RE CHEUNG KING TONG SIMON

bjbj HCB 10680/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO. 10680 OF 2002 ____________ Re: LAW PAK WAI, a bankrupt Ex Parte: FRED LEE trustee of the property of LAW PAK WAI ____________ HCB 10789/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO. 10789 OF 2002 ____________ Re: LAW CHUEN MAN, a bankrupt Ex Parte: FRED LEE and CHOW WAI LAN, CHRISTINE, trustee of the property of LAW CHUEN MAN ____________ HCB 14330/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO. 14330 OF 2002 ____________ Re: NG SUI LING SALLY, a bankrupt Ex Parte: FRED LEE and CHOW WAI LAN, CHRISTINE, trustee of the property of NG SUI LING SALLY ____________ HCB 17538/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO. 17538 OF 2002 ____________ Re: LAW CHAU KUK, a bankrupt Ex Parte: FRED LEE and CHOW WAI LAN, CHRISTINE, trustee of the property of LAW CHAU KUK ____________ HCB 21720/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO. 21720 OF 2002 ____________ Re: WU WING KWONG, a bankrupt Ex Parte: FRED LEE and CHOW WAI LAN, CHRISTINE, trustee of the property of WU WING KWONG ____________ HCB 21721/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO. 21721 OF 2002 ____________ Re: HO SHUK YEE, a bankrupt Ex Parte: FRED LEE and CHOW WAI LAN, CHRISTINE, trustee of the property of HO SHUK YEE ____________ HCB 22498/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO. 22498 OF 2002 ____________ Re: CHU YIN WAH, a bankrupt Ex Parte: FRED LEE and CHOW WAI LAN, CHRISTINE, trustee of the property of CHU YIN WAH ____________ HCB 851/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO. 851 OF 2003 ____________ Re: CHEUNG KING TONG SIMON, a bankrupt Ex Parte: FRED LEE and CHOW WAI LAN, CHRISTINE, trustee of the property of CHEUNG KING TONG SIMON ____________ HCB 1098/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO. 1098 OF 2003 ____________ Re: HO KAI WONG, a bankrupt Ex Parte: FRED LEE and CHOW WAI LAN, CHRISTINE, trustee of the property of HO KAI WONG ____________ HCB 1902/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO. 1902 OF 2003 ____________ Re: LAU HON CHUNG, a bankrupt Ex Parte: FRED LEE and CHOW WAI LAN, CHRISTINE, trustee of the property of LAU HON CHUNG ____________ Before: Hon Barma J in Court Dates of Hearing: 7 & 9 November 2007 Date of Judgment: 7 March 2008 _______________ J U D G M E N T _______________ Introduction This was the hearing of applications by the trustees in bankruptcy in ten bankruptcies seeking, in each case, orders pursuant to section 30A of the Bankruptcy Ordinance (Cap. 6) ( the Ordinance ) that would have the effect of extending the length of the bankruptcies beyond the period after which the bankrupts would ordinarily be entitled to be automatically discharged from bankruptcy. The ten bankruptcies with which these applications are concerned are:- (1) HCB 10680/2002, in which a bankruptcy order was made against Law Pak Wai on 12 September 2002; (2) HCB 10789/2002, in which a bankruptcy order was made against Law Chuen Man also on 12 September 2002; (3) HCB 14330/2002, in which a bankruptcy order was made against Ng Sui Ling Ling, Sally on 22 October 2002; (4) HCB 17538/2002, in which a bankruptcy order was made against Law Chau Kuk on 2 December 2002; (5) HCB 21720/2002, in which a bankruptcy order was made against Wu Wing Kwong on 13 January 2003; (6) HCB 21721/2002, in which a bankruptcy order was made against Ho Shuk Yee (the wife of Wu Wing Kwong) also on 13 January 2003; (7) HCB 22498/2002, in which a bankruptcy order was made against Chu Yin Wah on 21 January 2003; (8) HCB 851/2003, in which a bankruptcy order was made against Cheung King Tong, Simon on 13 March 2003; (9) HCB 1098/2003, in which a bankruptcy order was made against Ho Kai Kwong on 10 March 2003; and (10) HCB 1902/2003, in which a bankruptcy order was made against Lau Hon Chung on 3 April 2003. In the first of these cases, Mr Fred Lee was appointed as the trustee in bankruptcy. In each of the other cases, the trustees in bankruptcy are Mr Fred Lee and Ms Christine Chow. For convenience I shall refer to them in this judgment as the Trustees in all of the cases. The statutory scheme Each of the bankrupts was a first-time bankrupt. Under the provisions of the Ordinance, they would ordinarily have automatically been discharged from bankruptcy on the expiry of four years from the date of the bankruptcy orders made against them respectively: see sections 30A(1) and (2) of the Ordinance. The right to an automatic discharge is not, however, absolute. The effect of sections 30A(3) and (4) of the Ordinance is that a trustee in bankruptcy, or a creditor of the bankrupt, may object to the automatic discharge of the bankrupt on one or more of the grounds identified in section 30A(4). When such an objection is raised, the court may, if it is satisfied of the validity of the objection, in effect suspend the automatic discharge for a period of up to four years (in the case of a first-time bankrupt), by making an order that the relevant period after which the bankrupt shall be automatically discharged shall cease to run for such length of time as the court shall think appropriate in the circumstances of the case. It should be noted at the outset that the court s power to suspend the operation of the automatic discharge provisions is a discretionary one. In order for the court s jurisdiction to be engaged, the objecting trustee or creditor must show that one or more of the grounds mentioned in section 30(A)(4) is established. Once the court s jurisdiction is engaged, however, it is a matter of discretion whether or not any suspension of automatic discharge should be imposed, and, if a suspension is ordered, for how long such suspension should be: see e.g., Lee Fred (Trustee in Bankruptcy of the Property of Leung Chin Yeung) v Leung Chin Yeung [2007] 1 HKC 164; Re Liu Man Hoo (unreported, HCB 11719/2002, Lam J, 14 September 2007; and Re Wong Hing Wah Michael (unreported, HCB 26018/2002, Barma J, 12 October 2007). The Trustees objections and the grounds for them In each of the cases before me, the Trustees have objected to the automatic discharge of the bankrupt. These applications were made, in each case, no more than two months before the bankrupt would have obtained his or her automatic discharge from bankruptcy. In every case, the Trustees obtained an order for the interim suspension of the automatic discharge of the bankrupts pending the resolution of their application. As a result, the bankrupts remained subject to the bankruptcy regime pending the hearing of the applications. In each case, the Trustees relied only upon section 30(A)(4)(d) of the Ordinance. This provides that it is a ground for objection to automatic discharge if it is established that the conduct of the bankrupt, in respect of the period before or the period after the commencement of the bankruptcy, has been unsatisfactory . In each case, the Trustees contend that two aspects of the bankrupts conduct, prior to the commencement of their bankruptcies, were unsatisfactory. There is no suggestion of any unsatisfactory conduct on the part of the bankrupts after their bankruptcy. On the contrary, the Trustees appear to accept that their post-bankruptcy conduct has been largely satisfactory. The bankrupts have also made contributions to their estate out of their earnings while bankrupt, although the amount of such contributions has varied from case to case, The first aspect of allegedly unsatisfactory conduct related to the bankrupts behaviour in obtaining loans from various lenders at a time when, according to the Trustees, the bankrupts must have been aware, in the light of their existing indebtedness, repayment obligations and other personal expenses, that they would not be able to repay them. The loans in respect of which this complaint was made were the last loans (in some cases the last two loans) obtained by the bankrupts before petitions were presented against them. In the cases under consideration, the last loan obtained by the bankrupts prior to their respective bankruptcies was obtained between 3 weeks and 8 months prior to the presentation of bankruptcy petitions against them. In seven cases, the last loan obtained was within 3 months of the presentation of the relevant petition, while in the remaining three cases (those of Ho Kai Kwong, Lau Hong Chung and Chu Yin Wah), the last loan was obtained 5 months, 6 months and 8 months before the presentation of the relevant petition. The second aspect of allegedly unsatisfactory conduct related to what were said to have been misrepresentations by the bankrupts to some of their creditors (generally, but not always, the same ones who had made the loans relied upon in support of the first ground) concerning their financial situation, by failing to disclose to the lenders the full extent of their existing loans and other financial obligations, such as those under credit cards held by them. In each case, there was, according to the Trustees, a failure to disclose a significant number of such other loans and financial obligations. A brief procedural history Before considering the merits of the applications, it is, I think, necessary to explain how it is that ten similar applications come to be heard at the same time. Since about mid 2002, at a time when there was an upsurge in the number of bankruptcy cases, the Trustees were appointed as trustees for a very large number of bankrupts. I was informed by the Trustees that they were (or one of them, usually Mr Lee, was) so appointed in no less than 1,946 cases. Of these 1,946 cases, in some 1,230 cases the bankruptcy order was made on or before 11 October 2003, so that the bankrupts in question would (barring a successful objection being made) have been automatically discharged from bankruptcy by 11 October 2007, about four weeks before this hearing took place. Objections to automatic discharge were lodged by the Trustees in 438 of those cases (representing some 35% of those 1,230 cases). Of those 438 cases, in slightly over half (220) the cases, the ground for objection was based exclusively on pre-bankruptcy conduct that was said to be unsatisfactory; in another 140 cases (some 32%), other grounds were relied on as well, while in the remaining 78 cases, there was no complaint in relation to pre-bankruptcy conduct, the objection being based exclusively on other grounds under section 30(A)(4). The Trustees explained that in one of the earlier cases in which they objected to the automatic discharge of a bankrupt, the bankrupt, through solicitors acting for him, suggested that instead of a suspension of his automatic discharge, he should be granted a discharge on the condition that he continued to make contributions to his estate for a period of time, pursuant to section 30A(9) of the Ordinance. The Trustees found this to be an acceptable suggestion, and an order of this nature was eventually obtained, apparently by consent. Thereafter, the Trustees appear to have adopted a practice of enquiring of bankrupts in respect of whom they had objected to automatic discharge whether or not the bankrupt might be willing to enter into a similar arrangement, which, apart from providing for continued contributions for a period of time, also provided for a payment to be made towards the Trustees costs of the objection application. In a number of cases, the bankrupts were agreeable to this course of action, and consent summonses were prepared for submission to the court. Shortly afterwards, in the latter part of 2006, the existence of this practice came to the notice of the High Court masters dealing with such applications, and three such cases were referred to Kwan J for her consideration and directions. In Leung Chin Yeung, Kwan J considered this practice, and held that it was inappropriate for the Trustees to consent to the withdrawal of their objection to automatic discharge without explaining why they considered that it was appropriate to do so. She also held that it was not appropriate for payment of part of the Trustees costs to be made a condition of discharge of the bankrupt. In the course of her judgment, she also made a number of other observations, to which I shall refer below, that have relevance in the context of these applications. Kwan J considered that the evidence before the court in that case was inadequate to enable it to come to a view as to whether the circumstances were such as to justify it in exercising its discretion to order a suspension of the automatic discharge to which the bankrupts would otherwise have been entitled, and remitted the applications for further consideration by a master, following the filing of further evidence. Moreover, as Kwan J was dissatisfied with the approach which the Trustees had adopted in raising objections to automatic discharge, she ordered that the Trustees should not be entitled to recover their costs of the applications before her from the estates of the bankrupts concerned. The Trustees appealed unsuccessfully against her decision (see CACV 30-32/2007, unreported, Court of Appeal, 11 October 2007). It seems that at the hearing of the appeal, the Trustees indicated that they did not intend to pursue their objections to automatic discharge in those three cases, and the Court of Appeal accordingly discharged the interim orders that had been made in those cases. Thereafter, a number of the outstanding applications made by the Trustees have been heard and resolved or otherwise disposed of. I was informed by the Trustees that of the 438 cases in which objections to automatic discharge had been raised, 148 had yet to be dealt with, including, I would suppose, the ten cases now under consideration. Of the applications which had by 11 October 2007 been resolved in one way or another, the outcome has been mixed, some (146 cases) resulting in a suspension of automatic discharge, others being dismissed or no suspension being granted as a matter of discretion (19 cases) and yet others being withdrawn (86 cases). There were also a number of cases in which a discharge was granted with conditions, these being presumably prior to the decision in Leung Chin Yeung. In a number of the remaining cases, the bankrupts were represented by the same solicitors, Messrs. Yip, Tse and Tang. As, in many such cases, the grounds of objection that were relied upon by the Trustees were broadly the same, it was thought sensible that a selection of such cases should be grouped together and referred to a judge for decision, so that, apart from disposing of these particular cases, the decision would provide guidance for other similar cases that remained outstanding. It was thus that the ten cases now before me came to be grouped together for hearing. Discharge of interim suspension orders At the hearing, Mr Chan, who appeared for the Trustees, indicated that having regard to the length of time that had elapsed since the applications were lodged, it would be appropriate for the interim suspension orders to be discharged at the outset, thereby bringing the bankruptcies of each of the bankrupts to an end. This approach, which in my view was a sensible one, was predicated on an acceptance by Mr Chan and the Trustees that any period of suspension that might be ordered if the applications were successful was unlikely to exceed six months, in the light of recent decisions of the court (see, e.g., Re Tong Yuk Kin (unreported, HCB 22870/2002, Deputy Judge A. To, 20 June 2007) and the Wong Hing Wah Michael case, both of which involved pre-bankruptcy conduct on the part of the bankrupt that was held to be unsatisfactory and to call for a suspension of automatic discharge of six and four months respectively). I therefore discharged the interim suspension orders in each case with immediate effect. This left open for argument the questions of whether the Trustees had established that the bankrupts had been guilty of unsatisfactory conduct before the commencement of their bankruptcies, so as to engage the court s discretion to make an order under section 30A(3) of the Ordinance; if so, whether the court should exercise its discretion to make such an order; and if so, what length of suspension would be appropriate. The Trustees case as to unsatisfactory conduct Mr Chan submitted that in each case, the bankrupt had been guilty of unsatisfactory conduct in both the respects identified in paragraphs 8 and 9 above. The Trustees complaints in relation to each of the bankrupts can be summarised as follows:- (1) In relation to Law Pak Wai (HCB 10680/2002):- (a) He had conducted himself unsatisfactorily in obtaining two loans within about 10 weeks prior to the presentation of the petition against him, these being a loan of HK$50,000 obtained on 28 March 2002 from JCG Finance Company Limited ( ), and a loan of HK$30,000 obtained on 20 March 2002 from SHK Finance Limited ( ), when he should have known that he was insolvent and would be unable to repay them, having regard to the fact that he was already indebted to creditors under eight other loans, and some 33 credit cards. According to the Trustees initial evidence filed in support of this application, Mr Law would have had to make monthly loan repayments of about HK$22,000 odd at a time when his pre-tax income was only some HK$27,400. At the hearing, the Trustee suggested that, taking account of Mr Law s living expenses and liabilities to make minimum repayments under the credit card facilities, when taking out these loans, he would have had monthly expenses totalling some HK$60,000 odd to meet. (b) He had also conducted himself unsatisfactorily in that he had made misrepresentations to JCG when applying for the loan from them, as he had disclosed, in answer to a question on the loan application form enquiring whether he had ever applied for credit facilities or loans previously, only three of his other loans, and one of his credit cards, rather than the eight or nine loans and 30 odd credit cards which he had at the time. (c) Subsequently, in further evidence filed by the Trustees after the bringing of this application, the Trustees sought to rely also on alleged misrepresentations of a similar nature by Mr Law when applying for the loan from SHK, and an earlier loan from United Asia Finance Limited ( ). (2) In relation to Law Chuen Man (HCB 10789/2002):- (a) He had conducted himself unsatisfactorily in obtaining three loans within about three months prior to the presentation of the petition against him, these being a loan of HK$70,000 obtained on 13 May 2002 (less than three weeks before the presentation of the petition) from UA, a loan of HK$25,000 obtained on 20 April 2002 Aeon Credit Service (Asia) Company Limited ( Aeon ), and a loan of HK$160,000 obtained on 4 February 2002 from JCG, when he should have known that he was insolvent and would be unable to repay them, having regard to the fact that he was already indebted to creditors under five other loans, and some 19 credit cards. According to the Trustees initial evidence filed in support of this application, Mr Law would have had to make monthly loan repayments of about HK$16,000 odd at a time when his pre-tax income was only some HK$23,000. At the hearing, the Trustees suggested that, taking account of Mr Law s living expenses and liabilities to make minimum repayments under the credit card facilities, when taking out these loans, he would in fact have had monthly expenses totalling some HK$57,000 odd to meet. (b) He had also conducted himself unsatisfactorily in that he had made misrepresentations to JCG when applying for the loan from them, as he had disclosed, in answer to a question on the loan application form enquiring whether he had ever applied for credit facilities or loans previously, only one of his other loans, and one of his credit cards, rather than the five loans and 18 other credit cards which he had at the time. He had also, it was said, been guilty of misrepresentation when applying for a credit card from Wing Hang Bank Limited on 14 September 2001, by failing to disclose any of his then outstanding loans or credit cards in response to a question on the relevant application form. (3) In relation to Ng Sui Ling Ling, Sally (HCB 14330/2002):- (a) She had conducted herself unsatisfactorily in obtaining a loan of HK$35,000 from Aeon on 6 May 2002, less than two months before the presentation of the petition against her, when she should have known that she was insolvent and would be unable to repay it, having regard to the fact that she was already indebted to creditors under seven other loans, and some 17 credit cards. According to the Trustees initial evidence filed in support of this application, Mr Law would have had to make monthly loan and credit card repayments of about HK$25,000 odd at a time when his pre-tax income was only some HK$25,000. At the hearing, the Trustees suggested that, taking account of Ms Ng s living expenses, when taking out these loans, she would in fact have had monthly expenses totalling some HK$43,000 odd to meet. (b) She had also conducted herself unsatisfactorily in that she had made misrepresentations to JCG when applying for a loan from them on 8 February 2002, as she had disclosed, in answer to a question on the loan application form enquiring whether she had ever applied for credit facilities or loans previously, only one of her other loans then outstanding, and five of her credit cards, failing to mention some five other loans and 12 credit cards which she had at the time. (c) Subsequently, in further evidence filed by the Trustees after the bringing of this application, the Trustees sought to rely also on alleged misrepresentations of a similar nature by Ms Ng when applying for a Compass Visa credit card. (4) In relation to Law Chau Kuk (HCB 17538/2002):- (a) She had conducted himself unsatisfactorily in obtaining a loan of HK$120,000 from Wing Hang Credit Limited ( ) on 11 June 2002, less than three months prior to the presentation of the petition against her, when she should have known that she was insolvent and would be unable to repay it, having regard to the fact that she was already indebted to creditors under seven other loans, and some 14 credit cards. According to the Trustees initial evidence filed in support of this application, Ms Law would have had to make monthly loan and credit repayments of about HK$26,000 odd at a time when her pre-tax income was only some HK$23,000. At the hearing, the Trustees suggested that, taking account of Ms Law s living expenses, when taking out these loans, she would in fact have had monthly expenses totalling some HK$42,000 odd to meet. (b) She had also conducted herself unsatisfactorily in that she had made misrepresentations to JCG when applying a loan from them on 22 February 2001, as she had disclosed, in answer to a question on the loan application form enquiring whether she had ever applied for credit facilities or loans previously, only one of her other loans, when she had at least one other instalment loans and two revolving loans outstanding. She had also, it was said, been guilty of misrepresentation when applying for a credit card from Wing Lung Bank Limited ( ) on 26 March 2002, by disclosing, in response to a question on the application form, only one loan and one credit card, rather than the six other loans and many other credit cards which she had by then obtained. (5) In relation to Wu Wing Kwong (HCB 21720/2002):- (a) He had conducted himself unsatisfactorily in obtaining a loan of HK$320,000 from WHC on 19 August 2002, just over two months prior to the presentation of the petition against him, when he should have known that he was insolvent and would be unable to repay it, having regard to the fact that he was already indebted to creditors under nine other loans, and some 25 credit cards. According to the Trustees initial evidence filed in support of this application, Mr Wu would have had to make monthly loan and credit card repayments of about HK$31,000 odd at a time when his pre-tax income was only some HK$28,000. At the hearing, the Trustees suggested that, taking account of Mr Law s living expenses and liabilities to make minimum repayments under the credit card facilities, when taking out these loans, he would in fact have had monthly expenses totalling some HK$46,000 odd to meet. (b) He had also conducted himself unsatisfactorily in that he had made misrepresentations to WHC when applying for the loan from them, as he had disclosed, in answer to a question on the loan application form enquiring whether he had ever applied for credit facilities or loans previously, only three of his other loans, rather than the nine other loans and many credit cards which he had at the time. (6) In relation to Ho Shuk Yee (HCB 21721/2002):- (a) She had conducted herself unsatisfactorily in obtaining a loan of HK$70,000 from JCG on 6 September 2002, less than 2 months prior to the presentation of the petition against her, when she should have known that she was insolvent and would be unable to repay it, having regard to the fact that he was already indebted to creditors under some 13 other loans, and some 18 credit cards. According to the Trustees initial evidence filed in support of this application, Ms Ho would have had to make monthly loan and credit card repayments of about HK$27,000 odd at a time when her pre-tax income was only some HK$15,000. At the hearing, the Trustees suggested that, taking account of Ms Ho s living expenses, when taking out these loans, she would in fact have had monthly expenses totalling some HK$38,000 odd to meet. (b) She had also conducted himself unsatisfactorily in that he had made misrepresentations to JCG when applying for the loan from them, as she had disclosed, in answer to a question on the loan application form enquiring whether she had ever applied for credit facilities or loans previously, only three of her other loans, and two of her credit cards, and had not mentioned the 10 other loans rather than the 8 or 9 loans and many credit cards which she had at the time. It was also suggested that she had been guilty of a similar sort of misrepresentation when applying for a loan of HK$320,000 (jointly with Mr Wu) from WHC on 19 August 2002, mentioning, in response to a similar question on the application form, only six other loans and one credit card, rather than all of the loans and credit cards which she had outstanding at the time. (7) In relation to Chu Yin Wah (HCB 22498/2002):- (a) She had conducted herself unsatisfactorily in obtaining a loan of HK$83,000 from JCG on 19 March 2002, some 8 months prior to the presentation of the petition against her, when she should have known that she was insolvent and would be unable to repay it, having regard to the fact that she was already indebted to creditors under some seven other loans, and some 11 credit cards. According to the Trustees initial evidence filed in support of this application, Ms Chu would have had to make monthly loan and credit card repayments of about HK$16,000 odd at a time when her pre-tax income was only some HK$23,300. At the hearing, the Trustees suggested that, taking account of Ms Chu s living expenses, when taking out these loans, she would in fact have had monthly expenses totalling some HK$45,000 odd to meet. (b) She had also conducted her unsatisfactorily in that she had made misrepresentations to JCG when applying for the loan from them, as she had disclosed, in answer to a question on the loan application form enquiring whether she had ever applied for credit facilities or loans previously, only two of her other loans, and two of her credit cards, and not the other five loans and nine credit cards which she had at the time. (8) In relation to Cheung King Tong, Simon (HCB 851/2003):- (a) He had conducted himself unsatisfactorily in obtaining a loan of HK$100,000 from JCG on 19 October 2002, some three months prior to the presentation of the petition against him, when he should have known that he was insolvent and would be unable to repay it, having regard to the fact that he was already indebted to creditors under eight other loans, and some 15 credit cards. According to the Trustees initial evidence filed in support of this application, Mr Cheung would have had to make monthly loan and credit card repayments of about HK$50,000 odd at a time when his pre-tax income was only some HK$56,000. At the hearing, the Trustees suggested that, taking account of Mr Law s living expenses, when taking out these loans, he would in fact have had monthly expenses totalling some HK$83,000 odd to meet. (b) He had also conducted himself unsatisfactorily in that he had made misrepresentations to JCG when applying for the loan from them, as he had disclosed, in answer to a question on the loan application form enquiring whether he had ever applied for credit facilities or loans previously, only four of his other loans, and two of his credit cards, and had not disclosed the four other loans and many other credit cards which he had at the time. (9) In relation to Ho Kai Kwong (HCB 1098/2003):- (a) He had conducted himself unsatisfactorily in obtaining a loan of HK$65,000 from JCG on 6 August 2002, within five months prior to the presentation of the petition against him, when he should have known that he was insolvent and would be unable to repay it, having regard to the fact that he was already indebted to creditors under six other loans, and also held some eight credit cards. According to the Trustees initial evidence filed in support of this application, Mr Ho would have had to make monthly loan repayments and credit card minimum payments of about HK$15,000 odd at a time when his pre-tax income was only some HK$21,000. At the hearing, the Trustees suggested that, taking account of Mr Ho s living expenses, when taking out these loans, he would in fact have had monthly expenses totalling some HK$32,000 odd to meet. (b) He had also conducted himself unsatisfactorily in that he had made misrepresentations to JCG when applying for the loan from them, as he had disclosed, in answer to a question on the loan application form enquiring whether he had ever applied for credit facilities or loans previously, only two of his other loans, and none of his credit cards, and not the four other loans or any of the credit cards which he had at the time. It was also said that similar misrepresentations had been made to UA when Mr Ho applied for a loan of HK$20,000 from them on 10 May 2002, when he disclosed only four loans (rather than the seven which he then had outstanding) in answer to a similar question on the application form. (c) Subsequently, in further evidence filed by the Trustees after the bringing of this application, the Trustees sought to rely also on alleged misrepresentations of a similar nature by Mr Ho when applying for an overdraft from the Hong Kong and Shanghai Banking Corporation Limited ( HSBC ) on 20 April 2002, when he failed to disclose any of his other then existing indebtedness, despite being asked about other loans in the relevant application form. (10) In relation to Lau Hon Chung (HCB 1902/2003):- (a) He had conducted himself unsatisfactorily in obtaining a loan of HK$50,000 from JCG on 28 September 2002, some six months prior to the presentation of the petition against him, when he should have known that he was insolvent and would be unable to repay it, having regard to the fact that he was already indebted to creditors under seven other loans, and held three credit cards. According to the Trustees initial evidence filed in support of this application, Mr Law would have had to make monthly loan and credit card repayments of about HK$16,000 odd at a time when his pre-tax income was only some HK$21,000. At the hearing, the Trustee suggested that, taking account of Mr Lau s living expenses, when taking out these loans, he would in fact have had monthly expenses totalling some HK$25,000 odd to meet. (b) He had also conducted himself unsatisfactorily in that he had made misrepresentations to JCG when applying for the loan from them, as he had disclosed, in answer to a question on the loan application form enquiring whether he had ever applied for credit facilities or loans previously, only two of his other loans, and none of his credit cards, and had not mentioned the four other loans or any of the credit cards which he had at the time. Similar allegations were made in respect of loan applications made by Mr Lau to UA on 29 August 2002, and to SHK on 17 September 2002, where it was said that he had understated the number of loans which he had outstanding at the time of the applications. The bankrupts evidence Each of the bankrupts made affirmations in response to the applications against them. In relation to the allegations of over-borrowing, their responses were largely similar. They all acknowledged that they should probably have realised that they would not be able to repay their indebtedness to their creditors. However, they also pointed out that at the time when they took out the loans and credit cards, it was generally very easy to obtain such facilities, and that banks and finance companies were generally aggressive in their attempts to obtain borrowers. In most cases, they said that they believed that they would be able to put off having to repay the loans which they had taken out by entering into fresh loans from time to time. So far as the alleged misrepresentations were concerned, again, their evidence was very similar, making the following points (although it should be noted that Mr Ho Kai Kwong (HCB 1098/2003) did not deal in his evidence with the complaints in relation to the loans he obtained from UA and HSBC, which were only raised by the Trustees at a late stage):- (1) In relation to the JCG loans, with the exception of Lau Hon Chung (HCB 1902/2003), all said that they had been customers of JCG for some time, and had had previous loan relationships with JCG, as a result of which they thought that JCG would already have had an awareness of their credit history. Mr Lau made the same point in relation to the loan which he obtained from UA, and Mr Wu (HCB 21720/2002) and Ms Ho (HCB 21721/2002) also made this point in relation to the joint loan which they obtained from WHC. (2) In every case, other than the applications by Ms Ng (HCB 14330/2002) for a Compass Visa credit card, and by Ms Law Chau Kuk (HCB 17538/2002) for a WLB credit card, the bankrupts said that the application forms were filled in not by themselves, but by staff of the financial institution concerned. (3) In every case, the bankrupts said that they did not understand the request for other bank and credit card information to be a request for complete disclosure, believing that they needed only to provide some such information for reference purposes. In a number of cases, the bankrupts said that they had been told by the staff of the financial institution who filled in the forms for them that they should just provide some examples for reference only. (4) In every case, other than that of Ms Ho (HCB 21721/2002) in relation to the WHC loan application form and the two credit card applications referred to in sub-paragraph (2) above, they were asked only for minimal documentation, and that such documentation as they were asked for was in the nature of evidence of their stated income. (5) In each case, the bankrupts said that they did not pay close attention to the declaration in the application form, regarding it as something of a formality, given that in most cases they had a previous relationship with the lender, and also because it was in very small print. (6) In most cases (with the exception of the two credit card applications, and the cases of Ms Ho (HCB 21721/2002) and Ms Chu (HCB 22498/2002)), the bankrupts said that the application forms were not explained to them by the staff of the financial institutions who assisted in completing them. (7) In many of the cases, it was said that the process was a very short one, with approval for the loan or other facility being obtained after a short wait. The Trustees response to these allegations The Trustees did not seek to obtain detailed evidence from any of the financial institutions concerned in relation to the allegations of the bankrupts. In particular, there was no attempt to obtain or put forward any evidence from staff of the financial institutions who actually had dealings with the bankrupts. Instead, the trustees relied in every case on what they suggested was the inherent improbability of the case being advanced by the bankrupts, on the loan application forms themselves, an affidavit by a Mr Constable, an officer of HSBC, made in other, unrelated, bankruptcy proceedings, in which he dealt with the question of whether or not credit information could be shared between financial institutions, and a statutory declaration from an officer of JCG setting out what was said to be their general practice in dealing with loan applications, and their instructions to their staff dealing with such applications, which were said to be inconsistent with the bankrupts version of events. The bankrupts post-bankruptcy conduct I should also note at this stage that no criticism was made of the post-bankruptcy conduct of the bankrupts. In every case, the Trustees have accepted that their conduct has been satisfactory. Moreover, it is also accepted that each one of the bankrupts has made contributions (in varying amounts) to their estates from their continued earnings, so as to improve the recovery available to their creditors. The amounts so contributed were not insignificant, ranging from just under HK$3,000 per month in the case of Mr Ho (HCB 1098/2003) to some HK$30,000 per month in the case of Mr Cheung (HCB 851/2003). Expressed as a percentage of their debts, such contributions ranged from 15% in the case of Mr Law Chuen Man (HCB 10789/2002) and 18% in the case of Mr Wu (HCB 21720/2002) to as high as 54% in the case of Mr Cheung, and 63% in the case of Ms Chu (HCB 22498/2002), with the rest falling in the range of 23% to 43%. The bankrupts submissions Mr Bartlett, representing the bankrupts, made the following submissions:- (1) The Trustees applications should be dismissed as an abuse of process, having regard to the following matters:- (a) The approach of the Trustees in launching these (and other) applications almost as a matter of course where a ground for objection was identified by him, without regard to the likelihood of a suspension of automatic discharge actually being granted so as to merit the bringing of an application in the first place, was flawed and disclosed a failure on the part of the Trustees to carry out an important part of their role. (b) The late stage in the bankruptcy at which the applications were lodged meant that there was real prejudice to the bankrupts, as a result of the interim suspension orders which were obtained so as to lengthen the period of their bankruptcy. (c) The approach of the Trustees in failing to pursue other similar cases (such as those which were before the courts in Leung Chin Yeung), and the previous willingness of the Trustees to in effect compromise such applications by the conditional discharge arrangement previously adopted, suggests that the Trustees do not regard the behaviour of which they complain as being so serious as to merit a suspension of automatic discharge. (2) In any event, the behaviour complained of is not, in the circumstances, properly to be regarded as unsatisfactory pre-bankruptcy conduct within the meaning of section 30A(4)(d), and the applications should be dismissed on this ground. (3) Alternatively, even if the behaviour complained of is to be regarded as unsatisfactory conduct, having regard to all of the circumstances, the court should exercise its discretion against the grant of an order suspending automatic discharge, and dismiss the applications. Abuse of process Although I would agree that manner of the Trustees pursuit of these applications is open to criticism, I do not think that it would be appropriate to dismiss the applications on this ground alone. If the conduct of a bankrupt of which complaint is made in an application objecting to automatic discharge is so serious as to call for the exercise of the court s discretion to suspend the automatic discharge to which he would otherwise be entitled, I do not think that it would be appropriate for the court to refuse to make such an order because of failings on the part of the applicant. Applications of this nature are not in the nature of private litigation between ordinary parties they involve the public interest as well. Where a bankrupt s failings are such as to call for an extension of the length of his bankruptcy, the public interest would not appear to be well-served by a dismissal of an application for suspension of automatic discharge because the court disapproves of some aspect of the applicant s behaviour. I would not, therefore accept that such failings as there have been on the part of the Trustees would, of themselves, justify the dismissal of the applications. Whether the behaviour complained of was unsatisfactory. In Wong Hing Wah Michael, I considered the approach to be adopted in deciding whether or not particular pre-bankruptcy conduct was to be considered unsatisfactory, and whether it was such as to call for a suspension of the automatic discharge that would otherwise be available to a bankrupt, in the light of the decisions of this court in the Leung Chin Yeung, Tong Yuk Kin and Liu Man Hoo cases. I came to the view that the appropriate test for whether or not the conduct complained of is to be regarded as unsatisfactory is whether the conduct is such as society would be prepared to condone without any expression of disapproval. If it is not, the conduct in question will be unsatisfactory. The conduct complained of such be examined against all relevant background facts, and consideration given as to whether or not the hypothetical reasonable man would regard the conduct as unsatisfactory (see paragraph 16 of my judgment). So far as the exercise of the court s discretion was concerned, I held that whether a suspension was merited would depend in part on the nature of the conduct in question and in part on the behaviour of the bankrupt in the course of his bankruptcy, with weight being given to efforts made to contribute to his estate, and for genuine cooperation with his trustee in the conduct of his affairs (see paragraph 19 of my judgment). Both Mr Chan and Mr Bartlett were content to adopt those statements as embodying the right approach. Applying that approach, it seems to me that the complaints as to the circumstances in which the bankrupts incurred the loans immediately prior to their respective bankruptcies are well founded, and that their conduct in this respect was unsatisfactory. Although there are differences in the particular facts of each case, it seems to me to be clear that in every case the bankrupts were already heavily indebted at the time that the loans identified and relied upon by the Trustees were made, and that they were aware of this. The bankrupts approach of borrowing fresh loans to meet existing obligations was not one which could be regarded as sustainable, or responsible. Although Mr Bartlett questioned the basis of the Trustees estimation of the level of repayments that the bankrupts would have had to meet at the time that they entered into the loans which form the subject of this complaint, it seems to me that while these estimations are necessarily somewhat imprecise, they are nonetheless reasonable ones, which, taken with the bankrupts recurrent personal expenditure, show that in each case, the bankrupts were living well beyond their means. In these circumstances, I am unable to see any real distinction between this case and that of Wong Hing Wah Michael or Liu Man Hoo, in both of which similar cases of overborrowing were held to be unsatisfactory conduct. The position in relation to the alleged misrepresentations is, however, different. If it were established that the bankrupts had consciously and deliberately misrepresented the position in relation to their existing indebtedness, or their credit history, to the lenders concerned, this would clearly be seriously unsatisfactory conduct. However, in each of these cases, the court is confronted with the difficulty that the Trustees have chosen not to put before the court any evidence dealing with the particular cases of alleged misrepresentation, beyond the fact that the bankrupts signed the relevant loan or credit card application forms and thereby made declarations (expressly or implicitly) that they had provided full disclosure of their financial obligations. That this was a problem in relation to applications by these Trustees had been made clear by both Kwan J in Leung Chin Yeung and Lam J in Liu Man Hoo. In Leung Chin Yeung, Kwan J had this to say, at paragraphs 46 to 49 of her judgment:- 46. Misrepresentation in an application for credit could be a serious matter. If there is intention to defraud, this could constitute a criminal offence under the Theft Ordinance (Cap. 210). In Re Palenkas; ex p Raymor (Brisbane) Pty Ltd (1982) 66 FLR 115, the Federal Court of Australia held that fraudulent misrepresentations as to the debtor s assets for the purpose of obtaining a loan could be unsatisfactory conduct so that leave should be given to the creditor to enter an objection to automatic discharge. 47. The circumstances in which the alleged misrepresentations were made in the loan application forms in the three cases are not known or not fully know. In HCB No 9461 of 2002, in which the bankrupt did not mention 14 instances of previous borrowing, the bankrupt wrote to the court on 8 August 2006 stating that he had been borrowing from [JCG] for close to ten years and the staff had known him as an old customer. On the occasion that he last borrowed from them in 2002, he had told the staff that his previous loans were more or less the same. He claimed that the staff had allowed him to sign on the application form and offered to complete the information for him. 48. These are matters that would require investigation. 49. In the absence of information on the circumstances in which the misrepresentation was allegedly made in each case, I am unable to say whether this would amount to unsatisfactory conduct to warrant an order under s 30A(3). I reiterate even if an objection under one of the grounds is made out, the discretion whether to suspend the running of the relevant period must be exercised judicially, and may include the kind of factors considered by Master Levy in Re Yip Kam Hung Peter, HCB No 2774 of 1999, 9 September 2004, paras 26 to 41. Although these observations were made in the context of Kwan J s consideration and ultimately inability to determine whether there was any justification for the Trustees decision in the cases before her to enter into an arrangement for the conditional discharge of the bankrupts in those cases, it seems to me that they have equal resonance in the present situation, where the court must consider whether or not the alleged misrepresentations by the bankrupts should be viewed as unsatisfactory conduct. Much the same criticisms were made of the Trustees by Lam J in paragraphs 57 to 59 of his judgment in Liu Man Hoo, where he said:- 57. Regarding the alleged misrepresentations, again I have very little evidence as regards the circumstances under which the loan applications were filled and signed by Liu. The Trustee only relies on the documents. He had not investigated from Liu or the staff of the creditors responsible for handling the applications as regards the circumstances surrounding the completing and submitting of the loan applications. 58. The Trustee simply relied on the loan application forms, the declarations by Liu contained therein and an affidavit of a bank officer filed in another set of proceedings regarding restriction on sharing of credit information between financial institutions and a statutory declaration from an officer of JCG (one of the creditors) regarding their general practice. I do not find the affidavit and the statutory declaration to be of much assistance in rebutting Liu s evidence regarding how his creditors secured the loan applications from him. The deponents did not address their minds to these particular circumstances. The Affidavit of Mr Constable was filed in HCB 8779 of 2002 and he had nothing to do with the present proceedings. Whatever the general practice or instructions JCG might have adopted and given to its frontline staff, I am not prepared to infer from the statutory declaration that the instructions had been faithfully implemented when the Trustee could have obtained specific evidence from the person who actually handled Liu s application to deal with his allegation. 59. As regards the information in the loan application forms and the declarations contained therein, I think one must assess those against the background and circumstances under which these documents came to be signed. I agree they contained misinformation. However, the inaccuracies could be the result of frauds, negligence or even innocent mistakes due to misunderstanding of the effect of the forms. Typically, these loan applications were in very small prints and I have no information as to how much time was given to Liu to read the same carefully before he was asked to sign. Unfortunately, the Trustee did not deem it necessary to place specific information before the court. Each of these criticisms applies in every one of the ten applications with which I am faced. The Trustees have here, just as in the case of Liu Man Hoo relied simply upon the loan application forms themselves, and the same affidavit of Mr Constable and statutory declaration of the member of JCG s staff. At the time when the first seven of these applications were launched, the Trustees did not have the benefit of the views expressed by Kwan J in Leung Chin Yeung. However, they must have been aware of the desirability of putting forward specific and immediately relevant evidence in support of the misrepresentation complaint by the time they brought the last three of these applications, these having been made after that judgment was given. More surprisingly, The Trustees appear not to have taken on board the comments of Lam J at all. Lam J s judgment was given more than two months before this hearing. I find it quite extraordinary that the Trustees should have thought it right to persist in the serious allegations which they were making in respect of alleged misrepresentations by the bankrupts in the light of that judgment, on precisely the same evidence which Lam J, in my view quite rightly, rejected as being insufficient to enable the court to conclude that there had been any misrepresentations of such degree of culpability as to constitute unsatisfactory conduct by the bankrupts concerned. In these circumstances, I do not find it possible to dismiss out of hand the explanations of the alleged misrepresentations given by the bankrupts, as Mr Chan invited me to do. On the contrary, having regard to those explanations, and in the light of the conspicuous failure on the part of the Trustees to adduce specific evidence in relation to the particular loan applications of which complaint is made, I am not prepared to say that the bankrupts have been guilty of unsatisfactory conduct in this respect. Exercise of discretion As I have concluded that the conduct of the bankrupts in incurring debts at a time when they were clearly in no position to repay them was unsatisfactory conduct within the meaning of section 30A(4)(d) of the Ordinance, it is necessary to consider whether or not it would be appropriate to exercise my discretion by granting an order suspending the discharge of the bankrupts. In my view, it would not be appropriate to so order. In each case, the only unsatisfactory conduct established is excessive borrowing by the bankrupt concerned. However, in each case, the bankrupt has, it seems, been cooperative with the Trustee in the conduct of his or her affairs in bankruptcy. What is more, each of the bankrupts has made contributions to his or her estate in amounts that are clearly not insignificant. The situation in these cases is thus very similar to that in the Liu Man Hoo case, and unlike that in Tong Yuk Kin, where Deputy Judge A. To was satisfied on the evidence before him that the bankrupt had been guilty of deliberate misrepresentation, and that in Wong Hing Wah Michael, where the bankrupt was guilty of unfairly preferring certain lenders with whom he had a close personal relationship (his mother and a friend) to his other creditors. The situation would also appear to be broadly similar to that in the three cases considered in Leung Chin Yeung, which the Trustee decided (in my view, correctly) not to pursue. I therefore decline to order that there should, in any of the cases before me, be any suspension of the automatic discharge to which the bankrupts would ordinarily have been entitled, and I shall accordingly dismiss each of the applications. The outstanding applications According to the information with which I was supplied on behalf of the Trustees at the beginning of the hearing, there were 148 outstanding cases, of which the Trustees intended to pursue some 85, and to withdraw the remaining 63. Of the cases, which the Trustees intended to pursue, some 34 were said to be cases of misrepresentation only. I would urge the Trustees to carefully consider each of the cases which they are contemplating pursuing, and to assess realistically the nature and quality of the evidence which is available to them in such cases, and the likelihood of an order of suspension of automatic discharge being granted in any particular case before proceeding further with any of them. Moreover, I would also hope that the Trustees will give careful thought to the likely length of any suspension that might realistically be imposed in those cases which they decide, eventually, to pursue, and to seek the uplift of interim orders which have no doubt been imposed in any case in which the lapse of time since the making of the application is likely to exceed any suspension that may ultimately be ordered by the court. Costs I propose to make the following orders nisi as to costs. As the bankrupts have succeeded in resisting the applications made against them, they should have their costs of these application, to be taxed on the party and party basis if not agreed. As I am of the view that the Trustee has acted quite unreasonably in persisting in these applications on the basis of the evidence put forward by them in the light of the decision of Lam J in Liu Man Hoo, I shall order that the costs of the hearing itself, and any other costs incurred by the bankrupts after 15 September 2007 are to be borne by the Trustees personally, and that the balance of such costs is to be payable out of their respective estates. In each case, having regard to the conduct of the Trustees in respect of the manner in which these applications were brought and proceeded with, I shall order further that the Trustees are not to be entitled to recover any of their costs of these applications out of the estates of the bankrupts concerned. (Aarif Barma) Judge of the Court of First Instance High Court Mr Jeremy Bartlett & Mr Jacky Ip, instructed by Messrs Yip, Tse & Tang, for the Respondents/Bankrupts Mr Edward Chan, of Messrs Chan, Wong & Lam, for the Applicants/Trustees in Bankruptcy PAGE - 1udk 1udk H I J K L M N O P Q R S T U V A B C D E F G H I J K L M N O P Q R S T U V i$&`G XB_j7 -,h`Rf+ h<~J hcb.dot setup Microsoft Word 9.0 Judiciary Hong Kong Title Microsoft Word Document MSWordDoc Word.Document.8