RE PAK KWAN HO

HCB 5909/2016

[2018] HKCFI 54

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 5909 OF 2016

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J U D G M E N T

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Introduction

1.  There is before this court a bankruptcy petition dated 16 August 2016 (“Petition”) presented by China Citic Bank International Limited (“Bank”) against Mr Pak Kwan Ho (“Debtor”).  The Petition is based on the non‑compliance with a statutory demand dated 24 May 2016 (“statutory demand”) served personally on the Debtor for the sum of over HK$5.3 million (“Debt”) consisting of:

a. HK$5.1 million owed by Pada Industrial (Far East) Company Limited (“Pada Far East”) (in creditors’ voluntary winding up) to the Bank which was guaranteed by the Debtor under a Guarantee and Indemnity dated 18 August 2014, and

b. HK$269,357.45 owed by Pada Development Company Limited (“Pada Development”) (in compulsory winding up) to the Bank which was guaranteed by the Debtor under a Guarantee and Indemnity dated 30 November 2009.

2.  It is indisputable that at least 3 weeks have elapsed since the statutory demand was served on the Debtor and it has not been complied with.  There was also no application by the Debtor to set aside the statutory demand.

Deliberation

3.  It is well‑established that in order to successfully oppose a petition, a debtor has to show a bona fide dispute to the debt on substantial grounds, by sufficiently precise evidence which is believable, and must establish that he actually has a defence of substance, not just a fair probability of one: Wong Lo Fung v AXA China Region Insurance Co Ltd unrep; HCB 1864/2013; 29 August 2014 at [25]–[26]; re Shang Lili unrep; HCB 5329/2014; 25 January 2016 at [10].

4.  In the present case, the Debtor opposes the Petition on one and only one ground. In his 2‑page affirmation in opposition, the Debtor stated at paragraphs 3 and 4:

“3. 該呈請第2段指稱（而本人予以否認），於2016年5月20日起，Pada Industrial (Far East) Company Limited及Pada Development Company Limited（強制清盤中）（“該等公司”）分別結欠債權人HK$5,100,000.00及HK$269,357.45（“指稱款項”），而本人分別為該等公司就欠款提供擔保。

4. 對於該呈請第2段的指稱，本人現提出爭議。就本人所理解，一間名為“Truetime Industries Ltd”所持有的其中一個物業，即香港盛泰道100號杏花邨2座9字樓5室（“該物業”），已用作指稱款項的抵押及已抵銷該等公司欠債權人的所有款項或其部分。”

5.  In essence, the Debtor is alleging the Debt has already been repaid when the Bank exercised its right as mortgagee under a Tripartite Legal Charge/Mortgage dated 21 October 2014 in selling the property referred to in paragraph 4 of his affirmation (“Heng Fa Chuen Property”).  The Heng Fa Chuen Property was mortgaged by Truetime Industries Limited (in liquidation) to the Bank to secure the indebtedness of inter alia Pada Far East and Colour Apparel Company Limited (“Colour Apparel”).

6.  As expected, the Bank disputes the Debtor’s case.  In the Bank’s proof of debt dated 5 August 2016 exhibited to the 2^nd affirmation of Ng Ka Ki,

a. Pada Far East was shown as owing over US$1 million of principal to the Bank for invoice financing and HK$5.1 million of principal for packing loan;

b. Colour Apparel was shown as owing HK$2.23 million of principal to the Bank for packing loan;

c. Pada Development was shown as owing HK$269,357.45 as balance of outstanding principal to the Bank for instalment loan.

7.  It is true that the Bank’s proof of debt shows some partial repayments of the indebtedness of Pada Far East, Colour Apparel and Pada Development.  As far as the gross sale proceeds of the Heng Fa Chuen Property ie HK$6.23 million were concerned, they were applied to pay off Pada Far East’s invoice financing debts and Colour Apparel’s packing loan.  However, as far as the HK$5.1 million owed by Pada Far East and the HK$269,357.45 owed by Pada Development are concerned, there was no repayment, whether from the sale proceeds of the Heng Fa Chuen Property or otherwise.

8.  At the hearing, the Debtor was unable to challenge the accuracy of the figures in the Bank’s proof of debt, including in particular, how the Bank applied the sale proceeds of the Heng Fa Chuen Property in partial repayment of the indebtedness of Pada Far East, Colour Apparel or Pada Development.  Nor did the Debtor submit any proof that the HK$5.1 million or the HK$269,357.45 have already been repaid.

9.  In these circumstances, this court is not satisfied on the evidence that the Debt has been repaid, as alleged by the Debtor.  There being no other grounds put forward by the Debtor in opposition to the Petition, a bankruptcy order should be made.

Disposition and Costs Order Nisi

10.  There shall be a usual bankruptcy order against Mr Pak Kwan Ho and an order nisi that the costs of the Petition, including all costs previously reserved, if any, be to the Petitioning Creditor, to be taxed if not agreed, with certificate for counsel.