RE LEUNG CHERNG JIUNN

CACV 128/2015

CIVIL APPEAL NO. 128 OF 2015

(ON APPEAL FROM HCB NO. 244 OF 2014)

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J U D G M E N T

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Hon Yuen JA:

1.  I agree with the judgment of Kwan JA.

Hon Kwan JA:

2.  This is the appeal of the petitioning creditor, Prudential Hong Kong Limited, against the judgment of Recorder Linda Chan, SC on 21 May 2015 dismissing its bankruptcy petition against Leung Cherng Jiunn (“the debtor”).  The debtor was an insurance agent formerly in the service of the petitioner.  The petition was based on a statutory demand for a total debt of $3,211,906.64, of which the largest sum was a sign-on fee in the amount of $2,932,200.  The judge held that there is a bona fide dispute on substantial grounds whether the sign-on fee was due and payable as at the date of the statutory demand.

3.  Three broad issues are raised in this appeal.  The first relates to the contents of the statutory demand and whether the judge was wrong in holding that one of the debts could not be relied on to found the petition as the basis of the claim for that debt was not mentioned in the demand.  The second relates to the applicable standard required to be discharged by the debtor in opposing a petition on the basis there is a bona fide dispute on substantial grounds.  The third relates to the contention whether the judge was wrong in applying the law to the evidence before her.

The background

4.  The relevant background facts are set out in §§5 to 16 of the judgment, which I will produce below:

“5. The petitioner is a well‑established insurance company in Hong Kong. The debtor is an insurance agent with substantial experience, having worked in the industry since July 1998. For 12 years from July 1998 to October 2010, the debtor was an agent at American International Assurance (“AIA”) during which he won various awards and memberships in recognition of his top performance. In October 2010, the debtor together with a number of agents left AIA and joined Integrity Financial Advice Network Company Limited (“Integrity”).

6. In April 2012, the debtor left Integrity to join the petitioner as Regional Manager. On 19 April 2012, the parties signed the Service Agreement (which was dated 16 March 2012), the Agency Agreement and the Supplementary Agreement.

7. The debtor recruited Mr Kevin Leung (“Kevin”) as his “downline agent”. On 19 April 2012, Kevin signed the service agreement, the agency agreement and the supplementary agreement with the petitioner. During the period of Kevin’s service from 1 April 2012 to 7 April 2013, the petitioner paid monthly finance in the total amount of HK$100,500 to him.

8. On 27 April 2012, the debtor signed the Managers’ Deed of Undertaking and Guarantee for Kevin (“the Guarantee”). Under clause 2 of the Guarantee, if the service agreement of Kevin is terminated within 24 months, the petitioner shall have the right to recover the monthly finance paid to Kevin from the debtor. Under clause 3(a) of the Guarantee, if Kevin’s service agreement is terminated after the first 12 months but before the expiry of 24 months, the petitioner shall have the right to deduct 25% of the sign-on fee paid to Kevin from the debtor’s commission account.

9. On 14 May 2012, the petitioner paid HK$2,932,200 to the debtor, being the sign‑on fee payable to him under the Service Agreement (“Sign-on fee”). On the same day, the petitioner paid HK$562,800 to Kevin as his sign‑on fee.

10. On 7 March 2013, the petitioner intended to terminate the debtor’s appointment, and a meeting was held on 14 March 2013 between the debtor and Ms Ann Wong and Mr Joseph To, chief agency officer of the petitioner (“Mr To”), to discuss the debtor’s performance. On 18 March 2013, the debtor wrote an email to Mr To referring to their earlier meeting and stating that “I agree to continue [sic] my contract with the terms and condition according [sic] to my offer stated on the offer contract dated on [sic] 16 March 2012” (“the 1^st letter”).

11. By a handwritten letter dated 20 March 2012 to Mr To and Mr Benny Tsoi, deputy chief agency officer of the petitioner (“Mr Tsoi”), the debtor stated that his recent performance did not meet the expectation of the company probably due to his inability to adjust to the changes in environment in the past year. As stated in their earlier meeting on that day, he expected to be able to complete contracts in the amount of HK$500,000 with at least half of them having been approved (“the 2^nd letter”).

12. In response, Mr Tsoi in his letter dated 21 March 2013 to the debtor stated that the petitioner “accepted your business proposal and had withdrawn the termination of your Agency Agreement” and reminded the debtor that he had “committed to produce net AFYP HK$250,000 in March 2013” and if he fail to meet the production requirements in March 2013, the petitioner “will take appropriate action, including but not limited to demand for immediate repayment of the sign‑on fee, immediate termination of your Agency Agreement, without further notice”.

13. By a letter dated 3 September 2013 to the debtor, the petitioner terminated the Agreements with effect from 1 September 2013.

14. About three weeks later, on 27 September 2013, the petitioner issued the Statutory Demand claiming that as at 2 September 2013, the outstanding debts due to the petitioner in respect of his former service as agent pursuant to the Agreements amounted to HK$3,211,906.64 (i.e. the Debt) which comprised of:

Description	Amount (HK$)
Sign-on fee	2,932,200.00
Commission Account Own (Debt) Balance for August 2013	40,236.70
25% of sign-on fee advance to Kevin	140,700.00
SUA debit closing balance as of 31 August 2013	98,769.94

15. The Statutory Demand did not state the specific provisions the petitioner relied on in support of its claim that the Debt was due and payable or how the petitioner came up with the Debt.  There was no reference to the Guarantee.

16. Following service of the Statutory Demand by substituted service (through advertisement) on 13 November 2013 and the expiry of the period for compliance with the Demand, the petition was presented on 9 January 2014.  Apart from stating that the Debt is due and owing and that the debtor has failed to comply with the Statutory Demand, nothing is said about how the Debt came about or what are the bases of the petitioner’s claim for the Debt.  The same applies to the affirmation verifying the petition filed on the same day.”

5.  Of the four items of debt listed in the statutory demand, shortly before the hearing of the petition, the debtor had paid to the petitioner the second and fourth items ($40,236.70 and $98,769.94), leaving outstanding the other two items ($2,932,200 and $140,700).

6.  I turn to consider the three broad issues in this appeal.

The contents of the statutory demand

7.  The judge held that the petitioner cannot rely on its claim for $140,700 to mount the petition because this claim was based on the debtor’s liability under the Guarantee and there was no mention of the Guarantee in the statutory demand.

8.  Section 6(1) of the Bankruptcy Ordinance, Cap 6 provides that a creditor’s petition must be in respect of one or more debts owed by the debtor.  Section 6(2)(c) provides that a creditor’s petition may be presented in respect of a debt if, but only if, at the time the petition is presented, the debt is one which the debtor appears either to be unable to pay or to have no reasonable prospect of being able to pay.  It is provided in section 6A(1)(a) that for the purpose of section 6(2)(c), the debtor appears to be unable to pay a debt if, but only if, the debt is payable immediately and a statutory demand in the prescribed form is served by the petitioning creditor on the debtor requiring him to pay the debt or to secure or compound for it to the satisfaction of the creditor, and at least three weeks have elapsed since the demand was served and the demand has not been complied with or set aside in accordance with the rules.

9.  Rule 44 of the Bankruptcy Rules provides for the form and content of the statutory demand. Rule 44(3) provides, inter alia, the demand must state the amount of the debt, and the consideration for it (or, if there is no consideration, the way in which it arises).

10.  The prescribed forms for a statutory demand are found in the Bankruptcy (Forms) Rules, Cap 6B in Forms 162 to 164.  Form 163 was adopted by the petitioner’s solicitors in this instance.  The relevant part reads as follows:

When Incurred	Description of debt	Amount due as at the date of this demand
(1)	(2)	(3)	HK$
2 September 2013	Being the outstanding debts due and owing from you to the Creditor in respect of your former service to the Creditor as the Creditor’s agent pursuant to the agreements particularised hereinbelow	(a) Sign On Fee Advance   (b) Commission Account Own (Debt) Balance for August 2013   (c) 25% Sign On Fee Advance to Leung Chi Ming #01470807   (d) SUA Debit Closing Balance as of 31 August 2013	2,932,200   40,236.70       140,700       98,769.94
		Amount of Debt:	3,211,906.64

11.  The agreements particularised below the table in the statutory demand were “(a) Service Agreement for Regional Manager dated 16 March 2012; (b) Agency Agreement dated 19 April 2012; and (c) Supplementary Agreement for Managers dated 19 April 2012.”

12.  The total indebtedness in the statutory demand was made up of four items.  There were four separate debts and each must be considered separately.  For present purpose, we are concerned only with item (c), being the 25% sign-on fee of Kevin in the sum of $140,700.  This debt was not owed to the petitioner pursuant to any of the agreements particularised in the statutory demand.  It was a liability founded on the Guarantee signed by the debtor on 27 April 2012 but this document was not mentioned in the statutory demand.  We were given to understand by Mr Chan Pat Lun for the petitioner that there was no letter before action issued by the petitioner to the debtor making a demand for the debt in issue with reference to the Guarantee.

13.  The requirement regarding the information to be provided of the debt in the statutory demand is not onerous.  The creditor is not required to “completely” set out the bases of the debt in the statutory demand, as contended by Mr Chan, nor was that the judge’s holding in §28(1) of the judgment.  The statutory demand is merely to inform the debtor of the way in which the debt arises so that he would know what course he should take in the light of the information given.  This is because the statutory demand is an important document.  It is “the straight and narrow gateway” through which a creditor must pass in order to establish the debtor’s apparent inability to pay the debt demanded in order for a bankruptcy petition to be presented (TSB Bank plc v Platts (No 2) [1998] BPIR 284 at 288H).

14.  Mr Chan submitted the judge was wrong not to take a more flexible approach, in that there was no evidence of prejudice to the debtor and no indication he would have complied with the statutory demand if there were no defects.  And the point regarding defect was not even taken up by the debtor but was raised by the judge herself.  Any defect in a statutory demand could be remedied by issuing a revised demand and re-served on the debtor, which might also not be complied with.  This would only serve to increase the costs and would not be in the interest of anyone.  He further submitted that the omission to mention the Guarantee could be remedied in a supporting affidavit and it was remedied in the 1^st affidavit of Law Lai Wun Winnie filed on 7 August 2014.  In support of these contentions, he relied on certain statements of Nicholls LJ (as he then was) in In re A Debtor (No 1 of 1987) [1989] 1 WLR 271 at 277B, 278B to C, 279B to G, 280A to B.

15.  I am not persuaded by Mr Chan’s submissions. Nicholls LJ had also pointed out at 280D to E that whilst the statutory code affords the court a desirable degree of flexibility in dealing with an application to set aside a statutory demand for defects, this is not to be taken as a charter for slipshod preparation of statutory demands.  He also emphasised that as the making of a bankruptcy order remains a serious step for the debtor, and the prescribed preliminaries in the statutory code are intended to afford protection to him, if a statutory demand is defective, the court will be alert to see whether those mistakes have caused or will cause any prejudice to the debtor.

16.  Although no evidence as to prejudice was filed in the present case, and the point was raised by the judge not by the debtor’s lawyers, this does not detract from the fact that the statutory demand had failed to give the correct basis of the liability for the debt in issue and that the agreements mentioned in the demand did not support the claim for this debt.  As I have mentioned earlier, there was not even a letter before action making a claim for this debt with reference to the Guarantee.  It would not be just in the circumstances to allow the debt in issue to be relied on to support a case of apparent inability to pay for a bankruptcy petition to be brought.  The debtor had paid two out of the four items of debt.  The debt in issue was not a large sum.  It could not be said the defect would have made no difference in that he would not have paid anyway and no prejudice would have been suffered.

17.  As for remedying the defect in an affidavit, here the affidavit was filed after the presentation of the petition, unlike the situation in In re A Debtor (No 1 of 1987) in which the affidavit was annexed to the statutory demand and the affidavit contained the information which was omitted in the demand.  I do not think a subsequent affidavit would assist in the circumstances.

18.  I would uphold the judge in ruling that the debt in item (c) cannot be relied on for the purpose of bringing this petition.

The applicable test of a bona fide dispute

19.  Mr Chan next submitted that the judge had failed to apply the well settled principles in dismissing the debtor’s opposition to the petition on the basis there was a bona fide dispute on substantial grounds regarding the liability to repay the sign-on fees of the debtor.  He said the judge had applied “the wrong standard”.

20.  The applicable principles, as Mr Chan had stated, are well established.  The judge set them out in these paragraphs of her judgment:

“17. It is well-established that bankruptcy proceedings are summary in nature and are not intended to be used for the purpose of debt collection. The jurisdiction to make a bankruptcy order will only be exercised in very clear cases. If the court is satisfied that there is a bona fide dispute on the debt, the court will not usurp the function of a civil court and decide the disputes between the parties. The usual practice of the court is to dismiss the petition, leaving the petitioner to establish himself as a creditor by judgment to be obtained in the civil court (Re Malcolm Westley Casselle, HCB 1698/2010, 8 March 2011, §23, per To J; Re Mak Kam Ling [2004] 4 HKC 202 at §§26 and 31, per A Cheung J (as he then was)). …”

“28. (2) Where the debtor disputes the debt upon which the statutory demand is based, the petitioner must prove that the debt is due and payable in a summary manner. If the petitioner is unable to discharge this burden, the petition must be dismissed.

(3) As a corollary of the above, if the debtor raises a genuine triable issue which casts doubt on whether the debtor is liable for the debt, the petition must be dismissed.  For this purpose, there is no real difference between a genuine triable issue and a bona fide defence on substantial ground as both require the debtor to adduce evidence to satisfy the court that there is some basis to doubt the validity of the debt and such dispute is not one which can be determined summarily.”

21.  I do not think these statements of the law can be criticised. What Mr Chan took issue with is §19 of the judgment in which the judge would appear to have rejected the submission of the petitioner that “where a debtor opposes a petition on the ground that there is a bona fide dispute on the debt on substantial grounds, the debtor has a higher standard to discharge than resisting an application for summary judgment under Order 14 of the Rules of High Court”.  The often cited basis for drawing a distinction between the two are these statements in the judgment of Rogers J (as he then was) in Re ICS Computer Distribution Ltd [1996] 1 HKLR 181 at 183F to J, after a thorough review of cases:

“The analogy with Order 14 breaks down in a number of respects. As Oliver, L.J. said in the Claybridgecase[1] the analogy may be fair for many purposes but is not perfect. I would note that in the first place the wording of the Order 14 rule 3 is different from the test of bona fide dispute on substantial grounds. One of the distinctions between the 2 tests was brought out in the case of Re Welsh Brick Industries Ltd[1946] 2 All ER 197 a decision of Lord Greene M.R., Morton and Tucker LJJ. The distinction was there drawn between a fair probability of establishing a bona fide defence which might suffice for leave to defend on a summary judgment application and the Companies Court finding that there was no bona fide defence. As Shaw, L.J. said in the Claybridgecase there are public policy considerations to be considered in a winding up and, as Oliver, L.J. pointed out, in an Order 14 application the claim would be summarily determined whilst in a winding up the company’s claim can still be pursued by the liquidator. This was a point mentioned by Bokhary JA at page 6 of the Safe Richdecision[2].

Importantly for this case there is a distinction between a consideration of whether the company has established a defence on substantial grounds and a consideration of whether the evidence is believable. Taken to the ultimate, the difference is between whether there is evidence and whether that evidence is believable. It seems to me that the onus must be on the company against which a petition is presented to adduce sufficiently precise factual evidence to satisfy the court that it has a bona fide dispute on substantial grounds. This seems to me to be the proper approach which emerges both from the cases where the petition has been struck out and those for example as the Great Britain Mutual Life[3]to which I have referred and the Janeash Ltd [1990] BCC 250. In that case Browne-Wilkinson VC said at 252 “That huge weight of material has remained unanswered”. He went on to doubt the truth of such material as had been put in by the company, but that does not, in my view, detract from the basic point that the company’s evidence must establish a substantial case. If the evidence fails to establish that case the company cannot satisfy the test by arguing hypotheses of fact on which it is said that such a case exists or could exist.”

22.  There appear to be two lines of cases.

23.  The first line of cases draws on the above statements in ICS Computer and decided that to resist a petition, the debtor must show he has a bona fide defence, not a fair probability of one, so in that sense it is a higher standard than that required of a defendant in resisting a summary judgment under Order 14 rule 3, in which he would only need to show he has a fair probability of establishing a bona fide defence to obtain leave to defend (Re Grandfield Pacific Hotel Ltd, HCCW 29/2001, 3 January 2002, at §11; Re Malcolm Westley Casselle, at §24; Re Ip Pui Man Nina [2011] 3 HKLRD 299 at §§66 to 67; Chan Ping Lam Waymond v Noble Art Limited, CACV 270/2012, 30 September 2013, at §§8 to 10[4]).

24.  The other line of cases are two English decisions referred to by Recorder Anthony Chan, SC (as A Chan J then was) in Re Yuen Mun Wa [2015] 5 HKLRD 108, and they are Markham v Karsten [2007] BPIR 1109 at §§44 and 45 and Ross v Revenue and Customs Commissioners [2010] 2 All ER 126 at §66.  It was held in these English decisions that the test for the existence of a genuine triable issue in relation to the defence of a bankruptcy petition should be “no more stringent” than that applied to an application for summary judgment under Pt 24 of the Civil Procedure Rules and that the two tests are “broadly equivalent”.  The rationale was stated by Briggs J in Markham v Karsten at §45:

“Just as there is no reason to dismiss a petition and require a Claimant to commence proceedings in which he is likely to obtain summary judgment, so there is no reason to make a bankruptcy order where, had the petitioner proceeded by ordinary proceedings the Respondent / Defendant would have obtained permission to defend (even if only upon conditions, due to his defence being regarded as shadowy).”

25.  Recorder A Chan in Re Yuen Mun Wa found the analysis in Markham v Karsten “difficult to fault”, stating in §9 that “there is no compelling reason why a petitioner who relies on a disputed debt (a petition based on a judgment debt may be seen to be in a different category) should be in a better position than a plaintiff who applied for a summary judgment.  The adverse impact which a bankruptcy order has on the respondent supports the argument that the same summary judgment threshold should be applied.”

26.  Nevertheless, Recorder A Chan applied the threshold test in the first line of cases, as the test is well established in Hong Kong.  Further, the test of bona fide dispute involves different consideration in respect of the evidence.  As he stated in §11:

“In order to satisfy that test, sufficiently precise evidence is required from the debtor. By comparison, for the purpose of making out a triable issue to resist a summary judgment application, a defendant is required to “condescend upon particulars” in his evidence (see Hong Kong Civil Procedure 2012, Vol.1, p.245 para.14/4/4). The difference may not be huge but a debtor has a higher burden nevertheless.”

27.  I would endeavour to state my understanding of the law in this way:

(1) For the purpose of establishing a bona fide dispute on substantial grounds, I could discern no meaningful difference between a bankruptcy petition and a winding-up petition, notwithstanding the material differences in procedure between the two as noted by the judge in §20 and rule 70 of the Bankruptcy Rules[5] which has no equivalent in winding up.  See Re Malcolm Westley Casselle, at §24.

(2) The wording of Order 14 rule 3 is different from the test of bona fide dispute on substantial grounds.  The test of bona fide dispute involves different consideration in respect of the evidence.  The difference may not be significant, but there is still a difference.  See ICS Computer at 183F and Re Yuen Mun Wa at §11.

(3) The distinction between the two tests lies in establishing a bona fide defence (for resisting a petition) and a fair probability of establishing a bona fide defence (for obtaining leave to defend a civil action, whether unconditionally or with condition).  So in that sense, the threshold test for resisting a petition would require a higher standard.  See ICS Computer at 183G to J and Re Grandfield Pacific Hotel Ltd at §11.

(4) Notwithstanding this difference, it is fair to say that the threshold tests in both situations are broadly similar, as noted in the two recent English authorities.  If a petition is dismissed on the basis there is a bona fide dispute on substantial grounds, it would be most unlikely that summary judgment could be obtained.  Most probably, the defendant would be given leave to defend, whether unconditionally, or with conditions imposed if his defence is regarded as shadowy.  Conversely, where a defendant has obtained leave to defend, unconditionally or with conditions, it would be most unlikely that a petition would be granted.  See Markham v Karsten at §45.  The statements of Rogers J in ICS Computer at 183E to F[6] did not suggest otherwise.

(5) This is not to say it should be easier for a creditor to succeed in a petition than in seeking summary judgment in a civil action, notwithstanding the higher threshold test for resisting a petition in the sense as explained above.  It is well established that petitions are not meant to be used for the purpose of debt collection and the winding-up or bankruptcy jurisdiction of the court would be exercised only in very clear cases.  Where oral evidence is required to decide a real and substantial dispute of fact, the court will dismiss the petition.  And if there is an abuse of process in invoking the jurisdiction of the court in an improper manner, the petitioning creditor may be ordered to pay indemnity costs.

28.  Despite her apparent rejection of the submission that the debtor has a higher standard to discharge than resisting an application under Order 14, the judge had not misunderstood the law on what is required for a debtor to establish a bona fide dispute on substantial grounds, see §§17 and 28(2) and (3) of her judgment quoted earlier.  She had also said in §36: “Ultimately, the question is whether on the basis of the evidence filed by the parties there is a bona fide dispute on the debtor’s liability to pay the Debt or more specifically, the Sign-on fee.”

29.  I reject Mr Chan’s submission that the judge had failed to apply the legal principles in dismissing the petition on the basis there was a bona fide dispute on substantial grounds, or that she had applied the wrong standard in §37(1) of the judgment.  The judge had not misunderstood the legal principles.  Whether those principles were correctly applied would be dealt with in the next broad ground of appeal.  As for the reference to “it is at least arguable” in §37(1), I think Mr Chan has taken this out of context.  All that the judge was saying was that if the factual allegation of oral representations were established, there may be arguable defences in law.  The judge was not applying a lower standard in terms of the evidence required to establish a bona fide dispute on substantial grounds.

Applying the legal principles to the evidence

30.  The debtor’s case on the sign-on fee was based on the oral representations and promises allegedly made by various staff of the petitioner to him before and after he was appointed an insurance agent of the petitioner.  It was summarised in the judgment at §33:

“(1) The debtor left AIA and joined Integrity in October 2010 (together with a number of agents including Kevin) upon the promises made by Integrity that it would not terminate their agency contracts unless they could not maintain their insurance agent licence. In December 2011, Integrity reneged on its promises by terminating his agency contract and commencing proceedings against the debtor for repayment of certain transition benefit and allowance paid to him as part of the compensation package for joining Integrity. The nature of these benefit and allowance are similar to the Sign‑on fee.

(2) From early December 2011, the debtor (together with other agents then employed by Integrity) began to discuss with various personnel of the petitioner about the package for joining the petitioner. During these discussions, Derek Yung, the CEO of the petitioner, represented to the debtor that if he joins the petitioner as an agent, he would have 24 months to achieve his sales target and that he would not be terminated within this period. In January 2012, Ms Lisa Ng Ka Bo, a senior director of the petitioner, promised the debtor that his agency agreement would not be terminated within 24 months unless he was involved in criminal conduct or that his licence become “problematic”. He would have 24 months to achieve his sales target in order to retain 100% of the Sign‑on fee.

(3) The above representations and promises were repeated over 10 times at every meeting when the debtor met with the senior administrative staff of the petitioner.

(4) These representations and promises were made to the debtor and the other agents at Integrity to attract them to join the petitioner as a group. The representations and promises were important to the debtor, given his experience at Integrity.

(5) In reliance on these representations and promises, the debtor entered into the Agreements, thereby giving up the other offers made to him by other insurance companies.

(6) The agreed sales target for the debtor was set at a production credit of $2,345,760, which was lower than his Sign‑on fee ($2,932,200). If the debtor achieves this sales target, he would be entitled to retain 100% of the Sign-on fee.

(7) After the debtor joined the petitioner, in July 2012, the same promises and representations were repeated.

(8) The petitioner was aware that the debtor’s mode of operation is to bring in “jumbo cases”, that is, low sales number with high sales volume and because of this, the petitioner had waived monthly or period sales targets and adjusted the sales target to one which needs to be achieved by the end of 24 months. This makes sense for both parties in that if at the end of the 24 months, the debtor is unable to achieve the agreed target, he would still be liable to refund the Sign‑on fee to the petitioner.

(9) The representations and promises were not recorded in writing as the debtor had been assured by various senior personnel of the petitioner on various occasions and he trusted them. After the petitioner had threatened to terminate his appointment, the debtor did complain orally to various senior personnel of the petitioner to the effect that the petitioner had promised not to terminate him within 24 months.

(10) The debtor’s evidence is corroborated by the evidence of Ms Lau Shun Man and Kevin, who had previously worked at Integrity and joined the petitioner at the same time.”

31.  On the basis of the alleged representations and promises, the debtor raised these defences at law: (1) there should be an implied term of his agreements with the petitioner that the latter was not entitled to claw back the sign-on fee in circumstances where the petitioner was not entitled to terminate his agreements; (2) estoppel by representation, promissory estoppel and/or estoppel by convention; and (3) collateral contract.

32.  In support and in opposition of the contention that oral representations and promises were made, the parties filed a total of 19 affidavits between them.  On the part of the petitioner, ten affidavits were given by eight staff members.  For the debtor, apart from making several affidavits himself, he also adduced affidavits from two of his former colleagues, Kevin and Lau Shun Man, who alleged that similar representations and promises were made by the petitioner’s staff to them.

33.  I should also mention that in one instance involving another former colleague Lai Kar Yee Kelly, she had applied to set aside the petitioner’s statutory demand for repayment of a sign-on fee of over $5 million (in HCSD 1/2014), raising the same defence as the debtor regarding representations and promises that her appointment would not be terminated within 24 months.  Her application was dismissed by Deputy High Court Judge Lok (as he then was) on 5 November 2014.  She appealed against his decision in CACV 233/2014.  This was heard by another division of the appeal court on 2 June 2015 and judgment is pending.  Mr Chan also appeared for the petitioner in that matter at first instance and on appeal.

34.  Mr Chan advanced the same submissions before us being the matters accepted by Deputy Judge Lok as suggesting that the alleged representations and promises are incredible.  They were set out in §§28 to 38 of the decision of the Deputy Judge, and are similar to the submissions made by another counsel for the petitioner before the judge in the present proceedings as recorded in §35 of the judgment.  I do not propose to set out the submissions.  Although I recognise the force of his submissions, the question remains whether, on the existing evidence, it has been shown to the satisfaction of this court that the judge must have failed to apply the legal principles correctly in arriving at the view she did.

35.  It could not be said that the judge had failed to take into consideration the relevant background and evidence that was not disputed or not capable of being disputed, as Mr Chan has complained on appeal.  The background matters were recited in some detail in the judgment, and the judge had summarised the submission of the petitioner before her.  In rejecting the petitioner’s contention that the debtor’s allegations are incredible, the judge did not think the matters urged on her by the petitioner were sufficient to outweigh those other matters she had considered, as set out in §37 of her judgment, and those matters were apparently not considered by Deputy Judge Lok.  Taking those other matters into account and giving such weight to them as appropriate, the judge came to the view that ultimately the dispute is not one which can be resolved without oral evidence.

36.  As far as I can gather from Mr Chan’s submission, other than contending that the judge took into account an irrelevant consideration in §37 concerning the description of the sign-on fee as “commission” in the petitioner’s tax filings with the Inland Revenue Department (and I do not consider this a factor crucial to the judge’s decision, even if Mr Chan’s complaint is made out), Mr Chan did not contend that any of the other matters the judge took into account in §37 was in error.  Rather, his contention would appear to be that had the judge given more weight or greater emphasis to the matters urged by counsel for the petitioner, and the additional matters he relied on in his written submission before us, the judge should have arrived at the opposite conclusion.

37.  Ms Bianca Yu for the debtor highlighted other matters in the debtor’s evidence not specifically mentioned in the judgment and which she submitted as suggesting that his case is believable.  In particular, the alleged arrangement that the petitioner would not terminate the debtor’s appointment within 24 months could not be said to be contrary to business sense, given that the debtor would be obliged to return 100% of the sign-on fee if he should fail to meet at least 60% of the sales target at the end of the 24^th month (clause 4A.2(b) of the Service Agreement).

38.  In the circumstances, I am not prepared to differ from the judge that there is a real dispute turning to a substantial extent on disputed questions of fact that should be resolved in a civil action with pleadings and oral evidence, and this dispute cannot properly be decided in a bankruptcy petition.

39.  I would dismiss this appeal with costs against the petitioner.

Hon Au J:

40.  I respectfully agree.