RE LI YE

HCB 5271/2017

[2023] HKCFI 3281

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 5271 OF 2017

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J U D G M E N T

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A. INTRODUCTION

1.  There are two summonses before me:

(1) a summons (“the NCO Summons”) taken out by the trustees in bankruptcy (“TIB”) on 27 April 2018 for an order under s.30AB of the Bankruptcy Ordinance (“BO”) (the
non-commencement order, “the NCO”) that the relevant period for the bankrupt (“Li”) is treated as not commencing to run on the date of the bankruptcy order, ie 1 November 2017 (“the NCO Application”);

(2) a summons (“the SO Summons”) taken out by the TIC on 7 October 2021 for an order under s.30A of the BO (the suspension order, “the SO”) that the relevant period shall cease to run for a period of 4 years or such other period as the court sees fit (“the SO Application”).

2.  TIB are primarily seeking the NCO. In the event that the NCO Application is unsuccessful, TIC would seek the SO as an alternative.

3.  In the hearing before me, TIB are represented by Mr Kurt Ng, and Li is represented by Mr Ian Chau.

B. BACKGROUND

4.  This case has a long history.

5.  On 1 November 2017, the bankruptcy order was made against Li. Li was absent in that hearing. The bankruptcy petition was previously served on Li by substituted service. The bankruptcy order was based upon the debts as stated in a statutory demand, the amount of which being over HKD 22.8 million and USD 235,000.

6.  On 2 February 2018, TIB were appointed at the general meeting of creditors of Li.

7.  On 7 March 2018, TIB sent an initial letter to Li at 8 known addresses in Hong Kong by ordinary post and requested Li to attend the initial interview scheduled at the TIB’s office on 16 March 2018 at 3:00 pm and to provide TIB with information and documents concerning the affairs, dealings and properties of Li as set out in that letter. On the same day, TIB also made calls to Li to try to confirm the initial interview, but Li could not be reached.

8.  Six out of 8 letters were returned. On 22 March 2018, TIB sent out a follow up letter.

9.  On 20 April 2018, TIB sent another letter to Li at an address in Canada (“the Hanna Road Property”, a property registered under the joint names of Li and her husband Mr Yuen (“Yuen”)), requesting Li to provide TIB with the requested information and documents and contact TIB for appointment of initial interview. According to Li, she received this letter on 23 April 2018, and came to know the bankruptcy order against her in this case for the first time after seeing the letter.

10.  Li claimed that since 2014, she and her husband had been in separation. At all material times, Li was living in Canada.

11.  On 27 April 2018, TIB took out the NCO Summons.

12.  On 5 June 2018, Li made an application for an order to annul the bankruptcy order (“the Annulment Application”).

13.  On 11 June 2018, G Lam J (as he then was) made an order that the NCO Summons be adjourned sine die, with liberty to restore.

14.  On 4 July, 24 July and 24 August 2018, TIB sent letters to Li at the Hanna Road Property. Li’s case is that although she was living in the Hanna Road Property, she did not receive the letters dated 4 July and 24 August 2018. The first time that she became aware of these 2 letters was at the end of 2018, upon being informed by her solicitors the existence of these two letters. As to the letter dated 24 July 2018, that letter was returned and marked unclaimed.

15.  In December 2019, TIC made an application in the Canadian Court for an order recognizing the bankruptcy order made in Hong Kong (“the Recognition Order”).

16.  On 29 April 2020, the Annulment Application was dismissed by Master Lai (“the Dismissal Judgment”). On 25 May 2020, Li first contacted TIB to seek permission to allow her to lodge an appeal against the Dismissal Judgment. On 26 May 2020, Li filed a notice of appeal against the Dismissal Judgment (CACV 136/2020). On 28 May 2020, Li provided TIB her contact person in Hong Kong.

17.  On 16 June 2020, TIB wrote to Li chasing for the information requested in the 07.03.2018 letter.

18.  On 21 July 2020, Li provided an unaffirmed statement of affairs (“the 21.07.2020 SOA”) to TIB.

19.  On 3 September 2020, TIB requested Li to provide bank statements for her accounts in HSBC Canada or authorizing TIB to obtain the same, and to provide evidence of payment and related documents of a mortgage charge registered on the Hanna Road Property. On 24 September 2020, TIB was told that Li was reluctant to provide the requested bank statements in HSBC Canada due to privacy reasons.

20.  On 13 November 2020, TIB obtained the Recognition Order in Canada. On 23 November 2020, Li lodged an appeal against the Recognition Order, which resulted in the stay of the Recognition Order.

21.  From 24 November 2020, there were some negotiations between TIB and Li to explore the chance of having a settlement.

22.  On 21 May, 9 July and 29 July 2021, TIB sent letters to Li, asking Li to provide information and documents requested under the 07.03.2018 letter.

23.  On 22 August 2021, Li provided some documents in relation to the acquisition and disposal of a property in Canada, ie the Roberta Drive Property. On 30 August 2021, Li provided 3 annual statements from August 2018 to August 2021 and a Transfer Ledger Statement in relation to purchase of Hanna Road Property.

24.  On 6 September 2021, Li provided an affirmed statement of affairs (“the 06.09.2021 SOA”) to TIB. However, in this SOA, Li did not disclose the details concerning the Hanna Road Property, the Roberta Drive Property and her bank account in HSBC Canada requested by TIB.

25.  In respect of the Hanna Road Property, on 10 November 2017 (ie after the making of the bankruptcy order), a charge was created in favour of Li Ying for CAD1,350,000 (“Li Ying Charge”). The same was subsequently discharged and a charge was created in favour of Yuan Yilin for CAD1,100,000 on 4 June 2018 (“Yuan Yilin Charge”). The Hanna Road Property was subsequently sold by way of mortgage foreclosure on 1 May 2021, with surplus of CAD13,384.18.

26.  On 7 October 2021, TIB took out the SO Summons.

27.  On 20 October and 16 November 2021, TIB asked Li to provide an authorization to authorize TIB to obtain bank statements from HSBC Canada.

28.  On 27 October 2021, by consent, Master Lai made an interim order that the relevant period under s.30A(1) and s.30A(2)(a) of the BO shall cease to run until the determination of the SO Summons.[1]

29.  On 25 November 2021, Li replied that no authorization would be given as it would infringe her privacy. In the same letter, Li also claimed that Yuan Yilin was informed of Li’s bankruptcy, but Yuan did not care about it. Li provided statements for 4 bank accounts but not all the bank accounts in HSBC Canada known to TIB. On 21 December 2021, TIB issued a follow-up letter.

30.  In Li’s 3^rd Affirmation dated 4 January 2022, Li produced an email to her solicitor dated 24 January 2019, in which a statement of affairs was enclosed (“the Email SOA”).

31.  On 20 April 2022, Li said that the money in 3 bank accounts in HSBC Canada not disclosed to TIB belonged to Yuen’s business partner, a Mr Kwong (“Kwong”). Li produced a declaration signed by Yuen dated 15 March 2022 (“Yuen’s Declaration”), in which Yuen said that Kwong was not willing to disclose his personal information. Kwong would take action against Yuen, and Kwong’s action would put Yuen’s personal safety in danger. Yuen therefore ordered Li not to disclose information in these accounts. The contents of Yuen’s Declaration are as follows:

“本人袁銳興在加拿大HSBC銀行開設了與李葉聯名戶口 ….. 由於此戶口是給我一個以前大陸上生意朋友鄺先生使用，我不知道怎樣使用，經鄺先生通知，他不願意公開他個人資料，他會對我採取行動，會對我人身有危險行為。

為此我命令李葉不可以列印上述戶口資料，所有資料不能給予他人及不授權他人取得此聯名戶口資料。”

32.  On 27 April 2022, Master Lai ordered that the SO Summons be adjourned sine die with liberty to restore. The learned master indicated that the determination of the SO Summons would depend upon the outcome of Li’s appeal against the Dismissal Judgment and the outcome of the NCO Summons.

33.  On 17 August 2022, Li’s appeal against the Dismissal Judgment in CACV 136/2020 was dismissed by consent.

34.  On 24 August 2022, TIB requested Li to provide outstanding and further information and documents, and to attend the initial interview on 7 September 2022.

35.  On 5 September 2022, Li claimed that she had some mental problem and had difficulties in attending the initial interview. Li has not provided medical proof in support of her claim.

36.  On 22 February 2023, Li provided some answers to TIB. On 18 May 2023, TIB replied and said that Li’s answers were inadequate and unsatisfactory, and requested for further documents and information.

37.  On 23 July 2023, Li provided some further information to TIB.

38.  On 15 August 2023, TIB requested Li to attend the initial interview at TIB’s office in Hong Kong on one of the dates proposed by the TIB. TIB also said if Li would not be available to attend the initial interview in person, Li should indicate the same in her reply so that TIB could make necessary arrangements.

39.  On 16 August 2023, TIB wrote to Li again, making some changes to the dates proposed in the letter dated 15 August 2023. TIB repeated that if Li would not be available to attend the initial interview in person, Li should say so in her reply, so that TIB could make necessary arrangements.

40.  On 5 October 2023, Li replied and said that she was sick. She would be available to attend the initial interview via Zoom at the timeslots set out in her letter. On 9 October 2023, TIB replied and agreed to have the initial interview on 11 October 2023 via Zoom.

41.  On 11 October 2023, a video conference (“the 11.10.2023 VC”) between TIB and Li (accompanied by her solicitor) was held. Before the hearing on 6 December 2023, both TIB and Li regarded the 11.10.2023 VC as the “initial interview” under s.30AB of the BO. TIB claimed that the outstanding information and documents requested by them were not provided by Li during that “initial interview”.

42.  There was correspondence passing between TIB and Li after the 11.10.2023 VC. On 27 October 2023, Li provided an authorization letter signed by her (“the Authorization Letter”) to TIB, in which she authorized the mortgagees to release the surplus of the sale proceeds obtained after the realization of the Hanna Road Property to TIB.

C． NCO APPLICATION

43.  BO, ss.30AB and 30AC provide:

“30AB. Non-commencement of relevant period: trustee’s application

(1) The trustee may apply to the court for a non-commencement order against a bankrupt if —

(a) the trustee has required the bankrupt to—

(i) attend an initial interview on a day appointed by the trustee for the administration of the bankrupt’s estate; and

(ii) provide the trustee at the initial interview with information concerning the bankrupt’s affairs, dealings and property;

(b) the bankrupt—

(i) has failed to attend the initial interview; or

(ii) has attended the initial interview, but failed to provide the trustee at the initial interview with all of the information concerning the bankrupt’s affairs, dealings and property as reasonably required by the trustee; and

(c) the administration of the bankrupt’s estate was prejudiced by the matter referred to in paragraph (b)(i) or (ii).

……

(6) To avoid doubt, a bankrupt has failed to attend an initial interview under subsection (1)(b)(i) if the bankrupt is not physically present before the trustee at the initial interview.

30AC. Non-commencement of relevant period: court order and trustee’s notice

(1) On an application made by the trustee under section 30AB(1), the court may approve the application and make a non-commencement order against the bankrupt if it —

(a) is satisfied by the trustee as to the matters mentioned in section 30AB(1)(a), (b) and (c); and

(b) is not satisfied by the bankrupt that there is sufficient cause for the order not to be made.

……”

44.  It is clear that in order to have a NCO, either s.30AB(1)(b)(i) or s.30AB(1)(b)(ii) must be established. At the beginning of the hearing on 6 December 2023, I sought counsel’s assistance on a preliminary issue, ie whether the 11.10.2023 VC is the “initial interview” in s.30AB.

45.  It is also clear that after the 11.10 2023 VC and until I raised the aforesaid preliminary issue in the hearing on 6 December 2023, TIB were seeking the NCO by relying upon s.30AB(1)(b)(ii) only. TIB treated the 11.10.2023 VC as the initial interview in s.30AB and hence did not rely upon s.30AB(1)(b)(i).

46.  Having considered the submissions made by Mr Ng and Mr Chau respectively, in my view, the 11.10.2023 VC cannot be the “initial interview” in s.30AB. For the purpose of that section, the “initial interview” must be an actual physical meeting, in which the bankrupt is present before the trustee. A video conference cannot be the “initial interview” in that section.

47.  The aforesaid conclusion is supported by the plain and natural meaning of both the English and the Chinese texts of s.30AB(6). The English version of that subsection has been set out in the above. The Chinese version of the subsection is as follows:

“(6) 為免生疑問，破產人如沒有在初次會面中，親身面晤受託人，即屬第(1)(b)(i)款所指沒有出席初次會面。” (underline supplied)

48.  The aforesaid conclusion is also supported by the legislative history of s.30AB(6). The non-commencement regime was introduced by the Bankruptcy (Amendment) Bill 2015. At the beginning, the proposed s.30AB in the bill did not contain subsection (6). Subsection (6) was added to s.30AB at the committee stage by an amendment moved by the administration. The reasons for adding subsection (6) have been recorded in the Report of the Bills Committee. It is pertinent to read the following paragraphs in the Report:

“14. In view that the proposed new arrangements are intended to target a Bankrupt’s failure to attend a “face to face” interview …… the Hong Kong Bar Association (“HKBA”) has requested the Administration to consider defining the term“initial interview” to (i) make it clear if an "initial interview" could beconducted via video/web conferencing ……

……

16. To address the concern of the Bills Committee and HKBA that thepresent drafting of the proposed section 30AB(1)(a) may not have expressly excluded the conduct of the “initial interview” by way of video/web conference, the Administration will introduce a Committee Stage amendment (“CSA”) to add a new subsection under the proposed section 30AB to clarify that if the bankrupt is not physically present before the trustee at the initial interview, he/she has failed to attend that interview.

17. The Bills Committee has followed up on the concern raised by the Legal Adviser to the Bills Committee about whether the requirement of the bankrupt's physical presence at the “initial interview”, (i.e. a bankrupt who is overseas would be required to return to Hong Kong to attend the interview) would impose an unreasonable restraint on the bankrupt's constitutional freedom to travel and be subject to challenge, in view of the CFA's ruling on 5 November 2015 in Official Receiver v Zhi Charles formerly known as Chang Hyun Chi (FACV 8/2015) that section 30A(10)(a) is unconstitutional. The Administration has advised that the main issue of contention over the existing abscondee regime was the “automatic” element of the suspension of the “relevant period”. The proposed new arrangements are to replace the abscondee regime to, among other things, tackle the issue and address the constitutionality issues which have arisen from the present abscondee regime. Unlike the existing abscondee regime which has an automatic suspension mechanism, the proposed new arrangements will provide the court with discretion to decide whether to make a non-commencement order after taking into account all relevant facts and factors.”

49.  Mr Ng submits that the “initial interview” in s.30AB can be a physical meeting or a video conference. With respect, in the light of the plain and natural meaning of s.30AB(6) and the clear legislative intent as shown in the legislative history as set out in the above, this submission must be refused.

50.  Mr Ng also submits that s.30AB(6) would only affect s.30AB(1)(b)(i) but would not affect s.30AB(1)(b)(ii). By this submission, Mr Ng is arguing that although the “initial interview” in s.30AB(1)(b)(i) must be a physical meeting, there is no such restriction in s.30AB(1)(b)(ii). In s.30AB(1)(b)(ii), the “initial interview” can be a physical meeting or a video conference. With respect, I do not accept this submission.

(1) In view of the legislative intent as shown in the legislative history, there is no reason to adopt the interpretation as suggested by Mr Ng. In my view, the phrase “initial interview” in all the subsections of s.30AB should bear the same meaning, ie the initial interview must be an actual physical meeting, in which the bankrupt is present before the trustee.

(2) The flaw in Mr Ng’s submission is that following his submission, Li would fall within s.30AB(1)(b)(i), for the 11.10.2023 VC is not a physical meeting. While Li is within the s.30AB(1)(b)(i), Li cannot be within s.30AB(1)(b)(ii).

51.  Mr Ng further submits that if the “initial interview” in both s.30AB(1)(b)(i) and s.30AB(1)(b)(ii) must be an actual physical meeting, TIB would seek a NCO by relying upon s.30AB(1)(b)(i). Mr Ng submits that while the 11.10.2023 VC is not the “initial interview” in s.30AB, Li would have failed to attend the initial interview, and TIB would be entitled to rely upon s.30AB(1)(b)(i) to seek a NCO.

52.  With respect, in the circumstances of this case, I am of the view that TIB should not be allowed to run a case based upon s.30AB(1)(b)(i). I disagree. As said before, after the 11.10.2023 VC, TIB regarded that Li had attended the initial interview but failed to provide the information requested at the initial interview, and TIC were seeking a NCO by only relying upon s.30AB(1)(b)(ii). In my view, TIC are not entitled to suddenly and fundamentally change their case in the hearing before me to say that Li has failed to attend the initial interview, and to rely upon s.30AB(1)(b)(i) to seek a NCO. This would be grossly unfair to Li. If prior notice is given by TIB to Li that TIB are going to rely upon s.30AB(1)(b)(i) in the substantive hearing of the NCO Summons, Li would have had the opportunity to adduce evidence to explain why she was unable to come back to Hong Kong from Canada to attend a physical meeting (bearing in mind that on 5 October 2023, Li indicated in the letter that she was sick), and why a NCO should not be made against her under s.30AB(1)(b)(i) in the circumstances. Without giving any prior notice to Li that s.30AB(1)(b)(i) would be relied upon, Li has been deprived of the said opportunity. That being the case, TIB should not be allowed to suddenly change their case and rely upon s.30AB(1)(b)(i) in the substantive hearing of the NCO Summons.

53.  In my judgment, TIB’s reliance on s.30AB(1)(b)(ii) is misconceived, for the 11.10.2023 VC cannot be the “initial interview” for the purpose of s.30AB. TIB is not allowed to suddenly shift the basis of their application to s.30AB(1)(b)(i) in the circumstances of this case. Accordingly, the NCO Application must be refused.

D. SO APPLICATION

D1. Grounds of the application

54.  BO, s.30A provides:

“30A. Discharge from bankruptcy

(1) Subject to this section and section 30AC, a bankrupt is discharged from bankruptcy by the expiration of the relevant period.

(2) The relevant period referred to in subsection (1) is as follows—

(a) where a person has not previously been adjudged bankrupt, the period of 4 years;

(b) where a person has been previously adjudged bankrupt, the period of 5 years,

beginning with the commencement of the bankruptcy.

(3) Where the court is satisfied on the application of the trustee or one of the bankrupt’s creditors that a valid objection based on one or more of the grounds set out in subsection (4) has been made, the court may order that the relevant period shall cease to run for such period, not exceeding, in the case of a person who —

(a) has not previously been adjudged bankrupt, 4 years; or

(b) has previously been adjudged bankrupt, 3 years,

as may be specified in the order.

(4) Subject to subsection (4A), the grounds on which an objection can be made to the discharge of a bankrupt under this section are as follows —

(a) in the case of a discharge to which subsection (2)(a) applies, that the bankrupt is likely within 5 years of the commencement of the bankruptcy to be able to make a significant contribution to his estate;

(b) that the discharge of the bankrupt would prejudice the administration of his estate;

(c) that the bankrupt has failed to co-operate in the administration of his estate;

(d) that the conduct of the bankrupt, either in respect of the period before or the period after the commencement of the bankruptcy, has been unsatisfactory;

(e) without limiting paragraph (c) or (d), that the bankrupt has departed from Hong Kong and has failed forthwith to return to Hong Kong following a request to do so from the Official Receiver or the trustee;

(f) that the bankrupt has continued to trade after knowing himself to be insolvent;

(g) that the bankrupt has committed an offence under section 129 or any of sections 131 to 136;

(h) that the bankrupt has failed to prepare an annual report of his earnings and acquisitions for the trustee.

(4A) A matter referred to in section 30AB(1)(b)(i) or (ii) does not form the basis for the grounds set out in subsection (4) if—

(a) the trustee has applied under section 30AB to the court for a non-commencement order against the bankrupt; and

(b) the court has approved or dismissed the application.

……”

55.  In the SO Summons, the grounds relied upon by TIB in support of the SO Application are the grounds in s.30A(4)(c), (d) and (g) (“Ground (c)”, “Ground (d)” and “Ground (g)” respectively). However, in Mr Ng’s oral submissions, Mr Ng has said that TIB are also relying upon s.30A(4)(b) (“Ground (b)”). I asked Mr Ng whether TIB would make an application to amend the SO Summons. Mr Ng said that TIB did not intend to do so. In the absence of any application to amend the SO Summons, I would not allow TIB to rely upon any ground which has not been set out in the SO Summons.

56.  Accordingly, the issue before the court is whether TIB is able to make out a case for a suspension order by relying upon Ground (c), Ground (d) and/or Ground (g). Mr Ng has put forward 8 points in support of TIB’s case. Before going to discuss these 8 points, there is no dispute that:

(1) By reason of s.30A(4A), the 11.10.2023 VC and the alleged failure of Li to provide all the information requested by TIB in that meeting cannot be evidence in support of the SO Application.

(2) The affirmations filed by TIB in support of the NCO Application are not evidence in the SO Application. For the purpose of the SO Application, only the 4^th and the 7^th Affirmations of Osman Mohammed Arab dated 7 October 2021 and 1 April 2022 respectively (“Arab 4^th” and “Arab 7^th” ) are relevant.

(3) Notwithstanding the aforesaid, the correspondence passing between the parties (including the enclosures) after 1 April 2022 can be considered for the purpose of the SO Application.

57.  It is well established that:

(1) As to the duty to cooperate in the administration of the bankrupt’s estate:

(a) It is incumbent on the bankrupt to make a full and frank disclosure and to proffer all the pertinent information regarding his or her assets and financial dealings to the trustee. It is not good enough for a bankrupt to adopt a purely passive or reactive role, responding when asked in the expectation that with any luck, pertinent matters might be overlooked.[2]

(b) A bankrupt has to pro-actively reveal the complete picture of his financial affairs to the trustee, and where pieces do not appear to fit, in that his or her conduct or transactions appear to be inconsistent, it is for him or her to explain the inconsistencies and convince the trustee of the true state of affairs.[3]

(2) As to unsatisfactory conduct, the question of whether the conduct is unsatisfactory is whether the conduct is one which the society is prepared to condone without expressing disapproval. This question is to be answered by the reasonable man’s test.[4]

58.  I would now turn to the 8 points put forward by Mr Ng.

D2.1 Point 1 – Failure to provide some bank authorisations

59.  TIB has repeatedly asked Li to provide some authorisations to them so that TIB could have access to the information of some accounts under Li’s name. Those requests were made in the 07.03.2018 letter and in the 03.09.2020 letter. The same request was also made by TIB in their letter dated 20 October 2021. However, Li refused to provide the same by relying upon some unspecified privacy reason on 25 November 2021. Li repeated the refusal on 20 April 2022 by relying upon the alleged threat from Kwong. In this hearing, Li is relying upon Yuen’s Declaration in support of her case.

60.  In my view, Li’s refusal to provide the bank authorisations requested by TIB is clearly a failure to cooperate in the administration of her estate, and is clearly an unsatisfactory conduct.

61.  Mr Chau for Li submits that as a matter or reality, Li could not ignore Kwong’s threat against Yuen as set out in Yuen’s Declaration. Although Li and Yuen had separated, it would be natural for Li to be concerned with the safety of another person. Further, Kwong was a dangerous man, and Li had reason to worry about herself and her family in Canada. In Mr Chau’s submissions, the non-production of the bank authorisations should not justify any period of suspension, as it is mitigated by Kwong’s threat.

62.  With respect, I am unable to agree. The alleged threat from Kwong is a mere allegation from Yuen and/or Li without the support of any corroborating evidence. Further, even if the alleged threat is true, Li has not explained why she could not report the matter to the law enforcement authority in Canada and seek protection from the authority. In my view, it would be wrong in principle to allow Li to rely upon some alleged unlawful acts as a reasonable excuse exonerating her from complying with the requirements in the BO and performing her statutory duties thereunder.

63.  Point 1 is substantiated.

D2.2 Point 2 – Delay in providing SOA and inconsistent answers in SOA

64.  Mr Ng submits that in the 21.07.2020 SOA, the 06.09.2021 SOA, and the Email SOA, Li has provided inconsistent information concerning her assets in HKD and CAD, and her immovable properties. Mr Ng further submits that there has been delay in providing the SOAs. The 21.07.2020 SOA was provided nearly 3 years after the making of the bankruptcy order. The 06.09.2021 SOA was provided close to 4 years from the bankruptcy order.

65.  Mr Chau submits that:

(1) The fact that Li did not mention her two immovable properties in Canada in the 06.09.2021 SOA is a mere clerical error. Li has never denied that the two Canadian properties (ie the Hanna Road Property and the Roberta Property) were jointly acquired by Yuen and herself.

(2) As to the differences in the HKD and CAD assets in the SOAs, TIB did not enquire specifically about such differences, whether in correspondence or in previous written submissions. This suggests that TIB did not consider such differences to be important. Further, prima facie, there is nothing suspicious about such differences. The circumstances were that Li’s Canadian bank account was frozen, and various sums were trust monies. The differences may simply be whether or not trust monies were included in a SOA.

(3) As to the delay in providing the SOAs, Li was focusing on the Annulment Application from June 2018 to April 2020. Further, from November 2020 onwards, there have been some settlement negotiations between TIB and Li. All these would need to be taken into account in relation to the delay.

66.  I am of the following view:

(1) I note that the Hanna Road Property and the Roberta Property have been mentioned in the 21.07.2020 SOA. In the circumstances, I accept that the non-mentioning of these two properties in the 06.09.2021 SOA is a mere clerical error.

(2) As to the differences in the HKD and CAD assets in the SOAs, given that Li has to proactively reveal the complete picture to TIB, I do not regard Mr Chau’s submission as a satisfactory answer to TIB’s complaint. Further, as to whether the differences are due to whether or not trust monies were included in a SOA, Li has not offered any evidence on this matter.

(3) Subject to subparagraph (4) below, the delay in providing the SOAs raised by TIB is a legitimate complaint. As submitted by Mr Ng, there has never been any stay of the bankruptcy order. The fact that Li was pursuing the Annulment Application, and the fact that there have been some negotiation discussion, would not obviate the necessity of Li performing her obligations under bankruptcy in any way.

(4) Li claimed that she first became aware of the fact that a bankrupt order was made by this court against her on 23 April 2018. Based upon the evidence before this court, there is no evidence contradicting this. Accordingly, in considering whether there has been any delay in performing the duties under bankruptcy, the time should start to run on 23 April 2018, not from the date of the bankruptcy order, ie 1 November 2017.

67.  In my judgment, point 2 is partially substantiated.

D2.3 Point 3 – Inconsistent answers concerning CAD407,606.65 (“the Sum”)

68.  Mr Ng submits that Li has given inconsistent answers concerning the Sum.

(1) In Li’s solicitors’ letter to TIB dated 22 February 2023, Li said that she “transferred [the Sum] to persons appointed by [Kwong].”

(2) In Li’s solicitors’ letter to TIB dated 20 July 2023, Li said that she “did not arrange the transaction”, and she “does not herself give instructions to the bank”.

69.  Mr Chau submits that this issue is outside the scope of Arab 4^th and Arab 7^th, and TIB are not entitled to rely upon the same. In any event, there is no inconsistency in the answers given by Li. As I can understand, Mr Chau’s submission is that authorising someone to do the transfer would be different from Li doing the transfer herself personally.

70.  In my view, Mr Ng is entitled to rely upon the two letters set out in the above to make his submission. As mentioned in the above, the parties can rely upon the correspondence passing between the parties after 1 April 2022 in support of their respective case. On the face of these two letters, it is plain that the answers given by Li concerning the Sum are inconsistent. With respect, I am of the view that Mr Chau has not provided a satisfactory answer explaining the inconsistency.

71.  Point 3 is substantiated.

D2.4.    Point 4 – Transfer of money after having knowledge of the bankruptcy order

72.  Mr Ng is relying upon the following in support of this point:

(1) transferring the Sum (which was the balance in a bank account as of 30 July 2018) to persons allegedly appointed by Kwong;

(2) redeeming some equity funds and transferring CAD388,826 allegedly to Kwong on 20 August 2018, and transferring CAD91,657.56 and CAD28,855 allegedly to Kwong on 22 August 2018.

73.  Mr Chau submits that these matters are outside the scope of Arab 4^th and Arab 7^th, and TIB are not entitled to rely upon the same. Alternatively, these sums are trust money belonging to Kwong and not part of the assets in the bankrupt’s estate. Li has not transferred assets in the bankrupt’s estate to someone else.

74.  With respect, I am unable to accept Mr Chau’s submissions. Mr Ng is entitled to rely upon these matters, for these matters have been set out in the correspondence passing between the parties. Whether these sums are part of the bankrupt’s estate should be investigated by TIB. If Kwong has any claim to these sums, the claim should be handled by TIB. By giving away these sums without giving any prior notice to TIB, Li has completely taken the matter out of the hands of TIB. In doing so, Li is not cooperative in the administration of the bankrupt’s estate, and her conduct is unsatisfactory.

75.  Point 4 is substantiated.

D2.5 Points 5, 6 and 7 – Matters concerning Li Ying Charge and Yuan Yilin Charge

76.  Mr Ng has made the following points in support of the SO Application:

(1) Creation of the Li Ying Charge and the Yuan Yilin Charge without informing the chargees of obtaining credit (Point 5)

(2) Failure to explain the inconsistencies on matters concerning Li Ying Charge (Point 6)

(3) Creation of Yuan Yilin Charge after Li having knowledge of the bankruptcy order, and thereby reducing the bankrupt’s estate (Point 7)

77.  TIB’s case is as follows:

(1) Both Li Ying Charge and Yuan Yilin Charge were executed by Li after the bankruptcy order was made. It is indisputable that Yuan Yilin Charge was executed by Li after Li knowing that the bankruptcy order had been made against her. Li has never sought permission from TIB before executing the Yuan Yilin Charge.

(2) Li claimed that she did not obtain credit by way of Li Ying Charge or Yuan Yilin Charge. However, the documentary evidence shows that in relation to Yuan Yilin Charge, Li was stated to be one of the borrowers. Li has not been telling the truth.

(3) On 25 November 2021, Li through her solicitors informed TIB that the Li Ying Charge was created as a result of intimidation and duress (“Alleged Intimidation”) and the Yuan Yilin Charge was in fact the sale of Li Ying Charge to Yuan Yilin. However, Li did not reveal the Alleged Intimidation to TIB at an earlier time, so that TIB would have the opportunity to consider to apply for setting aside the charges before the sale of the Hanna Road Property on 1 May 2021.

(4) By creating the Yuan Yilin Charge after having knowledge of the bankruptcy order, Li was knowingly reducing the assets of the bankrupt’s estate without TIB’s approval.

78.  Li’s case is as follows:

(1) Yuen informed Li that 李英 (“LY”) was the representative of 羅偉國 (“Law”) and 王向東 (“Wong”) in Canada in relation to debt recovery. Law and Wong were creditors of Yuen and LY in relation to Yuen’s business. LY and his triad friends, in order to press Li to repay the money owed by Yuen to Law and Wong, went to Li’s house in Canada and intimidated Li and her three children criminally (ie the Alleged Intimidation). As a result of the Alleged Intimidation, a charge was created on 10 November 2017 in favour of LY (ie the Li Ying Charge) for and on behalf of Law and Wong. LY, Law and Wong have no relationship by blood with Li, and are not associates of Li under s.51B of the BO.

(2) In relation to the Yuan Yilin Charge, it was done because of the sale of the Li Ying Charge by LY to Yuan Yilin. It was only a transfer of mortgage between LY and Yuan Yilin. That was why the Li Ying Charge was discharged on 4 June 2018, the same date as the Yuan Yilin Charge. Yuan Yilin has no relationship by blood with Li and is not an associate of Li under s.51B of the BO.

(3) It should be understandable that, at the time of the creation of the Yuan Yilin Charge in 2018, Li did not immediately inform TIB. The Yuan Yilin Charge was essentially only a transfer of the mortgage from LY to Yuan Yilin. The Yuan Yilin Charge therefore only replaced the pre-existing charge.

(4) A co-owner of a property could co-sign a mortgage, which on its face may state that the co-owner is a borrower, even though the co-owner in fact did not receive any credit. Li in fact did not obtain credit by executing the Li Ying Charge and the Yuan Yilin Charge. The procurement of credit to another person by the bankrupt does not amount to “obtaining of credit”.[5]

(5) On 25 October 2023, Li signed the Authorization Letter, authorizing the release of the surplus obtained after the sale of the Hanna Road Property to TIB. Li has every intention to cooperate with TIB.

79.  As to point 5, Mr Ng’s point is that Li obtained credit under these charges but Li had not informed the chargee that she was an undischarged bankrupt before executing the charges. In my view, point 5 is partially substantiated.

(1) Based upon the evidence before me, Li did not know the bankruptcy order when she executed the Li Ying Charge. That being the case, in relation to the Li Ying Charge, TIB’s complaint is not substantiated.

(2) As to the Yuan Yilin Charge, based upon the documentary evidence, Li had obtained credit by reason of this charge.

(3) Li’s case is that she executed the Li Ying Charge involuntarily because of the Alleged Intimidation, and the debt secured by Li Ying Charge was Yuen’s debt. Subsequently, Li Ying Charge became Yuan Yilin Charge. She had told Yuan Yilin that she was an undischarged bankrupt, but Yuan Yiling did not care about this. In my view, Li’s case is not supported by any corroborating evidence, for example, an affirmation or a statement from Yuen. Further, the fact that Li did not reveal the Li Ying Charge and the Yuan Yiling Charge before the sale of the Hanna Road Property on 1 May 2021 is a matter which should be taken into account and is a matter casting doubt on Li’s case. Had Li really intended to cooperate with TIB, she would have had informed TIB the existence of the Li Ying Charge, the Yuan Yilin Charge and the Alleged Intimidation without delay, to enable TIB to take action to preserve the Hanna Road Property before the same was sold. I do not accept Li’s case.

(4) Once Li’s case is rejected, in relation to the Yuan Yilin Charge, I am of the view that TIB’s complaint is substantiated.

80.  As to point 6:

(1) Mr Ng submits that there are inconsistencies between the terms of the Li Ying Charge and the terms of the related loan agreement and the related guarantee. There is no explanation from Li regarding these inconsistencies.

(2) Mr Chau submits that TIB did not ask Li to explain these inconsistencies in the correspondence. In any event, Li was informed about the relevant circumstances by Yuen, and Li has no knowledge of the details concerning Li Ying Charge. It should not be held against her by reason of something which is not within her knowledge.

(3) As said in the above, I refuse to accept the Alleged Intimidation in Li’s case. Bearing in mind that Li has the duty to proactively reveal the complete picture to TIB, point 6 is substantiated.

81.  As to point 7,

(1) Mr Ng submits that after knowing the bankruptcy order, Li executed the Yuan Yilin Charge, thereby reducing the assets of the bankrupt’s estate.

(2) Mr Chau submits that Li did so because of the Alleged Intimidation. In any event, Li has executed the Authorization Letter and has agreed to the release of the surplus obtained after the sale of the Hanna Road Property to TIB.

(3) I have refused to accept the Alleged Intimidation in Li’s case. Li has no defence to this point. Point 7 is substantiated.

(4) The Authorization Letter came in at a very late stage. At most, that Authorization Letter could only be a mitigating factor in considering the length of the suspension period. It must also be borne in mind that the surplus is only a modest sum (comparing with the indebtedness owed by Li), ie CAD13,384.18.

D2.6 Point 8 – Delay and continued failure in providing information to TIB both before and after 11 October 2023

82.  Mr Ng submits that Li first began to provide information to TIB by the 21.07.2020 SOA. By that time, it was already nearly 3 years after the making of the bankruptcy order. Thereafter, Li provided some further information to TIB in bits and pieces slowly. Up to now, Li has not revealed the whole picture to TIB.

83.  Mr Chau submits that the matters not in Arab 4^th and Arab 7^th should not be considered. As to the delay raised by TIB, the fact that Li was focusing on the Annulment Application from June 2018 to April 2020 should be taken into account.

84.  As said in the above, the parties are entitled to rely upon the correspondence passing between the parties. In my view, the delay point raised by Mr Ng is sufficiently supported by the correspondence. Further, for the reasons given in the above, the Annulment Application cannot be a matter justifying Li’s delay in providing information to TIB.

85.  Point 8 is substantiated.

D3. Valid objection to discharge made out

86.  In my judgment, by reason of the points substantiated as set out in the above, TIB has made out a valid objection to the discharge of the bankruptcy based upon Ground (c) and Ground (d).

87.  Mr Ng has also raised Ground (g). Mr Ng submits that by reason of Point 5, Li has committed an offence under s.131(a) of the BO, and hence TIB may also rely upon Ground (g).

88.  The wording of Ground (g) is “that the bankrupt has committed an offence under section 129 or any of sections 131 to 136”. During the hearing, I asked Mr Ng whether Ground (g) could be invoked in the absence of any criminal conviction, bearing in mind that the wording in the statute is “has committed an offence”. Mr Ng referred me to Re Qin Jun[6], in which Master Lai has considered Poon J (as he then was)’s decision in Re Hau Po Man Stanley[7] and the Court of Appeal’s decision in Re Lay Man Yee Mary[8]. The learned master is of the view that by reason of the Court of Appeal’s decision in Re Lay Man Yee Mary, for the purpose of section 30A(4) of the BO, if a bankruptcy offence is involved, a conviction is not a prerequisite. The applicant would have no need to prove beyond reasonable doubt that the bankrupt has committed the specified bankruptcy offence(s), and would only need to prove the same on the balance of probabilities with compelling evidence.

89.  With great respect to the learned master, I am not sure whether the conclusion in Re Qin Jun as to s.30A(4)(g) is correct, given the clear wording “has committed an offence” in that subsection. I observe that in Re Lay Man Yee Mary, the issue before the Court of Appeal was s.30A(4)(d) of the BO, not s.30A(4)(g). I share the view expressed by Poon J (as he then was) in ReHau Po Man Stanley that it is arguable that in order to invoke Ground (g), it is necessary to show a conviction of the bankrupt for an offence specified in s.30A(4)(g) in the first place.

90.  Having considered the matter, I would leave the aforesaid issue open and would not make a definite ruling on the issue in this judgment. In my view, by the points substantiated as set out in the above and by relying upon Ground (c) and Ground (d), TIB have already made out a case for a suspension order. Whether TIB can also rely upon Ground (g) would not make a difference in the outcome of the SO Application.

D4. Suspension period

91.  Li has not previously been adjudged bankrupt, and hence the maximum length of the suspension period is 4 years.[9] Under s.30A of the BO, the maximum bankrupt period is 8 years.[10]

92.  In considering the length of the suspension period, what has been said by Yuen JA in Re Lee Raymond Cho Min & Re Lee Priscilla Hwang[11] should be borne in mind:

“6. It is well-established that an application for suspension of discharge from bankruptcy should be considered in two stages:

(1) the court should first determine whether one or more of the grounds mentioned in s.30A(4) has been established; and if established,

(2) the court would then move on to consider whether or not, in the exercise of its discretion, a suspension of discharge should be ordered,

- having regard to all the circumstances of the case, including the nature of the acts complained of and the post-bankruptcy order conduct of the bankrupt, and

- bearing in mind the two main objectives of this part of the [Bankruptcy Ordinance]:

(a) the rehabilitation of the bankrupt by allowing him to resume a normal commercial life, as well as

(b)   the public interest in ensuring that the return of the bankrupt to the commercial world would not carry with it an unacceptable risk to persons who may be engaged in commercial relations with him, and in preserving commercial morality.”

93.  Mr Ng submits that the suspension period should be 4 years. Mr Chau submits that the appropriate suspension period should be a period of 2 years. Counsel have referred me to the following cases:

(1) In Re Leung Yat Tung[12], the Court of Appeal held that the maximum period of 4 years should be reserved for the most egregious cases. In that case, whilst the bankrupt was not cooperative in substance, he at least remained in communication with the Official Receiver, and the Official Receiver’s failure to adduce evidence as to how long it took him to find funding for the public examination of the bankrupt should also be taken into account. In view of all these, the Court of Appeal held that a suspension period of 3 years would be appropriate.

(2) In Re Qin Jun[13], the bankrupt failed to assist the trustees to obtain fund of some withholding tax in Canada, and was also uncooperative in dealing with some overseas properties. Further, the difficulties encountered by the trustees in their investigation into the affairs and assets of the bankrupt were largely (if not solely) caused by the bankrupt’s failure to cooperate with the trustees in failing and/or refusing to provide information and supporting documents in relation to his assets. Master Lai ordered a suspension period of 3 years.

(3) In Re Nanik Dayaram[14], the bankrupt arranged his affairs prior to bankruptcy in a way which would make the work of the trustees particularly difficult unless the bankrupt was upmost cooperative. But the bankrupt chose not to be cooperative. The bankrupt did not make full and frank disclosure to the trustees. The bankrupt chose to be passive and reactive. The bankrupt had also been convicted of a 9 counts of conspiracy to defraud in the High Court, which consisted of making and submitting false invoices and false bills of lading to banks, and obtaining loans as a result. The loans remained overdue and outstanding. There was no undue delay in the administration of the estate by the trustees. Taking all these into account, Master Lui ordered a suspension period of 3 years.

(4) In Re Tang Yiu Hong Eric[15], the bankrupt had failed to explain what had become of some HKD22 million withdrawn from his bank accounts. He had only given belated information, regarding which the Official Receiver would have difficulties in investigating the truthfulness of the information. Master Kwang (as he then was) ordered a suspension period of 2 years.

(5) In Re Cheng Chao Ming[16], the bankrupt ignored letters of request for the filing of annual reports. These were important information to determine of there were other assets available for collection. Master Hui ordered a suspension period of 2 years.

(6) In Re Yeung Kwok Lai[17], the bankrupt rendered no co-operation with the Official Receiver during the 4 years of his bankruptcy, had repeatedly failed to fulfil his positive duties, and lived a lifestyle totally incompatible with that of a bankrupt. Master Kwang ordered a suspension period of 4 years.

94.  Having considered the above, in my judgment, the suspension period in this case should be 3 years.

(1) This case cannot be said as one of the most egregious cases. Over the years, Li maintained communication with TIB and provided some information to TIB. Further, Li was willing to attend a meeting to provide further information to TIB, and the 11.10.2023 VC was taken place as a result. The fact that Li made the Annulment Application in Hong Kong and the fact that Li challenged the Recognition Order in Canada would not be taken as factors against Li, for Li was only exercising her legal rights in those matters. In these circumstances, it would not be appropriate to impose the maximum suspension period of 4 years.

(2) On the other hand, the findings set out in the above would warrant a suspension period. Among the points substantiated, in my view, the following matters are of particular importance:

(a) Point 1 - Up to now, the bank authorisations have not been provided to TIB, and TIB are still unable to obtain information concerning the relevant accounts.

(b) Point 4 – By transferring money out after having knowledge of the bankruptcy order, Li was knowingly acting in breach of the bankruptcy order.

(c) Points 5, 6 and 7 – By not revealing the Li Ying Charge and the Yuan Yilin Charge to TIB before the sale of the Hanna Road Property, Li has deprived TIB from having an opportunity to take action to preserve the Hanna Road Property. This is a serious matter. Li’s concealment in fact has facilitated the chargee to take away most of the sale proceeds. In my view, the existence of the Authorization Letter would not render this matter as not serious, given the sum of the remaining surplus is a modest sum.

(d) Point 8 – Up to now, Li has not revealed all her financial matters to TIB. The whole picture has still not been given to TIB.

(3) With all the aforesaid in mind, while this case is not in the most egregious category, this case is still a serious case. In my view, the situation in the present case is similar to Re Qin Jun. Taking all the circumstances into account and bearing the guiding principles as set out in Re Lee Raymond Cho Min & Re Lee Priscilla Hwang, I am of the view that the appropriate suspension period is a period of 3 years.

95.  I would order that the suspension period shall cease to run as from 27 October 2021 for a period of 3 years. For avoidance of doubt, the interim stay period in the Order of Master Lai dated 27 October 2021 and the interim stay period in the Order of Master Phoebe Man dated 12 November 2021 are covered by the suspension period in my order. In other words, the relevant period will end on 1 November 2024.

E. DISPOSITION

96.  For the reasons above, I dismiss the NCO Application but allow the SO Application. I make the suspension order as set out in [95] above.

97.  Costs should follow the event. Li succeeds in resisting the NCO Application, and TIB succeeds in the SO Application. In my view, the time spent in the NCO Application is similar to the time spent in the SO Application. In the circumstances, for the purpose of simplifying the matter, I am minded to take a broad-brush approach and make no order as to costs, so that each party shall would their or her own costs in these applications. On a nisi basis, there be no order as to costs in the NCO Application, and there be no order as to costs in the SO Application. In view of the coming Christmas and New Year holidays, I would allow the parties to have 21 days to consider whether it would be necessary to make an application for variation of the costs order nisi. Unless there is any application made by an inter-partes summons for an order to vary the costs order nisi within 21 days, the costs order nisi will become absolute without a further order.

98.  Lastly, it remains for me to thank counsel for the assistance rendered to the court.

Mr Kurt Ng, instructed by Johnnie Yam, Jacky Lee & Co, for the Trustees

Mr Ian Chau, instructed by Wong, Hui & Co, for the Bankrupt

Official Receiver, attendance excused

HCB 5271/2017

[2020] HKCFI 636

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS

NO 5271 OF 2017

________________________

________________________

_________________________________

JUDGMENT

_________________________________

Introduction

1.  This is an application of Madam Li Ye (“Madam Li”) to annul the bankruptcy order made against her on 1 November 2017 (the “Bankruptcy Order”) relying on section 33(1)(a) of the Bankruptcy Ordinance (Cap 6) (the “Ordinance”). 

2.  Unless otherwise stated, the page numbers in brackets in this judgment are page numbers of the document hearing bundles B (“Bundles B”).

Procedural history

3.  On 27 September 2016, the Petitioner commenced HCMP 2586/2016 (the “HCMP Action”) against Gold China Industries Limited (“Gold China”), Win Time Limited (“Win Time”), Yuen Yui Hing (“Mr Yuen”) and Madam Li.  In the HCMP Action, the Petitioner claimed against Madam Li under two guarantees dated 5 March 2010 (the “2010 Guarantee”) and 25 July 2014 (the “2014 Guarantee”) (together the “Guarantees”) securing the indebtedness of Gold China.  The Petitioner claimed HK$21,666,826.26 and US$568,682.01 together with further interest against Madam Li and other defendants.  The Petitioner claimed a further sum of HK$3,695,957.46 with further interest against Mr Yuen in the HCMP Action which did not concern Madam Li. 

4.  On 13 October 2016, Katherine Y W Or & Co (“KYWO”) filed acknowledgment of service of originating summons for all the defendants (including Madam Li) in the HCMP Action.  

5.  By an order by consent dated 20 April 2017 in the HCMP Action, it was ordered that the Petitioner did recover from the defendants (including Madam Li) jointly and severally the sums of HK$22,409,611.10 and US$231,925.49 together with further interest from 3 March 2017 until payment and costs in the sum of HK$31,750.00 (the “Consent Order”). 

6.  On 14 May 2018, Cheung & Co filed notice of change of solicitors to represent Madam Li in the HCMP Action.  

7.  On 26 May 2017, the Petitioner through its solicitors issued a statutory demand (the “SD”) to Madam Li demanding payment of the sums of HK$22,875,273.13 and US$235,911.89.  The Petitioner put the following addresses in the SD as the addresses of Madam Li:

(1)  Flat A, 9^th Floor, Latin Court, 229-231 Prince Edward Road Kowloon, Hong Kong (the “Latin Court Address”);

(2)  2B, Good Year Industrial Building, 119-121 How Ming Street, Kwun Tong, Kowloon (the “How Ming Street Address”); and

(3)  Flat 3B, Ground Floor, Century Centre, 44-46 Hung To Road, Kwun Tong, Kowloon (the “Hung To Road Address”).

The Addresses

8.  As the Petitioner had attempted service of the SD and the bankruptcy petition to Madam Li at the aforesaid three addresses, I shall put them into proper context. 

9.  There are three companies which have been referred to by the parties in this case.  They are Gold China, Win Time and a company called “HK Bella Vita International Fashion Company Limited” (“Bella Vita”). 

10.  Madam Li was a director of Gold China from 13 January 2003 until 17 August 2016 (pp 109 to 114).  As at 22 October 2003, Madam Li and Win Time were the only directors and shareholders of Gold China with Madam Li holding 1,999,999 shares and Win Time holding 1 share (pp 123 to 128).  Win Time was basically a company wholly owned by Madam Li until about 1 May 2014. (See para 18 below)  Gold China increased its issued share capital from $2,000,000 to become $5,000,000 on 6 January 2005.  All the newly issued capital was issued to Madam Li (pp 213 to 216).  As such, Madam Li held 4,999,999 shares in Gold China as at 22 October 2005 whereas Win Time still held 1 share (pp 129 to 146). 

11.  Gold China moved its registered office to the Hung To Road Address on 22 October 2006 (p 217). Madam Li reported change of her residential address as director of Gold China from a PRC address to the Latin Court Address with effect from 21 October 2013 (pp 219 to 221).  Gold China moved its registered office away from the Hung To Road Address to another address at Shing Yip Street and increased its issued capital to $10,300,000 between 22 October 2014 and 22 October 2015.  The newly issued capital was issued to Mr Yuen on 22 April 2015.  As such, the shareholding of Madam Li in Gold China was diluted from 99.99% to became 48.54% from 22 April 2015 onwards.  Mr Yuen became the majority shareholder holding 51.45% of Gold China’s issued capital.  Mr Yuen was also appointed as a further director of Gold China on a day between 22 October 2014 and 22 October 2015 (pp 25 to 41).  Madam Li remained as a director of Gold China until 17 August 2016.  Thereafter she only remained as a shareholder of Gold China holding 48.54% of its issued capital.  Her address in the shareholders’ register remained at the Latin Court Address as at 22 October 2016 (ie the reporting date of the 2016 annual return of Gold China).  The Latin Court Address was also the address of Mr Yuen reported in Gold China’s annual returns up to the year of 2016 (pp 42 to 49).  The annual returns of Gold China after 2016 were not produced to this court.  As such, I do not know whether there had been any changes on the addresses of Madam Li and Mr Yuen in the statutory records of Gold China after 22 October 2016. 

12.  From the statutory records filed with the Companies Registry it can be seen that the Hung To Road Address had been the registered office address of Gold China from 22 October 2006 to a date between 22 October 2014 and 22 October 2015. 

13.  Madam Li had been a director of Gold China from13 January 2003 until 17 August 2016.  The Latin Court Address was Madam Li’s reported residential address as director of Gold China from 21 October 2013 to at least 22 October 2015 (ie the reporting date of the 2015 annual return of Gold China). 

14.  Madam Li has been a shareholder of Gold China latest from 22 October 2003 (ie the reporting date of the 2003 annual return of Gold China) onwards.  Madam Li was the majority shareholder of Gold China holding 99.99% of its issued share capital until 22 April 2015.  She still held a substantial shareholding of 48.54% in Gold China thereafter.  The Latin Court Address had been the address of Madam Li as a shareholder kept in the statutory records of Gold China from between 22 October 2012 and 22 October 2013 to at least 22 October 2016 (ie the reporting date of the 2016 annual return of Gold China). 

15.  According to the statutory records filed by Gold China (many of them signed by Madam Li), prima facie, the residential address of Madam Li from 21 October 2013 up to at least 22 October 2016 was at the Latin Court Address. 

16.  Madam Li was a director of Win Time from 25 August 2003 until 2 May 2014.  She was also the sole director of Win Time as at 9 October 2013 with reported residential address at the Latin Court Address.  Mr Yuen was appointed as a director of Win Time on 2 May 2014 and became the sole director of Win Time thereafter up to at least 9 October 2016 (ie the reporting date of the 2016 annual return of Win Time) (pp 50 to 81 and 115 to 122).  Mr Yuen’s reported residential address was also the Latin Court Address. 

17.  The How Ming Street Address was the registered office address of Win Time latest since 9 October 2003 (ie the reporting date of the 2003 annual return of Win Time) to at least 9 October 2016 (ie the reporting date of the 2016 annual return of Win Time). 

18.  Madam Li had been a shareholder of Win Time since 25 August 2003 holding 90% of its issued capital.  The other shareholder was Gold China.  Gold China was basically a company wholly owned by Madam Li until about 1 May 2014 when Mr Yuen became the majority shareholder of Win Time which held a nominal one share in Gold China. (See paras 10 to 11 above)  As at 9 October 2003, Madam Li and Gold China were the only directors of Win Time (pp 458 to 463).  Madam Li became the sole shareholder of Win Time on 20 May 2005 when Gold China transferred all its shareholding in Win Time to Madam Li.  She also became the sole director of Win Time (pp 473 to 481).  Madam Li was holding 10 shares of Win Time being all the issued capital of Win Time at that time.  The corporate structure of Win Time remained unchanged until 1 May 2014 when 499,990 shares of Win Time were allotted to Mr Yuen making him the majority shareholder of Win Time (pp 552 to 555).  Madam Li still kept her 10 shares in Win Time.  The shareholding structure of Win Time remained unchanged at least up to 9 October 2016 (ie the reporting date of the 2016 annual return of Win Time). 

19.  Madam Li reported her residential address at the Latin Court Address with effect from 10 July 2013 as a director of Win Time (pp 549 to 551)  Madam Li remained as a shareholder of Win Time even after ceasing as a director of the company.  Her address kept in the shareholders’ register of Win Time (at least from 9 October 2013 to 9 October 2016) was the Latin Court Address.  As in the case of Gold China, annual returns of Win Time after 2016 were not produced to this court and I have no information on whether there had been any changes in the reported address of Madam Li in the statutory records of Win Time after 9 October 2016.

20.  According to the statutory records filed by Win Time (many of them signed by Madam Li), prima facie, the residential address of Madam Li (at least from 10 July 2013 to 9 October 2016) was at the Latin Court Address and the How Ming Street Address was the registered office address of Win Time at least from 9 October 2003 to 9 October 2016. 

21.  Madam Li was the sole shareholder of Bella Vita as at 28 September 2013 (ie the reporting date of the 2013 annual return of Bella Vita) when Madam Li and Mr Yuen were directors of Bella Vita (pp 82 to 91).  The corporate structure of Bella Vita remained unchanged at least up to 28 September 2015 (ie the reporting date of the 2015 annual return of Bella Vita) (pp 100 to 108). 

22.  Madam Li reported the Hung To Road Address as her residential address in the 2013 and 2014 annual returns of Bella Vita.  She reported the Latin Court Address as her residential address in the 2015 annual return of Bella Vita (pp 100 to 108). 

23.  The statutory records of Bella Vita showed that as at 28 September 2015 (ie the reporting date of the 2015 annual return of Bella Vita), the residential address of Madam Li was at the Latin Court Address.  Annual returns of Bella Vita after 2015 were not produced to this court.  As such, I do not know whether there were any reported changes of Madam Li’s address in the statutory records of Bella Vita after 28 September 2015. 

24.  To summarize, the Latin Court Address was the reported residential address of Madam Li from 21 October 2013 to at least 22 October 2016.  In fact, the Latin Court Address property was purchased by Madam Li on 15 September 2009 (pp 760 to 768).  It was sold on 26 July 2016 (pp 773 to 782).  In the assignment selling the Latin Court Address, Madam Li provided an address at Ngau Tau Kok as her address. 

25.  The How Ming Street Address was the registered office address of Win Time at least from 9 October 2013 to 9 October 2016. 

26.  The Hung To Road Address was the registered office address of Gold China from 22 October 2006 to between 22 October 2014 and 22 October 2015.  It was also the residential address of Madam Li as at 28 September 2013 and 28 September 2014 reported in the annual returns of Bella Vita as well as the address of Madam Li stated in the 2010 Guarantee and the 2014 Guarantee.  No evidence has been adduced to suggest that Madam Li had informed the Petitioner of any changes of her address in the Guarantees.  In fact, the Hung To Road Address was a property purchased by Win Time on 30 December 2005 and the assignment was executed by Madam Li for Win Time as purchaser (pp 556 to 566). 

27.  Madam Li contends that all the companies (ie Gold China, Win Time and Bella Vita) were formed by Mr Yuen and she had no knowledge of their corporate structures. (See para 23 of Li’s 1^st Affirmation and para 19 of Li’s 2^nd Affirmation)  However, many of the corporate documents of these companies filed with the Companies Registry were signed by Madam Li.  Even if Madam Li’s bare assertion is accepted, it is not Madam Li’s case that Mr Yuen, being the husband of Madam Li, did not know the residential address of his wife (ie Madam Li) in 2014, 2015 and 2016.

Service of the SD at the Latin Court Address

28.  When the process server of the Petitioner’s solicitors attempted service of the SD to Madam Li at the Latin Court Address in June 2017, he was informed by a female adult through intercom of the Latin Court Address that there was no such person known as Madam Li living at the Latin Court Address.  The said female adult and the caretaker of Latin Court told the process server that they did not know the whereabouts of Madam Li and did not have any means of contact of Madam Li.  The caretaker of Latin Court told the process server that Madam Li had moved out from the Latin Court Address for more than three years. 

29.  Appointment letter dated 8 June 2017 for serving the SD sent to the Latin Court Address was returned by the Hongkong Post through the dead letter service and marked “moved, redirection service not arranged by addressee”. 

Service of the SD at the How Ming Street Address

30.  When the process server attempted service of the SD to Madam Li in May and June 2017 at the How Ming Street Address, he found that “unit 2B” had been sub-divided into eight units, namely units 2B1 to 2B8.  The process server was told by occupants of unit 2B2, unit 2B6 and other neighbouring units at the same floor and the caretaker of Good Year Industrial Building that they did not know the whereabouts of Madam Li and did not have any means of contact of Madam Li.  

31.  Appointment letter dated 5 June 2017 for serving the SD sent to the How Ming Street Address had not been returned by the Hongkong Post. 

Service of the SD at the Hung To Road Address

32.  When the process server attempted service of the SD to Madam Li at the Hung To Road Address in June 2017, he found that there was no “Flat 3B” at the Ground Floor of the Hung To Road Address.  “Flat 3” at the Ground Floor of the Hung To Road Address was found to be occupied by a business called “Chef Hat Café”.  The process server was told by a male adult at the cashier of the said business, a female adult in Flat 4 of the Ground Floor, a male adult in Flat 6 of the Ground Floor and the caretaker of Century Centre that they did not know “Flat 3B”.  They further told the process server that they did not know the whereabouts of Madam Li and did not have any means of contact of Madam Li. 

33.  Appointment letter dated 6 June 2017 for serving the SD sent to the Hung To Road Address had not been returned by the Hongkong Post.

34.  After the aforesaid unsuccessful attempts of personal service of the SD to Madam Li, the Petitioner’s solicitors advertised the SD on 19 June 2017 in a Chinese newspaper circulating in Hong Kong. 

35.  Bankruptcy petition against Madam Li (the “Petition”) was issued on 29 August 2017. 

Service of the Petition

36.  Attempted personal service of the Petition on Madam Li at the Latin Court Address, the How Ming Street Address and the Hung To Road Street in August and September 2017 were also unsuccessful.  The process server encountered similar difficulties as when he was attempting service of the SD to Madam Li at these addresses. 

37.  The appointment letter dated 5 September 2017 for serving the Petition sent to the Latin Court Address was returned by the Hongkong Post and marked “Addressee unknown” whereas the appointment letters also dated 5 September 2017 sent to the How Ming Street Address and the Hung To Road Address had not been returned. 

38.  On 28 September 2017, the court granted an order for substituted service of the Petition on Madam Li by ordinary post to the aforesaid three addresses and by advertising in a Chinese newspaper circulating in Hong Kong (the “Sub-Service Order”).  Service of the Petition to Madam Li was effected by ordinary post and newspaper advertisement on 4 October 2017 pursuant to the Sub-Service Order. 

39.  Madam Li did not attend the hearing of the Petition scheduled for 1 November 2017 and the Bankruptcy Order against her was granted. 

The annulment application

40.  On 5 June 2018, Madam Li took out this application to annul the Bankruptcy Order under section 33(1)(a) of the Ordinance (the “Application”). 

41.  Madam Li filed her first affirmation on 8 June 2018 (“Li’s 1^st Affirmation”) in support of the Application. 

42.  On 8 November 2018, the Petitioner took out a summons (“P’s Summons”) requiring the trustees-in-bankruptcy of Madam Li (the “Trustees”) to file and serve an affidavit on the financial position of Madam Li as at the date of the Bankruptcy Order and the ability of Madam Li to settle all undisputed liabilities as at that day.  P’s Summons also asked the Trustees to file and serve affidavit evidence on matters which in the Trustees’ view would assist the court in determining the Application. 

43.  The Petitioner filed both affirmation of Sin Shu Kai (“Sin”) (“Sin’s Affirmation”) and affidavit of Tang Lai Shan (“Tang”) (“Tang’s Affidavit”) herein on 7 November 2018 in opposition to the Application and in support of P’s Summons. 

44.  Madam Li filed her second affirmation on 26 November 2018 (“Li’s 2^nd Affirmation) in reply to Sin’s Affirmation and Tang’s Affidavit and in opposition to P’s Summons. 

45.  By a consent summons filed herein on 4 February 2019, the parties (ie the Petitioner, Madam Li and the Trustees) agreed for the court to grant an order for the Trustees to file and serve affidavit evidence in respect of the financial position of Madam Li (including the assets of Madam Li in Hong Kong and overseas and the liabilities of Madam Li known to the Trustees); and finding(s) of the Trustees’ investigations in respect of the affairs of Madam Li relating to her financial position.  An order was granted on 18 February 2019 accordingly. 

46.  On 10 September 2019, Mr Osman Mohammed Arab of the Trustees filed his third affirmation (the “Trustee’s Affirmation”) pursuant to the aforesaid order of 18 February 2019.  

47.  Madam Li raised the following three grounds in support of the Application:

(1)  Madam Li was not domiciled in Hong Kong at the date of presentation of the Petition and for the three years preceding the date of presentation of the Petition on 29 August 2017, Madam Li had not been ordinarily resident in Hong Kong (the “Domicile / Ordinarily Resident Ground”);

(2)  the Petitioner had not done all that were reasonable for bringing the SD to the attention of Madam Li (the “Service Ground”); and

(3)  the Guarantees and the Consent Order were procured or obtained by duress, undue influence, misrepresentation and/or fraud (the “Challenge to the Consent Order and Guarantees Ground”). 

48.  The Petitioner contends that Madam Li fails to make out any of the aforesaid Grounds.  She is unable to demonstrate that “on any grounds existing at the time the [bankruptcy] order was made, the order ought not to have been made”. (Para 7(a) of the skeleton submissions for the Petitioner/Bank)  The Petitioner further contends that having regard to the substantial indebtedness continued to be owed by Madam Li, the court should, in any event, not exercise its discretion to annul the Bankruptcy Order. 

The legal principles 

49.  Section 33(1)(a) of the Ordinance provides that:

“(1) The court may annul a bankruptcy order if it at any time appears to the court that –

(a) on any grounds existing at the time the order was made, the order ought not to have been made”.

50.  In determining an application to annul a bankruptcy order under section 33(1)(a) of the Ordinance, the court shall first see if there were any grounds on which a bankruptcy order ought not to have been made at the material time when it was made, with the applicant bearing the burden of proving the existence of such grounds.  Second, even if such grounds existed, the court still has a discretion as to whether to grant an annulment, after carefully considering the interests of the creditor, the debtor and the public, bearing in mind that a bankruptcy order is to be annulled only in exceptional circumstances. (See Kam Hung Cheung v Bank of China (Hong Kong) Ltd [2009] 3 HKLRD 597 at 600-601)  

51.  The Court of Appeal in the Kam Hung Cheung case (supra) further endorsed the following views of Carlye Chu J (as she then was) expressed in Re Kam Hung Cheung [2008] 5 HKLRD 487 at 492:

“25. 又倘若一名破產人對破產令所涉債項有所爭議，他必須提供強而有力的表面證據以顯示他的爭議是基於真實和有力的理由。而如果破產令所涉債項是一項判決債務，法庭一般不會重新考慮對所涉債項的爭議：見Re Kwong Ngai Ping, ex p Chinachem Finance Co Ltd (unrep., HCB 9447/2003, [2004] HKEC 471) 第24段。

26. 此外，倘破產令是在破產人缺席下頒發，又或是破產令所涉的得直判令是基於破產人沒有給予抗辯通知書，則破產人必須就其缺席或沒有給予抗辯通知書給予合理可信的解釋：Re Luk Tsun Yin [2000] 1 HKC 744, 777 及Re Ng Chi Wo, ex p Aigun Export Ltd (unrep., HCB 2819/2003, [2004] HKEC 921) 。”

The Domicile / Ordinarily Resident Ground

52.  Section 4(1) of the Ordinance provides that:

“(1) A bankruptcy petition shall not be presented to the court under section 3(1)(a) [creditor’s petition] or (b) [debtor’s petition] unless the debtor –

(a) is domiciled in Hong Kong;

(b) is personally present in Hong Kong on the day on which the petition is presented; or

(c) at any time in the period of 3 years ending with that day –

(i)   has been ordinarily resident, or has had a place of residence, in Hong Kong; or

(ii)  has carried on business in Hong Kong.”

53.  In the Petition, the Petitioner relied on the grounds that: “The Debtor is domiciled in Hong Kong and has within 3 years immediately preceding the presentation of this Petition ordinarily resided at Flat A, 9^th Floor, Latin Court, 229-231 Prince Edward Road, Kowloon [ie the Latin Court Address], within Hong Kong.”  As such, the Petitioner relied on sections 4(1)(a) and 4(1)(c)(i) of the Ordinance to present the Petition. 

54.  Miss Kwong for Madam Li submits that it is for the Petitioner to prove that the conditions in section 4(1) of the Ordinance have been satisfied. (See para 17 of the Skeleton Submissions of the Bankrupt (“B’s Skeleton”))  This statement is right for hearing of a bankruptcy petition as in Re Liu Yi Fang (unrep, HCB 5613/2013, 26 February 2014) but not quite right for an application to annul a bankruptcy order.  The Court of Appeal has pointed out in the Kam Hung Cheung case (supra) that the person applying to annul a bankruptcy order bears the burden of proving that when the order was made there were grounds on which the order ought not to have been made. (See para 11 of the judgment)

55.  Miss Kwong contends that Madam Li was not domiciled in Hong Kong when the Petition was presented on 29 August 2017 and that within three years immediately preceding the presentation of the Petition (ie from 30 August 2014 to 29 August 2017 (the “Relevant Period”)), Madam Li had not been ordinarily resident in Hong Kong. The burden of proof is on Madam Li to prove the existence of such ground(s). In Re Wong Lei Kwan Joanne, ex p Bank of China (Hong Kong) Ltd [2009] 3 HKLRD 173 the court annulled a bankruptcy order due to, amongst other things, the bankrupt being found not to be ordinarily resident in Hong Kong in the three years before the presentation of the bankruptcy petition. 

56.  In Li’s 1^st Affirmation, Madam Li stated that she married Mr Yuen in Hong Kong on 1 April 2009 and that:

“19.  我和女兒於2009年9月才從中國內地移居香港太子道229號蘭亭閣9樓 [ie the Latin Court Address] 與袁先生 [ie Mr Yuen] 同住。

20.  在2010年底收到加拿大移民局正式文件，文件指明需要在2011年1月13日至2011年6月3日期間登陸加拿大。於是我們一家就在2011年4月22日到達加拿大溫哥華做第一次登陸，然後去多倫多看朋友和考察學校，15日後全家人返回香港，仍然居住在太子道蘭亭閣9A單位。”

“24.  2013年春節後我全面停止工作，同年9月得知懷孕，我想避免為初生嬰兒重新申請移民手續，就決定2014年4月返回加拿大生孩子。在2014年4月30我去加拿大生孩子後，直到2016年1月8日，我由加拿大經香港回深圳數次，看望居於深圳的媽媽，因為她做了脊柱連接手術，我希望照顧她。”

“35.  2014年4月底我返回加拿大，在6月底生了孩子後，就忙於照顧孩子們生活起居及讀書學習。2015年3月7日至2015年3月22日，在香港居住過一日。其餘三次回中國探親都只是過境香港，沒有居住。在加拿大，我沒有過問公司及袁先生的事情。”

57.  In Li’s 2^nd Affirmation, Madam Li stated that:

“10.  一直以來，每當我向袁先生問及公司業務或問他給我甚麼文件簽時，袁先生只會不耐煩的叫我只管好孩子就可以了，其它的不用我多管。我知道以袁先生的脾氣，我再追問下去，他又會不分場合的大聲罵我是狗吠，為避免難堪，我只能強忍。在簽公司文件及銀行文件的時候，縱使我內心有不安想多問，他馬上就會瞪著眼對我說〝不會賣了你的〞。我只好在他要求籤[原文如此]署的地方簽下去，因為我知道，如果不簽文件或做違背他意願的事，以他的脾氣，他不知又會鬧成什麼樣。以前他曾在家裡砸爛了兩台電視機，摔杯打碗都有。而且在孩子面前、在公眾場合及在辦公室當著員工的面，他都是照樣直接高聲責罵我，令我非常難堪，心裡也很難受。我心裡明白除非離婚，別無他法，可我當時还沒有勇氣去離婚的。2014年定居加拿大之後，由於時差關係，我和袁先生聯系少了，通電話一般都是說孩子上學方面的事，每當我問他關於公司的事，他都說他可以搞定。由現在回想，當初在簽文件這個問題上，的確有很多問題。袁先生拿來的文件有時多，有時少，有時也好多疊。他有時拿到家裡要我簽，有時在外面的飯店邊吃邊簽，也有在私家車上簽過。我無法知道文件是否是整份、文件內容是什麼、為什麼要簽等等。

11.  自從第三個孩子出生後，我就專注在加拿大照顧他們仨，也一心留在加拿大陪伴孩子們成長學習。除了在2016年1月後由加拿大經香港回深圳數次探望媽媽外，我都一直待在加拿大陪伴孩子們。而且，我不諳廣東話，袁先生也一直不讓我處理公司的任何事宜，因此，我絕不可能像Scanny在SSK誓章 [ie Sin’s Affirmation] 第5段所說只是偶爾到加拿大照顧孩子們，更不用說我有任何需要回香港處理公司事宜。”

58.  The above are all evidence adduced by Madam Li in respect of the Domicile / Ordinarily Resident Ground. 

Domicile

59.  Madam Li married Mr Yuen, a Hong Kong resident, on 1 April 2009 and moved to live in Hong Kong in September 2009.  Madam Li holds a Hong Kong Identity Card and a passport issued by HKSAR (p 1836).  In such circumstances, it is likely that Madam Li had acquired Hong Kong domicile prior to 2014.  There is no suggestion of the otherwise.  The existing domicile of a person is deemed to continue until it is proved that he/she has acquired a new domicile (section 9 of the Domicile Ordinance (Cap 596)) and he/she who asserts a change of domicile bears the burden of proving the truth of the assertion. (See Re Ku Chu Keung (a debtor) [2007] 2 HKLRD 292 and Re張承勷 (unrep., HCB 6679/2015, 16 May 2017)) 

60.  Miss Kwong relies on paras 24 and 35 of Li’s 1^st Affirmation and paras 10 and 11 of Li’s 2^nd Affirmation to submit that Madam Li was domiciled in Canada as at 29 August 2017.  I have quoted the relevant paragraphs of Madam Li’s affirmation in full in paras 56 and 57 above. 

61.  In para 24 of Li’s 1^st Affirmation, Madam Li stated that she went to Canada on 30 April 2014 until 8 January 2016.  She seems to suggest that she was living all the times in Canada from 30 April 2014 until 8 January 2016.  However, in para 35 of the same affirmation, Madam Li admitted that she came back to Hong Kong four times from 7 March 2015 to 22 March 2015 and stayed overnight in Hong Kong once. 

62.  It is noted that the 2014 Guarantee dated 25 July 2014 was executed by Madam Li in the presence of the relationship manager of the Petitioner. (See para 9 of Sin’s Affirmation and para 8(b) of Tang’s affidavit)  The aforesaid evidence of Sin and Tang was not disputed by Madam Li in Li’s 2^nd Affirmation (being a replying affirmation to the Petitioner’s affirmations in opposition).  It is further noted that Madam Li had executed a power of attorney on 24 April 2015 (the “Power of Attorney”) at a solicitors’ firm in Hong Kong (pp 2649 to 2650).  It is clear that Madam Li had spent more time in Hong Kong since 30 April 2014 than disclosed in her affirmations. 

63.  In para 10 of Li’s 2^nd Affirmation, Madam Li only stated that she moved to live in Canada in 2014.  In para 11 of the same affirmation, Madam Li stated that since the birth of her third child (which was on 23 June 2014 (see para 25(c) of Li’s 1^st Affirmation)) she had been staying in Canada except for a few visits to Shenzhen via Hong Kong after January 2016.  This is inconsistent with what she had said in para 35 of Li’s 1^st Affirmation about her travelling to Hong Kong in 2015 and contradicted by the 2014 Guarantee executed by her on 25 July 2014 and the Power of Attorney executed by her on 24 April 2015. 

64.  Madam Li does not produce any documentary proof on particulars of her stay in Canada or her stay (or lack of stay) in Hong Kong since 30 April 2014 despite knowing the allegation in Sin’s Affirmation that Mr Yuen had told Sin that Madam Li would only stay in Canada occasionally to look after her children there.  No movement records of Madam Li from the Immigration Department since 30 April 2014 have been produced.  In fact, no movement or travel records at all of Madam Li have been produced by Madam Li. 

65.  It is noted that when Madam Li affirmed Li’s 1^st Affirmation on 1 June 2018 and Li’s 2^nd Affirmation on 20 November 2018, she did not have a permanent address in Canada but stated that she was living temporarily at (暫居於) an address in Toronto.  This does not lend support to her assertion that she has been domiciled in Canada and has been ordinarily resident in Canada since 2014. 

66.  An abandonment or change of domicile is a very serious issue and satisfactory evidence is needed to prove an intention to change a domicile. (See Re Ku Chu Keung (supra)) Madam Li has been domiciled in Hong Kong since 2009.  The fact that Madam Li had spent some times in Canada since 2014 is insufficient to change her domicile bearing in mind that her husband, Mr Yuen, was still domiciled in Hong Kong during the material times.  The Petitioner presented the Petition against Madam Li on the ground that she was domiciled in Hong Kong.  As pointed out in the Kam Hung Cheung case (supra), the burden is on Madam Li to prove that when the Petition was presented against her on 29 August 2017, she was not domiciled in Hong Kong.  I find that Madam Li fails to prove on balance of probabilities that she was not domiciled in Hong Kong as at 29 August 2017. I find that the Petitioner is entitled to present the Petition against Madam Li on 29 August 2017 relying on section 4(1)(a) of the Ordinance. 

Residency

67.  The Petitioner also relied on section 4(1)(c)(i) of the Ordinance to petition for the bankruptcy of Madam Li.  Section 4(1)(c)(i) of the Ordinance requires the Petitioner to show that Madam Li at any time in the Relevant Period has been ordinarily resident in Hong Kong or has had a place of residence in Hong Kong. 

Ordinarily resident

68.  Madam Li admitted that she lived at the Latin Court Address after she moved to Hong Kong in September 2009.  I do not think that she may dispute that she had been ordinarily resident in Hong Kong since then until at least 30 April 2014 when she alleged that she had gone to Canada and had been staying there thereafter.  The issue is whether Madam Li had ceased to be ordinarily resident in Hong Kong before the commencement of the Relevant Period on 30 August 2014.  As pointed out in paras 61 to 64 above, it is not clear how much time Madam Li had actually stayed in Canada and how much time she had returned to stay in Hong Kong since 30 April 2014.  As a person may maintain more than one residence at the same time, even if Madam Li had been a resident of Canada during the Relevant Period, it does not necessarily mean that she was not ordinarily resident in Hong Kong during the same period of time.  It is noted that although Madam Li asserted that she had moved to Canada since 30 April 2014, in the 2014 Guarantee dated 25 July 2014 she still put the Hung To Road Address as her address and in the Power of Attorney dated 24 April 2015, she still put the Latin Court Address as her address.  As pointed out in paras 10 to 26 above, Madam Li had reported the Hung To Road Address and the Latin Court Address as her residential address to the Registrar of Companies up to at least 22 October 2016. 

69.  In Re Wong Lei Kwan Joanne (supra) Barma J (as he then was) found the debtor not being ordinarily resident in Hong Kong in the three years before the bankruptcy petition against her was issued.  His Lordship set out the basis for the aforesaid finding as follows:

“22. Although I would accept that the fact that Ms Wong holds a Hong Kong identity card and has a residential address recorded at the Companies Registry provides prima facie evidence that she is resident, and perhaps ordinarily resident, here, as was held by Deputy Judge Louis Chan in Re Shum Fong Chung, ex p DBS Bank (Hong Kong) Ltd (unrep., HCB 5782/2006, [2007] HKEC 523), I am satisfied that the evidence which she has adduced, in the form of the Immigration Department records and her own affidavit, are more than sufficient to rebut a prima facie case. The position here is quite different from Re Shum Fong Chung, where no travel records or other documents were produced by the debtor to back up his bare assertions of non-residence in Hong Kong.” (Emphasis added)

70.  Miss Kwong draws analogy between Madam Li’s case and the Wong Lei Kwan Joanne case.  I am of the view that the case before me is more similar to the Shum Fong Chung case than the Wong Lei Kwan Joanne case when Madam Li produced no travel records or other documents to back up her bare assertion of non-residence in Hong Kong. 

71.  In no document signed prior to 1 November 2017 (ie the date of the Bankruptcy Order) adduced by the parties (including documents adduced by Madam Li) a non-Hong Kong address had been stated as Madam Li’s address.  Without specific information, such as Madam Li’s movement records in and out of Hong Kong during the Relevant Period, the court is unable to hold that Madam Li had ceased to be ordinarily resident in Hong Kong prior to 30 August 2014.  If Madam Li had remained ordinarily resident in Hong Kong “at any time” during the Relevant Period, the requirement of section 4(1)(c)(i) of the Ordinance was fulfilled.  The burden is on Madam Li to prove that she had ceased to be ordinarily resident in Hong Kong prior to 30 August 2014.  Other than her bare assertion that she was living in Canada most of the time after 30 April 2014, Madam Li adduced no evidence to show that she had ceased to be ordinarily resident in Hong Kong.  In fact, she even did not adduce documentary evidence to show that she had left Hong Kong on 30 April 2014.  I find that Madam Li has failed to prove on balance of probabilities that she ceased to be ordinarily resident in Hong Kong prior to 30 August 2014. 

Place of residence

72.  Paragraph 4.07 in Butterworths Hong Kong Bankruptcy Law Handbook (6^th ed) (2019) states that:

“A person has a place of residence in Hong Kong if he has a ‘place of residence’, such as a house or lodging to which to return to: see R v St Leonard, Shoreditch, Inhabitants (1865) LR 1QB 21; and R v Glossop Union (1866) LR 1QB 227; and he occupies or has the intention to occupy the place as a place of residence: see Re Brauch (A debtor) ex p Britanic Securities & Investment Ltd [1978] Ch 316, [1978] 1 All ER 1004. ... ...

It is not necessary that occupation of a place of residence be for the whole of the three (3) year period before presentation of a bankruptcy petition, provided that the debtor has a place of residence at some time during the 3 years: see Re Hecquard [1890] 24 QBD 71 at p 74, per Lord Esher MR, followed in Re Brauch (A debtor) ex p Britanic Securities & Investment Ltd (above). A person may have more than one place of residence at the same time: see Levene v Inland Revenue Commissioner [1928] AC 217; also Herbert v Byrne [1964] 1 All ER 882, [1964] 1 WLR 519.” (Emphasis added)

73.  The above views were accepted and confirmed by DHCJ Louis Chan (as he then was) in Re Ku Chu Keung (a debtor) (supra) (see para 52 of the judgment).

74.  Madam Li stated in Li’s 1^st Affirmation that she lived at the Latin Court Address when she moved from China to Hong Kong in 2009.  It is noted that the Latin Court Address property was owned by Madam Li since 15 September 2009 and the same was not sold until 26 July 2016 (ie about 13 months prior to the presentation of the Petition). (See para 24 above)  As such, Madam Li had had a place of residence in Hong Kong since 2009. 

75.  In para 35 of Li’s 1^st Affirmation, Madam Li admitted that she had stayed for one night in Hong Kong during the period from 7 to 22 March in 2015.  She did not state where did she live for that night.  As Mr Yuen was living in Hong Kong, probably at the Latin Court Address, it was likely that she was living there during her stay in Hong Kong. 

76.  The fact that Madam Li might have been residing in Canada after 30 April 2014 does not necessarily mean that she did not have a place of residence in Hong Kong after 30 April 2014.  In the circumstances of this case, I am of the view that Madam Li did have a place of residence in Hong Kong during the Relevant Period.  The jurisdictional requirement of section 4(1)(c)(i) of the Ordinance for presenting the Petition was fulfilled. 

77.  I find that Madam Li also fails to prove on balance of probabilities that she did not have had a place of residence in Hong Kong “at any time” during the Relevant Period.  

Other matters on the Domicile / Ordinarily Resident Ground

78.  Miss Kwong refers to para 8(c) of Tang’s Affidavit when Tang pointed out that Madam Li deliberately inserted the registered office address of Gold China (ie the Hung To Road Address) as her address in the Guarantees.  Miss Kwong submits that: “In respect of the bankruptcy order obtained against [Madam Li], the Petitioner has made it clear in the bankruptcy petition that it only relies on Section 4(1)(a) and/or Section 4(1)(c)(i) in the presentation of the bankruptcy petition.” “Therefore, notwithstanding the subsequent affirmations seemingly suggesting [Madam Li] to have carry on business in Hong Kong in the 3 years preceding the date of presentation of petition (section 4(1)(c)(ii)), the Petitioner had not made it clear it was relying on section 4(1)(c)(ii) in the presentation of the bankruptcy petition and thus should not be allowed to place reliance on this section for the purposes of the present application.” (Paras 17 and 18 of B’s Skeleton)  I agree.

79.  Tang pointed out in Tang’s Affidavit that Madam Li put in the Hung To Road Address (being the registered office address of Gold China) in the Guarantees as her address and the Latin Court Address as her residential address in various corporate documents of Gold China, Win Time and Bella Vita up to 2016.  This showed that Madam Li was residing in Hong Kong at the material times.  The Petitioner does not switch to the section 4(1)(c)(ii) ground as contended by Miss Kwong.  Miss Kwong has simply missed the point. 

80.  The suggestion proposed by Miss Kwong in para 20 of B’s Skeleton that Madam Li put in a Hong Kong address in the Guarantees was done at the request of the bank (ie the Petitioner) or Mr Yuen simply has no basis.  It is not supported by any evidence, not even evidence from Madam Li.  In any event, if Madam Li had ceased to live in Hong Kong and had already moved to live in Canada at the material times, why would the Petitioner or Mr Yuen request Madam Li to put in an inaccurate address in the Guarantees unless the handling officers of the Petitioner or Mr Yuen had some ulterior motives to defraud or deceive the Petitioner.  There is no such suggestion.  There is also no suggestion that Madam Li had provided untrue or false information in the Guarantees to defraud or deceive the Petitioner. 

81.  Miss Kwong submits that the circumstances upon which the Guarantees were signed bears all the hallmarks of a classic case of duress and/or undue influence.  This is totally beside the point.  Whether the Guarantees were executed under duress or undue influence will be dealt with later in this judgment.  However, this has nothing to do with the address of Madam Li at the material times. 

82.  Tang pointed out in Tang’s Affidavit that in all the annual returns of Gold China and Win Time for the years 2013, 2014, 2015 and 2016, Madam Li put the Latin Court Address as her address and in the annual returns of Belle Vita for the years 2013, 2014 and 2015 Madam Li put either the Hung To Road Address or the Latin Court Address as her address.  Miss Kwong contended that Madam Li only needed to put an address but not necessarily her residential address in the annual returns of the companies.  This may be right in respect of a shareholder of a company but certainly wrong in respect of a director of the company.  It is clearly stated in the annual return form that the address of the director required is the residential address of the director.  Madam Li was a director of the aforesaid companies at the material times.  Her address stated in the annual returns should be her residential address at the material times.  There is no suggestion that Madam Li had provided false or untrue information to the Registrar of Companies.  As such, Madam Li held out that she had a residential address in Hong Kong at the material times.  This is what section 4(1)(c)(i) of the Ordinance requires (ie at any time in the period of 3 years ending with the day of presentation of the bankruptcy petition, the debtor has had a place of residence in Hong Kong).  

83.  I find that Madam Li has failed to prove on balance of probabilities that the requirements of sections 4(1)(a) and 4(1)(c)(i) of the Ordinance do not apply to her.  Madam Li thus fails on the Domicile / Ordinarily Resident Ground.  

The Service Ground

84.  Miss Kwong relies on Re Chung Sun Kwan [2016] HKCFI 1587 to submit that failure to service the SD properly is a ground for holding that the Bankruptcy Order ought not have been made.

85.  Rule 46(2) of the Bankruptcy Rules (Cap 6A) (the “Rules”) provides that:

“(2) 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.”

86.  Paras 2.5 and 2.6 of Part I of Practice Direction 3.1 (“PD 3.1”) provides that the following steps taken are considered reasonable steps that should normally be taken by a creditor to discharge his obligation under Rule 46(2) of the Rules in respect of service of a statutory demand:

(1)  at least two personal calls should be made to all the debtor’s addresses known to the petitioning creditor;

(2)  the calls should be made on weekdays and at reasonable hours.  If the service is attempted at the residential address, it should be at such time of the day when the debtor is expected to be found there (usually before 7:30 am or after 7:30 pm).  If the service is attempted at the business address, it should be at such time of the day when the debtor is expected to be found there (usually between 9 am and 6 pm);

(3)  each call should be made on a separate day.  The calls should not be made in close succession and an appropriate interval should be allowed between them;

(4)  the second (or subsequent) call(s) should be made by appointment by letter (“the appointment letter”) sent to the debtor by ordinary prepaid letter post, giving not less than 2 business days’ notice, enclosing a copy of the statutory demand to be served, and offering an opportunity of making a different appointment;

(5)  the appointment letter should state that if the debtor fails to keep the appointment, the creditor proposes to serve the debtor by post and by advertisement, and that in the event of a bankruptcy petition being presented, the court will be asked to treat such service as service of statutory demand on the debtor;

(6)  upon keeping the appointment made by letter, and if the debtor to be served cannot be found, the process server should inquire whether the debtor has received the appointment letter and the debtor’s whereabouts; and

(7)  if the process server is informed that the debtor is away, inquiry should be made as to when he will return and whether letters are being or have been forwarded to another address.

87.  The Petitioner’s solicitors had followed the aforesaid guidance of PD 3.1 in attempting to effect personal service of the SD on Madam Li at all her addresses known to the Petitioner, ie the Latin Court Address, the How Ming Street Address and the Hung To Road Address.  Such efforts were set out in the service affirmations (ie Affirmation of Leung Pak Kwan; Affirmation of Wong Sze Shing; and 2^nd Affirmation of Leung Pak Kwan) all filed on 29 August 2017 herein.  They showed that the reasonable steps required by PD 3.1 had been taken by the Petitioner’s solicitors in attempting personal service of the SD to Madam Li. 

88.  Miss Kwong takes no issues on compliance with PD 3.1 but contends that the Petitioner had actual knowledge of Madam Li not being in Hong Kong at the material times.  Ms Kwong refers to the 2^nd Affirmation of Mr Yuen filed and served in the HCMP Action on 19 April 2017 (“Yuen’s HCMP Affirmation”) when Mr Yuen stated that: “The 4^th Defendant [ie Madam Li] is my wife and she is always leaving in Canada.” (the “Statement”)  Miss Kwong submits that: “Having regard to context and purposive interpretation, the word “leaving” can only be reasonably understood as a typographical error which could only be taken to mean LY [ie Madam Li] is always “living” in Canada as “leaving” would only make sense if one was leaving “from” and not “leaving in”.  In these circumstances, the Petitioner has had direct knowledge and/or notice that LY is not ordinarily resident in Hong Kong.” (Para 24 of B’s Skeleton)

89.  Miss Kwong relies on Re To Cho Ping [2012] 1 HKLRD 125 to submit that the Petitioner should have made reasonable enquiries with Mr Yuen on the whereabouts of Madam Li in view of the Statement made in Yuen’s HCMP Affirmation.  

90.  I agree that it is arguable that the Statement in Yuen’s HCMP Affirmation may mean that Madam Li was always living in Canada.  However, Mr Yuen did not say that Madam Li “lives all the times” in Canada but only “always living” in Canada.  That means, Madam Li also “lived” somewhere else when she was not living in Canada.  This place could only be reasonably understood to be Hong Kong as Madam Li’s husband and companies were in Hong Kong. 

91.  Taking Madam Li’s case to the highest, the Statement does not necessarily mean that Madam Li was not ordinarily resident in Hong Kong at the material times.  In the annual returns of Gold China and Win Time signed by Mr Yuen on 17 November 2016, Mr Yuen reported the Latin Court Address as Madam Li’s address as well as his own address.  Mr Yuen as Madam Li’s husband should know the residential address of Madam Li.  This shows that Madam Li was living both in Canada and in Hong Kong at the material times.  In fact, Madam Li’s family members lived in both Canada and Hong Kong, ie her children were living in Canada but her husband was living in Hong Kong.  It is not unusual for families in Hong Kong to have residence both in Hong Kong and in another country.  This is reinforced by KYWO acknowledging service of the originating summons in the HCMP Action (the “OS”) for Madam Li on 13 October 2016.  The OS was issued on 27 September 2016 and served within jurisdiction to Madam Li in September / October 2016. Furthermore, according to Sin, Mr Yuen had informed him that Madam Li would only stay in Canada occasionally to look after her children there and would come back to Hong Kong to handle her companies in Hong Kong. (See para 5 of Sin’s Affirmation)  Madam Li has not adduced any evidence from Mr Yuen to rebut the aforesaid evidence of Sin. 

92.  The Statement was no more than an ambiguous and vague statement providing no particulars of the address at which Madam Li could be contacted.  Reading the Statement in context does not put the Petitioner on actual notice that Madam Li was not ordinarily resident in Hong Kong in June 2017 when the Petitioner attempted service of the SD on her and that reasonable inquiries on the whereabouts of Madam Li ought to be made to Mr Yuen. 

93.  I have found that Madam Li has failed to prove that she ceased to be ordinarily resident in Hong Kong. As Madam Li remained ordinarily resident in Hong Kong at the material times, the steps taken by the Petitioner in attempting personal service of the SD to Madam Li in accordance with the guidance set out in PD 3.1 were reasonable steps that should be taken by a creditor to discharge its obligation under rule 46(2) of the Rules in respect of service of a statutory demand.  Madam Li also fails on the Service Ground. 

The Challenge to the Consent Order and Guarantees Ground

94.  Miss Kwong contends that the Consent Order giving rise to the petitioning debt is liable to be set aside.  She contends that the Consent Order was entered without express consent of Madam Li (see para 3 of B’s Skeleton) or that the consent was obtained by misrepresentation and/or fraud.  She further contends that the Guarantees giving rise to Madam Li’s liabilities to the Petitioner were executed by Madam Li under duress, undue influence and/or misrepresentation. 

The Consent Order

95.  Where the debt which forms the basis of a bankruptcy order is a judgment debt, the starting point is that the court will normally not consider any dispute on the debt. (See Re Kam Hung Cheung (supra))  As pointed out by the Court of Appeal in Re Tam Mei Kam (unrep., CACV 87/2012, 8 May 2013) the bankruptcy court would treat a judgment for a sum of money as prima facie evidence that the judgment debtor was indebted to the judgment creditor for that sum.  The Court of Appeal further pointed out that if the judgment concerned was a judgment obtained after a full trial on the merits, the general principle was that the bankruptcy court would inquire into such a judgment only if the judgment debtor could show fraud, collusion or miscarriage of justice. (See paras 22.1 and 26.2 of the judgment)

96.  Although the Consent Order was not one made after a full trial, it was made under consent of the parties when all parties were legally represented in the HCMP Action.  As pointed out by Ng J in Re Chow Yuen Chuen (unrep., HCB 6004/2015, 20 July 2016) that:

“12. Where the underlying debt is based on a judgment, the court hearing the bankruptcy petition will treat the judgment as prima facie evidence that the judgment debtor is indebted to the judgment creditor. In appropriate circumstances, the court may “go behind” the judgment – what is normally required is some “fraud”, “collusion” or “miscarriage of justice” which impinges on the validity of the judgment ... ...”

97.  I am of the view that for Madam Li to set aside or overturn the Consent Order, she has to adduce cogent prima facie evidence to show fraud, collusion or miscarriage of justice. 

98.  The Court of Appeal further pointed out in Re Tam Mei Kam (supra) that the rationale for the court “going behind” a judgment is to protect a debtor’s real creditors from collusive judgments entered into by the debtor in order to initiate a bankruptcy and thereby reduce the funds available for his real creditors.  The reason why a bankruptcy court is not conclusively bound by a judgment debt is so that (in appropriate circumstances) it can inquire whether there was actually bona fide consideration for it. (See paras 22.2 to 23 of the judgment)  There is no suggestion that the debt due from Madam Li to the Petitioner lacked consideration or that the Consent Order was a “collusive judgment”. 

Knowledge to the HCMP Action and the Consent Order

99.  Miss Kwong contends that Madam Li could not have been aware of the HCMP Action and the OS could not have been validly served on Madam Li as Madam Li had left Hong Kong for Canada since 2014. 

100.  As discussed above, Madam Li might or might not have gone to Canada in 2014.  Even if the bare assertion of Madam Li is accepted, her case is that she went to Canada on 30 April 2014 but came back to Hong Kong occasionally thereafter (ie in March 2015 and after January 2016).  The OS was issued on 27 September 2016 and served to Madam Li within jurisdiction.  KYWO filed acknowledgment of service of the OS for Madam Li on 13 October 2016.  No issue had been taken in the HCMP Action on the OS not being validly served on Madam Li.  Miss Kwong’s submissions that “any substituted service order in respect of the OS does not and cannot constitute good service” (para 50 of B’s Skeleton) are misconceived as no substituted service order in respect of the OS had been applied for by the Petitioner or made by the court in the HCMP Action.

101.  In Li’s 1^st Affirmation, Madam Li stated that:

“7.  我對於自己身在HCMP 2586/2016 一案從不知情。直至今次經親友替我委託香港律師到法庭找尋相關文件，才駭然發現丈夫袁銳興先生(“袁先生”) 竟然在 HCMP 2586/2016 一案中聲稱獲我授權代表我參與該案法律程序。

8.  我必須指出，只是在我近日追問袁先生時，袁先生才告訴我當時呈請人有職員 Scanny Sin (中文姓冼) (“Scanny”) 就 HCMP 2586/2016 一案與他聯絡，並告訴袁先生與銀行合作，要求所有被告放棄抗辯以使呈請人能賣去有關資產償還債項，更說如果配合得好，一般情況下銀行都不會告欠款人個人破產。袁先生說是因為依賴銀行這些說話，就代表了 HCMP 2586/2016 一案所有被告表示不抗辯。”

102.  However, in Li’s 2^nd Affirmation, Madam Li told a different story as follows:

“13. 在 HCMP 2586/2016 案發生時，袁先生告訴我他自己拖欠了呈請人一筆款項 (金額詳細我不知道)，袁先生解釋由於我是公司股東，因此我也成為案件的被告人，但法律上完全是他的責任。袁先生對我說只要透過代表律師承認欠款數目及同意法庭頒令就可以，而他已想好只要把公司的物業抵押還款就夠還款，所以他給我簽了文件 (而我從沒有看到過完整的文件)，袁先生說是委託律師幫忙處理把公司的物業抵押還款一事。當時，袁先生從沒有告訴我欠款是外匯賣買虧損所致，也沒有告訴我有份拖欠款項，更加沒有告訴我有機會給法庭頒下破產令。

14. 記憶中，袁先生也告訴我會有一個叫 “思琪” (中文寫法不肯定) 的人打給我。那叫思琪的人是 Katherine Or 律師行的人，她打過兩次給我，第一次，是簡短介紹說代表袁先生替他打他的欠款官司；第二次，她說我也是被告人，也需要找一位律師代表我，她又建議我委託袁先生一個人處理這些事，讓事情快些得到處理，所以我也委託了袁先生。我也記得當時曾有 “Katherine Or” 的律師行的一個 Carmen 在電郵發過一些文件給我，通常在收到電郵前，袁先生會先致電給我通知我將有電郵，叫我留意電子信箱。收到電郵後，我會先把文件列印出來，簽之前，我都會問袁生是否應該簽，袁先生說是被銀行控告後有關還款的文件，我必須要簽，其他的他會代表我去處理，他說會把公司物業都賠給銀行就夠還款了，我是完全相信的 (因為之前他曾很興奮的跟我說過他买的物業升值了很多，可以賣七八千萬了)。由於當時是袁先生全權在處理這件事，我從沒有機會去置疑。至於整個案件的過程及最後結果，我問過袁先生，他說已經把款還完了，沒事了。所以我就以為還完款就算了，就沒有再問袁生。

15. 我把相關十一封電郵連同裡面的附件交給我的代表律師，我才知道那些 (a) 好些法律文件草擬本通常只給我簽名那一頁；(b) 而電郵都是由 [email protected] 寄出，而副本有時則抄送 YOYO 及/或一個 [email protected] 的電郵。我相信後者那個電郵就是上述那個叫思琪的人。當時 Katherine Or 律師行的人從沒有跟我說案件的緣起是外匯買賣債務，倒是我今年四月後收到那一整疊文件時問以前公司的財務 YOYO 陳小姐她告訴我的，她說袁先生是用公司名義去做的外匯投資導致欠款。” (Original underline but bold print emphasis added)

103.  Contrary to what Madam Li stated in Li’s 1^st Affirmation, it can be seen from Li’s 2^nd Affirmation that Madam Li had actual notice and was fully aware of the HCMP Action.  KYWO advised the Trustees that KYWO took instructions on the HCMP Action from Mr Yuen pursuant to the Power of Attorney executed by Madam Li on 24 April 2015 (pp 1776 and 2650).  Furthermore, Madam Li was in actual contact with KYWO, who represented her in the HCMP Action, by phone and by email.  Madam Li had been expressly advised by KYWO that she needed to be represented by lawyers in the HCMP Action but she decided to authorize Mr Yuen to deal with the HCMP Action for her. 

104.  The Court of Appeal after explaining the rationale for the bankruptcy court to “go behind” a judgment in Re Tam Mei Kam (supra) remarked in para 23 of the judgment that:

“However that is not to say that in every case the bankruptcy court should exercise its power of inquiry simply for a judgment debtor to get a second bite of the cherry and conduct parallel proceedings to review a judgment which he has lost or to avoid its execution,”

105.  It is wholly without merits for Madam Li now to seek to contend that she had no knowledge of the HCMP Action or that the Consent Order was entered against her without her express consent or that she had not authorized Mr Yuen to deal with the HCMP Action for her. 

Duress / undue influence / misrepresentation / fraud

106.  Miss Kwong’s contends that “if one tests the entering of judgment and/or order in HCMP 2586/2016 against background of dealings between [Madam Li] and [Mr Yuen], there exists an arguable case of duress, undue influence, misrepresentation and/or fraud.” (See para 53 of B’s Skeleton)

107.  Doing my best to decipher Madam Li’s contentions in respect of duress, undue influence, misrepresentation and/or fraud, it seems that Madam Li is relying on the following matters:

(1)  She did not know about the HCMP Action and Mr Yuen claimed to have been authorized by her to handle the HCMP Action for her without her knowledge; (para 7 of Li’s 1^st Affirmation) (fraud in obtaining the Consent Order)

(2)  Madam Li did not speak Cantonese and did not know English; she was not allowed to involve in the operations of Gold China and Win Time in Hong Kong; she was only nominee director in Gold China and Win Time and did not know the details of the companies; (paras 22, 23, 26 and 29 of Li’s 1^st Affirmation) (undue influence in signing the Guarantees)

(3)  When Mr Yuen asked Madam Li to sign documents, Mr Yuen would only tell Madam Li that they were ordinary banking documents to be signed every year; (para 30 of Li’s 1^st Affirmation) (undue influence / misrepresentation in signing the Guarantees) 

(4)  When Mr Yuen asked Madam Li to sign documents, there was never any witness present; (para 32 of Li’s 1^st Affirmation) (fraud in signing of the Guarantees)

(5)  When Madam Li was asked to execute the power-of-attorney, she was told by the solicitor that it was an authorization to deal with properties, company documents, cheques, and general affairs of the companies; (para 33 of Li’s 1^st Affirmation) (misrepresentation / fraud in obtaining the Consent Order)

(6)  When Mr Yuen asked Madam Li to sign documents, he would scold her in the public; (para 34 of Li’s 1^st Affirmation) (duress / undue influence in signing of the Guarantees)

(7)  Madam Li was a new immigrant and was not familiar with the rules and regulations in Hong Kong; (para 34 of Li’s 1^st Affirmation) (undue influence in signing of the Guarantees)

(8)  When Madam Li and Mr Yuen met with Sin, Madam Li would be disregarded as she did not speak Cantonese; (para 8 of Li’s 2^nd Affirmation) (undue influence in signing of the Guarantees)

(9)  Whenever Madam Li asked Mr Yuen about the affairs of the companies or the contents of documents required to be signed by Madam Li, Mr Yuen would become impatient and asked her not to bother or stare at her.  She signed the documents as requested to avoid being scolded and she did not know the contents of the documents; (para 10 of Li’s 2^nd Affirmation) (duress / undue influence in signing of the Guarantees)

(10)  Mr Yuen told Madam Li that the HCMP Action was about a loan due from Mr Yuen to the Petitioner.  Madam Li was named as a defendant because she was a shareholder of the company but Mr Yuen would be wholly responsible; (para 13 of Li’s 2^nd Affirmation) (misrepresentation in obtaining the Consent Order)

(11)  Mr Yuen told Madam Li that she only needed to admit the amount outstanding and agree to the court granting the order through lawyers.  Mr Yuen told her that they only needed to sell the properties of the companies which would be sufficient to pay the Petitioner and she was asked to sign documents to charge the companies’ property to secure repayment.  She was never told that she was liable for repayment or that she might be adjudged bankrupt; (para 13 of Li’s 2^nd Affirmation) (misrepresentation in obtaining the Consent Order)

(12)  Madam Li was asked to sign documents sent to her by KYWO.  Mr Yuen told her that those were documents relating to repayment to the Petitioner.  She only needed to sign the documents and all other matters would be taken care by Mr Yuen.  Mr Yuen told her that after selling the companies’ properties, the sale proceeds would be sufficient to pay the Petitioner; (para 14 of Li’s 2^nd Affirmation) (misrepresentation in obtaining the Consent Order)

(13)  When Madam Li was required to sign documents, Mr Yuen would only show her the places where she needed to sign.  After she signed, the documents would be taken away.  Madam Li did not have a chance to read the contents of the documents signed.  Mr Yuen was the head of the family and the decision maker of the companies, Madam Li had no right to challenge him. (para 18 of Li’s 2^nd Affirmation) (duress / undue influence in signing of the Guarantees)

Duress

108.  “Duress of the person may consist in violence to the person, or threats of violence, or in imprisonment whether actual or threatened.” (Para 8-012 of Chitty on Contract Vol 1 (33^rd ed) (2018)) 

109.  The matters raised by Madam Li do not amount to duress of person.  In para 10 of Li’s 1^st Affirmation, Madam Li alleged that:

“... ... 以前他 [ie Mr Yuen] 曾在家裡砸爛了兩台電視機，摔杯打碗都有。而且在孩子面前、在公眾場合及在辦公室當著員工的面，他都是照樣直接高聲責罵我，令我非常難堪，心裡也很難受。... ...”

110.  No particulars have been provided in respect of the aforesaid alleged incidents.  They at most show that Mr Yuen is a person with bad temper.  There was no violence or threat of violence to Madam Li.  What Madam Li tried to avoid was the bad temper of Mr Yuen. I find that Madam Li fails to prove on balance of probabilities that she signed the Guarantees under duress of Mr Yuen. 

111.  Even if Madam Li signed the Guarantees under duress of Mr Yuen, it was not duress from the Petitioner, the contractual counter-part of the Guarantees.  As stated in para 8-053 of Chitty on Contract Vol 1 (above):

“Where it is sought to avoid a contract on the ground of duress exercised, not by the party seeking to enforce the agreement, but by some third person, the party seeking to avoid the contract must prove that the other party knew the duress, or had constructive notice of it or had procured the making of the contract through the agency of the party who exercised the duress.”

112.  No evidence has been adduced by Madam Li to prove that the Petitioner knew the alleged duress or had constructive notice of it or had procured the signing of the Guarantees by Madam Li through the agency of Mr Yuen.  Both Sin’s Affirmation and Tang’s Affidavit denied that the Petitioner had knowledge of the dealings between Mr Yuen and Madam Li.  Madam Li in her replying affirmation (ie Li’s 2^nd Affirmation) adduced no evidence to rebut the aforesaid evidence of Sin and Tang.  The alleged duress (not accepted as being proved) even if proved does not assist Madam Li in seeking to set aside or overturn the Consent Order or to render the Guarantees unenforceable. 

Undue influence

113.  In Royal Bank of Scotland v Etridge (no 2) [1998] 4 All ER 705 Stuart‑Smith LJ said in the English Court of Appeal at 711f‑j that:

“5. Cases of undue influence are now classified in three categories. Class 1 consists of cases of actual (or express) undue influence. In these cases it is necessary for the complainant to prove affirmatively that she entered into the impugned transaction not of her own free will but as a result of actual undue influence exerted against her. Class 2 consists of cases of presumed undue influence. In these cases it is sufficient for the complainant to establish the existence of a relationship of trust and confidence between her and the wrongdoer of such a nature that it is fair to presume that the wrongdoer abused the relationship in procuring her to enter into the impugned transaction. ...

6. The necessary relationship can be established in either of two ways.  Class 2A consists of certain well‑known relationships which are by presumption of law irrebuttably treated as relationships of trust and confidence.  Class 2B consists of other cases where the complainant establishes by affirmative evidence that she was accustomed to repose trust and confidence in the wrongdoer.”

114.  When the case went to the House of Lords [2002] 2 AC 773, Lord Scott had reservation on the utility of the Class 2B classification.  His Lordship stated in para 161 of the House of Lords judgment that:

“161 For my part, I doubt the utility of Class 2B classification. Class 2A is useful in identifying particular relationships where the presumption arises. The presumption in Class 2B, however, is doing no more than recognising that evidence of the relationships between the dominant and subservient parties, coupled with whatever other evidence is for the time being available, may be sufficient to justify a finding of undue influence on the balance of probabilities. The onus shifts to the defendant.”

115.  To rely on the defence of undue influence, Madam Li has to either prove actual undue influence (Class 1) or adduce evidence of her relationship with Mr Yuen together with other available evidence to justify a finding of undue influence on the balance of probabilities (Class 2).  

116.  In Bank of China (Hong Kong) Limited v Chan Fook Wing and Another (unrep, HCMP 420/2004, 25 September 2015) To J pointed out that:

“30. In case of actual undue influence, the subservient party has to prove affirmatively that the dominant party exerted influence on him which caused him to enter into the particular transaction impugned. He has to prove that the alleged dominant party has the capacity to influence the subservient party; the influence was in fact exerted; the exercise of influence was undue; and the exercise resulted in the transaction complained of, although it need not be the only reason as long as it was a significant reason,”

117.  The facts alleged by Madam Li (see para 107 above) were far from evidence sufficient to establish actual undue influence.  As pointed out above, they were at most attempts by Madam Li to avoid the bad temper of Mr Yuen.  In the words of DHCJ Poon (as he then was) in Bank of China (HK) Ltd v Wong Yuk Ping & Anor [2003] 1 HKLRD 1 at 17J: “Actual undue influence is an equitable wrong committed by the dominant party against the other which makes it unconscionable for the dominant party to enforce his legal right against the other.  It is typically some express conduct overbearing the other party’s will.”   The facts alleged by Madam Li did not support a plea of express undue influence. 

118.  The relationship of husband and wife does not fall within any of the special classes in which the law will presume a relationship of trust and confidence.  When the Etridge case went to the House of Lords, their Lordship emphasised that the courts should not be too ready to find undue influence as between husband and wife.  Lord Nicholls said at para 32 of the House of Lords judgment that:

“32. I add a cautionary note, prompted by some of the first instance judgments in the cases currently being considered by the House. It concerns the general approach to be adopted by a court when considering whether a wife’s guarantee of her husband’s bank overdraft was procured by her husband’s undue influence. Undue influence has a connotation of impropriety. In the eye of law, undue influence means that influence has been misused. Statements or conduct by a husband which do not pass beyond the bounds of what may be expected of a reasonable husband in the circumstances should not, without more, be castigated as undue influence. Similarly, when a husband is forecasting the future of his business, and expressing his hopes or fears, a degree of hyperbole may be only natural. Courts should not too readily treat such exaggerations as misstatements.”

119.  Lord Scott also said in the House of Lords judgment of the Etridge case (supra) that in the surety wife cases, while there are cases in which the husband abused his wife’s confidence in him, for example by over-estimating his prospects, misrepresenting his intentions or subjecting her to excessive pressure, it should be recognised that undue influence, though a possible explanation for the wife’s agreement to become a surety, is a relatively unlikely one. (See para 160 to 162 of the House of Lords judgment)

120.  In the Wong Yuk Ping case HCDJ Poon (as he then was) expressed the following view at 17A‑C that:

“48. The primary question is whether in a particular relationship with its own characteristics between two persons, one has acquired over another a measure of influence or ascendancy of which the ascendant person then takes unfair advantage: Royal Bank of Scotland Plc v Etridge (No 2) [2001] 3 WLR 1021 at para 8. When approaching this fundamental question, I respectfully agree with the observation of Mr Recorder Ma in Bank of China (Hong Kong) Ltd v Wong King Sing [2002] 1 HKLRD 358 at p 366H‑J, that one has to apply a large degree of common sense when assessing the relevant evidence.”

121.  Mr Recorder Ma SC (as he then was) pointed out in Bank of China (Hong Kong) Ltd v Wong King Sing & Ors [2002] 1 HKLRD 358 at 370D‑G that:

“47. In Class 2(B) cases, the complainant needs to do more before the presumption arises. Here the complainant has first to show that:

(a) he placed trust and confidence in the influencer or that the influencer had acquired an ascendancy or domination over him; and

(b) the transaction cannot be readily explicable by the relationship of the parties.

See Royal Bank of Scotland Plc v Etridge (No 2) [2001] 3 WLR 1021 at p 1030 para 14, p 1032 para 21.”

122.  In Li Sau Ying v Bank of China (Hong Kong) Ltd [2005] 1 HKLRD 106, Lord Scott NPJ stated at 121A‑C that:

“34. ... hope that in future cases, where undue influence has to be proved but where the relationship between the parties is not a relationship that falls within Slade LJ’s Class 2A category, the parties will concentrate on whether the evidence justifies the inference that, on a balance of probabilities, the impugned transaction was procured by undue influence, that is to say, by an abuse by the allegedly dominant party of the trust and confidence reposed in him by the allegedly subservient party. ...”

123.  The burden rested on the complainant to show that the evidence justifies a conclusion that the impugned transaction was brought about by undue influence.  As pointed out by Mr Recorder Anthony Houghton SC in Citibank, N.A. v York Star Company Limited and Others (unrep., HCA 526/2016, 9 March 2017) that:

“13. This defence [of undue influence] is no different to many others, insofar as it is the obligation of the party asserting undue influence to prove that allegation. Whether or not a transaction has been brought about by the exercise of undue influence is a question of fact, and the evidence required to establish such a defence will, in the usual course, encompass details of the relationship between the parties, the extent and nature of the alleged undue influence, the personalities of the parties in question, and facts going to show the way in which the transaction, in the circumstances of the case, cannot readily be accounted for by the ordinary motives of persons in that particular relationship.”

124.  Madam Li tried to paint a picture that she was a new immigrant housewife lived a life of subservience to the wishes or commands of Mr Yuen.  However, information provided by Madam Li in her affirmations does not project such image. 

125.  In Li’s 1^st Affirmation, Madam Li stated that after she finished high school, she studied nursing (醫士護理專業) for three years at 新疆衛生職業中專and then studied foreign trade (外貿) at 新疆成人教育學院 for two years.  As such, she is well-educated.

126.  She worked in Xinjiang from 1995 to 1997 as administrative assistant of the general manager office (總經理辦公室主任行政助理) at a hotel.  She then moved to Shenzhen in 1997 and worked at various Taiwan invested factories as sales coordinator (業務跟單) or to manage sales department (業務部管理工作).  In 1999, she changed to work for a Hong Kong invested company as chain-stores district sales management (連鎖店區域銷售管理).  She started her own import/export customs clearing business (進出口貨物報關公司) in 2001 in Shenzhen and met Mr Yuen in 2002 over business.  In 2003, she started to assist Mr Yuen to develop sale of sewing machine business in China.  She was responsible for customer development and after-sale services (客戶廠家及行家客戶開發、售後服務) in China.  In 2011, she assisted Mr Yuen and his partners to establish a company called 永昌盛國際公司 with office in Shenzhen.  She was responsible for purchasing, human resources and company expenditures (物料採購，人事及日常支出) of the company until 2013 when the company’s Shenzhen office was closed.  As such, Madam Li is an experienced business woman.  She was managing Mr Yuen’s company in Shenzhen. 

127.  Madam Li is also an independent person.  She went to work in Shenzhen from Xinjiang in 1997 at the age of 25.  She set up her own business in Shenzhen in 2001, ie about 4 years after coming to Shenzhen.  She gave birth to a child for Mr Yuen in 2004 without getting married.  She applied for migration to Canada with her daughter in 2005 (before marrying Mr Yuen and not including Mr Yuen in the application). It was Mr Yuen who later requested Madam Li to include him in the migration application.  They then married in 2009.  According to Madam Li, she moved to live in Canada with her children since 2014 without Mr Yuen and they had had less contact since then.  Madam Li described her personality as straight and logical (率直和講條理) (see para 16 of Li’s 1^st Affirmation).  She would not be shied of expressing her views on business matters to Sin whom Madam Li said that she had only met for a few times. (See para 28 of Li’s 1^st Affirmation and paras 7 and 8 of Li’s 2^nd Affirmation.) 

128.  Madam Li’s bare assertion in her affirmations of her subservience to the commands of Mr Yuen does not tally with her independent personality.  In view of the above, Miss Kwong’s description of Madam Li as “a domestic and obedient wife who was willing and simply following her Husband’s commands and instructions” (see para 31 of B’s Skeleton) is far from an accurate description of Madam Li’s personality. 

129.  Madam Li also tried to portray herself as a mere nominee of Mr Yuen in respect of the affairs of Gold China and Win Time.  In fact, Madam Li had been a director of Gold China since 13 January 2003 and a director of Win Time since 25 August 2003.  This was the time when Madam Li said that she was assisting Mr Yuen to develop sewing machine sale business in China.  In para 14 of Li’s 1^st Affirmation, Madam Li stated that: “2003年全面協助袁先生開拓大陸衣車銷售市場，負責大陸客戶廠家及行家客戶開發，售後服務。”  At that time, Madam Li in fact was the majority shareholder of Gold China holding 99.99% of the issued capital of Gold China. As such, in 2003 she was not assisting Mr Yuen but developing the business of her own company (Gold China). 

130.  Madam Li did not merely sign the Guarantees securing the indebtedness of Gold China to the Petitioner. She had also executed as a director of Gold China or Win Time various corporate documents filed with the Companies Registry and bank documents relating to credit facilities granted by the Petitioner to Gold China.  Tang listed out 70 such documents in para 9 of Tang’s affidavit.  These had not included other internal corporate documents and documents relating to credit facilities granted by other creditors to Gold China and/or Win Time which might also have been signed by Madam Li.  I do not propose to list out all the documents referred to in Tang’s Affidavit.  Suffice for me to say that the number and nature of documents signed by Madam Li for Gold China and Win Time went far beyond documents which a nominee would be expected to sign.  Madam Li not only signed banking documents for Gold China and Win Time with the Petitioner.  She also signed banking documents for Gold China and Win Time with other banks including The Hongkong and Shanghai Banking Corporation (“HSBC”) (pp 258 to 334, 451 to 457, 597 to 689), China Citi Bank International Limited (pp 427 to 450), and Bank SinoPac Hong Kong Branch (“Bank SinoPac”) (pp 1698 to 1707).  

131.  Miss Kwong submits that the documents may appear to bear the signature of Madam Li but the Petitioner has not adduced evidence to prove that those documents were actually signed by Madam Li.  In para 21 of Li’s 2^nd Affirmation, Madam Li alleged that signature on the following eight documents were not signed by her:

(1)  Gold China’ annual return for the year 2011 (p 196 of the exhibit to Tang’s Affidavit / p 196 of Bundles B);

(2)  Extract of Board Minutes of Gold China dated 25 July 2014 in respect of the facility letter of the Petitioner dated 8 May 2014 (p 425 of the exhibit to Tang’s Affidavit / p 425 of Bundles B);

(3)  Charge Over Securities and Deposits dated 22 October 2015 in favour of HSBC (p 456 of the exhibit to Tang’s Affidavit / p 456 of Bundles B);

(4)  Win Time’s annual returns for the years 2005, 2010 and 2011 (pp 481, 523 and 531 of the exhibit to Tang’s Affidavit / pp 481, 523 and 531 of Bundles B); and

(5)  The Petitioner’s notices in respect of amendment regarding supplemental facility letters dated 31 August 2015 and 2 February 2016 (pp 738 and 740 of the exhibit to Tang’s Affidavit / pp 738 and 740 of Bundles B). 

132.  I note that the signing of the Charge Over Securities and Deposits in favour of HSBC by Madam Li was witnessed by an officer of HSBC with the name “Y H Sin”.  Madam Li is accusing fraud against that officer of HSBC.  This is a serious but bare accusation to which I shall not make any finding without hearing evidence.  Furthermore, I see no reason why someone would forge the signature of Madam Li to file annual returns for Gold China and Win Time.  Madam Li provides no explanation for the alleged forgery signatures. 

133.  In any event, taking Madam Li’s case to the highest and assuming that all the aforesaid eight documents were not signed by Madam Li, there are still more than 60 corporate documents or bank documents relating to Gold China and Win Time signed by Madam Li for these companies.  As Miss Kwong rightly pointed out, Madam Li had admitted in para 10 of Li’s 2^nd Affirmation that she did sign some corporate as well as bank documents. 

134.  Miss Kwong submits that the shareholding as set out in the company documents simply set out the legal position when in fact, the real and equitable shareholder is Mr Yuen. (Para 28 of B’s Skeleton)  This is a bold submission without supporting evidence.  It is not Madam Li’s case that she holds the shares in Gold China and Win Time as trustee for Mr Yuen.  Nowhere in her affirmations did she make such assertion.  

135.  This is not a case where Mr Yuen could not have conducted the operations of Gold China or Win Time or held their shares in his own name and had to control the companies behind the scenes through a nominee.  In fact, Mr Yuen had become a shareholder and director of Gold China between 22 October 2014 and 22 October 2015 (probably on about 22 April 2015 when 5,300,000 shares in Gold China were allotted to him). (See para 11 above)  Mr Yuen also became a shareholder and director of Win Time in early May 2014. (See paras 16 and 18 above)  If for some unknown reasons Mr Yuen needed a nominee to hold shares and directorship in Gold China (prior to April 2015) and Win Time (prior to May 2014) for him, he would have required Madam Li to transfer back the shares to him after he himself had become shareholder of these companies.  In fact, if Mr Yuen wished to get back control of the companies from his nominee, he would have required his nominee to transfer the shares back to him instead of causing the companies to allot new shares to him. 

136.  No declaration of trust has been produced and no explanation has been provided for why Mr Yuen would require a nominee to hold shares in Gold China and Win Time for him.  There is also no explanation for Mr Yuen to require Madam Li to continue holding substantial shareholding in Gold China for him when Mr Yuen himself was already a shareholder of Gold China from April 2015 onwards.  I reject Miss Kwong’s aforesaid unsubstantiated submissions. 

137.  Madam Li alleged that she was not allowed to be involved in the affairs of the companies and did not even have a working desk in the companies.  She said that she did not have any actual power in the companies.  However, in para 33 of Li’s 1^st Affirmation, Madam Li admitted that Mr Yuen required authorization or power-of-attorney from her to deal with corporate affairs of the companies, in her words: “處理公司的物業買賣、公司文件及支票方面等一般性公司事務”.  In fact, Madam Li was one of the authorized signatories to operate the credit facilities granted by the Petitioner to Gold China in 2014.  Madam Li signed the Petitioner’s facility letters dated 16 May 2013 (pp 335 to 343), 5 February 2014 (pp 396 to 405) and 8 May 2014 (pp 409 to 423) as the authorized signatory of Gold China.  The investigation of the Trustees showed that Madam Li was also one of the authorized signatories of Gold China’s bank account held with CTBC Bank Co Ltd (“CTBC”) from 29 August 2012 to 28 February 2018. (See para 25 of the Trustee’s Affirmation)  CTBC submitted proof of debt for the sums of HK$327,720.00 and US$162,725.06.    The above show that Madam Li did have management control of the companies. 

138.  It is also noted that Madam Li was in contact with Ms Yoyo Chan, the former staff in charge of the financial matters of the companies, even after Ms Chan had left the companies and that Ms Chan would provide Madam Li with the financial information requested. (See para 36 of Li’s 1^st Affirmation and paras 12 and 15 of Li’s 2^nd Affirmation)  As such, Madam Li had access to at least the financial information of Gold China and Win Time.   If Madam Li had not been involved in the affairs of the companies, she would not have known staff of the companies, not to say maintaining contact after the staff had left the companies.  This suggests that Madam Li did have significant involvement at least in the financial matters of Gold China and Win Time. 

139.  Madam Li also alleged that Mr Yuen would not explain the contents of documents required to be signed by her and would get angry at her if she asked about that.  In para 10 of Li’s 2^nd Affirmation, Madam Li stated that: “每當我向袁先生問及公司業務或問他給我甚麼文件簽時，袁先生只會不耐煩的叫我只管好孩子就可以了，其它的不用我多管。”  She said that she dared not to ask. However, Madam Li stated later in the same paragraph that: “每當我問他關於公司的事，他都說他可以搞定。”  In fact, in para 30 of Li’s 1^st Affirmation, Madam Li had said that: “基於對袁先生的信任，我並無追問下去。”  If Madam Li signed the Guarantees without paying attention to the contents of the documents, this was not because she signed the documents under undue influence of Mr Yuen but because she trusted Mr Yuen.  The fact that she trusted Mr Yuen did not per se constitute Mr Yuen having undue influence on her.  As Lord Nicholls stated in the House of Lords judgment in the Etridge case (supra):

“30. I return to husband and wife cases. I do not think that, in the ordinary course, a guarantee of the character I have mentioned [ie a wife charged her interest in her home in favour of a bank as security for the debts of the husband or that of the husband’s business] is to be regarded as a transaction which, failing proof to the contrary, is explicable only on the basis that it has been procured by the exercise of undue influence by the husband. Wives frequently enter into such transactions. There are good and sufficient reasons why they are willing to do so, despite the risks involved for them and their families. They may be enthusiastic. They may not. They may be less optimistic than their husbands about the prospects of the husband’s business. They may be anxious, perhaps exceedingly so. But this is a far cry from saying that such transactions as a class are to be regarded as prima facie evidence of the exercise of undue influence by husbands.”

140.  Furthermore, it is Madam Li’s case that since she moved to Canada in April 2014, she had less contact with Mr Yuen.  If Madam Li was under undue influence of Mr Yuen prior to April 2014, such undue influence ceased to affect her after April 2014.  It is noted that the 2014 Guarantee was executed on 25 July 2014 when, even in Madam Li’s own case, she was no longer under undue influence of Mr Yuen. 

141.  Miss Kwong refers to Bank of China (Hong Kong) Limited v Well Lok Printing Limited and Others [2008] 1 HKC 416, CACV 386/2006, 23 January 2008 to submit that Madam Li’s case is also a case where an inference of undue influence can properly be drawn.  In the Well Lok Printing Limited case, the wife together with the husband mortgaged their jointly owned property to the bank to secure the husband’s borrowing.  The wife in that case was a person of limited education.  She did not complete her primary education and was unable to read English documents. She had always been a menial worker earning no more than $4,000 - $5,000 per month.  The Court of Appeal held that the circumstances of the case viewed as a whole, including the particular cultural background of the wife, were such that, unlike ordinary cases, a presumption of undue influence arose. 

142.  However, in the case before me, Madam Li is a well-educated experienced business woman.  She was guaranteeing the borrowings of Gold China in which she was the majority shareholder at the material times.  The Court of Appeal has pointed out in para 14 of the judgment of the Well Lok Printing Limited case (supra) that:

“14. For the presumption of undue influence to arise, it is necessary for the wife to establish not only that she reposed trust and confidence in the husband in the management of her financial affairs but also that the transaction could not be readily explicable by the relationship of the parties. ... ...”

143.  Madam Li did not stand as surety for Mr Yuen or Mr Yuen’s companies, she stood as surety for her own company.  I do not see how such transaction can fall within “transaction could not be readily explicable by the relationship of the parties”.  The Well Lok Printing Limited case (supra) does not assist Madam Li. 

144.  The matters alleged by Madam Li even if accepted do not establish a relationship between Mr Yuen and Madam Li whereby Mr Yuen had acquired over Madam Li a measure of influence or ascendancy of which Mr Yuen then took unfair advantage. 

145.  Furthermore, as pointed out by Warren J in Fladgate Fielder v Smith [2005] All ER (D) 264 (May), to raise the presumption of undue influence in such case it was necessary to establish two prerequisites, namely a relationship of trust and confidence between the parties and that the transaction called for an explanation.  Ordinary, unexceptional transactions of everyday occurrence would not be caught. 

146.  The credit facilities granted by the Petitioner to Gold China included: overdraft, installment loans, term loan, trading finance (ie letter of credit, cargo receipt, and trust receipt), account payable financing, and negotiation under documentary credit with discrepancies. (See pp 335 to 343, 396 to 405 and 409 to 423)  These are ordinary credit facilities for a trading company.  A guarantee executed by a majority shareholder of a company to secure such borrowing of his/her company is ordinary unexceptional transaction of everyday occurrence.  

147.  I find that Madam Li has failed to prove on balance of probabilities that she executed the Guarantees under undue influence. 

148.  Madam Li stated her case against the Petitioner in para 37 of Li’s 1^st Affirmation as follows:

37.       我認為那些由我簽署的有關星展銀行文件，是由袁先生不正當影響所簽署，簽署過程中存在刻意隱瞞成分，而且星展銀行也沒有履行責任去解釋及確保我清楚知道簽署有關文件的內容。”

149.  This is a case when the alleged undue influence did not come from the Petitioner (the plaintiff) but from Mr Yuen, a co‑defendant.  “Where one party seeks to avoid a contract on the ground of undue influence by a third person, it must appear either that the third person was acting as the other party’s agent, or that the other party had actual or constructive notice of the undue influence.” (para 8-110 of Chitty on Contracts Vol 1 (above)) 

150.  In the case of a wife guaranteeing the obligation of a husband, Lord Hobhouse put the following questions to be answered by the court in the Etridge case (supra) in para 101 of the House of Lords judgment:

(1)     Has the wife proved what is necessary for the court to be satisfied that the transaction was affected by the undue influence of the husband? 

(2)     Was the lender put on inquiry? 

(3)     If so, did the lender take reasonable steps to satisfy itself that there was no undue influence?

151.  His Lordship further pointed out that unless the first question was answered in favour of the wife neither of the later questions arise.  In this case, whether the Petitioner was put on inquiry becomes a non-issue as Madam Li has failed to prove the de facto existence of a relationship of trust and confidence in Mr Yuen exceeding the reciprocal trust and confidence being a natural and admirable consequence of the relationship of a mutually loyal married couple (in the words used by Lord Scott in the Etridge case (supra) in para 159 of the House of Lords judgment).  Furthermore, this is not a case where the wife guaranteeing the obligation of her husband.  It is a case where the wife guaranteeing the obligation of a company which was basically wholly owned by her at the dates of execution of the Guarantees. 

152.  At the material times, Madam Li was not only a director but also the majority shareholder of Gold China.  It would only be natural and reasonable for her to guarantee borrowings of Gold China from the Petitioner.  There was nothing out of “ordinary”.  The following observation of Anthony Chan J made in Bank of China (Hong Kong) Ltd v Leigh Hardwick (Unrep, HCA 1110/2006, 28 August 2013) are also applicable to the case before me:

“I agree with the Decision on the lack of merits in the defences of misrepresentation and undue influence. They have no proper foundation given the fact that the defendant was a shareholder and director of the Company. There is no suggestion that the loan in question was anything other than a normal business transaction in the interest of the Company. There was no reason for the plaintiff to be put on enquiry as to any misrepresentation or undue influence of Madam Hung.”

153.  In this case, the credit facilities granted to Gold China were normal business transaction in the interest of the company.  The Petitioner would not be put on enquiry as to any misrepresentation or undue influence of Mr Yuen or requirement of independent legal advice for Madam Li when Madam Li was the majority shareholder of Gold China as at 5 March 2010 and 25 July 2014 when the Guarantees were executed (see paras 10 to 11 above).  In fact, in two identical single page bilingual documents called “Confirmation and Acknowledgement” dated the same dates of the Guarantees, it was expressly stated, inter alia, in Chinese that: “本人進一步確認及承認，貴行 (ie the Petitioner) 已建議本人就抵押文件尋求獨立的法律意見” (pp 727 and 729).   As such, I see no merits in Madam Li’s contention that the Petitioner had failed to discharge its duties towards her to ensure that she had independent legal advice before signing the Guarantees. 

154.  In Barclays Bank Plc v O’Brien [1994] 1 AC 180 at 196, the English House of Lords pointed out that there is a substantial risk that the wife may act as surety when the transaction is not to her advantage because of some legal or equitable wrong by the husband.  Where the creditor is aware that the debtor and the surety are husband and wife, and the transaction is on its face not to the financial advantage of the surety as well as of the debtor, the creditor will be fixed with constructive notice of any undue influence, misrepresentation or other legal wrong by the debtor unless it has taken reasonable steps to satisfy itself that the surety has entered into the obligation freely and with knowledge of the true facts. 

155.  According to the O’Brien case (supra), to fix a creditor with constructive notice of undue influence, misrepresentation or other legal wrong by the husband so as to render the surety of a wife in favour of the creditor unenforceable, the following requirements have to be fulfilled:

(1)  the husband is the debtor and the wife is the surety;

(2)  the transaction is on its face not to the wife’s financial advantage;

(3)  there is substantial risk in transactions of that kind that, in procuring the wife to act as surety, the husband has committed a legal or equitable wrong; and

(4)  the creditor is aware of the fact that the debtor and the surety are husband and wife.

156.  In the Etridge case (supra), the English House of Lords applied a similar approach wherever the relationship between the surety and the debtor is non-commercial. 

157.  In the case before me, none of the above requirements has been met.  The surety (Madam Li) was the director and majority shareholder of the debtor (Gold China) when the Guarantees were executed, ie on about 5 March 2010 and 25 July 2014.  The relationship between Madam Li and Gold China was a “commercial” relationship. Although the surety is the wife (Madam Li) of Mr Yuen, the debtor (Gold China) is not the husband (Mr Yuen).  The debtor (Gold China) was not even a company of the husband but a company of the wife at the material times.  Obtaining credit facilities for the wife’s company (Gold China) was on its face to the financial advantage of the wife.  As pointed out in para 146 above, the credit facilities granted by the Petitioner to Gold China and guaranteed by Madam Li were ordinary commercial banking facilities.  They were not transactions involving “substantial risk”.  In such case, the Petitioner would not be fixed with constructive notice of undue influence, misrepresentation or other legal wrong (if any) committed by the husband.  Madam Li’s claim that the Petitioner had the legal obligation to explain to her and to ensure that she understood the contents of the Guarantee lacks legal foundation. 

158.  Miss Kwong submits that this was an unusual situation to the Petitioner in that the Petitioner was being presented by Mr Yuen with documents already signed and executed by Madam Li, the multitude of legal documents signed by Madam Li and the legal effects thereof, and Madam Li almost invariably being absent when the signed documents were presented to the Petitioner.  She submits that the Petitioner ought to and should have been aware of the need to ensure Madam Li has had legal advice independent of Mr Yuen. 

159.  Sin pointed out in para 9 of Sin’s Affirmation that: “the Guarantees and Indemnity dated 5 March 2010 was signed by Mr Yuen and [Madam] Li jointly and severally in the presence of Mr Steven Chan, the Relationship Manager of the Petitioner and the Guarantee and Indemnity dated 25 July 2014 was signed by Mr Yuen and [Madam] Li jointly and severally in the presence of Mr Man Hoi Ming, Brian, the Relationship Manager of the Petitioner.”  The same was referred to in paras 8(a) and (b) of Tang’s Affidavit.  Madam Li in her replying affirmation (ie Li’s 2^nd Affirmation) did not dispute the aforesaid evidence of Sin and Tang but only asserted that the Petitioner’s officers had not explained to her the contents of the documents signed by her.  Miss Kwong’s aforesaid contention of “unusual situation” was not supported by evidence. 

160.  Both Sin’s Affirmation and Tang’s Affidavit denied that the Petitioner had knowledge of the dealings between Mr Yuen and Madam Li and of the alleged misrepresentation made by Mr Yuen to Madam Li.  The evidence adduced by Madam Li does not show that Mr Yuen was acting as the Petitioner’s agent or that the Petitioner had actual or constructive notice of the alleged undue influence (if any).  Mr Yuen was not the debtor but a co-guarantor.  Madam Li was not guaranteeing debts of her husband, Mr Yuen.  She was guaranteeing debts of her own company, Gold China. The transaction was to the financial advantage of Madam Li’s company, so as to Madam Li.  The alleged undue influence (not accepted as being proved) even if proved does not assist Madam Li in seeking to set aside or overturn the Consent Order or to render the Guarantees unenforceable. 

161.  I do not see that Madam Li has shown an arguable case that she executed the Guarantees as a result of actual or presumed undue influence.  This is also not a case where the Petitioner is legally required to take reasonable steps to satisfy itself that Madam Li had brought home to her the practical implications of entering into the Guarantees or where the Petitioner would be fixed with notice (whether actual or constructive) of any undue influence which Mr Yuen might have on Madam Li. 

Misrepresentation

162.  Miss Kwong put the case of Madam Li in para 58 of B’s Skeleton as follows:

“[Mr Yuen] falsely represented to [Madam Li] that she was named as one of the defendants in HCMP 2586/2016 because she was the shareholder of Gold China and Win Time. [Mr Yuen] also falsely represented to [Madam Li] that HCMP 2586/2016 was due to his personal debts owed to the Petitioner Bank. He assured [Madam Li] that he would resolve the matters on his own as long as [Madam Li] would affix her signatures on all documents sent to her email.”

163.  It is noted that no evidence has been adduced from Mr Yuen in respect of the alleged misrepresentation.  They were no more than bare assertions from Madam Li. Putting Madam Li’s case to the highest, the alleged misrepresentation (if any) was made by Mr Yuen.  Both Sin’s Affirmation and Tang’s Affidavit denied that the Petitioner had knowledge on alleged misrepresentation made by Mr Yuen to Madam Li.  There is no evidence to show that the Petitioner had actual or constructive notice of the alleged misrepresentation or that Mr Yuen was making the alleged misrepresentation as the Petitioner’s agent. 

164.  Para 7-025 of Chitty on Contracts Vol 1 (supra) states that:

“In order to ground relief to a person who has entered into a contract as a result of a misrepresentation, it is normally necessary that the misrepresentation should have been made either by the other party to the contract, or by his agent acting within the scope of his authority, or that the other party had notice of the representation; notice may be actual or constructive.”

165.  The alleged misrepresentation even if proved does not affect the Consent Order.  The same applies to the alleged misrepresentation relating to signing of the Guarantees by Madam Li.  

Fraud

166.  I have dealt with the knowledge of Madam Li in respect of the HCMP Action and the authorization of Mr Yuen to handle the HCMP Action for Madam Li in paras 99 to 105 above.  Madam Li’s allegation of fraud relying on having no knowledge of the HCMP Action or not having authorized Mr Yuen to handle the HCMP Action for her simply has no merits. 

167.  Madam Li made an unparticularized statement in para 32 of Li’s 1^st Affirmation that: “袁生讓我簽文件時，我並未見到有見證人”.  

168.  According to documents produced to the court, Madam Li signed the Guarantees in the presence of the relationship managers of the Petitioner (pp 1 to 6 and 9 to 16).  Such facts were confirmed in Sin’s Affirmation and Tang’s Affirmation.  They were not disputed by Madam Li. (See para 159 above)  Most important of all, Madam Li never disputes that she signed the Guarantees. 

169.  If Madam Li seeks to allege fraud to avoid liabilities under the Guarantees, she is bound to fail. 

170.  From evidence adduced by Madam Li in her affirmations on events leading to granting of the Consent Order, it is not Madam Li’s case that the Consent Order was resulted from duress, undue influence, misrepresentation and/or fraud committed by the Petitioner or with the knowledge of the Petitioner.  Furthermore, it is the case of Madam Li that she had direct contact with lawyers of KYWO without hindrance from Mr Yuen. (See para 14 of Li’s 2^nd Affirmation) She might obtain information on the HCMP Action directly from KYWO and seek advice from them directly on the same.  Madam Li simply has no basis to assert “duress, undue influence, misrepresentation and/or fraud” in respect of the granting of the Consent Order. 

171.  Alleging duress, undue influence, misrepresentation and fraud committed by Mr Yuen against Madam Li does not assist Madam Li in seeking to set aside or overturn the Consent Order.

172.  Miss Kwong contends that: “The bankruptcy order bears the hallmark of one being premised upon an underlying judgment obtained by duress, undue influence, misrepresentation and/or fraud by [Madam Li’s] Husband and as such, should be annulled.” (See para 64 of B’s Skeleton”)  For reasons set out above, I do not see that Madam Li has an arguable case to set aside or overturn the Consent Order (in favour of the Petitioner being the plaintiff in the HCMP Action) relying on the ground of alleging duress, undue influence, misrepresentation and/or fraud on the part of Mr Yuen, a co-defendant in the HCMP Action. 

Non est factum

173.  When Madam Li complained of documents signed by her not being explained to her and of not knowing that she was signing guarantees (para 31 of Li’s 1^st Affirmation and para 9 of Li’s 2^nd Affirmation), it seems that she also raised the plea of non est factum.  

174.  In Ming Shiu Cheung & Ors v Ming Shiu Sum & Ors (2006) 9 HKCFAR 334 the Court of Final Appeal held that:

“84. ... ... Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large) print and therefore sign without actually knowing the terms (or all the terms) of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.”

175.  Litton NPJ said in Bank of China (Hong Kong) Ltd v Fung Chin Kan & Another (2002) 5 HKCFAR 515 at 533 that:

“... ... the fundamental principle that, generally speaking, when a person signs a legal document, he or she is bound by the act of signature: As a matter of general law, it is no defence to say that he or she did not understand the contents of a legal document; that person takes the chance of being bound by its terms, as he or she can take the simple precaution of not signing until its contents have been fully explained and understood.”

176.  As pointed out by Ng J in Re Leung Lai Hing Cindy (unrep, HCB 6777/2015, 3 April 2017) that:

“12. There is a heavy burden of proof on the person who seeks to invoke this defence [of non est factum] – it will be a rare case in which a person who does not suffer from a disability will be able to invoke non est factum when he has signed a document without checking to see what it is: Chitty on Contracts (32^nd ed) Vol 1 at paragraph 3-056. Importantly, carelessness on the part of the person signing the document would exclude the plea of non est factum: Saunders v Anglia Building Society [1971] AC 1004, 1019 (per Lord Hodson); 1036-7 (Lord Pearson).”

177.  Madam Li alleged that she was not familiar with English (不諳英文). However, Tang pointed out in para 11 of Tang’s Affidavit that Madam Li had signed numerous documents which were in English only without any interpretation clause.  These documents include credit facilities and security documents signed over a period of 6 years (ie from September 2009 to October 2015) (See exhibit “TLS-1” to Tang’s Affidavit). 

178.  Tang further pointed out in para 13 of Tang’s Affirmation that some security documents signed by Madam Li were in fact bilingual.  These bilingual documents including “Notice (to individual third party security provider)” dated 5 March 2010 and 25 July 2014 which contained, amongst others, express warning / confirmation as to the nature, purpose and effect of the Guarantees.  In two identical copies of bilingual “Confirmation and Acknowledgement” dated the same dates of the Guarantees (pp 726 to 729), Madam Li’s signatures appeared immediately above the words “Security provider” with the Chinese translation “擔保人” expressly printed thereon.  Even without knowledge of English, Madam Li would have no difficulties to know that she was signing documents as a guarantor.  

179.  According to Madam Li’s affirmation, she knew that she was signing banking documents.  She had been told by Mr Yuen that if the facilities were not used, no interest would be payable (para 30 of Li’s 1^st Affirmation).  As such, she knew that the documents were related to credit facilities.  She signed documents immediately above the words “Security provider” “擔保人”. She certain knew that she was signing some security documents providing guarantee to the Petitioner in respect of credit facilities. 

180.  Madam Li alleged that she was misled by Mr Yuen to think that the documents signed by her were ordinary bank documents and she did not ask further as she trusted Mr Yuen. (Para 30 of Li’s 1^st Affirmation)  Lord Reid had remarked in Saunders v Anglia Building Society (supra) at 1016 C-D that in cases involving documents signed by a person of full capacity, in general he would not be heard to say that he signed in reliance on someone he trusted.  Madam Li signed above the Chinese words “擔保人” and yet did not bother to read the documents.  As Lord Pearson stated in Saunders v Anglia Building Society (supra) at 1035G:

“If a person forbears to read the document, he nearly always should be reckoned as negligent or otherwise debarred from succeeding on the plea of non est factum.”

181.  In Re Leung Lai Hing Cindy (supra) where the debtor had signed documents in Portuguese, but alleged that she did not read or understand that language, Ng J was “of the firm view that for a person of full age and understanding to sign documents in a foreign language which he does not understand on numerous occasions over a period of almost 5 years, without asking for a translation or explanation of its nature and contents, amounts to carelessness.” (Para 18 of the judgment) In the case before me, Madam Li had signed English documents on numerous occasion over a period of more than 6 years.  If she had incurred any liabilities unknown to her in such circumstances, she only has herself to blame.

182.  If Madam Li seeks to invoke the principle of non est factum, she fails. 

183.  Madam Li also fails on the Challenge to the Consent Order and Guarantees Ground. 

Discretion of the court

184.  If the court does not think that ground(s) for annulling a bankruptcy order existed, it cannot invoke section 33(1)(a) of the Ordinance to annul the bankruptcy order. (See the Chung Sun Kwan case (supra))  Even if Madam Li has proved ground(s) for annulling the Bankruptcy Order, the court still has discretion not to annul the same after considering the interests of the creditor, the debtor and the public bearing in mind that a bankruptcy order is to be annulled only under exceptional circumstances. (See the Kam Hung Cheung case (supra)).

185.  Madam Li has failed to prove that there are ground(s) to annul the Bankruptcy Order, the Application can be dispose of on that basis.  For the sake of completeness, I shall briefly deal with the situation in the event that I were wrong in holding that Madam Li has failed to show such ground(s).  In that situation and in the exercise of my discretion, I shall still refuse to annul the Bankruptcy Order. 

186.  Tang pointed out in para 25 of Tang’s Affidavit that Madam Li had also been sued by three other banks in HCA 858/2016, HCA 1733/2016 and HCA 1181/2017 for the total sums of HK$14,210,940.69 and US$9,942,201.80.  Gold China and Mr Yuen were also defendants to the two 2016 actions and Win Time and Mr Yuen were also defendants to the 2017 action.  

187.  The Trustees’ investigation showed that Madam Li had been sued by six banks (including the Petitioner) in 2016 and 2017.  Particulars of the other five legal proceedings are as follows (paras 32 to 47 of the Trustee’s Affirmation):

Action no	Plaintiff	Claim amounts
HCA 779/2016	Bank SinoPac	US$297,040.85
HCA 858/2016	Ta Chong Bank Limited	US$3,761,588.59
HCA 1733/2016	CTBC	HK$327,720.00
		US$162,725.06
HCA 637/2017	Cathay United Bank Limited	US$297,040.85
HCA 1181/2017	The Bank of East Asia Limited	HK$61,371,434.05

188.  Other than the Consent Order, judgments had been granted against Madam Li in HCA 1733/2016 in favour of CTBC for the sum of US$164,800.03 together with further interest and costs (pp 1772 to 1774) (summary judgment) and HCA 858/2016 in favour of Ta Chong Bank Limited for the claimed amount together with further interest and costs (pp 2097 to 2098) (judgment in default of defence).  Excluding the sums due under the Consent Order, the sums of US$3,926,388.62 together with further interest and HK$221,045.00 as costs were adjudged due from Madam Li to these two other creditors under the aforesaid judgments.  It is noted that Madam Li had applied to set aside the default judgment in HCA 858/2016 and such application was stayed upon granting of the Bankruptcy Order (see para 45 of the Trustee’s Affirmation). 

189.  According to the information provided by the Trustees, as at 10 September 2019 the Trustees had received four proofs of debt (including that of the Petitioner but not including that of the claimant of HCA 858/206 who had not yet submitted its proof of debt) for the total sums of HK$85,352,868.34 and US$882,596.29. However, up to September 2019, the Trustees could only realize HK$1,366,426.91 for Madam Li’s estate. 

190.  The Trustees’ investigation also finds a property in Canada jointly owned by Madam Li and Mr Yuen.  However, the Canadian property is subjected to two legal charges.  The first legal charge is in favour of HSBC Bank Canada for CAD1,251,800.00 and the second legal charge is in favour of a Li Yin for CAD1,350,000.00.  No information has been provided by the Trustees as to whether there are any equities left in the Canadian property although it is noted that the Trustees took issue on the validity of the second legal charge which was created after the commencement of Madam Li’s bankruptcy. (See para 14 of the Trustee’s Affirmation)  

191.  Madam Li has adduced no evidence to show that she has the financial abilities to pay off her substantial indebtedness to her other creditors.  Other creditors have already taken legal actions against Madam Li.  If the Bankruptcy Order is annulled, other creditors will certainly pursue their claims against Madam Li.  If Madam Li is unable to answer her liabilities to her creditors, it is likely that a bankruptcy order against Madam Li is inevitable. 

192.  In the Kam Hung Cheung case (supra), the Court of Appeal stated in para 37 of the judgment that:

“As the English Court of Appeal pointed out in Owo-Samson v Barclays Bank Plc [2003] BPIR 1371, Askew v Peter Dominic [1997] BPIR 163 and Artman v Artman [1996] BPIR 511, the question for the court is: even if the bankruptcy order is annulled, will the debtor be declared bankrupt again? If in the court’s view there is evidence showing that this is unavoidable, the court may exercise its discretion to refuse to annul the bankruptcy order.”

193.  In the circumstances of this case, there is no point for this court to annul the Bankruptcy Order only to have another creditor petitioning for Madam Li’s bankruptcy again to have her estate administered through bankruptcy proceedings. 

Other matters

194.  Miss Kwong submits that: “The Trustees have asked not to appear in respect of [Madam Li’s] present application unless otherwise directed by the Court which is somewhat tantamount to taking a neutral stance.  This can be naturally understood as recognizing there to be merits in [Madam Li’s] application.  Otherwise, the Trustee would and could have actively supported the Petitioner’s opposition.” (Para 42 of B’s Skeleton)

195.  There is no logic in such contention.  The Trustees are here to administer the estate of Madam Li if the Bankruptcy Order is maintained.  They are not concerned with the disputes between the Petitioner and Madam Li.  It is only reasonable and sensible for the Trustees to take a neutral stance in respect of the Application.  To construe this as “recognizing there to be merits in Madam Li’s application” is simply groundless. 

196.  On the other hand, Mr Lok for the Petitioner contends that if there are merits to set aside or overturn the Consent Order, Madam Li should have already taken out the appropriate application.  The fact that no such application has been taken out reflects adversely on the merits of such application.  Mr Lok refers to Re Tam Mei Kam (supra) when the Court of Appeal remarked that:

“26.1 Where the judgment debtor has not lodged an application to set aside or an appeal by the time of the petition hearing but intends to do so (probably out of time), he must, in addition to satisfying the bankruptcy court of the reasonable prospects of success in his application or appeal, also provide a reasonable explanation why he has failed to act in time.”

197.  In Re Tam Mei Kam, the court was referring to hearing of a bankruptcy petition when the bankruptcy order had not been granted and the debtor still had the locus to appeal or apply to set aside the judgment concerned.  However, the case before me is an application to annul a bankruptcy order which had already been granted. Pursuant to section 58 of the Ordinance, the property of Madam Li (including things in action) had been vested in the Official Receiver on the making of the Bankruptcy Order and subsequently in the Trustees when the Trustees were appointed.  As such, before the Bankruptcy Order is annulled, Madam Li does not have the locus to appeal or take out application to set aside the Consent Order.  Of course, she may seek consent from the Trustees for her to appeal or take out the setting aside application.  However, this may incur costs and may not be easy as the Trustees may have their concerns including costs exposure. In such case, I shall not draw adverse inference against Madam Li for not taking this course of action. 

Conclusion and costs

198.  For reasons set out above, I dismiss the Application.  

199.  The Petitioner and the Trustees shall have their costs for the Application.  If the costs are to be paid from the estate of Madam Li, it will be the creditors (including the Petitioner) who will bear the costs of the Application.  I see no reasons why Madam Li’s creditors shall bear the costs incurred by the Petitioner and the Trustees for this futile application of Madam Li.  Such costs shall be borne personally by Madam Li. 

200.  As such, I make a costs order nisi that the costs of the Petitioner for the Application shall be paid by Madam Li personally to be taxed if not agreed with counsel certificate. Such costs to be paid after the unsecured creditors of Madam Li have been fully repaid or upon the discharge of Madam Li from bankruptcy whichever the earlier.

201.  As the costs of the Trustees for the Application are also part of the costs incurred by the Trustees in the administration of Madam Li’s estate, such costs shall initially be paid out from the estate of Madam Li but Madam Li shall reimburse her estate for such costs after all her unsecured creditors have been fully repaid or upon her discharge from bankruptcy whichever the earlier.  I make another costs order nisi to such effect. 

202.  The aforesaid costs order nisi shall become absolute after 14- days from the date of this judgment unless application is received from either party to vary the same.