RE: CHAN KUENG UN, ROY and EX PARTE : CHINA VEST II-A, LP AND OTHERS

HCB16/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO.B16 OF 1999

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Reasons Handed Down : 2 June 1999

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R E A S O N S

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1. This is the adjourned hearing of a bankruptcy petition based on a judgment debt in excess of US$3.5 million. The debt is not disputed.

2. The Respondent opposed the petition. He has not seen fit to file any evidence himself. Rather, affirmations have been filed on his behalf by Chan Yok King, his elder sister and more recently by Leung Wan Lok, Paula, his niece.

3. On 12 March 1999, three days before the hearing before the Master, Chan Yok King filed an affirmation to the effect that the Respondent has since 2 December 1998 been offered a job by P.T. Istana Mujur Makmur ("IMM") as manager at a salary of US$3,000 a month. A letter from that company was exhibited and the Respondent proposed to increase his monthly instalment payments to HK$40,000 a month. Nowhere was it explained how the Respondent is able to make instalment payments that amount to 166% of his salary. Be that as it may, it was asserted that the Respondent was in the course of raising money to settle the judgment debt in full and expected the money to arrive in Hong Kong on or before 17 May 1999. On that basis, the hearing was adjourned to 19 May.

4. At that hearing, a further affirmation was filed by Chan Yok King allegedly to explain why the remittance had not arrived in Hong Kong by 17 May. She exhibited a letter dated 3 May 1999 addressed to the Respondent from P.T. Inova Sari Sarana which was in the following terms :

"We have perused and studied the Feasibility Report showing that our joint-venture company for the above gold jewellery manufacturing will be making a profit in the region of One Million U.S. Dollars per year based on your business connection and experience.

We are prepared to give you great financial support on condition that you shall be the Managing Director of our new company and will not be adjudged bankrupt within the next 3 years during which period you shall devote all your time and effort for running the said new company.

We are aware that you have an outstanding debt of U.S. Dollars 3,500,000 and we shall inject such capital into the new company so as to enable you to settle the same on or before 19th July 1999 when we expect that this large sum will be available for your immediate settlement of the same in a lump sum."

It is to be noted that the letter contained no explanation of the two-month delay. In fact, there was no reference to the sum of US$3.5 million being made available by 17 May 1999. There was merely a bald assertion that US$3.5 million would be injected as capital into the new company on or before 19 July 1999.

5. When the petition came before me on 24 May 1999, the inadequacies of the evidence filed on behalf of the Respondent were highlighted. The Respondent sought an opportunity to file further evidence. He was given until noon 28 May to do so. This resulted in an affirmation made by his niece. After exhibiting letters from Bank Central Asia and IMM, said to explain the delay in the remittance, Miss Leung went on to depose as follows :

"2. ...I also confirm that Roy Chan is willing to act as the Managing Director of the new company for gold jewellery manufacturing which will be incorporated in Jakarta, Indonesia in about the middle of July 1999 the new company would also consent to settle the outstanding debt in a lump sum for Roy Chan out of the intended capital which is estimated to be in the region of US$4.5 million.

3. Due to unforeseen circumstances and the critical political situation in Indonesia, I would expect that the money would be arriving in Hong Kong on or about 19th July 1999 by bank remittance."

Paragraph 3 of Miss Leung's affirmation is in identical terms to paragraph 3 of Chan Yok King's affirmation dated 5 May 1999.

6. The letter from IMM is undated. It claimed that P.T. Inova Sari Sarana (whose letter of 3 May 1999 was exhibited to Chan Yok King's 2nd affirmation) is its holding company. It enclosed a letter from Bank Central Asia but that letter merely dealt with enquiries concerning remittance services. There was nothing in it to the effect that there would be delays of up to two months for US Dollar outgoing remittances. Rather, the assertion is made in IMM's letter that the approval process from the Bank of Indonesia and the Board of Commissioner for Business License would take approximately two months, noting that in the current political condition in Indonesia, it might take longer.

7. The Respondent's evidence is plainly riddled with difficulties : the Feasibility Report referred to in the letter of 3 May was not exhibited; the new company has not been formed; the identity of the investors is unclear; not least, there is no evidence as to the legality under Indonesian law (if that be the law of incorporation of this new intended company) of applying funds intended to be the working capital of the company to discharge the managing director's own personal debts. No legal opinion has been exhibited to deal with that issue. It is also not immediately apparent why a company would wish to make a loan of US$3.5 million (if that is the proposed arrangement) to a manager currently employed by one of the investors at US$3,000 per month. It simply defies belief.

8. In the circumstances, on the evidence before the court, I agree with the Petitioning Creditors that there is simply no credible evidence to support the assertion that the Respondent would be in a position to discharge the debt on 19 July 1999. The Petitioning Creditors were not prepared to grant any further indulgence to the Respondent and objected to any further adjournment. As there was no valid ground of opposition to the petition and no good reason has been made out to warrant the adjournment sought, the Respondent was adjudicated bankrupt with costs to the Petitioning Creditors.