George Moore v. The Official Receiver and Trustee Op the Estate of Tbe Bankrupt, Hassomal Gaganmal Moorjani Alias Tom Moore

IN THE COURT OF APPEAL

1986, No. 158
(Civil)

BETWEEN

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Coram: Fuad & Clough, JJ.A. and Mayo, J.

Date of Hearing : 19th February 1987

Date of Judgment: 19th February 1987

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J U D G M E N T

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Fuad, J.A.:

1. This is an appeal from the decision of Jones J. (dated 21 November 1986) who upheld the Official Receiver's rejection of a proof of debt in the bankruptcy of Mr. H.G. Moorjani. The Appellant is his brother, Mr. George Moore, alias Gul Gaganmal Moorjani.

2. The High Court, sitting in its bankruptcy jurisdiction, has power to reverse or vary any decision made by a trustee in bankruptcy in respect of a proof upon the application of a dissatisfied creditor under rule 24 of the Proof of Debt Rules, and every order of the High Court is subject to appeal to this Court by virtue of s.98(2) of the Bankruptcy Ordinance, Cap. 6.

3. The matter arose in this way. As long ago as 5 August 1977, Mr. H.G. Moorjani had a receiving order made against him on his own petition presented on 21 July 1977. An adjudication order was made on 3 October 1977 and the Official Receiver was appointed to be the trustee of the estate.

4. Meanwhile, on 18 August 1977, the Appellant had submitted a proof of debt with the Official Receiver. He claimed that he was the creditor of his brother in respect of the balance of a loan which he had advanced to him some two years earlier. The Official Receiver did not formally reject the proof until 21 August 1986.

5. The Appellant's case all along was that he had lent his brother $200,000 on 12 September 1975 and that his brother had paid back only $20,000 of the loan - this was on 26 March 1976. And so his proof of debt was in respect of the balance of $180,000 due.

6. The evidence shows that the Official Receiver required further evidence from the Appellant about the alleged loan and that the Appellant later produced the following in support of his claim to be a creditor of the estate:

(a) the counterfoil from his cheque book which showed that he had drawn a cheque on 12 September 1975 for $200,000. In his own handwriting, the counterfoil showed "To cash" and "For laon to Babu" (the family's pet name for Mr. H.G. Moorjani);

(b) a photocopy of this cheque supplied by his bankers. It is made out to cash for $200,000. On the reverse, the cheque is endorsed, in Chinese Characters, with the signature of a Mr. Wong Tak Shing, and in the Appellant's handwriting appears "cheque is issued to H.G. Moorjani as temporary loan against to (sic) purchase 200,000 shares of Tai Sang Land at $1 per share."; and

(c) the counterfoil of another cheque with a serial number one before the cheque to which I have earlier referred, also dated 12 September 1975. In his affirmation filed for the proceedings before the judge, the Appellant said that he had made out this cheque payable to his brother, but when his brother had seen it, he was asked to provide a cash cheque in its place. The counterfoil has written upon it “issued as cross cheque" and after the amount "He (H.G.M.) wants cash cheque." The word “cancelled” is written across the counterfoil.

7. I interpose here to say that from the start Mr. H.G. Moorjani has denied owing the money claimed or any part of it. Instead, he told the Official Receiver that the Appellant owed him $20,000. As the minutes of the first meeting of the Committee of Inspection show (15 September 1977) the Appellant, who was present, was told of this fact, as he acknowledges. In fact, in March 1979 we have Mr. H.G. Moorjani writing to the Official Receiver suggesting that the Appellant should be charged under s.137 of the Bankruptcy Ordinance for making a false claim. I would mention that that section had been repealed some nine years before.

8. The Official Receiver was unable to obtain an affirmation from Mr. H.G. Moorjani for use before the judge because of Mr. Moorjani's mental state.

9. The Appellant also produced to the Official Receiver a copy of a registered letter dated 8 September 1976. The letter, addressed to his brother, was in these terms:

I have been asking you repeatedly over the last several months for repayment of the HK$200,000.00 which I gave to you on the 12th Sept 1975 in the form of a CASH cheque. You promised that this sum would be repaid to when you obtain the release of your shares from the Far East Exchange Ltd. However, although those shares have now been released you have still to make payment and are requesting more time to pay.

I helped you out when you were in desperate need but in view of your broken promises, I must tell you that unless you repay me within the next ten days I shall have to refer the matter to my solicitors to take the appropriate action.”

I note in passing that the demand was for the full $200,000 despite the fact that both in his statutory affirmation, and in his later affirmation, the Appellant had deposed that his brother had repaid $20,000 of the loan on 26 March 1976. This discrepancy was not explained in any of the Appellant's affirmations.

10. As to the circumstances in which the Appellant says his brother received the money, his affirmation of 22 September 1986 says this:

"In fact when I issued the cheque I instructed my bank to transfer $200,000.00 from my fixed deposit which was due on that day to my current account and also instructed them that I had issued a cheque for $200,000.00 to my brother.

However after my lunch on my way back to the shop I visited the bank. As soon as I entered the bank, the bankrupt rushed up to me and informed me that he had been at the bank for more than an hour but had been unable to cash the cheque. I was surprised as I had already phoned the accountant that my brother would attend to cash the cheque. In the circumstances I spoke to the accountant who informed me that he had been trying to contact me because it was a Chinese gentleman and not my brother who was trying to cash the said cheque. My brother then informed me that he had an arrangement with this Mr. Bang and accordingly I instructed the bank that they could cash the cheque. In my presence the bank cashed the cheque and gave $200,000.00 in cash to Mr. Wong. Mr. Wong in turn, gave my brother a sum of H.K.$130,000.00. Thereafter I left the bank.”

Apart from challenging the decision on the merits of his claim to be a creditor, the Appellant had complained to the judge about the delay in dealing with his proof of debt. His stated grievances were, and still are, that he took it that his proof had been admitted once he had supplied the further evidence requested by the Official Receiver, and had heard no more, a belief which was reinforced by the fact that he was allowed to continue as a member of the Committee of Inspection. He had been prejudiced because the memories of the bank witnesses would now have faded even if they could still be found, and because any action against his brother would now be met by a defence under the limitation statutes. I would say here that this last complaint of itself is misconceived because s.12 of the Bankruptcy Ordinance would have prevented him from taking proceedings to recover the debt from his brother by ordinary action, without the leave of the Court, which one cannot imagine would have been given.

11. As to the merits of the decision ultimately to reject the proof, I am not persuaded that either the Official Receiver, or; later, the judge, erred. In view of the denial of the loan by the bankrupt, it seems to me that the Official Receiver was fully justified in requiring further evidence from the Appellant. When it was all in, there was no evidence of any acknowledgment of indebtedness by his brother or any other evidence to support the Appellant's averment that his brother had received any part of the money said to be advanced to him, and in all the circumstances, I venture to say that it would have been irresponsible for the Official Receiver to have admitted the proof. It was not his duty to interview the bank witnesses said to be present when the money was handed over by Mr. Wong to the bankrupt, or Mr. Bang himself, as the Appellant still maintains.

12. However, it seems to me that it is necessary to consider whether the long delay by the Official Receiver in his final adjudication of the Appellant's proof gave him any rights.

13. In my view, the provisions, which govern this issue are those contained in rr. 22-26 of the Proof of Debts; Rules made in pursuance of s. 36 of the Ordinance. I do not think that r. 114 of the Bankruptcy Rules themselves has any application since the Official Receiver has yet to give notice of his intention to declare a dividend.

14. Rule 22 of the Proof of Debts Rules is in these terms:

“22. The trustee shall examine every proof and the grounds of the debt, and in writing admit or reject it in whole or in part or require further evidence in support of it. If he rejects a proof, he shall state in writing to the creditor the grounds of the rejection.”

15. It is clear that under this rule no time limits are imposed within which the trustee must act. However, I apprehend that a trustee must exercise his powers within a reasonable time. He is enjoined so to do by s.70 of the Interpretation and General Clauses Ordinance, which provides:

"70. Where no time is prescribed or allowed within which anything shall be done, such thing shall be done without unreasonable delay ...."

16. It is common ground that the Official Receiver did not require the further evidence he sought from the Appellant in writing as rule 22 demands. And in my view the Official Receiver should not have left the matter unresolved for so long. After giving an alleged creditor a reasonable time within which to furnish further evidence in support of his proof, he should then have rejected it in writing assuming that his opinion as to its validity had remained unchanged. It seems clear that a creditor has the right to apply to the Court under r.24 of the Proof of Debt Rules if he is dissatisfied by the Official Receiver's decision to require evidence in support.

17. The Appellant is suffering under a burning sense of grievance over what the judge rightly called the "inordinate" delay in dealing finally with the matter. And, perhaps, understandably, but mistakenly, he felt secure in his position as a creditor by being allowed to continue as a member of the Committee of Inspection. This would not have happened if the Official Receiver had complied with r.22 in the way I suggest he should have done. However that may be, the Official Receiver did not admit the proof of debt, and I have said why I think he was right to reject it. The Appellant was at various times during this protracted bankruptcy represented by solicitors, and it was open to him to move the Court, raising any complaint he had about the Official Receiver's conduct in the bankruptcy, under s.84(1) of the Bankruptcy Ordinance. This was not done.

18. If I am wrong and the Official Receiver must, by his conduct, be taken to have admitted the proof, then for the reasons I have attempted to give, the proof was wrongly admitted. In such circumstances, as Gaff J. point out in Re Debtor (No. 819 of 1970) Ex p. Biart v. Trustee of Property of Debtor [1974] 3 All E.R. 502, at p.504:

“It is settled, however, that where, on appeal from the rejection of a proof by the trustee, objection be taken that the rejection was not made in due time, the court may treat the motion as an application to expunge, and act accordingly: Re Voght (1886) 3 Morr. 164.”

19. Goff J. was following Re Sissling, Ex p. Fenton (1885) 2 Morr. 289 where it was held that the objection by a creditor against the rejection of his proof outside the time limited by the Rules was good, but being only a matter of form, the creditor’s application should have been treated as if it had been a motion by the trustee to expunge the proof. There is also a helpful, Canadian case on the subject: Osrander & Co. Ltd. v. Canadian Credit Men's Trust Association [1930] 2 D.L.R. 88.

20. The power to expunge a proof improperly admitted is given to the Court by r.23 of the Proof of Debt Rules. Mr. Mackay, for the Official Receiver, has asked us to exercise this jurisdiction if need be. And so, to the extent that it might have been necessary, I would have directed that the proof be expunged with the same result as if the appeal had been dismissed. I would not have felt it necessary to remit the matter to the High Court for this purpose. The evidence put forward by the Appellant fell short of that required to establish that he was a creditor of the estate and, in fairness to the other creditors, particularly, the proof could not have been allowed to stand.

21. I would, therefore, dismiss the appeal.

Clough, J. A. :

22. I agree and have nothing to add.

Mayo, J.:

23. I also agree and have nothing to add.

Appellant - in person.

G. Mackay for the Official Receiver (Respondent)