RE YUEN MAN JESSICA

HCBI 396/2024

[2026] HKCFI 281

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS

INTERIM ORDER APPLICATION NO 396 OF 2024

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D E C I S I O N

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A.      INTRODUCTION

1.  By a summons issued on 20 December 2024 (“the 396 Summons”), Standard Chartered Bank (Hong Kong) Limited (“SCB”) seeks the following:

(1)     time for SCB to make the application as stated below be extended (“the Time Application”);

(2)     the application made by SCB under s.20J of the Bankruptcy Ordinance (“BO”) be allowed and the following reliefs be granted (“the s.20J Application”):

(a)     the approval of the proposal for a voluntary arrangement made by Ms Ho Yuen Man Jessica (“Ho”) and dated 27 May 2024 (“Ho IVA Proposal”) at the creditors’ meeting held on 6 August 2024 (“Ho IVA Meeting”) be revoked;

(b)     the Nominees’ decision to admit the alleged debt (“WMS Loan”) owed by Ho to Ms Wong Mei Sze (who is a friend of Ho, “WMS”) at HK$900,000 for the purposes of voting at Ho IVA Meeting be revoked, or alternatively, be suspended;

(c)     the Nominees’ decision to assess and/or adjudicate the debt owed by Ho to SCB at HK$60,348.98 be revoked; and

(d)     the debt owed by Ho to SCB be decided at the amount of HK$632,574.64 as at 24 October 2024 (with further interest accruing on the principal of HK$598,427.03) for the purposes of any further matters in relation to and/or concerning Ho’s voluntary arrangement and/or creditors’ meeting thereto.

2.  In this case, the Nominees are Ms Lyn Yee Jean (“Lyn”) and Ms Wong Siu Man (“Wong”) of PLLW Limited (“PLLW”), who are the joint and several nominees in respect of the IVA of Ho.

3.  The Official Receiver (“OR”) has expressed her view on the 396 Summons in her letter dated 10 February 2025 (“the OR’s Letter”).  The OR stated that she has no supervisory role over the conduct of nominees under the BO and would leave SCB to make out their case before the Court.  However, the OR have made some observations in that letter.  Attendance of the OR in this hearing has been excused.

4.  In the hearing before me, SCB is represented by Mr Adrian CK Wong.  Ho and the Nominees are acting in person.

5.  In this decision, I would give my conclusions on the Time Application and the s.20J Application, and I would provide succinct reasons for those conclusions. For avoidance of doubt, the points put forward by the parties in their respective submissions (both written and oral submissions) and the authorities referred to in their respective submissions which have not been mentioned in this decision have also been considered by the Court.

6.  At the time of handing down this decision, I also hand down my decision in HCBI 737/2024^[1], in which SCB and Hong Kong Mortgage Corporation Limited (“HKMC”) made a similar application pursuant to BO s.20J against an voluntary arrangement proposed by Ho’s husband, Mr Li Kwok Yin (“Li”).  That voluntary arrangement proposal was also handled by the same nominees, ie Lyn and Wong. 

B.     BACKGROUND

7.  Ho’s husband is Mr Li Kwok Yin (“Li”).  At the material times, Li was the sole shareholder, Ho and Li were the directors, of Premier International Marketing Limited (“the Company”).  The Company took out various loans with Standard Chartered Bank (Hong Kong) Limited (“SCB”), one of which was a business instalment loan applied for in July 2019 (“the Loan”).

8.  Ho and Li were both guarantors for the Company’s liabilities to SCB under the Loan. The HKMC Insurance Limited (“HKMCI”), a wholly owned subsidiary of HKMC, also provided a guarantee up to 80% for the amount of the Loan granted by SCB to the Company (“HKMCI Guarantee”).

9.  Having examined the Guarantee executed by Ho dated 22 October 2019 (“Ho Guarantee”), it is plain and obvious that:

(1)     The guarantee provided by Ho to SCB under Ho Guarantee is for the entire Loan, not for a portion of the Loan.^[2]

(2)     Under Ho Guarantee, Ho is liable to SCB as the sole or principal debtor for the liabilities covered by the guarantee.^[3]

(3)     Ho Guarantee shall be in addition to and is not to prejudice or be prejudiced any other guarantee or other security interest which SCB may have.^[4]  

10.  PLLW was incorporated in March 2024, with Ms Lai Tin Yin Fion (“Lai”) as the company secretary, director and member, and Lyn as member and director.

11.  The Company was voluntarily wound up by a special resolution passed on 26 March 2024 by Li on the ground of insolvency, with the Loan remaining unpaid.  Lai of PLLW was nominated as the liquidator of the Company for the purposes of such winding-up.

12.  In Ho IVA Proposal made by Ho in May 2024, Ho certified that the proposal was a “full, true and complete statement of affairs”. According to Ho IVA Proposal, Ho had only two creditors at the time of the proposal, ie WMS and SCB.  In Ho IVA Proposal, Ho made the following representations:

(1)     She owed an unsecured debt in the amount of HK$900,000 to WMS.

(2)     In §2.3 of the IVA Proposal, Ho said:

“I and my husband personally guaranteed to [SCB] that was borrowed under the SME Financing Guarantee Scheme – 80% Loan Guarantee Scheme (“80% SME FGS”), operated by [HKMCI]. However, the loan of [SCB] was in default on 26 March 2024. As the co‑guarantors, I and my husband are subject to 20% (10% each under two IVA proposals) contingent liabilities of the loan and dependence on the satisfaction of HKMCI as the principal guarantor. The contingent liabilities is now listed on no.2 of List E of Appendix I.”

As per the relevant item in Appendix I, Ho claimed that the amount of debt owed by her to SCB was HK$60,348.98.

(3)     WMS agreed to both waive her claim of HK$900,000 and sponsor Ho in the amount of HK$81,000, therefore allowing SCB as “admitted claim creditor to receive the full amount of the contingent liabilities as at the date of approval of the Proposal”^[5], with HK$61,000 to be paid to SCB and HK$20,000 for the Nominees^[6].

(4)     The intended nominees were Lyn and Wong of PLLW.

13.  As to Ho IVA Proposal, in their written submissions dated 31 December 2025 (signed by Lyn and Wong), the Nominees said at page 8:

“1. [Ho IVA Proposal] was prepared by [Wong] in her capacity as nominee on behalf of PLLW, and not by [Ho] alone. As preparers of the proposals, the Nominees had direct and comprehensive access to each debtor’s personal financial information …

2.   The Nominees did not merely rubber-stamp debtor-drafted proposals but actively engaged with the debtors to gather, verify and structure their financial information.  The Nominees guided the debtors on what information was required, assisted in locating documentation, and ensured that the proposals presented, on the available materials, an accurate picture of each debtor’s financial position.”

As admitted by Lyn and Wong, they are “preparers” of Ho IVA Proposal.

14.  On 4 June 2024, Ho filed an ex-parte application for an interim order.

15.  On 20 June 2024, SCB wrote a demand letter to Ho (“Ho Demand Letter”), in which SCB stated that as at 29 May 2024, Ho’s indebtedness owed to SCB as a result of the Loan was HK$606,118.66.

16.  On 15 July 2024, Ho’s application for an interim order was granted by Master SP Yip.  According to the interim order granted by the Court, there shall be a creditors’ meeting on 6 August 2024 to consider Ho IVA Proposal.  SCB complained that both Ho and the Nominees did not inform the Court these material matters: (a) the existence of Ho Demand Letter, and (b) the fact that the amount of indebtedness owed by Ho to SCB as claimed in Ho Demand Letter is much more than the amount claimed by Ho in Ho IVA Proposal, at any time before the Court granting the interim order.  In my view, SCB’s complaint is unanswerable.

17.  The evidence shows the following:

(1)     On 19 July 2024, the Nominees delivered the papers concerning Ho IVA Meeting to be held on 6 August 2024 (“the IVA Papers”) to SCB at SCB’s Kwun Tong office by hand.  There is a letter dated 19 July 2024 from PLLW to SCB with SCB’s “Collection & Recoveries” chop and date stamp of “19 JUL 2024” affixed thereon.

(2)     On the same date, Gazette Notice of Ho IVA Meeting was published.

(3)     On 22 July 2024, Lyn sent the IVA Papers to Ms Liang Ping Jing (“Liang”), who was an assistant manager of SCB, by email.

(4)     On 5 August 2024, Lyn sent an email to Liang, in which Lyn said:

“We called your office number of 3652 2148 but in vain. Kindly remind of the creditor’s meeting tomorrow as per appended email to you on 22 July 2024 and the IVA document bundle delivered to you on 19 July 2024.”

18.  On 6 August 2024, Ho IVA Meeting was held.  The meeting was chaired by Lyn.  Lai represented WMS attended the meeting.  The other nominee (Wong) and Ho also attended the meeting.  No representative from SCB was present in the meeting.  Lai voted in favour of Ho IVA Proposal.  Ho IVA Proposal was approved in the meeting (“Ho IVA Decision”).

19.  On 13 August 2024, the Nominees filed the Chairman Report of Ho IVA Meeting (“the Chairman Report”) with the Court.

20.  On 19 September 2024, the Nominees informed SCB the outcome of Ho IVA Meeting and tried to make distribution of dividend in the sum of HK$61,000 to SCB.  SCB’s case is that this was the first time SCB came to realize Ho IVA Proposal and Ho IVA Meeting.

21.  Subsequently, in September 2024, there were some communications between SCB and PLLW.  SCB refused to accept the distribution made by the Nominees. The Nominees made a complaint to SCB’s senior management regarding the refusal to accept the distribution.

22.  On 27 September 2024, the Nominees filed their Report of Completion (“Ho Completion Report”).  At [4] of the report, the Nominees claimed:

“[Ho] made a lump sum payment of HK$81,000, during the meeting on 6 August 2024. We sent a notice letter with a dividend cheque of HK$61,000 to the Bank by email and by hand on 19 September 2024 and redelivery by post on 25 September 2024. Despite repeated calls and reminders, we did not receive any response from the Bank since the delivery of IVA proposal on 19 July 2024, we enclose relevant emails and letters with the Bank as Appendices I, II and III of this report.”

23.  SCB’s case is that [4] of Ho Completion Report is false, for SCB has queried the Nominees on the distribution by the email from Mr Tow Choon Liang (“Tow”, a manager of SCB) to PLLW dated 19 September 2024.  In that email, Tow said Ho’s liability under Ho Guarantee should be 100% of the Loan and not only 10%.  Tow’s email has not been referred to in Ho Completion Report.  SCB complained that this is another material non-disclosure by the Nominees.  Having examined the evidence, I agree with SCB on this point.

24.  In October 2024, SCB informed the Nominees that SCB rejected the distribution.  Subsequently, there were negotiations between SCB and the Nominees.  No agreement is reached as a result of these negotiations.

25.  On 20 December 2024, SCB took out the 396 Summons.  SCB would need to make the Time Application in the summons, for they only took out the 396 Summons after the expiration of the 28-day period prescribed in BO s.20J(3). SCB could only proceed to the s.20J Application if the Time Application is successful.

C.     THE PARTIES’ RESPECTIVE CASES

C1.  SCB

26.  Mr Wong on behalf of SCB submits that the Time Application should be allowed, for SCB only came to know Ho IVA Decision on 19 September 2024, and SCB had tried to resolve the differences between SCB and the Nominees through negotiations.  When no agreement could be reached through the negotiations, SCB needed some time to instruct solicitors, and SCB’s legal representatives also needed some time to prepare the legal documents to make an application pursuant to BO s.20J.  Further, there are strong merits in the s.20J Application.  In these circumstances, there are good reasons justifying a time extension.

27.  As to the s.20J Application, Mr Wong submits that there are material irregularities at or in relation to the meeting.

(1)     There are clearly material irregularities in Ho IVA Decision and/or the Nominees adjudicating the debt owed to SCB as at the amount of HK$61,000, which only represented 10% of the true amount of the debt owed by Ho.  Ho IVA Proposal and/or Ho IVA Decision are materially wrong in purporting to say that SCB would be paid “in full” in the IVA.

(2)     The Nominees did not properly investigate the matters concerning WMS Loan.  Further and in any event, the Nominees ignored the fact that WMS Loan had already been entirely waived by WMS.

(3)     The fact that Lai of PLLW representing WMS in the Ho IVA Meeting calls into potential issues of conflict of interest.  There is evidence showing that WMS has all along been associated with the Nominees, being in long term business relationship via a similarly named company PLLW Consultancy Limited (“PLLW Consultancy”).  Such connection has never been disclosed by Ho and the Nominees. Coupling with the lack of proper evidence in support of WMS Loan and lack of independent investigation concerning that loan by the Nominees, there are grave doubts as to the veracity of that alleged loan and/or the intentions of the Nominees in adjudicating in favour of Ho and WMS and against SCB in matters relating to that loan.

C2.  Ho

28.  Ho opposes the Time Application.  Ho submits that SCB did not make a s.20J application in time because of their own internal management problems.  The one who should pay a price as a result of these problems should be SCB, not Ho.

29.  As to the s.20J Application made by SCB, Ho submits that:

(1)     Before she executed Ho Guarantee, she had not been given sufficient time to read the guarantee.  SCB staff had made a misrepresentation to her, inducing her to believe that at most she would be liable to 10% of the Loan under the guarantee (“the alleged misrepresentation”).

(2)     Further, Ho Guarantee should be set aside for the following reasons:

(a)     Ho Guarantee contradicts [6] of Section F of the facility letter (“the Facility Letter”), by which SCB granting some loans (including the Loan) to the Company.

(b)     She signed Ho Guarantee under economic duress, and Ho Guarantee was obtained by SCB unfairly.

C3.  Nominees

30.  The Nominees opposes both the Time Application and the   s.20J Application.

31.  As to the Time Application, the Nominees submit that there is no special circumstance and no good cause in support of the application, and the application should be dismissed.

32.  As to the s.20J Application, the Nominees submit that:

(1)     There is no material irregularity in Ho IVA proposal.

(2)     Regarding the Loan, by reason of the HKMCI Guarantee, SCB is a secured creditor to the extent of 80% of the Loan.  Further, Ho’s liability under Ho Guarantee is a contingent liability.

(3)     There is no problem in adjudicating the debt owed by Ho to SCB under Ho Guarantee as being HK$61,000, and in approving the debt of HK$900,000 owed by Ho to WMS.

(4)     There is no material non-disclosure by the Nominees.  The Nominees are also not in any conflict of interest in handling the matters in Ho IVA.

D.     TIME APPLICATION

33.  In order to make an application pursuant to BO s.20J, one has to observe the time limited prescribed in s.20J(3), which provides:

“An application under this section shall not be made after the end of the period of 28 days beginning with the day on which the report of the creditors’ meeting was made to the court under section 20G.”

34.  Pursuant to BO s 100(4), the Court may extend the 28-day period prescribed in s.20J(3) upon such terms as the Court may think fit to impose. BO s 100(4) is as follows:

“Where by this Ordinance or by general rules the time for doing any act or thing is limited, the court may extend the time either before or after the expiration thereof upon such terms, if any, as the court may think fit to impose.” (Emphasis added)

35.  BO s 100(4) is substantially similar to Order 3 rule 5 of the Rules of High Court, which is as follows:

“(1) The Court may, on such terms as it thinks just, by order extend or abridge the period within which a person is required or authorized by these rules, or by any judgment, order or direction, to do any act in any proceedings.

(2) The Court may extend any such period as is referred to in paragraph (1) although the application for extension is not made until after the expiration of that period.

……” (Emphasis added)

36.  In Astro Nusantara International BV v PT Ayunda Prima Mitra^[7], the Court of Final Appeal discussed the principles concerning time extension under Order 3 rule 5.  In that case, Ribeiro PJ endorsed^[8] the principle set out by Cheung JA in The Decurion^[9]:

“It is clear that the applicable principle in deciding whether time should be extended is to look at all relevant matters and consider the overall justice of the case. A rigid mechanistic approach is not appropriate …” (Emphasis added)

37.  Since BO s 100(4) is substantially similar to Order 3 rule 5, in my view, what has been said by the Court of Final Appeal in Astro concerning time extension is equally applicable in considering an application made under s 100(4).  Thus, in considering whether the Time Application should be allowed, this Court should consider all the relevant matters and the overall justice of the case.  A rigid mechanistic approach should be avoided.

38.  Mr Wong has helpfully referred me to Tager v Westpac Banking Corporation & Ors^[10], in which the factors in an application for extending the 28-day period in s 262(3) of the Insolvency Act 1986 (equivalent to BO s.20J(3)) are discussed.  In that case, the learned judge said^[11]:

“I have already held that I have a discretion to extend time. In exercising that discretion, I ought to follow the guidelines laid down by Griffiths LJ in CM Van Stillevoldt BV v EL Carriers Inc [1983] 1 WLR 207. The relevant factors are the length of delay, the reasons for the delay, the apparent merits of the underlying application and the prejudice to each side other than the inevitable prejudice inherent in re-opening the matter.” (Emphasis added.)

39.  I bear the aforesaid principles in mind in considering the Time Application. In my view, there are factors against, and there are also factors for the Time Application.

40.  On the one hand, the Chairman Report was filed on 13 August 2024. The 28-day time limit for making a s.20J application expired on 10 September 2024.  SCB only took out the 396 Summons at a time more than two months after the expiration of the period prescribed in s.20J(3).  While the delay can be partially explained by the fact that the Nominees only informed SCB the result of Ho IVA Meeting on 19 September 2024, there is no good explanation for the delay from the expiration of a 28-day period after 19 September 2024 to 20 December 2024.  I do not regard negotiations with the Nominees, time required in engaging solicitors, and time required in preparing the legal documents as good excuses for the delay.  There is nothing preventing SCB from preparing a s.20J application (including engaging solicitors) and negotiating with the Nominees at the same time.  I am not satisfied that the s.20J Application could not be prepared and made within a reasonable time after 19 September 2024, which, in my view, should be a period of 28 days by reference to the time provided in s.20J(3).

41.  On the other hand, for the reasons set out in Section E below, I am of the view that the s.20J Application is meritorious.  Further, I do not see any prejudice to Ho and the Nominees if the Time Application is allowed, other than the inevitable prejudice inherent in re-opening the validity of the matters decided by the Nominees in the Ho IVA Meeting.

42.  Having taken the aforesaid into account and in view of the overall justice of the case, I would exercise my discretion to allow the Time Application.  I would grant leave to SCB to make the s.20J Application out of time.

E.     S.20J APPLICATION

E1.  The principles

43.  SCB is relying upon s.20J(1)(b) in the s.20J Application, saying that there are material irregularities at or in Ho IVA Meeting.

44.  In s.20J, “material irregularity” is an irregularity having the effect of affecting the result of the creditors’ meeting.^[12]

45.  In Chin Wai Kay Geordie v Mok Yu Hon^[13], having reviewed the authorities, the Court of Appeal set out some fundamental principles in the statutory scheme for IVA.  Mr Wong has helpfully provided a summary of those principles in his written submissions.  Those principles are as follows:

(1)     In the context of IVA, it is essential that no opportunity should be given to an unscrupulous debtor to bypass the procedures devised to identify those who should be subject to the full investigation process of bankruptcy.

(2)     A debtor has a duty to give full and frank disclosure of his affairs. BO s 129(1)(f) provides for the criminal liability of a debtor if he makes any material omission or misstatement in any statement relating to his affairs, unless he proves that he had no intent to defraud.

(3)     The integrity of the IVA process depends very much on the candour of a debtor in his statement of affairs and other information provided by him concerning his financial position, right from the beginning in his proposal and the very first statement of affairs.

(4)     The full and accurate information which has to be supplied should include all necessary information regarding the nature of the debts in question and, if a debt of a particular creditor is likely to be challenged (not only by the debtor but also by other creditors), information to enable the nominee to admit or reject that creditor’s claim as to entitlement to vote.

(5)     The insolvency practitioners involved in implementing IVAs carry heavy responsibilities. The Court places substantial weight on the nominee’s opinion in deciding whether an interim order should be granted. The nominee should have taken such steps as are in all the circumstances reasonable to satisfy himself, and should have satisfied himself on three counts, namely that:

(a)     the debtor’s true position as to assets and liabilities does not appear to him in any material respect to differ substantially from that which it is to be represented to the creditors to be;

(b)     it does appear to him that, broadly, the debtor’s proposal as put to the creditors’ meeting has a real prospect of being implemented in the way it is to be represented it will be; and

(c)     the information that he has provided a basis such that, within the broad limits inescapably applicable to what have to be the speedy and robust functions of admitting or rejecting claims to vote and agreeing values for voting purposes, no already-manifest yet unavoidable prospective unfairness in relation to those functions is present.

(6)     Where such doubts have reasonably arisen, it cannot be right for the nominee to unquestioningly accept whatever is put front of him on the supposed basis that it is not for him, but for the creditors, to accept or reject the proposal. It is fundamental to the intended operation of IVAs that what the creditors vote on is not the debtor’s raw material but a proposal that (to the aforesaid qualified extent) has survived scrutiny and which (at least to that extent) has commended itself to an independent professional insolvency practitioner as proper to be put to, and capable of being not unfairly voted upon by, the creditors.

(7)     If it shall have become plain to the nominee, from his contact with creditors or otherwise, that the debtor’s proposal, with or without any likely amendment, has no prospect of achieving the statutory majority needed for its approval, he should not give as his opinion that a meeting of creditors should be summoned.  In such a case, the meeting would be pointless and serve no useful purpose, and would be just a waste of money.

46.  A nominee has to properly scrutinize the information provided by the debtor, particularly when the fullness and candour of the information provided come into question.  In Healthy Wharf Ltd v Leung Yat Tung^[14], Le Pichon JA said:

“86. … where the fullness and candour of the information provided by [the debtor] has properly come into question, it has to be apparent from the nominees’ report that the information supplied has been subjected to proper scrutiny. It seems to me that that can only be achieved by the nominees highlighting the matters that required an explanation or further information, stating the further explanation/ information given and why the nominees consider those initial concerns to have been properly and adequately addressed.” (Emphasis added)

47.  In Re Pan Sutong (a Bankrupt)^[15], Linda Chan J said:

“71. The principles governing the appointment of trustee‑in‑bankruptcy are not in dispute:

……

(2) As an office holder, a trustee-in-bankruptcy, must not only be independent of the parties, but must be seen to be so. Any conflict of interest or over-familiarisation should be discouraged. Where the conduct of a liquidator has been such as to give rise to a perception, on reasonable grounds, that he was biased, or where his conduct has been such as to give rise to a real and reasonable loss of confidence in him by the creditor, the court may accede to an application to remove him ……

(3) A liquidator should not be a person nor the choice of a person who has a duty or purpose which conflicts with the duties of the liquidator ……” (Emphasis added)

In my view, these principles also apply to a nominee, who has the duty to investigate the affairs of the debtor, to securitize the debtor’s IVA proposal, to assess whether there should be a creditors’ meeting to consider the proposal, and to adjudicate debts and votes in a creditors’ meeting.  Plainly, a nominee has to be impartial, and has to be seen as impartial.

E2.1  Debt owed to SCB

48.  I have no hesitation in rejecting the alleged misrepresentation submitted by Ho.  That allegation was raised by her for the first time in her affirmation in opposition dated and filed on 29 April 2025.

(1)     As said in [9] above, in accordance with the terms of Ho Guarantee, Ho’s liability under the guarantee is 100%, not 10%, of the Loan.  Had there been any truth in the alleged misrepresentation, Ho would have had mentioned the same in Ho IVA Proposal, given that the alleged misrepresentation was a basis upon which Ho claimed that her liability under Ho Guarantee was only 10% of the Loan.  Bearing in mind that Ho was assisted by the Nominees in the preparation of Ho IVA Proposal, and the Nominees had actively engaged with Ho to gather, verify and structure Ho’s financial information in the preparation of Ho IVA Proposal, had there been any truth in the alleged misrepresentation, the alleged misrepresentation would have had been stated in Ho IVA Proposal.

(2)     Before SCB taking out the 396 Summons, throughout all the negotiations between SCB and the Nominees concerning whether Ho’s liability under Ho Guarantee is 10% or 100% of the Loan, the alleged misrepresentation has never been raised.  Given that the alleged misrepresentation is a basis upon which Ho claims that her liability under Ho Guarantee would only be 10% of the Loan, and given that the Nominees have thoroughly investigated Ho’s financial situation in the preparation of Ho IVA Proposal, if there is any truth in that allegation, it is inexplicable why the alleged misrepresentation has not been raised in the whole negotiation process.

(3)     It is an indisputable fact that Ho only raised the alleged misrepresentation for the first time in her affirmation in opposition in late April 2025.

(4)     In my judgment, there can only be one reason why the alleged misrepresentation has not been mentioned in Ho IVA Proposal, and has not been raised in all the negotiations before SCB taking out the Summons.  The truth is that the alleged misrepresentation is a mere concoction made up by Ho recently, and that allegation is not true.

49.  Further, I have no hesitation in dismissing Ho’s challenge against the validity of Ho Guarantee.

(1)     Ho has misread Section F of the Facility Letter.  Section F of the Facility Letter concerns “Condition Precedent and Documentation” relating to the facility granted by SCB to the Company.  In Section F, [9] is “[s]uch other documents, items or evidence with the Bank may from time to time request”. Hence, SCB is entitled to demand for any other document, which would be treating as a condition precedent for granting facility to the Company.  For the sake of discussion, even assuming that Ho Guarantee is not a document within any other paragraph in Section F, it would be a document within the ambit of Section F [9].  There is no contradiction between the Facility Letter and Ho Guarantee.

(2)     In any event, Ho is not entitled to challenge the validity of Ho Guarantee now.  In Ho IVA Proposal, in her own words, Ho is owing a debt of HK$60,348.98 to SCB by reason of Ho Guarantee.  In saying so, Ho must have accepted that Ho Guarantee is valid and binding upon her.  Ho is bound by her own admission and cannot take back her own words.

50.  As set out in [9] above, it is plain and obvious that in accordance with the terms of Ho Guarantee, Ho’s liability under that guarantee is 100%, not 10% of the Loan.  There is no reason to assess Ho’s liability under Ho Guarantee as being 10% of the Loan.

(1)     Such an assessment is plainly contrary to the terms of Ho Guarantee.

(2)     As pointed out by Mr Wong in his submissions, and by OR in her letter dated 20 February 2025, SCB cannot be said as a “secured creditor” in respect of 80% of the Loan by reason of holding HKMCI Guarantee for the purposes of BO, for “secured creditor” is defined in BO s 2 as “a person holding a mortgage, charge or lien on the property of the debtor or any part thereof, as a security for a debt due to him from the debtor”.  HKMCI Guarantee is not a mortgage, charge or lien on the property of the Company.  Plainly, SCB is not a secured creditor in respect of any part of the Loan.

(3)     In accordance with the terms of Ho Guarantee, Ho’s liability cannot be contingent liability.^[16] The Nominees has tried to argue that Ho’s liability is contingent liability, because there is a valid expectation that the co-guarantor would discharge the liability.  This is clearly wrong as a matter of law.  Debts and liabilities are “contingent” if they only become payable on the occurrence or non-occurrence of certain event.^[17]  As submitted by Mr Wong, a debt under a surety agreement containing provisions to the effect that it may be enforced without having recourse to other rights cannot be said to be “contingent” upon liability of a co-guarantor.^[18]

51.  The Nominees have tried to rely upon a “SME Loan Guarantee Scheme General Guidelines on Submission on Default Claim” (“Guidelines”) in support of their stance on the debt owed by Ho to SCB.  As submitted by Mr Wong, the Guidelines concern matters between SCB as lending bank on the one hand and the Trade and Industry Department (“TID”) on the other hand.  It does not and would not affect the contractual relationship between SCB and Ho qua guarantor.  Further, in the Guidelines, TID requires the lending institutions participating in the scheme to take recovery action against the borrower and/or guarantor(s) first, before making any claim against the Government.  Plainly, there is nothing in the Guidelines which may assist Ho and/or the Nominees in resisting the s.20J Application.

52.  For the purpose of Ho IVA Proposal, the Nominees treated that the amount of the debt owed by Ho to SCB under Ho Guarantee as only 10% of the Loan.  For the reasons set out in the above, there is no valid reason in support the Nominees’ decision.  In my judgment, that decision is plainly and completely wrong.

E2.2  WMS Loan

53.  As to WMS Loan, the evidence in support of the existence of the loan is as follows:

(1)     A “Loans Confirmation” signed by Ho and WMS in early May 2024, in which Ho confirmed that she received the following amounts from WMS for the operation of the Company:

13 March 2023	HK$100,000
28 March 2023	HK$100,000
31 March 2023	HK$100,000
19 April 2023	HK$300,000
23 October 2023	HK$300,000
Total	HK$900,000

(2)     Bank statements of the joint account in the name of Li and Ho, which showing the following sums credited to the account

13 March 2023	HK$100,000
28 March 2023	HK$100,000
31 March 2023	HK$100,000
19 April 2023	HK$300,000
20 October 2023	HK$300,000

54.  Mr Wong submits that the documentary evidence in support of the alleged loan of HK$900,000 from WMS to Ho is unsatisfactory.

(1)     It is shown in the bank statements that the HK$100,000 credited to the account on 31 March 2023 was from WMS.  However, apart from this sum, the sources of each other sums credited to the account have not been indicated in the bank statements and have not been shown in any documentary evidence.

(2)     Further, according to the “Loans Confirmation”, the last batch of the loan was provided by WMS to Ho on 23 October 2023.  However, there is no corresponding entry in the bank statements.

(3)     As shown in the “Loans Confirmation” and as stated by Ho and WMS in their respective affirmations^[19], the purpose of the loans from WMS to Ho was to maintain the liquidity of the Company’s business.  However, in Ho IVA Proposal [2.4], it is stated that the purpose of the loan of HK$900,000 was to help Ho to maintain her own livelihood.

Mr Wong submits that these inconsistencies have not been properly explained by Ho, and have not been properly investigated by the Nominees.  I agree and accept Mr Wong’s submissions.  

55.  Mr Wong further submits that as shown in WMS’s affirmation filed for the purpose of the 396 Summons, WMS has clearly waived the debt owed by Ho to her in early 2024.  In her affirmation, WMS said:

“3. Unfortunately, their business did not bear fruits and I was given to understand in early 2024 that their company would have to be closed. Without hesitation, I then decided to waive the loans which I made to her entirely. This was not a decision made lightly, but one rooted in the love and compassion that I hold for Ms. Ho as a dear friend.” (Emphasis added)

56.  I agree with Mr Wong on this waiver point (“the Waiver Point”). In my view, what WMS said in [3] of her affirmation is clear and unequivocal. According to WMS, she had waived the loans lent by her to Ho entirely and unconditionally in early 2024.  That being the case, WMS would not be able to claim that she was still a creditor of Ho after giving that waiver, and she was not entitled to vote in Ho IVA Meeting.

57.  In view of the inconsistencies as set out in [54] above, in considering Ho IVA Proposal, the Nominees should contact WMS to investigate the details concerning the loans from WMS to Ho.  Had a thorough investigation been done, the Nominees would have had discovered the Waiver Point before putting Ho IVA Proposal to a meeting of creditors.

58.  In my judgment, the Nominees have failed to conduct a thorough investigation in respect of the total amount of the loans alleged lent by WMS to Ho.  Further, the Nominees have completely ignored the Waiver Point and wrongfully allowed WMS’s representative to vote in Ho IVA Meeting.

E2.3  Impartiality and non-disclosure

59.  SCB has adduced documentary evidence showing that:

(1)     PLLW Consultancy was established in around 2003, and deregistered and dissolved on 3 April 2025.  The business nature of PLLW Consultancy is identical to that of PLLW, being one of “office administrative, office support and other business support activities”.

(2)     WMS was a shareholder at all material times, and a director between 2003 to 2005.

(3)     Lyn was a director, a shareholder, and the company secretary at all material times.

(4)     Lai was a director since 12 July 2005, and a shareholder since some time between 2022 to 2023.

(5)     The application for deregistration was made by Lai on 28 October 2024.

60.  Lyn, WMS and Lai are closed connected with each other in Ho IVA Proposal.

(1)     Lyn, acting as a nominee, adjudicated on WMS Loan and the amount owed by Ho to SCB, accepting WMS Loan in its entirety and assessing the amount owed by Ho to SCB being only 10% of the Loan guaranteed by Ho Guarantee.

(2)     Lai represented WMS in Ho IVA Meeting and voted on behalf of WMS in the meeting.  Lai also represented PLLW and/or the Nominees in the negotiations with SCB regarding Ho IVA Proposal.  In those negotiations, Lai called Ho as her “client” (客人).

61.  As stated in [47] above, a nominee must not only be independent, and must also been seen to be do.  Any conflict of interest or over-familiarisation should be discouraged.  By reason of the facts as set out in [59] above, it is an undeniable fact that Lyn, Lai and WMS have associated with each other in business for over two decades.  That being the case, at the very least, it would not be possible for Lyn to be seen as being independent and impartial in adjudicating the claim made by WMS in Ho IVA Proposal.  Further, it would not be possible for Lyn to be seen as being independent and impartial in chairing Ho IVA Meeting on 6 August 2024.  In that meeting, Lyn as the chairman permitted Lai to vote on behalf of WMS for the whole amount in WMS Loan.

62.  Further, as admitted in the Nominees’ written submissions, Ho IVA Proposal was in fact prepared by the Nominees.  The Nominees have the duty to investigate and to scrutinize the matters in the IVA proposal.  When Ho IVA Proposal was prepared by the Nominees, it would not be possible for the Nominees to be seen as officers, who would independently and impartially investigate and scrutinize the matters in that proposal.

63.  Further, the Nominees cannot be seen as being independent and impartial, for they regard themselves as representing Ho’s interests at all times.  This is shown by a letter to the Court dated 20 May 2025 signed by both Lyn and Wong, in which the Nominees said:

“1. Representation of Debtor Interests:

As Nominees administering this IVA, we are duty-bound to ensure our represented debtor (whose primary language is Cantonese) can fully comprehend our oral submissions to be made in [the hearing on 20 June 2025].” (Emphasis added)

64.  The Nominees’ decision in adjudicating the amount owed by Ho to SCB as being 10% of the Loan (including accepting the alleged misrepresentation without any reservation), and the Nominees’ decision in fully accepting the WMS Loan without any reservation, are plainly decisions which cannot be supported by any valid reasons.  These decisions also cast serious doubts on the impartiality of the Nominees.

65.  In Section B above, I have already mentioned that there have been material non-disclosures by the Nominees in the ex parte application for an interim order.  I am further of the view that the long-term relationship between Lyn and WMS, and the fact that Ho IVA Proposal was prepared by the Nominees, have not been disclosed to the Court in the IVA proceedings.  These are also material matters which may well have the effect of affecting the Court’s decision in the IVA proceedings and ought to be disclosed to the Court.  However, the Nominees also failed to disclose these matters to the Court.

E3.  Material irregularities invaliding Ho IVA Meeting

66.  In my view, the fact that the Nominees cannot be seen as being impartial and the non-disclosures as stated in the above are material irregularities for the purpose of the s.20J Application.  I am sure that had the matters as stated in the above been properly disclosed to the Court, the Court would not have had allowed Lyn and Wong to act as the nominees to handle Ho IVA Proposal.  In other words, the non-disclosure of these matters indeed has the effect of affecting the result of Ho IVA Meeting.

67.  Further, the fact that WMS Loan has not been properly investigated, and the fact that the Waiver Point has not been considered by the Nominees, are also material irregularities.  Whether WMS is a true creditor of Ho, and whether WMS should be allowed to vote for the whole amount in WMS Loan in Ho IVA Meeting, are material matters which would have the effect of affecting the result of Ho IVA Meeting. 

68.  I am also of the view that the Nominees wrongfully treating the amount owed by Ho to SCB as only being 10% of the Loan is a material irregularity.  A reasonable nominee, having realized that (a) Ho’s liability under Ho Guarantee is 100% of the Loan (ie over HK$600,000); and (b) only part of the WMS Loan (ie the HK$300,000 transferred from WMS to Ho on 31 March 2023 as shown in the bank statements) is supported by clear documentary evidence, would know that there is no reasonable prospect that Ho IVA Proposal would be approved in a creditors’ meeting, and would not call for such a meeting.  In my view, the Nominees’ wrongful treatment of the liability owed by Ho to SCB has the effect of affecting the Ho IVA Meeting.

69.  In view of the material irregularities as set out in the above, the s.20J Application must be allowed.

F.     COSTS

70.  SCB succeeds in both the Time Application and the s.20J Application.

71.  Regarding the Time Application, although SCB is successful in getting time extension, SCB is seeking an indulgence from the Court.  In my view, as to the costs in the Time Application, there should be no order as to costs.

72.  Regarding the s.20J Application, both Ho and the Nominees have vigorously opposed the application.  At the end, SCB succeeds, and Ho and the Nominees fail in this application.  I am of the following view:

(1)     As between SCB and Ho, costs should follow the event.

(2)     Costs may be so ordered against a nominees where the court finds his conduct has fallen below the proper standard of duty and is worthy of censure.^[20]  In my view, for the reasons set out in Section E above, the Nominees’ conduct in handling Ho IVA Proposal indeed falls below the proper standard of duty and should be censured.  A costs order against the Nominee should be made in this case.

73.  SCB seeks indemnity costs against both Ho and the Nominees.

74.  As against Ho, SCB relies upon Clause 1(c) of Ho Guarantee, which provides that SCB is entitled to have indemnity costs in connection with the recovery by SCB of moneys due under the guarantee.  Having examined the terms of Clause 1(c), I agree that SCB’s application for indemnity costs against Ho should be allowed.  As submitted by Mr Wong, where parties had entered into a commercial transaction on an indemnity basis, the Court should be slow to disturb the parties’ agreement unless the circumstances were such as to cause the Court in the exercise of its discretion to intervene.^[21]  In my view, there is no special circumstances justifying a departure from this general rule.

75.  As against the Nominees, SCB submits that the Nominees should bear indemnity costs of the s.20J Application, for they have acted very unreasonably in handling Ho IVA Application.  The unreasonableness is shown in the matters complained by SCB in the s.20J Application.

76.  In order to obtain an order for costs on an indemnity basis, it is necessary to have some “special or unusual feature” in the case.  The grounds upon which an indemnity costs order is made must be connected with the case.  These grounds may extend to any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation, but no further.^[22]

77.  In Overseas Trust Bank Ltd v Coopers & Lybrand (a firm)^[23], Godfrey J (as he then was) said:

“The court has a discretion to order that the costs of the successful party to be taxed on the indemnity basis; but in my judgment, in ordinary hostile litigation it should only exercise that discretion in that way, and so depart from the ordinary rule that the costs ought to be taxed as between party and party, when it feels a proper sense of indignation at the unsuccessful party’s conduct ……” (Emphasis added).

78.  Having considered the matters in the s.20J Application, I have to say that a reasonable bystander would have a sense of indignation at the Nominees’ conduct in handling Ho IVA Proposal for the reasons set out in Section E above.  In my view, no reasonable nominee would handle Ho IVA Proposal in the same way.  The very unreasonable handling of Ho IVA Proposal leads to this litigation.  Having handled Ho IVA Application in an extremely unreasonable way, the Nominees filed evidence and made convoluted and unmeritorious submissions to vigorously oppose the s.20J Application.  The Nominees’ conduct in this litigation is also extremely unreasonable.  In the circumstances, I am of the view that an indemnity costs order against the Nominees is appropriate.

79.  Both Ho and the Nominees have unreasonably and vigorously opposed the s.20J Application without any success.  Ho IVA Proposal was made by Ho, and prepared and handled by the Nominees.  Both the Nominees were proposed by Ho.  In my view, both Ho and the Nominees shall be liable to pay costs of the s.20J Application to SCB by reason of the material irregularities in relation to the approval of Ho IVA Proposal.  The liability of Ho and the liability of the Nominees under the costs order made against them are joint and several.

80.  Adopting a broad-brush approach, I apportion the time spent on the Time Application and the time spent on the s.20J Application (including the time incurred in the preparation of papers and the hearing time) as 15% and 85%. Accordingly, there should be a costs order in favour of SCB that Ho and the Nominees have to bear 85% of the costs of the 396 Summons on an indemnity basis.

G.     DISPOSITION

81.  I allow SCB’s application as per the 396 Summons and make the following order:

(1)     time for SCB to make the s.20J Application be extended and there be leave to make the s.20J Application out of time;

(2)     the approval of Ho IVA Proposal at Ho IVA meeting be revoked;

(3)     the Nominees’ decision to admit the WMS Loan for the purpose of voting at Ho IVA Meeting be revoked;

(4)     the Nominees’ decision to assess and/or to adjudicate the debt owed by Ho to SCB at HK$60,348.98 be revoked; and

(5)     the debt owed by Ho to SCB be decided at the amount as shown on the 396 Summons for the purposes of any further matters in relation to and/or connecting with Ho’s voluntary arrangement and/or creditors’ meeting thereto.

82.  There be a costs order that costs of the 396 Summons, including costs reserved, be paid by Ho and the Nominees to SCB on an indemnity basis.  Ho and the Nominees are jointly and severally liable to those costs.  Those costs be summarily assessed on paper without an oral hearing.  There be leave to SCB to lodge and serve a bill of costs for summary assessment (limited to 3 pages) within 14 days^[24]. There be leave to Ho to lodge and serve her list of objections (limited to 3 pages), and leave the Nominees to lodge and serve their list objections (limited to 3 pages), within 14 days thereafter.

83.  Since Ho and the Nominees are acting in person, I direct that upon a request made by any of them, this decision be interpreted by a court interpreter to the person making the request at a mutually convenient time at a place inside the High Court Building.

84.  Lastly, it remains for me to thank Mr Wong for the very helpful assistance provided to the Court.