RE TAM MEI KAM

HCB 3777/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3777 OF 2011

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CREDITOR’S BANKRUPTCY PETITION ON FAILURE TO
COMPLY WITH A STATUTORY DEMAND FOR A
LIQUIDATED SUM PAYABLE IMMEDIATELY

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J U D G M E N T

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1.  This was the hearing of a bankruptcy petition presented on 17 June 2011 by Messrs Chiu, Szeto & Cheng, a firm of solicitors (“the Creditor”) against Madam Tam Mei Kam (“the Debtor”), who was formerly its client.  The petition is based on a judgment debt in the sum of HK$2,243,938.00, together with interest on that amount at the judgment rate from 5 November 2009 until payment and costs, which the Debtor was ordered to pay to the Creditor in HCA 2239/2009, and a further amount of HK$20,500.00 which the Debtor was ordered to pay to the creditor by way of costs assessed on a gross sum basis on 14 May 2010, also in HCA 2239/2009. The judgment debt was in respect of the outstanding balance of fees owed to the Creditor by the Debtor.

2.  The background to the debt can be briefly summarised as follows:-

(1)  The Debtor is the mother of the late Ms Mui Yim Fong, or Anita Mui, a well known singer and actress, who passed away on 30 December 2003.  Ms Mui left a will under which she left her residuary estate to a discretionary trust which she set up on 3 December 2003, the same day as she made her will.  HSBC International Trustee Limited (“HSBC”) was appointed as the sole executor of the will, and it was also the trustee under the trust.  Pursuant to the trust, a friend of Ms Mui (a  Mr Eddie Lau) was appointed as a beneficiary, and a Buddhist organisation known as New Horizon Buddhist Association Limited (“New Horizon”) was appointed as the repository beneficiary.  There was also a trust memorandum of wishes under which Ms Mui indicated that she wished to have certain assets distributed to Mr Lau, a sum of money set aside in order to assist her nephews and nieces to finance their education, and that the balance of the trust fund should be retained for the purpose of paying an allowance of HK$70,000 per month to the Debtor during her lifetime, after which the remaining balance of the trust fund should be distributed to New Horizon.

(2)  The Debtor issued proceedings (HCAP 2/2004) to challenge the validity of the will and trust, in which she sought a declaration that Ms Mui had died intestate and an order granting the Debtor letters of administration in respect of Ms  Mui’s estate.  At first instance, the Debtor did not advance any positive case, and simply put the defendants (HSBC, Mr Lau and New Horizon) to proof of the validity of the will and trust.  The Creditor was the firm of solicitors acting for her in these proceedings, which were dismissed by Andrew Cheung J (as he then was). At the trial, the Debtor was represented by leading and junior counsel instructed on her behalf.

(3)  Thereafter, the Debtor dispensed with the services of the Creditor and counsel instructed by them.  She appealed (unsuccessfully) to the Court of Appeal (CACV 200/2008) and then (again unsuccessfully) to the Court of Final Appeal (FACV 11/2010).  In both the Court of Appeal and the Court of Final Appeal, the Debtor sought to raise an argument to the effect that there was collusion and conspiracy on the part of Ms Sheila Ho (Ms Mui’s godmother) and Ms Doris Lau (an employee of HSBC) in relation to the preparation and execution of the will and the trust deed.  In both courts, her attempt to do so was rejected on the basis that this was a new point which could not properly be raised on appeal.  The point was dealt with by Chan PJ in the Court of Final Appeal at paragraphs 29 to 32 of that court’s judgment, where it was pointed out that:-

(a)  The Debtor’s position at the trial was to put the defendants to strict proof of the will.

(b)  Such allegations as there were in her pleading that might vaguely suggest collusion or conspiracy were not properly pleaded or particularised, and were only aimed at raising doubt about the defendants’ case.

(c)  Any suggestion of undue influence on the part of Ms Sheila Ho was expressly abandoned by the Debtor’s senior counsel at the trial.

(d)  On the facts of the case, there was no evidence to suggest that either Ms Sheila Ho or Ms Doris Lau had anything to gain from any supposed conspiracy or collusion, a matter which pointed to there being no basis for any such suggestion.

(e)  An attempt to blame the Debtor’s senior counsel for not taking the point at trial was unfair, having regard to the fact that in her own submissions she had accepted that she had been convinced by counsel that this was the wisest course to take.  In other words, she had agreed to the course taken.

(4)  While the appeal to the Court of Appeal was pending, the Creditor brought HCA 2239/2009 against the Debtor, seeking payment of the outstanding balance of fees owed to it.  The Debtor resisted payment, claiming that there had been an agreement by which the Creditor had agreed to charge a lump sum of HK$1.3 million as legal fees (including counsel’s fees) for HCAP 2/2004, and that any fees beyond that amount should only be payable if the Debtor succeeded in those proceedings.  This defence was rejected by the Master, who gave summary judgment in favour of the Creditor for the amount indicated in paragraph 1 above.  The Master’s decision was upheld by Chung J in his judgment dated 6 May 2010.  The Debtor took no steps to appeal against Chung J’s decision.

3.  After the presentation of the petition, the Debtor filed a Notice of Intention to Oppose the petition dated 9 August 2011. There, she asserted that:-

“There have been elements of fraud and dishonesty engineered by the [Creditor] both in securing the purported judgment debt and in the proceedings in relation thereto and this is a proper and justified case for the Bankruptcy Court to look behind an earlier judgment made by the Court of First Instance.”

4.  The Notice went on to suggest that:-

(1)  There had been a collateral agreement in respect of the professional fees payable to the Creditor.

(2)  The Creditor or senior counsel instructed by it had not acted in the Debtor’s best interests, and had been negligent or reckless in a way causing damage to the Debtor, such that the Debtor was not liable for the fees charged by the Creditor.

(3)  The Creditor had concealed material facts from Chung J, so as to mislead him into giving judgment in its favour.

5.  In her affirmation in opposition to the petition, the Debtor referred to the probate action and appeals, and asserted that Ms Sheila Ho and Ms Doris Lau had fraudulently procured Ms Mui to execute the will and trust, pointing to what she suggested were inconsistencies as to what Ms Mui’s wishes were, and suspicious circumstances surrounding the will and trust.  She repeated her claim that there had been an agreement to limit the fees payable to HK$1.3 million unless the probate action were successful, and complained that senior counsel had not put forward a case based on the fraudulent scheme which she alleged existed, but instead had advised her to advance different arguments, all of which failed, and which resulted in her being prevented from putting forward such a case on appeal.

6.  In her written submissions lodged before the hearing, the Debtor submitted that it was open to the court, sitting in its bankruptcy jurisdiction, to go behind a judgment and inquire into the validity of the underlying debt, and that this should be done in the present case.  She also submitted that the court should decline to make a bankruptcy order against her even if the judgment were a valid one, as justice demanded that no such order should be made.  In essence, she again relied on her assertion that counsel representing her at the trial of the probate action had not advanced the case (of fraud and collusion) that she intended to advance, and went on to assert that because the Creditor had been involved in “causing, aiding and abetting” the alleged fraud of Ms Sheila Ho and Ms Doris Lau, the Creditor was not entitled to recover the outstanding fees from her.  She also suggested that the Creditor had misled Chung J by concealing these matters from him.  She also suggested that the court should find (on the basis of her affirmation) that Ms Sheila Ho and Ms Doris Lau had been guilty of perjury, and that there had been a gross miscarriage of justice in relation to the probate action.

7.  In order to resist the making of a bankruptcy order, the Debtor must demonstrate, by sufficiently precise evidence, that there is a bona fide dispute in relation to the debt on which the petition is based.  In my view, the Debtor falls far short of doing this, and there is no merit to any of the Debtor’s submissions.

8.  The relevant judgment for present purposes is the judgment of Chung J, which confirmed the judgment debt on which the petition is based.  It is that judgment which the Debtor has to show was tainted by fraud in order to justify this court in going behind it.  However, an examination of that judgment shows quite clearly that there is no reason to think that it was in any sense obtained by fraud or deception on the part of the Creditor.  It is clear from the judgment of Chung J that the only point raised by the Debtor to resist payment of the outstanding fees was the allegation of a collateral or side agreement along the lines described in paragraphs 2(4), 4(1) and 5 above.  There was no suggestion that the Creditor (or senior counsel who had been instructed) had failed to have regard to the Debtor’s instructions, or had acted negligently or otherwise improperly in their conduct of her case. Nor is there any material before me to suggest that any such suggestion had been made to the Creditor up to that time.  In these circumstances, it is fanciful to suggest that the Creditor should have been expected to draw these matters to the attention of Chung J at the hearing of the summary judgment appeal.  There is nothing else to suggest that the Creditor had somehow obtained the judgment by fraud or by misleading the court.

9.  I am therefore quite unable to see that there was any fraud or other taint to the judgment of Chung J such as to open up the possibility of going behind it.

10.  Further, and in any event, I do not think that there is any merit in the Debtor’s suggestion that the Creditor should not be entitled to recover its fees on the basis of the allegations concerning the conduct of the probate action at first instance.  There are several reasons for this:-

(1) It appears from the judgment of Chan PJ in FACV 11/2010 (to which I have referred above) that the Debtor accepted the advice of counsel as to the way in which her case should be put at first instance.  This is not, therefore, a case of her legal advisers having ignored or failed to follow her instructions.  Rather, her case must be that the advice given was negligent.

(2) However, there is no evidence to suggest that such advice was in fact negligent.  It is well known that a party’s legal representatives should not advance a case of fraud unless satisfied that there is a sufficient basis for doing so.  The mere fact that a client wishes to make such an allegation is not enough.  As appears from Chan PJ’s judgment, the allegations which the Debtor made in her pleading in the probate action were vague and unparticularised, and were inherently improbable for the reasons there explained.  There is therefore no reason to think that the advice which the Debtor was given, and accepted, was anything other than proper and appropriate.

(3) Still less is there even a scintilla of evidence to suggest that the Creditor had somehow caused, aided or abetted the supposed wrongdoing of Ms Sheila Ho and Ms Doris Lau.  The addition of this point in the Debtor’s written submissions illustrates, in my view, the lengths to which the Debtor is prepared to go in her obstinate persistence in the views that she has formed.

11.  Finally, in relation to the allegation that the Creditor had agreed to accept a cap on the total fees to be charged of HK$1.3 million, unless the Debtor’s claim was successful, this point was squarely raised by the Debtor in the course of the summary judgment application, and was rejected by Chung J for the reasons he gave in his judgment.  There is no basis on which this matter can be reopened by the Debtor at this stage.

12.  In all the circumstances, I am quite satisfied that the Debtor has failed to demonstrate the existence of any bona fide dispute of substance in relation to the debt asserted against her, and there is, in my view, no other reason to withhold the making of a bankruptcy order against her.  I shall therefore make the usual bankruptcy order, with costs, against the Debtor.