RE YUNG MAN TUNG

HCB 2185/2025

[2025] HKCFI 3216

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 2185 OF 2025

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REASONS FOR JUDGMENT

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1.  At the hearing of the petition presented by Ashurst Hong Kong (A Firm) (“Petitioner”) on 20 March 2025 against the debtor, Mr Yung Man Tung (“Debtor”), I made a usual bankruptcy order against the Debtor. These are the reasons for my judgment.

2.  The petition is based on the Debtor’s failure to comply with a statutory demand served upon him on 16 August 2023 requiring the Debtor to pay HK$4,860,247.68 (“Debt”) within 21 days thereof (“SD”).

3.  The Debt represents the 4^th and final instalment payable by the Debtor to the Petitioner under a settlement deed dated 20 February 2023 made between the Petitioner, the Debtor and Tung Kee Development (Singapore) Pte. Ltd (“SG Company”) (“Settlement Deed”).

4.  On 31 August 2023, the Debtor (then legally represented) applied in HCSD 41/2023 to set aside the SD on the grounds of mistake and misrepresentation. The application was dismissed by DHCJ Kent Yee on 7 March 2025 (“March Order”), who held in his Decision dated 7 March 2025 [2025] HKCFI 955 (“March Decision”) (at §37) that there is no merit in the grounds advanced by the Debtor.

5.  As stated in the March Decision:

(1)  The Debtor is a businessman engaging in property investments in Hong Kong and Canada. He was a director and 20% shareholder of SG Company (§5(1)).

(2)  The Settlement Deed arose out of the Debtor’s failure to pay the outstanding legal fees for the services rendered by the Petitioner in legal proceedings in Singapore (“SG Proceedings”) and other matters, which led to the Petitioner presenting a bankruptcy petition against the Debtor in HCB 5728/2022 (“1^st Petition”) (§§5(2)-5(8)).

(3)  The Settlement Deed contains a payment schedule with 4 instalments, the last of which was payable on or before 31 July 2023. After payment of the first 3 instalments and the withdrawal of the 1^st Petition, the Debtor failed to pay the last instalment (§5(11)-(13)).

(4)  The Debtor alleges that the Settlement Deed was procured by misrepresentation and/or executed under mistake, and he mistakenly believed he would not be personally liable for the debt and that the last instalment would only be paid after determination of the SG Proceedings. He also argued that Schedule 1 to the Settlement Deed wrongly included an invoice which the parties had agreed to be superseded (“Superseded Invoice”) (§§3, 15).

6.  The learned Judge rejected the grounds raised by the Debtor, holding that:

(1)  the Debtor’s alleged mistaken belief is incredible (§24);

(2)  his “alleged mistaken belief as to the non-existence of his personal liability is derisory” (§27);

(3)  the allegation of misrepresentation was not supported by any evidence (§30); and

(4)  the inclusion of the Superseded Invoice was immaterial, as the Debtor was still liable to pay the Petitioner more than HK$4.5 million in any event (§§32-35).

7.  Since then, the Debtor has made a number of applications:

(1)  On 14 March 2025 (in HCSD 41/2023): he applied for a stay of execution of the March Order. This was dismissed by the learned Judge on 20 June 2025, with costs to be paid by the Debtor to the Petitioner (“June Order”).

(2)  On 31 March 2025 (in CACV 162/2025): he filed a notice of appeal against the March Order (“Appeal”). The hearing date has yet to be fixed[1].

(3)  On 24 June 2025 (in HCB 2185/2025): he filed an affirmation where he seeks an adjournment of the petition pending determination of the Appeal.

(4)  On 30 June 2025 (in HCSD 41/2023): he challenges the June Order on the ground that it is unfair for him to bear the Petitioner’s costs as he is not legally represented[2]. The summons has been fixed before DHCJ Kent Yee on 10 September 2025.

(5)  On 30 June 2025 (in CACV 162/2025): he appeals against the June Order on the grounds that he has already brought the Appeal such that the matter should be dealt with after determination of the Appeal, and it was unfair for the same Judge to deal with his application for stay of the March Order. No hearing date has been fixed.

Applicable Principles

8.  It is well established that in opposing a bankruptcy petition, a debtor bears the burden of showing that there is a bona fide dispute on substantial grounds in respect of the debt, and for this purpose, the debtor has to adduce sufficiently precise factual evidence which is believable, and must establish that he has a defence of substance, not just a fair probability of one (Re Leung Cherng Jiunn [2016] 1 HKLRD 850, at §27, per Kwan JA (as she then was); Re Soetrisno Farida [2019] HKCFI 2756, at §11, per Ng J). It is not sufficient for the debtor to merely raise “a cloud of objections on affidavits” (Artech Development Ltd v Posismo Ltd [2018] HKCFI 344, at §10(4), per Ng J).

9.  Further, where, as here, a 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. The relevant principles have been stated in Re Yip Kim Po [2022] HKCFI 1912, §§20-21:

“20. The principles on res judicata and issue estoppel apply to bankruptcy proceedings. In Chan Yuk Lun v Chan Ying Chit [2015] 1 HKLRD 501, §§9-13, Godfrey Lam J (as he then was) held that a determination on an application to set aside a statutory demand is a ‘final’ determination on the issues between the parties and the principle of res judicata applies to bar the parties from raising the same issue at the hearing of the petition:

‘9. However, it has been held by Susan Kwan J (as she then was) in the (strangely unreported) case of Re Choy Wai Bor (unrep., HCB 8565/2001, [2002] HKEC 650) (28 May 2002) at [30] that the court’s decision of refusing to set aside a statutory demand gives rise to a determination that, by virtue of the principle of res judicata, precludes the debtor from raising the same issue on the hearing of the bankruptcy petition, at any rate where there has been no change of circumstances.

…

13. Looking at the substance of the matter, such an order refusing to set aside a statutory demand, coupled with the operation of the principle of res judicata, has the effect of a final determination of specific issues as between the parties …’ (underlined added)

21. There is a further principle in bankruptcy law which has been described as the ‘Turner principle’ or the public policy principle. The principle may be summarised as follows:

(1) Where a debtor brought an application to set aside a statutory demand, that application being part of the bankruptcy process, is the proper forum for the parties to raise all their arguments against the petition debt (Turner v Royal Bank of Scotland [2000] BPIR 683, §§47, 49, per Chadwick LJ; Atherton v Ogunlende [2003] BPIR 21, at 27, per Neuberger LJ).

(2) It would be an abuse of the bankruptcy court’s practice if the debtor is allowed to run an argument which could and should have been run at the application to set aside a statutory demand (Harvey v Dunbar Assets plc [2017] EWCA Civ 60, §§51, 58, per Henderson LJ). It would also be a waste of court’s time and the parties’ money and would defeat the obvious purpose of the statutory scheme if a debtor can at the hearing of the petition ask the court to go into the question which has already been determined in the application to set aside the statutory demand (Turner, §49).

(3) If the debtor wishes to run new arguments at the hearing of the petition which were not run at the application to set aside the statutory demand, the court would inquire why those arguments were not run at the time when they could, and should, have been raised (Coulter v Chief Constable of Dorset Police (No 2) [2006] BPIR 10, §§20-22, per Chadwick LJ; Harvey §48).

(4) The court requires exceptional circumstances before it would allow the debtor to raise the same arguments at the petition stage (Atherton v Ogunlende, at 27).”

Discussion

10.  The Debtor has not filed any notice of intention to show cause as required by rule 68 of the Bankruptcy Rules (Cap. 6A). Nor has he applied for extension of time to file such notice.

11.  In his affirmation filed on 24 June 2025, all that the Debtor does is to apply for an adjournment of the petition until after determination of the Appeal. He does not attempt to show, whether in his affirmation or oral submissions, that he has a reasonable prospect of succeeding in the Appeal or that his grounds of appeal are arguable.

12.  The Debtor has applied for and failed to set aside the SD. It is not open to him to challenge the Debt or the SD at the hearing of the petition.

13.  Although the Debtor applies for an adjournment of the petition, he has not shown any ground, let alone good ground, as to why the court should adjourn the petition. The fact that he has applied for and failed in his application for a stay of the March Order reinforces the fact that there is no proper basis for this Court to adjourn the petition.

14.  At the hearing, this Court asks the Debtor whether he has the financial means to pay the Debt and whether he will pay the Debt. In response, the Debtor states that he will not pay the Debt as he takes the view that it is his company (presumably, SG Company), rather than him, which is liable to pay the Debt. This confirms that there is no utility in the court adjourning the petition as the Debtor has no intension to pay the Debt.

15.  For the reasons set out above, I do not consider that the Debtor has discharged the burden of showing that there is a bona fide dispute on substantial ground in respect of the Debt or that there is any valid ground for the court to adjourn the petition.

16.  It is unnecessary for this Court to consider whether the grounds set out in the ANOA are sufficient arguable. Indeed, at the hearing, the Debtor expressly disavows any reliance on the grounds set out in the ANOA.

17.  Nevertheless, in case this matter goes further, I will briefly explain why I do not think that the grounds set out in the ANOA are arguable.

18.  Ground 1 alleges that the learned Judge did not exercise its power to correct (糾正) the SD:

(1)  The complaint has been considered by the Judge and rejected for the reasons stated in §§33-36 of the March Decision.

(2)  The Debtor has not been able to identify any error in the Judge’s approach or the reasons given.

(3)  Nor has he begun to explain how the inclusion of the Superseded Invoice can vitiate the Settlement Deed, particularly when the amount concerned (HK$450,000) arose out of unpaid legal fees of over HK$7 million (which as part of the settlement between the parties was reduced to ~HK$5.8 million in the Settlement Deed), and was entered into to secure the withdrawal of the 1^st Petition the evening before the hearing of the same.

19.  Ground 2 concerns details of certain invoices giving rise to the Settlement Deed (specifically, the inclusion of Singapore tax (GST) and conversion of Singaporean dollars into Hong Kong dollars). There is no merit in this ground, given that:

(1)  The SD is based on non-payment of the last instalment under the Settlement Deed rather than the invoices. The Debtor has not explained how the alleged mistakes can vitiate the Settlement Deed.

(2)  In any event, for those invoices originally denominated in Singapore dollars, Schedule 1 to the Settlement Deed already set out the corresponding “HKD Equivalent”. There is no basis for the Debtor to now claim that he did not know how the exchange rate was calculated (“兌率怎樣計算我完全被蒙在鼓裏”).

(3)  Further, the Debtor has not adduced any evidence in support of his assertion that Singapore tax is not payable, even though  the engagement and the SG Proceedings related not only to him but also the SG Company, which was incorporated in Singapore.

20.  Ground 3 contains 3 sub-grounds, which are equally without merit:

(1)  The Debtor alleges that the Judge did not explain to him the legal procedure. He has not identified which part of the legal procedure on which he required explanation or why the Judge had to so explain it to him. The Debtor was legally represented at the time he made the application to set aside the SD. He did not need the Judge to explain the procedure to him.

(2)  The Debtor alleges that the Judge did not give him sufficient time to explain the truth of the matter. This is plainly not true. Sufficient time and opportunity were given to the Debtor to explain his position in writing (including in his affirmation in support, which was filed when he was legally represented, and his affirmation in reply), and orally at the hearing.

(3)  The Debtor complains that the Judge did not allow him to call the 3 solicitors for cross-examination. The Debtor has not demonstrated in what way the Judge erred in rejecting his belated application, raised only at the hearing, to cross-examine or subpoena the 3 solicitors. Such course is plainly inappropriate given that an application to set aside a statutory demand is summary proceeding, and the approach of the court is to consider all the evidence presented by the parties and ask whether the debtor has discharged the burden of showing that there is a bona fide dispute on substantial ground in respect of the debt.