RE LO TAK WING BENSON

CACV 26/2022

[2023] HKCA 192

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 26 OF 2022

(ON APPEAL FROM HCB NO. 4242 OF 2021)

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JUDGMENT

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Hon Chu VP giving the judgment of the Court:

1.  This is the debtor’s appeal against the bankruptcy order made against him by Master Rita So (“the Master”) on 22 December 2021.

Background

2.  On 23 October 2020, judgment in default of notice of intention to defend was entered in favour of the petitioner against the debtor in HCA 1488 of 2020. The judgment is for (1) the principal sum of HK$10,000,000 together with overdue interest for the period from 23 June 2019 to 1 September 2020 in the sum of HK$2,155,068.49 and further interest from 2 September 2020 to the date of judgment at 18% per annum and thereafter at judgment rate until full payment; and (2) fixed costs in the sum of HK$10,000 (collectively “the Debt”).

3.  The debtor has neither applied to set aside nor appealed the judgment.

4.  On 30 October 2020, the petitioner issued a statutory demand against the debtor. As at the date of the statutory demand, the Debt stood at HK$12,436,864.66. The statutory demand was served on the Debtor on 1 March 2021 by way of advertising in two newspapers. The debtor did not comply with the statutory demand.

5.  On 22 July 2021, the petitioner presented a bankruptcy petition against the debtor based on the Debt, which at the date of the petitioner (i.e. 21 July 2021) stood at HK$13,016,073.43.

6.  The petition was served on the debtor on 2 December 2021 by way of substituted service pursuant to the order made by Master Man on 19 November 2021.

7.  The petition was listed for hearing on 22 December 2021 before the Master. The debtor was absent. The Master, having considered the bankruptcy petition, the petitioner’s affirmation of truth, the affirmation of service and the certificate of continuing debt, made a bankruptcy order against the debtor.

The appeal

8.  On 12 January 2022, the debtor served and filed a notice of appeal to appeal the bankruptcy order. The grounds of appeal as appeared by the notice of appeal are that:

“I could not locate any trace of the alleged received funds from the plaintiff in my bank records. I do not understand why she alleged that I owed her money.”

9.  The petitioner applied by summons filed on 13 April 2022 to strike out the notice of appeal and dismiss the appeal, and alternatively, for security of costs. By the judgment of this Court given on 3 August 2022, we refused the striking out application, for the reasons given in [16], but ordered the debtor to provide security for costs in the amount of HK$116,000 ([2022] HKCA 1125). The debtor has complied with the order.

10.  The debtor failed to lodge a written submission within the time stipulated by the directions given by the Registrar of Civil Appeal. He only put in a written submission on 31 January 2023, after the petitioner had put in her skeleton arguments.

11.  The debtor made the following points in his written and oral submissions:

(1)  The judgment in HCA 1488/2020 was a default judgment without the petitioner having proved her case.

(2)  He has never received the loan of HK$10,000,000 from the petitioner.

(3)  He had borrowed HK$10,000,000 from the petitioner’s son. However, the petitioner asserted that he owed her son HK$20,000,000, half of which was assigned to her.

(4)  At the request of the petitioner’s son, he had for a period of time paid interest on the petitioner’s son’s loan to the petitioner. He stopped when he discovered that he had paid interest twice.

(5)  The petitioner’s son has not made any affirmation to support the petitioner’s case. The petitioner has also not come up with documentary evidence to show that her son had advanced HK$20,000,000 to him.

(6)  The petitioner’s son had obtained judgment against him on the debt of HK$10,000,000. It is wrong for the petitioner to bankrupt him based on a debt that does not exist.

Our decision

12.  It is well-established that a bankruptcy order is made in the exercise of the court’s discretion, and an appellate court would not interfere with it unless the appellant shows that there has been an error of law, or a misapprehension of material facts, or that the judge has failed to take relevant matters into consideration or has taken irrelevant matters into consideration matters, or that the decision is “plainly wrong” in the sense in which the term is understood at law: Lo Chun Cheong v Au Wai Ming (unreported) CACV 167/2015, 18 November 2016 at [12]; and Re Cheung Kwan [2021] HKCA 282 at [30].

13.  The debtor’s sole ground of appeal is that he does not owe the petitioner the sum of HK$10,000,000 claimed in HCA 1488/2020. For the reasons set out below, we are of the view that the appeal has no merits.

14.  Firstly, while the debtor denies owing HK$10,000,000 to the petitioner, he has neither applied to set aside nor appealed against the judgment in HCA 1488/2020. The judgment remains valid and is binding on the debtor. It is irrelevant that it is a default judgment. The petitioner is entitled to present a petition based on the unpaid judgment debt.

15.  Secondly, the bankruptcy court will not inquire into the validity of a judgment debt that underlines a bankruptcy petition, unless there is evidence that the judgment has been obtained by fraud, mistake or collusion or there has been a miscarriage of justice: Re Phoon Lee Piling Co Ltd [2003] 2 HKLRD 391 at [25]. 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: Re Tam Mei Kam (unreported) CACV 87/2012, 8 May 2013 at [22.1].

16.  The debtor did not contest the bankruptcy petition. Nor had he adduced evidence to oppose the bankruptcy petition. He also did not appear at the hearing before the Master. In the circumstances, the Master was entitled to rely on the judgment and the unpaid judgment debt as evidence that the debtor is indebted to the petitioner as stated in the petition, and to make the bankruptcy order against the debtor.

17.  Thirdly, the factual assertions made in the debtor’s written and oral submissions were not in evidence before the Master. There has been no application by the debtor to adduce new evidence in this appeal. The factual assertions are therefore not evidence before us and we will not have regard to them.

18.  We would further point out that, even if the debtor had applied to adduce new evidence of the matters raised in his submission, the application would probably fail at the first requirement of Ladd v Marshall [1954] 1 WLR 1489[1] since the debtor must have known prior to the hearing of the petition that he did not owe the petitioner the sum claimed in HCA 1488/2020 and could have adduced evidence to challenge the judgment and/or defend the petition, if indeed he did not owe any loan to the petitioner.

19.  In short, the debtor’s assertion that he does not owe the petitioner the judgment sum is no more than a bare assertion.

20.  For the above reasons, the Master did not err in making the bankruptcy order. There is no proper basis for this Court to interfere with her decision. Accordingly, we dismiss the appeal.

21.  There is no reason to depart from the usual order of costs follow the event. We make an order that debtor pays the petitioner the costs of this appeal to be taxed if not agreed, and to be paid out of the debtor’s estate.