RE YING KAM HUNG PETER

HCB2774/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY

PROCEEDINGS NO. 2774 OF 1999

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Re:    YING KAM HUNG, PETER

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JUDGMENT

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The application

1. By a summons dated 4 May 2004, the Official Receiver, as trustee of the bankrupt, applies for an order under section 30A(3) of the Bankruptcy Ordinance (“the Ordinance”) that the automatic discharge of the bankrupt, Mr Ying, which was to take place on 27 June 2004, should cease to run for such period as the court may order.

2. Mr Ying has not previously been adjudged bankrupt, hence, pursuant to section 30A(3)(a), the maximum period of suspension therefore should not exceed four years.

3. Pursuant to Rule 88 of the Bankruptcy Rules, the Official Receiver filed with the said application a report in support of the application for suspension of the automatic discharge.

4. The Official Receiver’sobjectionto Mr Ying’sautomatic discharge from bankruptcy was based on the three grounds set out in section 30A(4)(c), (d) and (h) of the Ordinance.  These groundsare, namely, that Mr Ying has failed to co-operate in the administration of his estate, that his conduct has been unsatisfactory, and that Mr Ying has failed to prepare an annual report of his earnings and acquisitions for the trustee.

5. According to the brief summary set out in the Official Receiver’s report, a bankruptcy order was made on 27 June 2000 against Mr Ying.  Immediately on the next day after the bankruptcy order was made, Mr Ying attended the Official Receiver’s office for an interview.  At the interview, Mr Ying was provided with a booklet issued by the Official Receiver’s office entitled “A Simple Guide to Bankruptcy”.  The Official Receiver in her report has not filed a copy of the said guide.  However, it is not in dispute that Mr Ying had acknowledged receipt of the said guide and that he was fully cognisant of the duties and obligations of a bankrupt, which obligations include, inter alia, the obligationsto file annual reports of his earnings and acquisitions and also to co-operate with the Official Receiver.

6. It is perhaps convenient to state at this stage the correspondence addresses provided by Mr Ying at the interview as these addresses would have a bearing on his conduct and, to a certain extent,on his failure to co-operate with the Official Receiver, both of which conducts form the subject ground of the application.

7. The two addresses provided by Mr Ying at the interview were his residential address at Flat B, 10th Floor, Wealthy Heights, 35 MacDonnell Road (“Wealthy Heights Property”), and the office address of Room B, 12th Floor, Trust Tower, 68 Johnston Road, Wanchai (“Trust Tower”).

8. The Wealthy Heights Property was Mr Ying’s family home prior to and shortly after the making of the bankruptcy order.  After Mr. Ying was adjudged bankrupt, the Wealthy Heights Property was eventually sold by the mortgagee.  As it was a property registered in the joint names of Mr Ying and his wife, his wife was able to keep half of the sale proceeds of the Wealthy Heights Property in the sum of $860,000, while the remaining half of which was kept by the Official Receiver aspart of Mr. Ying’sassets recovered amounting to the sum of around$1,130,000.

9. Apart from the family home, Mr Ying also owned a private vehicle, a 1996 Jaguar 32.  According to Mr Ying’s statement of affairs dated 10 March 2000, the value of the said Jaguar was at that time stated as $300,000.  The Official Receiver therefore also requested Mr Ying to return the Jaguar to the Official Receiver.

Obligations known to the bankrupt

10. Thus by virtue of the said interview on 28 June 2000, I find Mr Ying was fully aware of and had, in fact, knowledge of the following obligations: 

(i)  To provide the Official Receiver with all his updated contacts, whether they were telephone numbers or correspondence addresses. 

(ii)  That he was not to enter into any agreement without the approval of the Official Receiver. 

(iii)  To surrender the Jaguar to the Official Receiver to enable the Official Receiver to recover his assets on behalf of the estate. 

(iv)  That he was required to prepare annual reports of his earnings and acquisitions for the trustee.  

11.  Mr Ying admitted having failed to comply with all the aforesaid obligations and further admitted that his conduct after the commencement of the bankruptcy was far from satisfactory. His explanations for his conduct were as follows:

Explanations for the non-compliance

12. In connection with the first and the second obligations, that is, his obligations to keep in touch with the Official Receiver and not to enter into any agreement without the approval of the Official Receiver, Mr Ying admitted that after the meeting on 28 June 2000, he only contacted the Official Receiver on 16 January 2001 informing her that his wife or his friend might be able to purchase the Jaguar.  After the said contact with the Official Receiver, the Official Receiver, however, was not able to get in touch with him, either by letter or by telephone.  In the meantime, Mr Ying had since moved out from the Wealthy Heights Property and no longer worked at the Trust Tower address.  However, Mr Ying did not inform the Official Receiver of any of his new correspondence addresses or his updated contact. 

13. In fact, according to the information which information the Official Receiver only obtained in November 2003, it was found that Mr Ying and his wife entered into a tenancy agreement on 26 October 2001 to rent a property at Flat B, 7th Floor, Grandview Tower at Kennedy Road, together with a car park space on the same building, for a monthly rental of $19,500.

14. Mr Ying said that though he had signed the tenancy agreement, he did not live at the said Kennedy Road address as he was at that time already separating from his wife.  The said premises, he said, was rented as a family home for his wife and the two children.  As for him, Mr Ying said he had been living with a friend in an address, which Mr Ying up till now has not yet disclosed. 

15. He further admitted that he ought to have obtained the approval of the Official Receiver before he should have signed any agreement.  His explanation for becoming a party to the tenancy agreement was that the landlord of the Kennedy Road address, Mr Tsoi Kwok-wai, did not trust his wife, who was a housewife, and insisted that Mr Ying should also be a party to the tenancy agreement.  It was under those circumstances, the court was told, that Mr Ying also became a party to the tenancy agreement.

16. In relation to his office address, Mr Ying explained that after he was adjudged bankrupt, he was no longer able to work as a director for a company called Win way Property, which used Trust Tower as his office.  Since the making of the bankruptcy order, Mr Ying said he had since ceased going to work at that office and, in fact, had not been able to find any job until the last hearing.

17. Although Mr Ying admitted having failed to provide the Official Receiver any updated correspondence addresses, he said, however, he had not, in fact, evaded the Official Receiver.  His explanation for the Official Receiver’s inability to contact him by phone was due to his frequent trips he was required to make in the past three years for the purpose of finding job and business opportunities.  He said as a result of his frequent travels, it was probable that he might have omitted checking the messages left by the Official Receiver in his voice-box.

18. As regarding the third obligation, that is, his obligation to return the vehicle as requested by the Official Receiver, Mr Ying admitted the non-compliance but explained that it was due to his wife’s insistence on using the vehicle and refusing to co-operate with him by returning the car key as well as the registration documents of the vehicle.

19. According to the facts set out above, it is shown that Mr Ying had failed to keep in touch with the Official Receiver since January 2001.  It was only until the landlord of the Kennedy property, Mr Tsoi, informed the Official Receiver by a letter dated 10 November 2003 that Mr Ying had moved out from the Kennedy Road property without notice and had allowed rentals to fall into arrears in the total sum of $110,609, that the Official Receiver found out the whereabouts of Mr Ying.

20. In the letter, Mr Tsoi also informed the Official Receiver that he found Mr. Ying’s Jaguar in the car park rented to Mr Ying and his wife.  By virtue of the information received by the Official Receiver, the Official Receiver very shortly afterwards obtained the possession of the vehicle and eventually sold the vehicle by public tender for a much smaller sum of $3,399 on 13 November 2003.

21. Mr Tsoi, the landlord, also informed the Official Receiver that Mr Ying and his family had moved to another address at Kam Fai Building, MacDonnell Road.  Based on the latest address provided by Mr Tso, the Official Receiver, therefore, sent a letter to Mr Ying at this address on 17 November 2003 demanding Mr Ying to explain for his conduct.

22. Regarding the non-compliance of the fourth obligation, that is, Mr Ying’s failure to submit annual reports of his earnings, Mr. Ying submitted that after he had received the letter from the Official Receiver, he sent a letter in reply to the Official Receiver’s letter on 30 November 2003.  Together with this letter, Mr Ying also submitted an annual report of his earnings and acquisitions of the past three years.  Mr Ying’s explanations, according to the said letter, for his failure to co-operate with the Official Receiver and deliver the Jaguar vehicle were those already set out above.      

Findings

23. Based on the above facts, which are clearly not disputed by Mr Ying, I am satisfied that all the three grounds being relied upon by the Official Receiver are made out.  I am satisfied that Mr Ying’s failure to get in touch with the Official Receiver and his failure to effect prompt delivery of the Jaguar vehicle amount to a failure on his part to co-operate in the administration of the estate.  The aforesaid conduct, together with the failure to obtain the approval of the Official Receiver before entering into the tenancy agreement as aforesaid, in my view, also amount to unsatisfactory conduct after the commencement of the bankruptcy.  Undoubtedly, on his own admission, Mr Ying had also been in clear breach of the obligation to prepare annual reports of his earnings and acquisitions for the trustee of the past three years.

24.  Having so found, I am satisfied that the Official Receiver had made out a case under section 30A(4)(c), (d) and (h) of the Ordinance.  The legislative intent of the automatic discharge is to give a greater incentive to a bankrupt to co-operate with the trustee and to rehabilitate a bankrupt in order to enable him to resume a normal life in society, which rehabilitation should only be delayed as a consequence of a bankrupt’s own failings.  (In respect of this, see the Law Reports Commission in May 1995, paragraph 17.16, cited by Kwan J in the case of Re Chung Kwok Yin [2001]HKEC 684, as well as the case of Re Hui Hing Kwok [1999]3 HKC 683.)

25. In the present application, I am satisfied that Mr Ying’s conduct after the commencement of the bankruptcy is far from satisfactory.  He had chosen to ignore his obligations by offering, in my view, almost nil co-operation with the Official Receiver by shutting the Official Receiver out from any forms of contact with him.  This, together with Mr Ying’s failure to submit the annual report, constitute failings on his part which would justify a suspension of the discharge which Mr Ying would otherwise be automatically entitled to.

Period of suspension :relevant factors

26. Having come to this conclusion, I would next consider the period of suspension.  The legislation empowers me to order suspension for a period,in the present case, not exceeding four years.  There are currently no guidelines, statutory or otherwise, on the appropriate length of suspension.  Having had regard to the legislative intent of the regime governing automatic discharge, in my view, the court, in considering the appropriate length of suspension, may also have regard to the following factors:

(i) The grounds of objections

27. Section 30A(4) sets out eight different grounds upon which the Official Receiver can rely to object to an automatic discharge.  Some of thesegrounds obviously are more serious than the others.  A ground, for example, which is based on a bankrupt’s dishonesty or fraudulent conduct would, in some circumstances, warrant a much longer period of suspension than other grounds of objection.

(ii) The consequence of a bankrupt’s conduct 

28. A conduct which has the consequence, in my view, of prejudicing or impeding the administration of a bankrupt’s estate would be viewed with more severity than a conduct which, is only a technical breach of the grounds under section 30A(4) and has a little adverse consequence.

(iii) Explanations given by the bankrupt 

29. Good reasons, in my view, given by a bankrupt for his failure to comply with the statutory obligations, would in some circumstances, constitute good mitigating factors enabling a court to reduce the period of suspension in accordance with the principle set out in paragraph 24 above.

30. The above factors, however, are by no means exhaustive. Different facts of each case would require a court to take into account different factors.  The conduct being complained of may, in some cases, be required to be put into the perspective of, for example, the legislative purpose of the statutory regime governing automatic discharge as well as the total effect of a bankrupt’s non-compliance.

31. In the circumstances, in determining the appropriate period of suspension, I would have regard to the legislative purpose governing the automatic discharge as set out above as well as the various factors I consider relevant for the purpose of the present case.

Relevant considerations in this application

32. Having considered very carefully the evidence as contained in the Official Receiver’s reports and Mr Ying’s submissions, I find that the followings are the relevant matters which I will have regard to in coming to my decision on the period of suspension:

(i)    Mr Ying is an educated man. 

33. Before the bankruptcy order was made, Mr Ying was a successful businessman engaging in property investment involving substantial amounts of money.  He had, according to him, obtained a MBA in the United States and had previously vast experiencein project financing.  

34. In the circumstances, a man like Mr Ying, in my view, admittedly, was fully aware of his obligations.  However, from the reasons, which he gave in relation to his failure to keep in contact with the Official Receiver, I find that his failure to co-operate is more than an act of foolishness.  I do not accept Mr Ying’s submission that the reason for his failure to provide the Official Receiver of his updated address was due to the number of competing priorities he was facing after he was adjudged bankrupt. 

35. I find that up to the last hearing, Mr Ying was still far from being forthcoming in disclosing his current address.  His explanations regarding matters such as to whether he, in fact, lived with his family at the Kennedy property address and whether he was, in fact, also living with his family at the Kam Fai Building address in MacDonnell Road as well as the circumstances under which he entered into the tenancy agreement, in my view, are still woolly.

(ii) Reduction of the amount of assets recovered

36. As a result of Mr Ying’s failure to deliver the Jaguar vehicle promptly as requested by the Official Receiver has undisputedly led to a reduction of the amount of the assets, which the Official Receiver was able to recover.  I find Mr Ying’s explanation for his failure in delivering the Jaguar promptly on the ground of his wife’s refusal to co-operate is far from convincing.  An educated man like Mr Ying should have realised that his wife’s purported refusal to co-operate, even if it were true, could have been easily resolved by referring the matter to the Official Receiver who has a statutory duty to grab his assets for the purpose of administrating his estate.

(iii) Inability to verify the bankrupt’s earnings

37. Mr. Ying’s failure to submit annual reports of his earnings and acquisitions has impeded the ability of the Official Receiver to verify his income of the past three years.  Mr Ying informed this court that in the past three years he was unemployed and his main earnings came substantially from the commissions he earned from trips he made overseas in connection with the business deals which deals he arranged for example, in Mainland China and Indonesia.  As his earnings, according to Mr Ying, were largely paid in cash, there is a more compelling reason in my view that he should have reported all his earnings to the Official Receiver on a regular basis as required by the Ordinance. 

38. In the present application, however, despite his failure to submit the required reports, I ought to bear in mind that the Official Receiver, after having had the opportunity of perusing Mr. Ying’s annual report, has not reported a suspicion of any kind. 

39. All in all, therefore, having had regards to all the matters set out above, I come to the conclusion that the grounds I find having been proved leading to the suspension are not, however, the most serious types of conduct that justify a maximum period of suspension. On the other hand, I also bear in mind that the circumstances leading to Mr Ying’s suspension were substantially brought on by himself and that his explanations are tenuous.

40. The bankruptcy laws have clearly imposed stringent obligations on a bankrupt for a fair and smooth administration of his estate.  In the present case, Mr Ying has flaunted a number of these obligations. 

41. In deciding the appropriate length of the suspension, I accept that the lack of any evidence of any serious prejudice caused to the administration of his estate and the effort Mr. Ying made, albeit belated, to co-operate with the Official Receiver by submitting an annual report as soon as he was contacted by the Official Receiver in November last year constitute mitigating factors capable of reducing, to some extent, the length of the period of suspension.

Conclusion and Order

42. To conclude, having had regard to all the matters, which I have said above, I take the view that the appropriate length of suspension should be in the total period of 2 1/2 years.  All in all, I would therefore suspend the period of discharge for 2 1/2 years, running from 27 June 2004.