RE LI YE

HCB 5271/2017

[2023] HKCFI 3281

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 5271 OF 2017

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J U D G M E N T

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A. INTRODUCTION

1.  There are two summonses before me:

(1) a summons (“the NCO Summons”) taken out by the trustees in bankruptcy (“TIB”) on 27 April 2018 for an order under s.30AB of the Bankruptcy Ordinance (“BO”) (the
non-commencement order, “the NCO”) that the relevant period for the bankrupt (“Li”) is treated as not commencing to run on the date of the bankruptcy order, ie 1 November 2017 (“the NCO Application”);

(2) a summons (“the SO Summons”) taken out by the TIC on 7 October 2021 for an order under s.30A of the BO (the suspension order, “the SO”) that the relevant period shall cease to run for a period of 4 years or such other period as the court sees fit (“the SO Application”).

2.  TIB are primarily seeking the NCO. In the event that the NCO Application is unsuccessful, TIC would seek the SO as an alternative.

3.  In the hearing before me, TIB are represented by Mr Kurt Ng, and Li is represented by Mr Ian Chau.

B. BACKGROUND

4.  This case has a long history.

5.  On 1 November 2017, the bankruptcy order was made against Li. Li was absent in that hearing. The bankruptcy petition was previously served on Li by substituted service. The bankruptcy order was based upon the debts as stated in a statutory demand, the amount of which being over HKD 22.8 million and USD 235,000.

6.  On 2 February 2018, TIB were appointed at the general meeting of creditors of Li.

7.  On 7 March 2018, TIB sent an initial letter to Li at 8 known addresses in Hong Kong by ordinary post and requested Li to attend the initial interview scheduled at the TIB’s office on 16 March 2018 at 3:00 pm and to provide TIB with information and documents concerning the affairs, dealings and properties of Li as set out in that letter. On the same day, TIB also made calls to Li to try to confirm the initial interview, but Li could not be reached.

8.  Six out of 8 letters were returned. On 22 March 2018, TIB sent out a follow up letter.

9.  On 20 April 2018, TIB sent another letter to Li at an address in Canada (“the Hanna Road Property”, a property registered under the joint names of Li and her husband Mr Yuen (“Yuen”)), requesting Li to provide TIB with the requested information and documents and contact TIB for appointment of initial interview. According to Li, she received this letter on 23 April 2018, and came to know the bankruptcy order against her in this case for the first time after seeing the letter.

10.  Li claimed that since 2014, she and her husband had been in separation. At all material times, Li was living in Canada.

11.  On 27 April 2018, TIB took out the NCO Summons.

12.  On 5 June 2018, Li made an application for an order to annul the bankruptcy order (“the Annulment Application”).

13.  On 11 June 2018, G Lam J (as he then was) made an order that the NCO Summons be adjourned sine die, with liberty to restore.

14.  On 4 July, 24 July and 24 August 2018, TIB sent letters to Li at the Hanna Road Property. Li’s case is that although she was living in the Hanna Road Property, she did not receive the letters dated 4 July and 24 August 2018. The first time that she became aware of these 2 letters was at the end of 2018, upon being informed by her solicitors the existence of these two letters. As to the letter dated 24 July 2018, that letter was returned and marked unclaimed.

15.  In December 2019, TIC made an application in the Canadian Court for an order recognizing the bankruptcy order made in Hong Kong (“the Recognition Order”).

16.  On 29 April 2020, the Annulment Application was dismissed by Master Lai (“the Dismissal Judgment”). On 25 May 2020, Li first contacted TIB to seek permission to allow her to lodge an appeal against the Dismissal Judgment. On 26 May 2020, Li filed a notice of appeal against the Dismissal Judgment (CACV 136/2020). On 28 May 2020, Li provided TIB her contact person in Hong Kong.

17.  On 16 June 2020, TIB wrote to Li chasing for the information requested in the 07.03.2018 letter.

18.  On 21 July 2020, Li provided an unaffirmed statement of affairs (“the 21.07.2020 SOA”) to TIB.

19.  On 3 September 2020, TIB requested Li to provide bank statements for her accounts in HSBC Canada or authorizing TIB to obtain the same, and to provide evidence of payment and related documents of a mortgage charge registered on the Hanna Road Property. On 24 September 2020, TIB was told that Li was reluctant to provide the requested bank statements in HSBC Canada due to privacy reasons.

20.  On 13 November 2020, TIB obtained the Recognition Order in Canada. On 23 November 2020, Li lodged an appeal against the Recognition Order, which resulted in the stay of the Recognition Order.

21.  From 24 November 2020, there were some negotiations between TIB and Li to explore the chance of having a settlement.

22.  On 21 May, 9 July and 29 July 2021, TIB sent letters to Li, asking Li to provide information and documents requested under the 07.03.2018 letter.

23.  On 22 August 2021, Li provided some documents in relation to the acquisition and disposal of a property in Canada, ie the Roberta Drive Property. On 30 August 2021, Li provided 3 annual statements from August 2018 to August 2021 and a Transfer Ledger Statement in relation to purchase of Hanna Road Property.

24.  On 6 September 2021, Li provided an affirmed statement of affairs (“the 06.09.2021 SOA”) to TIB. However, in this SOA, Li did not disclose the details concerning the Hanna Road Property, the Roberta Drive Property and her bank account in HSBC Canada requested by TIB.

25.  In respect of the Hanna Road Property, on 10 November 2017 (ie after the making of the bankruptcy order), a charge was created in favour of Li Ying for CAD1,350,000 (“Li Ying Charge”). The same was subsequently discharged and a charge was created in favour of Yuan Yilin for CAD1,100,000 on 4 June 2018 (“Yuan Yilin Charge”). The Hanna Road Property was subsequently sold by way of mortgage foreclosure on 1 May 2021, with surplus of CAD13,384.18.

26.  On 7 October 2021, TIB took out the SO Summons.

27.  On 20 October and 16 November 2021, TIB asked Li to provide an authorization to authorize TIB to obtain bank statements from HSBC Canada.

28.  On 27 October 2021, by consent, Master Lai made an interim order that the relevant period under s.30A(1) and s.30A(2)(a) of the BO shall cease to run until the determination of the SO Summons.[1]

29.  On 25 November 2021, Li replied that no authorization would be given as it would infringe her privacy. In the same letter, Li also claimed that Yuan Yilin was informed of Li’s bankruptcy, but Yuan did not care about it. Li provided statements for 4 bank accounts but not all the bank accounts in HSBC Canada known to TIB. On 21 December 2021, TIB issued a follow-up letter.

30.  In Li’s 3^rd Affirmation dated 4 January 2022, Li produced an email to her solicitor dated 24 January 2019, in which a statement of affairs was enclosed (“the Email SOA”).

31.  On 20 April 2022, Li said that the money in 3 bank accounts in HSBC Canada not disclosed to TIB belonged to Yuen’s business partner, a Mr Kwong (“Kwong”). Li produced a declaration signed by Yuen dated 15 March 2022 (“Yuen’s Declaration”), in which Yuen said that Kwong was not willing to disclose his personal information. Kwong would take action against Yuen, and Kwong’s action would put Yuen’s personal safety in danger. Yuen therefore ordered Li not to disclose information in these accounts. The contents of Yuen’s Declaration are as follows:

“本人袁銳興在加拿大HSBC銀行開設了與李葉聯名戶口 ….. 由於此戶口是給我一個以前大陸上生意朋友鄺先生使用，我不知道怎樣使用，經鄺先生通知，他不願意公開他個人資料，他會對我採取行動，會對我人身有危險行為。

為此我命令李葉不可以列印上述戶口資料，所有資料不能給予他人及不授權他人取得此聯名戶口資料。”

32.  On 27 April 2022, Master Lai ordered that the SO Summons be adjourned sine die with liberty to restore. The learned master indicated that the determination of the SO Summons would depend upon the outcome of Li’s appeal against the Dismissal Judgment and the outcome of the NCO Summons.

33.  On 17 August 2022, Li’s appeal against the Dismissal Judgment in CACV 136/2020 was dismissed by consent.

34.  On 24 August 2022, TIB requested Li to provide outstanding and further information and documents, and to attend the initial interview on 7 September 2022.

35.  On 5 September 2022, Li claimed that she had some mental problem and had difficulties in attending the initial interview. Li has not provided medical proof in support of her claim.

36.  On 22 February 2023, Li provided some answers to TIB. On 18 May 2023, TIB replied and said that Li’s answers were inadequate and unsatisfactory, and requested for further documents and information.

37.  On 23 July 2023, Li provided some further information to TIB.

38.  On 15 August 2023, TIB requested Li to attend the initial interview at TIB’s office in Hong Kong on one of the dates proposed by the TIB. TIB also said if Li would not be available to attend the initial interview in person, Li should indicate the same in her reply so that TIB could make necessary arrangements.

39.  On 16 August 2023, TIB wrote to Li again, making some changes to the dates proposed in the letter dated 15 August 2023. TIB repeated that if Li would not be available to attend the initial interview in person, Li should say so in her reply, so that TIB could make necessary arrangements.

40.  On 5 October 2023, Li replied and said that she was sick. She would be available to attend the initial interview via Zoom at the timeslots set out in her letter. On 9 October 2023, TIB replied and agreed to have the initial interview on 11 October 2023 via Zoom.

41.  On 11 October 2023, a video conference (“the 11.10.2023 VC”) between TIB and Li (accompanied by her solicitor) was held. Before the hearing on 6 December 2023, both TIB and Li regarded the 11.10.2023 VC as the “initial interview” under s.30AB of the BO. TIB claimed that the outstanding information and documents requested by them were not provided by Li during that “initial interview”.

42.  There was correspondence passing between TIB and Li after the 11.10.2023 VC. On 27 October 2023, Li provided an authorization letter signed by her (“the Authorization Letter”) to TIB, in which she authorized the mortgagees to release the surplus of the sale proceeds obtained after the realization of the Hanna Road Property to TIB.

C． NCO APPLICATION

43.  BO, ss.30AB and 30AC provide:

“30AB. Non-commencement of relevant period: trustee’s application

(1) The trustee may apply to the court for a non-commencement order against a bankrupt if —

(a) the trustee has required the bankrupt to—

(i) attend an initial interview on a day appointed by the trustee for the administration of the bankrupt’s estate; and

(ii) provide the trustee at the initial interview with information concerning the bankrupt’s affairs, dealings and property;

(b) the bankrupt—

(i) has failed to attend the initial interview; or

(ii) has attended the initial interview, but failed to provide the trustee at the initial interview with all of the information concerning the bankrupt’s affairs, dealings and property as reasonably required by the trustee; and

(c) the administration of the bankrupt’s estate was prejudiced by the matter referred to in paragraph (b)(i) or (ii).

……

(6) To avoid doubt, a bankrupt has failed to attend an initial interview under subsection (1)(b)(i) if the bankrupt is not physically present before the trustee at the initial interview.

30AC. Non-commencement of relevant period: court order and trustee’s notice

(1) On an application made by the trustee under section 30AB(1), the court may approve the application and make a non-commencement order against the bankrupt if it —

(a) is satisfied by the trustee as to the matters mentioned in section 30AB(1)(a), (b) and (c); and

(b) is not satisfied by the bankrupt that there is sufficient cause for the order not to be made.

……”

44.  It is clear that in order to have a NCO, either s.30AB(1)(b)(i) or s.30AB(1)(b)(ii) must be established. At the beginning of the hearing on 6 December 2023, I sought counsel’s assistance on a preliminary issue, ie whether the 11.10.2023 VC is the “initial interview” in s.30AB.

45.  It is also clear that after the 11.10 2023 VC and until I raised the aforesaid preliminary issue in the hearing on 6 December 2023, TIB were seeking the NCO by relying upon s.30AB(1)(b)(ii) only. TIB treated the 11.10.2023 VC as the initial interview in s.30AB and hence did not rely upon s.30AB(1)(b)(i).

46.  Having considered the submissions made by Mr Ng and Mr Chau respectively, in my view, the 11.10.2023 VC cannot be the “initial interview” in s.30AB. For the purpose of that section, the “initial interview” must be an actual physical meeting, in which the bankrupt is present before the trustee. A video conference cannot be the “initial interview” in that section.

47.  The aforesaid conclusion is supported by the plain and natural meaning of both the English and the Chinese texts of s.30AB(6). The English version of that subsection has been set out in the above. The Chinese version of the subsection is as follows:

“(6) 為免生疑問，破產人如沒有在初次會面中，親身面晤受託人，即屬第(1)(b)(i)款所指沒有出席初次會面。” (underline supplied)

48.  The aforesaid conclusion is also supported by the legislative history of s.30AB(6). The non-commencement regime was introduced by the Bankruptcy (Amendment) Bill 2015. At the beginning, the proposed s.30AB in the bill did not contain subsection (6). Subsection (6) was added to s.30AB at the committee stage by an amendment moved by the administration. The reasons for adding subsection (6) have been recorded in the Report of the Bills Committee. It is pertinent to read the following paragraphs in the Report:

“14. In view that the proposed new arrangements are intended to target a Bankrupt’s failure to attend a “face to face” interview …… the Hong Kong Bar Association (“HKBA”) has requested the Administration to consider defining the term “initial interview” to (i) make it clear if an "initial interview" could be conducted via video/web conferencing ……

……

16. To address the concern of the Bills Committee and HKBA that thepresent drafting of the proposed section 30AB(1)(a) may not have expressly excluded the conduct of the “initial interview” by way of video/web conference, the Administration will introduce a Committee Stage amendment (“CSA”) to add a new subsection under the proposed section 30AB to clarify that if the bankrupt is not physically present before the trustee at the initial interview, he/she has failed to attend that interview.

17. The Bills Committee has followed up on the concern raised by the Legal Adviser to the Bills Committee about whether the requirement of the bankrupt's physical presence at the “initial interview”, (i.e. a bankrupt who is overseas would be required to return to Hong Kong to attend the interview) would impose an unreasonable restraint on the bankrupt's constitutional freedom to travel and be subject to challenge, in view of the CFA's ruling on 5 November 2015 in Official Receiver v Zhi Charles formerly known as Chang Hyun Chi (FACV 8/2015) that section 30A(10)(a) is unconstitutional. The Administration has advised that the main issue of contention over the existing abscondee regime was the “automatic” element of the suspension of the “relevant period”. The proposed new arrangements are to replace the abscondee regime to, among other things, tackle the issue and address the constitutionality issues which have arisen from the present abscondee regime. Unlike the existing abscondee regime which has an automatic suspension mechanism, the proposed new arrangements will provide the court with discretion to decide whether to make a non-commencement order after taking into account all relevant facts and factors.”

49.  Mr Ng submits that the “initial interview” in s.30AB can be a physical meeting or a video conference. With respect, in the light of the plain and natural meaning of s.30AB(6) and the clear legislative intent as shown in the legislative history as set out in the above, this submission must be refused.

50.  Mr Ng also submits that s.30AB(6) would only affect s.30AB(1)(b)(i) but would not affect s.30AB(1)(b)(ii). By this submission, Mr Ng is arguing that although the “initial interview” in s.30AB(1)(b)(i) must be a physical meeting, there is no such restriction in s.30AB(1)(b)(ii). In s.30AB(1)(b)(ii), the “initial interview” can be a physical meeting or a video conference. With respect, I do not accept this submission.

(1) In view of the legislative intent as shown in the legislative history, there is no reason to adopt the interpretation as suggested by Mr Ng. In my view, the phrase “initial interview” in all the subsections of s.30AB should bear the same meaning, ie the initial interview must be an actual physical meeting, in which the bankrupt is present before the trustee.

(2) The flaw in Mr Ng’s submission is that following his submission, Li would fall within s.30AB(1)(b)(i), for the 11.10.2023 VC is not a physical meeting. While Li is within the s.30AB(1)(b)(i), Li cannot be within s.30AB(1)(b)(ii).

51.  Mr Ng further submits that if the “initial interview” in both s.30AB(1)(b)(i) and s.30AB(1)(b)(ii) must be an actual physical meeting, TIB would seek a NCO by relying upon s.30AB(1)(b)(i). Mr Ng submits that while the 11.10.2023 VC is not the “initial interview” in s.30AB, Li would have failed to attend the initial interview, and TIB would be entitled to rely upon s.30AB(1)(b)(i) to seek a NCO.

52.  With respect, in the circumstances of this case, I am of the view that TIB should not be allowed to run a case based upon s.30AB(1)(b)(i). I disagree. As said before, after the 11.10.2023 VC, TIB regarded that Li had attended the initial interview but failed to provide the information requested at the initial interview, and TIC were seeking a NCO by only relying upon s.30AB(1)(b)(ii). In my view, TIC are not entitled to suddenly and fundamentally change their case in the hearing before me to say that Li has failed to attend the initial interview, and to rely upon s.30AB(1)(b)(i) to seek a NCO. This would be grossly unfair to Li. If prior notice is given by TIB to Li that TIB are going to rely upon s.30AB(1)(b)(i) in the substantive hearing of the NCO Summons, Li would have had the opportunity to adduce evidence to explain why she was unable to come back to Hong Kong from Canada to attend a physical meeting (bearing in mind that on 5 October 2023, Li indicated in the letter that she was sick), and why a NCO should not be made against her under s.30AB(1)(b)(i) in the circumstances. Without giving any prior notice to Li that s.30AB(1)(b)(i) would be relied upon, Li has been deprived of the said opportunity. That being the case, TIB should not be allowed to suddenly change their case and rely upon s.30AB(1)(b)(i) in the substantive hearing of the NCO Summons.

53.  In my judgment, TIB’s reliance on s.30AB(1)(b)(ii) is misconceived, for the 11.10.2023 VC cannot be the “initial interview” for the purpose of s.30AB. TIB is not allowed to suddenly shift the basis of their application to s.30AB(1)(b)(i) in the circumstances of this case. Accordingly, the NCO Application must be refused.

D. SO APPLICATION

D1. Grounds of the application

54.  BO, s.30A provides:

“30A. Discharge from bankruptcy

(1) Subject to this section and section 30AC, a bankrupt is discharged from bankruptcy by the expiration of the relevant period.

(2) The relevant period referred to in subsection (1) is as follows—

(a) where a person has not previously been adjudged bankrupt, the period of 4 years;

(b) where a person has been previously adjudged bankrupt, the period of 5 years,

beginning with the commencement of the bankruptcy.

(3) Where the court is satisfied on the application of the trustee or one of the bankrupt’s creditors that a valid objection based on one or more of the grounds set out in subsection (4) has been made, the court may order that the relevant period shall cease to run for such period, not exceeding, in the case of a person who —

(a) has not previously been adjudged bankrupt, 4 years; or

(b) has previously been adjudged bankrupt, 3 years,

as may be specified in the order.

(4) Subject to subsection (4A), the grounds on which an objection can be made to the discharge of a bankrupt under this section are as follows —

(a) in the case of a discharge to which subsection (2)(a) applies, that the bankrupt is likely within 5 years of the commencement of the bankruptcy to be able to make a significant contribution to his estate;

(b) that the discharge of the bankrupt would prejudice the administration of his estate;

(c) that the bankrupt has failed to co-operate in the administration of his estate;

(d) that the conduct of the bankrupt, either in respect of the period before or the period after the commencement of the bankruptcy, has been unsatisfactory;

(e) without limiting paragraph (c) or (d), that the bankrupt has departed from Hong Kong and has failed forthwith to return to Hong Kong following a request to do so from the Official Receiver or the trustee;

(f) that the bankrupt has continued to trade after knowing himself to be insolvent;

(g) that the bankrupt has committed an offence under section 129 or any of sections 131 to 136;

(h) that the bankrupt has failed to prepare an annual report of his earnings and acquisitions for the trustee.

(4A) A matter referred to in section 30AB(1)(b)(i) or (ii) does not form the basis for the grounds set out in subsection (4) if—

(a) the trustee has applied under section 30AB to the court for a non-commencement order against the bankrupt; and

(b) the court has approved or dismissed the application.

……”

55.  In the SO Summons, the grounds relied upon by TIB in support of the SO Application are the grounds in s.30A(4)(c), (d) and (g) (“Ground (c)”, “Ground (d)” and “Ground (g)” respectively). However, in Mr Ng’s oral submissions, Mr Ng has said that TIB are also relying upon s.30A(4)(b) (“Ground (b)”). I asked Mr Ng whether TIB would make an application to amend the SO Summons. Mr Ng said that TIB did not intend to do so. In the absence of any application to amend the SO Summons, I would not allow TIB to rely upon any ground which has not been set out in the SO Summons.

56.  Accordingly, the issue before the court is whether TIB is able to make out a case for a suspension order by relying upon Ground (c), Ground (d) and/or Ground (g). Mr Ng has put forward 8 points in support of TIB’s case. Before going to discuss these 8 points, there is no dispute that:

(1) By reason of s.30A(4A), the 11.10.2023 VC and the alleged failure of Li to provide all the information requested by TIB in that meeting cannot be evidence in support of the SO Application.

(2) The affirmations filed by TIB in support of the NCO Application are not evidence in the SO Application. For the purpose of the SO Application, only the 4^th and the 7^th Affirmations of Osman Mohammed Arab dated 7 October 2021 and 1 April 2022 respectively (“Arab 4^th” and “Arab 7^th” ) are relevant.

(3) Notwithstanding the aforesaid, the correspondence passing between the parties (including the enclosures) after 1 April 2022 can be considered for the purpose of the SO Application.

57.  It is well established that:

(1) As to the duty to cooperate in the administration of the bankrupt’s estate:

(a) It is incumbent on the bankrupt to make a full and frank disclosure and to proffer all the pertinent information regarding his or her assets and financial dealings to the trustee. It is not good enough for a bankrupt to adopt a purely passive or reactive role, responding when asked in the expectation that with any luck, pertinent matters might be overlooked.[2]

(b) A bankrupt has to pro-actively reveal the complete picture of his financial affairs to the trustee, and where pieces do not appear to fit, in that his or her conduct or transactions appear to be inconsistent, it is for him or her to explain the inconsistencies and convince the trustee of the true state of affairs.[3]

(2) As to unsatisfactory conduct, the question of whether the conduct is unsatisfactory is whether the conduct is one which the society is prepared to condone without expressing disapproval. This question is to be answered by the reasonable man’s test.[4]

58.  I would now turn to the 8 points put forward by Mr Ng.

D2.1 Point 1 – Failure to provide some bank authorisations

59.  TIB has repeatedly asked Li to provide some authorisations to them so that TIB could have access to the information of some accounts under Li’s name. Those requests were made in the 07.03.2018 letter and in the 03.09.2020 letter. The same request was also made by TIB in their letter dated 20 October 2021. However, Li refused to provide the same by relying upon some unspecified privacy reason on 25 November 2021. Li repeated the refusal on 20 April 2022 by relying upon the alleged threat from Kwong. In this hearing, Li is relying upon Yuen’s Declaration in support of her case.

60.  In my view, Li’s refusal to provide the bank authorisations requested by TIB is clearly a failure to cooperate in the administration of her estate, and is clearly an unsatisfactory conduct.

61.  Mr Chau for Li submits that as a matter or reality, Li could not ignore Kwong’s threat against Yuen as set out in Yuen’s Declaration. Although Li and Yuen had separated, it would be natural for Li to be concerned with the safety of another person. Further, Kwong was a dangerous man, and Li had reason to worry about herself and her family in Canada. In Mr Chau’s submissions, the non-production of the bank authorisations should not justify any period of suspension, as it is mitigated by Kwong’s threat.

62.  With respect, I am unable to agree. The alleged threat from Kwong is a mere allegation from Yuen and/or Li without the support of any corroborating evidence. Further, even if the alleged threat is true, Li has not explained why she could not report the matter to the law enforcement authority in Canada and seek protection from the authority. In my view, it would be wrong in principle to allow Li to rely upon some alleged unlawful acts as a reasonable excuse exonerating her from complying with the requirements in the BO and performing her statutory duties thereunder.

63.  Point 1 is substantiated.

D2.2 Point 2 – Delay in providing SOA and inconsistent answers in SOA

64.  Mr Ng submits that in the 21.07.2020 SOA, the 06.09.2021 SOA, and the Email SOA, Li has provided inconsistent information concerning her assets in HKD and CAD, and her immovable properties. Mr Ng further submits that there has been delay in providing the SOAs. The 21.07.2020 SOA was provided nearly 3 years after the making of the bankruptcy order. The 06.09.2021 SOA was provided close to 4 years from the bankruptcy order.

65.  Mr Chau submits that:

(1) The fact that Li did not mention her two immovable properties in Canada in the 06.09.2021 SOA is a mere clerical error. Li has never denied that the two Canadian properties (ie the Hanna Road Property and the Roberta Property) were jointly acquired by Yuen and herself.

(2) As to the differences in the HKD and CAD assets in the SOAs, TIB did not enquire specifically about such differences, whether in correspondence or in previous written submissions. This suggests that TIB did not consider such differences to be important. Further, prima facie, there is nothing suspicious about such differences. The circumstances were that Li’s Canadian bank account was frozen, and various sums were trust monies. The differences may simply be whether or not trust monies were included in a SOA.

(3) As to the delay in providing the SOAs, Li was focusing on the Annulment Application from June 2018 to April 2020. Further, from November 2020 onwards, there have been some settlement negotiations between TIB and Li. All these would need to be taken into account in relation to the delay.

66.  I am of the following view:

(1) I note that the Hanna Road Property and the Roberta Property have been mentioned in the 21.07.2020 SOA. In the circumstances, I accept that the non-mentioning of these two properties in the 06.09.2021 SOA is a mere clerical error.

(2) As to the differences in the HKD and CAD assets in the SOAs, given that Li has to proactively reveal the complete picture to TIB, I do not regard Mr Chau’s submission as a satisfactory answer to TIB’s complaint. Further, as to whether the differences are due to whether or not trust monies were included in a SOA, Li has not offered any evidence on this matter.

(3) Subject to subparagraph (4) below, the delay in providing the SOAs raised by TIB is a legitimate complaint. As submitted by Mr Ng, there has never been any stay of the bankruptcy order. The fact that Li was pursuing the Annulment Application, and the fact that there have been some negotiation discussion, would not obviate the necessity of Li performing her obligations under bankruptcy in any way.

(4) Li claimed that she first became aware of the fact that a bankrupt order was made by this court against her on 23 April 2018. Based upon the evidence before this court, there is no evidence contradicting this. Accordingly, in considering whether there has been any delay in performing the duties under bankruptcy, the time should start to run on 23 April 2018, not from the date of the bankruptcy order, ie 1 November 2017.

67.  In my judgment, point 2 is partially substantiated.

D2.3 Point 3 – Inconsistent answers concerning CAD407,606.65 (“the Sum”)

68.  Mr Ng submits that Li has given inconsistent answers concerning the Sum.

(1) In Li’s solicitors’ letter to TIB dated 22 February 2023, Li said that she “transferred [the Sum] to persons appointed by [Kwong].”

(2) In Li’s solicitors’ letter to TIB dated 20 July 2023, Li said that she “did not arrange the transaction”, and she “does not herself give instructions to the bank”.

69.  Mr Chau submits that this issue is outside the scope of Arab 4^th and Arab 7^th, and TIB are not entitled to rely upon the same. In any event, there is no inconsistency in the answers given by Li. As I can understand, Mr Chau’s submission is that authorising someone to do the transfer would be different from Li doing the transfer herself personally.

70.  In my view, Mr Ng is entitled to rely upon the two letters set out in the above to make his submission. As mentioned in the above, the parties can rely upon the correspondence passing between the parties after 1 April 2022 in support of their respective case. On the face of these two letters, it is plain that the answers given by Li concerning the Sum are inconsistent. With respect, I am of the view that Mr Chau has not provided a satisfactory answer explaining the inconsistency.

71.  Point 3 is substantiated.

D2.4.    Point 4 – Transfer of money after having knowledge of the bankruptcy order

72.  Mr Ng is relying upon the following in support of this point:

(1) transferring the Sum (which was the balance in a bank account as of 30 July 2018) to persons allegedly appointed by Kwong;

(2) redeeming some equity funds and transferring CAD388,826 allegedly to Kwong on 20 August 2018, and transferring CAD91,657.56 and CAD28,855 allegedly to Kwong on 22 August 2018.

73.  Mr Chau submits that these matters are outside the scope of Arab 4^th and Arab 7^th, and TIB are not entitled to rely upon the same. Alternatively, these sums are trust money belonging to Kwong and not part of the assets in the bankrupt’s estate. Li has not transferred assets in the bankrupt’s estate to someone else.

74.  With respect, I am unable to accept Mr Chau’s submissions. Mr Ng is entitled to rely upon these matters, for these matters have been set out in the correspondence passing between the parties. Whether these sums are part of the bankrupt’s estate should be investigated by TIB. If Kwong has any claim to these sums, the claim should be handled by TIB. By giving away these sums without giving any prior notice to TIB, Li has completely taken the matter out of the hands of TIB. In doing so, Li is not cooperative in the administration of the bankrupt’s estate, and her conduct is unsatisfactory.

75.  Point 4 is substantiated.

D2.5 Points 5, 6 and 7 – Matters concerning Li Ying Charge and Yuan Yilin Charge

76.  Mr Ng has made the following points in support of the SO Application:

(1) Creation of the Li Ying Charge and the Yuan Yilin Charge without informing the chargees of obtaining credit (Point 5)

(2) Failure to explain the inconsistencies on matters concerning Li Ying Charge (Point 6)

(3) Creation of Yuan Yilin Charge after Li having knowledge of the bankruptcy order, and thereby reducing the bankrupt’s estate (Point 7)

77.  TIB’s case is as follows:

(1) Both Li Ying Charge and Yuan Yilin Charge were executed by Li after the bankruptcy order was made. It is indisputable that Yuan Yilin Charge was executed by Li after Li knowing that the bankruptcy order had been made against her. Li has never sought permission from TIB before executing the Yuan Yilin Charge.

(2) Li claimed that she did not obtain credit by way of Li Ying Charge or Yuan Yilin Charge. However, the documentary evidence shows that in relation to Yuan Yilin Charge, Li was stated to be one of the borrowers. Li has not been telling the truth.

(3) On 25 November 2021, Li through her solicitors informed TIB that the Li Ying Charge was created as a result of intimidation and duress (“Alleged Intimidation”) and the Yuan Yilin Charge was in fact the sale of Li Ying Charge to Yuan Yilin. However, Li did not reveal the Alleged Intimidation to TIB at an earlier time, so that TIB would have the opportunity to consider to apply for setting aside the charges before the sale of the Hanna Road Property on 1 May 2021.

(4) By creating the Yuan Yilin Charge after having knowledge of the bankruptcy order, Li was knowingly reducing the assets of the bankrupt’s estate without TIB’s approval.

78.  Li’s case is as follows:

(1) Yuen informed Li that 李英 (“LY”) was the representative of 羅偉國 (“Law”) and 王向東 (“Wong”) in Canada in relation to debt recovery. Law and Wong were creditors of Yuen and LY in relation to Yuen’s business. LY and his triad friends, in order to press Li to repay the money owed by Yuen to Law and Wong, went to Li’s house in Canada and intimidated Li and her three children criminally (ie the Alleged Intimidation). As a result of the Alleged Intimidation, a charge was created on 10 November 2017 in favour of LY (ie the Li Ying Charge) for and on behalf of Law and Wong. LY, Law and Wong have no relationship by blood with Li, and are not associates of Li under s.51B of the BO.

(2) In relation to the Yuan Yilin Charge, it was done because of the sale of the Li Ying Charge by LY to Yuan Yilin. It was only a transfer of mortgage between LY and Yuan Yilin. That was why the Li Ying Charge was discharged on 4 June 2018, the same date as the Yuan Yilin Charge. Yuan Yilin has no relationship by blood with Li and is not an associate of Li under s.51B of the BO.

(3) It should be understandable that, at the time of the creation of the Yuan Yilin Charge in 2018, Li did not immediately inform TIB. The Yuan Yilin Charge was essentially only a transfer of the mortgage from LY to Yuan Yilin. The Yuan Yilin Charge therefore only replaced the pre-existing charge.

(4) A co-owner of a property could co-sign a mortgage, which on its face may state that the co-owner is a borrower, even though the co-owner in fact did not receive any credit. Li in fact did not obtain credit by executing the Li Ying Charge and the Yuan Yilin Charge. The procurement of credit to another person by the bankrupt does not amount to “obtaining of credit”.[5]

(5) On 25 October 2023, Li signed the Authorization Letter, authorizing the release of the surplus obtained after the sale of the Hanna Road Property to TIB. Li has every intention to cooperate with TIB.

79.  As to point 5, Mr Ng’s point is that Li obtained credit under these charges but Li had not informed the chargee that she was an undischarged bankrupt before executing the charges. In my view, point 5 is partially substantiated.

(1) Based upon the evidence before me, Li did not know the bankruptcy order when she executed the Li Ying Charge. That being the case, in relation to the Li Ying Charge, TIB’s complaint is not substantiated.

(2) As to the Yuan Yilin Charge, based upon the documentary evidence, Li had obtained credit by reason of this charge.

(3) Li’s case is that she executed the Li Ying Charge involuntarily because of the Alleged Intimidation, and the debt secured by Li Ying Charge was Yuen’s debt. Subsequently, Li Ying Charge became Yuan Yilin Charge. She had told Yuan Yilin that she was an undischarged bankrupt, but Yuan Yiling did not care about this. In my view, Li’s case is not supported by any corroborating evidence, for example, an affirmation or a statement from Yuen. Further, the fact that Li did not reveal the Li Ying Charge and the Yuan Yiling Charge before the sale of the Hanna Road Property on 1 May 2021 is a matter which should be taken into account and is a matter casting doubt on Li’s case. Had Li really intended to cooperate with TIB, she would have had informed TIB the existence of the Li Ying Charge, the Yuan Yilin Charge and the Alleged Intimidation without delay, to enable TIB to take action to preserve the Hanna Road Property before the same was sold. I do not accept Li’s case.

(4) Once Li’s case is rejected, in relation to the Yuan Yilin Charge, I am of the view that TIB’s complaint is substantiated.

80.  As to point 6:

(1) Mr Ng submits that there are inconsistencies between the terms of the Li Ying Charge and the terms of the related loan agreement and the related guarantee. There is no explanation from Li regarding these inconsistencies.

(2) Mr Chau submits that TIB did not ask Li to explain these inconsistencies in the correspondence. In any event, Li was informed about the relevant circumstances by Yuen, and Li has no knowledge of the details concerning Li Ying Charge. It should not be held against her by reason of something which is not within her knowledge.

(3) As said in the above, I refuse to accept the Alleged Intimidation in Li’s case. Bearing in mind that Li has the duty to proactively reveal the complete picture to TIB, point 6 is substantiated.

81.  As to point 7,

(1) Mr Ng submits that after knowing the bankruptcy order, Li executed the Yuan Yilin Charge, thereby reducing the assets of the bankrupt’s estate.

(2) Mr Chau submits that Li did so because of the Alleged Intimidation. In any event, Li has executed the Authorization Letter and has agreed to the release of the surplus obtained after the sale of the Hanna Road Property to TIB.

(3) I have refused to accept the Alleged Intimidation in Li’s case. Li has no defence to this point. Point 7 is substantiated.

(4) The Authorization Letter came in at a very late stage. At most, that Authorization Letter could only be a mitigating factor in considering the length of the suspension period. It must also be borne in mind that the surplus is only a modest sum (comparing with the indebtedness owed by Li), ie CAD13,384.18.

D2.6 Point 8 – Delay and continued failure in providing information to TIB both before and after 11 October 2023

82.  Mr Ng submits that Li first began to provide information to TIB by the 21.07.2020 SOA. By that time, it was already nearly 3 years after the making of the bankruptcy order. Thereafter, Li provided some further information to TIB in bits and pieces slowly. Up to now, Li has not revealed the whole picture to TIB.

83.  Mr Chau submits that the matters not in Arab 4^th and Arab 7^th should not be considered. As to the delay raised by TIB, the fact that Li was focusing on the Annulment Application from June 2018 to April 2020 should be taken into account.

84.  As said in the above, the parties are entitled to rely upon the correspondence passing between the parties. In my view, the delay point raised by Mr Ng is sufficiently supported by the correspondence. Further, for the reasons given in the above, the Annulment Application cannot be a matter justifying Li’s delay in providing information to TIB.

85.  Point 8 is substantiated.

D3. Valid objection to discharge made out

86.  In my judgment, by reason of the points substantiated as set out in the above, TIB has made out a valid objection to the discharge of the bankruptcy based upon Ground (c) and Ground (d).

87.  Mr Ng has also raised Ground (g). Mr Ng submits that by reason of Point 5, Li has committed an offence under s.131(a) of the BO, and hence TIB may also rely upon Ground (g).

88.  The wording of Ground (g) is “that the bankrupt has committed an offence under section 129 or any of sections 131 to 136”. During the hearing, I asked Mr Ng whether Ground (g) could be invoked in the absence of any criminal conviction, bearing in mind that the wording in the statute is “has committed an offence”. Mr Ng referred me to Re Qin Jun[6], in which Master Lai has considered Poon J (as he then was)’s decision in Re Hau Po Man Stanley[7] and the Court of Appeal’s decision in Re Lay Man Yee Mary[8]. The learned master is of the view that by reason of the Court of Appeal’s decision in Re Lay Man Yee Mary, for the purpose of section 30A(4) of the BO, if a bankruptcy offence is involved, a conviction is not a prerequisite. The applicant would have no need to prove beyond reasonable doubt that the bankrupt has committed the specified bankruptcy offence(s), and would only need to prove the same on the balance of probabilities with compelling evidence.

89.  With great respect to the learned master, I am not sure whether the conclusion in Re Qin Jun as to s.30A(4)(g) is correct, given the clear wording “has committed an offence” in that subsection. I observe that in Re Lay Man Yee Mary, the issue before the Court of Appeal was s.30A(4)(d) of the BO, not s.30A(4)(g). I share the view expressed by Poon J (as he then was) in Re Hau Po Man Stanley that it is arguable that in order to invoke Ground (g), it is necessary to show a conviction of the bankrupt for an offence specified in s.30A(4)(g) in the first place.

90.  Having considered the matter, I would leave the aforesaid issue open and would not make a definite ruling on the issue in this judgment. In my view, by the points substantiated as set out in the above and by relying upon Ground (c) and Ground (d), TIB have already made out a case for a suspension order. Whether TIB can also rely upon Ground (g) would not make a difference in the outcome of the SO Application.

D4. Suspension period

91.  Li has not previously been adjudged bankrupt, and hence the maximum length of the suspension period is 4 years.[9] Under s.30A of the BO, the maximum bankrupt period is 8 years.[10]

92.  In considering the length of the suspension period, what has been said by Yuen JA in Re Lee Raymond Cho Min & Re Lee Priscilla Hwang[11] should be borne in mind:

“6. It is well-established that an application for suspension of discharge from bankruptcy should be considered in two stages:

(1) the court should first determine whether one or more of the grounds mentioned in s.30A(4) has been established; and if established,

(2) the court would then move on to consider whether or not, in the exercise of its discretion, a suspension of discharge should be ordered,

- having regard to all the circumstances of the case, including the nature of the acts complained of and the post-bankruptcy order conduct of the bankrupt, and

- bearing in mind the two main objectives of this part of the [Bankruptcy Ordinance]:

(a) the rehabilitation of the bankrupt by allowing him to resume a normal commercial life, as well as

(b)   the public interest in ensuring that the return of the bankrupt to the commercial world would not carry with it an unacceptable risk to persons who may be engaged in commercial relations with him, and in preserving commercial morality.”

93.  Mr Ng submits that the suspension period should be 4 years. Mr Chau submits that the appropriate suspension period should be a period of 2 years. Counsel have referred me to the following cases:

(1) In Re Leung Yat Tung[12], the Court of Appeal held that the maximum period of 4 years should be reserved for the most egregious cases. In that case, whilst the bankrupt was not cooperative in substance, he at least remained in communication with the Official Receiver, and the Official Receiver’s failure to adduce evidence as to how long it took him to find funding for the public examination of the bankrupt should also be taken into account. In view of all these, the Court of Appeal held that a suspension period of 3 years would be appropriate.

(2) In Re Qin Jun[13], the bankrupt failed to assist the trustees to obtain fund of some withholding tax in Canada, and was also uncooperative in dealing with some overseas properties. Further, the difficulties encountered by the trustees in their investigation into the affairs and assets of the bankrupt were largely (if not solely) caused by the bankrupt’s failure to cooperate with the trustees in failing and/or refusing to provide information and supporting documents in relation to his assets. Master Lai ordered a suspension period of 3 years.

(3) In Re Nanik Dayaram[14], the bankrupt arranged his affairs prior to bankruptcy in a way which would make the work of the trustees particularly difficult unless the bankrupt was upmost cooperative. But the bankrupt chose not to be cooperative. The bankrupt did not make full and frank disclosure to the trustees. The bankrupt chose to be passive and reactive. The bankrupt had also been convicted of a 9 counts of conspiracy to defraud in the High Court, which consisted of making and submitting false invoices and false bills of lading to banks, and obtaining loans as a result. The loans remained overdue and outstanding. There was no undue delay in the administration of the estate by the trustees. Taking all these into account, Master Lui ordered a suspension period of 3 years.

(4) In Re Tang Yiu Hong Eric[15], the bankrupt had failed to explain what had become of some HKD22 million withdrawn from his bank accounts. He had only given belated information, regarding which the Official Receiver would have difficulties in investigating the truthfulness of the information. Master Kwang (as he then was) ordered a suspension period of 2 years.

(5) In Re Cheng Chao Ming[16], the bankrupt ignored letters of request for the filing of annual reports. These were important information to determine of there were other assets available for collection. Master Hui ordered a suspension period of 2 years.

(6) In Re Yeung Kwok Lai[17], the bankrupt rendered no co-operation with the Official Receiver during the 4 years of his bankruptcy, had repeatedly failed to fulfil his positive duties, and lived a lifestyle totally incompatible with that of a bankrupt. Master Kwang ordered a suspension period of 4 years.

94.  Having considered the above, in my judgment, the suspension period in this case should be 3 years.

(1) This case cannot be said as one of the most egregious cases. Over the years, Li maintained communication with TIB and provided some information to TIB. Further, Li was willing to attend a meeting to provide further information to TIB, and the 11.10.2023 VC was taken place as a result. The fact that Li made the Annulment Application in Hong Kong and the fact that Li challenged the Recognition Order in Canada would not be taken as factors against Li, for Li was only exercising her legal rights in those matters. In these circumstances, it would not be appropriate to impose the maximum suspension period of 4 years.

(2) On the other hand, the findings set out in the above would warrant a suspension period. Among the points substantiated, in my view, the following matters are of particular importance:

(a) Point 1 - Up to now, the bank authorisations have not been provided to TIB, and TIB are still unable to obtain information concerning the relevant accounts.

(b) Point 4 – By transferring money out after having knowledge of the bankruptcy order, Li was knowingly acting in breach of the bankruptcy order.

(c) Points 5, 6 and 7 – By not revealing the Li Ying Charge and the Yuan Yilin Charge to TIB before the sale of the Hanna Road Property, Li has deprived TIB from having an opportunity to take action to preserve the Hanna Road Property. This is a serious matter. Li’s concealment in fact has facilitated the chargee to take away most of the sale proceeds. In my view, the existence of the Authorization Letter would not render this matter as not serious, given the sum of the remaining surplus is a modest sum.

(d) Point 8 – Up to now, Li has not revealed all her financial matters to TIB. The whole picture has still not been given to TIB.

(3) With all the aforesaid in mind, while this case is not in the most egregious category, this case is still a serious case. In my view, the situation in the present case is similar to Re Qin Jun. Taking all the circumstances into account and bearing the guiding principles as set out in Re Lee Raymond Cho Min & Re Lee Priscilla Hwang, I am of the view that the appropriate suspension period is a period of 3 years.

95.  I would order that the suspension period shall cease to run as from 27 October 2021 for a period of 3 years. For avoidance of doubt, the interim stay period in the Order of Master Lai dated 27 October 2021 and the interim stay period in the Order of Master Phoebe Man dated 12 November 2021 are covered by the suspension period in my order. In other words, the relevant period will end on 1 November 2024.

E. DISPOSITION

96.  For the reasons above, I dismiss the NCO Application but allow the SO Application. I make the suspension order as set out in [95] above.

97.  Costs should follow the event. Li succeeds in resisting the NCO Application, and TIB succeeds in the SO Application. In my view, the time spent in the NCO Application is similar to the time spent in the SO Application. In the circumstances, for the purpose of simplifying the matter, I am minded to take a broad-brush approach and make no order as to costs, so that each party shall would their or her own costs in these applications. On a nisi basis, there be no order as to costs in the NCO Application, and there be no order as to costs in the SO Application. In view of the coming Christmas and New Year holidays, I would allow the parties to have 21 days to consider whether it would be necessary to make an application for variation of the costs order nisi. Unless there is any application made by an inter-partes summons for an order to vary the costs order nisi within 21 days, the costs order nisi will become absolute without a further order.

98.  Lastly, it remains for me to thank counsel for the assistance rendered to the court.