RE YEUNG KANG LAM

HCB 5166/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCYPROCEEDINGS NO. 5166 OF 2005

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J U D G M E N T

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1.  This is a petition for bankruptcy presented by Welco Development Limited against Yeung Kang Lam, formerly known as Yeung Wing Keung.

2.  The petition is founded on a judgment debt which is an arbitration award in the sum of HK$38,751,054.45.  There is an affirmation by a solicitor of this court that he had on 17 December 2004 at around 1 pm in the High Court personally served the debtor with the statutory demand dated 17 December 2004.  In the light of this, I do not see how the debtor can assert in his second affirmation that he had never received any statutory demand.

3.  The debtor opposes the petition on these grounds:

(1)	he is able to pay the judgment debt or has a reasonable prospect of being able to pay the judgment debt;
(2)	for other sufficient cause, no bankruptcy order should be made; and
(3)	his offer to settle the judgment debt was unreasonably refused by the petitioner.

4.  The debtor filed evidence to the effect that by an employment agreement dated 2 September 2005 he entered into with a company in Shenzhen called the China Shenzhen City Bill Yuen Motor Cars Company Limited, he is employed by the latter as the development manager for a period of 4 years.  According to a labour agreement dated 10 September 2005 between the Shenzhen company and the debtor, he is to be paid a salary of RMB 16,000 a month.

5.  Under the employment agreement, as the development manager, the debtor is to be responsible for the development of a project called the Shenzhen Motor Car City.  The debtor claims that it was agreed with the Shenzhen company that upon completion of the project at different stages, he would receive a remuneration package being a substantial share in the real estate or its monetary equivalent in market value at a 5% discount.  That would put him in a few years in the position to “substantially fulfil” the petitioning debt.

6.  By a letter dated 22 September 2005, the debtor made a repayment proposal to the petitioner to pay RMB 35 million odd in full and final settlement of the petitioning debt by 6 instalments.  The first instalment to be paid on signing of the settlement agreement is in the sum of RMB 80,000.00.  The second instalment is to be paid during 2006 in the total sum of RMB 1,072,000.00.  It is proposed that the debtor would pay RMB 6,000.00 a month and that he would pay RMB 1 million in October 2006.  The third instalment in the sum of RMB 4 million is to be paid by June 2007.  The fourth instalment of RMB 10 million is to be paid by December 2008, the fifth instalment of RMB 10 million by December 2009, and the sixth instalment of RMB 10 million is also to be paid by December 2009.

7.  The petitioner rejected this offer at the hearing before a Master of this petition on 28 September 2005.

8.  A revised proposal was put forward by the debtor dated 29 September 2005.  By this proposal, it is offered to pay the judgment debt of HK$38,751,054.45 in full by 6 instalments.  The first instalment to be paid before January 2006 is in the sum of HK$100,000.00.  It is clear that the figure of HK$1 million for the first instalment in the revised proposal must be a typing error, as this figure does not add up correctly with the other instalments.  The second instalment in 2006 is in the total sum of HK$4,072,000.00.  This is to be paid by HK$6,000.00 a month and that HK$4 million is to be paid in one go in October 2006.  The third instalment, to be paid by June 2007, is in the sum of HK$4 million.  The fourth instalment of HK$10 million is to be paid by December 2008, the fifth instalment of HK$10 million by December 2009, and the sixth instalment also to be paid by December 2009 is in the sum of HK$10,579,054.45.

9.  The revised proposal is also unacceptable to the petitioner, as it does not think this is a viable proposal.  As submitted by the petitioner’s counsel, whether in the original proposal or the revised proposal, large sums of money are only to be paid years down the road.  The debtor’s ability to repay such large sums is wholly dependent on the success of the project of his new employer.  The proposal of repayment is simply not attractive due to its contingent nature.  Further, the letter by the new employer to the petitioner dated 29 September 2005, proposing some form of guarantee in respect of the debtor’s liability, is also unacceptable to the petitioner.

10.  On the basis of the information provided by the debtor, I am unable to say that the rejection of his offer by the petitioner is such that this is beyond the range of possible reasonable actions of a reasonable hypothetical creditor in all the circumstances.  I reject the first and third grounds of opposition put forward by the debtor.

11.  The debtor has also in his affirmations deposed that it is his intention to apply for an interim order with the view of implementing a voluntary arrangement.  No steps whatsoever have been taken by the debtor in this regard, other than putting forward the two proposals to the petitioner which have been rejected.  No evidence has been put forward by the debtor if he has sought the views of any of his other creditors.  In any event, with the judgment debt of HK$38 million odd, the petitioner must be the major creditor of the debtor, although I have no information whether the petitioner’s debt is likely to be 75% or more in value of the aggregate liabilities of the debtor.

12.  I am not persuaded in the circumstances that there is a viable proposal which is to form the basis of any voluntary arrangement.  I see no other reason why a bankruptcy order should not be made.

13.  There is some feeble attempt on the part of the debtor in making allegations to impugn the correctness of the arbitration award.  I understand however from his counsel that he has no intention to challenge the award or the judgment by which the award was enforced.  The attempts made by the petitioner to enforce the award such as in applying for a warrant of arrest against the debtor, in having the debtor examined, and in obtaining a garnishee order against him are all steps taken within the petitioner’s right.  Whatever motive the debtor may wish to impute against the petitioner for enforcing the judgment debt and in bringing the bankruptcy petition against him is quite irrelevant.

14.  In all the circumstances, I see no reason why a bankruptcy order should not be made.  I therefore make a bankruptcy order against the debtor.  The petitioner’s costs and the supporting creditor’s costs are to be paid out of the debtor’s estate.