Lay Man Yee, Mary v. Fred Lee
Read the full judgment text of CACV 262/2008 on BabelCite. This Court of Appeal judgment was delivered on 20 March 2009.
1. By a bankruptcy order dated 8 October 2002, Madam Lay, the appellant, was made bankrupt on her own petition. In List B (unsecured creditors) of her Statement of Affairs, she disclosed indebtedness of $ HK$2,714,480 to various banks and finance companies in respect of credit cards and loans. In List D, she stated that her husband was unemployed and would apply for bankruptcy on the same day. Her other dependants were her son and daughter as well as her mother and a brother who was sufferin
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CACV 262/2008 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 262 OF 2008 (ON APPEAL FROM HCB NO. 13304 OF 2002) ---------------------- BETWEEN
---------------------- Before: Hon Tang VP, Yeung JA and Yam J in Court Date of Hearing: 13 March 2009 Date of Judgment: 20 March 2009 -------------------------- J U D G M E N T ------------------------ Hon Tang VP (giving the judgment of the Court): 1.By a bankruptcy order dated 8 October 2002, Madam Lay, the appellant, was made bankrupt on her own petition. In List B (unsecured creditors) of her Statement of Affairs, she disclosed indebtedness of $ HK$2,714,480 to various banks and finance companies in respect of credit cards and loans. In List D, she stated that her husband was unemployed and would apply for bankruptcy on the same day. Her other dependants were her son and daughter as well as her mother and a brother who was suffering from disability. In List G (Statement of Means), she stated that she had a monthly income of HK$51,860 and outgoing of $48,800. She also owned a residential property which was subject to a mortgage and a second mortgage. 2.Eventually, it was agreed that she should make a monthly contribution of HK$2,660 to her estate due to her bankruptcy with the 1st payment to be made on or before 9 December 2002. During the 4 years of her bankruptcy, she had made payments totalling about $122,000. 3.Under section 30A of the Bankruptcy Ordinance, Cap. 6, her bankruptcy would be discharged by the expiration of 4 years beginning with the commencement of the bankruptcy on 8 October 2002. 4.However, under section 30A(3):
5.By a summons dated 6 September 2006, the trustee applied:
Essentially, the trustee relied on section 30A(4)(d) which provides as follows:
6.Kwan J by her judgment dated 8 August 2008, after a hearing on 30 July 2008, made an order such that effectively, the appellant did not obtain her discharge until 7 August 2008. 7.On the same occasion, Kwan J dismissed the 3 summonses issued by the appellant dated 7 December 2006, 27 April 2007 and 12 October 2007 respectively. The appeal 8.This is the appellant’s appeal from the order of Kwan J, extending her bankruptcy until 7 August 2008 as well as the dismissal of her 3 summonses. 9.The appellant who acted in person below is represented by Ms. Margaret Ng in the appeal. The trustee is represented by Mr Stanley M. W. Ng. Both counsel have made their submissions in English, although the proceedings below were conducted in Chinese. 10.In Kwan J’s judgment, she had dealt in detail with the trustee’s application under section 30A(3). She had found proved 5 unsatisfactory conduct on the part of the appellant. 11.Ms Ng referred to them for convenience as follows:
12.Before turning to deal with the alleged misconduct, we deal first with the complaint against the trustee in relation to his application. Ms Ng has referred us to a number of decisions of the Court of First Instance and this court, where the trustee had also been the trustee, on issues relating to objection to automatic discharge on grounds of unsatisfactory conduct under section 30A(4)(d). Ms Ng submitted that a feature of the trustee’s approach in the present case in common with these cases is to rely solely on documents provided in connection with the statement of affairs or other documents without investigation, and without considering all relevant circumstances in a “quasi-judicial” manner before issuing his objection against the bankrupt’s automatic discharge, barely a month before the date of the automatic discharge, resulting in the extension of the bankruptcy. Ms Ng submitted that for these reasons the trustee’s application should be dismissed. 13.In Re Liu Man Hoo (a bankrupt) [2007] 5 HKC 346 where the same trustee made an application for a suspension order less than 1 month before the date of automatic discharge on grounds of pre-bankruptcy and post-bankruptcy unsatisfactory conduct, Lam J, after referring to the judgment of Kwan J in Fred Lee v Leung Chin Yeung and Ors [2007] 1 HKC 164 said at 352B:
14.It is important to note Lam J was not saying that absent proper investigation the trustee’s application should be dismissed in limine. We believe the correct approach to such complaint is as stated by Barma J in Re Law Pak Wai (a Bankrupt), unreported, HCB 10680/2002, dated 7 March 2008, ex parte, Fred Lee, trustee of the property of Law Pak Wai, where he said:
15.We turn to the alleged misconduct. Recent loan misrepresentation 16.The recent loan refers to the loan made less than 4 months before her application for bankruptcy. On 15 March 2002, the bankrupt borrowed from HSBC the sum of $79,000 which was repayable monthly at $2,033. As the learned judge pointed out, at that time, the appellant’s monthly income was $71,000, but the amount which she had to pay included the following:
17.Such amounts exceeded $94,000 which far exceeded her monthly income. Nor had they included her monthly family outgoings of $48,800. It is quite clear that at the time she borrowed $79,000 she was not in a position to repay it. 18.Moreover, the appellant admitted that she was extravagant (揮霍過度). The learned judge rejected her evidence that because it was easy to borrow money that had paralyzed her sense of crisis (危機意識), and that she thought she was still able to afford the loan. 19.On such evidence, we are satisfied that the learned judge was entitled to regard the recent loan as a misconduct on her part. 20.Of course as the authorities show and the learned judge recognized a finding of misconduct would not necessarily result in the court exercising its discretion to suspend the running of the bankruptcy period. Misrepresentation 21.That is dealt with in paras. 37 to 46 of the judgment. Ms Ng’s complaint is that no direct evidence from any representative of the financial institutions was produced, and that the trustee had made no attempt to investigate the matter with the appellant. It may be that in some cases the absence of evidence from the financial institutions involved will lead to a finding that the alleged misconduct has not been made out. Other times the court may nevertheless be in a position to find misconduct. The matter must be looked at with common sense. Here we are concerned with 2 application for loans, on 15 September 2000, and 21 November 2001 respectively. By the time of the trustee’s summons (6 September 2006), one wonders whether it was realistic to expect any of the persons who was involved with the application forms to have any reliable recollection. It is a counsel of perfection to suggest that the trustee should have made the enquiry within a reasonable time of the bankruptcy order. One should have regard to the size of estate in order to determine what can reasonably be expected of a trustee. It is true and we emphasize that in applying for an order under section 30A(3), the trustee is performing a public duty. He owes the duty to the court to act fairly and competently. Just as a section 30A(3) application “necessarily entail costs to be incurred”, so would investigation by the trustee. The amount of investigation which one can reasonably expect the trustee to do will vary according to the resources reasonably available to the trustee. 22.The approach adopted by Kwan J in this case cannot be faulted. She examined the evidence carefully before deciding whether on such evidence she could make the necessary finding. In this case, for the reasons stated by her in the judgment, we have no doubt that she was right to be satisfied that the appellantwas guilty of misrepresentation. 23.The learned judge pointed out that in the appellant’s application for a personal loan of $200,000 dated 15 September 2000, repayable by 36 installments, the appellant signed the application form which included the declaration that the information supplied by her in the form “to be true and correct”. On that form in relation to the enquiry whether she had obtained any loans from other finance company or bank the “no” box had been ticked. On expenditure, the form disclosed 3 items of expenditure:
24.For her income:
25.The learned judge said:
26.The learned judge has rejected the bankrupt’s explanation. The learned judge explained:
27.With respect, the reasons are so cogent and convincing that it will be superfluous for any additional comment from us. Pre-bankruptcy Macau visits and gambling 28.This was dealt with by the learned judge in paras. 47 – 60 of the judgment. 29.The trustee relied on the records of her visits to Macau. Ms Ng submitted that Kwan J should not have accepted such evidence as sufficient to constitute unsatisfactory conduct, and that frequent visits to Macau by themselves are legitimate activities unless extravagant spending or gambling was proved, and there was no evidence of either. 30.The learned judge had had the benefit of the oral evidence of the bankrupt and Mr Leung, her brother-in-law. Their evidence was to the effect that the purpose of her Macau visit was to help entertain Mr Leung’s PRC female business associates and had nothing to do with gambling. 31.Both the bankrupt and Mr Leung’s evidence had been rejected by the learned judge who had had the opportunity of hearing their evidence. So the learned judge’s finding that the explanation was not true or not entirely true is a primary finding of fact. We cannot interfere with such findings of fact unless we are satisfied on the facts that that learned judge’s conclusion on the facts are plainly wrong. Ting Kwok Keung v Tam Dick Yuen and Ors [2002] 5 HKCFAR 336. There is no basis upon which we can possibly come to that conclusion. 32.1 year before her bankruptcy, the appellanthad left Hong Kong 81 times of which 70 times were to Macau. Out of her 70 visits to Macau, she stayed for less than 24 hours in 34. Moreover, in these 34 visits, she left Hong Kong in the afternoon near the evening, returning the next day before 9 am. That after she had petitioned bankruptcy in July 2002, but before the making of the bankruptcy order in October, she went to Macau twice, once leaving Hong Kong for 24 hours, another occasion for 30 hours. 33.Her credit card and bank material showed that between August 2001 and June 2002, 45 transactions totaling HK$273,837.40 took place in Macau, of which 1 was to pay a restaurant; to jewelry companies; and other 42 times were cash payments, 1 of which was in a casino. 34.The learned judge pointed out that the bankrupt denied that she went to Macau for gambling. That not only she was not interested in gambling, she was afraid of gambling and did not wish to associate with gamblers. The learned judge said:
35.Ms Ng submitted that since gambling by a bankrupt is a criminal offence under the Bankruptcy Ordinance, it has to be proved beyond reasonable doubt. This applies with particular force to her post bankruptcy conduct. But, we are not concerned with criminal prosecution, the appropriate standard of proof is proof on a balance of probabilities. Solicitor (24/07) v Law Society of Hong Kong [2008] 2 HKLRD 576. As Bokhary PJ explained:
36.Although Kwan J had not excluded the possibility that:
Of course, the rejection of their explanation would not per se prove that she went to Macau to gamble. However in the absence of some other credible explanation for her frequent visits to Macau, we are of the view that the learned judge was fully entitled to come to the conclusion that the appellant went there “有很多時是為了賭博”. 37.Ms Ng submitted that although there had been many visits, but the intervals between the visits show that she was not a compulsive gamble. But the learned judge had not found the appellant to be a compulsive gambler. Post-bankruptcy Macau trips 38.The learned judge dealt with them in paras. 61 – 68. Between October 2002 and February 2006, she had been to Macau 30 times. She left Hong Kong in total 44 times. During her trips to Macau, 12 of them was for less than 24 hours, in average of 16 hours. 3 of them she left near the evening, returning early the next morning. 39.We will not deal with these trips separately. We are in full agreement with the learned judge. Non-notification of departure from Hong Kong 40.Section 30A(10)(b)(i) has been declared by the Court of Final Appeal to be unconstitutional and of no legal effect in Official Receiver & Trustee in Bankruptcy of Chan Wing Hing & Anor v Chan Wing Hing & Anor & Secretary for Justice (Intervener) [2006] 3 HKLRD 687. The bankrupt relied on that judgment before Kwan J. Section 30A(10)(b) provides:
41.But as Kwan J has correctly pointed out, the Court of Final Appeal has struck down section 30A(10)(b)(i) because it unnecessarily restricted the freedom of movement which is guaranteed by the Basic Law, but that as the Chief Justice pointed out:
42.We see no basis to dispute the learned judge’s conclusion. Essence of discretion 43.The learned judge then went on to consider whether the bankruptcy period should be extended. This is what she said:
44.Ms Ng submitted that Kwan J was wrong to have said the appellant:
Ms Ng referred to the case of Fred Lee v Lau Chi Kam [2008] 3 HKLRD 627 where Cheung JA said at page 631:
45.In para. 72 of her judgment, Kwan J referred to Lau Chi Kam. So Kwan J was fully aware of Lau Chi Kam. The rehabilitation of the bankrupt is of course an important consideration. The public interest that the return of the bankrupt to the commercial world would not carry with it an unacceptable risk is also an important consideration, as well as the preservation of commercial morality. Findings of misconduct under section 30A(4) may properly result in adverse consequence to the bankrupt. In a suitcase case misconduct should not go completely “unpunished”. The appellant's summons 46.Ms Ng concentrated on the appellant’s application under section 84 to enquire into the conduct of the trustee is concerned. As Ms Ng recognized the court has wide discretionary powers. She also referred to us to the fact that Lam J had raised this possibility in Re Liu Man Hoo (a bankrupt) in which Fred Lee was also the trustee. She identified the bankrupt’s grievances as follows:
47.She also submitted that the details disclosed in the present case raise public concern. The learned judge dealt with the bankrupt’s complaint in paras. 76 – 95 of her judgment. Of these complaints, it would appear that the only one of consequence left is that she had not ordered any enquiry under section 84. But as Ms Ng had recognized it is within the wide discretion of Kwan J, we can see no basis upon which we can properly interfere with the learned judge’s exercise of the discretion. 48.For the above reasons, we would dismiss the appeal and make an order nisi that the bankrupt pays the costs of the appeal to the trustee. Such cost to be taxed if not agreed.
Ms. Margaret Ng, instructed by Messrs Ho, Tse, Wai & Partners, for the Bankrupt / Appellant. Mr. Stanley M. W. Ng, instructed by Messrs Lee & Chow, for the Trustee / Respondent. |
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