RE GUY KWOK HUNG LAM

HCB 7204/2024

[2025] HKCFI 1220

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 7204 OF 2024

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J U D G M E N T

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1.  There is before the court a petition presented on 17 October 2024 (as amended on 30 December 2024[1])  (“Petition”)  by the petitioners, CP Global Inc. (receivers & managers appointed)  and CP Assets Ltd (“Ps”), seeking a bankruptcy order against the debtor, Mr Guy Kwok Hung Lam (“Lam”).

2.  The petitioning debt arose out of a costs order made by this Court on 21 July 2021 (“Costs Order”)  in HCMP 1647/2020 (“OS”), which are proceedings commenced by Ps (under the control of the Receivers[2])  to compel Lam (and another person)  to deliver up and provide access to the books, records and assets of Ps to the Receivers.

3.  The OS together with the bankruptcy petition presented by Tor Asia Credit Master Fund LP (“Tor”)  against Lam in HCB 4115/2020 (“Bankruptcy Petition”)  were heard before his Court on 9 June 2021 and judgment was handed down on 21 July 2021, [2021] HKCFI 2135 (“CFI Judgment”).  As stated in §88 of the CFI Judgment, a bankruptcy order was made against Lam (“Bankruptcy Order”).

4.  The Costs Order after taxation came to HK$2,448,372.11 (“Debt”)[3].

5.  There is no appeal against the Costs Order.  By a statutory demand sent to Lam by (inter alia)  email on 10 July 2024, Ps demanded Lam to pay the Debt within 21 days thereof (“SD”).  Lam did not comply with the SD. 

6.  As Lam has failed to comply with the SD, he is deemed unable to pay his debts by virtue of s.6A(1)(a)  of the Bankruptcy Ordinance (Cap. 6). 

7.  At the hearing, Lam admits that he does not have the financial means to pay the Debt but asserts that he will be able to do so in September 2025. 

Procedural history

8.  It is necessary to set out the procedural history of the matter, which is relevant to some of the grounds raised by Lam in opposition to the Petition:

(1)  On 9 October 2024, Master J Wong was satisfied that the SD had been served on Lam by electronic means and granted leave to Ps to issue the petition. 

(2)  The petition was presented on 17 October 2024 and was scheduled to be heard before a Master on 24 December 2024.

(3)  On 12 December 2024, Messrs. Y.S & Lau & Partners (“YSL”)  filed a notice to act as Lam’s solicitors and an affirmation of Lam (“Lam 1^st”).

(4)  At the 1^st callover hearing on 24 December 2024, Master SP Yip gave leave to Ps to amend the petition and to serve the same on Lam by way of substituted service through YSL. 

(5)  On 30 December 2024, the Petition was served on Lam through YSL. 

(6)  On 13 January 2025, i.e., one day before the 2^nd callover hearing before Master SP Yip on 14 January 2025, Lam filed his second affirmation (“Lam 2^nd”)  and a Notice by Debtor of Intention to Oppose Petition (“Notice”). 

(7)  On 22 January 2025, Lam filed his 3^rd affirmation (“Lam 3^rd”)  and a summons seeking extension of time to file the Notice within 7 days from the date of the order.   

9.  At the hearing before this Court on 27 January 2025:

(1)  Mr Tony Chow, solicitor advocate for Ps, asked for leave to file an affirmation in reply to the allegations raised in Lam 1^st, Lam 2^nd and Lam 3^rd and an early hearing date on the basis that the issues in the Petition are straight-forward.

(2)  Mr Christopher To[4], counsel for Lam, submitted that leave should be granted to Lam to file the Notice out of time given that (a)  Lam 1^st had been filed on 12 December 2024 and Ps were fully aware of Lam’s intention to oppose the Petition, and (b)  there was “no substantial difference” in the grounds stated in Lam 1^st and those stated in the Notice, such that Ps would not be prejudiced.   

Failure to comply with Condition

10.  The Notice was filed in breach of rule 68 of the Bankruptcy Rules (Cap. 6A)  (“BR”), which requires a debtor to file and send a notice of intention to show cause against a petition 3 days before the hearing of the petition, in this case, by 18 December 2024.   

11.  The approach of the court in dealing with an application for extension of time to file a notice out of time has been explained in Re Cheng Jonathan [2024] HKCFI 3669, §11[5]:

“The requirement under rule 68 is mandatory and must be complied with. This is reinforced by §16.1 of PD 3.1 which states that an application for extension of time to file such notice must be supported with good reasons, and the court would normally grant leave to the respondent to file an affidavit out of time conditional upon payment into court. It is incumbent upon the Debtor to satisfy the court that there is a good reason to justify the extension of time sought. Absent explanation for the delay, there is no proper basis to deny the Petitioner’s right to seek an immediate bankruptcy order (Re Liu Jiangyuan [2023] HKCFI 2326 at §§24-25).”

12.  As no explanation, let alone good reasons, had been provided by Lam to justify the extension sought, this Court granted leave to Lam to file the Notice out of time subject to the condition that he shall pay the full amount of the Debt into court within 4 weeks thereof (“Condition”). The Petition was adjourned to a Monday hearing on 10 March 2025. 

13.  On 26 February 2025 Messrs. Freshfields, Ps’ solicitors (“Freshfields”), wrote to YSL to enquire whether Lam had complied with the Condition.  No reply was made by YSL.

14.  On 28 February 2025, Lam filed a notice to act in person.  In his email to Freshfields dated 3 March 2025, Lam stated that he will not make a payment into court.

15.  As Lam has failed to comply with the Condition, the court may treat the Petition as uncontested and make a usual bankruptcy order against him on the basis that he is unable to pay his debts. 

16.  Nevertheless, I will deal with (1)  the late affirmation which Lam seeks to adduce at the hearing and (2)  the grounds raised by Lam in the Notice, his 3 affirmations and at the hearing and explain why I do not consider them to have any merit. 

Late affirmation

17.  No skeleton or written submissions has been lodged by Lam.  At the hearing, Lam refers to his 4^th affirmation said to have been filed on 5 March 2025 (“Lam 4^th”).  I do not see any basis to allow Lam to rely on Lam 4^th for the following reasons:

(1)  Lam has already filed 3 affirmations in opposition the contents of which are largely similar.

(2)  No application for leave to adduce Lam 4^th has been made. Nor has Lam provided any explanation as to why Lam 4^th was made so late such that it did not find its way to the hearing bundle or the court file.

(3)  It seems to me that the attempt to rely on Lam 4^th is nothing more than a tactic deployed by Lam to engineer an adjournment of the Petition.  Such tactic would not be condoned by the court. 

18.  Even after the hearing, on 11 March 2025, Lam attempts to put in another document entitled “skeleton argument” apparently to raise further arguments in opposition to the Petition. I do not see why the court should consider the so-called “skeleton argument” lodged by Lam after the hearing, particularly when no application for leave to re-open the matter or to put in further materials has been sought.   

Grounds in opposition

19.  The principles are well established:

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

(2)  An unpaid creditor whose debt is not in dispute is entitled ex debito justitiae to seek a bankruptcy order against the debtor.

(3)  The burden is on the debtor to show that there is a bona fide dispute on substantial grounds in respect of the debt.  For this purpose, the debtor has to adduce sufficiently precise evidence to establish a defence of substance, not just a fair probability of one (Leung Cherng Jiunn [2016] 1 HKLRD 850, §27; Re Soetrisno Farida [2019] HKCFI 2756, §11).   

(4)  It is not enough for the debtor merely to raise “a cloud of objections on affidavits” (Re Posismo Limited [2018] HKCFI 344, §10(4)). The court would caution itself against unsubstantiated and unparticularized assertions (Re Cheung Chi Mang [2018] HKCFI 984, §13(3), per Ng J; Re Cheung Kwan [2020] HKCFI 1033, §§30-31).

20.  The grounds in opposition, as stated in the Notice and Lam 1^st, Lam 2^nd and Lam 3^rd, may be summarized as follows:

(1)  Defective service of SD: the SD has never been served on him personally, and Freshfields’ attempts to serve the SD on him through his emails and by way of substituted service are “defective”[6].

(2)  Defective service of Petition: the Petition has never been served on him personally, and Freshfields’ attempts to serve the Petition by way of substituted service is “defective”[7].  This ground has been abandoned[8].

(3)  “Faulty” Costs Order: the Court of Appeal (“CA”)  and Court of Final Appeal (“CFA”)  have allowed his appeal and set aside the Bankruptcy Order, the “same logic” should apply to the Costs Order[9].

(4)  “Violation of Justice”: The New York court (“NY Court”)  rendered an interim decision on 18 October 2024 (“Interim Decision”)  in his favour, holding that there was no default on the loan advanced by Tor.  This confirms that the Bankruptcy Petition and the appointment of Receivers should not have taken place.  It is only fair that the costs of the Bankruptcy Petition and of the OS be paid by Tor, and the court should stay the Petition until the final decision of the NY Court[10].

(5)  “Without Prejudice Payment Offer”: Lam is willing to pay the Debt as soon as he receives the sale proceeds of the land (“Land”)  owned by Rosedale International LLC (“Rosedale”)  by no later than 30 September 2025[11]. Rosedale is owned and controlled by Mr J.T. Xiao (“Xiao”)  and Lam is a creditor of Rosedale.  The price of the Land has “increased a lot”.  It was only until 10 January 2025 that Lam managed to convince Xiao to pass a resolution to sell the Land by 30 June 2025 and transfer the net proceeds to Lam no later than 30 September 2025[12]. On 15 January 2025, Rosedale agreed to guarantee that it will give US$400,000 to Lam for him to settle the Debt which provides “more certainty” that he is able to pay the Debt[13].

Alleged defective service of SD

21.  The argument is wholly without merit.

22.  A statutory demand is not a court document issued by the court (PD 3.1 §2.2).  The only requirement applicable to service of a statutory demand is rule 46(2)  of the BR, which provides that:

“the creditor shall do all that is reasonable for the purpose of bringing the statutory demand to the debtor’s attention and, if practicable in the particular circumstances, to cause personal service of the demand to be effected”.

23.  Where, as here, a statutory demand had not been served on a debtor personally, the petitioner had to apply for leave from a Master to present a bankruptcy petition and for this purpose, must provide evidence to satisfy the court that it had complied with rule 46(2): 

(1)  Rule 46(2)  provides that “the creditor shall do all that is reasonable for the purpose of bringing the statutory demand to the debtor’s attention and, if practicable in the particular circumstances, to cause personal service of the demand to be effected”. 

(2)  As stated in PD 3.1, §2.1(b), service of a statutory demand by electronic means would normally be regarded as compliance with rule 46(2)  if the debtor has, for a period of 12 months immediately preceding the date of the statutory demand, used the electronic means in question to communicate with the creditor, and the creditor has sent the statutory demand to the debtor through that electronic means. 

24.  That is why when a bankruptcy petition comes to be heard by a judge, the question as to whether the requirement of rule 46(2)  of BR has been complied would not normally be an issue.  Indeed, at the petition stage, even if a debtor is able to show that a statutory demand has not been brought to his attention, at most, it is only relevant to the question of whether the petitioner is entitled to recover the costs of the petition and the standard of such costs.

25.  In the present case, the SD had been brought to the attention of Lam by emails, and Master J Wong was satisfied that the requirement of rule 46(2)  had been complied with (see §8(1)  above).  There is no suggestion that the Master’s decision was in any way incorrect. 

26.  In any event, the assertion that the SD has never been brought to Lam’s attention is plainly wrong:

(1)  The SD was repeatedly sent to Lam’s emails including his email address at gmail (“Gmail Address”)  on 10 July 2024, 12 July 2024, 18 July 2024, and 24 July 2024. 

(2)  Lam must have received the SD through (at least)  the Gmail Address as he used the same Address to send the following emails to Freshfields in relation to the SD:

(a)  In Lam’s email to Freshfields dated 22 July 2024, he stated:

“I refer to your letter dated 12 July 2024[14]in which you requested me to attend your office on 14 July 2024 [sic]…my claim against your clients is much bigger than your clients’ and they are in no position to issue statutory demand…

…I hope you would agree your clients have no legal basis to issue statutory demand against me…”.

(b)  In Lam’s email to Freshfields dated 30 July 2024, he stated:

“…I just checked my email and understand you may have advertised statutory demand…Please be advised I have not absconded or keep out of the way to avoid service of the statutory demand…

…And the statutory demand that you sent me is not legal…”

27.  Further, although not necessary to do so, Freshfields also sent the SD to Lam by fax, ordinary and registered post to his residential address (the same address he used in Lam 1^st, 2^nd and Lam 3^rd)  and to YSL.  This was in addition to the numerous attempts made by Freshfields to effect personal service of the SD at Lam’s residential and business addresses, details of which are summarized in the table annexed to the affirmation of service[15], which have not been challenged.

Alleged “faulty” Costs Order

28.  The suggestion that the Costs Order is “faulty” is misconceived:

(1)  There is no appeal against the Costs Order, which remains binding and enforceable against Lam. 

(2)  Other than asserting that the “same logic” should apply to the Costs Order, Lam has not articulated any reason or basis in support of his assertion that the Costs Order is “faulty”.

(3)  As recorded in §3 of the CFI Judgment, the relief sought by Ps in the OS were not opposed by Lam although he reserved his right to argue on costs. 

(4)  Indeed, it can be seen from the judgment of the CA dated 30 August 2022 [2022] HKCA 1297 (“CA Judgment”)[16] the CA took into account the fact that relief under the OS had been granted as one of the reasons for dismissing the Bankruptcy Petition.   

29.  I should add that at the hearing, this Court raises the question regarding the costs of the appeals against the Bankruptcy Order (“Appeals”), whether they were awarded by the CA and the CFA against Ps, whether they have been taxed and whether there is any basis for contending that the Costs Order may be set-off against the costs of the Appeals awarded against Tor.  In this regard:

(1)  Lam confirms that the costs of the Appeals have not been taxed. 

(2)  Mr Chow points out that the costs of the Appeals were awarded against Tor, and Ps were not parties to the Appeals.

(3)  That being the position, I do not think that there can be any set-off between the Costs Order and the costs awarded by the CA and CFA against Tor. 

30.  Having heard the questions raised by this Court, Lam asserts that Ps are agents of Tor and there should be a set-off between the Costs Order and the costs awarded against Tor in the Appeals.  As far as I understand his assertions, they boil down to these:

(1)  First, the appointment of Receivers was made by Tor and this somehow rendered the Receivers to become agents of Tor. 

(2)  Second, the appointment was made wrongfully as there had not been any default on the loan owed to Tor, as held by the NY Court in the Interim Decision.  Tor should be liable for all the loss and damage suffered by Lam as a result of the wrongful appointment of the Receivers, including all the costs and expenses incurred by the Receivers in the past 5 years. 

31.  Both assertions are false:

(1)  As noted in §21 of the CFI Judgment, the Receivers are agents of the sole shareholder of the Borrower[17], that is, Lam[18].

(2)  The NY Court did not hold that the appointment of the Receivers was wrongful or that there was no default on the loan.  As pointed out by Mr Chow:

(a)  The Interim Decision concerned applications made by (i)  Oksner and Tor to dismiss the Amended Complaint instituted by Lam against them in the NY Court, and (ii)  Tor for summary judgment.  

(b)  The NY Court dismissed Lam’s claim for a declaration that the “the appointment of the receivers and all actions taken by the receivers thereafter, are null and void”. 

(c)  The NY Court held that:

“…Tor is correct: the Mortgage controls here and undermines [Lam]’s allegations. Immediately upon an Event of Default, the Mortgage allows Tor to ‘appoint any one or more persons to be a Receiver of’ [Lam]’s shares in CP Global by ‘deed, under seal, or in writing’… ‘this Security will become immediately enforceable if an Event of Default occurs’… Thus, Tor appears to have been following, not breaching, the relevant agreements when it took over plaintiff’s companies… Tor took actions consistent with the Mortgage and SPA. Thus, Count 1 for declaratory judgment for breach of the SPA and voiding receivers is dismissed…” (underlined added).

32.  Not only was there no finding in the Interim Decision that there had been no default on the loan, the NY Court dismissed all but one of the claims made by Lam against Oskner and Tor. The only claim which “survive” is Lam’s claim based on an alleged oral waiver by Tor of its rights under the agreements and on this basis, the NY Court denied Tor’s motion for summary judgment. 

33.  Lastly, at the hearing, Lam tries to undermine the effect of the Costs Order by asserting that he was not able to appeal against the Costs Order as he had been adjudged bankrupt in July 2021 and remained under bankruptcy for “5 years”.  The assertions only fall to be rejected:  

(1)  In the first place, if there were any basis to suggest that the Costs Order was wrong, he could have appealed against the Costs Order and sought the consent of the Official Receiver (or the trustee in bankruptcy of his estate)  to bring such an appeal to avoid any argument that he has no locus to pursue the appeal.  This was particularly so when he obviously had the financial means to pursue such an appeal, having engaged solicitors, and junior and senior counsel to represent him in the Appeals. 

(2)  Even if, which is not established, the Bankruptcy Order had prevented him from appealing against the Costs Order, once the Bankruptcy Order was set aside by the CA a year later (on 30 August 2022), it was open to Lam to lodge an appeal against the Costs Order and applied for leave to appeal out of time but he never did. 

Alleged violation of justice

34.  In the Bankruptcy Petition, Tor applied for a bankruptcy order against Lam on the ground that he had failed to pay the petitioning debt in the amount of US$41,297,644.93 (“US$41m Debt”), being the outstanding principal and interest accrued up to 15 April 2020 less the estimated value of the “Equitable Mortgage”[19] (US$7,300,000.00).  The US$41m Debt was due and owing by the Borrower  to Tor, and Lam was liable as guarantor[20]. 

35.  Lam commenced proceedings in Texas, Cayman Islands and New York alleging that there was no event of default such that Tor was not entitled to appoint the Receivers over Ps[21]. 

36.  When the Bankruptcy Petition and the OS were heard before this Court, Lam advanced 6 grounds in opposition to the Bankruptcy Petition[22]. One of the grounds was the “EJC Ground”, that is, Tor was required by the exclusive jurisdiction clause to litigate the dispute in the NY Court before coming to Hong Kong to invoke the bankruptcy regime[23]. The arguments advanced by the parties were set out in §§32(5)  and 34-49 of the CFI Judgment. 

37.  It is notable to see that:

(1)  The principles governing the approach of the court in dealing with bankruptcy petition were not in dispute, that is, the burden was on Lam to demonstrate by sufficiently precise factual evidence that there is a bona fide dispute on substantial ground in respect of the US$41m Debt[24].

(2)  There was no suggestion by Lam that (a)  it was necessary for a party subject to an EJC (such as Tor)  to show that there were “exceptional circumstances” before the Bankruptcy Court would allow it to pursue the Bankruptcy Petition; or (b)  that the Bankruptcy Court should apply the approach in ordinary actions to bankruptcy proceedings.

(3)  Both points only surfaced, for the first time, in the appeal before the CA.  Indeed, the point that the approach in ordinary actions should be applied to bankruptcy proceedings was raised by the CA of its own motion. 

(4)  The CA set aside the Bankruptcy Order solely on the EJC Ground and did not deal with the merit of the other grounds advanced by Lam or, indeed, any of the facts and matters set out in the CFI Judgment.   

38.  I am unable to see how Lam can assert that there was the alleged or any “violation of justice” in circumstances where the Appeals were decided purely on points of law, particularly when such points had never been raised by any parties when the matters were heard before this Court.  For the same reason, I do not see why this Court should recuse from hearing the Petition, a course belatedly raised by Lam at the hearing.

39.  As regards the assertion that the NY Court found that there had been no default on the loan, that is plainly wrong for the reasons explained in §31(2)above.   

“Without prejudice payment offer”

40.  The so-called “offer” was mentioned for the first time in Lam 2^nd[25] in this way:

“22. [Rosedale], a company incorporated in the United States, agreed to pay me 50% of the net sale proceeds of [the Land], which is owned by Rosedale. The expected and/or target sales proceeds of the Land is around US$1 million. The Board of Rosedale has decided to sell the Land before July 2025. There is now produced and shown to me marked ‘GKL-4’, a copy of a Company Resolution signed by the Chairman of the Board of Rosedale.

  23.  Thus, I am willing to make a one-off payment of the [Debt] as soon as the sales proceeds of the Land are received, or no later than 30 September 2025.”

41.  As the last callover hearing on 27 January 2025, Mr Chow confirmed that Ps would not accept the “offer”, as there was no credible evidence to show that the sale of the Land would in fact take place or why Lam was entitled to receive US$500,000 out of the sale proceeds as he claimed.   

42.  At the hearing, Lam continues to rely on the “offer” and asserts that he will be able to pay the Debt by September 2025.  Mr Chow reiterates that Ps do not accept the “offer” even if it were a genuine offer, which Ps do not consider to be the case.

43.  As judgment creditors, Ps are entitled to decide whether or not to accept the “offer”.  It is not for Lam or the court to decide whether Ps should accept the “offer”.  This is particularly so when there is no certainty as to whether the alleged or any fund will become available to the use of Lam in a few months’ time.   

44.  Even if, contrary to my view, it is necessary for the court to consider whether the “offer” is reasonable or acceptable, I do not think that the “offer” can be regarded as reasonable or acceptable: 

(1)  There is simply no evidence, let alone cogent evidence, to show that Lam has a reasonable prospect of being able to pay the Debt.  All that Lam asserts is that Rosedale, a foreign company whose financial position is unclear and is owned by Xiao, intends to sell the Land and pay 50% of the net sale proceeds to him. 

(2)  There is no evidence on the whereabouts of the Land or its value. 

(3)  Nor is there any information or supporting documentation about Rosedale’s background, its relationship with Lam or what gave rise to the intended sale of the Land.  There is no credible evidence to show that the intended sale of the Land is genuine or that it will proceed within the timeframe asserted by Lam. 

45.  In the absence of any evidence about Rosedale and its financial position, I do not see how the so-called “guarantee” given by Rosedale can provide any certainty that the Debt will be paid by September 2025, as alleged by Lam.

46.  As Lam is unable to pay the Debt and has failed to discharge the burden of showing that there is a bona fide dispute on substantial grounds in respect of the Debt, Ps are entitled to seek an immediate bankruptcy order against him. 

47.  I make a usual bankruptcy order against Lam.