NWK 對 CCL  HKCFI 3595,  4 HKC 160
On 17 May 2022, the applicant received a statutory demand issued by the respondent. On 24 May, he applied to the High Court to set aside the statutory demand and on the same day, he filed his first affirmation, which only generally asserted that he did not admit the debts alleged by the respondent. On the same day, the Court considered that the applicant did not have sufficient cause shown for setting aside the statutory demand, and therefore ordered his application be dismissed pursuant to r 48(1) of the Bankruptcy Rules (Cap 6A). On 10 June, the applicant issued a summons requesting the Court to review the order and to set aside the statutory demand, pursuant to s 98 of the Bankruptcy Ordinance (Cap 6) and r 47 of the Bankruptcy Rules (Cap 6A). The respondent’s case was that, in December 2021, he ordered from the applicant eight mining machines for cryptocurrency, and he made a $3,040,000 payment for the goods; but the applicant told him that the supplier refused to supply the machines because its bank account was frozen; the supplier told them to pay $280,350 legal fees in the Mainland for requesting the law enforcement authorities to unfreeze the account; the applicant was unable to pay the legal fees, and so the respondent paid the supplier; and the applicant signed a document promising a full refund, stating that the payment for the goods had been received and the mining machines would be delivered on time, and promising that if the machines could not be delivered, a full refund would be made to the respondent. In January 2022, the applicant did not return the legal fees on loan to him, and did not deliver the eight mining machines. Although the parties had discussed operating a mine together, they had not yet reached an agreement. On the other hand, the applicant further explained in five other affirmations why he did not owe the respondent any debts. The applicant’s case claimed that their relationship was not one of purchaser and seller, but business partners in mining cryptocurrency. The respondent provided funds to purchase mining machines, whilst the applicant, making use of his network, purchased the mining machines for the respondent, and did the mining by making use of his talent; they worked together in operating a mine in a rented apartment in Tuen Mun, where the mining machines were put together operating, and the profits would be divided by percentage according to the yield. The respondent owed him $13,409.89 expenses in the mine in Tuen Mun. He had already given the payment for the goods to the supplier, he did not owe the respondent. He had never borrowed money from the respondent, and the legal fees in the Mainland were not paid to him. Once the bank account of the supplier had been unfrozen, he would give two of his own mining machines to the respondent.
Held, dismissing the summons:
Explanation for not showing sufficient cause
- The applicant could well have, in his first affirmation, explained why he did not owe the respondent any debt. When he first applied, he was not legally represented, so at that time, he did not know clearly what the legislation required of him. Because an exercise of discretion was involved, the circumstances of each case must be considered individually. In the present case, the following two special circumstances should be given sufficient weight: (a) Although the applicant, in his first affirmation, did not raise any grounds at all, it was not that after the Court rejected some of his grounds, he raised supplemental grounds on the basis he was then ‘not assisted by lawyers’, or he sought to present essentially the same facts and the same arguments but more forcefully or attractively; (b) the applicant received the statutory demand on 17 May 2022, the time limit expired on 6 June 2022, and he applied for a review on 10 June 2022, which was only four days later than the 18-day statutory time limit. When the Court considered whether it should in an application for review to accept new evidence, it applied a standard that was different from that when it considered the same question on an appeal. In the hearing of a review, the conditions in Ladd v Marshall did not apply. The Court should consider the applicant’s fresh evidence. Re A Debtor  2 All ER 991 and Re Yuan Yiqiang  4 HKC 485,  HKCFI 259 considered (paras 11-19).
Analysis of the $3,040,000 payment for the goods
- The issue to be decided by the Court was whether the applicant could produce cogent and credible evidence to show that, in the process of the sale-and-purchase of the eight mining machines, his role was not that of a seller, but a business partner of the respondent, who co-owned the eight mining machines. The grounds raised by the applicant were insufficient to show a dispute on substantial grounds in respect of the payment for the goods. DCKD & Anor v JPWL  4 HKC 261,  HKCFI 1059 considered (paras 28-32).
Analysis of the $280,350 loan
- Because of the decision regarding the debt of the payment for the goods, even if the applicant could raise a bona fide dispute on substantial grounds in respect of the $280,350 loan, that would be insufficient to set aside the statutory demand. If the applicant did not borrow from the respondent, why would he agree to give two mining machines to the respondent? Unless the applicant could produce evidence showing that the sum was a gift, the more reasonable inference was that it was a loan made by the respondent to him. The grounds raised by the applicant could not be said to be of any persuasiveness or substance (paras 33-37).
Debt owed by respondent to applicant
- Even if the respondent still owed the applicant expenses in the mine in Tuen Mun in the sum of $13,409.89, the amount was far from sufficient to set off the payment for the goods and the loan above, which would not have any effect on the Court’s conclusion (paras 38-40).
[The above is excerpted from the headnote to the report in HKC.]