RE LAM CHUNG HO ALASTAIR

HCB 3766/2021

[2023] HKCFI 260

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3766 OF 2021

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J U D G M E N T

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I.  Introduction

1.  This is the hearing of the Amended Petition dated 26 August 2021 of China Huarong International Holdings Limited (“the Petitioner”) against Lam Chung Ho Alastair (“the Debtor”) based on an unsatisfied statutory demand dated 1 February 2021.

2.  The debt claimed in the statutory demand arises under a Deed of Guarantee dated 30 June 2020 (“the Guarantee”) as amended by a Waiver Letter dated 6 July 2020 (“the Waiver Letter”) in which the Debtor guaranteed the performance and obligations of State Path Capital Limited (“SPC”) under a Deed of Assignment (“the Assignment”) dated 30 June 2020 made between SPC and the Petitioner.

3.  By the Assignment, SPC agreed to purchase from the Petitioner convertible notes issued by Bionic Vision Technologies Pty Ltd (“Bionic”) in the principal amount of USD 18 million by 9 instalments. SPC defaulted after the 4^th installment. In the Amended Petition, the amount outstanding as of 25 June 2021 (including default interest of approximately USD 0.8 million) is approximately USD 14.56 million (“the debt”).

4.  At the conclusion of the hearing, Judgment was reserved which I now give.

II.  Background facts

(a)  General background - the Petitioner, the Debtor and the debt

5.  The Debtor is content to adopt the factual background summarised in §§12-24 of the Petitioner’s skeleton set out below:

“Background of Petitioner and Debtor

12. [The Petitioner] is a limited company incorporated in Hong Kong engaging in the businesses of asset management and investments in equity, funds and convertible bonds. [The Petitioner] is a subsidiary of China Huarong Asset Management Co., Ltd., a company listed on the Main Board of the Hong Kong Stock Exchange (stock code: 2799).

13. [The Debtor] is an experienced and sophisticated businessman. His business interest and experience include but not limited to the following:-

(1) Since 5 April 2017, [the Debtor] is a director of [Bionic], a company limited by shares incorporated in Australia

(2) [The Debtor] is a founder of [SPC], a company incorporated in the British Virgin Islands, and serves as its director since 1 March 2016 (except for a short period between 22 April and 25 August 2020). [The Debtor] was a shareholder of SPC Ltd between 1 March 2016 and 9 July 2019;

(3) [The Debtor] is a co-founder of [Synergy], a company listed on the Hong Kong Stock Exchange (stock code: 1539), and had served as its director between 14 December 2011 and 19 December 2016;

(4) [The Debtor] was an executive director and chairman of AL Group Limited, a company listed on the Hong Kong Stock Exchange (stock code: 8360) between 12 July 2017 and 2 August 2021;

(5) [SPC] is a majority shareholder of [Bionic] holding 65,450 ordinary shares of [Bionic] (i.e. around 68.57% of [Bionic]’s total issued ordinary shares).

Background of the Deb

14. The [Assignment] dated 30 June 2020 was made between [the Creditor] as assignor, [SPC] as assignee and [the Debtor] as the personal guarantor for the assignment of certain convertible notes (“Convertible Notes”) issued by [Bionic] for a purchase price of USD18,624,329 (“Purchase Price”) payable in nine monthly instalments between 30 June 2020 and 31 March 2021.

15. The assignment of the Notes was completed on 30 June 2020 pursuant to the [Assignment] (whereby some of the conditions were waived by the Waiver Letter ...

16. The [Guarantee] was executed between [the Debtor] as personal guarantor and [the Creditor] as the assignor.

17. According to Clause 4.2 of the [Assignment], if the Assignee fails to pay any amount payable by it under the Payment Schedule, on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment at the default interest rate of 10% per annum (“Default Interest”). Default Interest shall be immediately payable by the Assignee on demand. Default Interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount on a daily basis and any such Default Interest is immediately due and payable, and be calculated on the basis of the actual number of days elapsed and a year of 365 days.

18. Pursuant to the [Assignment] and Clause 2.1 of the [Guarantee], [the Debtor] undertakes that he shall immediately on demand pay any amount not paid by the Assignee due under or in connection with the [Assignment] or any other transaction documents, as if [the Debtor] was the principal obligor.

19. The Assignee was late in making payments in respect of the 1^st to 4^th instalments and as a result Default Interest accrued in respect of the late payments, which remained unpaid. The Assignee then failed to make any payment for the Purchase Price since (and including) the 5^th instalment of the Purchase Price.

20. As a result of the Assignee’s default, an event of default (“Event of Default”) under paragraph 1.1 of Schedule 3 to the Deed of Assignment had occurred, which Event of Default is continuing as at the date of the Amended Petition. Pursuant to Clause 4.3 of the [Assignment], on and at any time after the occurrence of an Event of Default, [the Creditor] may by notice to the Assignee declare that all or part of the unpaid Purchase Price, together with accrued Default Interest be immediately due and payable.

21. On 30 December 2020, [the Creditor issued a Notice of Demand to the Assignee copying [the Debtor] pursuant to Clause 4.3 of the [Assignment] and declared that all of the unpaid Purchase Price, any other amounts due and payable but unpaid under the [Assignment] and accrued interest therein (including any Default Interest calculated pursuant to Clause 4.2 of the [Assignment]) to be immediately due and payable.

22. Since the Assignee failed to pay default interest and the Purchase Price since (and including) the 5^th instalment, [the Debtor] was and is personally liable to make payment of the unpaid Purchase Price plus all outstanding interests (including default interest) to [the Creditor] in a sum of not less than USD14,560,608.27, which remains outstanding as of today.

23. On 8 February 2021, a statutory demand dated 1 February 2021 was served upon [the Debtor] by personal service in respect of the Debt. The demand has yet been complied with and had not been set aside. There is no dispute as to service.

24. On 7 October 2021, [the Debtor] filed a Notice of Intention to Oppose.”

(b)  SPC and the Petitioner’s subscription of convertible bonds

6.  Apart from the Debtor, Tek Sian Kwan (“Kwan”) was also a founding member of SPC and one of its directors at its incorporation on 1 March 2016. The Debtor and Kwan each held 1 of 2 issued shares.

7.  In 2017, the Debtor introduced Bionic, a private Australian company to the Petitioner who acquired certain of the convertible bonds issued under the Convertible Note Deed of 7 March 2017 (“CN Deed”) for USD 18 million. The Debtor guaranteed Bionic’s compliance with its obligations under the CN Deed.

8.  It is common ground that by 7 April 2020, Bionic had suffered an insolvency event when external administrators were appointed although it is also the Petitioner’s case that an event of default had occurred when, in breach of condition 12 (7) of Schedule 1 of the CN Deed, the Debtor failed to transfer any of his shares in Synergy into the designated account within 6 months the issue of the Convertible Notes.

9.  On 5 May 2020, Bionic (and the Debtor who was copied) were notified by the Petitioner’s former solicitors that a default event had occurred (in relation to the Synergy obligation) and on 18 May 2020, a Default notice was sent to Bionic and its administrators (copying the Debtor and Kwan). The Petitioner exercised its rights to require Bionic to redeem the convertible notes registered in the Petitioner’s name.

10.  This led to the administrators issuing a letter to creditors of Bionic notifying them that the administrators intended to apply for a winding up order within 10 business days but that, if before the hearing, the administrators were to receive a written request from the largest creditor, i.e. the Petitioner, to defer the hearing, the administrators may consider doing so for sufficient reason.

11.  The Petitioner’s support was vital in staving off the winding up. Between May and June 2020, negotiations took place between the Debtor (or his assistant Thompson Lai (“Lai”), Kwan and the Petitioner regarding options for the reorganization of Bionic. The Petitioner had to be convinced to request the administrators to suspend the winding up of Bionic.

12.  In the course of negotiations between the Petitioner and SPC in June 2020 over the assignment of the convertible bonds from the Petitioner to SPC for USD 18 million, Kwan sought assistance from the Debtor in connection with that deal in that the Petitioner required SPC to place certain securities for the Assignment and insisted that the Debtor be included as the personal guarantor for the deal since he was guarantor for Bionic under the CN Deed.

13.  Meanwhile, on 19 July 2019, the Debtor sold his share in SPC to Kwan for US $3 million.

14.  The Debtor resigned from his directorship on 22 April 2020 but undertook that role again in August 2020[1] as Kwan was in Melbourne was unable to travel to Hong Kong because of Covid travel restrictions to handle SPC’s business.

III.  The Debtor’s defence

15.  The Debtor’s defence is that prior to the signing of the Assignment, the Petitioner and SPC made representations to the Debtor and it was agreed that SPC would provide securities for the performance of the Assignment comprising:

(i)  a charge over Simply Champion Limited (“Simply Champion”) (“Charge”);

(ii)  a pledge of shares amounting to 15% of the issued share capital of PT Cristian Eka Pratama (“Indo Co”) by Simply Champion Limited in favour of the Petitioner (“Pledge”);

(iii)  the Guarantee

(collectively the “Securities Representations”).

16.  Should the securities be insufficient for the performance of the Assignment, SPC would be personally responsible. In addition, SPC also undertook to secure the Charge and the Pledge in line with and immediately after the Guarantee was secured (“Securities Arrangement”).

17.  It is the Debtor’s case that in terms of the priority of enforcement of the securities, the Petitioner and SPC further agreed that the Charge and the Pledge should rank first; the Guarantee second, and SPC’s own liability comes last (collectively “Priority Arrangement”)[2].

18.  The events occurring in June 2020 said to give rise to representations are set out below:

(1)  The “common understanding” between the Debtor and Kwan

19.  It is the Debtor’s case that in early June 2020, when he was neither a shareholder or director of SPC[3], Kwan sought urgent help from him in relation to the potential Assignment mentioned in §12 above. To counter the Debtor’s initial unwillingness, Kwan mentioned his investment group’s interest in an Indonesian mining concession (“Indo Co”) estimated in a valuation report to be worth between USD 84 million and 215 million[4].

20.  The Debtor reached an understanding with Kwan that he would only agree to be guarantor on the basis that Kwan would provide securities of sufficient value (i.e. his Indonesian investment) to the Petitioner which would be enforced first (to shield the Debtor from any financial risk) and subject to the provision of the relevant valuation report (“the common understanding”)[5].

21.  As §5 of the Memorandum of Understanding dated 3 June 2020 made between SPC and the Petitioner (“MOU”) specifically stated that the Debtor would sign a new personal guarantee to protect the Petitioner, the common understanding must have been reached as early as 3 June 2020.

(2)  Proposals for the assignment of the convertible bonds

22.  On the same day as the MOU, Sun Haiqing, the Executive Vice President of the Fixed Income Department of the Petitioner (“Sun”), made proposals (“Sun’s proposal”) for the assignment of the convertible bonds requiring, inter alia, that the Debtor be made a personal guarantor which Lai (acting for the Debtor) agreed to in principle.

23.  On 5 June 2020, Kwan informed Sun that the winding up application had been lodged and that he was working with the Debtor (who was willing to provide his asset list) to provide enough security over tangible assets to the Petitioner.

24.  In an email of 8 June 2020 to Sun, Kwan proposed the inclusion of his interest in Indo Co as security for the proposed assignment, promising to provide a proper valuation report of the coal mine.

25.  On 9 June, Sun requested feedback on Sun’s proposals as well as audit reports of SPC and the Debtor’s asset list, warning that it would be difficult for Bionic to resume operations if it stopped on 1 July 2020[6].

26.  On 12 June 2020, the Debtor, in following up on Sun’s proposals, after referencing Kwan’s provision to Sun of the Debtor’s ‘Personal Net Asset Breakdown’, outlined ‘their’ framework[7] of the acquisition agreement (which evolved into the Assignment), proposing, inter alia, to provide extra security of a mine worth at least USD 50 million and that he would remain as guarantor of the acquisition.

27.  Sun responded promptly, targeting 26 June (then 2 weeks away) for the signing of (i) the S&P agreement, (ii) the mine valuation and (iii) the security pledge agreement, a timeline the Debtor found acceptable.

(3)  The valuation report

28.  The valuation report exhibited is undated. Using the average price of USD 40 per tonne, the value of the mine ranged from USD 84 million to USD 215 million, the valuer’s ‘preferred’ value being USD 141 million.

29.  Kwan’s evidence is that he provided the valuation to the Petitioner on 22 June 2020[8] but did not provide the Debtor with the same until 26 June 2020[9].

30.  Pausing here, it should be noted that there is no evidence as to when Kwan himself received the valuation exhibited which, as noted, is undated[10].

(4)  23 to 29 June

31.  The 1^st draft of the transaction documents[11] was circulated by the Petitioner for comment in the early evening of 23 June 2020. When, on the following day (24 June), the Petitioner requested a reply by 5 pm, she was informed by Lai that an internal meeting[12] was scheduled at that time. Lai suggested reverting at 2 pm on 25 June to which Sun counter-proposed 8 pm of 24 June but did not receive a response.

32.  Lai’s email to Sun sent at 21:04 hours on 25 June referred to the draft documents being reviewed by “our legal professionals”.

33.  Despite several more chasers from Sun, no response was received on 26 June, the targeted signing date. Although revised drafts[13] of the Assignment, Charge and Pledge were sent to Lai in the early hours of Saturday, 27 June 2020, there was no reply from the Debtor or Lai until 29 June.

34.  According to the Debtor[14], the draft version of the Assignment circulated on 27 June 2020 for comment stated that SPC would provide (a) a charge over Simply Champion Limited (ie the Charge); (b) a pledge of shares amounting to 15% of the issued capital of Indo Co by Simply Champion (“15% Pledge[15]”) in favour of the Petitioner and (c) the Debtor’s personal guarantee.

35.  It was only after the weekend of 26-27 that Kwan sent an email to Sun (copied to Lai) at 09.31 on 29 June, stating that the Debtor would only be comfortable with proceeding if, inter alia, (i) the securities are prioritised in the following sequence: (a) coal asset shares; (b) the Guarantee; and (c) SPC; and (ii) Kwan be given 60 days after the signing of the Assignment to charge the shares in Simply Champion and for the share pledge in the Indo Co. In other words, the Debtor may not proceed if those “conditions” were not accepted.

36.  There is no evidence that the Priority Arrangement (raised for the first time on the eve of the last day for signing) was accepted by the Petitioner. Sun did not respond to that email and, instead, circulated a list of documents required for the signing to take place the following day.

37.  That afternoon in an email sent at 14:35, Lai commented on the draft Assignment, noting that SPC rather than the Debtor should be described as a Payor and the Debtor as a guarantor “for the last resort to pay”.

38.  Replying at 15:09, Sun agreed that the Debtor should be a personal guarantor rather than a payor and was happy to have a further discussion but made no response to the comment shown in quotes in §37 above. Instead, Sun chased for the documents requested in §36.

39.  Lai’s response (sent at 15:22) only addressed the documents requested and did not follow up on the “guarantor for the last resort to pay” suggestion.

40.  According to the Debtor[16], (a) later the same day he called Sun for clarification and she confirmed that the Charge and 15% Pledge would be secured in line with or immediately after the Debtor’s personal guarantee and should there be any default, the 15% Pledge and Charge would be enforced first; and (b) Kwan orally confirmed that his legal advisors had reviewed the draft documents and guaranteed that the sequence of enforcement was in line with the common understanding; that due to Covid, the Charge and 15% Pledge would be secured if not at the same time, immediately after the conclusion of the Guarantee and that, collectively, their value would exceed that of the Assignment and would be enforced first.

41.  Later that day, Sun reminded Lai of the Law Society’s requirement that a warning notice[17] must be signed at least a day before the Assignment which the Debtor did. It is the Debtor’s case that he did so in reliance on the representations made: see §§15-17 and 40 above.

(5)  30 June to 6 July

42.  At 18:46 pm on 30 June 2020, Lai assured the Petitioner that their[18] Indonesian lawyers had advised that the procedures concerning the Pledge could be completed within 30 days and that the Petitioner would be updated on progress. Lai reiterated that the Debtor agreed to provide a personal guarantee. Surprisingly, he made no reference to the Priority Arrangement.

43.  The documents for execution were circulated to Lai, Kwan and the Debtor by email on 30 June 2021 at 19:51 pm. According to the Debtor, it was only then that the Debtor realised that (i) the percentage of shares of the issued share capital of Indo Co to be pledged increased from 15% to 20%: and (ii) the absence of any provision relating to priority in terms of the sequence of enforcement of securities.

44.  The Debtor then called Sun for clarification who reassured the Debtor that he need not worry about the sequence of enforcement of the securities as the Charge and Pledge would be more than sufficient and that the Guarantee would not to be need to be enforced.

45.  According to the Debtor, at around 8 to 9 pm, when Xu Yong (“Xu”) of the Petitioner called to ask the Debtor to do the Petitioner a favour[19], the Debtor raised the issues mentioned in §44 above. Xu promised to sort matters out after the audit deadline, requesting the Debtor to sign the documents first.

46.  On 1 July 2020, after the Assignment, the Guarantee and the Charge were signed, the Petitioner agreed to SPC’s request to make the provision of the Pledge a condition subsequent and to suspend the winding up proceedings of Bionic.

47.  As the Waiver Letter would contain a guarantee confirmation, on 2 July 2020, before signing it, the Debtor signed a warning notice (the 2^nd warning notice) with provisions similar to §§7-8 of the 1^st warning notice[20].

48.  Subsequently, on or before 6 July 2020, prior to the signing of the Waiver Letter, the Petitioner and/or SPC[21] made further representations to the Debtor (on which he relied) that

(a)  the Charge would be secured within 30 days from the date of the Waiver Letter (“Time Extension Securities Representation”); and

(b)  the Priority Representation still holds true (“Reconfirmed Priority Representation”).

(6)  Subsequent events

49.  Suffice it to say that throughout July 2020 the Petitioner repeatedly followed up on progress regarding the Pledge and reminded Kwan and Lai that the Pledge and the power of attorney to sell the shares had to be completed by 5 August 2020.

50.  Kwan gave various excuses[22] for not providing the Pledge. In short, by the end of December 2020, he still failed to secure the Pledge and the only securities provided consist of the Charge (rendered useless because of the failure to transfer shares in Indo Co to Simply Champion) and the Guarantee.

IV.  Whether a bona fide dispute as to the debt exists

51.  In essence, the Debtor’s case is that he is not liable on the Guarantee for 2 reasons: (1) but for the last-minute percentage increase, the Pledge would have been implemented; and (2) the Petitioner’s oral assurances (through Sun) about the sequence of enforcement of the Securities.

  (1) The Pledge

52.  As a preliminary matter, given the events occurring in June 2020 set out above, there is no evidential basis to support the notion or suggestion implicit in §3.1 (a) of the Debtor’s written submissions that the Petitioner and Kwan were acting in concert (or that Kwan was acting on behalf of the Petitioner) in making the Securities Representations.

53.  Rather, the evidence supports the view that the Debtor and Kwan were on the same side (as it were) if not also acting as a team[23]. The Securities Representations can be traced back to the common understanding between Kwan and the Debtor as well as the Debtor’s email to Sun on 12 June. The Securities Representations did not emanate from the Petitioner[24] but from Kwan and the Debtor.

54.  As I understand it, it is said that but for the last minute percentage change, the Pledge would have been implemented since board approval had been given for the transfer of 15% of the issued shares in Indo Co. In other words, the last-minute change caused the Pledge to be derailed.

55.  The evidence of the Petitioner is that it had insisted that the value of shares to be pledged must be sufficient to cover 100% of the purchase price[25] and that the 15% figure did not come from the Petitioner.

56.  But the 15% figure appears to have featured in the draft version circulated on 27 June 2020[26]. How and by whom it came to be incorporated into the draft remain unclear.

57.  There is little evidence concerning Indo Co’s board approval for the transfer of 15% of the issued shares. Apart from a Whatsapp message from Kwan to Sun on 22 July 2020 (which was well after that date the Deeds were signed), the evidence does not reveal either the date the approval was obtained or the date Sun was informed of such approval.

58.  As it was accepted at the hearing that there was indeed a last-minute change to 20%, for present purposes, it will be assumed that it was the Petitioner who made the change.

59.  However, in Kwan’s evidence concerning the common understanding[27], he deposed to having proposed

“to [the Debtor] that he would include his investment group’s interest in Indo Co as part of the security to cover for him and explained that the board of Indo Co had already agreed to have 15% or less to be included in the security list, which is sufficient to shield [the Debtor] from liability[28].”

60.  As earlier noted[29], the common understanding appears to have been reached as early as 3 June 2020. It would therefore follow that board approval had already been obtained by that date.

61.  In Kwan 1^st (at §26), Kwan appeared to express surprise at the percentage increase without prior consultation with him. Kwan’s evidence is that he called Sun to inform her that the board of Indo Co never agreed to such an increase and would not approve it. Sun then allegedly confirmed that the Petitioner would change it back to 15% after execution but for the time being the documents should be signed to meet the auditing deadline of 30 June 2020 first.

62.  However, that evidence does not gel with the Whatsapp exchanges between Sun and Kwan during the period from 22 July through 12 August described in §§ 63-64 below. They not only show that Kwan made no objection to the percentage increase, but that he was actively seeking board approval for the 20%.

63.  In response to Sun’s query on 22 July for an update regarding the share charge, Kwan advised her that he was setting up an internal meeting for approval for 20%. On 27 and 29 July, Kwan advised that he was still “pushing” for the board meeting and did not consider it necessary to postpone the deadline of August 5 for implementation of the Pledge despite a shutdown of Indo Co by the Ministry of Mining because of a covid death.

64.  It is to be noted that Sun’s subsequent chasers elicited further excuses[30]. Her request made on 3 August for an email confirming the matters raised by Kwan was never met. Then, in response to Sun’s enquiry on 12 August as to whether there was an expected timetable, Kwan explained that there was no point in rushing because the documents have to be lodged with the mining department which remained closed[31].

65.  In my view those exchanges being contemporaneous are to be preferred as reflecting the true position.

66.  Suffice it to say that it is far from clear that the percentage increase derailed the Pledge. As will become apparent, the fact that the Pledge was not implemented does not afford the Debtor a defence.

  (2) Priority Arrangement

67.  Whether there is a bone fide dispute as to the debt turns on a single issue, namely, whether there is credible evidence of the existence of the Priority Arrangement[32].

68.  While the Priority Arrangement formed part of the common understanding, that was a matter between Kwan and the Debtor only, the Petitioner not being privy to it.

69.  The evidence on which the Debtor relies and which involves the Petitioner are the following:

(a)  the email Kwan sent to Sun on 29 June 2020 at 09:31 hours: see §35 above;

(b)  Lai’s email to the Petitioner sent at 14:35 hours that afternoon describing the Debtor as a guarantor “for the last resort to pay”: see §37 above;

(c)  oral assurances given by Sun to the Debtor sometime after 15:09 hours on 29 June 2020: see §40(a) above;

(d)  oral assurances given by Sun to the Debtor sometime after 19:51 hours on 30 June 2021: see §44 above; and

(e)  at the time the Debtor was given the 2^nd warning notice to sign on 2 July, Kwan and Sun already confirmed with the Debtor again that the Priority Arrangement would still stand (“Reconfirmed Priority Representation”).

70.  The Debtor attached great significance to the fact that the Petitioner made no response to the 2 email communications of 29 June from Kwan and Lai respectively. That silence was equated with acceptance.

71.  In evaluating the evidence relied on, it is necessary to view each piece of evidence in context.

72.  Both email communications were not made until the very eve of the day for signing the various Deeds.

73.  The original targeted signature date agreed by the parties was 26 June. Therefore, when the 1^st draft circulated on 23 June, it was not unreasonable for the Petitioner to have requested a reply by 5 pm the following day (24 June). That was not forthcoming not only on 24 June but also 25 and 26 June during which time, according to Lai, the drafts were being reviewed by “our legal professionals” (emphasis added). The excuses proffered for the delay in responding are not readily explicable[33].

74.  Revised drafts were circulated in the early hours[34] of 27 June. It is not known how extensive or significant the revisions were but they did not concern the Guarantee which did not require revision and was not circulated on 27 June.

75.  In any event, it was only in the morning of 29 June that Kwan’s email was sent to Sun. Prior to that email, the Petitioner had no inkling that the sequence in the enforcement of the securities was a ‘condition[35]’: it was submitted at the hearing that the Debtor’s agreement to be guarantor under the Guarantee was subject to the 3 ‘conditions’ stated in Kwan’s email of 29 June.

76.  Against that backdrop, the absence of any response to Kwan’s email could not reasonably be interpreted as an implied acceptance. Rather, the absence of a response is consonant with a rejection or non-acceptance of new conditions/requirements imposed out of the blue at the 11^th hour.

77.  Immediately before receiving the revised draft of 27 June, the Debtor was receiving legal advice on, inter alia, the draft of the Guarantee circulated on 23 June. As that draft did not require any revision, there was no further version. Despite this, the Debtor chose to communicate via Kwan’s email of 29 June instead of proffering suitably drafted clauses to achieve what was desired.

78.  The fact that later the same day Lai sent his email describing the Debtor as a guarantor “for the last resort to pay” reinforces nothing since, according to the Debtor’s own definition of the Priority Arrangement, SPC rather than the Debtor ranked 3^rd in the sequence of enforcement.

79.  It is also to be noted that non-compliance with the 3^rd condition (that Kwan be given 60 days rather than 30 after signing of the Assignment to complete the Charge and the Pledge) did not deter the Debtor from signing the Guarantee.

80.  What is more surprising is Lai’s email of 30 June (which was sent the day after Kwan’s 29 June message) referenced completion of the Pledge within 30 (rather than 60) days.

81.  As regards the oral assurances said to have been given by Sun on 29 and 30 June, they remain nothing more than the Debtor’s bald assertion that such oral assurances were made. Given that it was a critical matter from the Debtor’s perspective, it defies common sense that they are not reflected in writing in any contemporaneous note or email confirming such assurances after they were allegedly made. That is the more surprising given that (according to Lai’s email of 30 June) the Debtor (and Kwan) were receiving legal advice in the run-up to 29 June.

82.  Remarkably, the Debtor made no protest after receiving the Petitioner’s demand by letter for immediate payment on 30 December 2020 nor after receipt of the statutory demand of 1 February 2021.

83.  In so far as concerns the Reconfirmed Priority Representation, the only evidence is the Debtor’s assertion that such a representation was made by the Debtor and Kwan. No specifics or particulars were given at all, for example whether it was at a meeting or by telephone with all 3 present or that such assurances were given separately. In those circumstances, it is not an assertion to which any significance could be attached.

Conclusion

84.  In my view, for the reasons stated above, I do not consider that there is sufficient or credible evidence of the existence of the Priority Arrangement which is fatal to the Debtor’s defence, regardless of who was responsible for the non-implementation of the Pledge.

85.  In the absence of any substantial and bone fide dispute, it follows that the Petitioner is entitled to an order on the Amended Petition that the Debtor be adjudged bankrupt.