LEUNG NGAI HANG v. BANK OF CHINA (HONG KONG) LTD

[English Translation – 英譯本]
CACV 217/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 217 OF 2006

(ON APPEAL FROM HCB NO. 11434 OF 2004)

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JUDGMENT

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Hon Cheung JA (giving the judgment of the Court):

Facts

1.          Leung Ngai Hang (“the Debtor”) appeals against the bankruptcy order made against her by Kwan J on 5 June 2006.

2.          The petitioner was formerly the Yien Yieh Commercial Bank Limited (Hong Kong Branch). The petitioner had granted a loan to the debtor and the loan was secured by four properties of the debtor. As the debtor failed to make repayment as scheduled, the petitioner sold three of the four secured properties in order to reduce the indebtedness of the debtor. The debtor still owed to the petitioner the sum of $1,454,393.35 as at 6 August 2003.

3.          The petitioner took out proceedings against the debtor in the Court of First Instance under HCA 3394/2003 for recovery of the said outstanding sum. As the debtor failed to give notice of intention to defend, the petitioner obtained judgment on 27 November 2003 whereby the debtor was ordered to pay the petitioner the principal sum of $1,454,393.35 with interest. The judgment has not yet been set aside.

4.          Under the judgment, the debtor owed to the petitioner the sum of $1,515,039.01 plus interest as at 10 February 2004.

5.          On 25 March 2004, the petitioner issued a statutory demand (“the demand”) requiring the debtor to pay the debt. The demand was never satisfied.

6.          On 24 July 2004, the petitioner allowed the owner of the remaining secured property (“the 4^th property”) to redeem the property at $315,495.89. After credit was given of this amount, the debtor still owed to the petitioner the sum of $1,322,395.51.

7.          The petitioner presented a bankruptcy petition on 26 November 2004 against the debtor. On 13 April 2006, the petitioner amended the particulars of the petition.

The debtor’s grounds of objection to the making of the bankruptcy order

8.          At the hearing of this appeal, the debtor repeated before us the grounds of objection to the making of a bankruptcy order which she had advanced before Kwan J. Kwan J had dealt with these grounds in detail in her judgment dated 5 June 2006. We concur with her judgment and consider it necessary for us to deal only with the following main points:

(1)             The debtor challenged the actual amount of the indebtedness. The bankruptcy petition was presented on the basis of the judgment of 27 November 2003 and the demand of 25 March 2004. Both of these legal documents are valid as neither of them has to date been set aside. In the circumstances, the debtor cannot possibly challenge the actual amount of her indebtedness. As a matter of legal principle, the court hearing a bankruptcy petition would look into the propriety of a judgment in another civil action only where there was solid evidence of the existence of fraud, collusion or miscarriage of justice in respect of that judgment (see Re Hawkins [1895] 1 QB 404, Re Yu Tat Yum Robert ex parte Fortune Retail Holdings (Beijing) Ltd [1999] 2 HKC 799 and Chung Kau Adapter ex parte the Hong Kong Housing Authority (HCB 581/2003)). In the present case, the debtor has not provided any solid evidence to show that there has been fraud, collusion or miscarriage of justice in the case.

(2)        Besides, the petitioner has filed a number of affirmations in support of the bankruptcy petition, including an affirmation of Ma Hok So dated 6 May 2005 which clearly set out details of the debtor’s indebtedness. According to clause 9(m) of the mortgage documents signed by the debtor on 26 March 1993, a written acknowledgement of the debtor’s indebtedness by the petitioner shall be deemed as conclusive evidence, and such a clause is legally binding (see Bache and Co v. Banques Varnes [1973] 2 Lloyd’s Rep 437).

(3)        The debtor alleged that the petitioner had submitted a forged document, namely a facility letter issued by the petitioner to the debtor on 29 November 2001, which was not signed by two mortgagors (namely Leung Wai Yu (梁慧予) and Man Sau Chun (文秀珍)) of the mortgaged properties and which did not bear the date of signing of the document by the mortgagors. The petitioner had admitted that the two mortgagors had not signed the facility letter. On this allegation regarding a forged document, Kwan J made a detailed analysis in her judgment. She accepted the creditor’s explanation as to the contents of the document and found that the document was not forged. We agree with her judgment. The debtor said that she had already reported the forgery to the police. In our view, even if the debtor was entitled to make the report, it did not follow that she had provided sufficient evidence to prove the existence of fraud in the case.

(4)        The debtor also claimed that there should be a surplus of $150,000, which has gone missing, after repayment of the mortgage loan from the proceeds of sale of her another mortgaged property by the petitioner. In this appeal, the debtor claimed that the surplus should amount to $190,000. In Kwan J’s judgment, the property was not one of the secured properties held by the petitioner when it granted the loan to the debtor. The mortgage documents pertaining to the property showed that the mortgage loan was for the purchase of the property and it had nothing to do with the petitioner’s case (HCA 334/2003). The petitioner had provided sufficient evidence to prove that it had not improperly dealt with the sum of $150,000. In our view, this argument by the debtor cannot constitute a ground for overturning Kwan J’s judgment. Even if the petitioner should have further deducted $150,000 or $190,000 from the debt owed by the debtor, it did not mean that she was free of any indebtedness. Under section 6 of the Bankruptcy Ordinance, Cap. 6 of the Laws of Hong Kong, if the court accepts that the indisputable part of the amount of the debt owed by the debtor exceeds the statutory minimum of $10,000, the court should make a bankruptcy order. The debtor has failed to provide sufficient reasons for denying the fact that the amount of the debt already exceeds $1,100,000. In the circumstances, even if the amount of $150,000 or $190,000 were an arguable sum, it would not have prevented the petitioner from presenting the bankruptcy petition (see Re Taylor’s Industrial Flooring Ltd [1990] BCC 44 and Re Pendigo Ltd [1996] BBC 608).

9.          In paragraph 4 of her judgment, Kwan J wrongly stated that the petitioner “sold” the 4^th property because, as the petitioner stated in the affirmation, the property was in fact redeemed by the mortgagor. However, this error does not affect the judgment as Kwan J merely erred on the wordings of “sold” and “redeemed”. The debtor asks this court to accept the new evidence that the property has not been sold but continues to be owned by the mortgagor. At trial, Kwan J already adopted a generous approach in allowing the debtor to produce evidence to oppose the bankruptcy petition. Therefore, the debtor cannot at this stage produce this evidence again or adduce other new evidence. In any event, the new evidence has no bearing on the judgment.

Conclusion

10.        We are satisfied that the debtor has failed to provide sufficient grounds of appeal to upset Kwan J’s judgment. Accordingly, we dismiss the debtor’s appeal and order her to pay the petitioner’s costs of the appeal.

Translated by the Judgment Translation Unit of the Judiciary and approved by Mr. Edmund Cham, Solicitor