Re Chan John Loong Fai

CACV 460/2019

[2021] HKCA 1834

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 460 OF 2019

(ON APPEAL FROM HCB NO 6991 OF 2017)

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Before: Hon Kwan VP, Barma JA and Au JA in Court

Date of Hearing:  10 November 2020

Dates of Further Written Submissions:  11, 13 and 24 November 2020, 21 January and 4 February 2021

Date of Judgment:  10 December 2021

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J U D G M E N T

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Hon Kwan VP:

1.I agree with the judgment of Barma JA.

Hon Barma JA:

Introduction

2.This was an appeal by the Official Receiver (“OR”)  against the order of L Chan J (“the Judge”)  dated 2 August 2019, by which the Judge:

(1)  dismissed the OR’s ex parte summons dated 25 May 2018 (“the Summons”)  seeking directions as to whether Mr Alan Chung Wah Tang (“Mr Tang”)  is a “fit person” whom the creditors in general meeting may consider appointing as trustee of the property of the Bankrupt under s.17 of the Bankruptcy Ordinance, Cap 6 (“the BO”), and if not, that the resolution passed at the first creditors’ meeting to appoint Mr Tang as trustee be declared to be invalid and ineffective; and 

(2)  made a costs order nisi that there be no order as to costs, which was subsequently varied by an order dated 25 October 2019 to require the OR to bear 50% of Mr Tang’s costs of the Summons and the application to vary the costs order nisi. 

3.This appeal essentially raises two questions.  First, whether the court has jurisdiction to give the directions sought by the OR (“the Jurisdiction Question”).  Second, if it does, did the Judge err in finding that Mr Tang is a “fit person” to be appointed as a trustee under s.17 of the BO (“the Fitness Question”).

4.In the course of the hearing, we formed the view that the Fitness Question was capable of being addressed by Mr Tang giving undertakings to the court in order to meet the OR’s concerns about Mr Tang’s fitness to act as trustee, as it appeared to us that the differences between the OR and Mr Tang in relation to the Fitness Question could be resolved if Mr Tang were prepared to acknowledge problems with his past conduct, and provide assurances regarding his future attitude, by way of undertakings to the court.  The parties were receptive to this suggestion. We therefore reserved judgment at the end of the hearing and directed the parties to indicate the terms of the assurances and undertakings that they respectively considered should be given by Mr Tang to the court with a view to satisfying the court that he would be a fit person to hold office as a trustee in bankruptcy, should the court consider this necessary.  This was done by further correspondence and submissions, which I shall refer to later in this judgment.

The factual background

5.The factual background to this appeal was not in dispute.  It was set out by the Judge at [4] to [22] of his Decision (reported at [2019] 4 HKLRD 109), and can be summarised as follows.

6.Mr Tang was found guilty of contempt of court in four respects by To J in Ip Pui Lam v Alan Chung Wah Tang (unrep, HCMP 450/2016, 18 October 2016)  (“the CFI Contempt Judgment”)  for his failure to comply with a court order made in certain bankruptcy proceedings that required him to produce certain documents. On appeal by Mr Tang (unrep, CACV 214/2016, 16 February 2017)  this court (differently constituted)  allowed his appeal in part (“the CA Contempt Judgment”), acquitting him on three out of the four charges of contempt, but upholding his conviction of contempt on the fourth charge for his failure to produce certain invoices and receipts.  In his sentencing judgment (unrep, HCMP 450/2016, 11 October 2017), To J commented adversely on Mr Tang’s conduct, finding that he had deliberately treated the court’s order with contempt, and fined Mr Tang HK$300,000 as he considered it to be a serious case of contempt.

7.On 20 February 2017, a few days after the CA Contempt Judgment was handed down, Mr Tang was party to an ex parte application on paper (in an unrelated matter)  for a regulating order in respect of JV Fitness Ltd, which had been ordered to be wound up some months earlier, and seeking the appointment of himself and two colleagues (Ms Hou and Mr Kan)  as liquidators of that company, of which they had earlier been appointed provisional liquidators (“the PLs”).  Harris J (who was aware of the CA Contempt Judgment)  declined to deal with the application on paper and required a summons to be issued.  The summons that was then issued sought appointment of Ms. Hou and Mr Kan (but not Mr Tang)  as liquidators.  In Re JV Fitness Ltd [2018] 1 HKLRD 553, Harris J indicated that his principal concern was as to the identity of the proposed liquidators, and at [9] to [12] of his judgment he criticised the PLs for making no reference in the ex parte application to the fact that Mr Tang had been found to be in contempt of court, commented that he would not have appointed Mr Tang, and stated that he had considered whether or not he should appoint Ms Hou and Mr Kan.  He also expressed the view that Mr Tang had in the past demonstrated unnecessarily confrontational behaviour in various previous proceedings before him and other judges.

8.The OR says that soon after the CFI Contempt Judgment, she decided not to put Mr Tang forward in future for appointment as a liquidator for new cases under the Panel A Scheme under which qualified private insolvency practitioners are placed on a roster from which “appointment takers” would be put forward for appointment as liquidators by the court, in certain cases.  For bankruptcy cases, the OR decided that she would, upon learning of nominations of Mr Tang as trustee, inform the creditors of Mr Tang’s conviction for contempt.  If the creditors nonetheless decided to persist with their nomination of Mr Tang as a trustee, the OR would proceed to seek a direction from the court under rule 158 of the Bankruptcy Rules (“the BR”)  as to whether Mr Tang is a fit person to be appointed under s.17 of the BO.

9.In these bankruptcy proceedings, the petitioner nominated Mr Tang for appointment as one of the joint and several trustees of the Bankrupt’s property.  Despite the OR sending letters to the creditors informing them of Mr Tang’s conviction for contempt, on 18 May 2018 the creditors resolved by a majority to nominate Mr Tang as one of the trustees. 

10.The OR then took out the Summons on 25 May 2018 seeking directions pursuant to rule 158 of the BR, as the OR doubted whether Mr Tang is a “fit person” whom the creditors can validly appoint as trustee, in view of his having been convicted and fined for contempt of court, and his subsequent failure to disclose such conviction in the ex parte application made to Harris J in Re JV Fitness Ltd (supra)  seeking appointment as a liquidator.

The Judge’s decision

11.The Judge took the view that the purpose of the Summons was effectively to seek the removal of Mr Tang as trustee in these bankruptcy proceedings.  He noted (at [53] of his Decision (“the Decision”))  that the application was not brought under s.96(2)  of the BO (which empowers the court to remove a trustee from his office where, inter alia, he is guilty of misconduct, fails to perform his duties or the interests of the creditors require it)  or rule 163 of the BR (which sets out specific grounds for refusing to approve the appointment of a trustee).

12.The Judge expressed the view (at [54] of the Decision)  that although the application was framed as one seeking the directions of the court as to the suitability of Mr Tang for appointment as a trustee in this bankruptcy, the grounds relied upon by the OR related to Mr Tang’s general fitness to be appointed as a trustee, and not to any factor specific to this case.

13.So far as the scope and applicability of rule 158 of the BR was concerned, the Judge did not regard Re Ng Shiu Fan [2008] 4 HKLRD 813 and Re Tung Wan Hoi Kee Products Factor (a firm) [1972] HKLR 66 as providing support for the use of rule 158 here, on the basis that those applications were based on matters that had happened in the relevant proceedings, whereas “[t]he grounds of this application did not arise from anything Mr Tang did or did not do in this bankruptcy”, and held that rule 158 was not intended to be used for removal of trustees for misconduct (which is provided for by s.96(2)  of the BO)  and that rule 163 of the BR is not applicable because the grounds there specified are not engaged in this case (see [58] to [64] of the Decision). 

14.As to Mr Tang’s fitness to act as a trustee, the Judge disagreed with the OR’s view that Mr Tang’s failure to disclose the finding of contempt against him impacted on his honesty and integrity, taking the view that Mr Tang’s conduct was at worst negligent.  He observed that Mr Tang had accepted that he should have been more proactive and instructed the legal team to ensure that his contempt conviction was disclosed and expressed remorse for his failure to do so.  The Judge also considered that Mr Tang’s stubbornness did not amount to dishonesty or malice, and did not regard it as impacting on his fitness to act.  While the Judge acknowledged that Mr Tang’s confrontational behaviour could be annoying or frustrating, he did not regard it as indicating any lack of honesty or integrity (see [65] to [70] of the Decision). 

15.The Judge also observed that there was no evidence of Mr Tang having disregarded court orders apart from the occasion which resulted in his conviction for contempt, for which he had been duly punished, and doubted whether it was open to the OR to administer further punishment against Mr Tang for his contempt, describing the actions taken by the OR following the CFI Contempt Judgment as “enforcing sanctions” against Mr Tang.  He also expressed the view that Mr Tang’s fitness in the general (non-case specific)  sense was a disciplinary matter for the disciplinary committee of his professional body, stating at [74] to [75] of the Decision that:

“74. I doubt if it is open to the OR to administer further punishment on Mr Tang for his contempt as he had already been punished by the court for it. If the OR did not intend to punish him again for his contempt but was concerned about his fitness in general because he failed to acknowledge his error in the contempt, then his fitness in general is a disciplinary matter. It is a matter for the disciplinary committee of the professional body that he belonged. The OR cannot apply administrative actions to suspend his practice either generally or selectively and either permanently or temporarily without invoking the disciplinary proceedings. Rule 158 is also not for deciding the fitness in general of an insolvency practitioner.

75.  Mr Chain referred in his para. 35 of his submissions to Mr Tang’s Affirmation… where he said in effect that if the OR should succeed in this application, that would mean that he would be found to be unfit to continue acting as an officer of the court generally (even though lasting till he shows his remorse).  Mr Chain submitted that this possible consequence has no relevance as to whether Mr Tang satisfies the ‘fit person’ standard.  The application may be for an answer of whether Mr Tang is a fit officer of the court.  But it is based on grounds that are of general application and not specific to this bankruptcy.  The finding, if in favour of the OR, would also be based on general grounds and be applicable to Mr Tang generally.  I just cannot see how r.158 can be employed to deal with such a general disciplinary issue.  Even if the OR should contend that Mr Tang is unfit only temporarily and until he acknowledges faithfully his error, it is still a disciplinary issue as it is his fitness generally that is being questioned, not his fitness or lack of the same on specific ground(s)  as set out in the Ordinances.  Such issue is for the disciplinary committee of his professional body.”

The appeal

The parties’ arguments

16.The OR advanced three grounds of appeal against the Decision.  The first relates to the Jurisdiction Question, and contends that the Judge erred in law in holding that he had no jurisdiction to grant the directions sought.  The second and third grounds relate to the Fitness Question.  The OR argues that the Judge failed to consider for himself whether Mr Tang is a fit person to act as trustee, thinking erroneously that this was a disciplinary matter for Mr Tang’s professional body.  Further or alternatively, even if the Judge did consider this question, his approach to it was manifestly and plainly wrong. 

17.Mr William Wong SC (leading Mr Christopher Chain), appeared for the OR on the appeal.  He advanced four propositions in relation to the Jurisdiction Question with a view to establishing that the court has power to grant the directions sought: 

(1)  He submitted that having regard to the clear legislative intent and purpose behind the bankruptcy regime, the Court of First Instance (“CFI”)  necessarily has overall supervisory jurisdiction over the bankruptcy process, and exercises that jurisdiction with the assistance of the OR as the regulator in respect of the bankruptcy process.

(2)  He submitted that s.17 of the BO imposes a qualifying condition in that only a “fit person” can be appointed as a trustee, and any purported appointment by creditors of a person who is not a “fit person” is an improper exercise of their power which renders the appointment invalid. 

(3)  He submitted that the CFI exercising its supervisory jurisdiction in relation to bankruptcies must retain the power to refuse, in an appropriate case, to approve an appointment of trustee made by the creditors in general meeting.  He referred to the previous regime under the old s.23 of the BO whereby a “fit person” appointed by the creditors as trustee had to be approved and certified as duly appointed by the CFI.  Although the requirement of approval and certification by the CFI was removed with the enactment of the current s.17 of the BO, Mr Wong SC submitted there was no reason to think that the legislature intended to reduce or otherwise fetter the CFI’s supervisory jurisdiction.

(4)  He submitted that rule 158 of the BR is the proper mechanism for the OR to raise the “fit person” question for the court’s consideration as it is of a very broad scope, and there is no other (more specific)  provision within the BO or the BR which allows the OR to raise the “fit person” question for the court’s consideration.  He submitted alternatively that, even if rule 158 was not apt for this purpose, the CFI could give the directions sought by way of declaration, so that it was wrong for the Judge to have dismissed the Summons without considering this, even if he thought that the incorrect procedure had been used.

18.Mr Wong SC also submitted that the Judge’s reasoning in relation to the Jurisdiction Question was fundamentally flawed in that he erroneously regarded the OR’s application for directions as a general disciplinary matter against Mr Tang, and erroneously held that rule 158 of the BR was inapplicable.

19.Mr Thomas WK Wong, who appeared for Mr Tang, contended that under s.17 of the BO, the creditors’ general meeting is the primary body for determining the fitness of a proposed trustee, and that the court should be slow to interfere with the creditors’ decision.  He submitted that there was no room for any supervisory jurisdiction on the part of the court, or any role for the OR in relation to the “fit person” criterion, save in exceptional cases.  In support of this argument, he relied on the amendments to the BO by which the former requirement for the court’s certification of the appointment of a trustee under the old s.23 as being something which reinforced his construction of s.17.  

20.He submitted that under the current provisions, the statutory scheme for disqualification or removal of a trustee is as provided for in ss.79A and 96(2)  of the BO and rule 163 of the BR, as follows:

(1)  Section 79A of the BO sets out 2 “mandatory” grounds for disqualification of appointment as trustee, namely, being an undischarged bankrupt or a body corporate, as any such appointments shall be void.

(2)  Rule 163 of the BR sets out two specified “sufficient” reasons for refusing to approve the appointment of a person as trustee, viz. that person has been removed as trustee under s.96(2)  in other proceedings, or has failed or neglected without good cause to render his accounts for audit for 2 months.

(3)  Section 96(2)  of the BO empowers the court to remove a trustee from his office and appoint another person in his place on one or more of the five grounds specified therein.

21.He went on to submit that absent wholly exceptional circumstances, the proper route to challenge a trustee’s fitness to act would be by seeking his removal under s.96(2)  of the BO, leaving no room for any general supervisory jurisdiction of the court or a general role for the OR by invoking BR rule 158.  He suggested that this view was supported by general principles of statutory interpretation, and that considerations of natural justice and fairness pointed to the conclusion that s.96(2)  was the only proper avenue for raising questions of removal, because the trustee would be a respondent to that application, whereas (as the OR accepted)  the established practice in respect of rule 158 applications is that they are made ex parte.

22.It was further argued (by ground 2 of the respondent’s notice)  that the Decision should be affirmed on the basis that the court’s jurisdiction to overturn, interfere with or substitute its own decision for that of the creditors’ meeting is limited to exceptional cases where the appointment is made mala fides, or is tainted by fraud or other impropriety, or is unreasonable in the Wednesbury sense.  

23.Turning to the Fitness Question, Mr Wong SC submitted that that the Judge’s conclusion was premised on a fundamental error of principle, in that he regarded the directions sought by the OR as being a disciplinary issue, and wholly overlooked that the OR was motivated by considerations which were concerned with maintaining the integrity of the bankruptcy process.  He submitted that this led the Judge to the plainly wrong conclusion that Mr Tang was a fit person to be appointed as a trustee, which the Judge reached without taking into account the very high standards of honesty, integrity, knowledge and ability expected of a trustee as an officer of the court performing a quasi-judicial role.  He submitted that the Judge had failed to properly take account of, or give sufficient weight to, the finding of contempt against Mr Tang, Mr Tang’s failure to disclose the contempt finding to Harris J in the Re JV Fitness case, and Mr Tang’s persistent failure to acknowledge his wrongdoing or express proper remorse. 

24.On behalf of Mr Tang, reliance was placed on the Judge’s view that Mr Tang was not guilty of dishonesty, malice or lack of integrity, and it was submitted that the Judge was entitled to conclude that Mr Tang was a fit person to act as trustee.  It was also suggested (by ground 1 of the respondent’s notice)  that the Decision should be affirmed because the findings and judicial comments in the CFI Contempt Judgment, the CA Contempt Judgment, the sentencing judgment and Re JV Fitness case were inadmissible evidence in relation to the issue of whether Mr Tang was a fit person to be appointed as a trustee under s.17 of the BO. 

25.At the hearing, Mr Wong SC confirmed that the OR was not contending that Mr Tang should be regarded forever as not being a fit person to act as a trustee.  This is also apparent from the nature of the concerns expressed by the OR as to Mr Tang’s fitness, as explained in paragraph 6 of the OR’s reply skeleton submission, sub-paragraphs (e)  to (g)  of which emphasized that:

(1)  there has not been any instance where Mr Tang clearly and unequivocally recognised that he was wrong and owned up to his mistake; every mention of the contempt finding by Mr Tang has been heavily qualified and sought to be explained away by criticisms of the contempt finding;

(2)  there are only two occasions on which Mr Tang has expressed any kind of remorse, viz. in Mr Tang’s skeleton for the hearing below, only after the OR had pointed out that there had been no expression of remorse by Mr Tang, and orally in the course of the hearing before the Judge (upon being asked about this directly by the Judge); and

(3)  such isolated expressions of remorse appeared to be mere lip service, as there had not been any suggestion by Mr Tang as to what lessons he has learned from the contempt finding, what remedial measures he has taken or will take, and what adjustments or changes he has made or will make to his behaviour and attitude so as to ensure that there will not be any further contempt findings against him.

26.These matters suggest (as Mr Wong SC confirmed)  that the OR’s concern is that Mr Tang has not demonstrated genuine understanding and acceptance of his failings, and of the need for changes to his approach and behaviour.  Should it be shown that Mr Tang acknowledges and regrets his past errors, and some meaningful assurance be provided that he will make efforts to improve his attitude and conduct, the OR might well accept that going forward, Mr Tang would be a fit person to be appointed to the position of trustee in bankruptcy.

27.For his part, Mr Tang relied on paragraphs 8 and 16 of his affirmation filed in opposition to the Summons on 22 August 2018 as demonstrating sufficient remorse on his part.  Those paragraphs read as follows:

“8. I accept that, with no possible denial, there is a Court of Appeal (‘CoA’)  decision confirming one act of contempt of Court against me (‘Contempt Finding’). Such Contempt Finding has formed and will continue to form a permanent scar in my professional name, reputation and career. For the purpose of this Application, however, I should like to provide further factual background to this Honourable Court concerning such Contempt Finding (and also the Contempt Findings of Mr Justice To), which may not be obvious from just reading (at ‘face value’)  the relevant Appeal Ruling / Contempt Judgment. It is essential from my perspective to provide such further factual background as without which, this Honourable Court may not be in a position to take a full and balanced understanding of this Contempt Finding for the purpose of this Application.

…

16.  I accept unreservedly the Contempt Finding of the CoA was due to my ‘stubborn’ view on payment of the inspection charges and the efforts involved (see paragraph 7.2 of the Appeal Ruling).  In light of the fact that there was no adverse finding on the professional conduct of the Alison Wong and me by the CoA, and the exorbitant costs involved in any further appeal, I accepted legal advice from Leading counsel not to appeal to the CFA.” 

28.The OR does not regard these statements as demonstrating any reform or remorse on the part of Mr Tang, and maintains the position that he is not, and should not be regarded as, a fit person unless and until he gives some reasonable assurances and undertakings to the court.

29.However, before the court considers what assurances or undertakings from Mr Tang might suffice, it is necessary first to be satisfied that the court has jurisdiction to consider and determine whether Mr Tang is a fit person to be appointed as trustee under s.17 of the BO, and if so, to be satisfied that the complaints of the OR would (or at least could)  support a determination that Mr Tang was not a fit person to be appointed as a trustee in bankruptcy so as to give rise to the need for such assurances in the first place.  If Mr Tang’s actions relied on by the OR (i.e. his conviction of contempt, and his failure to disclose the conviction to Harris J)  do not at least cast doubt on his fitness to act, there would be no reason to seek assurances or undertakings from him. That said, if they arguably do so, it would be open to Mr Tang to offer appropriate undertakings and assurances to the court in order to avoid a final view having to be taken in relation to the question of his fitness to act.  In the result, the parties were, as I have noted above, willing to explore this approach, and, as I shall explain below, it has been possible to arrive at undertakings and assurances which Mr Tang is willing to give, which in the court’s view are sufficient to enable him to be regarded as a fit person for appointment going forward.

30.However, as the Jurisdiction Question needs to be considered before that stage is reached, I shall deal with the Jurisdiction Question first.

Ground 1: The Jurisdiction Question

31.The Jurisdiction Question is primarily a question of statutory interpretation, in particular of s.17 of the BO.  In approaching this question, the court adopts a purposive approach by construing the statutory language with regard to its context and purpose.  Words are given their natural and ordinary meaning unless the context or purpose points to a different meaning.  Context and purpose are to be considered in every case, and not only when an ambiguity may be thought to arise: HKSAR v Cheung Kwun Yin (2009)  12 HKCFAR 568 at [11] to [12] per Li CJ. 

32.The context includes the existing state of the law, the descriptive parts of the statute, the other provisions in the statute, the sub-legislative framework, the legislative history and all facts constituting or concerning the subject matter of the statute: Li Yiu Kee v The Chinese University of Hong Kong (unrep, CACV 93/2009, 23 July 2010)  at [73] per Stock VP (as he then was); HKSAR v Cheung Kwun Yin (supra)  at [13]. 

33.Applying these principles, we start with the actual words used in s.17 of the BO, which are as follows: 

“Power to make appointment of trustees

The power to appoint some fit person as trustee (whether the first such trustee or a trustee appointed to fill any vacancy)  is exercisable, except at a time when an order for the summary administration of the bankrupt’s estate is in force, by a general meeting of the bankrupt’s creditors.

…

The appointment of any person as trustee takes effect at the time specified in the creditors’ resolution or the court order, as the case may be, appointing him.” (Emphasis added)

34.It is plain that whilst the section empowers the bankrupt’s creditors in general meeting to appoint some person as trustee, it limits the exercise of that power to the appointment of a “fit person”.  The phrase “fit person” is not defined in the BO and we were not referred to any case law considering the meaning of that phrase in the context of trustees in bankruptcy or liquidators.  There are also no provisions in the BO or the BR expressly providing for a procedure for the court to consider whether a person appointed as trustee by the creditors in general meeting is in fact a fit person to be so appointed. 

35.This stands in contrast to the position under the repealed s.23 of the old BO, which expressly provided that the court should certify that an appointment has been duly made unless the appointment was disapproved on the ground that, inter alia, the person appointed was not fit to act as trustee.  The repealed s.23 provided as follows:

“(1)  Where a debtor is adjudged bankrupt or the creditors have resolved that he be adjudged bankrupt, the creditors may by ordinary resolution appoint the Official Receiver or some other fit person, whether a creditor or not, to fill the office of trustee of the property of the bankrupt or they may resolve to leave his appointment to the committee of inspection hereinafter mentioned. A person shall be deemed not fit to act as a trustee of the property of a bankrupt where he has been previously removed from the office of trustee of a bankrupt’s property for misconduct or neglect of duty.

(2)  The person appointed shall, unless he is the Official Receiver, give such security as the court may direct or as may be prescribed, and the court, if satisfied with the security, shall certify under the hand of the Registrar that his appointment has been duly made, unless the appointment is disapproved by the court on the ground that it has not been made in good faith by a majority in value of the creditors voting, or that the person appointed is not fit to act as trustee, or that his connexion with or relation to the bankrupt or his estate or any particular creditor makes it difficult for him to act with impartiality in the interests of the creditors generally.

(3)  The appointment of a trustee shall take effect as from the date of the certificate.

(4)  When a debtor is adjudged bankrupt after the first meeting of creditors has been held and a trustee has not been appointed prior to the adjudication, the Official Receiver shall forthwith summon a meeting of creditors for the purpose of appointing a trustee. If no trustee is then appointed by the creditors the court shall on the application of the Official Receiver appoint the Official Receiver or some other fit person to be trustee.” (Emphasis added)

36.The requirement of the court’s certification, which was necessary in order for the appointment to take effect, was removed by the Bankruptcy (Amendment)  Ordinance 1996 (“the 1996 Amendment”)  which repealed the entire s.23 and introduced the current procedure under s.17 of the BO. 

37.Mr Thomas Wong submitted that the repeal of section 23 meant that the court no longer had a role to play in the appointment process, save perhaps in exceptional circumstances.  However, despite the removal of the certification requirement, I cannot discern, whether from the legislation itself or the legislative materials cited by the parties, any legislative intent to reduce or otherwise remove the court’s supervisory jurisdiction over the entire bankruptcy process, including the ability to refuse to approve the appointment of a person as trustee, and I am satisfied that this was not the intention. There are four principal matters which have led me to this conclusion. 

38.First, trustees are officers of the court and subject to its inherent jurisdiction:  Re Lehman Brothers International (Europe)  (In Administration) [2015] EWHC 2270 at [174] per David Richards J (as he then was).  In the absence of clear words or an expressed legislative intent to that effect, I do not think that it can be lightly concluded that the court has no jurisdiction to decide whether a person is fit to act as its officer and hold the office of trustee.

39.Secondly, it is well-established that the court, assisted by the OR, exercises supervisory jurisdiction over the entire bankruptcy process.  As Stock JA (as he then was)  held in Re C (a bankrupt) [2006] 4 HKC 582 at [4]: 

“The role of [the Court of First Instance ‘sitting in its bankruptcy jurisdiction’] is central to the entire process prescribed by, and the policy underlying, the [Bankruptcy Ordinance (Cap. 6)] from petition to discharge. The nature of the court’s function in the exercise of that jurisdiction is peculiar in the sense that it is a continuing one in the case of any person in respect of whom a petition is presented and a bankruptcy order is in due course made. The court, with the assistance of its officer, the Official Receiver, exercises a supervisory role, balancing the interests of creditors and the rights of the bankrupt with an eye as well on the policy of the law to maintain proper commercial standards.” (Emphasis added)

40.Various provisions in the BO also reflect the court’s supervisory jurisdiction over the conduct and office of trustees, and more generally over questions arising in bankruptcy cases – see for example ss. 84(1), 96(2)  and 97(1).

41.Thirdly, although the formal requirement of certification by the court was removed, the court’s power to refuse to approve an appointment of trustee has been retained.  This is clear from s.80(2)  of the BO which empowers the creditors to appoint persons to act as trustees in succession in the event of the appointment of one or more of the persons first named not being approved by the court.  Rule 163 of the BR sets out sufficient reasons for refusing to approve the appointment of a person as trustee, including that such person has been removed under s.96(2)  of the BO from the office of trustee in any other proceedings under the BO.  These provisions clearly undermine the contention that the court’s supervisory jurisdiction has been removed or reduced. 

42.Fourthly, the legislative materials suggest that the amendment was made as part of the overall streamlining of the bankruptcy procedure by removing unnecessary or unnecessarily cumbersome procedural steps (see the Legislative Council Brief on the Bankruptcy (Amendment)  Bill 1996, 27 February 1996, at [6(d)], [7] and [13] to [14]).  There is certainly no indication that the intention was to remove the ability to decide whether someone is fit to be appointed as trustee from the court and give it instead to the creditors exclusively.  In my view, the current procedure has simply been streamlined, in that appointments of trustees are no longer required to be certified as duly appointed by the court, and the court is no longer required to administer the trustee’s giving of security.  Instead, a person appointed as trustee first notify his appointment to the OR and give security to the satisfaction of the OR before he can act as trustee (s.23(1)  of the BO).  He must also arrange for notice of his appointment to be gazetted and, if he considers it advisable, have it published in a local newspaper (rule 162 of the BR).  In this way, his appointment will be made known to relevant stakeholders.  In the event of an objection to his appointment, the court may refuse to approve the appointment in the exercise of its inherent jurisdiction and discretion where sufficient grounds exist. 

43.In the premises, I am of the clear view that the court has jurisdiction to consider and determine whether a person is fit to be appointed as trustee, and reject the submission that the creditors’ general meeting is the primary “judge” for determining the fitness of a proposed trustee if by that it is meant to suggest that the matter is at the sole discretion of the bankrupt’s creditors in general meeting and is not subject to review or supervision by the court.  Nor do I see any reason why the court should be particularly restrained in interfering with the decision of the creditors’ meeting where such interference is called for, or that the court’s supervisory jurisdiction should be reserved only for exceptional cases.  Nor is there support, whether in the BO or the legislative materials, for the suggestion that the court should not interfere with the creditors’ decision in the absence of mala fides or unreasonableness in the Wednesbury sense.  All such arguments neglect the fundamental fact that the court has (as it must have)  inherent jurisdiction over its officers, which is reinforced by the various statutory provisions (mentioned in [40] above)  which, to my mind, confirm that the ultimate power to approve or disapprove an appointment of trustee is vested in the court.  It follows from this that I would reject ground 2 of the respondent’s notice.  

44.Following notification to the OR of an appointment of trustee, there must, of necessity, be some procedure under which the OR can properly raise with the court any matters which are relevant to, and may warrant disapproval of, the appointment.  In the present case, the OR has relied on rule 158 of the BR which provides as follows:

“Application for directions

In any case of doubt or difficulty or in any matter not provided for by the Ordinance or any rules thereunder relating to any proceeding in court, the Official Receiver may apply to the court for directions.” (Emphasis added)

45.The rule is plainly of broad scope.  It can be invoked in respect of any matter not provided for by the BO or any rules thereunder relating to any proceeding in court.  One such matter not provided for by the BO or the BR would be the application procedure by which the court can be asked to consider whether a proposed appointee is a “fit person” who can be appointed as trustee under s.17 of the BO.  As mentioned above, that was formerly a matter expressly provided for by the certification requirement provided for in the repealed s.23 of the old BO. 

46.I do not agree with Mr Thomas Wong’s submission that the question of whether a person is fit to be appointed as trustee is provided for by s.96(2)  of the BO. There is clearly a difference between the removal of a person (who has already been appointed)  from the office of trustee and the refusal to approve an appointment of a person as trustee in the first place.  Appointment and removal are dealt with by different provisions in the BO and the BR, and while the grounds for removal from office and those for refusal to approve an appointment may overlap in some respects, such overlap would not be complete, and there could be some grounds that would apply to one situation but not the other.  

47.I do not think that considerations of natural justice or fairness have much bearing on this issue.  Whatever may be the established practice in rule 158 applications, there is nothing in the rule that mandates that applications made pursuant to it must be made ex parte.  Whether a particular application should be made ex parte or inter partes will obviously depend on the nature and subject matter of the application.  Clearly an application of the nature of the application now under consideration, calling, as it does, for an assessment of the fitness of a proposed appointee for the position of trustee in bankruptcy, would be one which should be made inter partes so as to enable the individual or individuals in question to respond to concerns about their fitness to act, they being clearly interested parties affected by such an application.  In fairness, Mr Wong SC rightly acknowledged at the hearing that the application in the present case should have been made inter partes.  

48.Although rule 158 by its terms authorises the OR to apply to the court for “directions”, the rule has been applied to determine substantive matters such as the validity of resolutions passed at a creditors’ meeting (see Re Tung Wan Hoi Kee Products Factory, ex parte the Official Receiver [1972] HKLR 66 at 68, 70 per Blair-Kerr J)  and whether provident fund benefits form part of a bankrupt’s estate upon a proper interpretation of the BO (see Re Ng Shiu Fan [2009] 4 HKLRD 774 (CA)  at [5], [6] and [53] per Tang VP (as he then was)).  Thus, I would not regard the rule as being only capable of being invoked to determine purely procedural matters.  

49.The Judge distinguished those two cases on the basis that they were concerned with matters arising under the bankruptcy proceedings in which they were made, whereas in the present case, the grounds of the OR’s application did not arise from anything which Mr Tang did or did not do in this bankruptcy.  I do not see that this is a valid distinction.  The wording of rule 158 is wide, extending to matters relating to “any proceeding in court”.  In any event, whether Mr Tang is a “fit person” to be appointed as trustee under s.17 of the BO is, to my mind, plainly a matter arising in respect of the bankruptcy proceedings in which the application is made, even if the grounds which are relied upon to question his fitness may arise from different proceedings. 

50.More fundamentally, I agree with Mr Wong SC that the Judge wrongly characterised the nature of the application under the Summons as a disciplinary matter for the disciplinary committee of the professional body to which Mr Tang belongs.  I cannot agree that the OR should be regarded as seeking to further penalise Mr Tang for his previous contempt of court or to penalise him for the non-disclosure of his conviction for contempt when seeking appointment as liquidator in the JV Fitness case.  Rather, it seems to me that the OR is simply carrying out her duty as the regulator of the insolvency regime, by ensuring that the fitness of a person appointed as trustee is properly considered.  I therefore agree with Mr Wong SC that the directions sought by the OR are prospective, protective and regulatory in nature. 

51.I am therefore satisfied that the Judge was wrong to conclude that the court has no jurisdiction to consider and grant directions as to whether a person appointed by the bankrupt’s creditors is a “fit person” to be so appointed, and the OR must therefore succeed in her appeal in relation to the Jurisdiction Question.

Grounds 2 and 3: The Fitness Question

52.As I have noted at [25] and [26] above, the OR does not suggest that the finding of contempt against Mr Tang is a matter of such seriousness that Mr Tang could never again be considered to be a fit person to act as a trustee.  Rather, the OR’s position is that the finding of contempt of Mr Tang is exacerbated by his failure to ensure its disclosure to Harris J in Re JV Fitness Ltd, and by Mr Tang’s attempts to explain it away in his affirmation filed for these proceedings (see particularly [8] to [22] of the affirmation).  Mr Wong SC submitted that this showed that Mr Tang, while acknowledging (as he has to)  that he had been found guilty of contempt, had not yet accepted that he was in the wrong.  This is a matter for concern, as it suggests that Mr Tang still considers that it was in order for him to have disobeyed a court order, and may continue to disobey court orders in future if he considers that they are not justified.  It reflects a lack of awareness, remorse, and reform on his part, and thus impacts on his fitness to act as a trustee. 

53.I accept that the OR is genuinely concerned about Mr Tang’s conduct, which has a direct bearing on his fitness to act as trustee or liquidator, and that such concerns are legitimate.  They are echoed by the observations of Harris J in the JV Fitness case, where he referred to Mr Tang having demonstrated unnecessarily confrontational behaviour towards other parties and the court. The persistent attempts on Mr Tang’s part (continued in his affirmation)  to dispute the correctness (if not the fact)  of the finding of contempt against him, in my view clearly justify the OR’s concerns regarding the fitness of Mr Tang to act as a trustee in bankruptcy. 

54.However, in the light of the OR’s stance, we explored with the parties whether these concerns could be addressed by Mr Tang’s giving of appropriate assurances and undertakings to the court as to his past and future conduct.  As mentioned above, the parties were receptive to this proposal, resulting in our giving directions for the parties to address the court in writing as to the appropriate assurances and undertakings to be given.  

55.To this end, Mr Tang’s solicitors wrote to the court with his proposed undertakings on 11 November 2020, and the OR lodged submissions on 13 November 2020 setting out the undertakings she considered to be appropriate.  Following further correspondence between the court and the parties, including a personal letter from Mr Tang forwarded by his solicitors, in which he explained the circumstances surrounding the non-disclosure to Harris J of his conviction for contempt in the JV Fitness case, the court indicated by its letter dated 27 November 2020 that we would be minded to accept the following undertakings and assurances from Mr Tang:

(1)  his express and unqualified acknowledgment and acceptance of the finding of contempt of court against him as found by this court (Cheung, Kwan and Poon JJA, as Poon CJHC and Kwan VP then were)  in CACV 214/2016 (Date of Judgment: 16 February 2017)  and by Deputy High Court Judge To in HCMP 450/2016 (Date of Reasons for Judgment: 11 October 2017), and his express and unreserved apology for the same;

(2)  his express and unqualified acknowledgment and acceptance that the finding of contempt against him should have been disclosed (whether by Mr Tang or otherwise)  to Harris J in Re JV Fitness Ltd and that it was inappropriate to have failed to do so;

(3)  his undertaking not to commit any contempt of court again and to duly abide by any and all court directions or orders binding on him, acting in any capacity; and

(4)  his express assurance that he will, so far as the circumstances warrant it, adopt a professional and courteous attitude and approach (even if he needs to be robust)  in his dealings with and towards the Official Receiver in respect of insolvency cases and related matters.

56.The undertakings in [55(1)  and (4)] above were offered by Mr Tang in his solicitors’ letter of 11 November 2020.  The undertaking in [55(3)] above was put forward by the court in its letter of 18 November 2020, and the acknowledgment in [55(2)] above was put forward by the court in its letter of 27 November 2020.  Mr Tang indicated his agreement to all of them by his solicitors’ letter of 1 December 2020.

57.Unfortunately, matters did not rest there.  On 29 December 2020, while this judgment was pending, judgment was handed down by the Court of Appeal (differently constituted – Kwan VP, Cheung JA and Au JA)  in CACV 306/2019, in which Mr Tang was an appellant (represented by different solicitors from those representing him in this appeal)  but in which the OR did not take part, her attendance having been excused.  As it seemed to us that certain matters mentioned in that judgment might have some bearing on how this appeal should properly be resolved, this court wrote to the parties on 30 December 2020, to point this out.  As Mr Tang’s present solicitors and the OR were not involved in CACV 306/2019, we enclosed for their information a copy of the judgment in CACV 306/2019 and a copy of a letter dated 4 September 2020 from the clerk to G Lam J (as he then was)  which was referred to in [8.21] of the judgment in CACV 306/2019.

58.The issue arising in CACV 306/2019, which concerned a liquidation in which Mr Tang was a liquidator, that concerned us in the context of this appeal was this.  In that liquidation, Mr Tang took out a summons seeking production of documents and examination of former directors of the company in liquidation, which was dismissed by DHCJ William Wong SC as being oppressive on the grounds that Mr Tang had expressed his intention to bring contempt proceedings against the former directors against whom the orders were sought.  Subsequently, on 14 July 2020, Mr Tang applied ex parte for leave to commence committal proceedings against the former directors for their alleged failure to comply with an earlier court order.  The application was dismissed by G Lam J, who held (among other things)  that Mr Tang had been guilty of material non-disclosure for failing to disclose the judgment of DCHJ William Wong SC, which G Lam J considered highly relevant to the question of whether or not leave to bring committal proceedings should be granted, as it had a significant bearing on the question of whether any useful purpose would be served by pursuing the matter.

59.As this seemed to us to be a further incident which might impact on Mr Tang’s fitness to act, being a possible further example of unnecessarily or inappropriately confrontational or aggressive litigation conduct, and also raised questions as to Mr Tang’s judgment so far as the need to make proper disclosure was concerned, we directed the parties to lodge further written submissions in respect of Mr Tang’s fitness to act in the light of the matters disclosed in the judgment in CACV 306/2019 in this respect.  The OR duly lodged further submissions on 21 January 2021, to which Mr Tang responded on 4 February 2021.

60.The OR submitted that the conduct of Mr Tang reinforced her view that Mr Tang was not at present a fit person to be appointed as a trustee in bankruptcy. Reliance was placed on the material non-disclosure, and also on Mr Tang’s general conduct which the OR considered to be unreasonable and oppressive. However, the OR remained of the view that it was possible for Mr Tang to be considered fit if he were prepared to give appropriate undertakings and assurances as to his future conduct.  She submitted that in addition to the undertakings and assurances set out in the court’s letter of 27 November 2020 (which Mr Tang had, as noted above, agreed to give), Mr Tang should also undertake to take all necessary steps to modify his behaviour to ensure that there would be no possibility of future findings of contempt against him whilst acting in any capacity before the court.

61.Mr Tang argued that it would not be appropriate for this court to consider his conduct in another case for the first time on an appeal in an unrelated matter.  He also explained that his non-disclosure in that case was inadvertent, and occurred while acting in person.  Nonetheless he was prepared to give the further undertaking suggested by the OR subject to minor modifications, which I would regard as acceptable. 

62.In my view, the conduct of Mr Tang in other matters is clearly relevant to his fitness to act as a trustee in bankruptcy, having regard to the nature of the concerns that have been adumbrated above.  That said, I would accept that as the matters arising in the underlying liquidation that was the background to CACV 306/2019 took place before the hearing of this appeal, Mr Tang may not have fully appreciated the concerns that justifiably existed as to his attitude and approach in dealing with insolvency matters.

63.In all the circumstances, and having considered the further submissions arising from the matter in CACV 306/2019, it remains my view that this appeal can be suitably resolved by accepting assurances and undertakings from Mr Tang that are aimed at modifications to his behaviour so as to avoid the risk of future problems in his dealings with the court, the OR and other parties.  I note that the OR would accept that he is a “fit person” provided that he gives such assurances and undertakings to the court.  In the circumstances, it is not necessary for us to express any detailed views on the parties’ further submissions, and I would therefore accept that Mr Tang would be a fit person to be appointed as a trustee in bankruptcy, provided that he gives the undertakings (1)  to (4)  set out in [55] above, together with a further undertaking (which he has agreed to give)  in the following terms:

“(5)  His undertaking to take all reasonable and necessary steps to modify his behaviour to avoid any reasonable possibility of future findings of contempt against him whilst acting in any capacity before the Court.”

64.In the circumstances, it is also unnecessary to decide whether the Judge was correct to hold that Mr Tang was a fit person to be appointed as a trustee, although I am bound to say that the Judge’s view of this application as one which was punitive or disciplinary in nature was misconceived, and that this strongly suggests that he had not approached the question correctly.  High standards are rightly expected of a person holding the office of trustee (see Re Legend International Resorts Ltd (unrep, HCCW 1139/2004, 7 March 2011)  at [30] per Fok JA (as he then was)), and previous unsatisfactory behaviour and repeated incidents indicating a failure to modify or change such behaviour are clearly relevant to the question of fitness going forward.  

65.For completeness, I would add that I see no merit in ground 1 of the respondent’s notice.

Conclusion and disposition

66.For all of the foregoing reasons, I am of the view that the appeal should be allowed.  Given the manner in which it has been possible to deal with this matter by way of the undertakings, acknowledgments and assurances to be given by Mr Tang, I would make an order that upon Mr Tang giving the undertakings and assurances mentioned in [55] and [63] above, the appeal is to be allowed, the order of the Judge set aside, and no order be made on the OR’s summons dated 25 May 2018.

67.As far as costs are concerned, as the OR has succeeded on the Jurisdiction Question, and the Fitness Question has been disposed of on the basis of the undertakings, acknowledgments and assurances to given by Mr Tang (which were proposed by the court and which had not been considered below), I would make an order nisi that the OR should have half her costs of the appeal and in the court below, to be taxed on the party and party basis if not agreed, with a certificate for two counsel on appeal.

Hon Au JA:

68.I agree with the judgment of Barma JA.

Mr William Wong SC and Mr Christopher Chain, instructed by Official Receiver, for the appellant

Mr Thomas Wong, instructed by Tang & So, for Mr Alan Chung Wah Tang (Trustee of the Property of the Bankrupt)