RE YIP CHI HIM, ROGER

HCB 7535/2017

[2018] HKCFI 872

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 7535 OF 2017

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J U D G M E N T

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1.  By an amended creditor’s bankruptcy petition, the petitioner seeks an adjudication of the debtor as a bankrupt.

2.  The debtor, Mr Yip, opposes the petition by a document entitled “[t]he grounds to show cause”, produced as Exhibit 1 to an affidavit filed on 14 February 2018. 

3.  He filed another affidavit on 27 March 2018, exhibiting another document called “[r]evised cause against bankruptcy petition”.  He confirmed to me this morning that he only relied on the grounds in the second document as the grounds in the first documents are also contained in the second. 

4.  The ground of the amended petition is set out in its paragraph 2.  It is based on the judgment I made on 30 June 2015 in HCA 356/2006 requiring Mr Yip to pay the petitioner US$350,000 or its Hong Kong dollar’s equivalent at the time of payment with interest at 2.5 per cent above the best lending rate of the Hongkong & Shanghai Banking Corporation Limited, from 9 April 2009 until judgment, and thereafter at judgment rate until payment, and costs of the petitioner in that action to be taxed. 

5.  Paragraphs 3 and 4 of the amended petition further say that the debt abovementioned is a liquidated sum payable immediately and the debtor appeared to be unable to pay it.  The petitioner had served a statutory demand dated 25 October 2017 on the debtor, which demand has not been complied with, or set aside, and no application for its setting-aside is outstanding.

6.  I held in paragraphs 343 to 350 of the judgment in HCA 356/2009 that the debtor had practised various misrepresentations on the petitioner, which caused the petitioner to pay the debtor US$350,000 for the purchase of the controlling shares of a US corporation called Tabatha V Inc.  I further held that the petitioner had rescinded the contract for his purchase of the Tabatha V shares.  He sought repayment of the US$350,000 by the debtor.  He also undertook to the court to take all steps necessary to revert the Tabatha V shares registered in his name back to the transferor of the shares upon receiving the sum of US$350,000 and interest thereon. 

7.  I gave judgment to the petitioner upon the undertaking of the petitioner that upon the petitioner receiving the US$350,000 and interest thereon as adjudged, the petitioner do take all necessary steps to revert the shares in Tabatha V Inc that are registered in the petitioner’s name to the transferor. 

8.  I then adjudged that judgment be for the petitioner and his company, the 2nd defendant therein, on the claim and the counterclaim, and that the debtor and his company (named as the 2nd plaintiff in that action) do pay the petitioner the sum of US$350,000 or its Hong Kong dollar’s equivalent at the time of payment with interest, at 2.5 per cent above the best lending rate of the said bank from 9 April 2009 until judgment, and at judgment rate thereafter until payment. 

The debtor’s grounds

9.  The debtor in his “[r]evised cause against bankruptcy petition” said that:

“the judgment essentially requires of the following steps:

1. Upon this “undertaking”, YIP Chi Him Roger (“YIP”) is to pay the money US$350,000 plus interest to Lee, and

2. Upon receiving this money, Lee is to return the shares of Tabatha V Inc to YIP.

This is an order for a two-way exchange of shares and money between the two parties, not a one-way payment of money from one party to the other. The money amount mentioned in the petition is not a “debt” but a payment upon an undertaking to transfer shares back to the payor”.

10.  He further submitted that:

“The ultimate objective of this order is to achieve refund for property returned (i.e. the shares). There is no detail in the order for the question of how long the time lag should be for the return of property after payment, but it cannot be forever, nor never. It is not about the time and sequence, but the ultimate objective of the order that matters; and it is all about achieving refund and returning property.

Any one-way enforcement of the order must be wrong.

1. The property can be sold for money. The price of this property has also appreciated in value - and the rate of appreciation is huge due to excessive demand from Chinese companies wishing to go public in the US and the current economic boom (vs. the bust years at the time of litigation, i.e. the sub-prime mortgage crisis during December 2007 - June 2009);

2. If payment without return of property was allowed, this would imply that the property could be kept and sold by the petitioner for extra money. This would also imply that the property could even be sold later, or now, or before judgment issuance, or before trial, by the petitioner, who then still ask for refund. All such scenarios result in double compensation to the petitioner.

Therefore, payment without return of property is unjust.

No matter what the status of registration of Tabatha’s shares at the US Securities Exchange Commission (“the SEC”) is, the property (i.e. the shares) has to be in existence - this is the absolute minimum requirement. Hence, there has to be evidential proof for ownership. In the present case, this would mean:

1. a brokerage company issuing the latest shareholders’ list that includes the name and number of shares owned;

2. indication by the official transfer agent (Madison Stock Transfer Inc.), that the shares can be transferred via a proper process of share transfer.

However, the petitioner has never tried to mention about any proof of ownership and transferability. Recall that his representative lawyer told the Master in court on 14 February 2018 that the petitioner could clear some procedures of paying back some due fees and fines for getting the shares back, he should have shown proof for such procedures’ validity in a next meeting or by now; however, he has not mentioned about such matters again since then.

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In conclusion, the petitioner has not properly followed the judgment order; hence it should be rejected.”

11.  The effect of the petitioner’s undertaking and my judgment is that after the debtor has paid the judgment debt of US$350,000 plus interest, the petitioner should perform his undertaking of reverting the shares to the transferor.  However, Mr Yip, in his grounds that I have recited above, tried to turn my judgment and the plaintiff’s undertaking into simultaneous steps of exchange, to be undertaken by the parties.  That is a wrong interpretation of my judgment and the plaintiff’s undertaking. 

12.  In fact, the debtor had made a similar submission to the Court of Appeal in CACV 174/2015, when he appealed against my judgment.  The Court of Appeal said in paragraphs 54 and 56 of the judgment that:

“54. Also, the terms of the undertaking of the 1^st Defendant only oblige him to take all steps necessary to revert the Tabatha shares registered in his name to the company of the 1^st Plaintiff, BVI Capital upon receiving the US$350,000. Two points emerge from this. First, the Plaintiffs have not yet paid the US$350,000 and the 1^st Plaintiff told us that he had no means to pay. Second, the fact that Tabatha was not registered at SEC does not mean that the shares could not be reverted to BVI Capital if such payment is made.

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56. Hence we do not accept the 1^st Defendant could not perform his obligations under the undertaking.  We do not see any unfairness in the judgment in this respect.”

13.  In the premises, the debtor’s grounds of opposition have no merit.  I therefore make an order in terms of the amended petition, with costs of the amended petition be paid by the debtor.