FRED LEE and CHOW WAI LAN, CHRISTINE, trustee of the property of LAI WAI HUNG, a bankrupt v. LAI WAI HUNG HCB 14977/2002

S’s words:-

Subsequent to the case of FRED LEE, trustee of the property of LIU MAN HOO, a bankrupt v. LIU MAN HOO HCB 11719/2002, the same Trustee lost another case. However, the most important impact is that, it was ordered by the Court that the Trustee has to bear the costs of the application personally. Will that similar costs order come again in the future?

It is the right time for all trustee to review at what circumstances an application should/should not be made.

Certainly, I have got the thought of how to make better evidence on behalf of the trustees to support such kind of applications.

--- quote from judgment ---

Coram : Before Master Lung in Court

Date of Decision : 12 September 2007

According to the affirmation of the trustee, no creditor has complained to the trustee to initiate this application. This is purely the decision of the trustee himself.

The trustee originally relied on two grounds in support of his application under section 30A(4)(d) of the Bankruptcy Ordinance for his application, namely that the bankrupt had made excessive borrowings, knowing that he might not be able to repay and that he had made misrepresentations to JCG and SHK banks for loans. The trustee now abandons his ground of excessive borrowing in light of the judgment of Kwan J. in Lee Yuk Man’s case [2007] 1 HKC164. He only relies on the remaining ground of misrepresentation alone. The trustee has no other complaints against the bankrupt.

The Trustee has put forth no evidence to rebut the bankrupt’s evidence. I therefore accept the bankrupt’s evidence. I specifically ask Mr. Gopaoco how this court should draw the necessary inference under the evidence before me that the bankrupt had the intention of make misrepresentations to the banks at the material time. Mr. Gopaoco submits he was unable to invite this court to draw such inference.

I take into consideration of the judgment of Kwan J. in Lee Yuk Man’s case, in which the judge found that the approach and mechanism adopted by the trustee were flawed in that the trustee had acted too readily in deciding to take out this application without any investigations into the matter before taking out the application [183H]. In this case, the period of bankruptcy of the bankrupt has been prolonged unnecessary. Since the trustee has failed to discharge his quasi-judicial obligation properly, the trustee is not entitled to recover his costs of and occasioned by this application out of the bankrupt’s estate, following the approach of the learned Judge in Lee Yuk Man’s case [191D-F]. I further order that the bankrupt shall have costs of this application, including all costs reserved in the meantime, such costs are to be taxed, if not agreed. The question of whether such costs should be paid by the Trustee personally or out of the estate has been discussed before me by those the representing the respective parties. I consider that the costs of this application should not be borne by the creditors, as according to the Trustee, they did not initiate this application. I find that the Trustee has failed to discharge his duties of making reasonable investigations into the facts of this case before taking out this application. As such, I consider that the Trustee has to bear the costs of this application personally.