RE AFZAL MOHAMMAD

HCB1743/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO.1743 OF 2003

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J U D G M E N T

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1. This petition is based on a default judgment obtained by the petitioner in District Court Civil Jurisdiction Action No.4043 of 2002 on 5 August 2002 in the sum of $89,460.02, with interest.

Background

2. The facts leading to this petition are not in dispute. At all material times, the debtor was engaged by the petitioner as its insurance agent. The agent's agreement was signed by the debtor on 30 June 1998 and by the petitioner on 25 July 1998 which took effect from 20 July 1998. Clause 24 of that agent's agreement provided that on termination any debt owed to the petitioner by the debtor shall become due and payable immediately unless otherwise agreed by the petitioner in writing.

3. By an agent's advance agreement between the petitioner and the debtor which was signed by the debtor on 30 June 1998 and by the petitioner on 25 July 1998, the petitioner agreed to make advances to the debtor from time to time, at the latter's request. Such advances were to become repayable against any commission payable to the debtor under the agent's agreement.

4. By letter dated 29 June 1998, countersigned by the debtor on 3 July 1998, the petitioner appointed the debtor as an assistant sales manager. That letter provided that the debtor would be paid, upon his application, a monthly career advance subject to conditions specified therein.

5. There is a further document signed by the debtor on 30 June 1998 which was entitled "Repayment of Advance by Agent". By that document, the debtor applied for, among other things, career advances, and the petitioner approved the same. That document also provided that the debtor agreed to repay to the petitioner the total outstanding net indebtedness in the event of termination of the agent's agreement.

6. Between July 1998 and June 1999, a total sum of $122,198.40 had been advanced to the debtor as career advances. The agent's agreement was terminated on 29 January 2002. As at that day, the total amount of indebtedness owed to the petitioner by the debtor, pursuant to the agreement referred to above, stood at $89,460.02, which the debtor failed to repay.

7. On 2 July 2002, the petitioner commenced the District Court Action and obtained judgment by default on 5 August 2002. On 11 September 2002, the statutory demand in these proceedings was served on the debtor by way of substituted service. The demand was not met. The petitioner then took out the present petition on 28 January 2003.

The law

8. The applicable legal principles are well settled. The burden rests squarely on the debtor to satisfy the court that he has a bona fide dispute on substantive grounds regarding the petitioner's debt in question. Since the debt in question is a judgment debt, when hearing a bankruptcy petition based on such a debt, the court has jurisdiction to go behind the judgment or order and determine whether there was a good consideration for the debt in question. But the court would not normally go behind the judgment or order unless there was sufficient reason to do so. As a general principle, the validity of the judgment debt would only be inquired into where there was evidence of fraud or collusion or miscarriage of justice or there was no good petitioning creditor's debt apart from the judgment. Raising allegations of fraud alone is not sufficient for the purpose of persuading the Bankruptcy Court to go behind the judgment that gave rise to the petitioning creditor's debt. The debtor must condescend upon particulars and support the allegations with clear and credible evidence. These legal principles have been set out by me in HCB581/2003, which judgment was handed down on 15 May 2003.

No bona fide dispute

9. With these legal principles in mind, I turn to examine if the debtor had discharged the burden to raise a genuine dispute on substantive grounds regarding the judgment debt. Miss Chu appearing for the petitioner has helpfully summarised the gist of the debtor's evidence in paragraph 6 of her written skeleton submissions. In brief, the debtor did not seek to challenge or dispute that he was aware of the nature of those advances in question and that he was to repay those outstanding indebtedness at the time of termination of his agent's agreement with the petitioner.

10. The only main point taken by the debtor is that he considers the career advances as a means to force him to render "forced slavery" or "bonded labour" to the petitioner. This point is entirely without merit and misconceived. He particularly refers to clause 10 of the agent's agreement which dealt with the scenario where the debtor left the company and joined another life insurance company within 12 months from the date of termination. In such a scenario, the special allowance which is different from the career advances will have to be repaid to the petitioner by the debtor in accordance with the provisions specified in clause 10. There is simply no substance at all in the debtor's reading of clause 10 that may enable him to raise any point of "debt slavery or bonded labour".

11. The debtor also refers to special personal circumstances. But they are immaterial to this bankruptcy petition. The debtor attacks the way in which the petitioner operates its business. Again, these attacks are immaterial to this petition.

12. I have carefully considered the evidence and submissions made by the debtor. In my view, there is simply no substance at all in the purported defence raised by him, either in his affidavit evidence or in his oral submissions. He has failed to show any bona fide dispute on substantive grounds. He has failed to show any exception which enables me to go behind the default judgment. That being the case, I would proceed to make a usual bankruptcy order against him.

13. I will also order that costs of this petition, including all the costs reserved, be to the petitioner, to be taxed if not agreed. I see no reason why costs should not follow the event in this petition.