RE HO SIK TUNG TERRY

HCB 8006/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 8006 OF 2011

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REASONS FOR JUDGMENT

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1.  This is a bankruptcy petition. In the hearing on 25 September 2012, I allowed the petition and made a bankruptcy order against the debtor. I now give my reasons.

2.  The petition is based on a judgment debt of HK$514,362.87 obtained in DCCJ 2688/2011 (“the Debt”).  A statutory demand dated 14 November 2011 claiming the Debt and accrued interest was personally served on the debtor on 28 November 2011, but the Debt has remained unpaid.

3.  The petition first came before this court on 5 March 2012, when the debtor produced for the first time his employment contract for his new job and sought more time to file affidavit evidence.  The court directed that the debtor should within 14 days file evidence setting out the details of his proposal for repayment of the Debt, which he did on 19 March 2012 setting out his repayment proposal.  The petitioner then filed its affirmation in reply on 7 May 2012.

4.  The petition next came before this court on 17 May 2012.  In that hearing, the debtor successfully sought leave to file a further affirmation dated 16 May 2012.  The petitioner filed its affirmation in reply on 31 May 2012.

5.  Subsequently, there were exchanges of correspondence between the solicitors about the debtor’s repayment proposal. By 2 letters from the petitioner’s solicitors dated 28 May and 7 June 2012, the petitioner sought to clarify certain issues about the debtor’s repayment proposal, but no reply has been received from the debtor.

6.  The petition was adjourned to 25 September 2012 for substantive hearing.  One week before the hearing, the debtor filed the notice to act in person.

7.  According to the affirmations filed by the debtor, he does not dispute the Debt.  However, he claims that he has found a new job as a financial controller with a monthly income of $70,000, and he can make a monthly instalment of $30,000 to the petitioner over a period of 22 months to settle the Debt.

8.  The main issue in this petition is whether the court can be satisfied that the debtor is nevertheless able to pay the Debt, or that he has made an offer to secure or compound for the Debt but the said offer has been unreasonably refused by the petitioner, so as to justify the dismissal of the petition under s 6D(3) of the Bankruptcy Ordinance, Cap 6.

9.  S 6D(3) of the Bankruptcy Ordinance reads as follows:

“The court may dismiss the petition if it is satisfied that the debtor is able to pay all his debts or is satisfied-

(a) that the debtor has made an offer to secure or compound for a debt in respect of which the petition is presented;

(b) that the acceptance of that offer would have required the dismissal of the petition; and

(c) that the offer has been unreasonably refused,

and, in determining for the purposes of this subsection whether the debtor is able to pay all his debts, the court shall take into account his contingent and prospective liabilities.”

10.  It is trite law that the following legal principles set out in Re: Lam Kwok Hing Wilfred, unreported, HCB 3560/2003 (decision of Chung J on 21 November 2003) at para 6, are relevant for the court to determine whether to apply s 6D(3) to dismiss a bankruptcy petition:

“(a) in determining whether a petitioner's refusal of the debtor's offer is unreasonable, the court has to be satisfied that no reasonable hypothetical creditor in the petitioner's position, and in the light of the actual history, would have refused the offer: Re a debtor (No. 32 of 1993) [1995] 1 ALL ER 628, 639d-f and 640a-b;

(b) the position should be considered only as between the petitioner and the debtor without regard to the position of other possible creditors or the impact on the entire body of creditors: Re a debtor (No. 32 of 1993), p. 640g;

(c) in considering the debtor's offer, the petitioner is entitled to have regard to his own interests and is not required to balance his interests against those of the debtor, or to take a chance, or to show patience or generosity, even though some creditors might do so. Acting reasonably is not the same as acting justly, fairly or kindly: IRC v. a Debtor [1995] BCC 971, 974B-F;

(d) if a debtor wishes his proposals to be looked at with sympathy, it is incumbent on him to be full, frank and open with the petitioner in respect of his statements of his position: Re a debtor (No. 32 of 1993), p. 640a-c;

(e) in considering a debtor's ability to repay the debt, no regard should be given to future contingencies such as profit or income from future contracts if he is permitted to carry on his business: Re: Phillip and Lion Far East Ltd, CWU No. 130 of 1991 (17 May 1991); Re: Lam Ngai Fung Tony, HCB No. 4641 of 2001 (3 December 2001);

(f)    future income may be relevant only as part of the total circumstances to be considered regarding whether a debtor's offer to secure or compound for a debt has been unreasonably refused by the petitioner: Re: Lam Ngai Fung Tony.”

11.  Applying the aforesaid legal principles, it is, in my judgment, quite reasonable for the petitioner to reject the repayment schedule offered by the debtor because there will be a substantial wait for the full settlement.  In Re: Kong King Ong, Alexander, unreported, HCB 10771/2008 (decision on 27 August 2009), Barma J held that a repayment period of 2 years for a debt of a little below HK$900,000 was “generally be longer than a creditor should reasonably be expected to wait”.  As the debtor does not dispute the Debt and he does not have the ability to repay the Debt within a reasonable period of time, the petitioner is quite reasonable to reject the proposal.

12.  There is also some doubt in the debtor’s account about his financial position.  According to paras 1(2) and 4(3) of the employment contract produced by the debtor, the debtor’s employer should have before the execution of the contract (dated 29 February 2012) paid in advance to the debtor 3 months of salary (ie the sum of HK$210,000).  Nevertheless, it was not until such arrangement was challenged by the petitioner that the debtor in his affirmation filed on 16 May 2012 gave an explanation that: (i) the said arrangement did not take place eventually due to the “blockage” of his bank account by reason of this action; and (ii) he only received 1 month of salary in the amount of HK$70,000 on 5 April 2012 in cash.  The debtor deposed that his bank account was “blocked” due to this action and so his employer was unable to deposit 3 months of salary into his bank account at the time stated in the employment contract.  However, I have some reservation about such explanation because no bankruptcy order had yet been made against the debtor by that time.

13.  Further, I have serious doubt about the defendant’s ability and sincerity to honour his promise to repay the Debt, as the debtor gave no reply to the petitioner’s letters dated 28 May and 7 June 2012 requesting for clarification of the debtor’s offer.  In addition, after taking up his new job for a considerable period of time, the debtor has made no attempt to pay some of his income to settle part of the Debt owed to the petitioner.

14.  In the hearing, the debtor has also made an application to adjourn the hearing on the ground that he has every intention to repay the Debt and the solicitor representing him has been hospitalised. However, since the debtor has had ample time to make a reasonable offer for the settlement of the Debt and to satisfy the petitioner that he has the ability and sincerity to make the payment, it would not be fair to the petitioner to delay the making of the bankruptcy order.  I therefore refused the debtor’s application to further adjourn the hearing.

15.  By reason of the aforesaid, there is no reason for the court not to make bankruptcy order against the debtor.  I therefore made such order.