RE CHOY SHIU TIM

HCB 7443/2025

[2026] HKCFI 1338

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 7443 OF 2025

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REASONS FOR JUDGMENT

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1.  By Petition presented on 26 September 2025 the petitioner, Mr Chan Wah Lit (陳華烈)(“Petitioner”), seeks a bankruptcy order against the debtor, Mr Choy Shiu Tim (蔡紹添)  ("Debtor"), on the ground that he failed to comply with a statutory demand served upon him on 23 June 2025. The petitioning debt in the amount of HK$30,450,000 (“Debt”)  is based on a personal guarantee dated 3 November 2020 (“Guarantee”)  executed by the Debtor in respect of a loan in the amount of HK$21,000,000 (“Loan”)  said to have been made by the Petitioner to Mr Samuel Se Chung Chiu (“Chiu”).

2.  After hearing the submissions of counsel, I dismissed the Petition and ordered the Petitioner to pay the costs of and occasioned by the Petition to the Debtor on an indemnity basis and the Official Receiver’s costs be deducted from the deposit.  These are the reasons for my judgment.

3.  The Petitioner’s case, as pleaded in §2 of the Petition, is as follows:

“The [Debtor] is justly and truly indebted to [the Petitioner] in the aggregate sum of HK$21,000,000.00 plus 10% interest per annum in the sum of HK$9,450,000 up to 2^nd May 2025 and continues until payment being the outstanding loan repayment. Pursuant to the Guarantee dated the 3^rd day of November 2020, the [Debtor] is a guarantor to a loan made by [the Petitioner] to [Chiu]”.

4.  Reliance is placed on the statutory demand dated 22 May 2025 requiring the Debtor to pay the Debt within 21 days thereof (“SD”), which was served on the Debtor by way of advertisement on 23 June 2025[1].

5.  In the SD, the Debt is said to have been incurred on 3 November 2020; the Debtor “is a guarantor to a loan made by the [Petitioner] to [Chiu] which is in default”; and the Debt includes interest at 10% p.a. up to 2 May 2025.

6.  Prior to service of the SD, the parties engaged in correspondence as follows:

(1)  By letter dated 25 April 2025 to the Debtor, Messrs. Yuen & Partners (“YP”)  on behalf of the Petitioner enclosed a draft statutory demand and stated that unless the Debtor settle the Debt within 7 days, the SD would be “formally” issued.

(2)  In response, on 7 May 2025 the Debtor’s former solicitors, Messrs. CLKW Lawyers LLP (“CL”), requested YP to provide the loan agreement, the Guarantee and proof of payment of the alleged loan to Chiu.

(3)  On 14 May 20925, YP provided (a)  a 2-page Loan Agreement made on 3 November 2020 between the Petitioner and Chiu (“Loan Agreement”)  and (b)  the Guarantee, but not document relating to proof of payment.

(4)  By letter dated 20 May 2025, CL repeated the request for proof of payment of the alleged loan to Chiu.  The request was ignored by the Petitioner.

7.  The Petitioner did not provide any document evidencing payment or remittance of the Loan and issued the SD.  The Petitioner has not been able to serve the SD on the Debtor until 23 June 2025 when the same was served by way of advertisement.  

8.  On 26 September 2025, the Petition was presented.

9.  By letter dated 12 November 2025 to YP, Messrs. Ince & Co., solicitors for the Debtor, stated that (1)  the Loan Agreement and the Guarantee are “both sham documents, and that there was no genuine loan transaction between the Purported Borrower and Purported Lender”, the execution of which were allegedly witnessed by Mr Ernest Yuen of YP; and (2)  the Petitioner had failed to provide any documents evidencing payment of the alleged Loan, and demanded the Petitioner to produce evidence or proof of payment within 7 days.

10.  On 16 December 2025, the Debtor filed a notice of intention to show cause and an affirmation in opposition (“Debtor 1^st”).  In Debtor 1^st, the Debtor denies liability to pay the Debt on the following grounds:

(1)  The Debtor has never been provided with any contemporaneous records showing that the alleged Loan had been drawn down by Chiu or remitted by the Petitioner, despite specific requests made by the Debtor for such documents[2];

(2)  The alleged Loan is “deeply suspicious” in that (a)  it was only for a term of less than 2 months and repayable on 2 January 2021 such that Chiu would have been in default for 5 years; (b)  the first time the Debtor was told that Chiu had “defaulted” on the Loan was 25 April 2025 when the draft SD was sent to him; and (c)  the Debtor never received any notice of default against Chiu, and neither the SD nor the Petition states the nature of Chiu’s purported default, or the sum due and owing by Chiu; and

(3)  The Debtor is not aware of any attempts by the Petitioner to enforce the Loan Agreement against Chiu, which is material to assessing whether the Loan (and hence the Debt)  was genuine[3].

11.  The Debtor describes his relationship with Chiu and identifies some unusual features of the Loan which suggest that “the underlying transaction was not a genuine good faith commercial dealing”. These include[4]:

(1)    The Loan Agreement states that the Loan is for “personal purpose” and shall be repaid in less than 2 months (clauses 1.1, 1.3);

(2)    The Loan and the interest accrued may be repaid at any time with the consent of the Petitioner (clause 1.4), which is relevant to whether Chiu defaulted on the Loan;

(3)    Clause 1.5 specifies (in bold text)  that a guarantee must be obtained from the Debtor, which is “bizarre”;

(4)  The Loan is “far shorter and considerably less onerous than the Guarantee”;

(5)  The Debtor has no recollection of meeting Mr Ernest Yuen, the person allegedly witnessed his execution of the Guarantee;

(6)  The Petitioner failed to produce any evidence of transfer or proof of payment despite the Debtor’s repeated requests;

(7)  There is no evidence to suggest that Chiu defaulted on the Loan; and

(8)  The Petitioner has not pursued any claim against Chiu for repayment of the Loan, evidenced by the relevant search records.

12.  The Petition was heard before a Master on 23 December 2025 and adjourned to 12 January 2026 before the Bankruptcy Judge.

13.  Upon the joint application of the Petitioner and the Debtor, on 8 January 2026, leave was given to the Petitioner to file and serve an affirmation in reply within 35 days thereof, and the Petition was adjourned to 23 February 2026.

14.  By consent summons filed on 12 February 2026, the parties applied for a further extension of time for the Petitioner to file his reply affirmation by 27 February 2026 and vacate the hearing on 23 February 2026.

15.  Having considered the contents of Debtor 1^st and the considerable delay on the part of the Petitioner in filing his reply affirmation, on 13 February 2026, this Court directed the Petitioner to file his affirmation in reply, if any, before the scheduled hearing failing which the court may dismiss the Petition.

16.  The Petitioner filed his second affirmation on 16 February 2026 (“Petitioner 2^nd”)  where he said[5]:

(1)  The purpose of the Loan was to “buy into a pre-IPO USD-Fund called Hexagon Special Opportunities SPC Segregated Portfolio VII (HSOSPCS P71120)” (“Fund”).  The Fund was to be invested through Chiu’s investment account with an asset management firm, Venture Smart Asia Limited (“Venture Smart”).

(2)  The short duration of the Loan (from November 2020 to January 2021)  was because it was “a time-sensitive investment opportunity with a short-term maturity.”  The Loan Agreement and Guarantee were signed on 3 November 2020 on this basis.

(3)  On 26 November 2020, the Petitioner issued a cheque of HK$25 million in favour of Venture Smart.  The delay in remitting the Loan was “because the official approval for the Fund took time and [Chiu] did not want to draw the Loan early which would incur interest”.

(4)  The cheque included the amount of the Loan (HK$21 million)  and HK$4 million which represented the Petitioner’s own investment in the Fund.

(5)  The cheque was deposited into Venture Smart’s client account as shown by an account deposit form.

(6)  In late 2021 and early 2022, the Fund’s value declined sharply “due to market volatility”.  By March 2025, the Fund became worthless due to collapse of its underlying assets.  In the statement issued by Hexagon Special Opportunities SPC dated 14 March 2025 and the statement from Venture Smart dated 17 July 2025, “the investment resulted in a total loss and acknowledged that he had no remaining assets to repay the Loan”.  The Petitioner’s own investment in the Fund also became worthless.

(7)  In March 2025, the Petitioner demanded repayment of the Loan and interest from Chiu and the Debtor, but no repayment has been made by either of them.

(8)  Pursuant to clause 3.1 of the Guarantee, the Debtor is liable as if he was the principal debtor. Pursuant to clause 2.1, as Chiu did not repay the sum specified in the Loan Agreement, the Debtor would be liable on demand by the Petitioner.

17.  The approach of the Bankruptcy Court in dealing with a bankruptcy petition has been summarized in Re Tsoi Man [2026] HKCFI 586, §14:

“(1)  Bankruptcy proceedings are summary in nature and are not meant to be used for the purpose of debt collection. The jurisdiction to make a bankruptcy order will only be exercised in very clear cases. If the court is satisfied that there is a bona fide dispute on the debt, it will not usurp the function of a civil court and decide the disputes between the parties. The usual practice is to dismiss the petition, leaving the petitioner to establish himself as a creditor by judgment to be obtained in the civil court (Re Leung Cherng Jiunn HCB 244/2014 (CFI)  §17; Re Leung Cherng Jiunn [2016] 1 HKLRD 850 (CA), §27(5)).

(2)  Statutory demand is an important document. It informs the debtor of the way in which the debt arose so that he would know what course he should take in light of the information given. It is ‘the straight and narrow gateway’ through which a creditor must pass in order to establish the debtor’s apparent inability to pay the debt demanded in order for a bankruptcy petition to be presented (Re Leung Cherng Jiunn (CA)  §13).

(3)  Whilst the statutory code affords the court a degree of flexibility in dealing with an application to set aside a statutory demand for defects, this is not to be taken as a charter for slipshod in preparation of statutory demand. The making of a bankruptcy order remains a serious step for the debtor, and the prescribed preliminaries in the statutory code are intended to afford protection to him. If a statutory demand is defective, the court will be alert to see whether those mistakes have caused or will cause any prejudice to the debtor. Where the debt in issue was not a large sum, it could not be said the defect would have made no difference in that the debtor would not have paid anyway and no prejudice would have been suffered (Re Leung Cherng Jiunn (CA)  §§15-16, citing In re A Debtor (No 1 of 1987) [1989] 1 WLR 271 at 280D-E, per Nicholls LJ).

(4)  Rule 70 of the Bankruptcy Rules imposes the burden on a creditor to prove, at the hearing of the petition, any matters which the debtor has given notice that he intends to dispute (Re Leung Cherng Jiunn (CFI)  §§26-27).

(5)    In opposing a petition, the debtor has to show a bona fide dispute on substantial grounds in respect of the debt by adducing sufficiently precise 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 (CA)  §23).”

18.  In my judgment, the presentation of the Petition constitutes an abuse of process and should be dismissed for the following reasons.

19.  First, the only case pleaded in the Petition (and stated in the SD)  is that the Petitioner advanced the Loan in the amount of HK$21 million to Chiu on 3 November 2020, and the Debtor is liable as guarantor in respect of the Loan.  The burden is on the Petitioner to prove that the Loan was actually advanced to Chiu on 3 November 2020 as required by Rule 70:

(1)  The Debtor had since 7 May 2025 requested the Petitioner to produce documents and evidence to show that the Loan had in fact been paid or remitted to Chiu, which was ignored by the Petitioner.

(2)  In Debtor 1^st, the same issue was raised by the Debtor.

(3)  After much delay, the only documents produced by the Petitioner are documents showing that the Petitioner paid HK$25 million to Venture Smart.  Not a single document has been produced to show that the Petitioner has ever advanced the Loan in the sum of HK$21 million to Chiu, whether on 3 November 2020 or any other date.

20.  For this reason alone, the Petition should be dismissed.

21.  Second, there is no provision in the Guarantee which provides that the Debtor is liable to repay any amount paid by the Petitioner to any other person or entity.  In the Guarantee:

(1)  Recital (A)  refers to the Loan Agreement dated 3 November 2020 made between the Petitioner and Chiu, and Chiu being “desirous of borrowing a loan from the [Petitioner] for personal purpose and the [Petitioner] has agreed to advance a loan in the sum of HK$21,000,000 (‘the Loan’)  to [Chiu] on or before 3^rd November 2020 on the terms and subject to the conditions therein contained including the execution of this Guarantee”.

(2)  “Guaranteed Obligations” is defined as “all covenants in the Loan Agreements, conditions and provisions expressed or implied on the part of [Chiu] to be performed, observed or complied with under the Loan Agreement including but without limitation the obligations of [Chiu] to pay the Total Consideration by [Chiu] under the Loan Agreement” (clause 1.2).

(3)  The Debtor “hereby unconditionally and irrevocably to guarantee to the [Petitioner] the due and punctual performance and observations of and compliance with the Guaranteed Obligations by [Chiu] and in particular and without limitation, that, if for any reason any of [Chiu] did not pay any sum payable including but not limited to the Loan and Interest accrued by it to the [Petitioner], as the case may be, by the time(s)  and on the date(s)  specified in the Loan L Agreement for payment, the [Debtor] will immediately, on demand by the [Petitioner] pay that sum to the [Petitioner]” (clause 2.1). 

22.  The combined effect of the aforesaid terms in the Guarantee is that the Debtor only agreed to guarantee the liability of Chiu to repay the Loan advanced by the Petitioner pursuant to the Loan Agreement.  There is no provision in the Guarantee (none has been identified in the Petition or the SD)  to the effect that the Debtor agreed to guarantee the liability to repay any amount paid by the Petitioner to Venture Smart, let alone the amount paid on 26 November 2020. 

23.  The presentation of the Petition is abusive and costs should be awarded against the Petitioner on an indemnity basis to mark the disapproval of the court on such conduct:

(1)  The Petitioner was specifically requested by the Debtor to produce documents evidencing payment or remittance of the Loan to Chiu in as early as 7 May 2025.

(2)  The Petitioner was well aware that he would not be able to produce any documents evidencing payment or remittance of the Loan to Chiu on 3 November 2020.

(3)  Nevertheless, the Petitioner still chose to present the Petition on 26 September 2025 on the basis that he had advanced the Loan to Chiu on 3 November 2020 and filed an affirmation on the same date to verify the contents of the Petition, knowing full well that the statement in §2 of the Petition cannot be true.

(4)  After much delay, the Petitioner filed the Petitioner 2^nd but unable to produce a single document to show that the Loan was paid or remitted to Chiu, whether on 3 November 2020 or any other date.

(5)  This notwithstanding, the Petitioner still insisted on pursuing the Petition and instructed counsel to seek an adjournment of the Petition for substantive arguments, which was a total waste of time and costs.