RE WONG WAI CHI

HCB 571/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCYPROCEEDINGS NO. 571 OF 2005

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J U D G M E N T

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1.  This is a petition presented by the Bank of China (Hong Kong) Limited as the successor corporation of China and South Sea Bank Limited against Wong Wai Chi (“the debtor”), based on a judgment debt in HCA No. 2611 of 2001.  I shall refer to the petitioner and its predecessor interchangeably as “the bank”.

2.  Judgment was obtained by the bank in an application for summary judgment after a contested hearing.  The debtor was the 1^st defendant in the High Court Action, the 2^nd defendant was the co-guarantor.  They were represented by separate counsel.  The bank claimed against both on a guarantee they provided in June 1997 to guarantee the indebtedness of Modern Prosper Limited (“MPL”) to the extent of HK$20,330,000.00.  On 5 October 2001, Deputy Judge Gill gave judgment in favour of the bank against both defendants, both were ordered to pay the bank HK$19,494,758.71, with interest on the principal sum of HK$16,548,906.06 from 18 May 2001 at the rate of HK$7,027.62 per day up to 5 October 2001 and thereafter at judgment rate until payment.

3.  No payment was made by the debtor.

4.  In about February 2003, the bank sold a property at Wun Sha Street that had been mortgaged by MPL at HK$7.2 million.  After deducting the necessary expenses, the entire balance of HK$6.8 million odd was applied to reduce in part the judgment debt from HK$22 million odd to HK$15 million odd.

5.  In November 2003, the bank issued a statutory demand to the debtor (“the 1^st statutory demand”) demanding HK$16,493,279.49 as at 19 November 2003, being the date of the 1^st statutory demand.

6.  From November 2003 to September 2004, the bank tried to serve the 1^st statutory demand on the debtor personally.  The debtor replied by letters dated 17 March 2004 and 14 April 2004 claiming that he was out of Hong Kong as he was on business trip.  Eventually the bank managed to serve this on the debtor personally on 21 September 2004.

7.  Owing to a clerical error in the 1^st statutory demand in that on page 2 the judgment on which the debt was founded was not correctly described and the figure of indebtedness was wrongly stated, the bank decided not to rely on the 1^st statutory demand to found its creditor’s petition, notwithstanding these particulars were correctly given on pages 1 and 4 of the 1^st statutory demand.

8.  On 12 October 2004, the bank issued a fresh statutory demand to the debtor (“the 2^nd statutory demand”) demanding HK$17,622,775.94 as at the date of the 2^nd statutory demand.  The difference in the figures of the 2 demands was due to the interest that had accrued after November 2003.

9.  From October 2004 to December 2004, the solicitors of the bank tried to serve the 2^nd statutory demand on the debtor personally.  Altogether 6 appointment letters were sent to the 2 last known addresses of the debtor.  It is clear that the appointment letters had come to the debtor’s attention, and he was aware that the bank was trying to serve a statutory demand on him, as he had sent 2 letters to the bank’s solicitors in response dated 26 October 2004 and 21 December 2004, and the solicitors had received three telephone calls in relation to the appointment letters, two were made by someone on the debtor’s behalf.  Unlike the instances when the debtor did respond to the attempted service of the 1^st statutory demand, the debtor did not indicate on any of these occasions when he was responded to the appointment letters of the 2^nd statutory demand when he would be available to accept service.

10.  On 1 November 2004, the bank advertised the 2^nd statutory demand in a Chinese newspaper circulating in Hong Kong.

11.  The bank applied to a Master for leave to file the petition founded on the 2^nd statutory demand.  Under rule 49(9) of the Bankruptcy Rules, the court must be satisfied that the creditor has discharged the obligation imposed on him by rule 46(2) before allowing a petition to be filed.

12.  Under rule 46(2), the creditor must do all that is reasonable to bring the statutory demand to the debtor’s attention and, if practicable in the particular circumstances, to cause personal service of the demand be effected.

13.  On 14 January 2005, a Master gave leave to the bank to file this petition.

14.  The petition was presented on 20 January 2005, it was served on the debtor personally on 8 March 2005.

15.  The debtor filed two affirmations in opposition in these proceedings.

16.  In his 2^nd affirmation filed on 13 May 2005.  The debtor asked for leave to apply to set aside the statutory demand.  Under rules 47(1) and (2), the time within which the debtor may apply to set aside the statutory demand is 18 days from 1 November 2004, the date when the 2^nd statutory demand was advertised.

17.  The debtor is out of time for making an application to set aside the statutory demand.  There are no good grounds for extending time to allow him to apply to set aside the demand.  In any event, this is the hearing of the petition.  The debtor can raise the same objections as grounds in opposition to the petition.

18.  I turn to the grounds of opposition raised by the debtor.

19.  Firstly, the debtor contended that the order for substituted service of the 2^nd statutory demand was not justified.  He does not understand the procedure and requirement for service of a statutory demand.  No order for substituted service of a statutory demand is required to be made and none has been made.

20.  In the present circumstances, I am satisfied that the bank’s solicitors have complied with rule 46(2).  They had done all that was reasonable to bring the 2^nd statutory demand to the debtor’s attention and they had brought it to the debtor’s attention.  That they were not able to serve the 2^nd statutory demand on the debtor personally was not due to any want of efforts on their part.  As the debtor had given no indication at all in response to all six appointment letters when he would be available to accept service, it was not practicable to serve the 2^nd statutory demand on him personally.  The Master was correct in given leave to the bank to file the petition under rule 49(9).

21.  There is no substance in the contention that in seeking leave to file the petition, it was incumbent on the bank to disclose to the Master the 1^st statutory demand.  The petition the bank sought to present was founded on the 2^nd statutory demand.  The 1^st statutory demand is totally irrelevant.

22.  Secondly, the debtor said that the amount given in the 2^nd statutory demand is substantially disputed.  I find no substance in this dispute either.  There is nothing in the point that there was a difference in the amounts stated in the two statutory demands.  Further, the bank had clearly brought into account the proceeds of sale of the mortgaged property at Wun Sha Street and used the whole remaining balance to reduce the judgment debt.  The property was sold at a slightly higher price than the open market price given in two independent valuations obtained by the bank just before the sale.

23.  There is no evidence from the debtor that the price at which the property was sold in about February 2003 was significantly lower than the market price at that time.  The debtor’s bare assertion of what the market price of the property is in 2005 is simply not relevant.

24.  The bank has filed evidence giving a breakdown and an explanation of how the amounts demanded in the two statutory demands were calculated.  At the hearing today, the debtor raised for the first time that the sale of the property was in February 2003 and the bank had only applied the net proceeds to reduce his indebtedness on 8 April 2003, and that he had suffered prejudice due to two months’ delay.

25.  This matter was not raised in the two affirmations he filed in opposition in April 2005 and May 2005.  This is not something that the bank can answer without particulars of when the proceeds of sale were received.  I do not propose to take this into account.

26.  In any event, the amount of indebtedness of the debtor is well in excess of HK$10,000.00, which is the minimum figure for the amount of a debt in a statutory demand.

27.  Thirdly, the debtor said that the validity of the judgment debt is in dispute.  He claimed that he should be released from the guarantee upon the sale of the entire shareholding of MPL to a purchaser in October 1998, alleging that an oral agreement to this effect was reached with an officer of the bank.  This same defence was raised before Deputy Judge Gill in the High Court Action and was rejected.  The Judge found the allegation incredible.  It was a bare allegation, not supported by any documents or contemporaneous records.  It would be extraordinary for an officer of the bank to agree to reduce its security without first ensuring a satisfactory alternative, and it would be entirely fanciful that the alleged agreement was not in writing.

28.  There is no appeal from this judgment given 4 years ago.  It is far too late for the debtor to say today that he should be given an opportunity to seek leave from the Court of Appeal to appeal out of time.

29.  There are no sufficient grounds to go behind the judgment at all.  The further evidence adduced by the debtor in these proceedings would not have altered the position.  Even with the new evidence he put in, it does not seem to me that the court would have come to any different decision on the application for summary judgment.

30.  In summary, there are no valid grounds of opposition.

31.  I make a bankruptcy order against the debtor.  The costs of the petitioner are to be paid out of the bankrupt’s estate.