RE LI SHU CHUNG

HCB 5475/2018

[2021] HKCFI 3426

IN THE HIGH COURT OF THE19

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 5475 OF 2018

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REASONS FOR DECISION

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A.  BACKGROUND

1.  This is an ex parte application by the Trustees in Bankruptcy for an order that a second letter of request (“LR")  be issued to the UK Court for its assistance pursuant to section 426 of the Insolvency Act 1986 (“the Act”).  The application is supported by the 4^th affirmation of Chen Yung Ngai Kenneth filed on 8 October 2021 (“Chen-4^th”).

2.  On 11 October 2019, a bankruptcy order was made against the Bankrupt. On 10 August 2020, A Non-Commencement Order was made against the Bankrupt by reason of his persistent failure to cooperate with the Trustees.

3.  On 13 July 2020, the Trustees have applied to the Insolvency and Companies Court of the UK (“UKICC”)  under the Cross-Border Insolvency Regulations 2006 for a recognition order (“Recognition Application”).

4.  By an order dated 7 April 2021, this Court granted an order for the issuance of the first LR for recognition to the Bankruptcy Order and to give assistance per the LR.

5.  On 26 May 2021, the Trustees issued an application in the UK under section 426 of the Act (“s.426 Application”)  pursuant to the 7 April 2021 Order. 

6.  On 8 July 2021, the s.426 Application was heard before Deputy Judge Rees QC.  He took the view that the terms of the first LR were drafted too widely. He only granted an order (“8 July Order”)  authorizing the Trustees to take appropriate steps to determine and realize the Bankrupt’s interest in assets including a property in Surrey, funds in UK bank accounts with Natwest and potential other accounts and interests through various family trusts; and to issue applications in the UK without requirement of further permission or leave for that purpose.  The learned Deputy Judge adjourned the rest of the first LR to 15 November 2021, to be heard with the Recognition Application.

7.  On 8 October 2021, upon legal advice from UK counsel, the Trustees took out the present application for a further LR.  At this hearing, Ms Sat, counsel for the Trustees made clear that the further LR was a fresh one, instead of being one to clarify the first LR.

8.  Pursuant to the Bankrupt’s undertaking to the UKICC, the Bankrupt has produced some documents in July 2021 (“July Disclosure”)  but they were far from full disclosure.

9.  Pursuant to the 8 July Order (as set out in paragraph 6 above), the Trustees have written to the Bankrupt in September for disclosure of various documents and information.  They have only received holding replies from the Bankrupt’s UK solicitors.

10.  The Bankrupt had purportly transferred of 50% his property in Surrey to his daughter, Charlotte Fisher in March 2016 (“the Property Transfer”).

11.  The Trustees have written to various third parties, including the Bankrupt’s daughter, his previous conveyancing solicitors BLP and various banks for information, but no substantive response has been received.

12.  Against the above background, the Trustees therefore apply for a further LR.

13.  There is no dispute, even when the first LR came before the UKICC that the Bankrupt’s assets worldwide, are vested in the Trustees.

14.  I am satisfied from reading Chen-4^th that the Bankrupt has failed to attend the creditors’ meeting as required under section 26(1)  of the Bankruptcy Ordinance, Cap 6 (“BO”)  and failed to discharge his duty of providing the information required concerning his dealings, affairs or property after repeated demands from the Trustees.

15.  The Court has power under section 29(1)  of BO to summon before it the bankrupt or any person known or suspected to have information in his possession of any estate belonging to the bankrupt, or require such person deemed capable of giving information respecting the bankrupt, his dealings or his property, to produce any documents in his custody or power relating to the bankrupt, his dealings or property.

16.  After hearing counsel, I granted an order to issue the further LR.  Here are my reasons.

B.  TERMS OF THE DRAFT LR

17.  Paragraphs 1, 2 and 5 of the draft LR are requests to the UKICC to grant an order that the Bankrupt do cooperate with the Trustees to enable the Trustees to carry out their function, including to attend an interview with the Trustees as the Bankrupt is obliged to under section 26(1)  of BO.  Should the Bankrupt fail to do so the Trustees shall be allowed to issue applications against the Bankrupt in the UK to enforce this part of the draft order.  These paragraphs are justifiably sought to assist the Trustees in the discharge of their duties.

18.  Paragraphs 3 and 4 of the draft LR are requests to the UKICC to grant an order for disclosure of 5 classes of documents by the Bankrupt and third parties.

19.  Class A of the documents relate to the Property Transfer.  The documents already disclosed by the Bankrupt do not show transfer of the sale proceeds to Charlotte Fisher and/or to one ACJJIA Limited allegedly to repay the Bankrupt’s debt.  The Trustees’ letters to BLP (solicitors for the Bankrupt in the purported transfer)  and Charlotte Fisher have met with no response.  The Trustees are justified in seeking disclosure in respect of the Property Transfer, made 2 ½ years before the petition for bankruptcy was filed on 24 September 2018, which may be set aside for being at undervalue or with unfair preference to a creditor.

20.  Class B concerns the bank statements of the Bankrupt for his HSBC bank accounts in the UK and credit card which the Bankrupt has never disclosed. There were transfer records between the Bankrupt’s BOC account and the UK HSBC account.  The Bankrupt has also admitted in his letter dated 25 January 2020 that money had been paid into his HSBC personal current account in London.  The existence of the credit card can be deduced from an entry in a NatWest Bank statement disclosed by the Bankrupt showing transfer of money to that credit card account.

21.  With regard to the Bankrupt’s NatWest account, there had been payments into this account even after the Bankruptcy Order was issued, despite the Bankrupt’s assertion that he was long retired and had no assets.  There were payments out of this account even after presentation of the bankruptcy petition, which may be voidable dispositions under section 42 of BO.  The payments out after the Bankrupt was adjudged bankrupt amounted to £311,827.31, including spending in Italy and Greece.  There were also discrepancies in the balance amounts stated in the disclosed bank statements. 

22.  The Bankrupt has not made full disclosure of his Monzo Bank account.

23.  The Trustees also request for disclosure of bank statements of any other bank accounts or credit card statements.  This is what the Bankrupt is obliged to disclose as he has not already done so.

24.  None of the banks with whom the Trustees have asked for documents have responded. 

25.  Class C seeks disclosure on specific transactions and payments made to the Bankrupt’s American Express credit card.  This is based on the Trustees’ discovery that the credit card account received payments in but there are no corresponding records of payment out from the bank statements already disclosed by the Bankrupt.

26.  Class D concerns the New Joesh Trust relied on by the Bankrupt and his wife to assert that the Bankrupt does not have interest in Joesh Overseas Ltd, which in turn holds landed property in Hong Kong.  Thus far, only 2 pages extracted from the trust instrument have been provided to the Trustees.  The disclosure is plainly incomplete.

27.  Class E concerns receipt of £264,184 by the Bankrupt from the ACJJI Family Trust.  Save for a bare denial, the Bankrupt has never explained this trust and why the money was paid to him.

28.  I am satisfied that the classes of documents do exist, are defined with specificity and are in the possession of the Bankrupt but he had failed to disclose them.  Those documents will be of assistance to the Trustees in ascertaining and tracing the assets of the Bankrupt.  The period of disclosure sought does not exceed 5 years before presentation of the bankruptcy petition and within the period of which the Trustees can, if necessary, apply to have the dispositions set aside.

29.  I thank Ms Sat for her assistance.