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CACV 128/2015
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 128 OF 2015
(ON APPEAL FROM HCB NO. 244 OF 2014)
________________________
BETWEEN
RE: LEUNG CHERNG JIUNN
EX PARTE: PRUDENTIAL HONG KONG LIMITED,the petitioning creditor
________________________
| Before: |
Hon Yuen JA, Kwan JA and Au J in Court |
| Date of Hearing: |
11 December 2015 |
| Date of Judgment: |
23 December 2015 |
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J U D G M E N T
____________________
Hon Yuen JA:
1. I agree with the judgment of Kwan JA.
Hon Kwan JA:
2. This is the appeal of the petitioning creditor, Prudential Hong Kong Limited, against the judgment of Recorder Linda Chan, SC on 21 May 2015 dismissing its bankruptcy petition against Leung Cherng Jiunn (“the debtor”). The debtor was an insurance agent formerly in the service of the petitioner. The petition was based on a statutory demand for a total debt of $3,211,906.64, of which the largest sum was a sign-on fee in the amount of $2,932,200. The judge held that there is a bona fide dispute on substantial grounds whether the sign-on fee was due and payable as at the date of the statutory demand.
3. Three broad issues are raised in this appeal. The first relates to the contents of the statutory demand and whether the judge was wrong in holding that one of the debts could not be relied on to found the petition as the basis of the claim for that debt was not mentioned in the demand. The second relates to the applicable standard required to be discharged by the debtor in opposing a petition on the basis there is a bona fide dispute on substantial grounds. The third relates to the contention whether the judge was wrong in applying the law to the evidence before her.
The background
4. The relevant background facts are set out in §§5 to 16 of the judgment, which I will produce below:
“5. The petitioner is a well‑established insurance company in Hong Kong. The debtor is an insurance agent with substantial experience, having worked in the industry since July 1998. For 12 years from July 1998 to October 2010, the debtor was an agent at American International Assurance (“AIA”) during which he won various awards and memberships in recognition of his top performance. In October 2010, the debtor together with a number of agents left AIA and joined Integrity Financial Advice Network Company Limited (“Integrity”).
6. In April 2012, the debtor left Integrity to join the petitioner as Regional Manager. On 19 April 2012, the parties signed the Service Agreement (which was dated 16 March 2012), the Agency Agreement and the Supplementary Agreement.
7. The debtor recruited Mr Kevin Leung (“Kevin”) as his “downline agent”. On 19 April 2012, Kevin signed the service agreement, the agency agreement and the supplementary agreement with the petitioner. During the period of Kevin’s service from 1 April 2012 to 7 April 2013, the petitioner paid monthly finance in the total amount of HK$100,500 to him.
8. On 27 April 2012, the debtor signed the Managers’ Deed of Undertaking and Guarantee for Kevin (“the Guarantee”). Under clause 2 of the Guarantee, if the service agreement of Kevin is terminated within 24 months, the petitioner shall have the right to recover the monthly finance paid to Kevin from the debtor. Under clause 3(a) of the Guarantee, if Kevin’s service agreement is terminated after the first 12 months but before the expiry of 24 months, the petitioner shall have the right to deduct 25% of the sign-on fee paid to Kevin from the debtor’s commission account.
9. On 14 May 2012, the petitioner paid HK$2,932,200 to the debtor, being the sign‑on fee payable to him under the Service Agreement (“Sign-on fee”). On the same day, the petitioner paid HK$562,800 to Kevin as his sign‑on fee.
10. On 7 March 2013, the petitioner intended to terminate the debtor’s appointment, and a meeting was held on 14 March 2013 between the debtor and Ms Ann Wong and Mr Joseph To, chief agency officer of the petitioner (“Mr To”), to discuss the debtor’s performance. On 18 March 2013, the debtor wrote an email to Mr To referring to their earlier meeting and stating that “I agree to continue [sic] my contract with the terms and condition according [sic] to my offer stated on the offer contract dated on [sic] 16 March 2012” (“the 1st letter”).
11. By a handwritten letter dated 20 March 2012 to Mr To and Mr Benny Tsoi, deputy chief agency officer of the petitioner (“Mr Tsoi”), the debtor stated that his recent performance did not meet the expectation of the company probably due to his inability to adjust to the changes in environment in the past year. As stated in their earlier meeting on that day, he expected to be able to complete contracts in the amount of HK$500,000 with at least half of them having been approved (“the 2nd letter”).
12. In response, Mr Tsoi in his letter dated 21 March 2013 to the debtor stated that the petitioner “accepted your business proposal and had withdrawn the termination of your Agency Agreement” and reminded the debtor that he had “committed to produce net AFYP HK$250,000 in March 2013” and if he fail to meet the production requirements in March 2013, the petitioner “will take appropriate action, including but not limited to demand for immediate repayment of the sign‑on fee, immediate termination of your Agency Agreement, without further notice”.
13. By a letter dated 3 September 2013 to the debtor, the petitioner terminated the Agreements with effect from 1 September 2013.
14. About three weeks later, on 27 September 2013, the petitioner issued the Statutory Demand claiming that as at 2 September 2013, the outstanding debts due to the petitioner in respect of his former service as agent pursuant to the Agreements amounted to HK$3,211,906.64 (i.e. the Debt) which comprised of:
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Description
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Amount (HK$) |
| Sign-on fee |
2,932,200.00 |
| Commission Account Own (Debt) Balance for August 2013 |
40,236.70 |
| 25% of sign-on fee advance to Kevin |
140,700.00 |
| SUA debit closing balance as of 31 August 2013 |
98,769.94 |
15. The Statutory Demand did not state the specific provisions the petitioner relied on in support of its claim that the Debt was due and payable or how the petitioner came up with the Debt. There was no reference to the Guarantee.
16. Following service of the Statutory Demand by substituted service (through advertisement) on 13 November 2013 and the expiry of the period for compliance with the Demand, the petition was presented on 9 January 2014. Apart from stating that the Debt is due and owing and that the debtor has failed to comply with the Statutory Demand, nothing is said about how the Debt came about or what are the bases of the petitioner’s claim for the Debt. The same applies to the affirmation verifying the petition filed on the same day.”
5. Of the four items of debt listed in the statutory demand, shortly before the hearing of the petition, the debtor had paid to the petitioner the second and fourth items ($40,236.70 and $98,769.94), leaving outstanding the other two items ($2,932,200 and $140,700).
6. I turn to consider the three broad issues in this appeal.
The contents of the statutory demand
7. The judge held that the petitioner cannot rely on its claim for $140,700 to mount the petition because this claim was based on the debtor’s liability under the Guarantee and there was no mention of the Guarantee in the statutory demand.
8. Section 6(1) of the Bankruptcy Ordinance, Cap 6 provides that a creditor’s petition must be in respect of one or more debts owed by the debtor. Section 6(2)(c) provides that a creditor’s petition may be presented in respect of a debt if, but only if, at the time the petition is presented, the debt is one which the debtor appears either to be unable to pay or to have no reasonable prospect of being able to pay. It is provided in section 6A(1)(a) that for the purpose of section 6(2)(c), the debtor appears to be unable to pay a debt if, but only if, the debt is payable immediately and a statutory demand in the prescribed form is served by the petitioning creditor on the debtor requiring him to pay the debt or to secure or compound for it to the satisfaction of the creditor, and at least three weeks have elapsed since the demand was served and the demand has not been complied with or set aside in accordance with the rules.
9. Rule 44 of the Bankruptcy Rules provides for the form and content of the statutory demand. Rule 44(3) provides, inter alia, the demand must state the amount of the debt, and the consideration for it (or, if there is no consideration, the way in which it arises).
10. The prescribed forms for a statutory demand are found in the Bankruptcy (Forms) Rules, Cap 6B in Forms 162 to 164. Form 163 was adopted by the petitioner’s solicitors in this instance. The relevant part reads as follows:
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When Incurred
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Description of debt
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Amount due as at the
date of this demand
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(1)
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(2)
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(3)
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HK$
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2 September 2013
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Being the
outstanding debts
due and owing from
you to the Creditor
in respect of your
former service to the
Creditor as the
Creditor’s agent
pursuant to the
agreements
particularised
hereinbelow
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(a) Sign On Fee Advance
(b) Commission Account
Own (Debt) Balance
for August 2013
(c) 25% Sign On Fee
Advance to Leung
Chi Ming #01470807
(d) SUA Debit Closing
Balance as of
31 August 2013
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2,932,200
40,236.70
140,700
98,769.94
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|
|
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Amount of Debt:
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3,211,906.64
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11. The agreements particularised below the table in the statutory demand were “(a) Service Agreement for Regional Manager dated 16...
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