RE HUI CHI MING

HCB 4052/2024

[2025] HKCFI 4106

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4052 OF 2024

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DECISION ON COSTS

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Introduction

1.  By Judgment dated 22 July 2025 ([2025] HKCFI 3339)[1], I dismissed the petition herein and made a costs order nisi that the Petitioner do pay the Debtor’s costs in respect of the petition to be taxed if not agreed (with certificate for 2 counsel)[2].

2.  By summons dated 31 July 2025, the Debtor seeks to vary my costs order nisi. He asks that costs be taxed on an indemnity basis.

Legal Principles

3.  It is trite that the court has an unfettered discretion to order indemnity costs when some special or unusual features are present. The legal principles are set out in Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114. In paragraph 15, Li CJ, referring to Overseas Trust Bank v Copper & Lybrand (a firm) & Ors [1991] 1 HKLR 177 at p.182J; and Sun Foo Kee Ltd v Pak Lik Co (a firm) [1996] 3 HKC 570 at p.575C-D, pointed out that:-

“…the successful party should show, in order to obtain an order for costs on an indemnity basis, that the case has some ‘special or unusual feature’…” (emphasis added)

4.  In the context of insolvency, it has been suggested that a creditor abuses the court’s process if he serves a statutory demand or prosecutes a petition knowing that the debtor has a bona fide dispute on substantial grounds or a serious cross-claim for an amount that exceeds the debt. In this scenario, the court may order indemnity costs.

5.  In LB YS v F LTD [2023] 2 HKLRD 157 at para 34, Linda Chan J stated:-

“34. It has been said by the court, in the context of an application to restrain presentation of winding up petition where the debt is bona fide disputed on substantial grounds, that “it is an abuse of the process of the court to make a statutory demand or present a winding-up petition based on a claim to which there is a triable defence” (Re Sinom (Hong Kong) Ltd. [2009] 5 HKLRD 487, §11). In my view, the same consideration applies to bankruptcy proceedings. It would be an abuse of process for a creditor to serve a statutory demand on a debtor if it was aware that the debt the subject matter of the demand was subject to a bona fide dispute on substantial grounds or that the debtor had a serious cross-claim against the creditor for an amount which exceeds the debt. Where the court finds that the creditor has abused the process, it would order the costs of the application to set aside a statutory demand on an indemnity basis (see for e.g., Cheung Man Kok v Fenn Kar Bak Lily, HCSD 25/2003, 11 December 2003, §23).” (emphasis added)

Deliberation

6.  On 12 June 2024, the Petitioner presented the petition herein.

7.  On 6 September 2024, the Debtor filed his notice of intention to oppose petition (the “Notice of Opposition”). There, he made it clear that the Petition was opposed on the Illegality Ground, ie whilst Junson Capital was not a licensed money lender, it charged compound interest under the 1^st and 2^nd Loan Agreements and as such the same were illegal and unenforceable under the provisions of the MLO.

8.  It was not in dispute that Junson Capital charged compound interest as well as compound default interest against the Debtor. Thus, the issue in dispute was whether Junson Capital fell within the meaning of “money lender” under section 2 of the MLO.

9.  I was firmly of the view that the Petitioner had no answer to the Debtor’s complaint under the Illegality Ground:-

(1)  As pointed out in paragraph 29 of my Judgment, the Petitioner[3] was not even able to assert that Junson Capital was never involved in the business of moneylending, and there appeared to be a tacit admission that Junson Capital had a business in making loans, though this might not be its main business.

(2)  As pointed out in paragraph 30 of my Judgment, the Petitioner was unable to address the fact that as evidenced by the HCA 1591/2019 Judgment, Junson Capital, as lender, participated in a very substantial syndicated loan transaction and contributed HK$100 million.

(3)  As pointed out in paragraph 31 of my Judgment, the Petitioner, for no explicable reason, adduced no evidence from Mr Cai Kui to substantiate the assertion that Junson Capital provided the loans in question due to the friendship between Mr Cai Kui and the Debtor.

10.  Based on the materials available to this court, the Petitioner’s case on the Illegality Ground was completely hollow. Indeed, there was an overwhelming impression that the Petitioner sought to remain opaque, and it did not put forward the relevant evidence before the court.

11.  I am of the view that the Petitioner knew, and should have known, that the Debtor did have a bona fide dispute on substantial grounds. In my view, the Petitioner should not have continued to prosecute the petition after the Debtor filed his Notice of Opposition on 6 September 2024. Upon receiving the said Notice of Opposition, the Petitioner should have appreciated that it was no longer justifiable to prosecute the petition.

12.  In the premises, the Petitioner’s act of continuing to prosecute the petition after 6 September 2024 amounted to an abuse of the court’s process. The Petitioner knew, and should have known, that the parties’ dispute under the Illegality Ground could only be resolved in civil proceedings, and the bankruptcy court is not the avenue for resolving the parties’ dispute: see Re Leung Cherng Jiunn [2016] 1 HKLRD 850 at para 20 (per Kwan JA, as she then was).

Conclusion

13.  Having considered the parties’ submissions, I am persuaded that it would be appropriate to order the Petitioner to pay the Debtor’s costs after 6 September 2024 (ie the date of the Notice of Opposition) on an indemnity basis. This is necessary in order to reflect the court’s disapproval of the Petitioner’s litigation conduct.

14.  In the premises, I vary my costs order nisi and make a costs order absolute that:-

(1)  the Petitioner do pay the Debtor’s costs prior to 6 September 2024 on a party-to-party basis to be taxed if not agreed (with certificate for 2 counsel); and

(2)  the Petitioner do pay the Debtor’s costs after 6 September 2024 on an indemnity basis to be taxed if not agreed (with certificate for 2 counsel).

15.  As regards the costs of the present application, I make a costs order nisi that the Petitioner do pay the Debtor’s costs in respect of the summons dated 31 July 2025 to be taxed if not agreed on an indemnity basis (with certificate for 1 counsel).

16.  I thank Mr Alexsander Wong and Mr Oliver Tse (for the Petitioner) as well as Mr Alvin Cheung (for the Debtor) for their helpful assistance.