RE HUI CHI MING

HCB 4052/2024

[2025] HKCFI 3339

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4052 of 2024

________________________

________________

____________________

J U D G M E N T

____________________

A. Introduction

1.  By petition dated 12 June 2024, Denk Investment Ltd (the “Petitioner”) seeks a bankruptcy order against Dr Hui Chi Ming (the “Debtor”).

B. Material Background

2.  The following facts are not in dispute.

3.  On 8 May 2018, the Debtor (as borrower) and Junson Capital Co Ltd (“Junson Capital”) (as lender) entered into a loan agreement (the “1^st Loan Agreement”) whereby a principal sum of HK$60 million was lent to the Debtor.

4.  On 29 November 2018, the Debtor (as borrower) and Junson Capital (as lender) entered into a further loan agreement (the “2^nd Loan Agreement”) whereby a principal sum of HK$30 million was lent to the Debtor.

5.  The 1^st and 2^nd Loan Agreements were drafted and prepared by Junson Capital.

6.  Under the 1^st Loan Agreement, Junson Capital charged interest at the rate of 8% per annum to be compounded yearly.

7.  Under the 2^nd Loan Agreement, Junson Capital charged interest at the rate of 12% per annum to be compounded yearly.

8.  In the event of the default, Junson Capital was entitled to charge interest at the rate of 30% per annum to be compounded yearly.

9.  The indebtedness under the 1^st and 2^nd Loan Agreements was secured by 170,000,000 and 85,000,000 ordinary shares in a listed company named Wisdom Wealth Resources Investment (stock code: 00007) (hereinafter “Wisdom Wealth”). These shares were owned by various companies that appeared to be associated with the Debtor, namely (i) Triumph Energy Group Ltd; (ii) Hoifu Group Investment Holdings Ltd; and (iii) Hong Kong Finance Equity Holding Ltd.

10.  Despite the time extension granted by Junson Capital from June 2018 to April 2019, the Debtor was unable to repay the indebtedness under the 1^st and 2^nd Loan Agreements.

11.  Pursuant to 2 assignments dated 4 December 2023, Junson Capital assigned the rights and interests under the 1^st and 2^nd Loan Agreements in favour of the Petitioner.

12.  It is the Petitioner’s case that the said assignments were (i) physically delivered to the Debtor’s address; and (ii) provided to the Debtor electronically by email.

13.  On 3 January 2024, the Petitioner issued a statutory demand against the Debtor, which was (i) served on various addresses associated with him; and (ii) advertised. The statutory demand had neither been complied with nor set aside.

14.  In the premises, the Petitioner presented the petition herein on 12 June 2024.

C. The Debtor’s Grounds of Opposition

15.  In their submissions, Mr Laurence Li SC and Mr Alvin Cheung (for the Debtor) confirmed that the Debtor opposed the petition on the following grounds:-

(1) Junson Capital was a “money lender” within the meaning of section 2 of the Money Lenders Ordinance (Cap. 163) (“MLO”). Whilst Junson Capital did not have a license, it charged compound interest. As such, the 1^st and 2^nd Loan Agreements were illegal and unenforceable pursuant to sections 22 and 23 of the MLO (the “Illegality Ground”).

(2) The loans under the 1^st and 2^nd Loan Agreements should be reopened under section 25 of the MLO (the “Section 25 Ground”).

(3) The Petitioner should have enforced the security over the shares in Wisdom Wealth before taking action to recover the indebtedness against the Debtor (the “Security Ground”).

D. Legal Principles on Bankruptcy Petition

16.  The legal principles governing a bankruptcy petition are trite and summarized by Linda Chan J in Guy Kwok Hung Lam v CP Global Inc & Anor [2025] HKCFI 1220 at paras 19(2) to (4) as follows:-

“(2) An unpaid creditor whose debt is not in dispute is entitled ex debito justitiae to seek a bankruptcy order against the debtor.

(3) The burden is on the debtor to show that there is a bona fide dispute on substantial grounds in respect of the debt. For this purpose, the debtor has to adduce sufficiently precise evidence to establish a defence of substance, not just a fair probability of one (Leung Cherng Jiunn [2016] 1 HKLRD 850, §27; Re Soetrisno Farida [2019] HKCFI 2756, §11).

(4) It is not enough for the debtor merely to raise “a cloud of objections on affidavits” (Re Posismo Limited [2018] HKCFI 344, §10(4)). The court would caution itself against unsubstantiated and unparticularized assertions (Re Cheung Chi Mang [2018] HKCFI 984, §13(3), per Ng J; Re Cheung Kwan [2020] HKCFI 1033, §§30-31).”

17.  In Re Han Catherine, ex parte Zhongtai Financing (Hong Kong) Ltd [2019] HKCFI 2274 at paras 3 to 5, DHCJ William Wong SC (as he then was) stated:

“3. It is well established that the burden is on a debtor to demonstrate to the Court with sufficiently precise factual evidence that there is a bona fide dispute of the petitioning debt on substantial grounds. It is not enough for a debtor to simply raise some factual disputes and submit that such factual disputes have to be resolved in a trial.

4. In Re Leung Cherng Jiunn (debtor) [2016] 1 HKLRD 850, Kwan JA (as she then was) at §27 said:

‘27. I would endeavour to state my understanding of the law in this way:

(1) For the purpose of establishing a bona fide dispute on substantial grounds, I could discern no meaningful difference between a bankruptcy petition and a winding-up petition, notwithstanding the material differences in procedure between the two as noted by the Judge at [20] and r.70 of the Bankruptcy Rules which has no equivalent in winding-up. See Re Malcolm Westley Casselle at [24].

(2) The wording of O.14, r.3 is different from the test of bona fide dispute on substantial grounds. The test of bona fide dispute involves different considerations in respect of the evidence. The difference may not be significant, but there is still a difference. See ICS Computer at 183F and Re Yuen Mun Wa at [11].

(3) The distinction between the two tests lies in establishing a bona fide defence (for resisting a petition) and a fair probability of establishing a bona fide defence (for obtaining leave to defend a civil action, whether unconditionally or with condition). So in that sense, the threshold test for resisting a petition would require a higher standard. See ICS Computer at 183G–J and Re Grandfield Pacific Hotel Ltd at [11].

(4) Notwithstanding this difference, it is fair to say that the threshold tests in both situations are broadly similar, as noted in the two recent English authorities. If a petition is dismissed on the basis there is a bona fide dispute on substantial grounds, it would be most unlikely that summary judgment could be obtained. Most probably, the defendant would be given leave to defend, whether unconditionally, or with conditions imposed if his defence is regarded as shadowy. Conversely, where a defendant has obtained leave to defend, unconditionally or with conditions, it would be most unlikely that a petition would be granted. See Markham v Karsten at [45]. The statements of Rogers J in ICS Computer at 183E–F did not suggest otherwise.

(5) This is not to say it should be easier for a creditor to succeed in a petition than in seeking summary judgment in a civil action, notwithstanding the higher threshold test for resisting a petition in the sense as explained above. It is well established that petitions are not meant to be used for the purpose of debt collection and the winding-up or bankruptcy jurisdiction of the court would be exercised only in very clear cases. Where oral evidence is required to decide a real and substantial dispute of fact, the court will dismiss the petition. And if there is an abuse of process in invoking the jurisdiction of the court in an improper manner, the petitioning creditor may be ordered to pay indemnity costs.’ (emphasis added)

5. I am of the view that the key is for the Court to assess whether there are real and substantial disputes of fact which render the summary procedure of a bankruptcy and/or winding up proceedings unsuitable for the determination of such real and substantial disputes of fact. In such scenario, the validity of petitioning debt would need to be fully investigated in a trial. However, peripheral and/or disputes of fact which do not go to the foundation of the petitioning debt are normally distractions and are irrelevant in determining whether there are bona fide disputes to the petitioning debt on substantial grounds.”

E. The Illegality Ground

E1. Legal Principles

18.  As will be elaborated below, the key issue in dispute is whether Junson Capital was a “money lender” within the meaning of the MLO. Thus, the starting point is section 2, which provides that:-

“money lender (放債人) means every person whose business (whether or not he carries on any other business) is that of making loans or who advertises or announces himself or holds himself out in any way as carrying on that business, but does not include—

(a) a person specified in Part 1 of Schedule 1; or

(b) as respects a loan specified in Part 2 of Schedule 1, any person who makes such loan;”

19.  Section 22 of the MLO provides that:-

“(1) Any agreement made for the loan of money by a money lender shall be illegal if it provides directly or indirectly for—

(a) the payment of compound interest;

(b) …; or

(c) the rate or amount of interest being increased by reason of any default in the payment of sums due under the agreement:

Provided that provision may be made by any such agreement that if default is made in the payment upon the due date of any sum payable to the money lender under the agreement, whether in respect of principal or interest, the money lender shall be entitled, subject to Part IV, to charge simple interest on that sum from the date of the default until the sum is paid at an effective rate not exceeding the effective rate payable in respect of the principal apart from any default, and any interest so charged shall not be reckoned for the purposes of this Ordinance as part of the interest charged in respect of the loan.

(2) Notwithstanding subsection (1), if the court before which the legality of any agreement comes in question is satisfied that in all the circumstances it would be inequitable that any such agreement which does not comply with this section should be held to be unenforceable, the court may order that such agreement is enforceable to such extent, and subject to such modifications or exceptions, as the court considers equitable.”

20.  Section 23 of the MLO provides that:-

“No money lender shall be entitled to recover in any court any money lent by him or any interest in respect thereof or to enforce any agreement made or security taken in respect of any loan made by him unless he satisfies the court by the production of his licence or otherwise that at the date of the loan or the making of the agreement or the taking of the security (as the case may be) he was licensed:

Provided that if the court is satisfied that in all the circumstances it would be inequitable if a money lender who did not satisfy it that he was licensed at the relevant time was thereby not entitled to so recover such money or interest or to enforce such agreement or security, the court may order that the money lender is entitled to recover such money or interest or to enforce such agreement or security to such extent, and subject to such modifications or exceptions, as the court considers equitable.”

21.  In Lau Kam Sing Dickie v Lo Hon Kwong [2023] HKCA 506 at para 17, Kwan VP held that:-

“Where the debtor has admitted the loan and raised a defence that the creditor is a money lender operating without a license, the burden is on the debtor to establish that the creditor was carrying on business as a money lender as defined in section 2(1) of the MLO, namely, that he is one “whose business (whether or not he carried on any other business) is that of making loans or who advertises or announces himself or holds himself out in any way as carrying on that business”

22.  The question of whether a person is a money lender is a matter of fact, and the court’s findings depend on the circumstances of the case. In Re Florescent Holdings Ltd [2022] 2 HKLRD 203 at para 21, DHCJ Le Pichon stated:-

“It is common ground that the determination of whether a person is a money lender is a matter of fact to be determined by the court for each case and, necessarily, must depend on its own facts…”

23.  In Link Excellent Ltd v Ruijun Technology Ltd (HCA 1993/2016, 6 November 2017) at para 20, Lisa Wong J observed that the carrying on of a business requires a degree of repetition and continuity, and as such a single loan is generally insufficient to cause a lender to be treated as a “money lender”.

24.  However, in Florescent Holdings Ltd at paras 38 to 39, DHCJ Le Pichon pointed out that the remarks in Link Excellent were based on the evidence before the court in that case, and depending on the factual circumstances, even one transaction may be sufficient. Her Ladyship stated:-

“8. The Petitioner submitted that the carrying on of a “business” requires a degree of repetition, system and continuity. Accordingly, a single loan (which is the present case), is generally insufficient to cause a lender to be treated as a “moneylender” within §2(1) of the MLO, citing Link Excellent Limited v Ruijun Technology Limited, unrep., HCA 1993/2016, 6 November 2017.

39 Those remarks were made based on the evidence before the court in that case. As earlier noted, whether a person is a moneylender in relation to a particular transaction is highly fact-sensitive: the number of transactions made by the lender is not the determining factor. Even one transaction may be sufficient: see Chan Miu Chu Zoe at §21b and §21 above.” (emphasis added)

25.  In considering whether a person is a money lender within the meaning of the MLO, the factors that the court would consider include:-

(1) whether the parties had a pre-existing relationship: Florescent Holdings Ltd at para 37(1);

(2) whether the amount advanced was substantial: Florescent Holdings Ltd at para 37(2); Chan Miu Chu Zoe v Choi Chiu Yuk (HCA 698/2012, 21 February 2014) at para 27(a) (per Registrar Lung);

(3) whether the rate of interest was significant: Florescent Holdings Ltd at para 37(2); Chan Miu Chu Zoe at para 27(b);

(4) whether income deriving from the loan was significant: Florescent Holdings Ltd at para 37(3);

(5) whether the loan was initiated by the lender: Chan Miu Chu Zoe at para 27(d);

(6) whether the lender had said that it had lent money to other people: Chan Miu Chu Zoe at para 24;

(7) whether the loan documents were drafted by the lender: Chan Miu Chu Zoe at para 27(e); and

(8) whether the lender had taken security for the loan: Chan Miu Chu Zoe at para 27(h).

E2. Deliberation

26.  It is not in dispute that:-

(1) Junson Capital has never obtained a money-lending license under the MLO.

(2) Under the 1^st and 2^nd Loan Agreements, Junson Capital charged (i) compound interest at 8% and 12% per annum prior to default; and (ii) compound interest at 30% per annum after default.

27.  Accordingly, if Junson Capital fell within the meaning of “money lender” under section 2 of the MLO, the 1^st and 2^nd Loan Agreements would be unenforceable[1] under (i) section 23of the MLO; and (ii) section 22(1)(a) and (c) of the MLO.

28.  For the following reasons, I am of the view it is highly arguable that Junson Capital was a “money lender” within the meaning of section 2 of the MLO, such that section 22(1)(a) and (c) as well as section 23 were engaged.

29.  First of all:-

(1) In the Petitioner’s affirmation in opposition, Mr Yuen Wai Chung (“Mr Yuen”), who is Junson Capital’s legal counsel as well as one of Junson Capital’s directors and the Petitioner’s directors, stated:-

“I am advised and verily believe that Junson Capital is not a money lender under the MLO.[2]

…Junson Capital does not operate a primary or main business of money lending in its ordinary course of business. I can further confirm that Junson Capital has never advertised or announced itself or held itself out in any way as carrying on the business of lending money.”[3] (emphasis added)

“…I verily believe that the primary business of Junson Capital does not involve the making of loans or the lending of money.[4]

For these reasons, I am advised and verily believe that Junson Capital does not fall within the meaning of a “money lender” under the MLO.[5]”

(emphasis added)

(2) Despite the Debtor’s suggestion that Junson Capital was a money lender within the meaning of the MLO[6], Mr Yuen carefully and tactfully avoided making a factual assertion that Junson Capital was never involved in the business of moneylending. Mr Yuen merely affirmed that Junson Capital’s primary or main business was not concerned with and did not involve moneylending.

(3) It appears to me that Mr Yuen’s statements were deliberately equivocal. Had Junson Capital never conducted a business of moneylending, Mr Yuen could have stated so directly. For reasons best known to Mr Yuen, he chose not to make an outright denial. In my view, this is telling.

(4) I accept Mr Li’s submissions that Mr Yuen has effectively made a tacit admission that Junson Capital had a business in making loans, though this might not be its primary or main business. There was plainly no reason why Mr Yuen would have avoided making a denial had it been the case that Junson Capital never carried out a business of moneylending.

(5) In the premises, there is no substance in Mr Yuen’s alleged “belief” that Junson Capital is not a money lender under the MLO[7]. As correctly pointed out by Mr Li, this was not even an assertion of facts, but an alleged belief based on some advice. For the reasons elaborated above, I am not of the view that Mr Yuen’s alleged belief is grounded on a solid factual foundation. Mr Yuen was not even able to make a factual assertion that Junson Capital had never conducted a business of moneylending.

30.  Second:-

(1) In paragraphs 11 to 15 of Linda Chan J’s judgment in HCA 1591/2019 dated 28 April 2023 ([2023] HKCFI 1133 (the “HCA 1591/2019 Judgment”), it was recorded that Junson Capital, as a lender, participated in a very substantial transaction in respect of a syndicated loan facility granted to a company named Tianlai Holding Group Ltd. Whilst the total loan facility involved was HK$1.795 billion, Junson Capital contributed HK$100 million.

(2) The Petitioner has not put forward any evidence that addresses the facts stated in the HCA 1591/2019 Judgment. This is telling. There is no suggestion that Junson Capital participated in the syndicated loan transaction in light of some related business dealings with Tianlai Holding Group Ltd and/or its related entities.

(3) Mr Li submitted that the court should draw an inference that Junson Capital was invited to participate in the syndicated loan facility because it was well-known for making similar types of loans and was a “repeat player” within the moneylending business.

(4) I see for the force of Mr Li’s submissions, which make ample commercial sense. One does not expect a company or a person to participate in a sizeable syndicated loan transaction involving HK$100 million out of the blue. Bearing in mind that the Petitioner and Mr Yuen have deliberately kept the matters regarding this transaction opaque, I am not in a position to conclude that the inference suggested by Mr Li could not be drawn. In my view, this is a matter to be resolved at trial.

31.  Third:-

(1) It is the Petitioner’s case that the loans under the 1^st and 2^nd Loan Agreements were provided to the Debtor out of goodwill. According to Mr Yuen:-

“…Junson Capital made the 1^st and 2^nd Loans to the Debtor out of pure goodwill. Mr. Cai Kui was the director of Junson Capital at the time of making the 1^st and 2^nd Loans, and he considered Hui as his friend. To the best of my knowledge and understanding, the Loans were made by Junson Capital to the Debtor to provide financial assistance to the Debtor who was in financial need at the time.”[8]

(2) The Debtor refuted this suggestion. In his supplemental affirmation, the Debtor said:-

“…whilst it is true that I had known Mr Cai Kui for a long time, this does not mean that he/his companies lent me money as a friend.” [9]

“In fact, when we discussed my getting a loan from him/his company, he insisted on having security, saying that others to whom he/his companies lent money also needed to give security.”[10]

(3) Had Mr Cai Kui caused Junson Capital to grant the loans in question due to his friendship with the Debtor, Mr Cai Kui would have said so expressly. Surprisingly, the Petitioner has not adduced any evidence from Mr Cai Kui[11], and no explanation has been offered.

(4) There is no substance in Mr Yuen’s bare assertion (which is hearsay in nature). Put simply, there is not a shred of concrete evidence in support of the Petitioner’s case that the loans under the 1^st and 2^nd Loan Agreements were provided to the Debtor on a friendly basis, rather than on a commercial basis. Without Mr Cai Kui’s evidence, I am not in a position to reject the Debtor’s assertion summarily on affidavit.

32.  Fourth, the material terms of the 1^st and 2^nd Loan Agreements do not sit comfortably with the Petitioner’s case that the loans thereunder were some “friendly” assistance provided to the Debtor purely out of goodwill. In this connection:-

(1) Under the 1^st and 2^nd Loan Agreements, Junson Capital charged interests at commercial rates to be compounded yearly. In the event of default, Junson Capital would charge an interest rate of 30% to be compounded yearly. According to Mr Li’s calculation, the effective interest rate charged against the Debtor as of the date of the statutory demand was tantamount to 51.53% per annum[12]. In my view, the terms of the 1^st and 2^nd Loan Agreements were harsh. It did not appear that the loans were some friendly assistance, and there was a strong impression that the lender was seeking to make a substantial profit out of the transactions.

(2) The principal sums involved were very substantial (i.e. totally HK$90 million). It does not appear that the present case involved a scenario where a party put forward some idle cash to assist another friendly party out of goodwill.

(3) The indebtedness under the 1^st and 2^nd Loan Agreements were secured by the shares in Wisdom Wealth. I accept that this factor is not ipso facto conclusive: Chow Wun Sing Winston v Yiu Chun Luk (CACV 295/2006 6 March 2008) at paras 18, 21 and 23 (per Tang VP). However, this is, to say the least, a relevant factor that the court may take into account. There is no question that, like any other professional lenders, Junson Capital was fully aware of the need to protect its interest, and the transaction was conducted in a “business-like” manner.

33.  Fifth, I do not lose sight of the fact that the 1^st and 2^nd Loan Agreements were prepared by Junson Capital, and the same were drafted professionally, comprehensively and competently in a sophisticated manner. For instance, they contain extensive clauses on jurisdiction, governing law, service of notices and assignments. There is a strong impression that Junson Capital was experienced in dealing with loan transactions, and this was why it was in a position to come up with carefully drafted contractual clauses that were designed to safeguard its commercial interests.

34.  Sixth:-

(1) For completeness, it should be pointed out that there is no room for the Petitioner to contend that the loans under the 1^st and 2^nd Loan Agreements constituted “exempted loans” under Part 2 of Schedule 1 of the MLO, such that Junson Capital did not fall within the meaning of “money lender” under section 2(1) of the MLO.

(2) Under Part 2 of Schedule 1 of the MLO, a loan will be exempted if it is:-

“A loan made by a company or a firm or an individual whose ordinary business does not primarily or mainly involve the lending of money, in the ordinary course of that business” (emphasis added)

(3) It does not appear to me that it is open to the Petitioner to rely on the exemption under Part 2 of Schedule 1 of the MLO.

(4) As mentioned, it is the Petitioner’s case that Junson Capital made available the loans under the 1^st and 2^nd Agreements to the Debtor by reason of the “friendly” relationship between Mr Cai Kui and the Debtor. For the reasons elaborated above, I am skeptical about the Petitioner’s allegations.

(5) Be that as it may, in light of the way in which the Petitioner’s case is framed, there is no suggestion that Junson Capital provided the loans under the 1^st and 2^nd Loan Agreements “in the course of” an ordinary business that was not concerned with moneylending. This is not the Petitioner’s case. There is no evidence showing that the loans in question were connected with some other ordinary businesses that Junson Capital “ordinarily” carried on.

(6) In the premises, at the hearing, Mr Wong indicated that the Petitioner does not seek to rely on the exemption under Part 2 of Schedule 1 of the MLO. In my view, this concession was fair and appropriate.

35.  For the above reasons, I am satisfied that the Debtor has raised a bona fide dispute on substantial grounds, and there is sufficiently credible and particularized evidence showing that Junson Capital might be a “money lender” within the meaning of section 2 of the MLO, such that by virtue of section 22(1)(a) and (c) as well as section 23 of the MLO, the 1^st and 2^nd Loan Agreements might not be enforceable.

36.  In my view, the dispute between parties could only be resolved at a trial in civil proceedings. The bankruptcy court should not usurp the function of a civil court and decide the disputes between the parties: see Re Leung Cherng Jiunn [2016] 1 HKLRD 850 at para 20 (per Kwan JA, as she then was).

37.  For this reason alone, the Petition should be dismissed.

38.  For completeness, I will succinctly address the parties’ disputes relating to the Section 25 Ground and the Security Ground.

F. The Section 25 Ground

39.  Mr Alexsander Wong (for the Petitioner) fairly acknowledged that there are 2 ways to prove that a loan transaction is extortionate:-

(1) The first way is to rely on the presumption under section 25(3) of the MLO, which provides that a transaction is presumed to be extortionate if the effective rate of interest exceeds 36%. Section 25(3) of the MLO reads as follows:-

“Any agreement for the repayment of a loan or for the payment of interest on a loan in respect of which the effective rate of interest exceeds 36 per cent per annum shall, having regard to that fact alone, be presumed for the purposes of this section to be a transaction which is extortionate; but except where such rate exceeds the rate specified in section 24(1), the court may declare that any such agreement is not extortionate for the purposes of this section if, having regard to all the circumstances relating to the agreement, the court is satisfied that such rate is not unreasonable or unfair.”

(2) The second way is to rely on the wide range of factors under sections 25(2) and (4) to (6) of the MLO. These provisions read as follows:-

“(2) For the purposes of this section, a transaction is extortionate if—

(a) it requires the debtor or a relative of his to make payments (whether unconditionally or on certain contingencies) which are grossly exorbitant; or

(b) it otherwise grossly contravenes ordinary principles of fair-dealing.

(3) Any agreement for the repayment of a loan or for the payment of interest on a loan in respect of which the effective rate of interest exceeds 36 per cent per annum shall, having regard to that fact alone, be presumed for the purposes of this section to be a transaction which is extortionate; but except where such rate exceeds the rate specified in section 24(1), the court may declare that any such agreement is not extortionate for the purposes of this section if, having regard to all the circumstances relating to the agreement, the court is satisfied that such rate is not unreasonable or unfair.

(4) In determining whether a transaction is extortionate for the purposes of this section, regard shall be had to such evidence as is adduced concerning—

(a) interest rate prevailing at the time it was made;

(b) the factors mentioned in subsections (5) and (6); and

(c) any other relevant considerations.

(5) Factors applicable under subsection (4)(b) in relation to the debtor include—

(a) his age, experience, business capacity and state of health; and

(b) the degree to which, at the time of entering into the transaction, he was under financial pressure, and the nature of that pressure.

(6) Factors applicable under subsection (4)(b) in relation to the lender or other person by whom the proceedings are taken include—

(a) the degree of risk accepted by the lender, having regard to the nature and value of any security provided;

(b) his relationship to the debtor;

(c) whether or not a specious cash price was quoted for any goods or services included in the transaction; and

(d) where one or more other transactions are to be taken into account, the question how far any such other transaction was reasonably required for the protection of the debtor or the lender, or was in the interest of the debtor.

40.  In his submissions, Mr Li emphasized that:-

(1) The simple interest rate upon default under the 1^st and 2^nd Loan Agreements were effectively 51.53%[13], and this is, by any metric, extortionate.

(2) Clause 2.2 of the 1^st and 2^nd Loan Agreements lifts the interest rates by respectively 22% and 18% upon default. They are penalties and should not be enforced.

(3) The conduct of Junson Capital was reprehensible, in that contrary to the provisions of the MLO, it (i) carried out a business of moneylending without license; (ii) charged compound interest; and (iii) charged default interest.

41.  Mr Li submitted that in light of Junson Capital’s flagrant disregard of the provisions in the MLO and multiple breaches, it would be open to the court to invalidate the transactions under the 1^st and 2^nd Loan Agreements in their entirety.

42.  I am not in a position to conclude that Mr Li’s contention is unarguable. As pointed out, the Petitioner and/or Junson Capital[14] have kept the matters relating to the syndicated loan transaction mentioned in the HCA 1591/2019 Judgment opaque. Further, in the absence of any evidence from Mr Cai Kui, I am not of the view that the Petitioner and/or Junson Capital[15] have been forthcoming with regard to the matters relating to the transactions under the 1^st and 2^nd Loan Agreements.

43.  In the premises, I am not in a position to reject Mr Li’s suggestion that Junson Capital knowingly and reprehensibly carried out a moneylending business without license in flagrant disregard of the prohibition under the MLO. This is an important factor that the court will take into account. I cannot rule out the possibility that the court may, at the end of the day, invalidate the transactions under the 1^st and 2^nd Loan Agreements in their entirety.

44.  For the above reasons, I am inclined to the view that the Debtor has raised a bona fide dispute on substantial grounds under section 25 of the MLO, and the parties’ dispute in relation thereto should be resolved at trial.

G. The Security Ground

45.  Relying on Tsang Kin Chung Terry v Wong Chung Mang Jonah & Anor [2021] HKCFI 1033 at paras 4, 6, 13, 14 and 16 (per Recorder Stewart Wong SC), Mr Li submitted that there are situations where a creditor may be bound to enforce the security first, before being entitled to sue the debtor on the loan.

46.  In my view, Tsang Kin Chung Terry is confined to the facts of that particular case and does not avail the Debtor. In that case, Recorder Stewart Wong merely considered whether it was arguable that based on the loan agreement between the parties, there was an implied term that the creditor had to resort to the security first even where the loan became due and payable (see paras 13(1), 13(4), 15, 21 and 23).

47.  Insofar as the present case is concerned, Mr Li referred to clauses 1.2, 4.2 and 5.1 of the 1^st and 2^nd Loan Agreements. In my view, these clauses do not support Mr Li’s contention that Junson Capital is not contractually entitled to sue the Debtor for payment until and unless the shares in Wisdom Wealth are realized. This is not what the said contractual provisions provide.

48.  In this connection, Mr Wong referred to clause 6 of the 1^st and 2^nd Loan Agreements, which effectively provides that the remedies available to Junson Capital are cumulative. In my view, Mr Wong was correct in submitting that the 1^st and 2^nd Loan Agreements do not contain the implied term contended by Mr Li.

49.  Meanwhile, Mr Wong (for the Petitioner) pertinently referred this court to Southwest Securities (HK) Brokerage Ltd v Nieumarkt Investments Ltd [2021] HKCA 740 at paras 5.10 to 5.11. There, Cheung JA, referring to China and South Sea Bank v George Tan [1990] 1 AC 535, 545, pointed out that generally a secured creditor is not under a duty to realize the security. He could sue the debtor (as well as the surety (if any)) and enforce the security simultaneously or successively. He may even take no action at all:-

“5.10 In respect of the security held by the plaintiff, Lord Templeman in China and South Sea Bank v George Tan [1990] 1 AC 536 at 545 stated that a secured creditor is not under a duty to exercise his powers of sale over the mortgage securities at any particular time or at all. He explained:

‘......the creditor had three sources of repayment. The creditor could sue the debtor, sell the mortgage securities or sue the surety. All these remedies could be exercised at any time or times simultaneously or contemporaneously or successively or not at all. If the creditor chose to sue the surety and not pursue any other remedy, the creditor on being paid in full was bound to assign the mortgaged securities to the surety. If the creditor chose to exercise his power of sale over the mortgaged security he must sell for the current market value but the creditor must decide in his own interest if and when he should sell. The creditor does not become a trustee of the mortgaged securities and the power of sale for the surety unless and until the creditor is paid in full and the surety, having paid the whole of the debt is entitled to a transfer of the mortgaged securities to procure recovery of the whole or part of the sum he has paid to the creditor.’

5.11 Although in China and South Sea Bank Limited Lord Templeman was dealing with a case of a surety, the principles he had enunciated covered the position of the borrower as well. If the issue of the value of the security is to be disregarded, then clearly there is no room for any assessment of damages.

(emphasis added)

50.  Mr Wong also referred to Re Sng Allan [2018] HKCFI 2016 at paras 3 and 6. There, G Lam J (as G Lam JA then was) rejected the debtor’s contention that the petitioner failed to realize the security. His Lordship stated:-

“3… The respondent had had the statutory demand since 30 May 2018 but had not been able to point to any provision in the agreements with the petitioner that imposed any obligation on the petitioner to sell the shares held as margin security at any particular time. Nor is there any basis whatsoever to think that there can be any such implied obligation arising from any industry practice.

6. Mr Yim asserted that if the shares had been realised earlier at the time of the default, the proceeds of sale would have been sufficient to meet the outstanding indebtedness. There was no evidence to support this, or even any numbers obtained from publicly available sources. But this was in any event quite immaterial, as there was no arguable case that the petitioner breached any duty in not selling the shares at that time…” (emphasis added)

51.  On the strength of the authorities, I accept Mr Wong’s submissions that Junson Capital and/or the Petitioner (being Junson Capital’s successor-in-title) are not duty-bound to realize the shares in Wisdom Wealth before taking recovery action against the Debtor. On the facts of the present case, I am not of the view that such a duty exists.

52.  In the premises, I am not of the view that the Debtor has raised a bona fide dispute on substantial grounds under the Security Ground.

53.  In light of this conclusion, it is unnecessary for me to decide whether the shareholding in Wisdom Wealth is still valuable or not.

54.  I do not propose to express any view on whether the Petitioner and/or Junson Capital deliberately refused to take enforcement action against the shares in Wisdom Wealth in order to benefit from the high interest rates under the 1^st and 2^nd Loan Agreements[16]. This is a matter to be canvassed at trial.

H. Conclusion and Disposition

55.  For the reasons elaborated in sections E and F above, I am satisfied that the Debtor has raised a bona fide dispute on substantial grounds under the Illegality Ground and the Section 25 Ground.

56.  Accordingly, I dismiss the petition herein.

57.  Costs should follow the event.

58.  I make a costs order nisi that the Petitioner do pay the Debtor’s costs in respect of the petition to be taxed if not agreed (with certificate for 2 counsel).

59.  I thank Mr Alexsander Wong and Mr Oliver Tse (for the Petitioner) as well as Mr Laurence Li SC and Mr Alvin Cheung (for the Debtor) for their very helpful assistance.