Re Li Shu Chung

HCB 5475/2018

[2019] HKCFI 2500

IN THE HIGH COURT OF THE19

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 5475 OF 2018

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J U D G M E N T

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A. INTRODUCTION

1.The debtor (“Ken Li”) was engaged in hostile litigation against his own father (“the Father”).  Ken Li lost at first instance and on appeal.  He had to pay taxed costs of over $11 million (“the Debt”). The Debt is not disputed but Ken Li has not paid.

2.There are 4 applications before this court:

(1)     The Petition for bankruptcy of Ken Li based on the failure to pay the Debt;

(2)     Ken Li’s summons to set aside leave granted by a Master for issue of the Petition (“the Set-aside Summons”); and

(3)     Ken Li’s summons to strike-out Seline Li’s affirmation dated 11 March 2019 filed on behalf of the Petitioners (“the Strike-out Summons”). 

(4)     Related to item (3) is the Petitioners’ summons for leave to file and serve the affirmation of Lee Shu Hang in opposition (“the Affirmation Summons”).

3.Ken Li disputes the Petition on 4 grounds:

(1)     Jurisdiction defence: he claims that the court has no jurisdiction to make a bankruptcy order against him as he has been residing in England.  To this, the Petitioners assert that Ken Li has admitted on various occasions that he had a place of residence in Hong Kong, that he was ordinarily resident and/or was domiciled in Hong Kong;

(2)     Service defence: he claims that the Statutory Demand and the Petition have not been served on him properly.  To this, the Petitioners assert that Ken Li has been evading service and the Petitioners had to undergo a cumbersome process to effect service.  Ken Li in fact admitted receiving the Statutory Demand and responded with a settlement proposal;

(3)     Material non-disclosure defence: he asserts that the leave to issue the Petition was obtained from Master Hui due to material non-disclosure and/or mis-statement of the Petitioners.  This forms the subject matter of the Set-aside Summons.  The Petitioners deny the allegation and say that the court had been informed of the full facts.

(4)     The settlement proposal defence: Ken Li claims to have made a settlement proposal of charging the shareholding in a company that ultimately holds 34% interest in the Family Residence (“the Offer”) but the Petitioners rejected it. To this the Petitioners say that the Offer was unreasonable as Ken Li was dishonest and has filed winding-up proceedings against that company.

4.The Strike-out Summons asserts that Seline Li’s affirmation was scandalous, irrelevant and otherwise oppressive, besides being inadmissible as evidence of fact, and ought to be struck out.

B.  BACKGROUND

5.The factual background is largely undisputed and is taken from the helpful summary of Mr William Wong SC (leading Mr Alan Kwong and Ms Stephanie Wong). 

6.The Father (the late Mr Lee Sai) was a successful entrepreneur in Hong Kong.  He founded the Luen Tat Group of companies which carried on the business of manufacturing and trading of watchbands.  Two of the substantive companies within the Group were Luen Tat and Pak Tat.

7.Three of the Father’s children were involved in the Group: Ken Li (the eldest son), Richard Lee (the second son) and Seline Li (the daughter).

8.Like his siblings, Ken Li was brought up in Hong Kong.  He received tertiary education in the UK but returned to Hong Kong in 1986 for good: in order to work in Luen Tat.  (See Ken Li-3^rd in HCA1831/2010, §§61-64.)

9.The Father, Ken Li and Richard Lee (and their respectively families) used to live in the Family Residence at 5A Wiltshire Road, Kowloon Tong, Hong Kong.

10.Since about 2008, Ken Li had had serious disputes with the Father, Richard Lee and Seline Li.  Ken Li wrongfully expelled all other family members from the affairs of the Group.

11.The disputes have generated a plethora of hostile litigation set out in Annex A to Mr William Wong SC’s submission[1].

12.In the light of the tension with the Father, Ken Li and his family moved out of the Family Residence in 2009.  Since then, Ken Li has rented serviced apartments for himself and his family at Harbour City, Tsimshatsui.  See Ken Li-3^rd in HCA 1831/2010, §65, 74, 76-79, 83.

13.The litigation most relevant to the Debt was HCA 1711/2009.  By a judgment dated 9 December 2015, DHCJ Leung held that the Father was the sole beneficial owner of the shareholding in Luen Tat and Pak Tat, and Ken Li had no entitlement to the profits of the Group at all.

14.Ken Li appealed in CACV 2/2016 and lost.  Judgment was handed down by the Court of Appeal on 19 January 2017.

15.Ken Li had to bear taxed costs in both HCA 1711/2009 and CACV 2/2016 amounting to over $9 million.  As of the date of the Statutory Demand (ie 22 December 2017), the taxed costs and accrued interest totalled $11,178,443 and constituted the Debt.

16.In 2016, not long after the judgment in HCA 1711/2009 was handed down, Ken Li transferred his assets to his wife and children:

(1)     In March 2016, he transferred his interest in a property in Surrey, UK, to his daughter, Charlotte Li;

(2)     Sometime around February 2016, he transferred away to his wife, Charlotte Li and Joshua Li (his son) his entire shareholding in Joesh Overseas Ltd (through which he owned 34% shareholding in Roteland Development Ltd which then held and still holds the interest in the Family Residence).

17.Meanwhile, the Petitioners’ solicitors discovered that Ken Li have been engaged in 2 sets of litigation against his former solicitors, Stevenson Wong & Co.  In both his writ in HCA 594/2018 dated 14 March 2018 (“the 2018 Writ”) and Ken Li-4^th [2] in HCMP 3367/2016 filed on 3 December 2018 (“the HCMP Affirmation”), Ken Li gave an address in Ma Wan which the parties described as “the New Territories Address”.

18.As Ken Li did not pay the Debt, the Petitioners issued the Statutory Demand.  On 7 September 2018, Master Hui gave ex parte leave to issue the Petition.

19.I will first deal with the Strike-out Summons and the Affirmation Summons.  The Set-aside Summons will be dealt with in the context of the issues under the Petition.

C.  THE STRIKE-OUT SUMMONS AND AFFIRMATION SUMMONS

20.The Strike-out Summons was procedurally defective and in lack of merits.

21.Procedurally,

(1)     It was taken out on 22 March 2019 – just 2 clear days before this hearing, with only 15 minutes fixed for call-over.  The supporting affirmation of Joshua Li was affirmed only on 25 March 2019, ie less than 2 clear days before this hearing.

(2)     There was thus no reasonable opportunity for the Petitioners to file evidence in opposition.  It was plainly an attempt to hijack a substantive hearing.  Ken Li had repeatedly sought time extensions to file his own affirmation in opposition to the Petition which culminated in Master Hui’s unless order dated 15 January 2019.  It was not open to Ken Li even to suggest that Seline Li’s affirmation was filed only about 2 weeks before this hearing. The lateness in issuing the Strike-out Summons was sufficient in itself to have it dismissed.

(3)     Insofar as it was to inform the court that Ken Li did not have a residence in Hong Kong, there was no reason why Joshua Li (rather than Ken Li) should have filed the affirmation.  Ken Li has previously served a signed Ken Li-2^nd and had it formally sworn and filed later.  There was no reason why he could not have done the same this time.

(4)     Joshua Li’s affirmation contained new evidence on Ken Li’s residence and the reasonableness of the Offer, in reply to Seline Li’s affirmation.  This was an attempt to circumvent the order dated 26 November 2018 that no further evidence with regard to the Petition shall be adduced without leave.

22.On merits, it is not necessary to set out Mr Barlow SC’s arguments in Annex B of his written submission, which I have read them.  Mr Barlow SC has to concede in his oral submission that §§52, 54-56 of Seline Li’s affirmation are relevant.  In §6 of his affirmation, Joshua Li actually conceded that (unidentified) parts of Seline Li’s affirmation related to the Petition although he said they were untrue and unreliable. 

23.Having read Seline Li’s affirmation, I find that it is highly relevant. It sets out the history of hostile litigation between Ken Li and his Father which led to the Debt.  It discloses information on, amongst others, Ken Li’s residences and attempts to evade service of the statutory demand.  It also explains why the Petitioners are critical and skeptical of the settlement proposal. In addition, the affirmation purports to show that there had been findings of credibility against Ken Li and so his evidence should not be taken at face value.  All of such information is relevant to the issues, as will be demonstrated by the references to it in the analyses below.  There is no question of admissibility, only a question of weight for the court.

24.Seline Li relied on Ken Li’s admissions as to residence and judicial findings in her affirmation.  Such evidence could not be described as scandalous or oppressive.

25.For the reasons given in section C, I dismiss the Strike-out Summons and make no order on the Affirmation Summons.  The procedural defects and lack of merits in the Strike-out Summons clearly demonstrated an abuse of process.  I make an order, nisi, that Ken Li do pay indemnity costs for both summonses.

D.  THE JURISDICTION DEFENCE

D1.  Each party’s case

26.The court will have jurisdiction over a bankruptcy petition if:

(a)     at any time in the period of 3 years ending with the day of presentation of the petition (“the 3 Years”), the debtor

(i)    has had a place of residence in Hong Kong; or

(ii)   has been ordinarily resident in Hong Kong;

or

(b)     the debtor is domiciled in Hong Kong. 

See section 4(1)(a) and (c) of the Bankruptcy Ordinance, Cap 6 (“BO”).

27.The Petitioners pleaded that in the 3 Years between 25 September 2015 and 24 September 2018, Ken Li had resided in Hong Kong at (a) 3211 Sutton Court, Harbour City, Kowloon (“the Sutton Court Address”); and (b) the New Territories Address.

28.Mr Barlow SC (leading Mr Justin Lam) requires the Petitioners “to stay within the four corners of their petition”.  Ken Li claimed that his address has been in Surrey, UK (“the Surrey Address”).

D2.  Whether Ken Li has had a place of residence in Hong Kong

29.The principles on place of residence in Hong Kong have been summarized in Re Ku Chu Keung (a debtor) [2007] 2 HKLRD 292, §52, DHCJ L Chan (as he then was):

(1)     A person has a place of residence in Hong Kong if he has a place of residence such as a house or lodging to which to return and which he occupies or has the intention to occupy as a place of residence;

(2)     It is not necessary that the occupation of a place of residence be for the whole of the 3 Years, provided that the debtor had a place of residence at some time during the 3 Years;

(3)     A person may have more than one place of residence at the same time; and

(4)     Whether a person is resident in a particular place and whether that residence is permanent are questions of fact and degree.

30.In Re Ku Chu Keung, the debtor could stay at his young brother’s home when he returned to Hong Kong.  It was held that this may not be the debtor’s home but it was still his place of residence in Hong Kong to trigger the court’s bankruptcy jurisdiction.

31.Ken Li alleged that following his rift with the Father and the litigation between them, in mid-2013, he moved back to England, where he and his wife have since been permanently residing at the Surrey Address.  During the 3 Years, his involvement in the family litigation (which gave rise to the Debt) had required him to visit Hong Kong.  During those visits he stayed at the Sutton Court Address as a cheaper alternative to a hotel but he claimed never to have stayed at the New Territories Address, the home of Charlotte Li.

32.Ken Li claimed that the Petitioners were aware of those matters by June 2018, the latest, when Mok-2^nd (which sought leave to present a bankruptcy petition) was filed.  And yet he asserted that the Petitioners chose to disregard them and relied on the fact that Ken Li had cited the New Territories Address in the 2018 Writ.

33.Ken Li claimed that he was advised by JYJL that it would be preferable to cite a Hong Kong address in the 2018 Writ.  So he used the New Territories address with the permission of his daughter.

34.Mr Barlow SC submits that Ken Li’s alleged “admission” could not establish a non-existent place of residence at the New Territories Address: New Technology Cable Ltd v Popbridge Industrial Ltd, CACV 50/2000, 3 May 2000, p.5.

35.With respect to Mr Barlow SC, New Technology held that an admission in a pleading was not binding in a subsequent action, but it may be evidence of lack of bona fides on the part of the defendant who made the admission.  New Technology did not support his proposition in the preceding paragraph.  Ken Li’s “admission” came through an earlier piece of evidence, ie the HCMP Affirmation, and not pleading.

36.But more importantly, Ken Li’s assertions have to be viewed with caution. 

37.Firstly, he had twice admitted that the New Territories address was his residence in Hong Kong – in the 2018 Writ and the HCMP Affirmation, filed in the 1^st and 4^th quarter, respectively, of 2018.

38.Order 6, rule 5(1) of the Rules of the High Court (“RHC”) provides that,

“Before a writ is issued, it must be indorsed –

(a) where the plaintiff sues by a solicitor, with the plaintiff's address and the solicitor's name or firm and a business address of his within the jurisdiction and also (if the solicitor is the agent of another) the name or firm and business address of his principal;

(b)    where the plaintiff sues in person, with the address of his place of residence and if his place of residence is not within the jurisdiction or if he has no place of residence, the address of a place within the jurisdiction at or to which documents for him may be delivered or sent.”

39.The effect of this rule is that where a plaintiff sues by a solicitor, his address need not be his “place of residence”, but where he sues in person, it must be his place of residence, ie the place which he occupies as his home, where he lives.  The purpose of requiring a plaintiff to state his address as well as his solicitor’s address, which is the address for service, is to inform the other party whether the plaintiff is ordinarily resident within or outside the jurisdiction; and if it is the latter, the other party may wish to apply for security for costs.  Thus, the address of the plaintiff that should be stated in the writ must be his place of residence.  See Like Grand Holdings Ltd & anor,HCCW 603/2001, 11 July 2003, at §§5-9, Kwan J (as she then was), in the context of a petition.

40.Ken Li did not even name the solicitor who gave the advice in paragraph 33 above.  Be that as it may, as Ken Li sued by a solicitor in the 2018 Writ action, his address on the writ need not be his place of residence.

41.However, the same could not be said of the HCMP Affirmation.  Order 41, rule 1(4) of RHC provides that an affirmation must state the place of residence of the deponent.  Ken Li took the trouble to “rectify” the 2018 Writ by removing the New Territories Address in 2018, but continued to use that address (without explanation) in the HCMP Affirmation, which was filed as recently as on 3 December 2018.  The Petitioners could not be blamed for thinking that Ken Li had resided at the New Territories Address throughout 2018.

42.Secondly, the reason for Ken Li not stating his place of residence as the Surrey Address in the 2018 Writ was not difficult to see.  He has had the experience of being asked to provide security for costs in CACV 2/2016. He would not want to face a similar application for security in the 2018 Writ action.

43.Thirdly, Ken Li had been found to blame his former legal representatives whenever he was unable to explain inconsistencies in his evidence: §215 of the judgment in HCA 1711/2009, DHCJ Leung.  The learned judge found that Ken Li was “wholly incredible”.

“Whenever asked to explain, Ken almost invariably blamed it on his former legal representatives. Caution must be exercised before accepting such excuse as fact, when it came handy for Ken to blame the former legal representatives who could not be heard. I must say that his evidence as to the manner in which he had instructed his legal representatives, to the extent it could legitimately be revealed and considered by the court, at different stages of his evidence in court was far from impressive. Nor was his reference to time constraint a full, if any good, answer. I have no reservation in categorizing his explanation as wholly incredible.”

44.There is reason for this court to be wary that Ken Li is adopting the same pattern of laying blame on his (current) solicitors, JYJL.

45.Fourthly, the fact that the New Territories Address belonged to Charlotte Li was irrelevant.  A father could reside at his daughter’s place when he was in Hong Kong: cf Re Ku Chu Keung.  That fulfilled the elements of continuity, habitual nature and regularity; it was not transient nor fortuitous: Kok Hiu Pan.

46.Fifthly, the existence of the Surrey Address would not preclude Ken Li from having a second place of residence in Hong Kong. 

47.Having regard to the matters in section D2 above, I find that Ken Li has had a place of residence in Hong Kong.

D3.  Whether Ken Li has been ordinarily resident in Hong Kong

48.It is a question of fact and degree if the debtor has been ordinarily resident in Hong Kong within the relevant period.  The court should have regard to the ordinary and natural meaning of the expression “ordinary residence”. That term connotes residence in a place with some degree of continuity and apart from accidental or temporary absence.  The converse to “ordinarily is “extraordinarily” and that part of the regular order of a man’s life, adopted voluntarily and for settled purposes, is not extraordinary.  Ordinarily resident means no more than that the residence is not casual and uncertain but that the person held to reside does so in the ordinary course of his life.  In their natural and ordinary meaning the words mean “that the person must be habitually and normally resident here, apart from temporary or occasional absences of long or short duration.  The significance of the adverb “habitually” is that it recalls two necessary features, namely residence adopted voluntarily and for settled purposes: Re Kok Hiu Pan [2002] 3 HKLRD 20, at §27-29, Kwan J (as she then was), following Levene v IRC [1928] AC 217; IRC v Lysaght [1928] AC 234; and R v Barnet London Borough Council, ex parte Shah [1983] 2 AC 309.

49.It is not necessary to show that the debtor was ordinarily resident in Hong Kong throughout the 3 Years.  The consideration is whether the debtor was ordinarily resident in Hong Kong of unspecified duration at any time during those 3 Years.  Re 張承勷, HCB 6679/2015, 16 May 2017, §§23, DHCJ Marlene Ng (as she then was).

50.A person can have ordinary residence in more than one country at the same time.  The residence must be voluntary and cannot be forced against the person’s free will.  Temporary or occasional absences of long or short duration do not negative ordinary residence. Re 張承勷, §24.

51.I have taken into account the following factors:

(1)     KLG’s letter dated 17 February 2016 asserted that Ken Li would move back to Hong Kong for permanent residence from 16 March 2016 and start operating business here.  The Petitioners acted on that confirmation and did not seek security for costs in CACV 2/2016 against Ken Li.

(2)     Consistent with KLG’s letter and the immigration records produced by Ken Li, Ken Li had been in Hong Kong since 29 March for over 183 days in 2016, a period that would have attracted tax consequences in Hong Kong. 

(3)     Mr Wong SC draws to my attention that the trial in HCA 1711/2009 had ended in August 2014.  Judgment was delivered in December 2015.  There was only a one-day appeal on 13 December 2016 and yet Ken Li was in Hong Kong for over 183 days in 2016.  The irresistible inference was that Ken Li resided and/or worked here.

(4)     In HCA 1831/2010, Ken Li-3^rd filed on 14 January 2015 claimed that he had been renting serviced apartments in Harbour City, Tsimshatsui for himself and his children; he and his family wished to move back to live in the Family Residence.  Ken Li still maintained that position before Lok J on 17 June 2015.  See the Reasons for Decision in HCA 1831/2010 dated 20 October 2015, §§7 & 35.

(5)     There was no evidence showing that Ken Li had ceased renting serviced apartments and/or residence in Hong Kong since 2015 or why he had to do so.  There were plainly other proceedings in Hong Kong underway then.

(6)     It is incredible that Ken Li would hide in the UK and give up everything in Hong Kong since June 2015.  He is only aged 57 as of today and he had/has excellent business connections in Hong Kong, where he developed his career.  He remained a 50% shareholder of a Hong Kong company, which was only dissolved on 7 October 2016.

(7)     Ken Li’s affirmation filed on 28 November 2016 in HCCW 497/2009 stated the Sutton Court Address as his residential address in Hong Kong.

52.I find that Ken Li had been ordinarily resident in Hong Kong in the 3 Years.  S.4(1)(c)(i) BO has been satisfied.

D4.  Whether Ken Li has been domiciled in Hong Kong

53.In Re Ip Pui Man Nina [2011] 3 HKLRD 299 at §30, Au J (as he then was), citing Re Ku Chu Keung (supra) summarized the legal principles as follows:

(1)     A person who desires to acquire a domicile in a country must intend to reside in it permanently or indefinitely.

(2)     In determining whether a person has the intention to reside permanently or indefinitely in a country, the court must have regard to the motive for which he has taken up residence there. To acquire a domicile in a country, a person must freely choose to reside there and must not reside there because he is prescribed or dictated by external factors such as the duties of office, the demands of creditors or the need to seek medical treatment. If a person has a special purpose for going to and staying in a country and he will leave that country once the purpose is achieved, then he lacks the intention to stay in that country as required by law and hence cannot acquire a domicile in that country.

(3)     The existing domicile of a person is deemed to continue until it is proved that he has acquired a new domicile; and he who asserts a change of domicile bears the burden of proving the truth of the assertion.

(4)     An abandonment or change of domicile is a very serious issue and satisfactory evidence is needed to prove an intention to change a domicile.  A person must show a determination to give up all the rights, privileges and rights of succession in the place of his original domicile. Satisfactory evidence is needed to prove an intention to change a domicile.  See also Re Ku Chu Keung, at §§40-41.

54.Ken Li was brought up in Hong Kong.  After studying in the UK, he developed his career in Hong Kong, working for the Father in Luen Tat for decades. His business connections were in Hong Kong.

55.He and his family had lived in the Family Residence for 2 decades since 1989.  After moving out in 2009, Ken Li rented serviced apartments in Hong Kong for himself and his children.

56.In the premises, the burden rested upon Ken Li to show that he had the clear determination to change his domicile from Hong Kong to UK. However, he has only made one bare assertion that he had been re-domiciled in England since mid-2013: Ken Li-1^st, §8.  Mr Barlow SC did not make any submission on this aspect.

57.That may be because the Petition has not pleaded Ken Li’s domicile and Mr Barlow SC requires the Petitioners “to stay within the four corners of their petition”.  However, this stance has no legal foundation.

58.It has been held (in the context of a strike-out application) that a petition is not a pleading and “a petition by itself cannot be dealt with under the ordinary rules of pleading and is not intended to be in the form of an ordinary pleading.  It is intended to be and regularly is a more discursive and free-running document”.  See Re Unisoft Group Ltd (No.2) [1994] BCC 766, at 768G, per Harman J.

59.Whereas the jurisdictional basis to wind up a company under s.327 of the Companies Ordinance (Cap 622) needs to be clearly pleaded, in bankruptcy, it is not necessary for the facts on which jurisdiction is based to be mentioned in the petition.  It would usually suffice to set out the petitioning debt and the grounds on which the bankruptcy order is sought. It is usually for the debtor to raise a challenge to the court’s jurisdiction under s.4 of BO if he has a basis for doing so.  See Re Patrick Major Lee, HCB 3448/2008, unrep, 29 July 2009, Barma J (as he then was) at §24; followed in Re Cai Sui Xin [2019] HKCFI  330, §§6-11; Dai Guoliang v Sino Pacific Global Multi-Strategy Fund [2019] 2 HKLRD 332 at §32, DHCJ Maurellet SC.

60.In any case, Ken Li’s specific averment in the Notice by Debtor of Intention to Show Cause that he was domiciled in England and not Hong Kong was an issue within the four corners of “pleading”.

61.I find that Ken Li was and is domiciled in Hong Kong.  Even if the court were to ignore the domicile issue, for the reasons given in Sections D2 and D3 above, there is ample evidence to find that Ken Li has a place of residence in Hong Kong or has been ordinarily resident in Hong Kong for the 3 Years. The jurisdiction defence fails.

E.  THE SERVICE DEFENCE

E1.  Legal principles on service of the statutory demand

62.Proper service of a statutory demand on the debtor under s.6A of BO is a pre-requisite for commencement of bankruptcy proceedings.  The creditor shall do all that is reasonable for the purpose of bringing the statutory demand to the debtor’s attention and, if practicable in the particular circumstances, to cause personal service of the demand to be effected: r.46(2) of the Bankruptcy Rules (Cap 6A).

63.There has to be strict compliance with the mandatory statutory requirements for service of a statutory demand because of the importance of establishing with certainty the period within which a debtor has to comply with the statutory demand.

64.In Re Cheung Hoi Chu, HCB 865/1998, 24 December 1998, Le Pichon J (as she then was) held, at §§13-14:

“The Petitioner’s case comes to this: so long as the statutory demand does come to the notice of the Debtors (and it matters not how this came about), that is sufficient.

If this submission is correct, one wonders why the rules go to such elaborate lengths specifying requirements as to service as well as to what is required by way of proof of service. I do not agree that rules as to service can be flouted with impunity so long as by some lucky happenstance the statutory demand at some point falls into the hands of the debtor. In my judgment, requirements as to and proof of service must be strictly adhered to because of the importance of establishing with certainty the period within which a debtor has to comply with the statutory demand. Non-compliance gives rise to consequences which go far beyond those that would flow from any ordinary action.”

65.Whether a creditor has done all that is reasonable for the purpose of bringing the statutory demand to the debtor’s attention must be judged objectively but in the light of the information actually or constructively available to the creditor at the time of the service: Re Lam Lai Wah Susanna [2002] 4 HKC 334, §22, per DHCJ Poon (as he then was).

66.Where a debtor has one or more addresses, personal service must be attempted or effected at each of those addresses: Re Pang Mei Lan May [2005] 1 HKC 319, at §26, 28, Barma, J (as he then was).

67.Rule 46(2) clearly envisages personal service if practicable in the particular circumstances: Re Lam Lai Wah Susanna, §22.  Personal service is not practicable if the exact whereabouts of the debtor is unknown to the petitioner at the time of the attempted service: Re Ho Kai Wa Francis (a debtor) [2015] 1 HKLRD 277 §8, Chung J.

68.If personal service has failed or is impracticable (and there must be good reasons to demonstrate that that is the case), or reasonable enquiries have led nowhere, other modes of service are permissible: Re Lam Lai Wah Susanna, §22; Re Pang Mei Lan May, at §§26 & 28.  The word “reasonable” under rule 46(2) connotes a range of, instead of a particular, conduct: Re Ho Kai Wa Francis, §8.

69.The debtor did not have to be domiciled, resident or carrying on business in Hong Kong, or present in Hong Kong on the day the statutory demand was served: Re Damnerncharnwanit [2000] 1 HKC 579 at 581I-582A, Yuen J (as she then was).

70.Before newspaper advertisement is permitted, rule 46(3), requires the creditor to know or have reasonable cause to believe “that the debtor has absconded or is keeping out of the way with a view to avoiding service”.

71.There are 2 other requirements, namely:

(a)     Personal service cannot be effected: Re Pang Mei Lan May, §§23 & 28.

(b)     The debtor must be in Hong Kong at the time of service by advertisement, otherwise it would clearly fail to serve the purpose of drawing the statutory demand to the attention of the debtor.  The affidavit of service of the statutory demand should address “whether the debtor was within the jurisdiction or believed to be so at the time when the attempts to effect service were made, giving the facts upon which the inference is founded for such belief”: §2.6(h) of Practice Direction 3.1.

72.Where the debtor is out of the jurisdiction, leave from the Court for service out of the jurisdiction of a statutory demand is not required. However, a creditor wishing to serve a statutory demand outside the jurisdiction may (not must, as suggested by Mr Barlow SC) adopt the procedure prescribed by O.11, r.6, RHC; §2.2 of Practice Direction 3.1. 

73.When a statutory demand is to be served outside the jurisdiction, the time limits of 21 and 18 days respectively referred to in the demand must be amended by adding 21 days to each of these time limits wherever they appear: §2.3 of Practice Direction 3.1.

74.An affidavit of service of the statutory demand has to be filed.  The contents are governed by r.49 of the Bankruptcy Rules.

75.Rule 49(4) requires that:

“If service of the statutory demand (however effected) has been acknowledged in writing either by the debtor himself, or by some person stating himself in the acknowledgment to be authorized to accept service on the debtor’s behalf, the affidavit must be made either by the creditor or by a person acting on his behalf, and the acknowledgment of service must be exhibited to the affidavit.

76.Rule 49(5)requires that:

“If neither sub-rule (3) [which governs personal service] nor (4) applies, the affidavit must be made by a person having direct personal knowledge of the means adopted for serving the statutory demand, and must —

(a) give particulars of the steps which have been taken with a view to serving the demand personally;

(b) state the means whereby (those steps having been ineffective) it was sought to bring the demand to the debtor’s attention; and

(c)  specify a date by which, to the best of the knowledge, information and belief of the person making the affidavit, the demand will have come to the debtor’s attention.”

77.Rule 49(7) provides that:

“If the affidavit specifies a date for the purposes of compliance with subrule (5)(c), then unless the court otherwise orders, that date is deemed for the purposes of these rules to have been the date on which the statutory demand was served on the debtor.”

E2.  Service of the Statutory Demand

78.Ken Li’s challenge as to service of the Statutory Demand is a desperate attempt because of his receipt and knowledge of the Statutory Demand well ahead of the Petition: Bush v Bank Mandiri (Europe) Ltd [2011] BPIR 19, §34.

79.Firstly, KLG put forward the Offer as solicitors for Joesh to the Petitioners' solicitors twice by letters dated 28 December 2017 and 1 February 2018.  It was apparent that KLG had read the Statutory Demand and compared the Debt to the value of the shares in Roteland.

80.Secondly, by a letter dated 21 June 2018, JYJL expressly admitted that it had recently come to Ken Li’s attention that the Statutory Demand had been issued regarding the taxed costs.  JYJL even purportedly made the Offer.  That was 3 months before issue of the Petition. 

81.Anyway, the attempts to serve the Statutory Demand on Ken Li are summarized below:

(1)     On KLG: on 22 December 2017 and 31 January 2018, the 1^st and 2^nd appointment letters were sent to KLG.  KLG was then acting Ken Li in a series of extant legal actions, and was still acting for Joesh (which is controlled by Ken Li and/or his family) in HCCW 302/2011.  KLG denied having instructions to accept service or to respond to the Statutory Demand but made the Offer.  On 6 February 2018, there was substituted service on KLG, who acknowledged receipt on the same day without returning the original Statutory Demand.  KLG replied on 15 February 2018 reiterating the Offer and that they had no instructions to accept service.

(2)     At the Sutton Court Address: on 19 January 2018 and 30 May 2018, the Petitioners’ solicitors personally attended the Sutton Court Address, after sending appointment letters there.  This address was taken, amongst others, from (i) KLG’s letter under HCA 1711/2009 informing the Petitioners’ solicitors that Ken Li had resided in Hong Kong since about March 2016; and (ii) Ken Li-6^th in HCCW 497/2009 made on 28 November 2016.  Tse, the process server, was told that Ken Li had moved out.  The land search record showed that Ken Li was not the owner.

(3)     At the New Territories Address: after the Petitioners’ solicitors discovered the New Territories Address from the 2018 Writ, they mailed appointment letters there.  I am satisfied from Mok-3^rd that the New Territories Address was correct and that the returned mail with the words “no such address” was not written by the Post Office staff.  The Petititioners’ Solicitors then personally attended that address on 17 and 29 May 2018.  The land search record showed that Ken Li was not the owner.  Further,

(a)   Tse had given detailed evidence by affirmation as to what happened at his personal visits.  He was told by the staff there that she did not know Ken Li but that Ms Li and her English husband lived there.  A woman at the New Territories Address said that she did not know the details of Ken Li and had not replied to Tse’s query as to whether she was the family member or servant of Ken Li.  An English man was angry with Tse and switched off the telecom at the New Territories Address, used foul lang on Tse and threatened to call the police if Tse would not leave.  Charlotte Li, in her affirmation, made no comment at all on these happenings.  She did not even suggest who that woman and the English man could be, if not her and her husband.

(b)   Despite filing an affirmation in support of Ken Li’s “Notice of Intention to show cause herein and in opposition to the Bankruptcy Petition herein”, Charlotte Li has never denied that Ken Li had resided at the New Territories address.  It was only 2 months later that Joshua Li sought leave to file an affirmation (in support of the Strike-out Summons) to state that Ken Li never lived at the New Territories address.

(4)     By advertisements on 15 February 2018 in the Sing Tao Daily and The Standard. However, as Ken Li was not in Hong Kong at the time of the advertisement, this substituted service was not effective: Deutsche Bank AG v Zhang Hong Li [2016] 3 HKLRD 303, §5.

(5)     On JYJL: the Statutory Demand was sent on 18 May 2018 and 9 October 2018 when JYJL was representing Ken Li in the 2018 Writ action.  By a letter dated 21 May 2018, JYJL stated that it had no instructions to accept service nor arrange appointment.

(6)     At the Surrey Address: on 25 May 2018, the Statutory Demand was sent by registered mail addressed to Ken Li.  The Petitioners' Solicitors did so because they were informed by the Petitioners that Ken Li may sometimes reside at the Surrey Address, which was the address used by Ken Li’s son, Joseph, in his witness statement in HCA 1711/2009.  The mail was returned marked with the words “gone away”.  A UK law firm conducted an ownership search and found that Ken Li was not the owner.

82.The bulk of these happened at least 6 months before the Notice to Act was filed by JYJL.  Ken Li was plainly evading service.

83.Mr Barlow SC complains that, despite engaging English solicitors to do a title search on the Surrey Address, the Petitioners have chosen not to attempt personal service of the Statutory demand (and the Petition) in Surrey, which did not require leave of the court.

84.With respect, his submission presumes that the Petitioners knew that Ken Li resided at the Surrey Address when the incontrovertible evidence was that:

(1)     Having fought 8 sets of litigation in Hong Kong since late 2010 (see HCA 1831/2010, Lok J, §42), the Petitioners have had no contact with Ken Li all along and could not have known the exact whereabouts of Ken Li.  I accept this to be probably true given the animosity among the parties.

(2)     It was only on 21 June 2018 that JYJL, for the first time, asserted that Ken Li had not visited Hong Kong since October 2017.  By then, all the attempted personal service and advertisement had been performed.

(3)     Truly, the Petitioners’ Solicitors did not attempt personal service at the Surrey Address.  However, the “wrong” mode of service by registered mail produced useful information to the Petitioners' solicitors that Ken Li had moved away.  The title search of the Surrey Address verified that to be probably true.  Ken Li, his wife living with him or his son, have never explained how someone could have marked “moved away” on the returned mail. 

85.Judged objectively, after the attempted service by mail at the Surrey Address, it could not be said that the information actually or constructively available to the Petitioners was such that they knew or ought reasonably to know that Ken Li lived at the Surrey Address.  Personal service of the Statutory Demand on the Surrey Address was impracticable.  Ken Li was plainly evading service: Ho Kai Wah Francis.  The Petitioners could not be faulted for thinking that service by advertisement was appropriate.

86.This was not a situation where the Petitioners flouted the rules of service with impunity such that “by some lucky happenstance”, the Statutory Demand at some point fell into Ken Li’s hands: Re Cheung Hoi Chu (paragraph 64 above).  Nor was there a lax approach to service as described in Bush v Bank Mandiri.  There were reasonable attempts to effect service before and after advertisement was resorted to.

87.Mok-1^st did state that the Statutory Demand had been brought to the attention of Ken Li since about 28 December 2017 and that Mok believed that service had also been effected through KLG on 6 February 2018 and by advertisement on 15 February 2018.  She did say that Ken Li had deliberately avoided service and repayment.  She did say that there was no real prospect of recovering the debt by execution or other process.  She did say that Ken Li had failed to comply with the Statutory Demand on or before 8 March 2018 (counting from the date of the newspaper advertisement).  Mok-3^rd did refer to JYJL’s assertion that Ken Li had not lived in Hong Kong since 2017.  All of these satisfied r.49(4) and (5) of the Bankruptcy Rules.

88.In the premises, I find that Ken Li had been evading service of the Statutory Demand.  Even if the advertisement was an inappropriate mode of service, I am satisfied that Ken Li has had actual notice of the Statutory Demand at least 3 months before the Petition was issued.

E3.  Service of the Petition

89.The provisions of the RHC relating to service of process do not apply to bankruptcy proceedings: s.99(1) of BO. The procedural provisions governing service of a petition are rr. 59 and 31 of the Bankruptcy Rules. Lam Michael Alan Nigel, HCB 3929/2000 (unrep, 28 May 2002), §14, Kwan J (as she then was). 

90.Rule 59 of the Bankruptcy Rules provides that:

“(1) Service of a creditor’s petition shall be effected by the creditor or his solicitor, or a person in their employment, delivering a sealed copy of the petition to the debtor.

(2) If the court is satisfied by affidavit or other evidence on oath that prompt personal service cannot be effected because the debtor is evading service of the petition or any other legal process, or for any other cause, it may order substituted service to be effected in such manner as it thinks fit.

(3)     Where an order under subrule (2) has been carried out, the petition shall be deemed to have been duly served on the debtor.”

91.Rule 31 of the Bankruptcy Rules provides that:

“When the debtor is not in Hong Kong, or cannot be found, the court may order service on him of the petition or any order made against him, or of any summons issued for his attendance, to be effected within such time and in such manner as it thinks fit.”

92.Various attempts have been made to serve the Petition:

(1)     At the New Territories address – by personal visits on 3 and 18 October 2018 after an appointment letter was given.  The same English man cut off the intercom and shouted abuse at Tse.

(2)     At KLG on 9 October 2018.  KLG informed the Petitioners' solicitors that KLG no longer represented Ken Li and that all communication should be directed to JYJL.

(3)     At JYJL on 9 October 2018.  The Petitioners' Solicitors expressly asked JYJL on 29 October whether the New Territories Address was no longer used by Ken Li.  Apart from a holding reply on 1 November, JYJL never gave an answer.

(4)     At the Surrey Address by post on 15 October 2018 but it was returned marked “not known at this address”, consistent with the result as to service of the Statutory Demand. 

93.In view of those attempts, it was impracticable for personal service to be effected at all, whether in Hong Kong or at Surrey.

94.Mok-5^th filed on 5 November 2018 sought an order for substituted service of the Petition.  Mok frankly affirmed to the fact that JYJL claimed that Ken Li had not visited Hong Kong since October 2017 and so advertisement in Hong Kong might not bring the relevant matter to the attention of Ken Li.  This met the requirement in PD3.1, §2.6(h).  However, Mok stated that JYJL (then acting for Ken Li in HCA 1039/2018 concerning a default judgment) was able to contact Ken Li and bring the Petition to Ken Li’s notice. 

95.Before an order for substituted service was granted, Ken Li already surfaced.  On 14 November 2018, JYJL filed a notice to act expressly stating that it was “(without prejudice to the contention of [Ken Li] as to jurisdiction and irregularity for service).”  So Mok’s statement in MOK-5^th that JYJL was able to bring the Petition to Ken Li’s notice turned out to be true; and that service was effective.

96.The Petitioners’ solicitors served the Petition on JYJL on the following day.  JYJL acknowledged service with the firm’s chop.  These came a day before Master Grace Chan raised requisition on Mok-5^th:

“As the Debtor has legal representation now, and will the Petitioners’ solicitors attempt to serve the Petition on solicitors for the Debtor?”.

97.Ken Li did not dare to state how he got hold of the Statutory Demand and Petition before 14 November 2018.  The challenge as to service of the Petition was disingenuous.  At the call-over hearing of the Petition on 21 November 2018, Master H Au-Yeung specifically put this adverse remark on record:

“Despite the Notice to Act and despite the Petitioners’ service of the Petition on the Solicitors firm acting for the Debtor, the Debtor insisted that there was no valid service as such and this is maintained as one of the grounds in resisting this Petition, despite the Court’s reminder of the rationale under the CJR.”

98.I share Master H Au-Yeung’s observation.  Having regard to the various attempts on service, the service defence, both as to the Statutory Demand and the Petition, was utterly hopeless and a complete waste of the court and the Petitioners’ time.

F.  APPLICATION TO SET ASIDE LEAVE TO ISSUE PETITION

F1.  Grounds for setting aside ex parte leave

99.Ken Li suggested that the Petitioners were guilty of material non-disclosure or false statement in Mok-4^th when they sought ex parte leave to issue the Petition.  The Petitioners failed to correct the misstatements when Mok-5^th and Denise Tse-1^st were filed in support of an application for substituted service of the Petition.  Details of the alleged material non-disclosure or false statements are in Annex A to Mr Barlow SC’s written submission, which it is not necessary to set out here.

100.It is trite law that if any of these is established, the ex parte leave will be set aside although the court has discretion to re-grant it.

101.Mr Barlow SC complains that the primary bases for establishing service was service on KLG (who had no instructions to accept service) and by advertisement (when Ken Li was out of Hong Kong on the date of advertisement). There was no personal service on Ken Li out of jurisdiction at the Surrey Address despite the Petitioners’ knowledge that Ken Li normally resided at the Surrey Address. 

102.He submits that the Petitioners’ sole ground purportedly to show that Ken Li was in the jurisdiction was Mok’s misdescription of the contents of KLG’s letter dated 17 February 2016.  That letter set out Ken Li’s “conditional proposal” to move back to Hong Kong (meaning that he was living in England), which (as the Petitioners and Mok knew) the Father and the Petitioners themselves never accepted.  The known consequence was that Ken Li did not move back to Hong Kong and instead continued to permanently reside in English.  Nevertheless, the Petitioners chose to invoke rule 46(3) to advertise the Statutory Demand in Hong Kong upon Mok’s false description.

103.Further, he submits that despite knowing, at least from 21 June 2018, that Ken Li had not been in Hong Kong since October 2017, Mok suppressed the information from the court that the Petitioners’ previous attempts to serve by advertisement was ineffective because Ken Li was not in Hong Kong.

104.Due to the Petitioners’ “calculated contraventions” of the rules on service of statutory demand, Mr Barlow SC submits that it was simply not possible to calculate when the statutory demand was supposedly brought to Ken Li’s attention.  None of the Petitioners’ affirmations of service attempted to specify that date, in breach of the mandatory requirement of rule 49(5)(c).

F2.  Analyses of the grounds for setting aside ex parte leave

105.These submissions have to be considered with caution as the evidence was taken out of context.

106.With regard to paragraph 101 above, the analyses in Section E2 on service above refute Mr Barlow SC’s submission. 

107.With regard to paragraph 102, KLG’s letter dated 17 February 2016 was in reply to the Petitioners’ demand for security for costs on appeal in CACV 2/2016.  KLG’s letter affirmatively stated that Ken Li “would move back to Hong Kong for permanent residence from late March 2016”.  He “would start his business again in Hong Kong in healthy food products.” There was no averment that such moves were conditional upon his being admitted to the Family Residence.  Ken Li plainly could not have insisted on that condition, otherwise he would likely face an order for security for costs.  Mok did not mis-describe the contents of KLG’s letter.  The 2018 Writ, the HCMP Affirmation and Ken Li’s transfer of the Surrey Property to Charlotte Li provided support to KLG’s assertion.

108.Further, Ken Li applied to court to return to the Family Residence but was refused.  See Lok J’s Reasons for Decision dated 20 October 2015.  KLG’s assertion that Ken Li would return to reside in Hong Kong could not be conditional upon his being able to reside at the Family Residence.

109.With regard to paragraph 103, there was no suppression of information. Mok-3^rd (§§13-16) had frankly informed the court about JYJL’s letter dated 21 June 2018.  See paragraph 87 above.

110.With regard to paragraph 104, Mok-1^st did say that Ken Li failed to satisfy the Statutory Demand on or before 8 March 2018 (21 days from the advertisement).  See paragraph 87 above.

111.For the reasons given in Section F, the application to set aside the ex parte leave to issue the Petition has no merits.

G.  THE SETTLEMENT PROPOSAL DEFENCE

G1.  Legal principles on settlement proposal

112.The court may dismiss a petition if the debtor has made a reasonable settlement offer which, if accepted, would have led to a dismissal of the petition, but which the petitioner has unreasonably refused to accept: s.6D(3) BO and Cheung Wah v China State Bank Ltd [1999] 4 HKC 185, at 190D-E, Ribeiro J (as he then was).

113.The reasonableness or otherwise of the refusal is to be judged at the date of the hearing.  The test is whether a reasonable creditor, in the position of this petitioning creditor, and in the light of the actual history as disclosed to the court, would have accepted or refused the offer.  In order to conclude that the refusal was reasonable, the court has to be satisfied that no reasonable hypothetical creditor would have refused the offer, and that the refusal of the offer was therefore beyond the range of possible reasonable actions in the context.  See Cheung Wah, at 191; Kong King Ong Alexander, HCB 10771/2008 (unrep, 27 August 2009) §19(2), Barma J (as he then was).

114.The petitioner is entitled to have regard to his own interests and may have regard to the fact that in a bankruptcy there will be an investigation of the debtor’s affairs.  He is not required to balance his interests against those of the debtor, or to take a chance, or to show patience or generosity. Acting reasonably is not the same as acting justly, fairly or kindly”.  See Kong King Ong Alexander, §19(4); Re Cheng Ka Lun Grand, HCB 17553/2002, 23 December 2002, at §10, Kwan J (as she then was).

115.The test is whether the debtor can pay it out of cash or readily realizable assets in his hands.  No regard may be given to future contingencies, because those events may or may not happen.  See Re Lam Ngai Fung Tony, HCB 4641/2001 (unrep, 3 December 2001), at §§12-13, per DHCJ To.

G2.  Reasonableness of the settlement proposal

116.The Offer was to charge the Debt against the 34% shareholding in Roteland.  Roteland holds the Family Residence as its sole property.  That property was valued in about November 2017 at HK$169 million, without competing creditors.

117.Joesh, of which all the shareholders are immediate family members of Ken Li, holds 34% shares in Roteland, but Ken Li is not a shareholder or director.  The 34% shareholding was worth at least at HK$57.46 million (ie HK$169 million x 34%). 

118.The remaining 66% was held by the Father through his corporate vehicle. Upon the Father’s death, the Petitioners took charge as executors.

119.By a petition issued on 16 September 2011 in HCCW 302/2011 against the Father’s corporate vehicles, Joesh sought an order for the major shareholders of Roteland to buy out the shares of Joesh, on the ground of unfair prejudice or on the just and equitable ground. 

120.Back in 2017, the Petitioners have turned down the request of Joesh for (i) a validation order to enable Roteland to sell the Family Residence; and (ii) the Petitioners to buy out Joesh’s shareholding.

121.Eventually, by consent, a validation order was obtained on 19 July 2018 to allow sale of the Family Residence at a price of not less than HK$180 million.  Ken Li claims that no sale has been effected till now because of the Petitioners’ refusal to take reasonable steps to sell the property.

122.Joesh had, on 23 November 2018, passed a board resolution to irrevocably acknowledge, confirm and/or ratify the Offer.  Charlotte and Joshua Li’s affirmation confirmed that Joesh agreed to make the Offer, with a draft share charge for the Petitioners’ consideration.

123.Ken Li, Charlotte Li and Joshua Li have confirmed by affirmation that the 34% shareholding was not subject to prior incumbrances.

124.However, I agree with the Petitioners that no reasonable creditor in their position would have accepted the Offer for these reasons:

125.Firstly, the Debt has been owing for almost 2 years since the allocaturs were issued.  The Offer was not in the form of cash.  Under clauses 3.1 and 3.2, the proposed security shall only become enforceable only if the market value of the Family Residence falls below an amount yet to be agreed. The Petitioners should not be put to such uncertainty.

126.Secondly, Ken Li complains that it was the unreasonableness of the Petitioners in insisting on an offer price of HK$220 million (on the estate agent’s web page) that the Family Residence could not be sold.  However, the evidence was that Richard Lee has been working with estate agents to sell the property.  In any case, it was open to Ken Li to find a buyer at HK$180 million.  The fact remained that there was no offer to purchase at any price since the validation order about a year ago.  The Family Residence was not a “readily realizable asset”.

127.Thirdly, HCCW 302/2011 has not yet been set down for trial.  In light of the uncertainty surrounding the litigation (as well as the liquidation process, if any), there is no realistic possibility that the Petitioners would get paid soon in the foreseeable future.

128.Fourthly, the history known to the court and the Petitioners was that: Ken Li  (i) has been dishonest (as repeatedly found by the court[3]); (ii) transferred away the Surrey Property and shareholding in Joesh to evade the Debt; and (3) was hostile towards his family all along[4].  The Petitioners could not be blamed for being sceptical of him. 

129.Fifthly, in the liquidation process of Luen Tat under HCCW 497/2009, Ken Li had been dishonest in filing bogus proof of debts and colluding with liquidators to raise false allegations of tax evasion and insolvency[5]. The Petitioners have every reason to believe that if Roteland is wound up, Ken Li (who has been hostile and malicious) would play the same sort of gamesmanship to complicate the liquidation process and to obstruct the Petitioners from getting paid.

130.Sixthly, Ken Li has other debts: (i) HK$2.49 million taxed costs owed to Yuen Hing (a company within the Group controlled by the Father and Seline Li) in HCA 1711/2009; (ii) HK$745,667 taxed costs owed to Yuen Hing in CACV 2/2016; (iii) HK$28 million owed to Luen Tat under a default judgment in HCA 1039/2018; and (iv) a potential judgment for HK$30 million owed to Luen Tat in HCA 2846/2018. These debts are no less than HK$60 million (excluding interest).  The interest in Roteland is not sufficient to cover all of them.

131.I therefore find that there was no reasonable settlement proposal made that would have justified dismissal of the Petition.

H.  CONCLUSION

132.This is a case where Ken Li has fought litigation and lost but refused to accept the consequence of having to pay costs.  He evaded the Debt by transferring away assets to his wife and children.  He plainly has had a place of residence in Hong Kong, was ordinarily resided here or was domiciled here in the 3 Years.  He evaded service, changing his version as to place of residence as and when it suited him.  The jurisdiction defence fails.

133.There is ample evidence of the Petitioners taking all reasonable steps to try and serve the Statutory Demand and Petition at every possible address known to the Petitioners.  Ken Li has had notice of the Statutory Demand at least 3 months before the Petition.  The Petition came to his notice through JYJL, at the latest, and before an order for substituted service was made.  The service defence fails. 

134.The Offer was not acceptable to reasonable creditors like the Petitioners having regard to the known history of the litigation and the past dishonest conduct of Ken Li.  The settlement proposal defence fails.

135.Master Hui has not been misled into granting leave to issue the Petition.  The Set-aside Summons is dismissed.

136.There being no defence to the Petition, I make a bankruptcy order. Having regard to the conduct of Ken Li in evading service and the unmeritorious defence, I make an order for costs (including costs of the Set-aside Summons), on a nisi basis, to the Petitioners on indemnity basis.

137.The Strike-out Summons is dismissed.  Costs, on a nisi basis, of that Summons and the Affirmation Summons shall be to the Petitioners on indemnity basis.

138.I thank counsel for their assistance.

Mr William Wong SC, Mr Alan Kwong and Ms Stephanie Wong, instructed by D.S. Cheung & Co, for the petitioners

Mr Barrie Barlow SC and Mr Justin Lam, instructed by Johnnie Yam, Jacky Lee & Co, for the debtor

Official Receiver’s attendance has been excused