Re Kong King Ong Alexander
Read the full judgment text of HCB 10771/2008 on BabelCite. This HCB judgment was delivered on 27 August 2009.
1. This was the hearing of a bankruptcy petition presented on 10 December 2008 by AMTD Risk Management Limited (“the Petitioner”) against Mr Kong King Ong, Alexander (“the Debtor”). The petition was based on a judgment debt of HK$790,622.40 obtained in DCCJ 1996/2008. A statutory demand claiming the judgment debt and accrued interest was personally served on the Debtor on 20 October 2008, but went unpaid. By the date of the hearing the total amount of the judgment debt and accrued interest wa
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HCB 10771/2008 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE IN BANKRUPTCY PROCEEDINGS NO. 10771 OF 2008 ----------------------
---------------------- Before: Hon Barma J in Court Date of Hearing: 23 July 2009 Date of Judgment: 27 August 2009 ---------------------- J U D G M E N T ---------------------- 1.This was the hearing of a bankruptcy petition presented on 10 December 2008 by AMTD Risk Management Limited (“the Petitioner”) against Mr Kong King Ong, Alexander (“the Debtor”). The petition was based on a judgment debt of HK$790,622.40 obtained in DCCJ 1996/2008. A statutory demand claiming the judgment debt and accrued interest was personally served on the Debtor on 20 October 2008, but went unpaid. By the date of the hearing the total amount of the judgment debt and accrued interest was a little below HK$900,000. 2.The Debtor did not dispute his liability in respect of the debt, although, in his first affirmation filed in these proceedings on 30 January 2009, he made a number of complaints about what he considered to be the Petitioner’s unreasonable attitude towards the debt, which led to judgment being obtained against him, and towards the steps taken in relation to recovery of the judgment. In the Debtors’ view, the Petitioner had been unjustifiably unwilling to consider any form of compromise, including repayment proposals, which he said he had made, to enable him to repay the debt over a period of time. 3.The petition first came before this court on 9 February 2009, when the Debtor sought more time to pay the debt. This was opposed by the Petitioner, who said that the Debtor had previously made offers to repay involving the payment of a reasonably substantial lump sum followed by monthly payments, but that these had come to nothing. On that occasion, I directed that he should within seven days file evidence setting out details of his repayment proposal, which should contain evidence of his ability to honour the proposal he put forward. 4.When the petition next came before Reyes J on 9 March 2009, the Debtor had not put forward any evidence as directed. Instead, it seems that he had offered to make monthly payments in correspondence with the Petitioner. He told Reyes J that he could pay HK$100,000 immediately, HK$300,000 two months later, and the remaining balance over 24 months. Reyes J directed him to provide a concrete repayment proposal within 14 days. Again, the Debtor failed to comply with this direction. 5.Instead, when the matter came before me again on 30 March 2009, the Debtor said that he had made a further revised proposal to the Petitioner. 6.At these hearings, the Debtor mentioned plans to sell the shareholding in a company with which he was involved to an investor – however, he said that he was unable to provide more concrete information or documentation concerning this unless the Petitioner provided an undertaking to keep such matters confidential, because this was required by the potential investor. 7.On 30 March 2009, I adjourned the petition for a substantive hearing, at which the issue for determination would be whether the Petitioner had unreasonably refused the Debtor’s offers to settle the debt, so as to justify the dismissal of the petition under section 6D(3) of the Bankruptcy Ordinance (Cap. 6), which provides that the court may dismiss the petition if it is satisfied that the debtor has made an offer to secure or compound for the petition debt which has been unreasonably refused. 8.This was the substantive hearing of the Petition. At the hearing, the Debtor made a further revised proposal for repayment, offering an immediate payment of HK$200,000 (in respect of which he had a bankers’ draft available) with the balance to be repaid by monthly instalments over a period of 24 months. As the balance would have been about HK$700,000, this would have required the Debtor to make monthly payments of about HK$28,000 per month. 9.The Debtor said, however, that arrangements had been made to sell a company called Akasas HK Limited (“Akasas”), which was wholly owned by a company of which his wife was the sole shareholder, to a BVI company called SBI E-2 Capital Limited, which the Debtor said was owned by a wealthy Malaysian investor, for HK$1,710,000. The Debtor produced a sale and purchase agreement dated 14 July 2009 in relation to this transaction, and said that a deposit of HK$513,000 had already been received (this apparently being the source of the HK$200,000 which he had available at the hearing), with the balance of HK$1,197,000 being payable by about April 2010. He said that the deposit was non-refundable, and that once the balance of the purchase price was received, so much of it as was needed would be used to pay off the remaining balance owing to the Petitioner at that stage, so that the entire debt would be paid off within about 9 months. He said that his wife and Sino Dynamic Solutions Limited (“Sino Dynamic”), the company through which she beneficially owned Akasas, would agree that the balance of the sale proceeds should be used for this purpose, and produced a letter signed by his wife on Sino Dynamic’s letterhead to this effect. 10.At the hearing the Debtor also produced a copy of his employment contract as Chief Executive Officer of Asiatravelmart Sdn Bhd, a Malaysian company, which was dated November 2008, and stated his salary to be 30,000 Malaysian Ringgit (about HK$66,000) per month, with incentive payments depending on profits achieved, and a discretionary bonus. 11.The Petitioner objected to the late production of this evidence, pointing out that the Debtor had been given more than one opportunity to file evidence as to his repayment proposal and means of honouring it, but had chosen not to do so. Having heard submissions from Mr Kwong, who appeared from the Petitioner, I indicated that I would permit the Debtor to refer to the new materials at the hearing, as the key document (the sale and purchase agreement) had only recently been entered into, and I considered that the Petitioner would not be unduly prejudiced by the new material being allowed to be adduced. I directed the Debtor to file an affirmation exhibiting the new material within three days. 12.The Debtor in fact filed two further affirmations on 27 and 30 July 2009 respectively. The first of these summarised the repayment proposal, referred to his employment, and exhibited the documents produced at the hearing. The second went into further detail as to the reasons why the Debtor considered that the proposal should be accepted, as to the hardship he would face if made bankrupt, and exhibited the documents, together with a number of further documents not previously produced. The Petitioner objected to the production of the further documents. As the hearing has already concluded, and the Petitioner has therefore not had an opportunity to comment on these additional documents, I have not had regard to them for the purpose of this judgment (although I should add that there is, in my view, nothing in them that would have altered the outcome of these proceedings). 13.In summary, therefore, the Debtor’s proposal involves an immediate payment of HK$200,000, monthly payments of HK$28,000 per month, and the prospect of full repayment within about nine months, if the sale of Akasas is completed and payment received. 14.Mr Kwong informed me that, having taken instructions, his client was not prepared to accept this offer. He submitted that his client’s rejection of the offer was not unreasonable. 15.Mr Kwong stressed that throughout, the Petitioner had considered the various proposals that had been made by the Debtor. These consisted of two proposals made before the presentation of the petition, and three proposals made thereafter. The proposal put forward at this hearing was therefore the sixth repayment proposal put forward by the Debtor. Mr Kwong said that an important consideration which had led to the Petitioner’s rejection of the proposals was that it was not satisfied as to the Debtor’s ability to honour them. In particular, the Debtor had failed (despite promises to do so) to disclose his employment contract until it was produced at this hearing, and had (until this hearing) provided no information as to the share sale transaction which he had previously claimed was under negotiation. 16.In respect of the documents produced, Mr Kwong contended that they should be viewed with some reserve, given the lateness of their disclosure. He also pointed out that the Debtor had provided no real information as to his other liabilities (although he had at various times alluded to their existence), or as to his expenses, so as to enable any assessment to be made of his ability to meet the monthly payments proposed out of his income. Taking these matters into account (and even accepting the documents at their face value) Mr Kwong expressed doubt as to the Debtor’s ability to honour the proposal that had been made at this hearing. 17.Mr Kwong also submitted that a repayment period of two years was simply too long to expect the Petitioner to have to wait, drawing my attention to the decision of Deputy Judge S Kwan (as she then was) in Re Lau Chi Kwong, Sunny (unreported, HCB 587/2000, Dep. Judge S. Kwan, 3 October 2000), in which it was accepted that a repayment period of two years was too long, in respect of a debt of a little over HK$500,000 (where an initial payment of HK$50,000 was offered, followed by monthly instalments of HK$28,000). 18.Finally, Mr Kwong submitted that other aspects of the Debtor’s conduct also gave rise to justifiable concerns on the Petitioner’s part about his sincerity– reference was made in particular to:-
19.In considering whether or not the Petitioner’s refusal of the offer made by the Debtor is unreasonable, it is necessary to bear in mind that:-
20.Although it would appear that the Debtor and his wife have made efforts to raise funds to enable the Debtor to pay off the Petitioner, I do not think that it can be said that the Petitioner’s refusal of the offers that have been made, and in particular the latest offer, can be said to be unreasonable. Still less do I think that it can be said that the Petitioner’s position is one which no reasonable creditor in its position could have taken. 21.It seems to me that the terms proposed are such that it would not be unreasonable for the Petitioner to reject them. The offer is to pay a sum of HK$200,000 immediately, followed by monthly payments of HK$28,000 odd for a period of 24 months, with the prospect of a possible earlier settlement in about nine months’ time. It seems to me that in general, it will not be unreasonable for a creditor to refuse to accept terms of repayment that involve a substantial wait for full settlement. In this regard, a period of two years will, I think, generally be longer than a creditor should reasonably be expected to wait. Although I would not rule out the possibility that, where, for example, there are assets to secure the repayment, or there is evidence to show that the repayment of the petitioning debt in full can be regarded as a matter of near certainty, a creditor should reasonably accept an offer involving a period of delay before full payment, I do not think that this is such a case. 22.In relation to this, the Debtor contends that in the light of the sale of Akasas, the period of delay will be much reduced, to about nine months. However, an examination of the sale and purchase agreement indicates that the receipt of the balance of the sale consideration in the amount of HK$1,197,000 is by no means a certainty. 23.In the section of the agreement headed “Terms of Payment and Completion” (on the fifth page of the agreement), clause 2 indicates that the balance is to be settled by dividends to be declared to the shareholders of Akasas “per mutually agreed period”, which should be paid within nine months. Clause 3 states that if the balance of the purchase price has not been paid within the nine months (presumably out of the dividends referred to), the purchaser has an option whether or not to pay any outstanding balance that remains due, and if it chooses not to do so, Sino Dynamic may repurchase the Akasas shares by repaying whatever payments have been received. Clause 4 sets a profit target, which, if not met, will relieve the purchaser of the obligation to make any further payments. 24.There is no evidence as to the profitability of Akasas, or its ability to pay the intended dividends. There is therefore no certainty that the purchaser will be obliged to make the final payment, or that its intended source of payment of the balance of the purchase price will actually produce an amount sufficient to enable the balance to be paid. In either case, there may not be enough funds available to enable the Debtor to make full settlement of the amount still owing by him by that stage, and conceivably no funds available at all, if Sino Dynamic chooses to repay what it has received from the purchaser and take back the Akasas shares. 25.Finally, it must be borne in mind that it is not the Debtor, but Sino Dynamic, that will receive any payments made under the sale and purchase agreement in respect of the Akasas shares. Although it is indicated that Sino Dynamic (through the Debtor’s wife) is willing to undertake to pay the Petitioner out of the balance of the sale proceeds, there is no certainty that it would do so, and I do not think that the Petitioner could reasonably be required to take on the risk of non-payment by Sino Dynamic, and the possibility of having to pursue that company for payment. 26.For these reasons, I think that it is entirely reasonable for the Petitioner to have reservations about being paid in full in less than two years, which should be regarded as the relevant repayment period in relation to this proposal. 27.Further, it seems to me that there must be real doubt as to the Debtor’s ability to meet the monthly payments proposed, whether for nine months or two years. Even accepting his employment contract at face value, there are a number of other uncertainties about his financial position which have not been adequately addressed. The Debtor’s monthly salary is equivalent to about HK$66,000. Although he has said in his latest affirmation that he can comfortably meet the proposed payments of HK$28,000 per month out of his salary, this was not something that was stated by him at the hearing, when he indicated that it was not possible for him to make a down payment out of his salary. Given that the Debtor has not provided any information as to the level of his living and other expenses, or as to the extent of his other indebtedness (the existence of which he has acknowledged at various hearings), it is impossible to be satisfied as to whether or not he will be able to meet the monthly payments proposed from the resources available to him. In this regard, I do not think that any weight can be placed on the incentive payments or bonus referred to in his employment contract, as there is no evidence as to the likelihood of these being received, or as to their likely amount. 28.There can therefore be no certainty that the monthly payments that have been proposed will be paid. This, too, makes it impossible to say that the Petitioner is being unreasonable in refusing to accept the Debtor’s offer. 29.Further, it seems to me that the frequent revisions to the repayment proposals that have been made, the failure to make any payment at all in the period since the Debtor defaulted on the loan to him, and his failure to provide meaningful information on a timely basis are all factors that the Petitioner is entitled to take into account, and which render its decision to reject the proposal for settlement of the petitioning debt one which cannot be said to be unreasonable. 30.That said, I do not place much weight on the complaints made in relation to the Debtor’s transfer of a property to Ms Chu, who is his wife, or in respect of his failure to repay the debt in full on realisation of the properties purchased with the loan on which the petition is based. The Debtor offered an explanation in relation to the transfer of the property, indicating that the funds for it were provided by his wife, who had allowed him to be registered as the majority owner to assist him in qualifying to obtain resident status in Hong Kong, and so far as the failure to repay is concerned, it is not suggested that this was a breach of the Debtor’s obligations, and it seems to me that had he kept up with his payments, there would have been no reason for complaint by the Petitioner. 31.Having concluded that the Petitioner’s refusal of the offers made by the Debtor to settle the debt is not unreasonable, it follows that the requirements of section 6D(3) of the Bankruptcy Ordinance are not satisfied. I therefore make the usual bankruptcy order, with costs, against the Debtor.
Mr Alan Kwong, instructed by Messrs Hui & Lam, for the Petitioner The Debtor, Kong King Ong, Alexander, in person (present) Official Receiver, attendance excused |
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