RE YIU TIN CHEONG

HCB 8992/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 8992 OF 2008

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D E C I S I O N

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APPLICATION

1.  This is an application for suspension of automatic discharge of bankruptcy.

BACKGROUND

2.  On 30 October 2008, Mr. Yiu Tin Cheong applied to this Court for his own bankruptcy.  He deposed that he owed debts for over $470,000 and was unable to pay them.

3.  On 9 December 2008, a bankruptcy order was made against Mr. Yiu (hereinafter called the “Bankrupt”).

4.  Under the present bankruptcy legislation, the Bankrupt should be discharged on 9 December 2012, i.e. after 4 years from the said bankruptcy order.  However, on 5 November 2012, the Joint and Several Trustees (the “Trustee”) applied to extend the bankruptcy period.

5.  Briefly, the Trustee said that the Bankrupt failed to co-operate in the administration. His conduct after the bankruptcy was unsatisfactory. He did not submit the annual reports of his earnings and acquisitions (the “annual reports”). Last but not least, the discharge of the Bankrupt would prejudice the administration of his estate. Section 30A (4) (b), (c), (d) and (h) of the Bankruptcy Ordinance (Cap.6) (“BO”) were relied upon. In order to substantiate these grounds, the Trustee made the following specific complaints.

(a) The Bankrupt failed to provide documents in respect of his job and income.

(b) The Bankrupt repaid “debt” during his bankruptcy without consent of the Trustee.

(c) The Bankrupt failed to file his annual reports.

6.  The Bankrupt opposed the application.  Interim order was made to suspend his discharge in the meantime and I heard parties’ argument on 2 May 2013. The attendance of the Official Receiver was excused. Miss Wong appeared for the Trustee and the Bankrupt appeared in person.  Having heard from the parties, I reserved my decision to be handed down.  I now do so.

DISCUSSION

Are the Trustee’s complaints established?

7.  I have no hesitation to find on balance that the Trustee has proved all three complaints.

(a) Parties’ argument started when the Trustee asked for a copy of the employment contract of the Bankrupt. He replied that he was only an agent, earning a commission. The Trustee then pursued for the “agency’ agreement. However, nothing has been produced by the Bankrupt, including any documents showing his income, tax return or bank statements. At the hearing before me, the Bankrupt explained, inter alia, that “these documents (apparently existing, at least for some of them)” had been passed to his “attorney” who assisted him to remedy his failure to submit his annual reports. However, why they were not passed directly to the Trustee, despite requests and demands?  Up to the hearing date before me, it remains an indisputable fact that the Bankrupt has never produced a single document to the Trustee and/or this Court to prove his employment income and so forth.

(b) The Bankrupt did not deny that, out of his MPF account, he received a total of $63,996. And, out of such sum, he paid $20,000 to one Ms. Tong (湯家寶). He explained that Ms. Tong lent him such sum so that he could make the bankruptcy petition. He promised to repay her. He did so and he also understood that it was not proper for him to do so.

(c) There cannot be any dispute on the failure of the Bankrupt to submit his annual reports during the 4 years of bankruptcy.  Indeed, in relation to his failure for the 1^st, 2^nd and 3^rd years, he was convicted in the criminal court (ESS 37156/2012) for such an offence (section 43A BO) and fined $2,000. Regarding the 4^th annual report, he has not submitted the same up to the date hereof.

 Exercise of discretion: suspension, and if so, for how long?

8.  I now move to the exercise of the Court’s discretion to see if the discharge of bankruptcy against the Bankrupt should be suspended, and if so, for how long. In this respect, I remind myself of the underlying principle of the current bankruptcy regime as per paragraphs 17.6 and 17.24 of the Law Reform Commission Report on Bankruptcy (1995):

“17.16 The introduction of automatic discharge should, with the objection system, have two-folded effect. Firstly, bankrupts should have a greater incentive than at present to co-operate with the trustee, as failure to co-operate could result in the trustee objecting to a bankrupt’s discharge. Secondly, the rehabilitation of a bankrupt from bankruptcy would be assured, subject to rehabilitation being delayed as a consequence of a bankrupt’s own failings.”

“17.24 The introduction of automatic discharge would shift the emphasis from discharge being a privilege to its being a right. This right, however, must be set alongside a bankrupt’s duty to co-operate with the trustee in the administration of the estate. If he fails to co-operate with the trustee after bankruptcy, or if a bankrupt’s conduct before bankruptcy was unsatisfactory, he should not be automatically discharged.”

9.  Further, useful guidance can be located in comment of Mrs. Justice Le Pichon (as she then was) in two authorities, viz: Re Hui Hing Kwok [1993] 3 HKC 683 and Re Li Tak Kong [2000] 3 HKC 360 respectively:

“Rehabilitation is the sense of enabling the bankrupt to resume a normal life in society is a key, if not the key consideration. It should only be delayed by bankrupt’s own failings ……”

“In exercising its discretion, the court would have regard to the scope and purposes of the statutory provisions conferring the discretion, the interests of commercial morality and the public interest. Before a discharge was granted or permitted to occur, there should be an adequate investigation of a bankrupt’s conduct and affairs, and such investigation should generally be concluded. It was incumbent on the bankrupt to make a full and frank disclosure and to proffer all pertinent information regarding his assets and financial dealings to the Official Receiver. In seeking a discharge, the bankrupt had to show that he had taken all reasonable steps to ensure that his estate was available for distribution among his creditors and that the trustee was appraised of all relevant information; it was not good enough for him to adopt a purely passive or reactive role. Where there had been concealment or lack of co-operation on the part of the bankrupt, it would not be unfair to delay his discharge.”

10.  Applying the above principle and guideline in the present case, I note the following matters in particular.

(a)The Bankrupt has not contributed a single cent to his estate.

(b)He has not supplied with the Trustee and/or this court any documents to support his financial position.

(c)The Bankrupt maintains his bare allegations in his Defence.

(d)He appeared to mitigate his “conduct”, including agreeing with the Trustee to repay her the said sum of $20,000. He also faxed his 1^st, 2^nd and 3^rd annual reports to the Trustee on 23 November 2012. However, with respect, I do not consider him to be truly remorseful of what he has done. Despite his promise of repayment by installment as early as in November 2012, it has never happened so far. Worse still, if one looks at his annual reports having been filed, he no doubt will question their accuracy and truthfulness. There are no supporting documents. All reports show a breakeven situation, i.e. all income having been spent exactly leaving no surplus to contribute. The Bankrupt maintains that he is not an employee when expenditure includes MPF in 2 years. Upon being questioned, he simply replied that his attorney had made mistakes which were further overlooked by him when the same was signed in the form of statutory declaration. 

11.  With the above in mind, I find the conduct of the Bankrupt unsatisfactory. His bankruptcy should be delayed so that proper administration of his estate could be done by the Trustee.

12.  As to the duration, Miss Wong said that a period of 2.5 years ought to be appropriate in her experience as trustees. The Bankrupt made no submission in this respect. I see fit to adopt the suggestion of Miss Wong.

CONCLUSION

13.  To conclude, I order that the automatic discharge of the Bankrupt shall be suspended for 2.5 years and he is only to be discharged from 9 June 2015.

COSTS

14.  The Trustee asked her costs to be summarily assessed by this Court in the event that the case of Trustee would be accepted.  I see no reason why it should not be done in such a way. The Bankrupt did not say much on the question apart from maintaining that he had no money to pay the costs.

15.  Miss Wong was admitted in 2006. She asked for an hourly rate of 3,000.  She spent a total of about 10 hours, including communication, preparation of documents and hearings.  I find them proper in the circumstances. However, no legal research is to be allowed in light of the fact that the present case is not complicated. Finally, manual work and disbursements in total sum of $2,000 are to be allowed.

16.  Hence, I further order the Bankrupt to bear the costs of the Trustee in her application, including all costs reserved, in the assessed sum of $32,000.