Introduction
In today’s complex financial landscape, creditors face numerous challenges when attempting to recover outstanding debts. As the number of individuals struggling with overwhelming financial burdens continues to rise, it becomes crucial for creditors to explore alternative strategies to maximize their chances of reclaiming what is owed to them. Strategy that creditors can leverage are (i) personal bankruptcy; and (ii) prohibition order, which can serve as powerful tools in the debt recovery process.
Bankruptcy Petition
One of the most common methods for a creditor to exert pressure to a debtor in Hong Kong is to present a petition to the Court for a bankruptcy order against the debtor.
Personal service of the petition on the debtor is required. If a debtor cannot be found, a creditor would usually apply to the court for a substituted service.
If an individual has changed her domicile of origin, the bankruptcy petition, even if served by way of substituted service can be opposed on the basis that the petitioner failed to establish the jurisdictional requirements under section 4(1) of the Bankruptcy Ordinance.
Section 4(1) of the Bankruptcy Ordinance provides that:
(1) A bankruptcy petition shall not be presented to the court under section 3(1)(a) or (b) unless the debtor—
(a) is domiciled in Hong Kong;
(b) is personally present in Hong Kong on the day on which the petition is presented; or
(c) at any time in the period of 3 years ending with that day—
(i) has been ordinarily resident, or has had a place of residence, in Hong Kong; or
(ii) has carried on business in Hong Kong.
When a debtor claims that s/he has abandoned his or her domicile of origin and acquired a domicile of choice elsewhere, the burden shifts to the debtor to prove, on the balance of probabilities, that s/he has abandoned her domicile and acquire a domicile elsewhere.
The principle as set out in Re Chow Kan Fai [2004] 1 HKLRD 161 can be summarized as follow:
- Change of domicile is not to be lightly inferred from casual language or even long period of residence. It has to be proved with perfect clearness and satisfaction of a fixed and settled purpose, a determination, a final and deliberate intention to change.
- In order to prove that a debtor has changed his domicile, it is insufficient to show merely that he is ordinarily resident in the new alleged domicile. What must be shown is that such residence was imbued with an intention of staying in the new alleged domicile permanently or indefinitely.
- There is a strong presumption in favour of continuation of domicile of origin.
On 14 June 2023, the High Court of Hong Kong in Re Fang Sau Mei Angel, ex p Bright Smart Futures & Commodities Co., Ltd. [2023] HKCFI 1595 held, among others, that:
- Travel records from the Immigration Department showing that one has not resided in Hong Kong for a number of years alone is not sufficient to show a change of domicile;
- Any claims by the debtors that s/he has acquired a domicile elsewhere needs to be verified by an affidavit, rather than bare assertions; and
- The debtor would need to show that s/he intends to abandon her domicile of origin for good, and to stay in his/her new domicile permanently or indefinitely.
Prohibition Order – Preventing a Judgment Debtor from Leaving Hong Kong
In the legal world, justice goes beyond obtaining favorable judgments. It extends into ensuring that those judgments are effectively enforced, guaranteeing the rightful parties receive what they are owed. One powerful legal tool that aids in this process is a prohibition order against a judgment debtor.
The other method is that commonly seen in Hong Kong is for party to apply for a prohibition order from the Court, prohibiting the judgment debtor from leaving Hong Kong to facilitate the chasing of the judgment debt.
The application may be made ex-parte (without giving notice to the debtor). There should be an affidavit or affirmation in support. The judgment debtor who is prohibited by a prohibition order from leaving Hong Kong may, on 2 days clear notice to you and upon being present in person in court, apply for the order to be discharged. A prohibition order lapses after one month but the court may, on your application, extend or renew the order for a period which does not exceed, with the initial period of one month and any other period of extension or renewal, 3 months.
Key takeaways
In an increasingly complex legal landscape, making a bankruptcy petition or applying for a prohibition order against judgment debtors serve as vital tools in preserving justice and safeguarding the rights of creditors. At YTL LLP, our lawyers possess a deep understanding of this area of law and are committed to providing effective and tailored solutions for our clients. Contact us today to protect your rights.
Alfred Leung, Partner (E: alfredleung@hkytl.com; T: 852 3468 7202)
YTL LLP is a law firm headquartered in Hong Kong, China. This article is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.
