RE FAN CHI WING

bjbj ing as an additional Judge of the Court of First Instance) in Court Date of Hearing: 10 November 2009 Date of Decision: 10 November 2009 ______________ D E C I S I O N ______________ This is a summons taken out by Fan Chi Wing, a debtor who was adjudged bankrupt on 9 January 2009, for an order that the interim order made in his favour be extended to 23 November 2009, 7 days after the holding of an adjourned meeting of his creditors on 16 November 2009. His summons is supported by an affirmation of the nominee, Chung Cheuk Ming Alex, filed on 6 November 2009. Apart from that, Mr Fan has adduced no other evidence. The Official Receiver, who is the trustee in bankruptcy, has no comments on the summons and has not attended this hearing. The application is opposed by Sanford Yung-Tao Yung, who has obtained a bankruptcy order against Mr Fan. The application arose in this way. On 6 October 2009, I granted an interim order on Mr Fan s application despite the objection of Mr Yung. As I was given to understand by the nominee that the creditors meeting to consider Mr s proposal was to be held on 3 November 2009, I made a direction that the period for which the interim order has effect be extended to 7 days after the holding of the creditors meeting. The creditors meeting was duly held on 3 November 2009, chaired by the nominee. Under my order of 6 October 2009, the interim order has effect up to today, unless further extended. Under section 20C(2) of the Bankruptcy Ordinance, Cap. 6, the court may make an order if it thinks it appropriate to do so for the purpose of facilitating the consideration and implementation of the debtor s proposal. Minutes of the meeting on 3 November 2009, which would appear to serve as the nominee s report to the court, were exhibited to the nominee s said affirmation filed on 6 November 2009. According to the minutes, (1) 23 creditors attended the meeting, of which 10 are banks or financial institutions and 13 are individuals including Mr Yung; (2) the nominee admitted the claims of 14 creditors for the purpose of voting, the admitted claims amounted to $9,053,820.16; (3) the claims of 9 individual creditors were not admitted for the purpose of voting and the reasons given to them were set out in the minutes; these claims amounted to $5,360,212.59; (4) of the 9 individual creditors whose claims were not admitted for the purpose of voting, the nominee considered that 3 were secured creditors and hence their claims would not be taken into account for voting purpose pursuant to rule 122R(3)(b) of the Bankruptcy Rules; the claims of these 3 creditors amounted to $2,017,900; (5) 4 creditors that are banks or financial institutions made various requests to Mr Fan to improve the recovery rate and interest rate and Mr Fan did not accept any of their requests; (6) Mr Fan s proposal was then put to a vote; 3.21% in value of the admitted claims voted in favour and 96.79% in value voted against; (7) this was followed by a discussion of the creditors of the possibility of increasing the tenor of Mr Fan s proposal and certain other aspects of his proposal, the details of which were not set out in the minutes or in the nominee s supporting affirmation; (8) some of the creditors, whose claims were not admitted for voting purpose, indicated they needed time to prepare further supporting documents to support their claims. After the meeting and on the same day, the nominee issued a notice pursuant to rule 122S(4) that the creditors meeting has been adjourned to 16 November 2009. That notice was filed in court on 4 November 2009. Under rule 122S(2), if on the day of the creditors meeting the requisite majority for the approval of the voluntary arrangement has not been obtained (i.e. a majority in excess of three quarters in value of the creditors present in person or by proxy and voting on the resolution), the chairman of the meeting may adjourn the meeting for not more than 14 days. Miss Winnie Tsui submitted on behalf of Mr Yung the interim order should not be extended for the purpose of holding the adjourned meeting on 16 November 2009, as the requisite majority for the approval of the voluntary arrangement would not be achieved and the meeting is pointless. She seeks an order under section 20G(2) of Cap. 6 that the interim order be discharged. I have discretion to exercise whether to extend the interim order. If the evidence before the court does not indicate a sufficient likelihood that the voluntary arrangement would be approved by the creditors at the adjourned meeting, there would be no justification for the extension. Miss Tsui pointed to the following matters: (1) Notwithstanding Mr Fan s earlier affirmation filed in support of his application for an interim order on 12 May 2009 that 44 out of 73 creditors representing about 77.22% of the total indebtedness indicated support of his proposal and 42 of them were willing to support the proposal without modifications, only 12 creditors who are individuals (excluding Mr Yung) had attended the creditors meeting in person or by proxy and only 3 of these creditors had their claims admitted for voting purpose. The total claims of these 3 creditors amounted to only 3.21% in value of the total admitted claims. This fell far short of the required threshold of 75% in value. (2) All the creditors that are banks or financial institutions voted against the proposal, so did Mr Yung. Their total claims amounted to $8,762,633.36. (3) Even if the claims of the other 9 individual creditors were admitted for voting purpose (assuming they were able to come up with supporting documents and disregarding the claims in the value of $2,017,900 might be secured liability) and all had voted in favour of the proposal, the total claims of these 9 individual creditors would amount to $5,360,212.59 only. (4) Thus, the requisite majority of 75% in value would not be obtained on the most favourable scenario to Mr Fan. The nominee stated in his supporting affirmation that some creditors including Hang Seng Bank Limited, Citibank (Hong Kong) Limited and Diners Club International (Hong Kong) Limited indicated they were willing to further consider the debtor s proposal at the adjourned creditors meeting. This indication was not recorded in the minutes of the creditors meeting. Before Mr Fan s proposal was put to vote, the position of Citibank and Diners was that there should be no haircut and it should be a 100% recovery. I agree with Miss Tsui the alleged willingness of Citibank and Diners to further consider the debtor s proposal at the adjourned creditors meeting does not seem to accord with their stance at the creditors meeting. I note also in the nominee s report it is not mentioned Mr Fan would come up with a new proposal with improved terms for the creditors. The adjourned meeting is for creditors to further consider the debtor s proposal , namely the same proposal that was put to a vote on 3 November 2009. Mr Jason Wong submitted on Mr Fan s behalf the extension sought for the interim order is for six days only and it is the first adjournment of the creditors meeting. He urged the court to consider the following matters among other things: (1) when Mr Fan made the application for an interim order on 6 October 2009, this was not premised on the views the banks and financial institutions might have on his proposal; (2) the interim order was granted on the strength of the positive replies obtained from 44 creditors representing 77.22% of the total indebtedness of $33,427,902.58; (3) a majority of the individual creditors failed to attend the meeting on 3 November. One cannot ignore the support in writing they had given and it is fair to give them another opportunity to vote on the proposal at the adjourned meeting which is to be held just 6 days away; (4) if these individual creditors should fail to attend the adjourned meeting notwithstanding the further opportunity given, the proposal would not be approved with the requisite majority when it is to be voted upon for a second time. I acknowledge Miss Tsui s submission there is nothing to indicate those individual creditors who did not turn up earlier would attend the adjourned meeting and that they would do so with adequate supporting documents for their claims to be admitted for voting purpose. It is possible the percentage of support of 77.22% indicated earlier might not be achieved. I consider this very much a borderline case. On balance I am persuaded the situation is not so clear that it is unlikely the voluntary arrangement would be approved so the adjourned meeting would be pointless. I decide to exercise my discretion to grant an extension of the interim order to 23 November 2009. Mr Fan is seeking an indulgence from the court. I see no reason why he should not bear the costs of Mr Yung who is entirely within his rights in opposing the application in this borderline case. I order Mr Fan to pay the costs of Mr Yung in this application, assessed on a gross sum basis at $16,000. (S Kwan) Justice of Appeal (sitting as an additional Judge of the Court of First Instance, High Court) Mr Jason L H Wong, instruct 1udk 1udk N O P Q R S T U V A B C D E F G H I J K L M N O P Q R S T U V i$&`G -r~@* -r~@ hcb.dot Administrator Microsoft Word 9.0 Title Microsoft Word Document MSWordDoc Word.Document.8