Re Cheung Hok Choi

HCB 3629/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3629 OF 2013

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REASONS FOR DECISION

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1.These are my reasons for dismissing the debtor’s petition for bankruptcy herein on 22 July 2013.

2.By a petition dated 23 May 2013, Mr Cheung Hok Choi sought an order for his own bankruptcy.  The statement of affairs, filed with the petition as required by s 10(2) of the Bankruptcy Ordinance (Cap 6), listed two unsecured creditors, namely, a Mainland company called Xiangfan Yuchang Fine Chemical Co., Ltd., stated as a creditor for RMB 300,000, and one Ho Wai Yee, stated to be a creditor in respect of $75,000.  Madam Ho is in fact Mr Cheung’s former wife.

3.Madam Ho appeared at the hearing to oppose Mr Cheung’s petition.  There is no dispute that the husband and wife had been in litigation in the family court in respect of their divorce and the consequent financial provision (where the proceedings were numbered FCMC 7240/2011). After a contested hearing on ancillary relief that lasted several days, Deputy District Judge Yim gave judgment on 4 January 2013, inter alia requiring Mr Cheung to transfer his interest in the matrimonial home, of which he was (and still is) the sole registered owner, to Madam Ho, and to pay periodical payments to Madam Ho for the benefit of the younger two of their three sons in the sum of $7,500 per month per child, until each child reaches the age of 18 years or ceases full-time education whichever is the later.

4.Despite the order of the court, Mr Cheung failed to transfer and has still not taken steps to transfer the family home to Madam Ho.  Further, Mr Cheung has failed to pay any of the periodical payments for the children’s maintenance to Madam Ho.  The 5-month arrears of such monthly payments, totalling $75,000, constituted the debt in respect of which Madam Ho was stated to be a creditor in the statement of affairs prepared by Mr Cheung.

5.Mr Cheung said he was unable to pay his debts and therefore sought his own bankruptcy to “make a fresh start”.

6.I dismissed his petition at the hearing of it on 22 July 2013 for the following reasons.

7.First, I am not satisfied that there is a debt due to the Mainland company as alleged.  There is no evidence whatsoever, other than Mr Cheung’s own assertion, of the alleged debt of RMB 300,000.  Not a single piece of paper had been adduced in support of any loan agreement.  Nor was there any documentary evidence of the advance of any fund to Mr Cheung.  I am not prepared to act on the uncorroborated assertion of Mr Cheung alone.

8.Secondly, the only other unsecured creditor set out in the statement of affairs is Madam Ho, to whom it is said $75,000 is owed by way of maintenance payments.  However, it appears that arrears of periodical payment of maintenance do not constitute a provable debt: Re Cheuk On Ching [2004] 3 HKC 192.  On this basis, even if such a debt is capable of founding a petition, I doubt that the court should ordinarily make a bankruptcy order on the basis of it.  Nor is it at all clear that such a debt would be discharged after the bankruptcy comes to an end so as to enable Mr Cheung to have a “fresh start”.  The proper thing to do, if a person subject to an order for ancillary relief by way of periodical payment is unable to comply with it, is for him to return to the family court and apply for the order to be varied or altogether discharged: see section 11 of the Matrimonial Proceedings and Property Ordinance (Cap 192).  Further, the unsecured creditor in respect of the debt in question, namely Madam Ho, actually opposes the making of any bankruptcy order.  I do not therefore think that Mr Cheung’s petition should be granted on the ground that he is unable to pay Madam Ho the arrears of maintenance or the future maintenance payments.

9.Thirdly, Mr Cheung has stated in his statement of affairs to the effect that he has no assets whatever, other than $100 in a bank account.  He also said that he is now unemployed, having ceased to work for the Mainland company.  Yet he is stated to have monthly expenditure of $8,500.  I am far from satisfied that Mr Cheung has disclosed fully to this court his financial position including the source of funds for his living.  It is to be noted in this regard that the family court had concluded that Mr Cheung had concealed from Madam Ho and from that court an unascertainable amount (but over $1 million worth) of assets: see paragraphs 44, 47 and 53 of the judgment of Deputy District Judge Yim.

10.Fourthly, Madam Ho, not unjustifiably in my view, is concerned that the bankruptcy petition has been presented by Mr Cheung with the object of obstructing the transfer of the family home to her pursuant to the family court’s order.  Mr Lee, who appears for the Official Receiver, stated that the order might have had the effect of constituting the family home a trust property held in favour of Madam Ho, in which case it would not fall within the bankruptcy estate even if Mr Cheung was bankrupted (see s 43 of the Bankruptcy Ordinance), though he did not go so far as to suggest that this was a certain outcome.  In these circumstances, making a bankruptcy order would, it seems to me, inevitably have the effect of complicating the transfer of the family home.  Such complication would be unwarranted in the circumstances of this case.

The debtor appeared in person

The creditor appeared in person

Mr Wilson Lee for the Official Receiver