Re Lok Wing Sang

HCB001721/1997

HCB 1721/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS NO. 1721 OF 1997

_______________________

_______________________

Coram: Master Lung, in Court

Date of Hearing: 22 October 2002

Date of Judgment: 29 October 2002

____________________

J U D G M E N T

____________________

1.Mr. Lok Wing Sang (the bankrupt) was adjudged bankrupt by an order of the court dated 7 September 1998. By virtue of sections 30 A (1) and 30A(2)(a) of the Bankruptcy Ordinance, the bankrupt will stand to be discharged automatically on 7 September 2002. However, the Official Receiver as trustee in the estate of the bankrupt (the trustee) has applied to court by way of a summons dated 27 June 2002, objecting to the automatic discharge of the bankrupt. The trustee relies on the ground that the bankrupt has failed to co-operate in the administration of his estate pursuant to section 30A(4)(c) of the Bankruptcy Ordinance.

2.The trustee has submitted a report to the court in support of the application. In the report the trustee sets out the particulars of the bankrupt's failure of co-operation in the administration of his estate. The particulars are summed up as follow:

1) The bankrupt attended the trustee's office on 25 June 1998 for preliminary examination. He disputed the judgment debt of $860,000.00 he owed to the judgment petitioner.

2) The bankrupt submitted a statement of affairs on 16 July 1998.

3) The petitioner reported that it had paid the price of goods for the sum of $498,300.63 to Green Young Industries Company Limited (Green Young), of which the bankrupt was a director. The goods delivered by Green Young to the petitioner was found to be defective. The petitioner requested the trustee to require an explanation from the bankrupt to account for the said sum of $498,300.63.

4) Upon the request of the trustee, the bankrupt submitted the audited accounts of Green Young and said that the company had ceased business. He further told the trustee that the said sum received by Green Young from the petitioner had been used to purchase the raw materials for the production of the goods delivered to the petitioner. The trustee required him to produce documents to prove what he said.

5) The bankrupt faxed to the trustee extract of purchase orders for the amount of $196,410.30 only. By a letter dated 12 July 1999, the trustee asked the bankrupt for more information. The bankrupt telephoned the trustee informing her that he had sent all the documents in his possession to the Officer Receiver's office. He considered that all the allegations of the petitioner were unreasonable. He refused to provide further information.

6) Since then, the bankrupt had not attended the trustee's office to provide further information. The trustee has tried to contact the bankrupt by sending a letter to his last known address. But the letter was returned. The trustee was unable to contact him since then.

7) The trustee has realized the bankrupt's assets for $468.13, which is insufficient to pay a preferential payment or a dividend. The petitioning creditor has submitted the proof of debt for $977,421.63.

3.The bankrupt opposes the application. He does dispute the above facts. He filed an affirmation in which he explained that upon the request of the trustee, he had faxed 7 pages of documents to the trustee. Because of this application by the trustee, he had called the trustee again. It was then discovered that the trustee only received 6 pages of the documents, missing the third page. He said that the first 2 pages accounted for the amount of $196,410.30. With the third page, they should account for the amount up to $437,341.30. The remaining amount of $60,959.30 was the overheads and profit of Green Young (which he did not tell the trustee nor was it stated in the documents given to the trustee or in page 3). On that day in question, a staff of the trustee, Miss Chiu had confirmed that she had received all the documents. He did not realize that she had not received page 3. Mr. Wong, acting for the bankrupt, submits that the above explains the reason why the bankrupt had told the trustee that he had sent all the documents in his possession to her and that he had nothing further to give to her.

4.As to the letter to the last known address being returned to the trustee, the bankrupt explained that it was because his prior place of residence had been demolished for reconstruction and he had moved to his present address at Room 2703, Block A, Hoi Fu Court, Mongkok, Kowloon in December 1999. In his affirmation, the bankrupt did not explain the reason why he had not informed the trustee the change of his address.

5.Miss Phyllis McKenna, acting for the trustee, submits that she accepts that the bankrupt had faxed the documents to explain the amount of $498,300.63. But he has failed to give further information to the Miss Chiu of the trustee. The documents received only accounted for $196,410.30. He had also told Miss Chiu that he refused to provide any further information to her. He has failed to inform the trustee when he changed his address. The trustee was unable to contact him. All these amount to failure on his part to co-operate with the trustee in the administration of his estate under section 30A (4)(c). However, she accepts that this is not a case of blatant disregard of the trustee by not attending the trustee's office or supplying any information to the trustee. She invites the court to adopt the maximum of 4 years suspension as the starting point. Taking into account of the conduct of the bankrupt, there should be a 50% deduction, resulting in 2 years suspension of the discharge of the bankruptcy order.

6.Mr. Wong submits that although the bankrupt had not informed the trustee of his change of his address, the court should not adopt 4 years as the starting point.

7.It is not in dispute that the period of suspension should commensurate with the gravity of the bankrupt's conduct and 4 years is the maximum period under section 30A of Bankruptcy Ordinance.

8.First of all, I consider the conduct of the bankrupt. In the absence of any evidence from Miss Chiu of the trustee, I accept the bankrupt's explanation that he thought that Miss Chiu had received all those pages faxed to her. However, I cannot accept that this gives him the reason for refusing to give further information to the trustee. He was aware that the trustee required him to give evidence to prove that Green Young had spent $498,300.63 on the raw materials and that he was obligated to account for that sum to the trustee. Even if the trustee had received page 2, he could only account for $437,341.30. As to the remaining balance of $60,959.33, the documents faxed to the trustee do not prove it. Nor did the bankrupt tell Miss Chiu at any stage according to his affirmation filed on 28 July 2002, which Mr. Wong confirmed it was prepared with legal advice. The trustee was perfectly entitled to make further inquiry in relation to the balance. There is no justification for the bankrupt to refuse to give further information to the trustee. As to his failure of informing the trustee of his change of address, I find that the bankrupt has failed to give any justifiable reason for it. He was aware that the trustee was not satisfied with the evidence that he had supplied to her. Although he had refused to give further information, which I find that he had no justifiable reason to do so, he could well anticipate that the trustee would make further inquiry. Without giving the trustee the new address, the bankrupt had cut the contact from the trustee. In the end, I find that the trustee has been able to prove the case to me. The bankrupt is in violation of section 30A (4)(c ) of the Bankruptcy Ordinance.

9.I accept that the bankrupt's conduct is not the worst of the kind. He did not disregard the trustee's request. He had given some documents to the trustee. For these reasons, I accept Mr. Wong's submission that I should not use the maximum of 4 years as the starting point. Having considered the circumstances of this case, I consider that a period of suspension of 18 months is appropriate.

10.I order that the relevant period for the automatic discharge of the bankrupt under section 30A of the Bankruptcy Ordinance be suspended for 18 months commencing on 7 September 2002. The bankrupt shall be discharged on 7 March 2004.

Representation:

Mr. S. Wong of Messrs. Yaddy Cheung & Co. for the Petitioner.

Ms. Phyllis McKenna, of Official Receiver's Office