Kho Luis Fabregas v. Wu You

HCSD 59/2024

[2026] HKCFI 125

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY DEMAND

NO 59 OF 2024

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D E C I S I O N

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Introduction

1.Mr Wu served two statutory demands both dated 9 December 2024 on Mr Kho. One is for the amount of USD2,400,000 (“the SD”) and the other one is for the amount of USD 279,616.43 (“the Other SD”). Mr Kho filed an Application to Set Aside a Statutory Demand dated 23 December 2024 to set the SD aside (“the Application”).

2.By summons dated 6 May 2025 (“the Amendment Summons”), Mr Wu applies for leave to amend the SD as per the draft annexed to the Amendment Summons (“the Draft Amended SD”).

3.By another summons dated 3 June 2025 (“the EOT Summons”), Mr Kho applies for an extension of time to file his reply affirmation for the purpose of the Application within 28 days from the determination of the Amendment Summons.

4.This is the substantive hearing of both Summonses and both applications are contested. Ms Tong SC, leading Mr Wong, appears for Mr Wu and Mr Kwan appears for Mr Kho.

Background facts relating to the SD

5.The following account is provided by Ms Tong to which Mr Kwan agrees.

(1)  Mr Kho and Mr Wu entered into a written agreement dated 11 August 2023 “the Contract and Bill of Sale for Automobile” (“the Automobile Contract”) whereby Mr Wu agreed to purchase from Mr Kho a Ferrari vehicle (“the Vehicle”) for US$3,400,000 (“the Purchase Price”).

(2)  Under Clauses 2.1 to 2.3 of the Automobile Contract, Mr Wu agreed to pay the Purchase Price in three instalments in the following manner:

(a)  The first instalment payment in the amount of US$2,000,000 should be made at the time of the contract (Clause 2.1);

(b)  The second instalment in the amount of US$400,000 was to be paid by 1 September 2023 before the delivery of the Vehicle and upon notification by Mr Kho (Clause 2.2); and

(c)  The third instalment in the amount of US$1,000,000 was to be made upon the presentation of Mr Kho of the invoice issued by the Ferrari dealer (Clause 2.3).

(3)  It is common ground that Mr Wu has paid Mr Kho US$2,228,000, which comprised:

(a)  The first instalment of US$2,000,000; and

(b)  HK$1,000,000 (approximately US$128,000) on 26 September 2023 and US$100,000 on 16 October 2023, as part of the second instalment of US$400,000.

6.By the Draft Amended SD, Mr Wu demands repayment of US$2,228,000 in restitution, instead of the total amount of the two initial instalments (US$2,400,000) demanded in the SD.

7.It is not in dispute that the Vehicle was never delivered to Mr Wu despite his payments. The Automobile Contract was eventually terminated by consent on 25 September 2024.

8.The case of Mr Wu is that Mr Kho is liable to return the amount of US$2,228,000 to him (“the Demanded Amount”) by reason of a total failure of consideration.

9.Mr Wu apparently seeks to reduce the amount which Mr Kho is liable to pay him under the SD by way of the proposed amendment. This should be to the advantage of Mr Kho. However, Mr Kho opposes this application on two main grounds.

10.First, Mr Kwan argues that the Demanded Amount in the Draft Amended SD is based on restitution and there is a long line of authorities holding a claim founded on restitution cannot be regarded as a liquidated sum and cannot form the basis of a statutory demand.

11.Second, Mr Kwan argues that instead of making an application for leave to amend the SD, Mr Wu should have withdrawn the SD and issued a fresh one.

Issues to be determined

12.Thus, there are two legal issues calling for resolution:

(1)  Whether the Demanded Amount, being a claim founded on restitution, is a liquidated sum; and

(2)  Whether the amendment application is procedurally wrong.

13.I bear in mind that this is an application for leave to amend only and the threshold is that the proposed amendments cannot be plainly liable to be struck out.

The Demanded Amount – a liquidated sum?

14.There is no dispute that a valid statutory demand must be for a liquidated sum and that Mr Wu’s claim for the Demanded Amount is a claim in restitution. The dispute is whether the Demanded Amount claimed by Mr Wu in restitution can be characterised as a liquidated sum. Ms Tong submits that it can whilst Mr Kwan disagrees with her. Both of them submit that their respective positions are well supported by authorities.

15.Ms Tong places particular reliance on the following authorities.

16.First, in Global Logistics Management Ltd (unreported, HCCW 356/2008, 27.3.2009), the liquidators served a statutory demand on the company and the demand was made on the basis of a loan repayment and, alternatively, as money had and received by the company to the use of the petitioner’s use or benefit. Counsel for the company argued that the liquidated sum claimed in the statutory demand must be based on either contract or tort.

17.Kwan J (as she then was) rejected this submission and said this at §17,

“… I fail to see any rationale for confining the legal basis of the liquidated sum demanded to contract or tort. Besides, it is just not the case that a creditor’s petition could only be brought on the basis of a liquidated demand arising out of a contract or tort.”

18.The learned judge, after referring to TSB Bank plc v Platts [1998] 2 BCLC 1, explained at §19 that whilst a demand for a quantified sum may be usually based on contract or tort, she saw no reason for confining the legal basis to contract or tort, and excluding a claim base on quasi-contract. The learned judge went on to point out at §21 that provided that the fact of a payment was established, and there was a clear liability to make repayment, it did not matter that the claim was put on two alternative bases.

19.Next, Ms Tong refers to Re Goldstone Holdings Ltd [2024] HKCFI 3598. There, the winding-up petition was grounded on a debt of HK$11,718,751, which was paid by way of cheque to the company by the petitioner under a subscription agreement in return for the allotment of 100 shares in the company. Despite the payment, no shares was ever allotted. The petitioner made a claim in unjust enrichment and the company sought to strike it out.

20.Anthony Chan J (as he then was) accepted the validity of the claim and observed:

“A claim in unjust enrichment is a claim in debt and not for damages and is a claim which is not founded on the commission of a wrong. Liability is strict … The remedy to reverse an unjust enrichment is monetary”: see Chitty on Contracts, [33-016] and Investment Trust Companies v Revenue and Customs Commissioners [2019] AC 275.”

21.In Re Lee Ming Cheung [2020] 2 HKLRD 76, DHCJ Le Pichon was asked to consider the validity of a statutory demand which the debtor contended not to be founded by a liquidated demand. According to the description given in the statutory demand, the applicant had entrusted her money to the debtor for investment in the Hong Kong Stock market and after 12 years, the applicant instructed the debtor to liquidate the portfolio and to repay the total value of the invested stocks and accrued dividend which was HK$4,716,284.31 as at the date of the instruction. The debtor on various dates through text messages acknowledged and promised to repay the same. However, other than a dishonoured cheque in the sum of HK$200,000 and a sum of HK$40,000, the applicant received nothing from the debtor.

22.The debtor maintained that the claim of the applicant against him could not found a statutory demand or a bankruptcy petition as it was not a liquidated claim but one against him as trustee for breach of trust.

23.DHCJ Le Pichon did not accept the submission made on behalf of the debtor that the follow passage from the judgment of Sales LJ in Barnett v Creggy [2017] PNLR 4 (at §45) was irrelevant:

“In my opinion, the basic rule in a trust case where trust monies have been improperly paid away by the trustee is sufficiently analogous to a claim at common law for a fixed sum of money as to be capable of being described as a ‘liquidated pecuniary claim’ for the purposes of s.29(5)(a)…

In a similar way, a restitutionary claim for a certain sum of money as money had and received arising under the common law of unjust enrichment on the grounds that it was paid by mistake or pursuant to an unjustified claim for tax can properly be described as a claim for a ‘liquidated pecuniary claim’ within s.29(5)(a)’.”

24.The learned deputy judge at §33 observed that the relevance of the foregoing passage concerns the nature of a claim to recover trust property. Sales LJ founded such a claim to be restitutionary in nature, to restore the trust fund to what it should be. In that regard, it is no different from a claim at common law for a fixed sum of money provided the amount is a sum certain capable of precise quantification by arithmetical calculation.

25.Further, in Bright Islands Corp v Chao [2002] 2 HKLRD 97 (CA), Mayo VP and Chung J in their joint judgment accepted that the decisive hallmark of a liquidated claim is that the process of quantification is already complete, and there is an absence of any element of “penalty” to be imposed over and above the actual loss sustained (§§38, 60-61). On the other hand, Cheung JA cited with approval the following extract from Hong Kong Civil Procedure 2002, Vol.1 §6/2/4 (which remains unchanged in the current edition):

“A liquidated demand is in the nature of the debt, i.e. a specific sum of money due and payable under or by virtue of the contract. Its amount must either be already ascertained or capable of being ascertained as a mere matter of arithmetic. If the ascertainment of a sum of money, even though it be specified or named as a definite figure, requires investigation beyond mere calculation, then the sum is not a ‘debt or liquidated demand’, but constitutes ‘damages’.

The words ‘debt or liquidated demand’ do not extend to unliquidated damages, whether in tort or in contract, even though the amount of such damages be named at a definite figure (Knight v Abbott (1883) 10 QBD 11). A claim for a stated sum of money paid to the defendant for a consideration which has failed is a recognised form of liquidated demand.”

26.Ms Tong pertinently draws to my attention what the learned editors of Goff & Jones on Unjust Enrichment (10^th edn, 2022) say about a claim for restitution of unjust enrichment at §1-47:

“A claim for restitution on the ground of unjust enrichment is not a claim for damages or equitable compensation founded on the commission of a civil wrong, but a claim for a liquidated sum that is treated as a claim in debt for procedural purposes.”

27.This was also cited by Godfrey Lam JA in Wong Chi Hung v Lo Wing Pun [2025] 2 HKLRD 882 in a footnote under §20 to show his agreement that a liquidated sum awarded for a claim in restitution should not be called as “damages”.

28.From the foregoing authorities, I can distill the following principles:

(1)  A claim for restitution on the ground of unjust enrichment can be a claim for a liquidated sum;

(2)  So can a claim for a stated sum of money paid to the defendant on the ground of a failure of consideration; and

(3)  For a sum of money demanded to be qualified to be a liquidated sum, completion of the process of quantification without any further investigation is essential.

29.Here, Mr Wu paid the Demanded Amount to Mr Kho as partial payment of the Purchase Price of the Vehicle under the Automobile Contract. The Vehicle was not transferred to Mr Wu. The Automobile Contract was terminated. Prima facie, Mr Wu is entitled to a repayment of the Demanded Amount on the ground of unjust enrichment and/or money had and received. The Demanded Amount is the exact amount which Mr Wu has paid Mr Kho. It requires no further quantification or calculation. Mr Kwan does not suggest otherwise.

30.Applying the foregoing principles expounded by the authorities cited by Ms Tong to the present case, I am of the view that, to say the least, it is very much arguable that the Demanded Amount, being a claim for restitution of unjust enrichment and/or money had and received, is a liquidated sum that can found in a statutory demand.

31.Now I turn to the authorities relied by Mr Kwan. First, he places heavy reliance on Hope v Premierpace (Europe) Ltd [1999] B.P.I.R. 695 to support his main plank that a claim for restitution cannot be regarded as a claim for a liquidated sum.

32.In that case, as summarized by Mr Kwan, the bankruptcy petition was based on a claim that the debtor had misappropriated monies during his employment with the petitioner. The debtor admitted that he had taken monies from the petitioner but claimed that this was reimbursement of payments he had personally made on its behalf. The Court considered various ways in which the petitioner’s cause of action could be characterised, including as a restitutionary claim for money had and received. It held that such a claim was not one for a liquidated sum (at 699D-H):

“As to claims for money had and received the decision of the Court of Appeal in Portman Building Society v Hamlyn Taylor Neck (a Firm) [1998] 4 All ER 202 affirms that the remedy for such a claim is an account and payment….

Mr Rainey submits that it follows that none of the company’s claims for a remedy is in the nature of an order for payment of a liquidated sum. It is irrelevant that the company claims to be able to identify its claim down to the last penny. It is still faced with the difficulty that its range of alternative claims against the debtor are claims for damages or for an account and payment. A claim for damages is not a claim for a liquidated sum; and nor is a claim whose remedy is that of an account, even though it may be that the taking of the account so ordered could be dealt with in a summary way and a judgment there and then given for a specific sum.

I accept that submission. I agree with Mr Rainey that the petition is not based on a debt for a liquidated sum. It follows that in my judgment no bankruptcy order could properly be made on it. I will therefore not merely discharge that order. I will also dismiss the petition” (emphasis added)

33.The Hope case was followed in Navier v Leicester [2002] EWHC 2596 (Ch) (by Rimer J himself) and Re Dusoruth [2023] 1 All ER (Comm) 1075. Mr Kwan submits that in Re Dusoruth, the Court (at §124) emphasised that until there is a determination that the debtor has been unjustly enriched and the claim has been properly quantified, the liability to make restitution cannot be regarded as liquidated even if the extent of the claimant’s entitlement appears to be clear:

“While it may be clear that the debtor’s defence to the claim has no merit, until there is a determination that the debtor has been unjustly enriched, and, if so, to what extent, and what restitutionary remedy is appropriate, it cannot be said that the debtor’s liability has been pre-ascertained. To hold otherwise would, as Proudman J said, conflate the nature of the claim with whether there is a dispute about liability. The process may require little or almost nothing by way of an account – that is acknowledged by Rimer J in Hope v Premierpace in saying that the account may be dealt with in a ‘summary way’ – but the process of accounting is, as Lord Millett says, the first step in a process enabling the claimant ‘to quantify’ a loss and ‘seek the appropriate means’ by which restitution may be effected. Until that quantification has taken place and the appropriate means of restitution determined, the claim cannot be liquidated within the meaning of s 267 IA 1986. It is true that there may be cases where the extent of the claimant’s claim is so clear that a formal account is unnecessary and might not be even be pleaded – the claimant can simply say ‘this is the sum to which I am entitled’. That would have been the position in both Hope v Premierpace and in respect of the cash in Navier. Nonetheless, the claimant’s entitlement to his remedy and the sum in which he is entitled to be reimbursed must still be established before a petition may be presented.” (emphasis added)

34.Ms Tong highlights to this court that the correctness of the decision in the Hope case was doubted by Briggs J (as Lord Briggs then was) in McGuinness v Norwich and Peterborough Building Society [2011] 1 WLR 613. At §25, the learned judge said this,

“… I have real doubt whether distinctions based on different causes of action (i e debt, account and payment, damages) satisfactorily address the purpose behind section 267(2)(b) of the Act, which seems to me to distinguish between cases where there is no issue as to the amount of a liability, and cases where some process of assessment by the court is necessary, before the amount can be identified. I can well understand that a claim for an account which depends upon the defendant providing disclosure as to the amount of an alleged secret profit cannot possibly be a claim for a liquidated sum. By contrast, a claim to recover stolen money, where the precise amount stolen is known by the claimant, seems to me in principle to be a claim for a liquidated sum, even though the form of action is one for account and payment.” (emphasis added)

35.For completeness, section 267(2)(b) of the Insolvency Act 1986 is near identical to section 6(2)(b) of the Bankruptcy Ordinance, Cap. 6 (“the BO”) and it provides that a creditor’s petition may be presented to the court in respect of a debt or debts only if at the time petition is presented, the debt or each of the debts is for a liquidated sum payable to the petitioning creditor or one or more of the petitioning creditors.

36.The UK Court of Appeal dismissed the appeal from the decision of Briggs J in McGuinness v Norwich and Peterborough Building Society [2012] 2 All E (Comm) 265. Patten LJ examined the reasoning of Rimer J in the Hope case and concluded that it was correctly decided on its facts. There, the company suffered loss as a result of misappropriation by his employee of money. None of the company’s claims for remedy was in the nature of an order for payment of a liquidated sum. It asked for monetary compensation in a sum equivalent to its loss.

37.Patten LJ accepted that a claim for damages is not a claim for a liquidated sum; and nor is a claim whose remedy is that for an account, even though it may be that the taking of the account so ordered could be dealt with in the summary way and a judgment there and then given for a specific sum. He opined that Briggs J was not saying that a claim in damages could not be a debt within the meaning of section 267 regardless of the nature of the claim: see §40-41.

38.I agree with the proper analysis of the Hope case by Patten LJ. The Hope case is of little relevance to the present case. Mr Wu does not ask for monetary compensation. Nor does he ask for an account. He asks for the full refund of the Demanded Account that he has paid Mr Kho for a failed consideration and Mr Kho has been unjustly enriched thereby. No further assessment and investigation is necessary to adjust the specified amount claimed.

39.I note that ICC Judge Mullen in Re Dusoruth had a different view. The learned judge opined that Patten LJ only observed that it was not authority for the proposition that a claim for damages can never be regarded as a claim for a liquidated sum. The learned judge held that it is good law that a claim for money had and received is not a liquidated sum within section 267.

40.I am not convinced by the reasoning of ICC Judge Mullen and his conclusion differs from those reached by the local courts as explained above. I believe that all of contractual, tortious and restitutionary claims should be able to give rise to liquidated demands. The fundamental requirement is that the sum claimed must be already ascertained or capable of being ascertained as a mere matter of arithmetic without any need for judicial assessment, adjustment or investigation.

41.I am not satisfied that this court should follow the Hope case. Mr Kwan submits that it was cited with approval by DHCJ Poon (as he then was) in Cheung Man Kok v Fenn Kar Bak Lily (unreported, HCSD 25/2003, 11.12.2003). I cannot accept his submission.

42.In the Cheung Man Kok case, the respondent issued a statutory demand in respect of a debt of HK$83,787.43 which she alleged the applicant had converted and misappropriated to her own use. Both of the applicant and the respondent were practicing solicitors and were equity partners of the same firm of solicitors. They were bound by a deed of the firm regulating their rights and obligations upon the dissolution of the partnership between the partners.

43.The learned judge referred to some passages in Muir Hunter on Personal Insolvency at §13. In those passages, the Hope case was referred to and the holding of Rimer J that the petitioning creditor’s claim that the debtor (its employee) had stolen GBP24,369.72 was either a claim for damages or a claim for an account was noted. The learned editors went on to state in another passage that where liability for the sum sought to be claimed is dependent on the taking of an account, or the doing of some administrative act, it will not qualify as liquidated until that has been done.

44.The learned judge then referred to the deed and concluded that the parties had not taken the steps to wind up the partnership business despite its dissolution pursuant to the deed. The learned judge, on the established partnership principles, absent any contrary provision in the deed, held that the respondent had no specific right to sue for the recovery for the monies held in the accounts of the partnership without taking of an account. In other words, the respondent had no right to make any demand at all.

45.In the premises, the learned judge did not really follow the Hope case.

46.I am of the view that the authorities cited to this court by Ms Tong are of direct relevance and there is no reason why this court should not follow such authorities of the Court of First Instance.

47.On the question as to whether the Demanded Amount can be accepted as a liquidated sum the purpose of section 6(2)(b) of the BO, my conclusion is in the affirmative.

Amendment – wrong procedure?

48.Ms Tong explains that the Amendment Summons was issued pursuant to the guidance of the Court of Appeal in Chan WS v CC Bank [2022] 3 HKLRD 520. She stresses that this decision is binding on this court.

49.In Chan WS, the court below set aside a statutory demand on the ground that, among other matters, it contained an over-statement of the debt. The Court of Appeal allowed the appeal and in the judgment of Au JA, at §23, it was pointed out that it is well-settled that an over-statement of the indebtedness in the statutory demand will not automatically entitle the debtor to have the demand set aside. The relevant question is whether injustice would be caused to the debtor by allowing the particular demand to stand.

50.The amount in the statutory demands was substantially over-stated (HK$6,369,546 overstated to HK$7,057,746.73). Nevertheless, Au JA found that there was no evidence that the debtors would have been in a position or would have been prepared to pay or settle the correct amount of debt even if it had been correctly stated in the statutory demands. And the correct amount of the debt was in any event well in excess of the statutory minimum of HK$10,000 prescribed under the BO. On this basis, Au JA did not find any injustice caused to the debtors if the statutory demands were allowed to stand despite the over-statement of the amount of the debt.

51.Au JA in dealing with the costs issue observed that much of the dispute could have been avoided had the respondent applied to amend the statutory demands to correct the amount of the debt stated therein (§47).

52.Mr Kwan submits that Chan WS is different in that the over-statement was due to a clerical mistake. I cannot accept this submission. Au JA did not appear to place any weight on why the debt was over-stated in the first place.

53.Whilst I do not think that the appeal in Chan WS turned on whether the statutory demand should have been amended to correct the over-stated amount, I would observe that the failure to make the correction of the amount demanded in the statutory demands by way of amendments would lead to adverse costs consequences.

54.On this basis, I have no doubt that the present application to apply for amending the amount of the debt in the SD is a perfectly proper procedure to adopt and Mr Wu cannot be faulted.

55.I should add that in his affirmation, Mr Wu explained why he intended to reduce the amount of the debt in the SD. He forgot whether he had paid the full amount of the second instalment under the Automobile Contract and hence when confronted by Mr Kho, he agreed to reduce the amount to US$2,228,000 which Mr Kho agreed to have been paid by him.

56.The proposed amendments do not change the case of Mr Wu in substance. They only relate to the actual amount that Mr Wu has paid Mr Kho under the Automobile Contract.

57.Mr Kwan seeks to rely on the following paragraph of Linda Chan J’s decision in DCKD & PSL v JPWL [2022] HKCFI 1059 (§29):

“The purpose of serving the 1^st SD is to give time for A1 to consider the demand and decides whether or not to pay or compound for the debts described therein. Upon A1’s failure to comply with the 1^st SD, R is entitled to rely on such failure as the basis for establishing inability to pay debt when she presents a bankruptcy petition against A1. The procedure does not allow a creditor to issue a statutory demand for a number of discrete debts and continues to rely on the debtor’s failure to comply with such demand when he knows that one or more of the debts cannot properly form the subject matter of a statutory demand. The proper course would be for the creditor to withdraw the demand and issue a fresh one so that the debtor can decide whether to comply with the new demand or to face the risk of a bankruptcy petition being presented against him if he does not do so. It is only when a debtor neither complied with the demand nor raised any bona fide dispute on substantial grounds in respect of the debts stated therein and a petition has been presented in reliance on his failure to comply with the demand that a creditor would seek leave to amend the petition (instead of amending the demand) to make clear that he is no longer relying on such part of the debts which is in dispute.” (emphasis added)

58.I do not think that the above observation of Linda Chan J can assist Mr Kho. It is very much confined to the particular facts of that case. The 1^st SD concerned 5 debts and at the hearing, the respondent agreed that she could not rely on one of the 5 debts. Her counsel invited the court to accept her undertaking that she would not rely on that debt in her presentation of a bankruptcy petition against the applicant to save the 1^st SD. Linda Chan J refused to accept this invitation. There was no application to amend the 1^st SD at all. It is no authority for the proposition that a withdrawal of the SD instead of an amendment thereto is the only appropriate step to correct the amount claimed in the SD.

59.On the question as to whether amendment of the SD is the proper procedure, I have no doubt that it is.

60.Having resolved the two legal questions, I am of the view that the Amendment Summons should be allowed in the circumstances of the present case. I am unable to see why Mr Wu should be disallowed to amend the SD. It is hardly conceivable that Mr Kho would suffer any prejudice if a less amount is to be demanded for the same transaction in the Draft Amended SD. Indeed, there is no evidence of any prejudice adduced by Mr Kho.

61.As regards the EOT Summons, it is only fair to allow Mr Kho the extension of time sought to file his reply affirmation within 28 days from the date hereof.

Conclusion and orders

62.For the reasons given, I accede to the application of Mr Wu by the Amendment Summons and the application of Mr Kho by the EOT Summons.

63.For costs of the Amendment Summons, I believe that Mr Kho’s futile opposition is unreasonable. I make an order nisi that Mr Kho should pay Mr Wu his costs of and occasioned by the hearings of the Amended Summons excluding costs of and occasioned by the actual amendments with certificate for two counsel.

64.For costs of the EOT Summons, I do not think the opposition is reasonable though it is Mr Kho who asks for indulgence. I make an order nisi that there should be no order as to costs.

65.I note that Ms Tong has helpfully lodged with this court a copy of Mr Wu’s statement of costs but I cannot make a summary assessment without hearing Mr Kwan.

66.I direct that Mr Kho do within 14 days from today lodge with this court his note of objections not more than 2 pages (A4 size, 1.5 line spacing). It should be borne in mind that summary assessment is no mini-taxation and it would be done on paper.

67.Lastly, I thank Ms Tong, Mr Wong and Mr Kwan for their helpful assistance.

Mr Eugene Kwan, instructed by Messrs. Simon Si & Co, for the Applicant

Ms Sara Tong, SC & Mr William Wong, instructed by Messrs Tanner De Witt, for the Respondent