Re Lam Kwok Hing Wilfred
Read the full judgment text of HCB 3560/2003 on BabelCite. This HCB judgment was delivered on 28 August 2003.
1. This is a creditor's petition taken out on 25 February 2003 for the bankruptcy of the debtor. At the end of the hearing, a usual bankruptcy order with costs was granted against the debtor. The following are the reasons for that decision.
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HCB 3560/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO. 3560 OF 2003 ____________ Re: LAM KWOK HING WILFRED Ex parte: MAGNUM INTERNATIONAL SECURITIES LIMITED ____________ Coram: Hon Chung J in Court Date of Hearing: 28 August 2003 Date of Judgment: 28 August 2003 Date of Handing Down Reasons for Judgment: 21 November 2003 ___________________________________ REASONS FOR JUDGMENT ___________________________________ Introduction 1.This is a creditor's petition taken out on 25 February 2003 for the bankruptcy of the debtor. At the end of the hearing, a usual bankruptcy order with costs was granted against the debtor. The following are the reasons for that decision. 2.The bankruptcy petition was based on a statutory demand dated 15 March 2002 served on the debtor on 3 April 2002 (that is, about 1 year 4 months before the hearing of the petition) in respect of $1,397,895.56. That sum was the balance of the amount due under a settlement agreement dated 27 July 2001 (that is, an agreement made some 1-1/2 years before the taking out of the petition and about 2 years before the hearing before me). The debtor does not dispute that, since about 1 February 2002, he has been in default of making prompt payment in accordance with the settlement agreement. 3.The background leading to the settlement agreement is as follows. The petitioner is a limited company carrying on the business of a securities broker. The debtor was a customer of the petitioner and owed the petitioner $1.7 million as at June 2001 (being the trading balance of the debtor's account with the petitioner). The petitioner commenced an action in the High Court to recover the debt in June 2001. The settlement agreement was reached (as stated above) on 27 July 2001 whereby the debtor was to repay $1.8 million odd by 18 monthly instalments. The action was discontinued in August 2001. The Debtor's Case in the Petition 4.The debtor does not dispute the debt, or his liability to pay it. However, he contends that no bankruptcy order should be made against him on the following grounds:-
These grounds will be dealt with under separate headings below. Legal Principles 5.Several provisions of the Bankruptcy Ordinance (Cap. 6) are relevant to this petition. The relevant part of s. 6D(1)(a) provides:-
S. 6D(3) provides:-
6.Further, the following legal principles are undisputed:-
Credibility of Witnesses 7.By reason of the matters set out under the next heading, I prefer the testimony of the petitioner's witnesses to that of the debtor. Was an Agreement Reached between the Petitioner and the Debtor? 8.The debtor affirmed as follows. Shortly after the settlement agreement, he became aware he would not be able to continue with the instalment payments as agreed. He therefore discussed other solutions with the petitioner. In April 2002, the debtor proposed to transfer his property in Beijing ("the Beijing property") to the petitioner as part payment of his debt. The Beijing property was purchased by the debtor in about 1995 and, according to him, was valued at US$102,000 in April 2002. The debtor met with Mr To and Mr Chan of the petitioner twice for this purpose. The debtor deposed:-
The debtor deposed about that aspect in his second affirmation as follows:-
9.The debtor's assertion of an agreement is denied by the petitioner. Mr To said this in his first affirmation:-
10.The relevant parts of exhibit "LKHW-4" referred to above read:-
Exhibit "LKHW-7" was the correspondence in Chinese between the debtor and his PRC lawyers from 13 May 2002 to 28 May 2002. They referred to the intended sale of the Beijing property. The fax dated 28 May 2002 contains the following:-
Hence, they indicate the debtor's intention to realise the Beijing property rather than to transfer it to the petitioner. 11.Thus, the debtor's assertion is denied by the petitioner and there is no contemporaneous document in support of it. The documents rather show a different arrangement (or proposal). In these circumstances, I agree with the petitioner that the debtor has not made out this part of his case, namely, there was an agreement regarding the transfer of the Beijing property to the petitioner as part payment of the debt. 12.The debtor also suggests that there was another agreement between him and the petitioner for the Beijing property to be sold and the sale proceeds be used as part-payment of the debt. I also do not find this to be credible in view that there is no supporting contemporaneous document (save perhaps the debtor's authorisation regarding the sale proceeds (which will be dealt with below)). 13.Further, I also agree with the petitioner's argument that the totality of the contemporaneous documents shows that the terms of the parties' discussion relating to the Beijing property changed with time: see para. 8-15, the petitioner's closing submissions. This also supports the petitioner's case that there was no binding agreement. 14.The debtor emphasises the fact that the authorisation given by him in the petitioner's favour ("LKHW-4") has never been revoked by the petitioner. That may well be so. But that fact is insufficient to establish an agreement between the parties. As the debtor himself said in his affirmation:-
Promissory Estoppel 15.By reason of the matters set out under the previous heading, I do not find that there is sufficient factual evidence to establish any promissory estoppel on the petitioner's part. Did the Petitioner Unreasonably Refuse the Offer? 16.Insofar as the debtor should rely on his willingness to transfer the Beijing property and/or its sale proceeds as part-payment of the debt, I do not consider the petitioner to be unreasonable in refusing to accept this offer. The evidence shows that the debtor intended to sell it at least since about May 2002 (if not earlier). There is as yet no indication of a binding agreement regarding its sale. The precise value the Beijing property is also in doubt. On the other hand, despite having entered into the settlement agreement in July 2001, the debtor has failed to perform it by paying the instalments in accordance with its terms as long ago as February 2002. 17.Apart from the offer relating to the Beijing property, the debtor also claims that he would be able to repay the debt from his future income. This part of the debtor's case can be summed up in this way. The debtor deposes that there will be the following sources of income:-
18.The income related to the Golden Light debt was first raised when the debtor applied to set aside the statutory demand in April 2002. At the time of the hearing, it was still unknown when the legal proceedings for its recovery would conclude. 19.Information about the remuneration from the mainland joint venture project first appeared in the correspondence from the debtor's solicitors in April 2003. The debtor says a mainland-related company, one Continental Oil and Fuel Company Limited ("Continental Oil") has agreed with a Huizhou Daya Bay General Trading Company Limited ("Daya Bay Trading") whereby the two would form a joint venture company ("the JV company") to acquire a Guangdong Daiyabay Yue An Oil and Chemicals Limited ("Yue An") in the mainland. In addition, the debtor deposed (and repeated during the hearing) that he had entered into an agreement with Continental Oil on 10 April 2003 under which he would be entitled to 5% of the issued share capital of the JV company. 20.To sum up, I agree with the petitioner's observations regarding this aspect:-
The petitioner contends it could reasonably conclude that there is no satisfactory proof that income would be available to the debtor at any definite time in future. 21.The debtor fairly accepts in his closing submissions (at para. 17) that the prospective income set out at sub-para. (1) and (3) above is not readily available for repayment. He argues, however, that there is abundant documentary evidence in support and this shows the joint venture project has been progressing smoothly. 22.Whether there is substance in the debtor's last argument is irrelevant. What is crucial is whether the petitioner has been unreasonable in refusing this offer. Taking everything set out above into account, the petitioner could not be said to be unreasonable in refusing this offer (whether on its own or together with the other offers). 23.Finally, the debtor says that he has been employed with effect from 1 August 2003 at $28,000 per month. The petitioner cannot be faulted in observing that if the debtor uses his monthly income to repay the debt, it will take years for the debt to be fully repaid. In this connection, the petitioner is particularly entitled to take into account the debtor's earlier failure to perform his obligations under the settlement agreement. There are also other substantial claims against the debtor amounting to over $45 million: see para. 41(3), the petitioner's closing submissions. 24.The petitioner also mentioned other relatively small sums offered by the debtor, such as the refund of his professional indemnity insurance of $90,000. I agree with the petitioner that even if these are taken into account, the debtor's offers can still be reasonably refused.
Representation: Mr Simon Leung, instructed by Messrs Cheng, Yeung & Co., for the Petitioner Ms W Mak, of Messrs Alfred Lam, Keung & Ko, for the Debtor |
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