INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LTD v. CHIN CHI WING SIMON

HCB 6405/2007 & HCB 6406/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY

NOs. 6405 and 6406 OF 2007

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D E C I S I O N

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1. This is a Bankruptcy Petition that is based on an unpaid judgment debt.  The original judgment debt involved the sum of some HK$300,000 and the judgment was against both the Debtors, Mr Chin and his wife, Madam Ng. 

2. The judgment was entered some seven or more years ago.  Mr Chin and Madam Ng have accepted that they are liable under the judgment.  Indeed, they obtained a stay of execution of the judgment from Master Kwan on the basis that they would make repayments in monthly instalments of $5,000 to clear the debt, with interest on the debt being paid after the principal had been cleared.

3. At the time that the stay of execution was granted on those terms, it was made clear in the order granting the stay that, in the event of any default, the stay would be immediately lifted and the judgment creditor, now the Petitioner, would be entitled to take such steps as it thought necessary to enforce the judgement. 

4. Unfortunately, although a few instalments were paid at first, Mr Chin and Madam Ng’s personal financial position took a turn for the worse shortly after the consent order was made and, as a result, they found themselves unable to maintain payments at the level of HK$5,000 a month.  As a result, Mr Ng made payments of $500 a month, as and when he was able to, to the Petitioner, although it seems that there were occasions when payments even of this lower amount could not be made because of Mr Chin’s personal situation. 

5. More recently, in the early part of 2006, Mr Chin and Madam Ng found themselves in a position where even $500 a month was beyond their means to repay, and they therefore reduced the amount that they were paying to the Petitioner to $100 a month.  It was shortly after that that the Petitioner took out these proceedings seeking Bankruptcy Orders against Mr Chin and also against Madam Ng on the grounds of their inability to pay the debts. 

6. Mr Ng has filed an affirmation in opposition to the petition.  In it, he sets out the history of the matter from his point of view and he makes, as I see it, two principal points.  The first point relates to a suggestion that the Petitioner should have been able to recover much of the debt for itself by disposing of certain machinery which was the subject of the financing transaction that led to the loan on which the judgment was based in the first place. 

7. However, as the Petitioner has pointed out, and as Mr Kwan has submitted, this issue was a matter that had in fact been raised, albeit by another party, in the proceedings which led to the judgment being entered,

and the Petitioner had, in fact, filed evidence in those proceedings, explaining the steps that it had taken to dispose of the equipment in question, showing that it had been unable to do so despite having expended some efforts in this regard. 

8. In these circumstances, I do not think that the Petitioner can be criticised for failing to realise the property that was provided to it, whether by way of security or by way of an attempt to effect some form of repayment.

9. Mr Chin’s other point is that he is, he says, willing to resume payments at the level of about $500 a month and that while he may have some difficulty in meeting even that amount for the rest of this year, he is hopeful that his circumstances will improve next year so that he will be in a position to make that payment.  It has to be said that Mr Chin quite properly accepted that, on his own evidence, at present the combined income of himself and Madam Ng is, even on the best case, insufficient to meet their regular living expenses. 

10. In these circumstances, although I have a great deal of sympathy for the position in which Mr Chin and Madam Ng have found themselves through the unfortunate deterioration in their financial circumstances over the years, it does appear to me that I have very little scope in terms of exercising my discretion as to whether or not to make a Bankruptcy Order so as to exercise it in their favour.  The fact is that Mr Chin and Madam Ng have been unable to meet the instalment payments that were agreed under the consent order by which a stay of execution was granted.  That stay is, therefore, no longer in effect and it is thus open to the Petitioner to seek to enforce its judgment by bringing these proceedings. 

11. Mr Ng suggests in his affirmation that he had agreed with the Petitioner that the amount of the instalments should be reduced from $5,000 to $500.  But even if there had been such an agreement - as to which there is only Mr Ng’s assertion - the fact is that even that agreement has, unfortunately, not been one to which Mr Chin has been able to adhere. 

12. In those circumstances, the position is, unfortunately, that there is clearly a debt that is due from Mr Chin and Madam Ng to the Petitioner and, that debt being based on a judgment which is no longer stayed, it is one in respect which the Petitioner is entitled to present a bankruptcy petition.  In such cases, a petitioner is entitled, almost as of right, to a Bankruptcy Order being made where the debtor is unable either to put forward some basis for setting aside the judgment, or for suggesting that he has a proposal for repayment which the petitioner ought reasonably to accept. 

13. In this case, the proposal that is effectively put forward is to continue to make repayments at the rate of HK$500 a month, but I cannot say that it is unreasonable for the Petitioner to have rejected this proposal.  At the rate of HK$500 a month, it would take many years before even the balance of the principal amount of the debt would be cleared.  During that period, interest would be continuing to accrue on the debt.  Indeed, the interest, as at the date of the petition, had accrued to an amount almost equal to the original amount of the debt itself and it is likely that, at the rate of $500 a month, the same amount again, or more, would have accrued by way of interest by the time the principal debt was finally repaid.  Quite apart from that, the fact is that, on the present financial situation of Mr Chin and Madam Ng, it is doubtful whether even the sum of $500 per month is an amount that

they will be able to pay on a regular basis.  In all of the circumstances, therefore, it does not seem to me that it can be said to have been at all unreasonable for the Petitioner to have declined to accept the proposal which has been put forward. 

14. I therefore consider that I should make the usual Bankruptcy Order, with costs, in both of these petitions.