RE LEE ON WAI

HCB 3359/2025

[2025] HKCFI 3764

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3359 OF 2025

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REASONS FOR JUDGMENT

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1.  At the hearing of the petition presented by the petitioners, Athora Lux Invest S.C.SP. – Loan Origination and Apollo Credit Funds ICAV (“Petitioners”), I made a usual bankruptcy order against the debtor, Mr Lee On Wai (“Debtor”). These are the reasons for my judgment.

2.  The petition was presented on 2 May 2025, following the dismissal of the Debtor’s applications to set aside 2 statutory demands dated 3 January 2024 issued by each of the Petitioners(“SDs”)  requiring the Debtor to pay the sum of HK$135,466,319.51 (“Debt”). The setting aside application was heard by DHCJ Jonathan Wong on 2 July, 21 October, 14 November and 2 December 2024.  On 12 March 2025, the learned Judge handed down the Decision [2025] HKCFI 1036 (“Decision”)  in which he dismissed the application and authorised the Petitioners to present a bankruptcy petition against the Debtor forthwith.

3.  The background leading to the application has been fully stated in the Decision and will not be repeated here.

4.  In short, the Debtor alongside with Mr Mok Tsan San (“Mr Mok”)  and 3 companies[1] were parties to a Facility Agreement dated 28 March 2022 (“Facility Agreement”)  whereby (1)  the Petitioners agreed to advance a term loan of HK$250 million to Joy Rich Development Ltd[2] (“Joy Rich”)  for the purpose of financing the acquisition of a property known as House B together with car parking space at 28 Middle Gap Road (“Property”)  and (2)  the 3 companies, Mr Mok and the Debtor agreed to guarantee, jointly and severally, all the amount due and payable to the Petitioners.  Despite the extension of the repayment date to 29 September 2023, the loan remained unpaid.  By letters dated 6 October 2023, the Petitioners demanded the guarantors (including the Debtor)  to repay the sum of HK$127,912,120.  This was followed by service of the SDs on 4 January 2024 requiring the Debtor to pay the Debt[3].

5.  The Debtor advanced many grounds in support of his application to set aside the SDs.  At the substantive hearing, counsel on behalf of the Debtor contended that:

(1)  the SDs were defective for failing to state the consideration for the Debtor’s liability as a guarantor;

(2)  there was a bona fide dispute on substantial grounds as to whether the Acquisition Termination Event had occurred;

(3)  no proper demand had been made before service of the SDs on the Debtor;

(4)  the court should exercise its residual discretion to set aside the SDs as the Petitioners had been enforcing various other securities to recover the outstanding amount; and

(5)  there was a common mistake in that the Petitioners must have acted on the shared assumption that Fameway[4] had the proper standing and authority as mortgagee of Joy Rich to sell the Property, relying on the learned judge’s earlier decision in HCA 510/2022 and HCA 1497/2022 dated 28 August 2024[5].

6.  The learned Judge dealt with each of the grounds advanced and rejected them for the reasons set out in §§5.1 – 9.15 of the Decision.

7.  Meanwhile, by judgment handed down on 15 April 2025 [2025] HKCFI 499, DHCJ Kent Yee rejected similar grounds advanced by Mr Mok in opposition to the bankruptcy petition presented by the Petitioners and made a usual bankruptcy order against him.

8.  The approach of the court in dealing with bankruptcy petition is well established:

(1)  Where, as here, the debtor has applied to set aside a statutory demand and failed in the application, he is barred by the principles on res judicata and issue estoppel and cannot seek to raise the same or new arguments against the petitioning debt or the statutory demand. The Turner principle applies to bankruptcy proceedings, which requires the debtor to show exceptional circumstances before he may raise the same or new arguments at the petition stage (Re Yip Kim Po [2022] HKCFI 1912 §§20-21).  

(2)  If a debtor opposes a bankruptcy petition, he shall file a notice of intention to show cause (“Notice”)  with the Official Receiver specifying the grounds on which he intends to show cause, and shall post to the petitioning creditor or to his solicitors a copy of the Notice, in each case 3 days before the day on which the petition is to be heard before a Master[6]. The requirement under rule 68 is mandatory and must be complied with[7]. If no Notice is filed, the court may treat the petition as uncontested and make a bankruptcy order against the debtor (Re Deng Jiang [2024] HKCFI 2260, §18(3)).

9.  As the first hearing of the petition before a Master was 29 July 2025, the Debtor was required to serve his Notice by 24 July 2025.  In breach of rule 68, the Debtor did not serve any Notice.  It follows that the court may treat the petition as uncontested and make a bankruptcy order against the Debtor.

10.  It was only until 15 August 2025 that the Debtor belatedly issued a summons seeking leave to file a Notice out of time.  However, it is clear from the Debtor’s affirmation[8] that the Debtor had received the petition but chose not to file or serve any Notice until the summons was issued:

(1)  The Debtor admittedly received a copy of the petition on 25 July 2025 when the same was delivered to the office of Revelry Gains (of which he is a director).  On the same day, the Debtor instructed Messrs. Lau Kwong & Hung (“LKH”)  to act for him and attend the first hearing of the petition before a Master on 29 July 2025.

(2)  At the hearing on 30 July 2025[9], LKH stated that the Debtor opposed the petition.  The Master considered that the “papers are not in order” and adjourned the petition to 12 August 2025.  At the second hearing on 12 August 2025, the Master adjourned the petition to this Court.

(3)  Despite having received a copy of the petition on 25 July 2025 and with the benefit of legal advice, no step has been taken by the Debtor to prepare and serve any Notice.

11.  There is no justification or good reason for the court to exercise its discretion to extend time for the Debtor to serve the Notice.

12.  Nevertheless, Mr Christopher K.H. To, counsel for the Debtor, submits that the petition should be adjourned for substantive arguments relying on 2 main grounds:

(1)  The petition was only served on the Debtor’s solicitors on 11 August 2025, which was less than 7 clear days before the day fixed for the hearing of the petition as required by §3.3 of PD 3.1 (Service ground).

(2)  There has been “a material change of circumstances” after the hearing of the setting aside application in that the BVI court made a winding up order against Revelry Gains and appointed liquidators on 24 January 2025.  Revelry Gains is a mortgagee of the Property.  Taking into account the market value of the Property at HK$310 million and the value for sale under repossession of HK$248 million in December 2021, “it is envisaged that the sale of the Property can enable the Petitioners to recover the total outstanding amount due from the Debtor” (Material Change ground).

13.  Neither ground has any merit.

14.  As regards the Service ground:

(1)  It is based on an erroneous assumption that the petition was only served on the Debtor on 11 August 2025.  As stated in §10(1)  above, the Debtor admitted that a copy of the petition had been delivered to and received by him on 25 July 2025.

(2)  Service of petition is governed by s.9(1)  of the Bankruptcy Ordinance (Cap. 6)  (“BO”)  which provides that a creditors’ petition “shall be served in the prescribed manner”.  The reference to “prescribed manner” are rr.59 and 60 of the Bankruptcy Rules[10].  Rule 59 provides that “service of a creditor’s petition shall be effected by the creditor or his solicitor, or a person in their employment, delivering a sealed copy of the petition to the debtor”.  This was done when a copy of the petition was delivered to the Debtor on 25 July 2025.  Neither rule deals with the time for service.

(3)  The requirement of service of a petition not less than 7 days before the hearing of the petition (as described in PD 3.1 §3.3)  is the requirement under Order 9 rule 4(2)  of Rules of the High Court, which applies to bankruptcy petition by virtue of s.99(1)  of the BO. The requirement was complied with by the time the petition was heard before the Master on 12 August 2025.  

15.  The Material Change ground is in substance the same as the discretionary ground (see §5(4)  above), which had already been considered and rejected by the learned Judge.  It is not open to the Debtor to raise the same ground at the petition stage.  In any event, the allegation that the Petitioners would be able to recover the total outstanding amount through the liquidation of Revelry Gains is pure conjecture and not supported by any evidence.