NICK L. HEMANDAS alias NARAIN LOKUMAL SUJANANI v. BANK OF CREDIT AND COMMERCE (HONG KONG) LIMITED

IN THE SUPREME COURT OF HONG KONG

IN BANKRUPTCY

NO. B201 OF 1985

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BETWEEN

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JUDGMENT

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1. This is an application for a Receiving Order. The debtor was a director of a company called Mart Electronics Limited.  In this company he held three thousand out of the four thousand shares of $100 each and his wife held the balance of one thousand. The company obtained banking facilities from the petitioner as did the debtor himself in his personal capacity. The company was unsuccessful and the debtor was unable to pay off his personal overdraft which had been granted by the petitioner. As a result two judgments were entered against the debtor and one against the company. The first was against the debtor on the 22nd October 1983 for the sum of $52,562.47 and the second was against the debtor jointly with the company on the 25th November 1983 for $343,211.89. Payment of the debts is still outstanding. A bankruptcy notice based on the judgments was filed on the 13th of March this year and was served upon the debtor on the 15th of March. The debtor failed to comply with the terms of the bankruptcy notice and a petition was afterwards filed on the 22nd of April. The petition came before me on the 20th of May when the debtor raised the defence of the 15% provision under section 9(3) of the Bankruptcy Ordinance. Directions were then given and the case was adjourned to a date to be fixed.

2. The debtor admits his liability to the petitioner, but contends that his assets will not be sufficient to pay a dividend of 15% and he therefore asks the court to exercise its discretion not to make an Order. I have already expressed my views on the 15% provision in the case of Re: Antony Lo and Re Eddie Lo, both ex-parte British Columbia Financial Corporation (Hong Kong) Limited, Bankruptcy Nos. 271 and 272 of 1984. The judgment was delivered on the 29th of March this year. In that case I held that the burden of proof lies on the debtor to establish this defence.

3. The debtor filed an affirmation on the 22nd of May. In this affirmation he says that as a result of his present financial difficulties and on the advice of two of his creditors Lloyds Bank International and Middle East Finance International he took the position of merchandizer which was offered to him by a company called Kenzar Limited and says that his monthly salary amounts to $5,000. He says that he lives with his parents in what can be described as a fashionable address. at Evergreen Villa in Stubbs Road. He says he own no real property, stocks, shares, motor vehicles or other assets except those set out in his affirmation which is restricted to two accounts with the Hong Kong & Shanghai Banking Corporation: These are a current account in which he says there is a credit balance as at the 17th of April this year amounting to $1,077.98 and a savings account where the balance at the 12th of April this year amounted to $2,210.15. He then refers to the three thousand shares that he holds in Mart Electronics Limited which he says has no value. He also puts in by way of assets an estimated sum of $5,000 for his personal clothing, jewellery and furniture. He therefore claims that his total assets amount to $8,288.13.

4. He then goes on to refer to a life policy of insurance for the sum of US$100,000 which he has with Transamerica Occidental Life Insurance Company which was taken out in August of 1980. He says that this policy has no surrender value at present although he would be able to raise a loan on it after the 28th of August this year but only for the sum of approximately US$600. It is to be observed that the annual premium in 1984 for this policy was US$1,345 and this year the premium payable on the 28th of August will be US$1,405. He then refers to his liabilities which include a small sum of $3,400 due to the Hong Kong Government for salaries tax for the year 1984-85. He then deals with his liability to the petitioning creditor and to a debt due to the Middle East Finance International Limited which amounts to US$725,350.70. There is also a further amount due to the Middle East Finance International Limited of HK$565,386.60. Another debt of $1 million is due to Lloyds Bank International Limited and there is a sum of HK$789,309 plus interest due to an associated company of the Petitioner VCCI Finance International Limited. Finally he claims that he owes his mother $868,951.27.

5. Since these proceedings have been issued the petitioner has made certain enquiries into the assets of the debtor and leave was granted by me today to file additional evidence from Mr. Lee who is an Assistant Solicitor with the petitioning creditor's solicitors. He exhibits to his affidavit a copy of an affidavit filed by Mr. Watkins in other proceedings relative to the debtor's wife in Bankruptcy Action No. 303 of 1985. An affidavit has also been filed by Mr. Stevenson, the solicitor who is acting for the debtor. These affidavits relate to the non-disclosure by the debtor of a property that he jointly owns with his wife in Hawaii. The explanation given by the debtor through Mr. Stevenson who swore his affidavit on the 29th of June is as follows. In his affidavit Mr. Stevenson says:-

"I am informed by the debtor and verily believe that she (that is the debtor's wife) was aware that a property in Hawaii had been purchased in the joint names of herself and her husband but that she always understood the property had been disposed of some years ago and no longer constituted an asset. At 11 a.m. today, the 29th June 1985, I spoke by telephone to the debtor who is in Tokyo or, a business trip with his father. I was informed by him and I believe he bought the property in about 1969 but that in 1980 he needed funds to invest in his company Mart Electronics and borrowed US$5,000.00 from his father in return for the said property and he delivered to his father the title deeds to the property but his father has never implemented such delivery by having the property formally transferred into his name. His father has since that time paid for his own account all the outgoings in respect of the property including taxes thereon and the debtor believed that he and his wife no longer had any beneficial interest in the property."

6. As stated by Mr. Stevenson the debtor is at present on business in Tokyo with his father but he gives no explanation as to what business he is conducting and for whom nor is any reference made as to whether his father has any connection with the firm for whom he is working Kenzar Limited.

7. A relevant factor with regard to the 15% provision is of course that of the Official Receiver and Miss Chow who appeared on the Official Receiver's behalf today supports the application.

8. May I say that the evidence of the debtor in this case is wholly unsatisfactory. He provides a modicum of information. He has failed to give any explanation for the collapse of his company nor has he given any explanation for the amount included in the accounts for the bad debts for the year of 1982 which have been submitted in evidence before me and which come to the staggering figure of $2,382,785.00. He gives no details of his present employment other than his salary. He does not say what he is exactly doing nor does he provide any corroboration in respect of his salary. Further he is guilty of a glaring failure to disclose his full assets with regard to the property in Hawaii. I find the explanation which has been given that he believed the beneficial ownership had been transferred to his fathermost unconvincing. No credence in my opinion can be given to this averment.

9. I would repeat on this occasion what I said in the case of Re Antony Lo and Eddie Lo with regard to the evidence that should be provided in cases where the 15% provision is raised. I refer to the case of In Re Birkin (1896) Volume III Manson at p.291 which held that the debtors own affidavit is not sufficient to discharge the burden of proof. In his judgment at p.294 Rigby L.J. said,

"Here we are asked to rely only on an affidavit of the debtor. I am of the opinion that an affidavit by the debtor only is not enough to establish no assets; even if we were entitled to rely upon it, the evidence is insufficient."

10. The same approach was adopted in In re Barakat (1920) N.Z.L.R. 134 where the court made an order of adjudication in its discretion where the only evidence of want of assets was the uncorroborated evidence of the debtor.

11. Today the only evidence before me is the uncorroborated evidence of the debtor. The debtor has failed lamentably to discharge the burden of proof that is cast upon him, but in any event whether the burden is cast upon the petitioner or the debtor this is a case clearly where the court in the exercise of its discretion should grant a Receiving Order. In fact I find the debtor's opposition to this application to be wholly unmeritorious. Accordingly there will be a Receiving Order with the usual Order as to costs.