Re Kan Kwok Yu

HCB 4229/2023 and HCA276/2022
(Heard Together)

[2024] HKCFI 1469

HCB 4229/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4229 OF 2023

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AND

HCA 276/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 276 OF 2022

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____________________

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JUDGMENT

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Introduction

1.This is the combined hearing in HCB 4229 of 2023 (“the HCB proceedings”) and HCA 276 of 2022 (“the HCA proceedings”). Sino Resources (Hong Kong) Limited (“P”) is the petitioner in the HCB proceedings and the plaintiff in the HCA proceedings. The judgment in the HCA proceedings entered on 6 July 2022 against Kan Kwok Yue (“D1”) gave rise to the petition in the HCB proceedings (“the Judgment”).

2.The matters before the Court are:

(1)  the petition in the HCB proceedings issued against D1 on 25 July 2023 (“the Petition”); and

(2)  D1’s application by summons on 15 November 2023 to set aside the Judgment with consequential relief (“the Summons”).

3.At the conclusion of the hearing, judgment was reserved which I now give.

Relevant background

4.P is a Hong Kong company and a licensed money lender.

5.D1 is the registered owner of a unit in “the Belcher’s” (“the Property”).

6.Kan Kwok Shu Albert (“D2”) is D1’s elder brother.

7.D1 and D2 entered into a loan agreement with P on 4 August 2020 for the sum of $11.3 million (“the 1^st Loan”) secured by way of a 2^nd mortgage against the Property.

8.On 7 October 2020, D1 entered into a loan agreement with P for the sum of $300,000 (“the 2^nd Loan”). The 2^nd Loan was also secured by way of a 2^nd mortgage against the Property. The 1^st Loan and the 2^nd Loan are collectively referred to as “the Loans”.

9.On the instructions of D1 and D2, a little over $11 million of the 1^st Loan was paid to Jospa Trading Company Limited (“Jospa”) in repayment of an existing loan. The balance of the 1^st Loan and all of the 2^nd Loan was paid to D1.

10.Default in repayments under the Loans began in October 2021.

11.On 16 February 2022, P’s solicitors (“TYL”) sent demand letters to D1 and D2 seeking repayment of the Loans. D1’s then solicitors (“YP”) replied on his behalf on 21 February 2022. Further correspondence ensued with YP stating that they had no instructions to accept service.

12.P commenced the HCA proceedings on 3 March 2022 seeking sums of $12,255,750 and $327,000 being the sums then due under the Loans, plus interest and costs and other relief[1].

13.On 6 May 2022 P took out a summons (“the May summons”) seeking leave to enter judgment against D1. As earlier noted, it culminated in the Judgment entered against D1 on 6 July 2022. That led to a statutory demand[2] which, when unmet, resulted in the Petition.

14.On 15 November 2023 approximately 16 month later, D1 filed the notice to oppose the Petition and the Summons on the bases that

(a)  the Judgment was irregular; and

(b)  there is a bona fide dispute on substantial grounds as to the amount of the debt.

Legal principles

15.It is common ground that where a petition is based on a judgment debt, the applicable principles are those set out in Re Tam Mei Kam CACV 87/2012, unrep., 8 May 2013 at §§22-27. Thus, the Judgment is treated as prima facie evidence that the judgment debtor is indebted to the judgment creditor.

16.However, a bankruptcy court is not conclusively bound by the judgment debt. If circumstances so warrant, the Court may go behind the judgment. In general, the bankruptcy court would inquire into such a judgment only if the judgment debtor can show fraud, collusion or miscarriage of justice.

17.In its approach to setting aside applications, Hong Kong courts draw a distinction between regular and irregular judgments. A default judgment entered irregularly (in the sense that it was obtained without good and effective service of the writ) is liable to be set aside ex debito justitiae, irrespective of the merits of the proposed defence.

18.The Court does not have to accept the defendant’s assertion that he has not received the writ: on the defendant must show by compelling evidence that he did not have notice of the writ at the time the default judgment was entered: Cheung Sai Lon v Cheung Sai Ha & Anor, [2021] HKCFI 904 at §14.

19.At §15 of Cheung Sai Lon, in the context of the setting aside a judgment that is regular, Coleman J observed that

“the Court may set aside a judgment that is regular if a meritorious defence can be shown by the defendant. He must show a real prospect of success, meaning a defence which is one that could well be established at trial, requiring clear and objective evidence casting doubt on the claim. The power to set aside a regular default judgment is discretionary and unconditional, and the Court should have regard not just to the merits of the defence case put forward but to all relevant circumstances.”

20.It is well-established that where a debtor can show by sufficiently precise evidence which is believable, a bona fide dispute on substantial grounds in relation to the debt on which the petition is based, the Court will not make a bankruptcy order: see Re Leung Cherng Jiunn [2016]1 HKLRD 850 at §§20, 26-27.

Whether the Judgment was irregular

A.  D1’s account of events

21.The writ and the statement of claim (“SOC”) in the HCA proceedings were inserted into the letterbox at the Property which was D1’s usual or last known address on 3 March 2022 pursuant to RHC Order 10, rule 1(2). Under rule 1(3)(a), there is a presumption that the date of service is deemed to be the 7^th day after the date of insertion into the letterbox.

22.The relevant test for service in Hong Kong is “actual notice” and delivery by insertion into a letterbox is not deemed service unless and until it comes to the attention of the defendant: Tse Shiu Hoi v Sun Bo [2021] HKCFI 2351 at §35.

23.D1 contends that the Judgment was an irregular judgment. His version of events may be summarised as follows:

(1)  D1 used to live at the Property with his family;

(2)  in late January 2022, his brother, D2, persuaded D1 to move to live in a village house belonging to the family in Sheung Shui because of threatening calls D1 and his family had been receiving from moneylending companies[3];

(3)  D1 moved to the village house in late January 2022, and his family to an address near the border. They never returned to the Property thereafter;

(4)  D2 kept the mailbox key of the Property and on the way to the village house D2 ‘snatched’ D1’s 2 mobile phones so that D1 would no longer receive disturbing calls;

(5)  despite being ‘imprisoned[4]’ in the village house, D1 managed to go out twice alone[5] and on each occasion D1 bought a new phone which D2 expropriated upon D1’s return to the village house;

(6)  following D2’s advice to move to the UK, D1 did so with his family on 31 March 2022 and never returned to Hong Kong;

(7)  D1 maintains that he had no notice of the writ and SOC nor did he inform P[6] of his move to the UK; and

(8)  at D2’s request, he put his signature on several blank pieces of paper.

B.  D1 and PCCW

24.Acknowledgements of service (“AS”) in the HCA proceedings signed by D1 and D2 respectively were emailed by D2[7] to a firm of solicitors (“PCCW”) on 15 March 2022 who filed an acknowledgment of service on their behalf[8]. D1 maintains that he never gave PCCW such instructions. However, he does not say that he did not sign the AS but only that he does not recall signing the same.

25.The May summons was served on PCCW as solicitors for D1 and D2. Upon its receipt, PCCW informed TYL that they needed further time to take and confirm instructions for the purpose of preparing the Defence and Counterclaim (if any) and requested a 28 day extension.

26.D1 maintains that PCCW never informed him of the May summons nor the progress of the HCA proceedings.

27.However, D1 acknowledges that he did meet with Damy Lou (“Mr Lou”) (a solicitor with PCCW and a friend of D2’s who had moved to the UK) in the UK twice, once in mid-April 2022 and again in early June 2022. According to D1, the April visit from Mr Lou was to learn how D1 was settling in the UK and nothing was mentioned about the HCA proceedings. The June visit was for D1 to sign 2 documents relating to his surrendering vacant possession of 3 properties to the 1^st mortgagee (Hang Seng Bank). That did not come as a surprise as D1 had signed a power of attorney[9] authorising D2 “to handle the matter of surrender on [D1’s] behalf”. But the HCA proceedings were not mentioned at all during the June visit.

28.D1 then described the circumstances that gave rise to the Judgment granted on 6 July 2022:

(1)  On 22 June 2022, PCCW wrote to TYL stating that “… our clients do not object to your client’s application for leave to enter Judgment against [D1] under the 2^nd Loan.”

(2)  Later the same day, TYL replied to PCCW, referring to Ms Francesca Chao of PCCW’s confirmation that “[their] clients have no objection to [P’s] application” made by the May summons and enclosing a draft letter[10] to that effect with a view to it being produced to the Court to excuse PCCW’s attendance[11] at the hearing of the May summons.

29.D1 speculated[12] that there could be a degree of collusion between Mr Lou and D2 given the “objective effect that D1 alone became liable to the Judgment at an early stage of the HCA proceedings”.

30.Upon becoming aware of the HCA proceedings and the Judgment in September 2023, D1 instructed his current solicitors (“ELC”) to obtain the transfer of case papers and to enquire into the conduct of the hearing on 6 July 2022.

31.On 31 October 2023 ELC requested PCCW to provide further documents and information. D1 took exception to what was said to be evasive conduct, namely, that PCCW only did so much later - on 7 December 2023 and 12 March 2024.

32.PCCW’s documents and further information before the Court show that

(1)  on 11 March 2022, PCCW received costs on account paid by D2 (on behalf D1 and D2) in relation to the HCA proceedings;

(2)  that was followed by an email from D2 on 15 March 2022 attaching the writ, the SOC and 2 scanned copies of AS’ signed by D1[13] and D2;

(3)  on 17 March 2022, PCCW confirmed to TYL that they act for D1 and D2 and enclosed a copy of the AS in the HCA proceedings which, due to GAP, could not be filed until 12 April 2022;

(4)  upon receipt of the May summons on 5 May 2022, PCCW requested a time extension of 28 days to take and confirm instructions from their clients;

(5)  on 31 May 2022, Mr Lou met with D1 in Birmingham which meeting is recorded in an entry in PCCW’s Bill dated 1 December 2022;

(6)  upon checking with Mr Lou, PCCW confirmed by letter dated 7 December 2023 that at that meeting Mr Lou took instructions from D1 concerning, inter alia, the surrender of properties to Hang Seng Bank (the 1^st mortgagee) and the HCA proceedings;

(7)  PCCW provided further details of that meeting in their letter to ELC of 12 March 2024 which stated that

(i)  the meeting (which lasted for 45 minutes) took place in Mr Lou’s car parked at the loading area at D1’s address;

(ii)  Mr Lou produced 2 surrender acknowledgements prepared by solicitors for the 1^st mortgagee (“MB”) which D1 signed;

(iii)  at that meeting Mr Lou informed D1 of the HCA proceedings and took instructions from D1;

(iv)  D1 expressed his intention to stay in the UK for good in order to start anew and thus instructed Mr Lou not to contest the HCA proceedings;

(v)  D1 also instructed Mr Lou that it is not necessary to let him know in detail the progress of the HCA proceedings.

C.  Disposition

33.The Court is not bound to accept a defendant’s assertion no matter how improbable: Bank of China (Hong Kong) Limited v Cheung King Fung, Francis and Anor CACV 66/2005, unrep., 22 July 2005 at §33. As stated in the Cheung Sai Lon case referred to in §18 above, the onus is on the defendant to provide “compelling evidence” to show that he did not have notice.

34.Mr Raymond Lau, counsel for D1, referred to the effect that threats D1 received in January 2022 had on his mental state and the fact that he had to consult a psychiatrist on 3 occasions, i.e. 27 and 29 January 2022 and 4 February 2022[14] whose diagnosis was that D1 was suffering from recurrent depressive disorder. Further, the relevant window between the date of the writ and D1’s departure for the UK was relatively short, being no more than 4 weeks.

35.It is to be noted that on 28 January 2022, despite his need to consult a psychiatrist, D1 had the mental capacity to execute a power of attorney in favour of D2.

36.As regards the involvement of PCCW, Mr Lau pointed to the absence of a written retainer or any written instructions from D1. Nevertheless, D1 accepts that he did meet with Mr Lou to sign the 2 surrender acknowledgements[15] on 1 June 2022 rather than 31 May 2022 but denies any discussion or mention of the HCA proceedings, much less the giving of any instructions relating to them.

37.Various aspects of D1’s account raise concerns as to its veracity. The notion of his having been ‘imprisoned’ in the village house and rendered incommunicado between moving there in January 2022 until his departure on 31 March 2022 beggars belief for the following reasons:

(1)  on D1’s own account, he was able to leave the village house at least twice;

(2)  if he truly believed he was being imprisoned there, it is difficult to understand why he would voluntarily return to it rather than to his own family;

(3)  his evidence relating to his imprisonment is only that D2 “would lock the main door of the house when he went out without leaving a key for [D1]”. He did not state that it was the only means of access to the house nor whether there was a rear door[16].

38.It is also clear that his many creditors[17] (including P) were hard on his heels between January and his departure at the end of March 2022. In fact, upon receipt of P’s demand letter of 16 February 2022, D1 instructed YP to reply[18] to it.

39.When YP was asked to confirm on 25 February 2022 whether they had instructions to accept service in respect of the “intended action”, YP replied on 28 February 2022 that they act for D1 but “have no instructions to accept any writ or court documents for our client”. However, it would be surprising if YP sent their response without consulting D1.

40.PCCW’s evidence and records tally with the timeline of events. It is Mr Lou’s evidence that at his meeting with D1 when the surrender acknowledgements were signed, the HCA proceedings were discussed and instructions obtained from D1. That is entirely consistent with Mr Lou’s reasons for requesting a 28 day extension upon receipt of the May summons. Specifically, he needed further time to take and confirm his instructions.

41.The instructions he obtained from D1 (not to contest the HCA proceedings) also gel with D1’s intention to stay in the UK for good and to start anew.

42.D1’s allegations against Mr Lou/PCCW are extremely serious. If true, they mean that PCCW (i) had lied in correspondence and to the Court; (ii) had acted dishonestly by going on record as D1’s solicitors; and (iii) allowed the Judgment to be entered against D1 when PCCW did not have instructions to act for D1.

43.Despite accusing PCCW of such egregious and serious misconduct, neither D1 nor (for that matter) ELC saw fit to lodge any complaint or bring those allegations to the attention of the Law Society. That is surprising and inexplicable.

44.Looking at the totality of the evidence, I do not accept that D1 did not know about the HCA proceedings. Faced with the choice between D1 or PCCW’s evidence, I have no hesitation in preferring the evidence of PCCW that the HCA proceedings were brought to D1’s attention and instructions obtained from him. I also do not accept D1’s allegations against PCCW. PCCW were doing no more than carrying out D1’s instructions.

45.In my view, the Judgment is regular and as D1 was represented at the hearing on 6 July 2022, the Judgment is not a default judgment.

46.Unless D1 succeeds on the Summons (considered below), there would be no reason not to make a bankruptcy order on the Petition.

The Summons

47.I now turn to consider whether D1’s application to set aside the Judgment should be allowed and leave to defend given. That turns on whether D1 can show that there is a bona fide dispute on substantial grounds in relation to the debt on which the Petition is based.

48.D1’s case is that the Loans did not represent the true agreement between D1 and P which was of a hybrid nature, part loan and part investment.

A.  Background

49.According to D1,

(1)  P had an employee[19] called Chan Koon Lam (“Mr Chan”) who handled more than 15 mortgages for D1 between 2015 and 2018 and who knew that D1 actively invested in properties. Mr Chan suggested that D1 should partner with P and introduced D1 to his boss, a Mr Kwok by arranging dinners on 3 July 2019 and 19 September 2019.

(2)  P and D1 reached an understanding comprising the following elements (“the Understanding”):

(a)  P would partner with D1 to establish a fund-raising platform;

(b)  P was owned by Mr Kwok and his partner Mr Zhou;

(c)  P would be more comfortable with expanding its investments in D1’s projects if D1 mortgaged the Property to P;

(d)  P could put up to HK 0.5 billion into D1’s project; and

(e)  P’s internal rules required any investment to be in the form of a loan.

(3)  Meanwhile, on 7 August 2019, through D2’s introduction, D1 obtained a loan of $9,744,942 from Jospa Trading Company Limited (“Jospa”) at 8% per annum for a 2-year term.

(4)  In late January 2020, the loan was increased by $1,255,058 to a total of just under $11 million.

B.  D1’s case

50.Since 2020, Mr Chan has been aware of D1’s plan to inject a portfolio of property assets into a property fund to be launched by Havenport Investment Pte Ltd (“Havenport”), its business partner.

51.In July 2020, oral communications based on the Understanding took place between P (through Mr Chan) and D1 when it was further agreed as follows (“the Hybrid Agreement”):

(1)  P would provide $11.6 million to D1 to replace the Jospa loan;

(2)  only $4.95 million of that sum was a loan carrying 8% interest, the balance being P’s equity investment per se;

(3)  P would continue to provide funds by way of equity investment but which would not affect the $4.95 million loan at 8% interest or $33,000 per month;

(4)  in return for the provision of further funds by P, D1 would pay additional “sincerity money” to P at the rate of 24%;

(5)  the split of the equity profits would be determined in further negotiations, taking into account the sincerity money paid.

52.In his 3^rd affirmation dated 25 April 2024 (“D1 3^rd”) (at §31 (a)-(c)), D1 sought to clarify the Hybrid Agreement by explaining that P would be funding D1’s property purchases and technically D1 would take on a debt that would on its face carry interest obligations but repayment would be on a best-efforts basis. The property would then be sold and profits split 50-50.

53.The Hybrid Agreement on which D1 relies is an oral contract that is partly in writing. In such a case, D1, as the party alleging that there was such agreement bears the burden of proving it on a balance of probabilities and it is not for P (the other party) to convince the court of the truth of its alternative account: see Yu Jiang v Cheng Wai Lin Rosalind, unrep., HCA 2562/2005, 11 June 2014, at §16.

54.In evaluating the oral agreement, the Court will consider whether the evidence is coherent or self-contradictory or inconsistent with the contemporaneous documents: World Food Fair Limited v Hong Kong Island Development Limited (2006) 9 HKCFAR 735 at §37.

55.D1 relied heavily on an offer letter from P dated 22 July 2020 (“the offer letter”) of a loan in the sum of $4.95 million at 8% interest for one year, to be drawn down on 4 August 2020. D1 considered the offer letter to be the lynchpin of his case.

56.Mr Lau submitted that

(1)  the offer letter corroborates the Hybrid Agreement;

(2)  there is no evidence that the offer letter had been withdrawn or revoked;

(3)  there is no evidence from Mr Chan to rebut D1’s case;

(4)  D1 had no difficulty in making interest payments under the Jospa loan;

(5)  it makes no commercial sense whatsoever for D1 to replace the Jospa loan (at 8% interest) when he was halfway through the 2 year term with the Loans (at 27% interest), which more than tripled the amount of interest payable per month.

57.P’s evidence is that the offer letter was issued to D1 at his request to P through its appointed financial intermediary, Mr Chan, subject to the terms and conditions set out therein and the Loan Memorandum. The terms stated in the offer letter included the signing of the Loan Memorandum by D1 on a date to be fixed by P as well as a mortgage of the Property. P’s rights to withdraw the offer at any time before the drawdown date were specifically reserved.

58.The offer letter which D1 signed consisted of 3 pages only. There was no Loan Memorandum attached to it nor any documentation for the mortgage of the Property. The 2^nd mortgage was the only contemplated security under the offer letter. D2 did not feature at all in the offer letter.

59.It is not disputed that P provided a total of $11.6 million to D1. D1’s case is that $4.95 million out of the $11.6 million advanced by P represented the loan at 8% interest and the balance of $6.65 million was for the investment part of the Hybrid Agreement. In other words, the offer letter was somehow subsumed into or took effect under the 1^st Loan. On that basis, the balance for investment would be $300,000 less than what had been agreed to be the investment part of the Hybrid Agreement.

60.While the 2^nd Loan matches the shortfall, there is no explanation why the entire the transaction between D1 and P based on the Hybrid Agreement could not have been catered for in a single document. Nor is there explanation for splitting the investment part into 2 tranches.

61.P’s case is that the offer letter was revoked and superseded when D1 decided to apply for a loan of $11.3 million. As earlier noted, on 4 August 2020, the 1^st Loan (of $11.3 million) was made not only to D1 but to D1 and D2 jointly and severally. Unlike the offer letter, the 1^st Loan is properly documented. Its documentation comprises 7 separate items including a “Memorandum under Section 18 of the Money Lenders Ordinance” signed by D1 and D2 at P’s office.

62.When the 1^st Loan was completed, D1 provided P with an undated cheque in the sum of $11.3 million. On D1’s case, the loan was no more than $4.95 million. If so, why would he have provided P with a cheque for $11.3 million?

63.The 2^nd Loan came about when, 2 months later, D1 applied for a loan of $300,000 with interest at 27% per annum. Relevantly, D2 is not a party to the 2^nd Loan.

64.Various aspects of the Hybrid Agreement referred to in §§49(2) and 51-52 above are self-contradictory, inherently vague and incapable of being enforced. For example,

(1)  P and D1 were said to be partnering in a co-investment strategy. In that case, it is not apparent why D1 should be required to provide a mortgage to P.

(2)  Under the Hybrid Agreement, the balance of $6.65 million of the Loans was P’s equity investment but that sum was not applied to investing in anything: it simply refinanced D1’s prior debt with Jospa.

(3)  D1 does not explain why D2 was a party[20] to the 1^st Loan when he was not involved in the Hybrid Agreement and is not a party to it.

(4)  D1 does not explain why the amount of $11.6 million to be made available had to be split into 2 transactions.

(5)  The notion that, in a commercial context, D1 would voluntarily provide additional “sincerity money” to P for the further funds provided by P at the rate of 24% defies rational explanation when it is contrasted with his obligation to pay interest for the $4.95 million loan at 8%.

(6)  §51(5) above is too uncertain to be an enforceable contractual term.

(7)  The notion that a borrower need only pay interest on a loan on a “best efforts basis” is so uncommercial that it cannot be taken seriously. However, that is the effect of the arrangement referred to in §52 above.

65.D1’s case hinges on the reason he advanced for the need to disguise or dress up the investment part of the Hybrid Agreement as a loan because of P’s “internal rules” which D1 described in the following terms[21]:

“the equity investment to be injected by [P] into [D1’s] investment projects, as formality, shall be in the name of loan.”

66.Other than D1’s bare assertion, he has adduced no evidence whatsoever in support, when the very existence of such rules is, at best, dubious. No reason has been advanced to explain why a private company should have an internal rule of that nature or what purpose it would serve.

67.Be that as it may, D1’s entire case is that those internal rules caused P to document the Hybrid Agreement as Loans when in reality it was something else.

68.Further, D1 was unable to provide credible evidence to support various assertions made such as (a) his being Havenport’s “business partner” and (b) that he had referred numerous projects to P as part of the Hybrid Agreement. Not only is there no evidence of his alleged business partnership with Havenport, there is also no evidence of a single referral or project made to P despite the $0.5 billion line of credit said to have been agreed and available for investment.

69.Nowhere in the documents produced does one find a reference to “24%” other than in D1’s affirmations.

70.D1 made 3 monthly interest payments of $33,000 (interest on $4.95 million at 8%), $193,000 and $6000 (as sincerity monies). While the $33,000 plus $193,000 produces the amount what is due and payable on a monthly basis under the 1^st Loan and the $6000 under the 2^nd Loan, those payments take into account the rebate offer contained in §25 of the respective loan Memoranda for punctual payments during the 1^st to 12^th payments of interest.

71.P submitted that the sincerity payments at the rate of 24% could not have been based on investment returns since there was no way of knowing/predicting the rate of return to arise in the future.

72.Rather, the fact that the monthly payments align perfectly with the amounts due monthly under the Loans (after factoring in the rebate provision) required a degree of reverse engineering of the numbers and that explains the “24%” rate. It was an exercise that was open to D1, but not P, as the rebate provision was an integral part of the terms of the loan Memoranda already in existence.

  C.  D1’s conduct

73.In August 2023, after the 1^st mortgagee had been repaid, its solicitors (MB) corresponded with D1’s then solicitors regarding the surplus proceeds. His solicitors were seeking to increase the amount payable to P out of the surplus proceeds by $2.7 million to $10.2 million. That is inexplicable when it is D1’s case that the loan to him was no more than $4.95 million. Why then should D1 cause $10.2 million to be paid to P?

74.D1 apparently became aware of the HCA proceedings in late September 2023.

75.On 22 of September 2023, ELC filed a notice to act for D1 in the HCB proceedings and replied to a letter from TYL of 21 September 2023 concerning the 1^st hearing scheduled for 26 September 2023. They sought an adjournment to 19 December 2023 which TYL refused.

76.On 26 September 2023, the hearing was adjourned on the basis of a consent summons pursuant to which cheques totalling $30,000 were paid to P, coupled with D1’s undertaking to pay a sum of $170,000 within 14 days and a further sum of $2.4 million to P within 3 months which sums would be applied to settle part of the petition debts. Upon breach of the undertaking, P would be at liberty to bring forward the bankruptcy hearing.

77.At the very least, I agree that such conduct on D1’s part is tantamount to an admission that there is a debt owing to P that exceeds the sums payable pursuant to the consent summons.

D.  Conclusion

78.The burden on D1 is to show by sufficiently precise evidence which is believable, a bona fide dispute on substantial grounds in relation to the debt on which the petition is based.

79.While Mr Lau submitted D1 should be given the opportunity to defend the HCA proceedings based on §56(5) above, that cannot possibly outweigh all the matters raised in §§57-77 above. In my view, D1 has clearly not discharged the burden required.

Orders

  A.  The HCA proceedings

80.The Summons dated 15 November 2023 is dismissed.

81.I make an order nisi of costs of and incidental to the Summons in favour of P with certificate for counsel, such costs to be summarily assessed and payable forthwith.

  B.  The HCB proceedings

82.D1 is adjudged bankrupt.

83.I make an order nisi of costs of and incidental to the Petition in favour of P, with certificate for counsel, such costs to be summarily assessed and payable forthwith.

84.It is further directed that (1) P do lodge its statement of costs within 14 days; (2) D1 do lodge his list of objections (not exceeding 2 pages) within 14 days thereafter; and (3) P do lodge the reply (not exceeding 2 pages if any) within 7 days thereafter.

Mr Toby Brown, instructed by T Y Lam & Co, for the Plaintiff (HCA 276/2022) and Judgment Creditor (HCB 4229/2023)

Mr Raymond Lau and Mr. Immanuel Fong, instructed by Eddie Lee & Company, for the 1^st Defendant (HCA 276/2022) and Judgment Debtor (HCB 4229/2023)

Official Receiver (HCB4229/2023), attendance was excused