to time to divert them from what they regard as their task, that of deciding real issues, into deciding theoretical or hypothetical issues.

11.  In Ruislip-Northwood Urban DC v Lee (1935) 145 LT 208 at 214, Greer LJ made the following observation[5]:

“ I do not think that anyone can go about and say that ‘Mr. X will probably be going to make a claim against me. He has not said so. I have no reason to suppose it, except my own thoughts, and I will therefore issue a writ against him and claim a declaration that if he ever does make that claim against me he will be wrong.’ You cannot do that.”

12.  In Midland Bank Plc v Laker Airways Ltd [1986] QB 689, the Midland Bank sought a declaration that they were not liable under the laws of England for or in connection with the collapse of Laker Airways.  The Judge at first instance had refused to strike out the claim.  However, the Court of Appeal reversed his decision.  Lawton LJ, in a judgment with which, on this point, the other two members of the court agreed, said [6]:

“ As the liquidator has never threatened to take proceedings against either bank in the English courts, on the authority of Re Clay, Clay v Booth [1919] 1 Ch 66 there is no jurisdiction in the court to make the declaration asked for. The claim for it should be struck out.”

13.  The learned editors of Zamir & Woolf, The Declaratory Judgment, 4^th Ed observed at para 4‑70 that although Lawton LJ indicated there was “no jurisdiction” to make the declaration, this should be treated as an example of a court saying that there was no jurisdiction to make a declaration when what is meant is that the circumstances are such that the court would invariably exercise its discretion by refusing to make a declaration.

14.  In 曾婉玲 對 兆隆苑業主立案法團unrep, LDBM 199 of 2001; 18 September 2001 at [22], HH Judge Johnson Lam (as he then was) said:

“ 22. A well‑established reason for a court to refuse to grant declaratory relief is a situation where the exercise does not serve any useful purpose. The principle is summarized in Zamir & Woolf, The Declaratory Judgment, 2^nd Edn., at Para 4.087,

‘ If it can be shown that a declaration would not serve any practical purpose, this will weigh heavily in the scales against the grant of declaratory relief.  If, on the other hand the grant of declaratory relief will be likely to achieve a useful objective, the court will be favourably disposed to granting relief.  The question of whether or not any useful purpose would be served by granting declaratory relief is therefore of prime importance in determining how discretion should be exercised.’”

15.  Lastly, in Kao Lee & Yip v Midland Realty International Ltd unrep. HCA 2153 of 2007; 31 March 2009, at [62], DHCJ Lisa Wong SC (as she then was) cited with approval the following passage of Lord Diplock’s speech in Gouriet v Union of Post Office Workers [1978] AC 435 at 501:

“ … It is when an infringement of the plaintiff’s rights in the future is threatened or when, unaccompanied by threats, there is a dispute between parties as to what their respective rights will be if something happens in the future, that the jurisdiction to make declarations of right can be most usefully invoked. But the jurisdiction of the court is not to declare that law generally or to give advisory opinions; it is confined to declaring contested legal rights, subsisting or future, of the parties represented in the litigation before it…”

16.  At paragraphs 26 to 28 and 32 to 33 of the Plaintiff’s skeleton submissions, the purpose of the declaration sought is stated in this way:

(1)     The declaration sought together with legal advice explaining the effect and implication of a discharge under sections 30, 30A, 32 and 34 of the BO would form the basis of the Plaintiff’s ground of appeal against the Dubai Judgment — paragraph 26.

(2)     There are disputes between parties as to (i) whether the Plaintiff’s right to appeal has lapsed; and (ii) if so, whether the Plaintiff can appeal out of time.  It is not for this court to decide on the above questions, as they are questions of foreign law — paragraph 27.

(3)     Even assuming if the Plaintiff does not appeal against the Dubai Judgment, it would be deemed final and conclusive, there is the possibility of the Defendant seeking to enforce the Dubai Judgment in Hong Kong under common law — paragraph 28.

(4)     The Dubai Judgment falls squarely within the definition of a bankruptcy debt as set out under paragraph 24(b) hereinabove — any debt or liability to which he may become subject after the commencement of the bankruptcy (including after his discharge from bankruptcy) by reason of any obligation incurred before the commencement of the bankruptcy — paragraph 32.

(5)     The declaration sought would amount to a complete defence if the Defendant elects to enforce the Dubai Judgment against the Plaintiff in Hong Kong.  The Court need not consider the likelihood of that happening, so long as the Court is satisfied that the declaration would serve the purpose of defending such a claim (whether in Hong Kong or any other jurisdiction), the declaration should be granted — paragraph 33.

17.  The Defendant disagrees and opposes the present application on the ground that the Plaintiff is seeking an academic and purposeless declaration.  As can be seen from the Defendant’s skeleton submissions, the Defendant’s stance is that:

(1) there is no dispute the Debt is a bankruptcy debt;

(2) the Defendant does not dispute the Plaintiff’s liability towards it under the Guarantee has been released upon her discharge from bankruptcy under theBO;

(3) the Defendant has never challenged and does not challenge the effect of the discharge or the release under the BO; there is simply no dispute between the Plaintiff and the Defendant as to the legal effect of sections 30, 30A and 32 of the BO with regard to the discharge of the Plaintiff and the release of her bankruptcy debts;

(4) the Defendant has not enforced or threatened to enforce the Dubai Judgment in Hong Kong;

(5) the Defendant has filed an affidavit of Roseline Vroman who, at paragraph 24, confirmed that the Defendant has no intention to enforce the Dubai Judgment in Hong Kong.

18.  This court agrees with the Defendant.

19.  Given the Defendant’s stance as aforesaid, there are no existing disputes between the parties on the legal effect of sections 30, 30A and 32 of the BO such that the declaration sought may serve a useful or practical purpose.  There are also no contested legal rights which the declaration sought may be needed in order to resolve them.  Lastly, there is no threat by the Defendant to enforce the Dubai Judgment in Hong Kong.

20.  As for the Plaintiff’s intended appeal against the Dubai Judgment, if she sees fit to invoke the provisions of the BO in support of her grounds of appeal, she does not require the assistance of a declaration by a Hong Kong Court.  As far as the Dubai Court is concerned, the BO is a foreign law and litigants from time to time invoke foreign law by adducing expert evidence on that law.  The same is true in the event the Defendant seeks to enforce the Dubai Judgment in Dubai or anywhere else outside Hong Kong and the Plaintiff wishes to invoke the provisions of the BO to resist the Defendant’s enforcement action.

21.  In the end, it seems to this court the declaration sought by the Plaintiff is exactly what Lord Diplock said in Gouriet v Union of Post Office Workers that the court would not do ie to declare the law generally.  A fortiori, when the law ie the legal effect of the relevant provisions of the BO is not even in dispute.

22.  For all the above reasons, the court, in the exercise of its discretion, must refuse to grant the declaration sought.  The Plaintiff’s application is hereby dismissed.

23.  I will now hear the parties on costs.