Y K ENGINEERING CO LTD v. SHI JIAREN

HCB 407/2021

[2021] HKCFI 3159

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 407 OF 2021

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D E C I S I O N

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1.  This is the substantive hearing of the bankruptcy petition of Y K Engineering Company Limited (the “Petitioner”) against Mr Shi Jiaren (the “Debtor”).

2.  The Debtor has raised no causes to oppose the petition.  Yet, the Debtor, in paragraph 15 of his 2^nd Affirmation, sought to dismiss the petition allegedly because the Petitioner unreasonably refused the offer by the Debtor, made through Messrs MCA Lai Solicitors LLP on 21 July 2021.

3.  By way of background, the Petitioner as sub-contractor and the Debtor as sub-sub-contractor, entered into a written sub-contracting agreement in 2016 for the plastering works at the Nam Cheong Station.

4.  In the Small Claims Tribunal action entitled SCTC007320/2019, the Tribunal found for the Petitioner in the decision dated 7 January 2020 (the “Decision”). Due to the jurisdiction of the Small Claims Tribunal, the Tribunal ordered the Debtor to pay $75,000 to the Petitioner with post‑judgment interest to be calculated at the judgment rate.

5.  The Debtor applied to have the Decision reviewed.  After the hearing, the Small Claims Tribunal maintained the Decision by a decision dated 31 July 2020.

6.  After they reviewed the Decision, the Debtor applied to the Court of First Instance for leave to appeal, which application was refused by Marlene Ng J on 13 November 2020.

7.  Yet the Debtor failed to pay the Petitioner the judgment sum and interest.  Hence, the Petitioner served the Statutory Demand (“SD”) on the Debtor on 23 December 2020 in relation to the judgment debt.

8.  The Debtor failed and still fails to comply with the SD.  In the premises, the Petitioner rightly presented the bankruptcy petition against the Debtor on 19 January 2021.

9.  The Debtor was represented by Messrs MCA Lai Solicitors LLP when he made his 1^st Affirmation on 7 June 2021.  In it, the Debtor sought to adjourn the petition for negotiation.

10.  Messrs MCA Lai Solicitor LLP on the Debtor’s behalf made a repayment proposal by letter dated 21 July 2021.  In gist, the Debtor proposed to pay $32,000 within 7 days of the acceptance of the offer, and the remaining outstanding sums would be paid by 10 equal instalments, each of $5,300.

11.  There is thus no dispute that the Debtor failed to pay the judgment sum and the post-judgment interest to the Petitioner when the SD was served and the petition was presented.  The Debtor did not suggest that he was able to pay his debts to the Petitioner.

12.  As rightly pointed out by the Petitioner, the only issue relates to the repayment offer made by the Debtor.  Section 6D(3) of the Bankruptcy Ordinance, Cap 6 (“BO”), provides that:

“(3) The court may dismiss the petition if it is satisfied that the debtor is able to pay all his debts or is satisfied:

(a) that the debtor has made an offer to secure or compound for a debt in respect of which the petition is presented;

(b) that the acceptance of that offer would have required the dismissal of the petition; and

(c) that the offer has been unreasonably refused...”

13.  In order to determine if the Petitioner’s refusal was unreasonable, the court has to be satisfied that no reasonable hypothetical creditor in the position of the Petitioner and in the light of the actual history as disclosed to the court, would have refused the offer and that the refusal was therefore beyond the range of possible reasonable actions in the circumstances, see: Re Lai Ka Hing Fanco [2008] 5 HKLRD 552, per Poon J (as the CJHC then was) at paragraph 15.

14.  Further, it is incumbent on a debtor if he wishes his proposal to be looked at with sympathy to be full, frank, and open with his creditors in respect of his statements of his position (see: Re A Debtor (No 32 of 1993) [1994] 1 WLR 899 at 810H).

15.  The Petitioner submits that the Debtor’s offer has not been unreasonably refused.  First, the genuineness of the Debtor’s offer is seriously in doubt given the history of events.  Further, even if the Debtor was genuine in his offer, there is serious doubt as to the Debtor’s ability to pay the instalments as proposed.

16.  I agree.

17.  The Debtor did not take any action or make any repayment proposal when the SD was served upon him on 23 December 2020.

18.  Again, when the Petitioner presented the petition on 19 January 2021, the Debtor did not take any action or make any repayment proposal.  The Debtor never mentioned his intention to pay when he was before Master R Lai on 7 April 2021 and 5 May 2021, or before Peter Ng J on 10 May 2021.

19.  When the Debtor’s offer was presented to the Petitioner for consideration under Messrs MCA Lai Solicitors LPP’s letter on 21 July 2021, the Debtor did not explain why he needed 10 months to repay the outstanding balance, or how he could repay the outstanding balance as proposed.

20.  It was only in the Debtor’s 2^nd Affirmation dated 10 August 2021, filed 10 days before the substantive hearing, that the Debtor purported to explain why he needed 10 months to repay the outstanding balance, and how he could repay the outstanding balance as proposed.

21.  Yet, the Debtor has not exhibited any of his bank statements.  The Debtor’s assertion that he is now a casual worker at a construction site is a bare assertion without any supporting documents or proof.  Similarly, there is no employment contract, income statement, tax return records, or even bank statements.  There is no supporting document to show that he is earning $12,750 a month as alleged.  There is simply nothing to verify what he had said in his affirmation.

22.  The Debtor made no reference to the status of his current liability, or any of his contingent and prospective liability.

23.  In the premises, I agree that there is grave doubt as to the Debtor’s ability to pay the Petitioner by 10 instalments as proposed.

24.  For the reasons given above, I agree that the Petitioner is justified to refuse the Debtors offer.  The Debtor has no ground whatsoever to seek an order to dismiss the petition under section 6D(3) of the BO.

25.  Accordingly, I grant the bankruptcy order against the Debtor and will now hear counsel on the question of costs.

(Discussion re costs)

26.  I see no reason why costs should not follow the event and Ms Ho does not oppose a costs order in favour of the Petitioner.

27.  Accordingly, I order that the costs of the petition, including all costs reserved (if any), be paid by the Debtor to the Petitioner, such costs are to be taxed if not agreed.