Re Ng Kwok Cheung Paul

HCB 104/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY NO. 104 OF 2000

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Re: NG KWOK CHEUNG PAUL

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Coram : Before Master Ho in Court

Date of Hearing : 23 July 2004

Date of Handing Down Reasons for Decision : 2 November 2004

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D E C I S I O N

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Introduction

1.This is an application taken out by the Official Receiver and Trustee (“the Official Receiver”) on 16 January 2004 objecting to the automatic discharge of the bankrupt Mr. Ng Kwok Cheung, Paul (“the Bankrupt”) under section 30A(3) of the Bankruptcy Ordinance, Cap 6 (“the Ordinance”).

2.The bankruptcy order against the Bankrupt was made on 28 February 2000.  Pursuant to section 30A(1) and (2)(a) of the Ordinance, the Bankrupt would have been discharged from bankruptcy on 28 February 2004 if no objection was raised.

3.On 16 February 2004, the Bankrupt filed a Notice of Intention to oppose the Official Receiver’s application and sought for an order of discharge under section 30A(1) of the Ordinance or alternatively an order under section 30A(8) and (9) for a conditional discharge.

4.It is to be noted that on 12 February 2004, a Notice of Intention to object to the Bankrupt’s discharge pursuant to section 30A(4) of the Ordinance was also filed by Credit Suisse First Boston (Hong Kong) Limited for and on behalf of Credit Suisse First Boston (“Credit Suisse”), one of the creditors of the Bankrupt.  However, subsequent to the filing of the Notice of Objection, no further action had been taken by Credit Suisse nor had it attended the hearing of the application by the Official Receiver on 23 July 2004.

5.According to the 1^st report filed by the Official Receiver on 16 January 2004 (“the 1^st report”), the proofs of debt received by the Official Receiver amounted to a total sum of HK$563,820,415.61 and US$2,200,000.  The assets realized amounted to HK$322,230.42.

6.On 25 February 2004, an interim order was made by this court suspending the automatic discharge of the Bankrupt pending the determination of present application by the Official Receiver.

Grounds of Objections

7.In objecting to the automatic discharge of the bankruptcy order against the Bankrupt, the Official Receiver relies on 2 grounds under section 30A(4)(c) and (d) of the Ordinance namely that:-

(a)    the Bankrupt has failed to co-operate with the Official Receiver in the administration of his estate; and

(b)    that the conduct of the Bankrupt in respect of the period after the commencement of the bankruptcy has been unsatisfactory.

8.It is the case of the Official Receiver that since the making of the bankruptcy order on 28 February 2000, the Official Receiver had issued numerous letters and reminders to the Bankrupt requesting him to submit his statement of affairs and to provide information and documents for the purposes of investigating into his affairs and assets.  However, despite the repeated reminders, the Bankrupt has either failed to provide the requisite information and documents or has been dilatory in supplying them to the Official Receiver.  In support of the present application, the Official Receiver has in his 1^st report exhibited a chronology of events setting out the letters and reminders sent to the Bankrupt as well as the reply letters from the Bankrupt and his solicitors.  These letters are also exhibited in the 1^st Affirmation of the Bankrupt dated 24 February 2004 (“the 1^st Affirmation”).

9.According to the Official Receiver, the Bankrupt was a shareholder of 5 companies registered in the British Virgin Islands.  These 5 companies are Cayley Limited; Good Era Investment Limited; Kaillay Limited; Centre Pride Limited and Mili-Fortune Limited (“the 5 BVI companies”).  However, despite repeated requests by the Official Receiver, the Bankrupt has failed to submit documents showing the directors; shareholders and the registered and business addresses (both overseas and local) of these 5 BVI companies.

10.As revealed from the correspondence exchanged between the Official Receiver and the Bankrupt and his solicitors, it is also the case of the Official Receiver that the Bankrupt has been dilatory in submitting amongst other things the following information and/or documents:-

(a)    the statement of affairs:

According to the Official Receiver, the Bankrupt is required under section 18 of the Ordinance to submit his statement of affairs not more than 21 days after the making of the bankruptcy order against him.  However, in breach of such statutory obligations, the Bankrupt only submitted his statement of affairs on 10 January 2002, some 23 months after the making of the bankruptcy order and again only after repeated requests.  Further, the statement of affairs submitted was not fully completed, it had to be returned to the Bankrupt for amendments;

(b)    information and documents relating to his assets as set out in the Statement of Assets and Liabilities of the Bankrupt as at 3 October 1997 prepared by Credit Suisse and confirmed by the Bankrupt (“the Credit Suisse’s Statement”);

(c)    resignation documents as director of Bassington International Limited (“Bassington”) and Viewin Properties Limited (“Viewin”).

11.Apart from the failure on the part of the Bankrupt to duly supply the information and documents as requested, it is also the case of the Official Receiver that the Bankrupt has failed to attend the interview fixed on 4 May 2000.  According to the Official Receiver, the Bankrupt was required to attend the scheduled interview at 3.00 p.m. but he failed to turn up.  It was only when the staff of the Official Receiver’s office contacted the Bankrupt via his mobile phone at 5.00 p.m. that the Official Receiver was then advised that he was sick.  According to the Official Receiver, the Bankrupt had been unwilling to attend the Official Receiver’s office for his 1^st interview despite requests by letters of 29 February 2000, 1 March 2000 and 17 March 2000.  The Official Receiver submitted that the Bankrupt’s pending appeal against the bankruptcy order should not excuse him from attending the interview as the appeal does not operate as a stay of the bankruptcy order.

The Bankrupt’s case

12.The Bankrupt disputes that he has failed to co-operate with the Official Receiver or that his conduct had been unsatisfactory.  He admitted that there was some delay in providing the statement of his affairs or other information and documents to the Official Receiver, but such delay was not deliberate but was attributable to his family and personal problems.  He argued that he had provided all the information within his power in relation to the 5 BVI companies to the Official Receiver.

13.According to the evidence, the Bankrupt was at one time and before 1997, an extremely wealthy and successful man.  Having been in the property development business for over 30 years, he was well-known and well connected in the property development circle in Hong Kong.

14.According to his 1^st Affirmation, the Bankrupt first joined the Cheung Kong group in 1972, two months before Cheung Kong (Holdings) Limited (“Cheung Kong”) was listed in the Stock Exchange of Hong Kong.  He began working as an assistant to Mr. Li Ka Shing and gradually worked his way up and became the Group Manager reporting directly to Mr. Li Ka Shing.  He said that during his employment with Cheung Kong, he was involved in numerous residential, commercial, industrial and government development projects.  These include joint ventures projects with principal property developers in Hong Kong such as the Hong Kong Land, Swire Properties, Sun Hung Kai Properties, New World Development, Mass Transit Railway Corporation and the Hongkong and Shanghai Banking Corporation (“HSBC”).

15.In about 1986, he was invited to become the Chief Operating Officer of Allied Properties Limited; also a listed company in Hong Kong with net assets of about HK$200 million.  He said that when he left Allied Properties Limited in 1991, it had a net asset value over a few billion dollars.

16.In about 1992, the Bankrupt started his own property company and acquired a controlling shareholding in Chi Cheung Investment Company Limited (“Chi Cheung”), a listed company in Hong Kong.  According to the Bankrupt, the main business activities of Chi Cheung were property development and property agency business.  At one time, Chi Cheung had over 70 branches of real estate property agency in Hong Kong with a net asset value as much as HK$2 billion.  However, with the emergence of the Asian Economic Crisis at the end of 1997, the property and stock markets plummeted.  According to the Bankrupt, the Hang Seng Index dropped 18% between October 1997 and December 1998.  During the same period, the share prices of property stocks dropped sharply.  This had financially crippled both Chi Cheung and the Bankrupt as huge loans and borrowings had been arranged to finance the acquisition of other Chi Cheung shares and securities in connection with a joint venture business project with another Hong Kong listed company Paliburg Holdings Limited (“Paliburg”).  The consequence was that both Chi Cheung and the Bankrupt became heavily indebted.  The Bankrupt stated that as of July 1999, he owed Credit Suisse a sum of HK$282,623,866.20.  He was also indebted to HSBC for about US$2 million, Paliburg for about HK$94 million and to Chase Manhattan HK$94 million.  His inability to repay his heavy debts had subsequently led to a bankruptcy order made against him.

17.According to the Bankrupt, despite that both Chi Cheung and himself were in great financial difficulties, he had not evaded his responsibilities and liabilities.  He had used his best efforts to rescue Chi Cheung and to resolve his own personal indebtedness.  He said that in 1999, he had engaged a Mr. Patrick Yeung (“Mr. Yeung”) of Asian Capital (Corporate Finance) Ltd to act as the adviser to the Board of Chi Cheung to assist in the debt restructuring of Chi Cheung.  He stated that even after he was adjudged bankrupt in February 2000, he had continued to assist other directors in finalizing Chi Cheung’s restructuring which was eventually completed towards late 2000.  He stated that at about the same time, Mr. Yeung had also assisted him in restructuring his personal debts on an informal basis and without charging him any fees.  Both before and after the commencement of the bankruptcy proceedings against him, he had tried his best efforts to restructure his personal debts.  In support of such contention, he exhibited a letter from Mr. Yeung dated 18 February 2004.  In the said letter, Mr. Yeung stated that throughout the process of their involvement in Chi Cheung and in the affairs of the Bankrupt, they found that the Bankrupt had been “approachable and co-operative, offering a high degree of transparency to the advisers and creditors and readily accepting requests from creditors to unwind assets to mitigate losses to the creditors”.

18.On the other hand and according to the Bankrupt, his heavy indebtedness and the legal proceedings against him in 1999 had strained the relationship with his wife.  He said that his wife is a reputable fashion retailer and used to run a chain of high fashion boutique.  But because of his predicament, his wife did not want to have any association with him as she felt that his bankruptcy would get her into financial trouble and would tarnish her reputation in her field of business.  He stated that after many heated arguments, his wife left him and he was asked to leave the matrimonial home.  He said that he separated from his wife at the end of 2000 and now lives in a 600 square feet flat provided by his brother.

19.The Bankrupt stated that after he was adjudged bankrupt, most of his close friends and business associates had deserted him.  He lost his company, his wife, friends and home.  He felt emotionally disturbed and physically exhausted.  He later developed symptoms of depression and was required to take medications.  He said that during this period of time, he felt incapable of dealing with the bankruptcy matters.  He produced to the Official Receiver, through his solicitors Messrs. Y.C. Lee, Pang & Kwok (“the Bankrupt’s solicitors”) two 2 medical certificates by his family doctor, Dr. Levi Lee (“Dr. Lee”) to confirm his mental condition at that time.  According to the Bankrupt, his solicitors have been acting for him on a gratuitous basis.

20.In the 1^st medical certificate dated 8 June 2000, Dr. Lee stated that for the past previous months, the Bankrupt had been in a state of extreme nervous tension.  He had developed symptoms of depression and psychomotor retardation.  His thoughts were disorganized and he was unable to think clearly.  He was lethargic and exhausted.  Dr. Lee believed that he was on the verge of a mental breakdown and recommended him to rest for a few months and take medications.

21.In the 2^nd medical certificate dated 23 February 2001 (incorrectly written as year “2000”), Dr. Lee stated the Bankrupt had been under his treatment for depression, anxiety and insomnia since June 2000 but the Bankrupt had made little progress since then.  He was still facing tremendous stress and pressure daily.  He also had difficulty in dealing with his family especially his wife who had behaved like a psychotic and was constantly badgering and taunting him.  Dr. Lee hoped that with increased medications, the Bankrupt might improve in a few months’ time.

22.In his 1^st Affirmation, the Bankrupt exhibited a 3^rd medical certificate by Dr. Lee dated 14 February 2004.  In the 3^rd certificate, Dr. Lee reiterated what he had stated in his previous two certificates and concluded that during the period from March 2000 to April 2002, the Bankrupt would not have been able to function normally or to carry out his regular duties because of his mental breakdown.  His thoughts were disorganized and he was unable to think clearly.  He stated that the Bankrupt had attended his clinic frequently since March 2000.

23.At the hearing, Mr. Andrew Macrae SC, leading Counsel for the Bankrupt, submitted that when the court considers the alleged uncooperative conduct of the Bankrupt, the court should consider them in the context of the Bankrupt’s family and health problems.  In any event, it is submitted by Mr. Macrae that the Bankrupt has not willfully failed to perform the duties imposed on him under the Ordinance.  Mr. Macrae submitted that despite the family problems and health condition of the Bankrupt, he had made proper endeavour to produce a statement of his affairs to the satisfaction of the Official Receiver on 10 January 2002, 18 April 2002 and 31 May 2002.  He had also co-operated with the Official Receiver by taking the following steps or actions:-

(a)    he had attended an interview with the Official Receiver on 28 March 2000 where he had agreed to provide a list of companies in which he acted as director and shareholder.  He had also undertaken to provide details of his club memberships;

(b)    at the subsequent interview on 12 May 2000, he did submit to the Official Receiver a list showing his shareholdings in the Hong Kong companies as well as his shareholdings in Cayley Limited, one of the 5 BVI companies.  He also informed the Official Receiver that he had no other club membership except for those previously disclosed.  At the interview, he confirmed that he did not have any contract of employment with Chi Cheung nor had he earned any income since the making of the bankruptcy order.  He further reported to the Official Receiver his comments regarding his assets and liabilities as set out in the Credit Suisse’s Statement and promised to provide more information and documents in relation to those assets.

(c)    he had voluntarily disclosed to the Official Receiver that he had watches with an estimated value of $500,000.00 to $700,000.00.  Upon the request of the Official Receiver, he had handed over eleven watches to his solicitors for delivery to the Official Receiver;

(d)    he had informed the Official Receiver as well as the Inland Revenue Department about his medical condition by submitting the medical certificates of Dr. Lee;

(e)    by a letter from his solicitors dated 10 January 2002, he had advised the Official Receiver that many of his assets had been foreclosed by his creditors and that the Official Receiver should contact his creditors directly;

(f)    he had on 22 May 2003 furnished the Official Receiver documents relating the allotment of shares in Garlitz Investment Limited (“Garlitz”).  On 19 June 2003, he had provided the Official Receiver with the audited accounts of Garlitz.

24.In response to the contention of the Official Receiver that the Bankrupt had declined to be interviewed, Mr. Macrae submitted that the interviews were deferred with the mutual agreement of the Official Receiver as at that stage, the Bankrupt was considering lodging an appeal against the bankruptcy order.  Further, some of the interviews had to be postponed such as the interview on 4 May 2000 because the Bankrupt was sick and not medically fit to attend.

25.In respect of the Bankrupt’s statement of affairs, Mr. Macrae submitted that the delay in submitting the statement of affairs was due to the medical condition of the Bankrupt.  Further, due to the complexity of the Bankrupt’s affairs, the Official Receiver had also agreed to extend time for him to submit the statement of affairs.  Mr. Macrae submitted that the Bankrupt filed his statement of affairs on 10 January 2002.  He duly complied with the request of the Official Receiver by amending it on 18 April 2002 and had it signed on 15 May 2002.

26.As for the documents relating to the 5 BVI companies, Mr. Macrae submitted that the Bankrupt had not been hesitant in providing documentation relating to those companies.  He had made his best endeavours to look for the files of these 5 BVI companies.  These included making enquiries with his wife’s secretary; with his accountant a Mr. K.S. Heng and with his other accountant Chartac Secretaries Limited (“Chartac”).  He had also caused his solicitors to conduct a property search on the 5 BVI companies but all these attempts were unsuccessful.  Mr. Macrae submitted that the Bankrupt had difficulties in locating the documentations of these 5 BVI companies which might have been lost or misplaced for reasons unknown to him.  However, he had undertaken to provide the requisite documents to the Official Receiver when he located them.

27.In the 2^nd report dated 23 March 2004, the Official Receiver challenged the evidence of the Bankrupt.  The Official Receiver pointed out that in the 1^st Affirmation, the Bankrupt had stated that since about early 1999 and even after he was declared bankrupt, he had continued to assist Chi Cheung in finalizing its financial restructuring which was completed in late 2000.  During this period of time, he was also involved in dealing with his own personal indebtedness.  The Official Receiver submitted that it is inconceivable that on the one hand the Bankrupt contended that he could not provide the Official Receiver with information and documents sought because of his medical condition, but on the other hand and at the same period of time he was actively involved in the restructuring of Chi Cheung and in dealing with his own personal indebtedness.  The Official Receiver again referred the court to the said letter from Mr. Yeung of Asian Capital (Corporate Finance) Limited dated 18 February 2004 where it stated that they had been involved with the Bankrupt for a period of two years from early 1999 (i.e. until early 2001).  It stated that throughout this period, the Bankrupt was “approachable and co-operative, offering a high degree of transparency to the advisers and creditors, readily accepting requests from the creditors to unwind assets to mitigate the losses to the creditors”.  The Official Receiver submitted that the Bankrupt has put forward his medical condition as an excuse for not being able to provide the information to the Official Receiver, but at the same time, he was active and co-operative as regards Chi Cheung and his own financial affairs.

28.In response, Mr. Macrae submitted that the said letter from Mr. Yeung of Asian Capital (Corporate Finance) Limited only showed the general impression that Mr. Yeung had had during the two year period from early 1999.  The said letter did not suggest that the Bankrupt was “active” regarding these financial affairs.

29.Mr. Macrae further referred the Court to the 2^nd letter from the Mr. Yeung dated 29 June 2004 which is exhibited in the 2^nd Affirmation of the Bankrupt dated 29 June 2004.  In the 2^nd letter, Mr. Yeung clarified that prior to his bankruptcy, the Bankrupt had heavy and active involvement in the debt restructuring of Chi Cheung, but after the bankruptcy order had been made on 20 February 2000, his involvement was substantially curtailed as he was suffering from depression since February 2000.

30.Mr. Macrae submitted that the Official Receiver has failed to establish the grounds of objection under section 30A(3) of the Ordinance.  He argued that the Bankrupt has made his best endeavors to provide the information and documents requested by the Official Receiver.  He has also taken steps to procure the provision of documents by third parties in relation to the 5 BVI companies.  Admittedly, there was delay on the part of the Bankrupt in providing the statement of affairs or other documents but the delay was attributable to his family and health problems.

The Present Situation of the Bankrupt

31.According to the Bankrupt, he has been offered a senior management post in a company owned and controlled by a well-known entrepreneur in Beijing namely a Mr. Zhou Chu Jian-he (“Mr. Zhou”).

32.Mr. Zhou is the Chief Executive Officer of a company called Junfield (Holdings) Limited and a member of the Beijing Committee of People’s Political Consultative Conference.  He is a property developer and the operator of SOGO department stores in Beijing and Wuhan.  According to the Bankrupt, Mr. Zhou’s company has two major property development projects in Beijing and Shanghai with over 20 million square feet of floor area.  In October 2003, he had acquired control of a listed company in Hong Kong and has plans to expand his businesses.  In recognition of the Bankrupt’s expertise in property development, Mr. Zhou has offered him a senior management post with a salary of not less than HK$1.5 million a year.  Mr. Macrae submitted that this is an exceptional offer which would give the Bankrupt an opportunity to rehabilitate himself following his bankruptcy.  If the court is to suspend his automatic discharge, it would take away the opportunity of the Bankrupt to resume his normal life in the society.  Mr. Macrae informed the court that the Bankrupt’s legal costs in opposing to the present application is all funded by Mr. Zhou.

The Law

33.The Law Reform Commission’s Report on Bankruptcy issued in May 1995 has set out the rationale behind the provisions for automatic discharge.  Paragraphs 17.16 and 17.24 of the Report stated:-

“17.16  the introduction of automatic discharge should, with the objection system, have two-fold effect.  Firstly, bankrupts should have a greater incentive than at present to co-operate with the trustee, as failure to co-operate could result in the trustee objecting to a bankrupt’s discharge.  Secondly, the rehabilitation of a bankrupt from bankruptcy would be assured, subject to rehabilitation being delayed as a consequence of a bankrupt’s own failings.

17.24  The introduction of automatic discharge would shift the emphasis from discharge being a privilege to its being a right.  This right, however, must be set alongside a bankrupt’s duty to co-operate with the trustee in the administration of the estate.  If he fails to co-operate with the trustee after bankruptcy, or if a bankrupt’s conduct before bankruptcy was unsatisfactory, he should not be automatically discharged.”

The above paragraphs have been referred to with approval in Re Hui Hing Kwok [1999] 3 HKC 683 and Re Li Tat Kong [2000] 3 HKC 360.  It is clear from the above that ‘failure to co-operate’ with the trustee is a reason for delaying the bankrupt’s rehabilitation (see Re Li Tat Kong (supra) at p.377).

34.As pointed out by Madam Justice Le Pichon (as she then was) in Re Hui Hing Kwok (supra) at p.687 that:

“Rehabilitation in the sense of enabling the bankrupt to resume a normal life in society is a key, if not the key, consideration.  It should only be delayed by a bankrupt’s own failings.”

35.In Re Li Tat Kong (supra), Madam Justice Le Pichon further explained the meaning of ‘co-operation’.  At p.377 thereof, she stated:

“What does co-operation mean?  In Totterdell v Nelson (1990) 97 ALR 341, the Full Court of Australia observed (at 346):

Nor is it really right to say, because no evidence was led of specified requests ignored by the bankrupt, that there was lacking any evidence of non-cooperation.  Co-operation is a positive concept.

I would respectfully agree.  In my judgment, it is incumbent on the bankrupt to make a full and frank disclosure and to proffer all pertinent information regarding his assets and financial dealings to the trustee.  As French J observed in Re Barrie Andrew Knight (WB 307/1988, 14 August 1994, unreported), a decision of the Federal Court of Australia:

… It is not sufficient, I think, for a bankrupt to say in relation to the deficiencies which the trustee complains are unexplained, that it is all there in the transcript of evidence and auditor’s report put before the District Court in criminal proceedings.  Nor is it sufficient to say that the trustee has not made inquiry of him.  It is the bankrupt’s duty, if he seeks the indulgence of discharge where discharge would not otherwise be automatically available, to show that he has taken all reasonable steps to ensure that his estate is available for distribution among his creditors and that the trustee is appraised of all relevant information.

Thus, it is not good enough for a bankrupt to adopt a purely passive or reactive role, responding when asked in the expectation that with any luck, pertinent matters might be overlooked.”

In the same judgment at p.377, she continued to set out the applicable principle as to how the court should exercise its discretion:

“Further, in exercising its discretion, the court will have regard to the scope and purposes of the statutory provisions conferring the discretion.  In Re Weiss (27 June 1986, unreported), a decision of the Federal Court of Australia cited in Totterdell v Nelson (at p 344), Burchett J observed:

An essential part of the reciprocal provisions made by the bankruptcy law for the benefit of each of creditors, debtors, and the community itself, is that there should be an adequate investigation of the conduct and affairs of the bankrupt.  In a case presenting features which call for an exercise of discretion upon the question when and on what terms the bankrupt should be discharged, the investigation should generally be carried to a conclusion before a discharge is granted or permitted to occur.  There may be cases where it would be unfair to a bankrupt to delay his discharge by reason of an incomplete investigation, lethargically pursued, to the torpor of which he has not contributed.  But no such unfairness may appear where has been concealment or lack of cooperation on his own part.

The court will also have regard to the interests of commercial morality and the public interest:

We are bound in the exercise of our discretion in such a matter, and I think I might almost say in all matters under this Act, to take a wider view.  We are not only bond to regard the interests of the creditors themselves, who are sometimes careless of their best interests, but we have a duty with regard to the commercial morality of the country.

See per Fry LJ in Re Hester (1889) 22 ABD 632 at 641.”

The Decision

36.As I see it, the Bankrupt basically opposes the present application by the Official Receiver on two main grounds.  Firstly, he argued that the delay in providing the information and documents to the Official Receiver was not deliberate as at the material times, he was suffering from depression and was incapable of dealing with the bankruptcy matters.  Secondly, he argued that he had not failed to co-operate with the Official Receiver as he had already made all proper efforts to supply the requested information and documents to the Official Receiver.  I shall now deal with his first argument.

37.The Bankrupt relied on the medical certificates of Dr. Lee in support of his contention that because of his mental condition, he was not able to deal with the requests by the Official Receiver.  According to Dr. Lee’s medical certificates, the Bankrupt had developed symptoms of depression and psychomotor retardation.  His thoughts were disorganized and he was unable to think clearly.  He was lethargic and exhausted and was on the verge of a mental breakdown.  Dr. Lee concluded that during the period from March 2000 to April 2002, the Bankrupt would not have been able to function normally or carry out his regular duties because of his mental breakdown.

38.Having considered all the evidence, I do not agree with the above opinion of Dr. Lee in particular to his comment that during the period from March 2000 to April 2002, the Bankrupt was suffering from serious depression that he was not able to function normally or carry out his regular duties.  In my view, the opinion and comment of Dr. Lee are inconsistent with the evidence before the court and I do have great reservations regarding his opinion and comment for the following reasons:

(a)    the 1^st medical certificate was issued by Dr. Lee on 8 June 2000.  Before that date, the Official Receiver was not informed nor was it mentioned in any of the correspondence between the Official Receiver and the Bankrupt’s solicitors that the Bankrupt was suffering from symptoms of depression or psychomotor retardation.  It should be noted that by that time and according to Dr. Lee, the Bankrupt had been in a state of extreme nervous tension for a few months already.  However, it was only on 9 June 2000 that the Official Receiver was for the first time informed that the Bankrupt was suffering from depression;

(b)    in the correspondence prior to 9 June 2000, the Bankrupt’s solicitors had on a number of occasions requested for extension of time to submit the Bankrupt’s statement of affairs.  The reason advanced was because of the complexity of his affairs.  It was never mentioned that the Bankrupt was not able to prepare his statement of affairs because of his mental condition bearing in mind that prior to 9 June 2000, the Bankrupt had been suffering from depression for a few months already;

(c)    at the first interview with the Bankrupt on 28 March 2000, a preliminary examination of the Bankrupt was conducted.  He confirmed that he had no landed property and promised to provide more information and documents to Official Receiver relating to his directorship and shareholding in various companies.  There was again no mention about his depression or mental condition save that the Official Receiver was informed that the Bankrupt was not in good terms with his wife.  At the interview, there was no evidence that his thoughts were disorganized or that he was unable to think clearly.  It is to be noted that throughout the interview, his solicitor Mr. William Kwok from Messrs. Y.C. Lee, Pang & Kwok was accompanying the Bankrupt.  Mr. Kwok had not informed the Official Receiver that the Bankrupt was suffering from depression or that he had been in a state of extreme nervous tension as diagnosed by Dr. Lee;

(d)    at the 2^nd interview on 12 May 2000, the Bankrupt was able to provide information and documents relating to the shareholdings of those companies that he was involved.  He had also made comments regarding his assets and liabilities as set out in the Credit Suisse’s Statement.  Again there was no evidence which shows that at that time the Bankrupt was lethargic, exhausted or that he was not able to function normally or carry out his duties as Dr. Lee described.  There was no indication that the Bankrupt was on the verge of a mental breakdown as Dr. Lee suggested.  I should add that in this 2^nd interview, Mr. William Kwok, his solicitor was also present.  If the Bankrupt was suffering from depression and was not able to function normally, one would expect his solicitor to have raised this with the Official Receiver at the interview but that was not the case.

(e)    further and despite the opinion of Dr. Lee that the Bankrupt’s thoughts were disorganized and that during the period from March 2000 to April 2002 the Bankrupt would not have been able to function normally or carry out his regular duties, the Bankrupt was able to complete and submit his statement of affairs on 10 January 2002; he was able to give instructions to his solicitors and to Chartac, his accountant, to deal with the documents requested by the Official Receiver.  For instance, in a letter from Chartac to the Bankrupt’s solicitors dated 8 January 2002, Chartac stated that they had been instructed by the Bankrupt to assist him in attending to matters raised by the Official Receiver.  His solicitors had also on his instructions rendered a substantive reply letter to the Official Receiver on 10 January 2002.  Indeed, according to the Bankrupt’s own affidavit evidence and the 1^st letter from Mr. Yeung dated 18 February 2004, the Bankrupt had been involved in dealing with the financial affairs of Chi Cheung and his own personal indebtedness even after he was adjudged bankrupt.  In this respect, I do not accept the clarification by Mr. Yeung in his 2^nd letter of 29 June 2004.  In the 2^nd letter, he stated that the Bankrupt’s involvement in the financial restructuring of Chi Cheung had been substantially curtailed since February 2000 because of his mental depression.  I find such clarification unconvincing as it is inconsistent with the Bankrupt’s own affidavit evidence and the 1^st letter of Mr. Yeung dated 18 February 2004.  It is to be noted that the 2^nd clarification letter was prepared after the Official Receiver had pointed out the contradictory evidence of the Bankrupt.  With respect, I do not agree with Mr. Macrae that the 1^st letter only showed the general impression of Mr. Yeung during the two year period from early 1999.

39.In my view, and on the evidence before the court, I do not agree with the opinion of Dr. Lee that during the period from March 2000 to April 2002, the Bankrupt would not have been able to function normally or carry out his regular duties because of his mental breakdown.  As can be seen from the above, at least for the period from March 2000 to 9 June 2000, there was no evidence or indication that the Bankrupt’s thought were disorganized or that he was suffering from the diagnosis that Dr. Lee had mentioned.  To certain extent, I accept that because of the predicament of the Bankrupt, he had suffered from depression and was required to take medications.  But I do not accept that his mental condition had deteriorated to such an extent as to have debilitated the Bankrupt.  As I have pointed out above, the evidence does not seem to support that the Bankrupt was in a state of extreme nervous tension or that he was unable to think clearly.  Indeed, according to the 2^nd medical certificate issued by Dr. Lee, he stated that the Bankrupt was under his treatment since June 2000.  This contradicts with his 3^rd medical certificate where he stated that the Bankrupt had frequently attended his clinic for treatment since March 2000.

40.Turning to the second argument of the Bankrupt, on the evidence, I do not accept that the Bankrupt had co-operated with the Official Receiver in the administration of his estate.  I agree with the submissions of the Official Receiver that the Bankrupt had been dilatory in providing the requested information and documents.

41.According to the Official Receiver, the Bankrupt was requested to provide information and documents relating to the 5 BVI companies as early as on 30 May 2000.  However, by a letter from the Bankrupt’s solicitors dated 9 June 2000, the Official Receiver was informed for the first time that the Bankrupt had been in a state of extreme nervous tension and was incapable of attending to the request by the Official Receiver.  On 12 January 2001, which was about 6 months after the Official Receiver was informed that the Bankrupt was suffering from depression, the Official Receiver further wrote to the Bankrupt’s solicitors requesting for the same information.  On 16 January 2001, the Bankrupt’s solicitors replied that the Bankrupt’s physical condition had not been improved.  On 24 February 2001, the Official Receiver received the 2^nd medical certificate from Dr. Lee.

42.On 8 August 2001, which was about 6 months after the Official Receiver had received the 2^nd medical certificate of Dr. Lee, the Official Receiver again wrote to the Bankrupt’s solicitors for a reply regarding the requested information and documents relating to the 5 BVI companies.  This had not been met with a reply.  A reminder was sent on 10 September 2001, again no response was received.  On 3 December 2001, a further reminder letter was sent by the Official Receiver to the Bankrupt.  On 4 December 2001, the Bankrupt’s solicitors replied and said that they were taken instructions from the Bankrupt.  On 10 January 2002, the Bankrupt’s solicitors wrote and suggested the Official Receiver to contact Chartac directly regarding the information required.

43.On 1 March 2002, the Official Receiver informed the Bankrupt that Chartac would not assist the Official Receiver in obtaining the documents of the 5 BVI companies.  The Official Receiver required the Bankrupt to provide the requested documents by 21 March 2002.  Again, the Official Receiver received no response by the deadline date of 21 March 2002.  By a letter dated 3 April 2002, the Official Receiver requested the Bankrupt for an immediate reply.  Then about 2 weeks later, the Official Receiver received a holding reply from the Bankrupt’s solicitors dated 18 April 2002.  The reply letter stated that the Bankrupt was arranging the relevant information and documents to be sent to the Official Receiver.

44.On 17 May 2002, the Official Receiver again wrote to the Bankrupt and reminded him that the requested documents had still not been supplied.  The Official Receiver required them to be submitted by 27 May 2002.  Again the deadline date was ignored and no response was received from the Bankrupt.  On 8 July 2002, the Official Receiver further wrote to the Bankrupt chasing for an immediate reply.  On 18 July 2002, the Official received another holding reply from the Bankrupt’s solicitors which stated that they were in the course of seeking copies of the requested documents from Chartac and would provide them to the Official Receiver when available.  On 24 July 2002, the Bankrupt’s solicitors informed the Official Receiver that Chartac had not kept the requested documents relating to the 5 BVI companies.

45.On 30 April 2003, the Official Receiver wrote to the Bankrupt and reiterated that the documents relating to the 5 BVI companies were still outstanding from him.  On 22 May 2003, the Bankrupt’s solicitors replied and stated that the Bankrupt was trying to locate the document requested.  On 13 June 2003, the Official Receiver wrote again requiring the Bankrupt to submit the requested documents without further delay.  The same request was repeated by the Official Receiver in his letter of 30 June 2003.  Again no documents were provided by the Bankrupt.

46.It can be seen from the above that despite the repeated requests and reminders, the Bankrupt had failed to provide the requested information and documents relating to the 5 BVI companies.  It is to be noted that the Bankrupt had not only failed to response to some of the letters from the Official Receiver, but had also ignored the deadline dates imposed by the Official Receiver.  In my view, the repeated failure on the part of the Bankrupt to response to the Official Receiver’s requests and reminders would by itself amount to a failure to co-operate with the Official Receiver and unsatisfactory conduct.  It is to be noted that no explanation had been given by the Bankrupt for his repeated failure to response to the letters from the Official Receiver.

47.Further, throughout a period of 37 months from 30 May 2000 (i.e. the date on which the request for information relating to the 5 BVI companies was first made by the Official Receiver) up to 30 June 2003, the steps taken by the Bankrupt in trying to obtain the requested information were limited to making enquiries with his wife’s secretary; his accountant Mr. K.S. Heung and Chartac only.  That is insufficient and unsatisfactory.  Moreover, it is not right as per the letter from the Bankrupt’s solicitors dated 8 January 2002 to require the Official Receiver to contact Chartac directly for the required information.  It is in my view incumbent on the Bankrupt to obtain the information from Chartac for the Official Receiver and not for the Official Receiver to contact Chartac for the information.  As pointed out by Madam Justice Le Pichon in Re Li Tat Kong (supra) that co-operation is a positive concept.  It is for the Bankrupt to make a full and frank disclosure and to proffer all pertinent information regarding his assets and financial dealings to the trustee.  It is the duty of the Bankrupt and not the Official Receiver who should obtain the requested information from Chartac.

48.I note that the Bankrupt had instructed his solicitors to conduct a property search on the 5 BVI companies.  In this regard, I agree with the submission of the Official Receiver that this is irrelevant as the search was conducted after the present application was taken out.  In my view, and having considered all the evidence, the Bankrupt has failed to provide the requisite information and documents relating to the 5 BVI companies.  I find that the manner in which the Bankrupt dealt with the Official Receiver’s request for such information and documents unsatisfactory and amounts to a failure to co-operate with the Official Receiver.

49.In respect of the statement of affairs, I accept that during the period between 17 March 2000 up to 5 June 2000, the Official Receiver had on a number of occasions and upon the requests of the Bankrupt’s solicitors, agreed to extend the time for the Bankrupt to submit his statement of affairs.  According to the Official Receiver’s letter of 30 May 2000, the Official Receiver agreed that the Bankrupt should submit his statement of affairs by the deadline date of 5 June 2000.  Apparently, no statement of affairs had been submitted as on 9 June 2000, the Official Receiver was informed that the Bankrupt was in a state of extreme nervous tension and was advised by Dr. Lee to take rest for a few months.

50.However, after a lapse of more than 12 months from 9 June 2000, I see no justification for the Bankrupt not to response to the various reminder letters from the Official Receiver dated 8 August 2001 and 10 September 2001 chasing the Bankrupt to submit his statement of affairs as well as the information relating to the 5 BVI companies.  I note that the statement of affairs was submitted on 10 January 2002, but it had to be returned to the Bankrupt for amendments.  Again, the Official Receiver had to issue reminder letters before the statement of affairs was properly signed and submitted on 31 May 2002.  According to the Official Receiver, the Bankrupt was required to submit the duly amended statement of affairs by 21 March 2002.  This was ignored.  It was only after a reminder letter of 3 April 2002 that the amended statement of affairs was returned by the Bankrupt’s solicitors on 18 April 2002.  On 23 April 2002, the Official Receiver again sent back the amended statement of affairs to the Bankrupt for further amendment and required the Bankrupt to return it by 6 May 2002.  Again this was ignored.  On the above evidence, I am of the view that the Bankrupt had been dilatory in submitting his statement of affairs.  He had repeatedly failed to response to letters from the Official Receiver and this amounts to a failure to co-operate with the Official Receiver and unsatisfactory conduct.  It is to be noted that the fully completed statement of affairs was submitted some 26 months after the making of the bankruptcy order.

51.On the evidence, I also accept that the Bankrupt had failed to provide to the Official Receiver the information and documents relating to his assets as stated in the Credit Suisse’s Statement.

52.By a letter dated 20 April 2000, the Official Receiver requested the Bankrupt to provide information and documents showing the then current position of the assets mentioned in the Credit Suisse’s Statement.  At the interview on 12 May 2000, the Bankrupt had promised to provide the required details and documents but that had not materialized.  Again, because of the medical condition of the Bankrupt, the Official Receiver had not pursued the matter further until 8 August 2001 when the Official Receiver wrote to the Bankrupt reminding him that his statement of affairs as well as the information and documents relating to the 5 BVI companies and Credit Suisse’s Statements were still outstanding.  As mentioned above, the Official Receiver’s letter of 8 August 2001 and the reminder letter of 10 September 2001 had all been met with no reply from the Bankrupt.  Then on 10 January 2002, the Bankrupt informed the Official Receiver that he could not provide any details regarding the assets mentioned in the Credit Suisse’s Statement.  The Bankrupt’s solicitors advised the Official Receiver that most of the assets referred to in the Credit Suisse’s statement had been foreclosed by the creditors and suggested the Official Receiver to contact the creditors directly for the required information.  I find such reply unacceptable and amounts to failure to co-operate with the Official Receiver and unsatisfactory conduct.

53.Firstly, the Bankrupt had not informed the Official Receiver the attempts that he had taken in order to obtain the details relating to the assets mentioned in the Credit Suisse’s Statement.  Secondly and more importantly, it is incumbent on the Bankrupt and not to the Official Receiver to proffer all pertinent information relating to his assets to his trustee (see Re Li Tat Kong (supra)).  As submitted by Ms. McKenna for the Official Receiver, it is not the role of the Official Receiver to source such information on his own account.  I agree with Ms. McKenna that this amounts to a blatant breach of the Bankrupt’s duty to co-operate.

54.On the evidence, I also find that the Bankrupt had been dilatory in providing to the Official Receiver documents showing his resignation as directors of Bassington and Viewin.  In the letter from the Official Receiver dated 1 March 2002, the Bankrupt was reminded that the resignation documents relating to these 2 companies were still outstanding from him.  However, it was only after repeated reminders by the Official Receiver on 30 April 2003, 13 June 2003 and 30 June 2003 that the resignation documents were provided to the Official Receiver on 31 July 2003.  However, it is noted that in breach of section 156 of the Companies Ordinance, the Bankrupt resigned as director of Bassington only on 7 July 2003, which was 3 weeks prior to his submitting the resignation documents to the Official Receiver on 31 July 2003 and 3½ years after he was made bankrupt.  This is unacceptable and unsatisfactory.  According to section 156 of the Companies Ordinance, an undischarged bankrupt is prohibited from acting as a director.

55.Regarding the complaint that the Bankrupt had been unwilling to attend the 1^st interview requested by the Official Receiver on 29 February 2000, 1 March 2000 and 17 March 2000, I agree with Mr. Macrae that the 1^st interview was deferred with the agreement of the Official Receiver.  Though I note that the Official Receiver was reluctant to postpone the 1^st interview, but in view of his agreement, I do not think the Official Receiver can thereafter complain about it.  However, on the evidence, I find that the Bankrupt had failed to attend the interview fixed on 4 May 2000 at 3.00 p.m.  According to the 2^nd Report of the Official Receiver, it was not until the staff of the Official Receiver’s Office contacted the Bankrupt at 5:00 p.m. was the Official Receiver advised that the Bankrupt could not attend the interview because he was sick.  In this respect, I agree with the submission of Ms. McKenna that if the Bankrupt was not able to attend the scheduled interview, he was under a duty to inform the Official Receiver in advance, it was not for the Official Receiver to take steps to find out why he could not attend.  In my view, the failure on the part of the Bankrupt to attend the scheduled interview on 4 May 2000 amounts to a failure to co-operate with the Official Receiver and conduct unsatisfactory.

56.Further, at the interview on 28 March 2000, the Bankrupt had promised to provide details regarding his club memberships as well as his directorships and shareholdings in the various companies that he was involved.  He agreed to supply those details within 3 weeks.  However, he failed to do so.  He only managed to provide the required details at the interview on 12 May 2000 and after reminders from the Official Receiver by letters dated 20 April 2000 and 5 May 2000.  This is also unsatisfactory.

57.Having considered all the evidence, I am satisfied that the Official Receiver has established the grounds of objection under section 30A(4)(c) and (d) of the Ordinance.  On the evidence, I find that the Bankrupt has been dilatory in submitting his statement of affairs and other requisite information.  He has also failed to provide the information and documents relating to the 5 BVI companies and to the Credit Suisse’s Statement.  He has also failed to attend the interview on 4 May 2000.

58.In coming to such a decision, I have given due consideration and allowance to the fact that the Bankrupt had suffered from depression because of his family and personal problems.  As such no adverse influence has been drawn from his inactivity during the period from 9 June 2000 to about early August 2001.  I accept that the Bankrupt had to and as advised by Dr. Lee take rest and medications.  However and as I have pointed out above, I do not accept that the Bankrupt was suffering from such serious mental depression as to have debilitated him.  The evidence does not support that the Bankrupt’s thoughts were disorganized and that he would not be able to function normally or to carry out his regular duties.

59.On the review of the correspondence exchanged between the Official Receiver and the Bankrupt’s solicitors, I accept the submission of Ms. McKenna that the Official Receiver has had to push and demand every piece of information from the Bankrupt.  Continuous reminders have had to be issued.  And despite requests, there were periods of no reply from the Bankrupt.  I agree with Ms. McKenna that the Official Receiver cannot be expected to undertake the effort expended in this case to obtain the basic information from the Bankrupt.  The duty on the Bankrupt to co-operate is a positive one.  It is not good enough for a bankrupt to adopt a purely passive or reactive role, responding when asked in the expectation that with any luck, pertinent matters might be overlooked (see Re Li Tat Kong (supra) at para. 35 above).

60.To conclude, and despite the offer of a senior management post, I am of the view that the rehabilitation of the Bankrupt has to be delayed because his own failings.  In my judgment, the unco-operative attitude and unsatisfactory conduct of the Bankrupt described above warrant a suspension of his automatic discharge.  It would not be appropriate to grant a conditional discharge.

61.In determining the appropriate period of suspension, I agree that the court should be guided by the principle that its ‘jurisdiction to suspend an order of discharge is a penal jurisdiction and the length of refusal should be apportioned to the just infliction of punishment on the bankrupt’ (see Butterworths Hong Kong Bankruptcy Law Handbook, 2^nd edition at p. 109).  In the present case, I do not think it is right to say that the Bankrupt has not rendered any co-operation to the Official Receiver at all.  In this regard, I have taken into account of the steps and action taken by the Bankrupt mentioned in paragraph 23 above.  In my judgment, the appropriate period of suspension should be 2 years.  Accordingly, I order that the automatic discharge of the Bankrupt be suspended for 2 years.  The discharge would be 28 February 2006.

Costs

62.In the present case, I see no reason why costs should not follow the event.  I make an order nisi that the costs of the Official Receiver should be paid by the Bankrupt.  As agreed between the parties, there will be no order for costs in respect of the hearing before Registrar Chan on 5 July 2004.

Ms. McKenna for the Official Receiver’s Office.

Mr. Andrew Macrae S.C. instructed by Messrs. Y.C. Lee, Pang & Kwok for the Bankrupt.