TSIM CHE KONG v. KWOK KWAN YING

HCB 14967/2009

[2019] HKCFI 1822

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 14967 OF 2009

AND

OTHER BANKRUPTCY PROCEEDINGS AS STATED IN THE SCHEDULE

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D E C I S I O N

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1.  This is an application by one of the joint and several trustees in bankruptcy in 918 cases as stated in the schedule to the amended summons before me for the removal of the respondent as the other co‑trustee. Since the applicant has obtained release orders under section 94 of the Bankruptcy Ordinance (Cap 6) in 6 cases following the amendment of the summons, the application as it stands affects 912 of the cases. Application is also made for the appointment of a replacement trustee, namely, Miss Kwok Nga Yin Irene.

2.  The trustees were originally both members of the same firm of solicitors, Tam & Partners, whose tender to the Official Receiver was accepted in 2009 following which the applicant and the respondent were proposed as the “appointment‑takers” within the firm to take up appointment as joint and several trustees in bankruptcy in relation to various bankruptcy proceedings.

3.  When the summons was first issued in February 2019, 3 grounds were advanced in support:

(1) alleged misconduct on the part of the respondent;

(2) alleged incapacity due to certain medical condition related to the eyes of the respondent; and

(3) impracticability for the respondent to continue as one of the trustees.

4.  The Official Receiver, as far as I can see from her two reports, takes the view that the respondent should be replaced due to the practicalities of the matter, but is otherwise neutral in relation to the first two grounds. On this hearing, Mr Leung, who appears for the applicant, also indicates that the applicant is content to rely solely on ground 3.

5.  The principles relating to the court’s powers to remove trustees in section 96 of the Ordinance are well established.  It should in particular be noted that under section 96(2)(e), the court may remove a trustee from office and appoint another person in his place if the court is of opinion that the interests of the creditors require it.

6.  I take a practical approach in this matter.  It is in my view unnecessary to resolve the questions whether the respondent has been guilty of misconduct in the manner alleged by the applicant and whether there was any incapacity as alleged, or whether, conversely, it was the firm that failed to give sufficient staff and administrative and other support to the respondent, and I make no finding whatever in that regard.

7.  It is quite clear that the working relationship between the applicant and the respondent has completely broken down.  The respondent is, in fact, suing the firm in the Labour Tribunal for unfair dismissal.  The applicant and the respondent are not on speaking terms.  They cannot realistically be expected to carry on together as joint and several trustees in any ongoing bankruptcy.  In fact, the respondent shares that view and indicates to the court this morning that she is quite prepared to resign on the basis that she does not feel comfortable in working with the applicant anymore.

8.  The Official Receiver has expressed no concern in respect of the applicant’s ability to continue to act as a trustee or as to the ability of the proposed replacement trustee.  In these circumstances, it seems clear to me that it would be in the interests of the creditors and the administration of the estates for the respondent to step down.

9.  On that basis, there will be an order for her removal and the appointment of Miss Kwok Nga Yin Irene in her place as one of the joint and several trustees with the applicant in the estates in question.

10.  As regards the question of costs, the respondent did at one stage offer to resign but that was subject to the condition of payment of her commission, and at this hearing, she has indicated her willingness to resign, although for practical reasons it is desirable to have an order for removal and appointment of a replacement, having regard, in particular, to the need otherwise to hold creditors’ meetings in more than 900 estates.

11.  On the other hand, while the applicant has managed to obtain the order for removal, it is notable that he has made allegations of misconduct against the respondent including very serious allegations of deliberate misleading of the Official Receiver in relation to the progress of the administration of the bankruptcies as well as allegations of incapacity which are now not relied on for the purpose of this hearing and which would have been, in any event, impossible to adjudicate upon without a substantial contest including, potentially, cross‑examination of various witnesses, which would have been a wholly disproportionate exercise in the context.  These allegations proved to be unnecessary and could have been anticipated to be vigorously resisted by the respondent.

12.  In all the circumstances, I take the view that the costs of the hearing this morning should be paid by the respondent, but otherwise there should be no order as to costs as between the respondent on the one hand and the applicant and the Official Receiver on the other, but that the costs of the applicant and the Official Receiver not ordered to be paid by the respondent should be paid out of the estates.

13.  I will be prepared to conduct summary assessment of the costs of the hearing today.  The applicant and the Official Receiver should submit a bill within 7 days.  The respondent is to lodge and serve her statement of objections, if any, to the bills within 14 days thereafter, and the applicant and the Official Receiver may reply within 7 days thereafter.