RE WONG CHIU WO RICHARD

HCB 3225/2020

[2021] HKCFI 531

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3225 OF 2020

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R E A S O N S   F O R   J U D G M E N T

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1.  At the hearing of the petition presented by Mr Iu Wai Ching Jonathan Dominic (“petitioner”) on 21 May 2020 (as amended on 6 July 2020) (“Petition”), I made the usual bankruptcy order against Mr Wong Chiu Wo Richard (“debtor”). These are the reasons for my judgment.

2.  The Petition is based on the debtor’s failure to satisfy a statutory demand served upon him by way of substituted service on 8 July 2019 whereby the petitioner demanded the debtor to pay $4,712,661.33 (“SD”), being (1) the judgment debt in the amount of $4.4 million together with interest[1] granted by Master Suen on 13 November 2018 in HCA 1115/2018 (“Judgment”); and (2) the costs of the Charging Order Absolute awarded to the petitioner on 23 January 2019 (together “Debts”). 

3.  Shortly after the Judgment, on 21 December 2018, the petitioner obtained a charging order nisi over the property at Flat B, 12/F, Tower 5, La Grove, Yuen Long (“Property”).  The Property has since 11 April 2013 been assigned to and registered in the name of the debtor. 

4.  On 23 January 2019, the charging order nisi was made absolute.  At that time, the Property was already subject to 2 prior encumbrances namely:

(1)  a legal charge dated 22 February 2010 executed in favour of Hang Seng Bank Limited as security for $2,744,000; and

(2)  a second mortgage dated 30 April 2018 executed in favour of Yes Choice Universal Investment Co., Limited as security for up to $6 million.

5.  On 29 January 2019, another judgment creditor, Cheung Siu Ling (“supporting creditor”), obtained a charging order nisi over the Property, which was registered against the Property on 13 February 2019. 

6.  The debtor appealed against the Judgment, which was dismissed by Ng J on 2 April 2019. 

7.  Following the debtor’s failure to satisfy the SD within 21 days of service of the SD, on 21 May 2020, the Petition was presented and was fixed to be heard before a Master on 29 July 2020. 

8.  Shortly before the hearing, on 27 July 2020, the debtor issued an application to set aside the SD (HCSD 39/2020) on the ground that in the SD, the petitioner failed to state that he holds security in the form of the Charging Order Absolute or to put a value on such security and, as such, the SD falls foul of the requirement of rule 44(5) of the Bankruptcy Rules (“BR”) and should be set aside under 48(5)(c) of the BR (“Application”).

9.  By the time the Application was issued:

(1)  the time limit prescribed in rule 47(2) of the BR for making the Application had already expired for 14 months (on 26 May 2019); and

(2)  the petitioner had already filed the amended Petition (on 6 July 2020) to state that he holds security in the form of the Charging Order Absolute, and will give up such security for the benefit of all creditors in the event that a bankruptcy order is made against the debtor.

10.  In view of the Application, the Master twice adjourned the Petition to 14 October 2020 and 24 February 2021 respectively. 

11.  In the meantime, the debtor issued another application in HCA 1115/2018 for “extension of time”, presumably to appeal against Ng J’s decision to dismiss the debtor’s appeal against the Judgment, and “stay of execution” of the Judgment.  The application was heard before Ng J on 17 December 2020 and was adjourned to 23 April 2021.  The debtor was ordered to pay the costs of and occasioned by the adjournment in the amount of $53,000 to the petitioner (“1^st Costs Order”). 

12.  On 27 January 2021, I dismissed the Application on the bases that (1) the debtor failed to show that there were special circumstances and good reason to justify an extension of time by 14 months for making the Application; and (2) the Application had already been taken over by events, given that the Petition had already been amended to state the security held by the petitioner and the Petition would soon be heard by the Court.  I ordered the debtor to pay the costs of the Application which was assessed at $100,000 (“2^nd Costs Order”). 

13.  The debtor has not paid the Debts or the amounts due under the 1^st Costs Order and the 2^nd Costs Order. 

14.  At the hearing, Mr Nicholas Oh, counsel for the debtor, opposes the Petition and proposes a 3 months’ adjournment on the grounds that:

(1)  the petitioner failed to state the security and its value in the SD;

(2)  the petitioner has not done all that is reasonable for the purpose of bringing the SD to the debtor’s attention;

(3)  although the second mortgagee has on 11 February 2021 obtained an order for vacant possession of the Property, the balance of proceeds “may be sufficient to repay the Debts”; and

(4)  the debtor’s application for extension of time to appeal against Ng J’s decision will be heard on 23 April 2021. 

15.  None of the above ground has any merit. 

16.  As regards the failure to state the security in the SD:

(1)  the point was raised by the debtor in the Application, which I dismissed on 27 January 2021 on the basis that it had already been taken over by events.  It is not open to the debtor to resurrect the same point for the purpose of opposing the Petition; and

(2)  the argument of Mr Oh shows a lack of understanding of the nature and purpose of a statutory demand, which is to establish the debtor’s “inability to pay” the debts founded on the demand and no more (Budge v AF Budge (Contractors) Ltd [1997] BPIR 366 at 372A-D;Owo-Samson v Barclays Bank Plc & Boyden (No 1) [2003] BPIR 1373, at §16). 

17.  As regards service of the SD, I agree with Mr Ernest Koo, counsel for the petitioner, that at the time the Application was made, the debtor did not take issue with the service of the SD.  That being the position, the debtor must be taken as having accepted the validity of the service of the SD. 

18.  The third ground concerns the debtor’s inability to pay.  Other than the bare assertion of the debtor, there is nothing to show that there will be surplus available for payment of the Debts.  In my judgment, the petitioner has demonstrated that the debtor is unable to pay his debts, in light of the following matters:

(1)  The Debts remain unpaid, notwithstanding the fact that the Judgment had been obtained by the petitioner in as early as November 2018 and the SD served upon the debtor in July 2019;

(2)  The debtor has not paid the amounts due under the 1^st Costs Order and the 2^nd Costs Order; and

(3)  The debtor is indebted to the supporting creditor in the amount of $1,738,847.76, being the judgment debt awarded against the debtor in HCA 1726/2018.  The supporting creditor has presented a bankruptcy petition in HCB 4593/2020. The debtor has not adduced any evidence to show that he has the means to pay the debt owed to the supporting creditor.

19.  As regards the coming hearing for extension of time to appeal against Ng J’s decision, Mr Oh has not articulated any basis to show that there is merit in the intended appeal or that the Court will grant the extension of time sought.  In any event, as the Judgment has not been stayed, the petitioner is entitled to rely on the Judgment and the Debts to demonstrate the debtor’s inability to pay debts.