RE LEUNG LAI CHING MARGARET

HCB 771/2018

[2018] HKCFI 1910

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 771 OF 2018

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REASONS FOR JUDGMENT

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1.  The petitioner is the judgment creditor under the judgment of the court dated 28 October 2015 (and amended on 3 November 2015) in HCMP 2080/2015, which was pursuant to the registration of a Mainland judgment [1] as a judgment of this court pursuant to the Mainland Judgments (Reciprocal Enforcement) Ordinance, Cap 597 (“the Judgment”). The judgment sum was HK$169,837,466.09 as at 3 November 2015. The unsatisfied debt amounts to HK$169,719,069.78.

2.  The petitioner filed this bankruptcy suit against the debtor for her failure to comply with the statutory demand dated 16 September 2017 in respect of the above debt.  The amended petition was filed on 24 May 2018.

3.  The parties last appeared in court on 23 July 2018.  This was the resumed hearing of the petition.  At the end of the hearing, I made the usual bankruptcy order with costs against the debtor.  For the benefit of the debtor, I briefly explained my ruling in Chinese, and indicated that full reasons in English will be handed down in writing.  I now do so.

4.  Section 6(2) of the Bankruptcy Ordinance, Cap 6 sets out the criteria which must be met before a creditor’s petition may be presented.

5.  In the present case, it is essential to note that the petition was presented in respect of a debt existing and payable to the petitioner immediately at the time of the petition under section 6(2)(b).  I should also mention that the debtor’s earlier attempt to set aside the registration of the Mainland judgment was dismissed on 16 February 2016, and there has been no appeal from that.

6.  The petitioner said that the debtor appeared to be unable to pay under section 6(2)(c).  He was in a position to say so, because by virtue of section 6A, a debtor appears to be unable to pay the debt for the purpose of section 6(2)(c) if he/she fails to comply with a statutory demand in respect of a debt which is payable immediately.  The statutory demand in respect of the debt in question was served back in September 2017.  There is no outstanding application to set aside the statutory demand, and therefore section 6(2)(d) was also satisfied.

7.  It is trite that in order to successfully oppose the petition, the burden is on the debtor to show a bona fide dispute on substantial grounds, by sufficient precise evidence which is believable, and must establish that he actually has a defence of substance, not just a fair probability of one.

8.  Prior to the last hearing, the debtor filed her affirmation in opposition.  The essence of that was that she, through her wholly owned Mainland company, owned substantial assets in the Mainland in the form ofland and natural resources, and their value would be more than sufficient to satisfy the debt.  Documentation was exhibited, including what appeared to be valuation evidence dated in 2013.

9.  Whether or not the debtor’s assertions were true, the fact was that she had not paid the debt, and there was no evidence of settlement or agreement for payment reached between the parties.  As it was pointed out on behalf of the petitioner, all the partial satisfaction of the Judgment has so far been secured by way of enforcement proceedings commenced by the petitioner in Hong Kong.  As seen above, such costly exercise has yielded minimal result in reducing the debt.

10.  The petitioner effectively had another 14 days prior to the resumed hearing.  She filed another affirmation, which was without leave and served on the petitioner only on the day before the hearing.  The petitioner elected to proceed, notwithstanding that.

11.  Essentially the debtor gave an account of the development in respect of her alleged assets in the Mainland.  She produced what appeared to be a written agreement with a third party in the Mainland for her to sell 70% of shareholdings in her Mainland company holding those assets.  The consideration was RMB 3,000,000,000 payable in five years, with the first instalment of RMB 1,000,000,000 payable by 28 September 2018. There was also what appeared to be a written loan agreement, whereby the third party agreed to extend to the debtor a loan of RMB 300,000,000 on 18 September 2018.  Both documents appeared to be dated 1 August 2018.

12.  The debtor suggested that with the above development, she demonstrated her ability to pay the petitioner.  On this basis, the debtor requested to essentially further adjourn [2]these proceedings to 28 September 2018.

13.  Whilst the debtor tried to project a prospect of her becoming able to pay the debt, she lost sight of the fact, as mentioned above, that it is a debt which has become immediately payable since the Judgment, and should have been paid after the service of the statutory demand or by the time of the petition at the latest.  If time would have to be given, she has had the time since 2016 as matter of fact.

14.  The fact, after another two weeks from the last hearing, remained that she has not paid the debt or alternatively settled with the petitioner.  Nor was there suggestion or evidence of concluded payment agreement between the parties.  In court, she went on to suggest certain consensus reached with the petitioner.  This had no evidential back up.  Even according to the concluding paragraph of her latest affirmation, her ability to pay would hinge upon the actual performance of the agreements mentioned above by the parties to them and, when she does receive the money, she would expect the petitioner to liaise with her lawyers in the Mainland in respect of the payment of the debt.

15.  This cannot be what the statutory framework permits as a valid ground for not making the bankruptcy order in relation to a debt which is payable immediately.

16.  Whilst a bankruptcy order, by operation of law, has its consequence on the transactions of the debtor, and thus the agreements she has entered into with the Mainland third party, it is not apparent from the terms of those agreements that this per se must frustrate the deal from the point of view of the debtor’s Mainland counterpart.  If the transaction is proved to be genuine and has the potential as projected by the debtor, I am sure the trustee in bankruptcy will engage in the necessary investigation and take the necessary step to ensure that this could benefit the creditors and the estate of the debtor in her bankruptcy.

17.  I therefore found it right to make the usual bankruptcy order with costs, including costs reserved, to be taxed if not agreed.  For the avoidance of doubt, I put on record the undertaking of the petitioner to give up such security that he still holds in the form of shares in a number of the debtor’s companies subject to the charging order obtained by the petitioner in 2016 and not covered by the subsequent order for sale.  They were set out in the schedule to the amended petition.