In Re Chow Kai Weng (A Debtor) [2025] HKCFI 1888, the Court dismissed the Debtor’s interim order application.
Individual Voluntary Arrangement (IVA) is an alternative to bankruptcy – it involves an application to the Court for an Interim Order. The debtor is required to make a repayment proposal to the creditors which, on approval, is binding on all creditors. However, contrary to the widely-held belief that interim order applications appear to be non-contentious in nature, time and again the Court of Appeal has reminded practitioners that:
1. The Court does not blindly sanction proposals
2. A debtor must discharge his duty of full and frank disclosure regarding his net assets and liabilities.
3. The proposed nominee, as an officer of the Court, is duty bound to carry out independent investigation as to whether the debtor has discharged his duty of full and frank disclosure.
See: Re Leung Yat Tung [2009] 5 HKLRD 456
In this case, the Petitioner presented a Bankruptcy Petition (HCB 2619/2024) against the Debtor in April 2024 in respect of a debt over RMB30 million. Following an application for interim order taken out by the Debtor in June 2024, the hearing of the Bankruptcy Petition was stayed pending determination of the interim order application.
In the first hearing of the interim order application, the Petitioner challenged the Debtor’s lack of candour in respect of his disclosure of assets, and cast doubt on the authenticity of various creditors – i.e. 7 of the Debtor’s alleged creditors (accounting for >HK$212 million of alleged indebtedness) sharing the same address of a random apartment in Shatin.
After being afforded a second chance (on an unless basis), the Court found that the Nominee had failed to discharge his duty to carry out independent investigations as to whether the Debtor had made full and frank disclosure of his assets and liabilities by virtue of his wholesale acceptance of the Debtor’s mere say-so. As a result, sanction took effect automatically (after the Court refused to grant relief from sanction) and the interim order application was dismissed.
This case serves as a salutary reminder to (1) insolvency practitioners not to treat the Court as a rubber stamp in an interim order application, as if it would always be granted as a matter of course, (2) anyone who wishes to take advantage of the benefit of IVA to discharge his duty of full and frank disclosure, and (3) intended nominees of their overarching duties to the Court.
The full judgment can be viewed here.
Parkside’s Raphael Leung was instructed by Chun Sing Tam and Priscilla Wong of H.Y. Leung & Co. LLP, Solicitors for the Petitioner.
