RE CHENG CHI MING

HCBI 454/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT BANKRUPTCY INTERIM ORDER

NO. 454 OF 2004

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DIRECTION : CONSIDERATION OF THE CHAIRMAN’S REPORT

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1. The debtor’s proposed voluntary arrangement (“IVA”) in this case was duly approved on 26 July 2004.  The original nominee, Mr. Lee Wing Hang, was already replaced by another nominee, Miss Catherine Cheung, in the creditors’ meeting.  This is the 6^th adjourned hearing for the consideration of the Chairman’s Report and it is for the purpose of considering if I should, in accordance with s.2 of the Bankruptcy Ordinance (“the Ordinance”), find Mr. Lee not suitable to perform the duties specified in s.20G of the Ordinance as a result his non-compliance with a number of statutory provisions.

2. In Mr. Lee’s written explanation and submission submitted to this court, he has admitted having failed to comply with the following provisions of the Bankruptcy Rules (“the Rules”)

(1)    R.122S  : holding the final adjourned creditors’ meeting later than 14 days since the first meeting without obtaining any leave from the court. The first meeting was held on 8 July 2004 as proposed by the nominee and ordered by the court, which meeting was adjourned to 19 July 2004.  No meeting was held on that day and Mr. Lee further adjourned it until 26 July 2004, in which the debtor’s proposal as modified was duly approved by the creditors.  It is noted however that no notice of the fact of adjournment was given by Mr. Lee to the court in respect of any of the aforesaid adjournments in compliance with Rule 122S(4).

(2)    R.122V

(i)    The Report of the creditors’ meeting was not filed in court within 7 days of the meeting being held.  The Report was filed on 19 August 2004.  There was neither an application for an extension for time nor an explanation given for the late filing.

(ii)    The Report fails to include information, which is relevant and should be made known to the court.  The Report fails to state before the resolution was taken to replace Mr. Lee with another nominee, Miss Cheung, whether it had been produced to him at or before the meeting Miss Cheung’s written consent to act and her written confirmation that she is experienced in insolvency matter so as to comply with R.122T.  Further, the Report also fails to record why and how the preferential creditor stated in the proposal was subsequently not included in the IVA.

3. Apart from the non-compliance with the Rules, Mr. Lee has also failed to answer the requisitions raised by me before the hearing for the consideration of the Chairman’s Report regarding matters arising from the Report.

4. From the above, it would appear that Mr. Lee has failed to perform the statutory duties set out in s.20G of the Ordinance, that is, to report the result of the creditors’ meeting to the court in accordance with the Rules.  Mr. Lee’s explanation for the above conduct is that he has “overlooked”.

5. I am neither convinced with the said explanation nor impressed by his repeated disregard of the statutory provisions.  Rules are legislated for people to comply.  His inability to observe the statutory provisions and failure to respond to requisitions raised by the court in a timely fashion has certainly cast doubt, in my view, on his ability to discharge his duties as a nominee.

6. According to the qualifications and experience set out in the Proposal, Mr. Lee has very impressive credentials. It is stated that Mr Lee has been practising as a Certified Public Accountant in Hong Kong since 1999 and that he has experience in “works relating to insolvency, company’s voluntary and compulsory liquidation, debt structure and financing, accountancy, auditing, company secretary, management consultancy and taxation.”  While I am unable to comment if Mr. Lee has the necessary experience in the areas stated in the Proposal, I must say that in respect of this case, he has certainly failed to show that he has possessed the necessary experience and knowledge pertinent to the discharge of his duties as a nominee.  Despite his seemingly impressive qualifications and experience, I would expect him to properly acquaint himself with the relevant statutory provisions before he should accept any appointment as a nominee in IVA cases in the future.

7. Luckily the said non-compliance has not adversely affected this IVA. Mr. Lee has now voluntarily undertaken to this court in not accepting any appointment as a nominee for three months so as to enable himself to learn more about the statutory provisions on IVA.  In view of the fact he is no longer the nominee in this case and that the requisitions have now been answered by affirmations and a supplementary Chairman’s Report, I accept Mr. Lee’s undertaking and am not inclined to state (apart from what is stated above) any opinion in relation to Mr. Lee’s suitability to perform the duties of a nominee.

8. As the proposal was duly approved and is how being implemented in the hands of a replacement nominee and the effect of the approval of the IVA having take place by virtue of s.20H, I do not find it necessary to give any directions.

9. Before I leave the matter on the consideration of the Chairman’s Report, I should further mention the undesirable conduct of the solicitor, Mr. Kwong, and Mr. Lee, who had been absent twice from the hearing for the consideration of the Chairman’s Report in this case. 

10. At the 3^rd adjourned hearing when they had finally turned up for the first time at the hearing for the consideration of the Chairman’s Report, they did not however bring with them a copy of the Chairman’s Report to the court.  As a result, they were not able to answer the questions I raised in the Report and the hearing had to be further adjourned.

11. I find the conduct of both Mr. Kwong and Mr. Lee extremely regrettable. They have wasted a lot of the court’s time. I further find their explanation for their absence on the ground of having overlooked the hearing dates unconvincing. While I have accepted their apologies for their absence, I have however warned the solicitor and the nominee that such conduct may be referred to the relevant professional bodies if it were to be repeated.  In the future, practitioners should not assume that the court would automatically vacate the hearing date for the consideration of the Chairman’s Report when a  proposal is duly approved and should attend the scheduled hearing promptly.