The Court of First Instance granted a bankruptcy order against a Debtor in respect of an undisputed debt of US$389 million in 

 [2024] HKCFI 3460. The underlying debt concerned investment loans advanced by the Petitioner to the Debtor to fund a Taiwanese property development project (

). The debt was secured by a share charge over the top holding company which owns the A7 Project (

At the time the statutory demand was issued, the Petitioner estimated that the Security was worth some US$26.9 million. Prompted by discoveries that the Security had been cut off from the A7 Project which came to light after the statutory demand was issued, the Petitioner amended the Petition and revised her estimate of the value of the Security to nil.

The Debtor argued that the Amended Petition should be dismissed, since (a) the statutory demand and the Amended Petition referred to a different figure, there was no jurisdiction to grant a bankruptcy order; and (b) he has, in any event, raised a real issue that the value of the Security (based upon optimistic valuations of the A7 Project) had exceeded the full value of the petitioning debt.

DHCJ Roxanne Ismail SC rejected both arguments. On the first argument, the Court held that:

(a) having regard to the statutory provisions read as a whole, “the debt” as referred to in s.6(2) of the Bankruptcy Ordinance refers to the same obligation giving rise to the liability in question, even if the quantum may change between the date of the statutory demand and the date of the petition;

(b) in circumstances where a misstatement of the amount of the debt is not a fundamental matter going to jurisdiction, it follows that it cannot be right that the Court has no jurisdiction to make a bankruptcy order only because the amount stated as outstanding in the petition was different from the amount claimed in the statutory demand; and

(c) in any event, there can be no prejudice to the Debtor where there is no evidence that the Debtor would have paid any of the debt had the amount claimed in the statutory demand been the higher amount claimed in the Amended Petition.

On the second argument, the Court held that on a proper construction of the Bankruptcy Rules and understanding of the case authorities, the Court would not inquire into the correctness of the estimate of the value of the security provided that it was genuine, unless the Debtor proves on a balance of probabilities (as opposed to merely showing a real issue) that the value of the security equals or exceeds the full amount of the debt.

, instructed by DLA Piper Hong Kong, for the Petitioner.

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Court of First Instance Grants Bankruptcy Order on a US$389m Debt; Clarifies Approach When Debtor Opposes The Petition on The Ground that The Debt is Fully Secured

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