XCHRX Re Alexander POA Kwok-ho ("the bankrupt") and Ex Parte Official Receiver & Trustee

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY

NO. 401 OF 1998

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R U L I N G

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1. The hearing this morning has been generated by the Official Receiver, very properly seeking direction from the court as to what properly he can or should do under the provisions of the new Section 30C of the Bankruptcy Ordinance.

2. Section 30C provides transitional provisions in respect of certain bankruptcies which were made before what I will call the new Bankruptcy Ordinance came into force.

3. The proposal of the Official Receiver was that in relation to the bankrupt, Mr POA, in this case, he should advertise that Mr POA will be automatically discharged from bankruptcy on 1 April next year, by virtue of the provisions of Section 30C, unless any creditors should object in the meantime in which case their objections would be placed before the court.

4. It is to this proposal to advertise that Mr POA makes objection. He has placed before me a lengthy and careful skeleton and a considerable quantity of authorities. I have not looked in detail at the authorities because largely they are authorities that are well known on the construction and interpretation of statutes. I have, however, read thoroughly Mr POA's skeleton argument. He raised in that skeleton, and also before me this morning, a number of points. Some I confess I still don't understand. Some seem to me to have nothing in them. But at the end of the day Mr POA does have one good point and in essence it is this. It would be futile for the Official Receiver either himself to object to Mr POA's automatic discharge from bankruptcy, or to seek objections from creditors, because the court has no power to do anything even if an objection is raised.

5. First, said Mr POA, the court has no power to extend the period of his bankruptcy as the court can do under other bankruptcies under Section 30A. This is because of what Mr POA calls "the eight year rule", which under Section 30A is brought about because a person will automatically be discharged from bankruptcy at the end of four years. The court, however, has a power to extend that by up to another four years in the event of there being objections. So the totality of the court's power, says Mr POA, is to extend the bankruptcy to a period not exceeding eight years. As he, himself, has already been bankrupt for over eight years the court has no power to make any extension beyond April next year.

6. The words in Section 30C(2), "that the court can deal with the matter as it sees fit, in the case of there being an objection", were brought to Mr POA's attention. Rhetorically, as it were, he asked me, "Well, if the court cannot extend, what other powers can it possibly exercise?" In all those circumstances, said Mr POA, the seeking of objections, or the placing of objections, before the court would be an exercise in futility and the court is not here to indulge in an exercise in futility.

7. I think that Mr POA is probably right about the court having no power to extend his bankruptcy beyond April next year. Correctly, he says that the intention of the new Ordinance is to ensure, as far as possible, the rehabilitation of bankrupts and to facilitate their discharge from bankruptcy. Under the old Ordinance, if I may call it that, in order to obtain a discharge from bankruptcy, the bankrupt, or perhaps the Official Receiver, had to make a formal application to the court.

8. Under the new regime no application is necessary, bankruptcy will automatically be discharged after a period of four years, or in the case of transitional bankruptcies, such as Mr POA's, no later than 1 April next year. And indeed on reading Section 30A as a whole, particularly sub-section (9), it is clear to me that the legislation intended to draw a line after a person had or has been bankrupt for a total period of eight years. That, of course, principally applies to new bankruptcies but it seems right to me that it should apply equally to old bankruptcies such as Mr POA's as well.

9. However, even if the court is not empowered to extend any bankruptcy beyond a period of eight years, or 1 April next year, even if there is a real compelling objection, I am satisfied that the court is not powerless.

10. Mr Winckless, who appears on behalf of the Official Receiver, has given what appears to me to be a very real example of what the court could do. That example is the situation where a creditor objects to the discharge because it has come to the creditors' knowledge that the bankrupt has been sitting on hitherto undisclosed funds or assets. In such circumstances the court could, and should, make an order that the bankrupt disgorge those funds or assets and, in the event that that order is not complied with, then in the same way as contempt proceedings would follow under sub-section (8) of Section 30A, contempt proceedings would follow if such an order is breached.

11. In my judgment, therefore, the placing of objections before the court under Section 30C is not a futile or otiose exercise.

12. But I am satisfied that Section 30C does not impose an obligation on the Official Receiver, as does Section 30A. It seems to me that in cases that fall within Section 30C, such as Mr POA's, the Official Receiver may take view of the particular bankruptcy before him and decide whether or not he is going to object, or whether or not he is going to canvass the creditors.

13. If the Official Receiver's view is that the bankruptcy has been properly run and is effectively closed, and nothing more needs to be done, then probably he will not place objections before the court. But if the Official Receiver has doubts about the matter and decides that he should, in all the circumstances, consult the other creditors, in my view it would not be wrong for him to proceed in one of the ways prescribed by Section 30A(5).

14. In the light of the views, which I have expressed, there is no reason why the Official Receiver should not advertise, if he thinks fit to do so, but in the light of the views which I have expressed the Official Receiver may, in the circumstances, wish to re-consider the matter and allow the bankruptcy to come to an end automatically on 1 April next year.