Re: CHAN SAI KIT and Ex parte: WONG YAN YAN AMY AND OTHERS

HCB 3614/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS NO. 3614 OF 2001

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J U D G M E N T

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1. This is a summons to rescind a bankruptcy order made on 17 September 2001 upon the undertaking of the applicant and bankrupt, Mr Chan Sai Kit, to perform the terms of a settlement agreement set out in paragraphs 1, 2 , 4 and 6 of a letter dated 10 October 2001 from the petitioners' solicitors to the applicant's solicitors.

2. The petition for bankruptcy was presented on the basis of a judgment debt obtained by the petitioners in HCA Nos. 11920, 11921 and 11922 of 1998 in the sum of HK$1,878,895.56. For the background and reasons for making the bankruptcy order, I refer to the reasons handed down on 21 September 2001.

3. The applicant seeks a rescission of the bankruptcy order made against him on the ground that he has reached a compromise with the petitioners, and that the other two creditors who are both secured creditors are supportive of his application to rescind the bankruptcy order.

4. At the first hearing of this application on 17 October 2001, I adjourned the application for the Official Receiver to carry out investigation if there are any further creditors of the applicant and if any of them would wish to oppose the application. Pursuant to the directions I made on that day, the Official Receiver has placed a notice of the bankruptcy order and of the application to rescind the bankruptcy order in the Gazette and advertised this in an English newspaper and a Chinese newspaper. No additional creditors have come forward to date. The Official Receiver has considered the statement of affairs filed by the applicant and the additional information provided by his solicitors. The comments of the Official Receiver have been set out in the Official Receiver's second report to the court dated 30 October 2001. The Official Receiver has no objection to the application to rescind the bankruptcy order on the basis that all known creditors have been identified and they all support the application.

5. I do not propose to go into the details of the applicant's settlement with the petitioners. Suffice it to say that the applicant's solicitors have been put in funds of half of the sum owing by third parties who have undertaken not to seek repayment from the applicant, and there is satisfactory evidence before me of the applicant's ability to discharge the remaining half of the debt to the petitioners by instalments as agreed.

6. As for his debts to the two secured creditors, I am satisfied on the evidence before me that the securities provided by the applicant and the applicant's wife are sufficient to satisfy the debts owed to these creditors. The applicant's wife has given an undertaking in writing that she is willing to have her security realised to settle the indebtedness, if required.

7. I am satisfied under Section 33(1)(b) of the Bankruptcy Ordinance, Cap. 6 that the provable debts and expenses have, since the making of the bankruptcy order, been either paid or secured to the satisfaction of the court. There is no suggestion of misconduct on the part of the applicant. In my judgment, this is a proper case for the exercise of my discretion to annul or rescind the bankruptcy order under Section 33 or Section 98 of the Bankruptcy Ordinance.

8. I make the following orders:

(1) leave is given to the applicant to amend his summons filed on 17 September 2001 as per the draft amended summons annexed to the applicant's summons filed on 15 October 2001 and the service of the amended summons is dispensed with;

(2) upon the undertaking of the applicant to perform the terms of the agreement between himself and the petitioners set out in paragraphs 1, 2, 4 and 6 of the letter dated 10 October 2001 from the petitioners' solicitors to the applicant's solicitors (a copy of which was annexed to the draft amended summons), the bankruptcy order made on 17 September 2001 is rescinded and annulled;

(3) the costs of the Official Receiver for this application are to be borne by the applicant, agreed at the sum of HK$50,000.00; and

(4) the costs of the petitioners to date are to be borne by the applicant.

Representation:

Mr Yeung Yun Por of Messrs Yeung Law & Co., for the Petitioners

Mr C Y Li, instructed by Messrs Hau, Lau, Li & Yeung, for the Bankrupt

Ms Phyllis McKenna, for the Official Receiver

HCB 3614/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS NO. 3614 OF 2001

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REASONS FOR JUDGMENT

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1. This is a petition based on a judgment debt in the sum of HK$1,878,895.56 in a judgment given by Dep J Gill on 12 March 2001 in three actions which were consolidated, being High Court Action Nos. 11920, 11921 and 11922 of 1998. The statutory demand was served personally on the debtor, Mr Chan Sai Kit, who was the second defendant in the High Court proceedings, on 17 April 2001. The petition was filed on 28 May 2001 and served on the debtor personally on 6 June 2001. On 9 August 2001, the debtor took out a summons seeking dismissal of the petition, alternatively an order that the petition be stayed until the determination of the debtor's appeal from the judgment in the High Court proceedings. The debtor's appeal is to be heard on 7 November 2001. The debtor has not applied for a stay of the judgment pending appeal, claiming that it was due to "oversight and preoccupation with [his] job and business" that he has not done so. I have reservations about this, having read the correspondence exchanged between the debtor's solicitors and the petitioners' solicitors, in particular the letters dated 24 April 2001 from the debtor's solicitors and the letter dated 27 April 2001 from the petitioners' solicitors in reply.

2. The petitioners' stance is that they do not oppose the debtor's application to stay the bankruptcy proceedings pending the determination of his appeal only on condition that the debtor is to pay into court the entire judgment debt. This the debtor is unable to do. Mr Lee Tung Ming, who appeared for the debtor, has told me that the best the debtor could do is to pay HK$500,000.00 into court and offer three properties (two of which are encumbered) to be charged as security. There being no agreement between the parties as to the condition for a stay of proceedings, the petitioners have pressed for a bankruptcy order. It is not in dispute that the appeal has been taken seriously by the debtor in the sense that he has prosecuted his appeal with due diligence. What is in issue is whether the appeal is a bona fide appeal in the sense that the grounds of appeal raised by the debtor would appear to have real substance and are not unarguable (see Ex parte Yeatman (1880) 16 Ch. D. 283 at the headnote and 289; Re Noble [1965] 1 Ch. 129 at 140 G, 145 E-F; Re A Debtor [1995] 1 WLR 467 at the headnote, 470 F-471A and 473 E; and Muir Hunter on Personal Insolvency 1987 ed., para. 7-311).

3. I bear in mind that this hearing is not a mini-trial or a mini-appeal and that I should look at the position broadly to see whether the appeal is plainly unarguable. I have read the 25-page judgment of Dep J Gill, the closing submission of the debtor's counsel at the trial of 40 pages, the detailed grounds of appeal in the Notice of Appeal which are based essentially on the closing submission of the debtor's counsel at the trial, and the written submission of the debtor's counsel in opposing the petition (he was the counsel at the trial and his written submission was adopted by Mr Lee who appeared for the debtor at the hearing of the petition), and I have considered the oral submission made by Mr Lee. I am not persuaded that the debtor has demonstrated that his appeal is a serious appeal raising grounds that are properly worth considering. My reasons are as follows.

4. The petitioners' claim against the debtor is for recovery of deposit in three property transactions. They have obtained judgment against the vendor, Modern Park Limited ("MPL"), who had defaulted in the return of the deposit. The petitioners have proceeded to wind up MPL but have not been able to recover anything in the liquidation. The debtor is the controlling director and he owns the shares of the two companies who are the shareholders of MPL. He had given a written guarantee to the petitioners dated 28 November 1997 to refund the deposit to them if MPL did not complete the transactions on the original completion date being 6 March 1998. The parties subsequently agreed to extend the completion date to 30 June 1998. The petitioners claimed that there was an oral agreement made in a telephone conversation between the debtor and one of the petitioners, Mr Kwok Siu Wing, that the guarantee previously given by the debtor was likewise to be extended to 30 June 1998.

5. The debtor's defence was that there was no such telephone conservation between him and Mr Kwok to extend the guarantee at any time. Dep J Gill made a finding against the debtor that there was such a telephone conversation between the two on 16 February 1998 and gave detailed reasons at pages 22 to 25 of his judgment for his finding as to why the account given by Mr Kwok was a credible one. It is apparent from the judgment that the points taken by the debtor's counsel at the trial (which the debtor proposes to take again in his appeal) and by Mr Lee before me have been considered and rejected by the trial judge who has set out his process of reasoning in his judgment. I am not persuaded that the judge had made a wrong interpretation of the letter of MPL's solicitors dated 16 February 1998, nor am I persuaded that the debtor has made out prima facie grounds for the Court of Appeal to interfere with a finding of the trial judge on the credibility of the petitioners' witnesses.

6. It would appear from the grounds of appeal in the Notice of Appeal that the appeal is essentially concerned with the finding of fact of the trial judge whether there was an agreement between the parties for an extension of the guarantee by the debtor to 30 June 1998. The point of law raised by the debtor in the Notice of Appeal is of subsidiary importance. On the finding of fact made by the trial judge, I am unable to see how it could be alleged that the agreement to extend the guarantee was without consideration or otherwise unenforceable.

7. For the above reasons, I have come to the view that the debtor's appeal is unarguable. I have made a bankruptcy order with costs to the petitioners.

Representation:

Mr Don So, instructed by Messrs Yeung, Law & Co., for the petitioners

Mr Lee Tung Ming, instructed by Messrs Hau, Lau, Li & Yeung, for the debtor

Miss Phyllis McKenna, for the Official Receiver