RE SIN KWOK LAM

HCB 3008/2025

[2025] HKCFI 3242

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3008 OF 2025

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REASONS FOR JUDGMENT

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1.  By petition presented on 17 April 2025, the Petitioners seek a bankruptcy order against the debtor, Mr Sin Kwok Lam (冼國林)  (“Debtor”). At the hearing, I made a usual bankruptcy order against the Debtor. These are the reasons for my judgment.

2.  The petition is based on the Debtor’s failure to comply with a statutory demand served upon the Debtor by inter alia advertisement on 18 March 2025 (“SD”)  requiring him to pay the judgment debt in the sum of HK$14.3 million within 21 days thereof.  The judgment debt was based on a judgment entered against the Debtor in HCMP 973/2022 on 24 February 2025 following a full trial before Recorder William Wong SC. 

3.  As can be seen from the Judgment dated 24 February 2025 [2025] HKCFI 741 (“Judgment”):

(1)  The Petitioners are the liquidators of Best Year Enterprises Limited (in liq)  (“Company”)[1].

(2)  The Petitioners claim that (a)  the sum of HK$7 million paid by the Company to the 2^nd defendant[2] on 18 October 2017; (b)  the sum of HK$5 million paid by the Company to the Debtor on 3 November 2017; and (c)  the sum of HK$2.3 million paid by the Company to the 2^nd defendant on 10 January 2018 constituted unfair preferences under s.266 of the Companies (Winding Up and Miscellaneous Provisions)  Ordinance (Cap. 32)  (“CWUMPO”)[3].

(3)  The Debtor was the sole shareholder and director of the 2^nd defendant, and he admitted that the 2^nd defendant was his corporate vehicle and alter ego[4].

(4)  The learned Recorder found that all 3 payments constituted unfair preferences within the meaning of s.266 of CWUMPO, and ordered the Debtor to repay a total sum of HK$14.3 million to the Petitioners[5];

(5)  The learned Recorder also ordered the Debtor to pay 80% of the Petitioners’ costs, to be taxed on party and party basis[6]. 

4.  As at the date of the petition, the amount owed by the Debtor, inclusive of interest accrued on the judgment debt, was HK$14,476,726.06 (“Debt”). 

5.  The approach of the Bankruptcy Court in dealing with bankruptcy petition has been stated in Re Deng Jiang [2024] HKCFI 2260, §18:

“(1)  A petitioning creditor has to set out his grounds for seeking a bankruptcy order in the petition[7] and other information required by rules 50(2)-(3)  and 51 of the BR, followed by an affirmation verifying the facts stated in the petition[8].

(2)  Where debtor has failed to comply with a statutory demand, he is deemed insolvent by virtue of s.6A(1)  of the BO.  The petitioner has discharged the onus of showing that the debtor is unable to pay his debt, as required by s.6(2)(c)  of the BO.

(3)  If a debtor opposes a bankruptcy petition, he shall file a notice with the Official Receiver specifying the grounds on which he intends to show cause, and shall post to the petitioning creditor or to his solicitors a copy of the notice, in each case 3 days before the day on which the petition is to be heard before a Master[9]. The requirement under rule 68 is mandatory and must be complied with[10]. If no such notice is filed, the court may treat the petition as uncontested and make a bankruptcy order against the debtor.

(4)  The burden is on the debtor to show that there is a bona fide dispute on substantial ground by adducing sufficiently precise factual evidence which is believable, and must establish that he has a defence of substance, not just a fair probability of one[11].  For this purpose, it is incumbent upon the debtor to file an affirmation to make good his grounds in opposition to the petition.   

(5)  The court will consider the grounds raised by the debtor and the reply affirmation filed by the petitioner and decide whether there is a bona fide dispute on substantial ground in respect of the debt.  If there is such a dispute, the petition will be dismissed.  Conversely, if the debtor fails to show that there is a bona fide dispute, a usual bankruptcy order will be made against him.   

(6)  Generally, it would be a waste of time and costs for a debtor to seek security for costs as unlike a civil action which involves filing of pleadings, discovery and a trial, a bankruptcy petition does not involve any such steps and the petition will be disposed of summarily.  This is enshrined in PD 3.1 ‘Bankruptcy and Winding-Up Proceedings’ §§14.2 and 16.

(7)  This is particularly so where, as here, there is no dispute that the Debt is due and payable and the Debtor has failed to comply with the SD, such that the Petitioner is entitled ex debito justitiae to seek a bankruptcy order against the Debtor.  The Bankruptcy Court would not allow a debtor who is insolvent to waste time and costs in pursuing such application.”

6.  As the Petitioners are judgment creditors and the Debt remains unpaid, they are entitled ex debito justitiae to seek a bankruptcy order against the Debtor. 

7.  The Debtor only filed a notice to show cause on 14 July 2025 (“Notice”), one day before the petition was due to be heard before a Master. 

8.  In the Notice, the Debtor states that he opposes the petition on the following grounds:

(1)  He filed a notice of appeal on 24 March 2025 against the Judgment in CACV 153/2025 (“Appeal”)  which, he believes, “contains merits and has reasonable prospect of success, such that a bankruptcy order at this stage would cause irreparable harm to [him]”; and

(2)  There is “no proper service” of the SD and the petition. 

9.  At the hearing, Mr Oliver Tse, counsel for the Debtor, applies for an extension of time to file the Notice. 

(1)  The only explanation proffered by counsel is that the solicitors were “only recently instructed to act”.  This is hardly a proper explanation to justify the delay in compliance with rule 68. 

(2)  No explanation has been offered by the Debtor in his undated and unsigned  affirmation[12] (“Draft Aff”)  as to why he did not instruct solicitors earlier or why he did not cause the Notice to be filed within the time limit. 

(3)  This is notwithstanding the fact that, as is clear from the Draft Aff, the Debtor was aware of the fact that the petition had been presented against him as a copy of the petition was sent to Messrs. David Fenn & Co (“DFC”), the solicitors acting for him in HCMP 973/2022, under cover of a letter dated 30 April 2025, but the Debtor decided not to instruct DFC to represent him at that time.

(4)  As the Debtor fails to show that there is any valid ground for the court to exercise its discretion to extend time for filing the Notice, it seems to me that the extension should only be granted upon the usual condition requiring the Debtor to pay the Debt into court. 

(5)  Mr Tse informs the court that the maximum amount which the Debtor is able to pay into court is HK$200,000, which represents 1.38% of the Debt.   

10.  As the Debtor confirms that he will not comply with the condition for extension of time, there is no utility in the court granting the extension conditional upon payment of the Debt into court. The court may treat the petition as uncontested.

11.  In any event, I do not consider that the grounds raised in the Notice has any merit.

12.  As regards service of the SD:

(1)  The point is abandoned by the Debtor as it is not mentioned in Mr Tse’s submissions (written or oral)  or in the Draft Aff.

(2)  A statutory demand is not a court document issued by the court (PD 3.1 §2.2).  The only requirement applicable to service of a statutory demand is rule 46(2)  of the BR which provides that “the creditor shall do all that is reasonable for the purpose of bringing the statutory demand to the debtor’s attention and, if practicable in the particular circumstances, to cause personal service of the demand to be effected”.

(3)  The SD was sent to the “Specified Addresses” (as defined in §14(1)  below).

(4)  The SD was also sent to DFC, which acknowledged receipt of the same.  In response to the SD, by letter dated 26 February 2025, DFC stated that the Debtor intended to appeal against the Judgment, and if the Petitioners proceed with the SD, the Debtor would apply to the court for “an appropriate order”.  This shows that DFC must have brought the SD to the attention of the Debtor. 

(5)  The SD was advertised on 18 March 2025. 

(6)  In the circumstances, the Petitioners had done all that was reasonable for the purpose of bringing the SD to the Debtor’s attention, as required by rule 46(2)  of the BR. 

13.  Further, Master Jack Wong was satisfied that the Petitioners had complied with rule 46(2)  of the BR and granted leave to the Petitioners to present the petition on 11 April 2025.

14.  As regards service of the petition:

(1)  On 16 May 2025, Master Jack Wong ordered substituted service of the petition by permitting the Petitioners to send the petition to the Debtor at 3 specified addresses in Hong Kong (“Specified Addresses”)  as well as by advertisement (“Order”). 

(2)  The Specified Addresses are (a)  the residential address stated in the Debtor’s affirmation filed in HCMP 973/2022, (b)  the address stated in the annual return filed by Na Sing Sing Entertainment Ltd of which the Debtor is a director, and (c)  the address stated in the annual return filed by Lau Jarm Hung Kuen Alumni Association Ltd of which the Debtor is a director and shareholder.  

(3)  Pursuant to the Order, the petition was served on the Debtor at the 3 Specified Addresses on 20 June 2025, and by advertisement on 24 June 2025. 

(4)  There is no basis for the Debtor to contend that the petition had not been served in compliance with the BR.

15.  As for the Appeal:

(1)  It is well established that where, as here, the debt is based on a judgment, the court will treat the judgment as prima facie evidence that the debtor is indebted to the creditor.  The bankruptcy court would only inquire into the judgment unless there is some evidence to suggest that the judgment was obtained by fraud, collusion or that there is a miscarriage of justice which impinges on the validity of the judgment (Re Tam Mei Kam, CACV 87/2012, 8 May 2013 at §§22-27, per Yuen JA; Re Tam Kwok Hung Johnson [2024] HKCFI 1573 at §13). 

(2)  There is no suggestion, let alone evidence, to show that the Judgment was obtained by fraud, collusion or that there is a miscarriage of justice.  The mere fact that the Debtor has lodged the Appeal is not a valid ground in opposition to the petition as an appeal does not operate as a stay on the Judgment. 

(3)  The Debtor has never applied for stay of execution and no explanation has been proffered.  This is material.  Had the Debtor applied for a stay pending appeal, he would need to demonstrate that there are “strong grounds” of the proposed appeal or that there are good reasons for the court to grant a stay (Hong Kong Civil Procedure 2025, §59/13/1).  Having decided not to apply for a stay from the learned Recorder, who is familiar with the matter, I do not think it is right for the Debtor to contend before the Bankruptcy Court that he has “strong grounds” in the Appeal, even if that is the contention (which it is not). 

(4)  Mr Tse cites Re Lau Wang Chi Barry [2024] 3 HKLRD 118, §§35, 42-43 in support of his contention that “the bankruptcy court may stay the petition to await the outcome of the appeal or application, if satisfied that the debtor has reasonable prospect of succeeding”. No attempt has been made by Mr Tse to demonstrate that there is any reasonable prospect of succeeding in the Appeal. 

16.  Even if it falls on this Court to trawl through the Draft Aff to see whether the Debtor has any reasonable prospect of succeeding in the Appeal, which I do not think is the right approach, I am unable to discern any such prospect in the Draft Aff.  All that the Debtor said is that he believes that “there are reasonable prospects of success in the [Appeal]” on the following grounds[13]:

(1)  “The learned Recorder erred in failing to give due regard to the clear statutory requirements in s.266 of [CWUMPO]”;

(2)  “The learned Recorder erred in finding that [the 2^nd defendant] received the two payments as agents for and on behalf of me”;

(3)  “The learned Recorder erred in holding that the doctrine of subrogation did not apply to my benefit”; and

(4)  “The learned Recorder erred in rejecting the third party payments as demonstrating that a continuous pattern of dealings existed between [the Company] and me”. 

17.  The above grounds are nothing more than self-serving assertions or repetition of arguments which have already been considered and rejected by the learned Recorder.  They fall far short of showing any reasonable prospect of success in the Appeal.