RE WONG SAI CHUNG

HCB 4039/2023

[2025] HKCFI 155

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4039 OF 2023

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J U D G M E N T

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1.  Introduction

1.1  The Petitioning Creditor (“P”) and the Debtor (“D”) were respectively the Plaintiff and the 1^st Defendant in HCA 1906/2021.

1.2  On 30 September 2022, Master Rita So granted summary judgment in HCA 1906/2021 against D and the 2^nd Defendant, Hillwealth Holdings Limited (“HHL”) in (materially) the following terms (“Judgment”):

“AND UPON the Plaintiffs undertaking to the Court and to the Defendants that, upon the Defendants’ performance of paragraph 1 of this Judgment (or any part thereof), the Plaintiff would assign the US$5,000,000 principal amount of the US$226,000,000 15% Senior Notes due 2021 ("Notes") issued by Cheergain Group Limited [(“CGL”)] (or any corresponding part thereof) to the Defendants, or any party nominated by the Defendants [(“1^st Undertaking”)]

AND UPON the Plaintiffs undertaking to the Court and to the Defendants that, after full execution and satisfaction of this Judgment, and insofar as the total amount of recovery pursuant to this Judgment and any amounts received from China Construction Bank (Asia) Corporation Limited (in its capacity as Trustee for the Holders of the Notes) [(“CCB”)] is in excess of the amount ordered under paragraph 1 of this Judgment, the Plaintiff shall forthwith return such excess to the Defendants [(“2^nd Undertaking”)]

IT IS THIS DAY ADJUGDED THAT:

1. The 1^st and 2^nd Defendants do pay to the Plaintiff:

(a) the sum of US$5,100,000;

(b) interest of US$1,839,143.84; and

(c) interest at the rate of 24% per annum on the principal sum set out in paragraph 1(a) above, for the period commencing 8 February 2022 until the date of judgment, and thereafter at judgment rate until full payment.

2. Costs of this action, including the costs of the summonses filed on 5 May 2022 and 22 August 2022 summarily assessed at HK$230,000, be paid by the 1^st and 2^nd Defendants to the Plaintiff forthwith.”

1.3  As pleaded in the Statement of Claim in HCA 1906/2021, D was at all material times the sole shareholder and director of HHL and a director of China Properties Group Limited (“CPGL”). In the evidence filed in the present proceedings, D admits that he is the ultimate substantial shareholder of CPGL through HHL. CGL was a wholly-owned subsidiary of CPGL.

1.4  Although the Judgment was granted in September 2022, it remained wholly unsatisfied until P took steps to bankrupt D. In the foregoing regard:

(1)  P issued a statutory demand (“SD”) on 13 October 2022 based on the Judgment for the amounts of US$7,741,730.15 (pursuant to Judgment §§1(a)-(c))[1] and HK$230,000 (pursuant to Judgment §2);

(2)  The SD was initially served on Messrs Lau, Horton & Wise LLP (“LHW”), D’s solicitors in HCA 1906/2021. However, LHW took the position that they did not have instructions to accept service of the SD on behalf of D. Eventually, the SD was served on D on 1 December 2022;

(3)  Following the successful service of the SD, LHW and P’s solicitors (“Withers”) engaged in correspondence on D’s proposal to satisfy the Judgment. The first offer was made by LHW’s letter dated 22 December 2022, by which it was offered that partial payment in the sum of US$2,500,000 was to be made on or before 31 December 2022 and the balance of the Judgment was to be paid on or before 30 June 2023. Eventually, on 30 December 2022, Withers and LHW agreed on a proposal whereby US$2,500,000 was to be paid by 9 January 2023 and the remainder of the sum due under the Judgment by 31 March 2023;

(4)  On 9 and 10 January 2023, partial payments in the sum of US$2,500,000 was made (“First Tranche Repayments”). As stated in Wither’s letter dated 17 March 2023, the First Tranche Repayments were used to partially satisfy Judgment §1(a), leaving an outstanding balance of US$5,386,255.01 under Judgment §1. Judgment §2 remained outstanding in its entirety;

(5)  D requested further indulgence from P and made 3 further repayments of HK$500,000 (totaling HK$1,500,000) on 21 April, 12 May and 22 May 2023 (“Subsequent Repayments”). No further repayment was made by D thereafter. Unlike the First Tranche Repayments, P did not make any appropriation of the Subsequent Repayments to a particular outstanding sum due under the Judgment, but it is D’s case[2] that he has by his evidence filed in these proceedings communicated his appropriation of the Subsequent Repayments to Judgment §1(a);

(6)  On 14 July 2023, P issued a bankruptcy petition against D, which petition was amended on 30 November 2023 to make a number of administrative corrections (“Amended Petition”). The Amended Petition is based on D’s failure to fully comply with the SD, and asserts that, as at date of the petition, the outstanding amounts (excluding interest accrued from the date of the SD to the date of the petition) were US$5,050,274.06[3] and HK$230,000;

(7)  The petition was only served on D by way of substituted service in November 2023 which was necessitated by D’s evasion of service.

1.5  This is my judgment on the Amended Petition. At the hearing, P was represented by Mr Abraham Chan SC (leading Mr Gary Leung (solicitor advocate)) and D by Mr Anson Wong SC (leading Mr Martin Kok).

2.  D’s grounds of opposition

2.1  The grounds advanced by Mr Wong on behalf of D to oppose the Amended Petition are, in summary, as follows.

2.2  First, it is said that the Amended Petition should be dismissed on the basis that, on a proper construction of the Judgment, D’s liability to satisfy the Judgment is subject to the 1^st Undertaking. In the present case, it is common ground that D has partially satisfied the Judgment to the extent of approximately US$2.7 million (ie the First Tranche Repayments and the Subsequent Repayments). Yet, in breach of the 1^st Undertaking, P has indisputably not assigned a “corresponding part” of the Notes to D (“Ground 1”).

2.3  Secondly, D contends that the Amended Petition should be dismissed in the exercise of the court’s discretion. It is said that the commencement of the present bankruptcy proceedings in the light of P’s persistent breach of the 1^st Undertaking amounts to an abuse of process (“Ground 2”).

2.4  Thirdly, D argues that the Amended Petition should be dismissed as the SD and the Amended Petition are defective, in that both have erroneously described the Judgment as a simple debt when the Judgment in fact provides a more elaborate mechanism by which D’s liability is expressly subject to and premised upon the 1^st and 2^nd Undertakings given by P (“Ground 3”).

2.5  Fourthly, D submits that the petitioning debt premised on Judgment §1 is not a liquidated sum and is incapable of supporting the Amended Petition (“Ground 4”).

2.6  Two matters are of note.

2.7  First, although 4 grounds are advanced by D to oppose the Amended Petition, as will be seen below, they ultimately revolve around Ground 1. As Mr Wong accepted at the hearing, Grounds 2-4 are in fact various permutations premised upon the correctness or arguability of Ground 1.

2.8  Secondly, it will be seen from the above that D’s grounds are directed only at that part of the Amended Petition which is premised upon Judgment §1. I record that D has offered at the hearing to settle the sum due under Judgment §2 by way of a cashier order. Subsequent to the hearing, I have been informed that a cashier order in the sum of HK$230,000 was in fact delivered to Withers on 8 July 2024 in satisfaction of Judgment §2.

2.9  There is no dispute between counsel on the general principles. I largely adopt the summary set out at Mr Wong’s Skeleton Submissions §§24-26:

(1)  Bankruptcy proceedings are summary in nature and are not meant 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, it will not usurp the function of a civil court and decide the disputes between the parties: Re Li Man Hoo [2020] HKCFI 1354 at §15(1) and Re Leung Cherng Jiunn [2016] 1 HKLRD 850 at §§19-27;

(2)  On the hearing of a bankruptcy petition, the petitioner bears the burden of proving the matters which the debtor has given notice that he intends to dispute: Rule 70 of the Bankruptcy Rules Cap 6A (“BR”) and Re Li Man Hoo at §15(4) and 25-32;

(3)  The requirements for the presentation of a creditor’s petition under section 6(2) of Bankruptcy Ordinance Cap 6 ("BO") are cumulative, and it is for the petitioner to demonstrate, inter alia, that (a) the debt is for an amount in excess of the statutory requirement, (b) the debt is for a liquidated sum payable to the petitioning creditor, and (c) the debtor is either unable to pay or has no reasonable prospect of being able to pay: Re Li Man Hoo at §19(1).

3.  Ground 1: Effect of the 1^st Undertaking

3.1  Counsel’s submissions proceeded on the basis that the resolution of Ground 1 entails a construction exercise of the Judgment. At the hearing, it was clarified by Mr Wong that (1) his primary position is that a breach of the 1^st Undertaking would effectively lead to a stay of the entirety of Judgment §1 and (2) in the alternative, the said breach would at least give rise to a stay of Judgment §1(a).

3.2  The principles applicable to construction of a court order are set out at Essilor v Wong Kam Wai & Ors [2020] HKCA 351§25. The starting point is the natural and ordinary meaning of the words used in the light of the syntax, context and background in which those words are used, ie involving both a textual analysis and contextual analysis. See also Natwest Markets PLC v Owner of “Angelic Glory” [2023] HKCFI 644 §§24 and 40 where, in the particular circumstances of that case, emphasis was placed on the contextual analysis.

(i)   The relevant context and background

3.3  As stated earlier, the Judgment was granted on P’s application for summary judgment.

3.4  In HCA 1906/2021, P’s claim was premised on a breach of a deed of undertaking dated 1 December 2020 (“Deed”) and a supplemental deed dated 10 February 2021 (“Supplemental Deed”) on the part of D and HHL. In summary:

(1)  By a subscription agreement dated 11 October 2018 (“Subscription Agreement”), CGL agreed to issue and sell the Notes in a private placement and P agreed to subscribe for US$30,00,000 principal amount of the Notes;

(2)  In connection with the private placement of the Notes, CGL and D, amongst others, entered into an Indenture dated 15 October 2018 (“Indenture”) pursuant to which, inter alia, D unconditionally guaranteed the due and punctual payment of all amounts payable under the Notes;

(3)  As of 17 August 2020, P held US$20,000,000 in aggregate principal amount of the Notes (“P’s Notes”);

(4)  By a Note Repurchase Agreement dated 17 August 2020, CGL agreed to purchase or procure the purchase of US$3,000,000 in aggregate principal amount of P’s Notes by September 2020. No repurchase was made pursuant to the said agreement;

(5)  By the Deed, D and HHL undertook to procure a purchaser to purchase P’s Notes in accordance with the terms and by the completion dates therein set out, failing which D and HHL jointly and severally undertook to purchase P’s Notes on the same terms;

(6)  As of 10 February 2021, D and HHL had only procured the purchase of part of P’s Notes in the principal amount of US$4,000,000;

(7)  By the Supplemental Deed, P, D and HHL agreed to vary the terms of the Deed. In gist, in respect of the remainder of P’s Notes (in the aggregate principal amount of US$16,000,000): (a) the consideration would be 102% of the principal amount and related accrued interest at 9% per annum from 16 April 2020 to 15 October 2020 and 24% per annum from 16 October 2020 to the date of actual payment of the consideration and (b) the completion of the purchase would take place by 10 March 2021 (in respect of US$2,000,000) and 30 March 2021 (in respect of US$14,000,000) subject to an accelerated deadline in the event that the first deadline of 10 March 2021 was not met. The Supplemental Deed was to be construed as supplementing and forming part of the Deed;

(8)  On 11 June 2021 (which was after the stipulated accelerated deadline as the first deadline of 10 March 2021 was not met), repurchase of P’s Notes in the principal amount of US$9,000,000 took place, leaving P holding US$5,000,000 in the principal amount (“Balance Notes”);

(9)  On 15 October 2021, the Notes matured. It was P’s pleaded case that following the Notes’ maturity, they were delisted from the International Stock Market, as a result of which the Notes were no longer “resaleable in the secondary market from that date”;

(10)  By a letter dated 13 December 2021, P demanded D and HHL to fulfil their obligations under the Deed and the Supplemental Deed, which demand was not complied with by D and HHL;

(11)  The Statement of Claim in HCA 1906/2021 was filed on 7 February 2022, by which P sought US$5,100,000 (being the consideration agreed at 102% of the principal amount of the Balance Notes) and contractual interest.

3.5  It is pertinent to note what was the position adopted by P in HCA 1906/2021. In the 4^th Affirmation of Mr Lau Luen Hung Thomas (“Lau”) in HCA 1906/2021 dated 26 September 2022 (“Lau 4^th (HCA 1906)”), it is stated:

“[12] Finally, I should add that, even up till the date of this Affirmation, the Plaintiff has not received any payment of the principal amount of the Balance Notes or interest thereon, whether pursuant to the Subscription Agreement, the Indenture or otherwise. It continues to hold the Balance Notes and is willing and able to perform the Deed of Undertaking and Supplemental Deed. The Plaintiff is advised and verily believes that, insofar as its rights under the Subscription Agreement, the Indenture and the Deeds are concerned, it shall not obtain double recovery and it does not intend to do so. It is willing to give any appropriate undertaking to such effect, as the Court sees fit.” (emphasis added)

3.6  At the hearing, counsel disagreed on whether the Notes were, in Mr Chan’s words, “worthless”. Mr Wong refers to D’s Affirmation dated 20 December 2023 filed in the present proceedings (“D 1^st”):

“[11] In relation to the Notes held by the Petitioner, I should note that they were and are of significant market value. The nominal value of the Petitioner's Notes was US$5,000,000, and the Notes could be freely transacted in the open market before their maturity on 15 October 2021. Even after the maturity of the Notes, I understand that the Notes could be transferred in the secondary market at a significant value. Moreover, by continuing to hold the Notes, the Petitioner is entitled to receive semi-annual interest paid on the Notes at 15% per annum. In particular, I understand that on 15 April 2021, Cheergain paid semi-annual interest on the Notes, and the Petitioner had already received no less than US$1.2 million in interest payment.” (emphasis added)

3.7  Mr Wong emphasizes that D 1^st §11 has not been controverted specifically by P in these proceedings.

3.8  Whilst it is true that P’s evidence does not specifically address D 1^st §11, the 5^th Affirmation of Lau filed in these proceedings contends that D’s arguments premised on P’s failure to assign a corresponding part of the Notes is an afterthought. P’s evidence points out that after the making of the First Tranche Repayments, D never requested a transfer of a corresponding part of the Balance Notes but continued to effect the Subsequent Repayments.

3.9  Having reflected on the matter, I am unable to accept that the evidence set out at D 1^st §11 is believable for the following reasons:

(1)  At the material time, P had dual capacities in relation to the Balance Notes. On the one hand, it remained a holder of the Balance Notes. On the other hand, P had an enforceable agreement to dispose of the Balance Notes to D and HHL on the terms set out in the Deed and the Supplemental Deed. It is true that Lau 4^th (HCA 1906) was filed on 26 September 2022, well after the maturity of the Notes in October 2021. In acknowledging that P did not intend to obtain double recovery, it seems to me that one has to proceed on the basis that P held the view that some recovery might be achieved qua its status as a holder of the Balance Notes;

(2)  However, that does not mean that D 1^st §11 is believable insofar as it suggests that the Notes could be transferred in the secondary market at a significant value;

(3)  The starting point is that D 1^st §11 is a bare allegation and is not supported by any documentary evidence. Further, it is significant to note that it does not have the effect of showing that, at the time of Judgment, the parties and Master Rita So were proceeding on the basis that the Balance Notes were marketable and of significant value;

(4)  Whether the Notes would have any or any significant value would depend on the prospects of recovery. It is plain from Lau 4^th (HCA 1906) that part of the defence raised in HCA 1906/2021 was that CPGL (the holding company of CGL) was facing liquidity issues, and even on D’s own evidence, the last interest payment under the Notes was made on 15 April 2021 and there is no suggestion that any interest payment has since been made. As part of the defence in HCA 1906/2021, it was said that CPGL’s continuous efforts to resolve its liquidity issues had allegedly given rise to a common understanding between P, D and HHL that the holders of the Notes would collectively not enforce their rights, which defence plainly did not have the effect of preventing the Judgment from being entered against D and HHL;

(5)  The Notes matured on 15 October 2021. There is no evidence from D to show that (a) CGL is in the position to pay interest or redeem the Notes or (b) since the maturity of the Notes, there has in fact been any transfer in the secondary market, and if so, at what value;

(6)  The documentary evidence shows that D had never contemporaneously requested the assignment of any corresponding part of the Notes following the making of the First Tranche Repayments or the Subsequent Repayments. Indeed, the complaint of an alleged breach of the 1^st Undertaking was only first made in D 1^st.

3.10  In my view, at the time of the Judgment, the relevant context and background were as follows. First, whilst P’s case was premised on the Deed and the Supplemental Deed, P remained the holder of the Balance Notes as a result of D and HHL’s breach of their obligations under the Deed and the Supplemental Deed. Secondly, by the time of the Judgment, the Notes had matured and CGL was in breach of its obligations to redeem the Notes and to pay interest under the Notes. Thirdly, the parties had entered into a contractual arrangement by the Deed and the Supplemental Deed whereby P was to offload P’s Notes prior to their maturity at the agreed consideration, which disposal did not transpire by reason of D and HHL’s breach of their contractual obligations. Fourthly, the Notes had become a distressed asset.

3.11  In the process of preparing this judgment, the court discovered the existence of HCA 1628/2021 (“CCB Action”) in which CCB, suing in its capacity for the holder of the Notes, obtained summary judgment against D on 23 August 2022 under the Indenture for the principal amount due under the Notes (“CCB Judgment”) and for interest and default interest to be assessed. On 23 December 2024, I invited submissions from the parties on the significance of the CCB Judgment in the present construction exercise. The parties lodged their respective supplemental submissions on 30 December 2024.

3.12  In gist, Mr Wong submits that the CCB Action is not a relevant matter or it would be unfair and prejudicial to require D to engage with any argument regarding its relevance, it not having been raised by P.

3.13  I am unable to accept Mr Wong’s submissions. As pointed out by Mr Chan, as a matter of record, the CCB Judgment was specifically referred to by D himself in HCA 1906/2021 and Master Rita So had specifically raised a requisition on 28 September 2022 on the implication of the CCB Judgment in HCA 1906/2021. Indeed, it is plain that the 1^st and 2^nd Undertakings were based on the submissions made in the Reply Note dated 30 September 2022 lodged on behalf of P in HCA 1906/2021.

3.14  It is clear from the supplemental submissions lodged by Mr Chan that, at the time of the Judgment, the further relevant context was as follows. First, the 1^st Undertaking was included in the Judgment to reflect the contractual bargain reached by the parties in the Deed and Supplemental Deed, namely against payment of the agreed consideration, P would transfer the Balance Notes (or corresponding part thereof) to D, HHL or their nominated parties. Secondly, the 2^nd Undertaking was included in the Judgment by reason of avoiding double recovery which might arise from the CCB Judgment, as D is liable in both HCA 1906/2021 (to P) and the CCB Action (to CCB as trustee of the holder of the Notes and any recovery made thereby would be distributed to the holders of the Notes). Thirdly, at the time of the Judgment, the parties did not proceed on the basis that the Notes were themselves of any significant value.

(ii)   Analysis of D’s construction of the Judgment

3.15  As noted above, Mr Wong clarified at the hearing that, on a proper construction of the Judgment, any failure by P to comply with the 1^st Undertaking would effectively give rise to a stay of the entirety of Judgment §1 (his primary position) or at least Judgment §1(a) (his alternative position). It is also Mr Wong’s submission that the present construction exercise should not be determined by the bankruptcy court, as the proper course would be for P to seek clarification of the Judgment in HCA 1906/2021: Man Ping Nam v Man Fong Hang (No 2) (2007) 10 HKCFAR 140 at §10.

3.16  In summary, Mr Wong’s argument runs as follows:

(1)  P is not entitled to seek any further payment from D under the Judgment without P itself complying with the 1^st Undertaking to assign the corresponding part of the Balance Notes to D or HHL;

(2)  In the present case, the clear evidence is that the First Tranche Repayments were appropriated by P itself to Judgment §1(a) (§1.4(4) above) and the Subsequent Repayments were appropriated by D to Judgment §1(a) (§1.4(5) above). P has not assigned a corresponding part of the Balance Notes to D or HHL;

(3)  The effect of the Judgment was such that it did not permit P to retain both the Balance Notes and the monies paid by D for the purchase of the Balance Notes. To construe the Judgment in any other way would be contrary to the context and purpose of the Judgment;

(4)  It would be absurd to suggest that the Judgment should be construed so as to permit P to continue to breach the 1^st Undertaking whilst at the same time compel D to unilaterally perform the Judgment for the benefit of the wrongful party in breach.

3.17  I do not agree with Mr Wong. As I have found in the preceding subsection, the context and the purpose of the Judgment were (1) to grant judgment in favour of P on its rights under the Deed and the Supplemental Deed to “offload” the Balance Notes to D in accordance with the agreed terms and (2) to avoid double recovery qua P’s capacity as holder of the Balance Notes should any recovery be made by CCB on behalf of the holders of the Notes pursuant to the CCB Judgment.

3.18  I first deal with Mr Wong’s primary position. I cannot see how, on a proper construction of the Judgment, an alleged breach of the 1^st Undertaking would have the effect of giving rise to a stay of the entirety of Judgment §1. Judgment §1 consists of 3 parts, of which Judgment §1(b) covers prejudgment interest, which is a significant sum in and of itself. I fail to see any linkage or conditionality between the 1^st Undertaking and Judgment §1(b). As found above, the inclusion of the 1^st Undertaking was simply to reflect the contractual bargain set out in the Deed and the Supplemental Deed, namely for P to transfer the Balance Notes against receipt of the agreed consideration. The obligation to assign the Balance Notes or “corresponding part thereof” can only be by reference to performance by D or HHL of Judgment §1(a), and any failure to do so would not have an impact on Judgment §1(b).

3.19  It seems to me that the real issue is whether there is a linkage or conditionality between the 1^st Undertaking and Judgment §1(a) such that, on a proper construction of the Judgment, an alleged breach of the 1^st Undertaking on P’s part would, as Mr Wong contends, effectively give rise to a stay of Judgment §1(a). In my view, it is plain that it does not for the following reasons:

(1)  The Judgment was given in respect of D and HHL’s breach of the Deed and the Supplemental Deed to purchase the Balance Notes. By the Judgment, D and HHL were to pay the agreed consideration forthwith;

(2)  There is no time stipulation for P to perform the 1^st Undertaking;

(3)  Conversely, by the 2^nd Undertaking, it is envisaged that there would be an accounting exercise after full execution and satisfaction of the Judgment in order (a) to take into account how much has been paid by D or HHL in satisfaction of the Judgment and the amounts received from CCB (in its capacity as Trustee for the Holders of the Notes) pursuant to the CCB Judgment, the latter presupposing that P would remain as a holder of the Balance Notes and (b) for P to return the excess to D and HHL;

(4)  Given (a) the context set out in the preceding subsection, (b) the lack of any express time stipulations in the 1^st Undertaking, (c) conversely the existence of an express time stipulation in the 2^nd Undertaking and (d) the accounting exercise contemplated under the 2^nd Undertaking, I agree with Mr Chan that, on a proper textual and contextual analyses of the Judgment, D’s liability to satisfy the Judgment in full is not contingent upon P’s assignment of the Balance Notes (in whole or in part) to D or HHL or their nominated party;

(5)  Further, even if there was a breach of the 1^st Undertaking, I agree with Mr Chan that the Judgment by its terms does not provide for a stay of D’s payment obligation as a consequence. I agree with Mr Chan’s submission that even were there a breach of the 1^st Undertaking, such breach would at best entitle D to a cross-claim against P, for the value of the Notes P was obliged to assign to D under the Deed and the Supplemental Deed. As stated above, the purpose of the 1^st Undertaking was to reflect the contractual bargain between the parties, namely a transfer of the Balance Notes against payment of the agreed consideration, and any breach thereof would prima facie amount to a cross-claim maintainable by D for a breach of the Deed and the Supplemental Deed. It is trite that for a court to reject a petition on the basis of a cross-claim, it must be an amount exceeding the amount of the petitioning debt: Re Li Wing Sang [2019] HKCFI 924 §39. There is simply no evidence to substantiate the cross-claim. As noted above, the complaint of an alleged breach of the 1^st Undertaking was only first raised in D 1^st and no particulars are provided on the market value of the Notes. D has proffered no answer to Mr Chan’s submission and Mr Wong at the hearing disavowed any reliance on a cross-claim;

3.20  As noted above, counsel’s submissions proceeded on the basis that the resolution of Ground 1 entails a construction exercise of the Judgment. For the reasons set out above, I do not agree with Mr Wong that, as a matter of proper construction, a breach of the 1^st Undertaking would effectively give rise to a stay.

3.21  For completeness, I should also point out that it seems to me pertinent that no application has been made by D pursuant to RHC Order 45, rule 11 or the court’s inherent jurisdiction for a stay of execution of the Judgment, especially when the alleged breach of the 1^st Undertaking took place in January 2023. Even were such an application made, it seems to me clear that, on the material adduced by D, such an application would not have been successful.

3.22  As explained at Credit Lyonnais v SK Global Hong Kong Ltd, CACV 167 of 2003, 30 July 2003 §§2 and 3, the court retains an inherent jurisdiction, in suitable cases, to make orders staying execution quite apart from those situations expressly permitted under the Rules of the High Court (namely, RHC Order 45, rule 11, Order 47, rule 1 and Order 59, rule 13). By the term "suitable cases" are meant those situations in which the inherent jurisdiction of the court is required to be exercised so as to avoid injustice, prevent abuse, preserve the dignity of the court or to facilitate the administration of justice;

3.23  As further explained at Credit Lyonnais §5, in exceptional cases, a judgment creditor may be prevented from levying execution. Examples given were (a) new evidence emerges after the relevant judgment showing that it was not valid or (b) in certain circumstances, the judgment debtor has a claim against the judgment creditor yet to be determined; D’s belated reliance on an alleged breach of the 1^st Undertaking (and Mr Wong disavowing any reliance on any consequential cross-claim) does not fall within the rubric of the foregoing 2 scenarios;

3.24  On a more general note, even on the basis that there was a breach of the 1^st Undertaking, it is in my view plain that the exceptional avenue of a stay of execution would not be activated. The exceptional avenue would only be activated to prevent injustice, to preserve the dignity of the court or to facilitate the administration of justice. Given the context and purpose of the Judgment stated above, there is no evidence to show that P has reaped double recovery. Equally if not more importantly, there is no or no believable evidence that D’s ability to satisfy the Judgment has in anyway been affected by P’s failure to assign a corresponding part if the Balance Notes to him or HHL.

3.25  Ground 1, in my view, does not raise a bona fide dispute.

4.  Ground 2: Discretion

4.1  Section 9(3) of the BO provides:

“If the court is not satisfied with the proof of the petitioning creditor’s debt or of the service of the petition, or is satisfied by the debtor that he is able to pay his debts or has a reasonable prospect of being able to pay them, or considers that for other sufficient cause no order ought to be made, the court may dismiss the petition.” (emphasis added)

4.2  Mr Wong relies on the “other sufficient cause” limb. He submits that that limb encompasses the situation where the presentation of the petition is an abuse of process of the court: Hong Kong Bankruptcy Law Handbook, 8^th Ed at 9.08 and relies on the submissions made in respect of Ground 1, namely that it is an abuse of process for P to commence bankruptcy proceedings against D on the basis of the Judgment when at the same time P has failed to comply with the 1^st Undertaking.

4.3  Ground 2 therefore is in substance a permutation of Ground 1. For the reasons set out in the preceding section, I do not agree with Mr Wong that the presentation of the present petition is an abuse of process.

5.  Ground 3: SD and Amended Petition defective

5.1  Rule 44 of the BR provides for the form and content of a statutory demand. Rule 44(3) provides:

“The statutory demand must state the amount of the debt, and the consideration for it (or, if there is no consideration, the way in which it arises) and –

(a) if made under section 6A(1) of the Ordinance and founded on a judgment or order of a court, it must give details of the judgment or order; or

(b) …”

5.2  In Leung Cherng Jiunn §15, the Court of Appeal stated:

“[13] The requirement regarding the information to be provided of the debt in the statutory demand is not onerous. The creditor is not required to “completely” set out the bases of the debt in the statutory demand, as contended by Mr Chan, nor was that the judge’s holding in §28(1) of the judgment. The statutory demand is merely to inform the debtor of the way in which the debt arises so that he would know what course he should take in the light of the information given. This is because the statutory demand is an important document. It is “the straight and narrow gateway” through which a creditor must pass in order to establish the debtor’s apparent inability to pay the debt demanded in order for a bankruptcy petition to be presented...

[15] …[W]hilst the statutory code affords the court a desirable degree of flexibility in dealing with an application to set aside a statutory demand for defects, this is not to be taken as a charter for slipshod preparation of statutory demands… [T]he making of a bankruptcy order remains a serious step for the debtor, and the prescribed preliminaries in the statutory code are intended to afford protection to him, if a statutory demand is defective, the court will be alert to see whether those mistakes have caused or will cause any prejudice to the debtor.”

5.3  In Li Man Hoo, Linda Chan J said:

“[23] Despite the apparent acceptance of the Scheme Claim and the Interest Claim (which the Petitioner deducts for the purpose of the hearing but disputes the Debtor’s claim), no attempt has been made by the Petitioner to amend the Debt stated in the SD and the petition. Ms Ho submits that no amendment is necessary. So long as the bulk of the Debt is indisputable, that would be sufficient for the Court to make a bankruptcy order against the Debtor...

[24] In my judgment, the SD and the petition are defective as they both rely on the Debt, which the Petitioner accepts at the hearing to be incorrect. The Scheme Claim and the Interest Claim is not immaterial, as they represent almost one-fourth of the Debt. Nor is the defect a matter of mere technicality. The Debtor was entitled to know what constituted the Debt and decided how to respond to the claim… [I]t could not be said the defect would have made no difference in that the debtor would not have paid anyway and no prejudice would have been suffered. For this reason alone, I would dismiss the petition.”

5.4  Mr Wong submits that the SD and the Amended Petition are defective as neither document refers to the 1^st Undertaking and they have therefore failed to accurately or properly give details of the Judgment.

5.5  At the hearing, Mr Wong accepted Ground 3 is yet another permutation of Ground 1, in that the failure to mention the 1^st Undertaking in the SD and the Amended Petition would only amount to a defect if D’s construction of the Judgment was arguably correct.

5.6  For the reasons set out at section 3 above, I do not regard D’s argument on the construction of the Judgment raises a bona fide dispute. Where, as I have found, D’s liability to satisfy the Judgment in full does not depend on the P’s performance of the 1^st Undertaking, there can be no further challenge that either the SD or the Amended Petition has advanced a petitioning debt which is incorrect or has failed to inform D of the way in which the petitioning debt had arisen. In particular, in respect of the SD, at the time of its issuance, no payment had been made to satisfy the Judgment and there was no question that the 1^st Undertaking had become relevant.

6.  Ground 4: Petitioning Debt not a liquidated sum

6.1  The debt is a liquidated sum if the money payable to the creditor is already ascertained or capable of being ascertained by a simple process of arithmetical calculation: Bankruptcy Law Handbook §6.08.

6.2  Mr Wong submits that the petition debt is not a liquidated sum as D’s liability under the Judgment can only be properly ascertained upon taking into account of the value of the relevant Balance Notes and the amounts which P has received from CCB.

6.3  I am unable to accept Mr Wong’s submissions. First, it is not apparent why D’s liability of the Judgment would depend on the value of the Balance Notes. Under the Judgment, it is plain that D and HHL were to pay 102% of the face value of the Notes to P (ie US$5,000,000 x 102% = US$5,100,000). Therefore, even if the 1^st Undertaking was relevant for present purposes (which it is not), the obligation is to assign the corresponding part, not the corresponding value, of the Balance Notes to D and HHL, which was plainly ascertainable by an arithmetic exercise. Secondly, the formula to pay over to D the excess (if any) of recovery resulting from amounts received from CCB is also ascertainable from an arithmetic exercise.

6.4  Indeed, at the hearing, Mr Wong accepted that Ground 4 is in fact merely another permutation of Ground 1, as if I were to disagree with D on Ground 1, it is difficult for D to further contend that the petitioning debt is an unliquidated sum.

7.  Conclusion

7.1  As D has failed to provide any grounds of opposition which are meritorious, this court is satisfied that P is entitled to a bankruptcy order against him.

7.2  There will be a usual bankruptcy order against D and an order nisi that the costs of the Amended Petition, including all costs reserved, if any, be to P.