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HCB5967/2007
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
BANKRUPTCY PROCEEDINGS NO. 5967 OF 2007
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| Re : |
HO YIN MAN |
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| Ex Parte : |
COSIMO BORRELLI |
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G JACQUELINE FANGONIL WALSH |
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Before : Hon Poon J in Court
Date of Hearing : 3 March 2008
Date of Decision : 3 March 2008
Date of Reasons for Decision : 7 March 2008
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REASONS FOR DECISION
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1. This is an application by the Bankrupt to rescind or annul the bankruptcy order made against him on 12 November 2007 (“the Order”) or alternatively to stay the bankruptcy proceedings pending the determination of HCA269/2007 and HCA711/2007 (“the High Court Actions”).
2. On 3 March 2008, I refused the application with costs. These are my reasons.
Background
3. The Bankrupt was the majority shareholder of Stereo Limited (“Stereo”). In July 2003, Stereo became insolvent. As at 31 March 2003, Stereo had assets with a book value of about HK$87 million and total liabilities of about HK$98 million. The Bankrupt had guaranteed some of Stereo’s bank loans. His personal debts amounted to some HK$32.5 million.
4. Subsequently, Stereo went through a restructuring, which resulted in a scheme of arrangement. The scheme was approved by the court on 5 July 2005.
5. As part of the restructuring, the creditors of the Bankrupt needed to approve a voluntary agreement (“IVA”) proposed by the Bankrupt in accordance with the provisions of the Bankruptcy Ordinance, Cap. 6, which they subsequently did on 2 September 2005. On 22 February 2006, upon his application, the court annulled the bankruptcy order made against the Bankrupt in another earlier bankruptcy proceedings.
6. One of the terms of the IVA is that the Bankrupt undertakes to make monthly contribution of HK$150,000.
7. It is not in dispute that since 8 November 2005, the Bankrupt has failed to make any monthly contributions. (The petitioners, who are the nominees under the IVA, also complained that the Bankrupt had committed other breaches of the IVA. But for present purposes, the parties’ submissions are principally concerned with the Bankrupt’s liability to make monthly contribution. So I will just leave those matters aside.) The creditors then resolved to terminate the IVA and authorized the issuing of the present petition, which was presented on 11 July 2007.
8. At the hearing on 12 November 2007, neither the Bankrupt nor his solicitor appeared. Reyes J made the Order in his absence.
Discussion
9. The Bankrupt sought to rescind or annul the Order on the ground that the underlying debt upon which the petition was based was disputed on substantial grounds. He alleged that prior to the making of the IVA, he and one Mr Ronald Chan (“Mr Chan) entered into an oral agreement whereby, inter alia, Mr Chan would pay on his behalf the monthly contributions under the IVA (“the Oral Agreement”). Thus he was not personally liable to do so. (In fact, the Oral Agreement is the very subject matter of the Bankrupt’s claims in the High Court Actions. There, he sued a number of defendants including Mr Chan and the 1st named petitioner herein. He sought an order that Mr Chan be ordered to pay the monthly contributions under the IVA for 10 years. The defendants denied the existence of the Oral Agreement. And there is pending in the High Court Actions an application for striking out the Bankrupt’s claims.)
10. I can see no substance in this ground at all.
11. First, the liability under the IVA to make the monthly contributions remains squarely with the Bankrupt personally. The Oral Agreement, even if proved, is something between him and Mr Chan. It does not relieve him of his personal liability to make the monthly contributions.
12. Second, none of the creditors under the IVA is a party to the Oral Agreement. I fail to see how they are bound or in any way affected by it as contended by Mr Chong, counsel for the Bankrupt.
13. Third, Mr Chong submitted the IVA had not been properly explained to the Bankrupt when he signed it. A fraud had been committed against him. I first note that there is a wealth of evidence showing that the Bankrupt was aware of the terms of the IVA. But even assuming that the Bankrupt signed the IVA in the circumstances as he alleged, I fail to see how that would affect the creditors under the IVA. The mere fact that the 1st named petitioner in his capacity as one of the nominees under the IVA allegedly knew that the Bankrupt signed the IVA in such circumstances does not mean that his knowledge can be imputed to the creditors, thus adversely affecting their position. Mr Chong has not cited any authority to support his submission.
14. Fourth, Mr Chong submitted that, as a fall-back position, the Bankrupt can under the Oral Agreement call upon Mr Chan to pay the monthly contributions. He can ask Mr Chan for an indemnity to such effect. The need to make the order against the Bankrupt would not arise. I reject this submission because on the evidence before me, the Oral Agreement, which is disputed, amounts to no more than some contingent claims that the Bankrupt may have against some persons other than the creditors under the IVA.
Conclusion
15. For the above reasons, I see no reason for rescinding or annulling the Order or staying the bankruptcy proceedings. I therefore refuse the application with costs against the Bankrupt.
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(J. Poon)
Judge of the Court of First Instance
High Court |
Miss Naphtali of Messrs Lovells, for the Petitioners
Mr K.M. Chong, instructed by Messrs Tam, Pun & Yipp, for the Bankrupt
Miss Ada Sze for Officer Receiver
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