RE CHUNG WINSTON

HCB 4005/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4005 OF 2012

____________

____________

_____________

D E C I S I O N

_____________

1. This is the trustees’ application for leave to issue a warrant of arrest under the Bankruptcy Ordinance to apprehend the bankrupt.

The legal principles

2. Section 27(1) of the Bankruptcy Ordinance, Cap 6, (“the Ordinance”) gives the power to arrest a bankrupt:

“(1) The court may, by warrant addressed to any person or persons named therein, cause a debtor to be arrested, and any books, papers, money and goods in his possession or under his control or relating to his affairs to be seized, and him and them to be safely kept as prescribed until such time as the court may order under the following circumstances–

(a) …

(b) if, after presentation of a bankruptcy petition by or against him, it appears to the court that there is probable cause for believing that he is about to dispose of or remove his goods with a view to preventing or delaying possession being taken of them by the Official Receiver or trustee, or that there is probable ground for believing that he has concealed or is about to conceal or destroy any of his goods or any books, documents or writings which might be of use to his creditors in the course of his bankruptcy;

(c) …

(d) …

(e) if there is probable cause for believing that he has committed an offence punishable under this Ordinance.”

(emphasis added)

3. Section 129(1) of the Ordinance sets out offences which are punishable under the Ordinance:

“(1) Any person who has been adjudged bankrupt shall in each of the cases following be guilty of an offence–

(a) if he does not to the best of his knowledge and belief fully and truly discover to the trustee all his property, real and personal, and how and to whom and for what consideration and when he disposed of any part thereof, except such part as has been disposed of in the ordinary way of his trade (if any) or laid out in the ordinary expenses of his family, unless he proves that he had no intent to defraud;

(b) if he does not deliver up to the trustee, or as he directs, all such part of his movable or immovable property as is in his custody or under his control and which he is required by law to deliver up, unless he proves that he had no intent to defraud;

(c) if he does not deliver up to the trustee, or as he directs, all books, documents, papers and writings in his custody or under his control relating to his property or affairs, unless he proves that he had no intent to defraud;

…” (emphasis added)

4. Under section 29(2), a person summoned who refuses to produce documents may be apprehended:

“(1) The court may, on the application of the Official Receiver or trustee, at any time after a bankruptcy order has been made against a bankrupt summon before it the bankrupt or his spouse, or any person known or suspected to have in his possession any of the estate or effects belonging to the bankrupt or supposed to be indebted to the bankrupt, or any person whom the court may deem capable of giving information respecting the bankrupt, his dealings or property, and the court may require any such person to produce any documents in his custody or power relating to the bankrupt, his dealings or property.

…

(2)   If any person so summoned, after having been tendered a reasonable sum, refuses to come before the court at the time appointed, or refuses to produce any such document, having no lawful impediment made known to the court at the time of its sitting and allowed by it, the court may, by warrant, cause him to be apprehended and brought up for examination.”

(emphasis added)

The facts

5. The bankrupt has a history of being uncooperative with the trustees since he was declared bankrupt on 27 February 2013.  This has been set out in my decision dated 13 November 2013.

6. Put briefly, the bankrupt has judgment debts of HK$229 million.  His claimed tangible assets had net book value in 2012 of well over HK$1.65 billion and intangible assets HK$1.9 billion. He held interests in private and listed companies.

7. However, the details the bankrupt disclosed did not tally with his claimed wealth. He breached his promise to provide further details or documents on several occasions and failed to answer questions put to him by the trustees.  It was impossible to fathom the true state of his property, affairs and dealings.  Hence, an order for his private examination and disclosure of documents was made on 13 November 2013 (“the disclosure order”).

8. The bankrupt attended the private examination before Master Michael Wong on 27 February 2014, but had not produced a single document as required by the disclosure order.  His attitude during the examination was uncooperative, evasive and untruthful. He refused to answer some questions.

9. The private examination has been adjourned to 12 September 2014.  The learned Master ordered the bankrupt to (a) comply with the disclosure order; and (b) disclose documents requested by the trustees within 14 days after receiving the trustees’ list of required documents.

10. Pursuant to Master Michael Wong’s order, the trustees gave 2 lists of required documents to the bankrupt on 6 March 2014.  The documents required have not been supplied at all. 

11. Despite the trustees’ request, the bankrupt has failed to turn up on 16 April 2014 for a meeting and failed to provide any document as requested in or responded to the trustees’ chaser letter dated 10 April 2014. 

Application of the legal principles

12. This is a thoroughly bad case of an uncooperative bankrupt.  He resides in the Mainland but his assets are in companies in the USA, BVI and the Mainland.  The trustees need his assistance to be able to properly administer the estate. 

13. It has been over 1.5 years since the order of bankruptcy and yet the bankrupt has not supplied the information which he stated would be supplied in his Preliminary Examination Questionnaire and Statement of Affairs.  He fails to appear today to explain his conduct or resist the summons.

14. The bankrupt has committed the offences of failure to fully and discover to the trustees all his property, failure to deliver up his movable or immovable properties in his custody or control, and failure to deliver up books and documents in his custody or control relating to his property or affairs, contrary to section 129(1)(a), (b) and (c) respectively.

15. The bankrupt has blatantly ignored 2 court orders for production of documents, in breach of section 29(2).  There was no lawful impediment made known to the court at the time of its sitting. 

16. The uncooperative attitude gives rise to probable grounds for believing that he has concealed his goods, books, documents or writing which might be of use to his creditors in the course of his bankruptcy, in breach of section 27(1) of the Ordinance.

17. A warrant of arrest is well justified to ensure that the bankrupt will provide the documents sought before the adjourned private examination.  I thus order one to be issued.

18. I order costs in favour of the trustees, summarily assessed at $98,000 to be paid out of the estate.