RE NG YIN MAN, FARWINA

IN THE SUPREME COURT OF HUNG KONG

BANKRUPTCY PROCEEDINGS

Nos. 414 & 415 of 1985

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BETWEEN

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JUDGMENT

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1. Bankruptcy petitions Nos. 413 to 416 of 1985 all relate to a judgment obtained by the petitioning creditor, the China and South Sea Bank Ltd. against the respective debtors for the sum of $6,371,324.48 plus interest and costs. Petitions Nos. 413 and 416 have today been adjourned to a date to be fixed in order that the debtors in those cases file further evidence. The other two petitions have proceeded today for hearing.

2. Petition No. 414 of 1985 is against Mr. Yan Chung Kai whilst No. 415 relates to his wife. Bankruptcy notices based on the judgment debt were served upon these debtors on the 20th May 1985. The petitions based upon failure to comply with the bankruptcy notices were filed on the 1st August 1985. Both debtors admit their indebtedness, but oppose the grant of a receiving order on the grounds that they have insufficient assets after appropriate deductions to pay a dividend of 15% in accordance with the provisions of section 9(3) of the Bankruptcy Ordinance. No issue arises today on the vexed question as to the burden of proof upon which there are conflicting decisions. I have therefore been invited by Mr. Cheung who appeared today for the petitioning creditor to exercise my inherent discretion by granting receiving orders.

3. In Bankruptcy No. 414 of 1985, the debtor has filed an affirmation which was affirmed on the 27th September 1985. In that affirmation he sets out details of his indebtedness to other creditors. According to his solicitor, Mr. To, his total indebtedness exceeds HK$9,000,000. The debtor is a married man with one son, He lives in rented premises. The rent is paid by his younger brother. He states that he is the Manager of Healey Superstore Ltd. where he earns a monthly salary of $7,000 with double pay at the end of the year. He is not provided with quarters and does not derive any other benefit from the company. Out of his income, he contributes $5,000 to his wife for the household expenses which includes a sum of $1,000 for water, gas and electricity, and also includes school fees and tuition for his son. The balance of $2,000 is kept by the debtor for his own personal expenses. His wife is not employed but looks after their son. He states that he has no real property in Hong Kong or elsewhere and has no savings.

4. An affirmation has been filed on behalf of the petitioning creditor by Mr. Yen Fu Sin who is the Deputy General Manager. He makes reference to various matters that have not been disclosed by the debtor and in particular says that the debtor is the shareholder and director of a company called Never Second Investment Ltd. in which it is alleged that he holds 900,000 shares out a total number of 3,000,000. The debtor is also a director of Monsieur Design Co. Ltd. and in respect of this company, Never Second is also a director and shareholder. The company in fact holds 3,600 shares out of a total number of 4,000. That Monsieur Design Co. L td in turn operates a firm called Narita Trading Co. which carries on the business of importing furniture to be sold by furniture shops operated by Healey Steel Furniture Co. Ltd. and/or Healey Super Store Ltd. Mr. Yen claims that the debtor is a director and former shareholder of Healey Steel Furniture Co. Ltd. Never Second is also a director and shareholder of this Company holding 8,000 out of 10,000 shares. It is further alleged that the debtor was formerly a director of Olympic Winner Co. Ltd. from which company he resigned on 25th May 1985 which is significant having regard to the fact that the bankruptcy notice was served upon him on the 20th May 1985. Never Second was formerly a shareholder of this company with 330,000 shares out of a total number of 990,000, the shares being transferred on the. 6th September 1984. Olympic Winner Co. Ltd. was apparently a former shareholder of Healey Super Store Ltd. of which the debtor was said to be the manager. Olympic Winner hold 9,999, shares out of a total number of 10,000 shares. The debtor was also formerly a director of Healey King Holdings Ltd. from which company he resigned on the 25th May 1985. Healey King Holdings Ltd. in turn is a shareholder of Healey Super Store Ltd. holding 9,999 shares out of a total number of 10,000. Further evidence with regard to Healey Super Store Ltd. is set out in this affirmation in which it is said that the Company operates a chain of furniture shops situate both in Hong Kong and in Kowloon. The furniture shops were previously operated by Healey Steel Furniture Co. Ltd. of which company the debtor is a director and former shareholder. Reference is also made in the affirmation to the proceedings against him which were instituted on the 14th December 1983 for the recovery of monies advanced under a mortgage dated the 6th September 1980. Shortly after the institution of those proceedings, the furniture shops previously operated by Healey Steel Furniture Ltd. were switched to Healey Super Store Ltd. According to business registration records, the debtor is still the proprietor of Kai Kee Piece-Goods.

5. A helpful chart setting out details of the debtors, directorships and shareholdings was submitted by Mr. Cheung on behalf of the petitioning creditor. In his affirmation of the 27th September 1985, the debtor said that his indebtedness arose as a result of the failure of his business. In that affirmation he said he was in the course of preparing further evidence to prove his business loss, but he has not in fact sought to adduce such evidence. Mr. Knos who today appeared on behalf of the Official Receiver supported the Petitioners' application. The debtor has incurred considerable debts arising from his business activities. He has chosen to give no explanation for his failure, and evidently considers that it is unnecessary to do so. It is clear that the debtor has not made full disclosure. Although upon the evidence available the debtor has insufficient assets to pay a dividend of 15% nevertheless in the exercise of my discretion and in the public interest this is a case that warrants a thorough investigation of the affairs of the debtor by the Official Receiver. Accordingly I shall make the usual receiving order together with the usual order as to costs.

6. In the second Bankruptcy Petition No. 415, the only evidence adduced is that by the debtor in her affirmation which was affirmed on the 27th September 1985. She says that judgment was entered against her in default because she had mortgaged property in order to secure banking facilities for her husband in respect of his business Kai Kee Piecegoods. She says that she is a housewife and confirms that she receives $5,000 per month for household expenses. Her monthly expenses amount to $4,745. She says she has no real property in Hong Kong or elsewhere. Although she has some savings account, there are only some small amounts in credit. She states she has no other savings, jewellery, shares, stocks or debentures.

7. Mr. Cheung, on behalf of the petitioning creditor drew my attention to certain entries, which were revealed in her bank statements which were exhibited as "NYM-5" and in particular to credits of $20,000 on the 23rd August 1984, $35,000 on the 28th September 1984, two further credits totalling $8,000 on the 23rd November 1984, $6,242 on the 30th November 1984 and $20,000 on the 4th February 1985. No evidence has been adduced as to where these monies have come from nor was any evidence adduced as to how she acquired monies to purchase the property in 1980. Mr. To says that the entries have no significance for the account has never been substantially in credit. That may well be true, but at present there is no evidence one way or the other. Although the debtor may not have been concerned actively with her husband's business affairs, she was prepared to provide a guarantee for the banking facilities granted by the petitioning creditor for this purpose. As was submitted by Mr. Knos, the affairs of both this debtor and her husband are closely interlinked.

8. In my judgment and in the public interest the affairs of the wife also require a thorough investigation by the Official Receiver. Accordingly in the exercise of my discretion I shall make a receiving order against her together with the usual order as to costs.