Re Malcolm Westley Casselle

HCB 1698/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 1698 OF 2010

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Before: Hon To J in Court

Date of Hearing: 24 January 2011

Date of Judgment: 24 January 2011

Date of Reasons for Judgment: 8 March 2011

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REASONS FOR JUDGMENT

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Background

1.This is a creditor’s petition based on a statutory demand dated 27 October 2009 for a debt of HK$116,053 comprising of the principal sum of HK$88,700 and interest of HK$27,353 accrued as at the date of issue   of the statutory demand (“Petition”).  The creditor is a solicitors firm (“Petitioner”).  The debtor (“Debtor”) and his companies or companies in which he was employed were clients of the Petitioner.  The principal sum was in respect of professional legal service charges and disbursements incurred as at 15 July 2008 (“professional fees”). 

2.Upon receipt of the statutory demand via e-mail on 27 October 2009, the Debtor replied to Ava Yiu of the Petitioner at 4:18 pm on the same day that he had wired in excess of the amount demanded to the Petitioner the year before and that the funds had been retained by the Petitioner since that time.  Ava Yiu requested for details of the transfer.  On or about 17 November 2009, the Debtor sent two documents to the Petitioner in reply by courier.  One was a copy of the statutory demand evidencing the fact that it had been received by the Debtor.  The other was a photostat copy of a document titled “Money Order Receipt” with what purported to be copy of a money order dated 17 November 2009 (“Money Order”) issued by the Debtor to the Petitioner for the sum of US$16,000.  The Money Order contained a reference number, “GDO/27127/2008 Purchase of Spinner Grp”, which was referable to the professional fees demanded in the statutory demand.  On 18 February 2010, Master Hui granted leave for the Petition dated 9 February 2010 to be filed within 28 days. The Petition was filed on 5 March 2010 and set down for hearing on 5 May 2010. 

3.At the time of filing of the Petition, the Debtor was residing in Los Angeles in the United States.  Despite repeated attempts, the Petitioner’s agent in Los Angeles was unable to serve the Petition on the Debtor, which necessitated a number of adjournments.  On 16 July 2010, the Petitioner obtained leave from Master Hui to serve the Petition by substituted service on the Debtor by ordinary post at the Debtor’s address in Los Angeles and by placing an advertisement of a notice of the Petition in an English newspaper published and widely circulated in Los Angeles.  Service was effected accordingly, the Petition and notice of hearing were sent by post to the Debtor under the Petitioner’s covering letter dated       30 August 2010.

4.In addition to the above mode of service, on 10 September 2010, a trainee solicitor of the Petitioner, Maggie Ng, informed the Debtor of the hearing of the Petition on 29 September 2010 by e-mail to his last known e-mail address.  On 15 September 2010, she reached the Debtor through his cell phone.  The Debtor confirmed that he had received notice of the hearing via her e-mail.  Maggie Ng also notified the Debtor of the hearing by letter to his address in Los Angeles on 16 September 2010 and by SMS message to his cell phone on 20 September 2010.

5.On or about 17 September 2010, the Petitioner received two documents from the Debtor by courier.  One was titled “Constructive Notice of Conditional Acceptance” dated 13 September 2010.  It was not entirely clear what message the Debtor intended to convey by that document.  The Debtor referred to the Petitioner’s letter dated 30 August 2010 serving the Petition and notice of hearing on him, which he defined  as the “Notice”.  He wrote:

“I conditionally accept your offer in that ‘Notice’ upon proof of claim that:

1. This is not a frivolous response as defined by FedEx # 798675982637,

and

2. That this matter isn’t already settled by Fedex #(s) 793062852048, 793027639959, 793192635023,

and

3. That the instrument(s) contained in the above FedEx shipment(s) did not settle account # GDO/2717/2008 of MALCOLM WESTLEY CASSELLE (hereinafter “Account”)

and

4. That there any defects in the instrument(s) contain in the above listed Fedex shipment(s)

and

5. That you can point to the defect(s) in the above listed instrument(s).

MR OLDHAM, you have five (5) days from receipt of this Constructive Notice of Conditional Acceptance to respond on a point-by-point basis, …  Failure to respond shall be deemed agreement with the facts stated herein, and an inability to prove your claim, thereby indicating that the Account is settled and no further controversy exists.

Furthermore that:

1) The referenced the Account is settled, and your claim is null and void

and

2) That any further frivolous responses by either your office, or any other office / agency within Hong Kong SAR will be charged at $20,000.00 USD per correspondence / incident.

…”

The Debtor misquoted the Petitioner’s reference number, which should be GDO/27127/2008.  With respect, what he wrote was incomprehensible.  Doing the best I could, I guess he was repeating that he had paid US$16,000 by the Money Order sent by FedEx #793027639959 and the account was settled with no amount due.  Impliedly, he admitted that he had the legal services of the Petitioner but alleged that he had paid by the Money Order.  The other document was a copy of the Petitioner’s letter dated 30 August 2010 to the Debtor enclosing a sealed copy of the Petition, evidencing the fact that he had received the Petition.

6.On 24 September 2010, this Court received by courier the Debtor’s document titled “Motion in support of application to set aside bankruptcy petition” (“1^st Motion”) made at Los Angeles alleging that the Petition came into his hands on 13 September 2010 and asked for time to respond.  He also alleged that the demand did not comply with the bankruptcy rules.  Attached to the 1^st Motion was what purported to be a Notice of Originating Motion prepared on a standard court form. The Notice of Originating Motion was not issued in accordance with procedures of the Court.  The documents revealed a second address of the Debtor in Las Vegas.

7.On 27 September 2010, the Petitioner obtained an order from Master Hui that service of the notice of adjourned hearing on 29 September 2010 dated 9 September 2010 by ordinary mail to the Debtor’s Los Angeles address was deemed to be good and sufficient service on the Debtor.

8.The Debtor did not appear at the hearing on 29 September 2010.  Master Hui did not make any ruling in respect of the 1^st Motion and Notice of Originating Motion.  He adjourned the hearing of the Petition to 20 October 2010 and ordered that notice of the adjourned hearing with a warning that the Court may proceed on the return day even in the Debtor’s absence be served on the Debtor by ordinary post at his Los Angeles and Las Vegas addresses.  Notices of the adjourned hearing were served on the Debtor on 4 October 2010 pursuant to the order of Master Hui.

9.On 19 October 2010, the Debtor caused a bundle of documents to be filed with the Court.  The bundle included:

(1)  Motion in support of application to set aside bankruptcy petition dated 19 October 2010 (“2^nd Motion”);

(2)  Certification of non-performance/dishonor/liability dated 18 May 2010;

(3)  Certification of due presentment of notice under notary seal;

(4)  an undated Constructive Notice of Conditional Acceptance;

(5)  Certificate of service certifying service of the following documents on the Registrar:

copy of Notice of Default in Dishonor;

copy of Certificate of Non-Performance/Dishonor/ Disability;

copy of Certificate of Non-Response/Non-Performance;

copy of Notary’s Certificate of Service;

copy of Notice Fault in Dishonor/Opportunity to Cure;

copy of Commercial Affidavit;

copy of Constructive Notice of Conditional Acceptance;

copy of HSBC Transfer Receipt October 2008; and

copy of Money Order Receipt November 2009.

(6)  Motion to Set Aside;

(7)  Order to Set Aside; and

(8)  Certificate of Service of the above documents.

Some of the documents were purportedly notarized by a notary public in the state of California.  Some were originals and the others were copies.  By the 2^nd Motion, the Debtor sought to have the Petition set aside by reason of the documents filed.

10.At the hearing on 20 October 2010, the Debtor did not appear.  Master Hui adjourned the hearing to 1 November 2010 before a judge.  On the same day, Maggie Ng served notice of the adjourned hearing on the Debtor by ordinary post at his Los Angeles and Las Vegas addresses pursuant to the order of Master Hui.

11.At the hearing on 1 November 2010, the Debtor did not appear.  Barma J adjourned the hearing to 24 January 2011 and gave the following directions:

(1)  that a sealed copy of the Court order together with the transcript of His Lordship’s ruling made at the hearing be served by ordinary post to the Debtor’s two last known addresses in Los Angeles and Las Vegas; and by e-mail to  his two last known e-mail addresses;

(2)  that the Debtor had leave to file and serve further evidence within 42 days; and

(3)  that the Petitioner had leave to file and serve a reply to the Debtor’s evidence within 14 days thereafter.

Notices of the adjourned hearing and a sealed copy of the order of Barma J were accordingly served on the Debtor on 26 November 2010. 

12.On or about 3 January 2011, the Petitioner received from the Debtor by courier a document titled “Constructive Notice of Conditional Acceptance” dated 28 December 2010, a copy of the Petitioner’s covering letter dated 26 November 2010 enclosing a sealed copy of Barma J’s order dated 2 November 2010 and a copy of the transcript of his Lordship’s ruling.

13.On 12 January 2011, the Petitioner received two documents from the Debtor by courier.  One was a copy of the Petitioner’s covering letter dated 29 December 2010 to the Debtor enclosing a copy of the 6^th affirmation of Maggie Ng.  The other was titled “Constructive Notice of Conditional Acceptance” dated 3 January 2011.  Except for a few minor alterations, the Constructive Notice of Conditional Acceptance dated 28 December 2010 and the one dated 3 January 2011 were same as the one dated 13 September 2010: see paragraph 5 above.

14.On 17 January 2011, the Petitioner received from the Debtor a three-page document titled “Constructive Notice of True Bill Due and Owing” dated 8 January 2011, alleging that the Petitioner’s partner, Oldham owed the Debtor US$20,000.

15.The Debtor did not file any affirmation with the Court at all.  On 18 January 2011, he served a packet of documents on the Petitioner out of time, including one titled “1^st Affirmation by Malcolm Westley Casselle” dated 17 January 2011.  That document was purportedly made in Los Angeles.  It was in the form of a statement and not by way of an affirmation or affidavit (“Debtor’s 1^st Statement”).  In the statement, the Debtor made three points.  Firstly, he disputed that the Petitioner had provided reasonable evidence showing the Petitioner had not received payment in full.  Presumably, he was referring to his alleged payment by the Money Order dated 17 November 2009.  Secondly, he asserted that an additional payment had been transferred to the Petitioner via Hong Kong & Shanghai Banking Corporation (“HSBC”).  He exhibited a transfer slip of HSBC dated 29 October 2008 for a sum of US$17,250 as evidence of the transfer. Thirdly, he also asserted that Oldham owed him US$20,000 by reason of the Constructive Notice of True Bill Due and Owing dated          8 January 2011. The Petitioner responded by further affirmations of Maggie Ng, Siu, Jen and the affidavit of Campbell.

16.At the hearing on 24 January 2011 before me, the Debtor did not appear.  After hearing Ms Lee, counsel for the Petitioner, and the Official Receiver, and reading the affirmations filed by the Petitioner and all the documents received from the Debtor, I granted the usual bankruptcy order against the Debtor. 

17.On the afternoon of 24 January 2011 after the bankruptcy order had been made, the Court received another three-page document from the Debtor (“Debtor’s 2^nd Statement”), purportedly made at Shanghai but was faxed to the Court from Hong Kong.  It responded to the affidavit of Campbell, the 8^th affirmation of Maggie Ng, the 2^nd affirmation of Siu and the affirmation of Jen, but has no impact on the bankruptcy order which I made.

18.Hereunder are the reasons for my decision.

The law and the issues

19.The law of bankruptcy is relatively simple and straight forward.  There are certain conditions to be satisfied in respect of the debtor before   a petition may be presented against him.  The petition must be in respect   of one or more debts owed by the debtor to the petitioning creditor. There are certain requirements as to the debt.

20.Under section 4(1) of the Bankruptcy Ordinance, Cap. 6, a bankruptcy petition shall not be presented unless the debtor is: (a) domiciled in Hong Kong; (b) is personally present in Hong Kong on the day on which the petition is presented; or (c) at any time in the period of three years ending with that day (i) has been ordinarily resident, or has had a place of residence in Hong Kong; or (ii) has carried on business in Hong Kong.  This Petition was presented on the basis that the Debtor had within three years immediately preceding the presentation of the Petition carried on business in Hong Kong. This is not disputed by the Debtor.

21.Section 6(2) specifies the requirements as to the debt in respect of which the petition is presented.  These requirements are:

“(2) Subject to sections 6A to 6C, a creditor’s petition may be presented to the court in respect of a debt or debts if, but only if, at the time the petition is presented –

(a) the amount of the debt, or the aggregate amount of the debts, is equal to or exceeds $10,000 or a prescribed amount;

(b) 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, either immediately or at some certain, future time, and is unsecured;

(c) the debt, or each of the debts, is a debt which the debtor appears either to be unable to pay or to have no reasonable prospect of being able to pay; and

(d) there is no outstanding application to set aside a statutory demand served under section 6A in respect of the debt or any of the debts.”

22.There was no dispute that the debt was a liquidated sum exceeding the prescribed amount.  Subject to the Debtor’s dispute that the debt had been paid, the debt was unsecured and immediately payable to the Petitioner.  There was ample evidence that the Debtor received the statutory demand served on him on 27 October 2009.  Despite that he protested that he had wired money into the account of the Petitioner in settlement of the professional fees demanded, there was no dispute that he had never applied to have the statutory demand set aside.  Thus, the requirements under section 6(2)(a), (b) and (d) were satisfied.  The issues raised by this Petition are: (1) whether the debt is disputed; and (2) if it is not disputed or disputable, whether the Debtor appears to be unable to pay or to have no reasonable prospect of being able to pay the debt. 

23.In respect of the first issue, there was no dispute that the Debtor had received the legal services of the Petitioner for which the professional fees were payable.  The dispute is whether the professional fees were paid.  Bankruptcy proceedings are summary in nature.  They 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.  If satisfied that there is a bona fide dispute as to the debt, the usual practice  of the court is to dismiss the petition and let the dispute be resolved by the usual process. 

24.A bona fide dispute is not a trivial or insubstantial dispute but one based on solid grounds disputable both in law and on the facts of the case.  In Re ICS Computer Distribution Limited, [1996] 3 HKC 440, the test of bona fide dispute in company winding up cases was set out by Rogers J, as he then was, at 443C-444A as follows:

“Importantly for this case there is a distinction between a consideration of whether the Company has established a defence on substantial grounds and a consideration of whether the evidence is believable. Taken to the ultimate, the difference is between whether there is evidence and whether that evidence is believable. It seems to me that the onus must be on the company against which a petition is presented to adduce sufficiently precise factual evidence to satisfy the Court that it has a bona fide dispute on substantial grounds. This seems to me to be the proper approach which emerges both from the cases where the petition has been struck out and those for example as the Great Britain Mutual Life to which I have referred and the Janeash Ltd [1990] BCC 250. In that case Browne-Wilkinson V-C said at 252 “That huge weight of material has remained unanswered”. He went on to doubt the truth of such material as had been put in by the company, but that does not, in my view, detract from the basic point that the company's evidence must establish a substantial case. If the evidence fails to establish that case the company cannot satisfy the test by arguing hypotheses of fact on which it is said that such a case exists or could exist.”

This is a higher standard than that required of a defendant in resisting an application for summary judgment under Order 14 rule 3 of the Rules of the High Court.  This test is equally applicable to personal bankruptcies.  Thus, the burden is on the debtor to show not only that his case is believable but also that there is precise factual evidence in support of his case, which are not just mere assertions.  The court will look at the debtor’s evidence against so much of the background and incontrovertible evidence that is not disputed or not capable of being disputed.  An honest belief on the part of the debtor that he has a substantial ground of defence is not sufficient to avoid a bankruptcy order.

25.As for the second issue, section 6A provides a statutory definition for the phrase, “a debt which the debtor appears either to be unable to pay or to have no reasonable prospect of being able to pay” as follows:

“(1) For the purposes of section 6(2)(c), the debtor appears to be unable to pay a debt if, but only if, the debt is payable immediately and either—

(a) the petitioning creditor to whom the debt is owed has served on the debtor a demand (known as "the statutory demand") in the prescribed form requiring him to pay the debt or to secure or compound for it to the satisfaction of the creditor, at least 3 weeks have elapsed since the demand was served and the demand has been neither complied with nor set aside in accordance with the rules; or

(b) execution or other process issued in respect of the debt on a judgment or order of any court in favour of the petitioning creditor, or one or more of the petitioning creditors to whom the debt is owed, has been returned unsatisfied in whole or in part.”

26.The Petitioner is relying on the presumption under section 6A(1)(a).  More than three weeks have elapsed since the service of the statutory demand on the Debtor.  There was no dispute that the statutory demand was neither complied with nor set aside.  The presumption applies, but this presumption may be rebutted.  Usually, if a debtor is unable to show a bona fide dispute of the debt on substantial grounds, if the statutory demand is not complied with within three weeks and if no formal application has been made to have the statutory demand set aside, the presumption is almost irrebuttable. 

The Debtor’s case

27.As mentioned at paragraph 2 above, the Debtor’s first response to the statutory demand on 27 October 2009 was that he had wired to the Petitioner funds in excess of the amount demanded.  On 17 November 2009, he gave further particulars of the payment in the Money Order Receipt including his reference number with the Petitioner.  He also attached a copy of the Money Order purportedly directing the processor, IRS Technical Support Division in Washington DC, to pay the Petitioner US$16,000.  That was an implied acknowledgment that he had received the legal services of the Petitioner for which he was obliged to pay the professional fees.  To that extent the petitioning debt was not disputed.  The Debtor only disputed the Petitioner’s case that he had not paid the professional fees.  That was the limited extent of his dispute about the petitioning debt. 

28.On 17 January 2011, the Debtor alleged through his Constructive Notice of True Bill Due and Owing that by reason of either  or both his Constructive Notice of Conditional Acceptance and Oldham’s default, Oldham owed him US$20,000.  Thus, the Debtor was raising a counterclaim or set off which would extinguish the petitioning debt.

29.The Debtor did not file any affirmation pursuant to the order of Barma J made on 1 November 2010, but served the Debtor’s 1^st Statement dated 17 January 2011 on the Petitioner, alleging that the Petitioner failed to provide evidence that it had not received his payment by the Money Order, that he had paid an additional sum of US$17,250 by transfer via HSBC on 29 October 2008 and that Oldham owed him US$20,000.  That statement was served out of time and was not made by way of an affidavit or affirmation.  Thus, he introduced a further defence that he had made an additional payment of US$17,250 by the transfer via HSBC    a year before the professional fees demanded.  The Petitioner responded  the defence by the Siu’s 2^nd affirmation, Maggie Ng’s 8^th affirmation,         Jen’s affirmation and Campbell’s affidavit.

30.After the bankruptcy order was made on the morning of 24 January 2011, this Court received the Debtor’s 2^nd Statement on the same day in response to the above affirmations and affidavit of the Petitioner.  The Debtor made two points.  Firstly, he demanded proof that the Money Order had been presented to the processor named in the Money Order in accordance with the instruction on the Money Order.  Secondly, he said that by acknowledging receipt of the transfer of US$17,250 via HSBC, the Petitioner was contradicting its earlier evidence that it had not received the said funds and demanded proof that the      funds were paid based on a valid bill, valid invoice and valid contract between the Debtor and Petitioner.

31.In addition, on 19 October 2010, the Debtor caused to be filed with the Court a bundle of documents: see paragraph 9 above. Some of those documents were purportedly notarized by a notary public in the state of California certifying that the Petitioner was in some kind of a default or dishonour.  The Debtor did not adduce expert evidence on the laws of the United States.  The legal effect of those documents was therefore unknown.  Among those documents was a copy of the Money Order and HSBC transfer slip.  I believe the Debtor’s purpose in filing those documents was to show that he had paid the professional fees demanded   in support of the 2^nd Motion.  Thus, those documents did not raise any issues other than those discussed above.

32.In summary, the Debtor’s case was basically that he had a bona fide dispute as to the petitioning debt on the ground that he had already paid for the professional fees by the Money Order.  The Debtor’s 1^st and 2^nd Statements dated 17 and 24 January 2011 were not filed within the time prescribed by Barma J and were not by way of an affidavit or affirmation.  These statements need not be taken into account.  But even ignoring the technicalities, his further case was that he had made double payment for the professional fees demanded via the HSBC transfer and had a counterclaim or set off against Oldham who owed him US$20,000.  He also complained via the 1^st Motion about lack of sufficient time to respond to the Petition.  I shall deal with all of these grounds of opposition below.

Lack of sufficient time to respond to the Petition

33.In his 1^st Motion in support of application to set aside the Petition, the Debtor complained about lack of sufficient time to respond to the Petition.  He admitted that the Petition had come into his hands on 13 September 2010.  There was also incontrovertible evidence that he had received the statutory demand almost a year before as evidenced by his sending a copy of the statutory demand to the Petitioner together with the Money Order Receipt dated 17 November 2009.  Even if he did not have enough time to make a proper response by 29 September 2010, Master Hui adjourned the hearing of the Petition to 20 October 2010 which gave him more than a month to respond to such a simple debt.  He was given a warning by Master Hui that the Court may proceed with the hearing of the Petition even in his absence.  At the hearing on 20 October 2010, Master Hui adjourned the hearing to 1 November 2010 before Barma J.  His Lordship then adjourned the hearing to 24 January 2011 before me.  All along the Debtor had been given notice of the adjourned hearing.  He was granted leave to file affirmation in opposition to the Petition within 42 days from 1 November 2010 pursuant to Barma J’s order.  He had ample time until 13 December 2010 to file his affirmation in opposition.  He could not have any legitimate complaint about not having sufficient time to respond to the Petition and to the Petitioner’s affirmations filed up to the hearing before Barma J on 1 November 2010.

34.The Debtor chose not to file any affirmation pursuant to the order of Barma J.  Nevertheless, on 17 January 2011 when time for filing affirmation had lapsed, he served his Constructive Notice of True Bill Due and Owing on the Petitioner alleging that Oldham owed him US$20,000. Again, on 18 January 2011, he served the Debtor’s 1^st Statement on the Petitioner alleging for the first time payment of the sum US$17,250 in settlement of the professional fees in question by transfer via HSBC.  This was a new allegation, which the Petitioner was entitled either to  ignore as it was not filed within time and not made by way of an affidavit.  In all fairness to the Debtor, the Petitioner chose to respond by Siu’s        2^nd affirmation, Maggie Ng’s 8^th affirmation, Jen’s affirmation and Campbell’s affidavit, otherwise, I would have to ignore the Debtor’s         1^st Statement altogether.

35.After the bankruptcy order was made on 24 January 2011, the Debtor faxed the Debtor’s 2^nd Statement to the Court.  He complained that the Petitioner changed its position by admitting receipt of the sum of US$17,250.  That cannot be described as a change of position.  The transfer via HSBC of the sum of US$17,250 in settlement of the professional fees was a new allegation by the Debtor.  Until the receipt of the Debtor’s 1^st Statement of 17 January 2011, that payment was never in issue.  The Petitioner had never said that they had not received that payment before.  The Petitioner admitted the receipt of the funds and explained how the funds had been applied.  This complaint was groundless.  The Debtor also advanced other arguments which, in my view, were unable to advance his case further.

36.Therefore, it cannot be said that the Debtor did not have sufficient time to consider and respond to the Petition.  He had received the statutory demand, the Petition, notice of the various adjourned hearing and sealed copy of Barma J’s order to file affirmations.  He had received a warning that the Court may proceed with the hearing of the Petition even  in his absence.  In the circumstances, I consider it right that the hearing of the Petition should proceed even in the Debtor’s absence.

Payment of US$16,000 by the Money Order

37.The Petitioner’s client service manager, Campbell, filed an affidavit in response to the Debtor’s allegation of having paid the professional fees by the Money Order.  He said that upon receipt of the Money Order dated 17 November 2009, he attended the HSBC’s head office in or about November 2009 and presented the Money Order over the bank’s service counter.  However, after verifying with the documentation verification department of the bank, the counter staff informed him that the Money Order was not an instrument by which one could receive money and refused to accept the Money Order. 

38.The Petitioner’s financial controller, Siu, confirmed in his 2^nd affirmation that no funds of US$16,000 had been received by the Petitioner between 12 and 30 November 2009.  In her 6^th affirmation, Maggie Ng also produced a copy of the Petitioner’s sole multicurrency passbook as evidence of non-receipt of the funds.

39.In the Debtor’s 1^st Statement, the Debtor said that he was not satisfied with Siu’s evidence and complained that the Petitioner had not exhibited full and complete statements from November 2008 for all corporate, presumably meaning company, bank accounts and personal accounts under Oldham’s control.  He demanded proof that the Money Order had been presented to the processor named in the Money Order in accordance with the instruction on the Money Order.  He said that if the Petitioner did not follow the instruction stated on the Money Order, the fact that HSBC refused to accept the Money Order had nothing to do with him.

40.In my view, the Debtor’s allegation was a bald and frivolous one.  On the face, the Money Order did not appear to have been issued by any known bank.  There was no instruction on the Money Order as to how to bank the Money Order.  In particular, there was no instruction that the Money Order had to be presented to the processor, namely IRS Technical Support Division in Washington DC, for payment.  In fact, it   was absurd to suggest that the Petitioner had to go to Washington to obtain payment for services it provided to the Debtor in Hong Kong. Presentation of a bill of exchange or money order to a local bank is the normal way of obtaining payment from such an instrument.  The Money Order had been verified by HSBC as not being an instrument by which   one could receive money.  It was the Debtor’s obligation to pay.  If he purported to pay by the Money Order which was not an instrument by which the payee could receive money, he could not put the blame on the Petitioner or HSBC.  He had never paid and it remained his obligation to pay.  There is no substance in the Debtor’s defence.

41.As for the Debtor’s complaint that the Petitioner had not exhibited full and complete statements from November 2008 for all the Petitioner’s company bank accounts and personal accounts under Oldham’s control, I think it was also frivolous and vexatious.  The Money Order    was received in November 2009 and expressly made payable to the Petitioner.  It would serve no purpose to exhibit all the Petitioner’s bank accounts from November 2008 to November 2009 and any of Oldham’s personal bank accounts.

42.The Debtor did not dispute his liability to pay the professional fees demanded.  He said that he had paid the professional fees by the Money Order which obviously was incapable of being an instrument  by which one could receive money.  On such evidence, the Debtor was unable to show he had any bona fide dispute of the petitioning debt on substantial ground.

Payment by HSBC transfer of US$17,250

43.On 17 January 2011, the Debtor changed his position and said that he had paid US$17,250 on 29 October 2008 and exhibited an HSBC transfer slip as evidence.  That payment was not disputed by the Petitioner.  According to the Siu’s 2^nd affirmation, the Petitioner had been instructed by the Debtor on various matters, apart from the one in issue, including matters concerning Globalcast Networks HK Ltd (“Globalcast”). Globalcast was a client of the Petitioner.  The Petitioner provided legal services to Globalcast, which its subsidiary, OLN Corporate Services Limited, provided Globalcast company secretarial services, nominee shareholder and directorship services.  Globalcast gave instruction to the Petitioner and OLN Corporate Services Limited through Gregory Brown and his assistant who was the Debtor.  Between 2008 and 2009, the Petitioner issued various invoices to Globalcast in respect of legal services rendered to Globalcast.  Despite repeated demands, three invoices remained unpaid.  On 25 August 2009, the Petitioner issued a petition to wind up Globalcast.  A winding up order was granted against Globalcast on           28 October 2009.  It was against the above background that the transfer   via HSBC was received.

44.On or about 29 October 2008, Globalcast received US$17,250 from J & T Investment Limited.  On 4 November 2008, the Debtor instructed the Petitioner by e-mail to remit US$17,500 from Globalcast account to his “Light Entertainment account”.  As the funds belonged to Globalcast and not the Debtor and Globalcast was indebted to the Petitioner, the Petitioner did not remit the funds to the Debtor’s Light Entertainment account but applied them to partially settle the three outstanding invoices due from Globalcast.

45.The Debtor was only an assistant to Gregory Brown who had control of Globalcast.  It was clear that the funds were funds belonging to Globalcast and not the Debtor.  It was appropriate that the Petitioner did not effect the transfer to the Debtor’s account.  Besides, most importantly for the present Petition, the Debtor had never instructed that the funds be transferred from Globalcast to settle the professional fees owed by the Debtor to the Petitioner.  The HSBC transfer was not related to the professional fees demanded.  The alleged settlement was clearly a recent concoction by the Debtor.  The Debtor was trying to mislead the Court by dressing up the transfer of funds by J & T Investment Limited to Globalcast as a transfer by him to the Petitioner in settlement of the professional fees he owed.  The amount of payment did not even correspond.

46.The Debtor said in the Debtor’s 2^nd Statement dated 24 January 2011 that the Petitioner contradicted its earlier position by admitting receipt of the sum of US$17,250 transferred via HSBC.  As already explained in paragraphs 35 and 44, there was no contradiction.  The Petitioner was responding to a new allegation of payment.  The Debtor challenged the Petitioner to produce supporting invoices and contract for its entitlement   to the said sum of US$17,250.  In my view, the Petitioner had adequately explained the reason for the receipt of the said funds and how the funds were applied.  In any event, the funds belonged to Globalcast and not the Debtor.  The Debtor’s argument was contrived.  Based on such allegation, he was unable to show he had a bona fide dispute of the petitioning debt  on substantial ground.

Money owing by Oldham

47.The Debtor asserted that Oldham owed him US$20,000 under the Constructive Notice of True Bill Due and Owing dated 8 January 2011.  The basis of that debt was that the Petitioner had agreed to give him a point-by-point response to the points he raised in his four Constructive Notices of Conditional Acceptance.  The basis of his claim as set out in the Constructive Notice of True Bill Due and Owing was as follows:

“DISHONOUR: By the terms and conditions of the agreement resulting by the offer and acceptance of the Presentment, the Respondent(s) are under the duty and obligation to timely and in good faith honour the offer by presentment within ten (10) days with a response on a point-by-point basis, via a sworn affidavit, under the Respondent(s) full commercial liability, signing under the penalty of perjury that the facts contained therein are true, correct, complete and not misleading. …

…

FAULT: For the failure of honouring of the offer is placing the Respondent(s) at fault. For the Respondent(s) failure, refusal, or neglect in the presentment of a verified response, as a sufficient verified response is defined below, to this Constructive Notice of True Bill Due and Owing is consenting with the Claimant(s) entry of a Commercial Lien upon the Respondent(s), and the issuance of a judgment verifying Respondent(s) non-performance, acceptance of liability, and Respondent(s) acquiescence and tacit agreement with all terms, conditions and stipulations herein by Hanh Maria Hoang, Notary Public.

RESPONSE: Only a response that meets the following criteria qualifies as a sufficient verified response:

…

DEFAULT: Default is with the Respondent(s) confession of judgment to the following:

1) The referenced Account is paid in full

and

2) No further controversy exists

and

3) That any further frivolous responses by either your office, or any other office/agency within Hong Kong SAR will be charged at $10,000.00 USD per correspondence/incident.

This brings the total amount due and owing to date: $20,000.00 USD

…”

48.Besides being incomprehensible, the terms in the Constructive Notice of Conditional Acceptance were unilateral terms which the Debtor set for Oldham.  There was no evidence that those terms had been accepted by the Petitioner to form a binding contract.  What was stated in the Constructive Notice of True Bill Due and Owing dated 8 January 2011 was garble and not capable of being understood.  All those documents provided no basis for his claim of US$20,000 against Oldham.  Besides, that alleged debt was not a debt due from the Petitioner as to be capable of constituting a counterclaim or set off against the petitioning debt.  Again, the Debtor was unable to show he had a bona fide counterclaim or set off exceeding the petitioning debt.

Conclusion

49.The Debtor did not dispute that he had received the legal services from the Petitioner for which he was obliged to pay the professional fees.  He disputed liability on the basis firstly that he had paid US$16,000 by his Money Order dated 17 November 2009.  That defence had been clearly rebutted by the Petitioner.  Then he disputed saying that he had paid a year earlier via the HSBC transfer.  The transfer showed that US$17,250 had been transferred from J & T Investment Limited to Globalcast and became the funds of Globalcast which were applied to meet Globalcast’s debt owed to the Petitioner.  It was not a transfer or payment by the Debtor to the Petitioner.  In any event, the instruction given by the Debtor was to transfer the funds from Globalcast  to his Light Entertainment account and not to settle the professional fees  he owed to the Petitioner.  This defence therefore also failed.  His last defence was that he had a counterclaim or set off of US$20,000 against Oldham.  There was absolutely no basis for this claim.  The Debtor therefore has failed to show by credible evidence that he had a bona fide dispute about the debt on substantial grounds or a bona fide counterclaim or set off exceeding the petitioning debt.  A statutory demand in the prescribed form had been served on the Debtor requiring him to pay,  secure or compound the debt.  Three weeks had elapsed.  The demand had neither been complied with nor set aside.  The Debtor therefore appeared  to be unable to pay the petitioning debt.  The conditions under section 6    of the Bankruptcy Ordinance for making a bankruptcy order are satisfied. 

50.Accordingly, I issue the usual bankruptcy order with costs against the Debtor.  The Official Receiver’s costs shall be deducted from the deposit paid by the Petitioner and recoverable from the estate of         the Debtor.

Ms Connie Lee, instructed by Messrs Oldham, Li & Nie, for the Petitioning Creditor

The Debtor, act in person, absent

Ms Joyce Lam, for the Official Receiver