Section 30A(6) of the Bankruptcy Ordinance (Cap.6): Care to be exercised by creditors when making objections to automatic discharge from bankruptcy

In the recent case of Re Shum Tung Lam formerly known as Shum Wan Man [2020] HKCFI 1720, the Court of First Instance was asked to clarify the requirements under section 30A(6) of the Bankruptcy Ordinance (Cap. 6) (BO) which governs objections made by creditors or trustees to the automatic discharge of a bankrupt from bankruptcy. The case acts as a useful reminder to creditors and trustees to act prudently if they wish to object to a bankrupt’s automatic discharge from bankruptcy to avoid such applications being dismissed by the Court for being made out of time or on the basis of irregularities found in the application itself. 

Background

Shum was a first time bankrupt and was adjudged bankrupt on 15 July 2015. According to sections 30A(1) and 2(a) of the BO, Shum would be discharged from bankruptcy automatically on 15 July 2019.

On 9 July 2019, 6 days before Shum’s automatic discharge, one of Shum’s creditors (Applicant) issued a summons to object to the automatic discharge (Objection Summons). The Court made an interim order suspending the running of the relevant period, pending determination of the Objection Summons.

On 10 October 2019, one day before the hearing of the Objection Summons, the Applicant took out another summons to amend the Objection Summons (Amendment Summons). On 14 January 2020, the Applicant took out a further summons seeking a time extension for the Applicant to make the objection application by the Objection Summons (Time Summons).

For reasons further explained below, whilst the Court decided that it had jurisdiction to deal with the Objection Summons (i.e. Preliminary Issue) despite it being issued out of time, the Court found that the Objection Summons was defective in substance and refused to exercise its discretion in the Applicant’s favour. The Court also dismissed the Amendment Summons and Time Summons.

The Court ordered that each party bear its own costs on the basis that Shum failed on the Preliminary Issue but partly succeeded in obtaining discharge of the interim order and the Applicant failed in all its applications.

Time limit for creditors to issue the Objection Summons

Section 30A(6) of the BO provides that:-

Where the trustee or a creditor objects to the discharge of a bankrupt, he shall:

(a) notify the court; and

(b) in the case of a creditor, also notify the trustee,

not less than 14 days before the end of the relevant period, stating the grounds of his objection and applying for an order under subsection (3).

The relevant period in this case is the period of four years beginning with the commencement of Shum’s bankruptcy. Objections to Shum’s automatic discharge from bankruptcy should therefore have been made on or before 1 July 2019.

Whilst the Applicant filed the prescribed Form 82 with the Court on 17 June 2019 giving notice of its intention to object to Shum’s bankruptcy, the Applicant did not issue the Objection Summons until 9 July 2019.

The Court considered the wording of section 30A(6) of the BO and ruled that the draftsman’s intention when drafting this section was that the 14 day period requirement should apply to both (a) notification of objection as well as (b) application for an order. This means that the Applicant was required under section 30A(6) to file Form 82 as well as issue its Objection Summons on or before 1 July 2019. Accordingly, the Court found that the Objection Summons was filed 8 days late.

Can the Court extend the time for issuance of the Objection Summons?

Shum contended that given that the Objection Summons was issued out of time, the Court did not have jurisdiction to extend the time for the Applicant to take out the Objection Summons.

The Court however invoked section 100(4) of the BO, which gives the Court discretionary power to extend the time for doing any act or thing which is limited by the BO and ruled that the Court did have jurisdiction to deal with the Objection Summons.

Irregularities in the Objection Summons

The Court however noted that different grounds of objections were stated in the Applicant’s Form 82 and the Objection Summons.

The Court held that a bankrupt should not be caught by surprise in dealing with an objection against his discharge from bankruptcy and that it is only logical for the grounds stated in both the Form 82 notice and the Objection Summons to be the same, as section 30A(6) of the BO requires both steps to be undertaken at the same time. 

Whilst Counsel for the Applicant tried to argue that section 124(1) of the BO provides that formal defects and irregularities may not invalidate proceedings, the Court ruled that relying on a different ground in the Objection Summons which was not referred to in the Form 82 notice was not a formal defect but a defect in substance.

The Court further went on to state that but for the interim order, Shum would have been discharged from bankruptcy on 15 July 2019. The Amendment Summons and Time Summons were not taken out until 10 October 2019 and 14 January 2020. An interim order was a measure to preserve the status quo pending determination of the issues, but not to allow more time for a party to decide how he may wish to formulate his case.

Amendment Summons

Absent any justification or explanation by the Applicant for issuing the Amendment Summons after a date when Shum should have been discharged from bankruptcy and noting that different grounds of objections were stated in the Applicant’s Form 82 notice and the Objection Summons, the Court dismissed the Applicant’s Amendment Summons.

Time Summons

Counsel for the Applicant attempted to rely on the fact that the Applicant was not informed by the Trustee until 20 June 2019 that the Trustee had decided not to object to the discharge of Shum from bankruptcy, and as such, the Applicant was left with less than one month to prepare its objection application.

The Court took the view that the Applicant and Trustee were relying on different grounds of objection and the Applicant would have to take out a separate objection application in any event.  The Court also did not see why Shum should be held responsible for the Trustees’ handling of the case and dismissed the Applicant’s Time Summons.

Conclusion

This recent case sets out a useful checklist of the things which a creditor needs to bear in mind when making an application to object to the automatic discharge of a bankrupt under section 30A(6) of the BO, to avoid the application being dismissed by the Court on the basis of irregularities contained in the application. These matters include the following:-

1.

The notice of intention to object and the application for objection both need to (a) be made not less than 14 days before the end of the relevant period and (b) rely on the same grounds of objection. 

2. 

A creditor’s right to object to the automatic discharge of the bankrupt is separate and independent from that of a trustee in bankruptcy. A creditor should not wait and rely on the trustee to make an application only to find him/herself with insufficient time to prepare an objection application in the event that the trustee decides not to make one. As shown in this case, this reason will not be entertained by the Court as a valid ground for granting a time extension for a creditor to put forward his/her objection application.