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Re Allan Yap

Judgment Cited authorities 1 Cited in Precedent Map Related
Vincent
Judgment Date07 August 2020
Neutral Citation[2020] HKCFI 1946
Year2020
Judgement NumberHCB7290/2019
Subject MatterBankruptcy Proceedings
CourtCourt of First Instance (Hong Kong)
HCB7289/2019 RE ALLAN YAP

HCB 7289, 7290 & 7291/2019

[2020] HKCFI 1946

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 7289 OF 2019

____________

Re: ALLAN YAP, Debtor
Ex-Parte: BLOOM RIGHT LIMITED, Petitioner

____________

AND

BANKRUPTCY PROCEEDINGS NO 7290 OF 2019

____________

Re: ALLAN YAP, Debtor
Ex-Parte: PLENTY CHOICE INVESTMENTS LIMITED, Petitioner

____________

AND

BANKRUPTCY PROCEEDINGS NO 7291 OF 2019

____________

Re: ALLAN YAP, Debtor
Ex-Parte: UNIQUE ROSY LIMITED, Petitioner
____________
(Heard together)
Before: Hon Au-Yeung J in Court
Date of Hearing: 3 August 2020
Date of Judgment: 7 August 2020

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J U D G M E N T

_______________

A. BACKGROUND

1. There are 3 petitions (“the 3 Petitions”) before me concerning the same debtor, Mr Yap, supported by 2 other creditors. The summary is as follows:

Petitioning Creditor
Debt
Bloom Right Limited
(HCB 7289/2091)		 $107,434,823.70 as at 31 August 2019, with interest accruing at $3,504.07 per day
Plenty Choice Investments Limited
(HCB 7290/2019)		 $214,270.098.86 as at 19 September 2019 with interest accruing at $7,033.81 per day
Unique Rosy Limited
(HCB 7291/2019)		 $322,675,566.22 as at 31 August 2019 with interest accruing at $14,016.29 per day
CW Financing Limited (supporting creditor) Not less than $29,500,000
Citizens Money Lending Corporation Limited (supporting creditor) Not less than $12,000,000

2. The debts in the 3 Petitions arose out of personal guarantees (“the Guarantees”) given by Mr Yap in respect of liabilities of Master Glory Group Limited (“MGG”). MGG was itself ordered to be wound up on 1 June 2020.

3. The related statutory demands and the 3 petitions were served on Mr Yap on 18 October 2019 and 3 December 2019 respectively. There is no dispute as to service.

4. The common defence to oppose the 3 Petitions is that Mr Yap signed the Guarantees on the misrepresentations of unidentified representatives of the petitioning creditors, all from the Huarong Group. The representation was said to be that the representatives would make arrangements to ensure that the Guarantees to be signed by Mr Yap would not be enforceable and would only be used for internal approval and/or clearing within the Huarong Group (“the Representation”).

5. It is therefore submitted that there is a bona fide dispute on substantial grounds for the following reasons:

(1) The Petitioners and Mr Yap had no intention to create legal relations as against him as a purported guarantor; and

(2) The Guarantees are liable to be set aside on the ground of misrepresentation and/or unconscionability.

6. Mr Yap had taken out applications, out of time, to set aside the statutory demands on 14 January 2020. Linda Chan J ruled that it was unnecessary to deal with the applications because by then the 3 Petitions have then been presented. In any event, the applications were made out of time and no good reason has been shown as to why the Court should extend the time. Hence, Linda Chan J has not dealt with the alleged bona fide dispute on substantial grounds.

B. LEGAL PRINCIPLES ON OPPOSING A BANKRUPTCY PETITION

7. The legal principles are not in dispute and I gratefully adopt the summaries of Mr Cheung, counsel for Mr Yap; and that of Mr Leung, counsel for the Petitioners.

8. Bankruptcy proceedings are not intended to be used for the purpose of debt collection. If there is a bona fide dispute on the debt which involves disputed questions of fact necessitating oral evidence, such a dispute should not be decided on a bankruptcy petition, which petition should be dismissed for the debt to be resolved by trial in the usual way: Re Li Xiaoming, HCB 1498/2019 (unreported, 4 March 2020) at §31, Mimmie Chan J.

9. In opposing a bankruptcy petition, the debtor has to show a bona fide dispute on substantial grounds by sufficiently precise evidence which is believable and must establish that he has a defence of substance, not just a fair probability of one. It is not sufficient for the debtor to raise “a cloud of objections” on affidavits. See Re Cheung Kwan [2020] HKCFI 1033, 3 June 2020, Linda Chan J.

C. LEGAL PRINCIPLES ON CONTRACT LAW

10. It is trite law that for an agreement to be legally enforceable there must have been at the time it was entered into an intention, objectively established, to create legal relations. It follows that if, as a matter of objective reality, parties to documents in the form of contracts have no common intention to create thereby legal rights and obligations between them, the rights and obligations set forth in the documents will be unenforceable: see FTLife Insurance Co Ltd v Choy Hoi Yan Jacqueline, HCA 1599/2014 (unreported, 28 October 2016), §8, DHCJ Field.

11. The core elements of the law of misrepresentation are as follows:

(1) Generally, an actionable misrepresentation requires a false statement of past or present fact, as distinct from a statement of opinion or intention; though a statement of opinion/intention or as to the future may entail an implied statement of fact.

(2) Where there is a dispute as to the meaning conveyed, the Court interprets the relevant words or conduct. The approach is objective, viewing the communication from the perspective of a reasonable person in the position of the representee. The test is whether: (i) the words or conduct in fact led the representee to believe the alleged false fact; and (ii) it was reasonable for the representee to believe it from the words or conduct as he perceived them. In applying the test, the characteristics of the representee, including level of sophistication, are taken into account.

(3) Where an implied representation is alleged, the question is what a reasonable person would have inferred was being impliedly represented by the representor’s words and conduct in their context.

(4) The statement must have the character of one...

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