RE ASSOULINE JACQUES ISAAC

HCB 1858/2023

[2023] HKCFI 2269

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 1858 OF 2023

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REASONS FOR JUDGMENT

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1.  At the hearing of the petition presented by Ultimate Top Limited (“Petitioner”) on 3 April 2023 against Mr Assouline Jacques Isaac (“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 the statutory demand served upon him on 10 March 2023 (“SD”) requiring him to pay HK$673,842.70 (“Original Debt”) within 21 days.   

3.  The SD was based on the Judgment of the Lands Tribunal in LDPD 125/2023 dated 23 February 2023 whereby it was ordered that the Debtor do deliver vacant possession of the property at House 1, No.74 Mount Kellet Road, The Peak (“Property”) to the Petitioner on or before 19 March 2023, and pay the following amounts to the Petitioner:

(1)  Balance of arrears of rent from 10 December 2022 to 2 February 2023 in the sum of HK$390,000;

(2)  Interest on arrears of rent calculated from the date on which the same became due until 2 February 2023 at 2% per month, that is, HK$9,938.70;

(3)  Arrears of rent / mesne profits at HK$195,000 per month from 3 February 2023 until delivery of vacant possession of the Property; and

(4)  Costs assessed at HK$16,000.

4.  In the SD, the Original Debt was described as (1) arrears of rent and mesne profit payable in the amount HK$647,904 on the basis that the Debtor would deliver vacant possession of the Property on 19 March 2023; (2) interest as at 23 February 2023 at HK$9,938.70; and (3) costs as at 23 February 2023 at HK$16,000. 

5.  The Debtor filed an affirmation on 30 May 2023 (“Debtor 1^st”) seeking to oppose the petition on the following grounds:

(1)  He is a director of a company which engaged in a contract with the Government of Indonesia.  The project experienced delays due to Covid-19 but is “near its financial closing, which is scheduled for September”.  He also engages in “advisory activities” which are “expected to bring financial benefits in the coming weeks”;

(2)  He does not receive any regular income or salary, and does not have any assets that could be “liquidated” to satisfy the Debt;

(3)  He initially acknowledged the Debt, but subsequent demands from the Petitioner led him to question the validity of the claim;

(4)  In the “additional demands” issued by the Petitioner, new claims had been added which lack justifications, and the rent for the period from 10 December 2022 to 19 March 2023 and legal costs had been claimed twice;

(5)  He is due to receive “funds from the financial closing of the Indonesian project” and his advisory activities; and

(6)  He requests an 8-week adjournment “to present a comprehensive repayment plan”, and is prepared to provide supporting documents to substantiate his assertions. 

6.  In reply, the Petitioner filed the 2^nd affirmation of Chiu Tsz Hin on 31 May 2023 (“Chiu 2^nd”) stating that in breach of the Judgment, the Debtor failed to make any payment and only delivered vacant possession of the Property to the Petitioner on 11 April 2023.  As a result, the following additional amounts, not stated in the SD, were due and payable by the Debtor (collectively “Additional Claims”):

(1)  mesne profits from 20 March 2023 to 11 April 2023 in the amount of HK$145,096;

(2)  interest on judgment debt at judgment rate (8.169%) from the date of judgment (23 February 2023) to 24 May 2023 in the amount of HK$16,678.95; and

(3)  reinstatement costs and other costs and expenses in the sum of HK$183,825. 

7.  In Chiu 2^nd, the Petitioner stated that after applying the deposit of HK$585,000 to set-off the Additional Claims, there was a remaining balance of HK$239,400.05.  The Petitioner has no objection to applying the remaining deposit to set-off the Debt, leaving an unpaid balance of HK$434,442.65.  Therefore, as at 31 May 2023, the debt which remained due and owing by the Debtor was HK$434,442.65 (“Debt”).

8.  The Debtor filed his 2^nd affirmation on 2 June 2023 (“Debtor 2^nd”) to oppose the petition on the further grounds that (1) the details presented by the Petitioner are not clear; (2) the reinstatement costs in the amount of HK$183,825 claimed have not been justified; and (3) he will propose a repayment plan in 8 weeks. 

9.  At the first hearing of the petition before this Court on 19 June 2023, Mr John Leung, counsel for the Petitioner, submitted that this was a straightforward and appropriate case for the court to make an immediate bankruptcy order against the Debtor given that:

(1)  There was no bona fide dispute as to the Original Debt.  The Debtor’s various contentions did not relate to the Original Debt, and he was seeking an adjournment of the petition pending receipt of funds which he claims would enable him to satisfy the Original Debt; and

(2)  The Debtor had not adduced any reasonable or credible repayment proposal to justify an adjournment of the petition.

10.  As Mr Leung submitted, the principles applicable to bankruptcy petitions are, as stated in Re Cheung Kwan [2020] HKCFI 1033, §§30-31:

(1)  Where a debtor has failed to comply with the statutory demand and has not repaid the debt, by virtue of s.6A(1)(a) of the Bankruptcy Ordinance (Cap 6) (“BO”), the petitioner has discharged the onus of showing that the debtor is unable to pay his debt as required by s.6(2)(c) of the BO.

(2)  In opposing a bankruptcy petition, the debtor has to show a bona fide dispute on substantial grounds by sufficiently precise evidence which is believable and must establish that he has a defence of substance, not just a fair probability of one.  It is not sufficient for the debtor to raise “a cloud of objections” on affidavits. 

11.  The Debtor failed to discharge his burden to show that there is a bona fide dispute on the Debt for the following reasons.

12.  First, the Debtor’s suggestion that the Petitioner is “using the bankruptcy threat to inflate the claim” is premised on his denial to the Petitioner’s claim for reinstatement costs of HK$183,825.  However, this reinstatement costs are not part of the SD and the Original Debt, but are post-petition losses which the Petitioner claims to have separately suffered.

13.  Second, there is no substance in the Debtor’s allegation that the Additional Claims have already been included in the Original Debt. 

14.  Third, where the debt upon which the petition is based is clearly established and the procedural requirements have been complied with, a petitioning creditor has a prima facie right to seek a bankruptcy order, and the court would only exercise its discretion to adjourn the petition for payment where there is a reasonable prospect of the debt being paid in full within a reasonable time (Re Cheung Chun Yuen Barry, HCB 1223/2014, 15 April 2015, §4).  The Debtor failed to adduce any credible or precise evidence to show that there is any prospects of repayment of the Debt within a reasonable time.  No details or supporting documents on the Indonesian project or advisory activities have been provided. 

15.  The Petitioner’s submissions are well-founded. 

16.  However, in view of the serious ramifications of a bankruptcy order on the Debtor and the relatively modest amount of the Debt, this Court was prepared to give 6 weeks to the Debtor to pay the Debt if the Debtor was prepared to give an undertaking to the court not to oppose the petition in the event that he did not pay the Debt within 6 weeks.  The undertaking was to avoid the need for the Petitioner to incur further costs in pursuing the petition in the event that the Debtor failed to pay the Debt during the adjournment.  The Debtor confirmed that he was prepared to give the undertaking and on that basis, the petition was adjourned to be heard on 7 August 2023 before Ng J.

17.  The Debtor did not pay any part of the Debt.  Instead, he filed his 3^rd affirmation on 31 July 2023 seeking to oppose the petition on the ground that the Petitioner misled this Court by asserting that the reinstatement costs had not been included in the Original Debt, and contending that the entire reinstatement costs should be deducted from the Debt, leaving an unpaid balance of HK$250,617.65. 

18.  In view of the stance adopted by the Debtor, this Court directed the hearing to be heard on 28 August 2023.   

19.  At the hearing before this Court, the Debtor still failed to pay the Debt or the part which he does not dispute but sought to oppose the petition on the ground that the Debt had been inflated for the same reasons stated in his affirmations.  The Debtor failed to put forward any reason as to why he should be allowed to act inconsistently with his undertaking given to the court.  In any event, I do not think that he has any valid ground to oppose the petition.  As can be seen from the facts set out in §§2-4 and 6-7 above, the bases for claiming the Original Debt and the Debt are clear, and there is no double-counting of any claims. 

20.  The Debtor is clearly unable to pay his debts, having regard to (1) his failure to comply with the SD and is deemed unable to pay his debts; (2) he admits (in Debtor 1^st and 2^nd) that he has no income or assets to pay the Original Debt; and (3) despite being given 6 weeks to pay the Debt, he is still unable to make any payment.