NANIK DAYARAM, A BANKRUPT v. THE JOINT AND SEVERAL TRUSTEES IN BANKRUPTCY OF NANIK DAYARAM, A BANKRUPT

CAMP 48/2019

[2021] HKCA 939

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 48 OF 2019

(ON AN INTENDED APPEAL FROM HCB NO 7651 OF 2011)

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D E C I S I O N

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Hon G Lam JA (giving the Decision of the Court):

1.  This is an application by Mr Dayaram, a discharged bankrupt (“bankrupt”) for leave to adduce new evidence in his intended appeal against the decision of Master S Lui on 20 November 2018 deferring the automatic discharge of his bankruptcy (“Decision”). The bankrupt took out a summons on 27 March 2019 for leave to appeal against the Decision out of time, and issued the summons for adducing new evidence on 4 May 2020. The Joint and Several Trustees in Bankruptcy (“Trustees”) oppose the application to introduce new evidence.

2.  Both parties have lodged written submissions. Having considered the written materials, we consider it appropriate to determine the application on paper without an oral hearing.

Background

3.  The bankrupt was adjudged bankrupt on 13 June 2013 on a petition presented by a bank creditor.  On 17 May 2017, the Trustees applied under section 30A of the Bankruptcy Ordinance (Cap 6) for an order in effect that the bankrupt’s discharge from bankruptcy be deferred for 4 years.

4.  In that application, the Trustees relied on the grounds in section 30A(4)(c) (namely, “that the bankrupt has failed to co‑operate in the administration of his estate”) and section 30A(4)(d) (namely, “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”), based on the following conduct of the bankrupt:

(1)  Non‑disclosure of the fact that the bankrupt had lodged a claim against Days International Ltd, a company incorporated in Hong Kong.

(2)  Non‑disclosure of the bankrupt’s shareholding in Days Impex Ltd (a company incorporated in Liberia) (“Days Impex Liberia”) and Days Impex Limited (a company incorporated in Hong Kong) (“Days Impex HK”).

(3)  Dissipation of shareholdings in certain related companies to associated parties.

(4)  Dissipation of funds from Mandatory Provident Fund (“MPF”) Scheme.

5.  In the Decision, Master Lui referred to the established principle that an application for suspension of discharge is to be approached in two stages: (1) determining whether one or more of the grounds mentioned in section 30A(4) has been established; (2) considering whether, in the exercise of the court’s discretion, a suspension of discharge should be ordered.[1] The Master found that the bankrupt’s conduct had been unsatisfactory and that he had failed to co‑operate with the Trustees, and that the two grounds in sections 30A(4)(c) and (d) were established.[2]  He considered that whilst the bankrupt’s case was a very serious one, it was not the most egregious one of its kind, and that the period during which time should cease to run should be 3 years.

The application to adduce new evidence

6.  By a summons dated 27 March 2019, the bankrupt applied to this Court for extension of time to appeal against the Decision.  On 2 April 2019, Kwan VP directed that a rolled-up hearing be held for the summons for extension of time to appeal, and, if leave be granted, the appeal itself.  The bankrupt has yet to fix a date for the hearing.

7.  Meanwhile, over 13 months later, on 4 May 2020, the bankrupt took out a summons for leave to adduce new evidence.  The new evidence is the bankrupt’s 7^th affirmation of the same date and the documents described in and exhibited to that affirmation.  The new documents are all copies of conveyancing documents, apparently taken from the Lands Registry, relating to the following properties:

(1)  Exhibit ND‑7A — Flat 2 on 7/F (Block A) and Car Parking Space No 289, Villa Monte Rosa, 41A Stubbs Road, Wanchai.

(2)  Exhibit ND‑7B — Flat 1 on 7/F (Block A) and Car Parking Space No 58, Villa Monte Rosa, 41A Stubbs Road, Wanchai.

(3)  Exhibit ND‑7C — Flat A, 16/F, South Tower 1, Residence Bel‑Air, 38 Bel‑Air Avenue, Island South.

(4)  Exhibit ND‑7D — Flat A, 30/F, South Tower 1, Residence Bel‑Air, 38 Bel‑Air Avenue, Island South.

(5)  Exhibit ND‑7E — House B15, Regalia Bay, 88 Wong Ma Kok Road, Stanley.

(6)  Exhibit ND‑7F — Flat B, 5/F, 2 Park Road, Mid‑levels.

(7)  Exhibit ND‑7G — Unit 701, 7/F, Peninsula Centre, 67 Mody Road, Tsim Sha Tsui East.

(8)  Exhibit ND‑7H — Unit 702-4, 7/F, Peninsula Centre, 67 Mody Road, Tsim Sha Tsui East.

Whether the new evidence should be admitted

8.  To understand the reasons submitted by the bankrupt for adducing the new evidence, it is necessary to describe briefly what happened at the hearings before the Masters.

9.  The Trustees’ section 30A application was initially supported by the 3^rd affirmation of one of the Trustees, Mr Arab, dated 17 May 2017, which relied on the four areas mentioned in §4 above as unsatisfactory and uncooperative conduct.  The bankrupt filed an affirmation dated 21 July 2017 in opposition.  On 25 October 2017, the Trustees filed Mr Arab’s 4^th affirmation in reply.  Apart from dealing with the four areas of conduct relied on, that affirmation also referred to the investigations by the Trustees into the affairs of the bankrupt including three properties at Villa Monte Rosa (ie the two properties referred to in §7(1) & (2) above, and Flat 2 on 6/F (Block A) and Car Parking Space No 72) (“Villa Monte Rosa properties”) which were owned by Days Properties Ltd (“DPL”), a company incorporated under the laws of Turks & Caicos Islands.  It was said that the Trustees had found that the bankrupt signed various conveyancing documents on behalf of DPL in relation to those properties.  There was suspicion that the bankrupt had interests in those properties.

10.  On 2 January 2018, the bankrupt (then acting in person) made his 2^nd affirmation responding to Mr Arab’s 4^th affirmation and issued a summons seeking leave to adduce his 2^nd affirmation, but filed the affirmation without serving a copy on the Trustees.

11.  When the section 30A application came before Master M Wong on 16 January 2018, the bankrupt asked for leave to adduce his 2^nd affirmation, in order to deal with the Trustees’ new allegations in their 4^th affirmation about the Villa Monte Rosa properties and DPL.  The Trustees’ counsel explained that those matters were included in the 4^th affirmation only to show the work that had been done by the Trustees, in answer to the bankrupt’s allegation that there had been delay and inaction on their part, and not as a separate area of alleged unsatisfactory conduct or lack of cooperation.[3] Nevertheless, the bankrupt was given retrospective leave to file his 2^nd affirmation and, in addition, leave to file a further affirmation by 13 February 2018.  The Trustees were given leave to file a reply by 13 March 2018.[4]  The hearing was adjourned. 

12.  The section 30A application was eventually heard by Master S Lui on 26 June 2018.  At that hearing, the bankrupt was represented by counsel.  It was common ground that the matters concerning the Villa Monte Rosa properties and DPL referred to in Mr Arab’s 4^th affirmation were not relevant as areas of alleged lack of cooperation or unsatisfactory conduct, but went to the second stage of the court’s determination, ie the exercise of discretion and fixing the period of suspension.[5]

13.  In §§4 to 17 of the bankrupt’s 7^th affirmation, he set out the circumstances concerning the conveyancing transactions relating to the three Villa Monte Rosa properties in an attempt to show that “there was nothing sinister or complicated about the above mentioned nomination agreements”.  In §§20 to 22 of his 7^th affirmation, the bankrupt exhibited documents relating to the properties mentioned in §7(3)‑(8) above which were purchased by Days International Ltd or Days Impex Ltd, saying that these other property transactions had now become relevant due to the Trustees placing the three Villa Monte Rosa properties before the court as “Red Herrings”.

14.  From his 7^th affirmation, written submissions dated 6 July 2020 and reply submissions dated 15 September 2020, it can be seen that the bankrupt complains that the Trustees selectively presented documents related to their investigation of DPL and the Villa Monte Rosa properties.  He says that the Trustees had declared at the first hearing on 16 January 2018 that those matters were only adduced to deal with the allegation of delay and had no bearing on his conduct, but that in the hearing on 26 June 2018, the Trustees “ambushed” his team by inviting Master Lui to consider those matters for the purposes of stage 2 which involved examining the bankrupt’s conduct.[6]

15.  There is no dispute that there are three conditions as set out in Ladd v Marshall [1954] 1 WLR 1489 at 1491 for determining whether new evidence should be admitted for the intended appeal. They are as follows: (1) the evidence could not have been obtained with reasonable diligence for use at the hearing below; (2) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and (3) the evidence must be such as is presumably to be believed or it must be apparently credible, though it need not be incontrovertible.  All three conditions must be satisfied for new evidence to be admitted on appeal.

16.  In our view, the first condition is clearly not satisfied.  The bankrupt had filed his 2^nd affirmation in response to Mr Arab’s 4^th affirmation even before the Trustees explained the limited purpose of raising the matters concerning DPL and the Villa Monte Rosa properties at the hearing on 16 January 2018.  The bankrupt complained at that hearing about the allegedly selective manner in which the Trustees presented the conveyancing documents.[7]  His 2^nd affirmation was admitted by the Master, and he was given an opportunity to file further evidence, which he availed of by filing his 5^th affirmation on 4 May 2018 (which was filed by solicitors he had since engaged).

17.  There is nothing in the claim that his team was “ambushed” in the hearing on 26 June 2018 by any change of position on the part of the Trustees in relation to the relevance of DPL and the Villa Monte Rosa properties.  The bankrupt was represented by counsel at the hearing on 26 June 2018.  The bankrupt’s skeleton submissions for that hearing objected to those matters being relied on as part of the bankrupt’s uncooperative conduct but expressly accepted that those matters were relevant to the period of suspension of discharge.[8]  His counsel was fully aware of the Trustees’ position that those matters did not go to stage 1 but to stage 2 of the court’s determination, and was content to proceed on that basis.[9]  For example, at one point, his counsel said:

“ So we then move onto the DPL ownership issue. Well, actually there is one other point because of this stage 1 we are now moving into stage 2, and that’s common ground between us that DPL only goes to stage 2 and that’s the discretional stage. Of course, we do say in our skeleton that even if Master is persuaded, contrary to our submissions, that the conduct or cooperation ground is made out the discretion should still be exercised in Mr Dayaram’s favour.”

There is nothing that suggests the bankrupt’s legal representatives were taken by surprise by the Trustees’ position at that hearing.  There was no attempt then to seek leave to file any additional evidence.

18.  In our view, the bankrupt has wholly failed to show that the new evidence could not have been obtained or adduced with reasonable diligence for use at the hearing below.  Condition 1 is not satisfied.  On this basis alone, the application must be rejected.

19.  As for condition 2, in the Decision the Master confined his consideration at stage 1 to the four areas relied on by the Trustees (summarized in §4 above). The new evidence is not relevant to any of those four areas.

20.  In the discretionary exercise of stage 2, the Master did refer to the way the bankrupt arranged for the purchase of real properties and how it affected the work of the Trustees when considering how he should exercise the discretion on the length of the suspension of discharge (see §§43‑44 of the Decision).  However, this was only one of the several factors considered.

21.  The new evidence that seeks to explain the transactions relating to the Villa Monte Rosa properties does not alter the fact that complicated corporate structures were used for property transactions, making the work of the Trustees particularly difficult.  The new evidence that concerns transactions of other properties owned by Days International Ltd and Days Impex Ltd can have no conceivable relevance to any matter in question at all.

22.  Even if §44 of the Decision can be read as suggesting that the Master went a little too far in saying that the bankrupt’s conduct was unsatisfactory and uncooperative based on the DPL matters, having regard to all the circumstances including the other factors that the Master took into account, we are not satisfied that the new evidence would have any important influence on the outcome of stage 2 and, in particular, the period of suspension.  Condition 2 is therefore not satisfied either.

23.  It is unnecessary to deal with Condition 3.  Suffice it to say that there is some force in the Trustees’ submission that, whilst there is no dispute about the credibility of the new conveyancing documents exhibited, the bankrupt’s additional explanations in his 7^th affirmation are not such as are presumably to be believed.

24.  The bankrupt’s summons is therefore dismissed.

25.  Costs should follow the event.  The bankrupt has been discharged from bankruptcy since 13 June 2020.  We order him to pay the Trustees’ costs of this application forthwith. The Trustees’ statement of costs for summary assessment claims a total sum of $190,618.  Bearing in mind that the application is not complicated and the Trustees did not need to file any evidence, we assess the costs of the Trustees at the gross sum of $85,000.

[1] Decision, §12, citing Re Lee Raymond Cho Min & Re Lee Priscilla Hwang (CACV 112 & 113 of 2014; 30 July 2014).

[2] Decision, §§17-41.

[3] See pages 6K‑7N, 9M‑10S, 14H‑15O of the transcript.

[4] See pages 20S‑21E of the transcript.

[5] See the skeleton submissions of counsel for the bankrupt, at §§24‑28; and pages 15J-N, 24N‑25M, 37H-J of the transcript.

[6] See §§25-27 of the bankrupt’s 7^th affirmation.

[7] See pages 5F and 6C of the transcript.

[8] See §§27, 28(2) and 62(2) of the bankrupt’s skeleton submissions.

[9] See pages 15J-N, 24N‑25M, 37H-J of the transcript.