RE LAM YIN SANG

HCB 3298/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY NO. 3298 OF 1999

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D E C I S I O N

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1. This is an application on the part of the Trustee of the Bankrupt’s estate, John Robert Lees of John Lees & Associates Limited (“the Trustee”) for an order suspending the running of the relevant period for the Bankrupt’s discharge pursuant to section 30A(3) of the Bankruptcy Ordinance, Cap 6.  The grounds as stated in the Amended Application are that (i) in the case of a discharge to which section 30A(2)(a) of the Bankruptcy Ordinance 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; (ii) that the discharge of the Bankrupt would prejudice the administration of his estate; (iii) that the Bankrupt has failed to co-operate in the administration of his estate; and (iv) 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.  The Bankrupt opposed the application.

2. The Bankruptcy Order was made by Master B. Kwan of the High Court against the Bankrupt on 18 January 2000.  Pursuant to section 30A(2)(a) of the said Ordinance, if no objection is raised, the Bankrupt would be discharged from bankruptcy on 18 January 2004.

3. In support of his application, the Trustee has filed 2 affidavits dated 16 January, 2004 and 7 April 2004 respectively.  The Bankrupt relied on his two affirmations dated 25 February, 2004 and 6 September, 2004 respectively.

The Grounds of Objection

4. Mr. Lai, Counsel for the Trustee, abandoned ground (i) and just relied on grounds (ii) to (iv) as stated hereinabove.

5. All documents necessary for the purpose of the hearing are included in the agreed bundle except 4 letters.  They are the letter from the solicitors for the Bankrupt to the Solicitors for the Trustee dated 14 April, 2004 (“the said letter”) annexing

(a)                a letter signed by the Bankrupt authorizing the Trustee to deal with the affairs of Y & L Inc;

(b)               a letter signed by the Bankrupt authorizing the Trustee to deal with affairs of Score Tech International Limited; and

(c)               a letter authorizing the Trustee to deal with Y S Lam Family Trust (undated and not signed).

6. Mr. Lai submitted that the letters mentioned above were not included in the bundle because the Trustee had not received the letters under (a) to (c).  Mr. Wong, SC, counsel for the Bankrupt, submitted that it was a matter for the Court to resolve and sought leave to file and rely on the 2nd affirmation of the Bankrupt.  The affirmation was to confirm the contents of the said letter.  I granted the Bankrupt’s application as the contents of the affirmation raised nothing new and would not cause any prejudice to the Trustee in presenting his case.

7. I shall deal with the grounds of objection in such sequence as presented by Mr. Lai.

Failure to Co-operate with the Trustee (ground (iii))

8. The key complaints of the Trustee can be found from his 2nd affidavit.

“   10.    The information provided to me by the Bankrupt during the past 4 years has been inadequate.

    11.    Following the examination on 11 October 2000, I wrote to the Bankrupt to ask for those information which the Bankrupt has failed to provide during the examination.  In my letter, I asked the Bankrupt to reply within 21 days.  After the 21 days, I received no reply and I therefore wrote to the Bankrupt again on 19 December 2000.  There are now produced and shown to me marked “JRL-22” true copies of my letters to the Bankrupt dated 29 November 2000 and 19 December 2000 respectively.

    12.    I received the Bankrupt’s reply on 29 December 2000 and most of the answers to my questions were either he could not remember or he did not know.  There is not produced and shown to me marked “JRL-23” a true copy of the Bankrupt’s reply dated 29 December 2000.

    13.    On 19 January 2001, I wrote to the Bankrupt to follow up on the information disclosed in his reply relating to the sale of his property in Nathan Road to his sister, Ms. Lam Chi Lan, and his interest in Y&L Inc. and Score Tech International Limited.  A true copy of my letter to the Bankrupt dated 19 January 2001 is now produced and shown to me marked “JRL-24”.  No reply to this letter was ever received by me.

    14.    On 16 February 2001, I wrote to the Bankrupt asking for information relating to The Y S Lam Family Trust.  I did not receive any reply and I wrote to the Bankrupt again on 5 March 2001.  True copies of my letters to the Bankrupt dated 16 February 2001 and 5 March 2001 respectively are now produced and shown to me marked “JRL-25”.  No reply to this letters was ever received by me.”

9. This ground in fact also relates to the second part of ground (iv), namely, unsatisfactory conduct after commencement of bankruptcy.

10. As to paragraph 11 of the 2nd Affirmation of the Trustee, Mr. Wong, SC, explained that the Trustee first wrote to the Bankrupt on 29 November, 2000 giving 21 days to the Bankrupt to reply.  The Trustee wrote another letter to the Bankrupt on 19 December, 2000 making further enquiry as to the tenancy matter at Kadoorie Avenue because of the information provided by the landlord dated 18 December, 2000.  Mr. Wong, SC, stressed that the Trustee did not regard the Bankrupt having failed to provide answer within the time stipulated as he wrote:

“Please also ensure that you provide me with the information requested in my last letter of 29 November 2000 before the stipulated time.”

11. The Bankrupt replied on 29 December 2000.  Having taken into account that the letter dated 29 November 2000 could not arrive at the Bankrupt’s hand until 2 to 3 days after the letter was posted (by registered post), the delay, in my judgment, was just a few days and should not be regarded as something worth complaining.

12. The Trustee in paragraph 12 of his 2nd affidavit complained that the Bankrupt failed to give satisfactory replies in his letter dated 29 December 2000 in that most of the answers were either “could not remember” or “did not know”.

13. I shall first of all deal with the answers concerning the property at Bella Vista Silverstrand.  The only “I don’t know” answer was made to Question 3.  But then the Bankrupt only meant he did not know if the Bank had conducted any valuation of the property.

14. As to the property at Hang Yue Court, the Bankrupt stated that he forgot the amount of mortgage loan, the total outstanding of the loan before the property was sold and how much was repaid to the Bank.  The property was sold in 1997 and there was at least a lapse of 3 years when the Bankrupt was asked to provide the information, I do not find it surprising that the Bankrupt did not recall the figures.

15. Regarding the property in Montreal, Canada, the Bankrupt could recall not much about the mortgage.  However, the property was bought in 1991 and sold in 1993, it is nothing but understandable that the Bankrupt failed to recollect such details as requested by the Trustee.

16. Only two questions were posed in relation to Y&L Inc.

“Y&L Inc.

You advised that a substantial part of the HK$39 million received from Hatton Enterprises Corp. (“Hatton”) by Y&L Inc. (funds originally from William E. Simon & Sons (Asia) Limited) were paid to HSBC for the settlement of loans.

1.                   Hatton’s books and records reveal that you, on behalf of Hatton, instructed William E. Simon & Sons (Asia) Limited (“Simon Asia”) to direct transfer the following amounts (out of the US$15 million borrowed by Simon Asia to Hatton) to Y&L Inc’s bank accounts:-

Bank	Account No.	HK$
HSBC	600-637636-001	23,807,447.99
Credit Lyonnais	01-515262-100-00-0	11,166,190.37
	HK$	34,973,638.36

Was the HK$23 million used to repay HSBC’s loan?  Please provide me with details of such loan (such as name of the borrower and the amount of the loan).  What happened with the HK$11 million transferred to Credit Lyonnais and the balance of HK$4 million (ie net of HK$39 million and HK$34.90 million)?

2.                   Did you receive any amount out of the HK$39 million?”

17. However, the Bankrupt gave the answer “I can’t remember” to both these questions.  Mr. Wong, SC, submitted that the reliance on this was misplaced.  It was because the Bankrupt had already explained to the Trustee in the examination that the majority of the loan was to pay back the loan advanced by the Hong Kong Bank and that he did not have the documents.  Further, Mr. Wong, SC, submitted that the Bankrupt had already provided an authorization letter to the Trustee to deal with the affairs of the trust.

18. It should be noted that the Solicitors for the Trustee made no reply to the said letter.  Mr. Lai argued that the Trustee owed no duty to make any respond.  Nonetheless, in my judgment, it is rather surprising that the Trustee did not make any reply denying having received the letters annexed thereto.  They were not ordinary letters but were letters authorizing the Trustee to deal with certain affairs which the Trustee was minded to look into as early as in the late December 2000.  It should also be noted that the Trustee was alleging that the Bankrupt failed to co-operate and the failure to provide these authorization letters were also subject matter of his complaints.

19. Since there was nothing before me to show that the Trustee had chased after the Bankrupt for further information and authorization letters after early 2001, on a balance, I found that the Bankrupt had sent in the letters to the Trustee as referred to in paragraph 5 hereinabove.  For this reason, I do not accept that the Trustee had made out his case in relation to failure to co-operate with the Trustee.

Unsatisfactory Conduct (ground (iv))

20. There were suggestions that the Bankrupt incurred a high level of debt whereas his assets amounted to a few thousand dollars in 2000.  It was submitted on behalf of the Bankrupt that the loans were incurred long time before the bankruptcy and they were proven and admitted by the Bankrupt.  Further, the bulk of them were incurred in the capacity as guarantor for various business transactions.

21. In the Trustee’s affidavit, references were made to the spending of the proceeds of the property at Nathan Road and of surrendering two insurance policies, namely, Prudential Insurance and Manulife.  However, Mr. Lai did not stress too much on them.  The Nathan Road was sold for HK$1.2 million and that was 4 years before the bankruptcy.  The selling of the shares of Manulife took place 2 years thereafter and the proceeds was just HK$100,000.  In the absence of specific evidence suggesting impropriety, I do not find that the Trustee can rely on these 2 incidents to support his application.

22. The Bankrupt received HK$500,000 after he surrendered the insurance policy in around December, 1998 and they were spent on the pre-payment of the rent of the Bankrupt’s apartment.  During the examination, the Bankrupt explained that he made the pre-payment in return for a better deal.  There was no evidence to suggest otherwise.  For this reason, I also found that the Trustee can make out nothing from this.

23. There were then complaints that the Bankrupt was enjoying housing benefit of around HK$38,000/month and the use of a private car.  There was no dispute that such benefits came directly or indirectly from the family members of the Bankrupt.  Mr. Wong, SC, submitted that these were the assistance rendered by the Bankrupt’s family members and that also included the supporting of the Bankrupt’s child to study in Canada.  As there was no evidence before me suggesting that all these were pre-planned to let the Bankrupt leading a life as if he was not bankrupt, I found that this complaint cannot be sustained.

The discharge of the Bankrupt could prejudice the administration of his estate

24. Mr. Lai relied on the unsatisfactory conduct and a criminal investigation to support this ground.

25. As I have already found that the Bankrupt was not unco-operative and did provide the letters of authorization, the first part of the Trustee complaint must fail.

26. The criminal investigation, which had been carried out for 6 years, was in relation to inflation of prices.  That, in my judgment, had nothing to do with any unsatisfactory conduct as envisaged by section 30A(4)(d) which must relate to the bankruptcy and this complaint must fail too.

Conclusion

27. In the light of the matters aforesaid, I do not find that the Trustee has made out his case and thus I dismiss the Trustee’s application accordingly.

28. I also make an order nisi in relation to costs: the Trustee do pay the costs of this application to the Bankrupt to be taxed if not agreed.  This order nisi will become absolute after a lapse of 14 days after the handing down of this judgment.  Liberty to apply.