Re To Kwan Chak Trading As Legend Construction Engineering Company
Read the full judgment text of HCB 6709/2024 on BabelCite. This HCB judgment was delivered on 17 September 2025.
1. By a bankruptcy petition filed on 30 September 2024 (as amended on 22 January 2025) (the “ Petition ”), Linker Engineering Limited (滙溢工程有限公司) (“ Linker ”) seeks a bankruptcy order against To Kwan Chak (“ KC To ”) trading as Legend Construction Engineering Company (里程建工程公司) (“ Legend ”).
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HCB 6709/2024 [2025] HKCFI 4189 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO 6709 OF 2024 __________________
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________________ J U D G M E N T ________________ I. INTRODUCTION 1.By a bankruptcy petition filed on 30 September 2024 (as amended on 22 January 2025) (the “Petition”), Linker Engineering Limited (滙溢工程有限公司) (“Linker”) seeks a bankruptcy order against To Kwan Chak (“KC To”) trading as Legend Construction Engineering Company (里程建工程公司) (“Legend”). II. BACKGROUND 2.The debt in question arises from a housing project in Wong Yue Tan, Tai Po (the “Project”) initiated by the Housing Bureau of the Hong Kong Government. 3.A subcontractor of the Project was CNQC Intelligent Construction (HK) Limited (青建智造(香港)有限公司) (“CNQC”). 4.By a subcontract entered into on 28 October 2022 between CNQC and Linker (the “Subcontract”), Linker became a subcontractor to CNQC. Pursuant to the Subcontract, by 13 January 2023, CNQC had paid HK$12,162,375 to Linker. 5.On 6 March 2023, Linker issued an invoice to CNQC (the “1st Invoice”) for the following items in the total sum of HK$1,008,000:-
6.By an agreement dated 17 May 2023 (the “Termination Agreement”), the Subcontract was terminated on 24 May 2023. The Termination Agreement provided that:-
7.For convenience, I shall refer to:-
8.I also note that while the Termination Agreement was dated 17 May 2023 and the termination was to take effect on 24 May 2023, it is, as shall be explained below, Linker’s case that the Termination Agreement was entered into on 21 June 2023 after Linker and KC To reached the three Underlying Agreements mentioned below. 9.On 21 June 2023, Linker and KC To signed three agreements all dated 20 June 2023. Each of the agreements concerns an invoice issued by Linker to CNQC or Legend and a cheque drawn by Legend in favour of Linker. 10.The first agreement dated 20 June 2023 (the “1st Underlying Agreement”) provided:-
11.The invoice mentioned there was the 1st Invoice issued by Linker to CNQC on 6 March 2023 mentioned in §5 above. 12.The cheque mentioned there (the “1st Cheque”) was issued by Legend in favour of Linker for the sum of HK$1,008,000. There is dispute between the parties on whether the 1st Cheque was dated when delivered: Linker’s case is that it was post-dated, while KC To’s case is that it was undated. From the copy of the cheque produced before me, I have to say that it so happens that the area of the date is blurred and dark and so I am unable to see any date on it. 13.The second agreement dated 20 June 2023 (the “2nd Underlying Agreement”) provided that:-
14.The invoice mentioned there (the “2nd Invoice”) was issued by Linker to Legend on 18 June 2023 for “Warehouse storage fee” for 5 months, in the total sum of HK$2,500,000. 15.The cheque mentioned there (the “2nd Cheque”) was issued by Legend in favour of Linker for the sum of HK$2,500,000. Similarly, there is dispute between the parties on whether the 2nd Cheque was dated when delivered: Linker’s case is that it was post-dated, while KC To’s case is that it was undated. From the copy of the cheque produced before me, I have to say that it so happens that the area of the date is blurred and dark and so I am unable to see any date on it. 16.The third agreement dated 20 June 2023 (the “3rd Underlying Agreement”) provided:-
17.The invoice mentioned there (the “3rd Invoice”) was issued by Linker to Legend on 9 February 2023 for the following items in the total sum of HK$270,100:-
18.The cheque mentioned there (the “3rd Cheque”) was issued by Legend in favour of Linker for the sum of HK$270,000. Again, there is dispute between the parties on whether the 3rd Cheque was dated when delivered: Linker’s case is that it was post-dated, while KC To’s case is that it was undated. From the copy of the cheque produced before me, I have to say that it so happens that the area of the date is blurred and dark and so I am unable to see any date on it. 19.For convenience, I shall refer to:-
20.On 20 and 24 July 2023, the accounts officer of Linker named Wayne sent KC To a WhatsApp message asking him to honour the Cheques and telling him that the 1st and 3rd Cheques had been handed over to a third party for debt collection. KC To did not reply. 21.On 24 July 2023, Legend issued an invoice to CNQC (the “Legend’s Invoice to CNQC”) for the following items for a total sum of HK$5,454,500:-
22.Item (1) above in the Legend’s Invoice to CNQC is the same item under the 2nd Invoice. 23.On 28 July 2023, CNQC issued a demand letter to Linker in the following terms, enclosing therewith the Legend’s Invoice to CNQC:-
III. PETITIONER’S CASE 24.Linker’s case set out in the Amended Petition is:-
IV. KC TO’S OPPOSING EVIDENCE 25.According to KC To, Legend did not engage Linker to carry out demolition and reassembly work and storage for the Project. Instead, Legend was a sub-contractor to Linker, and after the termination of the Subcontract, Legend became the succeeding sub-contractor to CNQC under the Subcontract. 26.According to KC To, on or about 21 June 2023, Tang Kwai Keung, a representative of Linker, made the following representations (the “Representations”) to him:-
27.In reply, according to KC To, he replied that he would make the payments upon receipt of the Required Materials. 28.As a result, the Underlying Agreements were entered into. He issued the Cheques under the impression that:-
29.In response to Legend’s Invoice to CNQC issued on 24 July 2023, CNQC informed KC To, and so KC To became aware, that Linker had reached a full and final settlement of all outstanding obligations related to the Subcontract by the Termination Agreement. So, KC To takes the view that the Representations were false in that:-
30.KC To also says that Linker failed to deliver the Required Materials in breach of the Underlying Agreements, and therefore, he or Legend is not liable to pay Linker under the Underlying Agreements. He further says that because of the breach, Legend had to order additional roofing materials at its own costs to continue with relevant works under the Project. V. LINKER’S REPLY EVIDENCE 31.In its reply evidence, in respect of the relationships among CNQC, Linker and Legend, Linkers now says that KC To “is correct to say that Legend became the subcontractor of CNQC after the contract between CNQC and [Linker] came to an end terminated by mutual consent on 24 May 2023”: see §7 of the Affirmation of Wong Keung. While it does not expressly say so, such admission must mean an admission to the Termination Agreement. The provision in the Termination Agreement that “就我司承造上述工程(下稱”該工程”)一事，按現時前期項目運作經驗，由於該工程大部份工作均由里程建築工程公司進行”, suggesting Legend had been carrying out works in the Project, contradicts Linker’s case that CNQC and Legend engaged Linker to carry out the works. 32.Linker also explains that:-
33.In reply to KC To’s allegation that the Required Materials had not been delivered to KC To, Linker makes the following points in its reply evidence:-
34.Linker denies having made the Representations. VI. ISSUES 35.From the above, Ms Kathy Sze, counsel for KC To, raises several issues. I rephrase the issues as follows:-
VII. LEGAL PRINCIPLES 36.The legal principles in relation to bankruptcy petition are trite: Bankruptcy proceedings are summary in nature. The creditor carries the burden to prove matters set out in the petition if they are in dispute. If the debtor can show a bona fide dispute on substantial grounds by sufficiently precise evidence and a defence of substance (higher than one of a fair probability as in resisting an Order 14 application), the Court should dismiss the petition. See Re Li Man Hoo [2020] HKCFI 1354 at §15 per Linda Chan J. VIII. INACCURACY OF THE AMENDED PETITION 37.Before I proceed to analyse each of the Issues, I shall point out that the Amended Petition, verified by an affirmation of truth of statements in petition by Chan Hung Yu, general manager of Linker, is inaccurate to say at §2(a) of the Amended Petition that Linker was engaged by KC To and CNQC to carry out demolition and reassembly works and storage for the Project. While this inaccuracy has not been expressly admitted in Linker’s reply evidence, it is clear from Linker’s reply evidence that as KC To describes, Linker was a subcontractor to CNQC, and Legend was a subcontractor to Linker, subsequently replacing Linker as a subcontractor to CNQC. Mr Ronald Pang, counsel for Linker, also fairly admits that the Amended Petition is inaccurate in this respect. 38.Although I do not think this inaccuracy itself is fatal to the Amended Petition, which relies on the three Cheques, the relationship explains the genesis of the Cheques and the relationship is something Linker has the personal knowledge of. I bear all these in mind in assessing the credibility of Linker’s claim. IX. ISSUE OF REPRESENTATIONS 39.The gist of the Representations (see §26 above) is that CNQC was still liable to pay Linker. While Linker denies having made the Representations:-
40.Having considered all the above, I take the view that there is bona fide dispute on substantial ground that Linker did make the Representations to KC To. 41.It is at least more than probable in respect of the 1st and 3rd Underlying Agreements that by the TA’s 1st and 2nd Waiver Clauses, CNQC was no longer liable to pay Linker any items set out in the 1st and 3rd Invoices. I take this view even though Linker alleges in its reply evidence that the Termination Agreement was entered into after the Underlying Agreements because:-
42.The Representations, in reliance on which the Underlying Agreements were entered into and the Cheques were issued, would be actionable to avoid the 1st and 3rd Underlying Agreements and the 1st and 3rd Cheques, or as a counterclaim for damages. 43.At the hearing, Mr Pang stressed that I should consider each of the Underlying Agreements separately and individually. His oral submissions, wisely, focused on the 2nd Underlying Agreement and the 2nd Invoice. He emphasised that the 2nd Invoice was dated 18 June 2023, post the termination of the Subcontract and therefore at least for the 2nd Underlying Agreement and the 2nd Invoice, it was not about any obligation of CNQC to pay Linker and therefore, irrespective of the Representations. With respect, I reject Mr Pang’s such submissions for the following reasons:-
44.Having considered the above, in my view, there is a bona fide dispute on substantial ground on the Issue of Representations for all the Underlying Agreements and all the Cheques. 45.This is sufficient for me to dismiss the Amended Petition. For the sake of completeness, I should consider the other Issues as well. X. ISSUE OF COLLECTION OF REQUIRED MATERIALS 46.On the Underlying Agreements, without delivery or collection of the Required Materials, KC To was not liable to pay. While Linker deposes that KC To had collected the Required Materials, KC To denies and relies on an invoice issued by a supplier to it for similar materials for the Project, saying that because of Linker’s failure to deliver the Required Materials, KC To had to purchase those materials from a third party supplier. 47.There is no evidence of demand from either side for collection of the Required Materials. Linker would have the incentive to ensure that KC To would collect the Required Materials as soon as possible so that the 14 days period for payment would start. Absence of such demands tends to suggest that KC To had indeed collected the Required Materials. Similarly, KC To would like to collect the Required Materials so that Legend could start its work for the Project as soon as possible, and so absence of evidence of demands also tends to suggest that KC To had collected the Required Materials. 48.I am aware of the evidence produced by KC To of a delivery note issued a third party supplier for similar, but not the same, materials. This may suggest that KC To has not collected the Required Materials. However, it may also suggest that further materials were required for the Project on top of the Required Materials. I note that there was no price stated in this delivery note and there is no evidence of settlement of this delivery note, and therefore the evidence that the materials in this delivery note were indeed acquired and/or paid for is tenuous. Further, this delivery note was dated 30 July 2023, just about one month after the Underlying Agreements. I would expect that there would be evidence of demands from KC To for collection of the Required Materials before he would decide to incur costs to purchase from a third party supplier. Also, I cannot ignore the evidence that KC To only raised this point as a defence in the present proceedings but in any pre-action demands. I also cannot ignore the evidence that KC To issued an invoice to CNQC for payment of the 2nd Invoice, which on KC To’s own case he would be liable to settle only upon collection of the Required Materials. Thus, the issuance of the invoice to CNQC for the payment of the 2nd Invoice suggests that the Required Materials had been collected. 49.While Linker’s case is that KC To collected the Required Materials on 28 June 2023, I would expect a list of collected items acknowledged by KC To to avoid any possible dispute, for example, whether and/or when the 14 days period for payment has started. Nevertheless, there is no such list at all. 50.That said, if the Required Materials were still with Linker, Linker would in all likelihood have issued invoices for the continuing storage of the Required Materials on site. There is none. There is just the 2nd Invoice for storage up to 18 June 2023. 51.Having considered the above as well as the inaccuracy of the Amended Petition in respect of the relationship as mentioned above, I am not satisfied that KC To has established a bona fide dispute on substantial ground on the Issue of Collection of Required Materials. XI. ISSUE OF THE OWNERSHIP OF THE REQUIRED MATERIALS 52.As regards the ownership of the Required Materials:-
53.Based on the above, Ms Sze, for KC To, relies on the principle that one cannot give what they do not have (or in Latin, nemo dat quod non habet) and submits that the Underlying Agreements were in substance for sale of the Required Materials and since Linker could not sell the Required Materials not owned by it, there was no consideration for the Underlying Agreements. 54.With respect, I agree with Mr Pang’s submissions that the Underlying Agreements were not for sale of the Required Materials but on the proper construction, for release of the Required Materials. While it may be that Linker breached its obligation to return to CNQC the Subcontract Materials (which is, on my view above, the same as the Required Materials), it is a matter between Linker and CNQC. The release of the Required Materials is a matter between Linker and KC To under the Underlying Agreements. Ownership is not necessarily a precondition for retaining or releasing the Required Materials. Therefore, the reliance on nemo dat quod non habet does not help KC To to discharge his burden to raise bona fide dispute on substantial grounds. 55.The sum total is that there is no bona fide dispute on substantial ground on the Issue of the Ownership of the Required Materials. XII. ISSUE OF WAIVERS 56.Out of the three Waivers, TA’s 2nd Waiver Clause is worth more analysis:-
57.As regards TA’s 1st Waiver Clause, on the face of it, it is a waiver as between CNQC and Linker only. For the UA Waiver Clause, it seems improbable that it was intended objective to waive the obligations in the same Underlying Agreements. 58.In my view, there is no bona fide dispute on the Issue of Waivers. XIII. CONCLUSION 59.In the circumstances, I dismiss the Petition. I make a costs order nisi that Linker shall pay KC 80% of the costs of the Petition, the remaining 20% to reflect KC To’s failure to raise bona fide dispute on substantial ground in respect of other discreet Issues than the Issue of Representations. The parties have already lodged and served their respective statements of costs and lists of objections, and so I shall conduct summary assessment on paper upon the costs order nisi becoming absolute. 60.It remains for me to thank Mr Pang and Ms Sze for their assistance.
Mr Ronald Pang, instructed by Chak & Associates LLP, for the Petitioner Ms Kathy Sze, instructed by Wat & Co., for the Debtor Attendance of the Official Receiver was excused |
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