WU KWAI CHUN v. LAW JOSEPH NIMCHO

HCB 295/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY NO. 295 OF 1996

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D E C I S I O N

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1. This is an application on the part of the Judgment Creditor, Madam Wu Kwai Chun (“the Applicant”) for an order suspending the running of the relevant period for the Bankrupt’s discharge pursuant to section 30A(3) of the Bankruptcy Ordinance, Cap 6.  The main grounds as stated in the Application are that (i) in the case of a discharge to which section 30A(2)(a) of the Bankruptcy Ordinance applies, that the Bankrupt is likely within 5 years of the commencement of the bankruptcy to be able to make a significant contribution to his estate; (ii) that the Bankrupt has failed to co-operate in the administration of his estate; and (iii) that the conduct of the Bankrupt, either in respect of the period before or the period after the commencement of the bankruptcy, has been unsatisfactory.  The Bankrupt opposed the application.

2. The Bankruptcy Order was made by Master L. Cannon of the High Court against the Bankrupt on 24 July 1997.  Pursuant to section 30A(2)(a) of the said Ordinance, if no objection is raised, the Bankrupt would be discharged from bankruptcy on 24 July 2001.

3. In support of her application, the Applicant has filed 2 affirmations dated 20 July 2001 and 25 February 2004 respectively.  The Bankrupt relied on his three affidavits dated 18 September 2001, 16 April 2002 and 2 September 2002 respectively.

4. The Official Receiver supports the application and has filed two reports dated 22 August 2002 and 4 October 2004 respectively.

5. At the conclusion of the hearing on 11 October 2004, I made an order suspending the running of the relevant period for 4 years and said that reasons be given later.  I now give my reasons.

6. The key complaint from the Applicant was that the Bankrupt was and still is carrying on business in Mainland China.  She produced various company records to support her version.  In reply, the Bankrupt stated that the companies, namely, Panyu Capital Restaurant Equipment Co. Ltd. and Shenzhen Micro Electronics Co. Ltd. had ceased business in August 2000 and November 1996 respectively.  The Bankrupt emphasized that he was just an employee of the former though he was the chairman of the board of director of the latter until its closure in 1996.

7. As for Panyu Sunshine Environmental Protection Equipment Company Limited (“PSEPEC Ltd”), the Bankrupt denied that he has any connection with it.  In his affidavit dated 17 April 2002, he stated this

“   11.    I was not the general manager (總經理) of Panyu Sunshine Environmental Protection Equipment Company Ltd (番禺陽光環保設備有限公司) (PSEPEC Ltd) as alleged.  I was not a director nor a shareholder of the said company and I have never been employed by the said company.

    12.    My son, Henry Law is the legal representative (法人) of PSEPEC Ltd.  I know that he is only a minority shareholder of the said company and there are other foreign investors.”

8. However, documents produced by the Applicant shows that the Bankrupt was once the legal representative, general manager and chairman of the board of director of PSEPEC Ltd which was granted the licence to carry on business for a period of 11 years from 31 December 1998.  The Bankrupt ceased to be the legal representative and chairman in 2000 but remains as the general manager of the company.  His son, Henry Law, became the legal representative and chairman of the board of director.  The registered capital of the company is US$1 million.  According to the accounts records produced, capital in the sum of, at the least, US$500,000 has been injected by Delta King Enterprise Inc (“Delta King”) and a Joseph Law was the Secretary of Delta King.

9. The documents clearly shown that the Bankrupt was lying to the Court.  I should point out here that the Bankrupt was not aware of the fact that  the Applicant letter dated 25 February 2004 was indeed part of her 2nd affirmation.  The reason was that the Applicant mistakenly failed to serve the front page of her affirmation which shown it was an affirmation but not a letter.  Although I had asked if Mr. Fung, Counsel for the Bankrupt, needed time to take instructions so as to deal with such scenario, I was told that he had no instruction to reply to the 2nd affirmation of the Applicant.

10. There are 2 other complaints which were not denied by the Bankrupt.  The Bankrupt has never mentioned to the Official Receiver that he was appointed as a director of a Sunshine Environmental Protection Enterprises Limited (“SEPE”) on 28 April 2000 and that the majority shareholder of SEPE is Delta King as referred to hereinabove.  The fact that the Bankrupt was once a director of a United Wish International Ltd (“United Wish”) and that he resigned from such office on 4 October 1997 and further that he transferred his 7,000 shares in United Wish to LI Hon Shing on 6 October 1997 were not declared in his statement of affairs.

11. In the Official Receiver’s 1st Report, it was mentioned that the Bankrupt had borrowed 2 loans from a Dr. Constantine Lo in April and August 2001 respectively without disclosing that he was a bankrupt.  Two cheques drawn upon the account of United Wish dated 6 September 2001 and 24 December 2001 were produced under the said 1st report.  They shown that the Bankrupt was the authorized signatory of such bank account.  The Bankrupt explained that the loans were in fact made to United Wish.  However, no explanation was offered by the Bankrupt as to why United Wish need such a loan though the Bankrupt stated that United Wish was a dormant company.  Further, the Bankrupt said nothing as to why he was still the authorized signatory of the bank account of United Wish though he was no longer a director or shareholder of the same.

12. At paragraphs 12 and 13 of the Bankrupt’s 2nd affidavit, he explained the matters in relation to United Wish in this way

“   12.    I admitted I have resigned from directorship in UW on 4 October 1997 and had transferred 7,000 shares in UW to Li Hon Shing on 6 October 1997.

    13.    At the material time, UW was a dormant company and was suffering from a deficit and the shares of the company did not worth a penny.  As I thought that the shares of UW were worthless, therefore, I have not mentioned the same in my statement of affairs.  I did not intend to defraud the Official Receiver or the creditors and I trust that such resignation and transfer had not caused any prejudice to the creditors.”

13. In relation to the complaint concerning SEPE, the Bankrupt explained in his 2nd affidavit

“   3.      SEPE was not managed by me as alleged.  SEPE was and is owned by Delta King Enterprise Inc. (“DKE”) and DKE is holding 9999 shares of SEPE representing 99.99% of the issued capital.

    4.      I was only appointed by DKE as its director in SEPE and did not receive any income from such directorship and did not take part in any management of SEPE at all.  There is now produced and shown to me an exhibit marked “JL-6” a copy of board minutes of DKE dated 26 April 2000 showing that DKE appointed me as director in SEPE.

    5.      As I was only a non-executive director of SEPE and did not involved in the management of the company at all, I have not informed the Official Receiver about my appointment as a director of SEPE.”

14. The explanations given by the Bankrupt are, in my judgment, totally not acceptable.  In the light of the close relationship between SEPE, Delta King Enterprise Inc and PSEPEC Ltd, it is totally implausible that the Bankrupt was just appointed as a director without receiving any benefit and/or not taking any part in any management.  Even if that was so, there was also no reason why the Bankrupt would have failed to inform the Official Receiver.

15. As to United Wish, no explanation was given as to why he failed to declare his directorship.  The Bankrupt also failed to disclose details about the share transfers.

16. All these shown that the Bankrupt was and still is hiding a lots of thing.

17. I found that the Applicant had made out her case.  Mr. Fung submitted that, in the light of the authorities which he referred me to, even if I found in favour of the applicant, I should make an order with the effect that the Bankrupt may be discharged from bankruptcy with immediate effect.  The reason was that up to the date of hearing, there was already a suspension of over 3 years.

18. I do not accept Mr. Fung’s submission.  I consider that this present case is a very serious case.  The Bankrupt was all along concealing his financial means and resources.  The different manners the Bankrupt dealt with the complaints concerning (i) United Wish and SEPE and (ii) PSEPEC Ltd clearly demonstrated that the Bankrupt would try to find excuse when he had to faced matters that he cannot deny while maintaining full denial to other complaints which he saw no documentary proof against him.

19. There is such a delay before the application is heard is because of the fact that there are negotiations between the Applicant and the Bankrupt concerning repayment of the debt owing to the Applicant.  There were offers made by the Bankrupt and when the Applicant indicated her willingness to accept the latest offer, the solicitors for the Bankrupt stated that they need time to take further instructions because a reasonable period of time had lapsed since the offer was made.  I was told by Counsel for the Bankrupt that no settlement was reached since there were some changes to the source of money to pay off the debt.

20. I doubt very much about this.  As I have already found that the Bankrupt was hiding away his financial means and resources, I think the long settlement talk and the allegation of changes were just delaying tactics played by the Bankrupt in order to induce the Applicant not to press hard and side track the attention of the Official Receiver and not to make further investigation into the affairs of the Bankrupt’s estate.

21. For the reasons aforesaid, I ordered to suspend the running of the relevant period for the maximum term of 4 years.

22. At the conclusion of the hearing, I also made a costs order in favour of the Official Receiver, by way of gross sum assessment, in the sum of $43,600.  The Bankrupt in fact did not dispute this figure.

23. The Applicant claimed for over $60,000 as her costs.  She said that she worked as a private tutor in relation to personal health and charged $1,500 per hour.  For the purpose of these proceedings, she just claimed $1,000 per hour.  I found the hourly rate is reasonable.  I also found that the Applicant is entitled to claim costs for 9 hours in preparing her affirmations; 3 hours for previously court attendance; 3 hours for attending the hearing on 11 October 2004 and another 4 hours for preparing for court attendance.  The total costs I allow was $19,000.