RE: YUEN YUI HING and EX PARTE: ALLIED CAPITAL RESOURCES LTD., a Creditor

HCB 4033/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS NO. 4033 OF 2000

____________

____________

___________________________________

REASONS FOR JUDGMENT

___________________________________

1. This is a bankruptcy petition based on a judgment debt in the sum of HK$1,976,463.20 with interest thereon in High Court Action No. 15154 of 1999 dated 10 November 1999. The statutory demand was served on the debtor personally on 6 September 2000 and the petition herein was filed on 13 October 2000. The petitioner obtained an order for substituted service of the petition on 21 December 2000 and that order has been complied with. At the hearing on 6 August 2001, I made a bankruptcy order with costs to the petitioner and stated that the reasons for my judgment would be handed down.

2. The debtor sought to have the petition adjourned until after the hearing of an appeal to the Court of Appeal from a decision of Dep. J. Woolley on 24 July 2001 in which he allowed an appeal of the petitioner in the High Court Action from an order made by Master Yuen on 6 June 2001. The parties have placed before me the Reasons for Decision of Dep. J. Woolley and the evidence in the High Court Action placed before the Judge. In addition, I have considered the third affirmation of the debtor filed on 4 August 2001 in which he exhibited his Notice of Appeal to the Court of Appeal and deposed to various other matters to show that he has good grounds of appeal. Having considered the above documents and listened to submissions on both sides, I was not persuaded that the debtor has made out valid grounds of appeal with reasonable prospects of success. I therefore refused the debtor's application to adjourn the hearing of the petition. The detailed reasons appear below.

3. The debtor is the guarantor of the indebtedness of a company known as Gold Tube Limited ("Gold Tube") and the petitioner had granted facilities to Gold Tube on the security of, inter alia, the guarantee of the debtor. As Gold Tube had defaulted in payment, the petitioner made a demand against the debtor under the guarantee. The writ in the High Court Action was issued on 21 September 1999 and default judgment was entered on 10 November 1999. It is not in dispute that an agreement as evidenced by a letter of the petitioner to Gold Tube marked for the attention of the debtor dated 12 November 1998 (it is common ground that the correct date should have been 12 November 1999) was entered into between the petitioner and Gold Tube. By this agreement, the petitioner allowed Gold Tube to pay the outstanding debt which was in excess of HK$1.8 million by monthly instalments of HK$5,000.00 each. In the letter, the petitioner asked Gold Tube to keep its promise for the monthly payment, "otherwise, further legal action will be imposed."

4. Instalment payments of HK$5,000.00 were made pursuant to this agreement until about early 2000 when the amount paid was reduced from HK$5,000.00 to HK$2,500.00. After making a few instalments in this reduced figure, no further payment was made by Gold Tube or the debtor. It was in those circumstances that the petitioner issued a statutory demand on 6 September 2000.

5. When the matter first came before me on 15 January 2001, I adjourned the petition and gave directions for the parties to file evidence as it was alleged by the debtor that he had reached an agreement with the petitioner to pay by instalments and he had not defaulted in payment. The matter was adjourned in February 2001 because the debtor was late in filing evidence notwithstanding the directions given. At the hearing on 26 March 2001, I was informed by the debtor's solicitor that an application had been taken out by the debtor and Gold Tube to set aside the default judgment in the High Court Action. Accordingly, I adjourned the bankruptcy petition until after the determination of the debtor's application in the High Court Action.

6. What happened in the High Court Action was as follows. On 24 March 2001, the debtor and Gold Tube, as the first and third defendants in that action, filed an application to set aside the default judgment. On 31 May 2001, they issued a summons seeking a stay of execution of the default judgment on the ground that "[the petitioner] has agreed not to take further legal action or enforcement proceedings against [Gold Tube and the debtor] if [Gold Tube and the debtor] were to pay [the petitioner] a sum of HK$5,000.00 each month." On 5 June 2001, Master Yuen made an order giving leave to the debtor and Gold Tube to withdraw their summons filed on 24 March 2001 to set aside the default judgment. On 6 June 2001, the Master made an order on the summons issued on 31 May 2001 and ordered that there be a stay of execution of the default judgment until the petitioner "be in a position to establish a valid resile from the agreement evidenced in the letter dated 12 November 1999 from [the petitioner] to [Gold Tube]". This order was set aside by Dep. J. Woolley on the petitioner's appeal from the Master's decision.

7. The grounds for the decision of the Judge may be summarised as follows. Firstly, he held that there is no jurisdiction under O.45 r.11 of the Rules of the High Court upon which the application was made for a stay of execution to be granted. Under that provision, an application for stay of execution can only be brought on the ground of matters which have occurred since the date of the judgment. Having considered the evidence filed by the parties, and having noted in particular that it was the case of the debtor and Gold Tube that the agreement for instalment payment of HK$5,000.00 was made before the default judgment, the Judge was satisfied that the agreement evidenced by the letter dated 12 November 1998 (the correct date of which should have been 12 November 1999) was made before the default judgment was entered. Hence, the application for stay of execution of the judgment must fail on this ground alone as being outside the provisions of O.45 r.11.

8. In the hearing before me, it was submitted by the debtor's solicitor, Mr Cheng Chi Hung, that the debtor would argue on appeal that the learned Judge had erred in this ruling in that he had failed to look at "the whole conduct of the parties". I am quite unable to see how that ground could arguably be made out as it is apparent from the Reasons for Decision that the Judge has considered thoroughly the evidence filed on both sides before he arrived at the conclusion that the agreement to pay by instalments was made before the judgment was entered.

9. The next ground for the Judge in allowing the appeal from the Master was that the debtor and/or Gold Tube had in any event defaulted on the payments required under the agreement to settle, whether this be an amount of HK$5,000.00 or HK$2,500.00 a month, as it would appear from the evidence that the debtor and/or Gold Tube had made no further payment of even HK$2,500.00 after making a few instalments. It does not appear from the Notice of Appeal that the debtor would intend to challenge this finding of the Judge. However, in the third affirmation he filed in the bankruptcy proceedings on 4 August 2001, the debtor raised for the first time that there was yet another agreement made in June 2000 whereby the petitioner agreed to waive the monthly payment of HK$2,500.00 by the debtor altogether starting from August 2000. This is a completely new allegation not advanced in any of the affirmations that the debtor had filed in the High Court Action or in the two previous affirmations he filed in the bankruptcy proceedings. It is doubtful if he could rely on this evidence on appeal. In any event, I regard this as incredible as his alleged variation of the agreement to reduce the monthly instalment from HK$2,500.00 to nil was advanced only after Dep. J. Woolley had found that the debtor was in breach of the alleged agreement in that he had failed to pay even HK$2,500.00 a month.

10. The last ground of the Judge in allowing the appeal from the Master's order relates to promissory estoppel. The Judge rejected the argument advanced by the debtor that promissory estoppel could be invoked. In any event, he held that the promissor could resile from his promise on giving notice to the other party as it is well established that the effect of this doctrine is only suspensive in nature. I have considered the ground in the Notice of Appeal as well as the submissions made by the debtor's solicitor on the consideration allegedly provided by the debtor and the reasons advanced for the debtor's argument why the petitioner should not be allowed to resile on the promise. I am not persuaded there are prima facie grounds for arguing that the Judge had erred in his holding on promissory estoppel.

11. Lastly, the debtor has raised in his third affirmation filed on 4 August 2001 that he is seeking legal advice whether he can still make a fresh application to set aside the default judgment, notwithstanding he was given leave by the Master on 5 June 2001 to withdraw his application to set aside the judgment. This is not mentioned in the Notice of Appeal that the debtor has filed on 23 July 2001 and the debtor's solicitor has made no submission to me as to the ground upon which such an application could be made to the Court of Appeal. No or no valid basis has been put forward by the debtor to support this proposed application.

12. For the above reasons, as the debtor has failed to satisfy me there are grounds of appeal with reasonable prospects of success, I made a bankruptcy order with costs to the petitioner.