Re Li Kwok Yin

HCBI 737/2024

[2026] HKCFI 282

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS

INTERIM ORDER APPLICATION NO 737 OF 2024

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D E C I S I O N

A.      INTRODUCTION

1.By a summons issued on 20 December 2024 (“the 737 Summons”), SCB and HKMC seek an order to revoke the approval of a voluntary arrangement proposal dated 30 September 2024 (“Li IVA Proposal”) concerning the debts owed by Li made at the creditors’ meeting held on 16 December 2024 (“Li IVA Meeting”) pursuant to BO s.20J (“the Revocation Application”).

2.This decision and the decision concerning the voluntary arrangement proposal made by Li’s wife (ie Ho) in HCBI 396/2024 (“the 396 Decision”)^[1] are handed down at the same time.  For ease of reference, unless otherwise indicated, the abbreviations used in the 396 Decision are adopted herein.

3.On 2 September 2025, by consent of Li and the Nominees (ie Lyn and Wong), the Revocation Application is allowed.  However, as to the costs of the 737 Summons, the parties cannot reach any agreement.  SCB and HKMC are seeking an order that costs of the 737 Summons be borne by Li and the Nominees on an indemnity basis.  Li and the Nominees disagree.  The purpose of this hearing is to determine the costs of the 737 Summons.

4.In this hearing, SCB and HKMC are represented by Mr Adrian CK Wong.  Li and the Nominees are acting in person.

B.     BACKGROUND

5.At the material times, Li was the sole shareholder, Ho and Li were the directors, of Premier International Marketing Limited (“the Company”). The Company took out various loans with Standard Chartered Bank (Hong Kong) Limited (“SCB”).  Li was a guarantor for those loans.

6.Some of the loans were assigned by SCB to HKMC, and HKMC appointed SCB as its servicer to manage and administer such loans.

7.In respect of the loans owed by the Company to SCB (“SCB Loans”), HKMCI, a wholly owned subsidiary of HKMC, provided a guarantee up to 80% for the amount of the loans.  In respect of the loans owed by the Company to HKMC (“HKMC Loans”), HKMCI provided a guarantee up to 100% for the amount of the loans.

8.Having examined the Guarantee executed by Li dated 26 September 2018 (“Li Guarantee”), it is plain and obvious that:

(1)     The guarantee provided by Li to SCB under Li Guarantee covers all the loans granted by SCB to the Company.^[2]

(2)     Under Li Guarantee, Li is liable to SCB as the sole or principal debtor for the liabilities covered by the guarantee.^[3]

(3)     Li Guarantee shall be in addition to and is not to prejudice or be prejudiced any other guarantee or other security interest which SCB may have.^[4]  

9.PLLW was incorporated in March 2024, with Lai as the company secretary, director and member, and Lyn as member and director.

10.The Company was voluntarily wound up by a special resolution passed on 26 March 2024 by Li on the ground of insolvency, with the loans owed by the Company remaining unpaid. Lai of PLLW was nominated as the liquidator of the Company for the purposes of such winding-up.

11.On 20 June 2024, Messrs Tsang Chan Wong (“TCW”) on behalf of SCB sent the following demand letters to Li (“the 20.06.2024 Demand Letters”):

(1)     a demand letter concerning the the SCB Loans, the total of which as at 29 May 2024 being HK$1,653,742.80;

(2)     demand letters concerning the HKMC Loans, the amounts of which as at 29 April 2024 being HK$1,006,838.50, HK$1,450,531.55, and HK$1,020,422.82 respectively.

12.Li IVA Proposal was signed by Li on 30 September 2024 and filed on 21 October 2024.  In that proposal, it is stated:

(1)     An unsecured debt was owed by Li to his sister-in-law, Ms Ho Yuen Kwan Tianian (“HYK”) who “lent [Li] HK$2.3 million while [he] was in financial difficulties”^[5] (“HYK Loan”). HYK is Ho’s sister.  In Li IVA Proposal, HYK is described as an “associate creditor”^[6].

(2)     The amount of the debt owed to SCB was HK$270,700.  This was calculated by saying that HKMCI provided guarantee to 80% for the loans owed by the Company to SCB.  In respect of one of the loans, Li and Ho together as guarantors bear 20%, and hence Li himself should only bear 10%.  In respect of the other loans, Li would bear 20%.  As a result, the debt owed by Li to SCB was a “secured/contingent liability”, and Li should only bear HK$270,700.

(3)     The debt owed by Li to HKMC was nil.  According to Li IVA Proposal, HKMCI had provided guarantee to 100% of the loans owed by the Company to HKMC, and hence no debt was owed by Li to HKMC.

(4)     HYK agreed to both waive her claim of HK$2,300,000 and accept residual dividend of HK$221,600.

(5)     Li IVA Proposal would enable SCB to recover the “contingent liabilities”, with HK$270,700 to be paid to SCB.

(6)     The intended nominees were Lyn and Wong of PLLW.

13.As to Li IVA Proposal, in their written submissions dated 31 December 2025 (signed by Lyn and Wong), the Nominees said at pp.3‑4:

“1. [Li IVA Proposal] was prepared by [Wong] in her capacity as nominee on behalf of PLLW. As preparer of the proposals, the Nominees had direct and comprehensive access to each debtor’s personal financial information, including

……

(4) all documentary evidence of debts, including family loans and guarantees

2. The Nominees did not merely rubber-stamp debtor-drafted proposals prepared by the debtors. Rather, we actively engaged with the debtors to gather, verify and structure their financial information. We provided guidance on what information was necessary, assisted in locating documentation, and ensured that the proposals presented an accurate picture of their financial position based on the materials available to us.” (Emphasis added)

It is plain that Lyn and Wong are “preparer” of Li IVA Proposal.

14.An ex parte application for an interim order for summoning of a creditors’ meeting to consider Li IVA Proposal was granted on 29 November 2024.  The Nominees did not disclose to the Court in the ex parte application that the stance taken by SCB and HKMC as stated in the 20.06.2024 Demand Letters is very different from the picture presented in Li IVA Proposal.

15.On 12 December 2024, TCW on behalf of SCB and HKMC submitted claim forms to the Nominees.

16.On the same date, the Nominees rejected the claim forms submitted by SCB and HKMC.  In each claim form, the Nominees adjudicated that the amount of loan admitted to vote in the creditors’ meeting as nil.  The Nominees wrote to TCW and said:

“As both Claim Forms failed to identify the guarantee as provided by HKCMI. Under 122R(3)(b) of the Bankruptcy Rules, where the claim or part thereof is secured, both your clients’ claims are to be left out for voting purpose.”

17.On 16 December 2024, before Li IVA Meeting, TCW wrote to the Nominees. In the letter, TCW referred to BO s 2 and made the point that both SCB and HKMC could not be regarded as “secured creditor” of Li.  TCW also said:

“Please inform us whether you have satisfied yourself that the purported loan to [Li] in the amount of HK$2,300,000.00 from [HYK], the sister-in-law of [Li], is a genuine loan. If yes, what documents or evidence have you examined to so satisfy yourselves?

… our clients are not secured creditors in respect of the subject loans or debts and the claim formed submitted on 12 December 2024 are valid.

We take it that you as nominees are aware that you carry heavy responsibilities and the Courts place substantial weight on your opinion in deciding whether an interim order should be granted. You have a duty to take such steps as are reasonable to satisfy yourselves, and should have satisfied yourselves, inter alia, (1) that the debtor’s true position as to assets and liabilities does not appear to you in any material respect to differ substantially from that which it is to be represented to the creditors to be, (2) it does appear to you that, broadly, the debtor’s proposal as put to the creditors’ meeting has a real prospect of being implemented in the way it is to be represented and (3) the information that you have provides a bsis such that, within the broad limits inescapably applicable to what have to be the speedy and robust functions of admitting or rejecting claims to vote and agreeing values for voting purposes, no already-manifest unavoidable prospective unfairness in relation to those functions is present.

If you choose to maintain your views to reject and/or do reject our clients’ claims or claim forms o disallow them from voting at the upcoming meeting, we shall hold you personally liable for it and our clients shall take further actions including but not limited to legal proceedings and order for costs against you.” (Emphasis added)

18.On 16 December 2024, in the afternoon, Li IVA Meeting was held.  The meeting was chaired by Wong.  Lyn and Lai also attended the meeting.  In that meeting, HYK was represented by Ho, and SCB was represented by Mr Stephen Wong, a solicitor of TCW.  Ho was allowed to vote on behalf of HYK for the full amount of HYK Loan.  Voting right of SCB was adjudicated by the Nominees as only 10% of the SCB Loans.  The attendance of HKMC’s representative was denied, and the voting right of HKMC was completed rejected by the Nominees.  As shown in [1] of the chairman report of that meeting, the Nominees maintained the view that by reason of the guarantee provided by HKMCI, HKMC was a “secured creditor”, and hence had no voting right by reason of BR r 122R(3)(b).  In the meeting, Ho on behalf of HYK voted for Li IVA Proposal, while SCB voted against the proposal.  The Nominees considered that Li IVA Proposal was duly approved by a majority in the meeting (“Li IVA Decision”) and submitted a chairman’s report for approval by the Court.

19.OR has expressed her view on the 737 Summons in her letter dated 10 February 2025 (“the OR’s Letter”).  The OR stated that she has no supervisory role over the conduct of nominees under the BO and would leave SCB to make out their case before the Court.  However, the OR have made some observations in that letter.  Attendance of the OR in this hearing has been excused.

20.By the order of Master Elaine Liu dated 13 August 2025, the approval of Li IVA Proposal by the Court was adjourned pending the resolution of the 737 Summons.

21.On 19 August 2025, SCB and HKMC filed their skeleton submissions (“SCB/HKMC Skeleton”) for the hearing fixed on 2 September 2025 before me, in which SCB and HKMC made submissions on various material irregularities at or in relation to Li IVA Meeting.  The points made in SCB/HKMC Skeleton include the following:

(1)     HYK is clearly an associate for the purpose of BR r.122R(4)(c) and her vote should not be counted in Li IVA Meeting.  Li IVA Proposal should not be regarded as approved in Li IVA Meeting.

(2)     The Nominees’ treatment of the debts owed to SCB and HKMC as “contingent liabilities” or “secured indebtedness” is clearly legally invalid.

(3)     The only apparent “proof” of the alleged debt owed to HYK is a self-serving “loan confirmation”.

22.After receipt of SCB/HKMC’s Skeleton, the Nominees issued a “Supplemental Chairman’s Report of Creditors’ Meeting dated 19.8.2025”, in which the Nominees put forward various grounds to try to justify their handling of Li IVA Proposal, but they at the same time proposed to suspend the implementation of that proposal.  On 22 August 2025, the Nominees wrote to TCW and said that they “do not object to revoke the approval of [Li IVA Proposal]”.

23.On 2 September 2025, in the hearing before me, Li and the Nominees confirmed that they agreed to the revocation of Li IVA Decision.  However, the parties could not reach an agreement on costs.

C.     DISCUSSION

24.SCB/HKMC seek costs of the 737 Summons against Li and the Nominees on an indemnity basis.  This is opposed by Li and the Nominees.  Li says that there should be no order as to costs.  The Nominees’ stance is that there should be no order as to costs against them, and alternatively, they should only be liable to pay a modest sum to SCB/HKMC on a party and party basis.

25.Li and the Nominees have put forward two settlement proposals (which they called “ADR Proposals”) to SCB/HKMC on 8 April 2025 and 22 October 2025 respectively.  In my view, these proposals could not help Li and the Nominees in the arguments concerning costs of the 737 Summons, for the debts owed to SCB/HKMC have been substantially discounted in these proposals. Obviously, by successfully obtaining an order to revoke Li IVA Decision, SCB/HKMC have achieved a much better result.

26.As against Li, SCB/HKMC succeed in the Revocation Application made by the 737 Summons.  The general rule is that costs should follow the event. There is no reason to depart from this general rule.

27.SCB/HKMC rely upon Clause 1(c) of Li Guarantee, which provides that Li is liable to pay indemnity costs in connection with the recovery of moneys due under the guarantee.  Having examined the terms of Clause 1(c), I agree that SCB/HKMC’s application for indemnity costs against Li should be allowed.  Where parties had entered into a commercial transaction on indemnity basis, the Court should be slow to disturb the parties’ agreement unless the circumstances were such as to cause the Court in the exercise of its discretion to intervene.^[7]  In my view, there is no special circumstances justifying a departure from the contractual bargain.

28.As against the Nominees, in the circumstances of this case, I am of the view that the Nominees have seriously breached their duties, and they cannot be seen as acting independently and impartially in handling the matters in relation to Li IVA Proposal.^[8] In the circumstances, a costs order against the Nominees personally should be made.^[9]

(1)     Li IVA Proposal was prepared by the Nominees.  The Nominees have the duty to investigate and to scrutinize the matters in Li IVA Proposal.  When Li IVA Proposal was in fact prepared by the Nominees, it would not be possible for the Nominees to be seen as officers, who would independently and impartially investigate and scrutinize the matters in that proposal.

(2)     At the time of preparing Li IVA Proposal, since the Nominees had “direct and comprehensive access” to Li’s financial information, including “all documentary evidence of debts”^[10], the Nominees must have seen Li Guarantee and the 20.06.2024 Demand Letters.  In view of these documents, there can be no valid reason in support of making and putting forward the proposal as stated in Li IVA Proposal.

(3)     In the hearing on 2 September 2025, after hearing Li expressing his consent to the revocation of LI IVA Decision, the Court asked the Nominees to state their position.  Wong then on behalf of the Nominees said that they were Li’s spokesman and they respected Li’s will^[11].  Plainly, the Nominees regarded themselves as Li’s representatives in handling the IVA matters.  In the circumstances, the Nominees cannot be seen as independent and impartial.

(4)     The Nominees alleged that SCB/HKMC failed to disclose whether they had recovered anything from HKMCI.  Any such recovery would reduce their entitlements to claim against Li.  In my view, this is not a valid point against SCB/HKMC.  If HKMCI has paid anything to SCB/HKMC by reason of the HKMCI Guarantee, since the Company is in liquidation, HKMCI would demand Li to repay them the corresponding sum.  As a matter of fact, Li did not say that HKMCI had demanded him to pay anything.  Plainly, there is no basis to say that HKMCI might have made some repayments by reason of the HKMCI Guarantee, and there is no basis to criticize SCB/HKMC for failing to disclose anything.

(5)     The Nominees complained that SCB/HKMC had failed to disclose documents to them.  However, the Nominees had not pointed out exactly what document(s) SCB/HKMC had failed to disclose.  Further, the Nominees also had failed to explain that since they already had “direct and comprehensive access” to Li’s financial information, including “all documentary evidence of debts”^[12], why they would need some further document(s) from SCB/HKMC.

(6)     Having considered the evidence and the submissions, in my judgment, there is no arguable ground in support of the Nominees’ stance that SCB/HKMC should be regarded as “secured creditors”, and the SCB Loan and HKMC Loan should be regarded as “contingent liabilities”.[13] There is also no arguable ground upon which SCB and HKMC could be denied to vote in respect of the full amounts of the loans owed by Li to them in Li IVA Meeting.

(7)     Notwithstanding the clear reminder given by TCW in their letter dated 16 December 2024, the Nominees paid no heed to the words said by TCW and maintained their indefensible stance on HKMC’s voting right and SCB’s voting right in Li IVA Meeting.  The Nominees also made no explanation as to why they regarded that HYK Loan as a genuine loan to Li.

(8)     Regarding HYK Loan, it is stated in the “Loans Confirmation” produced by Li that HYK advanced various sums to Li from 21 November 2016 to 4 May 2020.  Copies of the cheques produced by Li (“the Cheques”) show that these sums in fact were paid to the Company, not to Li.  In view of the Cheques, one would reasonably ask if those sums are loans from HYK, whether those sums should in fact be loans to the Company, not loans to Li personally.  Obviously, this is a matter ought to be investigated.  But the Nominees did not investigate this matter.

(9)     Mr Wong has rightly pointed out as to the claims made by SCB/HKMC, the Nominees had tried very hard to say that there was insufficient information in support of their claims.  However, as to HYK’s claim, the Nominees had easily allowed the whole claim without any proper investigation.  The Nominees did not treat SCB/HKMC and HYK equally and did not apply the same standard in considering their respective claims.

(10)     Even assuming that all the sums represented by the Cheques are loans from HYK to Li personally, it is plain and obvious that HYK, being Ho’s sister and Li’s sister-in-law, is an associate and her vote cannot be counted in Li IVA Meeting.^[14] In fact, the Nominees described HYK as an “associate creditor” in Li IVA Proposal.  Hence, the Nominees clearly knew that HYK was being regarded as an associate for the purpose of Li IVA Proposal.  The Nominees could not satisfactorily explain why they would allow Ho to vote on behalf of HYK in Li IVA Meeting, and the voting right of HYK was counted in the full amount of HYK Loan.  The Nominees also could not satisfactorily explain why, in view of the clear objection from SCB/HKMC, they regarded that Li IVA Proposal was approved in the meeting.

(11)     In view of the fact that HYK Loan cannot be countered for the purpose of considering whether Li IVA Proposal is approved by a creditors’ meeting, and in view of the clear objection from SCB/HKMC, no reasonable nominee would summons a creditors’ meeting to consider the proposal.

(12)     All along, the Nominees have kept on putting forward convoluted and unarguable grounds to try to justify their decisions in relation to Li IVA Proposal.

(13)     Taking all the circumstances into account, the Nominees certainly cannot be seen as being independent and impartial in handling the matters in relation to Li IVA Proposal.

(14)     With all the aforesaid in mind, I have no hesitation in concluding that the Nominees’ conduct has fallen below the proper standard and is worthy of censure.

29.I am further of the view that indemnity costs should be ordered against the Nominees.^[15] I have to say that a reasonable bystander, taking the matters set out in the paragraph above into account, would have a sense of indignation at the Nominees’ conduct in handling Li IVA Proposal.  In my view, no reasonable nominee would handle Li IVA Proposal in the same way.  The very unreasonable handling of Li IVA Proposal leads to this litigation.  Having handled Li IVA Application in an extremely unreasonable way, the Nominees tried to justify their position by making convoluted and unmeritorious submissions.  In view of the extreme unreasonableness of the Nominees’ conduct, I am of the view that an indemnity costs order against the Nominees is appropriate.

30.Li IVA Proposal was made by Li, and prepared and handled by the Nominees.  Both Nominees were proposed by Li.  In my view, both Li and the Nominees shall be liable by reason the material irregularities in relation to the approval of Li IVA Proposal.  Both Li and the Nominees shall be jointly and severally liable for the costs of the Summons.

D.     DISPOSITION

31.For the reasons above, I am of the view that costs of the 737 Summons, including costs reserved, shall be paid by Li and the Nominees to SCB on an indemnity basis.  Li and the Nominees are jointly and severally liable to those costs.  Those costs be summarily assessed on paper without an oral hearing. There be leave to SCB to lodge and serve a bill of costs for summary assessment (limited to 3 pages) within 14 days.  There be leave to Li to lodge and serve his list of objections (limited to 3 pages), and leave the Nominees to lodge and serve their list of objections (limited to 3 pages), within 14 days thereafter.

32.Since Li and the Nominees are acting in person, I direct that upon a request made by any of them, this decision be interpreted by a court interpreter to the person making the request at a mutually convenient time at a place inside the High Court Building.

33.Lastly, it remains for me to thank Mr Wong for the very helpful assistance provided to the Court.

Mr Adrian CK Wong, instructed by Messrs. Tsang, Chan & Wong, for the Creditor (SCB)

The Debtor appeared in person

Ms Lyn Yee Chen Jean, the Nominee of the IVA of the Debtor, appeared in person

Ms Wong Siu Man, the Nominee of the IVA of the Debtor, appeared in person

The attendance of the Official Receiver was excused