Re Qin Jun

HCB 3231/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3231 OF 2016

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REASONS FOR JUDGMENT

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Introduction

1.This is the debtor’s application dated 22 September 2016 to annul the bankruptcy order (dated 27 July 2016) (made in the debtor’s absence), and to dismiss the bankruptcy petition.  It was taken out in reliance on s 33(1)(a), Bankruptcy Ordinance (Cap 6).  That section reads:

“The court may annul a bankruptcy order if it at any time appears to the court that ... on any grounds existing at the time the order was made, the order ought not to have been made”.

2.The principal grounds put forth in support of this application are:

(a)  the debt is disputed;

(b)  the debtor was not domicile, or ordinarily resident, in Hong Kong;

(c)  service of the petition was irregular because the debtor was absent from Hong Kong at the time of service;

(d)  (because of sub-para (a) and/or (b) and/or (c) above) the related parts of the petition and the verifying affirmation are untrue.  In any event, the court’s discretion should be exercised to annul the bankruptcy order.

Background

3.The petition was commenced in May 2016.  It concerns the debtor’s non-payment of $45 million and interest (“the subject debt”). According to the loan agreement dated 29 September 2014 (“the 2014 loan agreement”), the subject loan was to be paid by cheque to a company known as HEC Finance 92 Ltd (“the recipient company”) (clause 7.1 thereof).

4.The creditor drew a cheque in the sum of the subject loan in favour of the recipient company.  It was cleared in September 2014.

5.The debtor also signed the following documents:

(1)  a supplemental agreement dated 29 March 2015 (“the 2015 loan agreement”);

(2)  a letter dated 9 April 2015 (“the 2015 letter”).

6.The relevant parts of the 2015 loan agreement (after referring to the 2014 loan agreement and the subject loan) read:

“[The creditor] at the request of [the debtor], now agrees to, inter alia, extend the Final Repayment Date ... ” (recital (C));

“[The debtor] hereby expressly confirms that as at the date hereof, an aggregate sum of HK$45,000,000 has been drawn under the Loan Facility pursuant to [the 2014 loan agreement] ... ” (clause 3).

7.The relevant parts of the 2015 letter read:

“本人于2014年9月29日與貴司簽訂貸款協議 (‘該貸款協議’)﹐向貴司借款 HK$45,000,000 ...

... 本人承認至今仍未償還該借款及其利息的任何部份 ... ”.

The debt is disputed

8.The debtor deposed that he was never paid the subject loan, and exhibited statements of his two personal bank accounts in support.  In view of para 3 to 4 above, this does not advance the debtor’s case, because equally it is not the creditor’s case that the subject loan was paid into the debtor’s personal bank accounts (but paid as directed by him).

9.Apart from asserting that he has been misled and/or forced into signing the 2014 loan agreement and the 2015 loan agreement, the debtor also asserts that:

(a) the recipient company was related to the creditor;

(b) despite the creditor’s promise that the recipient company would transfer the subject loan to the debtor, the transfer never took place.

10.The debtor also refers to the subject loan having been paid over several days before the date of the 2014 loan agreement in support of his case that the recipient company and the creditor were related to each other.

11.It cannot sensibly be said the subject loan is not a substantial sum.  With this in mind, the debtor’s case is inherently implausible to the extent of being unbelievable.

12.The debtor deposed that one of the companies he was managing (“the debtor’s company”) was in need of money “at the material time” (the time has not been identified, but judging from the date of the 2014 loan agreement and the subject loan, it should be in September 2014).  However, although the subject loan was transferred by the creditor to the recipient company, the recipient company refused to transfer it to a subsidiary of the debtor’s company (as agreed).

13.The matter dragged on until early April 2015, when the debtor was asked to sign the 2015 loan agreement and the 2015 letter, and he did so.  However, the subject loan was still not transferred to the debtor’s company afterwards.

14.The debtor has not explained (for example):

(1)  why the need for money in September 2014 was not attended to before March 2015 (for example, whether it was because the need for money has disappeared, or that it was resolved through other means);

(2)  (in view that the creditor has not honoured its contractual obligation under the 2014 loan agreement) why he still considered it appropriate to approach the creditor for a loan;

(3)  (in view that the creditor has not honoured its contractual obligation under the 2014 loan agreement) why he still trusted the creditor and signed the 2015 loan agreement and the 2015 letter;

(4)  why the 2015 loan agreement and the 2015 letter were drafted on the basis of a pre-existing loan which has already been drawn down (that is, the subject loan);

(5)  why he admitted in the 2015 loan agreement and the 2015 letter to the effect he owed the creditor the subject loan;

(6)  why the need for money was not attended to after April 2015.

These matters are highly relevant to the credibility of the debtor’s story.

15.It can be inferred from the debtor’s failure to explain the above matters that his story is nothing more than assertions which should be given no weight.

16.Accordingly, I am not satisfied that there is a substantial dispute to the subject loan.

The debtor’s domicile/ordinary residence, etc

17.Here the debtor relies on s 4(1)(a), Cap 6 (domicile in Hong Kong) and asserts that he has not been ordinarily resident, has had no place of residence, in Hong Kong, and has not carried on business in Hong Kong (s 4(1)(c), Cap 6).

18.The debtor further asserts that:

(a)   there was never any intention to permanently and indefinitely reside in Hong Kong, and his place of residence is in Xinjiang, China;

(b)  in support, he produces records to show that he was not in Hong Kong from January to July 2016.  Further, he came to Hong Kong only for managing the business of the debtor’s company, and he was granted an employment visa;

(c)   he was not in Hong Kong on 6 May 2016 when the bankruptcy petition was presented.

19.In relation to para 18(a) and (b) above, the creditor points out (correctly) that the debtor has not provided his immigration records for the 3 years preceding the date of the bankruptcy petition (May 2013 to May 2016).  The debtor has not explained why he has not done so.

20.The assertion summarized in para 18(a) above is one which can be easily made, and no weight will be placed on it (see also para 23(1) below).

21.Further, in the annual reports for 2013 and 2014, the debtor has reported (to the Companies Registry) a Hong Kong address in a residential development in Wanchai as his residential address (used by the creditor for serving the court documents).  He used another Hong Kong address in a residential area as his residential address in the annual report for 2015.  These addresses were admittedly his residences in Hong Kong as a matter of fact (at least at the time when they were reported).

22.The residential address in Xinjiang used by the debtor herein was found to be a unit in a commercial building.

23.The above, when considered together with other matters such as the debtor was the director of at least 11 companies registered in Hong Kong, and he was the holder of a Hong Kong identity card, entitles an inference to be drawn that:

(1) (further to what has been stated in para 20 above) the debtor’s assertion that he never intended to domicile in Hong Kong should not be given weight;

(2) Hong Kong has been his place of domicile and/or his place of ordinary residence;

(3) he has had places of residence in Hong Kong.

24.In relation to para 18(c) above, it is noted that the sub-paragraphs of s 4(1), Cap 6 are disjunctive, rather than conjunctive.  Because I have concluded in the manner stated in para 23 above, it is unnecessary to consider this matter.

Was service of the bankruptcy petition defective ?

25.As the creditor correctly submits, the debtor’s reliance on:

(a) Re Vong Wun Man, ex parte Industrial and Commercial Bank of China (Asia) Ltd [2006] 3 HKLRD 650;

(b) Re Lam Lai Wah Susanna [2002] 4 HKC 334,

is misplaced for the simple reason that they are factually distinguishable.

26.Re Vong Wun Man was a decision where the petitioner knew of the bankrupt’s Macau connections and yet sought an order for substituted service by advertising the statutory demand in newspapers circulated in Hong Kong.  Re Lam Lai Wah Susanna was a decision where the petitioner has earlier given to the court (in a garnishee proceeding) a different address as the bankrupt’s “last known address”.

Alleged defective petition and the court’s discretion

27.Criticism has been levied against the petition and the supporting affirmation, but I do not find it to be valid.

28.It is alleged that there is a contradiction between the creditor having been informed that the debtor has left his earlier residences and the creditor’s deposition that the debtor was evading service.

29.The reason given for the alleged contradiction seems to be that the concept of absconding or evading service cannot at the same time stand with the concept of an intention to “permanently and indefinitely residing” in Hong Kong.  It is hard to see the logic of that argument.  Any Hong Kong permanent resident can decide to abscond or evade service by leaving the territory, but that does not somehow negate his being a Hong Kong permanent resident.

30.The debtor’s reliance on the court’s discretion to annul is in truth nothing more than a repetition of his earlier allegations (summarized and considered above).

Conclusion

31.The debtor’s application is dismissed.

Other matters

32.The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the reasons for judgment and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

Mr Jonathan Chang, instructed by Ching & Solicitors, for the creditor

Mr Jeffrey Tam, instructed by Khoo & Co, for the bankrupt (the debtor)

The Official Receiver’s Office did not appear