HCB 1498/2019
[2020] HKCFI 361
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
BANKRUPTCY ROCEEDINGS NO 1498 OF 2019
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IN THE MATTER OF THE BANKRUPTCY ORDINANCE
(CHAPTER 6)
AND
IN THE MATTER OF LI XIAOMING (李曉明)
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Before: Hon Mimmie Chan J in Court
Date of Hearing: 25 September 2019
Date of Judgment: 4 March 2020
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J U D G M E N T
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Background
1. This is the substantive hearing of the bankruptcy Petition filed by the Creditor, UBS AG, against the Debtor, Mr. Li Xiaoming. The ground of the Petition is that the Debtor failed to comply with a Statutory Demand dated 21 June 2018 which had been served on him, for payment of a sum of US $1,541,161.99, and interest of US $103,529.83 (“Debt”).
2. The Debtor was the guarantor of a loan extended under a Loan Agreement made between the Petitioner and Business Universe Limited as Borrower. On 23 September 2014, the Borrower and the Petitioner entered into an aircraft mortgage agreement (“Mortgage”), whereby the Borrower mortgaged its interest in a Gulfstream G550 corporate aircraft (“Aircraft”) to the Petitioner in order to secure the performance of the Borrower’s obligations under the Loan Agreement.
3. The Borrower defaulted under the Loan Agreement, and consequently, the Petitioner exercised its right under the Mortgage to sell the Aircraft at US $17.2 million. The Petitioner claims that after applying the proceeds from the sale of the Aircraft, a sum of US $1,541,161.99 (“Amount”) remained outstanding. A Statutory Demand for the Amount was issued on 21 June 2018. After unsuccessful attempts were made by the Petitioner to serve the Statutory Demand on the Debtor, the Statutory Demand was eventually advertised in 2 newspapers in Hong Kong and 1 newspaper in Hebei on the Mainland, on 31 August 2018. The Petition was filed on 14 March 2019, on the ground that the Statutory Demand had not been complied with. The Petition was opposed by the Debtor on the ground that there is a bona fide dispute on the Debt.
4. It is not disputed that, in deciding whether or not there is a bona fide dispute on a debt which is the basis of a bankruptcy petition, the burden is on the Debtor to establish that there is a genuine dispute of the Debt on substantial grounds. Applying the judgment of the Court in Re Hong Kong Construction (Works) Ltd unreported, 7 January 2003, HCCW 670/2002 in a winding up case:
“(1) The burden is on the company to establish that there is a genuine dispute of the debt on substantial grounds. In this context, "substantial" means having substance and not frivolous. An honest belief in an insubstantial 1