RE MA TING HOI ALBERT

HCB 1146/2024

[2024] HKCFI 3460

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 1146 OF 2024

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J U D G M E N T

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Introduction

1.  This is the substantive hearing of a creditor’s bankruptcy petition pursuant to s.6 of the Bankruptcy Ordinance (Cap 6) (“the BO”). The petition was presented by Angela Chen (“the Petitioner”) on 1 February 2024 against Albert Ma (“the Debtor”) and amended on 29 July 2024 (“Amended Petition”). The Amended Petition is based on an unsatisfied statutory demand dated 7 September 2023 (“the SD”).

Undisputed Facts

2.  The Petitioner and the Debtor are joint investors in a Taiwanese property development referred to as the A7 Project. The Petition Debt arose from a loan advanced by the Petitioner to the Debtor to fund the A7 Project, pursuant to a Second Supplemental Investment Deed dated 24 March 2021 (“Relevant Investment Deed”).

3.  Pursuant to the Relevant Investment Deed, the Petitioner and the Debtor were each 50% registered shareholders of Mighty Oak Developments Limited (“Mighty Oak”), which sits at the top of the corporate structure which owns the A7 Project.

4.  Pursuant to the Relevant Investment Deed, the Debtor executed a share charge dated 24 March 2021 over his shareholding in Mighty Oak in favour of the Petitioner (“the Security”).

5.  The sole asset of Mighty Oak is its shareholding in Sure Applause Limited (“Sure Applause”), which in turn holds a majority indirect stake in a Taiwanese company called Grand River Development Limited (“Grand River”), the entity which directly holds the A7 Project.

6.  When the Petitioner issued the SD, the Petitioner set out the particulars of the loan debt totalling US$389,269,708, and deducted the value of the Security, the value of which was estimated as US$26,937,656. The amount demanded was US$362,332,052.

7.  When the Petitioner presented the Petition on 1 February 2024, the outstanding debt was stated to be US$362,332,052, the particulars of which were stated in the same manner as in the SD.

8.  On 29 July 2024, the Petition was amended as to the particulars of debt to state the value of the Security to be nil and the total debt to be US$389,269,708 (“the Petition Debt”). (The introductory sentence however was not amended and continued to state that the Debtor was indebted to the Petitioner in the amount of US$362,332,052 as at 7 September 2023).

Issues

9.  The Debtor does not contest the Petition Debt itself, but contests the Petition on 2 grounds. The Debtor by his counsel Mr Vincent Chen submits:

(a)  On the basis that the Petition Debt is different from the debt claimed in the SD, the Petitioner is unable to establish the Debtor’s inability to pay debts pursuant to ss. 6 and 6A of the BO, and, as a matter of jurisdiction, the Court cannot make a bankruptcy order.

(b)  The Debtor has established to the necessary threshold that the value of the Security exceeds the Petition Debt.

10.  Of relevance to the second issue, the Debtor seeks to adduce a 4^th affirmation by a summons dated 7 November 2024 returnable before this court with the substantive hearing of the Petition (“the New Evidence Summons”). On the basis that it would be necessary to assess whether the new evidence has probative value, it was common ground that the application to adduce evidence be argued and determined alongside the substantive argument.

Applicable legal principles

(a)  “Inability to pay debts”/ the jurisdiction point

11.  S.6(2) of the BO provides:

“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.” (Emphasis added)

12.  Accordingly, by virtue of s.6(2)(b), the petition debt must be liquidated, payable immediately or at some certain future time, and unsecured.

13.  So far as material, s.6B(1)(b) provides:

“A debt which is the debt, or one of the debts, in respect of which a creditor’s petition is presented need not be unsecured if the petition is expressed not to be made in respect of the secured part of the debt and contains a statement of the estimated value at the date of the petition of the security for the secured part of the debt”. (Emphasis added)

14.  S6B(2) provides:

“In a case falling within subsection(1)(b), the secured and unsecured parts of the debt are to be treated for the purposes of sections 6 to 6C as separate debts”. (Emphasis added)

15.  S6A(1) provides so far as is material:

“ 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 …—

(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.” (Emphasis added)

16.  Accordingly, proof of apparent inability to pay the petition debt is on the basis that the petitioner has served a statutory demand requiring the debtor to pay such debt, at least 3 weeks have elapsed, and the statutory demand has been neither complied with nor set aside.

17.  Rule 44(5) of the Bankruptcy Rules (Cap 6A) (“the BR”) provides:

“If the creditor holds any security in respect of the debt, the full amount of the debt shall be specified, but—

(i) there shall in the statutory demand be specified the nature of the security, and the value which the creditor puts upon it as at the date of the demand; and

(ii) the amount of which payment is claimed by the demand shall be the full amount of the debt, less the amount specified as the value of the security.” (Emphasis added)

18.  In the context of an application to set aside a statutory demand, Rule 48(5)(c) of the BR provides that the Court may grant the application if:

“it appears that the creditor holds some security in respect of the debt claimed by the demand, and either rule 44(5) is not complied with in respect of it, or the court is satisfied that the value of the security equals or exceeds the full amount of the debt;” (Emphasis added)

(b) Valuation of security

19.  The following legal principles (identified in the Petitioner’s skeleton) are common ground. Many of them are taken from a helpful summary by Sara Tong S.C. DHCJ in Re Yu Pun Hoi [2024] HKCFI 960 at §§34-41.

20.  The petitioner must give a genuine estimate of the value of the security; and the court will not inquire into the correctness of that estimate provided it was genuine unless the debtor establishes to the necessary standard that the true value of the security equals or exceeds the full amount of the debt. See Re Choi Chi Kwun [2000] 3 HKC 503 at 507A-B.

21.  Where a debtor opposes a bankruptcy petition on the basis that the creditor is “fully secured” in respect of the debt, generally, the court should only be concerned with the value of the security as at the date of the statutory demand or petition; see Re Chiu Chi Hong [2021] 2 HKC 50 §28(1).

22.  However, the Court is entitled to take into account events that have occurred since the date of the statutory demand (or petition), where (i) the interests of justice demand that the question of adequacy of security ought to be approached with the most up-to-date and reliable facts available; and (ii) they are probative of the question of whether the debt is adequately secured (Re Yu Pun Hoi §40, citing Ludsin Overseas Ltd v Maggs [2014] EWHC 3566 (Ch) §22).

23.  The correct valuation basis for giving an estimate of the value of a security should be that of a “forced sale”, which is less favourable to the debtor than on an “open market basis” (Re Yu Pun Hoi §41); citing In re Cahillane [2016] 1 WLR 45 at §47).

24.  There is nothing wrong with a petitioner ascribing a value of “nil” to the security, provided that it is a genuine estimate and not a sham: Re Cai Zhong [2021] HKCFI 3143 §85(4).

25.  Where the debtor disputes the petitioner’s estimated value of security, the parties may provide their respective supporting evidence to the judge; see Re Yu Pun Hoi at §34(5) .

26.  It is incumbent on the debtor to adduce expert evidence to establish the true value of the security: Re Chiu Chi Hong (supra) §29; Re Li Wing Sang [2019] HKCFI 924 §§30-31, 53.

27.  As the English Court of Appeal recently noted in Hughes v Howell [2022] BPIR 135 §25, “Security is only of value if it enables a debt to be paid within a reasonable time. A creditor is not unreasonable in refusing to wait for an indeterminate time for an indeterminate amount before the security can be realised.”

28.  As submitted on behalf of the Petitioner, there is a difference in the language used in the authorities (both in Hong Kong and England) as to the standard of proof required to be satisfied by the debtor who asserts that the debt is fully secured.

(a)  Some of the cases refer to the concepts of “credible evidence” and “at least a real issue” (which apparently originates from the judgment of DHCJ Colin Rimer QC in In re A Debtor (No 64 of 1992) [1994] 1 WLR 264 at 270A-E).

(b)  However, some of the English authorities state that the debtor “must prove on the balance of probabilities that the value of the security… equals or exceeds the full amount of the debt” (emphasis added): In re Cahillane [2016] 1 WLR 45 §47; see also Platts v Western Trust & Savings Ltd [1993] BPIR 339 at 345A–C.

(c)  I consider that the differences in language used in the cases seem to arise from the fact that the court is not setting out to decide the applicable threshold for all cases, but is considering the facts of their own case and that the debtor is unable to achieve even the lowest possible threshold, e.g. in Choi Chi Kwun at 507, per Kwan DHCJ (as she then was), where the debtor had not advanced any evidence to impugn the petitioner’s valuation other than to state he took exception to it.

29.  As is submitted for the Petitioner, the language used in Rule 48(5)(c) BR requires the Court to be “satisfied” that “the value of the security equals or exceeds the full amount of the debt”. Rule 48(5)(c) provides the jurisdiction for the Court to interfere with the validity of a statutory demand. Having regard to the civil standard of proof, it seems to me that the burden on the debtor is to show that it is more probable than not that the value of the security equals or exceeds the full amount of the debt. It is clearly implicit that the debtor must advance admissible, reliable and probative evidence to that end.

30.  In any event, Mr Man SC submits that for his purposes, he is able to submit that the Debtor does not even meet a lower threshold of “credible evidence of” / “at least a real issue as to whether” the Petition Debt is fully secured.

(c) Late admission of expert evidence

31.  I have regard to the following legal principles set out by Bharwaney J. in Parsad v Great Wealthy Engineering Co Ltd [2012] 3 HKLRD 705 at paras 5-8, and by Wilson Chan J in Tao, Soh Ngun v HSBC International Trustee Ltd [2018] HKCFI 2543 at paras. 5-6.

(a)  The court must consider whether the application to adduce evidence, if granted, would assist the court in securing the just resolution of the dispute in accordance with the substantive rights of the parties.

(b)  Late applications can be dismissed on the basis of lateness alone.

(c)  A late application should be accompanied by a full and frank account for its lateness, as the court will not grant any indulgence without a satisfactory application.

(d)  A milestone date cannot be varied unless there are exceptional circumstances to justify the variation.

(e)  A late application will disrupt an innocent party’s preparation which is in itself a form of prejudice.

(f)  Expert directions should be sought as early as possible.

(g)  Expert directions should be fully complied with before a case is set down for trial (or, I extrapolate, a substantive hearing).

(h)  If new expert evidence sought to be adduced at a late stage could derail the milestone date, the court may refuse leave even if the applicant would have great difficulties in establishing his case.

The Debtor’s First Submission: Lack of Jurisdiction

32.  The Debtor’s submission is that the amount of the debt claimed in the Petition must be the amount of the debt claimed in the SD, in order to establish inability to pay, failing which there is no jurisdiction to proceed on the SD to make a bankruptcy order. The Debtor submits that where the amount of debt changes, as here with the re-valuation of the Security, the creditor must issue a new statutory demand stating the correct amount of the debt and wait for non-compliance before it can proceed to issue a petition.

33.  As a matter of practicality, this seems odd. If, as Mr Man SC suggested, the debtor paid off a small part of the amount claimed in the statutory demand, then, on Mr Chen’s submission, the creditor would have to serve a new statutory demand in the lower amount before it could proceed to petition. Similarly, as I suggested, if a security for the debt was genuinely valued at X as at the date of the statutory demand, but the value was variable (e.g. where the security is a publicly-listed shareholding and the value is readily ascertainable), it would not be pragmatic to issue a new statutory demand each time the value of the security changed. Mr Chen responded that this would not be a problem as the creditor could proceed to present a petition on the basis of the debt stated in the statutory demand. That clearly cannot be right as s.6B(1)(b) of the BO requires the creditor to state the value of the security as at the date of the petition.

34.  Having regard to the statutory provisions:

(a)  A literal construction of the statutory provisions in ss. 6 to 6C of the BO, in particular s.6B(2) to the effect that the unsecured and secured debts are treated as separate debts, might, taken in isolation, tend to support an argument that the petition must be presented in respect of the same amount of unsecured debt as the statutory demand was served.

(b)  However, the provisions read as a whole provide for the creditor to give an estimate of the value of the security. It seems to me to be implicit that the value of the security (and therefore of the unsecured debt) may not be known accurately and/or that it may vary from time to time.. It would be absurd to suggest that the statutory intention is for a statutory demand to be amended each time the value of the security, and therefore the amount of the unsecured debt, varies.

(c)  It may be seen from the words in ss6-6C of the BO that I have underlined above by way of emphasis, that there is a distinction drawn between different concepts such as “the debt”, “the full amount of the debt”, “the secured part of the debt”, “the amount claimed”. In particular, r.44(5)(ii) of the BR clearly draws a distinction between “the debt” on the one hand and “the amount claimed by the statutory demand”, which is defined as the full amount of the debt less the value of the security, on the other.

35.  This leads me to prefer Mr Man’s submission that where these provisions refer to “the debt” they are concerned with ensuring that the petition is based on the same obligation as that contained in the statutory demand, even if the quantum may change between the date of the statutory demand and the date of the petition.

36.  If a debtor makes part payment of the debt stated in the statutory demand, but does not reduce the debt below the statutory minimum of HK$10,000, then the statutory demand has not been complied with, and inability to pay is established for the purposes of a petition.

37.  Mr Man has relied upon Chan WS v CC Bank [2022] 3 HKLRD 520 and In re a Debtor (1 of 1987) [1989] 1 WLR 271 to show that a misstatement of the amount of a debt in a statutory demand is not considered a fundamental matter going to jurisdiction, but, rather, the Court has a discretion as to whether to allow the statutory demand to stand, having regard to the question of whether injustice would be caused to the debtor. Chan WS and In re a Debtor were both cases where the amount of the debt had been incorrectly stated in the statutory demand.

38.  Mr Chen submitted that those cases were distinguishable and inapplicable as (1) they were both decisions as to whether or not to set aside a statutory demand and (2) both involved mistakes having been made as to calculations of the amount of the debt stated in the statutory demand, rather than the statutory demand and petition claiming different amounts of debt.

39.  As to the first argument, it is clearly the position that an application to set aside a statutory demand is concerned with whether or not the statutory demand can be allowed to stand for its purpose of being the gateway step to a bankruptcy petition. Just Classic Ltd v Evershine Group Holdings Ltd [2023] 1 HKLRD 1386 concerned whether a winding-up order could be made where the statutory demand had overstated the amount of the debt and the petition continued to rely on the statutory demand. The Court of Appeal noted that the nature of a statutory demand in bankruptcy and in company winding-up was distinctly different as a statutory demand was only one of the means, rather than the only means, to establish a company’s inability to pay its debts. Nevertheless, the Court of Appeal held that, in the circumstances of that case, the winding-up petition ought to have succeeded even in reliance on the defective statutory demand (para. 20). Accordingly, this is authority that the discretion to rely upon a statutory demand to establish inability to pay debts (as discussed in In re a Debtor and Chan WS) applies on a petition hearing too.

40.  I simply did not understand Mr Chen’s second argument. It is common ground that the variation in amount of debt claimed in the SD and Amended Petition is due to a re-valuation of the Security in light of a change of corporate structure. I see no basis for applying different legal principles to the validity of a statutory demand depending on whether the amount stated is in error, or has changed in fact, although these may be part of the circumstances to be considered by the Court.

41.  Mr Chen sought to rely on Just Classic in order to submit that a petition can only succeed if it contains the same amount of debt as the statutory demand. However, I do not accept that. Just Classic concerned whether a winding-up order could be made where the statutory demand had overstated the amount of the debt and the petition continued to rely on the statutory demand. The statutory demand and petition in that case did both state the same but incorrect amount of debt. However, that was not a relevant factual basis for the decision. Just Classic is in my view authority for the fact that the Court has the discretion to make an order on a petition based on a statutory demand notwithstanding there was a misstatement as to the amount of the debt in the statutory demand.

42.  Accordingly, I do not accept Mr Chen’s submission that the court has no jurisdiction to make a bankruptcy order if the amount stated as outstanding in the petition is not the same as the amount claimed in the statutory demand.

43.  Mr Man submitted that, although his primary submission is that there is no defect by virtue of a difference in the stated amount of the debt in the Amended Petition from the amount of debt stated in the SD, his fall-back position is that, if there is a defect, the Court should exercise its discretion to allow the petition in any event.

44.  S.124(1) of the BO provides:

“No proceeding in bankruptcy shall be invalidated by any formal defect or by any irregularity unless the court is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by any order of the court.”

45.  Chan WS, at para. 32, is binding authority that an error in the statutory demand as to the amount of the debt does not automatically invalidate the statutory demand. The Court must ask whether or not injustice would be caused to the debtor by allowing the statutory demand to stand. To require a revised statutory demand in circumstances where the debtor was clearly unable to pay in any event would not be practical as the revised statutory demand would inevitably not be complied with and would only serve to increase costs.

46.  I note that Mr Chen did not seek to argue that I should exercise my discretion to find the SD to be invalid. He did not advance an argument as to prejudice to the Debtor if the SD was treated as valid. His position was simply that there was no discretion available to the Court on the basis of his jurisdiction argument.

47.  Nevertheless, for completeness’ sake, I address Mr Man’s fall-back argument:

(a)  I am satisfied that the SD identifies the amount outstanding under the Relevant Investment Deed both in terms of principal and interest; it provides an estimated value of the Security; and it states the amount claimed. I am satisfied that, for the main part, the Amended Petition identifies the same debt, it provides an updated estimate of the value of the Security; and it states the amount of outstanding debt.

(b)  However, as noted at para. 8 above, the introductory sentence to the particulars of debt in the Amended Petition was defective.

(c)  Save for the introductory sentence identified, I do not consider there to be any formal irregularity or defect in the statement of a different debt in the Amended Petition from the SD. In respect of the introductory sentence, and to the extent that I am wrong in finding that the particulars of the debt in the Amended Petition to be regular:

(i)  There is no question that the Debtor did not know what debt was to be paid.

(ii)  There is no evidence that the Debtor would have paid any of the debt had the amount claimed in the SD been the higher amount claimed in the Amended Petition.

(iii)  The Debtor has not established any prejudice that would be caused to him by reliance on the SD to establish inability to pay debts for the purpose of the Amended Petition.

(iv)  Accordingly, I would exercise my discretion to allow P to rely on the SD to establish inability to pay debts on the Amended Petition, and to waive the defect in the introductory sentence.

The New Evidence Summons

48.  Having identified the relevant legal principles as to the valuation of security, and therefore what type of evidence may be probative, I turn to consider the Debtor’s summons to adduce Ma 4. I must also consider the procedural context of the New Evidence Summons.

(a) Material procedural chronology

49.  On 7 September 2023, the Petitioner issued the SD.

50.  No application was made to set aside the SD.

51.  On 1 February 2024, the Petitioner issued the Petition, based on the unsatisfied SD.

52.  On 5 June 2024, the Debtor filed a summons to stay the bankruptcy proceedings pending the final determination of proceedings commenced by the Petitioner (or companies controlled by the Petitioner) in the BVI and in Samoa against the Debtor and/or companies allegedly controlled by the Debtor (“the Stay Summons”).

53.  On 5 June 2024, the Debtor also filed his 1^st affirmation (1) in support of the Stay Summons and (2) in opposition to the Petition (“Ma 1”). The Debtor stated:

(a)  He was advised by his lawyers that the valuation of the Security would involve expert evidence and he was prepared to seek leave to adduce the same, if necessary.

(b)  The value of the Security was a core issue in the proceedings in the BVI and Samoa, justifying the stay of the Petition proceedings until determination of those foreign proceedings.

54.  On 6 June 2024, the Debtor issued a notice of intention to oppose the Petition on the grounds that the Debt was fully secured and/or that after giving proper credit for the value of the Security, the Debtor is not indebted to the Petitioner.

55.  On 9 July 2024, the Debtor filed his 2^nd affirmation in support of the Stay Summons (“Ma 2”).

56.  On 10 July 2024, Chan Heung Wing of the Petitioners’ solicitors filed an affidavit (1) in support of the application to amend the Petition and (2) in opposition to the Stay Summons (“the Chan affidavit”). He made the affidavit in his capacity as solicitor with oversight of the BVI and Samoan proceedings.

57.  On 11 July 2024, the 2^nd affirmation of the Petitioner was filed (“Chen 2”).

58.  Chen 2 was made (1) in support of the Petitioner’s application to amend the Petition (2) to oppose the Stay Summons. The Petitioner sought to amend the Petition in order to reduce the estimated value of the Security to nil on the basis that she had discovered that the Sure Applause shareholding had been transferred out of Mighty Oak’s indirect ownership, thereby stripping Mighty Oak of its indirect interest in the A7 Project (“the Share Dissipation”).

59.  On 12 July 2024, Ching-Hsin Chang made an affirmation on behalf of the Petitioner (1) in support of the Petitioner’s application to amend the Petition (2) to oppose the Stay Summons (“Chang 1”). He made the affirmation in his then capacity as the sole director of Mighty Oak and deposed to the Share Dissipation.

60.  On 15 July 2024, Madam Justice Linda Chan ordered (1) leave be granted to amend the Petition to reduce the value of the Security to nil; (2) leave be granted to file Ma 2 in support of the Stay Summons; (3) dismissal of the Stay Summons; (4) directions as to evidence including: (a) the Petitioner have leave to rely on the Chan affidavit; (b) the Debtor have leave to file and serve evidence in opposition to the Amended Petition if any within 28 days; (c) the Petitioner to file any reply evidence within 28 days; (d) no further evidence without leave.

61.  On 12 September 2024, Madam Justice Linda Chan ordered that unless the Debtor file and serve evidence in opposition to the Amended Petition if any by 4pm on 19 September 2024, he would be debarred from doing so.

62.  On 19 September 2024, the Debtor filed his 3^rd affirmation (1) in opposition to the Amended Petition and (2) in response to the Chan Affidavit (“Ma 3”). Ma 3 (1) requested that this court refrain from deciding whether the Security was valued as nil by virtue of the Share Dissipation until that issue was determined in the BVI and/or Samoan proceedings [i.e. an informal repeat of the already-dismissed Stay Summons] and (2) “note[d] that [his] solicitors were in communications with the Petitioner’s solicitors regarding expert evidence on the valuation of the Security, which may be adduced and relied upon by the parties in due course.” The exhibited correspondence shows a discussion but no meeting of minds as to the remit or due date for any expert valuation evidence.

63.  The Petitioner filed the 2^nd affirmation of Chin-Hsin Chang dated 30 October 2024 (“Chang 2”). Chang 2 states that the BVI Court awarded summary judgment on 30 September 2024 and made a declaration to the effect that the Sure Applause shares were re-vested in Mighty Oak (thus returning the indirect interest in the A7 Project to the Mighty Oak ownership structure).

(b)  Consideration of the Debtor’s New Evidence Summons

64.  The Debtor seeks to adduce Ma 4 in order to exhibit a report in Chinese by REPro Knight Frank (“RKF”) dated October 2024 with an English summary. The Debtor states that this updated report is relevant as it addresses (1) propositions made in the Chan affidavit as to the Debtor’s valuation being outdated, and (2) allegations in Chang 2 as to further developments which had put the value of the A7 Project at risk. At the hearing, the Petitioner did not seek to rely on the Chang 2 allegations, so no evidence in response was necessary. I am concerned only with the admissibility of the RKF report.

65.  The Debtor states that he instructed RKF to prepare the updated report on about 15 September 2024 but it was not available until 6 November 2024.

66.  The English summary purports to value the A7 Project on the basis of it being completed and achieving certain income streams by 2027. The Debtor states that he was not able to ask RKF to consider the value of the Mighty Oak shares because that depended on corporate information not available to him.

67.  I do not see how the report could assist the court in determining the value of the Security (i.e. the Mighty Oak shares) as at the date of the SD or the Petition. It apparently seeks to identify a value for the A7 Project.

(a)  It involves an assumption of the A7 Project being completed, which requires some US$200 odd million of further funding.

(b)  It in no way seeks to provide a current realisable value of the A7 Project.

(c)  Nor does it recognize that the value should be provided on a forced sale basis.

(d)  Fundamentally, it does not value the Security.

68.  As to the assertion by Ma 4 that corporate information is not accessible in order to allow a valuation of the Mighty Oak shares as opposed to the A7 Project, I do not accept that to be sufficient explanation. If proper directions as to expert evidence been sought and obtained, the parties would have had to ensure that their appointed valuers had access to all relevant information for the valuation exercise.

69.  Further, the application is made too late.

(a)  Ma 1 of 5 June 2024 anticipated the need for expert valuation evidence.

(b)  I see from the inter-solicitor correspondence that the parties proposed and counter-proposed potential directions for filing expert valuation evidence but they were not agreed and the Debtor did not in the end apply to file expert evidence as part of the preparation for the Petition hearing.

(c)  I note that the Debtor did not attempt at an appropriate time to comply with Practice Direction 3.1 para 16.4.

(d)  Linda Chan J. had to make an unless order in respect of the Debtor’s opposition evidence.

(e)  Having filed evidence by that deadline of 19 September 2024, it is not open to the Debtor to ask to now file expert evidence without exceptional reason.

(f)  The Debtor himself states that he did not ask for a report until 15 September 2024, 4 days before the expiry of the unless order. He gives no explanation for that, let alone an exceptional one.

70.  Further, the evidence could not at this stage be admitted without prejudice to the Petitioner. The Debtor’s timing does not permit any opportunity to the Petitioner to file expert evidence in response.

71.  Accordingly, I dismiss the Debtor’s Evidence Summons with costs.

72.  I turn to consider whether the Debtor can satisfy the Court that the value of the Security equals or exceeds the Petition Debt.

The Debtor’s Second Submission: whether the value of the Security equals or exceeds the Petition Debt

(i)   Relevant evidence

73.  The Court has not been provided with any reliable evidence as to the forced sale value of the Security, namely the Mighty Oak Shares, as at the date of the SD or the Petition or the Amended Petition.

74.  Ma 1 asserts that the valuation should be approximately US$2.34 billion, and the Debtor states that is “a ball-park estimate on my part now and the exact figure is of course a matter of further expert evidence”. Ma 1 exhibits a copy of an extract of a “relevant valuation report in respect of the Property/A7 Project”. The extract is in Chinese and I have not been provided with a translation. However, it is undisputed that:

(a)  The report purports to value the A7 Project not the Security.

(b)  The report purports to provide a valuation as at April 2023, earlier than the SD or Petition date.

(c)  Ma 1 did not advance this report at the hearing as reliable expert evidence.

(d)  No leave was sought to adduce this report as expert evidence pursuant to PD 3.1 para 16.4.

75.  The Chan Affidavit:

(a)  Asserts the Security to be worthless in light of the Share Dissipation.

(b)  Explains the valuation of the Security in the original Petition before the Share Dissipation was discovered. This assumes a sale of the Project for US$1.8 billion upon completion in September 2025, but that valuation was of the A7 Project (not the Mighty Oak Shares), on a hypothetical basis that it was completed rather than in its actual state as at the date of the SD or Petition, and it was not on a forced sale basis.

(c)  Refers to the BVI receivers’ report dated 17 June 2024 as to projected realisations for secured creditors from a sale or refinancing of the A7 Project on the basis of different scenarios (from completion of the project to a failure to complete). Assuming a sale of the A7 Project for US$1.8 billion, all scenarios show that the secured creditors who have priority to the Petitioner will not be paid in full.

76.  Having reviewed the evidence, I see that the Security is extremely difficult to value. However, there is sufficient evidence to establish that the Petitioner’s estimate of the value as at the date of the SD was in my view genuine, and that the revision of the estimate as at the date of the Amended Petition was also genuine. As at today’s date, it appears that the original estimate contained in the SD is the most appropriate in light of the BVI Summary Judgment. Where the full loan debt is US$389 million odd, it does not seem to me to be significant that the valuation of the Security has varied between some US$26 million and nil, when one is considering whether the Debtor owes the Petitioner an amount in excess of HK$10,000.

77.  Approaching the matter from the other angle, I see no evidential basis upon which to find, on the balance of probabilities, that the true value of the Security equals or is in excess of US$389,269,708.

Order

78.  In these circumstances, I make the bankruptcy order sought in the Amended Petition. In light of the submissions already received as to costs, I further order that the Debtor do pay the Petitioner’s costs (including costs of and incidental to the Petition as amended as well as the New Evidence Summons) on a party to party basis, with certificate for two counsel, to be taxed if not agreed and paid out of the estate in bankruptcy.