Re Margaret Chiu

HCB 7106/2018

[2020] HKCFI 617

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 7106 OF 2018

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J U D G M E N T

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1. By a petition presented on 10 December 2018, V Capital Limited, the petitioner, seeks a bankruptcy order against Ms Margaret Chiu (“debtor”).

2. The hearing was scheduled to be heard on 3 February 2020 but was adjourned due to the general adjournment of court proceedings announced by the Judiciary. Given the nature of the proceedings (which determines the status of the debtor) and the fact that the petition was presented in as early as December 2018, this court decided to fix the hearing on an early date (i.e. 6 April 2020) and proceed with the hearing during the general adjournment.

3. At the hearing, Mr Kenny Lin (appearing with Mr Jeffrey Lee) informs the court that the debtor has decided to discharge the legal team and acts in person as there are certain matters which the legal team considers unable to advance on her behalf. Therefore, the court releases the legal team and the debtor acts in person. The debtor confirms that she adopts the written submissions prepared by Mr Lin.

4. The debtor seeks to adduce her 5^th affirmation (“Chiu 5^th”) as further evidence in opposition to the petition, which is only provided to the court and the petitioner at the hearing. The application to adduce Chiu 5^th strikes me as a tactical manoeuvre deployed by the debtor in the hope that the petition can be adjourned, and I refuse the application for the following reasons:

(1) There has been inordinate delay and inaction on the part of the debtor in filing any new evidence. The debtor filed her third affirmation on 24 April 2019 (“Chiu 3^rd”) in which she provided further documents in relation to her assets and encumbrances and provided an update on the matters set out in her previous affirmations (summarised in §25 below). Since then, for almost one year, there has been no attempt on the part of the debtor to adduce any further affirmation until this hearing.

(2) The matters set out in Chiu 5^th were admittedly well known to the debtor. It was open to the debtor to set them out in an affirmation and applied for leave to adduce it if she wished to do so. She claims that the reasons why this was not done earlier were because her secretary had fallen ill and her legal advisers failed to include the documents she had provided to them, and she was not aware that the petitioner would criticise her for not disclosing supporting documents in relation to her liabilities[1]. I am unable to accept her assertions. By the time the debtor made Chiu 2^nd and Chiu 3^rd, the petitioner had already made much criticisms on the deficiency of her disclosure (see §§21 and 23 below) and she had been able to enlist the assistance of her secretary.

(3) Allowing the debtor to adduce Chiu 5^th would prejudice the interest of the petitioner as it would effectively be deprived of an opportunity to consider and respond to the matters raised in Chiu 5^th.

A. BACKGROUND FACT

5. The following fact and matters are not in dispute.

6. The debtor is the legal and beneficial owner of 99.9% shares[2] of a Hong Kong company, Marspan Limited (“Marspan”) which, in turn, is the registered owner of a property located at Lots 2 and 630, Demarcation District No 238 (“Property”).

7. The late Deacon Chiu passed away on 17 March 2015, and was survived by his wife and 8 children including the debtor. On 3 February 2016, letters of administration were granted to Mrs Chiu as the administratrix (“Administratrix”) of the estate of the late Deacon Chiu (“Estate”).

8. By a deed dated 24 October 2016 made between inter alios the debtor and the petitioner, the debtor promised to pay the balance of the extension fee, the second extension fee and the professional fees to the petitioner. Apart from a partial payment of HK$7 million paid to the petitioner on 2 March 2017, the debtor failed to pay the amount due.

9. The petitioner through its former solicitors’ letter of 6 March 2017 demanded the debtor to pay the remaining balance of US$5,710,281.08, but no payment was made by the debtor. At that time, the Property was unencumbered.

10. Between 8 March 2017 and 13 July 2018, the debtor caused Marspan to create the following encumbrances over the Property (collectively “5 Mortgages”) as security for the loans advanced to her:

(1) a mortgage dated 8 March 2017 in favour of CS Credit Limited (“CS Credit”), which was registered at the Land Registry on 21 March 2017 (“1^st Mortgage”);

(2) a mortgage dated 29 January 2018 in favour of Asset Bridge Development Limited (“Asset Bridge”), which was registered at the Land Registry on 30 January 2018 (“2^nd Mortgage”);

(3) a mortgage dated 1 February 2018 in favour of CS Credit, which was registered at the Land Registry on 26 February 2018 (“3^rd Mortgage”);

(4) a legal charge dated 4 June 2018 in favour of Jad Wealth (Asia) Development Limited (“Jad Wealth”), which was registered at the Land Registry on 28 June 2018 (“4^th Charge”); and

(5) a mortgage dated 13 July 2018 in favour of E Capital Limited (“E Capital”), which was registered on 7 August 2018 (“5^th Mortgage”).

11. On 24 September 2018, the petitioner obtained a judgment by consent (in HCA 1431/2017) against the debtor, which required the debtor to pay within 30 days the following amounts: (1) US$3,677,168.23 as outstanding extension fees, (2) US$1,450,000 as outstanding professional fees, and (3) interest on the extension fee at 5% p.a. from 4 February 2017 up to date of judgment (“Judgment Debt”).

12. The debtor did not pay any part of the Judgment Debt by the due date. On 26 October 2018, the petitioner issued a statutory demand requiring the debtor to pay or compound for the Judgment Debt and interest accrued thereon at judgment rate from 27 October 2018 until payment (“SD”). The SD was served on the debtor on 2 November 2018.

13. On 29 November 2018, the petitioner obtained a charging order absolute over the debtor’s shares in Marspan (the order nisi was made on 30 October 2018).

14. On 10 December 2018, the petition was presented and served on the debtor. In the petition, the petitioner relied on the Judgment Debt and the SD which had not been complied with or set aside. In relation to the security held by the petitioner (i.e. charging order absolute), the petition stated (at §5) that it holds security and estimates the value of the security at HK$9,999, based on the registered share capital of Marspan.

15. On 24 December 2018, an order was made against the debtor (in HCA 1431/2017) requiring her to disclose, inter alia, documents relating to (1) her salary and professional fees received for the last 3 years and (2) the receipt and use of the loans secured by the 5 Mortgages (“1^st Disclosure Order”).

16. By letter dated 24 January 2019, Messrs SW Tai & Co (“SWT”), on behalf of the debtor, requested the Administratrix to provide copies of the letters of administration and schedule of assets and liabilities in relation to the Estate. The Administratrix through Messrs Woo Kwan Lee & Lo’s letter of 25 January 2019 declined the request, and stated that the administration was still “at the stage of conducting valuation of the assets and ascertaining the debts”, and the debtor “is entitled to approximately one-sixteenth of the net asset value of the Estate” (“WKLL Letter”).

17. On 29 January 2019, the debtor through SWT produced some documents to the petitioner in purported compliance with the 1^st Disclosure Order.

18. By letter dated 29 January 2019 to Messrs Jun He, solicitors for the petitioner (“JunHe”), SWT stated that the debtor had instructed them to “immediately take out an application” for an account and inventory of the Estate, and to make an offer on the following terms (“1^st Offer”):

(1) the debtor shall forthwith place the Property for sale and undertakes to sell the Property upon receiving an offer to purchase it for not less than HK$170,000,000;

(2) upon sale of the Property and discharging all encumbrances, the debtor undertakes to apply the net proceeds to settle the Judgment Debt;

(3) the debtor undertakes to take out an application for account and inventory of, and interim distribution from, the Estate;

(4) the debtor undertakes that upon receiving the interim distribution from the Estate, she shall utilise the funds received to first discharge the Judgment Debt; and

(5) the petition shall be withdrawn or stayed sine die with liberty to restore.

19. On 30 January 2019, the petition was heard before a Master. On 31 January 2019, the debtor filed an amended notice of intention to oppose the petition stating that she “intends to show cause against the petition” but without stating the grounds relied upon. On 1 February 2019, JunHe complained that the notice failed to specify the ground of opposition, as required by r 68 of the Bankruptcy Rules. No step was taken by the debtor to rectify the defect or to file an affirmation in opposition.

20. At the 1^st callover hearing of the petition on 18 February 2019, Anthony Chan J made an order that if the Property is not sold by 4 March 2019, the debtor “is to file and serve an affirmation setting out the valuation of the Property and all of the [debtor’s] existing indebtedness with appropriate supporting evidence on or before 11 March 2019” (“2^nd Disclosure Order”).

21. In their letter dated 27 February 2019 to SWT, JunHe complained about the inadequacy of the documents provided by the debtor...