RE PAU KIN YUEN LOUIS

1986, No. B773

IN THE HIGH COURT OF JUSTICE

HONG KONG

(BANKRUPTCY)

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J U D G M E N T

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1. This is an application by Pau Kin Yuen Louis (the debtor) to rescind a receiving order made on the 5th January 1987 on the grounds of non-service of the petition, and that sufficient cause has been shown that a receiving order should not have been made.

2. The facts that led to the making of the receiving order are as follows. The petitioning creditor, the Standard Charterd Bank formerly the Chartered Bank obtained a default judgment against the debtor on the 20th December 1984 in the sum of $96,700.12 with interest and costs. A bankruptcy notice based upon the judgment debt was issued on the 10th September 1986 and was deemed to have been served, service having been effected by post, on the 18th September 1986.

3. Although the debtor gave evidence before me that he had not received the bankruptcy notice, he did, in fact, admit to having received several other bankruptcy notices and in cross-exemination said, between four and five. I do not accept his evidence that he did not receive the bankruptcy notice filed on behalf of the petitioner and I find that he was properly served.

4. As the debtor failed to comply with the bankruptcy notice, a petition was issued on the 8th December 1986. Postal service of the petition was effected by sending a copy of the petition to the debtor's last known address on the 9th December 1986 and was therefore deemed, pursuant to the provisions of Order 10 of the Rules of the Supreme Court to have been served seven days thereafter. An affirmation of due service has been filed by a clerk of the petitioner's solicitors. The evidence of posting is not in dispute, but the debtor gave evidence that he did not receive the petition. As a result of his absence at the hearing of the petition on the 5th January, a receiving order was made and the Official Receiver was appointed to be the trustee of the estate.

5. The debtor, in his evidence, said that the first time he had knowledge of the receiving order was when he was informed by his family that staff of the Official Receiver's Office wished to see him. As a result of that information, he saw Mrs. Chung, a member of the staff of the Officer Receiver's Office on about the 6th January. Here he completed a standard form of questionnaire. However, the debtor says that he informed Mrs. Chung that he had not received the petition, but Mrs. Chung who also gave eviderce, said that she could not remember whether or not this was so. There would seem to be little point in completing the questionnaire if the debtor, as he contends, had not in fact received the petition, and it is likely, in my opinion, that Mrs. Chung would heve remembered if the debtor had made such a statement. I am quile satisfied that the debtor was not telling the truth on this matter and I reject his evidence that he did not receive the petition. It necessarily follows that I do not accept the suggestion that was made that the petition became mislaid in the Christmas mail.

6. Nevertheless, the debtor contends that he has shown good grounds whereby the receiving order should be rescinded. In support of his application, he made an affirmation on the 26th January in which he says that he was admitted as a solicitor in Hong Kong in October 1982. He says that his financial difficulties arose in about 1983 following inprudent investments and misplacement of trust in certain friends following which he started to contract loans and incur liabilities. He ceased practice from September 1984 until April 1985 when he resumed with a firm of solicitors where he was cmployed for about a year. During this period his income amounted to about $60,000. In March 1986, he joined another firm of solicitors where his total income amounted to about $10,000 per month.

7. In October 1986 he joined his present firm, Messrs. C.W. Leung & Co. where his initial salary was $6,000 a month together with handling charges and commission. He says that, but for the present proceedings, his monthly salary from January this year would have been raised to $16,000 per month.

8. In paragraph 6 of his affirmation the debtor refers to certain repayments that he has made to creditors which amounts to $73,000. He goes on to say that his total liabilities are in the region of $1.5m. He claims that he has no assets of value, either movable or immovable, in Hong Kong or overseas; that he lives with his parents and is unmarried. His only intangible asset is the value of his practice as a solicitor which is his only means of livelihood and that as a result of the present proceedings, his practising certificate has not been renewed by the Law Society.

9. When he joined Messrs. C.W. Leung & Co., the debtor said his financial prospects were likely to improve for he estimated that his commission and handling charges would increase, so that he would be able to put aside a substantial portion of his income for division amongst his creditors.

10. An affirmation in support has been filed by the debtor's employer, Mr. C.W. Leung who states that but for the receiving order, he had intended to take the debtor into partnership.

11. Mr. Bell who appeared for the debtor submitted that the debtor has shown genuine efforts to discharge some of his liabilities and that were it not for the receiving order, his financial situation would be markedly improved and he would, therefore, be in a position to increase his payment. He cited In re Otway⁽¹⁾ where a debtor had a life interest which ceased on bankruptcy in the income of certain property. He had no other property. He propesed to insure his life and to set aside half his income for the purpose of keeping up the insurance and paying his creditors a composition of 10s. in the pound. The petitioning creditor did not agree to this proposal and a receiving order was made on his petition. However, on appeal, the order was set aside when it was held that the fact that the effect of a receiving order would be to deprive the debtor of the only asset available for the payment of a composition to his creditors, was a sufficient cause why no order should be made.

12. Here, it is argued that the debtor by the continuance of the receiving order is deprived of his means of livelihood which is his only intangible asset and coupled with his genuine intention to repay his debts he has shown good grounds for rescission of the order. It was further submitted that by continuing the bankruptcy, there would be a waste of public funds by the Official Receiver in carrying out the investigation. That is of course not correct for the petitioner and the other supporting creditors are funding the costs. It is again significant that neither the petitioning creditor nor the supporting creditors who are today represented by Mr. Cook, have received any payment on account of their debts.

13. Miss Ho on behalf of the Official Receiver, said that her investigations are not yet complete and she is not in a position to comment to whether the receiving order should be rescinded on the grounds that there are insufficient assets and does not therefore support the present application.

14. Mr. Bell concedes that he has to show something more than the deprivation of the debtor's livelihood as a solicitor but essentially, that is the crux of this application. If the application is granted, it would mean that the Official Receiver who acts in the public interest for the general body of creditors, would not be able to carry out a thorough investigation into the financial affairs and conduct of the debtor purely on the basis that he might continue to make repayment of his debts to his creditors. Just because the debtor is a solicitor, does not entitle him to any privilege in this respect. If a professional person was to be accorded such treatment, it would render the bankruptcy procedure nugatory.

15. The present application is entirely without merit and is accordingly dismissed.

(1) [1895] 1 Q.B. 812