RE CHINA ZENITH CHEMICAL GROUP LTD (formerly known as XINYANG MAOJIAN GROUP LTD)

HCCW 243/2023

[2024] HKCFI 2769

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP)  PROCEEDINGS NO 243 OF 2023

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J U D G M E N T

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A. Introduction

1.  The petition was last heard before the Hon Linda Chan J on 29 July 2024, after which she handed down her judgment on 12 August 2024 (“12 Aug Judgment”).  The relevant background and procedural history of the petition have been set out in the 12 Aug Judgment.

2.  It suffices for present purposes to say that the petition has a chequered history, and was heard a number of times before the Hon Linda Chan J.  At the hearing on 4 March 2024, she determined that there is no bona fide dispute on substantial grounds in respect of the original petitioner’s debt, which the Company later paid off to avoid the consequence of winding-up. 

3.  Although the original petitioner thus stepped out of picture, it did not escape Her Ladyship’s attention that (i)  the Company seeks to dispute the original petitioner’s judgment debt when there was no valid ground to do so; (ii)  numerous supporting creditors had already made demands and/or served statutory demands on the Company, and filed summonses for substitution; (iii)  the claims of the supporting creditors are straightforward in nature, all of which being based on the HK$10 million bonds ostensibly issued by the Company, and (iv)  the Company is, on the face of it, balance sheet insolvent according to its 2023 Annual Report (see 12 Aug Judgment [28]).

4.  It was against such background that the Hon Linda Chan J moved on to consider the position of other supporting creditors at the hearing on 25 March 2024.  Leave was given for Lyu Yiling (“Lyu”)  to substitute as petitioner and file the Re-Re-Amended Petition.  Further, the Hon Linda Chan J did not accede to the Company’s request to deal with the claims of the supporting creditors one after the other and considered it appropriate to require the Company to file evidence in opposition to the claim of Lyu and to state the brief grounds of opposition to the claims of other supporting creditors who have issued summonses for substitution. 

5.  At the hearing on 3 June 2024, whilst taking the view that more time is required to consider Lyu’s debt, Her Ladyship examined the claim of another supporting creditor, Xu Wenjing, who has made an application for substitution.  After the court’s tentative indication that there is no bona fide dispute on substantial grounds in respect of Xu Wenjing’s debt, the Company offered an undertaking to pay within 42 days.  Yet, shortly thereafter, the Company resiled from such position and sought the discharge of the undertaking, which the court granted at another hearing on 3 July 2024 to avoid further unnecessary arguments.

6.  The petition was adjourned further to 29 July 2024 for the court to determine whether there is a bona fide dispute on substantial grounds in respect of the debt of Xu Wenjing.  As the Hon Linda Chan J held at [49]-[58] of the 12 Aug Judgment, the Company failed to discharge the burden and the petition was ordered to be listed for hearing on 19 August 2024 for pronouncing a winding up order against the Company.  Nevertheless, the court afforded an opportunity to the Company and directed that such hearing will be vacated if the Company does have the means to pay Xu Wenjing’s debt as it claims and provide evidence of payment by 15 August 2024.  Eventually, the hearing was vacated.  As it appears, the Company has paid Xu Wenjing’s debt but is also mounting an appeal at the same time.

7.  Meanwhile, pursuant to the Order of the Hon Linda Chan J dated 3 June 2024 (albeit mistakenly dated as 3 May 2024), the Re-Re-Amended Petition by Lyu and the applications for substitution by three supporting creditors (namely Gu, Chen and Qin as defined below)  have been adjourned to be heard together for substantive arguments, with 1 day reserved.  These were fixed before this court on 19 September 2024.  Prior to such hearing, applications for substitutions were made by three other supporting creditors.

8.  At the hearing on 19 September 2024, the court was concerned with the following:

(1)  Re-Re-Amended Petition by Lyu;

(2)  Application for substitution by Gu Yandong (“Gu”);

(3)  Application for substitution by Chen Shaohua (“Chen”);

(4)  Application for substitution by Qin Yuhuan (“Qin”);

(5)  Application for substitution by Xu Lingyan (“Xu”);

(6)  Application for substitution by Li Yizhou (“Li YZ”); and

(7)  Application for substitution by Li Wenli (“Li WL”).

9.  There is no dispute that the debt of Lyu should be dealt with in this hearing.  In relation to Gu and Chen, it is their position that the court should also deal with their debts substantively and determine whether the Company has discharged its burden of showing there is a bona fide dispute on substantial grounds.  Nevertheless, Mr John Scott SC took issue and complained that the Company had the onerous task of opposing the claims of so many alleged creditors in the course of one hearing, which is inappropriate.  He submitted on behalf of the Company that a winding-up petition should not be used as debt collection scheme, and any order of substitution should be dealt with one at a time.  Further, he refers to the Order dated 3 June 2024 and stresses that the supporting creditors’ Summonses are merely seeking substitution and it is not open to them to ask for winding-up immediately.

10.  Notwithstanding the foregoing, when pressed by the court by reference to the 12 Aug Judgment, Mr Scott SC appeared to accept ultimately that the Company should deal with the claims of Lyu, Gu and Chen at this juncture.  Whilst it is true that a winding-up petition is not a debt collection regime, the validity of his criticisms would turn on the merits of the Company’s defence.  If there is in fact no bona fide dispute on substantial grounds, there is nothing inherently objectionable for creditors to seek winding-up.

11.  Importantly, one must bear in mind the relevant context in considering the case management directions made by the Hon Linda Chan J.  As outlined above, this case has a chequered history and on the face of it the Company is balance sheet insolvent. Moreover, the claims of the supporting creditors are similar in nature, stemming from the HK$10 million bonds purportedly issued by the Company.  Against such context, the Hon Linda Chan J has decided that it is proper for the claims of Lyu, Gu, Chen and Qin to be dealt with at one hearing.

12.  The apparent concern of the court is the undesirability of leaving it entirely to the Company to deal with each supporting creditor’s debt in turn whilst keeping similar claims of other supporting creditors at bay and, whenever the court finds that there is no bona fide dispute on substantial grounds for a claim, to then seek time to pay off only such claim and get it out of the way, only for the same process to repeat itself.  As Mr Lau (on behalf of Gu)  put it, the Company has turned these proceedings into a game of musical chair.  The result is that, in the absence of active case management by the court, the petition could be dragged on disproportionately, despite a real risk that the Company may well be insolvent. 

13.  Of course, I am mindful that there are two competing concerns.  On the one hand, the Company should be afforded a fair opportunity to resist winding-up relief pursued by various creditors, and it may be said to be unfair and onerous to compel the Company to deal with the claims of so many creditors in one go.  On the other hand, if the Company does in fact have little merits in its defences to numerous claims which are similar in nature, it may be seen as part of a litigation tactics (if not abuse of process)  for the Company to buy time and avoid the consequence of winding-up by contesting one claim after another consecutively (if not perpetually)  on thin grounds, hoping that its financial condition may eventually turn around.  Whilst there is no inherent bar or objection against a company seeking to adjourn a winding-up petition in reliance of fundraising or restructuring (which should however be properly advanced and argued), this is not to say that a company should be afforded a self-engineered “moratorium” to achieve such agenda by taking the time to oppose a winding-up petition and deal with similar claims one after another, particularly if there is a seeming pattern of new and unmeritorious defences being marshalled whenever the Company is on the verge of being wound up.

14.  Nor does it seem to be correct for Mr Scott SC to submit that, on a proper interpretation of the Order dated 3 June 2024, the Hon Linda Chan J merely adjourned the applications for substitution for substantive arguments so that the issue is confined to substitution without determining whether there is bona fide dispute on substantial grounds.  With respect, this does not reflect the understanding of the parties during the hearing.  According to the transcript of the hearing on 3 June 2024, the following exchange took place between the Hon Linda Chan J and Mr Look Chan Ho on behalf of the Company:

“MR HO: In respect of the petitioner [i.e. Lyu], we would respectfully submit that this can be adjourned for substantive hearing.

COURT: Yes, yes, and I am asking you whether at the substantive hearing the court should also hear the parties’ arguments in relation to the debts claimed by other supporting creditors because otherwise it will be endless, right? For example, after hearing the parties’ arguments, the court comes to the view that there is no bona fide dispute on substantial grounds in relation to the debt owed to the petitioner, then there are still other creditors in the line.

MR HO: Yes, in that case …

COURT: It’s certainly it’s not the – I am not minded to every time entertain the company’s argument, and then make – and then have the petition be adjourned on multiple occasions.

MR HO: Yes, it makes sense from a case management perspective. So on that basis, we are prepared to deal with the petition and the other creditors to the extent they want to come at the substantive hearing.

…

COURT:  … So I am minded to adjourn the petition for argument, but at the next hearing, I want the – I think the court should deal with not just the claim of [Lyu], but also the claim of the other supporting creditors [i.e. Gu, Chen and Qin].”

15.  The above is also the understanding of the Company.  In the 7^th Affirmation of Ma Kin Ling (“Ma”[1] and “Ma 7^th”)  filed for the Company on 16 September 2024, it is stated at §6 as follows:

“I note that the hearing on 19 September 2024 (“Hearing”)  is directed at the claims of the Petitioner [i.e. Lyu] and 3 supporting creditors [i.e. Gu, Chen and Lyu] in respect of whom full evidence has been filed.”

16.  The long and short of it is that, given the order and directions made by the Hon Linda Chan J, it does not seem open to the Company to complain and not deal with the substance of the claims of the supporting creditors.  In any case, as far as the Company is concerned, it has already filed full evidence in response to the claims of Lyu, Gu, Chen and Qin, and there is no reason why this court should not (or could not)  deal with them substantively as directed by the Hon Linda Chan J.  This is subject to the caveat that, in the case of Qin, he has indicated that he would not be filing affirmation in reply or skeleton submissions.  In these circumstances, I agree with Mr Scott SC that the court should not deal with Qin’s claim (at least not at this stage).

17.  Insofar as Xu, Li YZ and Li WL are concerned, there are broad consensus that the court should grant directions for filing further evidence instead of determining their claims substantively at this stage.  In any case, I accept the submissions by Mr Scott SC that Ma 7^th is not intended to be exhaustive and the Company should be given fair opportunity to respond to these relatively recent applications.  As I have indicated at the outset of the hearing, I would grant directions for the filing of further evidence by the Company in opposition within 28 days and the filing of further evidence in reply within 28 days thereafter, although such directions should only come into effect upon my handing down of the judgment and in circumstances where I determine that there are bona fide disputes on substantial grounds for the claims of Lyu, Gu and Chen or alternatively where I rule otherwise but the claims are later paid off, such that it becomes necessary to consider the debts claimed by other supporting creditors.  Obviously, there would be no need for filing further evidence if eventually the Company is wound up on account of the claims of Lyu, Gu and/or Chen.

18.  I should mention that there are also other supporting creditors but they have not taken an active role in the hearing on 19 September 2024.

B.  Summary of Claims of Lyu, Gu and Chen

19.  For ease of reference, I would refer to Lyu (the Petitioner), Gu and Chen together as the “Supporting Creditors”.  On the case of the Supporting Creditors, they are each a holder of a HK$10 million bond issued by the Company (“Bond”), all of which are governed by Hong Kong law and contain non-exclusive jurisdiction clause in favour of Hong Kong courts. 

20.  The claims of the Supporting Creditors may be summarised as follows:

Creditor	Date of Bond	Maturity Date	Outstanding Principal (HK$)	Unpaid Interest (HK$)	Service of Statutory Demand
Lyu	14/9/2015	13/9/2023	10,000,000	--	27/10/2023
Gu	26/3/2014	25/3/2022	10,000,000	3,746,230	27/8/2024
Chen	4/2/2014	4/2/2022	6,750,000	594,185	19/1/2024

21.  Whilst the Company has mounted various defences, it may be noted that the Company does not dispute the status of Chen as bondholder but argues that (i)  he has not surrendered the certificate of the Bond (“Bond Certificate”)  and (ii)  the quantum is in dispute.  The Company also relies on Clause 5.2 of the Bond instrument (“Bond Instrument”). As regards Gu, the Company does not dispute that the Bond Certificate and the Bond Instrument were issued to him but argues that they are invalid (among other defences).  For Lyu, the Company’s position is that Lyu is not a bondholder, and the Bond Certificate and the Bond Instrument produced by Lyu are forged. Although Lyu is the now the (substituted)  petitioner, given that the claims of the Supporting Creditors are heard together, I consider it more convenient to deal with their claims in accordance with their complexity.  I would thus deal with the claim of Chen first, followed by the claim of Gu, and lastly the claim of Lyu.  It follows that, if I come to the view that there are no bona fide disputes on substantial grounds in respect of the claims of Chen and/or Gu, then it may not be strictly necessary to determine the claim of Lyu as the Company would be deemed to be insolvent anyway.  That said, I would still express my views for completeness.

22.  In terms of the relevant principles, there is no dispute among the parties that the burden is on the Company to demonstrate that there is bona fide dispute on substantial grounds.  As the principles are trite, I would not go into them in the judgment, and would move on to examine the claims of the Supporting Creditors in turn.

C.  Chen’s claim

23.  As mentioned, the Company does not challenge the status of Chen as a bondholder.  The following are not in dispute:

(1)  On 29 January 2014, Chen entered into a Subscription Agreement with the Company to subscribe for HK$10 million of bonds.

(2)  On 4 February 2014, Chen entered into a bond issue agreement by which the Company issued bonds of HK$10 million to Chen (“Chen Bond”).

(3)  On 19 May 2022, Chen and the Company entered into a supplemental agreement (“Chen 1^st SA”)  by which Chen agreed inter alia that (1)  no interest would accrue on the principal of HK$10 million, (2)  the Company would repay the principal in accordance with the payment schedule therein with the last payment to be made on 15 March 2024, (3)  if the Company failed to make repayment in accordance with the payment schedule, it would be liable to pay interest on the remaining principal at 4.5% p.a. from 4 February 2022, and (4)  the parties could vary the repayment schedule by mutual agreement.

(4)  On 2 December 2022, Chen and the Company agreed to vary the repayment schedule such that in respect of the period between 15 September 2022 and 15 January 2023, the Company would pay Chen HK$1.9 million on 31 January 2023 (“Chen 2^nd SA”).

(5)  On 19 January 2024, Chen served statutory demand on the Company requesting it to pay the debt owed to Chen, of which HK$6,750,000 is the principal.  Despite a lapse of three weeks and even up to now, the Company has failed to repay such amount.

24.  The Company advances two major defences:

(1)  It is a condition precedent to payment that Chen surrenders the Bond Certificate.  In parallel with this, the Company has issued a writ in HCA 912/2024 against Chen for a declaration that unless and until Chen produces the original of the Chen Bond, the Company is not under any obligation to make payment.  Further, Chen was required to surrender his existing Chen Bond for a fresh bond reflecting the reduced principal amount as a condition precedent of receiving partial redemption payments.  As Chen refused to do so, the Company was entitled to cease payments. This is in essence an argument on construction of contractual terms (“Construction Argument”).

(2)  The Company has repaid more money to Chen than he claims.  In particular: (i)  as admitted in Chen 1^st, he was paid HK$2 million (rather than HK$1 million)  as of 15 November 2022; and (ii)  On 1 August 2023, the Company paid Chen RMB1.35 million (equivalent to HK$1.5 million at time of payment)  through a Mainland subsidiary.  As a result, the total amount repaid has been HK$5.75 million rather than HK$3.25 million as claimed by Chen now.  There is a dispute as to quantum (“Quantum Argument”).

C1.  Construction Argument

25.  The Company’s argument is twofold, one being that the Company has no obligation to pay unless and until Chen produces the original of the Bond Certificate, and the other being the need to exchange for a fresh bond in partial redemption.  The Company relies on Clause 5.2 of the Bond Instrument for the former: 1^st Affirmation of Chan Yuk Foebe (“Chan Yuk” ^[2] or “Chan Yuk 1^st”), §11.  Alternatively, the Company prays in aid an alleged implied term under Chen 1^st SA for the latter: Chan Yuk 1^st §14.

26.  As regards the former, a similar argument was advanced by the Company vis-à-vis other supporting creditors, including Xu Wenjing: see 12 Aug Judgment, [32(1)].  It was rejected by the Hon Linda Chan J in the 12 Aug Judgment, [33(1)-(4)]:

“(1)  The alleged condition precedent is inconsistent with clause 6.1, which provides that the 2021 Bond shall on the maturity date and upon the Company tendering payment of the principal be redeemed automatically[3]. This is reinforced by clause 6.3[4], which makes clear that it is only when the Company has fixed the time and place for redemption that Xu has to return the original of the 2021 Bond. As the Company never fixed the time and place for redemption, there was no obligation for Xu to return the original of the 2021 Bond.

(2)  Further, as the correspondence show, Xu had since 22 November 2023 given notice to the Company to redeem the 2021 Bond. Had the Company genuinely believed that redemption was subject to the alleged condition precedent, it would have requested Xu to deliver the original of the 2021 Bond but it never did. It lies ill in the Company’s mouth to complain that Xu failed to deliver the original of the 2021 Bond.

(3)  In any event, Mr Yau confirmed that Xu would deliver the original of the 2021 Bond as and when the Company provided the time and place for redemption.

(4)  The commencement of HCA 913/2024 was merely a tactical step belatedly taken by the Company.  More importantly, it confirmed that the only substantive ground raised by the Company in not redeeming the 2021 Bond was the alleged condition precedent. …”  

27.  In a similar vein, DHCJ H Au-Yeung (as he then was)  rejected such argument in Wang Yuexian x Xinyang Maojian Group Limited [2023] HKCFI 3236, [42]-[49] – a case concerning the claim by the original petitioner against the Company.  Whist the judgment made no reference to Clause 6.1, it is significant that, like the Hon Linda Chan J, His Lordship placed emphasis on Clause 6.3 (quoted at [45])  and reasoned as follows at [46]-[48]:

“46. I agree with the plaintiff that Clause 5.2 should not be construed in isolation but should be read together with Clause 6.3, and the combined effect of these clauses is that:

(1)  The redemption shall take place at the time specified by the defendant;

(2)  At the time of the redemption, the plaintiff and the defendant shall exchange (1)  the Bond Certificate (held by the plaintiff)  and (2)  a cashier order for the amount to be redeemed;

(3)  If the plaintiff fails to produce the Bond Certificate at the time specified, then the defendant would not be under any obligation to redeem the Bond.”

47.  There is no evidence that the defendant had ever stipulated a time at which the redemption of the Bond should take place.  That is not surprising, because there had been disputes between the parties even before the Redemption Date arrived as to whether the defendant had to pay the plaintiff anything more than $5.5 million under the Bond.  …

48.  Hence, it is a non-starter for the defendant to say that the plaintiff has failed to deliver up her Bond Certificate or that any condition precedent for repayment has not been satisfied.”

28.  I agree with the reasoning of the Hon Linda Chan J and DHCJ H Au-Yeung (as he then was).  In particular:

(1)  Clause 6.1 makes it clear that, on the maturity date, the Chen Bond shall be redeemed automatically by the Company tendering payment of the principal.  Whilst Chen might well be obliged to surrender the Bond Certificate, this should not be elevated into a condition precedent to absolve the Company of its obligation to redeem and pay, which seems inconsistent with Clause 6.1.

(2)  Insofar as Clause 6.3 is concerned, the onus is on the Company to stipulate a time at which the redemption of the Chen Bond should take place.  In this regard, I accept Mr Cheng’s submissions that the Company cannot complain if it failed to appoint a reasonable date, time, and location for redemption, pursuant to the prevention principle under which a person is not permitted to take advantage of his own wrong: see e.g. Kensland Realty Ltd v Whale View Investment Ltd (2001)  4 HKCFAR 381, [96], [98].

29.  Upon the maturity date, the Company’s obligation to redeem would crystallise, and the onus rests on the Company to make an appointment for redemption, whereupon payment shall be made in exchange for the Bond Certificate.  In the case of Chen, there is no evidence from the Company that it has made any such appointment.  It seems to me to be putting the cart before the horse for the Company to argue, despite failing to make any appointment, that it nevertheless has a complete defence on the pretext that Chen has failed and/or refused to surrender the original Chen Bond despite the Company’s repeated (but unparticularised)  requests: Chan Yuk 1^st §8.

30.  In any case, Mr Cheng has confirmed during oral submissions that Chen is prepared to surrender the original Chen Bond for redemption.  As such, this renders the Company’s argument academic anyway.  It may be that the Company’s real argument is that Chen must surrender the Chen Bond for repayment of HK$4,250,000 only (see Chan Yuk 1^st §9), whereas Chen’s position is that the Company should repay HK$6,750,000.  However, even if one assumes that there is bona fide dispute on substantial grounds regarding quantum, there is no reason why the parties should be at a standstill such that the Company cannot pay on the one hand, whilst Chen cannot surrender the Bond Certificate on the other hand.  For instance and without being exhaustive, the Bond Certificate could perhaps be surrendered upon the Company paying the undisputed HK$4,250,000 to Chen and the disputed HK$2,500,000 into court, pending resolution of the quantum dispute; or the Company could perhaps pay the undisputed HK$4,250,000 with the Bond Certificate kept by a stakeholder or in escrow, pending resolution of the quantum dispute.  In any case, it cannot be right for the Company to insist on Chen surrendering the Bond Certificate without any further recourse upon the receipt of the lesser sum of HK$4,250,000 only.  Indeed, in such context, any complaint that Chen refused to surrender the Bond Certificate would be circular as it begs the question whether full payment will be made.

31.  As to the alleged need to exchange for a fresh bond, the Company says that a section for recording partial redemptions is specifically included at the bottom of the Bond Certificate. However, even if that is the case, at most it may be said that the particulars of the partial redemptions should be written down on the Bond Certificate. This does not mean that a fresh bond has to be issued.  In any case, assuming that such particulars should be filled in but they are not, it is difficult to see how this would then give rise to a defence to the Company for not paying the balance if, as Chen agrees, he is prepared to surrender the original Chen Bond upon redemption (i.e. when balance of payment is made).  Upon surrender of the Chen Bond in exchange for full payment of outstanding balance, there is plainly no more need for a fresh bond.

32.  Further and in any event, there is force in Mr Cheng’s submissions that various partial payments were already made by the Company prior to the alleged refusal on Chen’s part to surrender the original Bond (in exchange for a fresh bond or otherwise), and the Company has either waived such requirement or is estopped from insisting on such requirement.

33.  Hence, there is no merit in the Construction Argument.

C2.  Quantum Argument

34.  On the Company’s case, the following repayments have been made:

Date of Payment	Repayment Amount
Up to 15 November 2022	HK$2,000,000 (admitted in Chen 1st)
5 December 2022	HK$100,000
31 January 2022	HK$1,000,000
31 March 2023	HK$1,000,000
4 April 2023	HK$150,000
1 August 2023	RMB1,350,000 (equivalent to HK$1,500,000)
Total:	HK$5,750,000

35.  There is no dispute between the parties on the second to the fifth entries.  The only disputes are the first and last entries.

36.  In relation to the first entry, the Company simply relies on the “admission” in Chen 1^st §9 that the Company had paid Chen HK$2,000,000 as of 15 November 2022, as well as Chen’s draft Re-Re-Amended Petition to similar effect.  In my view, such argument cannot withstand close scrutiny.

37.  First, as explained in Chen 2^nd §§26 and 33, Chen’s previous confirmation of receipt of HK$2,000,000 as of 15 November 2022 is mistaken, and is based on the erroneous assumption that such amount was paid on time in accordance with Chen 1^st SA.  Hence, the Company cannot simply rely on the so-called “admission” without going into the actual evidence.

38.  Second, Chen 2^nd §26 set out the particulars of the total sum of HK$1,000,000 received, comprising 4 payments of HK$250,000 each with particulars of date and amount (as two of them are wholly or partly in RMB but agreed to be treated as HK$250,000). Chen also detailed the circumstances of receipt of each of the 4 payments and provided documentary evidence in support, save for the first payment which is nevertheless supported by Chen 1^st SA: see Chen 2^nd §§27-32.  In contrast, the Company has not produced any documentary evidence of the payment of HK$2,000,000 as of 15 November 2022. 

39.  Third, Chen 2^nd §34 challenges the Company to produce evidence of any payment to him if the Company disagrees and maintains that HK$2,000,000 in total was paid.  Chen 2^nd was filed on 22 August 2024, but the Company has not applied for leave to adduce documentary evidence to the contrary (which, if available, should not be difficult to produce).

40.  Fourth, Chen’s case finds support by reading Chen 2^nd SA alongside Chen 1^st SA.  Chen 2^nd SA was dated 2 December 2022.  Under Clause 1, the parties agreed to amend the payment schedule from 15 September 2022 to 15 January 2023.  The obvious implication is that payments supposed to be paid from 15 September 2022 onwards were not yet paid – hence the need to amend.  If one cross-references that to Chen 1^st SA, there are three outstanding payments since 15 September 2022 up to the date of Chen 2^nd SA, namely (i)  HK$250,000 by 15 September 2022; (ii)  HK$250,000 by 15 October 2022; and (iii)  HK$500,000 by 15 November 2022 (altogether HK$1,000,000).  This is convincing proof that, out of the scheduled payments of HK$2,000,000 in total by 15 November 2022, the Company has not yet paid HK$1,000,000 – in other words the Company only paid HK$1,000,000. 

41.  This is also borne out by Clause 2 of Chen 2^nd SA which provides that the Company shall pay the sum of HK$1,900,000 not yet repaid by the Company for the period from 15 September 2022 to 15 January 2023 under Clause 1.  If one cross-references that to Chen 1^st SA, the scheduled payments during such period should add up to HK$2,000,000.  This means the Company has not paid those sums at all except HK$100,000 (which seems referable to the undisputed payment of HK$100,000 on or about 5 December 2022).

42.  As regards the last entry, the Company alleges that, in or around mid-2023, Chen instructed the Company to make payment of RMB1,350,000 to a PRC company called “安慶市財康貿易有限公司” (“PRC Company”). In my view, there is no merit in such allegation.

43.  First, notwithstanding the fact that the parties saw fit to reduce things into writing as evidenced by Chen 1^st SA and Chen 2^nd SA, the Company is unable to produce any written agreement, correspondence, communications, email or other records to show that Chen authorized or instructed such payment.  Instead, all that the Company could produce is a payment instruction by the Company to a redacted entity (purportedly its subsidiary)  to make payment of RMB1,350,000 to the PRC Company as partial repayment to Chen on its behalf.  This is an internal document not communicated to or confirmed by Chen.  It is, with due respect, a self-serving document.

44.  Second, Chen has categorically denied the Company’s assertion, and is adamant that he has no business relationship with the PRC Company or its shareholders or directors: Chen 2^nd §§24-25.  Yet, the Company is unable to adduce any evidence to demonstrate any connections or links between Chen and the PRC Company.

45.  Third, the circumstantial evidence about the PRC Company is rather dubious.  Chen has instructed his solicitors to conduct a company search and it transpires that the PRC Company was established on 12 July 2023 but dissolved on 9 November 2023: Chen 2^nd §25.  All these cast further doubts on the credibility of the Company’s allegation that Chen indeed instructed the Company to make repayment to such entity.

46.  Hence, there is no merit in the Quantum Argument either. 

47.  For all these reasons, I hold that the Company has not discharged the burden of showing that there is a bona fide dispute on substantial grounds in respect of Chen’s debt.

D.  Gu’s claim

48.  Gu’s claim is made on the basis of the Bond Instrument and the Bond Certificate (both dated 26 March 2014)  in the principal amount of HK$10 million.  In essence, it is Gu’s case that:-

(1)  On 5 March 2014, Gu and Zenith Investment Limited (“ZIL”)  entered into a Sale and Purchase Agreement (“Gu SPA”)  in which he agreed with ZIL to purchase bonds issued by the Company in the principal sum of HK$10 million for the purposes of his application for the Capital Investment Entrance Scheme (“CIES”)  administered by the Immigration Department (“ImmD”).  ZIL was the same company that the Company subsequently announced would be its agent for seeking investors for the Bonds (for the CIES applications).

(2)  In accordance with the Gu SPA, Gu transferred HK$10 million to Kingston Securities Limited (“Kingston”)  and instructed Kingston to transfer it onwards to ZIL as payment of the bonds.

(3)  Gu was issued the Bond Instrument (“Gu Bond Instrument”)  and the Bond Certificate (“Gu Bond Certificate”)  both dated 26 March 2014 (together “Gu Bond”).  The Company does not dispute the authenticity of the Gu Bond but alleges it is invalid.

(4)  Gu stopped receiving interest payments from ZIL / Alpha Investment Group Limited (“Alpha”)  (apparently a company related to ZIL)  after 31 October 2018.

(5)  The maturity date of the Gu Bond is 25 March 2022.  Since then, Gu made various requests for repayment and redemption but without success.  In letters dated 30 May 2022 and 20 June 2022 from the Company’s solicitors Wellington Legal, it was asserted that Gu had executed a supplemental agreement with the Company (“Alleged Gu SA”)  to extend the term of Gu Bond to 25 March 2025 in exchange for payment of HK$750,000 to Alpha (“Alleged Extension”). 

(6)  The Alleged Gu SA was purportedly signed by (i)  Gu and (ii) Chan Yuk for the Company.  Gu denies having executed the Alleged Gu SA or received payment through Alpha, and has reported the matter to the Police.  In any case, even if the Alleged Gu SA exists (which Gu denies), the winding up proceedings in HCCW 243/2024 constitute an event of default by which the unpaid interest and entirety of the principal have become payable.

(7)  By letter dated 15 March 2024 from his solicitors, Gu gave the Company a redemption notice.  Gu is ready and willing to deliver up Gu Bond Certificate for redemption.

(8)  By letter from Wellington Legal dated 19 March 2024, the Company alleged for the first time that it had no record of Gu having made payment for the Gu Bond (“Alleged Non-Payment”).  The Alleged Non-Payment was also advanced in Ma 3^rd §71 (filed on 17 May 2024).

(9)  In Chan Yuk 3^rd (filed on 1 August 2024), the Company alleges for the first time that it has received HK$4 million from ZIL; it has agreed with ZIL that Gu Bond would be cancelled in default of payment of balance of HK$6 million; and the Company has issued the Gu Bond Certificate but has since cancelled it (“Alleged Cancellation”).

49.  The Company’s case is that:-[5]

(1)  Pursuant to a subscription agreement dated 21 March 2014 between ZIL and the Company, ZIL agreed to subscribe for a bond in the principal amount of HK$10 million (“Gu ZIL Bond”).

(2)  However, ZIL only paid HK$4 million to the Company for the bond to be issued.  The payment was made via a cheque drawn by Mr Yau Wai (“Sam Yau”), the principal of ZIL.

(3)  On the basis of ZIL’s agreement to pay the balance by 2 April 2014, the Company agreed for the bond that was to be issued to ZIL to be transferred to Gu instead.  Further, ZIL agreed not to release the Gu Bond to Gu until the balance had been paid.

(4)  Accordingly, the Company issued a bond to ZIL, immediately cancelled it, and issued the Gu Bond.

(5)  ZIL failed to pay the balance. In a letter dated 10 April 2014, the Company put it on record that the Gu ZIL Bond is invalid, and the transfer of the Gu ZIL Bond to Gu is similarly invalid.

50.  The Company advances the following arguments:

(1)  The Gu Bond was not fully paid for and thus invalid;

(2)  There were private agreements between Gu and Sam Yau which were inconsistent with the express terms of the Gu Bond;

(3)  Gu’s evidence is inconsistent and unreliable; and

(4)  Gu failed to surrender the original Gu Bond for redemption.

D1.  Gu Bond Not Fully paid for?

51.  The Company’s case is that Gu fails to prove payment of HK$10 million reaching the Company, and the Company only received HK$4 million from ZIL.  At most, ZIL could have transferred a bond to Gu in the principal sum of HK$4 million.  The Gu Bond, which is for the principal sum of HK$10 million, must be invalid.  The Company further argued that Gu is estopped from asserting otherwise due to ZIL’s agreement to pay HK$6 million by 2 April 2014 and its representation not to release the Gu Bond Certificate to Gu until the monies had been paid.  The Company also produced the following:

(1)  a letter of undertaking (承諾函)  dated 26 March 2014 from ZIL to the Company (“Alleged Undertaking”)  promising to pay balance of HK$6 million by 2 April 2014 but requesting the Company to issue Bond Certificate to ZIL, complete the transfer procedure for Gu and issue Bond Certificate to Gu first; and

(2)  a demand letter (催款函)  dated 10 April 2014 from the Company  to ZIL (“Alleged Demand Letter”)  stating that the Company had not received the balance of HK$6 million despite repeated demands; the Company will forthwith terminate the subscription agreement with ZIL; the transfer concerning such bonds are deemed invalid forthwith; and ZIL was requested to return the Gu Bond Certificate before 21 April 2014 (i.e. the Alleged Cancellation).

52.  On behalf of Gu, Mr Lau argues that the Alleged Cancellation is irrelevant in law, and the Company’s factual allegations are unbelievable in any event.  As explained below, having the benefit of submissions from both sides, whilst I consider it legally open to the Company to mount such defence, I am ultimately not convinced that it is factually believable.

53.  On the legal argument, Mr Lau says that it is not in dispute that the Company executed the Gu Bond Instrument and the Gu Bond Certificate, and Gu’s rights stem from being holder of the Gu Bond Certificate, and not from ZIL.  Thus, dealings between the Company and ZIL are irrelevant.  Mr Lau also stressed that Gu did pay HK$10 million and to the extent the Company denies having received it, this is only a condition precedent to the issuance of the Gu Bond Certificate which has either been satisfied or waived by virtue of the Company issuing the Gu Bond Certificate in favour of Gu.  In his oral submissions, Mr Lau emphasised that the Gu Bond Certificate refers to the Bond in its entirety (本金總額港幣$10,000,000的債券之全部)  and provides for unconditional obligation by the Company to pay Gu the principal amount of HK$10,000,000 and interest.

54.  There is some force in such argument particularly having regard to the nature of the Bond Certificate as a deed.  Moreover, on its face, the Bond Certificate is drafted in clear and unequivocal terms, and it may be said that it is intended to be a conclusive proof of the rights of the bondholder.  That said, Mr Lau has not cited any specific authority in support.  On the other hand, during the hearing, Mr Scott SC has produced additional authorities in support of the legal proposition that a deed may be delivered in escrow: Chitty on Contracts (35^th Ed.), [1-107], [1-117], [1-120]; Hunt v Fisher (unreported, HCA 10072/1993, 19 January 1995), pp.9, 12, 13; Hunt v Fisher [1995] 3 HKC 417 at 426.  In particular, as set out in Chitty on Contracts, [1-120]:

“Delivery of deed as an escrow A party may deliver a deed as an escrow, that is, so that it shall take effect or be his deed on certain conditions. It is in other words a limited or conditional delivery. Such delivery need not be accompanied by express words; if from all the facts attending the transaction it can reasonably be inferred that the writing was delivered so as not to take effect as a deed until a certain condition should be satisfied, it will operate as an escrow. … In other words, evidence is admissible to show the character in which and the terms upon which the deed was delivered. It is a question of fact, and depends on what the parties intended. Their intention may be ascertained either from their statements or from the surrounding circumstances prior to or simultaneous with (but not subsequent to)  the delivery of the instrument.” [Emphasis added]

55.  Therefore, if the Company has put forth a credible account that the Gu Bond was delivered by the Company to ZIL on the condition that the balance of HK$6 million be paid, it seems open in law for the Company to contend that it was delivered as an escrow and shall not take effect as the condition was not satisfied.  I should mention that Mr Lau has in his oral submissions drawn my attention to various clauses in the Gu Bond, including for instance the written variation clause contained in Clause 9 of the Gu Bond Instrument.  However, whilst such clause may have the effect of precluding any alleged oral variation after the Gu Bond takes effect, this does not seem to be an answer to the legal argument of Mr Scott SC which, if it prevails, would mean that the Gu Bond has not yet taken effect to begin with.

56.  Therefore, it seems open in law to the Company to rely on the defence of delivery of the Gu Bond as an escrow, and it is ultimately a question of fact.  In his oral submissions in reply, Mr Lau has fairly accepted that he could not dispute the above legal proposition.  Rather, his better point is that such defence is not open to the Company on the facts.

57.  Whilst the court should not attempt to resolve a factual dispute by a mini-trial, it does not mean that the court should not properly assess the merits of the defence including whether it is factually credible or believable.  Having considered the evidence, I come to the view that the defence is not believable.

58.  First, the Company’s case has changed substantially over time, from the Alleged Extension, to the Alleged Non-Payment, and now the Alleged Cancellation.  Worse still, the Company’s current defence is diametrically opposed to its initial defence of Alleged Extension.  By alleging previously that the Gu Bond is extended, the Company must logically accept the validity of the Gu Bond – otherwise there is nothing to be extended.  This casts grave doubt on the credibility of the Company’s latest defence.

59.  Second, when putting forth the Alleged Extension, the Company has produced the Alleged Gu SA and positively relied on it.  The Alleged Gu SA bears the signature of Chan Yuk on behalf of the Company.  In addition, the Company produced a cheque in the sum of HK$750,000 drawn on 29 March 2022 in favour of Alpha (“Cheque”), purportedly as payment in accordance with the Alleged Gu SA.  The Cheque also bears the signature of Chan Yuk.  Yet, despite having the opportunity to respond, Chan Yuk 3^rd did not give any explanation as to why Chan Yuk executed the Alleged Gu SA and the Cheque on 26 March 2022 if, as alleged, the Company had already cancelled the Gu Bond back in 2014.  There could be little excuse because the same Chan Yuk purportedly executed the Alleged Demand Letter on behalf of the Company.  It is thus incredible that having cancelled the Gu Bond, Chan Yuk saw fit to sign the Alleged Gu SA and the Cheque.

60.  Third, the defence of the Alleged Extension was maintained by the Company for a long period of time spanning at least a year, as can be seen in letters issued by Wellington Legal on 30 May 2022, 20 June 2022, 14 September 2022 and 17 May 2023.  It was a position taken seriously by the Company.  In the letter dated 17 May 2023, the Company categorically denied that the Alleged Gu SA was forged and maintained its position that “the date of maturity of the Bond has been extended to 26 May 2025 pursuant to parties’ agreement”.  It was not until the lapse of another year that the Company changed its stance to the Alleged Non-Payment in March 2024, and ultimately the Alleged Cancellation in August 2024.  Having committed to a contrary position for such a long time, the present allegation by the Company represents a stark U-turn, which bears the hallmark of recent fabrication.

61.  Fourth, despite the fact that Gu has been pursuing the Company for outstanding interest payment and met Ma in late 2019 (see Gu §8, which is not refuted in Chan Yuk 3^rd), and has instructed solicitors to demand repayment since March 2022, the Company never alleged that it only received HK$4 million from ZIL until August 2024.  Worse still, the Company only produced the Alleged Undertaking and the Alleged Demand Letter in August 2024.  If such documents did exist, it seems rather unbelievable that the Company has failed to produce the same despite the lapse of a few years (alternatively at least 2 years).  This is another hallmark of recent fabrication.

62.  In this regard, there is also force in Mr Lau’s submissions that the court should be wary of the Company’s tendency or tactics to come up with new evidence in a piecemeal manner or after the court has determined an issue in dispute, as in how the Company sought to reopen the dispute (by new evidence)  with the original petitioner after the original petitioner has obtained a summary judgment against the Company and even after the original petitioner prevailed on appeal (see 12 Aug Judgment [5]-[16]).  A similar incident happened with regard to the evolution and change of defences put forth by the Company against Xu Wenjing (see 12 Aug Judgment [21], [26], [32]-[55]).  All these echo my point above although, for the avoidance of doubt, I need only rely on the evidence pertaining to Gu’s claim. 

63.  Fifth, the Company’s defence is inherently improbable.  By the Alleged Undertaking, ZIL asked the Company to issue and then cancel the Gu ZIL Bond, complete the transfer procedure and issue the Gu Bond all on 26 March 2014, even though the balance of HK$6 million will only be paid by 2 April 2014.  There is no good explanation advanced as to why the Company would accede to such unreasonable request to have the bonds issued before full payment.  In particular, if ZIL promised to pay the balance by 2 April 2014 which was just a week after 26 March 2014, why was there the rush to take all these steps before receiving full payment? 

64.  The Alleged Demand Letter fares no better.  The non-payment of HK$6 million must be something major.  It is difficult to believe that there is only one documentary proof of follow-up.  Whilst the letter itself refers to repeated demands, such demands were not particularised or evidenced by other documents.  Most suspiciously, the Alleged Demand Letter merely requests ZIL to return the Gu Bond before 21 April (rather than immediately).  Worse still, the Gu Bond is not returned, and is still kept by Gu even up till now.  It seems unbelievable to suggest that the Company gave such a relaxing timeline, and did nothing whatsoever after 21 April 2014 (for a period of over 10 years).

65.  Sixth, the Company knew at the outset that ZIL was involved.  Indeed, ZIL had been involved in the claims of many supporting creditors.  There is a public announcement issued by Chan Yuk on behalf of the Company on 17 June 2014 disclosing the appointment of ZIL as the Company’s bond agent (債券代理)  from that day for a period of 90 days or such longer period as may be agreed in writing.  According to Ma 3^rd §63, the Company still had business transactions with ZIL until at least the end of 2018.  Yet, the Company now claims that it cannot reach ZIL or get in touch with it to find out what happened, which seems suspicious.  Notably, despite the rather straightforward claims made by the bondholders, the Company managed to come up with documents belatedly which bear the footprint of ZIL.  For instance, Clauses 3 and 4 of the Alleged Gu SA provide for payment of HK$750,000 and subsequent interest to Alpha, apparently a company related to ZIL.  The Alleged Undertaking was issued by ZIL, and the Alleged Demand Letter was issued to ZIL.  All these give rise to doubts that the Company has private dealings with ZIL and manages to come up with documents bearing ZIL’s input to contradict what are otherwise very straightforward claims in reliance of the Bond Certificates.

66.  Seventh, as submitted by Mr Lau, after the alleged cancellation of the Gu Bond in April 2014, there is a marked absence of evidence on what becomes of the HK$4 million admittedly received by the Company.  Indeed, if ZIL had paid HK$4 million only and both the ZIL Gu Bond and the Gu Bond were cancelled in 2014, it is inexplicable that the Company would nevertheless cling onto such payment of HK$4 million and did not return the same to ZIL.  Nor is there any sound reason why ZIL did not pursue the Company for the refund of HK$4 million if the aforesaid bonds were indeed cancelled.  The lack of any follow-up and refund of HK$4 million tend to suggest that this is nothing but a recent fabrication by the Company.

67.  Eighth, Gu has produced a letter issued by the Company on 20 April 2015 which certifies that Gu invested HK$10 million in the Bond via ZIL as the appointed bond agent, and that Gu’s name is registered in the register of the Bondholders.  Yet, the Company has not adduced any credible evidence to rebut such evidence.  Nor does the Company produce the register of the Bondholders to refute such point. Indeed, if the Company were right that the Gu Bond was cancelled in 2014, his name would not appear in the register of the Bondholders.  The Company could just produce it as proof, but it has chosen not to do so (despite being given leave to file evidence in response to Gu’s claim).

68.  Ninth, there are little merits in the Company’s challenge that Gu cannot prove payment of HK$10 million to ZIL (and ultimately the Company).  The Company has raised various peripheral (if not tenuous)  points which I have considered.  I do not think it is necessary to address each of them in details.  In the course of his oral submissions, Mr Gu has submitted a list of documents relied upon by Gu and drawn my attention to the same.  In my view, Gu has produced sufficient documentary evidence in support.  Among others, Gu produced the Gu SPA dated 5 March 2014 and HK dollar deposit slip of HK$10 million to Kingston on 19 March 2014.  I have also been shown statements issued by Kingston to Gu evidencing the deposit of HK$10 million, followed by withdrawal of HK$10 million and deposit of the Gu Bond.  Gu has also produced instructions to Kingston to pay HK$10 million to ZIL.  The Company’s suggestion that the HK$10 million had been withdrawn but may not be paid to ZIL seems fanciful and speculative.  In my view, there is cogent and convincing proof of payment of HK$10 million by Gu to ZIL.  Further, the fact that the Gu Bond was issued by the Company is itself a strong indicator that the Company did receive payment of HK$10 million (failing which the Company should not have issued the Gu Bond).

69.  The above is corroborated by the letter dated 20 April 2015 from the Company (see [67] above)  and a letter dated 11 November 2016 from Kingston which refers to Gu’s CIES application and confirms that he is the holder of the Gu Bond.  Given such evidence, I do not accept the criticism by Ms Scott SC that Gu failed to ask Kingston to give evidence in support.  In any event, this cuts both ways as there is no proper evidence before the court that the Company has approached Kingston to verify the facts either[6], bearing in mind that the onus is on the Company to demonstrate bona fide dispute on substantial grounds.

D2.  Private agreements between Gu and Sam Yau / ZIL?

70.  The Company argues that, on Gu’s own evidence, there is clearly more than meets the eye in respect of the transfer of the Gu Bond from ZIL to Gu, as he and Sam Yau entered into a number of private arrangements which were inconsistent with the express terms of the Gu Bond, namely:

(1)  The purported interest payments under the Gu Bond were paid to him variously by Sam Yau, Alpha and ZIL, not the Company, contrary to Clause 5.2 of the Gu Bond;

(2)  Gu claims to have received interest payments of 6%, contrary to the express terms of the Gu Bond which provide for interest of 7.5%;

(3)  It is said that Sam Yau had the authority to deduct part of Gu’s interest payment for the dubious reason of helping Gu’s family members purchase unspecified “identity documents” from a 3^rd country; and

(4)  Gu claims that Sam Yau is no longer paying interest to Gu and became uncontactable in 2019, and Gu is now unjustifiably attempting to pin blame on the Company.

71.  It can be seen from the above that the Company’s argument revolves around the payment of interest. Whilst Gu said he received interest from Sam Yau or his associated entities such as ZIL, one must not forget that ZIL was at least at one stage the bond agent of the Company.  Moreover, Ma 3^rd §63 accepted that the Company had business transactions with ZIL until at least end of 2018, but he gave no particulars of such business transactions.  It could be said that the Company had some private agreements with ZIL too, and so this point cuts both ways. 

72.  The fundamental point remains whether the Company’s version about the payment of only HK$4 million by ZIL and the cancellation of the Gu Bond in April 2014 is credible.  If it is not, the fact that interest payments were made by Sam Yau is, at best, a neutral factor.  Indeed, it may equally be said that, if the Gu Bond is already cancelled, there is no reason for Sam Yau to pay interest to Gu at all. Moreover, if Gu’s case prevails, that would inevitably point to the existence of private dealings between the Company and Sam Yau / ZIL which enable the Company to come up belatedly with evidence such as the Alleged Undertaking and the Alleged Demand Letter.  Therefore, if, as I have found, the Company’s case is not credible, it would inevitably implicate ZIL as well – i.e. ZIL was assisting the Company to perpetuate the advancing of false defences.  As such, the mere fact that ZIL somehow assisted the Company in the payment of interest in the past would indeed be consistent with such collaboration, and in any event will not unsettle the above conclusion.

73.  Further, there is force in Mr Lau’s submissions that, even if it can be shown that Sam Yau / ZIL took advantage of Gu, it is difficult to see how that would assist to lend credibility to the Company’s case.  In my view, the second argument raised by the Company would rise and fall together with the first argument anyway.

D3.  Gu’s inconsistent and unreliable evidence?

74.  The Company criticises Gu’s evidence with regard to the Alleged Gu SA.  In short, the Company says that, whilst disputing the authenticity of the Alleged Gu SA, Gu has included it as one of the documents for his CIES application in 2023.  The Company further notes that the certificate of true copy purportedly issued by ImmD to Gu is missing a chop and date.  Therefore, the Company submits that Gu has not been frank and forthcoming in his evidence.

75.  However, it is important to understand what is the real issue in respect of Gu’s claim.  Gu relies on the Gu Bond issued by the Company, and the current defence put forth by the Company is that it only received HK$4 million from ZIL and it is a condition that the balance of HK$6 million be paid before ZIL could deliver the Gu Bond to Gu.  Such defence hinges on alleged agreement and representations between the Company and ZIL.  Gu is not privy to such alleged agreement and representations. Therefore, the court would assess the credibility of the Company’s defence based on the Company’s own evidence and circumstantial evidence (including for instance the contradictory stance, the late evidence, the quality of evidence, the inherent probabilities of the Company’s case, etc), as opposed to the evidence of Gu himself.  Thus, the Company’s attack on Gu’s credibility does not add much to its case.

76.  That said, it is fair to say that Mr Lau is not able to explain why the Alleged Gu SA was included in the application in 2023.  However, it seems plain that even before 2023, Gu’s stance is blatantly clear and he has adamantly maintained that he did not sign the Alleged Gu SA and had reported the matter to the Police.  Hence, whilst there is no evidence to explain the inconsistency and whether for instance it may arise because of mistake or otherwise, I do not think that much mileage could be gained by the Company out of such collateral attack given the issue I have identified above. 

77.  Moreover, even if one is to assume that, contrary to Gu’s stance, the Alleged Gu SA was entered into, this is not going to assist the Company.  To the contrary, the Alleged Gu SA militates against the Company’s present defence because, if the Gu Bond was cancelled in 2014, the Company would not have extended its validity by executing the Alleged Gu SA.

78.  As regards the certificate of true copy issued by ImmD to Gu, nothing in the Company’s defence turns on the authenticity or otherwise of such certificate.  In any case, during the hearing, Mr Lau has produced the original of the certificate for examination by the court and the Company’s legal team.  It is clear that the whole pack of document is bound together with a red label of ImmD, which tends to suggest this is a single set of document from ImmD and has not been tampered with, even though such original still does not bear a chop and date.  In the circumstances, I do not think there is sufficient basis to question the authenticity of such certificate, and in any event the Company’s defence does not turn on it.

D4.  Gu’s failure to surrender the original Gu Bond for redemption?

79.  The Company relies on Clause 5.2 of the Gu Bond and argues that, unless it receives the original Gu Bond Certificate, the Company does not have to bear any obligations in relation to redemption of the Gu Bond. The Company further contends that Clause 6.1 does not unsettle the above interpretation, and that Clause 6.3 reinforces Clause 5.2.  Further, the Company argues that Clause 6.3 does not impose an obligation on the Company to fix a time and place for redemption.

80.  I have already dealt with a similar argument advanced by the Company in respect of Chen’s debt at Section C1 ([25]-[33])  above.  I will adopt my reasoning therein which should apply, mutatis mutandis, to Gu’s debt.  In particular, given the clear obligation for the Company to redeem the Gu Bond arising from Clause 6.1, I do not accept that the Company can refuse to pay by not making any appointment and then resorting to the excuse that it is up to either party to propose one.  

81.  Indeed, irrespective of whether Gu may propose an appointment, this should not relieve the Company from its contractual liability to pay.  Once the maturity date has arrived, there is an obligation on the part of the Company to redeem and pay pursuant to Clause 6.1, and it cannot be right that the Company can wriggle out of such obligation by failing to propose a reasonable appointment to facilitate the same.  This is a fortiori the case as Gu’s solicitors has requested for redemption since 17 May 2022.

82.  In any case, it has been stated in Gu’s written submissions that “Gu is ready and willing to deliver up Gu’s Bond Certicate for the purpose of redemption”.  In the course of oral submissions, Mr Lau confirms that Gu is willing to surrender the original Gu Bond.  In these circumstances, the Company’s argument is academic anyway.

83.  For all these reasons, I hold that the Company has not discharged the burden of showing that there is a bona fide dispute on substantial grounds in respect of Gu’s debt.

E.  Lyu’s claim

84.  It is Lyu’s case that:

(1)  Lyu subscribed for bonds valued at HK$10,000,000 from the Company (“Lyu Bond”)  pursuant to a Bond Instrument (“Lyu Bond Instrument”)  and Bond Certificate (“Lyu Bond Certificate”)  both dated 14 September 2015.

(2)  The maturity date of the Lyu Bond was 14 September 2023, on which the Company agreed to pay the principal amount of HK$10,000,000 back to Lyu.

(3)  The Company failed and/or refused to repay Lyu’s debt on the maturity date.

(4)  Notwithstanding the statutory demand covering Lyu’s debt served on the Company by Lyu on 27 October 2023 (“Lyu SD”), the Company still failed and/or refused to repay Lyu’s debt.

(5)  The Company is deemed to be insolvent and Lyu is entitled to apply to wind up the Company on the insolvency ground.

85.  On the face of it, Lyu’s claim is a straightforward one.  She relies on the Lyu Bond Certificate which is signed by Chan Yuk and another director of the Company, and the Lyu Bond Instrument which is signed by Chan Yuk.

86.  The Company’s case is that:

(1)  The Company has no record of issuing the Lyu Bond or of Lyu ever becoming a registered bondholder of the Company.[7]

(2)  Lyu has never been able to provide a coherent account of how she obtained the Lyu Bond. She has only provided piecemeal and internally inconsistent documents without an adequate accompanying explanation.[8]

(3)  The logical consequence is that at least some of the documents were forged, and that both the Company and the ImmD are victims of the forgery. 

87.  The Company argues that it has valid defence because:

(1)  There is no proper explanation of how the Lyu Bond was obtained;

(2)  No payment was made to the Company;

(3)  There was no claim for interest.

E1.  No proper explanation of how the Lyu Bond was obtained?

88.  The Company says that there were only two methods for an investor to obtain a bond issued by the Company, namely:

(1)  Direct Subscription Route: the investor executes a Subscription Agreement with the Company. After the subscription monies are paid, the Company issues a bond in favour of the investor.

(2)  Transfer Route: the investor executes a Transfer Form with an existing bondholder. After the Transfer Form and original bond certificate have been delivered to the Company, it cancels the original bond certificate and issues a new bond certificate to the new investor.

89.  The Company stresses that the two routes are distinct and mutually exclusive.  An investor cannot directly subscribe for a bond and also obtain the same via transfer.  The Company then critiques Lyu for failing to explain which of the two methods she used to obtain the Lyu Bond, and further submits that Lyu has not provided full supporting documents for either route.  For the direct subscription route, Lyu has not exhibited a subscription agreement between her and the Company.  As regards the Transfer Route, Lyu relies on a sale and purchase agreement with ZIL dated 1 September 2015 (“Lyu SPA”)  but has not exhibited any transfer form signed by her and ZIL.

90.  In my view, whilst there is superficial attraction in the Company’s argument, this does not really go to the crux of the matter in dispute.  The undeniable fact is that Lyu has produced the Lyu Bond Instrument and Lyu Bond Certificate which are prima facie sufficient for Lyu’s claim.  As the Company denies that those documents were issued, it must mean that the documents including the signatures of Chan Yuk and another director thereon were forged.  Whether the Company can demonstrate a bona fide dispute on substantial grounds in this respect would turn on whether such case of forgery is credible or believable.  The critique as to how Lyu actually obtained the Lyu Bond does not offer a sufficient answer and fails to grapple with this point.

91.  Moreover, it can be seen from the claims of numerous supporting creditors against the Company that a lot of them had enlisted the assistance of ZIL to acquire the Bond, and ZIL was at least at one stage the bond agent of the Company.  The Company contends that the appointment of ZIL was only for a term of 90 days since 17 June 2014 but this ignores the fact that the public announcement says that it could also be for a longer term as may be agreed in writing between the Company and ZIL.  Investors like Lyu (and indeed Gu)  would not be privy to the arrangement between the Company and ZIL, and the Company has not given much details save by saying that there are no further business transactions between them after the end of 2018 (see Ma 3^rd §63).  As Mr Tommy Cheung, Counsel for Lyu, has put it, Lyu acquired the Lyu Bond through the assistance of ZIL.  What matters to her is that the relevant Bond Instrument and Bond Certificate were issued in her favour, and she would have little reason to care whether there is any direct subscription or transfer.

92.  In any case, on the face of the Lyu SPA, it might be said that Lyu would acquire the Bond by way of transfer from ZIL.  If so, this would be similar to the case of Gu which acquired the Bond from ZIL.  Yet, even in the case of Gu which the Company accepted that it had executed the Gu Bond (albeit allegedly as an escrow), Gu has not produced any transfer form executed between Gu and ZIL, but the Company did not take any issue.  It seems to me that the argument now put forward by the Company is a technical one.  With respect, this should not distract one from the real issue, namely whether the Lyu Bond was genuine or authentic.  In relation to such issue, evidence pertaining to the register of bondholders, the authenticity of the signatures by Chan Yuk and another director, and the non-receipt of HK$10 million by the Company, etc (as opposed to the precise route)  would assume primary importance.  I would address these in conjunction with the Company’s next argument below.

E2.  No payment made to the Company?

93.  At the heart of the Company’s submissions is that the purported payment of HK$10 million Lyu seeks to rely upon was a payment from ZIL which the Company ultimately refunded to ZIL on ZIL’s request:-[9]

(1)  Shortly before 14 September 2015, ZIL orally informed the Company that it wished to subscribe for a bond and would be depositing HK$10 million into the Company’s account.

(2)  The Company received a HK$10 million deposit by way of cheque on 14 September 2015.

(3)  Shortly after 14 September 2015, ZIL informed the Company that it would not proceed with the bond subscription and requested the Company to refund its HK$10 million payment. As this was the 3^rd time in 6 weeks that ZIL had sought to subscribe for a bond but later requested a refund at the last minute, it was agreed that the Company would only refund HK$8.8 million to ZIL.

(4)  The refund arrangement was recorded in a Chinese typewritten note executed by ZIL (“Alleged Note”)  which referred to the sum of HK$8.8 million to be refunded in light of the failed subscription for a bond on 14 September 2015 (港币8,800,000 元正退回本公司于2015 年9 月14 日未成功购实債券的本金)  and requested HK$6 million to be paid to Omega Technology Development Ltd (“Omega”)  and HK$2.8 million to be paid to Willing Peace Limited (“Willing Peace”).

(5)  Pursuant to ZIL’s written instructions, the Company issued cheques to Omega and Willing Peace and the payments were recorded in the Company’s bank statements.

94.  Based on the foregoing, the Company contends that it has not received the HK$10 million as it was refunded.  The Company also submits that Lyu has not been able to provide satisfactory evidence that she had in fact paid HK$10 million to the Company.  As such, there would have been no reason for Chan Yuk to execute the Lyu Bond Instrument, nor any reason for Chan Yuk and another director to execute the Lyu Bond Certificate, which must therefore be forged.

95.  Having considered the evidence, I am of the view that the Company’s account is not credible or believable.

96.  First, on behalf of Lyu, Mr Tommy Cheung argues that the Company’s assertion that it does not have any record of Lyu’s Bond is a self-serving response, particularly when neither the then chairman (Chan Yuk)  nor the director of the Company (羅子平)  has prepared affirmation evidence denying their signatures.  Mr Cheung submits that adverse inferences can be drawn against the Company, but Mr Scott SC highlights that at the hearing on 3 June 2024, Mr Look Chan Ho on behalf of the Company has indicated that a director of the Company denied having signed the documents in question but the Company was refused leave to put in further evidence.

97.  In my view, there is some force in the submission by Mr Scott SC that adverse inferences ought not be drawn given that the Company attempted to seek leave (which was however refused)  to put in further evidence.  However, this does not mean that the court is handicapped and could not at least assess the quality and veracity of the evidence placed before it.  One must not forget that directions were already given by the court at the hearing on 25 March 2024 for the Company to file evidence in opposition to Lyu’s claim.  In response, the Company chose to file Ma 3^rd on 17 May 2024, which contains a section on “Suspected Forgery of Documents Provided by the Substituted Petitioner” (at §§38-41).  The Company must be left with no doubt that the authenticity of the documents provided by Lyu (including in particular the signatures thereon)  is in issue, and yet the Company has not asked Chan Yuk or the other director to come forward to file any affirmation to deny having signed the same; nor did the Company give any good reason why it was not in a position to do so.  In these circumstances, the court should at least be entitled to consider and assess the quality of evidence put forward, even putting aside the question of adverse inference.  In the premises, the absence of any affirmation evidence from Chan Yuk and the other director simply means that there is insufficient evidence to substantiate the Company’s version of events.

98.  Second, the above is fortified by the failure of the Company to produce the register of the Bondholders.  Such failure is particularly egregious as Lyu has produced and relied on a letter dated 14 September 2015 issued by the Company (“Company Confirmation Letter”)  stating inter alia that:

“The name of the Bondholder, Lu YiLing is registered in the register of the Bondholders. The present holder of the bond, Lu YiLing is treated as its absolute beneficial owner for all purposes and abided by the law of Hong Kong.” [Emphasis added]

99.  The Company Confirmation Letter was submitted to ImmD as part of Lyu’s CIES application.  It bears a chop of the Company.  As the Company denies the authenticity of the Company Confirmation Letter, one would expect the Company to produce the full register of the Bondholders if, as alleged, the Company in fact had no records of the Lyu Bond and Lyu is not registered in the register.  There is no apparent or good reason why the Company relies on the mere say-so by Ma: see Ma 3^rd §7.  

100.  On behalf of Lyu, Mr Cheung refers to following exchange between the Hon Linda Chan J and Mr Look Chan Ho for the Company as recorded in the transcript of the hearing on 3 June 2024:

“COURT: So if the company says that, well, the name of the petitioner had never appeared in that register one would expect the company to produce the register to make good the point, right? It is the responsibility of the company to keep that register.

MR HO: Yes, yes, the company does have the register. The company – the evidence says it’s not …

COURT: Has it been produced?

MR HO: That hasn’t been produced, but …

COURT: Why not?

MR HO: … I can undertake to produce it. The company has said to me clearly it’s not in the evidence. It’s not in the – the petitioner’s name is not in the register.

COURT: So the company you are saying – you are telling the court the company told you that the petitioner’s name is not in the register?

MR HO: Yes.

COURT: But somehow they decided to – not produce the register as part of the evidence in support of their allegation of forgery.

MR HO: So the …

COURT: Is that what you’re saying?

MR HO:    The company’s thinking would be what proves – what – as your Ladyship said last time, the most important thing is to prove payment.  If the company never received payment it would not be possible.”

101.  Again, Mr Scott SC stresses that the Company attempted to seek leave (which was refused)  to put in further evidence, and hence adverse inference ought not be drawn against the Company for failing to produce the register of the Bondholders.  However, for similar reason as I have expressed in relation to the lack of affirmation evidence by Chan Yuk and the other director, the court must at least be entitled to assess the quality of the evidence, namely that the Company alleges that there is no record of Lyu as a holder of any bond without producing the register of Bondholders.  This is particularly the case given the serious nature of the allegation of forgery of documents, which cannot be lightly pursued and entertained in the absence of cogent evidence commensurate with the seriousness of such allegation.

102.  In an attempt to reconcile the above, Mr Scott SC argues in his oral submissions that the Company has done its best.  He asks rhetorically how can the Company prove a negative, and what more can the Company do other than that it has examined the records and cannot find Lyu’s name.  With respect, that misses the point.  If there is no such thing as a register of the Bondholders, then it may well be said that it is for Lyu to prove her entitlement rather than for the Company to prove a negative. However, since a register has been kept, it is a contemporaneous document which can of course be produced – indeed it was confirmed by Mr Look Chan Ho on behalf of the Company in the hearing on 3 June 2024 that it could be produced. Such register would prima facie be an objective and contemporaneous record as to who is or is not registered.  Instead of producing it as contemporaneous records in support (which would lend credibility to the Company’s case), the Company relies on a mere say-so contained in Ma 3^rd which compromises the quality or veracity of the evidence.

103.  I should also add that, whilst the Company was not granted leave to put in further evidence in response to Lyu’s claim, there is force in Mr Cheung’s argument that (i)  the Company had had the opportunity to put in evidence earlier but chose not to do so; and (ii)  the Company was given leave to file evidence in response to Gu’s claim but yet the Company still has chosen not to adduce the register of Bondholders.  Given the Company’s case that the Gu Bond was only delivered as an escrow and it was in any event cancelled in April 2014, it must necessarily be the Company’s case that Gu’s name is not registered in the register of the Bondholders.  There is therefore no good reason for the Company’s failure to produce the register of the Bondholders anyway.

104.  Third, there are little merits in the Company’s criticism of Lyu’s failure to provide satisfactory proof of payment.

(1)  There is nothing in the Company’s complaint that Lyu has not produced her relevant bank statement.  Lyu has already produced pay-in slip issued by her bank (ICBC)  evidencing payment of HK$10 million from Lyu to SBI on 8 September 2015, and official receipt and statements issued by SBI evidencing receipt of HK$10 million from Lyu on 9 September 2015.  Lyu has also produced a letter dated 8 October 2015 from SBI (“SBI Confirmation Letter”)  confirming the utilisation of Lyu’s funds for acquiring the Lyu Bond by ZIL on Lyu’s behalf.  This should suffice to prove her payment to SBI.

(2)  The Company’s own evidence reveals that a cheque of HK$10 million was deposited by SBI China Capital Financial Services Limited (“SBI”)  into the Company’s bank account with Hang Seng Bank on 14 September 2014.  This tallies with Lyu’s case that she had paid HK$10 million and was issued Lyu Bond as a result.

(3)  Consistent with the foregoing, the statements issued by SBI recorded the deposit on 17 September 2015 of the Bond of HK$10 million issued by the Company (i.e. Lyu Bond).

(4)  Lyu has produced a recent statement issued by SBI on 30 April 2024 recording the Lyu Bond in the amount of HK$10 million.

105.  The Company has also made other tangential points which are either immaterial or without merits.

(1)  The Company picked on the difference of service charge of HK$150 deducted in ICBC’s pay-in slip as compared with the receipt and statements of SBI which suggest a deduction of only HK$15.  With respect, nothing turns on such difference.  It at most suggests there is a mistake in the computation of the service charge, but that in no way negates the payment of HK$10 million.

(2)  The Company argues that according to the documents submitted to ImmD for Lyu’s CIES application, the sum of HK$10 million deposited by Lyu with SBI was transferred to the SBI account held by ZIL on 11 September 2015 which was used by SBI to issue a cheque of HK$10 million in favour of the Company on 14 September 2015. The Company says payment was thus made by ZIL rather than Lyu.  However, this does not change the fact that the payment originated from Lyu.  Moreover, Lyu does not dispute that she acquired the Lyu Bond with assistance of ZIL. Indeed, this is the apparent effect as stated in the SBI Confirmation Letter (quoted in Ma 3^rd §48).

(3)  The Company challenges the authenticity of the Company Confirmation Letter which stated the interest rate as 6% instead of 7.5% on the face of the Lyu Bond.  This does not relate to the payment of money by Lyu.  Moreover, as submitted by Mr Cheung, in the announcement of the Company, the interest rate announced was “not higher than 7.5%” which may still be reconciled.  In any case, it seems rather drastic for the Company to suggest that the Company Confirmation Letter is forged simply because of any inaccuracy as to the stated interest rate.

106.  Fourth, despite the overwhelming evidence of payment of HK$10 million by Lyu, the Company contends that the HK$10 million was refunded as evidenced by the Alleged Note and the payment of HK$8.8 million to Omega and Willing Peace.  However, it should be noted that:

(1)  These are contrary to the Lyu Bond Instrument and the Lyu Bond Certificate.  As explained above, the Company has not adduced cogent evidence to challenge the authenticity of those deeds.

(2)  The Alleged Note was disclosed for the first time by the Company on 17 May 2024 when filing Ma 3^rd. Given the fact that Lyu has issued the Lyu SD on 27 October 2024, there is no sound reason why the Company’s lawyers did not ever refute Lyu’s claim by disclosing the Alleged Note if it already exists and is genuine.

(3)  The Alleged Note made no reference to Lyu – hence it is not even apparent on the face of the Alleged Note that it is referable to the sum of HK$10 million paid by Lyu.

(4)  The refund does not tally.  If ZIL did ask for refund of the payment of HK$10 million, there is no good reason why (i)  the refund was not made directly to ZIL, (ii)  the refund was split in two partial payments, and (iii)  the total amount of refund was only HK$8,800,000.  All these militate against the Company’s case.

(5)  The difference of HK$1.2 million is, at any rate, a very substantial amount.  If the Company’s case were genuine, ZIL requested for refund within a window of 2 days, as the sum of HK$10 million was paid on 14 September 2015 and the cheques of HK$6 million and HK$2.8 million were issued by the Company to Omega and Willing Peace on 16 September 2015.  There is no plausible reason for the Company to enjoy a windfall of HK$1.2 million when the refund was requested forthwith. That is so even taking into account the alleged refund on two other prior occasions.

(6)  As explained in [65] above, there are doubts that the Company has private dealings with ZIL and manages to come up with documents bearing ZIL’s input to contradict what are otherwise very straightforward claims in reliance of the Bond Certificates.  In the present case, the Company Confirmation Letter stated that Lyu invested HK$10 million in the bond of the Company via ZIL as the appointed bond agent.  This suggests that ZIL still acted as a bond agent in September 2015, contrary to the Company’s suggestion that it was for a mere 90 days.  In any case, given the previous relationship between the Company and ZIL, it is at least extraordinary that the Company has not procured ZIL to come forward to corroborate its account.  The Company has only alleged in rather generic terms that it could not get in touch with ZIL, without giving much particulars to substantiate such assertion.  This reinforces the doubts against the veracity of documents bearing ZIL’s footprint (i.e. the Alleged Note)  being put forward by the Company to resist winding-up.

E3.  No claim for interest

107.  The Company further questions Lyu for not seeking payment of interest from the Company under the Lyu Bond.  The argument is that a decision to forego such a substantial sum of interest is devoid of common and commercial sense and accords with the Company’s case that Lyu is not in fact a bondholder of the Company.  However, as explained by Mr Cheung, Lyu is the substituted petitioner and she is relying on the outstanding principal amount of the Lyu Bond for the purpose of winding-up.  If the Company is wound up, there is nothing to prevent Lyu from filing proof of debt for both the principal amount and interest.  It is therefore incorrect to suggest that Lyu has decided to forego a substantial claim of interest.

108.  Further, given the fact that the Company Confirmation Letter states the interest rate at 6% whilst the terms of the Lyu Bond provide for a rate of not higher than 7.5%, it seems understandable (and in any case not something unusual)  for Lyu to confine herself to the outstanding principal amount for the purpose of seeing winding-up relief, lest it may be suggested that there is bona fide dispute on substantial grounds in relation to the claim for interest.

109.  In the circumstances, I do not consider such point to the material (let alone determinative)  of the merits of the defence put forth by the Company, namely that the Company did not receive payment and the Lyu Bond is forged.

E4.  Further submissions by the Company

110.  In the course of his oral submissions, Mr Scott SC confirms that the Company’s case is that Lyu was putting forth the forged documents.  This is of course a serious allegation against Lyu.  In support of that, Mr Scott SC submits that there are five indications of fraud.  Whilst some of these have been addressed above, it is prudent for the court to set out and deal with them here for completeness.

111.  First, Mr Scott SC submits that the records of SBI produced by Lyu were tampered with.  He also relies on Ma 3^rd §41 and stresses that the text size, font type and character spacing of the SBI statements are different from other examples.

112.  With respect, it seems to me that the Company’s case is rather speculative.  The SBI statements have been submitted by Lyu to ImmD at the outset for Lyu’s CIES application.  It is a very serious allegation to suggest that Lyu fabricated or tampered with the SBI statements to deceive ImmD.  Cogent evidence is required to mount such serious accusation. Yet, all that the Company relies on is the alleged difference in formatting of the SBI statements.  As Mr Cheung has submitted, given that the SBI statements are printed out from computer systems, there could be all sort of reasons for any difference in formatting. 

113.  Moreover, SBI is part of a leading financial services group which remains in operation today.  As such, there is no sound reason why the Company should advance such serious accusations against Lyu before verifying with and obtaining confirmation from SBI. Whilst Mr Scott SC says that that the Company has written to SBI but has received no response, this does not thereby support the Company’s allegation. Instead, the fact remains that the Company’s accusation of forgery is not corroborated by SBI.

114.  In any case, it does not appear to be the Company’s case that the pay-in slip issued by ICBC is forged.  If Lyu did instruct ICBC to remit HK$10 million odd to SBI, then plainly Lyu must have maintained an account with SBI to which such money was deposited for the purpose of acquiring the Lyu Bond.  There would have been no need for Lyu to fabricate or tamper with statements from SBI.

115.  Second, Mr Scott SC complains about the discrepancy in the pay-in slip (or receipt)  issued by ICBC and the receipt issued by SBI, as there is a discrepancy of HK$135 apparently due to the computation of service charge at HK$150 for the former and at HK$15 for the latter.  As explained in [105(1)] above, nothing turns on such difference.

116.  Third, Mr Scott SC relies on Ma 3^rd §§47-48 and argues that there was no payment by Lyu to the Company.  I do not consider this to be meritorious for the reasons set out in [104]-[106] above.  Mr Scott SC further points to the erroneous reference to interest at 6% in the SBI Confirmation Letter.  For reasons similar to those set out in [105(3)] above, I do not consider this to be material either.

117.  Fourth, Mr Scott SC refers to the Company’s case on payment and refund in Ma 3^rd §§23-30. This has been addressed in [104]-[106] above.

118.  Fifth, Mr Scott SC stresses that Lyu never claimed repayment of interest and says this certainly requires investigations.  This has been addressed in [107]-[109] above.

119.  Further, it appears from Ma 3^rd §62 that Company also takes the point that Lyu has never produced the original Lyu Bond for inspection, and that Lyu has not even suggested that she is able to tender the same.  However, this point is not developed further in the Company’s written and oral submissions.  In any event, I have already dealt with a similar argument advanced by the Company in respect of Chen’s debt at Section C1 ([25]-[33])  above.  I will adopt my reasoning therein which should apply, mutatis mutandis, to Lyu’s debt.  If necessary, the Company can always request that payment to Lyu be accompanied by the simultaneous surrender of the Lyu Bond, and there is no indication by Lyu that she will oppose the same.

120.  For all these reasons, I hold that the Company has not discharged the burden of showing that there is a bona fide dispute on substantial grounds in respect of Lyu’s debt.

F.  Conclusion

121.  For the above reasons, I hold that the Company has not discharged the burden of showing that there are bona fide disputes on substantial grounds in respect of the debts of Chen, Gu and Lyu.

122.  I order that the petition be listed for hearing on 28 October 2024 for pronouncing a winding up order against the Company.  If the Company does have the means to pay the debts of Chen, Gu and Lyu and provide evidence of payment by 24 October 2024, the hearing will be vacated and the directions granted by me at [17] above should come into effect from the date of vacating such hearing.   

123.  As for costs, I order that the costs of and occasioned by the Re-Re-Amended Petition and the applications for substitution by Chen and Gu (including the costs of the hearing on 19 September 2024)  be paid by the Company to Lyu, Chen, Gu and the Official Receiver, to be assessed by way of gross sum assessment on paper and be paid forthwith.  I further direct that skeleton bills of costs be lodged by them within 7 days, and the Company be given leave to lodge a list of objections within 7 days thereafter.  Save as aforesaid, the costs of and occasioned by the applications for substitution by other supporting creditors are reserved and may be dealt with at the adjourned hearing of the petition (as directed on 28 October 2024 or, if such hearing is vacated, at such other date to be fixed in future).

124.  Last but not least, it remains for me to thank all Counsels and also Mr Lau for the helpful assistance given to the court.