Re Ho Suet Hung
Read the full judgment text of HCB 5205/2018 on BabelCite. This HCB judgment was delivered on 15 December 2021.
1. At the hearing of a summons issued by Ms Ho Suet Hung, a bankrupt (“ Bankrupt ”), on 22 November 2021 under s.83 of the Bankruptcy Ordinance (Cap. 6) (“ BO ”), I dismissed the summons with no order as to costs. These are the reasons for my decision.
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HCB 5205/2018 [2021] HKCFI 3836 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO 5205 OF 2018 ________________________
________________________ Before: Hon Linda Chan J in Chambers Date of Hearing: 15 December 2021 Date of Decision: 15 December 2021 Date of Reasons for Decision: 22 December 2021 ________________________ REASONS FOR DECISION ________________________ 1.At the hearing of a summons issued by Ms Ho Suet Hung, a bankrupt (“Bankrupt”), on 22 November 2021 under s.83 of the Bankruptcy Ordinance (Cap. 6) (“BO”), I dismissed the summons with no order as to costs. These are the reasons for my decision. 2.In the summons, the Bankrupt appeals against the decision and act of Mr Wong Ka Sek and Mr Wong Ka Lam King (“Mr Wong”), the joint and several trustees of the property of the Bankrupt (together “Trustees”), as follows:
Background 3.A bankruptcy order was made against the Bankrupt on 16 October 2018 upon a petition presented by herself on 10 September 2018. The Official Receiver (“OR”) became the provisional trustee of the property of the Bankrupt by virtue of s.12(1A) of the BO. 4.At the time of her bankruptcy, the Bankrupt was employed as an assistant accountant at the monthly salary of $24,000. 5.As with all the bankrupts, upon presentation of the petition, all the bank accounts opened in the name of the Bankrupt were frozen, and she was not able to open any new bank account. 6.On 22 October 2018, the Bankrupt applied to the OR for permission to open a new bank account at SCB for the purpose of receiving monthly salary from her employer. On the same day, the OR qua provisional trustee issued a letter dated 22 October 2018 addressed to SCB (“Letter”) which stated as follows:
7.Ms Ariel Kwok, solicitors of the Official Receiver’s Office (“ORO”), informs the Court that it is the usual practice of the OR, where she is the provisional trustee of the property of a bankrupt, to issue a letter in similar terms as the Letter so as to facilitate the bankrupt to operate or open a bank account for the purpose of receiving monthly salary from the employer. 8.The Bankrupt provided the Letter to SCB and successfully opened the SCB Account and, since then, has been using it to receive her monthly salary. 9.At the general meeting of creditors held on 4 January 2019, the Trustees were appointed whereupon the OR ceased to be the provisional trustee of the property of the Bankrupt. Mr Wong informs the Court that the creditors fixed the remuneration of the Trustees at 16% of the assets realised and brought to credit during the bankruptcy of the Bankrupt. The rate of remuneration seems to be in line with the rate charged by the OR where she acts as a trustee, as prescribed in Items 3 and 9 of Table B in the Schedule to the Bankruptcy (Fees and Percentages) Order (Cap. 6C). 10.On 27 December 2019, the Trustees’ representative interviewed the Bankrupt and was told that the monthly salary of the Bankrupt and of her husband was $24,700 and $30,000 respectively. The Trustees took the view that each of the Bankrupt and her husband should bear 50% of the family expenses and, on this basis, assessed the Bankrupt’s monthly living expenses at $19,352 (“Assessment”). In their letter dated 27 December 2019 addressed to the Bankrupt (“Assessment Letter”), the Trustees set out the breakdown of the Assessment and the reasons therefor in a table. 11.In the Assessment Letter, the Trustees stated inter alia that:
12.The Bankrupt did not comply with the above requests. 13.Instead, in January 2020, the Bankrupt sent emails to the OR to complain about the Assessment. In response, the OR enquired if the Bankrupt agreed with the Assessment and, if not, whether she had provided reasons in support of her disagreement to the Trustees for their consideration. 14.On 5 February 2020, the Bankrupt informed the Trustees that she would apply to the Court to reverse their decision on the Assessment, but no such application was made. 15.In the meantime, the Bankrupt continued to withdraw money from the SCB Account and used it to defray her expenses. Except for documents evidencing payment of $5,000 registration fee to JUPAS for her son, the Bankrupt did not provide any further documents relating to any of her expenses. 16.On 27 October 2020, the Trustees instructed SCB to freeze the SCB Account. This prompted the Bankrupt to issue the summons on 22 November 2021. Applicable principle 17.It is well established that in considering an appeal against any act or decision of the trustee under s.83 of the BO, the Court would only interfere if it is shown that the trustee’s act or decision was perverse or clearly wrong (Re Tyndall (1977) 30 FLR 6, at 10) or was utterly unreasonable and absurd that no reasonable trustee would so act (Re Chew Kean Kor [1957] 23 MLJ 34, following Sear v Lawson (1880) 15 ChD 426; Re Chung Kau [2004] 1 HKLRD C3, HCB 581/2003, 5 February 2004, at §13, per DHCJ Poon (as he then was)). 18.As stated above, the Bankrupt seeks to reverse or set aside the Trustees’ decision on the Assessment and their act in freezing the SCB Account. Trustees’ decision on Assessment 19.In her affirmation filed in support of the summons, the Bankrupt says that her current salary is $26,000 and, after deducting the mandatory contribution to MPF, the net amount available is $24,700. The Bankrupt claims that her total reasonable living expenses is $26,712 per month, and she sustains a deficit of $2,012 per month. She disagrees with the Assessment. 20.The items in dispute, the amounts claimed by the Bankrupt and the amounts assessed by the Trustees are summarised as follows:
21.Although it appears that many of the items are in dispute, as pointed out by Mr Wong, the differences are largely attributed to the fact that the amounts assessed for the items were made in December 2019, whereas the amounts claimed by the Bankrupt (and the documents in support) were incurred in the period between September 2020 and November 2020. Taking into account the supporting documents exhibited to the Bankrupt’s affirmation, the Trustees maintained that the Assessment for the period from January 2020 to August 2020 was reasonable, but increased the assessed monthly expenses to $20,744 with effect from September 2020 (“Revised Assessment”). Details as follows:
22.The differences between the Bankrupt’s claims and the Trustees’ Revised Assessment are attributed to the fact that the Bankrupt claims medical expense ($1,000) and medical expense at $2,886 for each of her 2 sons, whereas the Trustees consider that such expenses have already been included in personal care expenses ($1,500) and the expenses for maintenance of 2 sons ($13,000 in total). 23.In my judgment, the Bankrupt has failed to show that the Trustees’ Assessment or the Revised Assessment were perverse or clearly wrong. It seems to me that the Assessment and the Revised Assessment are reasonable, having regard to:
24.There is therefore no proper basis for the Bankrupt to reverse or set aside the Trustees’ Assessment and the Revised Assessment. Trustees’ act in freezing SCB Account 25.In her affirmation, the Bankrupt says that after the SCB Account had been frozen, she had to approach the Trustees’ office to obtain a letter authorising her to withdraw $19,352 from the SCB Account to pay her living expenses for that month, which was very inconvenient and time consuming. 26.Other than confirming that they had instructed SCB to freeze the SCB Account, the Trustees have not in their affirmation addressed the issue, specifically what is the source of their power in freezing the SCB Account and why in the circumstances of this case, they were entitled to exercise such power. This also calls into question whether the Trustees were entitled to require the Bankrupt to pay the Specified Amount into the Estate’s Account, and to freeze the SCB Account following her refusal to do so. 27.I note that in the Assessment Letter, the Trustees said:
28.The statement is plainly wrong in that:
29.Under the bankruptcy regime, a bankrupt’s estate comprises (1) all property belonging to the bankrupt at the commencement of the bankruptcy[1] and (2) all property acquired by the bankrupt after commencement of bankruptcy and becomes part of the estate pursuant to ss.43A to 43E of the BO. This can be seen from the following provisions. 30.First, the definition of “bankrupt’s estate” under s.43 of the BO, the most relevant part is s.43(1) which provides as follows:
31.Second, s.43A deals with after-acquired property. This section enables a trustee to claim any future-acquired property (but not income) after commencement of the bankruptcy in this way:
32.Third, s.43E deals with income. It provides that the bankrupt’s income will only form part of the bankrupt’s estate if the court makes an income payments order requiring the bankrupt (or the person making the payment) to pay the amount specified in the order to the trustee. This is the effect of s.43E of the BO which provides:
33.As the Trustees had never applied for an income payments order requiring the Bankrupt to pay any part of her income to the Trustees, there was no proper basis for the Trustees to require the Bankrupt to pay the Specified Amount into the Estate’s Account. It follows that there was no proper basis for the Trustees to freeze the SCB Account. 34.The aforesaid notwithstanding, Mr Wong confirms to the Court that the Trustees will take steps to unfreeze the SCB Account, to ensure that the Bankrupt will receive the amounts of living expenses in accordance with the Assessment and Revised Assessment or such other amount as assessed by the Court. It is therefore unnecessary for the Court to make any order in terms of §§2-3 of the summons. 35.The failure on the part of the Trustees in applying for an income payments order, coupled with the Trustees’ act in requesting SCB to freeze the SCB Account, seems to be the common practice amongst some trustees in bankruptcy. This gives rise to a concern that the bankrupts may be left at the mercy of the trustees in that:
36.Both Ms Kwok and Mr Wong assure this Court that in most cases, the concern does not arise. This is because it has been the usual practice of a trustee in bankruptcy to approach the matter in this way:
37.Similarly, it is the practice of the OR to try to agree with a bankrupt on the amount of “voluntary contribution” to the estate. This practice is both costs effective and provides the incentive to a bankrupt to cooperate with the trustee as the bankrupt does not need to disclose his bankruptcy to the employer. The only difference is that the OR rarely exercises the power to freeze the bank account of a bankrupt, and only does so when a bankrupt fails to make “voluntary contribution” agreed with the OR and the OR is unable to get in contact with the bankrupt. 38.It seems to me that if the trustee follows the above practice, there would be sufficient safeguard to ensure that the bankrupt’s interests would be protected, as he can seek to reverse the act of the trustee where the trustee has misused his power by forcing the bankrupt to make a “voluntary contribution” when his level of income and domestic needs do not permit him to pay the amount required by the trustee. 39.If, however, the trustee is not able to come to an agreement with the bankrupt on the amount of “voluntary contribution” to the estate, the trustee will have no alternative but to apply for an income payments order from the Court. This does not mean that the bankrupt will not have the incentive to agree with the trustee on the amount of “voluntary contribution” to the estate, as the bankrupt will face the risk of having to bear the costs incurred by the application if he fails to satisfy the Court that the amount required for his domestic needs exceeds the amount assessed by the trustee. 40.I express no view as to whether the trustee has the power to freeze the bank account of the bankrupt. It seems to me that this is an issue which requires further consideration, with the assistance of detailed submissions from the parties:
41.Mr Wong informs the Court that in accordance with the usual practice of the Trustees, they do not seek costs against the Bankrupt, as the bankrupt has the right to appeal against the decision of the trustee under s.83 of the BO. This seems to me to be fair and reasonable.
The Bankrupt appears in person Mr Wong Ka Lam King, one of the Joint and Several Trustees, appears in person Ms Ariel Kwok, of Official Receiver’s Office, for the Official Receiver [1] Section 30 of the BO provides: “The bankruptcy of a person against whom a bankruptcy order has been made - (a) commences with the day on which the order is made; and (b) continues until he is discharged under section 30A or 30B.” | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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