Re Paul Clement Tam, Debtor

HCB 4850/2023

[2024] HKCFI 2448

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4850 OF 2023

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REASONS FOR JUDGMENT

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1.This is the substantive hearing of:

a. the bankruptcy petition presented on 22 August 2023 by the Petitioner against Paul Clement Tam (respectively “the Petition” and “Tam”) based on an unmet statutory demand demanding Tam to pay the debt of HK$31,722,150 (“the Alleged Debt”) arising out of the liability of Tam as a guarantor; and

b. Tam’s application by summons dated 12 June 2024 (“the Stay Summons”) for the Petition to be dismissed or alternatively stayed pending the determination of arbitration proceedings HKIAC/PA24107 commenced by Tam on 25 April 2024 (“the Arbitration”).

2.The Petition is opposed by Tam on the ground that there is a bona fide dispute over the Alleged Debt. The Stay Summons was issued by him as a fallback.

3.At the conclusion of the hearing, I dismissed the Petition and made no order on the Stay Summons, with the costs of the Petition to be paid by the Petitioner, and the costs of the Stay Summons not yet dealt with.

4.Here are my reasons.

The Basic Facts

5.In August 2014, Brands United Limited (“the Company”) was incorporated in Hong Kong to carry on the business of retail merchandising, licensing, brand management and promotion. It was founded by 4 founders, namely, Yeung Chee Tat (“Stanley”), Lau Ka Wing (“Kelvin”), Lee Chun Sing Andrew (“Andrew”) and Tam (together “the 4 Founders”). Stanley was the sole registered shareholder of all 10,000 issued shares of the Company and was its sole director and the sole signatory of the Company’s bank accounts. Of the said 10,000 issued shares, 7,500 of them were held by Stanley on trust for Kelvin, Andrew and Tam in equal amounts, namely 2,500 shares each.

6.Tam was acquainted with Mr Yang Qi (“YQ”), the Vice President of Direct Investment of CCB International (Holding) Limited (“CCBI”), whom he introduced to the other 3 founders.

7.From August 2015 on, the 4 Founders and CCBI (through YQ) had been discussing and later agreed that CCBI would through the Petitioner invest into the Company by subscribing the Company’s newly issued convertible preference shares with a view to facilitating the successful listing of the Company within a period of 5 years.

8.On 23 or 24 February 2016, a Subscription Agreement and a Shareholders’ Agreement (respectively “the SA” and “the SHA” and together “the 2 Agreements”) were concluded by the same parties, namely, the Petitioner, the Company and the 4 Founders, whereby and among others, the Petitioner agreed to invest about HK$20,000,000 into the Company by subscribing for 1,112 convertible preference shares. Each of the 2 Agreements contained (a) a put option in materially identical wording (Clause 8 in the SA and Clause 9.1 in the SHA)(“the Put Option”) and (b) a general indemnity in identical wording (Clause 9.1 in the SA and Clause 12.1 in the SHA)(“the General Indemnity”).

9.By the Put Option, only Stanley, and not the other 3 founders, was obligated to purchase the Put Shares upon the Petitioner exercising the right and delivering the Put Notice.

10.In December 2017, the Company’s 100% shareholding in its then wholly owned subsidiary 3D Animation Gallery Limited (“3D Ltd”) was sold to Blossoms Company Limited (“Blossoms”) for the consideration of HK$15,000,000 through the signing of a non-binding memorandum of understanding on 4 December 2017, a sale and purchase agreement on 20 December 2017 and finally the instrument of transfer and bought and sold notes on 30 December 2017 (“the Sale of 3D Ltd”).

11.On 15 May 2018, the Petitioner, the Company and the 4 Founders executed an Amendment Deed (“the Amendment Deed”) agreeing to amend the 2 Agreements by replacing the definition of “Put Price” therein to the one in the Amendment Deed which would yield a higher Put Price as compared to the previous definition.

12.On the same day, ie 15 May 2018, a Facility Agreement was entered into between the Petitioner as lender, the Company as borrower and Stanley as guarantor whereby the Petitioner agreed to lend to the Company HK$25,000,000 for a term of 24 months and Stanley agreed to guarantee the Company’s liability.

13.In or around May 2020, YQ resigned from the employment of CCBI.

14.On 23 February 2021, the Petitioner exercised the Put Option and issued a Put Notice to Stanley requiring Stanley to purchase the Put Shares at the Put Price of HK$31,722,150 on the closing date of 2 March 2021.

15.Stanley failed or refused to purchase the Put Shares.

16.By a demand letter dated 20 May 2022, the Petitioner demanded Tam to indemnify the Petitioner the said sum of HK$31,722,150 pursuant to the General Indemnity contained in the 2 Agreements.

17.On 5 September 2022, a statutory demand for this sum was served on Tam, and as said, was unmet by Tam.

Legal Principles

18.The legal principles on bankruptcy petitions are well established.

19.As Kwan JA (as the learned VP then was) explained in Re Leung Cherng Jiunn (debtor) [2016] 1 HKLRD 850 at §§20 and 27:

a. Bankruptcy proceedings are summary in nature and are not intended to be used for the purpose of debt collection. The jurisdiction to make a bankruptcy order will only be exercised in very clear cases.

b. If the debtor raises a genuine triable issue which casts doubt on whether the debtor is liable for the debt, the petition must be dismissed. For this purpose, the debtor is required to adduce evidence to satisfy the court that there is some basis to doubt the validity of the debt and that such dispute is not one which can be determined summarily.

c. If the court is satisfied that there is a bona fide dispute on the debt, the court will not usurp the function of a civil court and decide the dispute between the parties. The usual practice of the court is to dismiss the petition, leaving the petitioner to establish himself as a creditor by judgment to be obtained in the civil court.

d. Where oral evidence is required to decide a real and substantial dispute of fact, the court will dismiss the petition.

20.Moreover, in order to successfully oppose a petition on the basis of a bona fide dispute to the debt on substantial grounds, a debtor has to adduce sufficiently precise evidence which is believable, and must establish that he actually has a defence of substance, not just a fair probability of one (Re Cheung Chi Mang [2018] HKCFI 984 Ng J at §11).

The Sale of 3D Ltd was a buyout that has rendered the Put Option invalid or not exercisable (“Dispute 1”)?

21.The Put Option is crouched in these terms, and as there is only very minor and immaterial difference between the wording of Clause 8.1 of the SA and Clause 9.1 of the SHA, I will only quote the former :

“In consideration of the Investor [ie. the Petitioner] agreeing to enter into this Agreement and other Transaction Documents, Mr. Yeung [ie. Stanley] hereby grants to the Investor the right (but not the obligation) (the “Put Option”) to require Mr. Yeung to purchase all or any part of the Put Shares if a Qualified IPO or a Buyout does not occur within sixty (60) calendar months from the Closing Date”[1] (Mr Pao’s emphasis)

22.The term “Buyout” was defined the same in the respective Clause 1.1 of the 2 Agreements, thus:

“ “Buyout” (i) the acquisition of any Group Company by a third party purchaser by means of any transaction or series of related transactions or (ii) a sale of all or substantially of the assets of the Group”[2]

23.The terms “Group” and “Group Company” were also defined in the respective Clause 1.1 of the 2 Agreements, thus:

“ “Group” the Company and its Subsidiaries, an organization chart of which as at the date of this Agreement is set out in Schedule 2 and a “Group Company” means any of them” (Clause 1.1 of the SA[3])

“ “Group” the Company and its subsidiaries from time to time, and a “Group Company” means any of them” (Clause 1.1 of the SHA[4])

24.Schedule 2 to the SA[5] consists of an organization chart which shows that the Company had 2 subsidiaries, and 3D Ltd was one of them (with the Company holding 50% of its shareholding at the time).

25.Mr Pao (leading Mr Chan), counsel for Tam, submitted that on the plain wording of the relevant definitions and provisions in the 2 Agreements :

a. 3D Ltd was clearly a “Group Company”;

b. The Sale of 3D Ltd to Blossom in December 2017 was clearly an acquisition of a Group Company by a third party within the definition of “Buyout”; and

c. The Sale of 3D Ltd was clearly well within 60 calendar months from the Closing Date of 24 February 2016.

26.Therefore, it was submitted, as the Put Option was granted only if a “Qualified IPO” or a “Buyout” did not occurr within time, and as a “Buyout” as stipulated had occurred, the Put Option was no longer valid or exercisable by the Petitioner, thus, Stanley’s refusal or failure to comply with the Put Notice was not a breach and there was no loss “resulting from or arising out of breach” by Stanley for which Tam could be asked to indemnify the Petitioner under the General Indemnity.

27.Mr Oh, counsel for the Petitioner, contended:

a. On a proper construction of the Put Option, “there is only a Buyout if there is no Qualified IPO and the Petition consents to a Buyout as an alternative”, and “it is clear that any such acquisition or sale of assets would only qualify as a Buyout with the Petitioner’s consent”[6]; and that this construction was supported (i) by reference to Clause 3.4.1 of the SHA, which states:

“The Existing Shareholders and the company unanimously agree that the objectives of the Parties is to consummate the Qualified IPO as soon as practicable upon the approval of the investor, and that, subject to the consent by the Investor, Buyout is a possible alternative to a Qualified IPO”.

and (ii) by the context, as deposed to in the 2^nd affirmation of Sinn Chung Ming Anthony (“Anthony”), that the total estimated value of the assets of the Company at the time of the signing of the 2 Agreements was HK$180 million and the price for the Sale of 3D Ltd was only HK$15 million.

b. Dispute 1 was “wholly without merit” as the same parties entered into the Amendment Deed.

c. In the oral hearing, Mr Oh relied on estoppel by convention and contended Tam was estopped as he had signed the Amendment Deed.

d. The other 3 founders, including Stanley, did not consider the Sale of 3D Ltd as a “Buyout” such as to make the Put Option not exercisable, as (i) the other 3 founders also signed the Amendment Deed, (ii) the 3 other founders each wrote a cheque in the sum of HK$6,000,000 to the Petitioner in the period from August to October 2021 (which were all returned); and bankruptcy orders were made against the 3 other founders upon the Petitioner’s petition.

28.As can be seen from the definitions and provisions set out above, the construction of the Put Option contended for by Mr Pao is based on the clear meaning of the plain wording of the 2 Agreements. I find the contention eminently arguable. On the other hand, the construction contended for by the Petitioner was much more nuanced, and I agree with Mr Pao’s comment, that it involved reading into the Put Option the new requirement of “consent by the Investor” which does not appear in the wording of the Put Option.

29.I also accept Mr Pao’s submission that even if some form of “consent” from the Petitioner was required, it is undisputed that (a) Clause 4.2.1 of the SHA provided that the Board of Directors of the Company would be consisting of 2 directors, one of which would be nominated by the Petitioner, (b) the Petitioner had nominated YQ who at the time of the Sale of 3D Ltd was the Company’s director, and (c) the Sale of 3D Ltd was formally ratified and affirmed by the resolution of the directors of the Company dated 4 January 2018[7] signed inter alios by YQ and the resolution itself expressly stated that the Board had full knowledge of the matter; and as such, it is arguable that the required “consent” has been given by the Petitioner.

30.I think it is very clear that the relative value of the consideration for the Sale of 3D Ltd as compared to the estimated value of the Company’s assets at the time of the signing of the 2 Agreement could not be a “context” or a factor, if even one at all, that would so support the Petitioner’s contention, if supporting it at all, to the point of dismissing Dispute 1 summarily in favour of the Petitioner.

31.I also do not think the fact that the other 3 founders chose to issue to the Petitioner cheques that later bounced and chose not to contest the bankruptcy petitions against them could be understood, without the other 3 founders themselves saying so, as “[they] did not consider the Sale of 3D Ltd as a ‘Buyout’”, as the Petitioner contended, such as to make it a basis to summarily dismiss Tam’s Dispute 1. For all we know, the other 3 founders might have their own considerations and reasons for having chosen to do what they did.

32.It therefore seems clear to me that Dispute 1 is a bona fide and substantial dispute.

33.In the Note of Reply lodged one day before the hearing by the Petitioner, it contended that Tam was estopped by convention to deny that the Put Option was not valid or exercisable, and it was contended to the effect that it would be dispositive to Dispute 1.

34.On this point, the Petitioner placed much reliance on the fact that the Amendment Deed was executed by all parties subsequent to the Sale of 3D Ltd, and that the Petitioner at the same time of the execution of the Amendment Deed made a loan to the Company in the sum of HK$25,000,000.

35.However, when looked a bit closer:

a. There is no documentary evidence whatsoever proffered by the Petitioner that in any way shows or indicates that, at around the time of the execution of the Amendment Deed, the Company or any of the 4 Founders or their agents have made any representation or communication to the Petitioner that they would regard the Put Option as still subsisting and exercisable, or shows or indicates that the parties were working under any understanding (common or unilateral) that the Put Option was still subsisting and exercisable or anyone working under the assumption that the Put Option was so.

b. Indeed, there is also no mention at all in all the affirmations filed by the Petitioner that there was such representation or communication made orally or that there was such understanding or assumption.

c. There is also no evidence proffered whatsoever to the effect that the further loan was made in reliance of such representation, communication, understanding or assumption.

36.In other words, the Petitioner is merely relying on the bare fact that the Amendment Deed was signed and that the further loan was made, and nothing more, and interpreting these bare acts retrospectively, to found the estoppel by convention as a dispositive answer to Dispute 1.

37.As explained by Ribeiro PJ in Unruh v Seeberger (2007) 10 HKCFAR 31, to establish estoppel by convention, it must be shown that “the parties must enter into some legal relationship on the basis of an assumption that is shared by or common to them both”[8], that “the assumption was communicated between the parties and acted upon”[9], that “the content of the common assumption must be “sufficiently certain to enable the court to give effect to it” ”[10], and that two further elements must also be established:

“150. Two further elements must be established for constituting an estoppel by convention. First, there must be an attempt by one party to depart from the common assumption which departure would be unjust because of “the part taken by him in occasioning its adoption by the other party”. Secondly, the other party would suffer detriment arising out of his having entered into the relevant transaction on the basis of the common assumption “if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption” when abandoning the common assumption”

38.As I set out above, the Petitioner’s evidence to establish such estoppel by convention is very flimsy indeed. In my view, it is clearly insufficient to readily show that there was such a common assumption, and was one that was communicated between the parties, or that Tam has taken a part in occasioning the adoption of the assumption by the Petitioner so as to make it unjust for Tam to depart from it.

39.I also accept Mr Pao’s further submission that Tam’s dispute over whether the Petitioner had such an assumption is not an empty dispute, but one of substance, as YQ (who was still acting for the Petitioner at the time of the execution of the Amendment Deed) clearly knew about the terms of the Put Option such that it is very improbable that he would assume that the Put Option was still exercisable; while it was equally probable that the Amendment Deed was executed based on some other reason or motive on the part of the Petitioner, such that Tam should have an opportunity to cross-examine YQ and not have this issue essentially assumed against Tam on the bare fact that the Amendment Deed was executed.

40.I took the view that the alleged estoppel by convention has not been readily and clearly established on the evidence and materials before me.

41.There was also an argument by the Petitioner that Tam “waived his right to arguing”[11] that the Put Option was not valid or exercisable. However, I accept, as pointed out by Mr Pao, that Clause 12.3 of the SA and Clause 18.3 of the SHA respectively provided that no waiver of any provisions in the 2 Agreements shall be effective unless set forth in a written instrument signed by the party waiving the provision. It is common ground that there was no such instrument signed by Tam.

42.I conclude that there is a bona fide dispute on substantial grounds regarding Dispute 1, and as a result there is a dispute on substantial ground of the Alleged Debt.

There was no agreement by Tam on the General Indemnity in that he only agreed to a narrower indemnity (“Dispute 2”) ?

43.My conclusion above is sufficient to dispose of the Petition. For completeness, I will also address Dispute 2.

44.Tam’s factual account was set out in §§5 to 46 of his 1^st affirmation. In summary:

a. He recounted how he got acquainted with Leon and YQ and how and why he reposed trust on YQ. Leon was YO’s colleague in CCBI.

b. There were 4 batches of the draft SA and SHA provided to him.

c. He has been concerned that the other 3 founders, rather than Stanley alone, would provide a general indemnity, as it was Stanley alone who was granting the Put Option to the Petitioner. He enquired with YQ by Wechat on 29 January 2016 and was confirmed by YQ that CCBI only required Stanley to give a general indemnity.

d. Despite that confirmation by YQ, the drafts sent to Tam did not correctly reflect that position. Tam repeatedly reminded YQ to correct it.

e. On 23 February 2016, at 10 am, Tam received an email from YQ enclosing the “executed version” of the SA and the SHA and the 3^rd draft restated Articles of Association of the Company. He did not review the document right away. Upon review later that day, he discovered that the General Indemnity has not been changed. He called YQ to complain. YQ promised to change that in the final version to be executed by the 4 Founders the next day, ie 24 February 2016.

f. On 24 February 2016, the other 3 founders (Tam could not recall whether Stanley was also there) attended the solicitors’ office at about 11:30 am, met with Ms Grace Yeung (“Yeung”) and Mengshan Zhang (“Zhang”) of the solicitors who provided hard copies of the revised SA and SHA which, as noted by Tam, finally contained respective amended versions of the General Indemnity which were narrower in wording (“the Narrow Indemnities”). Tam further asked and was assured by Yeung and Zhang that the Narrow Indemnities would not cover the Put Option granted by Stanley. The 3 founders took the hard copy versions of the SA and the SHA with them and left the solicitors’ office for lunch.

g. After lunch, the 3 other founders met Stanley and YQ at CCBI’s office. YQ said that as all the terms were agreed, he would not print the entire SA and SHA but only the execution pages for signature. They duly signed the execution pages.

h. Though Tam received an email from YQ the next day enclosing the executed version of the SA and SHA, Tam did not review them again as he had reviewed the hard copy version and trusted that the contents were the same.

45.The Narrow Indemnities as contained in the respective hard copies of the SA and the SHA read as follows:

“… each of the Existing Shareholders … jointly and severally undertakes to indemnify, defend, and hold harmless the Investor and the Investor’s Affiliates, officers, employees, directors, agents and professional and other advisers … from and against any and all losses, damages, Liabilities, claims, proceedings, costs and expenses … resulting from or arising out of any breach by any of the Company or the Existing Shareholders of any Warranty under Clause 4 and Schedule 3 or any undertaking under Clause 6, save for such Losses are incurred by wilful-default or fraud of the Indemnifying Party … ” (Clause 9.1 of the hard copy SA[12])

“… each of the Existing Shareholders … jointly and severally undertakes to indemnify, defend, and hold harmless the Investor and the Investor’s Affiliates, officers, employees, directors, agents and professional and other advisers … from and against any and all losses, damages, Liabilities, claims, proceedings, costs and expenses … resulting from engaging any activity by the Indemnifying Party outside the scope of this Agreement, save as such Losses are incurred by wilful-default or fraud of the Indemnifying Party … ” (Clause 12.1 of the hard copy SHA[13])

46.At the hearing, it is accepted by Mr Oh that it is arguable under the wording of the Narrow Indemnities that Tam would not be liable to indemnify the Petitioner for Tam’s failure to purchase the Put Shares.

47.Tam has exhibited the following documentary evidence in support of his allegations:

a. The Wechat message exchanged between him and YQ on 29 January 2016 at 10:32 am[14] :

“Tam : 所有 guarantee 是否由 Stanley 承擔還是 join n several ?

YQ : 是 Stanley

Tam : Thanks”

b. The Wechat messages exchanged between Andrew and YQ from 3 January 2016 to 5 March 2016[15] (“the Andrew YQ Messages”) which contained, among others, the following messages, which clearly support Tam’s version :

“17/2/2016	下午 7:05
Andrew:	Paul 應該已經說過，我們的要求是: Stanley當唯一的擔保人。Kelvin，Paul和我不會作全面擔保。
YQ:	听你的 咱们明天电話交流
Andrew:	謝謝楊總
22/2/2016	下午 8:39
Andrew:	楊總，擔保條款修改未？麻煩跟進。
YQ:	我在联系我们的后台
Andrew:	謝謝楊總
23/2/2016	上午9:17
YQ:	我看律师让您们签个档 签就是了 没事的
Andrew:	楊總，我們覆了電郵了，但合約擔保條款未改好 Kelvin, Paul 和我不作全面擔保，請問什麼時候會修改好嗎 ?
YQ:	例行程序 我正在跟律师开电话会讨论 反正不管怎么样 明天钱也到账了 你多包涵
Andrew:	謝謝楊總
23/2/2016	下午5:18
YQ:	律师明早办好 您们上律师楼看档 安排您们明天下午过来我办公室这边 下午咱们见面签约哦
Andrew:	謝謝楊總
24/2/2016	下午12:47
Andrew:	我們已經看了，擔保條款已經修改好，沒問題了，我們下午過來簽約
YQ:	那没问题 咱们下午签可以啦
Andrew:	謝謝楊總
YQ:	麻烦您們啦 签完让您们安心嘛”

c. The hard copy versions of the SA and the SHA.

d. The message sent by Tam on 25 August 2022 in the Wechat group amongst, Tam, Andrew, Kelvin, and Anthony showing that Tam has raised this issue that the indemnity he agreed did not cover Stanley’s liability under the Put Option :

“@冼仲銘 Anthony Sinn縱使我一直向貴司表示當日大家同意簽署的合同並不需要我們其他股東承擔Stanley獨自擔保的put option，我們一直都是抱著合作的態度進行協商盡量達成和解。...”[16]

48.Tam also filed the affirmation of Chong Lin Wan, a practicing solicitor, to depose to the fact that Tam, Kelvin and Andrew consulted him on 27 June 2022 and that they showed him the hard copy version of the SA and the SHA and sought his advice concerning matters relating to the fact that the version of General Indemnity relied on by the Petitioner was different from the version they agreed.

49.As can be seen, the above-mentioned documentary evidence, particularly the Andrew YQ Messages, lends support to Tam’s version.

50.The Petitioner contended that:

a. The hard copy version of the SA and SHA were fabricated by Tam as the bottom margin of their pages did not contain a version number; and

b. the Andrew YQ Messages were likely to have been tempered with because the soft copy of the Andrew YQ Messages, when reviewed by the I.T. Department of the Petitioner, and

“Upon adjusting the graphical parameters and increasing the contrast of the screenshot at Page 1, they were able to show some suspicious traits … odd colour differences surrounding almost every date and time tag while the same colour differences do not appear in the screenshot of the WeChat conversation between YQ and [Anthony]”^[17].

51.It turned out that the headers and footers of the hard copy version of the SA and SHA were inadvertently left out when a trainee solicitor applied a wrong setting when he scanned the documents to prepare them to be exhibited to Tam’s affirmation, and the Petitioner’s point that the lack of version number showed that they were fabricated was a red herring.

52.Moreover and fundamentally, whether certain documentary evidence proffered by Tam is false, fabricated or otherwise tampered with is a serious matter that might attract serious consequences, and is a matter that cannot be resolved summarily and presently based on the Petitioner’s such suspicion, but without any reliable investigation or indeed any proper evidence.

53.The Petitioner contended that the 2 Agreements were already executed on 23 February 2016 and therefore Tam’s version was false. Firstly, the Petitioner relied on two very short emails[18]. The first one was sent by YQ to Tam on 23 February 2016 at 9:54 am enclosing, among others, the “Revised Execution Versions” of the 2 Agreements - respectively version 10 of the SA and version 11 of SHA - and asking Tam:

“Could you please review and sign off the attached documents?”

To which, Tam replied by email sent from his iPhone at 10:06 am that day:

“Sign off”.

54.Evidently, and it was not contended otherwise by the Petitioner, Tam has not enclosed the signed execution pages of the 2 Agreements with the email he sent at 10:06 am. It is not the Petitioner’s case or evidence that Tam has on 23 February 2016, in any way or by any means, sent his signed copy of the execution pages of the 2 Agreements to the Petitioner or the lawyers.

55.Secondly, the Petitioner relied heavily on the email sent by Zhang at 10:28 am on 23 February 2016 to recipients including YQ, Feng Wenxing (“Feng”) and other lawyers of the same solicitor firm apparently attaching[19] the “executed SA and SHA”[20]. I said apparently as the email itself does not by any means show that documents were attached to it. On its face, this email was sent 22 minutes after Tam has sent his above-mentioned email at 10:06 am, and apparently sent when Tam has not yet signed the execution pages of the 2 Agreements. I do not think this email shows clearly that the 2 Agreements have been executed by Tam on 23 February 2016, as the Petitioner now contended.

56.The Petitioner also contended by referring to the internal emails circulated among members of the team in the lawyer’s firm to show that there was no indication or discussion that there was any intended change in the General Indemnity. The Petitioner also filed an affirmation from Feng on the mode of operation and work of the legal team to the effect that it was most unlikely that a hard copy version would be printed and handed to the 3 founders in the morning of 24 February 2016. These pieces of evidence clearly are but circumstantial.

57.In this regard, I find valid Mr Pao’s submission and criticism that despite evidently YQ was in contact with Anthony, Zhang and Yeung and was able to relay by way of hearsay what they said, but unusually and unsatisfactorily, all these 3 key personnel, especially YQ, who would have intimate and personal knowledge on the factual matters in dispute, did not themselves personally file any affirmation evidence.

58.I conclude that Tam has proffered sufficiently precise evidence that is believable that supports Dispute 2, which I find, is a bona fide dispute on substantial ground.

59.I do not find Mr Oh’s contention that Tam was in reality raising the defence of non est factum of any assistance, as in my view, whether on analysis Dispute 2 would be labelled as non est factum or not would not affect my assessment that it is a substantial dispute that should be resolved elsewhere.

The Stay Summons

60.Mr Oh invited this court to stay the Petition pending the Arbitration, rather than dismissing it, if I find in favour of Tam’s contention that either one or both of the disputes raised were substantial disputes. I declined such invitation as the settled law is to dismiss the Petition if such were my conclusion, and further, it would be an undue prejudice against Tam if the Petition were allowed to hang over his head despite there being no basis to issue the Petition in the first place.

61.As I was dismissing the Petition, it was not necessary for me to delve into and deal with the submissions by both parties on the stay. Both counsel agreed that the appropriate course would be to make no order on the Stay Summons.

62.For these reasons, I dismissed the Petition and made no order on the Stay Summons.

Costs

63.At the hearing, Mr Oh asked that Tam be deprived of 20% of his costs because the above-mentioned inadvertence by the trainee solicitor in causing the omission of the version number at the bottom margin of the hard copy of the SA and the SHA, though corrected by the short affirmation of Mr Lam dated 4 June 2024, has caused wastage of time and costs on the part of the Petitioner. Mr Chan, junior counsel for Tam, contested it.

64.I think the cost so wasted by this inadvertence was minimal and not substantial and I also note that the Petitioner has also raised a number of different minor points in the affirmations and at this hearing which have little substance on which costs were spent. Therefore and in the round, I declined to exercise my discretion on costs in such a minute manner to fillet costs.

65.I thus ordered the Petitioner to pay Tam his costs of this Petition to be taxed if not agreed with certificate for 2 counsel.

66.Though the possible course of having the costs of the Stay Summons follow those of the Petition has been briefly mentioned at the hearing, the parties have not had the opportunity to address me on the costs of the Stay Summons. As the Stay Summons was taken out by Tam as a fallback and now no order is made thereon, my provisional view is that I should make no order on its costs as well. I so order on nisi basis to be made absolute in 14 days unless any party by summons applies to vary within that time.

67.Lastly, I thank Mr Pao, Mr Oh and Mr Chan for their helpful assistance.

Mr Nicholas OH, instructed by Messrs Li & Partners for the Petitioner

Mr Jin PAO SC & Mr Zenith CHAN, instructed by Messrs Leung & Lau, Solicitors LLP for the Debtor

Official Receiver's Office, for the Official Receiver, attendance excused