CHOI KING HUNG v. FUNG SHING CHUNG

HCSD 41/2025

[2025] HKCFI 5938

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY DEMAND

NO 41 OF 2025

_________________

_______________

______________

J U D G M E N T

______________

Introduction

1.  This is the substantive hearing of the Applicant’s application made on 1 August 2025 (“the Setting Aside Application”) for an order setting aside a statutory demand dated 15 July 2025 (“the SD”) served on him by the Respondent on 22 July 2025. The Setting Aside Application is supported by the Applicant’s affirmation filed on 1 August 2025 (“the Supporting Affirmation”).

2.  With leave from the Court, the Respondent filed an affirmation in opposition on 21 August 2025.

3.  At the beginning of the hearing, with no objection from the Applicant, I granted leave to the Respondent to amend the SD and to rely upon a further affirmation in opposition filed on 28 November 2025. Service of the Amended SD be dispensed with.

4.  Since I have granted leave to the Respondent to amend the SD, the issue in this hearing is whether the Amended SD should be set aside by reason of the grounds put forward by the Applicant.

5.  In the hearing before me, Ms Cheryl Lam represents the Applicant, and Mr Perlman Sam represents the Respondent.

6.  Various legal principles are discussed in this judgment. For the benefit of the development of the law, I am of the view that this judgment should be published. Further, the debt in question is a judgment debt arising from a judgment entered against the Applicant and in favour of the Respondent on 8 April 2024 (“the Judgment”) in HCA 2860/2018 (“the Action”). The disputes in that Action, as well as the Applicant’s application for stay of execution of the Judgment and the enforcement proceedings are all conducted in open court or in chambers open to public. In my view, this is a further reason for the publication of this judgment. I also do not think that it would be necessary to anonymize any individual in this judgment.

Preliminary matter – Applicant’s Second Affirmation

7.  At the beginning of the hearing, Ms Lam told me that the Applicant had filed a second affirmation on 28 November 2025. Mr Sam told me that the Respondent had not been served with a copy of that affirmation. Ms Lam did not dispute this. I also could not find a copy of the Applicant’s Second Affirmation in the court’s file.

8.  As to why the Applicant’s Second Affirmation was not served on the Respondent, the Applicant could not provide any satisfactory explanation.

9.  The Applicant also did not bring copies of that affirmation to the hearing, and hence the Applicant was unable to provide copies of that affirmation to the Court and to the Respondent at the beginning of the hearing. Ms Lam asked for 10 minutes to prepare copies of that affirmation. I granted the time to the Applicant. However, after about 20 minutes, the copies were still not ready.

10.  In these circumstances, I refused to grant leave to the Applicant to rely upon the second affirmation in the hearing, copies of which had not been provided to the Court and the Respondent.

11.  After the hearing, after checking with the Registry, the truth is that the Applicant did not file any affirmation on 28 November 2025. It is regrettable that the Applicant has made an untrue representation (ie the Applicant filed an affirmation on 28 November 2025) to the Court in the hearing before me.

12.  Filing an affirmation on behalf of the Applicant would be a matter handled by the solicitor representing the Applicant. Whether the Applicant has filed an affirmation on 28 November 2025 would be a matter within the solicitor’s knowledge. The solicitor ought to explain to the Court why the aforesaid untrue representation was made to the Court in the hearing before me. I would direct that the solicitor do make an affidavit/affirmation personally to explain why the aforesaid untrue representation was made to the Court in the hearing on 2 December 2025, and do file and serve that affidavit/affirmation within 14 days. After seeing that affidavit/affirmation, I would consider whether some follow-up action is necessary.

Background

13.  The debt in the Amended SD (“the Debt”) is mainly a judgment debt arising from the Judgment. By the Judgment, the Applicant is held liable to the Respondent for US$1,028,053, together with interest thereon. The remaining parts of the Debt are costs awarded to the Respondent in the Action, in the subsequent enforcement proceedings, and in the Applicant’s application made to the Court of Appeal for stay of the execution of the Judgment.

14.  After the handing down of the Judgment, the Applicant lodged an appeal against the Judgment. The Applicant failed in his application for a stay of execution pending appeal in the Court of First Instance, and he also failed in his renewed application for stay in the Court of Appeal.

15.  The Respondent has obtained a series of charging and garnishee orders covering, inter alia, 3 properties jointly owned by the Applicant and his wife (“the 3 Properties”), and some shares (“the Shares”) owned by the Applicant. Some of the Shares have been sold and HK$290,177.28 representing the proceeds of the sold shares have been remitted to the Respondent’s solicitors.

16.  The Respondent has commenced HCMP 2157/2024 under Order 88 and Order 50 of the Rules of the High Court for an order of sale of the 3 Properties. Both the Applicant and his wife are resisting these enforcement proceedings.

Grounds of the Setting Aside Application

17.  It is trite that in an application for an order setting aside a statutory demand, the applicant must avail himself to the ground(s) as set out in the Bankruptcy Rules (“BR”) rule 48(5). That rule provides:

“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.”

18.  In the Supporting Affirmation, the Applicant has put forward the following grounds in support of the Setting Aside Application:

(1)  the value of the securities obtained by the Respondent in the enforcement proceedings (“the Securities”) is greater than the Debt;

(2)  part of the securities were realized to repay the Debt, hence there was an overstatement of the Debt in the SD; and

(3)  there is an ongoing appeal against the Judgment.

19.  In her oral submissions, Ms Lam has put forward an additional ground in support of the Setting Aside Application, ie there is an ongoing mediation for the purpose of resolving the dispute between the Applicant and the Respondent.

Discussion

20.  Each of the Applicant’s grounds is examined in the below.

21.  Ground 1 – Value of the Securities greater than the Debt?

(1)  This ground is based upon BR rule 48(5)(c). The Securities are the 3 Properties and the unsold shares.

(2)  Regarding the 3 Properties, it is indisputable that these properties are owned by the Applicant and his wife as joint tenants. Further, as evidenced by the opposition made by Applicant’s wife in HCMP 2157/2024, the Applicant’s wife is unwilling to agree to selling these properties to repay the Debt owed by the Applicant to the Respondent. Thus, it would be practically impossible to sell these properties to repay the Debt owed by the Applicant (not by the Applicant’s wife) to the Respondent. Mr Sam submits that in the circumstances, the value assigned to the 3 Properties should be nil.[1]

(3)  Mr Sam has referred me to Golden Connection Finance Limited v Chan Tat Man Simon[2], in which the plaintiff was seeking to enforce a charging order over the 1^st defendant’s 1/3 interest in the property, and the application was opposed by the 2^nd defendant, the co-owner of the property. In that case, the Court recognized that there has not been any “Hong Kong authority in which an order had been made under Order 88, rule 5A for the sale of a share of jointly owned property”.[3] Although the Court ruled that it has the discretion to make an order of sale in such a case[4], the Court recognized that “there are some dicta in the authorities which express reluctance as to the practicality of making orders for sale in respect of part-shares of property”[5]. At the end, the Court refused the enforcement application.

(4)  Mr Sam submits that, although the Respondent has commenced HCMP 2157/2024, it would be very difficult to enforce the charging orders against the 3 Properties. Thus, the value assigned to the 3 Properties should be nil.

(5)  I accept Mr Sam’s submissions. In my judgment, there is nothing wrong in assigning a nil value to the 3 Properties in the Amended SD.

(6)  As to the unsold shares, the Applicant says that the value of the unsold shares should be HK$3,010,400. For the purpose of this hearing, this figure is not challenged by the Respondent. However, obviously, this figure is far less than the Debt owed by the Applicant to the Respondent.

(7)  In my judgment, Ground 1 is not made out.

22.  Ground 2 – Overstatement of the Debt in the SD

(1)  Here, the Debtor is trying to rely upon the “other grounds” in BR rule 48(5)(d) in support of the Setting Aside Application.

(2)  As said the above, the SD has been amended at the beginning of the hearing before me. In the Amended SD, credit of the HK$290,177.28 mentioned in [15] above has been given to the Applicant. With this adjustment, it cannot be said that there is an overstatement of the Debt in the Amended SD.

(3)  Without prejudice to the above, even if there is an overstatement of the Debt in the Amended SD, this does not constitute a ground for setting aside the Amended SD. This point has been made clear by Winnie Tsui J in Ng Yiu Chi v Ng Kwok Piu Philip[6], in which the learned judge said:

“48. Where a debtor relies “on other grounds” within rule 48(5)(d), the question for the court remains whether the creditor is entitled to rely on the non-compliance with the statutory demand to found a petition, and whether it would be just to allow the statutory demand to be relied on for a bankruptcy petition to be brought: [DCKD v JPWL [2022] HKCFI 1059] at paras 25 to 26.

49. The fact that a debt in a statutory demand is overstated does not render the statutory demand invalid. Where only a part of the debt is disputed, the statutory demand still stands and a bankruptcy petition can properly be presented on the basis of the statutory demand, unless the undisputed or indisputable portion of the debt has been paid: Cheung Sun Lam v Lai Kam Man CACV 148/2011, 18 March 2013 at para 33; Re Cheung Chung [2019] HKCFI 2770 at para 9.”

(4)  There is no merit in Ground 2.

23.  Ground 3 – Ongoing appeal

(1)  Here, presumably, the Applicant is relying upon BR rule 48(5)(b) where “the debt is disputed on grounds which appear to the court to be substantial”.

(2)  The Debt arises from the Judgment in the Action. The Applicant’s stay application has been refused by the Court of First Instance and by the Court of Appeal. That must mean that there is no strong merit in the Applicant’s appeal. In the circumstances, the Applicant cannot have any substantial ground to dispute the Debt.

(3)  There is no merit in Ground 3.

24.  Ground 4 – Ongoing mediation

(1)  In her oral submissions, Ms Lam submits that there is an ongoing mediation, and the Applicant expects that the dispute between him and the Respondent can be resolved through mediation.

(2)  With respect, the evidence does not show any ongoing mediation between the Applicant and the Respondent. The evidence only shows that the Applicant intends to have a mediation to resolve the difference between him and the Respondent.

(3)  Unless a binding agreement is reached, everything said in a mediation would not prejudice the parties’ respective legal rights. Mediation, whether intended or ongoing, cannot constitute a ground in support of the Setting Aside Application.

(4)  There is nothing in Ground 4.

25.  In my judgment, the Applicant has failed to put forward any valid ground in support of the Setting Aside Application. The application must be dismissed.

Disposition

26.  I dismiss the Setting Aside Application. In accordance with BR rule 48(7), I also make an order authorizing the Respondent to present a bankruptcy petition against the Applicant on or after 23 December 2025.

27.  Costs should follow the event. There be a costs order nisi that costs of the Setting Aside Application be paid by the Applicant to the Respondent, and those costs be summarily agreed. Unless there is an application for variation of the costs order nisi by an inter partes summons within 14 days, the costs order nisi shall become absolute without a further order. There be leave to the Respondent to lodge and serve a statement of costs for summary assessment (limited to 2 pages) within 7 days after the costs order nisi becoming absolute, and leave to the Applicant to lodge and serve a list of objections (limited to 2 pages) within 7 days thereafter.

28.  I also make the direction set out in [12] above.

29.  Lastly, it remains for me to thank Ms Lam and Mr Sam for the assistance provided to the Court.