WFM MOTORS PTY LTD. v. MALCOLM MAYDWELL

1994, No.MP1405

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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D E C I S I O N

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1. There are three matters before me today :

1. The application by the Defendant for leave to appeal out of time against Master Britton's order of 17 October 1994 (this is what the plaintiff called "The Britton Order").

2. "The bankruptcy summons" of the Defendant in Bankruptcy No. B1023 of 1994 to set aside the Plaintiff's Bankruptcy Notice.

3. The application by the Plaintiff to me to hear "the second setting aside summons" of the Defendant dated 22 December 1994 scheduled to be heard before a master on the 17 January 1995.

The Britton Order

2. On 22 October 1993, the Plaintiff obtained by way of summary judgment in the New South Wales Supreme Court of Sydney before Master McLaughlin in favour of the Plaintiff against the Defendant for HK$3,709,342.32 plus interest and cost. On 8 June 1994, under the present proceedings, this New South Wales judgment was registered pursuant to Foreign Judgment (Reciprocal Enforcement) Ordinance Cap.319 and the Order was amended on 27 July 1994. On 4 July 1994, the Defendant applied by summons "the first setting aside summons" to set aside the registration order on the ground that an appeal is pending against the New South Wales judgment and that was then the only ground of application. Thereafter, on 16 August 1994, Windeyer, J. refused the Defendant leave to appeal out of time against the New South Wales judgment. In those proceedings the Defendant appeared and was cross-examined. On 26 September 1994 the Court of Appeal in New South Wales dismissed the Defendant's application for leave to appeal against decision of Windeyer, J.

3. Thereafter the Britton Order was made dismissing the Defendant's first setting aside summons with cost when the Defendant accepted that there was no longer any appeal pending against the New South Wales judgment. That application as I have said, was made under Cap.319, s.6(1)(b), i.e. on an application in that behalf duly made by any party against whom a registered judgment may be enforced, the registration of the judgment - may be set aside if the registering court is satisfied that the matter in dispute in the proceedings in the original court had previously, to the date of the judgment in the original court, been the subject of a final and conclusive judgment by a court having jurisdiction in the matter. When the matter came before Master Britton, there was no appeal afoot in New South Wales and the Defendant was refused leave to appeal out of time by both Windeyer, J. and later, the New South Wales' Court of Appeal.

4. The Defendant has raised no other grounds for setting aside the Registration Order. There is no appeal against the New South Wales judgment or to be exact, no appeal against the New South Wales judgment is currently afoot in Australia. Accordingly, I accept Mr Reyes' submission for and on behalf of the Plaintiff that there is no reason to grant leave to appeal out of time.

The Bankruptcy Summons and the Application by the Plaintiff to hear the Second Setting Aside Summons

5. I consider the two matters together for reasons which will be apparent herein below. The Defendant's application to set aside the Bankruptcy Notice was made pursuant to the Bankruptcy Rules in Cap.6, r.64 which provided that :-

"The filing of such affidavit [i.e. the affidavit referred to in rule 45(2)] shall operate as an application to set aside the Bankruptcy Notice and thereupon the court shall fix a date for hearing the application and not less than three days before the date so fixed, the Registrar shall give notice thereof both to the debtor and the creditor and to their respective solicitors if known. If the application cannot be heard until after the expiration of the time specified in the notice as the day on which the act of bankruptcy will be completed, the court shall extend the time and no act of Bankruptcy shall be deemed to have committed under the notice until the application has been heard and determined."

In respect of the grounds of setting aside the Bankruptcy Notice Mr Reyes for the Plaintiff, referred me to Williams and Muir Hunter on Bankruptcy, 19th Edn., at pp. 37-8 :-

"(a) On grounds of set-off, counterclaim or cross-demand

The debtor must, within the time prescribed by B.R.138 (for a notice served in England, seven days; for a notice served elsewhere, such longer time as the registrar may fix) file in court and affidavit showing with a reasonable degree of particularity the nature and amount of the set-off, etc., so as to satisfy the registrar that 'sufficient cause is shown' under B.R.139.

The registrar must consider whether, in the light of the evidence adduced by either side, there is a genuine triable case of set-off, etc. (as to 'genuine,' vide post), which (a) is presently enforceable by action and not merely a claim which might be the subject of a set-off in the bankruptcy under section 31; (b) equals or exceeds the judgment debt; (c) could not have been set up in the action in which the judgment was obtained, or in respect of which the debtor could not have obtained, by extension of time, leave to set it up in answer to proceedings for summary judgment.

If these requirements are satisfied, the registrar must set the notice aside. The Court of Appeal preferred the decription 'genuine' as to the nature of the set-off, to the descriptions 'prima facie' or 'offering a reasonable prospect of success'; no particular degree of proof can be specified, for each case must depend on its own facts, as to whether or not in principle it appears to be 'genuine.' To this end, therefore, the debtor must in general be entitled to adduce evidence in reply to that filed by the judgment creditor in answer to the debtor's initial affidavit.

A debtor's claim in a pending Chancery action that he was entitled to a charge on property into the hands of A in priority to B was held not to be a 'counterclaim, set-off or cross-demand' which would justify the setting aside of a notice issued by B on a money judgment obtained in a separate action. But the doctrine of equitable set-off is now every wide; and a husband's claim, in proceedings under the Married Women's Property Act, to recover chattels held by his wife, was held to be a 'cross-demand' justifying the setting aside of a notice issued by her on a money judgment.

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(b) On grounds other than set-off, etc.

The debtor may apply by motion (i.e. not by the summary affidavit procedure of B.R.139) to set aside the notice on other grounds, e.g. irregularity, bad service, payment (or quaere legal tender) of the debt, etc.; the time limit of seven days now fixed by B.R.138 does not apply to such applications. But the court cannot on such an application go behind the judgment and inquire into the validity of the debt, as it can in the case of a petition. A moneylender's notice cannot be disputed on the ground that, the bargain being harsh and unconscionable, the amount specified in the notice exceeds the amount actually due; but where payments by the debtor have been appropriated by the judgment creditor, in whole or in part, not in reduction of the judgment debt but in payment of extra interest or bonus, the case might be different and the bankruptcy notice might be bad."

6. Mr Reyes submitted that there is no evidence of any genuine counterclaim set-off or cross demand which equals or exceeds the amount of the judgment debt and which the Defendant could not have set-off in the action in which the New South Wales judgment was obtained. He further submitted that on the contrary the evidence is that the substance of the alleged counterclaim was raised in the Defendant's defence in the New South Wales action and was rejected. On the authority of Williams and Muir Hunter on Bankruptcy just cited, he submitted that the court cannot, on such an application, go behind the judgment and inquire into the validity of the debt as it can in the case of a petition. However, this contention of the learned author was in respect of grounds other than set-off, etc. under paragraph (b). Paragraph (a) concerned with grounds of set-off, counterclaim or cross-demand. The court on such an application is concerned with a reasonable degree of particularity, the nature and amount of set-off etc., so as to satisfy the Registrar that "sufficient cause is shown".

7. In respect of the second Setting Aside Summons, the Defendant raised a number of other grounds and explained in his fourth affidavit why they were not brought earlier in the first setting aside summons. Those grounds are as follows :-

(i) The evidence of the Plaintiff does not state the amount in respect of which the said judgment remains unsatisfied;

(ii) Further or in the alternative, the Supreme Court of New South Wales had no jurisdiction in the circumstances of the case;

(iii) Further or in the alternative, the said judgment was obtained by default by the Plaintiff and or its duly authorised representative or representatives;

(iv) Further or in the alternative, the enforcement of the judgment shall be contrary to public policy in Hong Kong;

(v) Further or in the alternative, the said judgment is a nullity for failure to satisfy the requirements of natural justice.

8. At the outset of the hearing before me, Mr Maydwell, the Defendant, has indicated to me that he has not prepared the second setting aside summons which was originally scheduled to be heard on 17 January 1995. He is a litigant in person, he said he has not prepared his submission. The fourth affidavit, together with the exhibits thereto amounted to 480 pages. The Defendant was about to mount on a submission which would involve detailed analysis of his allegations and documentary support thereto as contained in that affidavit. These submissions are interwoven with his submissions under the setting aside summons of the Bankruptcy Notice, in order to establish that he has a counterclaim against the Plaintiff.

9. Mr Reyes submitted that those matters or matrix of facts have already been fully canvassed in the New South Wales jurisdiction. The Defendant, however, submitted that some of the evidence were not before the New South Wales Court, an adjudication on those matter required a full hearing on the Second Setting Aside Summons.

10. The Defendant has already said that he has not prepared to make submissions thereto. The matter was scheduled to be heard before a master on 17 January 1995. Accordingly, I consider that these two matters are so closely connected and should be heard together. I do not think I should venture to hear the Second Setting Aside Summons. The estimated time of this hearing before me was ½ hour. It has already taken the whole morning without going into details of those submissions which were about to be made by the Defendant. I therefore consider that it would not be appropriate for me to hear this application in full even if Mr Maydwell, the Defendant, was ready to make those submissions. My other case, the long trial before me, will resume tomorrow and if I heard these two matters in part then the next adjourned hearing cannot be fixed within a short or reasonable period of time according to my diary. In the circumstances, I consider that the matter should be better disposed of by the Master by hearing the two matters together.

11. Accordingly :

(1) The Defendant's appeal against Master Britton's Order is dismissed with costs.

(2) The Defendant's summons to set aside the Bankruptcy Notice is adjourned to be heard by the Master hearing the Defendant's second setting aside summons.

(3) It goes without saying that the Plaintiff's application to me to hear the Defendant's second setting aside summons altogether is also refused.