RE CHIEN CHI HONG

HCBI 453 of 2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS

INTERIM ORDER APPLICATION
NO. 453 OF 2002

____________________

____________________

JUDGMENT

____________________

1. Mr. Lo Yip Tong and Ms. Lau Wai Fung applied for directions pursuant to Section 20K of the Bankruptcy Ordinance (Cap. 6) that the office of Ms. Lau as a joint and several nominee be vacated. At the hearing I dismissed the application and indicated that I would give my reasons later which I now do.

2. Mr. Lo and Ms. Lau formerly practiced under the same firm of Messrs. Y.T. Lo & Co., certified public accountants. Mr. Lo was the principal of that firm and Ms. Lau was under his employment. Both of them were appointed as nominees in the voluntary proposal by the debtor. The proposal of arrangement was approved by a creditors' meeting held on 20 November 2002. The arrangement was put into effect; as a result, both nominees became the supervisor for implementation of the arrangement.

3. On 12 December 2002 Ms. Lau resigned from her employment with Messrs. Y.T. Lo & Co. and started her own practice. Mr. Lo has found that "it is desirable to have her (i.e. Ms. Lau's) office as a nominee herein vacated because no function can be conveniently and properly carried out by Lau Wai Fung in respect of the voluntary arrangement". Ms. Lau has objection to vacating the office.

4. I was told by Mr. Tse, solicitor for the Debtor that a creditors' meeting was duly held on 10 July 2003. Those creditors present in person or by proxy passed a resolution in the meeting that Ms. Lau be removed from the office of nominee in that arrangement.

5. Both Mr. Tse and Mr. Lo as well as Ms. Lau, they were all present in this hearing; they considered a court direction was necessary. Thus, the application was made and they appeared before me.

6. First of all, I do not know under which paragraph of Section 20K the application was made. I consider either paragraph (2) or (3) or even both may be relevant.

7. Section 20K(2) of the Ordinance states as follows:

"(2) The nominee may apply to the court for directions in relation to any particular matter arising under the voluntary arrangement."

As I understand, the creditors had approved the resignation and the removal of Ms. Lau as a nominee under the arrangement. I wonder what direction they wanted from the court. The debtor whom Mr. Tse represented has agreed to it, the creditors have approved it in the creditors' meeting and the remaining nominee Mr. Lo has consented to it. Why do they need the court's blessing?

8. I always regard an arrangement, if duly approved, is an agreement among three different parties, namely, the debtor, the creditor and the nominees. The nominees in this case, though have not signed the proposal as the debtor has done or have not expressly approved it as the creditors did in a creditors' meeting, have impliedly agreed to be bound by the arrangement as they have made recommendation to the court for granting the interim order, have accepted payment of their remuneration and have been performing their duties as supervisors. All parties have agreed to change the agreement or arrangement by releasing Ms. Lau. It is an agreed modification. I find no reason for court to be involved or to give direction.

9. I have also considered Section 20K(3) which states as follows:

"(3) The court may, whenever -

(a) it is expedient to appoint a person to carry out the functions of the nominee; and

(b) it is inexpedient, difficult or impracticable for an appointment to be made without the assistance of the court,

make an order appointing a person who is experienced in insolvency matters, either in substitution for the existing nominee or to fill a vacancy."

I doubt whether it applies to resignation by consent. One may argue that the power to appoint and the power to substitute will include the power to remove an existing nominee without appointment of a new one.

10. My understanding of that paragraph is that the power will be exercised only under the circumstances specified in that paragraph i.e. where "it is inexpedient, difficult or impracticable for an appointment to be made without the assistance of the court". Definitely, the circumstances do not exist in the present case.

11. Mr. Tse tried to pursuade me that I had the power to make the direction requested. He cited to me the case of Sankey Furniture Ltd, e xp Harding, Re: Calorifique Ltd, ex p Betts, Re [1995] 2 B.C.L.C. 594, Chadwick, J., Ch D. He referred to the extract as found in Section 3481 in Current Law Year Book 1996 which states:.

"If an officer holder sought to vacate his office, he should ordinarily call a meeting of the creditors. The application would not be granted unless the court could ensure ...... the benefit to the creditors in considering the matter at a meeting was outweighed by the inconvenience and expense of holding a meeting."

In the present case, the meeting had been held. It was out of extra caution the parties sought the court's direction.

12. I believe I have power to remove a nominee under a voluntary arrangement but in the present case I do not think I could exercise such power as Ms. Lau had already been removed in the creditors' meeting. Neither do I think that it needs the court's direction as the removal has already happened. The application is unnecessary. I dismiss the application with no order as to costs.