RE HU SIYUN

HCB 6219/2023

[2025] HKCFI 579

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 6219 OF 2023

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JUDGMENT

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Introduction

1.  This is the substantive hearing of the bankruptcy petition presented by the Petitioner against the Debtor on 25 October 2023 (“Petition”). The Petition is for a debt of over HK$31 million (“Debt”) in respect of a margin securities trading account no.52452 (“Margin Account”) and pursuant to a Margin Client’s Agreement dated 24 May 2011 (“Margin Agreement”) between the Debtor and the Petitioner.

2.  The Petition is based on the non-compliance with a statutory demand dated 15 August 2023 (“Statutory Demand”) in respect of an outstanding sum of around HK$35.47 million as at 1 August 2023, which was based on the account balance of the same amount and the “Margin Call” of around HK$34.49 million in the Debtor’s account statement dated 2 August 2023.[1]

3.  In the Notice by Debtor of Intention to Oppose Petition dated 19 December 2023 (“Notice”), it was stated that the Debtor intends to dispute the Debt and contends that the Debt is time-barred under the Limitation Ordinance, Cap 347 (“LO”).

4.  It is not in dispute that the only ground of opposition to the Petition is that the Debt is time-barred. At para 2 of his skeleton, Mr Cheung submits “the only real issue is whether a cause of action for a recovery of loan is made afresh each time again upon a mere fresh demand. The correct position as a matter of Hong Kong law is no.”

Deliberation

5.  As a preliminary observation, while counsel on both sides have laboured in their skeletons on the niceties of the law, in this court’s view, the matter is fairly straightforward.

6.  It is common ground that the relevant limitation period for the present purpose is 6 years: s 4(1)(a) of LO. It is also common ground that demand is a necessary element of the Petitioner’s claim against the Debtor.

7.  As far as what constitutes a demand, the Debtor’s case is that the margin call in each of the monthly account statement constitutes a demand by the Petitioner under Clause 7 of the Margin Agreement. This is clearly correct and accepted by the Petitioner: see 3^rd affirmation of Chan Ka Ho at para 12, despite the baffling non-committal in Mr Yau’s skeleton at para 24.2.

8.  Clause 7 of the Margin Agreement provides:

“7. The Client shall on demand from the Broker make payments of deposits or margins in cash, securities or otherwise in amounts agreed with the Broker or which may be required by the rules of any exchange or market of which the Broker to a member. Such demand from the Broker can be in the form of oral, written or fax communication or wordings such as ‘Margin Call’ on the Client’s daily and/or monthly statements.” (emphasis added)

9.  The difference between the parties is when the first demand was made for the Debt.

10.  At para 2.1 of Mr Cheung’s skeleton, he submits that time started to run upon the first monthly account statement issued by the Petitioner in May 2011. Thus, the Petitioner’s claim against him was time-barred by May 2017. If Mr Cheung is right, the Petition must be dismissed: Re Li Man Hoo (A Debtor) [2013] 4 HKLRD 247 at [32].

11.  At para 17 of Mr Cheung’s skeleton, he submits that “Correct application of the limitation law in Hong Kong should conclusively dispose of the present Petition…the petitioning Debt is time barred as a matter of law. The cause of action first accrued in the first issued monthly statement (to which P admits) 2011. The time expires in May 2017. The current Petition was not taken out until 2023.” (sic) On the evidence, there is no such admission by the Petitioner as suggested by Mr Cheung.

12.  The account statement for the trading month of May 2011 was the first one issued by the Petitioner after the opening of the Margin Account. The account statement is in the Petitioner’s standard form which contains inter alia an item of “Margin Call” and an item of “Margin Expiry Date” which is “On Demand”. However, the item “Margin Call” in the May 2011 account statement stated it was nil. On any view of the matter, it is impossible to construe that statement as a demand for anything.

13.  At the hearing, Mr Cheung, obviously knowing paras 2.1 and 17 of his skeleton are wholly untenable, corrects it and submits that time should only start to run in May 2013, in which case the time to sue expired in May 2019.

14.  On the evidence, the “Margin Call” for the trading month of April 2013 was around HK$16.3 million. The “Margin Call” for the trading month of May 2013 dropped to around HK$3 million. The “Margin Call” for the trading month of June 2013 further dropped to around HK$2.34 million. The “Margin Call” for the trading month of July 2013 rose to around HK$3.2 million and so on and so forth. By the time of the so-called expiry date in May 2019, the “Margin Call” was around HK$15.45 million.

15.  The point here is that given the trading activities of the Debtor after the Margin Account was opened, and given the variation of the value of his stock portfolio in the Margin Account, the “Margin Call” and thus the sum demanded from him fluctuated from time to time.

16.  In the present case, the “Margin Call” for the trading month of May 2013 was only around HK$3 million. On the other hand, the Debt is based on the account balance and “Margin Call” in the account statement dated 2 August 2023 for the trading month of July 2023, which were HK$35 million and HK$34 million odd. This court asks rhetorically how the Petitioner’s cause of action for Debt could possibly be accrued in May 2013 and thus be time-barred?

17.  At the hearing, Mr Yau submits that the “Margin Call” in the 2 August 2023 account statement was the demand for the present purpose. This court agrees. It goes without saying that a demand and thus a cause of action for around HK$3 million is different from a demand and thus a cause of action for HK$34 or HK$35 million.

18.  As stated earlier, at para 2 of his skeleton, Mr Cheung submits “the only real issue is whether a cause of action for a recovery of loan is made afresh each time again upon a mere fresh demand. The correct position as a matter of Hong Kong law is no.”

19.  In this court’s view, Mr Cheung has framed the issue incorrectly, albeit his answer to that incorrect issue is correct. Obviously, if a claimant’s cause of action has accrued, he cannot unilaterally extend the commencement date of the accrual by issuing a fresh demand so as to bypass the 6-year limitation period imposed by the LO. That is the point made by To J in Secretary for Justice v Chung Kam Ho [2013] 5 HKLRD 203, cited by Mr Cheung, at [25] and [26] as follows.

“25. Ms Wu submits that, according to [China v Harrow Urban District Council [1954] 1 QB 178], even if a payer remained in default after the due date, provided that the Commissioner issued a fresh demand note for the Government rent in arrears and surcharge, time would run afresh from the date of the fresh demand note. In other words, the Commissioner could simply ignore the Limitation Ordinance and issue demand notes as he wished so as to recover debts in respect of which the limitation period for bringing claims had expired.

26. I am astonished by Ms Wu’s submission… With respect, Ms Wu’s submission rests upon a misunderstanding of the China case. In my view, under the Limitation Ordinance, time starts to run from the due date stated in the first issued demand note, and if, by reference to the date on which the cause of action accrued pursuant to the first demand note, the limitation period has already expired, then the Commissioner loses the cause of action in respect of the debt forever….” (emphasis added)

20.  As a desperate attempt to salvage his position, at the hearing, Mr Cheung refers this court to Lee Kwok Wing v Chung Chuen Hei [2012] 4 HKLRD 917 at [89], in the context of the effect of part payment under s 23(3) of LO. At [89], Deputy Judge Lisa Wong SC (as she then was) observed that “Where payments are made in respect of a running account debt, the position is that the outstanding balance at any given time will be regarded as a single debt, in which case, regular payments into that account may be regarded as payments in respect of the amount then owed.” (emphasis added)

21.  It is difficult to understand how [89] can assist the Debtor. First, that para was concerned with s 23(3) of LO on the effect of part payment. Second, and more importantly, is Mr Cheung seriously suggesting that an outstanding balance of HK$3 million in May 2013 is the same single debt as the outstanding balance of HK$35 million in the account statement dated 2 August 2023 ? Even on the assumption that they were a single debt, there is no doubt in this court’s view that single debt is HK$35 million which only accrued in August 2023.

22.  For all the above reasons, this court is of the firm view that the time-bar argument is misconceived. There is no need to consider the parties’ argument about the correctness or relevance of Bank of Baroda v Mahomed [1999] CLC 463 (cited by the Petitioner) or the argument on whether there was part payment by the Debtor and thus the applicability of s 23(3) of LO.

Disposition and costs order

23.  For the above reasons, this Court hereby grants the usual Bankruptcy Order against the Debtor with costs.

24.  Since the parties have agreed at the hearing that costs should follow the event, this costs order is not nisi.