RE LUU HUNG VEIT DERRICK<br>

HCB 4776/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 4776 OF 2011

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D E C I S I O N

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Application

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

Background

2. Mr. Zhang Liyuan 〔張禮元〕filed the petition herein on 1 August 2011 praying for a bankruptcy order against Mr. Luu, Hung Viet Derrick 〔劉志雄〕. It was said that Mr. Luu owed him a total sums of over $ 62 million.  Mr. Luu opposed the petition.

3. On 8 February 2012, the Hon. Barma J. (as he then was) refused to accept the arguments raised by counsel acting for Mr. Luu, including that there was prospect of establishing a bona fide dispute to part of the claim and the Court should exercise discretion to postpone the matter to afford Mr. Luu a further opportunity to try and pay the debt. Usual bankruptcy order with costs was then made against Mr. Luu (hereinafter called as “the Bankrupt”). 

4. The Bankrupt then filed his appeal in CACV 41/2012, but he took no further step to prosecute it.

5. Later, Mr. Stephen Wong and Mr. Osman M. Arab, both of RSM Corporate Advisory (Hong Kong) Limited were appointed trustees in bankruptcy (“the Trustees”) for the Bankrupt.  

6. The Trustees started administration of the estate of the Bankrupt.

7. By a Statement of Affairs (“SOA”) affirmed by the Bankrupt on 17 April 2012, he deposed, inter alia, that:

(a) His address was “House 18, 8 Severn Road, Hong Kong (the “Peak Property”).

(b) His net assets (or surplus) were in the sum of about $427 million.

(c) The amount of his assets was $607 million, comprising of:  

(i) Innovative Generation Holdings Ltd. (“Innovative”), and

(ii) 3/F, C, Hooley Mansion, No.21-23 Wong Nai Chung Road (“Hooley Mansion”).

(d) The amount of his liabilities was about $179 million,    comprising of : 

(i) 3 secured creditors for about $118 million, and

(ii) 5 unsecured creditors for about $61 million.

8. In the next few years, it followed by a series of communications arguments and litigations among the Trustees, the Bankrupt and some other parties. In June 2013, the Bankrupt applied, inter alia, to remove the Trustees. The Hon. G Lam J. rejected all the alleged misconducts on the part of the Trustees by the Bankrupt, including that funding arrangements were generally confidential in nature and there was no reason that the Trustees should disclose them to the Bankrupt. The application was dismissed on 26 September 2013.

9. On the other hand, the Trustees filed the present summons on 13 November 2015 to object the automatic discharge of the Bankrupt. They relied on 3 grounds.

(a) The automatic discharge would prejudice the administration of the Bankrupt’s estate.

(b) The Bankrupt failed to co-operate in the administration of his estate.

(c) The conduct of the Bankrupt, before or after his bankruptcy,  was unsatisfactory.

10. By consent of both parties, on 15 January 2016, usual directions for affidavit evidence were ordered, including that the discharge of the Bankrupt be suspended pending final disposal of the Trustee’s summons.

11. On 8 July 2016, I heard the substantive argument. Ms. Rachel Lam of Counsel acted for the Trustees and the Bankrupt was represented by Mr. Jonathan Chang of Counsel. Upon hearing from them, I reserved my decision to be handed down. Here it is.

Discussions

12. The Trustees made seven (7) complaints against the Bankrupt. He denied all of them. He further said that there was delay of the Trustees which caused the administration of the estate to be incomplete. I will see and decide if the Trustees could make out the complaints and then, consider if there was any delay on them.

(1) Hooley Mansion

13. The Trustees said that Hooley Mansion was owned by the Bankrupt.  He should have surrendered vacant possession of it to them. However, he did not do so. Notwithstanding the commencement of the HCMP 1844/2012 and the subsequent possession order made therein on 26 September 2012, the Bankrupt handed the keys to one of the mortgagees who subsequently sold the same. The Trustees were considering taking further steps to recover sale proceeds.

14. The Bankrupt disagreed and said, inter alia, that Hooley Mansion was occupied by his mother-in-law. Facing the claim of the mortgagees, he had no choice but to hand over the keys. Although the Bankrupt admitted that he only informed the Trustees the delivery of possession 8 days late, the latter sat on the case for 43 months without taking any step for the intended recovery of the sale proceeds.

15. In my view, the conduct of the Bankrupt regarding Hooley Mansion is not satisfactory, albeit not as serious as those complained by the Trustees. One of course cannot dispute that the Bankrupt did disclose the existence of the 2 mortgagees in the Statement of Affairs. However, but for the lack of information (including the discussion and agreed arrangement between the Bankrupt and the mortgagee(s)) and communications, the Trustees would not have unnecessarily spent time and costs in the MP proceedings which achieves nothing useful for the administration of the estate.

(2) Innovative

16. The shareholdings in Innovative are the major assets of the Bankrupt as disclosed by him in the SOA. The Trustees complained that the Bankrupt only disclosed very limited information regarding it.  Despite requests and demands, the Bankrupt has not been co-operative. Hence, the Trustees need to conduct further investigations.

17. The Bankrupt replied that he had provided all assistance he could have done, including documentation available in his hands. He also pointed to the Trustees other possible sources of information. It was the Trustees who failed to take effort or sufficient effort to follow up the matter. The Bankrupt should not be blamed. 

18. I am unable to accept the answers of the Bankrupt. With the evidence before me, on balance, I find that the Bankrupt has not disclosed all information with him on Innovative.

(a) It is the major asset owned by him, valued at $600 million.

(b) He is the sole shareholder and director of the Innovative.

(c) He is an experienced businessman.

(d)Even if most of the documents was no longer in the possession of the Bankrupt after the closing down of his business office, he could and should have provided with the Trustees more information, but not only 2 names, one individual and one company, who owe no duty to assist the Trustees at all. 

(3) Peak Property

19. The Trustees said that the Bankrupt did not disclose in the SOA his shareholdings in a BVI company (called “Alphred”) which was the sole shareholder of another company named “Fortune King”. It held the Peak Property. After his bankruptcy, without consent from the Official Receiver or the Trustees, the Bankrupt (and his wife transferred) their shareholdings in Alphred to another company “Satisfactory Kingdom”. It thereafter sold the Peak Property. The net proceeds of the sale amounted to about $13.4 million.

20. Although the Trustees were able to secure the proceeds with an injunction in HCA 1055/2012, the matter was complicated by a suspected judgment entered against Fortune King by one Construction Limited. The subsequent winding up of Fortune King even made the job of the Trustees more difficult. Parties were fighting for the proceeds and the Trustees have further work to carry out which is not expected to be concluded anytime soon.

21. In this regard, the Bankrupt explained in his affirmation in opposition that:

“…a Ms. M. L. Leung saw me on 17 April 2012 and assisted me in filling the Statements of Affairs. When I asked her whether I should fill in my BVA company, she advised me just to fill in the form briefly and to give supplemental information later because the creditors’ meeting would be held on 18 April 2012. I believed her and followed her advice…”

22. He further said that the proceeds were with the Court and it was up to the Trustees to see fit how to do. Nonetheless, it would be an abuse of process to extend the bankruptcy against him in the circumstances.

23. I have no hesitation to refuse the explanation given by the Bankrupt. With his level of education and experience in business, one cannot easily accept the excuse of omitting such important information in the SOA. In any event, he is the one who affirmed the document and is to be held liable for the material omission.  

24. This Court is not in a position to resolve the ownership of the proceeds. Nonetheless, I cannot agree more that, given the convoluted shareholdings and their transfer as well as the suspected transactions, time should be provided further to the Trustees to investigate and recover assets which might be belonging to the estate to be distributed to the creditors.    

(4) Celestial Heights

25. The Trustees discovered that, on 29 June 2009, the Bankrupt transferred his shareholdings in a company called “Champ Will” at $1 to his wife. Champ Will held a property at Celestial Heights. The Trustees commenced HCA 1808/2012 against all parties.

26. Due to funding issue, such action had been stalled but the Trustees asked for more time to deal with it.

27. The Bankrupt objected to it. He said that he merely held the shares on trust for his wife and as such, there was nothing wrong for him to transfer them back to her. The Trustees could not sit on the matter without prosecuting it.

28. The issue as to whether the de facto ownership of the Champ Will (and hence the Celestial Heights) is to be resolved within HCA 1808/2012. As far as the present application is concerned, the funding issue (without more details) appears to be a matter between/among the Trustees and others, and the Bankrupt has no role to play. 

(5) Dealings in Canada

29. The Trustees complained said that the Bankrupt had failed to disclose any of his assets or dealings in Canada. From their own investigations, they discovered that the Bankrupt was plaintiffs in 2 Canadian proceedings. Judgment was granted in his favour and payments were made to him.

30. The Trustees sought discovery of details of them in the Canadian Court. They won but the Bankrupt appealed. Although the Bankrupt lost all his appeals, he had not been cooperative with the Trustees. The Bankrupt even refused to disclose how he was able to fund the litigation costs in Canada, except one brief answer that his sister was helping him.

31. The Trustees expected that further in-depth investigations were needed to discover and realize the assets of the Bankrupt in Canada.

32. The Bankrupt argued that the proceedings and judgment were obtained before the bankruptcy. He was opposing the application of the Trustees because he had a legal right to do so in the Canadian Court. It should not be treated as an instance of “not co-operating” with the Trustees. 

33. After the final ruling by the Canadian Court, he did provide the Trustees with the documents, with irrelevant parts being redacted. He also saw nothing wrong in his sister helping him in funding the litigation there.

34. I agree with the Bankrupt to the extent that he should not be blamed in any respect of his exercise of his legal right after his bankruptcy. However, one has to bear in mind the followings in the present case.  

(a) The Bankrupt did not mention in the SOA any of his dealings in Canada.

(b) Upon being discovered by the Trustees, the Bankrupt did not co-operate with the Trustees.

(c) With the benefit of the various judgments from the Canadian Court, one can tell that the so-called exercise of legal right by the Trustees has been totally rejected.  

(d)Hence, the Bankrupt not only did not assist the Trustees by providing necessary information but also took each and every step to try avoiding them from finding the truth.

(6) Dealings in USA

35. The Trustees also, from their own investigations, discovered that the Bankrupt had been involved in proceedings in USA. He further, without consent from the Trustees, took steps therein.

36. Despite opposition by the Bankrupt, the Trustees managed to grant recognition on 9 April 2014 by the US court. It was further noted that, on 26 September 2014, the Trustees was granted a further order to realize the assets of the Bankrupt in US. They therefore asked for more time.

37. On the other hand, the Bankrupt maintained that he was free to defend the proceedings there. He was doing nothing more than protecting the estate.

38. The argument of the Bankrupt is misconceived. Immediately after his bankruptcy, his estate went into the hands of the Trustees. He simply did not have any locus to take further step in those proceedings.

39. The Trustees further informed that the US Court had granted a further order allowing, inter alia, realization of the assets of the Bankrupt in US. More time should be allowed to the Trustees for investigation and administration.

(7) Dealings in China

40. Once again, from the investigations of the Trustees, the Bankrupt was found to be the legal representative, majority shareholder and supervisor of various entities in China. The Trustees said that the Bankrupt continued to conduct business in there but he disclosed none.

41. The Bankrupt replied that the so-called disclosure by the Trustees was neither here nor there. They did not mean that it was a business in which he had a “disclosable” interest.

42. In my view, the attitude adopted by the Bankrupt is dissatisfactory and non-cooperative. No doubt, the Trustees would need more time to investigate to complete a meaningful administration.

Delay on the Trustees?

43. Regarding the argument by the Bankrupt that the Trustees had delays in the administration. I do think it holds any water at all. Ms. Lam provided a complete answer to it.

“55. As to a constant theme of the Bankrupt’s evidence that it was the delay of the Trustees which caused the administration of his estate to be incomplete…, the Trustees’ primary submission is that there is a substantial amount of evidence… showing that the Trustees have been carrying out the administration of his estate with diligence.

56. Further of alternatively, even if the court considers that there may have been an occasion delay in the Trustees’ administration of the Bankrupt’s estate, the Trustees submits that it was due to the deliberate concealment and lack of cooperation on the part of the Bankrupt.

57. In Re Leung Yat Tung (No.2)… Yuen JA stated that:

… However I do not think it would be right to treat that as an overriding factor. The court should not look at the time taken by the OR in isolation, oblivious to the facts of the particular case. Where the bankrupt has only disclosed information in dribs and drabs, it lies ill in his mouth to complain of delay on the part of the OR who, with limited financial and staff resources, has had to try grapple with this complex case.

As was held in Re Zeenek Weiss, ex p Official Trustee in Bankruptcy (No W 293 of 1978, unreported) (para 7):

‘There may be cases where it would be unfair to a bankrupt to delay his discharge by reason of an incomplete investigation, lethargically pursued, to the torpor of which he has not contributed. But no such unfairness may appear where there has been concealment or lack of cooperation on his own part’. (Emphasis added).”

The Findings

44. To conclude, on balance, the Trustees have satisfied this Court six (6) out of their seven (7) complaints.  I further agree that all the 3 grounds relied upon by the Trustees have been established.

Suspension of the Discharge? If so, for how long?

45. I now move to consider whether this Court should in the circumstances of the case exercise his discretion to suspend the automatic discharge, and if so, for how long.  In this respect, both counsel referred me to a number of different authorities. I see no conflicts among them. For the present purpose, I set out the followings.

46. As a starting point, I ask myself to bear in mind paragraphs 17.16 and 17.24 of the Law Reform Commission’s Report on Bankruptcy (1995)

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

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

47. Useful guidance can be located in comments of Mrs. Justice Le Pichon (as she then was) in two authorities, viz: Re Hui Hing Kwok [1999] 3 HKC 683 and Re Li Tak Kong [2000] 3 HKC 360

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

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

48. Further, Yuen JA said in Re Leung Yat Tung (No.2) [2007] 4 HKC 192 the followings.

   “As the courts have said, a bankrupt is not permitted to adopt a “catch me if you can” approach. He cannot wait and see if the trustee in bankruptcy manages to piece together the jigsaw of his financial affairs, and then when he is required to answer the trustee’s questions, try to get away with revealing as little as he can according to the strict letter of the questions. Instead he should pro-actively reveal the complete picture of his financial affairs to the trustee, and where pieces do not appear to fit, in that his conduct or transactions appear to be inconsistent, it is for him to explain the inconsistencies and convince the trustee of the true state of affairs. The more complex the bankrupt’s transactions, the more difficult the task of the trustee in bankruptcy, and so the more comprehensive the bankrupt’s disclosure should be.”

49. Last but not least, in Re Liu Man Hoo [2007] 5 HKC 346, Lam J (as he then was) agreed that:

“(2) The discretion should be exercised in line with the underlying spirit of bankruptcy law, that of the rehabilitation of the bankrupt to normal life upon expiry of the relevant period, subject to the public interest that a discharge be delayed if the conduct of the bankrupt indicated that the return of the bankrupt to the commercial world in full freedom might involve an unacceptable risk to persons likely to be engaged in commercial relations with him in the future.”

50. Ms. Lam asked the period of suspension be extended for the statutory maximum of 4 years. Mr. Chang said that the application should be dismissed, and in any event, the suspension should not be more than 1 year.

51. With the above principles and findings, I have no hesitation that the automatic discharge should be suspended and a period of 4 years is well-justified in the circumstances.

(a) The SOA does not reflect the true position of the Bankrupt. There is a lot of concealment. He was far from full and frank disclosure.

(b) In the administration of the estate, the Bankrupt did not co-operate with the Trustees. He was passive and reactive.

(c) He not only adopted the “catch me if you can” approach, but also went further to obstruct positively the Trustees from their investigation and recovery of assets, even upon being “caught”.

(d) Investigation and administration are on-going and have not been completed. The Bankrupt has been hiding his assets from disclosure and collection by the Trustees for distribution among the creditors.

(e) With the said conduct of the Bankrupt, his rehabilitation should be delayed because of his own failings. It should also be delayed in the eyes of public interest. He is a sophisticated business man at international level. His return to the commercial world with full freedom might expose the persons likely to be engaged in commercial relations with him in future an unacceptable risk.  

Costs

52. Costs usually follows event. There is no reason to depart from the general principle in the present case. I am also indebted to the assistance by both learned counsel.

Summary

53. To sum up, I will make the following orders.

(a) The discharge of the Bankrupt under section 30A of the Bankruptcy Ordinance (Cap. 6) shall cease to run for a period of 4 years.

(b) There is an order nisi that the Bankrupt do pay the Trustees costs of the application, including certificate for counsel for hearing on 8 July 2016 and costs reserved, to be taxed if not agreed.

HCB 4776/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4776 OF 2011

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D E C I S I O N

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1. By a summons dated 19 June 2013, Mr Luu, a bankrupt, seeks an order to remove “RSM Nelson Wheeler Corporate Advisory Limited” as his trustee in bankruptcy and an order to direct the Official Receiver to remove one Mr Christian Emil Toggenburger from the creditors’ committee. In fact, the trustees in bankruptcy are not the company known as RSM Nelson Wheeler Corporate Advisory Limited but two individuals who are its directors, namely, Mr Wong Tak Man Stephen and Mr Osman Mohammed Arab. The application has accordingly been treated as one seeking the removal of Mr Wong and Mr Arab as trustees.

2. Mr Luu was adjudged bankrupt on 8 February 2012 following a contested hearing of the petition presented by one Mr Zhang Liyuan as a creditor.  A notice of appeal was filed by Mr Luu on 28 February 2012 in CACV 41/2012 but no further step has been taken by Mr Luu to prosecute the appeal.  The trustees have taken the view that Mr Luu has abandoned the appeal.

3. The trustees were appointed on 18 April 2012 at the first creditors’ meeting.  A resolution was passed at that meeting that a creditors’ committee be formed comprising the petitioner and two other persons, namely, Mr Toggenburger and one Mr Lam Ching Kui.

4. Mr Luu had argued at the creditors’ meeting that Mr Toggenburger should not be permitted to vote as he had not been “confirmed” as a creditor.  Mr Toggenburger had sued Mr Luu in High Court Action No. 815 of 2009.  He claimed against Mr Luu damages in the amount of over HK$118 million or a sum of approximately HK$107 million as money had and received.  The action was tried in the Court of First Instance in 2011 and the first creditors’ meeting took place during the time when judgment was pending.  Nevertheless, the Official Receiver’s representative who presided as chairman of the creditors’ meeting admitted Mr Toggenburger’s proof for voting purposes, though she recorded Mr Luu’s objection.  In addition, she recorded that “Nevertheless, the bankrupt confirmed that he had no objection to the appointment of the joint and several trustees”.

5. On 31 July 2012, Chung J handed down a judgment dismissing Mr Toggenburger’s claims against Mr Luu in their entirety.  On 26 September 2012, Mr Toggenburger obtained leave to proceed with an appeal against that decision notwithstanding Mr Luu’s bankruptcy.  The appeal was heard by the Court of Appeal on 20 June 2013.  The trustees, in whom Mr Luu’s rights relating to those proceedings had vested, did not take any substantive part in the appeal.  The Court of Appeal has recently handed down judgment dated 6 September 2013, allowing Mr Toggenburger’s appeal in part.

6. The court has jurisdiction to remove trustees in bankruptcy pursuant to s 96(2) of the Bankruptcy Ordinance (Cap 6) (“the Ordinance”), which provides as follows. 

“(2) If the court is of opinion-

(a) that a trustee, other than the Official Receiver, is guilty of misconduct or fails to perform his duties under this Ordinance; or

(b) that his trusteeship is being needlessly protracted without any probable advantage to the creditors; or

(c) that he is by reason of lunacy or continued sickness or absence incapable of performing his duties; or

(d) that his connection with or relation to the bankrupt or his estate or any particular creditor might make it difficult for him to act with impartiality in the interest of the creditors generally; or

(e) that the interests of the creditors require it,

the court may remove him from his office and appoint another person in his place.”

7. According to the summons, the application to remove the trustees is based on alleged “wrongful conduct” of the trustees in permitting Mr Toggenburger to continue to be a member of the creditors’ committee even after his claim in HCA 815/2009 was dismissed by the Court of First Instance on 31 July 2012.  The two affirmations filed by Mr Luu for his application in the main amplify this point.  In addition, Mr Luu complains that the trustees have ignored his question whether Mr Toggenburger has paid any money to them, that they did not take a neutral stance on Mr Toggenburger’s appeal, and that their letter sent to the Court of Appeal shortly before the hearing of that appeal was misleading.  The statutory grounds for removal being relied upon by Mr Luu appear to be those specified in s 96(2)(a), (d) and (e). I shall deal with Mr Luu’s complaints in turn.

8. The main complaint, as I see it, is that despite that his action against Mr Luu was dismissed by the Court of First Instance on 31 July 2012, Mr Toggenburger had been permitted to remain a member of the creditors’ committee.  On 6 September 2013, however, as mentioned above, the Court of Appeal allowed Mr Toggenburger’s appeal in part, ordering that judgment be entered in his favour against Mr Luu for the sum of HK$37,702,670.40. It is therefore clear that Mr Toggenburger is a creditor of Mr Luu. 

9. Nevertheless, Mr Luu contends the Court of Appeal’s decision does not exonerate the trustees in relation to their conduct prior to 6 September 2013.  I shall examine the question whether any misconduct has been made out from the fact that Mr Toggenburger had continued to be a member of the creditors’ committee from the time of the Court of First Instance’s judgment up to the Court of Appeal’s judgment.

10. The role of the creditors’ committee in the statutory scheme is dealt with in a number of provisions of the Ordinance and the Bankruptcy Rules.  Thus s 82(1) of the Ordinance provides:

“… the trustee shall, in the administration of the property of the bankrupt and in the distribution thereof amongst his creditors, have regard to any directions that may be given by resolution of the creditors at any general meeting or by the creditors’ committee, and any directions so given by the creditors at any general meeting shall, in case of conflict, be deemed to override any directions given by the creditors’ committee.”

11. The creditors’ committee also have powers over, among other things, the remuneration of the trustee in bankruptcy (s 85 of the Ordinance) and the allowance to the bankrupt out of his property for the support of the bankrupt and his family (s 63 of the Ordinance). 

12. Further, under r 122ZF of the Bankruptcy Rules, subject to certain qualifications,

“it is the duty of the trustee to report to the members of the creditors’ committee all such matters as appear to him to be, or as they have indicated to him as being, of concern to them with respect to the bankruptcy.”

13. It can be seen therefore that membership of the creditors’ committee is a position of some significance in the context of the administration of a bankruptcy.  It should be noted, however, that a trustee has no power to change the composition of the creditors’ committee.  It is the court which has this power.

14. Under s 100E(1) of the Ordinance:

“(1) The court may on application being made by the Official Receiver or trustee by order appoint such qualified persons as it thinks fit as a creditors’ committee for the purpose of superintending the administration of the property of the bankrupt by the trustee, remove any member thereof and fill any vacancy therein.”

15. The power of the court to remove a member of the creditors’ committee is exercised on application, which may be made by both the trustee and the Official Receiver.  In this case neither the trustees nor the Official Receiver have applied to the court for Mr Toggenburger’s removal.

16. A member of the creditors’ committee may also be removed by resolution at a meeting of creditors: r 122ZM of the Bankruptcy Rules.  No meeting for the purpose of considering such a resolution has been proposed or convened.

17. Furthermore, under r 122ZE(2) of the Bankruptcy Rules, members of the creditors’ committee must be creditors of the bankrupt.  Under r 122ZL(1)(c) of the Bankruptcy Rules, a person’s membership of the creditors’ committee is “automatically terminated if … he ceases to be, or is found never to have been, a creditor”.  It follows that, on Mr Luu’s case, the trustees need not even apply to the court, or ask a meeting of creditors, to remove Mr Toggenburger from the committee: his membership was automatically terminated when his claim against Mr Luu was dismissed by the Court of First Instance.  The complaint against the trustees, in essence, is therefore that they had, after 31 July 2012, wrongly allowed Mr Toggenburger to continue to act as a member of the creditors’ committee.

18. Solicitors for the trustees, relying on In re a Debtor, ex parte The Debtor v Dodwell [1949] 1 Ch 236, submit that Mr Luu as the bankrupt has no locus standi to challenge any act or decision of the trustees, unless he can show that he would be entitled to a surplus but for the trustees’ act or decision.  I have some doubt whether that is not too wide a proposition.  Dodwell was a case that concerned the management and disposition of assets in the estate.  The trustee’s duty in relation to such assets is owed to the creditors; he is not accountable to the bankrupt unless there is a surplus.  This does not imply, in my opinion, that a bankrupt has no standing to challenge any decision of the trustee at all unless he can demonstrate there would be a surplus in the estate but for the trustees’ decision.

19. There may be an argument that, given that s 100E(1) only provides for an application to be made by the trustee or the Official Receiver for the removal of any member of a creditors’ committee, the bankrupt has no standing to complain about the composition of the committee.  It is unnecessary however to deal with this question since, as I shall explain below, I am satisfied that, on the facts, Mr Luu has failed to make out any ground for removing the trustees on the basis of Mr Toggenburger’s continued presence on the creditors’ committee.

20. There is no dispute that the trustees had continued to treat Mr Toggenburger as a member of the creditors’ committee despite Chung J’s judgment.  The trustees’ explanation is that they believe that Mr Toggenburger is in any event a creditor of Mr Luu because Mr Toggenburger is the assignee of a claim by First Federal Capital LLC (“First Federal”).  The trustees say that there are documents that show Mr Luu confirmed in writing that he personally received HK$500,000 from First Federal out of a larger sum of money to be advanced to a company associated with him.  None of the money was repaid, and First Federal assigned its claim to Mr Toggenburger.

21. However, it seems to me these documents simply show that Mr Luu’s personal bank account was the agreed destination for part of the loan proceeds in the sum of HK$500,000 borrowed by Sinoglobe Worldwide Ltd from First Federal.  The sum was acknowledged to be part of the loan to that company. There is no explanation as to how this made First Federal a creditor of Mr Luu.  The trustees say that the borrower is a company associated with Mr Luu.  That is highly probable, but does not in itself mean that Mr Luu is personally liable on the loan.

22. Moreover, no written notice of the assignment had been given to Mr Luu.  That means the assignment to Mr Toggenburger could not have taken effect at law but could only have been an equitable assignment, there being no evidence that the proper law is other than Hong Kong law or that, if the proper law is foreign law, such foreign law is different from Hong Kong law.

23. The trustees submit that upon a challenge of a trustee’s act or decision for the purpose of removal, by analogy with a challenge pursuant to s 83 of the Ordinance, the test is whether the act or decision of the trustee is utterly unreasonable or absurd.  In support of this proposition, the trustees refer to Re Chung Kau, HCB 581/2003, 23 February 2004, para 13.  There Deputy Judge J Poon (as he then was) said:

“When an application is brought under section 83, it would be inappropriate and unjust for the court to interfere with the decision of the Trustee unless it is shown that the Trustee’s actual decision was perverse or clearly wrong. In other words, unless the Trustee’s act or petition was utterly unreasonable and absurd and that no reasonable Trustee would so act, the court would not interfere.”

24. The trustees’ proposition seems to me to be too wide and based on reading Re Chung Kau out of its proper context.  The phrase “utterly unreasonable and absurd” came from the decision of Jessel MR in Re Peters, ex parte Lloyd (1882) 47 LT 64.  There, offers were made to purchase from the trustee in bankruptcy a reversionary interest which was the only asset of any value in the bankrupt estate.  When the trustee declined to accept any of the offers or to offer the reversionary interest for sale by auction, a creditor moved for an order for the trustee to realise the asset by sale by auction or private contract.  The Court of Appeal’s decision which, rejected the application, was based on s 20 of the Bankruptcy Act 1899, which provided as follows:

“The trustee shall, in the administration of the property of the bankrupt and in the distribution thereof amongst his creditors, have regard to any directions that may be given by resolution of the creditors at any general meeting …

Subject to the provisions of this Act, and to such directions as aforesaid, the trustee shall exercise his own discretion in the management of the estate, and its distribution amongst the creditors. …

  The bankrupt, or any creditor, debtor, or other person aggrieved by any act of the trustee, may apply to the Court, and the Court may confirm, reverse, or modify the act complained of, and make such order in the premises as it thinks just.  …”

25. It is in that context that Jessel MR said:

“… there is no locus standi for any one creditor to interfere and ask the court to order a sale, except on the ground that the trustee has not exercised his discretion bona fide. Here the appellant says that the refusal to sell is an absurd exercise of the discretion of the trustee. But the court will not interfere unless the trustee is doing that which is so utterly unreasonable and absurd that no reasonable man would so act.”

26. It can be seen that the decision was directed at an exercise of discretion by the office-holder in the management of the estate.  So also was the subsequent decision in Leon v York-O-Matic Ltd [1966] 1 WLR 1450, where an individual creditor complained that a liquidator was selling the company’s assets at an undervalue.  Plowman J refused to interfere with the liquidator’s decision under ss 245 and 246 of the Companies Act 1948 [1], stating (at p 1455C) that he was not satisfied that the liquidator had acted in a way in which no reasonable liquidator could have acted.  Re Chung Kau itself concerns a challenge against the Official Receiver’s demand for an indemnity for costs as a condition for allowing the bankrupt to continue certain legal proceedings.  It is in these contexts that the courts based the proper approach to a challenge of the office-holder’s decision upon reasonableness.

27. As Hunter JA pointed out in Eagle Queen Co Ltd v Thai Mercantile Development Finance Ltd [1989] 2 HKLR 71 at 73-74:

“Read in its context and in the light of the helpful UK authorities upon the corresponding provision in the UK, and its fore-runner, section 80 of the Bankruptcy Act 1914, it seems to me that the court under this sub-section will interfere only in two categories of case.

First in the language of Harman J in re a Debtor [1949] Ch 236, 241:

‘Administration in bankruptcy would be impossible if the trustee must answer at every step to the bankrupt for the exercise of his powers and discretions in the management and realization of the property’

To bring itself within this sub-section an applicant has to show exceptional behaviour e.g. that the liquidator ‘has not exercised his powers in good faith or has acted in a way in which no reasonable liquidator could have acted’ (Palmer Company Law, 24th edition, vol 1, para 88-38, and in Re Peters, ex p Lloyd. 1882 47 LT, 64, 65 per Jessel MR).

  The second category arises when in the course of his administration the liquidator is called upon to give a ruling or to make a decision which directly affects a party’s rights.  Examples of such decisions are conveniently collected in Halsbury Law of England, 4th edition, vol 7(2), paragraph 2035.  They include such matters as decisions upon the voting rights of creditors or contributories and upon the admission and rejection of proofs.  It is significant that when considering and ruling upon such matters the liquidator must act even-handedly as an impartial neutral; Re Exchange Securities and Commodities Limited [1983] BCLC 186.”

28. In the present case, I see nothing discretionary in r 122ZL(1)(c) of the Bankruptcy Rules, which provides that a person’s membership of the creditors’ committee is “automatically terminated if … he ceases to be, or is found never to have been, a creditor”.  The question is whether the person is a creditor of the bankrupt.  It is not a matter depending on the trustee’s discretion.  It is not a matter that calls for a commercial decision involving balancing considerations of cost and benefit and practicalities.  It is a legal question, albeit one that may turn on facts.  The trustee will no doubt take a view, but that view does not bind the court.  Nor do I think that on such a question the circumstances in which the court may intervene depend on whether the trustee’s decision can be described as absurd.  That is certainly not the test when the court adjudicates on whether a proof of debt should be admitted or rejected under r 117 of the Bankruptcy Rules: cfLouis Lo v Toohey [2005] 1 HKC 51.

29. On the materials available, it appears that the trustees had continued to regard Mr Toggenburger as a creditor, after Chung J’s judgment and before the Court of Appeal’s judgment, on the basis of the assigned claim from First Federal. I am not sure that was a correct decision in law given the matters I have referred to above.  In any event, however, even if their decision was based on a mistaken view of the effect of the assignment, I am not satisfied that the trustees’ decision to continue to treat Mr Toggenburger as a member of the creditors’ committee is so egregious as to constitute misconduct on their part, much less that it constitutes such misconduct that they ought to be removed pursuant to s 96(2)(a) of the Ordinance.

30. Nor do I think that the trustees’ decision shows that they have such a “connection with or relation to” Mr Toggenburger as might make it difficult for them “to act with impartiality in the interest of the creditors generally”, within the meaning of s 96(2)(d) of the Ordinance.  A significant reason against finding such lack of impartiality is the fact that, as I shall refer to below, the other major creditors fully support the actions of the trustees.

31. Mr Luu also complains that the trustees have failed to take a neutral stance on Mr Toggenburger’s appeal and wrote a misleading letter to the Court of Appeal shortly before the appeal was heard.

32. I find no substance in these complaints.  The Court of Appeal’s recent judgment demonstrates that the trustees had taken no part in that appeal.  The letter from the trustees’ solicitors to the Court of Appeal dated 18 June 2013 was in part written in response to Mr Luu’s criticism against the trustees that they did not take a more active part in opposing Mr Toggenburger’s appeal.  Mr Luu says that it was misleading for the trustees to say in that letter that part of the funds provided by Mr Toggenburger for investment had been put to Mr Luu’s personal use.  I do not accept that there was any attempt to mislead the Court of Appeal.  In their own conclusions based on the evidence before them, the Court of Appeal came to the view that various payments were made by Mr Toggenburger to Mr Luu’s agents, to whom Mr Luu gave instructions as to how to deal with the funds, in respect of which Mr Luu was liable to make restitution.

33. Finally, Mr Luu complains that the trustees have ignored the question he asked them whether they had been paid by Mr Toggenburger.  The trustees have written to Mr Luu on 17 June 2013 seeking clarification of the question.  In any event, the trustees have stated in their affirmation dated 10 July 2013 that funding had been obtained from creditors subject to the court’s approval and only for the purpose of the proceedings in HCA 1055/2012, which is an action brought by the trustees in Hong Kong against Mr Luu, his wife and various parties including a company called Fortune King Trading Ltd for a proprietary claim that that company was the alter ego of Mr Luu and that its assets were held as nominee for Mr Luu.  Funding arrangements such as that are generally confidential in nature and I see no reason why the trustees should disclose them to Mr Luu, particularly given that he is the defendant in that action.  I do not think the conduct of the trustees in this respect gives rise to any ground for their removal at all.

34. So far as the creditors’ interests are concerned, which are referred to in s 96(2)(e) of the Ordinance, the two members of the creditors’ committee other than Mr Toggenburger, who are also major creditors of the bankrupt, have confirmed in writing that they have found nothing wrong in the actions of the trustees to date and have expressed their full support for both trustees continuing to act as such.

35. In my view, no ground for the trustees’ removal has been made out.  The application for removal of the trustees is therefore dismissed.

36. There is also in Mr Luu’s summons an application for an order to direct the Official Receiver to remove Mr Toggenburger from the creditors’ committee.  As stated above, the power to remove members of the creditors’ committee lies with the court under s 100E(1) of the Ordinance (exercisable upon application by the trustee or the Official Receiver) and with the meeting of creditors under r 122ZM of the Bankruptcy Rules.  For the reasons already explained, there is no ground on which to impugn the Official Receiver for not taking steps for the removal of Mr Toggenburger.  This part of the summons is therefore also dismissed.

37. There will be a costs order nisi that Mr Luu pay the trustees the costs of his application.

HCB4776/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 4776 OF 2011

____________________

BETWEEN

____________________

(Heard Together)

____________________

J U D G M E N T

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1.  This is the hearing of two matters, the first being a bankruptcy petition issued by the creditor in these proceedings, Mr Zhang Liyuan, against the debtor, Mr Luu Hung Viet Derrick, in respect of a debt allegedly due by the debtor to the creditor of some HK$61,203,560.87.

2.  The petition is based on a statutory demand which was served on the debtor on 29 April 2011.  The petition itself was presented on 1 August 2011. 

3.  Subsequent to the presentation of the petition the debtor applied out of time to set aside the statutory demand which had been served on him on the ground that it was confusing and had thereby caused prejudice to him by leaving him in a situation which he did not and could not know the exact amount owed by him to the creditor.

4.  The application to set aside the statutory demand out of time was not immediately dealt with as the parties agreed by a consent order that both the petition and the application to set the statutory demand aside out of time should be dealt with at the same time, taking the view that the issues that would be raised in both applications were substantially the same.

5.  It is in those circumstances that both the petition and the application to set aside the statutory demand out of time have come before me today.

6.  The debt on which the petition is based arises out of a judgment in High Court Action No. 644 of 2010, in which the petitioner was the plaintiff and the debtor the defendant.  In those proceedings the petitioner claimed the sum of HK$43 million from the debtor.

7.  Those proceedings were commenced on 10 May 2010.  Just under a month after their commencement, on 9 June 2010, the parties entered into a consent order in the form of a Tomlin order which in effect obliged the debtor to pay the full amount claimed of HK$43 million plus interest thereon as from 6 May 2009 at a rate of 24 per cent per annum.

8.  Provision was made for the settlement of the $43 million principal of the judgment by the transfer of a certain number of shares in a company that is now known as Wai Chun Mining Industry Group Company Limited (“Wai Chun”), and the payment of a certain further amount of cash to top up the payment to an agreed value of HK$43 million.

9.  It appears that the debtor did not comply with the terms of this first consent order and in the event a second consent order was subsequently entered into on 8 December 2010, which in essence reiterated the terms of the first consent order, albeit with some variation as to the details in relation to the transfer of shares and the amount that was to be paid in addition to the shares to be transferred.

10.  This second consent order was also not complied with and as a result the petitioner applied, as he was entitled to do under the terms of the consent order, to obtain a formal judgment against the debtor of the amount in respect of the claim. 

11.  That application came on for hearing before Master K Lo on 15 February 2011.  Prior to the hearing, the debtor had put in an affirmation in which he made various points in opposition to the entering of judgment against him.  One point in particular is of relevance for present purposes – that is the debtor’s allegation that an amount of HK$8.12 million of the principal of the debt had, in fact, been satisfied by the transfer by him to a plaintiff in other proceedings (who was not the petitioner) of a certain number of shares in Wai Chun. 

12.  The exact nature of the debtor’s case on this is somewhat complicated but it involves the proposition that HCA 664 of 2010 (in which the judgment debt that is the subject of the petition arose) and the other set of proceedings, HCA 1962 of 2010, in both of which the debtor was a defendant, proceedings were in some way related and that the plaintiffs in the two sets of proceedings were in fact nominees for a Mr Lam, who had entered into a stock lending arrangement with the debtor.  It is suggested that the effected payment by transfer of shares in order to settle HCA 1962 of 2010 was to be taken into account so as to simultaneously reduce the amount of the judgment in HCA 644 of 2010 by the amount of HK$8.12 million.

13.  Notwithstanding this argument Master K Lo made an order giving judgment for the creditor of HK$43 million.  It seems to me, therefore, that the position must be that the debtor’s argument as to the payment of HK$8.12 million was rejected by the master and judgment for the full amount was accordingly entered against him.

14.  Thereafter, there was no appeal against this order.  Instead, there were two further consent orders that were made with a view to trying to settle the payment due under the judgment but neither of these resulted in anything and ultimately the statutory demand was served on 29 April 2011. 

15.  The statutory demand states that the debt was incurred on 15 February 2011, which is the date of the judgment granted by Master K Lo.  In the column for description of the debt, the debt is described as a judgment for the petitioner against the debtor on default on the part of the debtor in performing his obligations or discharging his liability in accordance with the schedule to the consent order dated 8 December 2010 under HCA 664 of 2010.

16.  In the third column (for the amount due as at the date of the demand) it is stated that the amount due is HK$43 million, plus interest thereon calculated from 6 May 2009 to 15 February 2011 at the rate of 24 per cent per annum and thereafter at the judgment rate until payment and costs assessed at HK$56,830, that having been the amount of costs assessed on a gross sum basis by Master K Lo and referred to in her order.  Having stated this, the entry in this column goes on give credit for “partial payment of costs in the sum of HK$40,000 on 24 March 2011 and interest in the sum of $60,000 on 6 April 2011.”  There is then stated a total for the amount of the debt – being the amount which I have indicated at the beginning of this judgment of $61,203,560.87.

17.  Before me, Mr Brian Wong, who appears for the debtor, has taken three broad points.

18.  First, he suggests that the debtor had demonstrated the existence of a dispute in relation to the amount claimed in relation to the HK$8.12 million which he says had been paid in effect by the transfer of shares to the plaintiff in HCA 1962 of 2010.  He therefore says that there is a bona fide dispute of substance in relation to this amount of the debt.

19.  Second, he suggests that in the alternative the statutory demand is defective and ought to be set aside, or alternatively that no bankruptcy order should be made on the strength of it because it was so lacking in clarity that the debtor was prejudiced as a result of the confusion caused by it.  In this respect the complaint relates to the way in which the amount of the debt is set out.  It is said that the information provided does not enable the debtor to be able to ascertain with clarity the amount of the debt that is said to be owing by him to the petitioner.  This, it is said, prejudiced the debtor because it had made it impossible for him to obtain assistance from friends or associates to raise the funds necessary to pay the debt.  In other words, what the debtor is saying is that but for the alleged uncertainty or lack of clarity in the statutory demand he would have taken steps to and would have been able to satisfy the debt that is properly due from him to the creditor.

20.  Finally, if both of those points go against him, Mr Wong suggests that, in the light of the fact that the debtor had indicated his intention to pay the debt, a period of time should be allowed for him to pay the debt after its correct balance had been ascertained.  He suggests that after ascertainment of the balance of the debt a period of some four months should be allowed to enable to debtor to make the necessary arrangements for payment.

21.  Mr Chain, who appears for the creditor, suggests that there is no substance to any of these points.  So far as the first point is concerned – the allegation that there is a bona fide dispute of substance in relation to some HK$8.12 million of the principal amount of the debt – Mr Chain says that there are at least three answers to this point.

22.  The point on which he places greatest reliance is the judgment of Master K Lo for the sum of $43 million entered after having considered the debtor’s affirmation in which he raises precisely this defence.  Mr Chain suggests that in those circumstances the matter is res judicata, as the matter has been raised and rejected by the court as reflected in the judgment of Master K Lo and that it is now too late for the debtor to try to reopen this point and that he is not entitled to do so.

23.  I think this must be right.  It is quite clear from the evidence and indeed the debtor’s own evidence, which included as an exhibit his affirmation placed before Master K Lo, that this precise point as to the HK$8.12 million was raised as a ground for resisting the entering of judgment in the full amount of HK$43 million.  This point has clearly been rejected as judgment has been entered for the full amount.

24.  I would add that on the basis of the material that the debtor has put forward in relation to the circumstances in which this credit is said to arise, it is in any event a case that is difficult to fully understand and is difficult to give credence to because it involves the proposition that a payment to a different plaintiff in an entirely different set of proceedings should somehow be regarded as amounting to a payment to the petitioner in his own action in respect of an apparently different debt.

25.  Although Mr Wong has urged on me the allegation concerning Mr Lam, who is said to have been the person behind both sets of proceedings, it has to be said that there is very little in the way of documentary evidence that would lend any support to the debtor’s case on this point and even if I had considered that the matter was one that could have been raised at this stage in the light of the judgment that had been entered, I would have been of the view that it was lacking in substance and was not such as would give rise to a bona fide dispute of substance such as to justify the court in refusing to make a bankruptcy order and requiring instead that the matter be dealt with by bringing proceedings in the ordinary way.

26.  Apart from the res judicata point it seems to me that there are two further points that can be made which, I think, give considerable support to the view that this is not a defence or argument that has any real substance to it. 

27.  The first is that the debtor, in fact, entered into consent orders under which he was obliged to pay the creditor $43 million.  While it might be said that the first of the two consent orders entered after the issue of the writ in HCA 644 of 2010 came before the supposed payment of HK$8.12 million by the transfer of shares in Wai Chun to the plaintiff in HCA 1962 of 2010, it cannot be gainsaid that the second consent order was entered into some months after that event, the transfer of shares having taken place on 17 June 2010.  The second consent order, however, was entered into on 8 December 2010, nearly six months later. 

28.  Notwithstanding the alleged partial payment the second consent order made no reference to it at all and under it the debtor undertook to pay the full sum of HK$43 million in the manner there provided.  Moreover, following the entry of the judgment by Master Lo, no attempt having been made to appeal the order, there were two further consent orders entered into, both of which proceeded on the basis that the debt owed by the debtor to the creditor was of a principal amount of HK$43 million. 

29.  Taking all of those matters into account it seems to me that it is quite clear that the defence of part payment and the allegation that there is a genuine dispute as to the HK$8.12 million is one that cannot be sustained.  I am quite satisfied that there is no substance whatsoever to the suggestion that there had been a part payment of HK$8.12 million.

30.  In any event, even if there had been some substance to that argument, it seems to me that this would not have availed the debtor in his attempts to resist the making of a bankruptcy order since even if credit were given for that amount the principal amount of the debt alone would still amount to some $34.88 million, well in excess of the amount required to sustain a bankruptcy petition.

31.  It therefore seems to me that there is no realistic prospect of establishing a bona fide dispute of substance in relation to this point and I accordingly reject it.

32.  I move on to the second point that has been made by Mr Wong.  In fairness, this was the point that he focused on both in his written submissions and in his submissions before me today.  It relates to the suggestion that the statutory demand was defective in that it was lacking in clarity and was likely to confuse the debtor as to the amount that he was being asked to pay and the amount of the debt alleged to be due from him.

33.  With respect, I am unable to accept that submission.  There are two aspects to it. The first is whether or not the statutory demand was in fact so lacking in clarity as to potentially prejudice the debtor.  In my view it was not. 

34.  Mr Wong very fairly drew my attention to the English authority of Re A Debtor [1989], 1 WLR 271, a decision of the English Court of Appeal in which a similar point was run.  However, in that case the English Court of Appeal held that notwithstanding a number of errors in the statutory demand, including the fact that the initial amount of the debt was wrongly stated, and although the demand might have been confusing to the extent that it might have been said that the debtor would have had some difficulty, although it would not necessarily have been impossible for him to calculate the amount of the debt that he was said owe to the creditor, the approach taken by the English Court of Appeal was to ask whether or not the defects caused prejudice to the debtor.

35.  In essence the court held that if the debtor was unable to show from his own evidence that first, he had been prejudiced, and second, that had it not been for the confusion he would have been in a position to take steps to pay the statutory demand due so as to avoid the presentation of a bankruptcy petition, it could not be said that the statutory demand had, due to its defects, caused any prejudice to the debtor.  In other words, unless the debtor could show that he would have been in a position to and would have paid the amount of the debt due had he known what it was, it could not be said that the confusion that might otherwise have been caused to him would have caused him any real prejudice since he would not have done or would not have been able to do anything about it in any event.

36.  In the present case it seems to me that, although the information contained in the statutory demand is not contained in precisely the correct columns as they are meant to be, according to the notes for creditors set out on the right–hand side of the statutory demand form, the information provided was sufficient for the debtor to be able to calculate the liability alleged against him and more importantly to be able to identify any respects in which he might dispute that liability.

37.  The statutory demand clearly states that the principal amount of the judgment debt is HK$43 million.  It goes on to give the period during which interest is to be calculated at the stated rate of 24 per cent.  It is, in my view, not a matter of any difficulty for the debtor to be able to calculate, given that information, the amount of interest accruing during that period of time. 

38.  Thereafter it is stated that interest continues to accrue on the principal amount at the judgment rate until payment.  Given that payment had not been effected at the date of the statutory demand and given the fact that the judgment rate is a matter of public record, there is no reason, in my view, why the debtor would not have been able to calculate the amount of interest accruing from the date of judgment to the date of the statutory demand by reference to the principal amount and the judgment rate applicable from time to time.

39.  In addition, the sum of HK$56,000-odd is claimed in respect of costs.  That is clear enough.  It is not suggested in the statutory demand that any amount of interest should accrue on that amount.

40.  Then there are two sums stated to have been received by way of partial payment: HK$40,000 in respect of costs and HK$60,000 in respect of interest, on the dates which I have mentioned.

41.  If there was any matter that the debtor wished to dispute, whether as to the amount of the principal debt, or as to the amount of interest, or as to the amount or nature or date of the payment of the partial payments, it seems to me that the debtor had all of the material necessary within his own possession to be able, armed with the statutory demand and the information contained in it, to do his own calculations as to the amount of the debt due from him to the creditor and to see whether that tallied with the total amount asserted in the statutory demand of $61million-odd .  If it did not, it would be open to him to dispute the amount setting out his own calculations and that would be a matter that could have been adjudicated upon in due course.  However, the debtor did not do this. 

42.  In those circumstances it seems to me that the statutory demand is clearly not so lacking in clarity as to be confusing to the debtor or so as to have made it impossible for him to do the calculations necessary to satisfy himself that the amount claimed was correctly calculated.  It also contained, as I have indicated, sufficient information to enable him to take any point he wished as to a dispute as to the liability to pay either the principal amount or the interest and to calculate the correct amounts that he said should have been payable.

43.  In those circumstances it seems to me that this second point which Mr Wong has taken must also fail.  But it seems to me that it would also fail for another reason.  Even if, contrary to the views that I have expressed, the statutory demand was in some respects lacking in clarity, it seems to me that on the evidence before me it cannot be said that the debtor has been prejudiced by this. 

44.  The debtor has not put forward any evidence of his ability to meet the amount of the statutory demand or some lesser amount which he may say he owes the creditor.  All that is said is that by reason of the alleged lack of clarity the debtor had been hampered in seeking to raise funds and has not been able to do so – but there is very little hard evidence of the sources from which the debtor would have raised such funds.  Reference is made to a Mr Yu, who provided the debtor with the shares which were used to effect the payment in respect of HCA 1962 of 2010.  It is said that Mr Yu had a further 140,000 shares in Wai Chun available to be used for the purpose of settling this debt. 

45.  However, the debtor’s own evidence and own calculations indicate that the value of those shares is slightly under HK$30 million.  That falls well short of the HK$61 million that is claimed.  It also falls well short of the HK$43 million in principal, although, in any event, it would not seem to me to be right to ignore the amount of interest since the allegation of the debtor is not that the interest is not payable, but that its amount is not readily ascertainable by him.  On any view, the amount of interest accruing on HK$43 million for a period of one year and nine months, up to the date of judgment, at a rate of 24 per cent per annum would be a substantial amount of money – Mr Chain pointed out in the course of his submissions that this amounted to interest at the rate of $28,000-odd per day.

46.  In those circumstances it seems to me that the possible availability of resources from which some $30 million-odd could be paid does not go anywhere near far enough to establish that the debtor would have been able to pay such amount as would have been indisputably due from him to the petitioner under the judgment that was entered against him.

47.  In those circumstances, it seems to me that the debtor has not established that any prejudice had been caused to him by the alleged lack of clarity in the statutory demand – an alleged lack of clarity which I have in any event held to be unfounded. 

48.  In those circumstances it seems to me that the second point that is taken by Mr Wong must also fail.

49.  That leaves Mr Wong’s third point, which is a request that the bankruptcy order be suspended or withheld and time be given for the debtor to pay.  However, with respect, it seems to me that having regard to what I have already said, that the debtor has had a considerable period of time in which to effect payment of the amount that is due from him to the creditor.  The first consent order was entered into on 9 June 2010 in which he undertook to pay HK$43 million plus interest to the creditor.  By now, some one year and eight months has elapsed, and no payment of any sort has been made in respect of the claim in HCA 644 of 2010. 

50.  In those circumstances it does not seem to me that I can give any credence to the debtor’s suggestion that if given time he will be in a position to pay the debt, and there is no reason why the petitioner should have to wait any longer to obtain the bankruptcy order which he seeks.

51.  I therefore decline to exercise such discretion as I may have to postpone the making of the bankruptcy order and afford the debtor a further opportunity to try and pay the debt.

52.  For all of those reasons I am satisfied that there is no substance in the disputes that have been raised by Mr Wong and the appropriate order to make would be to make the usual bankruptcy order with costs.  I shall therefore make that order on the petition, and it follows that the application to set aside the statutory demand out of time must also be dismissed with costs.

Mr Benjamin Chain, instructed by Leung & Associates, for the Petitioner (in HCB 4776/2011) and for the Respondent (in HCSD 31/2011)

Mr Wong Chao–wai, Brian, instructed by Simon Si & Co, for the Debtor (in HCB 4776/2011) and for the Applicant (in HCSD 31/2011)

Official Receiver, attendance excused