XCHRX WONG PING KWONG v. WING FAI CONSTRUCTION CO. LTD.

HCSD 8/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY DEMAND NO. 8 OF 1998

______________________

______________________

________________

D E C I S I O N

________________

1. This is an application to set aside a Statutory Demand based on Bankruptcy Rules r.48(5)(b) & (d). The Applicant claims that the judgment on which the Demand is based had been obtained irregularly because, he says, he had not been served with the Writ and he claims he has a substantial defence in that his firm was a nominee or front for the Plaintiff, i.e. the Respondent in this matter.

2. There were four defendants in that Action on which the judgment was obtained. The 1st Defendant has filed a Defence and the pleadings are now closed. The 2nd and 3rd Defendants also had default judgments against them and they have just had their default judgments set aside by a Master.

3. The default judgment obtained against the present Applicant was obtained in April 1998, the Statutory Demand was issued in June 1998 and it was served on the Applicant in August 1998:- that is asserted by the Applicant and that has not been disputed by the Respondent.

4. There has as yet been no application to set aside the default judgment in the Action. Mr. Leung appearing for the Applicant has referred me to a passage in Atkin's Court Forms (1993 issue) Vol. 7, p. 43 from which he seeks to justify the procedural route that he has chosen to take, namely to apply first to the Bankruptcy Court to set aside the Statutory Demand rather than to have applied in the Action to set aside the default judgment.

5. Mr. Wong appearing for the Respondent says that this Court should not allow or adjourn the application to set aside the Statutory Demand because of 3 reasons. First, he says there was an abuse of process on the part of the Applicant in not applying to set aside the default judgment in the Action earlier; secondly, he says that the Court must assume that the judgment was obtained regularly and that it should proceed as per the Practice Direction in England published at [1987] 1 WLR 119 and referred to by Ferris J. in his decision in Re a debtor (No. 657/SD/91) ex parte Inland Revenue Commissioners v. The Debtor [1993] BCLC 180; thirdly, he says that his client, the Respondent, would be prejudiced because any adjournment of any application to set aside the Statutory Demand would lead to a delay in the presentation of the Petition, because the date of presentation of the Petition triggers off certain ramifications in the Bankruptcy Ordinance.

6. In relation to these 3 points, my decision is as follows. In relation to the first point, I am not convinced that there has been any deliberate abuse of the process by the Applicant. It has not been shown to me to be an intentional abuse and I am prepared to accept for present purposes that there was a procedural error in not applying in the Action for setting aside of the default judgment earlier.

7. In relation to the second point, I agree with Mr. Wong that the Court must assume that this was a regularly obtained judgment until the Court determines to the contrary. It is not disputed that the address of the Applicant was correctly stated in the Writ and according to the affirmation of the process server, the Writ was inserted in a letter-box at that address. No doubt, a dispute of fact may arise but in relation to the address (at least, as opposed to the 2nd Defendant's case) one must assume that this is a regular judgment until shown otherwise.

8. In relation to the third point, I have taken into account the fact that there has been some delay on the part of the Plaintiff/the Respondent in that the Statutory Demand was issued 2 months after the default judgment was obtained and was served only 4 months after the default judgment was obtained.

9. On the other hand, I have also taken into account the fact that precious time has been wasted by the Applicant in that in July the Applicant was aware (by service of the Prohibition Order) of the default judgment having been obtained in April. It is now January 1999, so there has been a delay from July to January which is due entirely to the Applicant choosing not to set aside the default judgment in the Action.

10. In the exercise of my discretion, I consider that to be an important aspect of the case and I also take into account that I must assume the judgment to be regular unless shown otherwise. I would follow with respect the reasoning in the judgment of Ferris J. in Re a debtor (No. 657/SD/91) ex parte Inland Revenue Commissioners and since this Statutory Demand is based on a judgment which I have said I assume to be regular, and in particular, due to the delay from July to January, I consider that the proper approach would be not to set aside the Statutory Demand and to let the matter proceed to the hearing of the Petition. The prejudice that would be suffered by the Respondent if there is any further delay in the presentation of the Petition, is to my mind, substantial. The prejudice suffered by the Applicant would only be the costs wasted at the hearing of the Bankruptcy Petition, when the Applicant would have to ask for a stay of the hearing of the Petition in the event that the application to set aside the default judgment in the Action has not yet been heard. So the order I will make today is that the Statutory Demand would not be set aside, but the matter would proceed to the Petition.