RE GRANDEUR CONSTRUCTION CO

IN THE HIGH COURT OF JUSTICE

HONG KONG

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J U D G M E N T

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1. On the 17th February 1987 I made a receiving order against Grandeur Construction Company (the company) of which company John Lee Yiu Keung (the debtor) was the sole proprietor. I said that I would deliver my  reasons at a later date and I now proceed to do so.

2. The petitioner suffered personal injuries and loss as a result of an accident that occurred during his employment with the company on the 12th September 1978. On the 9th August 1985, he obtained judgment against the company, who did not appear at the trial, for damages in respect of the accident on the grounds of negligence and/or breach of statutory duty in the sum of $907,200 with interest and costs. No payment has been made under the judgment although the company appears to have been insured under a valid policy of insurance with the Cornhill Insurance Company Ltd.

3. A bankruptcy notice based on the judgment debt was issued on the 26th June 1986. However, service could not be effected upon the debtor in Hong Kong as he had left with his wife for Vancouver, Canada on the 5th October 1983 and he has not since returned. Prior to his departure, the debtor had been issued with an immigrant visa by the Commission for Canada in Hong Kong. A request made by the Director of Legal Aid on behalf of the petitioner for details of the debtor's address in Canada was refused on the grounds of confidentiality, but the Commission said that they would forward documents to the debtor at his last known address. Documents were later sent by the Commission on behalf of the petitioner, but were returned as the debtor had moved from that address.

4. An application was made to a Master for substituted service of the bankruptcy notice by advertisement in three Canadian newspapers, the Province or Vancouver Sun, leading newspapers in Vancouver, the national edition of The Globe and mail, a leading national Canadian newspaper and one of the Chinese newspapers published in Vancouver. An order to this effect was granted ex parte by Master Woolley based upon the evidence of Mr. McCormick who appeared for the petitioner.

5. Advertisements were duly published in the Canadian newspapers and an affidavit of service was subsequently filed. No steps were taken by the debtor to set aside the bankruptcy notice with the result that a petition based upon the failure to comply with the requirements of the bankruptcy notice was filed. An order for substituted service of the petition in the same newspapers was made by Master Woolley on the 3rd October 1986. After publication of the advertisements, an affidavit of substituted service was filed.

6. No opposition has been filed by the debtor to show cause why a receiving order should not be made. At the hearing I made an order to amend the petition by adding another act of bankruptcy to the effect that the debtor has, with intent to defeat or delay his creditors, remained out of Hong Kong. I dispensed with service of the amended petition.

7. Although there was no opposition to the petition, Mr. Robertson on behalf of the Official Receiver appeared, in effect, as amicus curiae, by submitting that the Court should consider whether the petitioner had taken all practical steps to locate the debtor and if satisfied on that matter, whether the Court could be satisfied that the debtor had received notice of the proceedings.

8. Although service of the bankruptcy notice and the petition are deemed to have been effectively served, pursuant to the terms of the Orders of Master Woolley, the Court may, nevertheless, review those Orders under section 98 of the Bankruptcy Ordinance. The helpful submission made by Mr. Robertson emanated as a result of certain correspondence between the Official Receiver and Messrs. Stevenson, Wong and Co., the solicitors for the Cornhill Insurance Company Ltd. who claim to be an interested party.

9. The provisions with regard to service of a bankruptcy notice and petition are contained in rules 48 and 59 of the Bankruptcy Rules. Rule 48 provides -

"A bankruptcy notice shall be served and service thereof shall be proved in the like manner as is by these rules prescribed for the service of a creditor's petition."

Rule 59 provides -

"A creditor's petition may be served in the same manner as a writ of summons."

10. Mr. Robertson cited a number of authorities including In re A Judgment Debtor [No. 1539 of 1936]⁽¹⁾, Re A Debtor [No. 419 of 1939]⁽²⁾, Gurtner v. Circuit⁽³⁾ and Re Stewart⁽⁴⁾ which decided that an order for substituted service should not be made unless it will, in all probability, be effective to bring notice of the proceedings to the knowledge of the person to be served. However, each of those cases necessarily depended upon the facts as presented to the Court. The first three cases related to bankruptcy proceedings whilst Gurtner v. Circuit⁽³⁾ involved a claim for damages for personal injuries suffered in a road traffic accident where the defendant was insured and could not be traced. It was held that provided that all reasonable efforts had been made to trace the defendant, the Court could make an order for substituted service on the defendant at the address of the insurers.

11. Mr. Robertson submitted that although the debtor went to Vancouver, there is no evidence that he is living there now with the result that the proceedings should be advertised in other parts of Canada which have Chinese communities. He further argued that there was no evidence to the effect that the debtor is literate and whether he was in fact likely to read any of the newspapers in which advertisements had been ordered. However, I do not consider that further advertisements are necessary for one of the papers in which an advertisement had been published is a national newspaper. Again I am of the opinion that it is unrealistic for the petitioner to provide evidence of the literacy and reading habits of the debtor which clearly are not within his knowledge. I am quite satisfied upon the evidence that the petitioner has taken all reasonable and proper steps to locate the debtor and that it is unrealistic to require the petitioner to make any further enquiries.

12. The test adopted by the Courts with regard to substituted service was originally referred to in Porter v. Freudenberg⁽⁵⁾ which was cited to me by Mr. McCormick where it was held that an order for substituted service could be made if the writ is likely to reach the defendant or come to his knowledge. Mr. McCormick also cited Jay v. Budd⁽⁶⁾ which held that an order for substituted service would be made if the circumstances of the case showed that it would be just to make such an order.

13. According to the evidence, it appears that the debtor has debts in Hong Kong amounting to about $16,000,000 from which it is reasonable to draw the inference that when he left Hong Kong in 1983, he did so with the intention of defeating or delaying his creditors.

14. Having departed from these shores, it is highly unlikely that the debtor will ever return to Hong Kong or respond to the bankruptcy proceedings.

15. Faced with the debtor's departure from the jurisdiction, the petitioner could only effect service of the bankruptcy notice and petition by way of substituted service. The only evidence of his whereabouts since he left Hong Kong, was that he went to Vancouver. Although it has not been established that he is living in Vancouver there is no evidence to the contrary. It is most probable that the debtor and his wife went to Canda with the intention of applying for Canadian citizenship which according to the Commission for Canada requires a period of three years residence in Canada within a period of four years immediately preceding the date of the application. As a result I accept from the evidence available that the debtor is living in Canada. In the circumstances, the only practicable steps to advertise the proceedings would be in newspapers in Vancouver and in a national newspaper. By placing the advertisements in these newspapers, there is, of course, no certainty that they will come to the knowledge of the debtor, but that criticism may well be directed to substituted service of proceedings in any newspaper.

16. There are serious consequences which arise from the making of a receiving order, but for all practical purposes, they are hardly likely to affect the debtor in this case. Any prejudice which the debtor may suffer is, in my judgment, heavily outweighed by the prejudice that would be suffered by the petitioner who at the present time, has been deprived of his damages for such a long period of time.

17. In my judgment on the evidence that was placed before him, Master Woolley was entitled to make the orders for substituted service on the grounds that the advertisements that he ordered to be published were the only means available that would be likely to reach the debtor or come to his knowledge. It would have been unjust had he refused to make those orders. Accordingly, in all the circumstances and in the exercise of my discretion, I am satisfied that service of the bankruptcy notice and petition were properly effected upon the debtor. I therefore made a receiving order with the usual order as to costs.

⁽¹⁾ [1937] 1 Ch. 137

⁽²⁾ [1939] 3 All. E.R. 429

⁽³⁾ [1968] 2 Q.B. 587

⁽⁴⁾ [1967] 10 F.L.R. 99

⁽³⁾ [1968] 2 Q.B. 587

⁽⁵⁾ [1915] 1 K.B. 857

⁽⁶⁾ [1898] 1 Q.B. 12