CHOW TAI FOOK NOMINEE LTD v. DIAMOND CITY LTD AND ANOTHER

HCA 85/2020, HCA 86/2020,
HCA 92/2020, HCA 123/2020 &
HCA 221/2020

[2021] HKCFI 3019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 85 OF 2020

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AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 86 OF 2020

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 92 OF 2020

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 123 OF 2020

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 221 OF 2020

________________________

________________________

________________________

J U D G M E N T

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A. INTRODUCTION

1.  There are six summonses before the court, namely:

(1)  Chow Tai Fook Nominee Limited (“CTFN”)’s Summons dated 1 June 2020 for summary judgment against Diamond City Limited (“Diamond City”) and Wu Wai Leung, Danny (“DW”), and striking out of DW’s counterclaim, in HCA 85/2020;

(2)  CTFN’s Summons dated 1 June 2020 for summary judgment against Gateway Asia Resources Limited (“Gateway Asia”) and DW, and striking out of DW’s counterclaim, in HCA 86/2020;

(3)  Idea Perfect Holdings Limited (“Idea Perfect”)’s Summons dated 7 June 2020 for summary judgment against Gateway Asia, DW and Chan Tak Yuen (“Allen Chan”), and striking out of DW’s counterclaim, in HCA 92/2020;

(4)  CTFN’s Summons dated 1 June 2020 for dismissing the action and striking out the Statement of Claim in HCA 123/2020;

(5)  Idea Perfect’s Summons dated 17 June 2020 for dismissing the action and striking out the Statement of Claim in HCA 123/2020; and

(6)  CTFN’s Summons dated 1 June 2020 for dismissing the action and striking out the Statement of Claim in HCA 221/2020.

2.  All six summonses have been ordered to be heard together, although CTFN is only concerned with the four summonses issued by it in HCA 85/2020 and HCA 86/2020 (the “CTFN Debt Recovery Actions”) and HCA 123/2020 and HCA 221/2020 (the “DW Declaration Actions”).  Idea Perfect on the other hand is concerned with the two summonses issued in HCA 92/2020 (the “Idea Perfect Debt Recovery Action”) and in HCA 123/2020.

3.  CTFN’s claims are founded upon written loan documents under which the borrowers (ie Diamond City and Gateway Asia) have defaulted and written guarantees executed by DW which he has breached.  No substantive defence has been advanced by Diamond City or Gateway Asia (both in receivership) to dispute their liability - the Receivers (ie Koo Chi Sum (“Koo”) and Simon Rhys Thomas (“Thomas”)) having indicated that they take a neutral position in respect of the claims and agree to be bound by any order or judgment of the court as to the determination of the issues between CTFN and DW.

4.  DW’s defence is that CTFN is estopped (by various alleged oral representations and agreements or understandings made or reached orally, of which there is not a shred of evidence recording or referencing the same) from claiming that an event of default has arisen under the relevant loan agreements and share mortgage/charge, and counterclaims for declarations to that effect.  He also alleges that the terms of the relevant loan agreements have been orally varied as to the timing of repayment.

5.  CTFN submits that in view of the contemporaneous documents, DW’s defence is patently unbelievable and frivolous, and gives rise to no triable issues or arguable defence, such that summary judgment ought to be entered against Diamond City, Gateway Asia and DW in the CTFN Debt Recovery Actions.  Furthermore, by reason of the frivolousness of DW’s case, and the fact that DW’s counterclaims in the CTFN Debt Recovery Actions entirely overlap with his claims in the DW Declaration Actions, the DW Declaration Actions ought to be dismissed and the Statements of Claim filed therein and DW’s counterclaims in the CTFN Debt Recovery Actions should also be struck out as an abuse of the process of the Court.

B.      THE CTFN DEBT RECOVERY ACTIONS AND DW DECLARATION ACTIONS

B1.    Background to the CTFN Debt Recovery Actions

B1.1  The parties and other relevant persons

6.  CTFN is and was at all material times a limited company incorporated in Hong Kong.  Dr Cheng Kar Shun (“Dr Cheng”) is one of its directors.

7.  Gateway Asia and Diamond City are companies incorporated in the BVI.  DW was at all material times the sole registered shareholder and director of Gateway Asia and Diamond City until 24 December 2019 and 23 January 2020 respectively when the Receivers were appointed by CTFN and/or Idea Perfect (as the case may be) as the receivers of the entire issued share capital of those companies.

8.  Idea Perfect is and was at all material times a limited company incorporated in the BVI.  Mr Chong Tin Lung Benny (“Mr Chong”) is one of its directors.

9.  Mr Remy Lie Ken Jie (“Mr Lie Ken Jie”) is and was at all material times the Senior Vice President of Chow Tai Fook Enterprises Limited (“CTFE”), and was personally involved in the matters relevant to the CTFN Debt Recovery Actions and the DW Declaration Actions.

B1.2  The Gateway Asia Loan Agreement

10.  On 30 October 2015, CTFN (as lender), Gateway Asia (as borrower) and DW (as guarantor) entered into a loan agreement (the “Gateway Asia Loan Agreement”) under which CTFN agreed to lend to Gateway Asia the principal sum of US$11,054,300.72 (the “Gateway Asia Loan”).

11.  The material terms of the Gateway Asia Loan Agreement have been set out in paragraph 4 of the Statement of Claim filed in HCA 86/2020.

12.  On the same day (ie 30 October 2015), DW executed a deed of guarantee (the “Gateway Asia Guarantee”) under which DW guaranteed to CTFN the due and punctual payment of the sums payable by Gateway Asia under the Gateway Asia Loan Agreement.

13.  The material terms of the Gateway Asia Guarantee have been pleaded in paragraph 6 of the Statement of Claim filed in HCA 86/2020.

14.  The Gateway Asia Loan originally became due on 31 October 2016, but was subsequently extended by an Extension Letter dated 21 November 2019 (the “Extension Letter”) to 29 November 2019 upon the provision of additional security by DW, ie a share mortgage dated 21 November 2019 executed by DW under which he mortgaged and charged the entire issued share capital of Gateway Asia beneficially owned by him to CTFN as security for the full and punctual performance of the obligations due under the Gateway Asia Loan Agreement (the “Gateway Asia Share Mortgage”).

15.  Gateway Asia did not repay the whole or any part of the Gateway Asia Loan by 29 November 2019 or at all.  This constituted an event of default under clause 6.1(a) of the Gateway Asia Loan Agreement, and DW is, upon demand, liable to pay the outstanding principal and interest pursuant to the Gateway Asia Guarantee.

B1.3  The Diamond City Facility Agreement

16.  On 6 June 2016, CTFN (as lender), Diamond City (as borrower) and DW (as guarantor) entered into a facility agreement (the “Diamond City Facility Agreement”) under which CTFN granted Diamond City a loan facility of up to US$57,500,000 (the “Diamond City Loan”).

17.  The material terms of the Diamond City Facility Agreement have been set out in paragraph 4 of the Statement of Claim filed in HCA 85/2020.

18.  On the same day (ie 6 June 2016), DW also executed:

(1)  a Deed of Guarantee (the “Diamond City Guarantee”) under which DW guaranteed to CTFN the due and punctual payment of the sums payable by Diamond City under the Diamond City Facility Agreement; and

(2)  a Deed of Share Charge (the “Diamond City Share Charge”) under which DW charged the entire issued share capital of Diamond City beneficially owned by him to CTFN as security for the full and punctual performance of the obligations due under the Diamond City Facility Agreement.

19.  The material terms of the Diamond City Guarantee have been pleaded in paragraph 6 of the Statement of Claim filed in HCA 85/2020.

20.  Pursuant to the terms of the Diamond City Facility Agreement, the principal and interest accrued thereon became due and payable on 6 June 2019.

21.  Diamond City did not repay the whole or any part of the same by 6 June 2019 or at all.  This constituted an event of default under clause 7.1(a) of the Diamond City Facility Agreement, and DW is, upon demand, liable to pay the outstanding principal and interest pursuant to the Diamond City Guarantee.

B1.4  Demands for repayment

22.  By a letter dated 2 December 2019 (the “Dec 2 Demand Letter”), CTFN gave notice of the default under the Gateway Asia Loan Agreement to Gateway Asia and DW and demanded DW to pay the outstanding sums pursuant to the Gateway Asia Guarantee.

23.  By a letter dated 4 December 2019 (the “Dec 4 Demand Letter”), notice of the default under the Diamond City Facility Agreement was given to Diamond City and DW, and DW was demanded to pay the outstanding sums pursuant to the Diamond City Guarantee.

24.  On 13 January 2020, Messrs Keith Lam Lau & Chan (“KLLC”) (acting on behalf of DW) issued a letter to CTFN, Idea Perfect and the Receivers (the “Jan 13 Letter”).  In the Jan 13 Letter, it was alleged, inter alia, that before the execution of the Gateway Asia Share Mortgage, the parties already agreed that the indebtedness under the Gateway Asia Loan Agreement “would not fall due until after the conclusion of the negotiation with respect to the Potential Acquisition” (defined below).  DW therefore disputed the validity of the appointment of the Receivers over the shares of Gateway Asia, and proposed certain undertakings to be given by the Receivers to maintain the status quo pending determination of the dispute.

25.  On 24 February 2020, KLLC (acting on behalf of DW) issued a letter to the solicitors acting for CTFN, Idea Perfect and the Receivers (the “Feb 24 Letter”).  In the Feb 24 Letter, it was alleged, inter alia, that on divers dates between or around March 2019 to July 2019, it was agreed orally and/or by conduct that the Gateway Asia Loan Agreement and the Diamond City Facility Agreement “were and are varied to the extent that the indebtedness thereunder would and will not fall due until after the conclusion of the negotiation with respect to [the Potential Acquisition]”. DW reiterated his dispute of the validity of the appointment of the Receivers and proposed certain modified undertakings to be given by CTFN, Idea Perfect and the Receivers to maintain the status quo pending determination of the dispute.

B1.5  Background to the CTFN Loans

26.  In the pleadings and affirmations filed by DW, he refers extensively to the background to the Gateway Asia Loan and the Diamond City Loan (collectively, the “CTFN Loans”), which were provided by CTFN in relation to a joint venture to acquire the assets of Sino-Forest Corporation (“Sino-Forest”).

27.  Much of that background is undisputed.  As deposed to in the 2^nd Affirmation of Lie Ken Jie filed in HCA 85/2020:

(1)  In mid-2014, DW and Mr Chong approached Dr Cheng with a proposal to acquire the assets of Sino-Forest. The acquisition consisted of two stages:

(a)  Stage 1: the acquisition of the shareholding interest in Greenheart Group Limited (“Greenheart Group”) through a newly-established joint venture company known as Newforest Limited (“Newforest”); and

(b)  Stage 2: the acquisition of the remaining assets of Sino-Forest through another newly-established joint venture known as New Plantations Limited (“New Plantations”).

(2)  Newforest was owned as to 60% by Sharpfield Holdings Limited (“Sharpfield”) and as to 40% by Gateway Asia.

(3)  New Plantations was owned as to 75% by Celestial Gold Holdings Ltd (“Celestial Gold”) and as to 25% by Diamond City.

(4)  Both Sharpfield and Celestial Gold are wholly-owned subsidiaries of CTFE, of which Dr Cheng is a director.

(5)  Stage 1 was carried out on or about 31 October 2014 when Newforest acquired 496,189,028 listed shares in Greenheart Group, 3,036,000,000 ordinary shares in Greenheart Resources Holdings Limited and certain shareholders’ loans at an aggregate consideration of USD110,587,242.06 (after adjustment).

(6)  The final tranche of the consideration in the sum of USD27,635,751.79 (ie 24.99% of the aggregate consideration) payable by Newforest was due on 31 October 2015. Accordingly, each of Sharpfield and Gateway Asia were to inject funds into Newforest proportionate to their respective interests.  Gateway Asia’s required contribution was in the amount of the Gateway Asia Loan (ie USD27,635,751.79 x 40% = USD11,054,300.72).

(7)  As Gateway Asia did not have the funds, it borrowed the same from CTFN under the Gateway Asia Loan Agreement.

(8)  Stage 2 was carried out on 21 April 2016 when New Plantations entered into an agreement to acquire the entire issued share capital of Emerald Plantation Group Limited (“EPGL”), which held the remaining assets of Sino-Forest, at an aggregate consideration of USD228,806,736 (after adjustment).

(9)  The consideration was to be injected by Celestial Gold and Diamond City into New Plantations in return for an allotment of shares in New Plantations in the proportions of 75% to 25% respectively.  Diamond City’s required contribution was therefore in the amount of USD57,201,684 (ie USD228,806,736 x 25%).

(10)  As Diamond City did not have the funds, it borrowed the same from CTFN under the Diamond City Facility Agreement.  Clause 2.2 thereof expressly provided that the Diamond City Loan shall only be utilized for the subscription of 25 ordinary shares in New Plantations, and the proceeds shall be used by New Plantations for the Stage 2 acquisition.

28.  At this juncture, it is convenient to refer to the loan made by Idea Perfect to Gateway Asia, which was also guaranteed by DW (and Allen Chan) and is the subject of the Idea Perfect Debt Recovery Action.

(1)  On 14 April 2016, Idea Perfect (as lender) and Gateway Asia (as borrower) entered into a loan agreement (the “IPH Loan Agreement”) under which Idea Perfect agreed to make available to Gateway Asia a loan facility of up to HK$212,989,361.70 (the “IPH Loan”).

(2)  This was supposed to be a short-term bridging loan to meet Gateway Asia’s immediate financial needs at the time.

(3)  On the same day, DW and Allen Chan executed guarantees in favour of Idea Perfect to guarantee the punctual performance by Gateway Asia of its obligations under the IPH Loan Agreement (the “IPH Guarantees”).

(4)  The original maturity date of the IPH Loan was 13 July 2016, but this was extended 7 times by the parties entering into 7 supplemental loan agreements as particularized in paragraph 13 of the 1^st Affirmation of Mr Chong filed in HCA 92/2020.  On each occasion, DW and Allen Chan also signed deeds of confirmation stating that the IPH Guarantees shall remain in full force and effect.

(5)  Eventually, Gateway Asia made partial repayments of the IPH Loan and interests totaling HK$155,980,000, leaving an outstanding balance of HK$57,009,361.70 with interest accruing thereon.

(6)  On 21 November 2019, the maturity date of the IPH Loan was extended to 29 November 2019 and DW executed, inter alia, a share mortgage in favour of Idea Perfect over his entire shareholding in Gateway Asia (the “IPH Share Mortgage”).

(7)  As Gateway Asia failed to repay the outstanding balance of the IPH Loan by 29 November 2019 or at all, Idea Perfect gave notice of appointment of the Receivers over the shares of Gateway Asia on 24 December 2019 and commenced HCA 92/2020 against Gateway Asia, DW and Allen Chan for repayment of the outstanding amount due under the IPH Loan Agreement.

B1.6  DW’s case

29.  DW’s case is that in or around May 2014, he orally agreed with Dr Cheng about the acquisition of the assets of Sino-Forest with a view to re-selling them for profit.  Both DW’s side and Dr Cheng’s side would cause funds to be injected into the acquisition, and the funds were not intended to be repaid until the acquired assets were disposed of (the “Alleged Initial Investment Agreement”).

30.  Further, at the time of executing the Gateway Asia Loan Agreement and the Diamond City Facility Agreement, there was a common understanding and/or assumed state of affairs between DW, Dr Cheng, Mr Lie Ken Jie and Mr Chong that the CTFN Loans advanced thereunder were not repayable until after the completion of the Alleged Initial Investment Agreement, ie the sale of the Sino-Forest assets so acquired (the “Alleged Common Understanding”).

31.  In or around March 2019, China Forestry Group Corporation (“China Forestry”) expanded its intention to acquire the controlling shares of Greenheart Group to also cover certain Sino-Forest’s assets acquired under the Stage 2 acquisition (together, the “Alleged Potential Acquisition”).

32.  In around July 2019, it was the common understanding of DW, CTFN, CTFE and Idea Perfect that (i) the completion of the Alleged Potential Acquisition would boost the economic value of Greenheart Group; (ii) the outstanding balance under, inter alia, the Gateway Asia Loan Agreement and the Diamond City Facility Agreement would be substantially settled by utilizing the consideration received by Gateway Asia and Diamond City upon the completion of the Alleged Initial Investment Agreement; and (iii) the Alleged Initial Investment Agreement and the Alleged Common Understanding were reaffirmed (the “Alleged Renewed Common Understanding”).

33.  On or around 18 July 2019, Mr Chong orally relayed a message from Dr Cheng offering or representing that notwithstanding the express provisions in the Gateway Asia Loan Agreement and the Diamond City Facility Agreement, the outstanding balance thereunder would not be due or have to be repaid until the conclusion of the negotiation with respect to the Alleged Potential Acquisition and CTFN has no intention to seek recovery of the same until the said conclusion (the “Alleged 2^nd Offer/Representation”) in consideration for (a) the substantial increase of likelihood of recovery of money and the amount thereof, (b) DW’s continued effort to negotiate for an eventual successful acquisition, which CTFN would wish to see to materialize, and (c) the giving of further security providing a cosmetic repayment date within 2019 for reasons which were hitherto not made clear to DW, and to which DW (for and on behalf of Gateway Asia) accepted (the “Alleged CTFN/DC Variations”).

34.  Based on the aforesaid, DW claims that CTFN has breached the Alleged CTFN/DC Variations by declaring an event of default under the Gateway Asia Loan Agreement and the Diamond City Facility Agreement.

35.  Further and/or alternatively, he claims that CTFN is estopped from departing from the Alleged Common Understanding, the Alleged Renewed Common Understanding and the Alleged 2^nd Offer/Representation by declaring an event of default under the Gateway Asia Loan Agreement and the Diamond City Facility Agreement and exercising their right to appoint the Receivers over the shares of Gateway Asia and Diamond City.

36.  It is against this context that the four summonses issued by CTFN for summary judgment and striking-out are to be determined.

B2.    Applicable Legal Principles

B2.1  Summary judgment

37.  The principles on summary judgment are well-settled:

(1)  The summary process of Order 14 can only be invoked where (a) the defendant has given notice of intention to defend, (b) the statement of claim has been served on the defendant, and (c) the affidavit in support of the application complies with the requirements of Order 14, rule 2 of the Rules of the High Court (“RHC”): Hong Kong Civil Procedure 2021, Vol 1, Practice Note 14/1/3.

(2)  The underlying policy of the summary judgment procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in a case in which the defendant clearly has no defence.  Once the preliminary requirements have been satisfied, it is for the defendant to show that there is a triable issue or an arguable defence on the merits: Hong Kong Civil Procedure 2021, Vol 1, Practice Note 14/4/1.

(3)  The test at the summary stage is whether the defendant’s assertions are believable, and that question is to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute: Re Safe Rich Industries Ltd, CACV 81/1994 (unrep, 3/11/1994) at p 5.

(4)  The court must not embark on a mini trial on affidavits: Mass International Ltd v Hillis Industries Ltd [1996] 1 HKC 434 at 439.

(5)  Unless it is obvious that the defence put forward by the defendant is “frivolous and practically moonshine”, Order 14 ought not to be applied: Man Earn Ltd v Wing Ting Fong [1996] 1 HKC 225 at 228E.

38.  It has been said that summary judgment proceedings are “eminently suitable for claims on dishonoured guarantees when the primary facts are not in doubt and the only result of letting the case go on trial would be to delay the plaintiff further in the recovery of the money plainly due to him”: Bank of Credit and Commerce Hong Kong Ltd (in liq) v Quadrutec Hotel Management & Development Ltd & Ors [1996] 4 HKC 316 at 324A-C per Godfrey JA.

B2.2  Striking-out

39.  The principles governing the court’s power to strike-out are also well-settled, and have most recently been summarized by Mr Recorder Manzoni SC in Polyline Development Limited (in liquidation) v Ching Lin Chuen and Ors [2021] HKCFI 483 at §§10-15:

(1)  Applications to strike-out are only for plain and obvious cases.  The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out.

(2)  However, plain is not the same as simple, and obvious is not the same as short.  If, on a careful reading of the statement of claim, however complicated, it can be seen that there is no cause of action or the claim will obviously not succeed, then it will be struck out despite the apparent complexity.

(3)  There should be no trial upon affidavit and disputed facts should be taken in favour of the party sought to be struck out.  Where the legal viability of a cause of action is sensitive to the facts, an order to strike-out should not be made.  However, the court should remain vigilant to ensure that its processes are not abused by the prosecution of hopeless claims.

(4)  In so far as the application is premised upon the proposition that there is no reasonable cause of action, the court must proceed on the basis that the facts alleged in the statement of claim will be established.  No evidence is admissible in relation to this limb of the application and the court must address the matter simply on the basis of what is pleaded.

(5)  In so far as the pleading is alleged to be scandalous, it will only be struck out if it is degrading, indecent and irrelevant to matters which are material.

(6)  In so far as “frivolous or vexatious” is concerned, the object of the rule is to stop cases which ought not to be launched.  A proceeding is frivolous when it is not capable of reasoned argument or is without foundation or cannot possibly succeed. A proceeding is vexatious when it is oppressive or lacks bona fides.

(7)  In so far as it is said that the statement of claim may “prejudice, embarrass or delay the fair trial of the action”, the court will generally give a liberal interpretation to these words but they are aimed at identifying pleadings which are unnecessary in a way which will cause undue difficulty at trial or undue difficulty to the other side because it is unable to understand the case that it has to meet. The rule is aimed at genuine embarrassment in dealing with the case or at matters which are wholly immaterial or irrelevant and which may involve expense trouble or delay in the overall resolution of the action.

(8)  In so far as “abuse of the process of the court” is concerned, this is designed to ensure that the machinery of the courts is used for bona fide purpose, and is not abused.

B3.    Summary Judgment: whether there is a triable issue or arguable defence

40.  Each of Diamond City, Gateway Asia and DW have given notice of intention to defend and had been served with the Statements of Claim in the CTFN Debt Recovery Actions.  The relevant facts have been verified in the 1^st Affirmation of Lie Ken Jie filed in HCA 85/2020, which contains the requisite statement of the deponent’s belief that there is no defence to the claims.  Accordingly, the preliminary requirements for summary judgment have been satisfied and the burden is on DW to show that there is a triable issue or an arguable defence on the merits.

41.  The only triable issues put forward by DW are whether CTFN is in breach of the Alleged CTFN/DC Variations or estopped from claiming that an event of default has arisen under the Gateway Asia Loan Agreement and the Diamond City Facility Agreement by reason of the Alleged Common Understanding, the Alleged Renewed Common Understanding and/or the Alleged 2^nd Offer/Representation.

42.  It is trite that DW’s assertions are to be taken in the context of the background which is either undisputed or beyond reasonable dispute.  This means that they should be tested against contemporaneous documents or circumstances to see if they are so incredible or contradicted that it becomes clear that the defence is a sham: Manciple Ltd v Char On Man [1995] 3 HKC 459 at 466G.

43.  Applying this test, I agree it is clear that the contemporaneous documents overwhelmingly contradict DW’s assertions.

(1)  Each of the Gateway Asia Loan Agreement and the Diamond City Facility Agreement stipulate a definite maturity date on which the CTFN Loans become due and payable.  Not even a hint of the Alleged Initial Investment Agreement or the Alleged Common Understanding (postponing indefinitely the repayment dates until some other event or occurrence) can be found in those agreements, the authenticity of which is expressly not disputed by DW.

(2)  In the case of the Gateway Asia Loan Agreement:

(a)  Prior to its execution, there was no mention of the Alleged Initial Investment Agreement or the Alleged Common Understanding in the emails circulating the draft agreements and guarantee for DW’s review.

(b)  Even if the Alleged Initial Investment Agreement or the Alleged Common Understanding existed, it would have been superseded by virtue of clause 9.5 of the Gateway Asia Loan Agreement and cannot give rise to any enforceable rights or obligations.

(c)  Further, before the Gateway Asia Loan became due, the parties had actually negotiated about its repayment since May 2016, long before any reference to the Alleged Potential Acquisition. In particular:

(i)  On or around 4 May 2016, there were email discussions about a “put-call” arrangement to repay the Gateway Asia Loan.  A term sheet was drafted and circulated internally on 4 July 2016.

(ii)  It was recorded in the minutes of a meeting held on 25 October 2016, which was attended by, inter alios, Mr Lie Ken Jie and DW, that DW proposed to extend the Gateway Asia Loan for another 24 months without having any “put-call” options.

(iii)  On 7 December 2016, Mr Lie Ken Jie circulated a draft loan extension agreement for DW’s review.  On the same day, DW replied that he would get back to Mr Lie Ken Jie as soon as possible.

(d)  Eventually, by the Extension Letter, the Gateway Asia Loan was extended to 29 November 2019 upon DW’s provision of additional security by executing the Gateway Asia Share Mortgage.

(3)   In the case of the Diamond City Facility Agreement:

(a)  Prior to its execution, DW sent an email to Mr Lie Ken Jie on 4 May 2016 recapping his discussion with Dr Cheng. According to DW, Dr Cheng agreed to lend him the Diamond City Loan “with a three-year term” and “an interest rate of 12% per annum”.  DW did not mention the Alleged Initial Investment Agreement or the Alleged Common Understanding.

(b)  DW had solicitors to review and comment on the terms of the Diamond City Facility Agreement and the Diamond City Guarantee, but nowhere was the Alleged Initial Investment Agreement or the Alleged Common Understanding referred to or manifested in the negotiations or comments.  The same goes for the comments on the Diamond City Share Charge.

(c)  Moreover, even if the Alleged Initial Investment Agreement or the Alleged Common Understanding existed, it would have been superseded by virtue of clause 10.5 of the Diamond City Facility Agreement and cannot give rise to any enforceable rights or obligations.

(4)  Furthermore, the Gateway Asia Guarantee, Gateway Asia Share Mortgage, Diamond City Guarantee and Diamond City Share Charge were seriously prepared documents that were formally executed by DW and to be enforced in accordance with their terms.  In particular, DW represented and warranted to CTFN that:

(a)  The Gateway Asia Guarantee and Diamond City Guarantee constitute legal, valid and binding obligations of DW enforceable in accordance with its terms (clause 5.1(c));

(b)  DW has the financial resources to perform his obligations under the Gateway Asia Guarantee and Diamond City Guarantee (clause 5.1(i)); and

(c)  The foregoing representations and warranties will be true and accurate throughout the continuance of the Gateway Asia Guarantee and Diamond City Guarantee (clause 5.2).

(5)  All these matters above are wholly inconsistent with the existence of the Alleged Initial Investment Agreement or the Alleged Common Understanding.

44.  Significantly, the Alleged Initial Investment Agreement and the Alleged Common Understanding are further directly contradicted by a WhatsApp message sent by DW to Mr Lie Ken Jie suggesting to meet to work out the repayment of the CTFN Loans and an email from DW dated 23 July 2019 summarising what was discussed in a meeting on 12 July 2019.  In DW’s summary, he clearly acknowledged that the CTFN Loans were “due” and that the debts were proposed to be settled by transferring Gateway Asia’s interest in Greenheart Group to CTFE and liquidating the assets of New Plantation.  This is a clear and unequivocal statement against his interest to which the courts would usually accord considerable weight.

45.  See also Recital (B) of the Gateway Asia Share Mortgage dated 21 November 2019, which provides that the “[Gateway Asia] Loan and all accrued interest thereon fell due for repayment on 30 October 2016, but remains due and unpaid”.  This was post-July 2019.

46.  In addition, I agree DW’s assertions are utterly unbelievable when tested against the following objective circumstances:

(1)  There are no contemporaneous documents at the time of entering into the CTFN Loans or subsequently to prove or corroborate the existence of the Alleged Initial Investment Agreement or the Alleged Common Understanding.

(2)  DW is a sophisticated businessman who has held senior positions in substantial companies.  It is unlikely that he would not have ensured that there are written records of important understandings or agreements which are contrary to what is formally stated in signed documents.

(3)  For example, if the Alleged Renewed Common Understanding and the Alleged 2^nd Offer/Representations were reached or made, DW would not have signed the Extension Letter, paragraph 1 of which unequivocally stated that Gateway Asia “has failed to repay CTFN the principal and the accrued interest on the [Gateway Asia Loan]”, in the absence of any written record to protect his interests.

(4)  Moreover, in the face of the Dec 2 Demand Letter and the Dec 4 Demand Letter, DW did not immediately raise any objection that the demands were in breach of or contrary to the Alleged Initial Investment Agreement, the Alleged Common Understanding, the Alleged Renewed Common Understanding and/or the Alleged 2^nd Offer/Representation. Instead, the Alleged CTFN/DC Variations was only asserted for the first time in the Jan 13 Letter and the Feb 24 Letter, whereas the Alleged Initial Investment Agreement, the Alleged Common Understanding and the Alleged Renewed Common Understanding were only asserted for the first time in the pleadings filed by DW.

47.  It is particularly noteworthy that in another case which shares a common background with that of the present matters (HCMP 2/2020), a business associate of DW had unsuccessfully attempted to restrain the lender from presenting a winding-up petition based on the non-repayment of a loan by relying upon an alleged “oral agreement” (again allegedly made with Mr Chong to the effect that notwithstanding the maturity date in the loan, it was not to be repaid before the conclusion of the negotiation for the Alleged Potential Acquisition by China Forestry).  In considering whether the company’s evidence establishes a bona fide dispute of the debt on substantial grounds (“substantial” here meaning that it has substance and is not frivolous), G Lam J (as he then was) observed that in the light of the parties’ execution of professionally-prepared, detailed legal documents stipulating the maturity date of the loan, it is “highly surprising that a serious agreement intended to have significant legal effect in relation to a very large sum of money would have been arrived at orally between the parties without any written record at all”, and it is “very difficult to accept, as between commercial parties, that after entering into detailed written loan agreements…which inter alia extended the Maturity Date…they would have come to an agreement indefinitely postponing the repayment date of a very substantial loan by reference to certain vague notion of ‘conclusion of the negotiation’ for certain acquisitions, without any written record or even a text message, email or internal note or memorandum”: China Latin (International) Engineering Company Limited v Keyes Global Holdings Limited [2020] HKCFI 977 at §§21-22.  As the context against which those allegations were considered and rejected is essentially the same as the context against which DW’s assertions are to be tested in the present case, the observations and reasoning of G Lam J are highly persuasive and forceful.

48.  Furthermore, DW’s reliance upon the Alleged CTFN/DC Variations (which is based on the Alleged 2^nd Offer/Representation) is obviously unarguable.  The Alleged CTFN/DC Variations, even if they were believable, are plainly ineffective as clause 9.8 of the Gateway Asia Loan Agreement and clause 10.8 of the Diamond City Facility Agreement expressly provide that any amendment thereof shall only be effective if made in writing and signed by all of CTFN, DW and Gateway Asia/Diamond City (as the case may be).  As the Alleged 2^nd Offer/Representation was, even on DW’s own case, “orally relayed” to DW by Mr Chong, and the Alleged CTFN/DC Variations were not agreed in writing and signed by the relevant parties, they are invalid by reason of the “no oral modification” clauses which are legally effective: MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] 2 WLR 1603 at §§10-16 per Lord Sumption JSC; and Hansom Finance Ltd v Lai Leong [2021] HKCFI 409 at §29 per Linda Chan J.  Accordingly, DW’s claim that CTFN acted in breach of the Alleged CTFN/DC Variations is completely unarguable.

49.  In the light of the matters above, it is clear that DW’s defence is patently frivolous and unbelievable.  Its sole object is to delay CTFN from obtaining judgment when in truth Diamond City, Gateway Asia and DW have no arguable defence to CTFN’s claims.  Summary judgment ought therefore to be entered against them, with costs on an indemnity basis.

50.  The obligation to indemnify and hold CTFN harmless against costs and expenses has been expressly agreed in clause 5.4 of the Diamond City Facility Agreement, clause 4.4 of the Gateway Asia Loan Agreement and clause 9.1 of the Diamond City Guarantee and the Gateway Asia Guarantee.  It is trite that the courts should be slow to disturb the parties’ agreement, although costs are always in the discretion of the court: Bank of China (Hong Kong) Ltd v Twin Profit Ltd (2012) 15 HKCFAR 560 at §§18-21.  In the circumstances, I would give effect to the parties’ agreement and order indemnity costs.

B4.    Striking-out

51.  CTFN relies on the grounds of frivolousness and abuse of process to dismiss the DW Declaration Actions and strike out the Statements of Claim filed therein and DW’s counterclaims in the CTFN Debt Recovery Actions.

52.  In this regard, it has been said that “it is permissible for a defendant to demonstrate by way of affidavit evidence that a plaintiff simply has no factual basis to support the cause of action pleaded in his claim.  If a defendant can demonstrate that then a claim should be struck out.  But inevitably in such circumstances a court must be very careful to ensure that the facts as alleged by the defendant are either entirely uncontroversial or cannot be the subject of any serious dispute.  A court should not allow a strike out simply on the basis that it considers the plaintiff's claim to be unlikely to succeed, or subject to some difficulty in proof”: Delco Participation BV v Chiho-Tiande Group Limited, HCA 3040/2015 (unrep, 27/06/2016) at §3 per DHCJ Manzoni SC.

53.  Similarly, Au-Yeung J said in Yifung Properties Limited and Ors v Manchester Securities Corp and Ors, HCA 1341 and 1359 of 2014 (unrep, 19/10/2015) at §12:

“A proceeding is ‘frivolous’ when it is not capable of reasoned argument, without foundation or where it cannot possibly succeed: Hong Kong Civil Procedure 2015, §18/19/8. Where a litigant brings a claim knowing that there is no substance in it or that it is bound to fail, or if the claim is on its face so manifestly misconceived that it can have no prospect of success, it may be deemed frivolous and an abuse of process: see ET Marler Ltd v Robertson [1974] ICR 72 at 76D-E. The court should see what the party in question knew or ought to have known if he had gone about the matter seriously: Cartiers Superfoods Ltd v Laws [1978] IRLR 315 at 317, §18.” (emphasis added)

54.  CTFN relies on the same evidence and arguments referred to above to demonstrate hereunder that DW’s case is frivolous, not capable of reasoned argument or is without foundation or cannot possibly succeed.  As this court determines that DW’s defence in the CTFN Debt Recovery Actions is frivolous and unbelievable, then by parity of reasoning, the bringing of his claims in the DW Declaration Actions (which are a mirror image of his defence in the CTFN Debt Recovery Actions) is plainly an abuse of process.  DW knew or must have known, in view of the overwhelming contemporaneous documents and circumstances to the contrary, that he has no factual basis to support his claims.

55.  Moreover, I accept that DW is estopped by deed from setting up the Alleged Initial Investment Agreement, the Alleged Common Understanding, the Alleged Renewed Common Understanding and Alleged CTFN/DC Variations, or contending that an event of default had not occurred under the Gateway Asia Share Mortgage, in which, as pointed out in paragraph 45 above, he acknowledged that the Gateway Asia Loan and all accrued interest thereon “fell due for repayment on 30 October 2016, but remains due and unpaid”.  By executing the Gateway Asia Share Mortgage as a deed, he is taken to have agreed to admit that this statement of fact in the recital (at paragraph (B)) is true and binding on him: Spencer Bower: Reliance-Based Estopped (5^th ed) at §§8.79-8.80.

56.  The DW Declaration Actions are therefore liable to be dismissed and the Statements of Claim filed therein to be struck out.

57.  As for DW’s counterclaims in the CTFN Debt Recovery Actions, they entirely overlap with his claims in the DW Declaration Actions.  It is plainly an abuse of process to pursue parallel actions on the same matters and claims.  As DHCJ Marlene Ng (as she then was) said in Weng Chi-Cheong v Barclays Capital Asia Limited, HCA 741/2016 (unrep, 6/12/2016) at §59:

“…P’s claims in LBTC3668/2016 repeated and duplicated P’s entire claim in the present action. In my view, it would be an abuse of process for P to maintain 2 legal actions on the same subject matter and the same claim. Halsbury’s Laws of Hong Kong at paragraph [90.0948] states that ‘[an] action may also be struck out where it is duplicitous in the sense that an action claiming materially the same relief has already been filed. Recently, HHJ Ko in Yuen Oi Yee Lisa v Charoen Sirivadhanabhakdi & ors also stated it is an abuse of process to commence multiple proceedings for the same claim. Plainly, in view of the existence of LBTC3668/2016, P’s claim in the present action was unnecessary and duplicitous. In my view, it would be an abuse of process to allow P to proceed with the present claim…”

58.  As the Writs of Summons in the DW Declaration Actions were issued beforeDW made his counterclaims in the CTFN Debt Recovery Actions, it is an abuse of process for DW to make the counterclaims whilst simultaneously pursuing the DW Declaration Actions.  On this ground alone, DW’s counterclaims in the CTFN Debt Recovery Actions ought to be struck out as an abuse of process, if not also on the basis that they are frivolous.

C.     THE IDEA PERFECT DEBT RECOVERY ACTION

C1.    Furthermaterial background to the Idea Perfect Debt Recovery Action

59.  Further background material to the Idea Perfect Debt Recovery Action is as follows:

(1)  VMS Group (“VMS”), the sole shareholder of Idea Perfect, has a longstanding business relationship with the “Chow Tai Fook” corporate group (“CTF Group”). VMS is principally engaged in private equity investments and corporate finance advisory services.

(2)  VMS provided financial advisory services to Newforest, and therefore became acquainted with DW.  Thereafter, DW approached Mr Chong (the Chairman of VMS and a director of Idea Perfect) for financial assistance, where Mr Chong arranged for Idea Perfect to provide to Gateway Asia a short-term bridging loan repayable within 3 months through a loan agreement dated 14 April 2016 (namely, the IPH Loan Agreement).

(3)  DW (sole shareholder of Gateway Asia) and Allen Chan (business partner of DW) acted as guarantors of Gateway Asia’s obligations under the IPH Loan Agreement.

(4)  The maturity date under the IPH Loan Agreement (“Maturity Date”) was extended for 7 times by 7 detailed, professionally drafted supplemental loan agreements:

Agreement Date	Agreement	Previous Maturity Date	New Maturity Date
14 July 2016	1st Supplemental Loan Agreement (which exhibits a 1st Amended and Restated Loan Agreement)	13 July 2016	13 October 2016
13 October 2016	2nd Supplemental Loan Agreement (which exhibits a 2nd Amended and Restated Loan Agreement)	13 October 2016	13 December 2016
13 December 2016	3rd Supplemental Loan Agreement (which exhibits a 3rd Amended and Restated Loan Agreement)	13 December 2016	13 April 2017
13 April 2017	4th Supplemental Loan Agreement (which exhibits a 4th Amended and Restated Loan Agreement)	13 April 2017	13 August 2017
24 August 2017	5th Supplemental Loan Agreement (which exhibits a 5th Amended and Restated Loan Agreement)	13 August 2017	13 February 2018
28 February 2018	6th Supplemental Loan Agreement (which exhibits a 6th Amended and Restated Loan Agreement)	13 February 2018	13 August 2018   SeeRecital Iand definition of “Maturity Date”
21 November 2019	7th Supplemental Loan Agreement (which exhibits a 7th Amended and Restated Loan Agreement)	13 August 2018	29 November 2019   SeeRecital K and definition of “Maturity Date”

(5)  On the signing of each Supplemental Loan Agreement, DW and Allen Chan signed deeds of confirmations to confirm that their guarantees remain in full force.

(6)  After the 6^th extension, on 4 April 2019, Idea Perfect issued a demand letter to Gateway Asia, DW and Allen Chan (“April Demand Letter”), declaring an event of default by reason of Gateway Asia’s failure to repay the outstanding loan which fell due on 13 August 2018 under the 6^th Supplemental Loan Agreement.

(7)  After the April Demand Letter was issued, DW together with his close business associate Lok Ho Ting (“Lok”) (whose corporate vehicle also obtained a substantial loan from a lender introduced by VMS) repeatedly pleaded for Idea Perfect’s leniency, and reassured Mr Chong that Gateway Asia would be able to raise funds to repay the debt as they were negotiating with China Forestry for its purchase of Gateway Asia’s interest in Greenheart (“Attempted China Forestry Fundraising”).

(8)  Eventually, upon the furnishing of further securities, namely (i) a second deed of share mortgage dated 21 November 2019 whereby DW charged his 100% shareholding in Gateway Asia in favour of Idea Perfect as mortgagee (ie the IPH Share Mortgage); and (ii) a second deed of mortgage dated 21 November 2019 whereby Gateway Asia charged its shareholding in Newforest in favour of Idea Perfect as mortgagee, Idea Perfect eventually agreed to a final extension of the Maturity Date to 29 November 2019, which led to the execution of the 7^th Supplemental Loan Agreement.

(9)  On the same date, DW also entered into inter alia a first deed of share mortgage over the Gateway Asia Shares with CTFN to secure the loans extended under the Gateway Asia Loan.

(10)  However, Gateway Asia failed to repay the Outstanding Debt of HK$72,887,536.79 by the Maturity Date under the 7^th Supplemental Loan Agreement (ie 29 November 2019).  The Outstanding Debt comprises (i) the outstanding balance of principal in the sum of HK$57,009,361.70; and (ii) balance of unpaid accrued interest in the sum of HK$15,858,175.09 as of 29 November 2019.

(11)  On 4 December 2019, due to Gateway Asia’s failure to repay the Outstanding Debt, Idea Perfect declared an event of default under the 7^th Amended and Restated Loan Agreement.

(12)  On 24 December 2019, CTFN and Idea Perfect appointed Koo and Thomas as the Receivers over the Gateway Asia Shares due to Gateway Asia’s default under the Gateway Asia Loan Agreement and the IPH Loan Agreement (as amended).

60.  In the premises, in HCA 92/2020, Idea Perfect claims against Gateway Asia (as principal debtor) for repayment of the Outstanding Debt under the IPH Loan Agreement (as amended).  Idea Perfect further claims against DW and Allen Chan for the Outstanding Debt as guarantors.

61.  Similar to his defence raised in the CTFN Debt Recovery Actions, DW’s defence to Idea Perfect’s claim for the Outstanding Debt is that:

(1)  In around May 2014, DW and Dr Cheng of the CTF Group purportedly orally agreed to jointly acquire the assets of Sino-Forest in 2 stages with a view to re-selling the acquired Sino-Forest assets for profits (ie the Alleged Initial Investment Agreement).

(2)  Part of the funds required to be contributed by DW for stage 1 of the acquisition was funded by the Gateway Asia Loan.

(3)  Part of the funds required to be contributed by DW for stage 2 of the acquisition was funded by the Diamond City Loan.

(4)  On the other hand, Gateway Asia obtained loans through the IPH Loan Agreement in April 2016 in the total sum of HK$212,989,361.70 to refinance the funds Gateway Asia borrowed from a third party in China in April 2015.

(5)  At the time when the Gateway Asia Loan Agreement, the IPH Loan Agreement and the Diamond City Facility Agreement were entered into, it was the common understanding amongst DW, Dr Cheng and Mr Lie Ken Jie (both on behalf of CTFE and CTFN), and Mr Chong (on behalf of Idea Perfect) that the loans advanced under the said agreements “were not repayable until after the completion of the [Alleged Initial Investment Agreement], that is, until the sale of the assets acquired pursuant to the said agreement” (ie the Alleged Common Understanding).

(6)  Since around March 2019, China Forestry, a PRC state-owned enterprise, expressed interest in acquiring certain Sino-Forest assets acquired under the Alleged Initial Investment Agreement (ie the Alleged Potential Acquisition).

(7)  In around July 2019, the Alleged Initial Investment Agreement and Alleged Common Understanding were reaffirmed.

(8)  On around 18 July 2019:

(a)  Mr Chong (on behalf of Idea Perfect) offered that notwithstanding the IPH Loan Agreement (as amended, including any further loan/security documents to be executed in connection thereto) and the April Demand Letter, the debt thereunder need not be repaid until the conclusion of the negotiation of the Alleged Potential Acquisition, to which DW (on behalf of Gateway Asia) accepted (the “Alleged Idea Perfect Oral Variation”).

(b)  Mr Chong relayed a similar offer from Dr Cheng, that notwithstanding the Gateway Asia Loan Agreement and the Diamond City Facility Agreement (including any further loan/security documents to be executed in connection thereto), the debt thereunder need not be repaid until the conclusion of the negotiation of the Alleged Potential Acquisition, to which DW (on behalf of Gateway Asia) accepted (ie the Alleged CTFN/DC Variations).

62.  Allen Chan essentially rides on DW’s case on the Alleged Common Understanding to deny that he is liable under the Guarantee.

63.  As to DW’s Counterclaim in HCA 92/2020 and his Statement of Claim in HCA 123/2020 as against Idea Perfect, relying on the Alleged Common Understanding and the Alleged Idea Perfect Oral Variation:

(1)  DW claims that by reason of the Alleged Common Understanding, the Alleged Idea Perfect Oral Variation and the Alleged CTFN/DC Variations, Gateway Asia’s non-repayment under inter alia the IPH Loan Agreement (as amended), the Gateway Asia Loan Agreement and the Diamond City Facility Agreement could not constitute any event of default, and thus the appointment of Receivers was wrongful.

(2)  In the premises, in HCA 92/2020, DW counterclaims against Idea Perfect for (i) a declaration that there was no event of default under the IPH Loan Agreement or the IPH Share Mortgage; (ii) a declaration that Idea Perfect is estopped from declaring an event of default under the IPH Loan Agreement or the IPH Share Mortgage; and (iii) damages to be assessed.

(3)  On the other hand, in HCA 123/2020, amongst other reliefs sought against CTFN, DW sought (i) the same reliefs against Idea Perfect which it sought in his Counterclaim in HCA 92/2020; and (ii) a declaration that the Receivers’ purported exercise of powers was invalid.

C2.    Summary Judgment

64.  Much of what I said about CTFN’s summary judgment application applies equally to the application by Idea Perfect.

65.  First, the Alleged Common Understanding, allegedly in existence since 2015, is plainly contradicted by the following contemporaneous documents and undisputed events:

(1)  The undisputed fact that Gateway Asia and Idea Perfect entered into 7 Supplemental Loan Agreements for 7 extension of the Maturity Date, expressly providing that the debt is due on the extended Maturity Date rather than until the completion of the Alleged Initial Investment Agreement, which is an unknown and indefinite date in the future.  In particular:

(a)  The IPH Loan Agreement and the supplemental agreements are all carefully drafted, detailed legal documents prepared by lawyers, with Messrs Troutman Sanders/Messrs Lau, Horton & Wise acting for Idea Perfect.

(b)  Specifically, Clause 29.4 further expressly provides that Gateway Asia was duly advised to seek independent legal advice in connection with the IPH Loan Agreement.

(c)  Throughout the negotiation of the 7^th Supplemental Loan Agreement, Gateway Asia/DW were all along legally represented.

(d)  In the premises, DW’s allegation that Idea Perfect is bound by the Alleged Common Understanding despite the parties’ execution of 7 professionally-drafted supplemental loan agreements (each providing for extensions of the Maturity Date to a specific date) is tantamount to saying that all such supplemental agreements are sham documents and of no legal effect.

(2)  The undisputed fact that the supplemental loan agreements expressly provide that no other amendment or variations are made except as expressly stated in the supplemental loan agreements.

(3)  The issuance of the April Demand Letter on 4 April 2019 by Idea Perfect to Gateway Asia, DW and Allen Chan, whereby:

(a)  Idea Perfect declared an event of default by reason of Gateway Asia’s failure to repay the outstanding loan by the Maturity Date of 13 August 2018 under the 6^th Supplemental Loan Agreement.

(b)  DW replied on behalf of Gateway Asia, fully accepting that Gateway Asia was liable to repay the outstanding loan and requested for time for Gateway Asia to raise funds to repay the loan.  This plainly contradicts the Alleged Common Understanding.

(c)  DW personally acknowledged receipt of the April Demand Letter and did not deny his liability to pay the outstanding loan as the guarantor.

(d)  Allen Chan did not respond to the April Demand Letter.

(4)  The minutes of a meeting held on 25 October 2016 (“25.10.16 Minutes”):

(a)  The meeting was attended by inter alios DW, Mr Lie Ken Jie of the CTF Group and one Mr Jack Chow of VMS where they discussed the repayment of loans due from DW/his entities to the CTF Group and VMS.

(b)  Paragraph 6 of the 25.10.16 Minutes expressly recorded that DW “anticipated repaying the outstanding bridge loan in December [2016]”.

(c)  It was confirmed by Mr Lai Ken Jie and Jack Chow that the “bridge loan” referred to the outstanding debt due from Gateway Asia to Idea Perfect under the IPH Loan Agreement (as amended).  In other words, DW told Idea Perfect that he/Gateway Asia would be able to repay the debt under the IPH Loan Agreement in December 2016.

(d)  The above plainly contradicts the Alleged Common Understanding, which was not mentioned in the contemporaneous 25.10.16 Minutes at all.

(5)  The Alleged Common Understanding was only raised for the first timein DW’s Defence and Counterclaim filed in HCA 92/2020.

(6)  Gateway Asia made partial repayments of the loan principal on 3 May 2016, 4 May 2016 and 12 February 2018, and duly paid interest up to 13 August 2018 and made partial interest payments thereafter.

66.  Second, the Alleged Idea Perfect Oral Variation, purportedly entered into in July 2019, is also plainly contradicted by the following contemporaneous documents and undisputed events:

(1)  Gateway Asia and Idea Perfect entered into the 7^th Supplemental Loan Agreement in November 2019, where:

(a)  The Maturity Date was extended to 29 November 2019, plainly contradicting the Alleged Idea Perfect Oral Variation which provides that the debt under the IPH Loan Agreement (as amended) shall not be repayable before the conclusion of negotiation in relation to the Alleged Potential Acquisition.

(b)  Clause 3.2 of the 7^th Supplemental Loan Agreement provides that no other amendment or variations are made except as expressly stated in the supplemental loan agreement.

(c)  Therefore, even if the Alleged Idea Perfect Oral Variation existed (which is denied by Idea Perfect), it was clearly superseded by the 7^th Supplemental Loan Agreement - any suggestion that the Alleged Idea Perfect Oral Variation existed despite the 7^th Supplemental Loan Agreement is tantamount to suggesting that the professionally-prepared 7^th Supplemental Loan Agreement (which Idea Perfect entered into under legal advice) is a sham or an unenforceable document.

(2)  The email dated 23 July 2019 from DW himself (“23.7.19 DW Email”) which summarised the discussions at a meeting on 12 July 2019 (“12.7.19 Meeting”) attended by inter alios DW, Mr Lie Ken Jie of the CTF Group, and one Vivian Wong of VMS.  In particular:

(a)  During the 12.7.19 Meeting, parties discussed the repayment of various loans owed by DW/his entities to Idea Perfect and CTFN.

(b)  In the 23.7.19 DW Email, DW himself stated inter alia that:

“…Vivian pointed out that there was another outstanding facility due from Gateway to VMS (code name "Project Green”) of approximately HK$60,000,000. Remy remarked that the total outstanding amount due from Gateway would be HK$124,149,488.53 plus HK$60,000,000, with a total sum of HK$184,149,488 and it would be mutually benefited if both loans could be repaid ASAP. I believed out that the 40% assets of Newforest should be more than sufficient to settle both loans and interest if the value was more than HK$0.3/share. Also, the Sheung Wan office was sold and the proceeds would be used to repay the Project Green loan which indicated our Intention to settle the Project Green loan…” (emphasis added)

(c) Vivian Wong had confirmed that the “outstanding facility due from Gateway to VMS … of approximately HK$60,000,000” referred to Gateway Asia’s outstanding debt under the IPH Loan Agreement (as amended).

(d) Crucially, the 23.7.19 DW Email, which was sent a few days after the Alleged Idea Perfect Oral Variation purportedly reached on 18 July 2019, made no mention whatsoever of the Alleged Idea Perfect Oral Variation, the Alleged Common Understanding, or the Alleged Potential Acquisition. Rather, DW clearly acknowledged that the debt under the IPH Loan Agreement (as amended) was due and payable.

(3) The Alleged Idea Perfect Oral Variation was only raised for the first time in the letter from DW’s solicitors KLLC dated 13 January 2020. Worse still, in the said letter, the Alleged Idea Perfect Oral Variation was alleged to have been reached in April 2019 when “negotiation with respect to the Potential Acquisition… was expected to be completed in late June 2019”, contradicting the terms of the version now put forward in DW’s pleaded case and affirmations.

67.  Third, the Alleged Common Understanding and the Alleged Idea Perfect Oral Variation are inherently implausible:

(1)  It is inherently implausible that Idea Perfect would orally agree to postpone the repayment of such a substantial loan by reference to vague notions of (i) the completion of the Alleged Initial Investment Agreement (as per the Alleged Common Understanding) or (ii) the conclusion of negotiation for the Alleged Potential Acquisition (as per the Alleged Idea Perfect Oral Variation), especially without any sort of written record at all.  When exactly would the repayment obligation be triggered?  Was repayment conditional upon Gateway Asia being paid pursuant to the Alleged Potential Acquisition?  None of such basic matters have been stated by DW.

(2)  It is also incredible and non-sensical that Idea Perfect would agree to be bound by such indefinite postponement of the Maturity Date notwithstanding express provisions in the further loan or security documents to be executed in connection with the IPH Loan Agreement.

(3)  This is particularly so when a total of 8 detailed and professionally prepared written loan agreements were signed by Gateway Asia and Idea Perfect.

(4)  Notably, according to the Alleged Idea Perfect Oral Variation, curiously it was Mr Chong/Idea Perfect who proposed that the Maturity Date be indefinitely extended to the conclusion of negotiation of the Alleged Potential Acquisition.  That isplainly incredible - while Idea Perfect would not mind if DW could raise funds from China Forestry, there is no reason why Idea Perfect would proactively offer (or agree) to indefinitely postpone the Maturity Date so as to ensure that DW could secure funds this way.  This is completely against business sense and common sense.

68.  In view of the above, it is clear that even if the 3^rd Affirmation of DW dated 26 April 2021 is considered on a de bene esse basis, that does not assist DW’s case at all:

(1)  The letter dated 12 April 2021 (the “CF Letter”) is neither here nor there.  It merely refers to China Forestry’s intention to continue with negotiations relating to potential acquisition of CTFE’s stake in Newforest, and it is unclear whether the potential deal in the CF Letter is the same as the Alleged Potential Acquisition.

(2)  In any event, as discussed in detail above, it is clear that DW’s case that the Maturity Date has been extended until the conclusion of negotiation relating to the Alleged Potential Acquisition is wholly incredible and unmeritorious.  As such, even if the CF Letter shows that negotiation regarding the Alleged Potential Acquisition is ongoing, that certainly does not assist DW (and Allen Chan). Indeed, the CF Letter further highlights the uncertainty as to when such negotiation will end, and how implausible and absurd it is for Idea Perfect to agree to extend the Maturity Date to the conclusion of such negotiation.

(3)  It is also difficult to understand how the photographs of Dr Cheng and DW exhibited to the 3^rd Affirmation may assist DW’s case at all. Even if there were direct/personal communications between Dr Cheng and DW, that does not mean the Outstanding Debt under the IPH Loan Agreement (as amended) is not due and payable.

C3.    Consequential striking-out of DW’s claims

69.  The crux of DW’s Counterclaim in the Idea Perfect Debt Recovery Actionand Statement of Claim in HCA 123/2020 is that there was no event of default under the IPH Loan Agreement (as amended) by reason of the Alleged Common Understanding and the Alleged Idea Perfect Oral Variation.

70.  As discussed in detail above, the Alleged Common Understanding and the Alleged Idea Perfect Oral Variation are plainly unsustainable and summary judgment should be granted in favour of Idea Perfect for the Outstanding Debt as against Gateway Asia, DW and Allen Chan.

71.  It must follow that DW’s Counterclaim in the Idea Perfect Debt Recovery Actionand Statement of Claim in HCA 123/2020 as against Idea Perfect, which is premised solely on the Alleged Common Understanding and the Alleged Idea Perfect Oral Variation, is also plainly and obviously unsustainable/frivolous and should be struck out.

D.     CONCLUSION

72.  By reason of the matters set out above:

(1)  In respect of CTFN, I order that (i) summary judgment be entered against Diamond City, Gateway Asia and DW in terms of the summonses in HCA 85/2020 and HCA 86/2020; (ii) DW’s counterclaim in HCA 85/2020 and HCA 86/2020 be struck out; (iii) the costs of and incidental to HCA 85/2020 and HCA 86/2020, including the costs of the summary judgment application and the striking-out application (and all costs reserved, if any), be paid by the defendants to the plaintiff, to be taxed on the indemnity basis if not agreed (with a certificate for 2 counsel); and (iv) DW’s Statement of Claim in HCA 123/2020 and HCA 221/2020 be struck out and the actions be dismissed as against CTFN, with costs to be taxed on the indemnity basis if not agreed (with a certificate for 2 counsel).

(2)  In respect of Idea Perfect, I order that (i) summary judgment be entered against Gateway Asia, DW and Allen Chan in terms of the summons in HCA 92/2020; (ii) DW’s counterclaim in HCA 92/2020 be struck out; (iii) the costs of and incidental to HCA 92/2020, including the costs of the summary judgment application and the striking-out application (and all costs reserved, if any), be paid by the defendants to the plaintiff, to be taxed on the indemnity basis if not agreed (with a certificate for 2 counsel); and (iv) DW’s Statement of Claim in HCA 123/2020 be struck out and the action be dismissed as against Idea Perfect, with costs to be taxed on the indemnity basis if not agreed (with a certificate for 2 counsel).

73.  Lastly, I express my gratitude to counsel for their helpful assistance in this matter.