RE ZULIFQAR ALI

HCB 6146/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 6146 OF 2011

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J U D G M E N T

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Introduction

1. This is a creditor’s bankruptcy petition presented by Standard Chartered Bank (Hong Kong) Limited (“the Petitioner”) against Zulifqar Ali (“the Debtor”).

2. The petition is based on a statutory demand (“the Statutory Demand”) served on the Debtor on 30 May 2011.  The Statutory Demand itself was based on a final judgment (“the Final Judgment”) dated 20 December 2010 given by this court in HCA 1224/2010 in favour of the Petitioner against the Debtor for the principal sum of HK$12,910,033.13 plus interest thereon and costs of the action.

The proceedings giving rise to the Final Judgment

3. By a writ indorsed with a statement of claim issued on 12 August 2010, the Petitioner claimed against the Debtor for amounts due under 3 guarantees dated 28 September 2007, 19 March 2009 and 25 September 2009 respectively (hereinafter referred to as the “1^st, 2^nd and 3^rd Guarantees”) in respect of the obligations of a company called Azico International (Hong Kong) Limited (“Azico”).

4. The Debtor is a director and the 99.9% shareholder of Azico, which apparently was a watch trading company.

5. Pursuant to 3 banking facilities letters dated (i) 18 March 2009 (as supplemented and amended by a letter dated 24 September 2009), (ii) 24 September 2004 and (iii) 14 September 2009 (as supplemented and amended by a letter dated 17 November 2009) respectively (hereinafter referred to as the “1^st, 2^nd and 3^rd Facilities Letters”), banking facilities were granted by the Petitioner to Azico.

6. Azico defaulted in its obligations to the Petitioner and failed to make repayment despite letters of demand issued to Azico dated 22 July 2011 and to the Debtor dated 22 July 2010 and 2 August 2010.  The proceedings in HCA 1224/2010 were commenced on 12 August 2010.

7. A Defence and Counterclaim bearing the name of counsel was filed on behalf of the Debtor on 13 October 2010.  The Petitioner applied for summary judgment on its claim under Order 14 of the Rules of the High Court.  Apparently, the Debtor did not appear, either in person or by counsel or solicitors, at the hearing of the summary judgment application before Master R Lai on 20 December 2010, and the Petitioner obtained the Final Judgment against the Debtor.

8. I am told by Mr Patrick Chong for the Petitioner that the Debtor has not appealed against the Final Judgment.  Accordingly, the Final Judgment is currently subsisting and binding on the Debtor.

No bona fide dispute of judgment debt on substantial grounds

9. It is well established that in a creditor’s petition, the burden is on the debtor to show by precise factual evidence that there is a bona fide dispute of the debt relied upon by the creditor on substantial grounds: see Re ICS Computer Distribution Limited [1996] 3 HKC 440 at 443C-444A, per Rogers J (as he then was).

10. In the present case, the Debtor contends that he is not liable under the Final Judgment because certain documents relied upon by the Petitioner in the High Court action were forged by the general manager of Azico, Afsheen.  In particular, the Debtor says that he was not in Hong Kong between 19 September 2009 and 22 December 2009 and thus he could not have signed the 3^rd Guarantee or the 2^nd Facilities Letter on the dates of those documents, or in the presence of the named witnesses.  It appears also to be the Debtor’s case that (i) the Petitioner’s letter dated 24 September 2009 which supplemented and amended the 1^st Facilities Letter and (ii) the Petitioner’s letter dated 17 November 2009 which supplemented and amended the 3^rd Facilities Letter, were not signed by him and his signatures thereon were forged.

11. In my view, the Debtor’s allegations are not credible and cannot give rise to any bona fide dispute of the judgment debt on substantial grounds, for the following reasons.

12. First, the allegation of forgery was never raised in his Defence and Counterclaim filed in HCA 1224/2010.  In that pleading, the Debtor did not dispute the validity of the 3 Facilities Letters or the 3 Guarantees.  His defence to the Petitioner’s claim at that stage was essentially that the Petitioner, in breach of contract and/or its duties to act in good faith or to deal fairly with Azico/the Debtor and/or equitable duty of care, unilaterally suspended or withdrew the banking facilities granted to Azico without any prior warning.

13. Second, the Debtor, in an attempt to explain why there was no challenge against the 3 Facilities Letters and the 3 Guarantees in the Defence and Counterclaim, alleges that his solicitors and counsel failed to follow his instructions.  Indeed, the Debtor went so far as to allege that his solicitors and counsel might have accepted advantages from unidentified bank officers of the Petitioner for not doing their best endeavours to protect his rights and interests in the civil action.  This allegation is contained in a statement made by the Debtor to the ICAC dated 20 March 2012, a copy of which was handed up to the court in the course of the Debtor’s submissions.  I consider this allegation to be totally incredible.

14. Third, it appears from the Debtor’s written statement that he did, in or about September 2009, sign bank documents relating to an application for banking facilities under the Government’s Special Loan Guarantee Scheme.  As mentioned above, both the 2^nd and 3^rd Facilities Letters were dated September 2009, but the one which the Debtor does not contend to be forged (ie the 3^rd Facilities Letter) did not relate to the Government’s Special Loan Guarantee Scheme, whereas the one which the Debtor contends to be forged (ie the 2^nd Facilities Letter) did relate to the Government’s Special Loan Guarantee Scheme.  It is likely, therefore, that the Debtor did sign the allegedly forged 2^nd Facilities Letter.

15. I should add that although it is not in dispute that the Debtor was not in Hong Kong between 19 September 2009 and 22 December 2009, it does not necessarily follow that the 2^nd Facilities Letter and 3^rd Guarantee which were dated 24 September 2004 and 25 September 2009 respectively were signed on those dates.  The evidence of Leung Yee Chun, the Head of Hong Kong, Group Special Assets Management of the Petitioner, which I accept, is that it was likely that the documents were first signed and returned by the Debtor to the Petitioner before they were signed by the “witnesses”.

16. Fourth, on the basis of the Debtor’s own written statement, he had discovered that Afsheen forged his signature on his personal cheque dated 4 May 2010 and obtained money from his account.  Nevertheless, he said that he still trusted and relied on Afsheen to introduce Tony Au & Partners to act as his solicitors in HCA 1224/2010.  Such conduct on the part of the Debtor does not seem to me to make sense.

17. In all, I am not satisfied that the Debtor has discharged the burden of showing that he has a bona fide dispute of the judgment debt on substantial grounds.  I therefore make the usual bankruptcy order against the Debtor with costs (including all reserved costs) to the Petitioner.