Re Tay Chuan-seng
Read the full judgment text of HCB 34/1972 on BabelCite. This HCB judgment.
1. This is an application by a debtor to have a scheme of arrangement with his creditors approved of by the court.
|
HCB000034/1972 IN THE SUPREME COURT OF HONG KONG IN BANKRUPTCY NO. 34 OF 1972 -----------------
----------------- Coram: Trainor, J. in Chambers Date of Judgment: 11th February, 1974. ----------------- JUDGMENT ----------------- 1. This is an application by a debtor to have a scheme of arrangement with his creditors approved of by the court. 2. A receiving order was made against the applicant on the 24th November, 1972 and subsequently be proposed a scheme of arrangement as to how he would discharge his indebtedness. This proposal was considered and approved at a meeting of creditors on the 25th January, 1973; the public examination of the applicant was concluded on the 20th March, 1973. 3. The total indebtedness of the applicant amounts to $61,789.38. This is due to four creditors, only one of whom has filed a proof of debt and that to the extent of $18,089.38. Two of the four creditors have announced their intention to waive their claims amounting to $3,700, and the fourth has stated its intention to seek repayment of its debt of $40,000 from a guarantor. Nevertheless the total of the debts of the applicants remain $61,789.38. 4. The scheme, though it might, perhaps, be more properly called a composition, is that the debtor will pay to the Official Receiver a monthly sum of $300 to be used to pay his creditors in proportion to what is due to each; this monthly sum to be guaranteed by a gentleman who is, I understand, the debtor's employer. 5. The debtor has no tangible assets other than about $500. There are, however, debts due to him by two firms in West Irian amounting to about $52,000 which, he said, would be available in discharge of his indebtedness when those sums are forthcoming. In his report to the court, and at the hearing, the Official Receiver intimated that he was highly sceptical of anything ever being received from West Irian. Mr. Harman who represented the Official Receiver told me that the Official Receiver had written by registered post to the applicant's debtors in West Irian but had received no reply. In his report the Official Receiver said that the applicant stated at his public examination that he had made no effort to recover the money because of the distance of West Irian from Hong Kong, and because the rule of law does not apply there. 6. It looks indeed doubtful if anything will ever be forthcoming from that source. 7. If nothing were forthcoming from West Irian it would take six years to discharge the indebtedness to the sole creditor who has filed a proof. Is the proposal of the debtor reasonable in the circumstances. 8. Section 20 of the Bankruptcy Ordinance deals with compositions and schemes of arrangement, their submission to the creditors for approval and for their approval by the court. 9. Section 20(9) reads:
10. Section 20(10) reads:
11. The "facts" referred to in that sub-section are, so far as they are relevant to this judgment, to be found in section 30(4)(a) of the Ordinance:
12. In the instant case there are two questions which arise from a consideration of the latter sub-section to be considered initially:
13. The answer to the first depends on the value of the West Irian debts. Clearly for the purpose of these proceedings, however valid the applicants chose in action may be, the result must be highly speculative and the asset no more valuable than the security referred to in In re Webb, (1914) 3 K.B.D. In that case the debtor offered to set aside £600 per annum to pay a trustee in respect of unsecured creditors of $28,000. In addition his brother offered to assign three fourths of his one tenth share of the net proceeds arising from the sale of certain allegedly oil-bearing lands in the U.S.A. This tenth share in effect only created a personal right against a gentleman in the U.S.A. Who was "a financial speculator to a large and not always a very successful extent, and as to whose financial means and capacity no evidence is forthcoming ....." Cosens Hardy, M.R. considered it almost ludicious to treat the matter seriously and consider that this consituted "a reasonable security". My assessment of the value of the chose in action against the debtors in West Irian of the applicant is no greater. 14. As to the books, Mr. Harman at the hearing of this application referred me to the answers of the applicant at his public examination. In thos answers the applicant said he had mislaid the books of accounts in his house. He was asked why he had not taken care of them and his answer was that he did not think he had much business - he did not expand on this answer - and there was great confusion when as changed premises. He later said that he merely took along documents that were relatively important when he changed but not the books as they were old. When it was pointed out to the applicant that as he had only commenced business in 1970 and ceased to operate in 1971 it could hardly be said that the books were old, he could only reply that he had moved from his place of business. 15. Clearly two of the "facts" envisaged by section 20(10) and set out in section 30(4) are there established and as no effort has been made by the applicant to prove that his indebtedness arose from circumstances for which he could not be held responsible the only decision open to me is to dismiss the application unless the proposal provides reasonable security for the payment of not less than 25 per cent on all the unsecured debts. That is a condition precedent to my approval. 16. In considering the reasonableness of the security regard must be had to the persons whose interest is most concerned, the creditors or in this case the only proving creditor. But I do not think that even a unanimous agreement to accept a scheme by the creditors is the deciding factor. The imperative words of section 20(10) "shall refuse ..... unless ....." impose on the court an obligation to decide the "reasonableness" for itself. 17. In In re Bottemley, 10 Morrell, 262 Vaughan Williams L.J. said that reasonable security does not mean an absolutely good security but reasonable security. In In re Paine (1891) W.N. 208 Lord Esher said:
18. In the instant case the scheme proposed is nothing more than an offer by the applicant to discharge his indebtedness by instalments from his salary (something which could in any case be obtained by an order in bankruptcy proceedings) guaranteed by his employer, plus the doubtful value of the West Irian debts. 19. In my opinion the security offered is very far from being reasonable; and no matter whether I consider the proposed scheme or composition in the light of section 20(9) or section 20(10) of the Bankruptcy Ordinance the application must be dismissed.
Representation: Harman for O.R. Lee of Ford Kwan & Co. for Ex-parte. Debtor in person. |