CHAN WS AND ANOTHER v. CC BANK

HCSD 22/2018

[2021] HKCFI 143

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY DEMAND

NO 22 OF 2018

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D E C I S I O N

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1.  By application dated 24 July 2018 (“Application”), Mr Chan WS (“Mr Chan”) and Mrs Chan CNP (“Mrs Chan”) (together “Debtors”) seek to set aside 2 statutory demands dated 15 June 2018 (“SDs”) served by CC Bank (“Respondent”) requiring each of them to pay $7,057,746.73 (“Debt”).

A.   Strike out Summons

2.  The Application was issued by Mr Chan at the time when he acted in person and the title was mis-stated as “on his own behalf and on behalf of the other Debtor, [Mrs Chan]”. The Respondent issued a summons dated 4 January 2019 (“Summons”) to strike out the name of the applicant and “prayer for relief” sought on behalf of Mrs Chan.  It is said that the Application discloses no reasonable cause of action and/or is an abuse of the Court’s processes on the grounds that (1) Mrs Chan is not a party to the proceedings and had not authorized Mr Chan to take out the Application on her behalf, and (2) Mr Chan has no locus standi to make the application on behalf of Mrs Chan. 

3.  In my view, the Summons is misconceived. 

4.  The Summons was issued under Order 15 rule 6 and Order 18 rule 19 of the Rules of the High Court (“RHC”) and inherent jurisdiction of the Court.  However, not all the rules under the RHC are applicable to bankruptcy proceedings.  Order 1 rule 2 of the RHC provides that the rules shall not have effect in relation to, inter alia, bankruptcy proceedings.  The application of the RHC to bankruptcy proceedings is governed by s 99(1) of the Bankruptcy Ordinance (Cap 6) (“BO”), which provides that:

“the rules and practice of the High Court for the time being for regulating the ordinary civil procedure of the court shall, so far as the same may be applicable and not inconsistent with the provisions of the Ordinance, be applied to bankruptcy proceedings” (underlined added)

5.  Under s 6A(1) of the BO, a creditor may present a bankruptcy petition against a debtor based on non-compliance with a statutory demand.  The requirements of a statutory demand are prescribed by rules 44 to 49 of the Bankruptcy Rules (Cap 6A) (“BR”), which must be strictly complied with.  These rules provide a complete code governing how a statutory demand is to be issued, served and challenged.  I am unable to discern any basis (none has been suggested) which requires the application of Order 15 rule 6 or Order 18 rule 19 of the RHC to an application to set aside a statutory demand.

6.  Further, an interlocutory application made pursuant to the RHC is inconsistent with the provisions under Part II of the BO which govern “proceedings from bankruptcy petition to discharge”, and Part III of the BR which govern “proceedings in bankruptcy”.  These provisions envisage and, indeed, require the Court to deal with the proceedings in a summary, expeditious and costs effective manner.  In the context of an application to set aside a statutory demand, the need for speedy determination is reinforced by rule 48(1) of the BR, which empowers the Court to dismiss the application without giving notice to the creditor.  This is necessary as once an application is made, the time for compliance with the statutory demand is suspended (see rules 47(3) and 48(2) of BR).

7.  Even if (contrary to my view) there is a proper basis for a party to make an interlocutory application pursuant to any rules under the RHC, it would generally be pointless if the application is based on a technical point.  This is because s 124(1) of the BO provides that “[n]o proceeding in bankruptcy shall be invalidated by any formal defect or by any irregularity unless the court is of the opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by any order of the court”. 

8.  The Summons is a pointless and unnecessary application:

(1)  Unlike other proceedings such as a writ action where determination of a strike out application may put an end to the entire proceedings (such that much costs and time can be saved), an application to strike out the Application would not have such effect, as the Court is still required to consider whether the grounds stipulated in rule 48(5) are made out.

(2)  It is difficult to see what benefit the Respondent seeks to achieve by pursuing a technical error made by a litigant in person. 

(3)  The alleged lack of authority was raised by the Respondent despite the fact that in Mr Chan’s affirmation filed on the same day as the Application, he stated that he had been duly authorized by Mrs Chan to make the affirmation in support of the Application.  Shortly after the Summons had been issued, Mrs Chan confirmed in her affirmation filed on 18 January 2019 that she had authorized Mr Chan to make the Application on her behalf and adopted the grounds set out in Mr Chan’s affirmation. 

(4)  As the Respondent did not abandon the Summons, Mrs Chan filed a fresh application on 25 October 2019 to formally adopt the grounds advanced in the Application, while Mr Chan sought leave to amend the Application to remove the reference to Mrs Chan. 

(5)  It was only until 28 December 2020 when the Skeleton was lodged by Ms Tiffany Chan, counsel for the Respondent, that the Respondent finally indicated that it was “prepared to proceed on the basis that the [Application] is made by Mr and Mrs Chan respectively”, but sought costs of the Summons in the amount of $26,775.50. 

9.  For the reasons stated in §§3 to 8 above, the Summons is dismissed. 

10.  As for costs, I make a costs order nisi that the costs of and occasioned by the Summons should be paid by the Respondent to the Debtors and assessed at $600, being 3 hours’ work at $200 per hour[2].

11.  I consider that the Summons is a satellite litigation.  I am minded to make a wasted costs order against the Respondent’s solicitors to deprive them of their right to recover all the costs incurred in respect of the Summons.  For this purpose, I allow the Respondent’s solicitors to show cause as to why the Court should not make such an order against them either at a 30 minutes hearing or by way of written submissions, to be fixed or lodged within 14 days of this Decision. 

B.      Background facts

12.  The Debtors were (and still are) the only directors and shareholders of DML (“Company”). 

13.  By a General Agreement dated 12 August 2008, the Respondent agreed to advance loan facilities to the Company (“General Agreement”).  On the same day, the Debtors executed a continuing guarantee in favour of the Respondent (“Guarantee”). 

14.  Between April 2009 and January 2015, the Respondent issued various facility letters to the Company, the last one of which was dated 29 January 2015 (“2015 FA”). 

15.  On 14 March 2016, the Respondent and the Company agreed to restructure the indebtedness on the terms set forth in a letter of the same date (“Restructuring Agreement”).  The Restructuring Agreement provided, inter alia, that (1) a new loan in the amount of $7,030,022.05 was formed to capture all the indebtedness due to the Respondent; (2) interest at HKD prime + 2% p.a.; (3) the loan should be repaid by 48 monthly instalments; (4) the instalment amount should be $50,000 for the 1^st to 12^th month, $160,000 for the 13^th to 24^th month and $313,000 for the 37^th to 48^th month; (5) if the Company failed to repay any of the instalments due, the remaining amount of the debt would become payable immediately; and (6) the Agreement was “without prejudice to, and should not be construed as a waiver of any other rights or remedies which [the Respondent] might have, including the overriding right of repayment on demand”. 

16.  The Restructuring Agreement did not refer to the General Agreement or any facility letters issued by the Respondent to the Company. 

17.  Between 29 March 2016 and 14 February 2017, the Company repaid the 1^st to 13^th instalments due.  However, on 13 January 2017, the Respondent exercised its right to demand full repayment of all the remaining amount due within the next 7 days. 

18.  After 2 without prejudice meetings between the Respondent and the Company (represented by Mr Chan), on 21 February 2017, the Respondent agreed to allow the Company to repay the amount due in accordance with an accelerated repayment schedule, which required the Company to repay by monthly instalments of $350,000 (for March, April and May 2017), $500,000 (for June, July and August 2017), and $1,200,000 (for September, October and November 2017) (“Accelerated Schedule”).  This was confirmed in PC[3]’s email of the same date (“Email”). 

19.  The Company did not repay the monthly instalments in accordance with the Accelerated Schedule.  Instead, between 16 March 2017 and 16 August 2017, the Company made partial repayments in respect of the 1^st to 6^th monthly instalments in the aggregate amount of $850,000. 

20.  In September 2017, the Respondent (represented by PC) had a meeting with Mr Chan (“WP Meeting”). At the WP Meeting, the Respondent sought further security from the Company and informed Mr Chan that the Respondent “would be prepared to hold off legal action momentarily” if Mr Chan could ensure timely payment in the future. 

21.  Thereafter, the Debtors procured EL (“EL”), a company wholly owned and controlled by them, to execute a mortgage dated 7 February 2018 over a property at No 45 Island Road (“Property”) in favour of the Respondent (“Mortgage”).  At that time, the Property was already subject to 2 prior mortgages in favour of Bank of East Asia (“BEA”) and another lender.  The Mortgage stated, inter alia, that in consideration of the Respondent agreeing at the request of EL and the Company not to enforce the immediate repayment of sums owed by the Company, they covenanted to pay on demand all “Secured Indebtedness” to the Respondent.

22.  On 30 May 2018, BEA exercised its power of sale and sold the Property for $54 million.  On 18 December 2018, the Respondent was informed by BEA’s solicitors that there was no surplus available for subsequent mortgagee of the Property.

23.  As no further repayment was made by the Company, EL or the Debtors, the Respondent issued and served the SDs on the Debtors on 15 June 2018. 

24.  In the SDs, the Debt was described in this way:

“Pursuant to the terms and covenants of, inter alia, the Guarantee dated 12 August 2018 executed jointly and severally by [Mr Chan] and [Mrs Chan], you are liable to pay to the creditor the amounts outstanding under the banking facilities granted by the creditor to [DML] pursuant to, inter alia, the facility letter dated 29 January 2015.

As at 5 June 2018, you were and are still indebted to the creditor the sum of HK$7,057,746.73 together with further interest accruing on the sum of HK$5,380,022.05 at the rate of 2% per annum over the creditor’s Hong Kong Dollar prime lending rate from and including 6 June 2018 until payment in full. The calculation are particularised as follows:

SCHEDULE
(i)	Principal	HK$5,380,022.05
(ii)	Accrued interest	HK$1,665,724.68
(iii)	Legal Fee	HK$12,000
		Total: HK$7,057,746.73”

C.      Applicable principles

25.  The Application is governed by rules 47 and 48 of the BR.   Rule 48(5) provides that the Court may grant the application if:

“(a) the debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt or debts specified in the statutory demand;

(b) the debt is disputed on grounds which appear to the court to be substantial;

(c) it appears that the creditor holds some security in respect of the debt claimed by the demand, and either rule 44(5) is not complied with in respect of it, or the court is satisfied that the value of the security equals or exceeds the full amount of the debt; or

(d) the court is satisfied, on other grounds, that the demand ought to be set aside”.

26.  The burden is on the Debtors to satisfy the Court that there are valid grounds to set aside the SDs.    

27.  A statutory demand followed by a bankruptcy petition is a two-stage process.  This was explained by Carnwath LJ in Owo-Samson v Barclays Bank Plc & Boyden (No 1) [2003] BPIR 1373, at §16 in this way:

“The ordinary procedure, involving the ‘two-stage process’ of a statutory demand followed by a bankruptcy petition, is well known (see the description in Re a Debtor (No 415-SD-1993) [1994] 1 WLR 917, per Jacob J). The service of a ‘statutory demand’ in the prescribed form is simply one means of establishing ‘inability to pay’: see s268(1)(a) of the 1986 Act. Jacob J said of this stage (at 920):

‘The procedure is intended to be brief.   In my view it is aimed at establishing an inability to pay and no more.  It is not a general coarse sieve where the court considers generally whether the petition will succeed or fail.’ (at 920G)”  

28.  In considering an application to set aside a statutory demand, the Court is only concerned with whether the creditor is able to establish a debt founded on the demand.   This was a limited exercise, as described by Peter Gibson LJ in Budge v AF Budge (Contractors) Ltd [1997] BPIR 366 at 372A-D :

“Miss Heilbron has submitted that the whole matter should be looked at, in her words, ‘in the round’. I think that this may be a misunderstanding of the limited exercise that 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. The creditor must establish a debt. It is for the debtor to establish why he cannot do so, at any rate by the route of a statutory demand …” (underlined added)

29.  Where a debtor relies “on other grounds” within rule 48(5)(d), the question for the Court remains the same – whether the creditor is entitled to rely on the non-compliance with the statutory demand to found a petition.   This was stated by Nicholls LJ in In re A Debtor (No 1 of 1987) [1989] 1 WLR 271 at 276B-E:

“… Under the Act, a statutory demand which is not complied with founds the consequence that the debtor is regarded as being unable to pay the debt in question or, if the debt is not immediately payable, as having no reasonable prospect of being able to pay the debt when it becomes due. That consequence, in turn, founds the ability of the creditor to present a bankruptcy petition because, under section 268(1)[4], in the absence of an unsatisfied return to execution or other process, a debtor’s inability to pay the debt in question is established if, but only if, the appropriate statutory demand has been served and not complied with.

When therefore the rules provide, as does rule 6.5(4)(d)[5], for the court to have a residual discretion to set aside the statutory demand, the circumstances which normally will be required before a court can be satisfied that the demand ‘ought’ to be set aside, are circumstances which would make it unjust for the statutory demand to give rise to those consequences in the particular case. The court’s intervention is called for to prevent that injustice.” (underlined added)

30.  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 (Re Leung Cherng Jiunn [2016] 1 HKLRD 850, at §27, per Kwan JA (as she then was)).  In this regard, it is not sufficient for the debtor to merely raise “a cloud of objections” on affidavits (Koo Hon Ming v Bank of Communications, HCSD 2/2001, 24 October 2001, §7).

D.   Merits of Debtors’ grounds

31.  In his affirmation filed on 24 July 2018 (“Chan 1^st”), the Debtors raised the following grounds in support of the Application: 

(1)  the Debt is “questionable and unjustified”.  No breakdown of the Debt was provided by the Respondent, despite their request (Disputed Amount Ground);

(2)  the Debtors relied on and acted upon the Restructuring Agreement and made repayment of $1.65 million. However, after the Respondent had commenced legal proceedings against the Debtors and the Company for repayment of other debts, the Respondent decided not to adhere to the Restructuring Agreement and sought immediate repayment of the Debt (Restructuring Agreement Ground);

(3)  At the WP Meeting, PC on behalf of the Respondent “unequivocally indicated” to Mr Chan that “if additional security could be provided to the [Respondent], the [Respondent] would not commence any legal actions against [the Debtors] and/or [the Company] in respect of the Debt until [Mr Chan] was in a position to make repayment by recovering the account receivables due to [the Company] by third parties, or the security is sold and/or realized, whichever is earlier” (“Promise”). In reliance on the Promise, the Mortgage was executed in favour of the Respondent. As the account receivables due to the Respondent have not been recovered and the Property has not been realized, the Debt is not immediately repayable (Promise Ground); and

(4)  The Respondent holds security in respect of the Debt (Security Ground).

32.  In his 2^nd affirmation filed on 19 August 2019 (“Chan 2^nd”), Mr Chan asserted that he had been told by PC that if additional security was provided, the Respondent “would allow more time for [them] to try to collect on [his] outstanding loans to third parties”, and the Respondent “would not seek repayment of the outstanding sums until [they] were in a position to make repayment”. 

33.  I first deal with the Promise Ground. 

34.  Ms Chan submits that the Debtors’ allegations in respect of the Promise are not supported by any evidence and are unbelievable given that:

(1)  in Chan 1^st, the Promise required the Respondent to withhold legal action indefinitely, whereas in §4 of Chan 2^nd, the Promise involved a “temporary time extension”;

(2)  the Promise is contradicted by the following contemporaneous documents:

a.  clauses 2-3 and 17 of the General Agreement where the Respondent has overriding right to demand for repayment, which may only be waived in writing and specifically;

b.  the Guarantee where the Debtors agreed (i) to repay the amount due by the Company “on demand” as if they are principal obligors (clause 2); (ii) the Guarantee is continuing and shall not be satisfied by any intermediate payment (clause 6); (iii) their obligations are not affected by any time or indulgence granted to the Company or any person (clause 10(a)); and (iv) the Respondent’s rights under the Guarantee may be exercised as often as necessary, and may only be waived in writing and specifically (clause 20);

c.  the 2015 FA, which stated that the finances were extended under the terms of the General Agreement;

d.  the Restructuring Agreement, which stated that (i) any failure to pay the instalments due would render the remaining amount due immediately, and (ii) the Agreement should not be construed as a waiver of any rights of the Respondent including the overriding right of repayment on demand;

e.  the Email where PC expressly reserved all the “unfettered rights” of the Respondent; and

f.  recital C and clause 2.01 of the Mortgage, which stated that  the Respondent agreed not to enforce immediate repayment of the sums due from the Company and to grant indulgence to the Company “for so long as the [Respondent] may from time to time determine at its absolute discretion”;

(3)  PC denied that he had made the Promise and he did not have the requisite authority to make such promise on behalf of the Respondent;

(4)  The Promise is inherently unbelievable as (a) it is contrary to commercial sense for any bank to bind itself to an indefinite extension of time to obtain repayment of the amount due, (b) is contrary to the Respondent’s debt collection policy, and (c) in respect of the Mortgage, both parties were uncertain as to whether there would be surplus for the Respondent;

(5)  The allegations do not give rise to a claim for promissory estoppel or waiver in that (a) there was no unequivocal representation made by the Respondent; (b) the Debtors have not altered their position in any detrimental way.  In any event, promissory estoppel only causes a temporal and limited change in the rights of the parties. Upon giving reasonable notice to the Debtors, the Respondent would be entitled to enforce its strict rights under the Guarantee (cf. Pacific Harbor, HCA 1257/2013,  1 August 2014, §§75, 78; Estoppel by Conduct and Election, 2^nd ed, §13-23).  Reasonable notice was given to the Debtors, as the SDs were served on the Debtors on 15 June 2018, more than a year after the last repayment had been made by the Debtors (in August 2017).

35.  I do not think that the Debtors have adduced sufficiently precise factual evidence in support of the Promise.  In none of the documents adduced by the parties was there any reference to the Promise.  To the contrary, the Promise is contradicted by clause 2.01 of the Mortgage, which stated that any indulgence granted by the Respondent would be “at its discretion”. 

36.  More importantly, on the Debtors’ own case, the Promise was made by the Respondent orally.  Such oral promise could not constitute a waiver of the Respondent’s rights under the Guarantee, as clause 20(c) of the Guarantee provided that the Respondent’s rights “may be waived only in writing and specifically”.

37.  There is no merit in the Security Ground. 

(1)  The only security identified by the Debtors is the Mortgage over the Property.  As the Property was provided by a third party (Easy Luck), it was not a “security in respect of the debt” for the purpose of rule 48(5)(c) of BR (Re A Debtor (No 310 of 1988) [1989] 1 WLR 452; Re Kwok Chok Yee [2000] 2 HKC 543 at 546B-C).     

(2)  In any event, the Property had already been sold by BEA and no surplus was available to any subsequent mortgagee.  There is no basis to suggest that there is any value in the Mortgage. 

38.  As for the Restructuring Agreement Ground, it is not in dispute that the Company relied on the Restructuring Agreement and repaid $1.65 million to the Respondent.  I do not think that such repayments would give rise to any estoppel or waiver of rights as against the Respondent. 

(1)  Ms Chan submits that the Restructuring Agreement was signed by the Debtors as guarantors.  This is not apparent from the copy of the Restructuring Agreement produced by the Respondent, which shows that it was signed by Mr Chan and Mrs Chan “for and on behalf of” the Company. 

(2)  This notwithstanding, as the Respondent agreed to allow the Company to repay the debt by instalments and the Debtors were liable to repay the same “as primary obligors”, the Debtors’ obligations to repay the debt would be governed by the Restructuring Agreement. 

(3)  The 4^th and 5^th paragraphs of the Restructuring Agreement made clear that the Respondent reserved its rights to demand immediately repayment of the “entire indebtedness” and that there was no waiver of any rights and remedies which the Respondent might have.

(4)  There was no detriment to the Company or the Debtors in making repayments pursuant to the Restructuring Agreement.  Prior to the Restructuring Agreement, they were liable to repay all the amount owed to the Respondent immediately, whereas under the Restructuring Agreement, they were only liable to repay the amount by instalments. 

39.  I do not agree with Ms Chan’s submission that the Company failed to repay the instalments in accordance with the Restructuring Agreement[6]. As stated in §17 above, until the Respondent exercised its right to require the Company to repay the amount due in full, the Company did repay the 1^st to 13^th instalments in accordance with the Restructuring Agreement.  However, as the Respondent specifically reserved its rights to demand immediate repayment, it was entitled to make such demand and, thereafter, to require the Company to repay the amount due in accordance with the Accelerated Schedule. 

40.  As for the Disputed Amount Ground, this is a point raised by the Debtors at the outset:

(1)  On 11 July 2018, the Debtors through their former solicitors, Messrs PC Woo & Co, requested Messrs Wilkinson & Grist (“W&G”), the Respondent’s solicitors, to provide a breakdown of the calculation of the principal and interest referred to in the SDs. 

(2)  In their letter dated 8 August 2018, W&G “put on record” that as at 18 July 2018, the Company were indebted to the Respondent in the sum of $6,403,497.39 together with interest accruing on the sum of $5,380,022.05 at 2% p.a. over prime lending rate from 19 July 2018.  In the schedule appended to their letter, it can be seen that as at 18 July 2018, the correct amount of the debt was $6,403,497.39 of which $1,023,475.34 was interest accrued on the unpaid principal. 

(3)  In §25 of the affirmation of AL filed on 4 January 2019 on behalf of the Respondent, he acknowledged that the Debt stated in the SDs had been “overstated due to clerical mistake”, but said that the Respondent had been advised by W&G that the overstatement would not be a ground for setting aside the SDs. 

41.  In light of the principles set out in §§27 -29 above, it would be incumbent upon the Respondent to amend the SDs or issue fresh demands with the correct amount and particulars of the debt, so that the Debtors can consider whether there is a proper ground to challenge the new demands or to pay the debt within the prescribed time limit.  It is difficult to see why the Respondent insisted on maintaining the SDs, which would not serve any purpose and would give rise to unnecessary argument between the parties.  This is because when a creditor presents a petition in reliance on the unsatisfied demand for the purpose of showing “inability to pay” debt, it will have to state and confirm that the debtor has failed to satisfy the demand served on the debtor (see s 6A(1)(a) of the BO).  The creditor will not be able to make such statement when it knows full well that the debt set out in the demand has been overstated.    

42.  To date, the Respondent has made no attempt to rectify the mistake in the SDs. 

43.  Ms Chan submits that the overstatement of the Debt “would not adversely affect the validity of the SDs”, relying on the following passage in Re Ip Pui Man Nina [2011] 3 HKLRD 299 at §75, per Au J (as he then was):

“An overstatement of the indebtedness in the statutory demand will not automatically entitle the debtor to have the demand set aside. The relevant question is whether injustice would be caused to the debtor by allowing the particular demand to stand: Re Kwok Chok Yee [2000] 2 HKC 543, 548G; Re a Debtor (No. 1 of 1987) [1989] 1 WLR 271, 276C-E, 279F-G.”

44.  As is clear from Re Ip Pui Man Nina and Re Kwok Chok Yee, the principle applies when the Court considers whether a  bankruptcy order should be made against the debtors at the hearing of the petition, in circumstances where the debtor has not applied to set aside the demand. It is not concerned with an application to set aside a statutory demand. 

45.  In any event, while an overstatement of the debt will not automatically entitle the debtor to have the statutory demand set aside, it is a factor which the Court will take into account in considering whether to set aside the demand.  Where, as here, the overstatement was of a significant amount and no attempt has been made by the creditor to correct the overstatement, the Court is entitled to set aside the demand on the ground that the debt is disputed on substantial ground or that the demand ought to be set aside, under limb (b) and (d) of rule 48(5) of the BR.

46.  For the reasons set out in §§40 to 45 above, the SDs should be set aside on the grounds that (1) there is a valid dispute on the amount of the Debt, and (2) the SDs, which contained an overstatement of the Debt, cannot be relied upon by the Respondent in the petition against the Debtors, and it was unreasonable for the Respondent to continue to pursue the SDs. 

47.  As for the costs of the Application, I make a costs order nisi that there be no order as to costs as between the Debtors and the Respondent.  This reflects the fact that while the Debtors succeed in setting aside the SDs, they fail in most of the grounds advanced in support of the Application. 

48.  I am minded to limit W&G of their right to recover the costs of the Application from the Respondent to not more than $100,000 for the following reasons:

(1)  It seems to me that but for the advice rendered by W&G, the Respondent would have taken step to amend the SDs or issue new demands which stated the correct amount of the debt.  Indeed, when pressed by this Court as to why the Respondent did not take such step when it was aware of the overstatement of the Debt shortly after the SDs had been served, Ms Chan is unable to offer any proper explanation, other than contending that the overstatement would not automatically invalidate the SDs and the Respondent wants to recover the costs incurred in the Application. 

(2)  I do not think that the stance taken by W&G is a proper or reasonable one, having regard to the matters set out in §§40-46 above.  Had W&G properly advised the Respondent, it would have obviated the need for the parties and the Court to consider the Disputed Amount Ground, and the Respondent would be able to present a petition in reliance on demands which state the debt correctly.   

(3)  W&G submitted a statement of costs in respect of the Application claiming an exorbitant amount of $670,195.  These include (a) $330,800 allegedly for “communications” with client (40.4 hours by a partner at $4,000/hour), the Debtors, counsel and attending the hearing (10 hours by the same partner); (b) $243,200 allegedly for preparation and perusal of documents (60.8 hours by the same partner) and attending hearings (12.5 hours by the same partner and another fee earner) and counsel’s fees for attending the previous adjourned hearing and this hearing ($37,500).    

(4)  The costs claimed by W&G are wholly unreasonable when the substantive contents of the Debtors’ affirmations were set out in 3 pages.  It is difficult to see how the solicitors could have spent so many hours on such a simple and straight forward matter, particularly when they have instructed counsel to attend the substantive hearings of the Application. 

49.  I allow W&G to show cause as to why the Court should not make the aforesaid wasted costs order against them either at a 30 minutes hearing or by way of written submissions, to be fixed or lodged within 14 days of this Decision.

50.  I take this opportunity to remind the practitioners that statutory demand and bankruptcy proceedings are designed to deal with clear cases where there is no real or bona fide dispute between the parties on the debt.  The Court would expect the costs claimed by a creditor to be commensurate with the nature of the proceedings.  A creditor cannot on the one hand contend that the application is a clear case and, at the same time, claim to have expended a lot of time and costs in opposing such application.  Where a client decides to allow its solicitors to expend much time and costs on the application and retain counsel to deal with the substantive hearing, they cannot expect the Court to allow both the solicitors’ costs and counsel’s fee at the expense of the debtor.