FRED LEE, trustee of the property of WONG CHI WAI SUNMY, a bankrupt v. WONG CHI WAI SUNMY HCB12941/2002

S’s words:-
Will the Court give more and more judgment in favour of the bankrupts in relation to the application for suspension of automatic discharge on the part of the Trustees, in particular, the Trustee who regarded by the Court as having routinely done the same.

Lam J’s judgment in Liu Man Hoo HCB 11719 of 2002 in no doubt will be the guidelines in future of which the Master in Wong Chi Wai Sunmy’s case also adopts the same.

The pre-bankruptcy conducts of the Bankrupt were doubtful. But when the total contribution to the Official Receiver in thie case was considered, “which is more than half of proven debts”, “the excessive borrowing conduct may be brushed aside.” It thus explains why no creditor would take initiative to object the automatic discharge.

Finally, a pure academic issue, that is, the decision of Master Au Yeung (now Registrar Au Yeung) was again adopted of which the suspension was lifted with retorspective effect as per the decision of Official Receiver v Chan Kwok Keung, HCB 20772 of 2002.

--- quote from judgment ---

Date of Handing Down Reasons for Decision : 28 September 2007

Envisaging that the Application would not be disposed of immediately should Mr. Wong object to the Application, the Trustee, who seems to have routinely done so, also on the same date of the Application issued a summons for an interim order to prevent Mr. Wong from being automatically discharged from bankruptcy. This resulted in the granting of an interim order by a Master on 1 September 2006 which order was further extended on 6 March 2007. The interim orders had been de facto preventing Mr. Wong from the automatic discharge until the Application was determined on 24 September 2007.

Before I handed down the judgment, Lam J on 14 September 2007 handed down a decision of Fred Lee, trustee of the property of Liu Man Hoo, a bankrupt v Liu Man Hoo, HCB 11719 of 2002, 14 September 2007 (unreported), which decision provides useful guidance (the relevant part of which will be discussed below) on how a trustee in bankruptcy should approach an objection to automatic discharge. That case involves not just the same trustee but also contains similar unsatisfactory pre-bankruptcy conducts as the present case. I consider that I should also have regard to the principles discussed in Re Liu Man Hoo.

In not less than 3 months before the date of Mr. Wong’s automatic discharge from bankruptcy, the Trustee on 3 June 2006 sent the section 30A(5)(a) notices to the proving creditors and informed them that he intended to object to the discharge on the ground of pre-bankruptcy unsatisfactory conduct under section 30A(4)(d).

No objection was raised by any proving creditors to Mr. Wong’s automatic discharge. The Trustee, as had indicated in his notices to the proving creditors, issued the Application, relying on the pre-bankruptcy unsatisfactory conduct ground under section 30A(4)(d).

At the hearing, Miss Ng has largely relied on the recent decision of Deputy High Court Judge To in Fred Lee and Chow Wai Lan, Christine (trustee of the property of Tong Yuk Kin) v Tong Yuk Kin, HCB No. 22870 of 2002, 20 June 2007 (unreported), a decision based on pre-bankruptcy conducts of excessive borrowing as well as misrepresentation as a ground of objection to discharge by the same trustee. In this case, the learned Judge referred to an earlier decision by Kwan J in Fred Lee and Chow Wai Lan, Christine (trustee of the property of Leung Chi Yeung) v Leung Chin Yeung, HCB No. 8779 of 2002 (and two other cases), 9 January 2006 (unreported) and expounded in detail the meaning of unsatisfactory pre-bankruptcy conduct under A30A(4)(d) in the context of the legislative objectives of section 30A.

Miss Ng also alluded to an earlier decision of Re Hui Hing Kwok [1993] 3 HKC 683, a decision expounding on the legislative objective behind section 30A, which lies in rehabilitation in allowing a bankrupt to resume a normal life in society.

To conclude, given the lack of detailed and timely investigations by the Trustee and the unchallenged evidence of Mr. Wong, I am unable to accept that the Trustee has satisfied me that the excessive borrowing and loss of money in speculation being unsatisfactory conduct. I however find that the conducts of gambling and misrepresentation have been - when viewed objectively - unsatisfactory.

Having concluded that some aspects Mr. Wong’s conducts have not been satisfactory, I should carefully consider whether I ought to exercise my discretion to suspend Mr. Wong from discharge of bankruptcy, and should I so find, to decide the appropriate period of suspension.

In considering how my discretion should be exercised, I shall bear in mind the principles elucidated in the cases referred to above, in particularly the very powerful observations of Lam J in Re Liu Man Hoo (op. cit.) at paragraph 66 that the court should take an overall view of the matter in the exercise of discretion and that suspension of automatic discharge should only be applied to conducts of exceptional gravity (See paras. 65 to 68 in Re Liu Man Hoo).

Mr. Wong’s said pre-bankruptcy unsatisfactory conducts should be balanced against the post-bankruptcy conducts as well as other factors such as the manner the Trustee conducts the investigations and all the circumstances of the case. The unsatisfactory conducts that I have found proved, in my view, are not grave. Further, no objections were raised by any proving creditors against Mr. Wong’s discharge from bankruptcy. Mr. Wong has cooperated with the Trustee in the administration of the estate. Further, from the amounts of contributions he had made to the bankruptcy estate, I am satisfied that Mr. Wong had done his best to contribute to the bankrupt estate without abusing the bankruptcy regime as a debt-clearing house. Last but not the least, by virtue of the interim orders, Mr. Wong prior to the disposal of this case, had effectively been prevented from discharge for about 12 months, which must have caused him much distress.

After having considered all the evidence and balanced the interests of Mr. Wong, that of the commercial world as well as the moral values behind section 30A, I consider that it is not fair to exercise my discretion to suspend any period of automatic discharge.

Upon dismissal of the Application, I also lifted the suspension imposed by the two interim orders granted by Masters and ordered that it should take retrospective effect, adopting the reasoning (with which I agree) in Official Receiver v Chan Kwok Keung, HCB 20772 of 2002, Master Au Yeung (as she then was) 5 July 2007 (unreported).