In the recent high-profile decision of Re: Li Yonghong [2025] HKCFI 3307, the Honourable Madam Justice Linda Chan made a bankruptcy order against Mr. Li Yonghong — a businessman best known for his prior ownership of A.C. Milan. The judgment offers important takeaways for bankruptcy and insolvency practitioners on, inter alia, the resolution of inaccuracies or defects in statutory demands and petitions.
Background
Bankruptcy proceedings were commenced by five investment funds (collectively, the “Petitioners”), all of which are indirect subsidiaries of a State-Owned Enterprise listed in Hong Kong. The debt concerned a sum of over US$289 million (over HKS$2 billion) guaranteed by Mr. Li under a Deed of Guarantee dated 27 February 2017 (the “Deed of Guarantee”) in relation to bonds issued by a BVI company controlled by him.
Despite filing two affirmations and a Notice of Intention to Show Cause (the “Notice”), Mr. Li ultimately abandoned most of his defences after having sight of the Petitioners’ affirmation evidence and Skeleton Submissions. The Court therefore focused on the two remaining arguments raised by Mr. Li: (1) whether a valid written demand had ever been made under the Deed of Guarantee (the “No Valid Demand Argument”); and (2) whether the quantum claimed by the Petitioners was overstated due to interest calculation errors and unaccounted payments (the “Quantum Argument”).
Decision
Both arguments were rejected by the Court:
- No Valid Demand Argument: The Court held that Mr. Li was barred from raising the No Valid Demand Argument as this was never mentioned in the two affirmations and Notice he filed. Indeed, the argument was raised for the first time in Mr. Li’s Skeleton Submissions. In any event, the Court found the No Valid Demand Argument to be unmeritorious, as (i) the Deed of Guarantee contained a principal debtor clause, rendering prior written demand unnecessary; and (ii) if required, the statutory demand served by the Petitioners sufficed to constitute a prior written demand.
- Quantum Argument: The Court reaffirmed the legal principle that inaccuracies in the petition do not invalidate the bankruptcy proceedings when substantial and undisputed debt remains unpaid. Further, the Court retains discretion to grant a bankruptcy order notwithstanding any defects in the bankruptcy petition presented.
A bankruptcy order was made against Mr. Li on this basis.
Key Takeaways
The decision of Li Yonghong offers the following 2 key takeaways for bankruptcy and insolvency practitioners:
- Raise Key Arguments as early as possible. The Court rejected the no valid demand argument as this was raised for the first time in Mr. Li’s Skeleton Submissions. Practitioners may at times be tempted to withhold full disclosure of the grounds in opposition to the bankruptcy petition in the affirmation evidence and/or Notice, so as to avoid tipping off the other side. However, this decision serves as a salutary reminder that in the interests of procedural fairness, practitioners should clearly state the grounds in opposition to the bankruptcy petition in the affirmation evidence and/or Notice. Failing which, practitioners may risk being denied the opportunity to argue a defence if raised for the first time in the Skeleton Submissions.
- Defects to Petition Not Fatal Where Debt Indisputable.Even in circumstances where a statutory demand or bankruptcy petition contains errors in quantum or form, the Court still retains discretion to grant relief, especially if the debtor is plainly insolvent and the debt is otherwise undisputed and substantial. Practitioners opposing a bankruptcy order should be reminded of these principles if they seek to rely on such technical grounds of opposition to a bankruptcy order.
Read the judgment here at https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=170893&currpage=T
Mr. Joshua Yeung was instructed by Messrs. Dorsey & Whitney for the Petitioners as sole counsel.
Mr. Alexander Tang also advised the Petitioners in these proceedings.
