Re Choi Lai Ming
Read the full judgment text of HCB 4390/2002 on BabelCite. This HCB judgment was delivered on 21 October 2005.
1. The applications now before me raise questions as to the extent of the Hong Kong Government (“the Government”)’s rights in relation to the recovery by it of a loan advanced to a civil servant under the Government’s Home Financing Scheme (“the Scheme”), by which it provided a form of housing benefit to eligible civil servants, in circumstances where the civil servant has subsequently been made bankrupt.
Cited by 11 cases · Cites 1 case
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HCB 4390/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCYPROCEEDINGS NO. 4390 OF 2002 ____________ Re: CHOI LAI MING, a Debtor Ex Parte: THE OFFICIAL RECEIVER ____________ Before: Hon Barma J in Chambers Dates of Hearing: 15 and 16 December 2004 Date of Judgment: 21 October 2005 _______________ J U D G M E N T _______________ Introduction 1.The applications now before me raise questions as to the extent of the Hong Kong Government (“the Government”)’s rights in relation to the recovery by it of a loan advanced to a civil servant under the Government’s Home Financing Scheme (“the Scheme”), by which it provided a form of housing benefit to eligible civil servants, in circumstances where the civil servant has subsequently been made bankrupt. 2.In this case, the civil servant involved is Mr Choi Lai Ming (“Mr Choi”), who is employed as a Senior Waterworks Inspector for the Water Supplies Department. However, with the exception of an application by the Official Receiver, Mr Choi’s trustee in bankruptcy, for an income payments order against Mr Choi, the questions raised by these applications are of wider significance, as they arise in a large number of bankruptcies involving civil servants to whom loans were made under the Scheme. The parties’ respective positions 3.The Government’s primary contention is that it is a secured creditor of Mr Choi in respect of the loan granted to him under the Scheme holding security, holding security in the form of a charge over Mr Choi’s salary, and that as the holder of such security, it is entitled, notwithstanding Mr Choi’s bankruptcy, to continue to make deductions from his salary in order to effect repayments by him of that loan and interest accruing upon it, until the loan and accrued interest are fully repaid. The Government also contends that it holds similar security over any pension that may be payable by it to Mr Choi. 4.As a fall back position, the Government says that, even if it is not a secured creditor of Mr Choi’s, it is entitled to make deductions from his salary and any other payments that may be due from it to him by way of set off, so as to effect repayments of the loan, until such time as Mr Choi obtains his discharge from bankruptcy. 5.The Official Receiver, as Mr Choi’s trustee in bankruptcy, takes the position that the Government is neither a secured creditor nor entitled to exercise any rights of set off against Mr Choi after he became bankrupt, with the consequence that the Government was not entitled to make the deductions which it continued to make from Mr Choi’s salary after his bankruptcy by way of repayment of the loan under the Scheme. The Official Receiver seeks to recover for Mr Choi’s estate in bankruptcy the deductions which have been so made, and going forward, also applies for an income payments order against Mr Choi under section 43E of the Bankruptcy Ordinance (Cap. 6) (“the Ordinance”) seeking a monthly payment from Mr Choi which is calculated without reference to the deductions which the Government claims to be entitled to make. The Official Receiver also contends, as a preliminary matter, that the Government is not in fact a creditor of Mr Choi at all, and so has no locus standi to apply for the relief which it seeks. 6.At the hearing before me, the Government was represented by Mr John Griffiths S.C. and the Official Receiver by Ms Linda Chan. Mr Choi appeared in person, but restricted his submissions to the income payments order, in relation to which he submitted that if such an order were to be made at all, it should be in a lesser sum than that sought by the Official Receiver, to take account (in particular) of what Mr Choi said were his obligations to support his wife, from whom he was separated, and to support his elderly mother. The applications under consideration 7.The applications before me consisted of an amended Summons issued by the Government in the bankruptcy, pursuant to section 97 of the Ordinance, issued on 4 May 2004 and amended on 13 September 2004, and the applications made by the Official Receiver under his report dated 20 July 2004 and under his Notice of Application for an Income Payments Order dated 30 September 2004. 8.By the amended Summons, the Government seeks:-
9.By his report dated 20 July 2004, the Official Receiver seeks:-
10.By the Notice of Application dated 30 September 2004, the Official Receiver seeks:-
The factual background 11.The factual background to the various applications now before me is set out in the affirmations of Lo Wai Man, a Senior Accounting Officer with the Treasury, and in the reports of the Official Receiver. This background can be summarised as follows. 12.So far as the Scheme is concerned, it is a form of housing benefit offered by the Government to eligible civil servants to enable them to purchase property for their residential accommodation. One form of benefit offered under the Scheme is a downpayment loan, usually limited to 30% of the cost of the property being purchased or 2 years’ salary of the borrower. Where a borrower has joined the Government’s New Pension Scheme, and has completed 10 years’ pensionable service, he may borrow up to the amount of his earned maximum commuted pension gratuity at the time of application for the loan. 13.It is well known that banks in Hong Kong are, in general, prepared to finance up to 70% of the cost of residential properties by way of mortgage. Thus, the downpayment loans under the Scheme provide a means by which civil servants are enabled to borrow up to the whole of the downpayment which they would otherwise have to fund from their own savings or other resources, and thus to own residential accommodation which they might otherwise find difficult to acquire. 14.Such loans are repayable by equal monthly instalments of principal and interest over a period of 10 years (or a shorter period up to the civil servant’s retirement age, if earlier). Where a civil servant applies for such a loan within 10 years before his retirement, he may elect to make monthly repayments of interest only, repaying the principal amount of the loan from his commuted pension gratuity. 15.These terms, and terms setting out the mechanisms by which repayments are to be effected, are embodied in a number of documents executed by the civil servant in the process of applying for and obtaining the loan, and in applicable Civil Service Regulations (“CSRs”) which form part of the loan terms (being incorporated by reference), and which are also part of the terms of employment of the civil servant. I shall refer to the relevant provisions in these documents and the CSRs below. 16.Mr Choi joined the civil service on 22 September 1980, and attained his current grade on 3 August 1982. His terms of employment provide that he agrees to be bound by all Government Regulations, including CSRs. 17.Mr Choi first joined the Scheme on 3 January 1997, and was granted a downpayment loan for the purchase of a property at 8 Honiton Road, Hong Kong. He borrowed some 70% of the cost of the property from a commercial bank, which obtained a first legal charge over the property. The property was also subject to a second legal charge in favour of the FSI as security for the downpayment loan. 18.In 1999, Mr Choi decided to purchase a different property, at Flat F, 11th floor, Block 6, Tung Chung Crescent, Tung Chung, Lantau. On 20 July 1999, he made an Initial Application for change of property. On 21 July 1999, he completed a Formal Application for a downpayment loan in respect of the new property in the amount of HK$776,400, this being 30% of the purchase price of HK$2,588,000. On 27 July 1999, he was informed by the Director of Accounting Services (“the DAS”) that the proposed change of property had been approved in principle under CSRs 1600-1799 governing the Scheme. The relevant documents and their terms 19.The Formal Application was addressed to the DAS. Clauses 4 and 5 of the Formal Application provided, so far as material, as follows:-
20.The Formal Application was accompanied by a number of other documents, including an Agreement Form for Repayment of Downpayment Loan. This document expressed itself to be made between the Government and Mr Choi, and provided, so far as material, as follows:-
21.Thereafter, on 2 August 1999, the DAS informed Mr Choi that his application for a downpayment loan had been formally approved. The memorandum by which this was done stated in paragraph 5 that the approval was “given on the understanding that [Mr Choi] will act in strict compliance with the [CSRs] pertaining to [the Scheme]”. 22.The relevant CSRs include the following:-
23.On 18 August 1999, the FSI gave instructions for the preparation of a second charge over the new property. These instructions are contained in a letter of that date to the solicitors acting for Mr Choi in connection with the purchase of the new property, in which it was stated that the Government agreed to the discharge of the second legal charge to the FSI in respect of the old property, on the terms and conditions set out in the letter. Thereafter, a downpayment loan in the amount of HK$776,400 was advanced to Mr Choi on 6 September 1999. In accordance with Clause 1(a) of the Formal Application, CSR 1656 and the instructions of 18 August 1999, a second equitable mortgage was created in favour of the FSI, which was replaced (on completion of the building of the new property) by a second legal charge in favour of the FSI on 20 October 1999. 24.At this time, the first mortgage was provided by Hang Seng Bank Limited. In 2001, there was a change of lender, as Mr Choi decided to refinance the loan from Hang Seng Bank Limited with a new loan from Shanghai Commercial Bank. As a result, a fresh second legal charge in favour of the FSI was executed on 6 July 2001 to secure the then outstanding sum on HK$634,897.98. This was done pursuant to a further letter of instructions from the FSI dated 7 June 2001, which (like the earlier letter of 18 August 1999) stated that the Government agreed to the discharge of the existing second legal charge in favour of the FSI on the terms and conditions stated in the letter. The second legal charge of 6 July 2001 describes the FSI as “the Lender”, and recites that “the Lender” has advanced or agreed to advance to Mr Choi the sum of HK$634,897.98. 25.The Government’s position, which is stated in the evidence of Mr Ho, is that the FSI acts as the agent of the Government in relation to the execution, holding and release of the second charge, and otherwise in relation to the loan. Mr Choi’s bankruptcy 26.On 8 March 2002, Mr Choi presented a petition seeking his own bankruptcy, on the basis that he was unable to pay his debts. A bankruptcy order was made against him on 28 May 2002. On 8 August 2002, it was ordered that his estate should be administered in a summary manner, and the Official Receiver was appointed as his trustee. Initially, Mr Choi agreed to contribute HK$8,000 per month out of his salary towards his estate in bankruptcy. However, apparently as a result of the monthly deductions which the Government made from his salary, he has not in fact made such contributions beyond the making of one payment of HK$8,000. 27.On 8 July 2002, the FSI lodged a proof of debt with the Official Receiver in respect of the unpaid balance of the downpayment loan, which then stood at HK$549,428.81. The covering letter accompanying the proof stated that the FSI had been advised that a charge had been created over Mr Choi’s salary, pension and any other monies due to him from the Government. It went on to state that the FSI was entitled to continue to deduct the monthly instalments from Mr Choi’s salary, and that monthly deductions of HK$9,467.37 would be made with effect from July 2002. 28.The proof itself stated the creditor to be the FSI. It also stated that the FSI held security for the debt in the form of the second legal charge over the property and over Mr Choi’s salary, pensions and other sums of money from the Government. The proof did not comply with the requirements of the Bankruptcy (Proof of Debts) Rules in that, contrary to rule 11 of those rules, no valuation was given for the securities said to be held. 29.It does not appear that the proof has been dealt with. It has been neither admitted nor rejected, and no dividend has been paid on it. 30.The property was subsequently sold by Shanghai Commercial Bank, and following such sale, a small surplus of HK$63,526.28 was paid to the FSI as the holder of the second charge. 31.I was told that if the Government continues to make deductions from Mr Choi’s salary as it is currently doing, the downpayment loan will be fully recovered by about October 2007. Mr Choi can, however, expect to receive his automatic discharge from bankruptcy in May 2006. The questions which arise 32.Against this background, the following issues arise for consideration in relation to the various applications which are before me:-
Is the Government a creditor of Mr Choi? 33.I consider first the question of whether the Government is in fact a creditor of Mr Choi. As to this, Ms Chan points to the following matters to suggest that the Government is not Mr Choi’s creditor:-
34.Against this, however, must be set the following:-
35.I think it is also right to have regard to Mr Ho’s evidence as to the position of the FSI as the agent of the Government, and not as the lender in its own right. To the extent that this evidence was challenged, it was not by way of cross-examination of Mr Ho, but by way of reference to the matters referred to in paragraph 33 above. 36.While it is fair to say that the documentation is somewhat inconsistent, it seems to me that the key documents are those by which the loan was brought into existence. These are, in my view, the Formal Application and the Agreement Form for Repayment of Downpayment Loan. Both of these documents make it clear that the lender of the loan is the Government. It is the party which agrees to make the loan available to Mr Choi. The latter document also stipulates for the provision of security over the property by way of a second legal charge, which in the event was granted to the FSI. It seems to me that the fact that such security was held by the FSI (essentially at the instructions of the Government, since it was the Government who stipulated for the security) should be regarded as indicating no more than that the FSI, in holding such security did so as agent for the Government. 37.It is true that the FSI described itself as the creditor in the proof of debt, and did not state itself to be the Government’s agent in submitting the proof of debt. However, that is a matter that can be put right by a suitable amendment to the proof of debt, to enable the FSI to state the capacity in which it lodged such proof, should that be necessary. I can see no prejudice to Mr Choi or his bankruptcy if such an amendment were to be made, particularly since the proof in its present form is in any case defective (in failing to value the security which is said to be held for the debt), and has not been dealt with by the Official Receiver to date. That said, however, in the course of the hearing before me, Mr Griffiths indicated that if the Government were found to be a secured creditor as it claims to be, it would seek to withdraw the proof and would elect to stand on its security. If it does so, the question of amendment to the proof of debt will become academic. 38.I do not regard the fact that payment of the surplus sale proceeds of the property were paid to the FSI as being particularly persuasive evidence indicating that the FSI and not the Government was Mr Choi’s creditor. At best, that fact is equivocal, as it would be equally consistent with the FSI having received such monies as the agent of the Government. 39.For the reasons explained above, I am satisfied that it is more probable than not that the Government, rather than the FSI, is the creditor of Mr Choi in relation to the downpayment loan made to him. It therefore follows that the Government has the necessary standing to seek the declarations which it does. Is the Government a secured creditor of Mr Choi? 40.I consider next whether the Government is a secured creditor of Mr Choi, holding security over his salary, pension and other payments which might be due from the Government to him. Salary 41.I shall deal first with the position in relation to salary. 42.Ms Chan, for the Official Receiver, referred me to the description of a security interest by Professor Goode, in Legal Problems of Credit and Security (3rd ed) at para 1-16:-
43.She further submitted that in determining whether or not “the right is given for the purpose of securing an obligation” so as to ascertain the true nature of the right created by the parties, the Court’s approach was as stated by Lord Millett in Agnew v Inland Revenue Commissioner [2001] AC 710 at 725-726, where he said:-
44.Mr Griffiths took issue with this approach. He pointed out that the decision in Agnew was concerned with the question of whether a charge that had been given was fixed or floating. The question of whether or not there was a charge at all was not in issue. He submitted that the better approach was to consider whether or not the intention of the parties was to confer on the creditor a security interest in the debtor’s property. Such intention, he submitted, could be gathered not just from the language used, but also from the surrounding circumstances, relying on the observations of Buckley LJ in Swiss Bank Corporation v Lloyds Bank [1982] AC 582 at 595:-
45.While it is true that Agnew’s case was concerned with the classification of a charge as either fixed or floating, it seems to me that there is not a significant difference between the two approaches contended for. On either approach, what is necessary is to seek to ascertain the intention of the parties as to their respective rights and obligations from the document(s) and admissible surrounding circumstances. Having ascertained what those rights and obligations were intended to be, the legal effect will be a matter for the courts, so that how the parties have described the arrangement will not be conclusive if that description is inconsistent with the legal effect of what they have done. 46.In this case, so far as salary is concerned, the most relevant provisions are, to my mind, Clauses 4 and 5 of the Formal Application (the latter of which brings in the CSRs), Clause 1(d)(ii) of the Agreement Form for Repayment of Downpayment Loan, and CSRs 1670(a), 1673(b) and 1741(b). The effect of these provisions (in particular CSR 1670(a)) is that it was expressly agreed between Mr Choi and the Government that payment of the instalments by which the downpayment loan and interest on it was to be repaid would be effected by deduction from his monthly salary. This therefore authorised the Government to repay itself out of Mr Choi’s salary. The authority to do so was, moreover, irrevocable, since Mr Choi could not revoke it without being in breach of his agreement. The authority was also, I think, irrevocable, in that being embodied in the CSRs, it could only be changed by the Government, and not by Mr Choi. 47.That situation appears to me to be indistinguishable from the situation which obtained in King v Michael Faraday and Partners Limited [1939] 2 KB 753, where a irrevocable direction by an employee to his employers that they should make certain payments out of his salary to a creditor of his was regarded as imposing a charge on the employee’s salary in favour of the creditor (which charge had been lost for other reasons). Unless there is some compelling reason for concluding that no charge over salary can have arisen, I would conclude that such a charge was created by the provisions to which I have referred. 48.Ms Chan submitted that the provisions relied upon by the Government did not give rise to an equitable charge over Mr Choi’s future salary. As I understood her, the principal bases for this submission were:-
49.As to these arguments, I do not think that the first point taken is a good one. For the reasons which I have already endeavoured to explain, I am of the view that the provisions in question go beyond a mere undertaking or agreement on the part of Mr Choi to repay the downpayment loan advanced to him, and extend to giving the Government a right to satisfy itself out of Mr Choi’s salary which might become due to him from the Government from time to time. 50.Similarly, it seems to me to be clear that the purpose of the provisions was to enable the Government to have a measure of security for the obligations of Mr Choi in respect of the downpayment loan. The whole purpose of CSR 1670(a) is to ensure that the Government is able to recoup itself for the monthly repayment instalments that would become due. While it is fair to say that the language of the provisions is not expressed in terms of the creation of a charge over Mr Choi’s salary in favour of the Government, it should also be borne in mind that it is not necessary, I think, for the precise words to be used as long as the effect of what is agreed gives rise to a charge as a matter of legal effect. 51.As to the supposed absence of any equity of redemption, it seems to me that this is implicit in the fact that the Government is only entitled to make deductions from Mr Choi’s salary so long as there is something owing from him to it. Once the downpayment loan is fully repaid, the Government will no longer have any entitlement to make deductions from Mr Choi’s salary in respect of it, and should it do so, will clearly be bound to repay any over-deduction to Mr Choi. 52.Although it is true that in Holroyd v Marshall, there were references to the need for the agreement giving rise to the equitable charge to be specifically enforceable, I do not see that there is any problem in this case. Assuming this to be correct, it seems to me that the relevant agreement is that which gives rise to the charge, not that which gives rise (or may give rise) to the property which is to be charged. It is of course true that Mr Choi’s employment contract is not one which is specifically enforceable. But that is not, in my view, the relevant contract. The relevant contract is the agreement that the Government should be entitled to have recourse to his salary (if earned) in order to repay itself in respect of the downpayment loan. I see no reason for thinking that that agreement would not be susceptible to being ordered to be specifically performed, if necessary. 53.Finally, so far as the question of the contingency that Mr Choi might not earn any salary in future if he ceased to be employed is concerned, I do not see that this is a problem in this case either. The relevant passage in Professor Goode’s book reads:-
54.Here, the only contingency would be whether or not Mr Choi would acquire an interest in the relevant asset - his right to be paid salary. 55.Ms Chan also suggested that an assignment of future salary might not be enforceable against a trustee in bankruptcy. As I understood it, this proposition was based on Ex parte Nichols (1883) 22 Ch D 782 and Re de Marney [1943] 1 Ch 126. However, so far as the former case is concerned, it seems clear that the decision was based on the court’s view that the earnings in that case which were said to have been charged to a credit were not the personal earnings of the debtor, but earnings from his business. As the debtor’s business was an asset which vested in the trustee, any carrying on of that business after the bankruptcy was to be regarded as having been done by (or on behalf of the trustee), so that any income arising from it was the income of the trustee, which could not be affected by an antecedent agreement between the debtor and his creditor. The same situation arose in Wilmot v Alton [1897] 1 QB 17, where the same approach was taken. Where the income is that of the debtor himself, in my view there is nothing that prevents that income from being assigned or charged in such a way as to be binding in the event of a subsequent bankruptcy (see King v Michael Faraday, supra). Although it does appear that a different conclusion was reached in Re de Marney, it is difficult to discern the basis of the decision from the short judgment given, and I prefer the reasoning in King v Michael Faraday. 56.Moreover, it is clear from section 43 of the Ordinance that the estate of a bankrupt comprises his property at the time when the bankruptcy commences (i.e. on the making of the bankruptcy order). Although it is possible for a trustee to claim after acquired property for the bankrupt’s estate under section 43A of the Ordinance, this does not extend to the bankrupt’s income (see section 43A(5)), which, if it is to be claimed, must be made the subject of an income payments order under section 43E. This means that the bankrupt’s income is not automatically part of his estate, although there may be circumstances in which part of that income may be ordered to be paid into his estate for the benefit of his creditors. In these circumstances, I do not see any insuperable objection in principle to an agreement being made, prior to bankruptcy, which has the effect of charging that income or part of it to a creditor. 57.I am therefore of the view that the Government is a secured creditor of Mr Choi, with security over his monthly salary. It seems to me that all of the elements of a security interest posited by Professor Goode are present in this case. There is a right given by a debtor (Mr Choi) to a creditor (the Government) in an asset (his future salary, the right to receive which is a form of property, being a future contingent thing in action). It is given by way of the grant of a security interest (a charge), for the purpose of securing an obligation (the downpayment loan). It is given in security only, since the right will cease on the loan being repaid), and the debtor (Mr Choi) is not free to dispose of the asset without regard to the security interest. Pension 58.So far as Mr Choi’s pension is concerned, it seems to me that the position is, similar. The question of whether the Government was a secured creditor in respect of Mr Choi’s pension was not the subject of as much argument, perhaps because this was not an asset that could form part of his bankruptcy estate. However, it seems to me that the provisions of the Formal Application, Agreement Form for Repayment of Downpayment Loan and the relevant CSRs also make it clear that it was intended that the Government should have a security interest in any pension to which Mr Choi might become entitled. Apart from the provisions which give rise to the Government’s entitlement to have recourse to Mr Choi’s pension, it is to my mind significant that:-
Each of these provisions indicates the importance of the commuted pension gratuity as a source of repayment of the downpayment loan, and to my mind they are strongly supportive of the Government’s contention that it is secured on Mr Choi’s pension as well. 59.I am therefore satisfied that the Government is also a secured creditor in relation to Mr Choi’s pension. 60.Some further support for this conclusion is also to be found in:-
Other payments due from the Government to Mr Choi 61.So far as other payments which might be due from the Government are concerned, the Government has, in the documents to which I have already referred, stipulated for the right to make deductions from such amounts in the event that it wishes to do so to effect recovery of the downpayment loan. Again, this stipulation would seem to be effectively irrevocable, and insofar as it is necessary, I would accept that the Government has security over such sums, should they arise in future. 62.Having regard to the conclusions to which I have come, it is in my view appropriate to make the declaration sought by the Government under paragraph 1 of the Government’s amended Summons. Set-off 63.In the light of my conclusion that the Government is a secured creditor of Mr Choi in respect of his salary, pension and other payments that may be due to him, the question of set-off does not need to be determined, and the declaration sought under paragraph (2) of the amended Summons would no longer appear to be required, and I do not propose to comment further on these. 64.I would, however, deal briefly with the other two points that were canvassed in argument, which I mentioned in paragraph 32(4) above. What effect will Mr Choi’s discharge have on the Government’s position as a secured creditor? 65.The first of these points relates to the effect, if any, that Mr Choi’s obtaining his discharge from bankruptcy will have on the debt owed to the Government under the instalment loan. Ms Chan suggested, on the basis of the decision of the New Zealand Court of Appeal in Perrott v Newton King Ltd [1933] NZLR 1131, that notwithstanding that the Government is (as I have held) a secured creditor, the debt will be discharged. 66.If by this submission Ms Chan intended to suggest that the effect would be that the Government could no longer enforce its security against Mr Choi after his discharge, I am afraid I do not agree. I have been unable to find in the report of Perrott the precise terms of the relevant provision of the then New Zealand bankruptcy legislation, and I therefore find that case to be of limited assistance. In any event, it seems to me that the position as to this point is governed by section 32(3) of the Ordinance. That section provides:-
67.In my view, the clear meaning of that provision is that, notwithstanding that the bankrupt has been released from the debt by reason of his discharge, the secured creditor remains able to enforce his security for the payment of such debt. That can only mean that the creditor remains able to satisfy himself out of such security. The consequence is, therefore, that the Government will be entitled to continue to have recourse to Mr Choi’s salary (and, if necessary, pension and other sums due to him from the Government). Is the Government entitled to post-bankruptcy interest? 68.As to the other point, Ms Chan submitted that by reason of section 71 of the Ordinance and rule 17 of the Bankruptcy (Proof of Debts) Rules, it was not open to the Government to continue to charge interest on the outstanding downpayment loan after Mr Choi was made bankrupt. Section 71 provides that interest on a debt is provable as part of the debt except insofar as it is payable in respect of any period after the commencement of the bankruptcy. In my view, that section has no application to the position of a secured creditor if he does not prove in the bankruptcy. In that situation, he has no need to prove for the interest on the debt, and can rely on his security to recoup himself both in respect of principal and interest. This is the position in New Zealand (see Lamont v Bank of New Zealand [1981] NZLR 142), and I am not aware of any contrary authority in Hong Kong. 69.The only complication here is that the Government has, through the FSI, submitted a proof of debt in Mr Choi’s bankruptcy. However, as I have already observed, that proof was defective in that it failed to comply with the relevant rule requiring the security to be valued, and the proof has not been dealt with. In these circumstances, I think that it would be open to the Government to simply withdraw the proof of debt, as Mr Griffiths indicated that it would. I can see no prejudice to any party if this were to happen, since no steps have been taken in relation to the proof. The Official Receiver’s applications of 20 July 2004 70.The consequence of the decisions to which I have come is that neither the order nor the declaration sought by the Official Receiver in his report of 20 July 2004 should be made. As I have held that the Government was entitled to rely on its security, and thus to make the deductions which it has done from Mr Choi’s salary, there is no basis for ordering it to repay such deductions to Mr Choi’s estate in bankruptcy. Nor is there any basis for the declaration which is sought. The application for an Income Payments Order 71.That leaves the income payments order sought against Mr Choi. The amount sought to be paid over, out of his income, is HK$11,713 per month. This was predicated on the basis that the Government is not entitled to deduct HK$9,467.37 per month from such income to repay itself in respect of the downpayment loan as it has been doing so far. That basis has proven to be unfounded. At best, therefore, an income payments order in the region of HK$2,300 per month could be justified. 72.However, as to this, Mr Choi did submit at the hearing that account should be taken of his commitments to provide for his wife and his elderly mother. Following the hearing, he provided (pursuant to leave which I gave) some evidence to substantiate these commitments, and also explained that his other brothers, who might otherwise be expected to assist in supporting his mother, were in no position to do so because they were either recently discharged or undischarged bankrupts. The bankruptcies of Mr Choi’s brothers was confirmed by the Official Receiver. 73.In these circumstances, I am not satisfied that it would be appropriate to make any income payments order against Mr Choi, and decline to do so. Disposition and Costs 74.There will therefore be a declaration in terms of paragraph 1 of the Government’s amended Summons. That apart, I shall make no order in relation to paragraph 2, or in respect of the various applications made by the Official Receiver. 75.So far as the question of costs is concerned, I was given to understand at the conclusion of the hearing that these had been agreed as between the Government and the Official Receiver. I shall therefore leave it to the parties to embody that agreement in the order to be submitted to me. Should there be any dispute or difficulty as to this, they are at liberty to apply in relation to the question of costs.
Mr. John Griffiths, SC QC &Mr. Andrew Bullett instructed by Department of Justice for the Applicant Miss Linda Chan instructed by Official Receiver for the 1st Respondent Bankrupt : Choi Lai Ming , in present (Present) |
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