A bankrupt can be required to pay a portion of his income earned during the bankruptcy to his or her trustees by way of a contribution to the bankrupt estate. Such payments can be fixed by the court pursuant to section 43E of the Bankruptcy Ordinance (Cap 6 of the Laws of Hong Kong) or agreed between the bankrupt and the trustees on an informal basis, and are calculated after assessing the bankrupt’s reasonable expenses.
The Hong Kong court requires the trustee in bankruptcy to maintain an even hand between the needs of creditors and the bankrupt when assessing the reasonable expenses of a bankrupt. Such view is articulated by Justice Reyes in Re Lau Nga Yee Christine.
In the recent case of Re Kwok Ting Wai, the bankrupt appealed to the Court of First Instance under section 83 of the Bankruptcy Ordinance seeking to increase his monthly expenses as assessed by the trustees. The bankrupt’s appeal was dismissed.
Section 83 of the Bankruptcy Ordinance reads “If the bankrupt or any of the creditors or any other person is aggrieved by any act or decision of the trustee, he may apply to the court, and the court may confirm, reverse or modify the act or decision complained of, and make such order in the premises as it thinks just“.
After interviewing the bankrupt, the trustees assessed his average monthly income at $14,535 and his monthly expenses at $12,285. The bankrupt was required to make a monthly contribution of $2,250 (i.e. the difference between his monthly income and monthly expenses) to his bankruptcy estate.
In this appeal, the bankrupt asked the court to increase the amounts of four items of monthly expenses from the levels allowed by the trustees, namely, miscellaneous household expenses, miscellaneous personal expenses, personal food expenses and private tutorial fees for his son.
In deciding this appeal, Mr Justice Peter Ng made it clear that “when an appeal is brought under section 83, it would be inappropriate for the court to interfere with the decision of the trustees unless it is shown that the trustees’ decision is clearly wrong“. In this case, the judge did not find the trustees’ assessment clearly wrong nor utterly unreasonable. As a result, none of the increases requested by the bankrupt were allowed by the Court.
It appears that some of the bankrupt’s reasoning in his request (or the lack of it) did not assist his case: for example, in making his request for a larger amount of miscellaneous personal expenses, he did not provide any explanation as to the purpose of those additional expenses. Further, in respect of the bankrupt’s claim for his son’s private tutorial fees, when the court asked him why such a claim was not made during his previous interview with the trustees, the bankrupt simply said he had forgotten to do so. The bankrupt also failed to produce any receipts for any tutorial fees for the purpose of his appeal.
The court also made two further remarks, namely (i) while the court had considerable sympathy for the bankrupt, the bankrupt had to bear the consequences of his bankruptcy; and (ii) looking at the bankrupt’s overall financial situation, his claim for additional sums, together with the sum of $12,285 approved by the trustees, would add up to over $16,000. That would result in a figure larger than his current income, which meant he would still be living beyond his means. It was unclear to the court how the bankrupt could manage to achieve that during his bankruptcy. In any event, the appeal was dismissed on the basis that the trustees were not clearly wrong or utterly unreasonable in refusing to approve the claims for additional sums.