Re Cheung Kam Chuen

HCBI 1640/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

In bankruptcy proceedings

Interim Order Application No. 1640 of 2004

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Coram : Mr. Registrar C. Chan in Court

Date of Hearing : 28 December 2004, 11 January and 25 January 2005

Date of Handing Down : 7 February 2005

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J U D G M E N T

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1.Mr. Cheung Kam Chuen applies to this Court for an interim order pursuant to Section 20 and 20A of the Bankruptcy Ordinance (Cap. 6) to facilitate him to make a proposal for consideration by the three creditors, to whom he owes the different debts.  By an affidavit filed with the court he verified that in view of his financial situation he was able to file a petition for bankruptcy.  The proposal and the nominee report are in the usual forms customarily used by the solicitor firm representing the applicant.  I have on many occasions explained that I have no objection that the forms be treated as their standard forms provided that the practitioners use them with care.  They should not just simply modify some parts without addressing the specific circumstances of each individual case.  The facts of each case vary and have its own features.  Say, if the applicant is a civil servant and has been working for many years with the Government we can easily be satisfied that he has a regular income.  If he is single I can anticipate that he can easily reduce his expenditure to meet the proposed schedule of repayment.  But, when we face with a self-employed person who was twice divorced having three sons in his custody, we need much more information before we can be satisfied that it is a serious and viable proposal.

2.The facts of this case are relatively simple.  The applicant was a self-employed cross-border lorry driver carrying on the business in the name of Hoi Chuen Transportation.  He claimed his monthly income was $12,000.00 and he had hardly any asset except a sum of $2,089.86 (which I do not know where it comes from) and an investment for a mandatory provident fund with a value of $28,200.00, both as set out in the List A of Appendix 1 to the Proposal.  The amount he owes to his three creditors is $195,596.09.  He intends to repay the outstanding sum by 55 instalments of $4,000.00 each including the nominee’s charges of $400.00.  I must say it is a relatively straightforward case.

3.At the first hearing on 28 December 2004 I doubted whether the applicant’s income is a regular and stable one and whether he could sustain such austere and frugal way of living as his family burden is heavy and the reason given for incurring such debts is due to overspending.  I adjourned it without granting an interim order pending further information to be supplied or explanation in support.  The case came before me again on 11 January 2005; the nominee filed a further nominee report that gave no further information or explanation except in paragraph 2 it states:

“Concerning the average net profit of the Debtor, I have reviewed the bank statement of the Hoi Chuen Transportation from November 2003 to November 2004 and the salary records of the Debtor’s business for a period of 6 months and confirmed that the business generates an average monthly net profit of about HK$12,000.00 before tax.”

That paragraph gives me more concern; the applicant’s income is before tax.  Neither in the proposal nor in the nominee report anything has been mentioned about the tax position of the applicant.  I also enquired whether the applicant has filed any return with the Inland Revenue but I received no answer for that.  I think the nominee should at least make enquiry on this and report to court on the subject.  But, he has done nothing and it seems to me that the nominee is happy with the 13 months’ bank statements produced to him for the period from November 2003 to November 2004 and the salary records of the Debtor’s business for a period of 6 months.  I do not know why he did not ask for more.  I must confess I do not fully understand the meaning of that paragraph.  Did the business employ any staff as it refers to salary record?  Or, does it mean that the nominee draws salaries from his business?  Why is there a record for 6 months and no more?

4.In fact, similar statement is found in paragraph 6.5 of the first report filed on 21 December 2004.  I was disappointed that the nominee did not take the opportunity of the adjournment to do further investigation.  On 11 January 2005 I adjourned the case again for two weeks hoping that the nominee and the solicitor could rectify the situation.

5.Before the hearing two further documents were filed: the 2^nd affidavit of the applicant and the 2^nd further nominee’s report and comments.  I find nothing new there; the applicant only stated that he could not find other documents and the nominee recommended the proposal to be placed before the creditors for consideration.  I do not know on what basis the professional team made such recommendation as I had on earlier occasions indicated that the information was insufficient.

6.With such lack of information I ask myself whether I am satisfied that it is a serious and viable proposal and whether I should accept the nominee’s recommendation to hold a creditors’ meeting to consider the proposal.  I re-examine the facts of the case.

7.The applicant has been working as a self-employed cross-border lorry driver for over 6 years.  He had two divorces: one in 1994 long before his present employment but the other one was in 2002 about 2 years ago.  His two ex-wives did not claim any maintenance except a nominal sum of $1 in each case.  But he is left with the custody of the three sons.  It seems to me that he really cares for the welfare of his children.  The eldest one is 20 studying in the mainland of China.  The younger brother of the applicant has been supporting him.  I have no doubt about it.  The other two children are 14 and 8 respectively staying with the applicant in Hong Kong.  I have asked the solicitor who is going to look after his two young children while he is at work, not to mention that he may have to stay overnight in the mainland.  I can find nothing in the report or the proposal.  My fear is that the applicant has seriously cut his household expenditure to meet the proposal without realizing that it may affect the children.  If it is so, such proposal will not last long particularly for a caring father.

8.He claimed that the debts incurred were due to his overspending.  There is no reason for me to doubt that: as set out in the statement of affairs he had two personal loan accounts and five credit cards with a total indebtedness of $195,596.09.  It seems to me that he may have to lead an austere and frugal way of living in order to meet his commitment in the proposal.  In appendix 5 where he sets out his income and expenditure, each month he has only $2,155.00 for his own spending covering all his personal expenses.  I have serious doubt whether he can sustain it for the arrangement period of 4 years 7 months.

9.At the last hearing I indicated to Mr. Wong, solicitor for the applicant, that I intended to adjourn the hearing to another day for the nominee and the applicant to attend and give their explanation as the solicitor had on previous occasions failed to gather sufficient information for me to consider.  But, Mr. Wong declined my invitation.  He chose to close his case and made submission.  I regret to say that I am not convinced that the proposal is a serious one.  With all my doubts in mind I cannot conclude by balance of probabilities that it is a viable proposal.  I have serious reservation in putting forward the proposal to the creditors for consideration in a creditors’ meeting.

10.With much regret I have to dismiss this application.  This rarely happens: the sense of the law is to assist those people who want to rehabilitate and rescue themselves.  In normal circumstances the court should not lightly deprive the creditors the chance of considering a proposal.  The court has been exercising his utmost patience in vetting all applications, about 100 a month, and making indications in appropriate cases what more information we need.  But, this should not be taken to mean that the court is merely rubber-stamping every application lodged.  As I have stated earlier, this is a simple, straightforward case with three creditors and the amount owing being less than $200,000.  The repayment period is only 55 months.  I have seen many proposals similar to the present one that have been approved by creditors.  I am sure that the creditors are very sympathetic with the applicant’s situation provided that they have obtained sufficient information about the debtor.

11.I also wish to take this opportunity to warn the nominee that he should take all the statements in his report seriously.  In paragraph 11 of his first report he states: “I am ready and willing to provide my assistance to the court if required to do so”.  It seems that he is only paying lip services to that pledge and has no real intention of honouring it.

12.For the above reasons I direct copies of my judgment be sent to the three creditors for their information and to the nominee as warning.

Mr. K.C. Wong of Messrs. Jimmie K.S. Wong & Partners for Debtor.