FRED LEE AND OTHERS v. NG KWOK LEUNG

HCB 9643/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 9643 OF 2003

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J U D G M E N T

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1. This is an application by the trustee in bankruptcy for an order under section 30A(3) of the Bankruptcy Ordinance Cap 6 for the extension of the bankruptcy period of the bankrupt.

2. Mr. Ng petitioned for his own bankruptcy on 20 May 2003 and a bankruptcy order was made against him on 30 June 2003.  His bankruptcy period, under normal circumstances, would have expired on 29 June 2007.

3. Prior to his bankruptcy he had acquired a residential property jointly with his wife and his younger daughter by way of a mortgage loan in the year of 1997.  He had also bought a motor vehicle through hire purchase arrangement.

4. When Mr. Ng was unable to afford his mortgage repayment and his hire purchase finance charges, the bank and the finance company repossessed his car and his land property.  The bank and the finance company exercised their powers of sale.  The shortfall of the mortgage loan and the hire-purchase loan comes up to a total amount of about HK$3,359,000.  Apart from the outstanding mortgage loan and hire purchase loan Mr. Ng had roughly a further sum of HK$871,000 outstanding debts.

5. Mr. Ng is aged 52, married and has 2 adult children, aged 29 and 27.  He worked as a site agent earning about HK$36,850 per month.  After his bankruptcy adjudication, Mr. Ng agreed with his trustee to pay a monthly sum of HK$5,000 towards the repayment of his outstanding debts.

6. Of his total indebtedness of about HK$4.23 million, Mr. Ng had paid off a sum of HK$591,816 within the last 4 years.

7. On 30 May 2007 the trustee lodged the present application with court to object to the automatic discharge of Mr. Ng under section 30A(4)(c) and (d) of Cap 6 on the ground that: -

(i)	Mr. Ng has failed to co-operate in the administration of his estate; and
(ii)	the conduct of Mr. Ng after the commencement of the bankruptcy order has been unsatisfactory.

8. The trustee considered the conduct of Mr. Ng to have been unsatisfactory and that Mr. Ng had been uncooperative as a result of the following incidents:-

(i)	Failure to disclose payment of annual bonus of HK$35,000 in 2004
	During the 1st interview between the trustee and Mr. Ng held on 12 August 2003, Mr. Ng disclosed he received a basic salary of HK$35,000 per month together and a monthly allowance of HK$1,550 from his employer.  His salary has been reduced from HK$38,300 to HK$35,000 from 1 August 2003.
	An agreement was reached during this meeting for Mr. Ng to pay a monthly contribution of HK$5,000.  During this interview Mr. Ng was also asked to submit his annual statement of his earnings and expenses each year and to inform the trustee of his receipt of bonus or double pay from his employment.
	In December 2003 the trustee made enquiry with Mr. Ng on whether he would be entitled to any bonus payment.  Mr. Ng gave the trustee no clear answer.  As a result the trustee made direct enquiry with Mr. Ng’s employer and was informed by the employer that a bonus payment of HK$35,000 would be payable to Mr. Ng.
	Eventually in July 2004 Mr. Ng paid over the sum of HK$35,000 (i.e. the bonus payment amount) to the trustee.
(ii)	Failure to submit an annual statement for his 2nd year of his bankruptcy for the period from 30 June 2004 to 30 June 2005
(iii)	Failure to disclose his pay rise since January 2004
	In early 2006 Mr. Ng requested the trustee to reconsider his income tax allowance.  The tax assessment (2004/2005) statement furnished by Mr. Ng showed that Mr. Ng had an assessable income of HK$511,204 for the year of 2004 to 2005.  A numerical calculation of Mr. Ng’s income showed Mr. Ng should have an annual income of only HK$473,600 [12 x ($35,000 + $1,550)] rather than HK$511,204.
	On account of the discrepancy of the two sums the trustee made enquiry with the employer of Mr. Ng and came to realise Mr. Ng had a pay rise of HK$1,300 since January 2005.
	A meeting was held between the trustee and Mr. Ng on 16 February 2006 for Mr. Ng to provide an explanation of his conduct.  During this meeting Mr. Ng admitted that his salary has increased since January 2005 and that he has failed to surrender the sum of additional salary he received, being a total of HK$15,600 for the 12 months payment of HK$1,300 per month.
	During this meeting Mr. Ng told the trustee he had used these sums of money to make payment for his tax and his family expenses.  Mr. Ng’s explanation was not accepted by the trustee as allowances had been made for Mr. Ng’s tax payment and family expenses in making calculation of Mr. Ng’s monthly contribution for his debt repayments.
(iv)	Failure to surrender bonus payment
	Mr. Ng further admitted having failed to surrender his bonus payment for the period between November 2004 and March 2005 in the sum of HK$36,000 to the trustee.
	The discussion on 16 February 2006 resulted in Mr. Ng agreeing to pay a monthly sum of HK$500 in order to pay back into his estate in bankruptcy the sum of HK$51,600 (HK$15,600 + HK$36,000).  A sum of HK$44,100 remained outstanding in respect of this sum at the date of this application on 30 May 2007.  By 4 June 2007 the outstanding sum was repaid to the estate in full by Mr. Ng.

9. None of the known creditors of Mr. Ng has intimated his or her intention to object to the automatic discharge of Mr. Ng.

10. Mr. Ng opposed the present application to extend his bankruptcy period.  He offered his explanation by way of an affirmation.  In gist, Mr. Ng’s explanation was:-

(i)	he had incurred medical expenses in respect of his mother who eventually died in the mainland on 18 September 2005;
(ii)	his wife Ms Ho Ngun Hang had an operation in Hong Kong Baptist Hospital on 26 April 2006 which necessitated the payment of medical expenses of HK$16,489; and
(iii)	his wife Ms Ho Ngun Hang had another operation at St. Teresa Hospital on 27 September 2006 incurring a further medical expense of HK$19,674.

Court’s Determination

11. I do not find it necessary to recite in detail the statements of law and the approach of the court in the application of the bankruptcy law expounded by Madam Justice Kwan in her decision of Re Leung Chin Yeung [2007] 1 HKC 164, by Mr. Justice Lam in Re Liu Man Hoo HCB-11719/02, by Mr. Justice Barma in Re Lo Man HCB-11786/02, and by Mr. Justice Rogers, V-P,  in Re Leung Chin Yeung CACV-30/2007.

12. I accept Mr. Ng has failed to disclose his pay rise and the receipt of his annual bonus, which constituted unsatisfactory conduct. The conscious decision of a bankrupt not to disclose his income is conduct which society would not have condoned on a reasonable man standard (see para 17 of the judgment of Deputy Judge To in Re Tong Yuk Kin HCB-22870/02).

13. Though Mr. Ng has failed to reveal or discuss with the trustee his financial needs at the time, he did ultimately provide the explanation and justification for the need of extra financial outlay in his affirmation for the purpose of the present application.  Though Mr. Ng has breached his duty of frankness and due diligence, his family circumstances mitigated the gravity of his breach, I found the equitable determination is to order a cessation of 4 months of his bankruptcy period to mark the court’s disapproval of Mr. Ng’s lack of frankness and due diligence without, on the other hand, imposing undue harshness to hamper his rehabilitation under the bankruptcy regime.

14. The trustee has rightly conceded not to ask for costs for the present application. There shall be no order as to costs for the present application.