RE MIAO ZHENGUO

HCB 6498/2020

[2022] HKCFI 1852

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 6498 OF 2020

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JUDGMENT

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Introduction

1.  This is the substantive hearing of the bankruptcy petition presented by the Petitioner against the Debtor on 23 September 2020 (“Petition”). There is also before this court the Debtor’s application by summons dated 21 May 2021 (“Setting Aside Application”) to set aside the ex parte leave granted by Master Hui on 17 August 2020 to issue and present the Petition on the grounds that the Petitioner has failed to (i) do all that is reasonable for the purpose of bringing the statutory demand dated 31 October 2019 (“statutory demand”) to the Debtor’s attention, (ii) file an affirmation of service in compliance with rule 49(3) of the Bankruptcy Rules, Cap 6A (“BR”) and (iii) give full and frank disclosure.

2.  While the parties have filed numerous affirmations in support of or in opposition to the Petition, it is fair to say that, apart from the affirmations of service, the Petitioner principally, though not exclusively, relies on the 5th affirmation of Jamie Che ((“Che”) and “Che 5”) while the Debtor principally, though not exclusively, relies on his 5th affirmation (“Miao 5”), both of which are composite affirmations consolidating their affirmations previously filed in these proceedings.

3.  The Petition is based on the non-compliance with the statutory demand for the sum of around HK$138 million (“Debt”). The statutory demand was served by inter alia advertising in the Hong Kong Economic Journal and China Daily on 31 October 2019.

4.  The Debt arose out of a Loan Agreement dated 19 April 2017 (“Loan Agreement”) executed jointly and severally by the Debtor, Cao Zhong (曹忠) (“Cao”) and Chen Yanping (陈言平) (“Chen”) (collectively “Borrowers”) for a loan of HK$120 million (“Loan”) together with interest. The term of the Loan was 2 years from the drawdown date. The Loan was secured by post-dated cheques issued by the Debtor and Cao and 8 security documents (“Security Documents”)[1] in respect of 49.83% equity interest in a PRC company named北京紫荆聚龙科技投资有限公司 (“PRC Company”) as security for their obligations under the Loan Agreement, including the Equity Pledges, the Equity Transfer Agreement (FDG), the Equity Transfer Agreement (Onshore Buyer), and the Equity Transfer Agreement (Offshore Buyer) as defined in the Loan Agreement.

5.  As at the date of the Petition, the Petitioner has been unable to recover any money under any of the Security Documents. In the Petition, the Petitioner states it will give up such security for the benefit of all the creditors in the event of a bankruptcy order being made.

6.  The Petition is opposed by the Debtor on 4 grounds:

(1) The Petitioner has failed to do all that is reasonable to bring the statutory demand to the Debtor’s attention. (Ground 1)

(2) The Debtor is not domiciled in Hong Kong and does not fall under any of the jurisdictional gateways under section 4 of the Bankruptcy Ordinance, Cap 6 (“BO”). (Ground 2)

(3) There is a triable issue in relation to the authenticity of the Loan Agreement. (Ground 3)

(4) The Debt is fully secured by the 49.83% shareholding interest in the PRC Company. (Ground 4)

Deliberation

Ground 1

7.  Under Rule 46(2) BR, “[t]he creditor shall do all that is reasonable for the purpose of bringing the statutory demand to the debtor’s attention and, if practicable in the particular circumstances, to cause personal service of the demand to be effected”. Under Rule 49(9) BR, “[t]he Court may decline to file the petition if not satisfied that the creditor has discharged the obligation imposed on him by rule 46(2).”

8.  In Re Pang Mei Lan May [2005] 1 HKC 319 at [25] and [27], Barma J (as he then was) explained the requirements of rule 46(2) as follows:

“ 25. Rule 46(2) specifies the steps which must be taken by a creditor in relation to service of a statutory demand on a debtor. The creditor is required to do ‘all that is reasonable’ for the purpose of bringing the statutory demand to the debtor’s attention. Where personal service is practicable, this is required. But the steps to be taken by the creditor must, I think, also include doing all that is reasonable to effect personal service, such as the taking of reasonable steps to obtain an address at which personal service might be effected. This seems to me to follow from the general requirement of doing all that is reasonable for the purpose of bringing the statutory demand to the debtor’s attention. If a creditor has not been able to serve the debtor at the address or addresses which he has in his records but has other information or other means available which might enable him to obtain an address for service, it seems to me that he should make use of them, where it is reasonable to expect him to do so, with a view to bringing the statutory demand to the attention of the debtor.

…

27. I would also add that as Yuen J (as she then was) pointed out in Re Li Wai Man (unreported, CFI, HCB 211/99, 1 November 1999), what is reasonable is to be judged objectively in the light of the information actually or constructively available to the creditor at the time ...” (emphasis added)

9.  More recently, in Re Cao Zhong unrep, HCB 7887 of 2020, 27 October 2021,[2] at [63], Recorder William Wong SC summarised the general principles in relation to service of a statutory demand as follows:

(1) If practicable, personal service of the statutory demand should be effected, including attempting to arrange an appointment for personal service through the debtor’s solicitors.

(2) If not, the creditor should do all that is reasonable to bring the statutory demand to the debtor’s attention, ie, by making two personal calls to the debtor’s address on separate days, the second of which should be by appointment letter.

(3) Failing all other reasonable means of bringing the statutory demand to the debtor’s attention, the creditor should apply for substituted service by advertisement of the statutory demand.

(4) The initial burden is on the debtor to show that the petitioner had not done all that was reasonable for the purpose of bringing the statutory demand to the notice of the debtor.

(5) If the Petitioner has done all that are practically reasonable, whether or not the debtor had in fact received the documents is beside the point.

10.  According to the 1st affirmation of service of Kwok Wai Nang William (“Kwok 1”), the 2 usual and last known addresses of the Debtor were as follows:

(1) Rooms 3001-3005, 30th Floor, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong (“Wanchai Address”) being one of the office addresses of the Debtor and the address for service stated in the Loan Agreement at Clause 20.2.

(2) Flat F, 28/F, Begonia Mansion, 8 Taikoo Wan Road, Taikoo Shing, Hong Kong (“TKS Address”), a property purchased by the Debtor and his wife in October 2010 and jointly owned by them until October 2019 when the same was transferred to the Debtor’s wife and daughter. It has been listed as his residential address in various corporate filings[3].

11.  Mr Kwok then explained his first attempt to personally serve a statutory demand originally dated 4 October 2019 on the 2 addresses on 4 October 2019. Service on the 2 addresses was unsuccessful but there was no indication from the receptionist at the Wanchai Address or the caretaker at the TKS Address that either address had been disused by the Debtor. Mr Kwok also managed to insert the statutory demand into the letterbox of the TKS Address. Mr Kwok then explained his second attempt to personally serve the statutory demand on the 2 addresses on 24 October 2019, having first sent 2 letters of appointment to the 2 addresses on 17 October 2019. Service on the 2 addresses was also unsuccessful.

12.  Meanwhile, Mr Chow Calvin Cheuk Yin (“Chow”), a partner of the Petitioner’s solicitors, also attempted personal service of the statutory demand on the Debtor on 5 October 2019 at around 3:30pm at the TKS Address. Chow was told by the caretaker that the Debtor was living there but he was out. The attempt was unsuccessful but Chow managed to leave the statutory demand enclosed in a sealed envelope addressed to the Debtor inside the front door gate of the TKS Address: first affidavit of Chow (“Chow 1”) at paras 3 and 4.

13.  Apart from the above, there were other attempts to serve the statutory demand on the Debtor. In Mr Maurellet SC’s skeleton argument, he has set out a detailed summary of all attempts to serve on the Debtor which is too lengthy to be repeated here. Rather, in Che 5 at paragraph 6, Che gave a more succinct summary of the Petitioner’s efforts to bring the statutory demand to the Debtor’s notice including inter alia the following:

(1) WeChat from Che to the Debtor on or about 5 October 2019 attaching a copy of the statutory demand.

(2) Che’s personal service of the statutory demand on the Debtor at a meeting with him in Hangzhou on 24 October 2019, where Che specifically told him the legal nature of the statutory demand.

(3) Follow-up SMS messages sent by Che to the Debtor on 26 October 2019 in connection with the statuary demand personally served on him on 24 October 2019. There was no denial by the Debtor of the service in the SMS message which followed.

(4) Ordinary posts containing the statuary demand dated 31 October 2019 to the Wanchai Address and the TKS Address, which were not returned.

(5) Lastly, advertisement in one Chinese Newspaper and one English Newspaper, both published and circulating in Hong Kong.

14.  On these facts, Mr Maurellet SC submits the Petitioner has taken and indeed gone beyond the steps required under para 2.6 of PD 3.1 and that by doing so, the Petitioner has taken all reasonable steps to bring the statutory demand to the Debtor’s attention. The requirements under rule 46(2) are thus satisfied. This court agrees.

15.  In his skeleton submissions, Mr Oh complains inter alia at paras 34 and 35 that no attempt whatsoever had been made to bring the attention of the statutory demand to his client through the following addresses/methods:

(1) The Debtor’s previous residential address in Shenzhen (Room 2207A, Block 2, Xuefu Garden, Xuefu Road, Nanshan District, Shenzhen, Guangdong, PRC) (“Shenzhen Address”) which was in the 2019 Annual Returns of FDG Kinetic Limited (stock code: 378) (“FDG Kinetic”) FDG Kinetic (Guian) Holdings Ltd.

(2) The Debtor’s current address at Hangzhou (No 116 Hongda Road, Yuhang Economic and Technological Development Zone, Hangzhou City, Zhejiang Province, China) (“Hangzhou Address”), which is the business address of Hangzhou Changjiang Automobile Co. Ltd. (杭州长江汽车有限公司).

(3) The Debtor’s phone number (+86 13510386960), which Che was clearly aware of as he had all along been sending messages via WeChat to the Debtor.

(4) The Debtor’s email address zgmiao@changjiangev.com which was his email address when he worked in Hangzhou Changjiang Automobile Co. Ltd. as Deputy General Manager and of which Che has all along been one of the directors.

(5) The statutory demand should also have been advertised in Hangzhou.

16.  In this court’s view, none of the complaints are justified. Nor do they detract from the fact that the Petitioner has already taken all reasonable steps to bring the statutory demand to the Debtor’s attention:

(1) On the Debtor’s own admission, he had moved out of the Shenzhen Address in 2016: Miao 5 para 8.

(2) As for service on the Hangzhou Address and advertising in Hangzhou, the undisputed fact is that he had been personally served at a meeting with Che in Hangzhou on 24 October 2019. Whether the place of service was at the Hangzhou address or somewhere else in Hangzhou is beside the point. Advertising in Hangzhou is also a waste of time.

(3) As for contacting the Debtor by phone, this has also been done by WeChat from Che to the Debtor as early as 5 October 2019 by attaching a copy of the statutory demand. The WeChat messages also show that Che had tried to call the Debtor.

(4) Che had stated on oath that the Petitioner had no knowledge that the Debtor has been using the email address zgmiao@changjianev.com until this was disclosed by him in these proceedings. But even if Che were aware of that email address, it seems to this court the mere omission to send the statutory demand to that address is immaterial, given the Petitioner had already done so much to bring the statutory demand to the Debtor’s attention.

17.  In view of this court’s conclusion that the Petitioner has taken all reasonable steps to bring the statutory demand to the Debtor’s attention and has in fact done so, in particular by WeChat on 5 October 2019 and at the Hangzhou meeting on 24 October 2019, there is absolutely no merits in the Setting Aside Application.

18.  Regarding the allegation that the Petitioner has failed to file a proper affirmation of service, if one takes all the Petitioner’s affirmations which depose to service ie Kwok 1, Kwok’s 2nd affirmation (“Kwok 2”), Chow 1 and Che 5 and takes a global view of them, it is quite clear that the Petitioner has complied with the so-called Direct Knowledge Rule[4] set out in Rule 49 of BR in that each of Kwok, Chow and Che has direct personal knowledge of the means adopted for serving the statutory demand on the Debtor.

19.  As for the Petitioner’s alleged failure to make full disclosure to Master Hui, this is a point only half-heartedly put forward by Mr Oh, as can be seen from paras 39 and 40 of his skeleton submissions.

20.  At para 39(a), the facts allegedly omitted from the affirmations of service before the Master were facts in favour of the Petitioner in that they show further steps to bring the statutory demand to the Debtor’s attention. At para 39(b), Mr Oh complains that the affirmations of service of Kwok were defective in that they had included matters not within the direct personal knowledge of Kwok but that has nothing to do with full and frank disclosure since the source of the information set out there ie from Che was clearly stated in them. Lastly, at para 40, Mr Oh in particular points to the failure of the Petitioner to disclose:

(1) That the Debtor worked at the Hangzhou Address and/or had an email address at which he could be reached, and/or that advertisements should be placed in newspapers in Hangzhou and Shenzhen as well.

(2) That the Debtor was not domiciled in Hong Kong.

21.  As for the first matter, for reasons already explained above, this court does not consider it to have any significance with regard to Master Hui’s decision to grant ex parte leave, given that the Petitioner has taken all reasonable steps to bring the statutory demand to the Debtor’s attention and has in fact done so - the personal service of the statutory demand on the Debtor in Hangzhou was in fact disclosed in Kwok 1 to the Master. The mere fact that there might be additional means to reach out to the Debtor (some of which is disputed, such as by emails, some of which is redundant, such as by service at the Shenzhen address or by advertisement in Shenzhen and Hangzhou) is in this court’s view immaterial to the Master’s decision. After all, a petitioner is only required to do what is reasonable to be judged objectively - he is not required to exhaust each and every conceivable inquiry and exhaust each and every conceivable means under the sun to bring the statutory demand to the Debtor’s attention. Ex hypothesis, the Master was satisfied, correctly, that the Petitioner had done enough to justify leave to issue and present the Petition. The Master’s decision cannot be faulted.

22.  Regarding the second matter, as explained below, domicile is only one of the jurisdictional gateways which leads to the presentation of a bankruptcy petition. The Petitioner is free to rely on any other jurisdictional grounds to support the Petition and it is for the Debtor to raise a challenge to the court’s jurisdiction if he has a basis for doing so. It is therefore difficult to see why the Petitioner should disclose to Master Hui when applying for leave that the Debtor might seek to argue he was not domiciled in Hong Kong even before the challenge was actually raised. It would be different if the Petitioner knew it did not come within any of the jurisdictional grounds in support of the Petition in which case there was no point for Master Hui to grant leave at all. But that is not the case here. On the contrary, this court is clearly of the view that the Debtor has been ordinarily resident, or has had a place of residence, in Hong Kong within the relevant 3-year period, for reasons set out below.

Ground 2

23.  Section 4(1) of the Bankruptcy Ordinance, Cap 6 (“BO”) provides that:

“(1) A bankruptcy petition shall not be presented to the court under section 3(1)(a) or (b) unless the debtor—

(a) is domiciled in Hong Kong;

(b) is personally present in Hong Kong on the day on which the petition is presented; or

(c) at any time in the period of 3 years ending with that day—

(i) has been ordinarily resident, or has had a place of residence, in Hong Kong; or

(ii) has carried on business in Hong Kong.”

24.  It is true that in the Petition, the Petitioner has only pleaded that the Debtor is domiciled in Hong Kong. However, Mr Oh properly accepts that it is not a requirement for the Petitioner to plead in a petition all the jurisdictional gateways relied on. Rather, it is for the Debtor to raise a challenge to the court’s jurisdiction under section 4 BO if he has a basis for doing so: Re Cai Sui Xin [2019] 6 HKC 329 at [8] and [11]; Re Cao Zhong at [32 (1) and (2)]. Having said that, the evidential burden to establish one or more of the jurisdictional gateways remains with the Petitioner: Re Cao Zhong at [32 (6)].

25.  While Mr Oh’s challenge to jurisdiction is primarily based on the Debtor’s claimed PRC domicile, at the hearing, Mr Maurellet SC very sensibly relies only on the fact that the Debtor had a place of residence and had been ordinarily resident in Hong Kong for the 3 years prior to the presentation of the Petition in September 2020 as clear proof of jurisdiction under section 4 BO. In this regard, Mr Maurellet SC points inter alia to the following indisputable facts in support of his contention.

26.  First, the TKS Address was a property jointly owned by the Debtor and his wife from October 2010[5] to October 2019. Although the Debtor claims that it has always been his daughter’s residence, he also accepts that he would stay at the TKS Address whenever he visited Hong Kong for business: Miao 5 at [32]. Importantly, the Debtor has failed to explain where he would stay when he was in Hong Kong, if not the TKS Address.

27.  Second, the utilities bills ie for HKT broadband and electricity for the TKS Address were all addressed to the Debtor’s sole name and sent to him at that address between June 2016 and June 2018. If, as his daughter claims in the Affirmation of Miao Qing, that she had been living at the TKS Address alone since 2012, there is no reason why the utilities bills were not addressed to her instead.

28.  Third, the Debtor admittedly holds a Hong Kong ID Card and was at the material time a senior officer of 2 companies listed in Hong Kong viz FDG Electric Vehicles Limited (stock code: 729) (“FDG Electric Vehicles”) and FDG Kinetic. In FDG Kinetic’s filing with the Hong Kong Stock Exchange dated 3 January 2019, the TKS Address was listed as the Debtor’s residential address. In fact, as recently as May 2021 when the Debtor was appointed a director of a Hong Kong company China Innovation Foundation Limited, he still cited the TKS Address as his residential address.

29.  Fourth, apart from his Hong Kong ID Card, the Debtor also applied for permanent residence in Hong Kong in about 2018. The application was approved in late 2019. FDG Kinetic assisted in his application by issuing a confirmation of his employment as CEO of FDG Kinetic which confirmation was signed by Che.

30.  Fifth, in his tax return to the Hong Kong Inland Revenue Department dated 11 June 2018, he stated he drew salary of HK$5.7 million from FDG Electric Vehicles and FDG Kinetic for the previous financial year. Obviously, the Debtor regarded his income was earned in Hong Kong and had to pay Hong Kong income tax - there is no evidence that the Debtor paid PRC tax even though he claimed the two companies’ assets and businesses were located in the PRC. Importantly, the Debtor claimed Home Loan Interest Deduction in the tax return on the basis that the TKS Address was his residence, despite his insistence that he did not live there, just temporarily stayed there when he visited Hong Kong, in Miao 5 para 32.

31.  Lastly, on the evidence, the Debtor spent more than a minimal period of time in Hong Kong during the relevant 3-year period. According to the Debtor’s travel records, the Debtor did stay in Hong Kong from time to time between 7 September 2017 and 10 December 2019 - in particular, he spent quite a lot of time in Hong Kong in 2018 ie 118 out of 184 days from May to October.

32.  In Re Cao Zhong at [34] and [35], Recorder William Wong SC recited the relevant principle on the “ordinary resident” ground as follows:

“34. The applicable test for ordinary residence is not in dispute between the parties. Mr Nip SC for the Debtor correctly cited the summary contained in Re Wong Lei Kwan Joanne [2009] 3 HKLRD 173 at [16] per Barma J (as he then was), which provides that:

(1) The term ‘ordinarily resident’ construed according to its natural and ordinary meaning refers to a man’s abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life for the time being, whether of long or short duration.

(2) In other words, the person must be habitually and normally resident in that particular place, apart from temporary or occasional absences of long or short duration.

(3) The words ‘habitually’ refers to two necessary features, namely (i) residence adopted voluntarily and (ii) for settled purposes.

(4) In relation to (ii), the learned judge said that ‘there must be a degree of settled purpose…all that is necessary is that the purpose of living where one does has sufficient degree of continuity to be properly described as settled’ [emphasis added].

35. I agree with the above. I would also add the following points:

(1) The question of whether a debtor is ordinarily resident in Hong Kong within the relevant period was one of fact and degree: Re Kok Hiu Pan [2002] 3 HKLRD 20 at [27] per Kwan J (as she then was).

(2) It is not necessary for the petitioner to show that the debtor was ordinarily resident in Hong Kong throughout the period of 3 years. The consideration is whether the debtor was ordinarily resident in Hong Kong of unspecified duration at any time during the period of 3 years: Re Li Shu Chung [2019] HKCFI 2500 at [49] per Au J (as he then was).

(3) Nor is the petitioner required to show that the debtor had any intention to remain in Hong Kong permanently or indefinitely (in contrast to the requirements of domicile): see Sheldon, Cross-Border Insolvency, 4^th ed (2015), at §§8.32 and 8.35. The learned authors also opined that ‘in the broadest terms, ordinary residence means simply where a debtor normally lives, albeit for a temporary period.’

(4) A person can have ordinary residence in more than one country at the same time. Temporary or occasional absences of long or short duration do not negative ordinary residence: see Re Li Shu Chung (supra) at [50].” (emphasis added)

33.  Applying the principles above, this court has no difficulty in finding that the Debtor was ordinarily resident in Hong Kong during the relevant 3-year period in that he resided in Hong Kong voluntarily and for settled purposes ie for business and family reasons. Even if one assumes for the sake of argument that the Debtor had ordinary residence in the PRC, that would not preclude his ordinary residence in Hong Kong.

34.  But in any event, on the available evidence, this court has absolutely no doubt that the Debtor had a place of residence in Hong Kong for the relevant 3-year period ie the TKS Address. Any suggestion to the contrary by the Debtor and his daughter is against the totality of the evidence and must be rejected as incredible.

Ground 3

35.  In Miao 5 at para 3 (c), the Debtor claims there is a substantive dispute as to the Debt. Upon enquiry with Mr Oh at the hearing, he very properly concedes that the Debtor does not dispute that he had received the Loan and the so-called dispute to the Debt is his Ground 3 ie the disputed authenticity of the Loan Agreement. Mr Oh also properly accepts that the sum total of his submission on dispute to the Debt are set out at 3 paragraphs of his skeleton submissions ie paras 58 to 61.

36.  The applicable principles in this regard are not in dispute: see Re Cao Zhong at [90]:

(1) The burden is on the debtor to demonstrate to the Court with sufficiently precise factual evidence that there is a bona fide dispute of the petitioning debt on substantial grounds.

(2) It is not enough for a debtor to simply raise some factual disputes and submit that such factual disputes have to be resolved in a trial.

(3) The key is for the Court to assess whether there are real and substantial disputes of fact which render the summary procedure of bankruptcy proceedings unsuitable for the determination of such real and substantial disputes of fact. In such a scenario, the validity of the petitioning debt would need to be fully investigated at trial.

(4) Peripheral and/or disputes of fact which do not go to the foundation of the petitioning debt are normally distractions and are irrelevant in determining whether there are bona fide disputes to the petitioning debt on substantial grounds.

37.  In this court’s view, the so-called dispute to the Debt is wholly unmeritorious and can be disposed of briefly.

38.  First, according to para 58 of Mr Oh’s skeleton submissions and Miao 5 at paras 41 to 43 and 58, the Debtor’s case is that he (as well as Cao) had only been given the signature page of the Loan Agreement and not the others and they had never seen a copy of the Loan Agreement. He said he trusted Che and did not ask for the other pages of the Loan Agreement when he signed. Further, the Debtor has never seen or been given the Security Documents until February 2021. He said he recognized his signature on the signature pages of some of the documents but suspected that he had only been given the signature pages of the Security Documents to sign or that the signature pages were obtained by fraud and attached to the Security Documents by transposition.

39.  It seems to this court that for a sophisticated businessman and CEO of 2 listed companies like the Debtor to obtain a loan of HK$120 million by only signing the signature page without seeing a copy of the Loan Agreement or inquiring into the terms of the Loan Agreement is simply beyond belief. But anyway, since the Debtor does not dispute having received the Loan, his story as stated above is just an irrelevant distraction which does not affect the foundation of the petitioning debt.

40.  Importantly, while the Debtor appears to dispute the authenticity of the Loan Agreement (or the Security Documents), he cannot seriously and does not dispute the Loan as such since the Borrowers, including himself, have issued and delivered post-dated cheques to the Petitioner as security, received the full loan amount and made partial repayments of the Loan and interest:

(1) On about 19 April 2017, the Borrowers delivered post-dated cheques issued by the Debtor and Cao to the Petitioner^[6].

(2) On about 19 April 2017, the Borrowers signed and issued a Drawdown Notice, pursuant to which the Petitioner advanced a total sum of HK$120 million to the Borrowers ie HK$60 million to the Debtor and RMB50 million to a company nominated by the Borrowers.

(3) The Borrowers had since 2017 made various interest payments for a total sum of HK$42 million. After the Loan had fallen due on 19 April 2019, the Borrowers made 2 partial repayments of RMB4 million and RMB6.68 million in August 2019 to a nominee of the Petitioner: Che 5 paras 37, 38 and 44(b).

(4) In the SMS messages exchanged between Che and the Debtor between October 2019 and January 2020 when Che chased for repayment of the Loan, the Debtor indicated he was prepared to make full repayment and hoped that the repayment issue could be duly resolved within a short time. The Debtor also pleaded with Che for the Petitioner to waive default interest on account of their personal friendship.

41.  For these reasons, Ground 3 or the Debtor’s alleged dispute to the Debt must be rejected.

Ground 4

42.  This ground is only half-heartedly put forward by Mr Oh in 4 paragraphs in his skeleton submissions ie paras 54 - 57. Perhaps the reason is that the same ground has been raised by Cao and was rejected in Re Cao Zhong.

43.  The simple answer to this ground can be found in Re Cao Zhong as follows:

“81. The starting point is §6B(1) of the Ordinance which provides that:

‘(1) a debt which is the debt, or one of the debts, in respect of which a creditor’s petition is presented need not be unsecured if either

(a) the petition contains a statement by the person having the right to enforce the security that he is willing, in the event of a bankruptcy order being made, to give up his security for the benefit of all the bankrupt’s creditors; OR

(b) the petition is expressed not to be made in respect of the secured part of the debt and contains a statement by that person of the estimated value at the date of the petition of the security for the secured part of the debt.’

…

83. In the present case, §8 of the Petition explicitly states that ‘we hold security for the payment of the above-mentioned sum. We will give up such security for the benefit of all the creditors in the event of a bankruptcy order being made.’

84. This, in my view, is a complete answer to the Debtor’s complaint: the Petitioner has expressly indicated in the Petition that it was prepared to abandon the Security upon a bankruptcy order being made and it is therefore compliant with the requirements under the Ordinance.” (emphasis added)

44.  In the present case, paragraph 8 of the Petition similarly provides that “[w]e hold security for the payment of the above-mentioned sum. We will give up such security for the benefit of all the creditors in the event of a bankruptcy order being made.”

45.  This court fully agrees with the reasoning of Recorder William Wong SC and finds paragraph 8 to be a complete answer to Ground 4. As the Petitioner does not intend to rely on the security, its value, which is seriously disputed (see Che 5 at para 61), is simply irrelevant for present purposes.

Disposition and costs

46.  As all the grounds of opposition are unmeritorious, this court is satisfied that the Petitioner is entitled to a bankruptcy order against the Debtor.

47.  There shall be a usual bankruptcy order against Mr Miao Zhenguo and an order nisi that the costs of the Petition, including all costs reserved, if any, be to the Petitioner.

48.  The Debtor’s Setting Aside Application is hereby dismissed. There shall also be an order nisi that costs of and occasioned by the application be to the Petitioner, to be taxed if not agreed and paid forthwith.

49.  For the avoidance of doubt, certificate for 2 counsel.