RE AU KA MAN CARMEN

HCB 7505/2014

[2019] HKCFI 2037

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 7505 OF 2014

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DECISION

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1.  This is an application by the bankrupt in these proceedings to reverse the decision of the trustees in bankruptcy pursuant to section 83 of the Bankruptcy Ordinance, Cap 6 (“the Ordinance”).

2.  For the present application, the trustees filed their affirmation in opposition only on the day prior to this hearing.  The affirmation basically set out the sequence of events, which are evidenced by the various contemporaneous documents.  The bankrupt confirmed in court that she did not intend to file further evidence in rebuttal.

3.  The bankruptcy order was made on 11 November 2014 upon the debtor’s own petition.  Subsequently the trustees were duly appointed.  Upon the trustees’ investigation, the bankrupt’s average monthly income and expenses were assessed to be HK$13,817 and HK$10,875 respectively.  It was agreed that the bankrupt would make a monthly contribution of the difference in the sum of HK$2,942 to her estate in repayment of the debt.  She signified her agreement by signing the relevant document in 2015.

4.  According to the proof of income provided by the bankrupt, her total income during the period should be HK$653,489.62 and the total expenses allowed should be HK$435,000.

5.  The trustees reported that the bankrupt has made only two contributions in April 2017 and August 2018, leaving a total outstanding contribution sum of HK$153,314.62 in accordance with the above calculation.

6.  Pursuant to sections 30A(1) and (2)(a) of the Ordinance, a bankruptcy order should be discharged by the expiration of the bankruptcy period of, in the present case, four years.  This is subject to the following subsections:

(1)  Pursuant to subsection (4), not less than three months before the end of the bankruptcy period, the trustee shall advertise whether he does or does not intend to object to the discharge and, where he does intend to do so, gives any of the grounds of objection set out subsection (4).

(2)  Where the trustee objects to the discharge of a bankrupt, he shall notify the court and take out an application not less than 14 days before the end of the bankruptcy period for an order under subsection (3), namely that the relevant period should cease to run (or effectively the bankruptcy to continue).

7.  In the present case, the trustees notified the bankrupt in writing on 3 August 2018 of their intention to object to the automatic discharge of her bankruptcy pursuant to section 30A as mentioned above.  The grounds of objection are that: (i) she has failed to co-operate in the administration of the estate (section 30A(4)(c)); (ii) her conduct, either in respect of the period before or the period after the commencement of the bankruptcy, has been unsatisfactory (section 30A(4)(d)); and (iii) she has failed to prepare an annual report of her earnings and acquisitions for the trustees (section 30A(4)(h)).  Specifically, the trustees complained that she has failed to supply sufficient proof of income or to make reasonable contributions to her estate.

8.  Nevertheless, the trustees and the bankrupt apparently entered into agreement whereby the trustees agreed not to oppose the automatic discharge of the bankruptcy, while the bankrupt agreed that a monthly sum not exceeding HK$9,800 and any year-end bonus would be applied from her estate from November 2018 towards the settlement of the outstanding amount.  Until then, the trustees would not issue letter of no objection to the bankrupt, and her bank account would continue to be frozen.  The terms of their agreement were set out in a 供款同意書（解除破產）dated 7 November 2018 (“the Agreement”), which the bankrupt signed.

9.  Now the bankrupt, amongst other things, complains about the trustees’ refusal to grant her the letter of no objection and the continued freezing of her account.  Yet in her complaint and the present application, the bankrupt disclosed an unsigned copy of the Agreement, but not the fact that it was agreed to and signed by her.  The bankrupt did not deny that in court.

10.  The trustees confirm that the outstanding amount under the Agreement is yet to be fully repaid.

11.  It is trite that when an application is brought under section 83, the court will not interfere with the decision of the trustees unless it is shown that such decision was plainly wrong or perverse in that no reasonable trustee would have made in the circumstances: see for instance, Re Chung Kau HCB 581/2003 (23 February 2004) at §13.

12.  Where the trustee intends to object to the automatic discharge of the bankruptcy, section 30A(6) requires him to apply for an order under section 30A(3).  Then the court will decide, under section 30A(9), whether or not to grant a discharge and, if yes, whether on condition such as that the bankrupt shall continue to make contributions to his estate in such amount and for such period as it considers appropriate (but not exceeding eight years from the date of the bankruptcy order).  In the present case, the trustees saved themselves from making an application under section 30A(3) and instead came to the Agreement with the bankrupt for the settlement of outstanding contributions, notwithstanding the automatic discharge of the bankruptcy.

13.  I asked Ms Ng, who appeared for the trustees, whether the Agreement is permitted under the statutory framework of section 30A.  Ms Ng confessed that she could not assist with reference to any relevant authority.  Nor was my attention drawn to any other provisions which might have a bearing on the question.  I was therefore left to consider the question on the basis of the materials before me.

14.  I consider that the Agreement is effectively one that the trustees reached with the bankrupt during the bankruptcy period and in terms of what the court would have been in a position to order pursuant to section 30A(9).  It would appear that if the trustees in bankruptcy had applied for an order under section 30A(3), they and the bankrupt could still have come to terms and sought an order by the court with the effect of discharging the bankruptcy in those terms so long as the terms do not infringe section 30A(9).

15.  Section 32(2) provides that the discharge releases the bankrupt from all the bankruptcy debts but has no effect: (a) on the functions (so far as they remain to be carried out) of the trustee and the operation of the provisions of the Ordinance for the purposes of carrying out those functions; or (b) on the liability of the discharged bankrupt to make continuing contributions to his estate pursuant to an order made under section 30A(9) mentioned above.   There seems to be basis for the trustees in the present case to remain in their position beyond the discharge for the purpose of enforcement of the terms of such agreement reached during the bankruptcy period.

16.  Section 30A(9) limits the court’s power to order the bankrupt to continue to make contribution to his estate after the discharge of bankruptcy for a period not exceeding 8 years from the bankruptcy order (effectively four years after automatic discharge).  Whilst the Agreement was stipulated to last until full payment by the debtor of the outstanding amount, it should take the bankrupt less than four years to comply with repayment timetable provided in the Agreement.  In other words, the Agreement was not intended to bind the debtor for a period after the discharge that will exceed what the court would have been in a position to order pursuant to section 30A(9).

17.  It is upon the above consideration that I do not accede to the bankrupt’s present application.  Having said that, I am not to be taken as sanctioning the approach adopted by the trustees in bankruptcy in the present case for future purpose.  I would still suggest that in the future, if the trustee in bankruptcy has grounds for objecting to the automatic discharge of the bankruptcy order, he should take out an application pursuant to section 30A(3). As mentioned, nothing prevents a consent application to be made instead of, or subsequently to, an application pursuant to section 30A(3).  The point is that in either case, the court will be seized of the matter, and will have the opportunity of examining the circumstances before determining whether to make an order in the consent terms or to make some other orders pursuant to section 30A(9).

18.  The bankrupt’s application is dismissed with costs.  Unless application to vary this costs order is made within 14 days, it shall become absolute without further order.  Upon that, the trustees shall submit and serve within 5 days their statement of costs, and the bankrupt shall submit and serve her comments within 5 days thereafter.  Costs shall be assessed summarily on paper only.

Interpreter assistance, if requested, will be arranged for the applicant when this decision is handed down.