Re Todd Gilmer Everts

Judgment Date01 March 2013
Subject MatterBankruptcy Proceedings
Judgement NumberHCB4767/2012
CourtHigh Court (Hong Kong)

HCB 4767/2012







Ex Parte: GERALD GORN, the Petitioner


Before: Deputy High Court Judge Le Pichon in Court
Date of Hearing: 26 February 2013
Date of Judgment: 26 February 2013
Date of Reasons for Judgment: 1 March 2013




1. This is a petition by Gerald Gorn ("the petitioner") for a bankruptcy order against Todd Gilmer Everts ("the debtor") based on the debtor's failure to comply with a statutory demand dated 28 June 2012. At the conclusion of the hearing the petition was dismissed with costs. My reasons appear below.

Background facts

2. The petitioner and the debtor have been close friends since about 2008 and kept in constant contact. The debtor is a director of Wall Street Global LLC ("WSG").

3. In 2009, the petitioner made 2 transfers to WSG. It is common ground that on 30 June 2009, the petitioner transferred to WSG a sum of $215,000 and four months later, on 30 October 2009 he transferred a further sum of $85,000. In respect of each of these transfers, the petitioner and WSG signed an agreement headed "Term Sheet-RAN Series "F" US $500,000 Senior Bridge Note Agreement". These were debt instruments issued by WSG, the petitioner being the subscriber.

4. For convenience, these agreements will hereafter be referred to as "the First Note" and "the Second Note" respectively and collectively as "the Notes". They were in identical terms save for the amounts subscribed and the dates for payment of interest and principal. The holder was entitled to be paid 12% simple interest annually on the anniversary of the advance or loan. Prepayment was permissible and any principal outstanding was repayable on the fourth anniversary of the Note in 2013.

5. The debtor guaranteed WSG's obligations under the Notes and for that purpose he gave 2 written guarantees, namely the "First Guarantee" dated 16 June 2009 and "the Second Guarantee" dated 30 October 2009 (collectively "Guarantees") which, for practical purposes, are in identical terms.

6. Clause 3 of the Guarantees gave the petitioner the option, upon default, of seeking recourse against either WSG or the debtor.

7. WSG failed to pay the interest due on 30 June and 30 October 2010 and 30 June and 30 October 2011. By November 2011 the only payments made by WSG consisted of HK $15,000 comprising three payments of $5000 each made in May, June and July of 2010 towards principal.

8. As a result of WSG's repeated breaches of its obligations to make interest payments, the petitioner informed the debtor in a conversation that the petitioner had decided to recall his loans. When that conversation took place is unclear but it was followed up in an e-mail dated 1 December 2011 in which, after stating that he would accept the late payment of the interest charges on the two loans, the petitioner went on to say:

"I would like to know when I can expect the loan to be paid back in full".

9. On 2 December 2011, the debtor paid the interest that should have been paid on the anniversaries of the Notes in 2010 and 2011. Thereafter various conversations and e-mail exchanges took place between the petitioner and the debtor. In paragraph 5 of the debtor's second affirmation, it is stated that:

"… between December 2011 and May 2012, the petitioner asked me daily about repayment. I was receiving a barrage of calls and messages from the petitioner. The petitioner had said that the loan was ending in June 2012 which made me believe that was in fact the case."

10. On 16 May 2012, the debtor sent the petitioner “our calculation for the June payment” showing both the principal and interest due under the Notes amounting to $317,600.

11. On 15 June 2012 the petitioner was informed that payment would not be made.

12. After an abortive ultimatum, the petitioner caused the statutory demand to be served on 28 June 2012. The demand described the debt as a loan incurred in June 2009 showing an amount due of $317,600.

13. A month or so later, the debtor through a subsidiary of WSG paid interest due on both loans for 2012. The payment was credited against the sum claimed in the statutory demand.

14. The petition is dated 23 July 2012. Paragraph 2 set out the basis upon which the debtor was said to be indebted to the petitioner. After describing the essential terms of the Notes and the Guarantees and recording that WSG had defaulted on payment of interest and that the petitioner had made demands to WSG and the debtor in respect of the same, it stated that:

"(f) By an e-mail dated 1 December 2011, the Petitioner claimed that the terms of [the Notes] had been breached and made demand of the Debtor for payment of the full debts under [the Notes].

(g) By e-mails dated 19 April 2012 and 15 May 2012 to the Petitioner, the Debtor admitted the debts due under [the Notes] and confirmed that the debts would be paid in full on 16 June 2012 by [WSG]. [WSG] defaulted on the said payment on 16 June 2012 and the sums due under [the Notes] and [the Guarantees] became immediately due and payable."

The petitioner's case

15. At the hearing of the petition, the petitioner's counsel Mr Julian Lam abandoned any contention that under the terms of the Notes, the petitioner was entitled to call in the loans and be repaid the principal amounts together with interest totalling $317,600 following WSG's default. Mr Lam accepted that nothing in the Notes conferred on the petitioner any right to be repaid the principal...

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