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HCB 345/2001
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
BANKRUPTCY PROCEEDINGS NO 345 OF 2001
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RE: LEE SIU FING, SIEGFRIED
(A DISCHARGED BANKRUPT)
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BETWEEN
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ALAN CHUNG WAH TANG |
Applicants |
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HOU CHUNG MAN |
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(JOINT AND SEVERAL TRUSTEES IN BANKRUPTCY OF THE PROPERTY OF THE BANKRUPT) |
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and |
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LEE SIU FUNG, SIEGFRIED |
1st Respondent |
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LI XIAO YI |
2nd Respondent |
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LELALERTSUPHAKUN SURASAK |
3rd Respondent |
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| Before: Hon G Lam J in Chambers (Not Open to the Public) |
| Date of Hearing: 28 September 2016 |
| Date of Decision: 28 September 2016 |
| Date of Reasons for Decision: 12 October 2016 |
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REASONS FOR DECISION
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Background
1. The summons of the trustees in bankruptcy (“trustees”) of the 1st respondent, issued on 19 July 2016, for an order for private examination of the 3 respondents pursuant to s 29 of the Bankruptcy Ordinance (Cap 6) (“Ordinance”) came before me on 28 September 2016. At the end of the hearing I adjourned the application as against the 2nd and 3rd respondents and gave directions for further conduct, but granted the application as against the 1st respondent. These are my reasons for doing so.
2. The 1st respondent was the founder, Chairman, CEO and the largest single shareholder of Siu Fung Ceramics Holdings Limited (“SFCH”), a company whose shares were listed in Hong Kong in the 1990s. I shall refer to SFCH and its subsidiaries and associated companies together as “the Group”. The 2nd respondent is the younger brother and the 3rd respondent is the son of the 1st respondent.
3. Petitions to wind up SFCH and several other companies in the Group were presented by HSBC in March 1999. On 9 May 2000, winding up orders were made. Claims of creditors admitted for the Group total approximately HK$8,436 million. To date no dividend has been paid to the creditors of SFCH. Aggregate dividends paid to the creditors of some of the companies in the Group are less than 1% of their admitted claims.
4. On 18 January 2001, a bankruptcy petition was presented by HSBC against the 1st respondent for a debt of HK$322 million based on a guarantee. He was adjudged bankrupt on 8 May 2001. Proofs of debt filed in the bankruptcy to date (pending adjudication) amount to some HK$458 million.
5. Soon after the adjudication the 1st respondent submitted a statement of affairs stating assets of HK$265 only. Between 2001 and 2004 he submitted 3 annual statements reporting zero income and zero expenditure. Nothing has been contributed by the 1st respondent to the bankruptcy estate. Not a single cent of dividend has been paid to the creditors. The 1st respondent had stayed mostly in the Mainland in the years immediately following the adjudication of bankruptcy.
6. In 2004, the Insider Dealing Tribunal, chaired by Lugar‑Mawson J, found that the 1st respondent had used the securities accounts of 3 persons to sell 16.94 million shares in SFCH in June 1996 and also counselled or procured his wife to sell 80 million shares in SFCH in July 1996 when he had price-sensitive information adverse to the Group, thereby avoiding losses of HK$69.87 million. The proceeds of sale were deposited by his wife into his bank account. The Tribunal imposed an order for disqualification of the 1st respondent from management of any company for the maximum period of 5 years (from 25 October 2004), ordered him to pay HK$69.87 million being the amount of loss avoided, HK$139.74 million in penalty, and HK$9.19 million in costs.[1] In making these orders, the Tribunal stated:
“In this regard, we are aware that Siegfried Lee is now bankrupt in Hong Kong. He has not responded to the publication of the first part of this report. He is believed to reside in Beijing, but neither the Tribunal nor the SFC knows his present address. There are however reasons to believe that Siegfried Lee is not totally without assets. In Chapter 11, at page 146, we referred to Daniel Chan admitting squirreling away $25 million offshore for Siegfried Lee’s benefit. We propose to proceed on the basis that Siegfried Lee remains a wealthy man and that eventually his assets will be tracked down. To do otherwise would be to reward mendacity.
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Siegfried Lee has made no representations to us in mitigation of penalty. We can find none. He was motivated by greed throughout all his dealings. He displayed a cavalier attitude towards his duties as the chairman of a listed company. He was prepared to use his family members, as well as his subordinates and their family members, to execute his dishonest schemes. There is evidence that he has feathered a nest offshore to avoid his creditors in Hong Kong and he has expressed no remorse for his wrongdoing.” (emphasis added)
7. An order for payment was also made against Daniel Chan, an employee of SFCH whom the Tribunal found to be the “trusted lieutenant” of the 1st respondent. When Daniel Chan failed to pay, an order was made for his oral examination as a judgment debtor. The explanation he gave there was accepted by the Master in a subsequent (unsuccessful) application by the Government as judgment creditor for an order of imprisonment under Order 49B rule 1B (unreported, HCMP 2851/2004, 23 October 2006), at §39:
“I accept the explanation of [Daniel Chan] that he was instructed by Lee Siu Fung to transfer the money of HK$25 million through his own HKBC account to the Singapore BNP account on the same day when he received cheques from Lee Siu Fung. The Singapore account did not belong to him and … apparently belonged to Lee Siu Fung. After the money was transferred to such account, [Daniel Chan] did not know what had happened to the money.”
8. Shortly before the expiry of 4 years from the adjudication of bankruptcy, on 5 May 2005, the trustees made an application, first, under s 30A(10) of the Ordinance, for a declaration that time had not run during the period in which the 1st respondent was absent from Hong Kong (the trustees alleging that the 1st respondent had gone to Beijing the day after he was adjudged bankrupt), and secondly, to object to automatic discharge on various grounds under s 30A(3) & (4) such as the 1st respondent’s alleged failure to cooperate with the trustees. In the light of the Court of Final Appeal’s decision in Re Chan Wing Hing (2006) 9 HKCFAR 545 (handed down on 20 July 2006) which declared s 30A(10)(b)(i) unconstitutional, the first part of the trustees’ application was withdrawn with leave in August 2006.
9. The trustees, however, failed to proceed with the second part of their application. On 2 February 2008, the 1st respondent, represented by the solicitors’ firm of Messrs Anthony Siu & Co, took out an application to strike out the trustees’ summons of 5 May 2005. In the end, on 27 August 2008, Barma J (as he then was) struck out the trustees’ summons on the ground that it was an abuse of process for the trustees to have taken out the application (and thereby obtained an interim suspension of discharge) and failed to proceed with it. The 1st respondent was as a consequence regarded as having been discharged from bankruptcy in May 2005. It should be noted that Barma J did not deal with the merits of the trustees’ objection based on s 30A(3) & (4). In fact, the 1st respondent had not yet by then filed evidence to respond to the allegations made against him because it had been agreed that the point on s 30A(10) would be dealt with first. Barma J took into account that an objection to automatic discharge should be made at a reasonably early stage and proceeded with expeditiously since delay would mean the bankrupt may be unfairly denied his discharge until some time after he should have obtained it. An interim order should not be left in place for longer than necessary to enable the objection to automatic discharge to be determined. The learned judge also noted that in this case while the maximum postponement of automatic discharge was for 4 years, by the time an application could be heard after the filing of evidence relating to the grounds in s 30A(3) & (4), there would have had been a de facto suspension of discharge for over 3.5 years.
10. As I shall explain further below, the 1st respondent’s discharge from bankruptcy did not in law end his duties to assist the trustees in their functions which continue notwithstanding the discharge. On 6 January 2012, the trustees wrote to the 1st respondent’s then solicitors, Messrs Anthony Siu & Co, asking the 1st respondent to attend on the trustees to answer various questions and provide information as set out in a letter issued by the trustees to the 1st respondent on 1 February 2005 (attaching previous letters) which had not been answered by him. On 10 and 23 February 2012, the trustees wrote to the same solicitors asking the 1st respondent to attend on the trustees to provide information. The 1st respondent refused to do so.
11. On 28 August 2012, the trustees wrote to Anthony Siu & Co again, pointing out that despite previous letters (including earlier letters of 4 October 2005, 12 January 2006 and 3 March 2008) to the 1st respondent, no information had been received from the 1st respondent, and asking the solicitors to remind the 1st respondent of his legal obligations and statutory duties. On 3 October 2012, the solicitors replied that their client, the 1st respondent, was “not obliged to entertain” the trustees’ requests because they had not provided particulars or documentary evidence to support their allegations.
12. From December 2015 onwards, the trustees have sent written questionnaires to the 1st respondent and various persons...
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