Woo Chor Wah and Ex Parte: Lehin Securities Ltd

HCB 4583/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 4583 OF 2001

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J U D G M E N T

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1. This is a petition presented by a judgment creditor based on two judgment debts and three allocaturs for costs in HCA No. 12480 of 1997, HCA No. 12481 of 1997 and CACV No. 341 of 1999. The last mentioned proceeding is an appeal of the debtor against the judgment in HCA No. 12481 of 1997. The total amount of the judgment debts and costs is HK$2,166,693.71, with interest calculated up to 25 May 2001.

2. The petitioner served a statutory demand on the debtor personally on 2 June 2001. The petition herein was filed on 28 June 2001 and it was served on the debtor personally on 26 September 2001. In the petition, it is stated that the unsecured part of the debt is in the sum of HK$1,346,693.71. This is because the petitioner has obtained a charging order against a property of which the debtor is the legal owner. It is the property at Beacon Heights, Phase II, Block 17, 1/F, Flat F, No. 17 Lung Ping Road, Kowloon ("the property").

3. It is the petitioner's case that the debtor's beneficial interest in the property is one-quarter, hence after making allowance for the secured part of the debt which is equivalent to one-quarter of the value of the property, the unsecured part of the debt according to the petitioner's valuation would come up to the sum that I have mentioned in the figure of approximately HK$1.3 million.

4. The debtor opposes the petition on two broad grounds. Firstly, the judgment is being challenged by the debtor. She has on 24 November 2001 filed an application for leave to appeal to the Court of Final Appeal out of time. It was submitted by Mr Yau Chap Yin on her behalf that she has good grounds to obtain leave to appeal out of time from the Court of Final Appeal and her intended appeal is meritorious, hence the Bankruptcy Court should not deal with the petition until after the debtor's application and intended appeal to the Court of Final Appeal have been determined. The second ground put forward on behalf of the debtor for opposing the petition is that the debtor has a three-quarter interest in the property, not a one-quarter interest. Hence the petitioner is a fully secured creditor. I would deal with the two grounds in order mentioned above.

5. The judgment of the Court of First Instance was given on 22 October 1999. Chung J found that the debtor was liable to the petitioner in the sum of HK$729,937.67. The debt arose out of a margin trading account of the debtor with the petitioner. I note in the judgment that various allegations had been made by the debtor's counsel of misconduct on the part of the broker who handled her account. Notwithstanding such misconduct as alleged, the judge accepted the broker's evidence and rejected the debtor's evidence, holding that the debtor was an unreliable witness.

6. The debtor then appealed to the Court of Appeal, and her appeal was dismissed on 30 May 2000. She made an application to the Court of Appeal for leave to appeal to the Court of Final Appeal. Her application was refused by the Court of Appeal on 20 October 2000. It is apparent from the papers submitted by the debtor to the Court of Appeal and from the judgment of the Court of Appeal, and I also understand from the petitioner's solicitor, Mr Terry Liu who have acted for the petitioner throughout in the various proceedings, that the Court of Appeal had considered the point raised by the debtor regarding the misconduct of the broker who was reprimanded by the Securities and Futures Commission for breach of provisions of the Code of Conduct and Guidelines which applied to securities' brokers.

7. The Court of Appeal rejected the submission that there is a question of general public importance involved and refused leave to appeal to the Court of Final Appeal. For me to adjourn the bankruptcy proceedings today, I must be satisfied that the application for leave to appeal to the Court of Final Appeal out of time is a bona fide application. In other words, that the grounds relied on by the debtor are not unarguable. Notwithstanding the submissions made on behalf of the debtor and I have fully considered the grounds put forward by the debtor in her Amended Application for leave to appeal in FAMV No. 27 of 2001 dated 30 November 2001, I am not persuaded that her application is a bona fide application in the sense that I have mentioned.

8. I also reject the submission of Mr Yau that the debtor is entitled as of right to appeal to the Court of Final Appeal. The wording of section 22(1)(a) of the Hong Kong Court of Final Appeal Ordinance is clear. The amount of the final judgment of the Court of Appeal does not exceed HK$1 million.

9. Besides, the debtor has not put forward any or any reasonable ground why no action was taken by her to apply for leave to appeal to the Court of Final Appeal until one year after her application for leave was dismissed by the Court of Appeal. I also agree with the views of the Court of Appeal that there is no question of general public importance involved in the intended appeal.

10. I turn to consider the second ground of opposition. It is pertinent to note the following matters. After the petitioner has obtained a charging order on the property, the petitioner commenced HCMP No. 7779 of 1999 to enforce the charging order. Initially, the debtor has maintained in her affirmation filed in the HCMP proceedings that she is holding one-quarter of the interest in the property for her children, and that she could not sell the property without the consent of her former cohabitee Mr Wong Yuk Fung. Mr Wong then commenced HCA No. 7091 of 2000 against the debtor, claiming that he has a beneficial interest in the property to the extent of a half share.

11. An order was made by a Master adjourning the HCMP proceedings until after the trial of the High Court Action commenced by Mr Wong. The debtor filed her amended defence in the High Court Action in which she alleged that the shares of the property are held as follows: three-quarter share belongs to the children beneficially and of which one-quarter is held by the debtor as trustee on behalf of the children; the remaining one-quarter share belongs to the debtor beneficially and legally. In an affirmation of the debtor filed in the bankruptcy proceedings on 20 November 2001, it is alleged by her that she owns a three-quarter interest in the property beneficially and given her share of beneficial interest in the property, the petitioner is a fully secured creditor. The debtor has not filed any affirmation to explain the inconsistent version put forward in her amended defence in the High Court Action.

12. I do not accept a have allegation made by the debtor in these proceeding which is wholly inconsistent with the stance she has taken in the High Court Action. It would appear that regardless of whether Mr Wong holds a half share in the property beneficially as alleged by him or whether the children owns a three-quarter interest in the property beneficially as asserted by the debtor in her amended defence, her beneficial interest in the property would only be one-quarter. Even if the value of the property is taken to be the open market value according to the valuation given in June 2000, and not the forced sale value as taken in the petition, the unsecured part of the debt would greatly exceed the threshold of HK$10,000.00 in the Bankruptcy Ordinance.

13. I am of the view that the second ground of opposition put forward is also without merit. As the debtor has failed to put forward any reasonable grounds of opposition and she is unable to pay the debt, I make a bankruptcy order and award costs to the petitioner.