FRED LEE and CHOW WAI LAN, CHRISTINE v. WONG HING WAH MICHAEL HCB 26018/2002

S’s words:-

A case that the trustees won.

However, please read CACV 30, 31 & 32 / 2007 as well.

In my own view, with more experience in making objections, I believe we will have more cases that are ruled against the bankrupts in the future.

The various case authorities, whether against or in favour of the trustees, are good examples/guidelines for the trustees to make objections in the future. Thus, planning can be made before objections are submitted.

--- quote from judgment ---

Date of Judgment : 12 October 2007

The grounds on which an order suspending an automatic discharge may be made are specified in section 30A(4) of the Ordinance.

The grounds on which the automatic discharge of Mr Wong from his bankruptcy are objected to were set out in an affirmation made by Mr Lee made in support of the application. Two matters were relied upon. Both were said to demonstrate unsatisfactory conduct on the part of Mr Wong in respect of the period before his bankruptcy.

The approach to the exercise of the discretion under section 30A(3)

As has been observed in a number of decisions, the introduction of the present section 30A of the Ordinance marked a significant change in the approach of the law towards bankrupts. Previously, there was no provision for automatic discharge. A bankrupt had to apply for his discharge, and it was generally difficult for him to obtain it. The effect of the change has been to place the emphasis on rehabilitation of the bankrupt so as to enable him to resume a normal life (see e.g. Re Hui Hing Kwok [1999] 3 HKC 683, per Le Pichon J at 687B).

So far as the power under section 30A(3) to suspend the automatic discharge of a bankrupt is concerned, it is, I think, clear that one of its main purposes is to provide the bankrupt with an incentive to cooperate with his trustee, and to comply with his obligations under the Ordinance. However, this cannot be its only purpose. If it were, there would be no point in including among the grounds for objection any reference to the pre-bankruptcy behaviour of the bankrupt. Other purposes that are served by the power to suspend automatic discharge would appear to me to include the protection of the public, where there is reason to think that the reintroduction of the bankrupt into ordinary commercial life might pose risks or dangers against which lenders and others who might have dealings with him should be protected, and, in appropriate cases, as a mark of disapproval of the way in which the bankrupt has conducted his affairs whether before or after his bankruptcy.

The court has recently considered the approach which should be adopted to objections to discharge in cases involving allegedly unsatisfactory pre-bankruptcy conduct in Lee Fred v Leung Chin Yeung [2007] 1 HKC 164 (Kwan J), Re Tong Yuk Kin (unreported, HCB 22870/2002, Deputy Judge A To, 20 June 2007) and Re Liu Man Hoo (unreported, HCB 11719/2002, Lam J, 14 September 2007). I should point out that the last of these decisions was given after the hearing in this matter concluded, and was not the subject of submissions by either party. However, the approach adopted in it is, I think, broadly in line with that taken in the other two decisions.

These authorities make it clear that there are two stages involved when the court is considering the exercise of its powers under section 30A(3). It is first necessary to determine whether one or more of the grounds mentioned in section 30A(4) has been established. If this is done, the court then moves on to consider whether or not, in the exercise of its discretion, a suspension of the automatic discharge that would otherwise have been available to the bankrupt should be ordered. It will not be in every case where a ground for suspension is made out that a suspension will be called for or imposed. In determining whether or not a suspension should be ordered, the court will have regard to all the circumstances of the case, including the nature of the acts complained of and the post-bankruptcy conduct of the bankrupt.

That said, bearing in mind the policy of rehabilitation, I would accept that save in very serious cases, a suspension of automatic discharge in respect of unsatisfactory pre-bankruptcy conduct is likely to be for a shorter period than might be ordered in a case in which a bankrupt had been guilty of other, post-bankruptcy ground for suspension, where a longer period of suspension may well be called for so as to ensure that the bankrupt properly complies with his obligations.

Taking account of the fact that there are no complaints as to Mr Wong’s post-bankruptcy conduct, and that he appears to have provided information to the Trustees as and when required, I have come to the view that a suspension of Mr Wong’s automatic discharge for a period of four months would be sufficient in this case. Accordingly, I shall order that the relevant period under section 30A(1) of the Ordinance shall cease to run, in the case of Mr Wong, for a period of four months. The effect will be that he is to be treated as having been discharged from his bankruptcy on 24 June 2007.