RE DAVID ANTHONY NEISH

HCB 3541/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 3541 OF 2007

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D E C I S I O N

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Application

1.  This is an application for suspension of automatic discharge of bankruptcy.

Background

2.  Wo Kee Hong (Holdings) Limited filed the petition herein on 23 April 2007 praying for a bankruptcy order to be made against Mr. David Anthony Neish. It was said that Mr. Neish owed it a sum of about $400,000, being balance of unpaid costs taxed under HCA 3736/2003.  Mr. Neish opposed the petition.

3.  However, the Hon. Barma J. made a bankruptcy order against Mr. Neish (hereinafter called as “the Bankrupt”) on 25 June 2007.  Under the current bankruptcy regime, the Bankrupt should have been discharged after a period of 4 years, i.e. on 25 June 2011.  However, the Official Receiver (‘the Trustee”) found the Bankrupt’s conduct uncooperative and unsatisfactory.  By a summons filed on 26 May 2011, the Trustee objected the automatic discharge of the Bankrupt.

4.  Owing to the fact that the Bankrupt applied for the assistance from the Director of Legal Aid, the summons was adjourned a couple of times. Nonetheless, the automatic discharge was suspended in the mean time. On 2 November 2011, Master Lai granted leave for the parties to file and serve further affidavit evidence. Both parties did so. Hence, there were the following evidences before this Court at the substantive hearing.

(a)  The Trustee’s report filed on 26 May 2011,

(b)  Affidavit of the Bankrupt filed on 16 November 2011, and

(c)  The Trustee’s supplemental report filed on 7 December 2011.

5.  On 7 February 2012, I heard the substantive argument of the application.  Ms. J. Lam, Acting Senior Solicitor, represented the Trustee and the Bankrupt appeared in person.

The Trustee’s case

6.  Ms. Lam told me that the Trustee made 2 main complaints against the Bankrupt.

(a)   He delayed in furnishing his financial information and submitting his annual statements. The delays for the 3 annual statements were for a period of 9 months, 15 months and 3 months respectively.

(b)   The Bankrupt did not remit a total surplus of $39,596 according to his said 3 annual statements.

The Bankrupt’s Position

7.  By the Affidavit of the Bankrupt filed on 16 November 2011, he produced a number of copy documents, including his income records, the bank transfer record of his payment of maintenance to his ex-wife, and the said 3 annual statements. He did not spell out his stance on oath. At the hearing before me, he told me that he admitted the delay in submitting the annual statements and offered his apology.  However, as to the surplus of $39,596, he denied the same. He told me that they were in fact “loans” from his ex-wife. He described them as “allowance” on the statements because he was told to do so by the officer in the Trustee.

The Trustee’s Reply

8.  On the other hand, Ms. Lam drew my attention to two matters.

(a)   When the Bankrupt was being asked by the Trustee to remit the said surplus, he did not deny his obligation at first. By the Bankrupt’s letter of 8 October 2010, he in fact wrote to reply as “3. Unfortunately, I am currently not in a position to pay the surplus of $39,596. Should an opportunity arise where I receive funds, this will of course be settled in full… ”.

(b)   By the Trustee’s supplemental report filed on 7 December 2011, it was said that the Bankrupt was not obliged to pay as much as he did to his ex-wife. It was to be borne in mind.

The Ruling

9.  Upon consideration of the parties’ evidence authorities and submission, I have decided that the discharge of the bankruptcy against the Bankrupt should be extended for 1 year in the circumstances.  My reasons appear in below.

(a)   The delays in filing of the annual statements are admitted. The Bankrupt offered his apology and did not submit any other mitigation.

(b)   As a matter of fact findings, on balance, I accept the complaints made by the Trustee upon the Bankrupt on his failure to remit the surplus. I find the submissions of Ms. Lam persuasive. They also coincide with my observation of the performance of the Bankrupt at the hearing before me. He is well educated. He could not have misunderstood the difference between “loan” and “allowance”. I further find it difficult to accept the allegation of an “un-indentified” officer of the Trustee telling the Bankrupt to describe his loans from ex-wife as allowance in the statements.

Suspension of the Discharge, if so, for how long?

10.  I then move to consider whether this Court should in the circumstances of the case exercise his discretion to suspend the automatic discharge, and if so, for how long.  In so doing, I ask myself to bear in mind paragraphs 17.16 and 17.24 of the Law Reform Commission’s Report on Bankruptcy (1995)

“17.16 The introduction of automatic discharge should, with the objection system, have two-folded effect. Firstly, bankrupts should have a greater incentive than at present to co-operate with the trustee, as failure to co-operate could result in the trustee objecting to a bankrupt’s discharge. Secondly, the rehabilitation of a bankrupt from bankruptcy would be assured, subject to rehabilitation being delayed as a consequence of a bankrupt’s own failings.”

“17.24 The introduction of automatic discharge would shift the emphasis from discharge being a privilege to its being a right. This right, however, must be set alongside a bankrupt’s duty to co-operate with the trustee in the administration of the estate. If he fails to co-operate with the trustee after bankruptcy, or if a bankrupt’s conduct before bankruptcy was unsatisfactory, he should not be automatically discharged.”

Further, useful guidance can be located in comment of Mrs. Justice Le Pichon (as she then was) in two authorities, viz: Re Hui Hing Kwok [1999] 3 HKC 683 and Re Li Tak Kong [2000] 3 HKC 360

“Rehabilitation is the sense of enabling the bankrupt to resume a normal life in society is a key, if not the key consideration. It should only be delayed by bankrupt’s own failings ……”

“In exercising its discretion, the court would have regard to the scope and purposes of the statutory provisions conferring the discretion, the interests of commercial morality and the public interest. Before a discharge was granted or permitted to occur, there should be an adequate investigation of a bankrupt’s conduct and affairs, and such investigation should generally be concluded. It was incumbent on the bankrupt to make a full and frank disclosure and to proffer all pertinent information regarding his assets and financial dealings to the Official Receiver. In seeking a discharge, the bankrupt had to show that he had taken all reasonable steps to ensure that his estate was available for distribution among his creditors and that the trustee was appraised of all relevant information; it was not good enough for him to adopt a purely passive or reactive role. Where there had been concealment or lack of co-operation on the part of the bankrupt, it would not be unfair to delay his discharge.”

11.  Ms. Lam left the period of suspension in my hands. However, she agreed that, based on the grounds having been relied upon in the present case, the conduct of the Bankrupt was not very serious. I concurred and will therefore suspend the automatic discharge for a period of one year only.

Costs

12.  Ms. Lam also told me that she was not asking for any costs against the Bankrupt and I therefore make no order as to costs.

Summary

13.  To sum up, I have made the following orders.

(a)The automatic discharge of the Bankrupt shall be suspended for 1 year and he shall not be discharged until 25 June 2012.

(b)There is no order as to costs.