RE TSOI MAN

HCB 5570/2025

[2026] HKCFI 586

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 5570 OF 2025

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REASONS FOR JUDGMENT

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1.  By Petition presented on 18 July 2025 the petitioner, Sun Kong Petroleum Company Limited (新港石油有限公司)  (“Petitioner”), sought a bankruptcy order against the debtor, Mr Tsoi Man (蔡敏)  (“Debtor”), on the ground that he failed to comply with a statutory demand dated 29 April 2025 (“SD”)  requiring him to pay HK$3,806,719.20 (“Debt”). After hearing the submissions of the parties, I dismissed the Petition and ordered the Petitioner to pay the costs of and occasioned by the Petition to the Debtor and the Official Receiver. These are the reasons for my judgment.

2.  The following facts are not in dispute.

3.  The Petitioner is a supplier of diesel fuel. 

4.  The Debtor is a director and the ultimate controller of 95% shareholding in Nanyang International Shipping Ltd (南洋 (國際)  船務有限公司)  (“Nanyang”)  through a number of intermediate holding companies[1].

5.  Since 2023, the Debtor has caused Nanyang to enter into a number of supply agreements with the Petitioner covering the supply of diesel fuel for Nanyang’s ships.  These include:

(1)  The supply agreement (船用燃油供應協議)  dated 15 August 2023 covering the period from 11 August 2023 to 10 August 2024 (“2023 Agreement”)[2];

(2)  The 2023 Agreement was amended by a supplemental supply agreement (船用燃油供應補充協議)  signed on 1 April 2024 covering the period from 11 August 2023 to 31 December 2024 (“2024 Agreement”)[3];

(3)  The 2024 Agreement was further amended by a second supplemental agreement (船用燃油供應補充協議二)  dated 10 May 2024 which required inter alia Nanyang to pay a higher amount as security deposit[4];

(4)  The supply agreement (船用燃油供應協議)  signed by the Debtor on 31 December 2024 and the Petitioner on 6 January 2025 covering the period from 1 January to 31 December 2025 (“2025 Agreement”)[5].

6.  In the SD[6], the Petitioner states that the Debt arose between 1 January 2025 and 17 March 2025 in this way:

(1)  Nanyang and the Petitioner entered into a 船用燃油供應協議 (supply agreement)  covering the period from 1 January to 31 December 2025.

(2)  By a deed of guarantee (擔保契約)  dated 10 May 2024 (“Guarantee”), the Debtor irrevocably and unconditionally agreed under clause 2.1.1(b)  to guarantee all the debts owed by Nanyang to the Petitioner. 

(3)  Pursuant to the supply agreement, the Petitioner issued invoices requiring Nanyang to pay the Debt. 

(4)  In breach of the supply agreement, Nanyang failed to pay the Debt.

(5)  In breach of the Guarantee, the Debtor failed to pay the Debt.   

7.  The SD was served on the Debtor on 30 April 2025.  The Debtor did not comply the SD. 

8.  On 18 July 2025, the Petition was presented. In the Petition, the Petitioner states that:

(1)  The Debt is “the outstanding balance as at the date hereof payable by the Debtor to the Petitioner pursuant to the Supplier Agreement (供應協議)  with [Nanyang] dated 6^th January 2025 and after service of a statutory demand dated 29^th April 2025 on 30^th April 2025” (§2).   

(2)  The Debtor signed “a Deed of Guarantee dated 10^th May 2025.  Under Clause 2.1.1(b), the Guarantor irrevocably and unconditionally makes good any default by the Purchaser in the payment of or discharge of Purchaser Obligations” (§3).

(3)  The Debt is for a liquidated sum payable immediately and the Debtor appears to be unable to pay it (§4).

(4)  On 30 April 2025 the SD was served on the Debtor but the Debtor failed to comply with nor set aside the same (§5).

9.  On 23 October 2025, the Debtor filed a notice of intention to oppose petition (“Notice”)  stating that he intends to show cause against the Petition and dispute the Debt on the following grounds:

(1)  He is not indebted to the Petitioner as the Guarantee did not cover any agreement made between the Petitioner and Nanyang in 2025;

(2)  He does not read or speak English. When he signed the Guarantee, he did not have the benefit of independent legal representation nor did the Petitioner’s representatives explain the terms to him;

(3)  He was not given a copy of the Guarantee after he had signed it;

(4)  To his knowledge, the terms of the Guarantee do not cover  future agreements and transactions between the Petitioner and Nanyang;

(5)  “No debt incurred by [Nanyang] that he is liable to repay [the Petitioner] under the [Guarantee]”.  Nanyang is able to repay the outstanding invoices.   

10.  On 28 November 2025, the Debtor filed an affirmation (“Debtor 1^st”)  stating that there is a bona fide dispute on substantial grounds in respect of the Debt for the following reasons:

(1)  He did not sign a guarantee on 10 May 2025 as asserted by the Petitioner.  He was asked to provide a personal guarantee for the 2023 Agreement (as amended by the 2024 Agreement)  in May 2024, not May 2025[7];

(2)  On 10 May 2024, he signed the Guarantee without any  opportunity to obtain independent legal advice or any explanation provided by the Petitioner.  His understanding and intention at the time was that the Guarantee only covered the 2023 Agreement and the documents ancillary thereto including the 2024 Agreement (being an agreement to extend the 2023 Agreement). He was not given a copy of the Guarantee[8].

(3)  The Guarantee provided by him in 2024 does not cover the Debt claimed in the Petition because (a)  the preamble of the Guarantee refers to the supply agreement dated 1 August 2024 appended thereto; (b)  clause 2.5.1 of the Guarantee states that the “Guarantor intent” only covers “the Agreement and ancillary documents”; and (c)  he has not provided any further guarantee that covers the 2025 Agreement[9].

(4)  There is no underlying debt as Nanyang is in the process of negotiating a schedule for payment of the supposed underlying debt to the Petitioner[10].

11.  In the reply affirmations (Cao 3^rd and affirmation of Li Xin[11]), the Petitioner goes beyond responding to the matters and grounds raised in the Petition and seeks to raise the following new matters, none of which have been referred to in the SD or pleaded in the Petition:

(1)  At the meeting on 18 December 2024, Cao insisted that “the Petitioner would only renew the [supply] agreement on the condition that the [Guarantee] would continue to be in force and be enforceable”.[12]

(2)  Cao proposed to sign a new agreement for 2025 and makes clear that for the new contractual period, “all the contractual terms remained the same.  The consolidation of all the terms in a new set of agreement is merely for the purpose of convenience”, and the Debtor agreed to his proposal and “expressly agreed for the [Guarantee] to continue to be in force and be enforceable”.  As the Guarantee contains no expiry date, the Debtor and Cao “considered that it was not necessary to execute another [Guarantee]”[13].

(3)  In the 2024 Agreement (appended as Appendix 1 to the Guarantee), it was “mis-stated as an agreement dated 1 August 2024” which was a typographical error.  “It was clearly the understanding of the parties that the [Guarantee] was executed to secure Nanyang’s obligation under the [2024 Agreement] and any other agreements between the same parties,” and the Debtor does not appear to take issue with this typographical error[14].

(4)  The Debtor has acknowledged liability to pay the Debt at the meetings held on 30 April 2025 and 6 August 2025[15].

12.  Mr Kevin Hon[16], counsel for the Debtor, submits that there is a bona fide dispute on substantial grounds in respect of the Debt and the Petition should be dismissed for the following reasons:

(1)  The Petition was not (properly)  verified by an affidavit as required by rule 56 of the Bankruptcy Rules (Cap. 6A)  (“BR”).  While the Petition relies on a Personal Guarantee signed on 10 May 2025, Cao 3^rd refers to the Guarantee signed on 10 May 2024;

(2)  On a true construction of the Guarantee, the Debtor is not responsible for any obligation of Nanyang arising from the agreements which the parties entered into after 10 May 2024 (date of Guarantee);

(3)  The Guarantee was discharged by variation of rights of the parties when the Petitioner and Nanyang executed the 2025 Agreement; and

(4)  No new guarantee was agreed by the Debtor in respect of the 2025 Agreement.   

13.  Ms Catherine Wong,[17] counsel for the Petitioner, submits that none of the complaints raised in Debtor 1^st constitutes a bona fide dispute on the Debt:

(1)  The allegation that the Debtor did not have any opportunity to obtain legal advice is incredible as he had in WeChat message acknowledged receipt of the draft Guarantee and said he would read its contents and digest them.  It is also irrelevant as he is bound by the Guarantee signed by him (Re Lo Kwai Ying Louisa, HCB 3145/2015, 5 April 2017, §§35-36).  The onus is on the Debtor to take all reasonable precautions before he signed the Guarantee in order to disown the same (Re Chow Yuen Chuen, HCB 6004/2015,20 July 2016, §§19-20).

(2)  The Guarantee covers the liabilities under the 2025 Agreement, relying on clause 2.1 and the definition of “Purchaser Obligation” in clause 1.1.

(3)  When the Guarantee was signed, Cao expressly said that he would only renew the credit arrangement if the Guarantee would continue to be in force and be enforceable.  The Debtor is not able to provide any cogent or precise evidence to rebut Cao 3^rd. 

(4)  The “Agreement” in clause 1.1 of the Guarantee was mistakenly defined as “the agreement dated 1 August 2024 (sic)”.  This typographical error does not affect the Petitioner’s reliance on the substantive provisions which covers all “other agreements”.

(5)  Even if there has been ongoing negotiations, there is no evidence to show that the Petitioner and the Debtor has reached any settlement agreement in respect of the Debt. 

14.  The approach of the court in considering a bankruptcy petition is well-established:

(1)  Bankruptcy proceedings are summary in nature and are not meant to be used for the purpose of debt collection.  The jurisdiction to make a bankruptcy order will only be exercised in very clear cases.  If the court is satisfied that there is a bona fide dispute on the debt, it will not usurp the function of a civil court and decide the disputes between the parties.  The usual practice of the court is to dismiss the petition, leaving the petitioner to establish himself as a creditor by judgment to be obtained in the civil court (Re Leung Cherng Jiunn, HCB 244/2014 (CFI)  §17; Re Leung Cherng Jiunn [2016] 1 HKLRD 850 (CA), §27(5)).   

(2)  Statutory demand is an important document.  It informs the debtor of the way in which the debt arose so that he would know what course he should take in light of the information given.  It is “the straight and narrow gateway” through which a creditor must pass in order to establish the debtor’s apparent inability to pay the debt demanded in order for a bankruptcy petition to be presented (Re Leung Cherng Jiunn (CA)  §13).

(3)  Whilst the statutory code affords the court a degree of flexibility in dealing with an application to set aside a statutory demand for defects, this is not to be taken as a charter for slipshod in preparation of statutory demand.  The making of a bankruptcy order remains a serious step for the debtor, and the prescribed preliminaries in the statutory code are intended to afford protection to him.  If a statutory demand is defective, the court will be alert to see whether those mistakes have caused or will cause any prejudice to the debtor.  Where the debt in issue was not a large sum, it could not be said the defect would have made no difference in that the debtor would not have paid anyway and no prejudice would have been suffered (Re Leung Cherng Jiunn (CA)  §§15-16, citing In re A Debtor (No 1 of 1987) [1989] 1 WLR 271 at 280D-E, per Nicholls LJ).

(4)  Rule 70 of the BR imposes the burden on a creditor to prove, at the hearing of the petition, any matters which the debtor has given notice that he intends to dispute (Re Leung Cherng Jiunn (CFI)  §§26-27).

(5)  In opposing a petition, the debtor has to show a bona fide dispute on substantial grounds in respect of the debt by adducing sufficiently precise 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 (CA)§23).

15.  The Petition should be dismissed for the following reasons.

16.  First, the Petitioner failed to comply with the procedural requirement prescribed in the BR in that no verifying affidavit as required by rule 56 has been filed.  Although in Cao 3^rd he says that “I have read the Petition, and I verify the contents pleaded therein are all true and accurate”, such statement does not comply with the wordings prescribed in Form 11 of the Bankruptcy (Forms)  Rules (Cap. 6B). More importantly, I am unable to see how Cao could say that the contents of the Petition “are all true and accurate” when there is no dispute that the Debtor never executed a guarantee dated 10 May 2025.

17.  Second, there are glaring inconsistencies between the SD and the Petition as regards the Petitioner’s case but no attempt has been made by the Petitioner to amend the SD or the Petition:

(1)  In the SD, the Petitioner referred to a supply agreement without mentioning its date whereas in the Petition, the Petitioner referred to a Supplier Agreement dated 6 January 2025; and

(2)  In the SD, the date of the Guarantee is 10 May 2024 while in the Petition, the Petitioner relied on “a Deed of Guarantee dated 10^th May 2025”. 

18.  Third, it is by no means clear that the Guarantee covers the debt owed by Nanyang under the 2025 Agreement, which only came into existence a few months after execution of the Guarantee and the Guarantee only referred to the 2024 Agreement:

(1)  In recital (1), it referred to “On 1^st day of August 2024, the [Petitioner] and [Nanyang] (as purchaser)  entered into [an agreement]  pursuant to which the [Petitioner] agreed to supply, and [Nanyang] agreed to purchase from the [Petitioner] Marine Gas Oil (500PPM)  and/or Euro V Diesel (10PPM), for a term of 1 year.  A copy of the Agreement is attached to this Deed as Appendix 1”.

(2)  Appendix 1 is a copy of the 2024 Agreement.

(3)  In clause 1.1, “Agreement” is defined as “means the  agreement dated 1^st day of August 2024 entered into between the [Petitioner] and [Nanyang] for the supply of Marine Gas Oil (500PPM)  and/or Euro V Diesel (10PPM)”.

19.  Ms Wong submits the Guarantee covers Nanyang’s liability to pay the Debt which arose under the 2025 Agreement, relying on:

(1)  The definition of “Purchaser Obligations” in clause 1.1, which states “means all present and future obligations and liabilities of [Nanyang] to the [Petitioner] under the Agreement and other agreement(s)  whether actual or contingent and whether owed or incurred alone or jointly and/or severally with another and as principal or as surety or in any capacity or of any nature”.

(2)  Clause 2.1.1 where the Debtor irrevocably and unconditionally “(a)  guarantees to the [Petitioner] the punctual payment and performance of the Purchaser Obligation” and “(b)  undertakes with the [Petitioner] that the [Debtor] will make good any default by [Nanyang] in the payment of or discharge of the Purchaser Obligations as if the [Debtor] instead of [Nanyang] was expressed to be the primary obligor in respect of the Purchaser Obligations”.

20.  I am unable to accept the argument:

(1)  Clause 2.1.1(a)  does not feature in the SD or the Petition.  It is not open to the Petitioner to rely on such clause.

(2)  Ms Wong’s contention that the latter part of the definition of “Purchaser Obligation” includes the 2025 Agreement is based on the assertions in Cao 3^rd §§20-22 and 26.  However, such assertions do not form part of the Petitioner’s case, whether in the SD or the Petition.  Whether the belated assertions in Cao 3^rd §§20-22 and 26 are true is an issue which cannot be determined summarily in these bankruptcy proceedings. 

(3)  It is at least arguable that the latter part of the definition of “Purchaser Obligation” which states “other agreement(s)  whether actual or contingent and whether owed or incurred alone or jointly and/or severally with another” is a reference to other agreement(s)  already existed at the time the Guarantee was signed by the Debtor.  There is no reference in the definition to any future agreement which will be entered into between the Petitioner and Nanyang.   

21.  Bankruptcy petition is a serious matter as it affects the status of a person.  The Bankruptcy Court expects a petitioner to comply with the procedural requirements under the BR and to rectify any mistake or omission in the statutory demand and the petition.  A petitioner cannot pursue bankruptcy proceedings in a sloppy manner and asks the Court to ignore any defects and errors, particularly when the debtor has specifically raised such matters as grounds in opposition to the petition.  The Petitioner only has itself to blame for putting forward inconsistent case, failing to rectify its non-compliance with the BR, failing to amend the Petition and failing to spot the issue on the scope of clause 2.1.1(b).