RE LEUNG CHERNG JIUNN

HCB 244/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 244 OF 2014

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J U D G M E N T

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1.  This is the hearing of a petition presented on 9 January 2014 by the petitioner, Prudential Hong Kong Limited (“the petitioner”), against Leung Cherng Jiunn (“the debtor”).  The petition is opposed by the debtor on the ground that there is a bona fide dispute on the debt upon which the petition is based. 

2.  The petition states that the debtor is indebted to the petitioner in the amount of HK$3,211,906.64 (“the Debt”), being the outstanding debt due and owing from the debtor to the petitioner in respect of his former service to The Prudential Assurance Company Limited (whose undertakings have been succeeded by the petitioner with effect from 1 January 2014)[1] as its agent pursuant to the Service Agreement for Regional Manager dated 16 March 2012 (“the Service Agreement”); the Agency Agreement dated 19 April 2012 (“the Agency Agreement”) and the Supplementary Agreement for Managers dated 19 April 2012 (“the Supplementary Agreement”) (collectively “the Agreements”).  The petition also refers to a statutory demand served upon the debtor on 13 November 2013 (“the Statutory Demand”) by way of advertisement and the debtor’s failure to comply with such Demand. 

3.  Despite the summary nature of bankruptcy proceedings, the parties filed a total of 19 affidavits running to 122 pages (excluding exhibits), 10 of which were filed on behalf of the petitioner.  Both parties have in their affidavits set out their versions of events relating to what had been discussed and agreed before and after the debtor joined the petitioner, which they consider relevant to the Debt.  As with all bankruptcy proceedings, the affirmants are not required to attend court to be cross-examined on their affidavits and the court is asked to consider the affidavits and decide whether there is a bona fide dispute on the Debt. 

Background fact

4.  The following fact relevant to the Debt is not in dispute. 

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	40,236.70
for August 2013
25% of sign-on fee advance to Kevin	140,700.00
SUA debit closing balance as of	98,769.94
31 August 2013

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.

Applicable principles

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)).  The summary nature of the proceedings is reflected in the provisions in the Bankruptcy Ordinance (Cap 6) (“BO”) and the Bankruptcy Rules (Cap 6A) (“BR”), as discussed below.

18.  Similarly, in the context of winding up petition, the court will in the exercise of its summary jurisdiction see if there is a bona fide dispute on the debt.  The approach was described by Rogers J (as he then was) in ICS Computer Distribution Ltd [1996] 1 HKLR 181 (at 182I‑J):

“The procedure of winding up a company for ‘insolvency’ by petition is a summary one. The test which the court applies is whether the debt is bona fide disputed on substantial ground. These are words which appear time after time in the cases. As a matter of practice, and not it may be noted as a matter of law, whether the court is satisfied that this criteria is satisfied the Companies Court should not embark on a trial to determine the issue of the validity of the debt. The petition is therefore dismissed or ‘taken off the file’ unless there are unusual circumstances about the case or the issues involved can be disposed of very simply. In that event the Companies Court may determine the dispute itself or the petition may be stayed and left on file pending determination.” (emphasis added)

19.  Mr Calvin Cheuk, counsel for the petitioner, submits 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, relying on Re Ip Pui Man Nina [2011] 3 HKLRD 299 at §§66‑67, per Au J; Re Malcom Westley Casselle, §24, per To J; Re Hong Kong Construction (Works) Limited, HCCW 670/2002, 7 January 2003, at §6, per Kwan J (as she then was)).  The statement can be found in Re Ip Pui Man (at §67) and Re Malcom Westley Casselle (at §24) which, in turn, referred to the same passage in ICS Computer Distribution Ltd, at 183H‑J.  However, in that passage, Rogers J was explaining that the test requires the company to adduce sufficiently precise factual evidence to establish a substantial case.  It did not say that the debtor company has a higher standard to discharge than in resisting an application for summary judgment.   

20.  In any event, there are material differences between the procedure governing winding up petition and bankruptcy petition and the approach of the court in determining a winding up petition is not the same as a bankruptcy petition.  Unlike winding up petition, there are strict conditions, prescribed by the BO and the BR, which a petitioner needs to comply with before the court considers whether there is a bona fide dispute on the debt upon which a bankruptcy petition is based.  I analyse these conditions in turn. 

21.  Section 6(1) of the BO provides that a creditor’s petition must be in respect of one or more debts owed by the debtor.  Section 6(2) provides as follows:

“Subject to sections 6A to 6C, a creditor’s petition may be presented to the court in respect of a debt or debts if, but only if, at the time the petition is presented –

(a) the amount of the debt, or the aggregate amount of the debts, is equal to or exceeds $10000 or a prescribed amount;

(b) the debt, or each of the debts, is for a liquidated sum payable to the petitioning creditor, or one or more of the petitioning creditors, either immediately or at some certain, future time, and is unsecured;

(c) the debt, or each of the debts, is a debt which the debtor appears either to be unable to pay or to have no reasonable prospect of being able to pay; and

(d) there is no outstanding application to set side a statutory demand served under section 6A in respect of the debt or any of the debts.” (emphasis added)

22.  Section 6A defines “inability to pay” and sets out the requirement of a statutory demand. The forms and contents of statutory demand are prescribed in rules 44 and 45 of the BR.  Section 6B deals with creditor with security while section 6C deals with expedited petition.  The provisions of sections 6 to 6C are materially the same as sections 267 to 270 of the Insolvency Act 1986.  The conditions laid down by these provisions must be strictly compiled with.  This was explained in Fletcher, The Law of Insolvency, 4^th edn, §6‑041 in this way:

“In addition to fulfilling the foregoing, general requirement of being a creditor enjoying the right to enforce his debt by means of bankruptcy proceedings, a petitioning creditor must satisfy all the particular requirements of section 267 of the Act, in order to be properly qualified to present a bankruptcy petition. Section 267 lays down a number of strict conditions relating to the debt on which the creditor’s petition is based. Only if all of these conditions are fully met will the debt in question be regarded as ‘a good petitioning creditor’s debt,’ with the consequence that the creditor’s eligibility to present a bankruptcy petition will be finally established.” (emphasis added)

23.  The requirement that the debt must be a liquidated sum is one of considerable importance, and was originally established by the common law of bankruptcy long before it became part of the express statutory provisions (Fletcher, op cit, §6‑047; Ex parte Charles (1811) 14 East 197).  Although “liquidated sum” is not defined in the statute, its meaning can be discerned from the textbooks and the case law and may be summarized as follows:

(1) “The decisive hallmark of a liquidated claim is that the process of quantification is already complete, and there is an absence of any element of ‘penalty’ to be imposed over and above the actual loss sustained” (Fletcher, op cit, §6‑048).

(2) “Any debt, or claim of indebtedness, which requires or awaits some further act or proceeding, or in the passage of a further period of time, in order to mature, or in order to reach a certain and fixed value, will be categorised as unliquidated, and as incapable of supporting a petition” (Muir Hunter on Personal Insolvency 2014, §3‑308, p 3053).

24.  The operation of the statutory scheme and the importance of the statutory demand in bankruptcy petition were explained by Peter Gibson LJ in TSB Bank plc v Platts (No 2) [1998] BPIR 284 at 288H‑290A as follows:

“The statutory demand can therefore be seen to be of crucial importance if a creditor, who does not have a judgment debt, is to obtain a bankruptcy order. As Sir John Vinelott put it in ‘Individual Insolvency – The Insolvency Acts 1985 and 1986’, (1987) Current Legal Problems at p14, the statutory demand is ‘the straight and narrow gateway’ through which a creditor must pass. It is accordingly quite different from a statutory demand in the field of company law which merely provides one means of establishing a company’s inability to pay its debts, the usual ground on which a company is wound up compulsorily. In contrast in bankruptcy it is not the debtor’s general inability to pay his debts that is crucial but the apparent inability to pay the debt in the statutory demand, and at the hearing of the bankruptcy petition the failure to pay or secure or compound for that debt.

By r.6.5(4) the court may grant an application to set aside a statutory demand if:

‘(a) the debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt or debts specified in the statutory demand; or

(b) the debt is disputed on grounds which appear to the court to be substantial….’[2]

Where the debtor claims that r.6.5(4)(a) or (b) is satisfied and, in the case of (b), the debt is not subject to a judgment or order, the court will normally set side the statutory demand if in its opinion on the evidence there is a genuine triable issue (Practice Note (Bankruptcy: Statutory Demand: Setting Aside) (No 1/87) [1987] 1 WLR 119, para 4). Although an application to set aside the statutory demand must be disposed of before the petition can be presented (s.267(2)(d)[3]), the debtor will not normally be precluded from taking the points which he could have taken on an application to set aside the statutory demand at the hearing of the petition.

The court on hearing the bankruptcy petition ‘may make a bankruptcy order’ (s.264(2)[4]). It has no jurisdiction to make an order if an essential condition, such as that contained in s267(2)(b) or (c)[5] is not satisfied. By r6.25(1) on the hearing of the petition the court may make a bankruptcy order if satisfied that the statements in the petition are true and that the debt on which it is founded has not been paid or secured or compounded for. One of the required statements in the petition is that the debt is for a liquidated sum (r6.8(1)(d)(i), corresponding to s267(2)(b)[6]). But by s271(1)[7] the court shall not make a bankruptcy order on a creditor’s petition unless it is satisfied that the debt, or one of the debts, in respect of which the petition was presented is either:

‘(a) a debt which, having been payable at the date of the petition or having since become payable, has been neither paid nor secured or compounded for, or

(b) a debt which the debtor has no reasonable prospect of being able to pay when it falls due.’

Thus at this point when the question for the court is whether it should make a bankruptcy order, the court’s consideration moves from the condition that the debtor must appear to be unable to pay the debt in respect of which the petition was presented to whether it is satisfied that the debt, which must have been payable at or since the date of the petition, has not been paid or secured or compounded for. If it is so satisfied, then it can make the bankruptcy order. The court has a general power to dismiss a petition.” (emphasis added)

25.  In light of the equivalent provisions in the BO and the BR, as identified in the footnotes, the above principles and approach should apply equally to bankruptcy petitions in Hong Kong. 

26.  In addition, rule 70 of the BR, not found in the Insolvency Rules 1986, is relevant to the hearing of a creditor’s petition.  Rule 70 of the BR provides as follows:

“On the hearing of the petition, the amount of assets and liabilities, and in the case of a creditor’s petition any matters which the debtor has given notice that he intends to dispute, shall be proved.”

27.  The effect of rule 70 is to impose the burden on a creditor to prove all matters it relies on in the petition insofar as they are in dispute. 

28.  The combined effect of the provisions governing the statutory demand, the creditor’s petition and the hearing of such petition seems to me to be this:

(1) The petitioner must set out the bases of the debt in the statutory demand, so that the debtor knows what case he has to meet and decides whether or not he disputes the debt demanded of him.

(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.   

Analysis of issues

29.  In the present case, the petitioner did not in the Statutory Demand, the petition or the verifying affirmation set out the bases of the Debt other than referring to the Agreements and giving a breakdown on the four items forming the Debt. 

30.  In his skeleton argument, Mr Cheuk set out the bases upon which the petitioner relies in contending that the Debt was due and payable at the time the Statutory Demand was issued.  In summary, the petitioner’s case is that:  

(1) It is the standard practice of the petitioner that its staff in the Agency Administration Department will explain the agreement in detail to the agent.  The signed written agreement will embody a complete set of terms between the agent and the petitioner.  No staff has any authority to make any promise or representation departing from the written agreement. 

(2) The petitioner’s staff followed the standard procedure and explained the terms and conditions of the Agreements to the debtor in detail.  In particular, the staff made clear to the debtor that there were on‑going production and performance requirements during his appointment, including those set out in clauses 3 and 5 of the Service Agreement. 

(3) Pursuant to clause 13.2 of the Agency Agreement, the petitioner shall have the right to terminate the appointment of any agent, with or without notice, in the event of the agent not meeting training, production persistency or other requirements, including those set out in §5(2) of his skeleton. 

(4) Pursuant to clause 4 of the Service Agreement, the debtor was granted, inter alia, the Sign‑on fee, which is in the nature of credit advance and is repayable in full if the debtor’s service is terminated within 24 months.  After the petitioner’s staff explained to the debtor the nature of the Sign‑on fee, the debtor signed the acknowledgement form, indicating his understanding that the Sign‑on fee is subject to the terms of repayment under the Service Agreement. 

(5) According to clause 2 of the Guarantee, the debtor agrees that if Kevin’s service agreement is terminated for whatever reasons within the first 24 months, the petitioner shall have the right to recover all monthly financing payments made to Kevin from the debtor without the need to seek recourse against Kevin. 

(6) According to clause 3(a) of the Guarantee, the debtor agrees, as primary obligor, that if Kevin’s service agreement shall be terminated for whatever reason 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. 

(7) The debtor has a Commission Account and a Special Unit Account (“SUA”) which recorded his commissions, the balance due to/from the petitioner at the end of each month, as well as any liability for Kevin’s sign‑on fee and Kevin’s monthly financing payments. 

(8) Clause 12 of the Agency Agreement provides that the records kept by the petitioner “shall be conclusive evidence of the state of accounts” between the agent and the petitioner unless an error is discovered and reported in writing to the petitioner by the debtor. The debtor never made any complaint in respect of his commission account or his SUA. 

(9) Despite the 1^st and 2^nd letters and the promises made therein, the debtor’s performance did not improve in particular, in breach of clause 13.2(i) of the Agency Agreement, the debtor failed to introduce two life assurance policies for 152 consecutive days (from 2 April 2013 to 31 August 2013).  As at the date of termination, the debtor only achieved about 3% of the total production target. The petitioner was entitled to and did terminate the debtor’s appointment on 3 September 2013. 

(10) As the debtor only worked for the petitioner for 17 months, he is obliged to repay 100% of the Sign‑on fee.

(11) As Kevin only worked for the petitioner for 12 months and 6 days, the debtor is obliged to repay 25% of the sign‑on fee paid to Kevin ($140,700). 

(12) The debtor is also liable to pay the monthly finance paid by the petitioner to Kevin, which was debited against the debtor’s SUA.  Kevin has in his statement of affairs filed in his bankruptcy proceedings, acknowledged that he owed $662,532.39 to the petitioner. The petitioner says that of this amount, $562,800 was the sign‑on fee and $99,732.39 was the monthly finance owed by Kevin. 

31.  So far as the petitioner’s claims described in §30(5), (6), (7), (11) and (12) above, which relate the payments made to Kevin, they are all premised on the debtor’s liability under the Guarantee.  This raises the question as to whether the petitioner should be permitted to rely on the Guarantee when the same was never mentioned in the Statutory Demand (or the petition).  In view of the important function served by a statutory demand, I do not think it is open to the petitioner to rely on the Guarantee at the hearing of the petition.  That being the position, the petitioner’s claims for the amounts of $140,700 and $98,769.94, which are based solely on the debtor’s liability under the Guarantee, must be disregarded.  This is notwithstanding the fact that the debtor has paid $98,769.94 to the petitioner shortly before the hearing as the basis for refusing to allow the petitioner to rely on the Guarantee is the petitioner’s failure to refer to the Guarantee in the Statutory Demand.  It does not depend on the stance taken by the debtor.

32.  As for the negative balance standing in the debtor’s Commission Account in the amount of $40,236.70, the debtor has repaid the amount to the petitioner shortly before the hearing and, therefore, ceased to be due and payable. 

33.  This leaves the petitioner’s claim for the Sign-on fee paid to the debtor.  Miss Bianca Yu, counsel for the debtor, submits that there is a bona fide dispute on the debtor’s liability to pay the Sign‑on fee by reason of the representations and promises made by the petitioner to the debtor both before and after he joined the petitioner.  The debtor’s case may be summarised as follows:

(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. 

(1) 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.

(2) 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. 

(3) 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.

(4) 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.

(5) 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.     

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

(7) 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. 

(8) 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. 

(9) 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.

34.  On the basis of the above evidence, Ms Yu submits that the debtor has a bona fide defence to the petitioner’s claim for the Sign‑on fee on the following grounds:

(1) It is an implied term of the Agreements that the petitioner is not entitled to “claw back” the Sign‑on fee in circumstances where the petitioner is not entitled to terminate the Agreements. 

(2) The petitioner made the representations and promises to the debtor that he would not be terminated within 24 months and that if he achieved the agreed sales target within 24 months, he would be entitled to retain 100% of the Sign‑on fee.  The debtor relied on such representations and promises in entering into the Agreements and has suffered detriment in that he had foregone the other offers made to him by other insurance companies at the time.  The petitioner was estopped from acting inconsistently with the representations and promises.  In this regard, the debtor contends that he has a bona fide defence based on estoppel by representation, promissory estoppel and/or estoppel by convention.   

(3) Alternatively, there is a collateral contract between the petitioner and the debtor with the representations and promises constituting its terms. 

35.  Mr Cheuk submits that the relevant staff involved in the discussions with the debtor all deny that they have made the alleged representations and promises.  The debtor’s allegation is “most incredulous” because:

(1) it is inconsistent with the express terms of the Agreements;

(2) it is contrary to common sense as the petitioner’s staff would not have made the alleged representations and promises which are inconsistent with the petitioner’s policy and the express terms of the Agreements; and

(3) it is not supported by any written record and, to the contrary, in his 1^st and 2^nd letters, the debtor promised to abide by the terms of the contract and to achieve a sales target of $500,000 in March 2013, without making any reference to the alleged representations and promises.

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. 

37.  In my view, there is a bona fide dispute on whether the Sign-on fee was due and payable as at the date of the Statutory Demand.  I give a few reasons as to why I come to this conclusion:

(1) If the representations and promises had been made by the representatives of the petitioner and the debtor relied on such representations and promises in entering into the Agreements, it is at least arguable that the debtor has a defence that the petitioner is estopped from acting inconsistently with the representations and promises or that such representations constitute a collateral contract between the petitioner and the debtor.  In this regard, I note that none of the Agreements contains an “entire agreement” clause which, if exists, would have the effect of precluding the parties from relying on any representations or promises beyond the terms set forth in the Agreements. 

(2) While the alleged representations and promises are inconsistent with some of the express terms of the Agreements which, on their face, support the petitioner’s contention that it was entitled to set any sales target for the debtor to comply within the time period stipulated and to terminate the debtor’s engagement upon his failure to achieve such targets, in fact, the sale targets were not as simple as the petitioner suggests.  For example, clauses 3 and 5 of the Service Agreement stipulated the minimum production requirements and the maintenance requirement to be achieved by the debtor.  There was another set of contract maintenance requirement under clause A1 of the Agency Terms and Conditions 2013, which were incorporated into the Service Agreement.  Yet, in the letter dated 1 February 2013 to the debtor, the petitioner referred to another set of production requirements which the debtor was required to achieve.  I do not think the petitioner can simply point to one or two clauses in the Agreements and contends that the debtor had failed to meet the targets stipulated therein when the correspondence between the parties show that the parties had at different points of time discussed and agreed on different sets of targets.

(3) The same applies to Mr Cheuk’s argument that under clause 13.2 of the Agency Agreement, the petitioner was entitled to terminate the debtor’s engagement upon his failure to introduce at least two life assurance policies in any 45 consecutive days, as the correspondence between the parties show that the petitioner did not rely on such clause as the basis for terminating the debtor.  In any event, I note that the Agency Agreement was not incorporated into the Service Agreement and it is not clear if the petitioner can rely on a breach of the Agency Agreement as a ground to terminate the Service Agreement.  It is only if the petitioner was entitled to terminate the Service Agreement that the petitioner was entitled to claim repayment of the Sign‑on fee.

(2) Although each of the 8 staff of the petitioner have in their affirmations denied having made the alleged representations and promises on the basis that they were inconsistent with the petitioner’s standard practice and policy, I do not think that such dispute is one which can be resolved without viva voce evidence.  This is particularly so when the issues between the parties are not defined by pleadings and it is not easy to discern precisely what are the parties’ cases on the Sign‑on fee, what specific provisions the petitioner relies on and whether such reliance is correct.

(2) While Mr Cheuk is at pain to emphasise that the Service Agreement expressly provides that the Sign‑on fee was in the nature of “credit advance” and would be repayable within 24 months, this contention is at odds with the petitioner’s own conduct in describing the sign‑on fee as “commission” paid to the debtor in the Notification of remuneration paid to persons other than employees for the year ended 31 March 2013 filed with the Inland Revenue Department.  This point raised by the debtor is not even answered in the affirmations filed by the petitioner. 

Conclusion

38.  I do not think that it is appropriate for the bankruptcy court to decide the disputes between the parties in this case.  The petitioner should establish itself as a creditor in the usual way. 

39.  For the above reasons, I dismiss the petition.  I make an order nisi that the costs of the petition be paid by the petitioner to the debtor, to be taxed if not agreed.