HONG KONG SAR, CHINA Law and Practice Contributed by: Eric H. H. Chow, Michael Cheng, Stephanie Wong and June Wong, C L Chow and Macksion Chan
Insolvency Proceedings A judgment creditor can also use insolvency – winding up for a company, bankruptcy for an individual – as an enforcement tool. The usual trigger is a service of a statutory demand for an undisputed debt of at least HKD10,000: for Hong Kong incorporated companies under Section 178 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32, and for individuals under the Bankruptcy Ordinance, Cap 6. If the judgment debtor does not repay the debt within 21 days, it is deemed to be unable to pay its debts, and the judgment creditor can petition to wind up the company or bankrupt the individual. A liquidator or trustee is then appointed to gather in and distribute the debtor’s assets according to statutory priority. Insolvency costs more than a single enforcement step, but it can reach hidden assets and unwind transac - Two narrower tools deal with funds or securities. A stop order prevents dealings with funds or securities held in court (including dividends or income on them); it is obtained by summons in a pending action, or by originating summons where none exists, served on all affected parties. A stop notice concerns a debtor’s securities that are not in court – for example, shares in a Hong Kong company, or a company whose share register is kept in Hong Kong – and prevents registra - tion of a transfer, or payment of a dividend, until 14 days after notice of the proposed dealing is given to the creditor. A stop notice is a temporary measure rather than a permanent freeze; once the 14-day peri - od runs out, the party served is free to proceed. Both measures are dealt with under Order 50 of the RHC. 2.3 Costs and Time Taken to Enforce Domestic Judgments Cost and timing turn on the nature and location of the judgment debtor’s assets and on whether the judgment debtor resists. Legal fees are generally charged on a solicitor-and-client basis, usually by time spent, and a successful judgment creditor can normally recover costs of enforcement from the judg - ment debtor on a standard party-and-party basis. The court may assess those costs summarily by reference to the Registrar’s published guideline figures for com - tions made before the insolvency. Stop Orders and Stop Notices
mon, uncontested enforcement applications (such as a garnishee or charging order). Enforcement against liquid assets is quicker: garnish - ee proceedings against a known bank account com - monly take at least three months to an order absolute. Seizing goods under a writ of fi fa through the bailiff takes longer and realising land through a charging order followed by an order for sale longer still, particu - larly if the judgment debtor resists. Insolvency is the most expensive route but can be the most effective where assets are hidden or where transactions need to be unwound. As a rough guide: garnishee proceed - ings suit a known bank balance; a writ of fi fa suits visible goods; a charging order suits real property held for the longer term; and insolvency suits cases where recovery calls for a liquidator or trustee – to investi - gate the debtor’s affairs, realise assets and achieve a fair distribution – or where other routes have not produced payment. Where a judgment creditor does not know about the judgment debtor’s finances, the court’s post-judg - ment disclosure tools – examination of the judgment debtor under Order 48 (individuals and corporate officers) and Order 49B (individuals, with power to secure attendance), and orders prohibiting the judg - ment debtor from leaving Hong Kong – are described in 1. Identifying Assets in the Jurisdiction and are not repeated here. In addition, once liquidation or bank - ruptcy begins, the liquidator or trustee investigates the debtor’s affairs, and the debtor must file a statement of affairs disclosing all assets, which can itself bring concealed assets to light. 2.5 Challenging Enforcement of Domestic Judgments The route a judgment debtor takes to resist enforce - ment depends on how the judgment was obtained and the stage the matter has reached. Common examples include the following. • Setting aside a default judgment. If the judgment was obtained irregularly – for example through defective service – the defendant can have it set aside as of right, without the court weighing the 2.4 Post-Judgment Procedures for Determining Defendants’ Assets
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