WU KWOK KWONG v. OFFICIAL RECEIVER

HCB 7690/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY

NO. 7690 OF 2008

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D E C I S I O N

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1. This is an application under section 114(2) of the Bankruptcy Ordinance (Cap. 6), seeking an order that the payment of the fees and remuneration charged by the Official Receiver in these bankruptcy proceedings pursuant to the Bankruptcy Fees and Percentages Order should be remitted.  

2. The bankrupt, Mr Wu Kwok-kwong (“the Bankrupt”), was adjudicated bankrupt on 11 February 2009 pursuant to a petition presented by a creditor on 17 September 2008.  The bankruptcy order was made in the Bankrupt’s absence as he did not appear at the hearing of the petition.  His case is that he was unaware of the bankruptcy proceedings, until he discovered, after the making of the order, that his bank accounts had been frozen.  As the Bankrupt had, in fact, sufficient funds in his bank accounts to pay the debt on which the petition was based, he made an application to annul the bankruptcy order against him, and an order annulling the bankruptcy was made by Master Wong on 9 September 2009. 

3. The position, therefore, is that the bankruptcy has lasted slightly over six months.  The total assets that were recovered amounted to some $2.1 million odd, consisting entirely of sums standing to the credit of three bank accounts, whereas the debts which had to be dealt with consisted of a single debt, that of the petitioner, for some HK$817,000.  The Official Receiver’s fees calculated in accordance with the order were $257,795 – the bulk of these fees derived from two items: first, the scale charge in relation to assets that have been collected, which accounts for slightly over $200,000; and secondly, the scale charge in respect of the debts that had been dealt with by the Official Receiver, which amounts to about $40,000. 

4. In the present case, the Bankrupt has made an affirmation, explaining that after the payment of the debt he is left with little in the way of assets, and that he has suffered considerable financial hardship as a result of the making of the bankruptcy order against him.  He says that the making of the bankruptcy order has had an unfortunate effect on his business, and that as a result his income has been affected.  He says that he has had to borrow money from his elderly father to meet his needs, and that he wishes to pay this back.

5. Whether or not any order should be made pursuant to section 114(2) is within the discretion of the court.  In this case, I am satisfied that an order for partial remission should be made.  Miss Lam, who has appeared for the Official Receiver today, has indicated that the Official Receiver takes a neutral stance on this application, but has indicated that the actual time costs of the Official Receiver in administering the estate were in the region of HK$70,000. 

6. In my view, it will not be in every case that the court will exercise its power to remit simply because the amount of the scale fees exceed the amount that the Official Receiver would have charged on a time cost basis.  It seems to me that it is relevant to have regard to the circumstances of the case, in particular the circumstances of the bankrupt, when considering whether or not to order a remission, and if so, to what extent.  Where a bankrupt is likely to suffer hardship as a result of the application of the scale fees, the court will be likely to be more inclined to exercise its discretion in his favour, particularly if the scale fees result in a very substantial mark-up over the time costs that have actually been incurred by the Official Receiver. 

7. At the same time, I think that it is relevant to bear in mind that the scale fees are set on a basis that clearly does not carry with it any intention to correlate, even approximately, the time spent by the Official Receiver with the fees that are charged according to the scale.  It seems to me that one reason for the existence of scale fees is to enable the Official Receiver to recover a sum to defray his costs, and, in cases where the scale fees produce an amount that is greater than that which would be charge on the basis of the time actually spent, to provide a surplus in the hands of the Official Receiver which may be used to defray his costs of administering other bankrupt estates in which there may be little or no recovery out of which his costs can be met.  It therefore does not follow, in my view, that the time cost element is the only factor to be borne in mind when considering the extent, if any, of any remission to be ordered.

8. In this case, however, I am satisfied that the bankrupt would suffer hardship if no order for remission were made.  I bear in mind also that the bankruptcy was a relatively simple one and that the bankrupt has, according to the Official Receiver, been cooperative throughout.  In those circumstances, I think that it would be right to order a remission of part of the Official Receiver’s fees that would be charged according to the scale. 

9. In all of the circumstances, I think that it would be appropriate to remit all except HK$100,000 of such fees.  As the fees calculated in accordance with the relevant order are $257,795, the amount remitted will be $157,795, leaving a balance of $100,000 to be retained by the Official Receiver.