CHEUNG BING KEUNG PETER v. LI YUK SHING

HCSD 53/2024 and HCSD 54/2024

(Heard Together)

[2025] HKCFI 3963

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE STATUTORY DEMAND

NO 53 OF 2024

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AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE STATUTORY DEMAND

NO 54 OF 2024

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R E A S O N S    F O R    D E C I S I O N

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1.  Before the Court are 2 summonses both dated 20 June 2025 (the “Stay Summonses”). They were taken out by the Applicant for a stay of 2 applications he made on 16 December 2024 to set aside 2 statutory demands (“SDs”) dated 11 November 2024 (the “setting aside applications”). The SDs were served on him by Li Yuk Shing (“Li”), the Respondent in HCSD 53/2024 and Hui Yuk Ying (“Hui”), the Respondent in HCSD 54/2024 respectively, (collectively, the “Respondents”).

2.  At the conclusion of the hearing, I dismissed the Stay Summonses with costs to the Respondents. My reasons appear below.

Relevant background

3.  The SDs relate to loans of HK$10 million and HK$6 million respectively made to the Applicant who is a sole practitioner of a law firm (“PCC”). The setting aside applications are fixed for hearing on 26 September 2025. Evidence in respect of that hearing closed when the Applicant filed and served his affirmations in reply on 28 May 2025.

4.  In January 2025, about a month after the Applicant made the setting aside applications, he was arrested by the Police. According to the Applicant the arrest was the result of the Respondents having made a report to the Police that the Applicant had failed to repay loans owed to the Respondents and that the Respondents were victims of the Applicant’s fraud[1].

5.  On 10 March 2025, the Respondents filed their affirmations in opposition to the setting aside applications.

6.  On 8 April 2025[2], the Police arrested the Applicant’s wife, Jenny Leung.

7.  It is the Applicant’s case that at the time of his arrest in January, the police seized all of his mobile phones. Subsequently, during the arrest of his wife, the Police also searched their home and seized certain documents.

8.  Despite this, on 9 April 2025 the Applicant took out a time summons to extend time for the filing of his reply affidavits to 30 April 2025 culminating in a consent order dated 14 April 2025 extending time to 30 April 2025.

9.  On 30 April 2025, the deadline for filing, the Applicant took out another time summons to extend that date to 28 May 2025.

10.  The Applicant’s 2^nd time summons came before Master Phoebe Man on 7 May 2025 who made an “unless order” in respect of the extension sought. At that hearing, the Applicant mentioned his intention to apply for a stay without presenting any draft summons or affidavit in support.

11.  The Applicant filed his reply affidavits on 28 May 2025.

12.  The Applicant and his wife believe that the criminal investigation under Criminal Case Report Number TST RN 24037692 is still ongoing because they are required to report to the Police for bail almost every month since the wife’s arrest. They believe that there is a significant likelihood that the case will lead to criminal proceedings.

13.  That circumstance is said to be the basis for the Stay Summonses[3] made on 20 June 2025, more than 3 weeks after the Applicant filed his reply affidavits.

Legal principles

14.  It is now common ground[4] that the applicable principles are derived from the English Court of Appeal’s judgment in First Jefferson Limited v Bhetcha [1979] 1 WLR 898 at 904 et seq. The relevant passages from the judgment of Megaw LJ are conveniently set out in the decision of Reyes J in China Sciences Conservational Power Limited (formerly known as Central China Enterprise Limited) v Chat Tat Chee & Ano , HCA 870/2009, unrep., 5 August 2010 at §§24-25:

“24. Where there is an overlap between a civil action and pending criminal proceedings, there is no general rule that the former should be stayed pending the outcome of the latter. The Court has a discretion to stay the civil proceedings:-

“if it appeared to the court that justice - the balancing of justice between the parties - so required, having regard to the concurrent criminal proceedings, and taking into account the principle, which applies in the criminal proceedings itself, of what is sometimes referred to as the ‘right of silence’ and the reason why that right, under the law as it stands, is a right of a defendant in criminal proceedings.” [Megaw LJ in First Jefferson Ltd. v. Bhetcha [1979] 1 WLR 898, at 904 ff.].

25. The authorities are adamant that there is:-

“no principle of law that a plaintiff in a civil action is to be debarred from pursuing that action in accordance with the normal rules for the conduct of civil actions merely because so to do would, or might, result in the defendant, if he wished to defend the action, having to disclose, by an affidavit under Order 14, or in the pleading of his defence, or by way of discovery or otherwise, what his defence is or may be, in whole or in part, with the result that he might be giving an indication of what his defence was likely to be in the contemporaneous criminal proceedings. The protection which is at present given to one facing a criminal charge - the so-called ‘right of silence’ - does not extend to give the defendant as a matter of right the same protection in contemporaneous civil proceedings.” [Megaw LJ in First Jefferson, at 904 ff.]

15.  The burden is on a defendant to show that it is “just and convenient that the plaintiff’s ordinary rights of having his claim processed and heard and decided should be interfered with: see Petroliam Nasional Berhad v. Tan Soon Gin [1990] 1 HKLR 4 (CA), at 8, citing First Jefferson with approval.

16.  In First Jefferson (at 905E-F), Megaw LJ also considered examples of when a Court might grant a stay. Reyes J considered those examples helpful (which he marked as Examples A, B and C in the relevant passage he cited in China Sciences (at §27)):

“27. Of course, one factor to be taken into account and it may well be a very important factor, is whether there is a real danger of the causing of injustice in the criminal proceedings. There may be cases - no doubt there are - where that discretion should be exercised. In my view it would be wrong and undesirable to attempt to define in the abstract what are relevant factors. By way of example, a relevant factor telling in favour of a defendant might well be the fact [Example A] that the civil action, or some step in it, would be likely to obtain such publicity as might sensibly be expected to reach, and to influence, persons who would or might be jurors in criminal proceedings. It may be [Example B] that, if the criminal proceedings were likely to be heard in a very short time ... it would be fair and sensible to postpone the hearing of the civil action. It might be [Example C] that it could be shown, or inferred, that there was some real - not merely notional - danger that the disclosure of the defence in the civil action would or might, lead to a potential miscarriage of justice in the criminal proceedings, by, for example, enabling prosecution witnesses to prepare a fabrication of evidence or by leading to interference with witnesses or in some other way.”

This application

17.  In seeking a ‘temporary’ stay of his setting aside applications until the conclusion of the criminal investigation and/or the criminal proceedings (if any) against the Applicant, whichever is later, the Applicant relies on what is said to be ‘germane background[5]’.

18.  In summary, the Applicant alleges that these proceedings are not simple debt recoveries by ordinary creditors. The allegation is that an entire unlicensed money-lending group of individuals (which includes the Respondents) (the “Group”) is attempting to use these proceedings as a “test case” to pave the way for other members who have loan agreements signed with the Applicant, “hoping to extract information that could enable them to obtain compensation from [the Applicant][6].”

19.  The Applicant also alleges that the Group has resorted to unlawful harassment of the Applicant and his family including his 2 children who are practising solicitors in the UK and that it is intent on using various means to compel the Applicant to surrender all his assets[7] to them.

20.  The relevance of those allegations and the point sought to be made are not readily apparent, even assuming there is evidence to substantiate them.

21.  The grounds the Applicant relies on for this application are considered below.

A.  The threshold test: real risk of prejudice

22.  In Re Estate of Wang Teh Huei, HCAP 8/1999, unrep., 20 June 2021, the defendant sought a stay of civil proceedings in light of possible criminal proceedings. As in the present case, the criminal investigation was still ongoing and it was not certain whether the defendant would ever be charged. In the circumstances, Yam J (at §18) did not accept that there was a real risk of serious prejudice which may lead to injustice and dismissed the stay application.

23.  Ms Cyndi Ho, counsel for the Applicant, sought to distinguish the threshold test applied in the Wang case on the basis that the Respondents had resorted to harassment tactics that are unacceptable[8]. Even assuming that the Respondents did engage in the conduct alleged, it is not understood how that those acts would render the Wang case distinguishable or impinge on the threshold test.

24.  The Applicant claimed that his arrest and seizure of his phone and several documents from his home when his wife was arrested a few months later compromised his ability to prepare for the setting aside applications. While in criminal proceedings the Applicant had a right to remain silent, Ms Ho highlighted the fact that for the setting aside applications, the Applicant had to file affidavits but was constrained from accessing relevant information in the mobile phones and documents that had been seized by the Police.

25.  That submission does not bear scrutiny in light of the sequence of events set out in §§4-13 above:

(i)  Although the arrest took place in January 2025, the Applicant did not consider it necessary to apply for a stay even after the Respondents filed their evidence in opposition on 10 March 2025.

(ii)  Instead, on 9 April 2025 the day after his wife’s arrest, he filed a consent order granting a time extension to 30 April 2025.

(iii)  On the day time expired, the Applicant took out another time summons for a further extension to 28 May 2025.

(iv)  It was never raised at the hearing before the Master on 7 May 2025 that his ability to file his reply affidavits was compromised by the events that occurred between January and hearing in May 2025, specifically the seizure of his mobile phones and certain documents from his home. After all, had the Applicant truly been compromised in filing his reply affidavits, he would not have sought time extensions and not waited for 5 months after his arrest before issuing the Stay Summonses.

26.  For those reasons, I reject any suggestion that the Applicant was ‘compelled’ to file Applicant 3^rd or that he has been prejudiced in any way in the conduct of his setting aside applications.

B. Balancing exercise: overlapping issues and inconsistent outcomes

27.  In Applicant 3^rd (at §§8-11), the Applicant claims that without a stay, there would be a risk of “inconsistent legal outcomes”.

28.  The issue in the setting aside proceedings that would follow if a stay were refused is whether there are any bona fide substantial dispute(s) concerning the underlying debt. As I understand it, the Applicant’s case is that the Respondents are moneylenders for the purposes of the Money Lenders Ordinance, Cap 163 (the “Ordinance”) and the loans are not recoverable as they are not “exempted loans” within Part 2 of the First Schedule to the Ordinance.

29.  Should the investigation lead to criminal proceedings, in the context of fraud, the issue would be whether a defendant did, by any deceit or with intent to defraud, induce another person to commit an act that results in some injury or loss to that other person.

30.  The issues are very different and it is difficult to see how they could or would result in inconsistent legal outcomes.

C. Balancing exercise

31.  So far as concerns the balancing exercise the Court has to undertake, as earlier noted, the burden is cast squarely on the Applicant to show that the Respondents’ “ordinary rights of having their claims processed and heard and decided should be interfered with”.

32.  Although the Applicant described the stay sought as ‘temporary’, as matters stand, it is entirely open-ended and indefinite as it is impossible to predict how long the criminal investigation is likely to last and whether criminal charges will be laid.

33.  Further, if it leads to criminal proceedings, it will be some time before those proceedings would conclude. As matters stand, the net effect is that the setting aside applications could be shelved indefinitely.

34.  In First Jefferson[9], in deciding whether to stay civil proceedings, a key factor is whether there is a real danger of the causing of injustice in the criminal proceedings if a stay were not granted. Of the 3 examples considered in that passage, none appears remotely applicable to the facts of this case.

35.  In the present case, the validity of the SDs, a precursor to bankruptcy proceedings, is due to be heard imminently. It is clear that the Respondents would suffer considerable prejudice in not having their rights determined should a stay which, as matters stand, is entirely open-ended, be granted.

36.  Mr Wong Hok Yan, counsel for the Respondents, cited Re Mak Kam Ling [2004] 4 HKC 202 for the proposition that as a matter of principle bankruptcy proceedings should generally be determined with reasonable dispatch. He submitted that by analogy, setting aside applications (which are bankruptcy-related) should also be determined with reasonable dispatch.

37.  It should be mentioned that towards the end of the hearing, Ms Ho stated that if the Court were minded not to grant a stay, the Applicant would request an undertaking[10] from the Respondents to stop sharing the case papers with third parties. Up to that point, the need for an undertaking never featured in the proceedings.

38.  The Applicant submitted that because of information sharing by the Respondents with the Group, the plaintiffs in the District Court cases[11] have amended their statement of claim. When pressed by the Court for specifics, the Applicant was unable to do so and withdrew his request.

Conclusion

39.  Given the Applicant’s inability to demonstrate that in the absence of a stay there is a real danger of the causing of injustice in the criminal proceedings, the Stay Summonses fell to be dismissed with costs to the Respondents.

40.  The Respondents applied for indemnity costs on the basis that the stay application is groundless and the Applicant’s alleged non-compliance with procedural rules. As non-compliance was not made out, the fact that application is unsuccessful is not of itself a ground for indemnity costs. I awarded costs on a party and party basis.

41.  Directions were then given for those costs to be summarily assessed in Chambers.