By Alex Liu

Hong Kong, 16 January 2025: A significant judgment from the Court of Final Appeal presents a clear legal framework allowing for the imprisonment of a bankrupt individual who wilfully refuses to disclose assets and income. The ruling provides welcome clarity in the complex regime governing bankruptcy protection and enforcement action.

The top court’s decision – delivered in Dadra Inc v Chan Choi Har Ivy 2025 HKCFA 25 – concerned the jurisdiction of a Master of the High Court to make an order for imprisonment of a bankrupt judgment debtor for wilful failure to make disclosure following an oral examination.

The CFA was told that the Respondent had obtained summary judgment against the Appellant on a dishonoured cheque for HK$90 million. When the Appellant failed to pay, the Respondent began enforcement proceedings under Order 49B of the Rules of the High Court (Cap 4A) requiring her to be orally examined and make full disclosure of her finances. Two orders for disclosure were made, but she failed to comply with either.

Meantime, the Appellant was adjudged bankrupt on the petition of another creditor. Acting under Section 12(1) of the Bankruptcy Ordinance (Cap 6), the Respondent obtained leave from the court to continue with the oral examination of the Appellant, notwithstanding her bankruptcy. Those proceedings determined that the Appellant had wilfully failed to make the disclosures and she was ordered by the Master to be imprisoned for six weeks.

The Appellant disputed this, arguing that the court lacked jurisdiction to proceed with an Order 49B examination, or make an order of imprisonment, after she had been adjudged bankrupt. The Court of Appeal dismissed her appeal and the case went to Hong Kong’s highest court.

Thus, the CFA had to consider whether a High Court Master only had jurisdiction to make an order for the imprisonment of a bankrupt judgment debtor if the judgment creditor had been granted leave under Section 12 of the Bankruptcy Ordinance specifically for that purpose.

The CFA declared that Order 49B constituted a holistic, coherent scheme for enforcement of a money judgment in which the court was empowered to make compulsory orders, including imprisonment. Section 12, meanwhile, was a separate procedure which enabled the bankruptcy court to exercise supervisory jurisdiction over the administration of a bankrupt’s estate. There was nothing in it to support the contention that separate leave to proceed was required for distinct parts of the Order 49B enforcement process.

Further, considerations of personal liberty did not alter this conclusion because the existing court practice had sufficient safeguards ensuring the fundamental rights of a judgment debtor. The appeal was therefore dismissed.

In summary, we now understand that the Order 49B of the Rules of the High Court procedure is an integrated scheme for judgment enforcement which includes oral examination and the power to imprison. Thus, once leave to proceed with the oral examination is granted under Section 12(1) of the Bankruptcy Ordinance, separate leave is not required for a subsequent application for an imprisonment order.

The CFA ruling makes it clear that being declared bankrupt does not mean immunity from the Order 49B enforcement process, while leave to proceed under Section 12(1) is simply a one-time application. From a broader perspective, the judgment is a further example of Hong Kong’s rule of law and its robust, yet transparent, financial regulatory regime.

Alex Liu is Managing Partner of BC&C. His key areas of practice include commercial and corporate litigation, investigations by governmental bodies such as the SFC, ICAC and Commercial Crime Bureau, insolvency and debt restructuring, intellectual property and employment matters. He can be contacted at alex@boasecohencollins.com.