RE YAU WING KEUNG

HCB 1641/2025

[2025] HKCFI 5551

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 1641 OF 2025

_______________

_______________

________________

J U D G M E N T

________________

I.  INTRODUCTION

1.  Great Top Kingdom Limited (“Great Top”) presented the bankruptcy petition on 3 March 2025 (the “Petition”) in respect of a total debt of HK$28,778,217.64 with interest (the “Debt”). By the Petition, Great Top, the Petitioner, seeks a bankruptcy order against Yau Wing Keung, the Debtor (“Yau”), also known as Frankie.

II.  GREAT TOP’S CASE

2.  Great Top’s case is that the Debt is a loan advanced by Mr Zhong Naixiong (“Mr Zhong”) to Yau under a Loan Deed dated 2 June 2017 (the “Loan Deed”) payable on or before 31 May 2022, with interest becoming payable on 31 May 2018. Mr Zhong makes an affirmation in support, saying that:-

(1)  In or around early 2017, Yau told him that Yau needed funds to purchase a property in Hong Kong, and Yau asked Mr Zhong to lend him RMB25,000,000 (equivalent to HK$28,387,500) to him as a personal loan.

(2)  Yau then provided a draft loan deed for Mr Zhong to sign. Mr Zhong passed the draft to his personal financial adviser Lau Wai Lun Ronald (“Ronald Lau”) for review.

(3)  Upon Ronald Lau’s review, Mr Zhong signed on the loan deed, which is the Loan Deed.

3.  Ronald Lau also makes an affirmation in support to corroborate Mr Zhong’s evidence, saying that at a dinner in around April 2017, Mr Zhong passed him a draft loan deed for him to review.

4.  By an assignment dated 8 August 2024 (the “Assignment”), Mr Zhong assigned all his rights and interests under the Loan Deed. Notice of Assignment dated 8 August 2024 was served on Yau on 8 August 2024, and again under letter dated 5 September 2024 issued by the Petitioner’s solicitors.

III.  YAU’S CASE

5.  I shall set out Yau’s case in this Part.

6.  According to Yau, he and Mr Zhong had been long-time friends and business partners:-

(1)  Mr Zhong has been the ultimate owner of Nanhai Nenking Group (“Nenking Group”) based in Foshan, Guangdong, People’s Republic of China (“PRC”) engaging in a wide range of business.

(2)  Before 2002, Yau was a private banker at Credit Suisse Hong Kong, and Mr Zhong was his client in around 2000. They became friends and the friendship continued even after Yau left Credit Suisse Hong Kong in 2002.

(3)  After Yau joined another financial institution in 2002, he and Mr Zhong remained in contact, and provided various assistance to Mr Zhong from time to time, both at personal level and business level.

(4)  Since at least 2003, Yau made various payments on behalf of Mr Zhong upon the latter’s request, including payments of his personal and business expenses. Mr Zhong would reimburse Yau after some time instead of each and every time of payment. Further, in 2003-2007, Yau also assisted Mr Zhong in his various business dealings, and Mr Zhong would give him money as rewards. For example, in 2005-2006, Yau received “several million Hong Kong dollars” as reward for his assistance to Mr Zhong in his disposal of a shopping mall in Foshan.

(5)  From 2007, Yau became more actively involved in Mr Zhong’s business projects and ventures. Mr Zhong also appointed Yau as a director in some of his Hong Kong companies.

(6)  In around mid-2007, Yau resigned from his position as investment director in a real estate fund. Upon Mr Zhong’s proposal, Yau agreed that he would set up a company to assist Mr Zhong to handle the latter’s business matters. As a result, Swiss Asia Investment Management (Hong Kong) Limited (“Swiss Asia”) was incorporated.

(7)  Even though before February 2024, the sole shareholder of Swiss Asia was an offshore company solely owned by Yau, Mr Zhong would provide funding to Swiss Asia to cover all its expenses, including a monthly salary to him as a director, initially in the amount of HK$100,000 per month and subsequently increased to HK$300,000 per month, with additional bonus when Mr Zhong’s projects were more successful.

(8)  In February 2024, upon Mr Zhong’s request, the only share in Swiss Asia was transferred to Mr Zhong.

7.  In 2014 to 2018, Yau assisted Mr Zhong to develop a big sports arena in Foshan, PRC (the “Foshan Arena”) as part of a development project known as Foshan New City, and for the development, since 2012, Yau had assisted Mr Zhong to obtain funding from Nanfung Group in the sum of RMB2.5 billion to Mr Zhong’s companies. On 31 December 2014, Mr Zhong’s companies defaulted in repayment to Nanfung Group. Yau assisted in obtaining extension of the loan and eventually arranged funding for another group to replace Nanfung Group. Yau takes the view that but for his assistance, Mr Zhong would have been bankrupted. He also mentions that “the common market practice was for external professionals who were engaged to procure financing to charge a fee of 3% of the amount raised.”

8.  As an aside, for the management of the Foshan Arena, Mr Zhong requested Yau to set up a company and engage professionals to manage the Foshan Arena:-

(1)  For that purpose, Yau, as 80% ultimate shareholder, and his friend Mr Alex Shum (“Mr Shum”), as 20% shareholder, jointly set up a company in the PRC known as 瑞達(深圳)商業運營管理有限公司 (“Ruida”).

(2)  Ruida paid an agreed fee to the owner of the Foshan Arena, which is a company owned by Mr Zhong, in exchange for Ruida’s exclusive right to operate the Foshan Areana for 15 years during which Ruida may lease the Foshan Arena to outsiders for sports and other events for income.

9.  Yau mentioned another event that took place in around 2014, namely, an investigation into a government official in Guangdong province with whom Mr Zhong had had dealings. As Mr Zhong had had dealings with that official, he also became subjected to the investigation. During this difficult period for Mr Zhong, Yau helped Mr Zhong by pulling his connections in the PRC, preparing statements for Mr Zhong and managing Nenking Group to keep its business running. At the end, with Yau’s help, the investigation was over without any adverse result to Mr Zhong, although that government official was disciplined.

10.  With all the assistance given by Yau to Mr Zhong, Mr Zhong was very grateful. In around late 2016 to early 2017, Yau asked for some remuneration for such work in addition to an increase in the monthly salary from Swiss Asia. At that time, Yau was minded to purchase a real property in Hong Kong, and told Mr Zhong about that. In response, Mr Zhong agreed to increase his salary and to subsidise the intended purchase.

11.  In around April 2017, Yau informed Mr Zhong that the property he intended to purchase was over HK$30 million. Mr Zhong then agreed to gift him a sum of HK$28,387,500, to be remitted to him through a company controlled by Mr Zhong, namely, Grand Joy Limited (“Grand Joy”) on 5 June 2017. Grand Joy had many bank transactions and in the past, the bank had raised queries. For the remittance, Yau suggested that Mr Zhong could mark the remittance as a loan and for that purpose, they signed the Loan Deed knowing that it was a sham, merely to be presented to the bank as a “proof” that the remittance was for a loan.

12.  In early 2021, Mr Zhong was in urgent need of capital. However, he or his companies had encountered difficulty in obtaining loans. Ruida, on the other hand, not being owned by Mr Zhong but having the exclusive right, was able to borrow. Therefore, Mr Zhong proposed that:-

(1)  Ruida would borrow a loan from a financial institution in the PRC known as 廣東粤財金融租貸股份有限公司 (“Yuecai”) with collaterals provided by Mr Zhong.

(2)  The principal of the loan would be transferred to Mr Zhong’s companies.

(3)  Mr Zhong and his companies would be responsible for the repayment of the principal, interest and all related expenses.

13.  Yau and Mr Shum agreed to the proposal, and this arrangement was put into place.

14.  Yau highlights that despite Mr Zhong’s difficulty in obtaining loans, he made no demands for the repayment of the “loan” under the Loan Deed. Instead, in October 2021, he had to borrow from Gold-face Finance Limited (“Goldface”) HK$16,000,000 through his company Vantage Up Group Limited with Yau as the guarantor. The interest in the loan was subsequently transferred to a group of businesspersons including Mr Kelvin Chan (“Mr Chan”).

15.  In late 2022 or early 2023, Mr Zhong had to borrow a new loan to make repayment to Goldface, and upon Yau’s request, Mr Zhong released him as the guarantor with Goldface’s agreement in February 2023.

16.  On or around 7 February 2024, Yau and Mr Zhong met to discuss repayment plans for Mr Zhong to repay Yau various debts. During the meeting (the “February 2024 Meeting”), Mr Zhong did not deny the debts owed to Yau, and did not mention any debts owed to him by Yau. During the meeting, Yau presented a statement setting out what Yau had paid as at 3 February 2024 to be reimbursed entitled “游墊支結余至2024年2月3日” (the “Statement on Reimbursements”), with which Mr Zhong did not express any disagreement.

17.  For convenience, I adopt the table summarising the Statement of Reimbursement prepared by Mr Terrance Tai, leading Mr Sik Chee Ching, counsel for the Petitioner, in their Skeleton Submissions §37:-

Date	Payee	Amount
22.7.2017	Assist Sports Management Inc (“Assist Sports”)	~HK$2,485,000 (consisting of US$21,418.03; US$269,252.83; EUR21,232.67)
22.7.2017	Brian Scott Hopson (“Hopson”)
22.7.2017	Ruiz-Huerta and Crespo S.L. (“Ruiz-Huerta”)
20.6.2018	Fok Chi Cheong	HK$4,000,000
28.6.2018	Harmony Health Pharmaceutical Co Ltd (“HHP”)	HK$500,000
9.8.2018	姜婷婷	HK$115,200
24.8.2018	Fung Yan	HK$1,600,000
29.8.2018	Eastern Athletic Association Football Team Ltd (“Eastern Football Team”)	HK$3,300,000
10.9.2018	Grand Joy Limited (“Grand Joy”)	HK$400,000
13.9.2018	姜婷婷
13.9.2018	Harmony Health Pharmaceutical Co Ltd	HK$530,000
14.9.2018	Grand Joy	HK$150,000
30.10.2018	Grand Joy	HK$400,000
30.1.2020	He Jiancong	RMB 280,000
13.2.2020	Liu Junfang	RMB 500,000
21.2.2020	Unknown service provider	RMB 45,213
11.3.2020	Eastern Football Team	HK$875,000
20.3.2020	Astrowalker Travel Servies Ltd	HK$47,260
21.2.2022	Zhong Wenjie	RMB 2,000,000
15.3.2022	Re: Sale price of 9 units in the Dali redevelopment project	RMB 21,628,977
18.11.2022	Eastern Athletic Association Basketball Team Ltd (“Eastern Basketball Team”)	HK$1,000,000
1.12.2022	Swiss Asia Investment Management (HK) Ltd	HK$300,000
14.12.2022	Swiss Asia Investment Management (HK) Ltd	HK$1,000,000
15.12.2022	Swiss Asia Investment Management (HK) Ltd	HK$900,000
23.12.2022	Eastern Basketball Team	HK$100,000
10.1.2023	Eastern Basketball Team	HK$200,000
6.4.2023	Swiss Asia Investment Management (HK) Ltd	HK$1,000,000
14.6.2023	Swiss Asia Investment Management (HK) Ltd	HK$500,000
20.1.2024	Eastern Basketball Team	HK$2,500,000

18.  In Yau’s affirmation §§98-182, Yau explained in some detail each of the above transactions. It is not necessary for me to detail them here. Suffice to say that these payments were indeed made, but there is no documentary evidence to show that these payments were made upon Mr Zhong’s request.

19.  The total balance as at 3 February 2024 was stated to be HK$4,553,177.68 and RMB 27,279,403 after certain set-off (對數). On Yau’s own evidence, this Statement of Reimbursement was not accurate. In his affirmation, he pointed out that:-

(1)  The partial repayment of HK$3,000,000 stated therein was a mistake. The exact sum was not HK$3,000,000, and was not for any repayment. This sum consisted of (a) his salary of about HK$1,900,000 paid by Swiss Asia and (b) Eastern Basketball Team’ repayment of loan of HK$1,100,000 Yau advanced to it.

(2)  A loan owed by Mr Zhong to Yau in the sum of HK$3,000,000 should not have been there because it was for the guarantee mentioned in §§14-15 above but he did not pay anything for the guarantee.

(3)  A sum of RMB2,825,213 was double-counted.

20.  The long and short of the above is that RMB2,825,213 should be taken out. The outstanding debt in Hong Kong dollars would remain HK$4,553,177.68 while that in RMB would become RMB 24,454,190 (that is, RMB 27,279,403 – RMB2,825,213).

21.  I pause here to note that in the Statement on Reimbursements, the set-off included a sum of HK$14,549,282.32 being the value of stock interest in a South Africa stock (the “SA Stock Interest”) against the outstanding liability in Hong Kong dollars (港元部分對消南非投資現值（2024年1月26日結單）匯率0.414計) held by Mr Zhong via a company known as Swiss Asia Financial Services (HK) Limited (“SA Financial”).

22.  According to Yau, this set-off by the South Africa Investment was just a proposal only. It was Yau’s proposal put forward to Mr Zhong that the latter should transfer to him the SA Stock Interest as partial settlement of his indebtedness to Yau. However, this was not reaslised. Instead, according to Yau, by an assignment of loan backdated 31 December 2023 (the “2023 Assignment of Loan”), a loan due and owing to Mr Zhong by SA Financial was assigned to Yau for HK$1. In his affirmation, he does not mention when the 2023 Assignment of Loan was signed, but just says that it was backdated.

23.  I further note that while Yau did not mention the value of the loan in the body of his affirmation, thus giving one an impression that the 2023 Assignment of Loan would be the documentary evidence in support of the setoff in the amount of HK$14,549,282.32 as stated in the Statement of Reimbursement, the actual amount of the loan stated in the 2023 Assignment of Loan was more than double this amount, that is, HK$30,818,587.58. Mr Earl Deng, leading Mr Dixon Co, counsel for Yau, submits that this should be understood to mean that the value of the loan assigned under the 2023 Assignment of Loan was intended to be HK$14,549,282.32. However, there is no evidence to that effect at all. There is no evidence about the market value of this loan. Nor is there any evidence to the effect that set-off would be available only when the loan was repaid by SA Financial. The context of the evidence is simply that instead of the proposal to set off, the Assignment of Loan was executed for the set-off. Therefore, on the face of it, the set-off in Hong Kong dollar in the Statement of Reimbursement should become HK$30,818,587.58 instead of HK$14,549,282.32, that is, HK$16,269,305.26 more for set-off. To argue otherwise would need sufficient basis to pass the threshold of bona fide dispute on substantial grounds, a matter I shall return to later below.

24.  On the face value, the above would mean that all the Hong Kong dollar of HK$4,553,177.68 would be set off, and there would be HK$11,716,127.58 available for further set off. This should set off the outstanding liability in RMB, which should be RMB 24,454,190. Taking the exchange rate of RMB1 = HK$1.1, the amount outstanding after set-off would be (HK$24,454,190 x 1.1) – HK$11,716,127.58, that is, HK$15,183,481.42 due and owing by Mr Zhong to Yau according to the Statement of Reimbursement.

25.  Since early 2024, Mr Zhong failed to repay the loan to Yuecai, and Yuecai discovered that Mr Zhong had sold the assets used as collateral for the loan without obtaining Yuecai’s consent. As a result, Yuecia issued demand letters to Ruida for the repayment of the loan in May and July 2024. Yau informed Mr Zhong of the demand letters, but Mr Zhong replied that he was unable to make repayment within a short time, and suggested that since Ruida had a stable cash flow, it should be transferred to him so that he could inject Ruida to a REIT to raise capital.

26.  Further meetings on this suggestion followed, including a meeting on or around 24 July 2024 at Four Seasons Hotel in Hong Kong (the “July 2024 Meeting”) which Yau’s another friend Mr Alex Mong (“Mr Mong”) attended. In this regard, Mr Mong makes an affirmation saying that he attended a meeting with Yau and Mr Zhong on or around 23 July 2024.

27.  Before the July 2024 Meeting, on 22 July 2024, Yau texted Mr Zhong:-

“…瑞达股权是由我持有80%，岑永雄持有20%。基于今年2月7日我和你在大茶馆沟通，第一轮对数后我的应收款项约为2,700万港币（相关款项明细已交纸质版予小林备案）。另外7月16日我们和阿蒙生在香港四季酒店沟通中，钟氏家族基金计划收购瑞达股权，我们建议采取以下方式。我可以在场馆今后经营产生的净现金流中分配，用以出售我所持有的80%股权对应的部份作为支付与我和阿蒙的合计约3,200万港币的款项，至支付完毕为止，我会将所有持股权转给指定的钟氏家族基金。对于阿岑持有的20%股权，建议以未来三年的年均息税前利润（ EBITA ）的5倍来计算瑞达公司的价值，并基于此价值计算阿岑股权的对应价值，来购买阿岑的20%股权，相应付款亦可通过场管今后的净现金流来支付，直到支付完毕为止。在支付完上述款项前，瑞达公司可与集团洽谈一个分配比例方式，分配部份净现今流予集团…” (emphasis added)

28.  According to Yau, at the July 2024 Meeting, Mr Zhong did not agree to repay Yau first and did not make any proposal to repay him, although he acknowledged his indebtedness to Yau. Mr Zhong also did not agree to buy out Mr Shum’s shares. Mr Zhong only repeated his request to acquire Ruida.

29.  For this July 2024 Meeting, according to Mong, Mr Zhong did say that he would try to repay Yau after Mr Zhong has settled some other liabilities owed to others.

30.  On 26 July 2024, Mr Zhong caused some people to enter the Foshan Arena to disrupt the operation of Ruida, and in the disruption, they hurt Mr Shum physically.

31.  On 26 July 2024, the following conversation via voice messages took place:-

“Yau: 阿鍾，兩千幾個唔使搞到大家咁樣吓嘛？如果叫得兄弟嘅，傾掂佢抹咗佢囉，我冇問題㗎，你唔好搞阿岑唔好搞阿蒙，好無？呢樣嘢，跌咗落去我搵得返，唔需要你亦都搞到呢啲咁嘅手段，搞埋你自己呀我同你講，好無啊？好無啊？如果係錢嘅問題，抹咗佢，唔緊要。如果你話廿幾年為咗呢兩千幾個搞到大家咁樣，我真係抹咗佢，我阿游宜家都未使揸兜乞食，好無？大家冷靜啲，下個禮拜傾掂佢，大不了抹咗佢。

Zhong: 阿游，到而家為止我都仲係叫你一聲大佬。你、你揞吓心口諗吓，到目前每一件事你處理乜嘢我都係尊重你㗎。但呢件事你尊重吓我得唔得？你俾吓面我得唔得？我話要處理阿岑，咁我都、我係一個實控人，你話間公司係我嘅，我都處理唔掂阿、阿、阿、阿岑呢，我做XX咩？…你就成日叫我係委屈求存，我就係做呢件事呢，我就係為咗啖氣，我絕對唔係兩千幾萬嘅事...阿游，喺你手上、手上又好，我唔係話要你…你嘅處理嗰、都已經係二十幾億嘅事啦？我、我有無一、一句怨言先？我絕對就唔係話呢啲事嚟、嚟、嚟、嚟生氣，但係呢你宜家呢，我搞個阿岑都處理唔掂咁呢，我真係好冇面。

Zhong: 多謝咁耐你嘅、對我嘅支持，都係要講、講一聲，我都今日嚟我都未話你點點點。你同我算舊帳啫，我都未同你算、算過任何嘢吓，即係，你話所謂嗰個兩千幾萬我從來冇話要抹平，又冇話咩嘅。你可以問阿蒙，我話幾時都係擺喺、處理阿師傅之後就處理你、你呢啲，我一未處理師傅之前我係無辦法。師傅嗰度你都知㗎啦，嗰啲都係三七二十九嘅數。” (emphasis added)

32.  “師傅”, according to Yau, referred to Goldface.

33.  On 6 August 2024, some more people entered the Foshan Arena and this time, Yau was physically injured. The incident was reported to the Public Security Bureau of Lecong in Shunde District.

34.  On 8 August 2024, Mr Zhong signed the Assignment purporting to assign to Great Top his rights and interests in a loan lent to Yau.

35.  In mid-August 2024, Ruida commenced legal proceedings (the “Mainland Proceedings”) against Mr Zhong’s companies.

36.  On 27, 28 and 29 August 2024, Mr Chan on behalf of Mr Zhong approached Yau for negotiation. From the negotiation, Yau came to understand that Mr Zhong’s assets and businesses were of little value and his only hope was in Ruida. Yau told Mr Chan about Mr Zhong’s indebtedness to Yau. On 29 August 2024, Mr Chan said that he would have to confirm with Mr Zhong about it first.

37.  On 30 August 2024, Mr Chan texted Yau:-

“1. To confirm the amount to repay to Frankie in future (under hk$20m). Repayment starts with profit in company. To be paid quarterly for 3 years.

2. Re-sign employment contract with Alex Shum, with KPI setting and bonus scheme.

3. Company bear at least 50% of the interest to [Yuecai] until principal repaid. Kelvin will bargain to bear less in the future.

4. Management company shares 100% held by Kelvin or his appointed entity.

5. Kelvin holds finance right while daily ops won’t be affected.

6. Kelvin pulls in resources from Forbes China and to boost business.

Frankie, this’s the basic framework in my mind.”

38.  Yau refused to accept the proposal.

39.  On 9 October 2024, the statutory demand (the “Statutory Demand”) underlying the Petition herein was issued.

40.  On 25 February 2025, Yau met Mr TC Yam (“Mr Yam”), a person connected to Mr Chan, upon Mr Yam’s request. During the meeting, Mr Yam told Yau that Yau should negotiate with Mr Zhong and settle the dispute as soon as possible, because someone was trying to take action to bankrupt him.

41.  On 27 February 2025, a mutual friend of Mr Yam and Yau telephoned Yau. The mutual friend passed a message from Mr Yam, asking Yau to offer a price for the sale of his shares in Ruida.

42.  On 3 March 2025, the Petition herein was presented.

43.  On 4 March 2025, Yau replied that he would not make any offer before there would be the outcome of the Mainland Proceedings.

IV.  THE 2^ND AFFIRMATION OF YAU

44.  On 22 September 2025, Yau filed a Summons for leave to file and serve his 2^nd Affirmation dated 20 September 2025, returnable at the hearing of the Petition. Yau’s 2^nd Affirmation mainly deposes to the following:-

(1)  In respect of the Mainland Proceedings, judgment was issued on 30 May 2025.

(2)  In respect of the drafting of the Loan Deed, Yau asked his personal assistant Amy Chan at Swiss Asia to prepare the draft “as supporting to remit out the fund to your HSBC account on Monday” requested by her. Amy Chan created the draft on 26 May 2017. Further, Yau keeps the original. Yau says that if Mr Zhong would like to enforce the Loan Deed, he would have insisted upon keeping the original. While it was prepared as proof for the bank, it was never presented to the bank. Further, Yau did not give any copy to Mr Zhong after signing, and the only copy was given to Amy Chan for filing in the premises of Swiss Asia.

(3)  In respect of the validity of the Loan Deed, Yau believes that Grand Joy never executed any shareholders or directors resolution authorising the transfer of the fund to him, or advanced any shareholders/directors loan to Mr Zhong.

(4)  In respect of the loan borrowed from Yuecia, according to the judgment in the Mainland Proceedings, Ruida was the borrower which on-lent the same to Nenking and Jinhe, contrary to Mr Zhong’s allegation that the loan was borrowed upon Yau’s request and to help Yau.

(5)  There is no evidence of demand for repayment of the loan under the Loan Deed.

(6)  The Loan Deed had already been breached on 31 May 2018 upon Yau’s failure to pay interest, and so the Petition, presented on 3 March 2025, has been time-barred.

(7)  By the Loan Deed, Mr Zhong was estopped from reneging upon his representation that the Loan Deed would be used as proof for the bank transfer only, in other words, a representation that Mr Zhong would not enforce the Loan Deed.

45.  To save time and costs, I read the 2^nd Affirmation of Yau on a de bene esse basis. As shall be seen below, I would consider the 2^nd Affirmation of Yau. Considering the reason for the delay (namely, the Petitioner filing their reply affirmation late which would necessitate a reply from Yau), I grant leave for filing this 2^nd Affirmation of Yau with costs in the Petition.

V.  ISSUES

46.  On the Loan Deed, the Petitioner has a prima facie case. On the evidence, Yau says the following are bona fide disputes on substantial ground:-

(1)  The Loan Deed was a sham.

(2)  The Loan Deed was not enforceable by estoppel.

(3)  The enforcement of the Loan Deed has been time-barred.

(4)  The loan under the Loan Deed was not properly authorised by Grand Joy.

(5)  If the Loan Deed is enforceable, relying on the amounts set out in the Statement of Reimbursement, Yau is entitled to a legal set-off.

VI.  IS THE LOAN DEED A SHAM?

47.  Yau’s allegation that the Loan Deed was a sham intended to be used to defraud the bank is a serious allegation that requires cogent evidence, while there is a very strong presumption against a finding of sham: see Vpower Group Holdings Limited v CRRC Hong Kong Capital Management Co. Limited [2025] HKCFI 551 at §§46-47 per DHCJ Kent Yee. In my view, there is no such cogent evidence, and the allegation itself is inherently improbable, for the following reasons:-

(1)  In the first place, I see no reason, and there is no evidence to explain, why a false reason would have to be given to the bank for the transfer. What the bank would need, according to Yau’s evidence, was some proof for the need to transfer, and on Yau’s own evidence, Mr Zhong’s fund would be a reward for his services rendered to Mr Zhong or his company in the past, effectively service fee or remuneration. There should be no difficulty in preparing a document to the effect that the money was for remuneration for Yau’s services.

(2)  The sum is a substantial sum. If the Loan Deed were prepared as a sham, it is inherently improbable that even though in very good relationship with Mr Zhong, Yau, being such a seasoned businessperson, would not have requested some documentary evidence, and sent a message, that the Loan Deed was not intended to be legally binding.

(3)  Yau stresses that had the Loan Deed been genuine, Mr Zhong would have demanded repayment from Yau as early as 2021 when he was in such financial difficulty that he had to use his assets as collateral for loan borrowed via his companies from Yuecai or in 2024 when he had to consider acquisition of Ruida for cashflow to him. However, to be precise, even on Yau’s own evidence (including the 2^nd Affirmation of Yau referring to the judgment in the Mainland Proceedings), the loan borrowed from Yuecai was borrowed by and on-lent to Mr Zhong’s companies, consistent with the usual business practice that the individual is separate from incorporated companies as a risk allocation and risk control. In other words, put to the highest in favour of Yau, it were Mr Zhong’s companies that needed funds, and therefore, also consistent with Mr Zhong not demanding repayment of the loan under the Loan Deed. Any capital injection by Mr Zhong from his own pocket into those companies may mean that Mr Zhong would have to take up the risk on his own. While Mr Zhong seemed to be a guarantor in respect of some of the borrowed funds, this is difference from Mr Zhong injecting personal fund direct into a company in financial difficulty.

(4)  Yau also stresses that Mr Zhong would have demanded repayment of the loan under the Loan Deed rather than asking him to pay so many expenses stated in the Statement of the Reimbursement on behalf of Mr Zhong. That may be one explanation. Another explanation is that Mr Zhong was prepared to have the reimbursement set off. Although this is not Mr Zhong’s evidence given his denial of the items in the Statement of Reimbursement, I am looking at the inherent probability on Yau’s own case that Mr Zhong was indeed liable to at least some of the items on the Statement of Reimbursement.

(5)  In fact, what Mr Zhong said to Yau in the voice message set out in §31 above, that “你同我算舊帳啫，我都未同你算、算過任何嘢吓” shows that Yau was indebted to Mr Zhong (although at the same time, Mr Zhong was also indebted to Yau, a matter I shall return to below).

(6)  Even if Yau keeps the originals of the Loan Deed, the fact is that Mr Zhong has kept a copy. There is no requirement that for a party to intend to enforce an agreement or a deed, he would have to keep the original. Insofar as Yau tries to insinuate that Mr Zhong obtained the copy from the premises of Swiss Asia with Amy Chan’s assistance, even if I assume this to be true, this only means that indeed Mr Zhong knew that he had a copy of the Loan Deed within his reach. This would be too remote to infer that Mr Zhong simply did not care about the Loan Deed or even did not intend to enforce it.

(7)  Mr Deng submits that referring to other deeds executed by Mr Zhong and Yau respectively, where “signed, sealed and delivered” was formally stated, neither Mr Zong nor Yau intended the Loan Deed to be legally binding because the Loan Deed does not contain such phrase at all. With respect, I am unable to accept such submissions. First, the phrase is not a prerequisite for validity of the deed. Second, it is not Yau’s evidence that both thought that this phrase would indicate intention to be legally bound while absence of this phrase would mean absence of such intention. Third, there is no evidence that the Loan Deed and all other deeds were drafted by the same person such that there is better reason to infer absence of such intention when the same person deliberately deletes certain phrase in the deed in question. Fourth, after all, it is a matter of construction of documents objectively, and I am unable to rely on the absence of this phrase in the present circumstances to say that there is any bona fide dispute on substantial grounds over absence of intention to be legally bound.

48.  Having considered the above, I am not satisfied that there is no bona fide dispute on substantial ground in relation to Yau’s case that the Loan Deed was a sham.

VII.  ESTOPPEL?

49.  With regard to estoppel, Mr Deng submits that:-

(1)  Since 30 May 2018, Mr Zhong had been entitled to recall the loan under the Loan Deed because Yau failed to pay interest due on 31 May 2018, but he did not do so despite the financial difficulty his companies had and his such companies having to raise funds.

(2)  Mr Zhong’s lack of calling the loan for a long period of time from 30 June 2018 to February 2024, long past the due date of 31 May 2022 for repayment shows that Mr Zhong consciously refrained from enforcing the Loan Agreement.

50.  It seems to be a defence of waiver rather than estoppel. In any event, for the present purpose, whether it was estoppel or waiver, broadly speaking, the requirements are the same: (1) a clear and unequivocal representation that the Loan Deed would not be enforced; and (2) detriment or change of position caused by reliance on such representation.

51.  Given that the Loan Deed was not a sham, it means that the parties did intend the Loan Deed to be what it purports to be: notably, there should be repayment. I cannot see how absence of enforcement in the circumstances could be understood clearly and unequivocally to mean that Mr Zhong would not enforce the Loan Deed anymore, while the terms of the Loan Deed clearly obliged Yau to repay and did not set out any contractual time limit for enforcing the Loan Deed. Nor can I see how there can be any change of position or detriment. In this regard, Mr Deng submits that the change of position or detriment was Yau’s purchase of the property. However, the conduct Yau is said to have relied upon as representation for the purpose of estoppel started to take place from 30 June 2018 for “a long period of time”, while the purchase of the property, according to Yau, took place in 2017. So, the change of position or detriment was suffered not as a result of any reliance on the representation in any event, if there were such representation. Insofar as there is any suggestion that the change of position or detriment was Yau’s payments on behalf of Mr Zhong as stated in the Statement of Reimbursement, clearly, such change of position or detriment is not such that it would be inequitable not to give effect to the representation – Yau in fact now claims for repayment of these expenses.

52.  In my view, therefore, there is no bona fide dispute on substantial grounds in relation to estoppel.

VIII.  LOAN DEED TIME-BARRED?

53.  The time limit for a deed is 12 years: see section 4(3) of the Limitation Ordinance (Cap. 347). Mr Deng, for Yau, submits that there is no delivery of the Loan Deed, and therefore, the Loan Deed is not legally valid, and the loan thereunder is only enforceable as a loan under a contract, the time limit for which is 6 years instead: see section 4(1) of the Limitation Ordinance (Cap. 347). There is no dispute that if it is 12 years, the enforcement has not been time-barred, and if it is 6 years, the enforcement is arguably time-barred.

54.  Whether a deed is delivered or not is a question of fact. Physical delivery or exchange is not necessary. Words or conduct may be the basis for inference for delivery. The test is whether the parties intend the instrument to be legally binding. A presumption of delivery arises when a deed is signed and sealed: see Segboer & Anor v A J Richardson Properties Pty Ltd & Anor (2012) 16 BPR 31235 at §§53-59 per Court of Appeal of New South Wales (Allsop P, Campbell JA and Sackville AJA).

55.  In the present case, the Loan Deed was signed and sealed. The presumption of delivery arises. That there was no delivery of the Loan Deed is raised only by Mr Deng in his written submissions for the first time. There is no evidence that there was no delivery. On the contrary, it is Yau’s own evidence that he has kept the originals. The only possible evidence of non-delivery is Yau’s evidence that there was no intention that the Loan Deed would be legally binding. This, however, goes back to whether the Loan Deed was a sham, and I have already found that there is no bona fide dispute on substantial ground in this regard.

56.  Therefore, I am not satisfied that there is any bona fide dispute on substantial grounds in relation to the delivery of the Loan Deed. It also follows that there is no bona fide dispute on substantial grounds in relation to the time-bar argument.

IX.  LOAN NOT PROPERLY AUTHORISED BY GRAND JOY

57.  Whether the loan was properly authorised by Grand Joy is an internal matter within Grand Joy. I see no ground for Yau, as the borrower, can say that because the loan was not properly authorised, he would have no liability to repay. Insofar as there is any suggestion that the loan came from Grand Joy and therefore should be repayable to Grand Joy but not Mr Zhong, given that the Loan Deed was between Mr Zhong as lender and Yau as borrower, the logical inference must be that Grand Joy on behalf of Mr Zhong advanced the loan to Yau, and as a matter of bookkeeping, there would be credit to Mr Zhong’s current account with Grand Joy. Such bookkeeping matter, again, is an internal matter within Grand Joy with which Yau has no business.

58.  Therefore, I am not satisfied that there is any bona fide dispute on substantial grounds arising from this authorisation point.

X.  SET-OFF?

59.  There are two aspects in respect of set-off here. First, whether Yau paid the items set out in the Statement of Reimbursement on behalf of Mr Zhong to be reimbursed, and second, whether the amount is sufficient to set off the Debt.

60.  It is convenient to deal with the second question first. As explained in §§20-24, on the face of the evidence, the outstanding debt in the Statement of Reimbursement should be HK$15,183,481.42. Taking everything in favour of Yau, setting off this amount against the Debt in the Petition would mean that there would still be an outstanding debt of HK$28,778,217.64 – HK$15,183,481.42 = HK$13,594,736.22. In this regard, Mr Deng submits that there is bona fide dispute on substantial grounds on whether the face value of the loan of HK$30,818,587.58 under the 2023 Assignment of Loan should be taken or whether the stock value of HK$14,549,282.32. With respect, I disagree. As explained in §23 above, there is no evidence to explain why the loan in the amount of HK$30,818,587.58 should be taken to have a value of only HK$14,549,282.32 for the set-off in the Statement of Reimbursement. The burden lies upon the debtor to put in proper evidence to show that there is a bona fide dispute. While Yau produces the 2023 Assignment of Loan, he does not say anything further about it. So, I am not satisfied that there is any bona fide dispute that despite the face value of the loan stated to be HK$30,818,587.58, the true value for the purpose of the Statement of Reimbursement should be less than half as Mr Deng submits.

61.  In any event, the amount available for set-off should be reduced because one item of the payment was made in 2017 and ten items of payments were made in 2018, all of which have been time-barred[1]. The total sum of these eleven items amount to approximately HK$13,480,000. This would mean that the outstanding debt available for set-off would become approximately (HK$15,183,481.24 – HK$13,480,000 = HK$1,703,481.24) only. Setting off this against the Debt means an outstanding amount of approximately (HK$28,778,217.64 – HK$1,703,481.24 = HK$27,074,736.40).

62.  This outstanding debt after set-off would still be a very substantial sum and far beyond the limit for the statutory minimum of HK$10,000 for presenting a bankruptcy petition. There is not even an indication that Yau would pay any of this large sum. This is sufficient to sustain a bankruptcy petition: see Re Wong Mui Kuen Joanna, HCB 1631/2014, 12 January 2015 at §8 per Ng J.

63.  Given my view above, it is strictly not necessary to deal with the question of whether there is bona fide dispute on substantial grounds that the payments set out in the Statement of Reimbursement were indeed payments made by Yau on behalf of Mr Zhong to be reimbursed. However, a substantial amount of evidence and detailed submissions have been made on this, and I should also briefly set out my view on this question.

64.  In my view, there is bona fide dispute on substantial grounds in respect of this question because:-

(1)  For the 2023 Assignment of Loan in respect of the loan of HK$30,818,587.58 in favour of Yau, Yau only had to pay a nominal consideration of HK$1. There is no explanation from Mr Zhong as to why. This is consistent with Yau’s evidence that the assignment of the loan was for some repayment to Yau.

(2)  Further, the text message set out in §27 above that upon calculation, Mr Zhong was indebted to Yau in the sum of about HK$27 million does not show that there was any dispute from Mr Zhong. While the amount may not be agreed, one would expect that if there was no loan at all, Mr Zhong would promptly deny that there was any loan at all. Further, in the voice message set out in §31 above, reading it in context, I disagree with Mr Tai, for the Petitioner, that the voice messages show that it was Yau who was indebted to Mr Zhong. In my view, the voice message shows that both were indebted to each other, as apparently from what Mr Zhong said, “你同我算舊帳啫，我都未同你算、算過任何嘢吓”.

(3)  The payments in the Statement of Reimbursement are all supported by documentary evidence of payments. Although they were payments to third parties, against Yau’s evidence that these payments were made on behalf of Mr Zhong and related to Mr Zhong or his companies, Mr Zhong’s evidence is mainly argumentative, for example, these payments were made to third parties, and there is no evidence that Mr Zhong instructed Yau to make the payments. While usually, documentary evidence of such instructions would be expected to exist, I take into account the long relationship between Mr Zhong and Yau and the absence of Mr Zhong’s evidence to explain the matter otherwise.

(4)  Considering the above in the round, I am satisfied that there is a bona fide dispute on substantial grounds that Yau paid the items set out in the Statement of Reimbursement on behalf of Mr Zhong to be reimbursed.

XI.  CONCLUSION

65.  In the premises, I make a usual bankruptcy order against Yau, with costs to the Petitioner, to be taxed if not agreed, with certificate for two counsel.

66.  Lastly, I thank Mr Tai and Mr Sik, counsel for the Petitioner, and Mr Deng and Mr Co, counsel for Yau, for their assistance.