Re: Chung Kwok Yiu Ringo ("the Bankrupt") and Ex Parte: The Official Receiver

HCB 739/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS NO. 739 OF 1996

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J U D G M E N T

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1. This is an appeal by the bankrupt against the order of Master Lung made on 26 February 2001 in which he suspended the automatic discharge of the bankruptcy order of the bankrupt, Mr Chung Kwok Yiu Ringo, by 21/2 years on the application of the Official Receiver pursuant to Section 30A(3) of the Bankruptcy Ordinance, Cap. 6.

2. The ground of objection of the Official Receiver was as provided in Section 30A(4)(c), namely that the bankrupt has failed to co-operate in the administration of his estate.

3. The Official Receiver was of the opinion that the bankrupt had not co-operated with the Official Receiver in providing information and documents relating to the proceeds of sale of the bankrupt's property at Flat 9, 26th Floor, Block A, Sui Wo Court, 5 Sui Wo Road, Shatin, New Territories ("the Property"). The disposal of the Property was made eight months before the petition was presented. According to the documents of the sale and purchase transaction, after the discharge of the mortgage loan to a bank there should be a balance of HK$558,120.65. It was this sum that the bankrupt had failed to account for with supporting documents. I set out the relevant events in chronological order as follows.

4. On 20 August 1996, two judgment creditors presented a petition for bankruptcy against the bankrupt for a debt of HK$117,177.00.

5. On 2 October 1996, a receiving order was made and this was served on the bankrupt by post at the Property on 12 October 1996.

6. On 3 January 1997, an adjudication order was made and the Official Receiver was appointed the trustee in bankruptcy. The adjudication order was served on the bankrupt by post at his last known address which was in Cheung Chau on 15 January 1997.

7. On 24 February 1997, a statement of affairs was received from the bankrupt which disclosed assets of HK$7,000.00 and liabilities of HK$255,127.00. The creditors were the petitioning creditors and various banks and credit card companies.

8. Investigation of the Official Receiver revealed the transfer of the Property that I have mentioned above. However, the bankrupt was unable to produce any document relating to the transaction despite the Official Receiver's request.

9. On 12 August 1998, the Official Receiver wrote to the bankrupt requesting information and documents relating to the transfer of the Property and the receipt of the balance of the proceeds of sale. A similar letter was sent by the Official Receiver on 22 September 1998. The bankrupt has alleged that on each of these occasions when he received the letter from the Official Receiver, he did make contact with the Official Receiver. However, he did not provide any document as requested.

10. After a lapse of almost two years, on 22 May 2000, the Official Receiver tried to contact the bankrupt by telephone to chase up for the documents and information but failed to get in touch with the bankrupt.

11. On 20 June 2000, the Official Receiver sent a letter to the bankrupt again chasing for information and documents. There was no response to the letter in June 2000 until mid October 2000. The bankrupt alleged that he did not learn about this letter until October.

12. On 13 October 2000, the Official Receiver issued a summons under Section 30A of the Bankruptcy Ordinance for an order that the automatic discharge of the bankrupt which was to take place on 3 January 2001 should cease to run for such period as the court may order.

13. On 16 October 2000, the bankrupt wrote to the Official Receiver stating that his family did not notify him of the letter of June 2000 from the Official Receiver. Further, he was unable to contact the purchaser of the Property, Caulfield Limited ("Caulfield"), despite his attempts.

14. On 25 October 2000, the bankrupt sent another fax to the Official Receiver in which he stated that he had lost the documents regarding the transfer of the Property to Caulfield. As for the balance of the purchase price in the sum of HK$500,000.00 odd, he stated that this amount was used to off set what he owed Caulfield and in return Caulfield had allowed him to remain in the Property for a year. No document was signed with Caulfield regarding this arrangement and he was unable to recollect details of the transaction.

15. In the meantime, the Official Receiver had written to the solicitors who acted for the bankrupt in the sale and purchase of the Property and had obtained from the solicitors the documents relating to the receipt of the proceeds of sale.

16. On 13 November 2000, a meeting took place between the bankrupt and the Official Receiver. On being provided with the documents that the Official Receiver had obtained from his former solicitors, the bankrupt changed his version and stated that not all of the balance of the purchase price of HK$500,000.00 was given to Caulfield, and that in fact he received HK$250,640.45 of which HK$60,000.00 was used to repay the debt or debts made to him by his family members and the balance was used to pay for his living expenses. This version was repeated in the bankrupt's letter to the court dated 29 November 2000. According to the explanation given by the bankrupt, his inaction and lack of response over two years was because he thought that the Official Receiver would not be seeking the documents and information as he did not hear from them for almost two years since 1998. He also mentioned that during this period he had got married to a mainland resident and was based in Zhuhai making frequent trips to Hong Kong to look after his elderly parents. Hence, he did not have time to attend to the Official Receiver's requests for information and he was suffering from mental and physical fatigue and was forgetful.

17. It was submitted by the Official Receiver that the responses received from the bankrupt in October and November 2000 were last minute attempts to explain the whereabouts of the balance of the proceeds of sale. Further, his attempts at co-operation were inadequate. There is still no documentary evidence produced by the bankrupt regarding the use of the HK$60,000.00 to repay his family members or how he had used the balance of HK$250,000.00 odd for his living expenses as alleged. Further, there was no detail provided regarding the debt owed to Caulfield which was altered from HK$500,000.00 odd to HK$360,000.00.

18. In my view, the Official Receiver has made out a case of an objection to automatic discharge under Section 30A(4)(c) that the bankrupt has failed to co-operate in the administration of his estate.

19. I agree with the Master that it would not be appropriate for the bankrupt to be automatically discharged. As I understand the bankrupt's submission today, he does not deny that he has failed to co-operate with the Official Receiver. What he has queried is:

(1) if the discharge of his bankruptcy order should be suspended at all; and

(2) if there should be a suspension, whether the period should be 2 1/2 years as ordered by the Master.

20. The purpose of the automatic discharge of a bankrupt as described in the Law Reform Commission's Report on Bankruptcy issued in May 1995 at para. 17.16 is as follows:

"The introduction of automatic discharge should, with the objection system, have a two-fold effect. Firstly, bankrupts would have a greater incentive than at present to co-operate with the trustee, as failure to co-operate could result in the trustee objecting to a bankrupt's discharge. Secondly, the rehabilitation of a bankrupt from bankruptcy would be assured, subject to rehabilitation being delayed as a consequence of a bankrupt's own failings."

21. As stated by Le Pichon J., as she then was, in Re Hui Hing Kwok [1999] 3 HKC 683:

"Rehabilitation in the sense of enabling the bankrupt to resume a normal life in society is a key, if not the key, consideration. It should only be delayed by a bankrupt's own failings."

22. In the present case, I am satisfied that there were and are failings on the part of the bankrupt to justify the delay of his rehabilitation. As for the length of the delay, I take into account the following matters:

1. There was little or no co-operation by the bankrupt until the eleventh hour.

2. The information he has furnished todate is still inadequate.

3. He has made no serious attempt to provide information. For instance, he could have approached the solicitors who had acted for him in the sale and purchase for the documents even though he does not have them in his possession and this he has failed to do.

4. His attitude that he need not respond to the Official Receiver's requests for information because the Official Receiver did not chase him up for the documents and information over two periods is totally unacceptable.

23. The maximum period of suspension that could be ordered by the court under Section 30A(3) is four years. Having regard to the above matters and the fact that the bankrupt did make some belated although inadequate attempts to co-operate, I regard a period of 2 1/2 years suspension to be on the high side. I would reduce it by 6 months and allow the appeal from the order of Master Lung by altering the date of discharge from 2 July 2003 to 2 January 2003.