FORTUNE CHOICE DEVELOPMENT LTD v. PROFIT CONCEPT FINANCE LTD

HCMP 203/2026

[2026] HKCFI 4327

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 203 OF 2026

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DECISION

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INTRODUCTION

1.  This is the substantive hearing of the Originating Summons dated 6 February 2026 issued by Fortune Choice Development Limited, the Plaintiff, seeking an injunction to restrain Profit Concept Finance Limited, the Defendant, from presenting a winding-up petition against the Plaintiff pursuant to a statutory demand dated 21 January 2026 (the “Statutory Demand”)  for a sum of HK$170,924,469 (the “Debt”).

2.  The issue for this Court to determine, in cases of this nature, is whether the Plaintiff can discharge its burden to demonstrate that the Debt is bona fide disputed on substantial grounds Re Hong Kong Construction (Works)  Ltd (Unrep., HCCW 670/2002, 7  January 2003)  at §6(1)).

3.  The applicable legal principles in this area of the law are well established. In Re Grande Holdings Ltd (unrep., HCMP 2369/2017, 22 Dec 2017)  at §14, Chow J. (as he then was)  summarized the relevant legal principles as follows: - 

(1)  The Court will grant an injunction to prevent the presentation of a winding up petition which it considers would be an abuse of process.

(2)  It is an abuse of process to present a winding-up petition based on a claim of which there is a bona fide dispute on substantial grounds.

(3)  The threshold for resisting a petition (requiring proof of a bona fide defence)  is higher than that for resisting an application for summary judgment (requiring proof of a fair probability of establishing a bona fide defence), but the difference between the two tests is, in most cases, likely to be more a matter of semantics than substance.

(4)  Petitions are not meant for the purpose of debt collection and the winding-up jurisdiction of the court would be exercised only in clear cases. Where oral evidence is required to decide a real and substantial dispute of fact, the court will generally dismiss the petition.

(5)  The onus is on the company to put forward credible evidence that demonstrates sound reasons to think that the asserted facts may be proved at the trial.

See, to the same effect, Re Sinom (Hong Kong)  Ltd [2009] 5 HKLRD 487 §§10–11 (Kwan J (as she then was)); Golong Co Ltd v Sesderma, SL [2021] HKCFI 568 §7 (Harris J);Aggressive Construction Co Ltd v Wing Yip Building Materials & Engineering Co Ltd [2025] HKCFI 5586 §§15–17 (DHCJ Alan Kwong).

4.  Some cases suggest that to demonstrate an abuse of process, it must further be shown that the creditor knows or should know that there is a genuine defence to the claim at the time the application is issued: Alco Holdings Ltd v World Crown Investments Ltd [2023] 1 HKLRD 335 §4 (Harris J). I do not find it necessary to decide this issue in the present case. But I am inclined to agree with Mr Man SC for the Plaintiff that the existence of a bona fide dispute itself suffices for a petition to be dismissed.  That should be sufficient for a quia timet injunction.  I am not entirely sure that knowledge of whether a debt is bona fide disputed on substantial grounds is a necessary element. Even if a debtor does not possess such knowledge, I am not convinced that it matters save and except in relation to the issue of costs.

5.  Further, if there is a debt which is in part above the statutory minimum and is indisputable, a petition can validly be presented even if the debt as claimed in the petition is for a larger sum, part of which is bona fide disputed:  Re Kwong Yuen Construction Co. Ltd (Unrep., HCCW 336/2001, 22 June 2001)  at §18.

MATERIAL FACTS

6.  The Plaintiff is a company incorporated in Hong Kong.  It is the developer of a residential project “Ocean Camino” (the “Development”)  which is located in Tuen Mun and consists of 30 buildings comprising almost 2,000 residential units. As of 6 February 2026, not all the residential units in the Development have been sold.  

7.  The Defendant is an indirectly wholly-owned subsidiary of Tianji Holding Limited (“Tianji”), a key subsidiary of China Evergrande Group (“CEG”). The Defendant was utilised by CEG and Tianji to, inter alia, act as a vehicle to provide financing to certain Hong Kong development projects managed by Tianji, including the Development.

8.  Following the liquidation of CEG, the Defendant’s present directors are Mr Edward Simon Middleton and Ms Wing Sze Tiffany Wong, who are the joint and several liquidators of CEG and Tianji (the “JSLs”).

9.  In November 2017, Tianji acquired the indirect ownership of the Plaintiff from Henderson Land. 

10.  In June 2018, the OCI Real Estate Fund I S.P. (“OCI Fund”)  acquired indirect ownership of the Plaintiff by purchasing its ultimate parent company (the “Acquisition”).

11.  On 28 August 2018, the Plaintiff and Tianji entered into a project management agreement, which provided, inter alia, that the Plaintiff’s board of directors (the “Board”)  would comprise three directors, one nominated by Tianji and two nominated by the OCI Fund (“OCI Directors”).  

12.  In or around April 2019, CEG and Tianji decided to set up the Defendant to provide financing for potential purchasers of units in residential developments to facilitate sales of the same.  This is recorded in a contemporaneous internal approval form dated 17 April 2019.

13.  On the Defendant’s case, from January 2020, to boost sales of the Development for the benefit of the Plaintiff, the Defendant granted the Subsidised Purchaser Mortgages on favourable terms (such as interest-free periods of up to 24 months and 90% LTV ratios)  to purchasers of units in the Development.  To do so, the Defendant had to borrow funds at higher commercial interest rates than those applicable to the Subsidised Purchaser Mortgages.

14.  It was later proposed that the Plaintiff would reimburse the Defendant for all costs incurred by the Defendant from January 2020 in providing the Subsidised Purchaser Mortgages.  This was approved by way of a CEG internal contract approval application on 3 December 2020, and on 4 December 2020, Rita Wong, a representative of CEG and its subsidiaries (“Evergrande Group”), emailed a draft of a Mortgage Subsidy Agreement (the “MSA”)  to Mr Wang Binran (“Mr Wang”)  for his approval.  The email (“4 December 2020 Email”)  expressly stated (as translated): -

“Hello! To assist in promoting sales for the Tuen Mun project, [the Defendant] commenced offering mortgages for the Tuen Mun project at low interest rates in 2020. Typically, interest is waived for the first one to two years, with an interest rate of P-2.5% applying for the second to third years. However, [the Defendant’s] interest costs significantly exceed its mortgage income. To demonstrate the reasonability of the mortgage arrangement, our company recommends that [the Defendant] pass on its interest costs to the project company at cost price via the attached Subsidy Service Agreement. This would be treated as a sales expense for the project company, while reducing the project company's tax burden.

Kindly review the relevant agreement. Should you have any comments, please do not hesitate to contact me. Our company aims to complete the relevant work by the end of the month. Thank you.” 

15.  On 21 December 2020, Rita Wong chased Mr Wang on WeChat for comments on the draft MSA.  The next day, Mr Wang replied that there should not be a big issue.

16.  In response to Rita Wong’s message that “as the year end is approaching, if everything is confirmed to be in order, we will arrange to sign the relevant contract and start reflecting the related expenses in [the Plaintiff’s] profit and loss statement for this year” (English translation), Mr Wang replied “ok”, to which Rita Wong replied that she would formally arrange for the signing of the MSA.

17.  After receiving Mr Wang’s reply, on the same day, i.e. 22 December 2020, Zhang Zhao (“Mr Zhang”), a director of the Plaintiff appointed by the Evergrande Group, signed the MSA on behalf of the Plaintiff.

18.  At all material times, Tianji had only one representative on the Board, whereas the OCI Directors controlled the majority of the Board (either 2 to 1, or 3 to 1). At all material times, Mr Wang, the main deponent on behalf of the Plaintiff and who signed each of the audited financial statements of the Plaintiff (the “AFS”), directors’ representation letters and audit confirmation requests recording the Debt (collectively, the “Financial Documents”), was one of the OCI Directors on the Plaintiff’s Board.

19.  On 20 March 2025, the JSLs were appointed as directors of the Defendant.  The Defendant then issued a demand letter to the Plaintiff on 3 April 2025.

20.  Thereafter, for the first time, the Plaintiff added a note to its AFS (for 2024)  to assert that the Debt was under dispute and arranged for a Board resolution dated 12 November 2025 to approve the 2024 AFS, and Mr Wang and another OCI Director, Ms Zheng Xiaosu (“Ms Zheng”), signed a directors’ representation letter that did not contain the Debt.  

21.  On the very same day, the Plaintiff’s solicitors, Messrs Simmons & Simmons (“S&S”), issued a letter to the Defendant to claim that the Plaintiff disputed the Debt, relying on, inter alia, the lack of Board resolutions approving the earlier AFS.

22.  Following further correspondence, the Statutory Demand was issued on 21 January 2026.  

23.  On 4 February 2026, that S&S asked the Defendant to confirm by 9 a.m. on 6 February 2026 that it would not issue a winding-up petition.  

24.  The Defendant says that solely to save time and costs, it agreed to undertake not to present a winding-up petition pending the resolution of the Plaintiff’s injunction application.

ANALYSIS AND DETERMINATION

25.  I have read the parties’ detailed written submissions and carefully considered the oral submissions by Mr Man SC for the Plaintiff and Mr Scott SC for the Defendant. Despite the eloquent submissions by Mr Man SC, I am of the view that there are no bona fide disputes to the Debt on substantial grounds. As such, there is no basis to substantiate the injunction application.

26.  The Debt has been repeatedly admitted and acknowledged by the Plaintiff, and it has derived substantial benefits from the MSA, including but not limited to tax benefits from recognizing the Debt in its financial statements over the years.

27.  First, Mr Man SC submitted that the MSA and a subsequent supplemental agreement (the “Supplemental Agreement”)  were entered into without proper authority from the board of the Plaintiff. It is submitted that Mr Zhang was not a director of the Plaintiff when he signed the MSA.  Mr Zhang was appointed as a director in August 2020. The Plaintiff submits that the MSA was entered into earlier in January 2020, hence Mr Zhang did not have the relevant authority to bind the Plaintiff. 

28.  Mr Man SC submits that Mr Wang admits that he had no authority to approve the MSA and the Supplemental Agreement.  The board of the Plaintiff was neither consulted on nor approved of the same. Mr Wang also confirms that Mr Zhang had no authority and was never authorized by the board to sign he MSA and the Supplemental Agreement. The other directors, Nelson and Susan also provided affirmative evidence that the Plaintiff’s board was not informed or involved in these documents.

29.  I am of the view that it is incorrect for Mr Wang who signed documents to verify and approve the MSA and the Debt to now say that he himself was not authorized when faced with a claim based on the Debt. Mr Scott SC is right that it is perfectly fine and proper for a board, by conduct, to delegate certain powers of the board of a company to a designated individual.

30.  The Plaintiff, in fact, admits that though the OCI Fund had control of the board of the Plaintiff since the Acquisition, the Plaintiff did not have any employees and was not engaged in any operation from June 2018 to mid-2023.  All project management activities with respect to the Development were contracted out to Tianji. Further, given the “loan-like nature” of the Acquisition, all management and day-to-day operations of the Plaintiff were indeed controlled by the Evergrande Group before its downfall.  This was the agreed modus operandi of the Plaintiff.

31.  To the knowledge and approval of the OCI Fund, Mr Zhang, who was also an employee of Evergrande Industrial Holdings Limited (a wholly owned indirect subsidiary of Tianji), was nominated by Evergrande Group as a director of the Plaintiff. Mr Zhang was designated to act for the Plaintiff with no question from any members of the Board of the Plaintiff.

32.  In relation to the 4 December 2020 Email, and some WeChat exchanges in December 2020, between Rita Wong and Mr Wang, which shows that Mr Wang had approved the MSA, Mr Man SC submitted that Mr Wang could not bind the Plaintiff either.  I disagree. I do not accept the submission that Mr Wang did it on his own volition only qua a member of the board of the Plaintiff.  Common and commercial sense dictate that he must have discussed this matter with the OCI Fund and/or the other directors.  It is one thing to say that there was no formal board discussion or board approval as in the form of a board resolution, it is quite another to suggest that Mr Wang approved the same without consulting the other directors.

33.  First, on the contemporaneous documents before this Court, I agree with Mr Scott SC that on the evidence, (1)  on 3 December 2020, CEG internally approved the entry of the MSA (2)  on 4 December 2020, there is an email from Rita Wong to Mr Wang attaching a draft of the MSA for his approval and (3)  on 22 December 2020, in the WeChat messages between Rita Wong and Mr Wang, Mr Wang approved the MSA.

34.  Hence, both Mr Wang and Mr Zhang approved the MSA.  I do not see any want of authority to enter the MSA. I note Mr Scott SC’s point that there is no evidence of any draft MSA in existence prior to December 2020. I accept that both the MSA and the Supplemental Agreement were signed by Mr Zhang when he was a director of the Plaintiff.

35.  Secondly, although there are no formal board resolutions to authority Mr Zhang to enter into the MSA and the Supplemental Agreement, I accept that as a matter of fact, Zhang had implied actual authority to enter the said agreements on behalf of the Plaintiff.  Implied actual authority can arise where the board appoints a person to a particular position, with the person impliedly authorised to do all such things that fall within the usual scope of that position: Bowstead & Reynolds on Agency (23^rd Ed.)  §§3-029; see also 3-043. In Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549, it was held that an individual, Mr Richards, had authority to act on behalf of the company, “such authority being implied from the circumstance that the board by their conduct over many months had acquiesced in his acting as their chief executive and committing [the company] to contracts without the necessity of sanction from the board” (584F-G). 

36.  On the facts of the present case, although it is not conclusive that Zhang was treated as a de facto managing director of the Plaintiff, I note it is the Plaintiff’s own case that Tianji was “effectively given free rein to manage the Development”, that the OCI Fund was content to only receive periodic updates regarding the status of the Development, and that Mr Zhang managed the affairs in relation to the Development.  It is also the Plaintiff’s case that the OCI Directors were “passive” directors who had little involvement in the affairs of the Plaintiff.

37.  Hence, I accept that Mr Zhang would have had actual authority to manage the affairs of the Plaintiff. Indeed, the Defendant has adduced contemporaneous evidence showing that Mr Zhang regularly signed documents on behalf of the Plaintiff.

38.  Mr Man SC relies on the principle that the actual authority of an agent is subject to the agent’s duty to act honestly and in the interest of the company (Bowstead (supra)§§3-011 to 3-012). That, of course, must be correct. However, I agree that there are no allegations of dishonesty and the suggestion that the MSA was not in the best interests of the Plaintiff cannot be sustained.

39.  Mr Scott SC is right that commercially, Clause 4.1 of the MSA makes clear the quid pro quo for the Plaintiff’s reimbursement: “In consideration of [the Defendant] participating in the Mortgage Plan and agreeing to offer, inter alia, special interest rate to the Participating Purchasers, [the Plaintiff] agrees to pay [the Defendant] a subsidy to reimburse all the costs, including funding costs from related companies or third parties, operating expenses, incurred by [the Defendant] for provision of finances to the Particular Purchasers”. 

40.  Realistically, there would otherwise have been no reason for the Defendant to incur substantial costs (now exceeding HK$170 million)  to provide the Subsidised Purchaser Mortgages to facilitate sales for the Plaintiff, particularly when it is the Plaintiff’s own case that this is not the case of a developer using an affiliated finance company within its own group.

41.  Preamble C of the MSA stipulates that favourable interest rates and repayment arrangements were offered to participating purchasers for the purpose of boosting or otherwise facilitating the sale of the units in the Development. As a matter of fact, pursuant to this arrangement, the Defendant granted 499 Subsidised Purchaser Mortgages totaling over HK$2.1 billion, facilitating the sale of 405 units in the Development, which in turn generated over HK$2 billion in sales proceeds for the Plaintiff.

42.  Additionally, and relevantly, the reimbursement of this subsidy to the Defendant would also reduce the amount of profits tax payable by the Plaintiff, as anticipated in the 4 December 2020 Email.  This in fact did take place, given that tax assessments were based on the figures in the AFS (which therefore took into account the Debt).  I am of the view that the entire board of the Plaintiff clearly took into account the Debt in its claim for tax reduction from the Inland Revenue Department.  Its tax liabilities were assessed on the premises that the Debt at all material times subsists.  I find it irresponsible for the Plaintiff now to turn around and to say that the very debt that it presented to the tax authorities for assessment is subject to dispute.

43.  I really do not see how this Court can re-open the commercial transactions entered by seasoned commercial entities. Mr Wang, himself, approved it before Mr Zhang signed on the MSA.

44.  Further, commercially, there is also nothing untoward about the Supplemental Agreement making clear that the MSA took effect retrospectively from January 2020. (See: Hang Kee Development Company Limited v Ming Hing Civil Contractors Limited [2022] HKCFI 455 at §37, parties are free to backdate a contract such that it can take effect retrospectively.)

45.  On the issue of conflict of interests, I do not see that per se can negate Mr Zhang’s actual authority. There is no dispute that the OCI Directors were always fully aware that Mr Zhang was the Evergrande Group’s representative.  They accepted it and delegated the operation of the business affairs to Mr Zhang. As such, even if there was any conflict of interest, all the OCI Directors would have been aware of it, waived and/or approved of the same. The fact is that the OCI Directors simply approved and designated Mr Zhang to sign the MSA because it was in the Plaintiff’s commercial interest to do so. There is nothing more complicated than that. I do not finds it attractive for the Plaintiff now to try to disown its contractual obligations by saying that Mr Zhang, one of its directors, did not have the actual authority to sign the MSA when at all material times the other directors, the OCI Directors, were fully aware of the terms of the MSA and approved the same.

46.  Mr Scott SC also, in my view, rightly submitted that in any event, the Defendant is entitled to rely on the ostensible authority of Mr Zhang. I accept that commercially the Defendant would have had no reason to doubt that Mr Zhang had authority, and as a result, the Defendant entered the MSA and continued to incur costs to grant the Subsidised Purchaser Mortgages. What the Plaintiff could not have done is to receive the benefits of the favourable interest rate packages arranged through, inter alia, the MSA and then turns around and says that the MSA is not binding on it. This is just not right.

47.  Finally, I accept that in any event the MSA has been subsequently ratified by the Plaintiff. I have no doubt that the MSA and the incurring of the Debt were ratified by the Plaintiff when the other directors took positive steps to sign the Plaintiff’s audit documents and make representations to Deloitte and tax authorities based on those documents. 

48.  Mr Scott SC stressed that the 2022 AFS and directors’ representation letter were signed by Mr Wang and Mr Lee (both OCI Directors), who, together with Mr Zhang, formed the majority on the Board, and the 2023 AFS and directors’ representation letter were signed by Mr Wang and Ms Zheng, who were the only directors then. 

49.  Crucially, the 2022 and 2023 AFS and directors’ representation letters were signed after purported disputes had been raised in the Plaintiff’s 16 June 2022 Letter, such that any requirement of knowledge of material circumstances would have been satisfied.  I agree.

50.  Mr Man SC submitted that there can be no ratification of transfers that are not bona fide in the company’s best interest and/or for a proper purpose. However, that begs the question. The question being why is it not in the Plaintiff’s best interest to enter the MSA with the Defendant? It is not for this Court to second guess the commercial judgment of the parties.

51.  Mr Man SC refers this Court to the case of Yona International Ltd & Anor v La Réunion Française Société Anonyme D’assurances Et De Réassurances [1996] 2 Lloyd’s Rep 84 at 103 (col 1), Moore-Bick J (as Moore-Bick LJ then was)  put particular emphasis on the following principles governing ratification:

“… (i)  although the doctrine of ratification is commonly relied upon to validate an unauthorized transaction, it may be applied to any act carried out in the name of another person by one who lacked authority; (ii)  ratification involves a conscious decision to adopt an unauthorized act; as such it may be express or implied, and will be implied whenever the conduct of the person in whose name an act has been done is such as to show that he adopts that act; (iii)  mere acquiescence or inactivity may be sufficient to constitute ratification if, in the circumstances, it amounts to clear evidence of an intention to adopt the act in question; (iv)  it is necessary that at the time of ratification the person adopting the act should have full knowledge of all the material circumstances in which it was done, unless he makes it clear that he intends to adopt it regardless of the circumstances; (v)  an act may be ratified by an agent, provided he has authority to do so in accordance with established principles.” (Emphasis added)

52.  Mr Man SC also submitted that his Lordship further explained at 106 (col 1)  that since the intention to ratify must be manifested in some way, it is in practice akin to an estoppel as it will often be argued by the third party that the manifestation amounts to an unequivocal representation that the principal is estopped by.  Thus, his Lordship concludes that unless the principal (i.e. the Plaintiff)  has a duty to speak (which the Defendant rightly does not suggest, and in any event is denied), mere silence or inaction will not usually be sufficient to evidence ratification, nor will it amount to an unequivocal representation sufficient to give rise to an estoppel. 

53.  It is further submitted that, it must crucially be shown that the Plaintiff made a conscious decision to adopt the unauthorized act of entering into the MSA, and that at the time of the ratification the Plaintiff had full knowledge of all the material circumstances in which the MSA was entered into.  There can be no ratification by the directors of the Plaintiff. It is at least reasonably arguable that Mr Zhang and Mr Wang did not act in the interest of the Plaintiff in approving the MSA. The directors therefore could not have approved (in 2020 or subsequently)  the MSA or the Debt, since as a matter of common law, approval by fellow directors would not be a sufficient answer to transfers that are not bona fide in the company’s best interest and/or for a proper purpose: see Shun Hing Holdings Company v Li Kwok Po David[2020] HKCA 309 at §§68, 72 per Lam VP (as he then was). 

54.  Additionally, there could not have been any valid act of directors when (i)  Mr Wang could not approve his own breach of duty; and (ii)  Nelson and Susan at least arguably acted in breach of fiduciary duty in abdicating their discretion, including by not exercising independent judgment and simply doing what they were told: Central Bank of Ecuador & Ors v Conticorp SA & Ors [2016] 1 BCLC 26 at §119. Any attempt to approve transfers that are not bona fide in the company’s best interest and/or for a proper purpose could itself be a breach of duties on the part of those directors who approved it: Shun Hing Holdings (supra)  at §42.

55.  I am of the view that the above argument is circular. It is premised upon the MSA and the Debt to be ratified were not in the best interest of the Plaintiff. But there is no evidence for this Court to reach that conclusion at this stage. The Plaintiff derived a substantial benefit from the increased in the sale of units in the Development as a result of the favourable interest rate package offered via the MSA.

56.  I agree that without the MSA, it is difficult to see why the Defendant would continue to incur costs to grant the Subsidised Purchaser Mortgages on terms that were unfavourable to the Defendant as the lender (such as lower interest rates, less stringent qualifying tests for borrowers and higher loan-to-value ratios).

57.  Mr Man SC submitted since the MSA was already terminated in 2022: see the 2023 Representation Letter, it could not have been in the Plaintiff’s interest for it to ratify the same (even less so the Debt)  after its termination. I disagree. As I said above, the Plaintiff derived benefits from the MSA and obtained tax benefits under it. It is not in the interest of the Plaintiff to invite litigation upon itself.  

58.  Secondly, I am of the view that the contemporaneous documents overwhelming prove that the Debt is duly admitted and acknowledged by the Plaintiff. 

(1)  In the 2020 AFS, the Plaintiff confirms the “mortgage service fee” of HK$56,107,340 for 2020. Both Mr Wang and Mr Zhang were stated to have been approved and authorized by the board of the Plaintiff to issue the same on 30 April 2021.

(2)  Mr Wang signed on an audit confirmation request dated 9 March 2022 and sent to the Defendant requesting the Defendant to confirm the accuracy that the Debt of HK$170,924,469 was due from the Plaintiff to the Defendant.

(3)  The directors’ representation letter signed by Mr Wang and Mr Zhang on 15 September 2022 confirming the “accrued mortgage subsidy service fee” of HK$170,924,470 as of 31 December 2021.

(4)  In the 2021 AFS, the Plaintiff confirms the “mortgage service fee” HK$114,817,130 for 2021 and HK$56,107,340 for 2020. Both Mr Wang and Mr Zhang were stated to have been approved and authorized by the board of the Plaintiff to issue the same on 15 September 2022.

(5)  The directors’ representation letter signed by Mr Wang & Mr Lee Tat Fai Nelson (“Mr Lee”)  (i.e. only OCI Directors)  confirming the “accrued mortgage subsidy service fee” of HK$170,924,470 as of 31^st December 2022.

(6)  In the 2022 AFS, the Plaintiff confirms the “mortgage service fee” of HK$114,817,130 for 2021. Both Mr Wang and Mr Lee (i.e. only OCI Directors)  were stated to have been approved and authorised for issue by the Board on 23 November 2023.

(7)  The directors’ representation letter signed by Mr Wang and Ms Zheng (ie only OCI Directors)  confirming the “accrued mortgage subsidy service fee” of HK$170,924,470 as of 31 December 2023.

(8)  In the 2023 AFS, which was based on, inter alia, the 2023 directors’ representation letter, Mr Wang and Ms Zheng (ie only OCI Directors); stated to have been approved and authorized for issue by the Board on 7 November 2024.

59.  I am of the view the above financial and audited documents  can be relied on as evidence against the Plaintiff’s factual case (Shun Hing Holdings Company Limited v Li Kwok Po David [2020] HKCA 309  at §78). I accept that the starting point is that the Court will not go behind the Financial Documents unless there is an evidential basis to suggest that they may be inaccurate (such as evidence from accountants or other experts that the AFS cannot be relied upon): Re T-Hero Industrial Company Limited [2023] HKCFI 3118 at §37.

60.  I note Mr Man SC’s submission that if Mr Zhang had no authority to enter into the MSA on behalf of the Plaintiff, no admission could change that.  There cannot be any estoppel given that there is absolutely no indication that the Defendant had detrimentally relied on these alleged “admissions” in any way which can feed an estoppel. First, as I said above, I am of the view that Mr Zhang did have the actual authority to enter into the MSA for the Plaintiff. Secondly, had Mr Wang not approved the same, it is quite clear to me that no favourable interest rate package would have been provided and the Debt would not have been incurred.

61.  I also appreciate Mr Man SC’s submission that one must also remember that as Lam VP explained in Shun Hing Holdings (supra)  at §§78-79, whilst an AFS can be relied on as evidence, it is not conclusive as to the nature of the transactions mentioned, or whether the shareholders have specifically approved the transactions.  But every case depends on its own facts. On the facts of the present case, there is no evidence adduced before this Court to prove that the relevant AFS were incorrect or they did not reflect the nature of any agreed commercial transactions.

62.  The Financial Documents are contemporaneous and independently scrutinised information audited by independent professional accountants, and this is relevant to the weight to be given to them: Patrick Cowley & Wong Wing Sze Tiffany (Joint and Several Trustees in Bankruptcy of the Property of Lau Yu also known as Jaffe Lau)  v All Powerful Holding Ltd & anor[2025] HKCFI 5223 at §§77-78.  Mr Scott SC submitted that in this case, while Mr Wang alleges (without supporting evidence)  that Deloitte refused to comply with his requests to make clear that the Debt was disputed, and even that Deloitte “steadfastly refused to reverse the entry”, no evidence has been adduced from Deloitte in support.

63.  In the present case, 7 of the 8 Financial Documents which acknowledged the Debt were signed by 2 directors. In Sociedade Nacional De Combustiveis De Angola - Empresa Publica v CSIL Ltd & anor [2025] HKCFI 3104  a dispute as to the existence of a loan owed by CSIL was held not to be an arguable defence.  In so doing, the Court made the following pertinent observations:-

(1)  In rejecting the argument that “there could not have been a valid approval by CSIL’s board as Ms Lo had no authority under CSIL’s Articles of Association to sign the Loan Agreement. Nor (Mr Li adds)  could there have been any ratification of Ms Lo’s signing of the Loan Agreement” (§9), the Court emphasised, inter alia, that (§10):-

“… there is a long string of CSIL’s own documents attesting to the loan’s existence. For example, CSIL’s audited accounts between 2005 and 2017, record the principal amount and the interest on the loan… More pertinently, CSIL’s audited accounts from 2005 to 2017 were approved by CSIL’s board and signed by its directors, including Ms Fung. Thus, over some two decades, CSIL (including Ms Fung)  has acknowledged in its audited accounts that the loan was made and interest on the loan has been accruing. I do not think that it is now open for CSIL to contradict its audited accounts.”

(2)  Further, the Court at §13 observed that “I do not see how the fact that Ms Fung signed the accounts under time pressure somehow excuses her from the consequences of what she has approved and accepted over the years and held out to the world as CSIL director”.

64.  I accept Mr Scott SC’s submission that in the present case, it is not open to the Plaintiff’s main deponent, Mr Wang, who signed on most of the Financial Documents to dispute the Debt on the Plaintiff’s behalf. Further, four out of the eight Financial Documents were in fact signed by the OCI Directors only.

65.  Directors owe duties to the company, including the statutory duty under ss 379-380 of the Companies Ordinance, Cap 620 to ensure that its audited financial statements give a true and fair view of the company’s financial position and performance, as well as their duty to exercise independent judgment. I totally agree that it is not open for the OCI Directors to disown the Financial Documents on the basis that they did not review them and simply trusted others, that they only signed “as a matter of formality”, or that they were pressurised by the Evergrande Group and/or the OCI Fund. 

66.  Mr Scott SC is also right that the lack of accounting experience, lack of experience in real estate or mortgage financing or pre-occupation with other engagements are not legitimate excuses.  In any event, Mr Wang, Ms Zheng and Mr Lee each have ample experience acting as directors of Hong Kong companies, and Mr Wang and Ms Zheng were also persons licensed by Securities and Futures Commission.  

67.  As a matter of fact, Mr Wang, Mr Lee and Ms Zheng continued to sign the 2021, 2022 and 2023 directors’ representation letters and the 2021, 2022 and 2023 AFS on behalf of the Plaintiff even after purported disputes had been raised in the Plaintiff’s 16 June 2022 Letter.  They must have satisfied themselves with the existence of the Debt.

68.  I do not attach weight to the 2024 AFS as it was prepared by the Plaintiff shortly after the Defendant issued a demand letter to the Plaintiff on 3 April 2025.

69.  Finally, in relation to the exact amount and the calculation of the Debt. The Debt is repeatedly stated in the Financial Documents. The Defendant has also provided the Plaintiff with a detailed Excel spreadsheet containing the breakdown that the JSLs retrieved from the Defendant’s office (“MSA Spreadsheet”)  on 6 February 2026, and an explanation as to how the Debt was calculated in Mr Middleton’s 1^st Affidavit at §§34-37 and Annexure 2.

70.  Although the Plaintiff points out that there are two errors in the MSA Spreadsheet (out of 499 Subsidized Purchaser Mortgages), I accept that the Plaintiff had over three months to verify the accuracy of the MSA Spreadsheet. Taking the Plaintiff’s case to its highest, it does not affect the Defendant’s status qua creditor to present a winding up petition based on the statutory minimum.

71.  Mr Man SC submitted that without knowing the precise amount outstanding, the Plaintiff is deprived of the opportunity to make payment of the outstanding sums. I am not persuaded by that for two reasons. First, in the present case, the Plaintiff is opposing the Debt root and branch. It is not saying that part of the Debt is presently due and owing and what it needs to be clear is the precise amount outstanding so that it could arrange payment. Secondly, the Plaintiff had been provided with the MSA Spreadsheet for over three months. It could have only pointed out a few errors. This is after its repeated admission and acknowledgment in the Financial Documents which were audited by external auditors.

72.  Hence, I am not sympathetic to the submission that no winding-up petition can be presented until and unless the Plaintiff is satisfied with the calculation set out in the MSA Spreadsheet.

73.  Finally, I have taken on board all Mr Man SC’s submissions about the solvency of the Plaintiff and the prejudice it will suffer if a winding-up petition is allowed to be presented against it.

74.  However, in view of my ruling that there is no bona fide dispute to the Debt on substantial grounds, the Defendant, as of right, is entitled to present a winding up petition against the Plaintiff.

75.  I have not lost sight of the evidence that there is an anticipated receipt of HK$200 million in sales proceeds and the Plaintiff had cash and cash equivalents of HK$79.3 million as of 24^th April 2026 which exceeds the Debt. Mr Man SC also submitted that based on the Plaintiff’s unaudited Statement of Financial Position dated 24 April 2026, it had net current assets of around HK$729 million and that it is a substantial and solvent company.

76.  However, Mr Scott SC pointed out that if one looks at the actual statement, this is highly dependent on an “Amount due from ultimate holding company” of over HK$2 billion. Indeed, the Plaintiff’s auditors actually refused to express an opinion on the Plainfiff’s 2024 AFS because “of material uncertainties ... that may cast significant doubt on [the Plaintiff’s] ability to continue as a going concern”.  While the Plaintiff claims that this no longer holds true in view of an extension of a bank loan, it should be noted that the Plaintiff’s present cash reserves are also insufficient to discharge the HK$125 million still owing to the bank, which would be due in 2027.

77.  Mr Scott SC also pointed out that the Plaintiff is still facing High Court claims for outstanding commission fees from various property agencies (Centaline Property Agency Limited, Ricacorp Properties Limited and Midland Realty International Limited etc). The claims by these three property agencies alone total over HK$230 million.

78.  Drawing the threads together, even on the Plaintiff’s own updated figures, the Plaintiff only has HK$79.3 million cash reserves, but against this, it faces, inter alia, a HK$170 million debt from the Plaintiff, over HK$230 million in claims by property agencies for commission fees and liability for a HK$125 million bank loan. Thus, it is in the public interest for the Defendant to be able to present a winding-up petition in the interests of the general body of creditors.

79.  Mr Man SC, on the other hand, impressed upon this Court that the prejudice to the Plaintiff if the injunction is refused is grave, and cannot be compensated by damages.  It is also detrimental to the interests of the public and third parties like owners of units in the Development.

80.  The presentation of a winding-up petition will destroy the Plaintiff’s ability to benefit from the present improving state of the market in respect of the sale of the units of the Development, as potential purchasers would question whether the Plaintiff has the financial means to honour all its obligations under the sale and purchase agreements and fearing that the Plaintiff may not have had the financial means to construct the units with the required standard etc. Such concerns would deter the general public from purchasing the Plaintiff’s properties.

81.  Even the news of a potential winding-up would negatively impact the value of the units in the Development, in particular given the Plaintiff’s historical connection with the Evergrande Group, the insolvency of which is world news.  In the worst scenario, the Plaintiff would be unable to sale its units at all.

82.  Further, as usual, a winding up petition will trigger events of default and entitle the Plaintiff’s bank to cancel its commitments and declare all or any part of the loans immediately due and payable.  This may further trigger cross-defaults under other facility agreements and/or financial arrangements and lead to cash-flow problems for the Plaintiff.

83.  Lastly, the Development is a landmark residential project in the New Territories region.  It is one of the larger residential property developments within the area.  A petition would likely have a negative impact on the property values of the Development which could, in turn, negatively affect the value of other residential units in the region. That would be wholly unjustified yet serious prejudice to third parties.

DISPOSITION

84.  For all the reasons stated above, the Originating Summons dated 6 February 2026 is hereby dismissed.

85.  However, I will grant a stay of this Court’s order to dismiss the Plaintiff’s application for an injunction to restrain the presentation of a winding up petition against the Plaintiff for a period of 28 days from the date of this Decision. This is to facilitate the Plaintiff to take this matter further and if it sees  fit to negotiate with the Defendant to come up with a mutually acceptable commercial arrangement.

86.  As far as costs is concerned, I make a costs order nisi that the Defendant is entitled to the costs of and occasioned by the Originating Summons dated 6 February 2026, to be taxed on a party to party basis if no agreement can be reached, with a certificate for two counsel. This costs order nisi will be made absolute within 14 days from the date hereof unless an application is taken out to vary the same within the 14-day period.

87.  Finally, it remains for this Court to thank Mr Man SC and Mr Lee for the Plaintiff and Mr Scott SC and Ms Cheung for the Defendant for their able and helpful assistance.