ALAN C.W. TANG, JOINT AND SEVERAL TRUSTEE IN BANKRUPTCH OF THE ESTATE OF LO SIU FAI LOUIS v. JOHN J. TOOHEY, JOINT AND SEVERAL LIQUIDATOR OF GLOBAL MARCH LTD

CACV 177/2004

 IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 177 OF 2004

(ON APPEAL FROM HCCW 180 OF 1998)

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J U D G M E N T

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Hon Woo VP :

1. I have had the advantage of reading Cheung JA’s judgment in draft, and I agree with it and the costs order he proposes.

Hon Cheung JA :

Background

2. Global March Limited (‘the Company’) is a company under liquidation.  It was wound up by a court order on 27 May 1998 on the presentation of a creditor’s petition by Jade Point International Inc. (‘Jade Point’).  The Company was controlled by Lo Siu Fai Louis (‘Lo’).  Lo is a bankrupt.  A bankruptcy order was made against him on 9 October 2002.

3. Lo used the Company as a vehicle to carry out property transactions in respect of Star House in Tsim Sha Tsui, Kowloon, Hong Kong.  The Company had two registered shareholders namely, Lo and Harvest Year Investment Limited (‘Harvest Year’).  Harvest Year was wholly owned by Lo beneficially.  Each of them held ten shares in the Company.  It was not in dispute that Lo held his ten shares on trust for Jade Point and Harvest Year held seven of its ten shares on trust for Jumbo Trade International Limited (‘Jumbo Trade’). 

4. On liquidation the Company only had an asset of $5,200,000.  Lo and Harvest Year claimed to be creditors of the Company.  So did Jade Point and Jumbo Trade.  They all had lodged proofs of debt.  Jade Point and Young Brothers Development Company Limited (‘Young Brothers’) were related companies.  Jade Point made the claim on behalf of both of them.  Lo and Harvest Year’s claim was lodged by the trustee in bankruptcy of Lo’s estate (‘the trustee’).  The particulars are as follows :

1.	Lo and Harvest Year (‘Joint Proof’)	$145,660,811.40
2.	Lo (‘Lo’s proof’)	$77,865,800.00
3.	Jade Point	$63,532,358.22
4.	Jumbo Trade	$63,330,097.20

5. The claims lodged by these four creditors were said to be shareholders’ loans advanced by them to the Company.  In respect of the claim by Lo and Harvest Year of $145,660,811.40 it represented the entire ledger balance of the shareholders’ loan account, before the last debit entry of HK$8,625,350.51 made on 31 March 1998.  The ledger on shareholders’ loan account recorded the funds advanced to the company to buy properties in Star House.

6. The liquidator of the Company rejected Lo’s proof but admitted part of the proof by the other creditors as follows :

1.	Joint Proof	$5,869,562.69
2.	Jade Point	$42,873,647.00
3.	Jumbo Trade	$58,098,485.38
		$106,841,695.07

7. The trustee of Lo applied to Kwan J to vary the decisions of the liquidator.  She dismissed the application with costs against the trustee.  The trustee now appeals against the decision.

The particulars

8. On 24 July 2003 the liquidator provided a breakdown of the $5,869,562.69 (‘Schedule A’)

Schedule A was attached to the letter of 24 July 2003 from the liquidator to the trustee.

9. What is significant from the General Ledger of the Company is that it only recorded the shareholders’ loans from Harvest Year and Young Brothers.  However, the liquidator after analysing the records of the Company was satisfied that both Jade Point and Jumbo Trade had indeed made shareholders’ loans to the Company.  When the liquidator issued the letter of 24 July 2003, it had not adjudicated Jumbo Trade’s claim.  It had since done so.

The principles

10. Rule 95 of the Companies (Winding-up) Rules provides that if a creditor or contributory is dissatisfied with the decision of the liquidator in respect of a proof, the court may, on the application of the creditor or contributory, reverse or vary the decision.

11. As correctly pointed out by Kwan J, an application to the court under this provision is a new hearing to determine to what extent the applicant should be allowed to rank as a proving creditor; the court is bound to decide the rights of the applicant in the light of all the evidence which is before the court, and not merely to express a view as to whether the liquidator was right or wrong in rejecting the proof on the evidence then available to the liquidator when he rejected it (Re Kentwood Construction Ltd [1960] 1 WLR 646 at 647 to 648).

12. Further, the onus of proof is on the applicant to show on a balance of probabilities that a real debt is due to him, see Re Adam Holdings Ltd [1985] 2 HKC 608 at 613B to G.

13. The position of a liquidator in adjudicating a proof of debt is the same as that of a trustee in bankruptcy. In Re van Laun [1907] 1 KB 135 at 162 it is stated that :

‘The trustee’s right and duty when examining a proof for the purpose of admitting or rejecting it is to require some satisfactory evidence that the debt on which the proof is founded is a real debt.  No judgment recovered against the bankrupt, no covenant given by or account stated with him, can deprive the trustee of this right.  He is entitled to go behind such forms to get at the truth...’

The trustee’s case

14. In gist the trustee’s case on appeal is that the liquidator was wrong to accept the claim of Jade Point and Jumbo Trade.  It was argued that as the proofs were mutually exclusive, if Jade Point and Jumbo Trade failed in their claims then Lo and Harvest Year must succeed in their claims.  The liquidator was also wrong to require Lo and Harvest Year to reimburse $4,375,350.51 before they were entitled to the claim of $5,869,562.69.  With the reimbursement, their admitted claim would be $10,244,913.20 (i.e. $5,869,562.69 + $4,375,350.51).

Jade Point/Young Brothers

15. The liquidator had identified that Jade Point/Young Brothers had made the following shareholders’ loans :

1)	1 February 1994	$23,280,055
2)	21 March 1994	$12,970,256
3)	30 May 1994	$9,456,480
4)	1 August 1994	$12,970,256
5)	30 September 1994	$20,000,000
		$78,677,047

Less Repayment

1)	3 August 1995	$5,000,000
2)	November 1996	$30,803,400
		$42,873,647

16. The liquidator had in his Memorandum dated 15 August 2003 set out what he considered to be the basis of his decision on the funds advanced by Jade Point by reference to the available documents.

The pleading

17. That Jade Point had advanced $78,677,047.00 was not seriously challenged in this appeal.  The crux of the trustee’s case is that the funds were advanced pursuant to a personal agreement between Lo and Jade Point.  In other words the funds were not advanced to the Company but to Lo, and Jade Point should claim it back from Lo’s estate and not from the Company.  The trustee relied on the amended statement of claim dated 14 February 2001 filed by Jade Point against Lo in High Court Action No. 569 of 2000.  The relevant part of the pleading relied upon by Jade Point was as follows :

‘	2.	Sometime in or about February 1994, at the request of [Lo], [Jade Point] agreed to advance loan capital to the Company [i.e. the Company in this appeal] for the purchase of various units in the building known as Star House, Tsimshatsui, Kowloon (‘the Star House Units’) from a company called Winner King Limited (‘the Vendor’) subject to the following conditions :-
	(a)	[Lo] personally undertook as a primary obligation to repay to [Jade Point] all principal and interest...outstanding in respect of the loans to be advanced by [Jade Point] to the Company at the request of [Lo];
	(b)	[Lo] would hold upon trust in favour of [Jade Point] 10 shares in the Company consisting of 50% of its issued capital.
	3.	Pursuant to the agreement as aforesaid, [Jade Point] advanced to the Company the following sums paid to various payees as directed by [Lo].

Date	Amount advanced (HK$)	Payee
17.3.94	12,970,256	[Lo]
21.3.94	23,280,055	the Vendor
31.5.94	9,456,480	[Lo]
1.8.94	12,970,256	the Vendor
30.9.94	20,000,000	the Company
	78,679,547	’

18. The sum of $78,679,547 stated in Paragraph 3 of the Amended Statement of Claim obviously consists of an arithmetical mistake.  The correct figure should be $78,677,047.  The pleading also pleaded that only $5,000,000 and $30,803,400 had been repaid to Jade Point on 3 August 1995 and 20 November 1996 respectively.

Personal agreement?

19. Ms. Linda Chan, counsel for the trustee, argued that Jade Point did not allege in the pleading that the Company was a party to the agreement.  Further Jade Point had since entered judgment by consent against Lo on 10 May 2002 for the sum of $78,000,000.  Earlier on 31 March 2002, Lo had issued a personal cheque of $78 million to Young Brothers as repayment of the amount claimed by Jade Point.  The cheque was dishonoured.  Ms. Chan argued that on that basis it was not open to Jade Point to make the Company liable for further sums.

20. I am not convinced with the argument.  Jade Point’s pleading clearly stated that the agreement was for Jade Point to advance loan capital to the Company and money was in fact advanced by it to the Company and the various payees as directed by Lo.  The Company was one of the payees.  The vendor of the property was another payee.  The third payee was Lo himself who controlled the Company.  All this is consistent with Jade Point making loans to the Company and with Jade Point’s present claim against the Company.  Lo was sued because he had assumed ‘a primary obligation to repay to [Jade Point] all principal and interest.... outstanding in respect of the loans to be advanced by [Jade Point] to the Company at the request of [Lo]’.  This does not mean the agreement to advance loan to the Company was made solely between Lo and Jade Point to the exclusion of the Company.  Jade Point’s pleading does not point to such an exclusion. 

Evidence

21. The evidence available to the liquidator was scarce.  Based on the available evidence, he has adjudicated in favour of Jade Point.  Bearing in mind the burden of proof that a real debt is due to the applicant lies with the applicant himself, I am not satisfied that the trustee has discharged this burden. 

22. Pursuant to the agreement pleaded in the Amended Statement of Claim, a declaration of trust was made by Lo of his ten shares in favour of Jade Point.  Again this does not support the trustee’s contention that the Company was not a party to the agreement whereby Jade Point would make loans to it.  Neither would the personal cheque of $78 million issued by Lo in favour of Young Brothers.  The judgment in High Court Action 569/2000 obtained by Jade Point against Lo was not satisfied.  Jade Point had also made a claim as a judgment creditor in the bankruptcy of Lo.  But this would not preclude it from claiming against the Company in respect of the loan. 

23. The liquidator made the determination based on the records of the Company.  It did not rely on the content of the Statement of Affairs submitted by Lo.  In it, Lo had expressly stated that a shareholders’ loan of $78,677,047 was made by Jade Point and $42,624,999 was due after taking into account repayments of $35,803,400 and cash at bank of $248,648. 

24. It is submitted that what Lo said does not create any estoppel against the trustee (Re Adam Holdings Ltd [1985] 2 HKC 608).  That may be so.  But Lo’s statement lent support to the liquidator’s determination on Jade Point’s case and there was no other credible evidence to contradict Lo’s statement.

Two loans

25. Of the five loans advanced by Jade Point that had been identified in the General Ledger as “Shareholders’ Loan YB (Young Brothers)” two of them were not identified at all namely, the sums of $23,280,055 and $9,456,480. 

26. The liquidator’s case is that these sums were in fact booked under the entry of “Shareholders’ loan by Harvest Year” dated 1 February 1994 for $9,940,512 and $28,800,000 making a total of $38,740,512.  The actual contributors were Young Brothers for $23,280,055 and Jumbo Trade for $16,852,203 making a total of $40,132,258.  The liquidator contended the difference between $40,132,258 and $38,740,512 of $1,391,746 had not been booked into the general ledger. 

27. While the ledger showed Harvest Year had advanced the two loans, there was no other evidence available to support this advancement.  On the contrary the liquidator was able to identify evidence of advancement by Young Brothers and Jumbo Trade.  The evidence in support of a loan by Young Brothers in respect of $23,280,055 included a copy of HSBC cheque dated 17 March 1994 issued by Joyca Limited for $23,280,055 to Lo, a copy receipt issued by Lo in favour of Jade Point dated 10 March 1994 for 10% of the purchase of the property at Star House (the receipt acknowledged that the money was the first payment by Jade Point for the purchase), a copy of promissory note for $23,280,055 issued by Lo in favour of Young Brothers dated 17 March 1994. 

28. In my view the evidence shows that Young Brothers had made the advancement.  If it is suggested that the advancement was made to Lo personally and not to the Company or that Harvest Year had actually made the loan, then the trustee has to show that was indeed the case.  Lo had chosen not to assist the trustee.  In my view, the trustee has failed to discharge the burden.

29. In respect of $9,456,480, the liquidator’s case is that the entry of shareholders’ loan by Harvest Year on 30 May 1994 for $18,912,960 in fact consisted of the following advances :

Harvest Year	$2,836,944
Young Brothers	$9,456,480
Jumbo Trade	$6,619,536

30. The evidence of payment by Young Brothers consisted of a fax from Grand Duke Group to Young Brothers instructing it to issue a cheque of $9,456,480 payable to Lo.  There was the following written endorsement on the fax ‘John/Anthony, Please issue check’ and ‘YBD HKB cheque no. 85673 dated 31 May 1994’.  The evidence was equivocal.  But considering Jade Point’s amended statement of claim actually pleaded a payment of $9,456,480 to the Company (the payee being Lo), this evidence clearly supports such a contention.  Again in the absence of contrary evidence, the liquidator’s determination on this sum clearly can be supported.

Concession

31. Ms. Chan, who did not appear before Kwan J, further submitted that counsel who previously represented the trustee had wrongly conceded not to dispute the credit entries of $12,970,256, $12,970,256 and $20,000,000 and the debit entry of $5,000,000.  It is not necessary to go into the question of estoppel that may have arisen by the concession.  Even without the concession, based on the available evidence, the liquidator clearly was entitled to make a determination in favour of Jade Point on these four entries.  Again there was simply no evidence to contradict it.

$30,803,400 repaid by Lo to Jade Point

32. The trustee argued that since Jade Point had admitted that $30,803,400 was repaid to it by Lo, the liquidator should accept this amount as a debt due to Lo.  This is because the claims by Lo and Jade Point were mutually exclusive.  What the liquidator disallowed as due to Jade Point should be allowed as Lo’s claim.

33. Much has been said about the different claims being mutually exclusive.  All that it means in the context of the present case is that Lo and Harvest Year were claiming the same loans that the other creditors said they had advanced to the Company.  When Jade Point had received $30,803,400, obviously this amount had to be deducted from the total loans it had advanced to the Company.  But it does not mean this sum will then automatically be credited to Lo.  Lo has to establish by credible evidence that it was he who personally paid the money for and on behalf of the Company to Jade Point.  Such evidence was lacking. 

34. Further in respect of the other payment of $5,000,000 it was actually repaid by the Company to Young Brothers.  The admission by Jade Point in the amended statement of claim that the sums of $30,803,400 and $5,000,000 had been repaid does not assist the trustee because there was no unequivocal plea that it was Lo who personally made the payment.  Paragraph 4 of the amended statement of claim merely pleaded that ‘.... [Lo] has up to now made or caused to be made only the following part payments ....’

35. It was further argued that as a matter of law the trustee should be entitled to prove that sum for the following reasons :

1)	For the purpose of mandatory set off under section 35 of the Bankruptcy Ordinance (which applies to a company under liquidation by virtue of section 264 of the Companies Ordinance) any payment effected by a guarantor pro tanto extinguishes the principal debt (see : MS Fashions Ltd v. Bank of Credit & Commerce International SA [1993] Ch. 425).
2)	Gore-Brown on Companies 50th ed. Ch. 59 para. 18 states that, ‘a right to prove may arise where the creditor has discharged the company’s own debt and becomes entitled in law or equity to recoup his payment, for example by subrogation or because the payment was made under compulsion of law’.
3)	Further a surety for part of a debt is entitled to prove in the winding up of the debtor company once a payment has been made to the creditor in relation to that part of the debt for which he or she is liable (see : McColl’s Wholesale Property Ltd v. State Bank of NSW [1984] 3 NSWLR 365).

36. These principles are accepted by Mr. Carolan, counsel for the liquidator.  However what is in issue here is again that the trustee has failed to establish by credible evidence that Lo made the payment personally for and on behalf of the Company and in circumstances which would qualify him to prove the payment as envisaged in these principles.  There was a complete lack of evidence that Lo paid the money as a guarantor or surety.  On the contrary, the case as advanced by the trustee is simply that Lo was primarily personally responsible for the advances to the Company.

Reversal of debit entry

37. As shown earlier the liquidator required Lo and Harvest Year to reimburse $4,375,350.51 before they were entitled to the claim of $5,869,562.69.  This was upheld by Kwan J.  She also ordered that unless the amount of $4,691,712 being director’s loans advanced by the Company to Lo during 1995 to 1998 is repaid, Lo is not entitled to any dividend payment.

38. This latter decision is now conceded by Mr. Carolan to be wrong.  On the sum of $4,691,712 the parties agreed that in this appeal the Court does not need to be concerned with the issue of taking it into account in the admitted proof of $5,869,562.69.  However the reimbursement of $4,375,350.51 is still a live issue.  The history of the matter is this.  Helena Cheng (“Cheng’) was the former wife of Lo and had sued Lo for maintenance.  In January 1998 the Company sold some properties in Star House and the Company’s solicitor held $14,777,462.33 as the net proceeds of the sale.  On 15 January 1998 the solicitor was instructed by the Company to pay $8,625,350.51 of the proceeds of sale to Cheng’s solicitors, Messrs. Hampton Winter & Glynn (‘HWG’) as settlement of Cheng’s claim.  A petition to wind up the Company was presented on 14 March 1998.  After the presentation of the petition, HWG on 23 March 1998 paid the money to Cheng.  The Shareholders’ loan account of the Company recorded a debit entry on 31 March 1998 of the sum of $8,625,350.51.  The Company was wound up by the court on 27 May 1998.  The liquidator considered the payment of $8,625,350.51 to be a void disposition by virtue of section 182 of the Companies Ordinance and commenced proceedings against both Cheng and HWG.

39. In February 2003, the parties reached a compromise that $4,250,000 was to be repaid to the liquidator in full and final settlement of the liquidator’s claim.

40. However the liquidator insisted the shortfall of $4,375,350.51 (i.e. $8,625,350.51 - $4,250,000) would not be considered as the admitted proof of Lo & Harvest Year.

41. In simple terms, the liquidator was of the view that Lo owed the Company $4,375,350 and as a result he was not entitled to the payment of dividends from the assets of the Company without accounting for that sum.

The equitable or V.G.M. principle

42. In upholding the liquidator’s determination, Kwan J appeared to accept the equitable principle that ‘a person entitled to participate in and bound to contribute the same fund cannot receive the benefit without discharging the obligation’ : see Re Rhodesia Goldfields Ltd [1910] 1 Ch. 239 and Re Davies Chemists Ltd [1992] BCC 697.

43. The starting point is that a liability of the company must exist at the date of commencement of the winding up for it to be provable against the company : see Fletcher on the Law of Insolvency 3^rd Ed. para. 23-004.  Further under section 35 of the Bankruptcy Ordinance (applicable to winding up by reason of section 264 of the Companies Ordinance) there shall be a mutual set off of debts due from the company to a creditor who also owes a debt to the company.  The parties are only entitled to the balance after the set off.  However, the condition for the set off must be that both debts must exist at the commencement of the winding up.  That date is the date of the presentation of the winding up petition : MS Fashions Ltd v. Bank of Credit and Commence International SA [1993] Ch. 425.  Under section 35 of the Bankruptcy Ordinance a person shall not be entitled to claim the benefit of any set off against the property of the debtor where he had, at the time of giving credit to the debtor, notice of the commencement of the winding up of the Company.

44. Further by virtue of the bankruptcy of Lo, the remedy of the Company against Lo is the right to prove in his bankruptcy : section 34(3) of the Bankruptcy Ordinance.  The Company is not entitled to any other remedy against the property or person of Lo : section 12(1) of the Bankruptcy Ordinance.  In the present case, the liquidator’s claim for $4,375,350.51 only arose after the commencement of the liquidation. 

45. However, even without the benefit of any statutory set off on the one hand and the restricted nature of the remedy available to the liquidator on the other hand, the equitable principle will come into play to ensure a debt due from the creditor to the company must be taken into account in order to ensure he would not receive the benefit without assuming the burden.  As Swinfen Eady J observed in Rhodesia Goldfields (at p. 246) :

‘A person who owes an estate money, that is to say, who is bound to increase the general mass of the estate by a contribution of his own, cannot claim an aliquot share given to him out of that mass without first making the contribution which completes it.  Nothing is in truth retained by the representative of the estate; nothing is in strict language set off; but the contributor is paid by holding in his own hand a part of the mass, which, if the mass were completed, he would receive back.  That is expanding what the Lord Chancellor calls in Cherry v.Boultbee 4 My. & Cr. 422, 447 ‘a right to pay out of the fund in hand,’ rather than a set-off.............  Under such circumstances the Court in effect says to the person claiming to be paid, ‘You have in your own hands that which is applicable to the payment¾pay yourself out of that’.’

46. This equitable principle came to be known as the V.G.M. principle because it was applied to a company in liquidation in the case of In re V.G.M. Holdings Ltd [1942] Ch. 235.  It is, however, abundantly clear that the application of this principle does not require the defaulter to physically make good the money due to the company first.  As Lord Greene observed in that case at page 241,

‘Indeed, it would be quite useless to order (the defaulter) to pay any sum of money part of which might eventually come back to him as a shareholder on a distribution of surplus assets.’

See a review of the authorities in Selangor United Rubber v. Cradock [1969] 1 WLR 1775.

47. In this case the actual payment of $8,625,350.51 to HWG and Lo’s wife was made after the commencement of the winding up and as the debt was not due from Lo, the statutory set off provision would not come into play.  However, it could hardly be argued against the proposition that it was Lo himself who caused the money to be paid in order to deal with his matrimonial settlement.  It was a matter personal to himself.  It was he who caused the assets of the Company to be depleted and in my view the equitable principle surely must apply in a situation like the present one to ensure that he could only receive the benefit by first accounting for the loss he had caused the company to incur.  That loss had nothing to do with the business of the Company and the Company would derive no benefit at all from the payment of $8,625,350.51. 

48. In my view Kwan J was correct to apply the equitable principle.  On that basis the admitted claim should be $5,869,562.69 which has already taken into account the sum of $4,375,350.51.  However, there should not be any requirement for the trustee to pay back $4,375,350.51 in order to be entitled to the admitted proof of $10,244,913.20 since this will be contrary to the V.G.M. principle.  This does not, however, affect the outcome of the appeal as the liquidator has now indicated through counsel that he will not ask for the physical payment of $4,375,350.51.

Jumbo Trade

49. The liquidator had determined that Jumbo Trade had made payment of $63,130,597.20 to the Company.  The details and the supporting documents relied upon by the liquidator are as follows :

1)	the sums of HK$16,852,203, HK$9,079,179, HK$6,619,536, HK$9,079,179.20 and HK$14,000,000 (items 2, 4, 6, 8 and 9/Schedule A respectively) : these payments to the Company are supported by a copy of a fax dated 7 November 1995 from the Company to Jumbo Trade (c/o Fairwood Holdings Ltd).  This fax states that as at 31 March 1995, the amount of shareholders’ loan made by Jumbo Trade amounted to HK$55,630,097.20.  This is the aggregate of the above sums.
2)	items 2, 4, 6 and 8/Schedule A are supported by a copy of a letter dated 22 December 1999, after the winding up of the Company from Lo and Harvest Year to the Liquidator, advising that the items totalling HK$41,630,097.20 were made by Jumbo Trade as shareholders’ loans to the Company.
3)	the sum of HK$7,700,000 (item 12/Schedule A) is supported by a copy of a fax 6 October 1995 from the Company to Fairwood Holdings Ltd, acknowledging receipt of this sum as a shareholders’ loan in respect of the purchase of Star House.  The Liquidator had caused enquiries to be made with Jumbo Trade as to its relations with Fairwood Holdings Ltd (‘Fairwood’).  He was advised that Jumbo Trade was a private company owned by Mr. Lo Hoi Yeung, Dennis, the chairman of Fairwood.
4)	the deduction of HK$199,500 (item 13, Schedule A) is supported by a copy of a HSBC cheque issued by the Company to Lo Hoi Yeung.

50. In my view, with such evidence and in the absence of other evidence, the only conclusion that the liquidator could possibly make is one in favour of Jumbo Trade.  Any other determination could only be a perverse one.

51. It was said that Kwan J had ignored the evidence that the sums paid by Jumbo Trade was pursuant to a personal agreement between Harvest Year and Jumbo Trade.  But the point is that there was simply no evidence of such an agreement.  The doctrine of privity of contract relied upon by Ms. Chan is well known but there is simply no evidence that will render the principle operative in this case in favour of the trustee.  The declaration of trust by Harvest Year of seven of its shares in favour of Jumbo Trade does not even begin to show there was such a personal agreement.

52. It was said that the letters dated 6 October 1995 and 7 November 1995 from the Company to Jumbo Trade were provided by Jumbo Trade to the liquidator and there was no evidence to suggest that they formed part of the books and records of the Company.  Further the letter dated 22 December 1999 only came one and a half years after the Company had been wound up and the circumstances under which it was signed were unclear; the amount stated in this letter was inconsistent with the amount claimed by Jumbo Trade; and what was said by Lo and Harvest Year does not operate as an estoppel against the trustee.

53. These are relevant considerations.  But ultimately one may ask what other evidence is there to contradict the determination made by the liquidator and the evidence that he had relied upon in making the determination?  The answer is that there is no such evidence.  This is a case where the trustee has simply failed to show that Lo and Harvest Year were entitled to more than what the liquidator had determined.

Other matters

54. There is a point raised by Ms Chan which needs to be addressed but only briefly.

55. It is said that according to the liquidator’s investigation, the outstanding shareholders’ loan owed by the Company amounted to $135,415,898.20.  But the debt admitted by the liquidator was $112,073,306.89 consisting of Jade Point’s $42,873,647, Jumbo Trade’s $63,330,097.20 and the Joint Proof of $5,869,562.69.  Hence there was a sum of $23,342,591.31 unaccounted for.

56. In my view this is an over simplification.  The $135,415,898.20 was in fact credit entries in the shareholders’ loan account of the Company which had been wrongly recorded and related to funds advanced by Jade Point and Jumbo Trade.  As shown in a summary (which contained detailed reference) submitted to Kwan J and this Court, after the adjustments there was no amount which was unaccounted for.  This is not a point of substance.

Conclusion

57. Accordingly the appeal must be dismissed. 

Costs

58. I see no reason why costs should not follow the event.  What was before Kwan J and this Court was available to the trustee.  The only difference is that the liquidator had not made a final determination of Jumbo Trade’s claim when the matter was before Kwan J.  The judge, however, had in fact already agreed with the liquidator’s determination of $63,330,097.20.  Although Ms Chan had argued that the liquidator should be deprived of the costs below I really do not see any exceptional feature in the case which would deprive a successful party of having its costs. 

59. The general rule which is accepted by the parties is that if a trustee in bankruptcy is a litigant and is unsuccessful, he is made personally liable for costs : Williams and Muir Hunter, The Law and Practice in Bankruptcy 19^th Ed Pg 403.  There will be a costs order for the liquidator against the trustee in respect of the appeal.

Hon A Cheung J :

60.  I agree.