FRED LEE v. KO FUNG MING

HCB 20609/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 20609 OF 2002

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REASONS FOR DECISION

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The application

1.  On 15 October 2007, at the hearing of the trustees’ application objecting to the bankrupt’s discharge pursuant to section 30A of the Bankruptcy Ordinance, the trustees withdrew their application. I disallowed the trustees’ costs from the estate with leave to the trustees to make further submissions within 14 days of my order.

2.  By their letter dated 29 October 2007, the trustees asked me to vary my order to the extent that they are not entitled to recover their costs of and occasioned in the hearing for directions before Master Kwang on 27 March 2007 only, which was the hearing for the interim order prolonging the bankruptcy of the bankrupt.

Grounds of application

3.  The trustees rely on the following grounds in support of their application: (1) recent authorities support their view that contracting debts while being insolvent or without any reasonable belief of being able to repay and misrepresentation in application for loan amount to unsatisfactory conduct under section 30A(4) of the Bankruptcy Ordinance; (2) the bankrupt did not intend to oppose the trustee’s application; and (3) Judge Kwan in the test case ordered that the trustee was not entitled to recover his costs of and occasioned in respect of the hearing before her out of the bankrupt’s estate. Similarly, the order should only have the effect of depriving the trustees’ costs of and occasioned in carrying out the investigation into the circumstances in which the alleged misrepresentations were made in the loan application forms.

4.  One of the trustees, Mr. Fred Lee, has made similar application in respect of the Bankruptcy Proceedings No.9850 of 2002 for variation of my order disallowing his costs from the estate. I have handed down my Decision refusing his application. For brevity, I shall refer to the guiding principles for costs in paragraph 4-6 of my Decision. In gist, Judge Kwan disallowed the trustee’s costs from the estate on the reason that the trustee failed to discharge his quasi-judicial obligations.

5.  The bankrupt in this matter should have his bankruptcy order discharged on 31 December 2006 had there not been the trustees’ application. The bankrupt’s bankruptcy order was only discharged on the date of hearing when the trustees withdrew their application on 15 October 2007. The period of the bankruptcy order has been prolonged for more than 10 months.

Grounds considered

6.  The trustees’ grounds 1 and 2 can be considered together. It is not necessary to go into detail of the trustees’ grounds in support of their application as they have withdrawn their application. This court had no opportunity of investigating into those grounds. The trustees chose not to withdraw their application after Judge Kwan’s judgment handed down on 9 January 2007. In fact, Judge Lam in Fred Lee v Liu Man Hoo HCB11719of 20002 unreported and Judge Barma in Fred Lee and Chow Wai Lan, Christine v Wong Hing Wah Michael HCB26018 of 2002 commented that the trustees should have raised the misconducts with the bankrupt after they had discovered such misconducts. They should not wait until the end of the bankruptcy order. They have failed to do so here.

7.  The question remains: Were they discharging their quasi-judicial obligations? I repeat my reasons in paragraphs 9-11 of my Decision in Bankruptcy Proceedings No.9850 of 2002. I take the view that in exercising my discretion as to the trustees’ costs from the estate, I should take a global view of the matter, taking into consideration of all relevant factors. I hold that the trustees have not shown to me that they had taken reasonable investigation into the matter before they took out this application. This application has prolonged the bankrupt’s bankruptcy order unnecessarily. I do not consider that the trustees have discharged their quasi-judicial obligations.

8.  As to the trustees’ 3^rd ground, as I have said in paragraph 8 of my Decision in Bankruptcy Proceedings No.9850 of 2002, the learned Judge had referred the consent summons and the joint application for discharge on conditions back to the Master for further consideration. She therefore only dealt with the costs of the hearing before her.

Conclusion

9.  For the reasons above, I confirm my order to disallow the trustees’ costs of their application from the estate. I also disallow their costs for this application from the estate.