RE QUANG XIN LEE

HCB 3769/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3769 OF 2016

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D E C I S I O N

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Introduction

1.  On 8 August 2016, I made a bankruptcy order against the debtor, Mr Lee. Mr Lee now seeks a stay of the bankruptcy order pending his appeal to the Court of Appeal (“the Appeal”) against the underlying decision which gave rise to the debt that supported the petition.

2.  The Petitioners and the Trustees in Bankruptcy (“the Trustees”) oppose the application.

Legal principles

3.  Under section 104 of the Bankruptcy Ordinance, Cap 6 (“the Ordinance”), the court may at any time, for sufficient reason, make an order staying the proceedings under a bankruptcy petition, either altogether or for a limited time, or subject to terms.

4.  It is undesirable to grant a general stay of a bankruptcy order pursuant to section 104.  The reasons have been summarized by Au J in Re Tsang Wing Lam, HCB 1203/2013, 3 December 2013, §4:

(1) This is because of the prejudice that might be caused to creditors and the administration of the estate of a bankrupt by a general stay.  Rather, even if warranted by the circumstances of the case, the stay should be limited to certain steps or consequences, such as the gazetting or advertising of the bankruptcy order, and on the condition that the bankrupt should attend the OR’s office and give an account of his assets and liabilities;

(2) A general stay would not only release the bankrupt from all his statutory obligations and duties under the Ordinance but would also seriously hamper the ability of the OR (or the trustee in bankruptcy) to have control over the bankrupt and his property.  Further, in the interest of the creditors, it was vital that there should be no undue delay in ensuring that the OR (or the trustee in bankruptcy) was put in a position in which he could ascertain the assets of the estate and take appropriate steps to preserve them.

(3) Furthermore, the mere fact that there is a pending appeal is usually not a sufficient ground to stay a bankruptcy order.  A stay pending appeal should be granted with circumspection, and only when the appeal is shown to be a bona fide one and the grounds of appeal are sufficiently arguable.

5.  The court is even more adverse to the grant of a stay where there is no pending appeal against the bankruptcy order itself: Re Zulifqar Ali, HCB 6146/2011, 15 October 2013, Ng J, §13.

6.  The court may, however, grant a stay of steps in the proceedings such as gazetting of a bankruptcy order.  Generally, the court will not stay those parts of the bankruptcy process which protect the interests of creditors: Re Ho Ying Pat Bobby, HCB 1946/2009, 7 January 2010, Harris J.

Application of the legal principles

7.  The fact that Mr Lee has been acting in person and has failed to take the right application at the right time is irrelevant.

8.  The fact remains that there has been no appeal against the bankruptcy order and the 28 days for him to do so has expired: Order 59, rule 4(1)(b) of the Rules of the High Court, Cap 4A.  The principle in Re Zulifqar Ali applies.

9.  Mr Lee has provided security for costs of the Appeal as ordered by the Court of Appeal before the bankruptcy order was issued on 8 August 2016.  However, on 12 August, he was informed by the Registrar of Civil Appeals that the Appeal has been stayed by operation of law under sections 12 and 58 of the Ordinance.

10.  It is not for this court to usurp the function of the Trustees to decide whether or not the appeal should proceed.  As Mr Jacky Lee acting for them has pointed out, the Trustees have only been appointed for about a month.  They require time to consider the appeal, the funding for it and the interest of the creditors.

11.  Mr Lee relies on merits in the Appeal.  His grounds for appeal are in fact a re-run of the arguments before the Court of Appeal (when it considered security for costs on appeal) and me (when I considered whether to stay the petition for bankruptcy pending the Appeal), this time with 22 pages of transcripts of the trial to support his arguments. 

12.  The 22 pages of transcripts are extracted from 632 pages.  It is difficult to see the context.  Doing my best in going through the 22 pages, I am not satisfied that the grounds are so sufficiently arguable as would persuade me to change my view on the merits of the Appeal. 

13.  Further, trustees in bankruptcy have been appointed.  The bankruptcy order has been gazetted and advertised.  The bankrupt has no landed properties and there is no issue of registration of the bankruptcy order at the Land Registry.  There is no specific step to stay and in any case no reason to grant general stay or a stay pending the already stayed Appeal.

14.  This application is wholly unmeritorious.  I therefore dismiss it.

15.  Costs shall be paid to the Petitioners and the Trustees.  This application has no complexity and the Trustees’ costs are grossly excessive.  I summarily assess costs of the Petitioners at $35,000, the Trustees at $35,000 and the Trustees’ solicitors at $20,000.

16.  I thank Mr Tang and Mr Jacky Lee for their assistance.

HCB 3769/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3769 OF 2016

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D E C I S I O N

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1.  The petitioners petition for the bankruptcy of the debtor on the basis of failure to pay in part the judgment debt in HCA 719/2009 and HCA 947/2009 in the sum of $10,820,957.

2.  The debtor showed cause solely on the ground that the petition should be stayed until his appeal against the judgment to the Court of Appeal in CACV 254/2015 has been heard.  He has no other claims against him.

Legal principles

3.  It is trite law that an appeal does not operate as a stay of judgment. 

4.  Where a judgment debtor has lodged an appeal, the bankruptcy court may stay the hearing of the petition to await the result of the appeal.  However, the bankruptcy court may refuse to do so and proceed to make a bankruptcy order if the judgment debtor fails to satisfy the court that he has a reasonable prospect of succeeding in the appeal: Re Tam Mei Kam, CACV 87/2012, 8 May 2013, at §25, per Yuen JA.

Application of the legal principles

5.  There was no application for stay of execution of the judgment in question.

6.  In the respondents’ (petitioners’) application for security for costs, the Court of Appeal found that the respondents have made out a case that the debtor was impecunious. 

7.  The Court of Appeal made a preliminary assessment of the strength of the debtor’s grounds of appeal in that application.  The Court of Appeal noted that it was an appeal against a trial judge’s finding of facts and the threshold was high.  The Court of Appeal did not think that the debtor had a strong case for arguing that the judge’s factual findings were plainly wrong and that the merits were not such as would amount to countervailing factors that militated against the making of an order for security.

8.  The debtor has provided security for costs on appeal as ordered.

9.  No date has been fixed for hearing of the appeal.  The parties are in the course of preparing the appeal bundle.

10.  At this hearing the debtor accepted that the threshold for appealing against findings of fact was high.  He maintains that transcript of the proceedings at trial would show that the level of discovery on the respondent’s side was lacking and once the transcript is available, he would be able to substantiate his grounds of appeal and demonstrate that the trial judge had ignored evidence or made wrong findings.

11.  The transcript was not before this court.  The debtor’s vague submission without specifying what in the transcript could substantiate his grounds of appeal fell short of demonstrating reasonable prospect of success in his appeal.

12.  I therefore ordered a bankruptcy order to issue with costs to the petitioners to be borne out of the estate.

13.  I thank Mr Kwong and Mr Lee of the Official Receiver for their assistance.