THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD v. FOOK COURT CO LTD (formerly known as TAI PAN COURT CO LTD)

HCMP 1434/2025

[2026] HKCFI 4858

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLEANOUS PROCEEDINGS NO 1434 OF 2025

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J U D G M E N T

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A. INTRODUCTION

1.  By its originating summons filed on 25 August 2025 (“the OS”), the Plaintiff (“HSBC”) seeks money judgment in the sum of about HK$24,620,000 plus accrued interest, and delivery of vacant possession of 3 properties in an industrial building. 

2.  Fook Court (“Fook Court”) does not oppose delivery of vacant possession but objects to the grant of money judgment.  It also counterclaims for return of HK$30,980,000 in its HSBC accounts applied by HSBC to set off debts due.  Fook Court has issued a summons on 23 December 2025 seeking conversion of the OS into a writ action (“Conversion Summons”). 

3.  It is Fook Court’s case that a trusted solicitor had not relayed instructions to HSBC, i.e. that the undertaking of Fook Court under the subject Mortgages was to be limited in scope (to the value of the mortgaged properties) and in time (up to and no later than 31 March 2024), at the time when the 2022 mortgage documents were negotiated and executed.

4.  Fook Court executed the 2022 mortgage documents (which was unlimited in amount and open ended in time) under a fundamental mistake as to their nature and effect.  The question is whether HSBC knew or ought to have known of the mistake and that it would be unconscionable for HSBC to enforce the Mortgages, and hence rectification would be proper.  Fook Court submits that there are factual disputes which warrant a trial. 

5.  The Plaintiff submits that there is no real defence or triable issues.  At best, there was a misunderstanding on Fook Court’s part as to the terms of the Mortgages despite having legal advice.

B.   FACTUAL BACKGROUND

6.  “Tai Pan”（大班）in this case refers to two distinct businesses at different points in time:

(1)  For over three decades from 1984, “Tai Pan” was a family bakery enterprise founded by the late Mr Kwok Hung Kwan (“Mr Kwok”), who had run the same with his wife (“Madam Kwok”) and his elder sister (“Betty Kwok”) (“Kwok’s Tai Pan”); and

(2)  After 2021, the business was acquired by Liu Chi Keung Ricky (“Mr Liu”) through his companies (“Liu’s Tai Pan”) and operated until 24 June 2025.

7.  The operational structure of Kwok’s Tai Pan was such that a company known as Tai Pan Bread & Cakes Company Limited (the “Borrower”) operated the bakery business, whilst Fook Court owned the factory premises, including the 3 subject Properties.

8.  Fook Court entered into 3 mortgages with HSBC:

Date	Facilities	Property Mortgaged
12 January 1998 (“Mortgage 1”)	To secure general banking facilities extended to Fook Court and the Borrower.	Unit 3D at Luk Hop Industrial Building (“Property 1”)
19 August 2014 (“Mortgage 2”)	To secure general banking facilities extended to Fook Court.	Unit 4C and the Flat Roof of Unit 4C at Luk Hop Industrial Building (“Property 2”)
21 February 2022 (“Mortgage 3”)	Kwok’s Tai Pan and Fook Court as borrower and mortgagor; all monies mortgage.	Unit 6B at Luk Hop Industrial Building (“Property 3”)

9.  Mr Kwok passed away in 2010.  Betty Kwok became the Chairman of Kwok’s Tai Pan.

10.  Pursuant to a Sale and Purchase Agreement dated 22 January 2021 (the “SPA”), the Kwok family and other vendors sold the entire issued share capital in Vast Luck Company Limited (being the parent company of the Borrower) to a purchaser, who in turn assigned all of the rights and obligations under the SPA to Bioera (International) Limited (“Bioera”), being a company owned by Mr Liu.

11.  As part of the transaction, Fook Court executed a Deed of Undertaking on 14 May 2021 (the “Deed of Undertaking”) in favour of Mr Liu and Bioera, whereby it unconditionally and irrevocably undertook to provide sufficient properties as security for banking facilities of not less than HK$100 million “during the period of twelve months from the Commencement Date”, and to continue to do so until 31 March 2024 (the “Undertaking Period”) (Clauses 3.1 and 7).  HSBC was not a party to the Deed of Undertaking.

12.  In February 2022, Fook Court entered into a Deed of Variation and Further Change in respect of Mortgage 2 (so it operated to secure also the liabilities of the Borrower), as well as a further mortgage (Mortgage 3) over Property 3, to secure the liabilities of both Fook Court and the Borrower (then taken over by Mr Liu).

13.  It was widely published in the media that Liu’s Tai Pan closed down on 24 June 2025.

14.  HSBC issued demand letters on 25 June 2025 to the Borrower and Fook Court, respectively, exercising HSBC’s overriding right of repayment on demand and requesting the Borrower to repay HK$56,408,999.70.

15.  To partially set off the indebtedness of Fook Court, HSBC applied HK$30,983,826.87 and HK$34,464.85, respectively, from the accounts of Fook Court and its guarantors.

16.  When no repayment was forthcoming, HSBC issued the OS to seek payment of the outstanding amount as well as to enforce the Mortgages.

C.   FOOK COURT’S CASE

C1.  The Kwok Family Business

17.  The directors of Fook Court were bakers by trade, and not professionally trained business people.  Madam Kwok completed only Secondary 1 education and can barely read any English.  Betty Kwok, who passed away on 3 May 2025, studied up to Secondary 3 and understood only simple English words.

18.  By reason of these limitations, the Kwok family relied entirely on their trusted advisors, in particular (1) Mr Tang Kwok Lay Johnny (“Johnny Tang”), their long-standing General Manager and a distant relative of the late Mr Kwok; and (2) Mr Chan Hung Yuen Robert (“Robert Chan”) of Messrs So, Lung & Associates (“SLA”), their trusted solicitor of over 30 years.

19.  Whenever banking documents required signatures, Johnny Tang would bring the documents, briefly explained the nature of the contents, and the Kwok family would sign in trust without question.  Over time, this became the norm of how the Kwok family operated, and formed the cultural and relational foundation upon which all banking and legal dealings were conducted.

C2.  The 2021 Sale and the Deed of Undertaking

20.  Pursuant to the SPA the Kwok family sold Kwok’s Tai Pan to Mr Liu.  The Kwok family’s intention was that this would be a complete sale and clean break.  In other words, Mr Liu would take over the Tai Pan brand, recipes, customer relationships, and ongoing business, whereas the Kwok family would retire with rental income from the properties held through Fook Court.

21.  As part of the transaction and completion on 14 May 2021, the Deed of Undertaking was executed.  Based on the legal advice received through Robert Chan, it was Fook Court’s clear understanding that the Deed of Undertaking was strictly limited and temporary in scope (i.e. Fook Court would provide the Properties and no more and in time (up to 31 March 2024) (the “Limited Undertaking”).  It was to provide interim security for the banking facilities for Liu’s Tai Pan, for the transitional Undertaking Period, after which the Properties would be absolutely released and the Kwok family would have no further dealings with Mr Liu or his companies.

22.  According to Madam Kwok, Fook Court’s security obligation under the Deed of Undertaking “was not a continuing assumption of debt by Kwok’s family” and “was not an open-ended security obligation for the transitional period, bearing in mind that the consideration under the SPA was substantially less than the facility amount (HK$100 million) under the Deed of Undertaking.”[1]

23.  Specifically, Fook Court never intended, was never advised, and never gave instructions that they would provide continuing unlimited securities (both in scope and in time) for the banking facilities of Liu’s Tai Pan beyond the date of 31 March 2024.

24.  Fook Court’s clear and consistent intention, and the only instruction given to Robert Chan were that, following the completion on 14 May 2021, Fook Court would only provide the Limited Undertaking. 

25.  Fook Court’s position was reflected in, and was entirely consistent with, the terms of the Deed of Undertaking itself, the commercial context of the transaction, and Fook Court’s subsequent conduct in instructing its current solicitors, CFN Lawyers LLP (“CFNL”) to seek formal discharge of the Mortgages post 31 March 2024.

26.  Crucially, Madam Kwok deposes that Fook Court:

(1)  Relied entirely on Robert Chan to liaise with HSBC and Liu’s solicitors to ensure that the facility and security documents reflected this Limited Undertaking; and

(2)  Relied on HSBC, as a professional lender fully aware of the context, to act reasonably and in good faith, knowing that Fook Court's participation was temporary and for a transitional purpose only.

C3.  Execution of the 2022 Mortgage Documents

27.  In February 2022, Betty Kwok was asked by Robert Chan to attend his office to sign further mortgage documents in connection with a change of ownership and directorship, and terms of the facilities. 

28.  On 21 February 2022, Betty Kwok (accompanied by Madam Kwok) signed the Deed of Variation of Mortgage 2 and Mortgage 3, without any proper advice, negotiation, or explanation of their legal effect in Chinese.  She signed purely out of trust in Robert Chan and in reliance on his assurances that these documents were part of the same limited, transitional arrangement consistent with the Deed of Undertaking.

29.  At all material times, Betty Kwok (or any director of Fook Court) was never informed that those documents contained “all monies” unlimited and open-end securities that secured all present and future liabilities of the Borrower.  Madam Kwok confirmed that, had they been so advised, Fook Court would have refused to sign immediately, in view of the purpose of achieving a clean break between the Kwok family and Tai Pan.

30.  SLA has confirmed in its letter dated 7 November 2025 that it did not hold any attendance notes of the meetings in relation to the execution of the 2022 mortgage documents.  Nor did HSBC produce any attendance notes.  It is Fook Court’s case that the absence of any such record raises serious questions as to whether proper independent advice was ever given to Fook Court as to the nature and effect of those documents.  This is a matter that can only be properly explored through discovery and cross-examination at trial.

C4.  Post-Undertaking Period

31.  By a letter dated 2 April 2024, Fook Court instructed CFNL to formally notify HSBC that the Deed of Undertaking had expired and to arrange for the discharge of the Mortgages (“CNFL’s Letter”).  Despite CNFL’s Letter, HSBC took no step to suspend or limit the Borrower’s credit line.

32.  It was only in July 2025, when HSBC exercised its right of set-off of HK$30,983,826.87 from Fook Court’s account that Fook Court first became aware that HSBC still regarded the Mortgages as continuing unlimited securities for the banking facilities of Liu’s Tai Pan.

33.  Fook Court claims that there are issues raised as to:

(1)  Whether the Mortgages, as executed, accurately reflect the true and common intention of the parties; alternatively, Fook Court’s intention as known or ought to have been known to HSBC would justify rectifying the Mortgages to accord with the Limited Undertaking;

(2)  Whether Fook Court executed the 2022 mortgage documents under a fundamental mistake as to their nature and effect, in particular, as to the unlimited and open-ended scope of the security obligations thereby assumed, and whether HSBC knew or ought to have known of such mistake, such that it would be unconscionable for HSBC to enforce the Mortgages in their current form; and

(3)  More broadly, the extent to which Fook Court is entitled to relief against HSBC, having regard to HSBC’s own conduct and state of knowledge throughout the material times.

34.  HSBC disputes Fook Court’s case.

D.   ISSUES

35.  To tackle its case of mistake that may give rise to relief in rectification, Fook Court raises the following issues:

(1)  Whether Robert Chan did in fact relay the Limited Undertaking to HSBC when the 2022 mortgage documents were being negotiated and executed (“Issue 1”);

(2)  What was HSBC’s actual knowledge of Fook Court’s position, the Deed of Undertaking, and the surrounding transaction structure (“Issue 2”);

(3)  Whether HSBC’s conduct at all material times was consistent with any obligation to bring to Fook Court’s attention the true and unlimited nature and effect of the security obligations being assumed (“Issue 3”); and

(4)  Whether HSBC’s conduct in continuing to allow the Borrower to draw on the facilities after 2 April 2024 amounted to failure to mitigate HSBC’s loss (“Issue 4”). 

36.  Four hours before the original handing down of this judgment on 25 August 2026, this Court was informed by HSBC’s solicitors that (i) on 20 July 2026, HSBC had received HK$10,000,000 from Fook Court in connection with the sale of another property which is not a subject Property; and (ii) HSBC received an aggregate sum of HK$20,177,972.89 from Fook Court in connection with the redemption of the Mortgage over Property 1.  The sum total well exceeds the judgment sum and costs claimed.

37.  Upon clarification with the parties, it was confirmed that the payments by Fook Court was on a without prejudice basis to stop interest from running.  Fook Court still disputes its liability for a money judgment.  I am satisfied that the issues are not rendered academic.

38.  In considering whether there are triable issues, I have taken Fook Court’s case at its highest, assuming that it will come up to proof. 

E.   LEGAL PRINCIPLES

E1.  Order 88 Applications

39.  The Court can give summary judgment in favour of the plaintiff if there is no triable issue on the evidence.  Under the Order 88 procedure, the burden is on the plaintiff to justify its entitlement to summary judgment.  Once this is prima facie demonstrated on the evidence, it is then up to the defendant to show that he does have a defence to the claim.  Summary judgment is only for clear cases without serious material factual disputes or a difficult point of law not fit for summary determination, unless it is obvious that the defence put forward in frivolous and practically moonshine.  The question is whether the defendant’s assertions are believable, not whether they are to be believed.  It is not appropriate to embark on a mini-trial on affidavits.  See DBS Bank (Hong Kong) Ltd v Honour Elite Corporation Ltd [2026] HKCFI 401 at §§35-36, Au-Yeung J. 

E2.  Conversion from OS to Writ

40.  Order 28 rule 8 of the Rules of the High Court (Cap. 4A) provides that:

“Where, in the case of a cause or matter begun by originating summons, it appears to the Court at any stage of the proceedings that the proceedings should for any reason be continued as if the cause or matter had been begun by writ, it may order the proceedings to continue as if the cause or matter had been so begun and may, in particular, order that any affidavits shall stand as pleadings, with or without liberty to any of the parties to add thereto or to apply for particulars thereof.”

41.  The relevant principles have been summarised in DBS Bank (Hong Kong) Ltd v Honour Elite Corporation Ltd [2026] HKCFI 401 at §37 per Au-Yeung J:

(1)  There is no hard and fast rule as to what cases can properly be dealt with by the originating summons procedure;

(2)  It is not the case that the existence of factual disputes will invariably render the originating summons procedure inappropriate, although it is a factor to be taken into account when exercising the discretion;

(3)  Other relevant considerations include whether the procedural advantages of an action begun by writ, such as delivery of pleadings and discovery, justify the exercise of the power under Order 28 rule 8 and whether in so ordering the ultimate resolution of the dispute would be significantly delayed;

(4)  If the issues of fact have been identified and can be properly resolved or the disputes of fact are not central to the court’s determination, the court is entitled to proceed to determine the action without converting it into a writ action; and

(5)  With regard to whether to hear the summons on oral evidence, what the court has to consider, as stipulated in Order 28 rule 4(3), is what is required for the just, expeditious or economical disposal of the proceedings.

E3.   Legal Principles on Rectification

42.  The principles governing rectification are that:

(1)  The party seeking rectification must show the existence and content of the inconsistent prior oral agreement;

(2)  The party seeking rectification must show that the written document does not correspond with the prior oral agreement, and that the other party either knew or ought to have known of the mistake in reducing the oral terms to writing.  Rectification is available where permitting the other party to take advantage of the error would amount to fraud or the equivalent of fraud in the wider sense where it would be unconscionable for a party to avail himself of the advantage obtained;

(3)  The party seeking rectification must show the precise form in which the written instrument can be made to express the prior intention; and

(4)  All of the foregoing must be established by convincing proof.

See Servus Credit Union Ltd v Waylan Mechanical Ltd (2010) 6 WWR 317 at §12, Ross J, citing Performance Industries Ltd v Sylvan Lake Golf & Tennis Club Ltd [2002] 1 SCR 678 [D#3] at §§37-41, Binnie J of the Supreme Court of Canada.

43.  Knowledge of the non-mistaken party is not limited to actual knowledge but covers 5 categories, namely, (1) actual knowledge, (2) wilfully shutting one’s eyes to the obvious, (3) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make, (4) knowledge of circumstances which would indicate the facts to an honest and reasonable man, and (5) knowledge of circumstances which would put an honest and reasonable man on inquiry.  See Commission for the New Towns v Cooper (Great Britain) Ltd [1995] Ch 259, at 280E-281B.

F.   MERITS OF HSBC’S CLAIM

44.  HSBC’s case is straight forward.  Money was lent to the Borrower on the security of the 3 Mortgages.  When payment was not forthcoming, HSBC exercised its right of set off in Fook Court’s cash available in bank accounts under Clause 1.9 of the General Terms and Conditions for Commercial Banking. 

45.  It then exercised its right to demand for repayment by notice, under Clauses 2.01(a) of Mortgage 1, Clause 3.01 of the Deed of Variation of Mortgage 2 and Clause 2.1 of Mortgage 3 to demand for full repayment of the outstanding indebtedness.  HSBC may enforce the Mortgages to seek vacant possession upon an event of default, i.e. failure of Fook Court to repay.  HSBC is, in principle, entitled to judgment.

46.  Fook Court’s sole defence is that its obligations under the Mortgages were discharged absolutely upon expiry of the Undertaking Period.  However, that cannot be a defence because HSBC was not a party to the Deed of Undertaking.  The Deed of Undertaking or any automatic discharge only governs the relationship between Fook Court and Liu's Tai Pan.

47.  HSBC’s knowledge of the change in beneficial ownership of Tai Pan, the existence of the Deed of Undertaking and the Undertaking Period would not take Fook Court’s case further.  This is because, the Borrower remained, as before 2022, although the ultimate owner had changed to Mr Liu.

G.   ARGUABLE ISSUES?

G1.  Fook Court’s Own Undertaking

48.  Before entering into the Deed of Undertaking, on Fook Court’s side, its board resolution dated 17 November 2021 (provided to HSBC at the time Mortgage 3 was being executed) stated that:

(1)  The directors of Fook Court (including Madam Kwok and Betty Kwok) had carefully considered the terms of the Deed of Variation and Further Change of Mortgage 2 and Mortgage 3, and noted the undertakings to be given by Fook Court to HSBC;

(2)  The directors considered it was bona fide in the best interest of Fook Court to enter into the security documents;

(3)  The entering into of such security documents and the transactions contemplated thereunder were approved in all respects; and

(4)  The First schedule (Security Documents) expressly described Mortgage 3 as “all moneys Mortgage” in bold.

This board resolution showed that Fook Court understood that Mortgage 3 was not limited in value and in time but covered “all moneys”.

G2.   Issues 1 and 2

49.  I return to the issues in Section D above.  In respect of issues 1 and 2, even assuming in favour of Fook Court (that Robert Chan had not relayed the Limited Undertaking to HSBC, and HSBC had knowledge of the Deed of Undertaking and the Undertaking Period), there was no evidence close to showing that there was a prior “agreement” of some kind between HSBC and Fook Court that the latter’s liability under the Mortgages was limited in value and in time.

G3.   Issue 3

50.  At the time when the 2022 mortgage documents were executed, Fook Court did not owe HSBC any money.  Therefore, Fook Court was providing securities on terms solely to the advantage of Liu's Tai Pan.  However, it is difficult to see what “obligation” HSBC had to bring to Fook Court’s attention the true and unlimited nature and effect of the security obligations under the Mortgage, except to interpret the terms to Fook Court and remind them to seek independent legal advice.

51.  Further, Fook Court was represented by SLA throughout the period that it dealt with HSBC.  Robert Chan, with whom Madam Kwok had been acquainted since early 1990s, has been a partner of SLA.  SLA have expressly put on record, denying that no proper explanation had been given to Fook Court when the Mortgages were being executed. 

52.  Still further, Fook Court’s case on mistake is inconsistent with its own case in CFNL’s Letter, issued upon expiry of the Undertaking Period and before action:

“In the premises, we are instructed to enquire with your Bank (a) whether Tai Pan and/or Mr Liu and/or their employees … has/have made any arrangement to substitute the Securities; (b) if so, please let us know whether the Securities could be substituted and released by 31 March 2024.  (c) If no arrangement has been made to substitute the Securities, please let us know the estimated timeframe for the release of the Securities.  Our client will inform Mr Liu, who is personally liable for any losses and damages arising from the Deed, before proceeding to release the Securities”.

53.  CFNL was aware that: the Mortgages remained in force and may have to be substituted; time may be needed before the Mortgages could be released; and Fook Court and Mr Liu had to liaise to sort out any loss and damage before there could be release of the Mortgages.  Plainly, Fook Court itself recognized that there could not be automatic discharge of the Mortgages as of 31 March 2024 without further agreement with HSBC. 

54.  In its reply on 22 July 2024, HSBC made it clear that full payment was required before release of the mortgages.  Further documents had to be executed for the purpose of release, precisely to address the issue of substitution of the security.  No documents were ultimately executed for the discharge as no agreement could be reached.  No information as to the outstanding amount was provided to Fook Court.  The Plaintiff also failed to answer whether Borrower (or Mr Liu) had made any arrangement for substitution of securities.

55.  One can see that in the process, HSBC had done nothing to lead or mislead Fook Court into believing that the Mortgages were or could be discharged without further ado.

56.  Looking at the circumstances in the round, Madam Kwok and/or Betty Kwok may have misunderstood the effect of the Undertaking and Mortgage 3.  They may have misplaced their trust in Robert Chan and SLA and even Mr Liu.  Fook Court may have a claim: (a) against Mr Liu/Liu's Tai Pan for breach of the Deed of Undertaking; and (b) against SLA/Robert Chan who may have failed to relay the Limited Undertaking to HSBC and/or to explain the true effect of the Deed of Undertaking and/or the 2022 mortgage documents to those 2 ladies.  However, these potential claims by Fook Court do not show a “common” mistake between Fook Court and HSBC, or constitute defences to HSBC’s claim.

G4.  Issue 4

57.  At the time the Deed of Undertaking was entered into, the Borrower did not owe HSBC any money, but the aggregate banking facilities of not less than HK$100 million were available to the Borrower (according to Recital D).  Accordingly, all that was drawndown since the Deed of Undertaking must have been made by Liu's Tai Pan.

58.  Fook Court submits that upon receipt of CFNL’s Letter, HSBC should have mitigated its loss by cutting the credit line of Liu’s Tai Pan.  In fact, Fook Court had repeatedly reminded HSBC that the Undertaking had expired.

59.  With respect, CFNL’s Letter did not inform or request HSBC to terminate the facilities available to Liu's Tai Pan.  I also agree with Ms So, counsel for HSBC, that the duty to mitigate is not engaged because HSBC is not claiming for damages but is recovering a debt. 

H.   CONCLUSION AND COSTS

60.  In summary, there are no triable issues raised on liability.  There is no challenge as to computation of the indebtedness, which HSBC stated on affirmation.  HSBC is entitled to judgment.

61.  I order judgment to the Plaintiff in the sum of HK$24,620,021.03 as principal, with interests as at 25 August 2025 in the sum of HK$1,580,245.27, as deposed to in the affirmation of Constance Leung of HSBC.  HSBC shall take into account monies received since this hearing to avoid double recovery and return what is overpaid.

62.  There is no reason to convert the OS into a writ action.  The Conversion Summons is dismissed.

63.  In accordance with Clause 18.1 of the Mortgages, Fook Court shall pay HSBC costs on solicitor-own-client basis.  As the costs statement of HSBC was not produced together with counsel’s submission but only upon reminder of this Court at the end of this hearing.  It was in breach of §8 of PD 14.3.  I therefore reduce the costs recoverable.  The costs of the OS are summarily assessed at HK$400,000.  The rest stated in the costs statement is not recoverable by HSBC’s solicitors from HSBC.  I make an order nisi accordingly.

64.  I thank counsel for their assistance.

[1]  Clauses 9 to 21 of the SPA stipulated that the aggregate maximum consideration was HK$43,500,000, of which HK$8,500,000 (comprising Tranches 2, 3 and 4) would only be released at Mr Liu’s sole and absolute discretion, and subject to further downward adjustment.