MCL v. JCPF

HCSD 43/2021

[2023] HKCFI 1409

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY DEMAND

NO 43 OF 2021

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D E C I S I O N

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BACKGROUND

1.  This is the Applicant’s application to set aside the Statutory Demand dated 25 August 2021 (“Statutory Demand”) served on him.

2.  The petitioning debt arises from the Applicant’s occupation from February 2020 to July 2021 of a flat situated in Smiling Court, 65 Bonham Road, Hong Kong (“Property”) of which the Respondent is and was at all material times its registered owner.

3.  The Respondent’s case is that the Applicant has failed to pay her a number of outstanding monthly rental payments totalling HK$434,736 during his period of occupation of the Property and the costs incurred in recovering the Property from the Applicant and restoring it to its original condition totalling HK$185,221.10.

4.  On 25 August 2021, the Respondent’s representatives served the Statutory Demand for the total sum of HK$619,957.10 on the Applicant.

5.  On 13 September 2021, the Applicant issued the present application to set aside the Statutory Demand.

6.  The Applicant has raised a number of points in his 2 affirmations filed in support of his setting aside application. At the hearing before me, the Applicant confirmed that he would only rely on the 3 grounds as set out in his written skeleton arguments as follows:

(a)  The debt is disputed on substantial grounds.

(b)  It is unjust for the Statutory Demand to stand.

(c)  The debt is not for a liquidated sum.

7.  I shall therefore only focus on these 3 grounds in the discussions below.

First Ground – The debt is disputed on substantial grounds

8.  Under Rule 48(5)(b) of the Bankruptcy Rules (Cap 6A), the court may grant an application to set aside a statutory demand if the debt is disputed on grounds which appear to the court to be substantial.

9.  In this case, the Applicant contends that the amount stated in the Statutory Demand is overstated and that the instrument(s)/document(s) which both parties rely upon to formulate the alleged det is also disputed.

10.  However, it is clear from the evidence filed by the Applicant himself that he admits that he owes the Respondent a portion of the debt to the tune of HK$227,950. In this regard, paragraphs 13 and 14 of the Applicant’s 1^st Affirmation dated 13 September 2021 clearly state as follows:

“13. However, the amount stated in the Statutory Demand is completely and unjustly overstated. While [the Respondent] now claims in the Statutory Demand that I owe her HKD619,957.10, the outstanding sum is in fact only HKD227,950.00 as shown in the only handwritten piece of paper of our arrangement, fully in [the Respondent’s] handwriting next to a printed Whatsapp conversion [sic] I have sent [the Respondent] in which she acknowledged and agreed to…

14. Due to some personal financial affairs, I was unable to make the payment to [the Respondent] which [the Respondent] knew full well and agreed to. I have since resolved my issue and am prepared to pay the amount of HKD227,950.00 to [the Respondent].” (emphasis added)

11.  It is trite that where only part of the petitioning debt is disputed on substantial grounds, the statutory demand still stands and a bankruptcy petition can properly be presented on the basis of the statutory demand, unless the undisputed/indisputable portion of the debt has been paid: Re Wong Mui Kuen Joanna (HCB 1631/2014, unrep, 12 Jan 2015) at §8 per Ng J; Re Cheung Chung, ex p Deng Wenyun [2019] HKCFI 2770 at §9 per DHCJ William Wong SC; Wong Man Kam Patrick v Ecosuccess Limited [2021] HKCFI 1725 at §§23 per DHCJ MK Liu.

12.  However, the Applicant has to date failed to repay the said admitted debt of HK$227,950.

13.  At the hearing, the Applicant submitted that he is now not liable to even repay the admitted sum of HK$227,950 because certain of the antiques which he owns and which were being held in a storage facility owned by the Respondent have been damaged. In particular, the Applicant stressed that a Song dynasty dish worth around US$65,000 (backed by an appraisal report) which he has now retrieved from the Respondent is damaged and he is entitled to set-off the value of the dish against the debt owing to the Respondent. During the hearing, the Applicant applied to adduce the said appraisal report as new evidence to support his set-off claim.

14.  However, the Applicant has:

(a)  never issued any summons returnable before this Court to adduce the said appraisal report;

(b)  never mentioned the alleged appraisal report in his skeleton arguments filed for this hearing;

(c)  not been able to provide a copy of the said report to this Court during the hearing.

15.  It is pertinent to note that in paragraphs 18 – 21 of his 2^nd Affirmation dated 3 December 2021, the Applicant deposed that he had reason to believe that his antiques which were then being held in the Respondent’s storage had been damaged. It is therefore plain that the Applicant has had plenty of opportunity before this hearing to adduce the necessary evidence to corroborate the alleged value that he now puts on the purportedly damaged antiques, but that he has not done so. The Applicant also accepted during the hearing that he has no good excuse for not adducing the necessary appraisal report or evidence earlier to support his set-off contention.

16.  In the circumstances, I would not accede to the Applicant’s application to adduce the purported appraisal report at this late stage. I also find that a portion of the debt claimed by the Respondent in the Statutory Demand (ie to the tune of HK$227,950) is undisputed or indisputable and for which the Applicant has not repaid.

17.  I therefore reject the Applicant’s first ground for setting aside the Statutory Demand.

Second Ground – It is unjust for the Statutory Demand to stand

18.  Under Rule 48(5)(d) of the Bankruptcy Rules, the court may grant an application to set aside a statutory demand if the court is satisfied, on other grounds, that the demand ought to be set aside.

19.  The Applicant submits that it would be unjust for the Statutory Demand to stand because he has the ability to repay the debt. In his skeleton arguments, the Applicant mentioned that he has to date completed two contractual works with monetary compensation well over the amount of the alleged debt. He prays in aid of §8 of the decision of Harris J in Shao Kung Chuen v The Bank of East Asia, Ltd (unrep, HCSD 35/2011, 7 Nov 2012) and submits that the court will in deciding whether to allow a statutory demand to stand take into account whether an applicant has taken any steps to secure the debt owed to the creditor.

20.  The Applicant’s submission that he has completed contractual works with monetary compensation well over the amount of the debt is nothing but a bare unparticularised assertion unsupported by affirmation or documentary evidence. It is in any event unclear how far this contention will advance the Applicant’s case when there is otherwise no credible evidence before me (eg bank statements) showing his current financial means to satisfy the debt. Although the Applicant indicated at the hearing that he could provide the contracts and the bank statements to the Court in due course to support his case, he also accepted that he has no good excuse for not adducing such evidence earlier.

21.  I do not see any good reason for acceding to the Applicant’s late application to adduce any such further evidence. Similar to the appraisal report mentioned earlier, the Applicant has had plenty of opportunity to adduce credible evidence of his financial means, but he has not done so.

22.  The reality is that despite clearly indicating in paragraph 14 of his 1^st Affirmation deposed back in September 2021 (see §10 above) that he had already resolved his personal financial affairs and was prepared to pay the debt of HK$227,950 to the Respondent, this undisputed portion of the debt remains outstanding. This objective fact speaks volumes of the Applicant’s ability to repay the debt owing to the Respondent.

23.  I therefore find that the Applicant’s second ground for setting aside the Statutory Demand has no merit.

Third Ground – The debt is not for a liquidated sum

24.  Under s6(2)(b) of the Bankruptcy Ordinance (Cap 6), a creditor’s petition may only be presented if the debt is for a liquidated sum payable to the petitioning creditor either immediately or at some certain, future time and is unsecured.

25.  The Applicant submits that if there is a genuine dispute over the amount owed and damages claimed, the amount owed may be considered an unliquidated sum and that the court will not in practice make a bankruptcy order for this particular type of debt, and there is no point in issuing a statutory demand. In this regard, he has referred me to §14 of the decision of Au-Yeung J in BKR v BBM [2021] HKCFI 2440.

26.  I find no merit in the Applicant’s contention.

27.  For the reasons already explained above in addressing the first ground for setting aside, the Applicant has already clearly admitted a liquidated sum of HK$227,950 owing to the Respondent.

28.  Further, BKR does not assist the Applicant. The court was concerned with the question of whether an unpaid lump sum instalment payable by the applicant there to his ex-wife pursuant to a family court order was a provable debt in bankruptcy and thus could have been the subject matter of a statutory demand. After referring to various authorities in the matrimonial context in §§10-12, the learned Judge held that courts do not in practice make a bankruptcy order on a petition founded on such matrimonial lump sum payments. It is in this context that the court then held in §14 that there is no point in issuing a statutory demand if the court will not in practice make a bankruptcy order for this particular type of debt. This clearly has no relevance to the present case.

CONCLUSION

29.  For the reasons given above, I dismiss the Applicant’s setting aside application.

30.  Pursuant to Rule 48(7) of the Bankruptcy Rules, I make an order authorising the Respondent to present a bankruptcy petition after 14 days from the date of this decision.

31.  There is also no reason why costs should not follow the event. I therefore make an order nisi that costs of these proceedings (including the hearing on 3 May 2023 and all costs reserved) be paid by the Applicant to the Respondent, such costs to be taxed if not agreed. The costs order nisi shall become absolute 14 days from the date of handing down of this decision.