RE HASAN HAROON

HCB 4760/2019

[2021] HKCFI 562

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4760 OF 2019

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R E A S O N S   F O R   J U D G M E N T

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1.  At the hearing of the petition presented by Easy One Finance Limited (“petitioner”) on 8 August 2019, I made the usual bankruptcy order against Mr Hasan Haroon (“debtor”). These are the reasons for my judgment.

2.  The petition is based on the debtor’s failure to satisfy a statutory demand served upon him on 22 May 2019 (“SD”) whereby the petitioner demanded the debtor to pay $490,507.57 (“Debt”).  The details of the Debt, as stated in the SD, are as follows:

(1)  The Debt arose out of 2 personal guarantees dated 22 August 2016 and 17 November 2016 executed by the debtor in favour of the petitioner whereby the debtor agreed to repay the amounts due by Hung Lai Han Casey, the borrower (“Borrower”), under the “1^st Loan Agreement” and the “2^nd Loan Agreement”. 

(2)  The Debt was incurred on 1 September 2018, that is, one day after the Borrower had failed to make any repayment.

(3)  The amounts due and payable under the “1^st Loan Agreement” and the “2^nd Loan Agreement” were $283,454.35 and $207,053.22 respectively. 

(4)  Under the “1^st Loan Agreement” and the “2^nd Loan Agreement”, interest was payable at 47.392% p.a. and 47.402% p.a. respectively. 

3.  Throughout these proceedings, the debtor appeared (and still appears) in person. 

4.  At the first hearing on 13 November 2019 before Master, the debtor admitted the Debt but opposed the petition on the ground that he needed more time to repay the Debt, whereupon the petition was adjourned to the bankruptcy judge. 

5.  There was then 11 hearings before different judges, which took place on 25 November 2019, 23 December 2019, 16 March 2020 (vacated due to GAP), 6 April 2020, 18 May 2020, 25 May 2020, 17 August 2020, 31 August 2020, 19 October 2020, 7 December 2020 (vacated by consent) and 18 January 2021.  It is sufficient to say that the adjournments were the result of a combination of the following matters:

(1)  the debtor’s repeated promises to repay the Debt to the petitioner if given time to do so;

(2)  the time required for the parties to engage in settlement negotiations;

(3)  the partial payments made by the debtor in the meantime;

(4)  the petitioner’s consent or non-objection to the proposed adjournments; and

(5)  the debtor’s representations that his company, Scoolsmart Hong Kong Limited (“Scoolsmart”), would soon receive $500,000 from the Cyberport Incubation Program (“Program”), which he would apply to repay the remaining balance of the Debt. 

6.  In the meantime, the debtor repaid an aggregate amount of $201,000 in the following manner:

Date of repayment	Amount repaid
16/5/2019-21/12/2019	$151,000
15/5/2020	$10,000
18/5/2020	$20,000
18/1/2021	$20,000

7.  At the last hearing before Godfrey Lam J on 18 January 2021, the parties were told in clear term that the petition was adjourned only because of the petitioner’s agreement and it is likely that a bankruptcy order would be made against the debtor at the next hearing. 

8.  In the “Certificate for proof of existing debt in bankruptcy proceedings” dated 1 March 2021 signed by the petitioner’s representative, the petitioner confirms that as at 1 March 2021, the debtor still owes $203,410.04 to the petitioner (“Unpaid Balance”). 

9.  At the hearing, the debtor confirms that he does not have the fund to repay the Unpaid Balance and the earliest time he can repay the same is by the end of March 2021.  In addition, the debtor hands up 5 pages of documents which consist of:

(1)  an email dated 23 February 2021 in which the petitioner urged the debtor to settle the amount due together with interest, failing which these proceedings would continue;

(2)  a table setting out the amounts due under “Loan 1”, “Loan 2” and “Loan 3” and the handwritten notes of the debtor objecting to the amount claimed by the petitioner;

(3)  a “Breakdown of the outstanding balance of debt” calculated up to 17 April 2020 wherein the petitioner confirmed that as at 17 April 2020, the total outstanding principal and interest under the 1^st and 2^nd Loan Agreements was $179,434.90; and

(4)  an email dated 25 February 2021 from a representative of the Program to the debtor (in his capacity as a representative of Scoolsmart), confirming that the first tranche of initial working capital grant in the amount of $30,000 had been deposited into the debtor’s bank account, and the balance of the initial working capital is still under process and may take 1-2 months (“Email”).   

10.  No explanation has been offered by the debtor as to why he did not set out the above matters in an affirmation filed and served before the hearing.  This is despite the fact that these proceedings have been ongoing for over 15 months such that the debtor must be familiar with the procedural requirement for filing and service of affirmations. 

11.  Nevertheless, the debtor seeks to rely on the documents described in §9 above in support of his contentions that (1) there is a genuine dispute on the Unpaid Balance in that according to his calculation, the petitioner has charged interest on the Debt at 115.66% p.a.; and (2) he will soon receive further funds from the Program which he will use to repay the amount due to the petitioner. 

12.  Leaving aside the fact that the 5 pages of documents are not proper evidence before the Court, I do not think either of the contention belatedly raised by debtor has any merit. 

13.  So far as the amount of the Unpaid Balance, it is the petitioner’s case that only $203,410.04 was due and payable as at 1 March 2021.  If one takes into account the amount of the Debt and the repayment in the amount of $201,000, the unpaid principal alone is $289,507.57, which is more than the Unpaid balance.  This has not taken into account the contractual interest accrued on the Debt from 1 September 2018 to the date of hearing.   

14.  As to the so-called new funds to be received under the Program, this has been a matter raised by the debtor since the hearing on 17 August 2020.  The Email shows that contrary to the debtor’s representations made during the previous hearings, (1) only $30,000 was disbursed under the Program; and (2) the fund was remitted to Scoolsmart on the basis that it would be applied as initial working capital grant for the project concerned.  It is not a fund which can be used by the debtor for his personal purpose or to repay the Unpaid Balance.

15.  The history of the matter shows that despite the considerable indulgence given to the debtor, he is still unable to pay the Unpaid Balance; and no reliance can be placed on the debtor’s promises to pay or his assertions as to the time or manner in which he will receive new funds. The petitioner, as an unpaid creditor, is entitled to seek a bankruptcy order against the debtor on the basis that he is unable to pay the Unpaid Balance.