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Re Yick Kin Chung

Judgment Cited authorities 7 Cited in Precedent Map Related
Vincent
Judgment Date01 December 2014
Year2014
Judgement NumberHCB1187/2004
Subject MatterBankruptcy Proceedings
CourtHigh Court (Hong Kong)
HCB1187/2004 RE YICK KIN CHUNG

HCB 1187/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 1187 OF 2004

____________

IN THE MATTER OF the property known as Flat 5 on 22/F of Block B, Yat Ngai Court, No. 3 Yat Nga Lane, Tai Po, New Territories
AND
IN THE MATTER OF Section 60 of the Bankruptcy Ordinance (Cap 6)
AND
IN THE MATTER OF an application for an order for sale under Section 6 of the Partition Ordinance (Cap 352)
AND
IN THE MATTER OF Order 31 of the Rules of the High Court (Cap 4A)

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RE: YICK KIN CHUNG, Bankrupt

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Before: Hon Mimmie Chan J in Chambers (open to public)
Date of Hearing: 26 June 2014
Date of Decision: 1 December 2014

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D E C I S I O N

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Background

1. On 16 March 2004, a Bankruptcy Order was made in respect of Mr Yick Kin Chung (“Bankrupt”), who had petitioned for his own bankruptcy on 4 February 2004. Flat 5 on 22nd floor of Block B, Yat Nga Court, 3 Yat Nga Lane, Tai Po, New Territories (“Property”) was held by the Bankrupt and his wife (“Wife”) as joint tenants since its purchase in July 1991. The total amount of debts filed by creditors and admitted by the Trustees in the bankruptcy was HK$297,700.63. The Bankrupt made contribution of HK $3,000 into his bankruptcy estate account.

2. On 16 March 2008, the Bankrupt was automatically discharged from bankruptcy. Shortly thereafter, on 26 September 2008, the Bankrupt died intestate, and the Wife was appointed as the personal representative of the estate.

3. There were 2 distributions of dividends. The 1st dividend of HK $108,900 was declared by the Trustees on 26 October 2005. The 2nd dividend of HK $5507.39 was declared on 22 September 2010.

4. In October 2004, December 2010 and February 2013, the Trustees had offered to sell the Bankrupt’s share of the Property to the Wife, or to sell the Property with the Wife’s half interest to a third party on the market. The Trustees failed to receive any, or any satisfactory, response from the Wife to such offer. Accordingly, on 23 April 2013, the Trustees applied to the Court for a declaration that the Property is held by the Bankrupt and the Wife as tenants in common in equal shares, for an order that the Property be sold pursuant to s6 of the Partition Ordinance, and that the net proceeds of sale of the Property be divided and paid to the Trustees and the Wife.

5. According to the Trustees, the valuation of the Property as at 5 June 2014 was approximately HK $2 million. The estimated amount of the provable debts incurred by the Bankrupt and expenses incurred up to 26 June 2014, including statutory interest calculated up to that date, was approximately HK $620,901.62. This comprises:

a. HK $183,293.24 (outstanding amount of the provable debts);

b. HK $269,535.53 (statutory interest up to 26 June 2014);

c. HK $169,709.19 (miscellaneous expenses)

Less

d. HK $1,636.34 (current bankruptcy estate balance)

6. The Wife as the surviving spouse and personal representative of the estate of the Bankrupt is entitled to the surplus of the sale proceeds of the Property after payment in full of the bankruptcy debts of the creditors. The Trustees claim that the surplus of the sale proceeds should first be divided between the Wife and the Bankrupt’s estate in equal shares, such that each share should be at least HK $1 million, subject to the deduction of the incidental legal costs, expenses and disbursements. The Bankrupt’s half share of the net sale proceeds should then be used to repay to the creditors the bankruptcy debts, with interest, and the costs, charges and expenses of the proceedings, in the sum of HK $620,901.62 as aforesaid. On this calculation, there will be a balance of HK $379,098.38 payable to the Wife as co-owner of the Property.

7. The Trustees further claim that the Wife was one of the Bankrupt’s dependents, and that the Bankrupt had financially supported his own family. The Trustees claim that there are reasons to believe that prior to his bankruptcy, the Bankrupt had been responsible for all the mortgage loan repayments and family expenses, and accordingly, that the Bankrupt should be entitled to more than a half share of the Property.

8. On behalf of the Wife, the application for sale was opposed on the basis that the sale was not necessary for the settlement of the Bankrupt’s debts. She claims that as a result of the Bankrupt’s automatic discharge in March 2008, pursuant to s 30A of the Bankruptcy Ordinance (“Ordinance”), he was released from all bankruptcy debts. Interest on the released debt was not expressly excluded from the effect of the discharge as provided for in s 32 of the Ordinance. As such, it was argued that after the discharge, no interest is payable in respect of the bankruptcy debts. Alternatively, it was argued that any interest payable should be limited to the 4 year period before the discharge, since s 71 of the Ordinance only provides for interest on bankruptcy debts to be payable “in respect of the period during which they have been outstanding since commencement of the bankruptcy”, and after the discharge of the bankruptcy, there is no debt which is outstanding.

9. The issues raised by the Wife turn on the effect of the discharge of a bankrupt under s 30A of the Ordinance.

The relevant provisions

10. The discharge of a bankrupt is provided for in s 30A of the Ordinance, subsections (1) and (2) of which provide as follows:

“(1) Subject to this section, a bankrupt is discharged from bankruptcy by the expiration of the relevant period under this section.

(2) The relevant period referred to in subsection (1) is as follows:

(a) where a person has not previously been adjudged bankrupt, the period of 4 years;

(b) where a person has been previously adjudged bankrupt, the period of 5 years.”

11. Section 30A (8) states:

“Where a bankrupt has been discharged, he shall, notwithstanding his discharge -

(a) continue to give such information respecting his affairs; and

(b) attend on the trustee at such times, and to such other things,

as the trustee requires for the purpose of completing the administration of the estate, and if the discharged bankrupt does not comply with the requirements of this subsection, he shall be guilty of a contempt of court and may be punished accordingly on the application of a trustee.”

12. Section 32 provides for the effect of an order of discharge. The relevant subsections of s 32 provide as follows:

“(2) Subject to subsections (1) and (3) to (8), where a bankrupt is discharged, the discharge releases him from all the bankruptcy debts, but has no effect -

(a) on the functions (so far as they remain to be carried out) of the trustee and the operation of the provisions of this Ordinance for the purposes of carrying out those functions; or

(b) on the liability of the discharged bankrupt to make continuing contributions to his estate pursuant to an order made under s 30A (9).

(3) Discharge does not affect the right of any secured creditor of the bankrupt to enforce his security for the payment of a debt from which the bankrupt is released.

...

(7) Discharge does not release the bankrupt from such other provable debts, not being debts provable in his bankruptcy, as may be prescribed.”

13. The Ordinance does not prescribe any other provable debts for the purposes of s 30 A (7).

14. Under s 2 of the Ordinance, “bankruptcy debt” is defined to mean, in relation to a bankrupt:

(a) any debt or liability to which he is subject at the commencement of the bankruptcy; and

(b) any debt or liability to which he may become subject after the commencement of the bankruptcy (including after his discharge from bankruptcy) by reason of any obligation incurred before the commencement of the bankruptcy.

15. Under s 58, the property of the bankrupt vests in the Official Receiver on the making of a bankruptcy order, and on the appointment of a person other than the Official...

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