Case Detail

HCB000242E/1992

HCB 242/1992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 242 OF 1992

____________

	IN THE MATTER of Section 84 of the Bankruptcy Ordinance (Cap. 6)

	AND

	IN THE MATTER of the Trustee of the estate of Ng Yat Chi, a bankrupt (discharged) and a Creditor, Choy Bing Wing

____________

BETWEEN
	CHOY BING WING	Applicant

	AND

	OFFICIAL RECEIVER and Trustee of the Bankrupt NG YAT CHI (Discharged)	Respondent

____________

Coram: Deputy High Court Judge To in Chambers

Date of Hearing: 24 March 2003

Date of Decision: 24 March 2003

_____________

D E C I S I O N

_____________

Introduction

1. This is an application by the Respondent, the Official Receiver and Trustee of the Bankrupt Ng Yat Chi (Discharged) to make the Charging Order granted by Master J Wong on 27 January 2003 against the Applicant absolute.

2. The Applicant, Mr Choy, is one of the unsecured creditors of the Bankrupt. He was until 15 November 1993 one of the members of the committee of inspection when he and another member were removed pursuant to an order of the Court. The Applicant was not satisfied with the conduct of the Respondent with respect to the disposal of a major and valuable asset of the Bankrupt, namely, shares in a company known as Alljean Investments Limited (the "Shares"). The Shares were charged by the Bankrupt in favour of Sin Hua Bank Limited to secure his indebtedness. The Shares were sold by way of public tender offer held by Sin Hua Bank Limited on or about September 1995 at the price of $23.5 million. After deducting the indebtedness and costs, a small surplus left was paid over to the Respondent forming part of the estate of the Bankrupt.

3. On 13 December 2000, the Applicant issued a Notice of Motion supported by his two affirmations alleging that the sale of the Shares was a fraudulent transaction. He also made various complaints against the Respondent to the Commissioner of Police, the Commissioner of ICAC and the Secretary for Financial Services.

4. The Notice of Motion was heard before the Honourable Madam Justice Yuen (as she then was) on 8 February 2001. On 15 February 2001, Yuen J dismissed the Notice of Motion and made an order nisi that the Applicant do pay the Respondent's costs ("Order of 15 February 2001"). The Applicant issued a summons to contest the order nisi. After hearing the parties on 2 May 2001, Yuen J made an order that the order nisi dated 15 February 2001 be made absolute. She made a further order nisi that the Applicant do bear the Respondent's costs of the summons ("Order of 2 May 2001").

5. On 6 May 2001, the Applicant lodged a Notice of Appeal against both the Order of 15 February 2001 and the Order of 2 May 2001 out of time. On 22 May 2001, Master B Kwan sitting as Registrar of Civil Appeal ruled that the appeal filed by the Applicant was invalid. She held that leave was required to appeal against the Order of 15 February 2001 and Order of 2 May 2001 pursuant to s. 14(3)(e) of the High Court Ordinance, Cap. 4 and ordered the Applicant to pay the Respondent's costs of the hearing on 22 May 2001 assessed at $1,660 ("Order of 22 May 2001").

6. The Applicant appealed against that order. His appeal was heard before the Honourable Madam Justice Kwan on 7 June 2001. Kwan J dismissed the appeal with costs to the Respondent ("Order of 7 June 2001").

7. The Applicant appealed to the Court of Appeal against the Order of 7 June 2001. In a written judgment handed down on 24 May 2002, the Court of Appeal dismissed the appeal with costs to the Respondent ("Order of 24 May 2002").

8. On 3 June 2002, the Applicant filed an application for leave to appeal to the Court of Final Appeal. The application was dismissed by the Court of Appeal on 19 July 2002 with costs to the Respondent ("Order of 19 July 2002").

9. The Applicant then applied to the Court of Final Appeal for leave to appeal. On 17 September 2002, the Appeal Committee of the Court of Final Appeal refused leave and ordered the Applicant to pay the Respondent's costs ("Order of 17 September 2002").

10. Apart from the costs awarded under the Order of 19 July 2002 which have not yet been assessed, the Respondent's costs have been assessed at $443,206. On 2 December 2002, the Respondent's solicitor, Messrs Stephenson Harwood & Lo, issued a letter of demand to the Applicant demanding full payment in respect of the Allocaturs dated 27 August and 13 November 2002. In response, the Applicant replied by a letter of the same date making various other allegations but evincing no intention to settle the costs.

11. On 27 January 2003, Master J Wong ordered that unless sufficient cause to the contrary was shown by 5 March 2003, the Applicant's property in 18th Floor of Hong Kong Jewellery Building at 178-180 Queen's Road Central be charged with payment of the costs and interest.

The law

12. It is well settled that the question whether a charging order nisi should be made absolute is one for the discretion of the court and the burden of showing cause why a charging order nisi should not be made absolute is on the judgment debtor, i.e. the Applicant in the present case. The same considerations in making a garnishee order absolute are applicable in making absolute a charging order nisi. The court takes into account all the circumstances of the case and exercises its discretion as to do equity, so far as possible, to all the parties involved, the judgment creditor, judgment debtor, other unsecured creditors and others who have an interest in the property charged.

The Applicant's case

13. In his affirmation filed for the purpose of opposing this application, the Applicant repeated his allegation of impropriety against the Respondent in his capacity as the Official Receiver and Trustee of the Bankrupt which led to his unsuccessful litigation and the various costs orders. There is no need for me to repeat his allegations here. Those matters had been litigated and concluded with decisions against him. He had exhausted his avenues of appeals up to the Court of Final Appeal.

14. His ground for opposition is that those decisions were all wrong and were not final. He referred to Article 82 of the Basic Law and submitted that the power of final adjudication in the Hong Kong Special Administrative Region is vested in the Court of Final Appeal and not the Appeal Committee of the Court of Final Appeal which refused him leave to appeal and prevented his access to the Court of Final Appeal. Hence, he submitted that without a determination by the Court of Final Appeal, the decision of the Court of Appeal against him was not final. With all respect to the Applicant, he has misinformed himself about the law. The Appeal Committee is constituted under section 18 of the Hong Kong Court of Final Appeal Ordinance, Cap 484. Under subsection (2), the power of the Court of Final Appeal to hear and determine any application for leave to appeal shall be exercised by the Appeal Committee. Subsection (3) further provides that the decision of the Appeal Committee shall be final and not itself subject to appeal. Hence, when the Appeal Committee refused his leave to appeal that decision was final. It effectively affirmed the decision of the Court of Appeal. Hence, the Applicant had a final decision against him. He may not re-litigate those matters and raise those matters as grounds for opposing the charging order.

15. The Applicant is the sole beneficial owner of the property to be charged. There is no suggestion that anyone else has any beneficial interest or equities in the property. The Respondent is not aware of any creditors other than the Respondent. The Applicant has not disclosed the existence of any other creditors. In applying the law as I have stated above and having regard to all the circumstances of the case, I find that the Applicant has failed to discharge the burden of showing why the charging order nisi should not be made absolute.

Conclusion

16. Accordingly, I make an order that the Applicant's interest in the property known as 18th Floor of Hong Kong Jewellery Building at 178-180 Queen's Road Central do stand charged with the payment of $497,818.58 and interest on $444,866.00 at judgment rate from 17 January 2003 until payment and with the costs of this application.

	(Anthony To)
	Deputy High Court Judge

Representation:

Applicant appearing in person

Mr Sanjay A Sakhrani, instructed by Messrs Stephenson Harwood & Lo, for the Respondent

Please refer to CACV78/2003 for the relevant appeal(s) to the Court of Appeal.

HCB000242D/1992

HCB 242/1992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 242 OF 1992

____________

IN THE MATTER of Section 84 of Bankruptcy Ordinance (Cap.6)

and

IN THE MATTER of the Trustee of the estate of Ng Yat Chi, a bankrupt (discharged) and a Creditor, Choy Bing Wing

BETWEEN
	CHOY BING WING	Applicant

	AND

	OFFICIAL RECEIVER and Trustee of the Bankrupt NG YAT CHI (Discharged)	Respondent

____________

Coram: Hon Kwan J in Chambers

Date of Hearing: 7 June 2001

Date of Judgment: 7 June 2001

_______________

J U D G M E N T

_______________

1. This is an appeal from the ruling of Master B Kwan made on 22 May 2001 sitting as the Registrar of Civil Appeals. She ruled that the Notice of Appeal filed by the applicant Mr Choy Bing Wing was invalid because no leave to appeal was obtained as required under s.14(3)(e) of the High Court Ordinance, Cap.4. The relevant provisions read as follows:

"14. Appeals in civil matters
(1) Subject to subsection (3), an appeal shall lie as of right to the Court of Appeal from every judgment or order of the Court of First Instance in any civil cause or matter.
(3) No appeal shall lie -

(e) without the leave of the court or tribunal in question or of the Court of Appeal, from an order of the Court of First Instance or any other court or tribunal made with the consent of the parties or relating only to costs which are by law left to the discretion of the court or tribunal."

2. It would be convenient to set out the background matters first.

3. The applicant issued a Notice of Motion under s.84(1) of the Bankruptcy Ordinance, Cap.6 for an inquiry into the conduct of the Official Receiver and trustee of the estate of Ng Yat Chi, a bankrupt who has since been discharged, relating to the sale of the bankrupt's shares in a company known as Alljean Investment Limited.

4. On 15 February 2001, the Notice of Motion was dismissed by Yuen J who was not satisfied that there was sufficient substance in the allegations of misconduct of the Official Receiver to justify an inquiry under s.84. In dismissing the application, Yuen J made an order nisi that the applicant was to bear the Official Receiver's costs of the application.

5. On 5 March 2001, the applicant issued a summons to vary the order nisi as to costs. The ground of his application was that the court has no jurisdiction to order costs against him in an application under s.84. It was contended by the applicant that on the true construction of s.84(1), that provision has imposed an administrative function and not a judicial function on the court hearing the application. Hence, the judge would have no discretion to order costs against an unsuccessful applicant in an application under s.84(1).

6. Yuen J heard the application to vary the order nisi on 26 April 2001 and gave a decision on 2 May 2001. She rejected the applicant's submission on the construction of s.84(1). She held that the court has jurisdiction to award costs against the applicant and she exercised her discretion to award costs against the applicant having regard to r.32A of the Bankruptcy Rules which provides that under the general rule the costs of an application to the court which is opposed shall follow the event.

7. The order of 2 May 2001 which was drawn up was as follows:

"It is ordered that:
(1) the Order Nisi be made absolute, and
(2) there be an order nisi that the Applicant do bear the Respondent the costs of the Summons."

8. On 4 May 2001, the applicant filed a Notice of Appeal to appeal against the order of Yuen J on 2 May 2001. In the Notice of Appeal, he seeks an order that (1) the order of 2 May 2001 be set aside in its entirety and the appeal be allowed, and (2) the court do enquire into the complaint made by the applicant against the conduct of the Official Receiver under s.84(1) of the Bankruptcy Ordinance and take such action thereon as may be deemed expedient.

9. If by (2) above, the applicant seeks to appeal against the decision of Yuen J given on 15 February 2001, the time for filing a Notice of Appeal has expired. It has been clarified with the applicant at the hearing before Master Kwan that he does not wish to appeal against the decision on 15 February 2001. He only seeks to appeal against the order of 2 May which is in the terms as I have quoted above and that is still the position of the applicant today as I have ascertained from him.

10. Having thus clarified the matter with the applicant, the Master ruled in favour of the Official Receiver that the intended appeal is caught by s.14(3)(e) of Cap.4, so leave to appeal is necessary.

11. The applicant has submitted before the Master and before me that no leave is required, relying on the decision of the English Court of Appeal in Hellyer v. Sheriff of Yorkshire [1975] Ch 16, in which Rusell LJ stated at 24A-C as follows:

"It is not always essential to an ability to appeal against an order as to costs only that there should be leave when those costs are in the discretion of the judge. I refer in this connection to the notes in the Supreme Court Practice (1973) p.884 under the side legend 62/2/25 and 62/2/26. In the present case, if it should be held, as I would hold, that the judge was wrong on the central point of law in the case, it is, in my view, quite clear that there was no relevant material upon which he could properly have exercised his discretion as to costs by ordering the sheriff to pay the unsuccessful liquidators' costs of the originating motion; and in those circumstances, in my view, leave to appeal was not required. The particular order for costs would have been made without (in law) any material upon which it could be justified as an exercise of the judicial discretion over costs. For those reasons, we decided that this was a case in which the appeal lies without leave of the judge below."

12. In my judgment, the applicant's reliance on Hellyer is misconceived for the following reasons.

13. The relevant provision considered by the court in Hellyer (s.31(1)(h) of the Supreme Court of Judicature (Consolidation) Act 1925, replaced by s.18(1)(f) of the Supreme Court Act 1981) is different from s.14(3)(e) of the High Court Ordinance. Under the English Act, if leave to appeal from an order as to costs is refused by the court below, the dissatisfied party would have no means of redress. Our s.14(3)(e) is different, in that the party aggrieved may seek leave to appeal from either the court below or from the Court of Appeal.

14. This difference between our legislation and the English legislation is the subject of comments of the Court of Appeal in Ho Lee Man v. Wong Wai Kai [1993] 1 HKC 183, see 185-6 and 189. Under the English legislation, the Court of Appeal did not have power to give leave to appeal in this situation and it was for this reason that the English Court of Appeal fashioned a means of redress in the form of a principle known as the Scherer principle, named after the case of Scherer v. Counting Instruments Limited [1977] FSR 569. That principle was developed before the decision in Scherer was given (see the extract from 1993 Supreme Court Practice, para.59/1/31 as set out in Ho Lee Man at 184H-185A).

15. Under the Scherer principle, where the judge below has not exercised the discretion as to costs at all or has not exercised the discretion judicially, the Court of Appeal would have entertained an appeal as to costs notwithstanding that no leave has been obtained.

16. The dicta I have quoted earlier from Hellyer relied on by the applicant, which is to the effect that no leave to appeal is required if there is no material on which the judicial discretion to award costs could be exercised, is but a variation of the Scherer principle. As our Court of Appeal has commented in Ho Lee Man, there is no justification for importing the Scherer principle into Hong Kong as our legislation is very different.

17. For the above reasons, I rule that leave is required for the applicant to appeal from the order of 2 May 2001. As no leave to appeal has been obtained, the Notice of Appeal filed on 4 May 2001 is invalid, and the Court of Appeal has no jurisdiction to entertain the appeal.

18. The time limit for lodging an appeal from the order of Yuen J made on 2 May 2001 and sealed on 10 May 2001 has expired. What the applicant should do in this situation, if he is minded to press on with his appeal, is to make a composite application to a single judge of the Court of Appeal seeking (1) leave to appeal under s.14(3)(e) of Cap.4, and (2) an extension of time for appealing from the order of 2 May 2001 (see Hong Kong Civil Procedure para.59/14/4).

19. For the above reasons, I dismiss the appeal against the ruling of Master Kwan made on 22 May 2001 and I would hear the parties on costs.

	(S. Kwan)
	Judge of the Court of First Instance High Court

Representation:

The Applicant in person, present

Ms YeeLing Wan, of Messrs Stephenson Harwood & Lo, for the Respondent

Please refer to CACV1233/2001 for the relevant appeal(s) to the Court of Appeal.

HCB000242C/1992

HCB 242/1992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 242 OF 1992

----------------------------------------------------------------

IN THE MATTER of Section 84 of the Bankruptcy Ordinance (cap. 6)

and

IN THE MATTER of the Trustee of the estate of Ng Yat Chi, a bankrupt (discharged) and a Creditor, Choy Bing Wing

BETWEEN:
	CHOY BING WING	Applicant

	AND

	OFFICIAL RECEIVER and Trustee of the Bankrupt NG YAT CHI (Discharged)	Respondent

Coram: Hon Yuen J in Chambers

Date of hearing: 26 April 2001

Date of Decision: 2 May 2001

--------------

DECISION

--------------

1. This is an application by the Applicant to vary a costs order nisi against him that was made on 15 February 2001 upon the dismissal of his Notice of Motion issued under s.84 of the Bankruptcy Ordinance that there be an inquiry into the conduct of the Respondent in relation to the sale of the Bankrupt's shares in a company called Alljean Investment Ltd.

2. The application to vary the costs order nisi was made by way of summons dated 5 March 2001 and it was not apparent on the face of the summons what the Applicant's grounds were. There was no affirmation in support. It transpired at the hearing that the Applicant's contention was that this court had no jurisdiction to order costs against him.

Applicant's contention

3. The Applicant's contention was that s.84 BO provided that in the event of any complaint being made to the court by any creditor, the court shall inquire into the matter and take such action as it shall deem expedient. The Applicant says that therefore the hearing of the Notice of Motion were not "proceedings" and he likens his position to that of a complainant to the Police, or the Independent Commission Against Corruption, or the Equal Opportunities Commission. Therefore, he says, he could not and ought not to have been ordered to bear the costs of the hearing of the Notice of Motion.

4. The Applicant's contention raises an interesting question on the interpretation of s.84 BO, enacted at the same time as s.83 BO.

Origins of s.83 and s.84 Bankruptcy Ordinance

5. The reference note to s.83 BO shows that it was based on s.80 of the English Bankruptcy Act 1914, and that s.84 BO was based on s.81 of the same Act. However, when the sections in the Act and the Ordinance are compared, it is clear that when s.84 of the BO was enacted in Hong Kong, important changes were made which have ramifications on the course open to a creditor when he is dissatisfied with a trustee in bankruptcy, which in turn has costs implications.

Section 80 Bankruptcy Act

6. Section 80 of the Bankruptcy Act provided:

"If the bankrupt or any of the creditors, or any other person, is aggrieved by any act or decision of the trustee, he may apply to the court, and the court may confirm, reverse, or modify the act or decision complained of, and make such order in the premises as it thinks just."

7. Pausing here, it is noted that this section deals with the situation where (i) there was an "act or decision" of the trustee in bankruptcy and (ii) any person, e.g. a creditor or the bankrupt, is aggrieved by that act or decision complained of.

8. The aggrieved person can then apply to the Court directly, and the Court considers the act or decision in question and makes an order on it.

9. It is clear from the English cases that where the applicant, whether he is the bankrupt (as in In re a Debtor ex p. The Debtor v Dodwell [1949] 1 Ch 236) or a creditor ( as in Ex p Lloyds (1882) 47 L.T. 64, Leon v York-o-matic Ltd [1966] 1 WLR 1450, 1454) fails in the application, the courts have never doubted that they have jurisdiction to order costs against him, and they have in practice exercised that jurisdiction against a failed applicant.

Section 81 Bankruptcy Act

10. Section 81 of the Act provided a different route for a dissatisfied creditor in different circumstances. It provided:

"(1) The Board of Trade shall take cognizance of the conduct of trustees, and, in the event of any trustee not faithfully performing his duties, and duly observing all the requirements imposed on him by statute, rules or otherwise, with respect to the performance of his duties, or in the event of any complaint being made to the Board by any creditor in regard thereto, the Board shall inquire into the matter and take such action thereon as may be deemed expedient.
(2) The Board may at any time require any trustee to answer any inquiry made by them in relation to any bankruptcy in which the trustee is engaged, and may, if the Board thinks fit, apply to the court to examine on oath the trustee or any other person concerning the bankruptcy.
(3) The Board may also direct a local investigation to be made of the books and vouchers of the trustee" [my emphasis]

11. The first thing to be noted in this section is that the jurisdiction to inquire into the trustee's "conduct" is vested in the Board of Trade, not the Court.

12. Secondly, the Board's jurisdiction to inquire is engaged in two possible situations:-

(a) where a trustee has not performed his duties and observed the requirements imposed by those duties ("Situation A"), or
(b) a complaint is made by a creditor ("Situation B").

13. In this respect, it is to be noted that under the Bankruptcy Act 1914, the Board of Trade had a wide range of powers and duties. For instance, under s.92 BA, it is to be provided with the accounts of trustees in bankruptcy. Accordingly, the Board could itself become aware of a failure on the part of a trustee, i.e. Situation A.

14. Alternatively, an inquiry would also be launched in Situation B if a complaint were made by a creditor, although not by anyone else.

15. Thirdly, the Board must inquire into the matter if a complaint were made by a creditor, but it would be able to decide for itself how far the inquiry needed to go. Sections 81(2) and (3) set out the powers of the Board in the process of making its inquiry.

Separate routes

16. It would thus be seen that in the Bankruptcy Act 1914, sections 80 and 81 were completely different routes (available to different persons), one involving the Court in a judicial procedure (s.80) and the other involving the Board of Trade in an administrative procedure (s.81).

17. A complaining creditor choosing to proceed along the s.80 route would be at risk as to costs if his complaint failed, but one choosing to proceed along the s.81 route would not, because no judicial proceedings are involved, only the Board's administrative acts. There might be some costs incurred if the Board decided to apply to the Court under s.81(2) for an order to examine the trustee on oath, but even then, the complaining creditor would not be at risk, because the decision to apply to Court would be the Board's, not his.

Hong Kong position

18. The Hong Kong position, although modelled on the Bankruptcy Act, is however quite different because of changes made in Hong Kong to s.81 of the Bankruptcy Act.

Section 83 Bankruptcy Ordinance

19. Section 83 is word for word the same as s.80 BA. Thus, anyone (including a creditor) who is dissatisfied by any particular "act or decision" of the trustee in bankruptcy can apply to the Court to reverse or modify it. A failed applicant would risk having to bear the costs of the application.

Section 84 Bankruptcy Ordinance

20. Section 84 BO is different from s.81 BA. The changes are shown below:-

"(1) The Board of Tradecourt shall take cognizance of the conduct of trustees who shall act in a fiduciary capacity and deal with property under their control honestly, in good faith, with proper skill and competence and in a reasonable manner, and, in the event of any trustee not faithfully performing his duties, and duly observing all the requirements imposed on him by ~~statute~~Ordinance, rules or otherwise, with respect to the performance of his duties, or in the event of any complaint being made to the ~~Board~~court by any creditor, the Official Receiver, the bankrupt or any other person in regard thereto by notice duly served on the trustee at least 8 clear days before the date of hearing, the ~~Board~~court shall inquire into the matter and take such action thereon as may be deemed expedient.

(1A) Without limiting the generality of the duties imposed on a trustee by subsection (1), in realizing the assets of a bankrupt's estate, it shall be the duty of a trustee to take all reasonable care to realize the best price reasonably obtainable in the circumstances.

(2) The ~~Board~~court may either of its own motion or on the application of the Official Receiver at any time require any trustee to answer any inquiry made by ~~them~~it or him in relation to any bankruptcy in which the trustee is engaged, and may ~~if the Board thinks fit, apply to the court to~~ examine on oath the trustee or any other person concerning the bankruptcy.
(3) The ~~Board~~court may also direct an~~local~~ investigation to be made of the books and vouchers of the trustee.
(4) Where on an application under this section the court is satisfied --
(a) that the trustee has misapplied or retained or become accountable for any money or other property comprised in the bankrupt's estate; or
(b) that a bankrupt's estate has suffered any loss in consequence of any misfeasance or breach of the fiduciary or other duty by a trustee in the carrying out of his functions,

the court may order the trustee, for the benefit of the estate, to repay, restore or account for money or other property (together with interest at such rate as the court thinks just) or, as the case may require, to pay such sum by way of compensation in respect of the misfeasance or breach of fiduciary or other duty as the court thinks just, and liability under this section is without prejudice to any liability arising apart from this section."

21. Subsection (4) is based upon s.304 Insolvency Act 1986, but even without reference to that subsection, the changes to s.81 BA are substantive.

Complaint under s.84 turned into legal proceedings

22. First, the Board of Trade in the United Kingdom is replaced, not by an administrative official of the government here, but by the Court.

23. Secondly, the complaint can be made by any of the same persons as in s.83 (with the addition of the Official Receiver) whereas in the English scheme, only a creditor can complain to the Board of Trade. This extends the scope and thus the number of persons who would be eligible to make a complaint against a trustee.

24. Thirdly, the complaint is made by way of service of a notice on the trustee at least 8 clear days before the date of hearing. Thus, there is no "vetting" process that the Court itself can perform upon receiving the complaint, whatever its nature or whatever its grounds. The court has no discretion to decide not to hold a hearing.

25. In my view, it is clear from the above changes that in so modifying s.81 BA, the legislature here has turned a complaint from what was originally an administrative procedure in England undertaken by a government arm into legal proceedings undertaken in Court.

Court has jurisdiction to award costs against complainant applicant

26. All legal proceedings in court have costs implications unless there is clear language to the contrary. There is nothing express in s.84 that exempts a complainant applicant from the risk of having to bear costs. The fact that the word "complaint" is used in s.84 does not imply any exemption from costs, because the same word (in "act or decision complained of") is used in s.83 (i.e. s.80 BA) and costs orders have been made in the English cases under that section.

27. Further, it cannot be said that such a complaint is no different from a complaint to the police or to the ICAC. In those situations, as indeed in the case of a complaint to the Board of Trade under s.81 BA, the authority can consider the complaint, and take such action (or refrain from taking any action) as it deems expedient depending on the nature or gravity of the complaint. If, for instance, the complaint is trivial, the trustee need not be troubled at all and would therefore not incur costs.

28. That is not the situation with a complaint under s.84 BO. A hearing is definite and assumed. The trustee is served with the notice, so it cannot be an ex parte hearing. All inter partes hearings have costs implications for both parties, and so it would be surprising if the court hearing it had no jurisdiction to award costs.

29. I should add as a matter of completeness that the reference in s.84(2) to the Court on its own motion or the Official Receiver requiring any trustee to answer any inquiry would cater for Situation A, i.e. where the Court becomes aware of a trustee's failure to perform his duties, e.g. the regular provision of trustee's accounts, and acts either directly or through the Official Receiver. It would not be apposite to a complaint by a creditor under Situation B, because as noted above, the complainant serves the trustee with notice of the hearing at the very beginning of the complaint process.

30. Moreover, it cannot be said that construed as above, s.84 would then be no different from s.83. Section 83 deals with specific "acts or decisions" which would be confirmed, reversed or modified. Section 84 deals with "conduct" which would include a more amorphous course or state of affairs.

31. It is therefore clear from the true construction of s.84 that the court has jurisdiction to award costs against a complainant applicant. It would be surprising if that were not so, because the scope of persons who can complain under s.84 is unrestricted and a hearing is unavoidable, whatever the grounds of the complaint. It cannot be right that a trustee would invariably have to bear the costs personally, or that the estate would have to do so.

Discretion

32. Finally, rule 32A Bankruptcy Rules provides that the general rule is that the costs of an application to the court which is opposed shall follow the event. Nothing that has been said has persuaded me to deviate from the general rule. It may be that the applicant was not aware that there would be costs implications in an application under s.84 BO, as he thought it would be similar to a complaint to the police or the ICAC. However, that is not sufficient ground to warrant a different order as to costs.

33. Accordingly, I would order that the order nisi be made absolute. As for the costs of the application to vary, I would give an order nisi that they follow the event, i.e. that the applicant bear the costs.

	(MARIA YUEN)
	Judge of the Court of First Instance High Court

Representation:

Applicant Mr Choy Bing Wing in person

Mr Malcolm Kemp of Stephenson Harwood & Lo for Respondent

Please refer to CACVXXX/2011 for the relevant appeal(s) to the Court of Appeal.

Please refer to CACV1233/2003 for the relevant appeal(s) to the Court of Appeal.

Please refer to CACV1233/2001 for the relevant appeal(s) to the Court of Appeal.

HCB000242B/1992

HCB 242/1992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDING NO. 242 OF 1992

____________

IN THE MATTER of Section 84 of Bankruptcy Ordinance (Cap. 6)

and

IN THE MATTER of the Trustee of the estate of Ng Yat Chi, a bankrupt (discharged) and a Creditor, Choy Bing Wing

BETWEEN
	CHOY BING WING	Applicant

	AND

	OFFICIAL RECEIVER and Trustee of the Bankrupt NG YAT CHI (Discharged)	Respondent

____________

Coram: Hon Yuen J in Chambers

Date of Hearing: 8 February 2001

Date of Decision: 15 February 2001

_______________

D E C I S I O N

_______________

1. This is an application by Mr Choy Bing Wing ("Choy") a creditor of Ng Yat Chi ("Ng"), who was adjudicated bankrupt in 1992 but who has since been discharged from bankruptcy. The present application before me is made under section 84 of the Bankruptcy Ordinance which provides as follows:-

"84. Control of court over trustee
(1) The court shall take cognizance of the conduct of trustees, who shall act in a fiduciary capacity and deal with property under their control honestly, in good faith, with proper skill and competence and in a reasonable manner, and in the event of any trustee not faithfully performing his duties and duly observing all the requirements imposed on him by Ordinance, rules or otherwise with respect to the performance of his duties, or in the event of any complaint being made to the court by any creditor, the Official Receiver, the bankrupt or any other person in regard thereto by notice duly served on the trustee at least 8 clear days before the date of hearing, the court shall inquire into the matter and take such action thereon as may be deemed expedient.

(1A) Without limiting the generality of the duties imposed on a trustee by subsection (1), in realizing the assets of a bankrupt's estate it shall be the duty of a trustee to take all reasonable care to realize the best price reasonably obtainable in the circumstances.
(2) The court may either of its own motion or on the application of the Official Receiver at any time require any trustee to answer any inquiry made by it or him in relation to any bankruptcy in which the trustee is engaged and may examine on oath the trustee or any other person concerning the bankruptcy.
(3) The court may also direct an investigation to be made of the books and vouchers of the trustee.
(4) Where on an application under this section the court is satisfied -

(a) that the trustee has misapplied or retained, or become accountable for, any money or other property comprised in the bankrupt's estate; or
(b) that a bankrupt's estate has suffered any loss in consequence of any misfeasance or breach of fiduciary or other duty by a trustee in the carrying out of his functions,

the court may order the trustee, for the benefit of the estate, to repay, restore or account for money or other property (together with interest at such rate as the court thinks just) or, as the case may require, to pay such sum by way of compensation in respect of the misfeasance or breach of fiduciary or other duty as the court thinks just, and liability under this section is without prejudice to any liability arising apart from this section."

2. The trustee in bankruptcy here is the Official Receiver. Mr Choy's application is for an order that the Official Receiver do disclose to the Applicant and the Court all relevant documents connected to the sale of a company called Alljean Investment Ltd before and after the sale and that an inquiry be made by this Court of the conduct of the Official Receiver over the said transaction after disclosure of the relevant documents as sought.

3. At the hearing of the application, Mr Choy formulated the documents that he was seeking from the Official Receiver in the following terms:-

"All documents exchanged between the Official Receiver of the one part, and of the other part the Sin Hua Bank, its agents, valuers, potential buyers and enquirers, concerning the purchase of Alljean's shares, from 1992 to date."

Background

4. Before I consider the application, it is necessary to first set out the background facts as I understand them as the matter has a long and complicated history.

Luk Yu Building

5. In July 1990, a building in Central now known as the Luk Yu Building was owned by a company called Max Share in which Mr Ng had 49% of the shares. The tenant of part of the Luk Yu Building was the Luk Yu Tea House.

6. Max Share wanted to sell the property. Mr Ng and the Tea House were interested in acquiring the building. For these purposes, a company called Wealth Burden Ltd was formed, with each party holding half of its shares.

Alljean

7. Mr Ng's half of the shares in Wealth Burden were held by a company in the name of Alljean. Mr Ng was the beneficial owner of all the shares in Alljean, although the shares were registered in the names of his nominees.

8. So it was that in September 1990, Alljean acquired 50% of the shares of Wealth Burden, and Wealth Burden bought the Luk Yu Building at a price of $73 million (it would appear that a mortgage had been obtained from a bank for the purchase of the property).

9. It is apparently the case that it is not disputed by the parties to the present application that for the purpose of Alljean's contribution to the purchase, loans were made to Alljean by Mr Ng or by companies controlled by him. The Official Receiver's position is that the loans made by or on behalf of Mr Ng to Alljean amounted to $10.5 million. That appears to be now disputed by Alljean which, as would appear later, has fallen into other hands.

Indebtedness to bank

10. In 1991, if not before that, Mr Ng was indebted to the Sin Hua Bank ("the Bank"). He was liable on personal loans made to him and also as guarantor of debts incurred by companies controlled by him.

11. As security for these liabilities to the Bank, Mr Ng through his nominees, the registered shareholders of Alljean, charged all the shares in Alljean to the Bank on 13 March 1991. (I have not been shown copies of the document evidencing the establishment of this security, but it appears to be accepted by all parties to the present application).

12. At the same time, Alljean itself charged its shares in Wealth Burden in favour of the Bank by deed, and it also gave a debenture in favour of the Bank of all its assets and undertakings to secure Mr Ng's debts both personally and incurred by his companies. (Again, I have not seen a copy of these documents but I have seen a reference to them in a letter from the Official Receiver to Simmons and Simmons in July 1993.)

13. So the effect was that Mr Ng was liable to repay the Bank, and Alljean was also liable to repay the same debt to the Bank as a "guarantor". The question in the present application centres upon who eventually repaid that loan:- whether Alljean or Mr Ng.

Transfer of shares in Alljean

14. At the time the shares in Alljean were charged in 1991, transfer forms were provided to the Bank to enable the Bank to transfer the shares in Alljean into the names of its nominees.

15. In April 1992, the shares in Alljean were transferred into the names of the Bank's nominees.

Mr Ng's bankruptcy

16. In August 1992, Mr Ng was adjudicated bankrupt. The Official Receiver was made the trustee in bankruptcy. Mr Choy was a member of the Committee of Inspection from June 1993 until he was removed in December 1993 pursuant to an application to the Court made by the Official Receiver.

17. By 31 December 1994, the indebtedness of Mr Ng and his companies to the bank was $33.11 million. One of the assets of his estate was his beneficial interest in the shares of Alljean, which shares had of course been charged to the Bank.

Sale of Alljean shares

18. In August 1995 the Bank invited a public tender for the purchase of the shares in Alljean. This invitation to tender was known to Mr Choy and indeed he has said that he tried to interest his friends who were developers to acquire those shares. However, his friends were not interested in tendering because of the existence of an exceptional item in Alljean's accounts, being a provision for doubtful debts of $33 million "made in respect of an irrecoverable amount due from a third party [i.e. Mr Ng] which was secured by the company's assets [namely the shares in Wealth Burden]."

19. In his submission to me in reply to that of Mr Kwok, Mr Choy complained about the Official Receiver permitting that provision to appear in Alljean's financial statements. It has not been explained to me by Mr Choy why he considered that the Official Receiver had any control over the contents of Alljean's financial statements, when the directors of Alljean had been appointed by the Bank's nominees and not by the Official Receiver.

20. On 25 October 1995, the public tender closed. The highest tender was made by a company called Lintax. The sale and purchase agreement entered into between the Bank through its nominees, the registered shareholders of Alljean, and Lintax were for the sale of Alljean's shares free from encumbrance.

21. The consideration for the purchase of the shares in Alljean was $35.5 million only, not $70 million or $100 million reported in the press according to Mr Choy.

22. At one stage it appeared to me that Mr Choy was alleging that the consideration was $35.5 million plus a separate amount of $33 million paid to the Bank. However Mr Choy has accepted that according to the sale and purchase agreement (a copy of which he has obtained since January 2001 if not before) the entire consideration paid was $35.5 million. I have not been given a copy of this sale and purchase agreement but Mr Choy accepts that (1) the entire consideration stated was $35.5 million and (2) the shares in Alljean were to be sold free from encumbrances.

23. Since the shares of Alljean were to be sold free from encumbrances, and since the Alljean shares had been charged by Mr Ng through his nominees to secure repayment of his liabilities to the Bank, and since Mr Ng's liabilities to the Bank were about $33.11 million, the Bank had to be repaid that amount first to release that charge. So it was that according to the accounts provided by the Bank's solicitors to the Official Receiver, of the $35.5 million paid by Lintax for the Alljean shares, there was only a surplus of $489,000 odd for payment to the estate of the Bankrupt, after repayment of the Bank to release the charge and payment of the expenses of sale of the Alljean shares. This was reported to the creditors by the Official Receiver in January 1996.

24. I note at this juncture that the return of a surplus of only $489,000 odd from the Bank to the estate of Mr Ng could only mean that the shares in Alljean had been sold after deducting from the proceeds of the sale the amount due from Mr Ng to the Bank. In other words, the debt of $33 million had been repaid by Mr Ng, and not by any other person or company.

Mr Choy's complaint of misfeasance

25. Mr Choy was unhappy with the small amount of the surplus. He has made various allegations against certain members of the Official Receiver's office based on his estimate of a much higher value of Luk Yu Building in 1995, but no evidence has been placed before me on this application to substantiate any of the allegations of collusion.

26. Mr Choy's present application arises from a position taken by Alljean. Since the end of 1995, Alljean has been controlled by Lintax. In 1996 the Official Receiver, as the trustee in bankruptcy of Mr Ng, started an action against Alljean for repayment of the $10.5 million lent by Mr Ng to Alljean as referred to above. This has been resisted by Alljean, which has alleged that when Lintax acquired Alljean, it was not aware that Alljean was still under this liability to Mr Ng's estate. Alljean has also made various contentions of unjust enrichment against the estate of Mr Ng and of subrogation, and of subordination of rights. I should not comment on the merits or otherwise of these contentions as Alljean is not a party to the present application, and the action between the Official Receiver and Alljean under the 1996 Action has yet to be determined.

Unfiled affirmation of Mr Ling

27. Mr Choy's present allegation of misfeasance against the Official Receiver stems from an unfiled affirmation of Mr Ling Chi Kin made on behalf of Alljean. In an affirmation dated 14 October 2000 which was apparently shown to the Master but which has never been filed, Mr Ling has alleged that it was Alljean which had repaid the debt for and on behalf of Mr Ng, so that Mr Ng's estate has become liable to repay Alljean $33.11 million, a sum which would extinguish the amount claimed by the Official Receiver against Alljean.

28. The audited accounts of Alljean for the year ended 31 December 1995 show, under Current Liabilities, the following items -

(1) Under accounts payable for the year ended 31 December 1994, there was an amount of $33.11 million. That presumably refers to Alljean's undertaking of liability to repay Mr Ng's debts under the documents executed by Alljean in 1991.
For the year ended 31 December 1995, that amount had been reduced to nil. Again, that can be understood because the Bank had been repaid by 31 December 1995.
(2) There is another item for the year ended 31 December 1995 in the sum of $33.8 million referred to as "amount due to shareholders", in other words amount due to Lintax. This seems to suggest that Lintax had lent $33.8 million to Alljean. The financial statements do not show what that loan was for. In the light of Mr Ling's affirmation which alleged that Alljean had repaid the debt for and on behalf of Mr Ng, Mr Choy suggests that that $33.8 million must have been lent by Lintax to Alljean, for Alljean (not Mr Ng) to repay the Bank.

29. If it was Alljean that had repaid the debt, then clearly the Bank should not have deducted another sum of $33 million from the proceeds of sale before paying the surplus to Mr Ng's estate, and the Official Receiver would of course have to pursue the balance from the Bank. Any refusal or neglect to do so may be so serious as to constitute misfeasance.

Filed affirmation of Ling

30. However it is far from clear to me at this stage that that was indeed the case. The allegation that Alljean repaid the debt for Mr Ng is missing from Mr Ling's later affirmation which was filed in January 2001. (I would note that there was also an allegation that Alljean had itself paid for its own shares in the unfiled affirmation, that has since also been omitted).

31. There is no evidence e.g. in the way of cheques, or bank statements, or vouchers, or journal entries, to the effect that the debt to the bank of $33.11 million was repaid by Alljean in its capacity as guarantor, so to speak, of Mr Ng's debts to the Bank.

32. There is one sentence in para. 20 of Mr Ling's affirmation that says that "in effect" Alljean had settled the indebtedness owed by Mr Ng's group of companies, but there is, as I have said, no evidence that any such amount has been paid by Alljean to the Bank, as opposed to that by reason of the sale of the Alljean shares to Lintax, the debt has been extinguished.

33. I have noted that Alljean has not filed any proof of debt against Mr Ng's estate. If in fact Alljean as guarantor had repaid the debt to the Bank, thereby releasing Mr Ng from his liability to the Bank, one would expect Alljean to have lodged a proof of debt.

Conclusion

34. Therefore, before there is cogent evidence that a sum of $33.8 million was lent by Lintax to Alljean which was used by Alljean to settle Mr Ng's debt to the Bank (a matter that awaits the determination by the Court in HCA 9515/96), there is nothing that points to any misfeasance of the Official Receiver in accepting payment of only $489,000 odd from the Bank. In Re Gault; Gault v. Law [1981] 57 FLR 165, the Federal Court of Australia discussed the principles to be applied in an application for an enquiry into the conduct of a trustee under the Bankruptcy Act of 1966. It was held by the Federal Court that a court is not obliged to order an enquiry unless it is satisfied that sufficient grounds in support of an application to hold an enquiry have been made out. In considering whether to order an enquiry, the court may take into account (a) whether substantial allegations are made of misconduct in the administration of the trustee, (b) that the applicant has other remedies which are open to him to pursue, and (c) the extent of any delay and the effect of any such delay upon any enquiries.

35. In the present case, as I have indicated above, the evidence before me at this stage does not persuade me that there is sufficient substance in the allegations of misconduct on the part of the Official Receiver. Accordingly, I would dismiss the Notice of Motion. I will make an order nisi that the costs follow the event, i.e. that the Applicant bear the costs of the Official Receiver.

	(MARIA YUEN)
	Judge of the Court of First Instance High Court

Representation:

Mr Choy Bing Wing, in person

Mr S H Kwok, instructed by Stephenson Harwood & Lo, for Official Receiver & the Trustee of the Bankrupt

Remarks:
On an application by the Applicant to vary a costs order, Hon Yuen J gave an order nisi that the Applicant bear the costs and the order nisi be made absolute. Please refer to HCB000242C/1992.

HCB000242A/1992

HCB242/92

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS

NO 242 OF 1992

---------------------

RE:	NG YAT CHI

Ex Parte:	THE OFFICIAL RECEIVER

---------------------

Coram: Madam Justice Yuen in Court

Date of hearing: 12 June 1999

Date of Handing Down of Decision: 11 November 1999

-------------------

D E C I S I O N

-------------------

1. This case deals with the new provisions in the Bankruptcy Ordinancecap.6 on discharge of bankrupts. It raises a novel point which is interesting and not easy.

2. Before I set out my understanding of the legislation and its application to the facts in this case, it may be helpful to briefly describe the new statutory scheme.

Discharge of bankrupts

3. Ordinance No. 76 of 1996 amended the Bankruptcy Ordinance to introduce a scheme whereby bankrupts could be discharged. The main provisions are sections 30, 30A, 30B and 30C.

4. Although these provisions came into operation only on 1 April 1998, they apply to bankruptcy orders made before that date [s.30C(1)]. Accordingly there were transitional provisions, and the present case is one falling within the transitional provisions [s.30C(2)].

Modes of discharge

5. The statutory scheme comprises 2 main modes of discharge:-

(1) discharge by expiration of time, or "automatic discharge" [s.30A]; and
(2) discharge upon the bankrupt's application, or "early discharge" [s.30B].

6. The present case deals with automatic discharge, and the interaction of s.30A and s.30C.

Automatic discharge by expiration of time

7. Automatic discharge allows bankrupts to be discharged simply by the expiration of a period of time, called the "relevant period" in s.30A.

8. In the case of persons made bankrupt for the first time ("1st- time" bankrupts), the relevant period is 4 years from the commencement of the bankruptcy. For "subsequent" bankrupts, the period is 5 years. (As the Bankrupt in the present case is a "1st-time bankrupt", I have excluded references to subsequent bankrupts in this Decision).

9. In general, the relevant period starts with the day on which the bankruptcy order is made, and it continues until the 4th anniversary of that date, when the bankrupt is automatically discharged. That is the scheme for, as it were, "uneventful" bankruptcies.

Variations on the relevant period

10. However, there are (at least) 3 variations on this theme which apply in special circumstances.

(1) Relevant period not commence to run

11. The 1st variation is where the relevant period does not commence with the day of the bankruptcy order. This is the case under s.30A(10)(a), which provides that the relevant period shall not commence to run, in circumstances relevant to the bankrupt's whereabouts which I will discuss later. It is important to note that this provision is mandatory.

(2) Relevant period not continue to run

12. The 2nd variation is where the relevant period does not continue to run within the 4 years. This is the case under s.30A(10)(b), which is again related to the Bankrupt's whereabouts after the commencement of bankruptcy. This provision is also mandatory.

(3) Suspension of relevant period

13. The 3rd variation is where a Court orders that the relevant period ceases to run or in other words, is suspended [s.30A(3)].

14. If the trustee in bankruptcy or a creditor considers for example, that the bankrupt had failed to co-operate in the administration of his estate, or that the bankrupt's conduct has been unsatisfactory, he may lodge an objection to the bankrupt's automatic discharge[s.30A(4)].

15. This is done by making application to the Court [s.30A(5) and (6)]. A number of rules have been put in place in the Bankruptcy Rules to regulate this procedure.

16. The Court then considers whether the objection has been made out on any of the grounds in s.30A(4). If it is so satisfied, it may order that the relevant period may "cease to run" for a period.

17. For a 1st - time bankrupt, this suspense period is a maximum of 4 years; for subsequent bankrupts, the suspense period is a maximum of 3 years.

18. When these periods are considered with the 4/5 year "pre-suspense" relevant period, the arithmetic shows that the legislature intended all bankrupts to be discharged, at the latest, 8 years after the commencement of bankruptcy. This is shown by the fact that a subsequent bankrupt whose conduct has been unsatisfactory can have his relevant period suspended for only 3 years, less than that for a 1st-time bankrupt.

19. It is important to note that unlike the previous 2 variations, the power of the Court to suspend the relevant period is discretionary.

Old bankruptcies - deemed discharge on 1.4.1999

20. As I have said, the statutory scheme came into operation on 1 April 1998 but applied to bankruptcy orders made before that date.

21. The legislature thus had to deal with a class of "old" bankrupts, persons who had been made bankrupt several years ago, for whom automatic discharge 4 years after the date of the adjudication of bankruptcy could not apply - because that period had already expired before 1 April 1998 (say, a person adjudicated bankrupt in 1992).

22. Section 30C(2) was enacted to apply to these persons, specifically, 1st - time bankrupts adjudicated bankrupt before 1 October 1994, and subsequent bankrupts adjudicated bankrupt before 1 October 1993.

23. For these bankrupts, s.30C(2) does not refer to any "relevant period" at all. It simply "deems" them to be discharged from bankruptcy on 1 April 1999.

24. One might infer from this that jurisprudentially, deemed discharge is different from automatic discharge. However, since s.30 of the Ordinance seems to recognise only 2 modes of discharge: "automatic discharge" under s.30A or "early discharge" under s.30B, and there is no reference to "deemed discharge" under s.30C(2), it would appear that the legislature regarded deemed discharge as only a sub-mode of automatic discharge.

Deemed discharge subject to section 30C(2)

25. However the legislature obviously intended that "old" bankrupts should not be discharged without any consideration of their affairs and conduct. Section 30C(2) provides:-

"Where a bankrupt -

(a) has not previously been adjudged bankrupt and the bankruptcy order was made not less than 42 months or
(b) has previously been adjudged bankrupt and the current bankruptcy order was made not less than 54 months

before sections 30 to 30B came into operation, he shall be deemed to be discharged from bankruptcy 12 months after the day this section comes into operation [i.e. on 1 April 1999] unless, during that 12 month period, the trustee or a creditor files an objection on a ground set forth in section 30A(4)(a) to (h), in which case section 30A applies and the court shall deal with the matter as it sees fit." [emphasis added]

Issue

26. The issue for consideration in the present case is whether the words italicized above meant that all the 3 variations discussed above (i.e. the relevant period not commencing to run [s.30A(10)(a)]; the relevant period not continuing to run [s.30A(10)(b)]; and suspension of the relevant period [s.30A(3]) apply, or whether none or some or one of them. Before I examine the issue, I should recount the relevant facts.

Date of adjudication of bankruptcy - 28 August 1992

27. The Bankrupt in the present case was adjudicated bankrupt on 28 August 1992, and the Official Receiver (OR) became trustee in bankruptcy.

Arrest of Bankrupt in Hong Kong - 4 November 1996

28. According to the Bankrupt's own evidence, he had left Hong Kong on 8 February 1992 for the Mainland. In October 1992, a warrant was issued in Hong Kong for his arrest, presumably on the request of the OR.

29. However, it was not until 4 November 1996 that the staff of the OR first found the Bankrupt in Hong Kong. The date of the Bankrupt's return to Hong Kong prior to 4 November 1996 is unknown, although he was in Hong Kong on 10 June 1996 when he filed a petition in person in CW321/96. There is evidence that the Bankrupt had a diplomatic passport, so Immigration Department records cannot assist.

Whereabouts of Bankrupt between August 1992 and November 1996

30. It is not disputed that the Bankrupt never presented himself to the OR in Hong Kong during this period. This was so notwithstanding the warrant for his arrest in Hong Kong throughout this period.

31. The Bankrupt says in his Affirmation that he "was prevented from returning to Hong Kong before March 1995" due to health problems (although he did travel to the United States and Canada on a few occasions during this period) .

32. It is to be noted that the Bankrupt has not actually said in his Affirmation that he did return to Hong Kong in March 1995. The Affirmation of Choy Bing Wing says that he met the Bankrupt in Macau in March 1995. Further, in a letter dated 22 April 1995, the Bankrupt informed the OR that he "may consider returning to Hong Kong", inferring that he was not in Hong Kong at the time. In a letter the next month, the Bankrupt again informed the OR that "I shall not return to Hong Kong unless the trustee who is not worthy of trust is replaced".

33. I note that Choy Bing Wing has in his Affirmation deposed to his having informed the OR that the Bankrupt "would then stay in Hong Kong, Macau and Zhuhai but he could not have a permanent address because he would stay with his son or daughter in Hong Kong, friends in Macau, and friends and relatives in China, from time to time." However the periods of such stays in Hong Kong are not deposed to.

34. Indeed, nowhere in his Affirmation does the Bankrupt actually say that he was in Hong Kong in the period between August 1992 and 4 November 1996 (although I note he was obviously in Hong Kong on 10 June 1996). Nor does he say that he notified the OR of his return to Hong Kong. The fact that he may have communicated with the OR either by correspondence (without giving any Hong Kong address) or through other persons in Hong Kong is not to the point.

Conclusion of facts

35. That being the case, the conclusion that I have to draw from the available evidence is that the Bankrupt was not in Hong Kong between August 1992 and 4 November 1996, save on 10 June 1996, and in any event if he had returned to Hong Kong during this period, he never notified the OR of his return until 4 November 1996.

Non-commencement of relevant period under s.30A(10)(a) not applicable

36. I then have to consider the OR's submission that s.30A(10)(a) applies so that the relevant period for the Bankrupt did not commence to run until 4 November 1996. Section 30A(10)(a) provides:

"Notwithstanding subsections (1) to (3), where a bankrupt -
(a) has, before the commencement of the bankruptcy, left Hong Kong and has not returned to Hong Kong, the relevant period under subsection (1) shall not commence to run until such time as he returns to Hong Kong and notifies the trustee of his return".

37. There is no doubt on the evidence that the Bankrupt here left Hong Kong before the day the bankruptcy order was made, and did not notify the OR of his return to Hong Kong until 4 November 1996.

38. However I do not think that the purposive canon of statutory interpretation permits me to accept the OR's submission.

39. One begins with s.30C(1) which enables s.30A to apply to bankruptcy orders made before 1 April 1998. However s.30C(1) is expressly subject to s.30C(2).

40. Section 30C(2) provides that for bankruptcy orders made before 1 October 1994, the bankrupt is deemed discharged on 1 April 1999. There is no reference at all to "relevant period" for calculation of time for the purposes of discharge. So the commencement date for the relevant period (whether the date of the bankruptcy order, or a postponed date) is irrelevant for persons who had been adjudged bankrupt before 1 October 1994.

41. If the legislature had intended to say that irrespective of the date of the adjudication order (i.e. even for persons whose adjudication orders were made before 1 October 1994), if a bankrupt had left Hong Kong before the order and had not notified the trustee of his return, he should not be discharged until 4 years after his notified return, that would have been an easy provision to enact. But there is no such provision. The postponement by reason of absence is pegged to the "relevant period" in s.30A only, and s.30C(1) states expressly that s.30A is subject to s.30C(2).

42. It is only where there is an objection on s.30A(4) grounds that s.30A (with its reference to "relevant period") applies to s.30C(2) situations. Section s.30C(2) provides that "he shall be deemed to be discharged from bankruptcy 12 months after the day this section comes into operation [i.e. on 1 April 1999] unless, during that 12 month period, the trustee or a creditor files an objection on a ground set forth in section 30A(4)(a) to (h), in which case section 30A applies and the court shall deal with the matter as it sees fit." [emphasis added]

43. In my judgment, that enables the Court, in the exercise of its discretion under s.30A(3), to postpone the date of deemed discharge if a ground of objection under s.30A(4) is made out, but it does not bring s.30A(10) into play.

44. It would be noted that "s.30A applies" when the trustee or a creditor files an objection, before the Court considers whether it is a valid one or not, and (even if it is a valid one) before the Court considers whether in the exercise of its discretion it should act on it to the bankrupt's detriment.

45. It cannot be the case, in my judgment, that on the mere filing of an objection by the trustee or a creditor, the mandatory provisions of s.30A(10) - which are independent of the grounds in s.30A(4) - would come into play so as to affect the course of the bankruptcy by putting back the commencement of the bankruptcy by a possibly substantial length of time, depending on the length of the bankrupt's absence.

Non-continuation of relevant period under s.30A(10)(b )not applicable

46. The OR's second submission that s.30A(10)(b) applies is, in the light of my conclusions on fact, without factual grounds. The Bankrupt left Hong Kong before the commencement of his bankruptcy, not after, and no date or period was ever specified by the OR as his trustee in bankruptcy for his return.

Suspension under s.30A(3) applicable

47. Finally, there is the provision in s.30A(3) dealing with suspension of the relevant period. It would be noted that the applicability of s.30A is triggered off by the filing of an objection on any of the grounds in s.30A(4).

48. The making of such an objection leads to a determination by the Court of the validity of the objection, and the exercise of the Court's discretion whether to order the relevant period to cease to run. It is important to note that suspension is the only order provided for under s.30A(3), though the Court has a limited discretion as to the period of suspension and the subsequent lifting of the suspension.

49. So when the legislature provided in s.30C(2) that "unless, during that 12 month period, the trustee or a creditor files an objection on a ground set forth in section 30A(4)(a) to (h), in which case section 30A applies and the court shall deal with the matter as it sees fit", it must in my judgment have intended that the Court should deal with such an objection by considering its validity, and exercising its discretion in ordering a suspension of discharge.

50. I note of course that s.30A(3) refers to suspension of the "relevant period" and not a postponement of the date of discharge, and the relevant period has no bearing on a deemed discharge under s.30C(2). However, if the Court cannot order a suspension of discharge, then there seems little left that it can do, when s.30C(2) says that the Court shall deal with the matter as it sees fit.

51. The requirement that the bankrupt give information and assist the trustee under s.30A(8) is a mandatory duty of the bankrupt in any event. And if the Court cannot affect the discharge (by deciding whether to suspend the date of discharge), s.30A(9) does not apply either as it applies only to situations where the court "grants" a discharge.

52. Accordingly I conclude that on an objection made under s.30C(2), the Court can in the exercise of its discretion suspend the discharge to a date after 1 April 1999.

Facts warrant suspension

53. In my view, the facts in this case do warrant a suspension. The Reports of the OR show clearly that the Bankrupt has been obfuscating the orderly dealing with his affairs by the OR. Bankruptcy is not a merely business matter. It is a personal state, and the Bankrupt is obliged to assist his trustee personally when so required.

54. It is no answer to say that the bankrupt had appointed an attorney to deal with the OR. A bankrupt cannot have an attorney (Halsbury's Laws : Agency 437, 522, 529-530). The trustee cannot be expected to have to deal with a person whose very status is doubtful.

55. If the Bankrupt had grounds to show that the OR's staff were not acting properly, he has the proper redress in Court (s.83).

56. In all the circumstances, particularly bearing in mind the 8-year overall period for bankruptcy in s.30A and the Bankrupt's age and health, and in the exercise of my discretion, I would order under s.30C(2) that the discharge of the Bankrupt be postponed to 27 August 2000.

	(MARIA YUEN)
	Judge of the Court of First Instance High Court

Representation:

Miss P McKenna of the Official Receiver's Office

Mr Simon SM Yip instr'd by Ho Lo & Yeung for the Bankrupt

HCB000242/1992

IN THE HIGH COURT OF HONG KONG

IN BANKRUPTCY

NO. 242 OF 1992

________________________

	IN THE MATTER OF NG YAT CHI, A BANKRUPT

	AND

	IN THE MATTER OF AN APPLICATION BY A CREDITOR TO REVERSE OR VARY THE DECISION OF THE OFFICIAL RECEIVER & TRUSTEE IN RESPECT OF A PROOF OF DEBT FILED AGAINST THE ESTATE OF NG YAT CHI, A BANKRUPT UNDER RULE 117 OF THE BANKRUPTCY RULES AND RULE 24 OF THE PROOF OF DEBTS RULES, CAP. 6

________________________

BETWEEN
	T.S. WONG AND COMPANY LIMITED	Applicant

	AND

	THE OFFICIAL RECEIVER & TRUSTEE OF THE PROPERTY OF NG YAT CHI, A BANKRUPT	Respondent

Coram : The Honourable Mr. Justice Rogers in Court

Date of Hearing : 4 November 1996

Date of Handing down of Decision : 28 November 1996

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D E C I S I O N

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1. This is an appeal against a decision of the Official Receiver and Trustee of the estate of Ng Yat Chi, the bankrupt, whereby claims totaling HK$4,493,962.28 were rejected. The proof of debt was lodged on the 13th December 1994, Notice of Rejection of the proof was dated the 14th August 1995 and the Notice of Appeal was filed on the 4th September 1995. There were a number of adjournments and the matter finally came for hearing on the 4th November this year. At the conclusion of the hearing which had over-run normal court hours, I said that I would hand down my decision in writing which I now do.

The Background

2. The bankrupt was a sub-contractor in respect of a number of building contracts. The Appellant, T.S. Wong and Company Limited, was a building contractor which sub-contracted a number of contracts to the bankrupt who traded under the name Vincent Construction Company.

3. One further feature of this case which is important is that the bankrupt, Mr. Ng Yat Chi, was apparently one of the four directors of the Appellant, the other three being Mr. Kei Kwong Chuen, Mr. Bao Feng and Mr. Wang Hong Ling. It appears that Mr. Bao is now dead. Mr. Wang and Mr. Kei are no longer directors of the Appellant and they apparently reside in China and at least for the purposes of this case have not been contacted. It would also appear that the bankrupt is likewise resident in China. I was informed at the hearing, that he too had been uncontactable, but was thought to be appearing that day in some other court. Mr. Ng has subsequently appeared in my court in connection with another case.

4. One of the contracts which the bankrupt was undertaking on behalf of the Appellant can be referred to as the "King's Road project". On the 11th August 1990, the bankrupt, trading as Vincent Construction Company, wrote to the Appellant in respect of the King's Road contract and informed them that he was encountering cash flow problems on the project as a result of what was referred to as "continuous increase in material and labour costs". It was said in the letter that it was anticipated that additional costs of some $4m. would be incurred by the end of the project compared with the original tender. The letter then asked for a loan of $4m. and went on to say:

"In view of the tight construction programme, we have entered into some bonus agreement with our sub-contractors to motivate timely Completion of this project, and this will lead to further additional costs being incurred by us. Therefore, we also request your consideration in granting us bonus paid on an ex-gratia basis if we could complete the project on or before the contract completion date."

5. There is a notation on that letter which indicates that Mr. Kei wrote "Agree to lend HK$2.6m. temporarily. Regarding the request for bonus, we shall consider after the work has completed." That notation is dated the 13th August.

6. At the end of August and beginning of September 1990, there were, it seems, a number of board meetings of T.S. Wong and Company Limited. For example, on the 31st August 1990, there was a board meeting at which Mr. Ng himself was elected Chairman of the meeting. On the 11th September 1990, there was another meeting. The exact business conducted at those meetings is not important but I will revert to that later.

7. On the 1st September 1990, there was, admittedly, a board meeting. It would appear that Mr. Kei was the Chairman of that meeting and Mr. Bao and Mr. Wang were also present since they signed against their names. Mr. Ng did not sign against his name. It is said in the evidence that it was a custom of that company that those directors who were present would sign against their names. The board meeting appears to have been concerned solely with the requests contained in the letter of the 11th August. Specifically, it was concerned with the request for a bonus to be paid on an ex gratia basis if the project was completed on or before the contract completion date.

8. Paragraph 2 of the minutes reads:

"After considering the matter, it was unanimously resolved that all the directors present that the Company shall paid Vincent Construction Company a bonus of HK$2,600,000 on ex-gratia basis if Vincent Construction Company could complete the project on or before the contract completion date."

9. The only evidence filed by the Appellant is the evidence of Mr. Li Kar Yin, who was apparently at the time a project quantity surveyor employed by the Appellants and has since April 1995 been promoted to the position of Contracts Manager. He is not and never has been a director of the Appellant. In paragraph 5 of his second affirmation he said:

"Further, I verily believe that as explained in paragraph 6(c) of my first affirmation, the earlier intention to grant the ex-gratia bonus to Vincent if the project was completed on time (paragraph 2, board minutes, exhibit LKY-4) has never been communicated to the bankrupt."

And a little further down:-

"I verily believe no other communication was made to the Bankrupt in relation to the matters discussed in the said meeting, or in relation to the intention to grant any ex-gratia bonus under the King's Road project if it could be completed on time."

10. His reference to paragraph 6(c) scarcely takes the matter any further since the paragraph merely contains a bald statement that there was no accrued right to the ex gratia payment and the decision at the board meeting that one would be paid was an internal decision of the applicant which was reversed and never communicated to Vincent or the bankrupt.

11. In view of the fact that statements which are made on information and belief have to be supported by the full facts upon which the statement is based, I have grave doubt as to whether that constitutes evidence that the decision was never communicated.

12. The statements by Mr. Li in his affirmations, appear to me to be statements merely of belief. They do not, at least explicitly aver that specific information has been passed to Mr. Li by any person within the company, nor does Mr. Li identify any document which states that Mr. Ng or Vincent Construction Company was not given information of the board meeting. In those circumstances it seems to me that Mr. Li has not given evidence of anything other than his own belief. He has not given evidence on information and belief.

13. Even if it does constitute admissible evidence, I find myself in the position that I am unable to accept Mr. Li's belief as sufficient evidence of the fact upon which I could either make a finding of fact or draw an inference that the decision was never communicated. It seems to me to be most unlikely that the decision was never communicated. Clearly the question of an ex gratia payment by way of bonus if work was completed on time must have been something which Mr. Ng, the bankrupt, considered important. The payment was, after all, a payment of HK$2.6m. Even on the assumption that Mr. Ng was not present at the meeting and took no part in the meeting of 1st September 1990 (and clearly he would have had a conflict of interest), I consider it most unlikely that as a director he would not know what decisions the other directors took at board meetings.

14. Before leaving this topic, it is also pertinent to point out that the Appellant had itself secured from the employer, Mount Land Limited, agreement to reimburse the Appellant for the cost of the bonus. That emerges from a memo dated 23rd December 1991.

15. In these circumstances, I find it difficult to conceive that Mr. Ng who, by all appearances, was an active director of the Appellant would not have known that the Appellant had agreed to the HK$2,600,000 bonus to Vincent Construction (part of which at least of course was being passed on to the sub-contractors) and that the Appellant had itself secured a corresponding undertaking from the employer.

16. Some attempt was at one stage made to raise the argument that the King's Road project had not been completed on time. The board minutes of the 1st September 1990 refer to "the contract completion date". I have not been shown the contract between T.S. Wong and Company Limited and the employer but from such correspondence as does exit, it would appear that an extension of time of 27 days was granted and therefore, in the light of the incomplete documentation, it does appear to me that the work was completed by the contract completion date which, for this purposes, I take to be the completion date as extended in accordance with what I would imagine to be the terms of the contract. In so far as this conclusion is inaccurate it seems to me that it is the Appellant's fault for not providing the full and complete information relating to the contract either to the Official Receiver or to this Court.

17. The final question which arises on this aspect is whether the HK$2.6m. which was admittedly paid to Vincent Construction as a loan is still recoverable or whether Vincent Construction is entitled to retain the money having completed the contract on time.

18. Even if it be right that the payment authorised by the board meeting of the 1st September 1990 should be regarded as a gift and that donation of the gift had not been perfected, I still consider that Vincent Construction Company is entitled to retain the HK$2,600,000. The letter of the 11th August 1990 makes clear that Vincent Construction was encountering cash flow problems and the costs were in excess of the budget. As Mr. Yeung, on behalf of the Official Receiver, pointed out there is no suggestion in this case that the agreement to make an ex gratia payment was obtained by duress. It seems to me that the agreement was beneficial to all parties. As I have indicated, it seems to me to have been part of a chain of agreements stretching from the employer at the top to the sub-contractors at the bottom. The clear result of the contract was that it was completed on time, there were no liquidated damages imposed by the employer and in my view following the case of Williams v. Roffey Bros. and Nicolls (Contractors) Limited [1991] 1 QB 1, it seems to me that the facts of this case fall within the parameters of a situation where the commitment to pay an ex gratia payment could be enforced irrespective of the fact that there were pre-existing contractual obligations. In this respect, I draw attention to what was said by Glidewell L. J. at page 15G-16B which was cited with the approval by Kaplan J. in UBC (Construction) Limited v. Sung Foo Kee Limited [1993] 2 HKLR 207.

Contra Payments

19. The next item is as to whether the Appellant is entitled to claim credit for the sum of HK$1,588,185.50 being a 15% charge on contra charges said to be incurred by it on behalf of the bankrupt or in the alternative to a 15% charge, the actual administrative costs and expenses it incurred in defraying the contra charges on behalf of the bankrupt.

20. Included in those charges is an element of interest. It is admitted on behalf of the Appellant that the interest claimed is unsustainable both as to the rate and as to the period.

21. Leaving that aside, the first basis upon which the administrative costs in respect of the contra payments is claimed is that it is a practice common in the trade. In my view, looking at the evidence that simply has not been made out. Apart from anything else, it is disputed by Mr. Wong Kam Din whose qualifications are not disputed. I would mention that there was some dispute as to whether he should be giving expert evidence but when it was pointed out that Mr. Li also had given expert evidence, the point was not pursued.

22. It was not disputed on behalf of the Official Receiver that the Appellant might be entitled to administrative costs in respect of contra payments properly made provided that those administrative costs were adequately demonstrated. In my view, the Official Receiver rightly rejected the claim for administrative costs and expenses in relation to the contra charges, I have been through the calculations which have been proffered and they are in exhibit LKY-12 to Mr. Li's affirmation. They are clearly highly repetitive and the excessive amounts claimed as administrative charges sometimes in respect of contra charges of very small amounts can only lead to the conclusion that claims inflated to an unacceptable amount have been lodged and in my view, the Official Receiver was correct in his approach in saying that these should be supported by at least some prima facie evidence from persons who undertook the work that the respective times suggested were spent.

23. As it is, the claim which has been put in claims what seems to me to be standard set amounts in respect of each bill no matter how large or small and on more than one occasion, the amount charged in respect of administrative costs is far in excess of the cost to be charged. In respect to the others, it is much more reasonable. Nevertheless, it seems to me to be very difficult to accept that the actual costs in respect of a large number of the payments could have been anything like what has been claimed. Moreover, the broad brush approach which appears to have been taken, in my view, justifies the Official Receiver in saying he requires to be satisfied properly that the appropriate amounts of time and therefore costs have been spent by the relevant persons.

24. This decision therefore does not prevent the Appellant from submitting a new claim properly supported by the necessary documentation and contracts and supporting evidence to show that the payments that were made were indeed contra payments and the quantity of the administrative costs which have been incurred in making those payments. I appreciate that as set out in Re Kentwood Constructions Limited [1960] 2 All E. R. 655 and Re Trepca Mines Limited [1960] 3 All E. R. 304, the court is empowered to look at new evidence provided by the Appellant but it seems to me that where the nature of the payments has been challenged it is necessary for the Appellant who seeks to a prove in a bankruptcy to show that he is entitled to the payments which he claims. As was made clear in the case of in Re Van Laun Ex parte Chatterton [1907] 2KB 23 the trustee in bankruptcy is not bound by any judgment or account stated or covenant for payment but has not only a right but the duty to investigate the nature of and grounds of the claim which has been put forward. It is his office to require some satisfactory evidence that the debt on which the proof is founded is a real debt.

25. In my view in this instance the Appellant has failed to bring forward satisfactory evidence and I therefore refuse this appeal. In doing so, I make it clear that it is open to the Appellant to present its case properly to the Officer Receiver and seek to be able to prove for an amount in respect of administrative costs.

26. I therefore refuse this Appeal and make an order nisi that the Official Receiver should have his costs taxed if not agreed.

(Anthony G. Rogers)

Judge of the High Court

Representation:

Mr. Joseph Fok instructed by Messrs. Kao Lee & Yip for Applicant

Mr. Yeung Ming Tai instructed by the Official Receiver

CHOY BING WING v. OFFICIAL RECEIVER

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