RE WONG WAI KEE RICKIE

HCB 1568/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY

NO. 1568 of 1998

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J U D G M E N T

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1. In these proceedings, the Petitioning Creditor petitions for a bankruptcy order be made against the Debtor on the ground that the Debtor is unable to pay his debt in that he had failed to comply with a statutory demand served on him on 8 October 1998. The statutory demand is founded on various debts said to be due and owing from the Debtor. The Debtor had not applied to set aside the statutory demand. It is not in dispute that the Debtor had not complied with the statutory demand within the prescribed period or at all. The grounds on which the Debtor opposed the Petition, as set out in his Notice of Intention to Oppose, are that the Creditor had demanded more than what was in fact owing from him, and that he is not liable for some of the items comprising the statutory demand.

Background

2. The Petitioning Creditor is a limited company carrying on the business of insurance business. Previously, it was known as Lippo Protective Life Insurance Company Limited. By an Agency Leader Agreement dated 6 June 1996 made between the parties, the Creditor appointed the Debtor as a deputy general manager commencing from 1 June 1996 ("the Agency Agreement").

3. At the time of joining the Petitioner, the Debtor had been in the insurance trade for 15 years. Immediately before joining the Creditor, he was the branch manager of another insurance company. It is common ground that negotiations and arrangement for the appointment of the Debtor took place before June 1996. The Debtor only joined the Creditor in June 1996 because of the time required for him to resign and leave his former company.

4. The structure and remuneration system of the Creditor is such that appointees may join or be promoted as managers of various grades. When the Debtor joined the Creditor, he was appointed as a grade 4 deputy general manager. At the time of his appointment, he had under him a grade 3 manager called Raymond Sham ("Raymond") and various grades 2 and 1 managers and marketing executives.

5. Like all other appointees of the Creditor, the Debtor would recruit and nominate other persons to be the agents of the Creditor. For agents recruited by him directly, they became the Debtor's direct agents. For agents recruited by his direct agents, they were the direct agents of the recruiters, but they were the indirect agents of the Debtor. The Debtor earned commissions from insurance policies he concluded. He also earned overrides or override commissions on policies concluded by his direct and indirect agencies. The percentage of override commissions for direct and indirect agents however differ.

6. In November 1996, Raymond ceased to be the down-line manager of the Debtor. As a result, a number of Raymond's down-line agents ceased to be the indirect agents of the Petitioner. It is the Creditor's case that in order to compensate the loss of commissions to the Debtor as a result of this split, it was arranged that 2 of the former direct agents of Raymond, hence indirect agents of the Debtor, changed to become the direct agents of the Debtor. The Debtor disputes this and says that these 2 agents should have been his direct agents right from the beginning. I shall return to deal with this in the later part of this judgment.

7. By a notice of termination dated 21 June 1997, the Creditor gave notice to terminate the appointment of the Debtor with immediate effect. The reason for the Creditor's decision is that the income generated by the Debtor failed to meet the minimum requirement of the Creditor. At the request of the Debtor, the Creditor, instead of terminating the appointment, permitted the Debtor to tender resignation with effect from 1 August 1997. Accordingly, the Debtor remained an agency manager of the Creditor until 31 July 1997.

8. During the period when the Debtor worked for the Creditor, and even immediately before that, the Creditor had extended several loans and advances to the Debtor so as to put him in funds until he was in a position to generate business and produce commissions. Upon the termination of the Debtor's appointment, the Creditor demanded payment of the outstanding loans and advances previously made to the Debtor. When no payment was made, the Petitioner issued the statutory demand and subsequently presented the Petition herein.

The Witnesses and the Evidence

9. The Creditor called only 1 witness, Mr Jimmy Wong. Mr Wong is the vice-president of the Finance Department of the Creditor. He had sworn 4 affidavits in these proceedings and these were adopted by him as part of his evidence. In his affidavits, he gave an account of the personnel and remuneration structure of the Creditor, the various loans and advances made by the Creditor to the Debtor and how the commission entitlement of the Debtor was computed. He elaborated on these matters in his oral testimony. In particular, he mentioned that 2 agents called Kim Chan and Irene Wong joined the Petitioner as the direct agents of Raymond Sham. They were therefore the indirect agents of the Debtor until the split in November 1997. As from 1 November 1997, they became the direct agents of the Debtor. He disagreed with the Debtor's suggestion that these two should have been his direct agents right from the beginning, but were mistakenly and wrongfully placed under Raymond Sham's unit as his direct agents.

10. The Debtor had also given evidence. He had also made 4 affirmations in these proceedings. His stance on the loans and advances upon which the statutory demand and Petition were based had changed in these affirmations. Likewise, his stance on the amounts to be set-off against his indebtedness to the Creditor has also shifted. In his oral evidence, he renewed his objections to the manner in which the Creditor computed his commission entitlement. In particular, he mentioned that Kim Chan and Irene Wong were directly recruited by him and therefore should have been his direct agents. Accordingly, he said his override commissions should have been much greater than what the Creditor had set out and was such as to extinguish all debts due from him to the Creditor.

11. The Debtor called no other witness.

12. Before leaving this part, I should briefly mention one matter. It is this. In the initial stage of the trial, the Debtor indicated he would call 2 witnesses, Sylvia Yu and Liza Chan. According to the Debtor, the former was his secretary and the latter one of his down-line agents when he was working with the Petitioner. He said that they were to substantiate his allegation that Kim Wong and Irene Wong were directly recruited by him. The Creditor understandably opposed as this point had hitherto never been raised by the Debtor, either in his affirmations or in the correspondence exchanged between the Creditor's and his former solicitors. In the end, I granted leave to the Debtor to call these witnesses.

13. After the close of the Creditor's case and at the end of the second day of the trial, the Debtor however indicated that he would call Irene Wong in lieu of Liza Chan. The reason given was that Miss Chan would not be available on the third day of the trial and that he had since secured the agreement of Miss Wong to testify. This was again opposed by the Creditor. After hearing arguments, I refused the Debtor's request to call Irene Wong. My reasons are as follows: Firstly, I do not consider the non-availability of Miss Chan to be a relevant consideration at all. The trial was set down for 3 days, it is incumbent upon the parties to make the necessary arrangement to ensure that their witnesses are available to testify during the trial. Secondly, while accepting that the evidence of Miss Wong is relevant, I have to weigh it against the prejudice occasioned to the Creditor by this last minute change of witness. The Creditor had already been taken by surprise by the indication to call witness. It then proceeded with the trial and tendered its evidence on the understanding that Miss Chan will testify. There will be serious prejudice and injustice to the Creditor if the Debtor were allowed to call a different witness after the Creditor had closed its case.

14. On the third day of the trial, after he concluded with his evidence, the Debtor indicated that he had no witness to call. He said that Miss Yu and Miss Chan were both engaged in work and could not attend court. He then went on to claim that Miss Irene Wong was in fact his younger sister and that the Creditor was well aware of this. He further mentioned certain conversations that allegedly took place between Mr Jimmy Wong and Miss Irene Wong after the commencement of the trial. All of these clearly do not form any part of the evidence in the trial and no consideration can be given to them in determining the merits of the case.

The Issues

15. As counsel for the Creditor rightly observed, the Debtor, whether when he was legally represented or thereafter, has not applied to set aside the statutory demand nor the Petition, which would suggest that he does not contest the existence of the debts specified in the statutory demand. Notwithstanding that, the Debtor had in his affirmations and at the trial disputed some of the debts in the statutory demand and further asserted that he has a set-off which exceeds the amount of the Creditor's debt. These are all matters which normally should fall to be determined at an application to set aside the statutory demand for, in effect, the Debtor is contending that there is no debt due from him. Be that as it is and since the Creditor has not taken any objection, this Court shall proceed to deal with the issues raised by the Debtor and they are as follows :

(1) Whether the debt is disputed on grounds which appear to be substantial ;

(2) Whether the Debtor appears to have a set-off that exceeds the debts stated in the statutory demand ; and

(3) Whether the Debtor is unable to pay the debts, if proved.

The Law

16. Counsel for the Creditor referred to the case of Re ICS Computer Distribution Ltd [1996] 3HKC 440 as being relevant to the approach to be adopted in cases where the Debtor disputes the debts. The case is a company winding up case, but I agree with counsel that the same principles would apply to a bankruptcy case. Rogers J. (as he then was) held that the onus is on the company against which a petition was presented to adduce sufficiently precise factual evidence to satisfy the court that it had a bona fide dispute on substantial grounds. If there is a bona fide dispute to the debt or a bona fide counterclaim on substantial grounds sufficient to extinguish the claim, then, that should, absent of other considerations, be the end of the matter. However, if only part of the debt is disputed, it may not be sufficient to determine the petition especially when the company is not in a position to make any payment (at pp. 444B-H). Accordingly, in this case, it is for the Debtor to adduce sufficient and clear evidence to demonstrate that he has a bona fide dispute on substantial grounds.

The Debts

17. As mentioned, the Debtor's stance on the various loans and advances that comprise the debt has shifted throughout the proceedings. In his oral testimony, after referring to his bank passbooks, he finally confirmed that he took no issue on the following items of debt specified in the statutory demand, namely,

(a) The monthly loan of $19,000 extended for 12 months from 31 May 1996 to 30 April 1997;

(b) The outstanding balance of the Special Loan of $160,000, being the sum of $88,888.88;

(c) Unpaid interest on the said Special Loan in the amount of $7,331.10; and

(d) The outstanding balance of the Computer Loan of $25,000, being the sum of $13,750.

18. I shall now deal with the other items of indebtedness which the Debtor does not agree.

(1) Special Income Loan

19. With regard to the 2 sums of Special Income loan, each in the amount of $21,825, advanced in May 1996 and March 1997, the Debtor does not dispute that he had received them. He, however, said that he was not liable to repay them. He had given 2 reasons for this.

20. In his 2nd affirmation, the Debtor relied on the provisions of a Memorandum on Special Income dated 6 June 1996 ("the Memorandum") and stated that he was obliged to refund the Special Income paid to him under the Memorandum only when the matters stipulated in clause 5 thereunder occur. As pointed out in the 3rd affidavit of Mr Jimmy Wong, the Debtor was misconceived. The Creditor is not seeking a refund of the Special Income paid under the Memorandum. The subject matter of the claim is 2 sums of loan advanced before the commencement of the Memorandum and after the termination of the Memorandum. The provision in the Memorandum therefore has no application.

21. In his oral testimony, the Debtor gave a different ground for disputing the 2 sums of loan. He claimed that he had reached the validation requirement under the Memorandum, but that the Creditor wrongfully terminated the payment of Special Income to him in March 1997. Yet, without any request from him, the Creditor resumed payment to him for the month of March 1997. The Debtor's assertion that he had met the validation requirement prescribed under the Memorandum is tied up with his case on the calculation of his commission entitlement, a matter that I will deal with in greater depth later. For the present purpose, suffice it for me to say that, for the reasons appearing in the latter part of this Judgment, the assertion is not made out. Even assuming that the Debtor was right in his assertion, the payment of $21,825 in May 1996 would still be in the nature of a loan advanced to him in that it was made before the Memorandum came into being.

(2) Contributions to the Individual Savings Scheme

22. The Debtor stated in his oral evidence that he had no idea whether the Creditor had already deducted the contributions for the months of May and June 1997. In his 2nd affirmation, he mentioned that the Creditor's record showed that his contribution to the Savings Scheme is $7,582.93 as at July 1997. The record in which this figure appears is the Summary of Commission Statement for June 1997. The figure, however, is referring to the value of the Debtor's share in the Savings Scheme as at June 1997. It does not show that the Debtor had paid the contributions for May or June 1997. There is no basis for the challenge to this part of the debt.

(3) Costs for the Mediterranean Conference

23. The Creditor's case is that the Debtor had taken part in a Mediterranean Conference organized by its marketing department in May 1997, but had not paid for the costs of it. It is common ground that this conference was related to a contest for the agents of the Petitioner. Under the contest, agents who met certain quota could attend the conference free of charge. The Debtor admits attending the conference. He merely disputes his liability to pay for it.

24. In his affirmations, the Debtor gave no specific reason to support his denial. In his oral testimony, the reason he gave was that he had what he called "a private deal" with Mr Manly Cheng, another vice president of the Creditor in charge of agents administration. It was said that Mr Cheng had promised him that he could attend the conference free of charge if any one of his down-line agents could meet the quota requirement set for the contest. Since Miss Liza Chan, one of his agents, had met the qualifying quota, he was invited by Mr Cheng to go along.

25. It is very odd, to say the least, that the Debtor had not set out this ground in any of his affirmations, not even those filed when he was on the Court's record legally represented. He had only stated in his 2nd affirmation that the conference was arranged by the Creditor and he denied being liable to reimburse the Creditor. If indeed it had been agreed that he needed not bear the costs of the conference, there is no reason why he did not say so in the affirmations.

26. In the course of his cross-examination, the Debtor's attention was drawn to an internal memo from the Creditor advising him that the costs of the conference would be deducted from his account in 3 instalments commencing June 1997. The Debtor denied receiving it. But the Commission Statement for June 1997 exhibited by the Debtor to his 2nd affirmation clearly shows a debit for the first instalment of $5,000. It is evident that the Debtor must have known that the Creditor was charging the costs of the conference to his account. It would be very strange that he raised no objection to this if indeed he had been promised a free trip.

27. Even if the Debtor's evidence on this part were to be accepted in its entirety, it is difficult to see how the "private deal" or the promise by Mr Cheng could have affected or bind the Creditor. The Debtor's evidence does not show that Mr Cheng intended or had the necessary authority, whether actual or apparent, to make the promise on behalf of the Creditor. It is in the Debtor's own words, a "private deal" which must mean something privy to Mr Cheng and himself, and did not involve the Creditor. The Debtor's challenge to this part of the debt must therefore fail.

(3) Commission Clawbacks

28. These were refunds of commission previously credited to the Debtor. The refunds came about because the relevant insurance policies lapsed before the Creditor had received 4 months' premium.

29. The Debtor had taken no issue on this until during the trial. His objection was that the terminations of these policies occurred after his appointment with the Creditor had been terminated, so that he is not liable to the clawbacks.

30. Under clause 6.6(b) of the Agency Agreement, the Debtor's obligation to refund the commission already credited to his account in the event the policy lapses before 4 monthly premiums have been received "shall continue irrespective of whether the Agreement has been terminated for whatever reason". The Debtor therefore has no basis to deny liability for the clawbacks.

31. In summary, it is obvious that the Debtor does not have a bona fide dispute to the debt, let alone on substantial ground.

The Set-off

32. In the statutory demand, the Creditor has given credit for several sums said to be payable to the Debtor. Of these sums, the part payment by the Debtor in May 1997, the refund of the Savings Scheme and the refund of the commission clawbacks due to reinstatement of the lapsed policies are not in dispute. As to the other items relating to commission payable and the agency building allowance, the Debtor contests that their computations are wrong. It is his case that based on his commission entitlement, he has a set-off that will extinguish the debt in its entirety. The Debtor's contention on this takes several form.

(1) The status of Kim Chan and Irene Wong

33. According to the Debtor, the Creditor had ever since his appointment calculated his commission erroneously. The error stems from the fact that Kim Chan and Irene Wong had been wrongfully placed under the direct unit of Raymond, when in fact they should have been his direct agents.

34. The Debtor's evidence in this regard is this. Raymond, Kim Chan, Irene Wong and him were working for the same insurance company before joining the Creditor. Raymond and Kim had joined the Creditor in May 1996 before he did in June 1996. As for Irene Wong, she joined in July 1996. Before he was formally appointed by the Creditor, there had been discussions between him and Mr Manly Cheng about the detailed arrangement. As the Debtor could only leave the former company in June 1996, it was arranged that when Kim joined the Creditor in May, he would be taken on by Raymond as a down-line agent until such time the Debtor joined the Creditor. The Debtor said that this was agreed between Manly Cheng and him and with the knowledge and consent of Raymond and Kim. After he joined the Creditor, he had repeatedly asked Manly Cheng to carry out the other part of the agreement, namely, to have Kim back as his direct down-line agent, but Manly Cheng kept stalling the matter. As for the case of Irene Wong, it was throughout understood by all parties concerned, including Manly Cheng, that she was joining the Creditor as the Debtor's direct agent. But somehow, she was put under the direct unit of Raymond and despite repeated requests from the Debtor, Manly Cheng refused to rectify the situation. It was only when eventually the Debtor and Raymond had the split in November 1996, that the position was put right by having the two as his direct agents.

35. Mr Manly Cheng was not called at the trial. This is hardly surprising because the allegations about him were only raised for the first time in the cross-examination of Mr Jimmy Wong. Given that Mr Cheng has not testified, I have to approach the veracity of the Debtor's evidence on these matters by assessing its inherent probabilities and against the contemporaneous documentary evidence before the Court.

36. There is, as I see it, an inherent flaw in the evidence of the Debtor with respect to how and why Kim Chan came to be put into Raymond's unit as his direct agent. Allegedly, Kim could not join as a direct agent of the Debtor because the Debtor had yet to join the Creditor, so he had to be taken on by Raymond for the time being. However, it is not disputed that Raymond joined the Creditor as a direct down-line manager of the Debtor in May 1996, at a time when the Debtor had yet to join the Creditor. If Raymond could join as his direct down-line manager before he joined the Creditor, there is no reason why Kim Chan could not have done the same. Indeed, the Debtor, when confronted with this, could not offer a reason for it. After much prevarication, he eventually agreed that Kim Chan could have been his direct down-line agent even before he joined the Creditor. What he then said was Manly Cheng would not allow Kim Chan to be his direct agent before he joined, but he gave no reason for the refusal. Indeed, there cannot be a good reason why Manly Cheng would, on the one hand, disallow Kim Chan to be his direct agent, yet, on the other hand, allowed Raymond to be his direct agent.

37. As for Irene Wong, she joined the Creditor after the Debtor's appointment. The Debtor had advanced no explanation at all as to how it was that she was made a direct agent of Raymond when it was understood by all concerned that she was recruited by him and was to be his direct agent. He seemed at some stage to have suggested that there was an error with the documentation, but he did not elaborate on this. Indeed, in the relevant documentation (pp.7-13 of exhibit P1), including Irene Wong's application form, Raymond was described as the direct leader of Irene Wong. On some of these documents, the Debtor had countersigned as the immediate leader of Raymond. If there were some errors resulting in the appointment of Irene Wong as the direct agent of Raymond, it is difficult to understand why the Debtor would go along with it and countersign the relevant papers.

38. The Debtor explained that in the course of his duties as a grade 4 manager, he had to sign many such documents day in and day out and he would have no idea what he was signing. I find it hard to accept that a deputy general manager with nearly 16 years of experience in the insurance trade would discharge his daily duties in such casual manner. This is particularly so having regard to his evidence that immediately after his appointment he had repeatedly urged Manly Cheng to let him have Kim Chan back as his direct agent. This will suggest that he was all along very concerned about who should be his direct agent. When it came to the case of Irene Wong, it would only be natural that he would pay special attention to ensure that Irene Wong was made his direct agent. It is inherently improbable that he would pay no attention to the documentation concerning Irene Wong, especially her application form, when he signed it. When the Debtor was cross-examined on the application form, he claimed that the section headed "To be completed by upline agency leaders" was blank when it was presented to him for signing. If that is the case, I cannot understand why he did not then put down his name in the space for the name of direct recruiter, and sign at the space for the signature of the direct recruiter. Had he done so, Raymond would not have been able to fill in his name and sign as the direct recruiter of Irene Wong and there would be no room for mistake.

39. In addition, it would appear that Irene Wong had also helped to compound the mistake by signing a Manager Financing Agreement dated 8 August 1996 which stated Raymond to be her immediate leader and her guarantor to the financial obligations thereunder. If it were everybody's understanding that the Debtor should have been Irene Wong's direct leader, then Irene Wong would have secured the Debtor to sign on this Agreement as her immediate leader and guarantor, and not Raymond.

40. The same difficulty applies to the documentation concerning Kim Chan (pp.1-6 of exhibit P1). Again, the Debtor had countersigned his application form which stated that his direct recruiter was Raymond. Obviously, the Debtor only signed this after he joined the Creditor, and according to the Debtor much afterwards. That would be at a time when he was demanding Manly Cheng to put right the position as to the relationship between Kim Chan and him. Any reasonable person would be very sensitive to any document which has the effect of confirming Raymond as the direct leader of Kim Chan. Yet, according to the Debtor, he paid no attention and countersigned it because he had to sign a lot of documents day in and day out. I find this wholly incredible.

41. It had also been put to the Debtor that he had not once complained to the senior executives of the Creditor about the mistakes with regard to the positions of Kim Chan and Irene Wong. The Debtor's version is that he had on many occasions raised this with Manly Cheng whom he trusted. Manly Cheng, he said, was a long standing friend whom he had known from the early 1980s. They had been on good terms since. It was Manly Cheng who approached him and asked him to change over to the Creditor. He therefore had great trust and believed in him until some 3 to 4 months after his appointment when he realized that Manly Cheng was stalling him. Against such a background, it is first of all difficult to understand why an old friend would trick him as he suggested with reference to the case of Kim Chan. Further, he would be in a good bargaining position since it was Manly Cheng who approached and head hunted him. There is therefore no reason why he could not insist on reserving Kim Chan as his direct agent just as in the case of Raymond. There should be no question of Manly Cheng insisting or refusing to let Kim Chan be his direct agent before he joined the Creditor. At any rate, his trust and faith for Manly Cheng must have eroded when he realized that Manly Cheng was stalling the matter. Yet apparently he continued to trust and believe him to the extent that he did not raise the problems with any other senior executives, including Mr Elroy Chan, who was Manly Cheng's senior and was responsible for signing the agency agreements.

42. It is the Debtor's case that Manly Chan was under what he alleged "a conflict of interests" in that he was a "concealed grade 6 general manager" in addition to being a vice president. Hence, the Debtor said, any unearned commission, including those arising from his business after he left the Creditor, would accrue to him. This is the motive attributed by the Debtor to Manly Cheng for what he had allegedly done to him. I have to point out that apart from the bare assertion of the Debtor, there is nothing to support it. The evidence of the Debtor in this regard also lacks the necessary particularity and precision. It is also Mr Jimmy Wong's evidence that after an agent left, the commission that would have been credited to him had he not left will simply not be issued. It will therefore not benefit any individual in the manner suggested by the Debtor.

43. Quite apart from these allegations against Manly Cheng, the Debtor had given no explanation why he could not have, on his own volition, applied directly to the Creditor to have Kim Chan and Irene Wong back as his direct agents, since this had been the understanding among all the directly affected parties.

44. There is plainly no substance in the Debtor's case that the Creditor had erred in the calculation of his commission entitlement by reason of the fact that Kim Chan and Irene Wong should have been his direct agents since his appointment in June 1996.

(2) Overrides after October 1996

45. The Debtor also challenged the Creditor's computation of his commission entitlement on the basis that he ought to continue to receive overrides from the new business concluded generated by the unit of Raymond after the split in November 1996. It is common ground that, despite the split, the Debtor would continue to derive overrides from the old productions made before the split by Raymond. Mr Jimmy Wong's evidence is that consequential upon the split, the Debtor would not be entitled to overrides from business concluded by Raymond's unit after the split. The Debtor however said otherwise. In my view, the version of Mr Jimmy Wong is clearly to be preferred, not least because the overall evidence of the Debtor had shown him to be an unreliable witness, but also because it accords with common sense and logic. There is simply no point in a split if the arrangement with respect to the payment of overrides were the same before and after the split. There is just no incentive for Raymond to have agreed to such an arrangement because he would be losing Kim Chan and Irene Wong, but stood to gain nothing. It is improbable that he would have accepted this when admittedly there were unhappy differences between him and the Debtor over the issue of commission.

(3) The Debtor's calculations

46. In his last affirmation, the Debtor had exhibited a schedule of what he claimed should have been his commission entitlement from June 1996 to July 1997. Based on this, he said that he had a set-off that exceeds the amount of his debts. The calculations in this schedule are flawed because they proceeded on the basis that Kim Chan and Irene Wong were throughout the Debtor's direct agents and that the Debtor was entitled to overrides from the new productions of Raymond's unit notwithstanding the split. I had for reasons set out above rejected these assertions of the Debtor.

47. Aside from these, the calculations are also wrong in that they were working on the Annualized First Year Commission (AFYC), instead of the First Year Commission (FYC), of the Debtor's agents. A important difference between the two is that AFYC is the estimate whereas FYC is the actual commission earning. Under paragraph 1.1.1 of Agency Leaders Basic Remuneration in the Agent's Manual, which admittedly is a contractual document governing the mode for computing commission entitlement, it was provided that : "Manager's remuneration will be mainly through an override on the FYC of their direct and indirect agents." There is thus ho basis for resorting to the AFYC.

48. The Debtor argued that there is little or no difference between the two. That had been shown to be wrong in his cross-examination when he was referred to the figures for AFYC and FYC in the Production Reports. The Debtor however argued further that the 2 figures would in due course match because given time the agents would have earned the difference. He said that had he not left in August 1997, the difference between the 2 figures would have disappeared. To say the least, his reasoning is hard to follow. In any event, his appointment came to an end in August 1997, so would his commission entitlement. Even if the AFYC and FYC figures were to meet eventually after August 1997, that does not accrue to his benefit. The Court is only concerned with his commission entitlement which crystallized on 31 July 1997.

(4) Validation requirement

49. The final point in the Debtor's case that requires mentioning is his assertion that he had all along been able to meet the validation requirement of the Creditor and that the Creditor was acting wrongfully in terminating his Special Income in March 1997 and in serving the notice of termination in June 1997. This in turn affects his liability for the Special Income Loan made in March 1997 and his commission entitlement, hence the amount of the set-off.

50. The Debtor is demonstrably wrong in this assertion, even accepting his premises with regard to the status of Kim Chan and Irene Wong and the entitlement to the productions of Raymond's unit after the split. As shown in his cross-examination, taking his case to the highest, the FYC of his and Raymond's teams for the year ending June 1997 was $2.264 million, much less than the $2.6 million validation requirement.

51. By reason of the above, the Debtor's challenge to the computation of his commission entitlement and the amount of the agency building allowance must fail. It also follows that the Debtor does not have a set-off against the Creditor independent of the various credits listed in the statutory demand, let alone one which exceeds the amount due to the Creditor.

Inability to Pay

52. By reason of section 6A(1)(a) of the Bankruptcy Ordinance, cap. 6, the Debtor is regarded as being unable to pay his debts as he failed to comply with the statutory demand within 3 weeks from its service and/or to apply to have it set aside. The Debtor had also not indicated in either of his affirmations or his oral testimony that he is in a position to pay the debts.

Conclusion

53. For the matters aforesaid, the requirements for making a bankruptcy order have been met. Accordingly, there shall be a bankruptcy order against the Debtor with costs.