RE ELION INTERNATIONAL INVESTMENT LTD

HCCW 648/2025

[2026] HKCFI 465

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 648 OF 2025

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J U D G M E N T

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1.  There is before the court a petition presented by Quam Finance Ltd (“Petitioner”) on 20 October 2025 seeking to wind up Elion International Investment Ltd[1] (“Company”) on insolvency ground.

Background facts

2.  The following facts are not in dispute.

3.  The petitioning debt arose out of a short-term loan facility and a margin loan advanced by the Petitioner to the Company in December 2019.

4.  In respect of the “Short Term Loan”:

(1)     Pursuant to a short-term loan facility agreement dated 19 December 2019 (as amended by a supplemental agreement dated 21 August 2020 and further amended by a 2^nd supplemental agreement dated 10 September 2021) (“Short Term Loan Agreement”), the Petitioner (as lender) advanced to the Company (as borrower) a term loan facility in the amount of HK$35,408,750.[2]

(2)     The Company failed to make repayment when the loan fell due on 18 June 2022.[3]

5.  In relation to the “Margin Loan”:

(1)     On 22 September 2017, the Company opened and maintained a margin account with Quam Securities Ltd (“Quam Securities”).[4]

(2)     In November 2017, Quam Securities entered into a Margin Loan Agreement with the Company whereupon it granted a margin facility of HK$140,000,000 to the Company for 2 years. 

(3)     At that time, the Company held 428,767,000 shares in China Oceanwide Holdings Ltd (stock code: 715) (“China Oceanwide” and “428m Shares”) which the Company agreed to charge as security for the Margin Loan (“Share Charge”).[5]

(4)     In February 2020, the Margin Loan was extended for another year subject to the condition that the Company shall repay the outstanding amount under a margin call by 30 June 2020.  However, the Company failed to meet the margin call.[6]

(5)     On 18 November 2020, the Company made a partial repayment of HK$43,749,805 and requested Quam Securities to extend the grace period for forced liquidation of the collateral until the end of 2020.[7]

(6)     Upon demands by Quam Securities, on 26 May 2021, the Company made a further partial repayment in the sum of HK$11,884,805.[8]

(7)     On 16 June 2021, Quam Securities and the Company signed a letter of conditional extension of credit limit up to HK$70,000,000 under the margin account, extending the final maturity date to 31 December 2021 (together with the earlier agreements in respect of the Margin Loan “Margin Loan Agreements”)[9]

6.  The Company failed to pay the agreed instalments and failed to repay the Margin Loan by the maturity date[10].

7.  On 31 August 2022, Quam Securities served a statutory demand on the Company requiring it to pay the outstanding amount under the Margin Loan[11].

8.  On 16 January 2023, Quam Securities enforced its rights under the Share Charge and sold 5 million shares in China Oceanwide to meet the margin shortfall[12].

9.  On 22 March 2024, another statutory demand was served by Quam Securities on the Company requiring it to pay the amount due under the Margin Loan[13].

10.  On 24 April 2024, Quam Securities presented a winding-up petition against Company in HCCW 245/2024 relying on the outstanding Margin Loan.[14]

11.  On 9 August 2024:[15]

(1)     Quam Securities assigned all its rights and benefits under the Margin Loan Agreements[16] to the Petitioner; and

(2)     The Company and the Petitioner entered into a settlement deed (“Settlement Deed”)[17] wherein the Company acknowledged that as at 29 December 2023, the “Outstanding Short Term Loan Amount” and the “Outstanding Margin Loan Amount” was HK$135,669,008.58 (“Unpaid Sum”)[18], and agreed to pay HK$82,523,957.46 (“Settlement Amount”) in full and final settlement of the Unpaid Sum, to be paid by 9 instalments as follows:

Instalment	Due Date	Amount Due (HK$)
1	17/6/2024	1,000,000
2	31/7/2024	1,000,000
3	30/8/2024	1,000,000
4	30/9/2024	8,000,000
5	31/12/2024	10,000,000
6	30/6/2025	10,000,000
7	31/12/2025	10,000,000
8	30/6/2026	15,000,000
9	31/12/2026	26,523,957

12.  The Settlement Deed provides inter alia as follows:

(1)     The Petitioner undertakes to procure Quam Securities to withdraw the winding up petition in HCCW 245/2024 no later than 14 days after the Effective Date with costs in favour of Quam Securities (clause 3.2).

(2)     Non-payment by the Company on the due date of any amount payable under the Settlement Deed constitutes an Event of Default (clause 13.1).

(3)     Subject to clause 14.2, the Settlement Deed shall lapse and all obligations, rights and liabilities of the Parties hereunder shall terminate at the election of the Petitioner and by notice to the other Parties following an Event of Default which is continuing (clause 14.1).

(4)     The Settlement Deed will cease to have any further effect on the date on which it is terminated under clause 14.1 save for clauses 13-16, 21 and 22 (clause 14.2).

(5)     The Settlement Deed does not amend or waive any of the Petitioner’s rights under the “Transaction Documents[19]” or any other documents and agreements unless and until the date the Petitioner has received the Settlement Amount in full and all other amounts the Petitioner may be entitled pursuant to the Deed (clause 15.1).

13.  Pursuant to the Settlement Deed, Quam Securities and the Company jointly applied by Consent Summons dated 27 August 2024 for leave to withdraw the winding-up petition which was granted by the court on 4 September 2024.[20]

14.  In breach of the Settlement Deed, the Company failed to pay the 4^th and 5^th instalments by 30 September and 31 December 2024 respectively.  Despite the Petitioner’s repeated demands, the Company did not make any further repayment. 

15.  By letter to the Company dated 26 August 2025, the Petitioner exercised its right to terminate the Settlement Deed.[21]

16.  By statutory demand served on the Company on 1 September 2025 (“SD”), the Petitioner required the Company to pay HK$160,200,257.01, being the amount due and payable as at that date (“Debt”)[22].

17.  By letter dated 18 September 2025 to Messrs. ONC Lawyers, the Petitioner’s solicitors (“ONC”), Messrs. Ashurst Hong Kong (“Ashurst”) on behalf of the Company requested the Petitioner to withdraw the SD on the following grounds (“Ashurst’s Letter”):

(1)     The Margin Loan Agreements and the Short Term Loan Agreement “were entered into as part of a broader investment and mutual assistance arrangement between [the Company] and Quam group companies” (“Arrangement”).

(2)     In accordance with the Arrangement, since 2015, the Company had invested HK$4 billion in China Oceanwide, an entity “affiliated with or closely related to” the Petitioner, of which HK$1.83 billion was financed by the Margin Loan Agreements.  The investment resulted in significant loss to the Company, “with an estimated 81% depreciation in stock value, amounting to a loss of at least HK$4.7 billion”[23] (§§3.1-3.3).

(3)     Mr Wang Weitao (“Wang”), the sole director of the Company, requested Mr Henry Liu (“Liu”)[24] of Quam group to buy back the shares in China Oceanwide, and Liu considered the request reasonable and said he would seek solution to address Wang’s concerns.  The Company reserves the right to claim the loss suffered “in connection with its investment in the Quam group and the [Arrangement]”, including the Margin Loan Agreements and the Short Term Loan Agreement (§§3.4-3.5).

(4)     The SD is “defective” as it stated that the Petitioner “did not become entitled to the [Debt] by way of assignment”, which is inconsistent with §18 of the SD (§5).   

18.  On 20 October 2025, the Petition was presented.  On 24 October 2025, the Petitioner filed and served a verifying affidavit in support of the Petition. 

19.  Pursuant to rule 32(1) of the Companies (Winding Up) Rules (Cap. 32H), the Company was required to file its affirmation in opposition by 5 November 2025.

20.  On 19 December 2025, Ashurst filed Wang 1^st and issued a summons seeking leave to file Wang 1^st out of time.

21.  At the callover hearing of the Petition before Master Hui on 24 December 2025:

(1)     The Petition and the summons were adjourned to 31 December 2025.

(2)     The Master observed that if the Petitioner intends to seek payment of the Debt into court as a condition for Company’s application for retrospective leave to file Wang 1^st, the Petitioner should make a cross-application.

22.  In light of Master Hui’s comment, the Petitioner issued a cross-summons on the same day.

23.  At the hearing on 31 December 2025, Master SP Yip adjourned the Petition, the Company’s summons and the Petitioner’s cross-summons to this hearing.

Summons for leave to file Wang 1^st

24.  Mr Alexander Burg, counsel for the Petitioner, submits that the court should only grant leave to the Company to file Wang 1^st out of time for the following reasons:

(1)     Where the company fails to file its affirmation in opposition in accordance with the time limit imposed under rule 32(1), it is the usual practice of the Companies Court to require payment of the amount (or at least a substantial portion) of the petitioning debt into court as a condition for adducing evidence out of time to contest the petition (Re Dexin China Holdings Co Ltd [2024] HKCFI 1610, §12).

(2)     The burden is on the Company to show good reason as to why leave should be granted without the usual condition (Re Ever Harmony Enterprises Ltd [2025] HKCFI 3351, §28).

(3)     The delay in filing Wang 1^st is substantial and inexcusable in that:

(a)     Pursuant to rule 32(1), the Company shall file its evidence in opposition by 5 November 2025.  However, it was only until 19 December 2025, more than 6 weeks after the deadline, that the Company filed Wang 1^st.

(b)     Although the Company complains that the Petitioner’s verifying affidavit was only served upon it on 6 November 2025, on its own case, it took no action until 19 December 2025, there was still a 35-day delay in filing Wang 1^st. 

(c)     The delay is inexcusable as Ashurst has been acting for the Company, and had already raised the grounds in opposition to the SD on 18 September 2025.[25]  The explanation that the Company required time to collate information[26] is disingenuous.   

25.  Mr Cedric Yeung, counsel for the Company, contends that the court should give leave to the Company to file Wang 1^st out of time, without the usual condition given that:

(1)     There are good reasons for the delay: (a) the Petition was only served on the Company’s solicitors on 6 November 2025, by which time the deadline for filing opposition evidence under rule 32 already expired; (b) this case concerns events dating back to 2015, time was needed for the Company to identify, retrieve and collate the documents and records of communication to substantiate its case[27]; and (c) the Company was able to outline its grounds of opposition in September 2025 is neither here nor there – it still took time for all the supporting documentation to be located.

(2)     The Petitioner has not suffered any real prejudice.  The issue is whether the delay in seeking time extension has caused any delay in the determination of the petition (Re Khingan Resources Ltd[2020] HKCFI 2717, §2).  No such prejudice  would be occasioned as the Petitioner has had a month to consider Wang 1^st (and has been aware of the grounds of opposition since September 2025), and could have filed reply evidence if it wished.  Given the substantial disputes on the Debt, it is far-fetched for the Petitioner to expect obtaining a substantive order at the first hearing in any event.

(3)     Imposing the usual condition would be unduly harsh to the Company, which has substantial defences to which the Petitioner has no valid answer (Re Khingan §10).

26.  In my judgment, there is no proper basis for the court to depart from the usual practice of granting leave to the Company to file Wang 1^st  conditional upon paying the debt (or a part thereof) into court, which I consider should be 50% of the Debt:

(1)     The amount represents the outstanding Settlement Amount which the Company had admitted liability to pay under the Settlement Deed less the first 3 instalments paid. 

(2)     I do not think that there is a good reason to justify a delay of 6 weeks in filing Wang 1^st when the Company, with the benefit of legal advice, had been dealing with:

(a)     the Petitioner’s claim for payment of the outstanding Short Term Loan and the Margin Loan since at least 24 April 2024 (after the petition in HCCW 245/2024 had been presented and served);

(b)     the negotiations on the terms of the Settlement Deed since at least August 2024;

(c)     payment of the Settlement Amount since May 2024; and

(d)     the SD served upon the Company on 1 September 2025. 

(3)     The Company was able to raise its grounds in opposition to the SD on as early as 18 September 2025.  It would have been a straight-forward matter for the Company to set out those grounds in an affirmation and exhibit any documents in support of its allegations. 

27.  It is not necessary for the court to grant leave for the Company to file Wang 1^st out of time for the reasons which will become apparent.

Whether the Debt is bona fide disputed on substantial grounds

28.  I have considered the grounds raised by the Company in Wang 1^st on a de bene esse basis.  I do not think that the Company has discharged the burden of showing that there is a bona fide dispute on substantial grounds in respect of the Debt. 

29.  The principles are not in dispute:

(1)     A company which disputes a petitioning debt bears the burden to show a bona fide dispute on substantial grounds.  Sufficiently precise evidence must be adduced to this end.  Whilst the Companies Court is not precluded from examining the evidence and taking a view on whether substantial disputes exist, it does not try the disputes on affidavits (Re Hongkong Bai Yuan International Business Co Ltd [2022] HKCFI 960, §23).

(2)     The court will consider whether the company’s assertions are believable against undisputed or indisputable background  (Re GW Electronics Co Ltd, HCCW 81/2016, 30 December 2016, §4(5)).  Where oral evidence is required to decide a real and substantial dispute of fact, the petition will be dismissed (Re Leung Cherng Jiunn [2016] 1 HKLRD 850, CA, §27(5)). 

(3)     Once a debt has been acknowledged, it would be harder for a company to satisfy the court that it has a bona fide dispute on substantial grounds.  The evidence and argument relied on to establish a substantial ground in opposition will have to be compelling (Re Yueshou Environmental Holdings Ltd, HCCW 142/2013, 16 July 2014, §§9-10)). 

30.  The Petitioner’s case is straight-forward.  It relies on the Settlement Deed whereby the Company acknowledged and admitted liability to pay the Unpaid Sum, being the outstanding amount due and payable under the Margin Loan Agreements and the Short Term Loan Agreement. The Debt represents the amount due as at the date of the SD.  As the Company failed to comply with the SD, it is deemed insolvent by virtue of s.178(1)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32).

31.  On the Company’s case, there was a “Cooperation Arrangement” between the Company and the Petitioner which is said to arise in this way:

(1)     China Oceanwide was listed on The Stock Exchange of Hong Kong Ltd (“HKEx”) until it was delisted on 24 April 2025.[28] 

(2)     Liu had been an executive director and deputy Chairman of China Oceanwide since November 2014 and January 2020 respectively.[29]

(3)     The Petitioner and Quam Securities are wholly owned subsidiaries of Quam Plus International Financial Ltd[30] (“Quam Plus”).  Quam Plus and its subsidiaries (“Quam Group”) carried on business in providing financial services. 

(4)     In 2015, at the request of its controlling shareholder, the Company began to invest in China Oceanwide and opened a margin account at Haitong International Securities Co Ltd (“Haitong”) to finance the purchase, with the expectation that Oceanwide Group would reciprocate by investing in the Company’s group [31]. 

(5)     Between 8 May 2015 and 11 May 2016, the Company invested in and became the holder of 428m Shares through a combination of subscriptions and purchase in the market in that:

(a)     On 8 May 2015, the Company subscribed for 260,144,000 shares;

(b)     Between 14 and 20 August 2015, the Company acquired 25,726,000 shares from the market;

(c)     On 2 March 2016, the Company subscribed for a further 142,935,000 shares; and

(d)     On 11 May 2016, the Company sold 38,000 shares[32].

(6)     In February 2017, the group of China Oceanwide (“Oceanwide Group”) acquired a controlling stake in Quam Group, and Liu became an executive director of Quam Plus.[33]

(7)     Since February 2017, China Oceanwide and Quam Plus were “connected entities” with Liu being a common director.[34]

(8)     Since September 2017, the share price of China Oceanwide had collapsed, which created a risk that Haitong would make margin call and the Company would have to liquidate the 428m Shares to meet the call, which could lead to a further decline in share price[35].

(9)     At that time, Liu suggested to Wang that the Company should continue to hold the 428m Shares “in order to support, stabilise and (where possible) enhance its share price” (“Cooperation Arrangement”).[36]

(10)     In furtherance of the Cooperation Arrangement, (a) China Oceanwide would coordinate off-market funds under its control to provide loans to supplement and maintain the Company’s position in Haitong margin account; (b) if a margin call was triggered, Liu would arrange for entities of Quam Securities and/or China Oceanwide to advance funds to the Company so as to satisfy any margin requirements; and (c) the Company would not be required to make any payment in respect of any margin call[37]. 

(11)     Liu assured Wang that “the Company would not bear ultimate liability for any loans coordinated by China Oceanwide under the Cooperation Arrangement; and he would coordinate with key officers within the Quam Group and the Oceanwide Group to that end, including to ensure that no enforcement action would be taken against the Company” (“Assurances”).[38] 

(12)     By the end of November 2017, the share price of China Oceanwide continued to fall and a margin call from Haitong became imminent.  In furtherance of the Cooperation Arrangement, the Company obtained the Margin Loan from Quam Securities and transferred the 428m Shares to Quam Securities as collateral (“Quam Account”).[39]

(13)     In August 2019, the share price of China Oceanwide continued to fall and outstanding Margin Loan exceeded the credit limit of the Quam Account.  In December 2019, Liu proposed to Wang that in order to maintain the Cooperation Arrangement, the Petitioner would provide funds to enable the Company to meet the margin shortfall, and the funds would be advanced as short term loan, and the parties entered into the Short Term Loan Agreement in December 2019.[40]

(14)     Had the Company not relied on the Assurances (and but for the Cooperation Arrangement), it would not have entered into the Margin Loan Agreement and the Short Term Loan Agreement[41].

32.  On the basis of the above facts,Mr Yeung argues that there is a bona fide dispute on substantial grounds in respect of the Debt on “illegality ground” and “collateral contract ground”. 

33.  The argument on “illegality ground” is put in this way:

(1)     When applying the doctrine of common law illegality, the court considers whether it would be harmful to the integrity of the legal system to allow a claim involving an illegal act, taking into account (a) the underlying purpose of the prohibition being transgressed; (b) any relevant public policies which might be rendered ineffective or less effective by denial of the claim; and (c) the possibility of overkill unless the law is applied with a due sense of proportionality (Monat Investment Ltd v All Person(s) in Occupation of Part of No 16 Ma Po Tsuen[2023] 2 HKLRD 1311, §36.4).

(2)     The illegality in the present case stems from, inter alia, s.275(1)(b) of the Securities and Futures Ordinance (Cap 571) (“SFO”), which prohibits price rigging where a person “enters into or carries out, directly or indirectly, any fictitious or artificial transaction or device, with the intention that, or being reckless as to whether, it has the effect of maintaining, increasing, reducing, stabilizing, or causing fluctuations in, the price of securities … that are traded on a relevant recognized market…”. 

(3)     The term “artificial or fictitious transaction” in this context refers to a transaction which would not have been entered into but for the purpose of price rigging, and which therefore does not reflect genuine supply and demand (Securities & Futures Ordinance (Cap 571) – Commentary and Annotations 2025, §275.03).  It covers transactions intended to have effect according to its terms (s.275(3) of SFO).  The legislative aim is to protect the market for securities against activities which will result in artificial or managed manipulation (North v Marra Developments Ltd (1981) 148 CLR 42, 59, per Mason J). 

(4)     Whilst s.304 of the SFO provides that “a transaction is not void or voidable by reason only that a contravention of” inter alia s.275, this does not preclude the common law illegality doctrine, in that the court may refuse to enforce the contract where it would help further illegal acts, particularly if no third parties are involved in the impugned transaction (Wong Lung v The Chinese University of Hong Kong Employees’ Credit Union,HCA 1122/2010, 2 November 2016, §79). 

(5)     Notably, in Re Tai Shing International (Holdings) Ltd,HCCW 83/2014, 26 March 2015, Anthony Chan J (as he then was) struck out a winding-up petition based on illegality arising from, inter alia, market misconduct contrary to the SFO (§§43, 49).

(6)     In the present case, the object of the Cooperation Arrangement was, by definition, price rigging.  Its existence is borne out by an array of objective and documentary evidence and is plainly believable:

(a)     China Oceanwide and Quam Plus were connected entities, with Liu being a common executive director.  This lends credence to the notion that Liu procured Quam Group to support the share price of China Oceanwide.  Liu (being an executive director and senior management of Quam Plus) had authority to act for the Petitioner and Quam Securities (being subsidiaries), especially where they did act in accordance with Liu’s directions by providing financial assistance to the Company (Bowstead & Reynolds on Agency,23^rd edn, 2024, §1-030). 

(b)     The contemporaneous WeChat records show that Liu coordinated with Quam Group’s officers to provide the Company with financial support for holding onto its China Oceanwide shares: (i) a few days before execution of the Margin Loan Agreement, Liu introduced the Company to Stanley Ng (Petitioner’s officer) as being responsible for the Company’s “project” (项目), and said they had already held a meeting and would immediately make arrangements for the Company; and (ii) it was Liu who arranged the Short Term Loan so as to meet the Company’s margin shortfall in Quam Account – these support the Company’s case that the Debt came into being as part of the Cooperation Arrangement for the Company to maintain its 428m Shares.

(c)     Contemporaneous minutes of a meeting between Liu and the Company show that its investment in China Oceanwide was due to “mutual assistance” (“兄弟企业相互帮忙的本意”).  It is thus wholly unsurprising that Liu would have asked the Company to maintain its China Oceanwide’s shares to avoid a collapse of its share price.

(d)     The objective facts are that (i) contrary to what an arm’s length investor would have done, the Company have held onto its 428m Shares since 2015 despite the continuous fall in its share price[42] (ii) contrary to what an arm’s length securities broker would have done, Quam Securities did not liquidate the 428m Shares despite the “maximum credit limit” of the Margin Account having been breached since January 2022[43]; and (iii) apart from the Debt, Liu procured other loans from China Oceanwide’s affiliates to meet the margin shortfalls in the Quam Account[44].  None of these would have made sense but for the Cooperation Arrangement.

(7)     It is at least credible (if not compelling) that the Debt came into being in furtherance of the Cooperation Arrangement, in that the Margin Loan and the Short Term Loan were devices for enabling the Company to hold the 428m Shares, and thus artificially maintained its share price.  On this basis, the Debt is unenforceable because (a) to allow its enforcement would lend assistance to a price rigging scheme, contrary to the legislative intent of s.275 of SFO; and (b) there is no suggestion of any countervailing public policy or “overkill” which should allow the Debt to be enforced.

34.  As for the “collateral contract” ground, Mr Yeung contends that:

(1)     Pre-contractual assurances may give rise to a collateral contract where one party refuses to enter into the main contract unless the other promises not to enforce a term of the written agreement (Chitty on Contracts, 36^th ed., 2025, §16-018).  The courts are more willing to find such agreements in modern days (Bank of China v Fung Chin Kan(2002) 5 HKCFAR 515, §55, per Litton NPJ).

(2)     As part and parcel of the Cooperation Arrangement, Liu assured the Company that it would not bear ultimate liability for loans advanced in furtherance thereof, but for which the Company would not have obtained the Margin Loan and the Short Term Loan, and would have liquidated the 428m Shares when its price kept falling[45].  This is credible in light of the objective and documentary evidence set out in the preceding paragraph.

35.  In my view, neither the illegality ground nor the collateral ground constitutes a bona fide dispute on substantial grounds in respect of the Debt. 

36.  First, as submitted by Mr Burg, the doctrine of contractual estoppel applies, the Company is precluded from disputing its liability to pay the Unpaid Sum.  The principle has been stated by the Court of Final Appeal in Ng Yuk Pui Kelly v Ng Lai Ling Winnie(2021) 24 HKCFAR 401, §§25-27:

“25. Thus, in the leading case of Peekay Intermark Ltd v Australia and New Zealand Banking Group Limited [46], Moore-Bick LJ explained the doctrine’s operation reference to what was agreed between the contractual parties:

There is no reason in principle why parties to a contract should not agree that a certain state of affairs form the basis for the transaction, whether it be the case or not. For example, it may be desirable to settle a disagreement as to an existing state of affairs in order to establish a clear basis for the contract itself and its subsequent performance. Where parties express an agreement of that kind in a contractual document neither can subsequently deny the existence of the facts and matters upon which they have agreed, at least in so far as concerns those aspects of their relationship to which the agreement was directed. The contract itself gives rise to an estoppel: see Colchester Borough Council v Smith [1991] Ch 448, affirmed on appeal [1992] Ch 421.

….

27. Finally, we should mention First Tower Trustees Ltd v CDS (Superstores International) Ltd[47], in which Lewison LJ stated:

It is now firmly established at this level in the judicial hierarchy that parties can bind themselves by contract to accept a particular state of affairs even if they know that state of affairs to be untrue. This is a particular form of estoppel which has been given the label ‘contractual estoppel’. Unlike most forms of estoppels it requires no proof of reliance other than entry into the contract itself. Thus as a matter of contract parties can bind themselves at common law to a fictional state of affairs in which no representations have been made or, if made, have not been relied on.” (underlined added)

37.  The Company’s allegations on illegality and collateral contract (i.e. Assurances) fly in the face of the following statements, acknowledgments and representations made by the parties as recorded in the Settlement Deed:

(1)     Recitals (I) and (J) record the sums due and payable by the Company under the Short Term Loan and Margin Loan respectively.

(2)     Recital (L) records that “the Unpaid Sum remains outstanding, and any defaults under the [Short Term Loan] and [Margin Loan] … have not been waived and are continuing”.

(3)     In clause 6.1, the Company “confirms and acknowledges … that the Principal and Interest are indebted by the [Company] to the [Petitioner] without any disputes” (underlined added).

(4)     Under clause 6.3, the Company represented that “The obligations expressed to be assumed by it in each Settlement Document are, legal, valid, binding and enforceable obligations” (underlined added).

38.  The fact that the above terms are contained in the Settlement Deed instead of the Short Term Loan Agreement and the Margin Loan Agreements is immaterial, for parties to an agreement may conclusively agree the validity of another contract (Contractual Estoppel, 2^nd ed., 2022,§5.05).

39.  Mr Burg refers to the earlier decision in Re Tse Wai Ip [2025] HKCFI 5399 which is on all fours with the present case:

(1)     The parties entered into a “Settlement Agreement” by which they agreed to settle an earlier bankruptcy proceedings (§§17-18).  Recital (E) recorded the debtor’s acknowledgement of his indebtedness to the petitioner (§30). 

(2)     After execution of the Settlement Agreement, the petitioner applied for and obtained leave to withdraw the petition (§19).  The debtor failed to pay in accordance with the Settlement Agreement (§20).  The petitioner presented another bankruptcy petition against the debtor. 

(3)     The debtor argued that the underlying debt was tainted with illegality and that there was a breach of collateral agreement to the underlying debt (§24).

(4)     In light of Recital (E), this Court held that the debtor was estopped from denying his liability to pay the debt (§30).

40.  The Company, having acknowledged and confirmed that the Company was indebted to the Petitioner under the Short Term Loan and the Margin Loan “without any disputes”, is estopped from denying its liability to pay the Debt. 

41.  Mr Yeung argues that contractual estoppel has no application to the Debt given that:

(1)     Contractual estoppel is inapplicable unless the contract subsists (Contractual Estoppel,2^nd edn, 2022, §2.61; Riddle v United Service Organisation Ltd[2004] EWHC 1263, §19).

(2)     The Settlement Deed has been terminated by the Petitioner on 26 August 2025 pursuant to clause 14.1 thereof.[48]

(3)     The Settlement Deed itself derives from the illegal Cooperation Arrangement and is unenforceable[49] – contractual estoppel does not help in this scenario (Contractual Estoppel, §5.07).

(4)     Re Tse Wai Ipis distinguishable – the Settlement Agreement giving rise to the petitioning debt was not terminated (§§18, 21) and there was no basis to find that the Settlement Agreement was illegal (§28).

42.  I am unable to accept Mr Yeung’s arguments.  As pointed out by Mr Burg:

(1)     Clause 14.2 of the Settlement Deed provides that the Deed will cease to have any further effect on the date on which it is terminated under clause 14.1, save for clause 13-16, 21 and 22.

(2)     Clause 14.4 further provides that each party acknowledges and agrees that upon termination of the Settlement Deed:

(a)     the outstanding Unpaid Sum together with interest accrued since 29 December 2023 shall become due and payable;

(b)     the Standstill Period ends immediately;

(c)     the Petitioner shall be entitled to take legal action in respect of the outstanding Unpaid Sum together with interest; and

(d)     the Petitioner shall be entitled to enforce their rights under inter alia the Short Term Loan Agreement and the Margin Loan Agreements.

43.  Further, clause 15.3 of the Settlement Deed provides that if the Deed is terminated by any party for any reason, the Petitioner’s rights under the “Transaction Documents shall be fully exercisable without restrictions”.  The combined effect of clauses 14.2, 14.4 and 15.3 is that upon termination of the Settlement Deed, the Petitioner is entitled to enforce its rights under the Short Term Loan Agreement and the Margin Loan Agreements and seek repayment of the Debt.

44.  More importantly, I am unable to see how the Short Term Loan Agreement and the Margin Loan Agreements can be said to have been made for the alleged purpose of “price rigging”:

(1)     On the Company’s case, the 428m Shares were acquired in 2015/2016, before the Margin Loan Agreement was entered into with Quam Securities in November 2017 (see §31(5) above). 

(2)     On the Company’s case, by September 2017, the Company already faced the risk of a forced liquidation of the 428m Shares.  There is no evidence, nor has it been explained, how the Company could sell the 428m Shares without first repaying the margin loan owed to Haitong. 

(3)     The Company was only able to repay the margin loan owed to Haitong after it had entered into the Margin Loan Agreement with Quam Securities in November 2017.  As part of the Margin Loan Agreement, the 428m Shares were provided as security for the Margin Loan by way of the Share Charge.  Again, unless the Company was able to repay the Margin Loan, it was not at liberty to sell the 428m Shares. 

(4)     There is no basis for the Company to allege that the acquisition of the 428m Shares (which took place in 2015/2016) or the continued holding of the 428m Shares by the Company, whether before or after the Margin Loan Agreement, could have been done for the alleged “price rigging” purpose. 

45.  Second, the Company has not been to show how the alleged Cooperation Arrangement and the Assurances would bind the relevant entitles within the so-called Guam Group when:

(1)     Liu was only an executive director of Quam Plus. He acting alone had no authority to enter into the Cooperation Arrangement or gave the Assurances on behalf of Quam Plus, a listed company whose power could only be exercised by its board of directors.

(2)     Liu did not have authority to act on behalf of Quam Securities, which is an entity separate from Quam Plus.  The officer authorised to sign the Margin Loan Agreement on behalf of Quam Securities was not Liu.

(3)     Liu did not have authority to act on behalf of the Petitioner, which is another entity separate from Quam Plus.  The officer authorised to sign the Short Term Loan Agreement on behalf of the Petitioner was not Liu. 

46.  Third, the alleged Assurances is wholly incredulous and is contradicted by:

(1)     The Company’s own act in (a) making repayment of the Margin Loan; (b) entering into formal agreements with Quam Securities and the Petitioner for the purpose of extending the repayment dates of the Margin Loan and the Short Term Loan; and (c) entering into the Settlement Deed acknowledging and admitting liability to pay the Margin Loan and the Short Term Loan; and

(2)     Quam Securities’ act in (a) selling 5 million shares in China Oceanwide to meet the margin call in January 2023, (b) demanding the Company to repay the Margin Loan, and (c) presenting winding-up petition against the Company in HCCW 245/2024.

47.  Fourth, even if, contrary to my view, there is any basis to suggest that the Company engaged in price rigging activities and somehow Liu was involved in such activities, at the highest, it is the persons involved in the price rigging activities who have acted in contravention of s.275 of the SFO.  There is no basis to attribute their conduct (or misconduct) to Quam Securities or the Petitioner. 

48.  Fifth, on the Company’s own case, the alleged Cooperation Arrangement only come down to how Liu assisted the Company to obtain re-financing and loan to meet the margin calls owing to a fall in the share price of China Oceanwide.  I am unable to see how the entities involved in giving such financing pursuant to the Margin Loan Agreements and the Short Term Loan Agreement (i.e. Quam Securities and the Petitioner) can  be said to have been involved in alleged price rigging or why the advancement of such loans would have the effect of rendering the Margin Loan Agreements and the Short Term Loan Agreement to become illegal. 

49.  Sixth, putting the Company’s case to the highest, the alleged illegality was something well known to its sole director (Wang) at the time he entered into the Settlement Deed, but the Company considered it appropriate to acknowledge and confirm that the Margin Loan Agreements and the Short Term Loan Agreement were valid and legal.  There is no reason why the Company, having benefited from the Settlement Deed and avoided a winding-up order being made against it, should be allowed to retract from, and act inconsistently with, its acknowledgement and confirmation given to and relied on by the Petitioner.

50.  As the Company is deemed insolvent and has failed to discharge the burden of showing that there is a bona fide dispute on substantial grounds in respect of the Debt, the Petitioner is entitled to seek an immediate winding up order against the Company. 

51.  I make a usual winding up order against the Company.