C v. B LTD

HCSD 58/2020

[2021] HKCFI 1981

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY DEMAND

NO 58 OF 2020

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DECISION

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Introduction

1.  This is an application to set aside a statutory demand served on the applicant by the respondent on 30 October 2020 (“the Statutory Demand”).

2.  The Statutory Demand is based on a judgment debt arising from a final judgment entered against the applicant in the District Court action DCCJ xxxx/xxxx on 13 December 2019.  The judgment is based on credit card debts of the applicant.  As of the date of the Statutory Demand, the judgment debt stood in the sums of HK$206,124.61 and CNY91,559.44, which comprised interest accruing up to that date.

The applicant’s ground to set aside

3.  The applicant contends that the debt in the above sums stated in the Statutory Demand is highly questionable and unjustified.  His evidence is that in or about October 2019, he had a telephone conversation with a Ms Leung of the respondent.  The applicant raised queries on the amount of the outstanding debt, in particular how the interest amount was arrived at.  Ms Leung promised to give him a reply via the respondent’s solicitors.  However, to date, the applicant has received no reply.

4.  In his oral submissions today, the applicant said that the failure of the respondent to give him a breakdown of the debt may suggest that the amount claimed by the respondent is not accurate or correct.  The applicant also referred me to the decision in Chan WS v CC Bank [2021] HKCFI 143 at para 45 in which the court ruled that the bank in that case (another bank) overstated the debt in the Statutory Demand in that case.  Furthermore, the applicant has been told by his friends that banks do sometimes miscalculate credit card debts. 

5.  In his affirmation, the applicant also deposed to his medical condition.  He has been receiving medical and hospitalisation treatment since October 2019.  The most recent and serious treatments were received in August and September 2020.  Copies of medical certificates were exhibited to his affirmation.

6.  For these reasons, the applicant says that there is no merit for the respondent to issue the Statutory Demand at such a premature stage and there are bona fide disputes on the debt.  The Statutory Demand ought to be set aside.

Legal principles

7.  Rule 48(5) of the Bankruptcy Rules, Cap 6A, sets out the grounds on which the court may set aside a statutory demand.

8.  It seems clear that the applicant is relying on rule 48(5)(b), namely the ground that “the debt is disputed on grounds which appear to the court to be substantial”.

9.  A limited exercise is involved when one is considering an application to set aside a statutory demand.  All that the court is concerned with is whether the creditor is able to pursue bankruptcy proceedings founded on the statutory demand: Budge v AF Budge (Contractors) Ltd [1997] BPIR 366 at 372A-D, cited recently in Chan WS at para 28.

10.  Where the statutory demand is based on a judgment or order, the court will not at this stage go behind the judgment or order and inquire into the validity of the debt nor, as a general rule, will it adjourn the application to await the result of an application to set aside the judgment or order:  Re Malcolm Maydwell [1999] 3 HKLRD 325 at 334; Re Choy Wai Bor HCB 8565/2001, 28 May 2002 at paras 17, 20 to 23; Fung Tak Chi v Billion Eagle Ltd [2010] 4 HKLRD 571 at para 21. 

Discussion

11.  The judgment debt arises from the District Court judgment entered against the applicant back in December 2019.  There has been no appeal against the judgment.  Nor has there been any application to set it aside.  It is therefore an effective one and is binding on the applicant.

12.  The applicant’s stance is that the debt in the sums stated is highly questionable and unjustified.  However, he has given no particulars to demonstrate why that is so.

13.  Where the debtor asserts that there is a bona fide dispute on substantial ground in respect of the debt, he has to adduce sufficiently precise factual evidence which is believable, and must establish that he has a defence of substance, not just a fair probability of one: see, eg, Chan WS at para 30.

14.  Here, the allegations the applicant has made so far are generic and devoid of any details.  He does not come close to even spelling out the grounds of dispute.  Instead, he complains that the respondent has not reverted to him on his queries on the amount of the debt, including the calculation of the interest.  It is important to note that the applicant has not spelt out exactly what his queries were and precisely why he took issue with the calculation of the interest.

15.  The crux of the applicant’s submission boils down to this.  Given that there is no reply from the respondent despite his repeated requests, there is reason for him to form a view that the total sum of the debt is highly questionable and unjustified.

16.  The respondent’s evidence is that during the period before the service of the Statutory Demand, from January to October 2020, the respondent’s staff tried to call the applicant on many occasions in response to his request for a breakdown. But the applicant was not contactable. 

17.  I am not in a position today to resolve this factualdispute.  In any event, the important point here, as noted above, is that the applicant has at no time spelt out precisely what his queries over the debt are.  Thus he has not made out any defence of substance.

18.  The applicant refers to his illness.  Again, he has not explained how such illness would be relevant to the validity of the debt or the present application to set aside the Statutory Demand.  In his affirmation, he simply stated that he received medical treatment.  He said that his illness had prevented him from filing a defence in the District Court action.  But it is unclear at all why he has to date taken no step whatsoever in relation to the judgment while he is apparently able to progress with the present proceedings.

19.  In the circumstances of the present case, the court would not re-visit the soundness or appropriateness of the judgment, based on which the Statutory Demand was served.  In any event, the applicant has put forward no material before the court which justifies it in doing so.  He has failed to make out a proper ground for the setting aside of the Statutory Demand.

Conclusion

20.  I dismiss the setting aside application.

21.  Pursuant to rule 48(7), I order that the respondent be authorised to present a bankruptcy petition against the applicant after 14 days from today.