RE MA SIK HUNG BRUCE

HCB 7754/2019

[2021] HKCFI 1551

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 7754 OF 2019

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J U D G M E N T

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Introduction

1.  There is before this court an amended creditor’s bankruptcy Petition dated 21 May 2020 (“Amended Petition”) presented by Ma Pui Yin Flora and Ma Sik Nin (“Petitioners”) against Ma Sik Hung Bruce (“Debtor”).  The Amended Petition is opposed by the Debtor.

2.  The Amended Petition is based on the Debtor’s non-compliance with a Statutory Demand dated 7 August 2019 (“Statutory Demand”) for the sum of HK$545,984.01 together with interest at judgment rate (“Debt”).  The Statutory Demand is founded on (i) a Costs Order dated 18 January 2018 (“Costs Order”) made by Master J Wong in HCMP 2568 of 2016 (“HCMP2568”) between the Petitioners as plaintiffs and the Debtor, being the administrator of the estate of Leung Kin, deceased (“Estate”), as defendant and (ii) an Allocatur dated 2 November 2018 which certified the Petitioners’ taxed costs at HK$545,984.01.

Background

3.  The deceased was the mother of the Petitioners and the Debtor. 

4.  On 23 September 2016, the Petitioners instituted HCMP2568 by Originating Summons (“OS”).  Paragraph 1 of the OS sought to remove the Debtor as the administrator of the Estate.  Paragraph 9 of the OS sought an Order that the Debtor should personally pay the costs of and occasioned by the application.

5.  By a Consent Order dated 22 June 2017, the Debtor was removed as administrator of the Estate and was substituted by Mr Tsang Kam Chuen, solicitor of Messrs Tsang, Chan & Woo.

6.  On 18 January 2018, after a hearing in which counsel for both parties attended, Master J Wong made the Costs Order.  Paragraph 1 of the Order provided:

“The Defendant do pay the 1st and 2nd Plaintiffs’ costs of these proceedings and this application including all costs reserved and certificate of counsel for the hearing today, to be taxed, if not agreed.”

7.  There was no appeal against the Costs Order.  Nor was there any application to set it aside.

8.  The Debtor however denied he was personally liable to pay costs under the Costs Order since (i) he was sued as the administrator of the Estate and (ii) paragraph 1 of the Costs Order did not contain the word “personally”.  Instead, he argued that costs should be paid out of the Estate.

9.  In view of the Debtor’s stance, on 18 February 2019, the Petitioners’ solicitors wrote to the clerk to Master J Wong proposing an amendment to the Costs Order under the slip rule by adding the word “personally”.

10.  On 25 February 2019, the clerk to Master J Wong replied to the Petitioners’ solicitors and the Debtor and set out Master J Wong’s comment that:

“Amendment is not needed. It was the Court’s intention that the Defendant (himself/personally) should pay the Plaintiffs’ costs. The Order, as it stands, is clear enough.”

11.  On 7 August 2019, the Statutory Demand was personally served on the Debtor.

12.  On 19 August 2019, the Debtor filed an Application to set aside the Statutory Demand.  In his affirmation in support at paragraph 2, the Debtor denied the Debt and asserted that the Costs Order did not require him to bear the legal costs personally.  At paragraph 4, the Debtor stated he had demanded the current Administrator of the Estate to send him a cheque in order to pay the Debt.

13.  By a Judgment handed down on 12 November 2019, the Debtor’s application was dismissed by DHCJ Leung with costs to the Petitioners.  At paragraph 11 of the Judgment, the learned Deputy Judge set out the 2 grounds in support of the Debtor’s application: (i) that Master J Wong did not specify in the Costs Order that the Debtor should bear the legal costs in his personal capacity; (ii) the Estate had cash sufficient to pay the Debt.  Both grounds were dismissed as unmeritorious. 

14.  According to Mr Yeung, there is no appeal against the said Judgment.

15.  On 12 December 2019, the Petitioners presented the original creditor’s bankruptcy Petition (“Petition”) against the Debtor.  The Petition was served on the Debtor personally on 19 December 2019 as evidenced by an affirmation of service of So Wing Sing dated 3 February 2020. Curiously, in his first affirmation in opposition to the Petition dated 17 January 2020 (“D1”), the Debtor claimed that as of 17 January 2020, he had not yet received the Petition filed by the Petitioners.[1]  How the Debtor could have prepared an affirmation in opposition to the Petition without the Petition itself is beyond belief.

Deliberation

16.  The applicable legal principles are well-established. 

17.  In order to successfully oppose the Petition, a debtor has to show a bona fide dispute on substantial grounds, by sufficiently precise evidence which is believable, and must establish that he actually has a defence of substance, not just a fair probability of one: Re Tam Mei Kam unrep, HCB 3777/2011, 25 April 2012, Barma J (as he then was); Re Yuen Mun Wa (a debtor) [2012] 5 HKLRD 108 (Recorder A Chan SC, as he then was).

18.  Where an issue has been properly ventilated at the stage of an application to set aside a statutory demand, and has been determined by the court at that hearing, a res judicata operates to preclude a debtor from raising, at the hearing of the petition, the same argument which has been determined against him, in the absence of any change of circumstances: Re Choy Wai Bor unrep, HCB 8565/2001, 28 May 2002, Kwan J (as she then was) at [30]; Re Sy Chin Mong Stephen unrep, HCB 5784/2013, 9 May 2014, Ng J.

19.  Unless a material change of circumstances has occurred since the dismissal of the application to set aside the statutory demand, all that the petitioning creditor has to do at the hearing of the bankruptcy petition is to show that he has made a statutory demand and that the amount of the debt has neither been paid nor secured nor compounded for: Brillouet v Hachette Magazines Ltd [1996] BPIR 518, 520, cited with approval by Kwan J (as she then was) in Re Choy Wai Bor, supra at [26].

20.  Where the underlying debt is based on a Judgment or Order, the court hearing the bankruptcy petition will treat the Judgment or Order as prima facie evidence that the judgment debtor is indebted to the judgment creditor.  In appropriate circumstances, the court may “go behind” the judgment — what is normally required is some “fraud”, “collusion” or “miscarriage of justice” which impinges on the validity of the judgment, the latter phrase being clearly capable of wide application according to the particular circumstances of the case: Dawodu v American Express Bank [2001] BPIR 983; Re Tam Mei Kam unrep, CACV 87/2012, 8 May 2013, Cheung, Yuen & Lam JJA.

21.  As far as the Statutory Demand is concerned, this court is satisfied that it has been issued and served personally on the Debtor and the Debt had not been paid.  There is no suggestion by the Debtor to the contrary. 

22.  As far as service of the Petition is concerned, as explained earlier, this court is satisfied that it had been served on the Debtor.  As for the Amended Petition, the Debtor confirmed to this court at the hearing that there is no dispute as to service.

23.  In his second affirmation in opposition dated 18 June 2020 (“D2”), the Debtor reiterated his argument that the Costs Order did not require him to be personally liable for legal costs on the ground that Master J Wong had refused the Petitioners’ request to amend the Costs Order.  This argument flies in the face of Master J Wong’s comment that “It was the Court’s intention that the [Debtor] (himself/personally) should pay the Plaintiffs’ costs.”

24.  In any event, the Debtor’s argument has been properly ventilated at the stage of his Application to set aside the Statutory Demand and has been dismissed by the court.  Hence, a res judicata operates to preclude the Debtor from raising, at this hearing, the same argument which has been determined against him, in the absence of any change of circumstances.  There is no suggestion by the Debtor that a material change of circumstances has occurred since the dismissal of his Application to set aside the Statutory Demand.

25.  Lastly, since the Debt is based on a Court Order and an Allocatur, this court will treat them as prima facie evidence that the Debtor is indebted to the Petitioners in the amount of the Debt.  There is no suggestion by the Debtor that this court should “go behind” them.  Nor can this court see any justification to do so.

26.  All in all, this court is not satisfied that the Debtor has shown a bona fide dispute to the Debt on substantial grounds. In the premises, the Petitioners are entitled to a bankruptcy order against the Debtor.

Disposition and costs order nisi

27.  There shall be a usual bankruptcy order against the Debtor and an order nisi that the costs of the Petition and the Amended Petition, including all costs previously reserved, if any, be to the Petitioners, to be taxed if not agreed, with certificate for Counsel.