JORA SISI OMAR v. T.K. TSUI & CO AND ANOTHER

HCB 8127/2016

[2024] HKCFI 2725

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 8127 OF 2016

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D E C I S I O N

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Introduction

1.  Before me this morning is a notice of appeal filed on 15 July 2024 by Ms Jora Sisi Omar, the discharged bankrupt in these bankruptcy proceedings, pursuant to Order 58 of the Rules of the High Court, Cap 4A.

2.  By that notice, the discharged bankrupt seeks to appeal against the decision of Master MK Liu made on 12 July 2024.

Legal aid stay

3.  Just three days ago, on 2 September 2024, the Director of Legal Aid filed a memorandum of notice of an application for legal aid, stating that the discharged bankrupt had applied for legal aid to prosecute an appeal against a decision dated 23 June 2023.

4.  It must be pointed out here that the legal aid is not applied for pursuing the present appeal. However, by operation of section 15(4) of the Legal Aid Ordinance, Cap 91, it would appear that all the proceedings in these HCB proceedings, including the present appeal, are now stayed for 42 days, counting from 2 September 2024.

5.  The first question that I need to deal with is whether the hearing should proceed today and whether the legal aid stay should be uplifted to that extent. Messrs T K Tsui & Co and the Official Receiver, the two respondents named in the appeal, take the view that today’s hearing should proceed to dispose of the appeal, and the legal aid stay should be uplifted to that extent. When asked to state her position on this issue, the discharged bankrupt told me this morning that it did not matter.

6.  The purpose of the statutory legal aid stay is to enable the Director of Legal Aid to properly assess and process the legal aid application: see Clare Hollingworth v Thomas Edward Juson HCA 249/2006, 3 July 2006 at para 4.

7.  The primary function of the court is to do justice between the parties. In considering whether to uplift the stay, the court should consider what is just and fair to the parties having regard to all the circumstances of the case: see Lee Shiu Ming v Yeo Hiap Seng (Hong Kong) Ltd CACV 39/1993, 14 July 1993.

8.  In that case, the Court of Appeal also said this:

“Although there will be cases that require them to lift a stay under section 15, the courts should be slow to do so before the application for Legal Aid is determined, a fortiori where it is sought by a layman as here to enable him to contend with matters of law.”

9.  Whether to exercise its power to uplift a legal aid stay must depend on the specific circumstances of each case. The justification for an uplift can be varied, and there is no closed list of matters that may amount to a proper justification. It has been said that whether the underlying purpose of the stay has been achieved is a most relevant factor in deciding whether to lift it or not: see para 4 of Clare Hollingworth.

10.  Here, I would exercise my discretion to uplift the stay to allow today’s hearing to proceed. For reasons which I will go into below, the present appeal ought to be dismissed because, in my view, it is plain that this court has no jurisdiction to hear the appeal and there is not much room for arguing otherwise. The appeal should therefore be disposed of today without any delay.

11.  Therefore, the legal aid stay should be uplifted but only to the extent to allow the disposal of the present appeal. As such, it would not have any impact on the Director of Legal Aid’s consideration of the discharged bankrupt’s legal aid application.

Procedural history

12.  I set out below the procedural history which has led to today’s appeal.

13.  On 9 September 2019, a bankruptcy order was made against the discharged bankrupt.

14.  On 21 July 2021, in these bankruptcy proceedings, Master Dick Ho granted leave to Ms Jora Harmidar Omar, the defendant in the probate action in HCAP 19/2011, to proceed with her counterclaim against the discharged bankrupt, who is the plaintiff in that probate action. Ms Jora Harmidar Omar has been referred to generally as “the applicant” in those proceedings.

15.  I quote below the relevant parts of Master Dick Ho’s order:

“1) leave be granted to the Applicant to proceed with the counterclaim against the Debtor in HCAP 19 of 2011, for delivery of vacant possession of 3/F, 170 Sai Wan Ho Street, Hong Kong (“the Property”) and mesne profit, under s.12(1) of the Bankruptcy Ordinance (Cap 6) and the inherent jurisdiction of the Court;

…

3) No judgment or order obtained by the Defendant in the HCAP19 of 2011 (“Probate Action”) shall be enforced against the Bankrupt, JORA SISI OMAR, without the leave of the Court”

16.  On 26 August 2022, in the probate action, Master J Wong entered judgment against the discharged bankrupt in favour of the applicant for the delivery of vacant possession of the above real property and to pay damages to be assessed.

17.  On 9 September 2023, the bankruptcy was discharged.

18.  On 31 May 2024, in these bankruptcy proceedings, Master Rita So granted leave to the applicant to enforce the order of Master J Wong.

19.  Lastly, by summonses dated 2 and 8 July 2024, the discharged bankrupt applied for a stay of the order of Master Rita So.

20.  Those two summonses were returned before Master MK Liu on 12 July 2024. He dismissed the two summonses.

21.  The discharged bankrupt is aggrieved by the dismissal and now seeks to appeal against that decision.

Discussion

22.  Section 12(1) of the Bankruptcy Ordinance, Cap 6, provides:

“… no creditor to whom the bankrupt is indebted in respect of any debt provable in bankruptcy shall have any remedy against the property or person of the bankrupt in respect of the debt, nor shall proceed with or commence any action or other legal proceedings, unless with the leave of the court and on such terms as the court may impose.”

23.  “[T]he court” referred to in the section means the Court of First Instance sitting in its bankruptcy jurisdiction: see section 2. It is plain that the orders of Master Dick Ho, Master Rita So and Master MK Liu are all orders made by the court sitting in its bankruptcy jurisdiction.

(1)  When Master Dick Ho granted leave to the applicant to continue her counterclaim against the discharged bankrupt in the probate action, with the condition that no judgment should be enforced against her without leave of the court, he was exercising the power under section 12.

(2)  When Master Rita So granted the leave to enforce to the applicant, which was stipulated as a condition in Master Dick Ho’s order, she was similarly exercising the power under section 12.

(3)  Finally, when Master MK Liu refused to stay Master So’s order, he was also exercising the power under section 12.

24.  In this case, if the discharged bankrupt wishes to appeal against Master MK Liu’s order, section 98(2) of the Bankruptcy Ordinance applies. It provides:

“Every order of the court or the Registrar shall be subject to appeal to the Court of Appeal …”

25.  Accordingly, the present appeal should lie to the Court of Appeal. The Court of First Instance has no jurisdiction to hear this appeal.

26.  The authorities are clear on this. Section 98(2) is in mandatory terms. It has exclusive application to bankruptcy matters. See Re Lee Siu Fung Siegfried No 2 [2018] 3 HKLRD 765, [2018] HKCFI 1811 at para 14.

27.  Order 58 of the Rules of the High Court, which provides that an appeal from a decision of a master lies to a judge (subject to certain exceptions), does not apply to a decision made by a master sitting in the bankruptcy jurisdiction.

28.  This is because Order 58, rule 1(1) is contrary to section 98(2) of the Ordinance. By operation of section 99(1) of the Ordinance, such contrary rule shall not apply. See Re Chung Kwok Yiu Ringo [2001] 2 HKLRD 749 at paras 4 and 5.

29.  By way of footnote, I should add that for the reasons stated above, Master MK Liu’s order was made under the power given in section 12 of the Bankruptcy Ordinance, and this case is therefore to be distinguished from the facts in Re Ho Yuk Wah David bankrupt (No 4) [2019] 4 HKLRD 379, [2019] HKCFI 2073 at para 7.

30.  At today’s hearing, the discharged bankrupt seeks to argue that this case is not a normal bankruptcy situation, but it is a case of fraud. The counterclaim in the probate action, she submits, is a fraud. Master J Wong had no jurisdiction to make the possession order which he granted because the real property concerned is under the scheme of the united co-operative building society for civil servants. She also says that Master Dick Ho, Master Rita So and Master MK Liu had no jurisdiction to make the orders which they granted. The leave which they granted were obtained by the counterclaim, which was itself a fraud.

31.  Hence, she submits that the present appeal does not fall within section 98 of the Bankruptcy Ordinance, and this court has the inherent jurisdiction to deal with the fraud.

32.  I do not accept that submission. There is no need to go into the merits of the fraud arguments. The critical question for today is which court should deal with those arguments. It was the bankruptcy court which has made the order leading to today’s appeal. That appeal should lie to the Court of Appeal.

33.  To conclude, Order 58 does not apply to the appeal against Master MK Liu’s decision. The Court of First Instance has no jurisdiction to hear this appeal. It should therefore be dismissed for that reason.

Orders

34.  I make the following orders:

(1)  The legal aid stay arising from the filing of the memorandum of notification of an application for legal aid on 2 September 2024 be uplifted only to the extent to allow the present appeal to be disposed of. Subject to that, the legal aid stay do remain in place.

(2)  The notice of appeal of the discharged bankrupt be dismissed for want of jurisdiction.

(Submissions re costs)

35.  Costs should follow the event.

36.  I order that:

(1)  The discharged bankrupt do pay costs of the appeal to Messrs T K Tsui & Co on a party and party basis, summarily assessed at $55,000, payable by the discharged bankrupt on or before 19 September 2024.

(2)  The Official Receiver does not apply for costs. Hence, there be no order of costs as between the discharged bankrupt and the Official Receiver.