KO SIN YUN v. CHAN CHUEN

HCB 4824/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY

NO. 4824 OF 2005

____________________

BETWEEN

	KO SIN YUN (高銑印)	Plaintiff
	and
	CHAN CHUEN (陳泉)	Debtor

____________________

 

Before : Hon. Barma J in Court

Date of Hearing : 10 May 2006

Date of Ruling : 10 May 2006

 

____________________

R U L I N G

____________________

 

1. This is an application for leave to appeal against a decision that I made as to the costs of a petition involving the petitioner and the debtor. 

2. At the hearing on 13 March 2006 when I gave my decision on costs, it was common ground between the parties that the petition should be withdrawn.  The only issue that arose for argument on that occasion was the question of costs.  The reason why the petition had to be withdrawn was that the judgment debt on which the petition was based had gone as a result of the judgment (which was a default judgment in the District Court) having been set aside by the District Court on the application of the debtor.  That application was only taken out after presentation of the petition and the decision of the District Court to set aside its earlier judgment was, of course, also given after the petition was presented. 

3. On that occasion, I came to the view that, although the District Court judgment had been set aside, and although submissions were made to me as to alleged deficiencies in the claim that had been put forward by the petitioner in the District Court proceedings, notwithstanding that there might have been deficiencies that had led to the judgment being set aside, any deficiencies that there were were properly matters to be raised by way of defence and that therefore the default judgment was a regular judgment, one which the creditor was entitled to enforce by taking out bankruptcy proceedings if he were minded to do so. 

4. There was no clear explanation for the debtor’s failure to take steps either to have contested the proceedings in the first place, or to have taken steps to have the default judgment set aside earlier, before the creditor expended time and money in presenting a bankruptcy petition against him. 

5. Mr Li, who appears before me today for the debtor, has drawn my attention to the case of Re Hon Sing Engineering Limited and has submitted that that is authority for the proposition that even where a petition is presented without fault on the part of the petitioner, if it is dismissed, the normal costs order will be that the costs should follow the event and that the petitioner should bear the costs involved in the petition proceedings. 

6. With respect, I am not sure that that is correct, in that in the Hon Sing case what had happened was that a person who claimed to be a creditor of the company had presented a winding-up petition against it.  However, the company disputed the debt on which the petition was based.  It was not a case in which there was a judgment debt.

7. In those circumstances, it seems to me that although the company may justifiably have thought that it had an undisputed debt, if it turned out to be wrong, the position would be no different from an action by a party who brings a claim which it considers to be justified but turns out ultimately not to be.  That seems to me to be a rather different situation to the one with which I was faced in which the creditor was proceeding on the basis of a judgment debt which, although obtained by default, had never been the subject of challenge until after the presentation of the petition.  In those circumstances, I do not think that the Hon Sing Engineering case is authority for the principle which Mr Li submits. 

8. Mr Li has also drawn my attention to the fact that an amended statement of claim in the District Court proceedings, which was prepared and served after the withdrawal of the petition, indicates that there may be more substantial problems standing in the petitioner’s way.  Again, that may be so, but it seems to me that that does not alter the basis on which I came to my decision as to costs on the last occasion.  It seems to me that while I should, of course, grant leave to appeal if I am satisfied that there is a possibility that I might have erred in the exercise of my discretion as to costs, I am afraid that on the materials which have been put before me both at the original hearing and today, I am not satisfied that that could be established. 

9. In the circumstances, I will dismiss this application and if Mr Chan wishes to take the matter further, he will have to apply to the Court of Appeal for leave. 

10. As far as today’s hearing is concerned, costs should follow the event. 

 

 

(Aarif Barma) Judge of the Court of First Instance High Court

 

Mr Lawrence Ngai, instructed by Messrs K C Ho & Fong, for the Petitioner

Mr Tony Li, Counsel, instructed by Messrs Pansy Leung Tang & Chua, for the Judgment Debtor

 

Debtor's appeal to Court of Appeal dismissed. Please refer to CACV147/2006 and CACV198/2006 dated 28 December 2006

HCB 4824/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY

NO. 4824 OF 2005

____________________

BETWEEN

	KO SIN YUN (高銑印)	Plaintiff
	and
	CHAN CHUEN (陳泉)	Debtor

____________________

 

Before : Hon. Barma J in Court

Date of Hearing : 13 March 2006

Date of Ruling : 13 March 2006

 

____________________

R U L I N G

____________________

 

1. The petition in this case is based on a judgment debt that arose under a default judgment obtained by the petitioner, the judgment creditor, against the debtor who was the defendant in proceedings in the District Court.  It appears that the writ in the District Court action was served personally on the debtor but, notwithstanding this, the debtor took no steps to enter an appearance in those proceedings and suffered default judgment to be entered against him.  Default judgment having been entered, no steps were taken to set it aside. 

2. A statutory demand was then served on the strength of the District Court judgment.  That too was apparently served personally on the judgment debtor but no steps were taken to institute proceedings for the setting aside of the statutory demand on the grounds that there was a dispute as to the underlying debt. 

3. It was not until well after the petition was served and, indeed, the matter had come on for hearing on not less than two occasions that the debtor first appears to have put forward his defence to these proceedings.  The defence was, in effect, that he had effectively repaid the alleged debt and that certain payments that the creditor says were payments of interest and not principal were, in fact, payments of principal. 

4. The debtor belatedly took out an application to have the District Court judgment set aside contending that service was irregular and also that he had a meritorious defence to the claim.  The District Court judge hearing the application set aside the default judgment but, in doing so, ruled in an oral ruling (of which I have not been supplied a transcript but both counsel appearing before me are agreed as to this) that service was regular but that there was disclosed a defence on the merits which justified the setting aside of the default judgment.

5. In those circumstances, the plaintiff in the District Court proceedings - the petitioner here - quite properly accepts that the judgment having been set aside, the petition must either be withdrawn or dismissed and has asked for leave to withdraw the petition.  The petitioner also accepts that it should bear the costs that the Official Receive has incurred which, I understand, are in the sum of $8,900 up to today and leave those, I suppose, to be dealt with as a matter of costs as between itself and the debtor in these proceedings. 

6. The petitioner, therefore, had asked for leave to withdraw the proceedings on terms that it bears the Official Receiver’s costs in the sum of $8,900 but asks for an order that the debtor be ordered to pay its costs to it.  The debtor opposes that order for costs and suggests that it should instead be the petitioner who should bear the costs of these proceedings and should be ordered to pay the debtor the costs incurred by the debtor in resisting these proceedings. 

7. Mr Li, who appeared for the debtor, very fairly accepted that he could not dispute that service had been validly effected, or regularly effected, in the light of the District Court judge’s decision on this matter and he did not pursue the matter before me.  He said, however, that there had been defects in the statement of claim which (as it seemed to me) related to the question of when the alleged loan was made and as to the status of the various repayments that have been made, according to the debtor, since the time the loan was first made.

8. With respect to Mr Li, it seems to me that those were matters of defence which ought to have been put forward in the District Court proceedings.  The fact remains that the District Court proceedings having been validly served by personal service, there can be little dispute but that the debtor was aware of those proceedings.  Being aware of those proceedings, he failed to take any steps to defend them and has not put forward any explanation for his failure to do so. 

9. In those circumstances, it does not seem to me that he has demonstrated any good reason for his failure to defend those proceedings and the situation, therefore, is in my view very similar to that which obtained in the case of Re Lanagan Brothers Limited cited to me by Mr Ngai who appears for the petitioner today.  In that case a default judgment had been entered against the company and the only material difference between that case and this is that in the Lanagan case, the company accepted that it was to blame for allowing the default judgment to be entered against it. 

10. In this case, although the debtor has not accepted that he was at fault in allowing the judgment to be entered against him, he has put forward no material before me which would justify me in finding coming to any conclusion other than he had himself and no one else to blame for the judgment being entered against him in the first place.  That being so, it seems to me that the appropriate order for costs would be that, as the petition had been perfectly properly presented on the basis of an apparently regular judgment and the creditor has acted with propriety in seeking to have it withdrawn as soon as the underlying judgment debt was set aside, the appropriate order to make as to costs in the exercise of my discretion would be to order that the costs of these proceedings be borne by the debtor and paid to the petitioner, such costs to be taxed on a party-and-party basis if not agreed. 

11. I will therefore order that leave be given to the petitioner to withdraw the petition; that the Official Receiver’s costs assessed at $8,900 be borne by the petitioner and be deducted from his deposit with the Official Receiver but that the petitioner is to have his costs including the costs payable by him to the Official Receiver to be recovered from the debtor, such costs to be taxed on a party-and-party basis if not agreed. 

 

 

(Aarif Barma) Judge of the Court of First Instance High Court

 

Mr Lawrence Ngai, instructed by Messrs K C Ho & Fong, for the Petitioner

Mr Tony Li, Counsel, instructed by Messrs Pansy Leung Tang & Chua, for the Judgment Debtor

Miss Karen Cheung, of the Official Receiver’s Office

 

Debtor's application for leave to appeal dismissed. Please refer to HCB4824/2005 dated 10 May 2006