RE NG YUK TING

HCB 5435/2023

[2024] HKCFI 1322

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 5435 OF 2023

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JUDGMENT

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Introduction

1.  This is the hearing of a bankruptcy petition presented by OCBC Bank (Hong Kong) Ltd¹ (“Bank”) against Ng Yuk Ting (“Madam Ng”) on the basis of an Order made by Master SH Lee on 27 January 2021 (“Order”) in HCMP889/2020 (“MP889”).

The Order in MP889

2.1.  In MP889, Madam Ng was the 1^st defendant.  The 2^nd defendant was a company (“Company”) which was controlled by her husband, who was the 3^rd defendant (“Mr Lau”). 

2.2.  Significantly, the Order shows that:

-  all three defendants were legally represented; and

-  no evidence had been filed by any of the defendants. 

2.3.  In the Order, the court ordered (among other things) that:

(1)  the Bank recover against all three defendants (including Madam Ng) the sum of $7,722,098.59, together with interest at various rates, and

(2)  Madam Ng deliver vacant possession of a unit² in Sham Tseng  (“ Property”) of which she was the registered owner, which was the subject of a Legal Charge made on 27 July 2016 which she executed in favour of the Bank (“Legal Charge”).

Post-Order events

3.  After the Order:

-  on 25 August 2021, the Company was wound up under a petition presented in March 2021,

-  by an assignment dated 29 December 2021, the Property was sold for $6.2 million (net proceeds being $6,111,294.54) and

-  on 28 June 2022, Mr Lau was made bankrupt.  

Bankruptcy proceedings                    

4.1.  On 16 June 2022, a Statutory Demand was served on Madam Ng for the sum of $2,280,645.27, being the balance of the said sum of $7,722,098.59 together with interest and costs summarily assessed by the master, less sums repaid arising from the said sale of the Property (“Balance”).

4.2.  On 18 September 2023, the petition was presented. 

4.3.  On 17 November 2023, Madam Ng filed an affirmation opposing the petition.

4.4.  On 8 January 2024, Anthony Chan J gave directions including that:

-  the Bank have leave to file an affidavit in reply to Madam Ng’s affirmation on or before 5 February 2024, and

-  no further affidavits be filed without the leave of the court.

4.5.  On 5 April 2024³, there were filed in reply two affirmations, one of Wong Chung Sing, an officer of the bank, and the other of Au Wan Kei Ricky, a solicitor instructed by the bank in 2016 to prepare the Legal Charge.

4.6.  On 25 April 2024, the Bank filed its skeleton submissions.  On 28 April 2024, Madam Ng filed her skeleton submissions. 

Summons filed 3 May 2024

5.1.  However on 3 May 2024, the Bank filed a summons for leave to file a further affirmation of Mr Wong. 

5.2.  As no reason other than “inadvertence” has been given for the earlier omission of the contents of the further affirmation, I refused leave and dismissed the summons with costs to Madam Ng of $200.

Madam Ng’s opposition to the petition

6.1.  Madam Ng opposed the petition denying liability for the Balance, saying that she had not signed a guarantee⁴ and that on 13 May 2016, the bank’s staff Miss Helen Wong and Mr Gary Leung had made representations to her that she would only be liable for 按揭樓宇貸款 (mortgage loan).

6.2.  At the hearing,

-  she said that she understood that 按揭樓宇貸款 (mortgage loan) meant an instalment loan of $1.9 million (this was one of two facilities offered to the Company by the Bank⁵) and

-  she said the amount outstanding on the instalment loan was less than $2 million.  Hence, she was not liable for the Balance.    

Discussion

7.1.  The short point is that in any event, this ground of opposition is no longer open to Madam Ng.  The bankruptcy petition is based on the Order which was made after the master heard the parties, including Madam Ng’s then legal representatives.

7.2.  The Order showed that no evidence had been filed by the defendants.  Since Madam Ng had failed to make the allegations regarding the representations made by the bank staff then, it would be an abuse of process to permit her to raise that ground of defence now, there being no newly discovered facts. 

7.3.  When Madam Ng’s attention was drawn to the MP889 proceedings, she said she thought it had to do with the Company’s winding-up.  However at the time MP889 came before the master (January 2021), winding-up proceedings had not begun.

7.4.  The Order made against all three defendants was for payment of more than  $7 million, which was clearly more than the sum outstanding on the instalment loan on Madam Ng’s own case.    However, there was no appeal from the Order and no allegation of fraud or collusion in the obtaining of the Order such that it should be set aside.  That is the end of the matter. 

8.1.  In any event it appears from the papers that there was no merit in the defence. Even on Madam Ng’s own case, the alleged representations were made by the bank’s staff in May 2016 at the stage when the Company was only applying for banking facilities.  

8.2.  Even if the alleged representations were made at that time, it is clear that on 7 July 2016, the bank offered the following specific facilities in the facility letter:

-  a facility limited to $1.9 million for an instalment loan, and

-  a facility limited to $2 million for discounting invoices.      

8.3.  This letter, which was addressed to the Company, was signed by Madam Ng as well. Thus Madam Ng was aware that the Company may become indebted to the Bank not only under an instalment loan (which she referred to as a mortgage loan) of $1.9 million, but also under trade facilities of $2 million.  Madam Ng did not provide any satisfactory explanation why she signed that document which referred to facilities in addition to the $1.9 million instalment loan.  

9.1.  This is significant because on 21 July 2016, according to Mr Au’s affirmation,

-  he highlighted to Madam Ng that (1) in an all-moneys legal charge, she would be liable to repay all outstanding indebtedness owed by the Company, (2) her personal liability under the legal charge would be unlimited; (3) the Property would be used as security and could be repossessed by the Bank for sale; and (4) if the value of the Property and her other assets are insufficient to discharge the Company’s debts, she could lose the Property and be made bankrupt;

-  Madam Ng confirmed that she understood the position;

-  she then signed a document entitled “Model letter by surety to solicitors where charging property to secure loan to borrower or his/her business” (“Model Letter”) which:

-  referred to the amount and terms of the proposed new facility as “IL” HKD1,900,000 and “Trade” HKD2,000,000,

-  stated (among other things) that the mortgage will be on “all monies” terms and her liability will be unlimited⁶, and that it was “not advisable for me to make myself liable for an unlimited amount”.

9.2.  It would therefore have been clear to Madam Ng that the secured indebtedness was not restricted to the instalment loan of $1.9 million.  Madam Ng was not able to explain why she signed that document and she only reiterated that her own understanding was that her liability was limited to the instalment loan as she had not signed a guarantee.  However that was only her subjective understanding, and the fact that she had not signed a guarantee did not vary the legal effect of the Legal Charge that she did in fact sign.

10.1.  Indeed, Madam Ng signed two documents dated 20 July 2016 both addressed to her identifying her as “Security Provider” and both entitled “Warning Notice”.  The wording of one was more general.  In the other, entitled “Warning Notice to a Guarantor or a Third Party Security provider”, it was stated (among other things):

“ (1)  The Borrower has applied to the Lender for banking facilities/loan to the extent of HK$ 3,900,000.00 on the security of a mortgage to be taken out on the Security Property (the “Encumbrance Document”).

…

(6)  Your liability under the Encumbrance Document will be unlimited.  Such Security Document/each of such Security Documents (as the case may be) secure/guarantee all the indebtedness and liabilities of the Borrower.  This means that you will be personally liable for any debts and liabilities of the Borrower to an unlimited extent, which include debts that may have nothing to do with the liabilities under the banking facilities/loan, such as future debts of the Borrower to the Lender, if you decide to go on with the transaction by signing/executing such Security Document(s).”

10.2.  Madam Ng was unable to explain why she signed the document stating the figure of $3.9 million, if she thought she was only liable for the instalment loan of $1.9 million.     

10.3.  Madam Ng said that she did not understand English.  However, she has not deposed that she had ever asked anyone for further information of the contents of the English documents.  Mr Au has also deposed that she said that she understood him.

11.  Further, against the backdrop of the above, on 27 July 2016, Madam Ng signed a document entitled “Important Notice” which was in both English and Chinese, which accompanied the Legal Charge.  It stated (among other things):

“ This Deed is an important legal document. It will create legal obligations and liabilities on your part once signed. You are strongly advised to seek independent legal advice from your own lawyer before signing this Deed, to make sure that you understand the contents of this Deed and the full consequences of your signing this Deed.

…

By signing this Deed, you will be liable for:

(1) all sums of money, obligations and liabilities, whether past, present or future, actual or contingent, now or at any time hereafter be or become from time to time due, owing or incurred to us by the Borrower as detailed in this Deed, including further or changed facilities that may be extended to the Borrower without your consent to an unlimited extent.

…

Your liability under this Deed will be unlimited.

…

You will charge or mortgage the Property described in the Schedule to this Deed (the “Property”) to secure the Secured Indebtedness [defined in the Legal Charge as all sums advanced and outstanding] and the due fulfilment by you and the Borrower of the agreements covenants and conditions contained in this Deed.

…

I further confirm that: -

(i) I/We have elected to enter into the above mentioned Deed in favour of [the Bank] as security unlimited in amount (a tick was placed in the box marked “unlimited”).”

12.  Thus in any event, the evidence shows clearly that Madam Ng was aware that the facilities offered to the Company were not limited to indebtedness under the instalment loan (which she referred to as a mortgage loan) of $1.9 million, and that it had been properly explained to her that she was undertaking unlimited liability in respect of the Company’s entire indebtedness.

Order

13.1.  The respondent having failed to demonstrate that there is a bona fide dispute of the debt on substantial grounds, I would make the usual Bankruptcy Order.

13.2.  The parties did not object to the usual order that costs should follow the event. 

13.3.  As for the quantum of costs, having considered the petitioner’s skeleton bill, I would summarily assess the costs at $254,000.