GUANGHUA SS HOLDINGS LTD v. CHEN JIANAN

HCA 184/2024

[2026] HKCFI 749

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 184 OF 2024

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JUDGMENT

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INTRODUCTION

1.  Before me is P’s summons filed on 26 March 2025 (“Summons”) for summary judgment under Order 14 rules 1 and 3 of the Rules of the High Court (“RHC”) against D for the amounts claimed in the Statement of Claim filed on 19 March 2024 (“SOC”), namely:

(1)     a.     The sum of US$204,930,325.76 (or its Hong Kong Dollars equivalent at the time of payment);

         b.     Default interest of US$258,709,033.50 as of 29 January 2024; and

         c.     Interest on the sum of US$204,930,325.76 (or its Hong Kong Dollars equivalent at the time of payment) for the period from 30 January 2024 up to the date of actual payment in full at the contractual rate of 24% per annum, compounded every six months from 30 June 2020.

(2)     D’s Counterclaim filed and served on 15 July 2024 be struck out under Order 18 rule 19 of RHC on the ground that it discloses no reasonable cause of action and/or that  the counterclaim is otherwise an abuse of process of the Court.

(3)     Costs of this application and this action be to P, to be taxed if not agreed.

2.  P’s claim is based on two personal guarantees dated 16 April 2021 executed by D as guarantor in respect of unpaid loans arising out of the facility agreements for which P have lent under the (i) Xeno Facility Agreement; and (ii) Aether Facility Agreement, both as defined below (“Facility Agreements”).

3.  In support of the Summons, P filed the Affirmation and 2^nd Affirmation of Wu Jun on 26 March 2025 and 13 November 2025 respectively.  D filed his affirmation in opposition to the Summons on 16 September 2025. 

4.  D filed a Notice to Act in Person on 7 January 2026 but was absent at the hearing.  At the hearing, I reviewed the affirmation of service of Lee Chun Pong filed on 9 January 2026 of service of the skeleton submissions, hearing bundles, list of authorities, and P’s Statement of Costs on 8 January 2026.  These documents indicated the hearing date.  Ms Ho also informed me that the parties fixed the hearing date for the Summons on 29 August 2025.  D had solicitors acting for him at that time.  I was satisfied that D had been given proper notice of the hearing and it was expedient to proceed to hear P’s application notwithstanding D’s absence, pursuant to Order 32 rule 5(1) of RHC.

P’s CLAIM

5.  P is and was at all material times a company incorporated in the Cayman Islands.  At all material times until 10 July 2023, the sole registered shareholder of P was Maples Fiduciary Services (Hong Kong) Ltd (“Maples”), which held 100% shareholding in P on trust for MBK Partners Special Situations I, L P (“MBK Partners”), an exempted limited partnership registered in the Cayman Islands.  On 10 July 2023, Maples transferred its 100% shareholding in P to Guanghua SS Finance Limited.  On 1 August 2023, Guanghua SSF transferred its 100% shareholding in P to Chang An Limited.  

6.  D is and was at all material times a PRC citizen. 

The Xeno Facility Agreement

7.  By a facility agreement dated 21 December 2017 made between (i) SCH 1 Ltd as original lender and security trustee, (ii) Xeno Origin Limited (“Xeno”) as borrower, and (iii) Mr Lim Yew Cheng (“Mr Lim”), Mr Lin Minghan (“Mr Lin”) and Kenora Corporation Ltd (“Kenora”) as original guarantors, which was assigned to P as new lender by a Transfer Certificate dated 21 May 2018 executed by SCH 1 Ltd and P, and amended by amendment deeds dated 21 May 2018, 13 January 2020, and 27 April 2020 between Xeno, Mr Lim, Mr Lin, Kenora, SCH 1 Limited and P (“Xeno Facility Agreement”):

(a)     SCH 1 Ltd as original lender and P as new lender agreed to make available to Xeno a loan of US$80 million (clause 2.1). 

(b)     Xeno agreed to repay P the loan principal amount of US$86,428,422.23 in full on 30 June 2020 (the “Termination Date”) (clause 6). 

(c)     Xeno agreed to pay P by the Termination Date accrued interest on the loan principal amount from 31 March 2020 up to the Termination Date at a rate of 19 % per annum, in the sum of US$4,150,965.06 (clauses 8 and 9). 

(d)     Default interest on any overdue amount under the Finance Documents (as defined in the Xeno Facility Agreement, to include in particular the Xeno Facility Agreement, the “Xeno Finance Documents”) will accrue according to clause 8.3 of the Xeno Facility Agreement, immediately payable by Xeno on demand, being the contractual rate of 24% annum, accruing from the Termination Date, compounded every six months from the Termination Date onwards (clause 8.3)

(“Xeno 1 Loan”).

Aether Facility Agreement

8.  By a facility agreement dated 21 May 2018 between P as original lender, Xeno as original borrower, Mr Lim, Mr Lin and Kenora as original guarantors and SCH 1 Ltd as security trustee, which was novated by a deed of novation dated 26 October 2018 between the said parties and Aether Limited (“HK Aether”) as the new borrower (“Novation Deed”), and amended by amendment deeds dated 13 January 2020 and 27 April 2020 between, among others, P and the said parties (“Aether Facility Agreement”):

(a)     P agreed to make available to Xeno (as the original borrower, and HK Aether as the new borrower) a loan of US$80,000,000 (clause 2.1). 

(b)     HK Aether agreed to repay P the loan principal amount of US$110,330,883.28 in full on the Termination Date (clause 6).

(c)     HK Aether agreed to pay P by the Termination Date accrued interest on the loan principal amount from 31 March 2020 up to the Termination Date at a rate of 18% per annum, in the sum of US$5,020,055.19 (clauses 8 and 9). 

(d)     Default interest on any overdue amount under the Finance Documents (as defined in the Aether Facility Agreement, to include in particular the Aether Facility Agreement, the “Aether Finance Documents”) will accrue according to clause 8.3 of the Aether Facility Agreement, immediately payable by HK Aether on demand, being the contractual rate of 24% per annum, accruing from the Termination Date, compounded every six months from the Termination Date onwards (clause 8.3)

(“Xeno 2 Loan”).

The Personal Guarantees

9.  By (i) a Personal Guarantee dated 16 April 2021 granted by D as guarantor in relation to the Xeno Facility Agreement (“Personal Guarantee 1”); and (ii) a Personal Guarantee dated 16 April 2021 granted by D as guarantor in relation to the Aether Facility Agreement (“Personal Guarantee 2”) (together, the “Personal Guarantees”), D irrevocably and unconditionally guarantees to P as lender and SCH 1 Ltd as security trustee under the Facility Agreements of the punctual performance by each of Xeno and HK Aether of all of their obligations under the Xeno Finance Documents and the Aether Finance Documents (“Finance Documents”) (clause 2.1(a)).

10.  Save and except the reference to the different Facility Agreements, the Personal Guarantees are substantially similar. 

11.  D irrevocably and unconditionally undertakes with P as Lender and SCH 1 Ltd as security trustee that whenever Xeno or HK Aether does not pay any amount when due under or in connection with the respective Finance Documents, D shall immediately on demand pay that amount as if he were the principal obligor (clause 2.1(b)). 

12.  D irrevocably and unconditionally waives any right he may have of first requiring the Plaintiff or SCH 1 Ltd to proceed against or enforce any other rights or security or claim payment from any person before claiming from D under clause 2.1 of the Personal Guarantees (clause 2.6).

13.  P and SCH 1 Ltd may, except as specifically provided in the Finance Documents, separately enforce their rights under or in connection with the respective Finance Documents (clause 3(b)).

14.  P is not a party to the Personal Guarantees.  However, it may enforce and enjoy the benefit of the provisions of the Personal Guarantees which expressly confers rights on it, subject to the provisions of the Third Parties Ordinance (clause 1.3 (b)).

Default of the Faculty Agreements

15.  In breach of the Xeno Facility Agreement, Xeno as borrower failed to pay P the loan principal and accrued interest due under the Xeno Facility Agreement on the Termination Date.  Accordingly, an event of default occurred under the Xeno Facility Agreement.

16.  In breach of the Aether Facility Agreement, HK Aether as borrower failed to pay the loan principal and accrued interest due under the Aether Facility Agreement on the Termination Date.  Accordingly, an event of default has occurred under the Aether Facility Agreement.

17.  By letters dated 15 October 2020, P demanded Xeno and HK Aether each as borrower respectively to pay the amounts due under the respective Facility Agreements, including the loan principal amount, accrued interest and default interest up to 15 October 2020 (which became immediately payable upon demand and continues to accrue).

18.  On 1 August 2023, P received US$1,000,000 through enforcement of the Xeno Share Charge as partial repayment of the principal, interest, and default interest under the Xeno Facility Agreement.  However, no further repayment was received in relation to the amounts due under the Facility Agreements. 

19.  By a demand letter dated 4 September 2023, P demanded that D as guarantor pay the outstanding amounts due and payable by Xeno to P under the Xeno Facility Agreement.

20.  Despite repeated demands, no further repayment was received in relation to the amounts due under the Facility Agreements. 

LEGAL PRINCIPLES – SUMMARY JUDGMENT

21.  I bear in mind that in an Order 14 application, the court should not conduct a mini trial on affidavits.  The approach is to ask the following:- (i) whether the plaintiff has established a prima facie sustainable case on its claim; and if so, (ii) whether the defendant has discharged its burden to show there are triable issues. 

22.  As observed by DHCJ R Ismail SC in Kenwell Limited v Safety Gondola Limited [2025] HKCFI 5894 at §§7-10:

(a)     Once P is able to show a prima facie case, D bears the burden of showing that there are triable issues: see Ju Yan Di Emperory Genesisy v Yau Wai Han [2015] 1 HKLRD 822 (at §14).

(b)     D’s affirmation must condescend upon particulars and should, as far as possible, deal specifically with P’s claim and affirmation, and state clearly and concisely what the defence is, and what facts are relied on to support it: Hong Kong Civil Procedure 2025 at §14/4/4.

(c)     The mere assertion in an affidavit of a given situation which is to be the basis of a defence does not, ipso facto, provide leave to defend; the court must look at the whole situation and ask itself whether the defendant has satisfied the court that there is a fair or reasonable probability of the defendant’s having a real or bona fide defence: Banque de Paris et des Pays-Bas (Suisse) SA v Costa de Naray [1984] 1 Lloyd Rep 21 at §28.

(d)     Although a court cannot resolve issues of fact on affidavits, there are some cases in which D’s own case is so incredible or so contradicted by contemporary documents or circumstances that it becomes clear that their defence is a sham: Manciple Ltd v Chan On Man [1995] 3 HKC 459, at §466G. 

23.  In considering whether there are triable issues, the court will not take the alleged defence at face value but to test it against inherent probability, contemporaneous documents, parties’ contemporaneous conduct, as well as matters which are undisputed or beyond reasonable dispute. 

24.  I have reviewed the Xeno Facility Agreement, Amendment Deeds to the Xeno Facility Agreement dated 21 May 2018, 13 January 2020, and 27 April 2020, and Transfer Certificate between SCH 1 as original lender and P as the new lender dated 21 May 2018.  In the 27 April 2020 Amendment Deed, it was acknowledged that the outstanding principal payable on the Termination Date is US$86,428,422.23 (clause 2.3 of the 27 April 2020 Amendment Deed). 

25.  I have also reviewed the Aether Facility Agreement, Amendment Deeds to the Aether Facility Agreement dated 13 January 2020 and 27 April 2020, and Deed of Novation between P as lender, Xeno as the original borrower, and the Novation Deed with HK Aether as the new borrower.  In the 27 April 2020 Amendment Deed, it was acknowledged that the outstanding principal payable on the Termination Date is US$110,330,883.28 (clause 2.2 of the 27 April 2020 Amendment Deed). 

26.  Xeno and HK Aether failed to make any repayment towards the loan principals and accrued interests under the Facility Agreements by the Termination Date.  I note the demand letters issued by Messrs Allen & Overy dated 15 October 2020 for the Xeno 1 Loan and Xeno 2 Loan. 

27.  I note that P commenced proceedings in HCA 1972/2020 against the original guarantors, Mr Lim and Mr Lin, under the Facility Agreements.  Summary judgment was obtained by P against Mr Lim and Mr Lin in HCA 1972/2020. 

28.  A letter of demand was sent to D by P dated 4 September 2023 to demand payment of the outstanding amounts due under the Xeno Facility Agreement.  No reply was received by P denying the obligation to pay the amounts from D. 

29.  The Personal Guarantees were signed by D in the presence of an unnamed witness. 

30.  Under clause 2.1(b) of the Personal Guarantees, D irrevocably and unconditionally undertakes with P as Lender and SCH 1 Ltd as security trustee that whenever Xeno or HK Aether do not pay any amount when due under or in connection with the respective Finance Documents, D shall immediately on demand pay that amount as if he were the principal obligor.  Further, under clause 1.3(b) of the Personal Guarantees, P may enforce and enjoy the benefit of the provisions of the Personal Guarantees which expressly confers rights on it, subject to the provisions of the Third Parties Ordinance.

31.  Under 2.1(c) of the Personal Guarantees, D irrevocably and unconditionally agrees with each Finance Party (including P) that if any obligation guaranteed by him is or becomes unenforceable, invalid or illegal, he will, as an independent and primary obligation indemnify P immediately on demand against any cost, loss or liability it incurs as a result of the Borrower not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Finance Document on the date when it would have been due.

32.  I am satisfied that P has established a prima facie sustainable case for its claim.  It therefore falls on D to establish whether there are any triable issues. 

WHETHER D HAS DISCHARGED HIS BURDEN TO SHOW THERE ARE TRIABLE ISSUES

33.  D has raised two defences: misrepresentation and economic duress. 

Misrepresentation Defence

34.  D’s case in the Defence and Counterclaim (“D&C”) is as follows:

(1)     In or around late March or early April 2021, Stephen Le (with the assistance of Mr Lim and/or Mr Lin) represented to D that he had to sign personal guarantees as a temporary measure, and arrangements would be made by Stephen Le, Mr Lim and Mr Lin to repay the Xeno 1 Loan and the Xeno 2 Loan, such that D would not be held liable under the Personal Guarantees (“PG Representations”) (§22 of D&C).

(2)     In this connection, Stephen Le insisted upon the PG Representations and refused to accept D’s counter proposals, including inter alia selling fixed assets (such as office premises) to raise funds for all necessary repayments, alleging that D’s counter proposals would not be effective (§22 of D&C).

(3)     In reliance on the PG Representations but not otherwise, D signed on the Personal Guarantees on 16 April 2021, believing that shortly thereafter arrangements would be made by Stephen Le, Mr Lim and Mr Lin to repay the Xeno 1 Loan and the Xeno 2 Loan, such that he would not be held liable under the Personal Guarantees (§23 of D&C).

35.  Further, consistent with and reflective of the PG Representations, on 15 November 2022, Stephen Le represented to D in the Shilla Hotel in Seoul, Korea that P would not pursue any litigation against D, in reliance on the Personal Guarantees or otherwise.  The PG Representations were reiterated.  P in fact did not sue D in reliance on the Personal Guarantees until very recently, notwithstanding that P already brought proceedings against Mr Lim and Mr Lin after their cooperation relationship had broken down (§24(1) and (2) of D&C).

36.  This defence is bad in law and fact for the following reasons.

(a)     First, Mr Le, Mr Lim and/or Mr Lin are not parties to the Personal Guarantees.  In order to succeed on the defence of misrepresentation, D must show that Mr Le (and/or Mr Lim or Mr Lin) was the agent of P or the directing mind and will of P with P’s knowledge is attributed to P when the representation was made (Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 at 713 per Viscount Haldane.  It is not pleaded that any of Mr Le, Mr Lim or Mr Lin acted as P’s agent and/or were the directing mind of P.  MBK Partners was the beneficial owner of P and Mr Le, Mr Lim and Mr Lin were not directors of P. 

(b)     Second, no evidence has been adduced by D in his affirmation regarding the alleged misrepresentations.  In fact, the evidence adduced by P contradicts the allegation of misrepresentation as set out below. 

37.  From D’s defence (which is adopted in §3 of D’s affirmation), HK Aether, through its subsidiary in the Mainland, Beijing Aether Property Development Ltd (“Beijing Aether”) is and was at all material times the developer of a commercial and residential project in the Chaoyang District of Beijing (“Beijing Project”).  The Beijing Project remains uncompleted to date (§7 of D&C).  D, through CBD Aether Center Ltd (“CBD Aether”), decided to invest in the Beijing Project through acquiring a 51% shareholding in HK Aether (§§11, 14(1) and (3) of D&C). HK Aether is a holding company which holds interest in the property in Beijing through its 80% shareholding in Beijing Aether (§6.2 of Reply and Defence to Counterclaim (“RDCC”)). 

38.  On 25 November 2020, P presented a winding up petition in the Cayman Islands against CBD Aether in respect of the guarantee given by CBD Aether of all of HK Aether’s obligations under the Aether Facility Agreement.  The principal due pursuant to the Aether Facility Agreement, as amended by the amendment deeds, was US$110,330,883.28.  An event of default occurred under the Facility Agreement, clause 19.1 (non-payment) by reason of HK Aether’s failure to repay the Xeno 2 Loan in full on the Termination Date pursuant to clause 6 of the Aether Facility Agreement. 

39.  As pleaded by D, CBD Aether is the corporate vehicle of D (§13 of D&C).  The winding up petition against CBD Aether led to D and Mr Zhao Zikai (the then director of CBD Aether) to approach P to seek an adjournment of the winding up petition whilst assuring P that D was taking steps to arrange repayment or exploring options to resolve the dispute arising out of the Aether Facility Agreement. 

40.  This can be seen in P’s Mr Jason (Kao) Liu’s email to Mr Zhao Zikai dated 31 December 2020 and titled “Regarding the Petition against CBDA”:

“We understand from our discussion with representatives of [CBD Aether] that whilst the Petition and the facts mentioned in it and the transactions under the Facility Agreement (as novated, amended and/or restated) are not disputed, [CBD Aether] would like to seek an adjournment of the hearing of the Petition from 22 January 2021 until the earliest date that the Grand Court is available on or after 26 February 2021 in order to enable it to negotiate a consensual resolution to the Petition with the Petitioner.

We have no objection in principle to [CBD Aether’s] request for an adjournment, provided that you confirm and acknowledge the contents of this email by printing, countersigning and returning the same (together with document evidencing the signatory’s identity) to us on behalf of [CBD Aether] and in your capacity as a director of [CBD Aether].

All our rights are expressly reserved.” (my underlining).

41.  On 3 January 2021, Mr Zhao Zikai sent to P’s Mr Jason Liu the certificate of incumbency of CBD Aether, and returned the printed and countersigned email of Mr Jason Liu dated 31 December 2020 and a copy of his PRC identity card with his signature. 

42.  On 17 February 2021, D sent P a letter confirming that he was the actual controller of CBD Aether and majority shareholder of HK Aether.  He wanted to cooperate with the MBK team to find a solution to the debt.  This would be by introducing a third party investor who would provide funding to repay the debt through direct or indirect acquisition of the B Block office building of the Beijing Project and equity in HK Aether. 

43.  P replied to D on 20 February 2021 through Mr Jason Liu acknowledging D’s willingness to use all efforts to expedite full repayment of the loans owning by Xeno and HK Aether to P.  Mr Jason Liu stated that P’s interest as lender was to speedily resolve the current default situation and get full repayment of the principal and interest of the Xeno 1 Loan and Xeno 2 Loan.  P’s Mr Jason Liu pointed out that no concrete repayment plan had yet been put forward. 

44.  On 24 February 2021, D sent P’s Mr Jason Liu an email stating that with the existence of the Xeno 1 Loan, Beijing Aether was restricted from repayment of the Xeno 2 Loan by borrowing another loan secured with its assets. 

45.  Furthermore, based on his communications with various potential purchasers, few people were willing to pay US$250 million for 49% shares in HK Aether, considering the minority shareholding could not give the purchaser the control over the operation of the company.  The construction project of the residential building of Beijing Aether faced great uncertainties considering that its construction planning permit had yet to be obtained, and the Beijing Project had been delayed for many years.  It was also uncertain when the Tower B office building would be completed.  Accordingly, it was not easy to find a purchaser of a minority stake in HK Aether’s shares.  D mentioned that a potential purchaser had proposed three pre-conditions for the purchase of the office building, one of which was for the majority shareholder of HK Aether to provide a guarantee for delivery of the title document with respect of the office building, failing which would trigger the purchaser’s right to sell the 49% shares it has acquired to the majority shareholder at the original price of US$250 million.  D requested in the 24 February 2021 email, as representative of CBD Aether, for P to adjourn the winding up petition to a date not earlier than 31 May 2021.  

46.  On 26 February 2021, Mr Jason Liu on behalf of P sent D and Mr Zhao Zikai an email titled “To CBD Aether.”  This referred to P’s winding up petition of CBD Aether and stated the following:

“We understand from communications with [D] (as representative of [CBD Aether]) that the Petition and the facts mentioned in it and the transactions under the Facility Agreement (as novated, amended and/or restated) are not disputed, and that [CBD Aether] would like to seek an adjournment of the hearing of the Petition in order to enable it to come up with a meaningful proposal to fully repay all debts owing to P. To this end, we are agreeable to an adjournment to the earliest date that the Grand Court is available on or after 26 March 2021. If you agree to the above, please provide us with confirmation and acknowledgement from each of you by printing, countersigning and returning a copy of this email (together with document evidencing the signatory’s identity) to us on behalf of [CBD Aether] and in your capacity as a director and/or authorized representative of the [CBD Aether] by February 26, 2021 noon (HK time).

Separately, while we welcome and would be willing to explore various repayment proposals (including the ones mentioned in [D’s] letters dated February 17, 2021 and February 24, 2021), we note that no concrete repayment plan has yet been put forward. As mentioned before, time is of the essence here, and if you have any concrete, credible and feasible repayment proposals with specific terms, please forward them to us for our consideration as soon as possible.” (my underlining).

47.  On the same day, by email, D and Mr Zhao Zikai returned the printed and countersigned email of Mr Jason Liu dated 26 February 2021 and copies of their PRC identity card with their signatures. 

48.  Right before the issue of the Personal Guarantees, by an email dated 15 April 2021, D wrote to P’s Mr Jason Liu stating that CBD Aether had been working diligently on a repayment plan and had made significant progress.  D believed that they could produce a binding offer within a month and requested postponement of the hearing before the Cayman court for one month so they could better advance the sale of the property and repayment plan. 

49.  From the above correspondence, it is clear that D wanted an adjournment of the winding up petition of his own corporate vehicle, CBD Aether, that he used to invest in the Beijing Project.  It was in this context that the Personal Guarantees were entered into by D. 

50.  I also refer to §§75-77 below regarding the two warning notices dated 16 April 2021 addressed to D regarding the Personal Guarantees, and the terms of the Personal Guarantees. 

51.  Accordingly, this defence is unarguable and improbable.

Economic Duress Defence

52.  The second defence raised by D is that the Personal Guarantees relied upon by P in bringing proceedings against D were executed under circumstances of economic duress (§4 of D’s affirmation).  D made the following allegations regarding economic duress in his affirmation:

(a)     Mr Lin informed him that if he refused to sign Personal Guarantee 1, all financing arrangements involving P and its affiliates (including MBK Partners), Mr Lin, Xeno, and D would be adversely affected. These included other property development projects and ongoing investments with HK Aether, into which D and his associated companies had already invested more than RMB 1.9 billion. Faced with this threat, D alleges that he had no real choice but to sign Personal Guarantee 1 under economic duress (§6 of D’s affirmation). 

(b)     Although the threats were conveyed by Mr Lin, D firmly believes they originated from P. If P had no knowledge of D’s role or relationship with Mr Lin, then it would not have required an unrelated third party to act as an additional guarantor.  P ought to have known that Mr Lin was exerting such threats, because D had no involvement whatsoever in the Xeno 1 Loan, neither as borrower, beneficiary, nor original guarantor. The loan was advanced in 2017, while Personal Guarantee 1 was signed in 2021.  P should have realized that Personal Guarantee 1 lacked any commercial rationale (§7.1 of D’s affirmation).

(c)     Personal Guarantee 1 was not executed independently but simultaneously with Personal Guarantee 2.  P was aware of D’s substantial commitments to the Beijing Project. Against this background, P required and/or accepted D’s signing of Personal Guarantee 1, thereby permitting Mr Lin to use D’s investments in Aether as leverage to coerce him into guaranteeing a loan unrelated to D (§7.3 of D’s affirmation). 

(d)     Signing Personal Guarantee 1 conferred no commercial benefit to any party other than P, since Mr Lin was already subject to judgment enforcement and the Xeno 1 Loan remained unpaid.  D’s guarantee served only to provide P with additional security (§7.4 of D’s affirmation).

(e)     The only reasonable inference is that P, acting in its own interest, required and/or accepted D signing of Personal Guarantee 1 despite its obvious lack of rationale, disregarding the threats Mr Lin made against D in relation to the Aether investments. P ought to have known of such threats (§7.5 of D’s affirmation).

(f)     The threats made or permitted by P through Mr Lin constitute illegitimate economic duress. D’s vulnerable position was exploited to compel him to sign Personal Guarantee 1, thereby granting Mr Lin and P benefits not contemplated under the original Xeno Facility Agreement (§8 of D’s affirmation).

(g)     Apart from the threats, there was no commercial reason for D to become an additional guarantor under the Xeno Facility Agreement. Personal Guarantee 1 itself contains no explanation of why D was required to do so, and D never received any benefit from the Xeno 1 Loan.  The only reasonable conclusion is that D signed Personal Guarantee 1 solely because of Mr Lin’s threats (§9 of D’s affirmation).

(h)     Personal Guarantee 2 was executed on the same day and at the same time as Personal Guarantee 1, under identical circumstances. It too was signed under economic duress exerted by P or permitted by P through Mr Lin (§10 of D’s affirmation).

(i)     Although the threats were conveyed by Mr Lin, D believed they originated from P.  If P had no knowledge of D’s role or relationship with Mr Lin, it would not have required D, an unrelated third party, to act as guarantor. P ought to have known of the threats, because D had no involvement in the Xeno 2 Loan—neither as borrower, beneficiary, nor original guarantor (§11 of D’s affirmation).

53.  As a starting point, in Fine Vision Opportunity III Ltd v Xinyuan Real Estate Co Ltd [2024] 5 HKLRD 300, the defendant sought to resist a summary judgment application on the basis of economic duress. That defence was dismissed.  Tam J observed at §30(i) that:

“As explained by Lord Hodge in Times Travel (at §§28 & 30), the scope for lawful act duress in contractual negotiations is “extremely limited”; and against the commercial background, the pressure applied by a negotiating party will “very rarely” come up to the standard of illegitimate pressure or unconscionable conduct. In the present case, it was plainly the result of commercial negotiations between the parties that led to the NPA and the Corporate Guarantee.” (my underlining).

54.  In The Hongkong and Shanghai Banking Corp Ltd v King Wai Piece Goods Co Ltd [2025] HKCFI 1371 which was an Order 88 application, Au-Yeung J set out the elements for a contract to be set aside on the ground of duress at §77-80:

“77. For a contract to be set aside on the ground of duress, the claimant must establish two essential elements. The first is a threat (or pressure exerted) by the other party that is illegitimate. The second is that that illegitimate threat (or pressure) caused the claimant to enter into the contract. In the context of economic duress there is a third element, namely that the claimant must have had no reasonable alternative but to give in to the illegitimate pressure: Duress, Undue Influence and Unconscionable Dealing, 4th edition, §§2-002, 2-003.

78. A threat to break a contract will generally be regarded as illegitimate, particularly where the defendant must know that it would be in breach of contract if the threat were implemented: Zebra Industries (Orogenesis Nova) Ltd v Wah Tong Paper Products Group Ltd (unrep. HCMP 436/2013, 31 August 2015), §84, G Lam J (as he then was), citing Kolmar Group AG v Traxpo Enterprises Pvt Ltd [2011] 1 All ER (Comm) 46, §92, Christopher Clarke J.

79. Judges and academics have propounded different formulations of the requirement of causation for economic duress. In Esquire (Electronics) Ltd v The Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439 at §157, Stock JA (as he then was) observed that authorities have summarized the tests as whether all that had to be shown was that the illegitimate pressure must constitute “a” reason for the weaker party to have entered in the agreement now sought to be vitiated, or (assuming there to be a difference, which Stock JA does not think there is) a “significant cause” “a predominant cause” or the “but for” test.

80.  It is not enough to refuse relief that there was an alternative at the time the disputed contract was made. The alternative must be a practical or reasonable one, in the sense that it is adequate for the claimant’s purpose in the circumstances. If there is an alternative (such as a claim for damages for breach of contract) but it is merely theoretical and would be of no practical use to the claimant, then the court will not expect him to take that alternative instead of submitting to the illegitimate pressure: Duress, Undue Influence and Unconscionable Dealing (supra), §4-020.”

55.  In The Hongkong and Shanghai Banking Corp Ltd (“HSBC”) case, HSBC sought to enforce payment of the outstanding indebtedness under the facility letter and the mortgages.  The Defendants’ defence was that the facility letter was voidable for economic duress, in that the threat to immediately call in the loan was illegitimate and the borrower had no realistic alternative but to execute the facility letter: §§3 and 29.  Au-Yeung J  held at §93-94 that:

“93. There is no illegitimacy shown in this case, apart from the great economic pressure felt by the Defendants.

94.  In the premises, the Economic Duress Issue is not triable.”

56.  In analysing the alleged economic duress in the HSBC case, Au-Yeung J noted that: (i) the allegation of duress was not raised in the first two affirmations filed, but only belatedly (at §84); (ii) the allegation of economic duress was contrary to contemporaneous documents and the defendants’ own evidence (at §84); (iii) the defendant did not accept the draft facility letter, showing that it did not give in to any alleged threat or pressure exerted on it.  Further, the facility letter was sent on 23 February 2023, but it was only executed on 21 March 2023.  KW Enterprise had the opportunity to consider the facility letter for 3 weeks before signing (§§86 and 88); and (iv) there was no illegitimacy in the pressure exerted, since a bank’s exercise of its overriding right of repayment on demand is a right (§§89 to 92). 

57.  In a contractual situation, commercial pressure is not enough: Pao On v Lau Yiu Long [1980] AC 614 per Lord Scarman at p 635B.  Even if there was pressure or threat exerted on D, illegitimacy has to be proved. In Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439, Stock JA (as he then was) at §154 held that:

“154. The key to proving economic duress is proof of the illegitimacy of the suggested pressure. Much commercial activity necessarily involves pressure, often considerable and sometimes overwhelming, exercised by parties who find themselves in powerful bargaining positions. But that of itself is not illegitimate. …”

58.  D alleged that Mr Lin informed him that if he refused to sign Personal Guarantee 1, all financing arrangements involving P and its affiliates (including MBK Partners), Mr Lin, Xeno, and D would be adversely affected.  However, even if this threat was made, threatening to enforce a legal right such as pursuing claims under the Xeno Facility Agreement and Aether Facility Agreement is not illegitimate pressure.  It is the ordinary course of commercial self-interest: Fine Vision Opportunity III Ltd per Tam J at §§25, 30(iii) and (v).     

59.  According to D, P was aware of D’s substantial commitments to the Beijing Project. Against this background, P required and/or accepted D’s signing of Personal Guarantee 1, thereby permitting Mr Lin to use D’s investments in Aether as leverage to coerce him into guaranteeing a loan unrelated to D.  Even if that were true, the mere knowledge by one party that another might have a need for funds is not sufficient in itself to amount to economic duress.  Much more needs to be demonstrated to substantiate this defence: Chow Sui Hei v Chow Sui Tak [2024] HKCFI 3360, per Recorder Jin Pao SC at §75.

60.  In this case, the allegation of economic duress was only raised belatedly until the filing of D’s affirmation.  It was not raised when P sent D a demand letter for payment on 4 September 2023. 

61.  D didn’t have to sign the Personal Guarantees, but had an incentive as there was a winding up petition against CBD Aether in the Cayman Islands.

62.  Before signing the Personal Guarantees on 16 April 2021, between late January and April 2021, D had sought to find a solution for the CBD Aether winding up and the Xeno 1 and 2 Loans.  D further alleges that there was no commercial reason for D to become an additional guarantor under the Xeno Facility Agreement, and D never received any benefit from the Xeno 1 Loan.  However, Xeno and Kenora used to hold 49% shareholding of HK Aether (§5.2(iii) of the RDCC).  Furthermore, before the entering of the Personal Guarantees, P’s exercise of its overriding right of repayment under the Facility Agreements is a right such that there was no illegitimacy in the pressure exerted, if any. 

63.  In determining whether there has been illegitimate pressure, the court takes into account a range of factors.  These include “whether he was independently advised; and whether after entering the contract he took steps to avoid it”: Fine Vision Opportunity III Ltd at §72.

64.  D was represented by lawyers when entering into the Personal Guarantees.  Ms Angela Cui of Messrs Han Kun Law Office was copied on the execution versions of the Personal Guarantees. 

65.  The lack of protest, affirmation of contract, and delay are telling.  The party asserting economic duress must promptly repudiate the contract, or take actions to avoid it.  If it delays, continues to perform, or affirms the contract, the claim of economic duress holds no water.  In Chitty on Contracts, (35th ed) at §11-040:

“Steps taken to avoid contract   The Pao On case also referred to the relevance of “whether after entering the contract he took steps to avoid it” in determining whether the claimant had been coerced. In Morley v The Royal Bank of Scotland Plc, the Court of Appeal found no coercion because, inter alia, the fact that the claimant:

“…did not take any step to set the agreement aside until five years later is significant, not only because it demonstrates his affirmation of the agreement, but also because it negates any finding of coercion.” ”

66.  Although the Personal Guarantees were signed in April 2021, no steps were taken by D to avoid them.  This conduct is fatal to any claim of economic duress: see Chow Sui Hei per Recorder Jin Pao SC at §78; Pao On per Lord Scarman at pp. 635D and 636B. 

67.  There are number of other problems with this defence.

68.  The economic duress defence was not pleaded in the D&C but only raised in D’s affirmation.  Ms Ho submitted that where a defendant has already filed a defence, it cannot, in opposition to a summary judgment application, rely on a case not pleaded in the defence: Wang Shuai v Qiaohui [2024] HKCA 304 at §46 per Anthony Chan J; Hong Kong Topkey Limited v Wintac (Hong Kong) Limited [2023] HKCFI 1711, §§14-16, applying the decision of the Court of Appeal in Kaefer AG v Winfield Marine Services Co Ltd [2022] HKCA 807, §§30-32. 

69.  I note the commentary in Hong Kong Civil Procedure 2026 at §14/4/3A that it is not apparent from the dictum in Kaefer AG that the Court of Appeal should be understood as laying down a general rule that would prohibit a defendant (who has already filed a defence) from relying on an unpleaded defence, even where (eg) such defence is raised fairly and squarely in the defendant’s affidavit in opposition.  

70.  In Gao Xin Jian Group (Hong Kong) Holding Co Ltd v Kin Lee Precast Concrete Products Co Ltd [2024] HKCFI 1058 at §34, Cheng Jobserved that the Court of Appeal in Kaefer AG “did not appear to lay down any general rule that in an O 14 application, a defendant cannot rely on a defence which has not been pleaded. After all, RHC O 14 r 4(1) provides that a defendant may show cause against a summary judgment application by affidavit or otherwise to the satisfaction of the court.”  Gao Xin Jian Group was applied with approval in Wu Yuan Hong v China Zenith Chemical Group Ltd [2025] 1 HKLRD 1191 per Au-Yeung J at §25. What was decided in Kaefer was specific to what happened in that case. It is not apparent that the Court of Appeal in Kaefer laid down any general rule: per Recorder Eugene Fung SC in CCMD Overseas Ltd v Sinom Investments Ltd [2023] HKCFI 2912 at §39(2).

71.  Accordingly, it would not be in the interests of justice not to consider all of D’s causes against a summary judgment application (CCMD Overseas Ltd v Sinom Investments Ltd [2023] HKCFI 2912 at §39, Gao Xin Jian Group (Hong Kong) Holding Co Ltd v Kin Lee Precast Concrete Products Co Ltd [2024] HKCFI 1058 at §34). 

72.  No evidence has been adduced by D in support of its defence of economic duress.  The prevalence of e-mails, text messages and other forms of electronic communication is such that most discussions which are of legal significance, even if not embodied in writing, leave some form of electronic imprint: Leung Chin Sing Rabo v Ko Chun Hay Kelvin [2021] HKCFI 2242 at §42 per DHCJ Jin Pao SC, which referred to Blue v Ashley [2017] EWHC 1928 (Comm)  at [65] per Leggatt J (as he then was); Music Holdings Property HK Ltd v Ooi Lean Choo [2020] HKCFI 1312 at [58] per Ng J.  

73.  Rather, the evidence adduced suggests the contrary.

74.  According to D’s evidence, Mr Lin informed him that if he refused to sign Personal Guarantee 1, all financing arrangements involving P and its affiliates (including MBK Partners), Mr Lin, Xeno, and D would be adversely affected. Having reviewed the correspondence leading up to the signing of the Personal Guarantees, Mr Lin is neither mentioned nor copied on the correspondence.  He does not feature at all.  

75.  D signed the two warning notices dated 16 April 2021 addressed to him in respect of the Personal Guarantees.  Extracts of the warning notices are as follows: 

“4. Before you sign the Guarantee which you have to sign if you go on with the transaction you should instruct a solicitor to protect your interests and to ensure that your rights and liabilities under the Guarantee are properly protected.

5. YOU ARE RECOMMENDED TO INSTRUCT YOUR OWN SOLICITOR who will be able at every stage of the transaction to protect your interest and to give you independent legal advice.

6. If you do not instruct your own solicitor, you will be required to attend the office of the solicitors acting for the Lender solely to sign and execute the Guarantee and the solicitors will only be instructed by the Lender to explain and to witness your signing and execution of the Guarantee. They do not act as your solicitor and will not be giving you any legal advice regarding the Guarantee.

7. YOU ARE STRONGLY ADVISED to obtain the financial information of the Borrower and the Original Guarantors and engage your own financial adviser to give you advice on such financial information before signing and executing the Guarantee.

… … …

9. You also have the choice not to proceed with the transaction.

10. Please think carefully before deciding whether to proceed with the transaction. You are free to choose whichever option you prefer.

I acknowledge receipt of a copy of this warning and fully understand the contents thereof.”

76.  The following were also terms of the Personal Guarantees which contradict the economic duress defence:

“6. REPRESENTATIONS

The representations and warranties set out in Schedule 1 (Representations) are made by the Guarantor to each Finance Party on the dates set out in paragraph 19 of Schedule 1 (Representations).”

77.  Schedule 1 “Representations” provides, among others, that:

“4. Independent legal advice

(a) Prior to the signing of this Deed, [D] has been advised by received a notice from the Security Trustee:

(i) recommending that he seek independent legal advice in relation to his obligations and liabilities under this Deed;

(ii) informing him that if he decides not to instruct his own counsel, he will be required to attend the office of the counsel acting solely for the Finance Parties to sign and execute this Deed who will only be instructed by the Finance Parties to explain and to witness his signing and execution of this Deed and will not be acting as his counsel or giving him any legal advice regarding this Deed;

(iii) informing him that he has the choice not to proceed with the transaction in connection with this Deed;

(iv) recommending that he obtain and review the financial information of, and satisfy himself as to the financial condition of, the other Obligors and the members of the Group and to engage his own financial adviser to advise him on such financial information before signing this Deed;

… … …

(c) He has obtained independent legal advice prior to the signing of this Deed, has waived his right to obtain independent legal advice. He fully understands the nature and extent of his obligations and liabilities under this Deed and has acted independently and free from any undue influence of any Person.

5. Binding obligations

(a) The obligations expressed to be assumed by him in this Deed are legal, valid, binding and enforceable obligations.”

78.  As stated above at §64, D was represented by lawyers when entering into the Personal Guarantees.

79.  The defence of economic duress is therefore unarguable.

80.  Accordingly, I conclude there are no triable issues and summary judgment should be ordered.

COUNTERCLAIM

81.  D counterclaims for a declaration that the Personal Guarantees are voidable and an order they be set aside and/or rescinded.  Further or alternatively, damages for misrepresentation and/or in lieu of rescission to be assessed (§§50-51 of D&C). Given that I have dismissed D’s defence on misrepresentation for lack of a triable issue, D’s counterclaim should be struck out: Sand Aire Ltd v Jin Zhangjie [2021] HKCA 1672 at §43-47.

QUANTUM OF P’s CLAIM

82.  At the hearing, Ms Ho pointed out a typographical error in the SOC in that the amount claimed in §1 of the reliefs section of the SOC and §1(a) of the Summons should be US$204,930,325.86 (instead of US$204,930,325.76). 

83.  This change should also be reflected in the interest amount claimed so that interest is claimed on the sum of US$204,930,325.86 (instead of US$204,930,325.76) for the period of 30 January 2024 up to the date of actual payment in full at the contractual rate of 24% per annum, compounded every six months from 30 June 2020. 

84.  The default interest amount of US$258,709.033.50 as of 29 January 2024 claimed in §2 of the reliefs section of the SOC and §1(b) of the Summons remains the same. 

85.  A draft Order with the correct amounts was provided in Annex 1 of the skeleton submissions dated 6 January 2026. 

DISPOSITION 

86.  For the reasons stated above, summary judgment is granted.  I make an order in terms of the draft Order submitted in Annex 1 of P’s skeleton submissions, save that §3 be changed to “costs of and occasioned by the Summons and this action with certificate for one counsel be to P, to be summarily assessed.”

87.  For the purposes of summary assessment, I direct that D shall lodge its List of Objections (if any) to P’s Statement of Costs served on 8 January 2026 within 5 days of the date of this judgment.  Summary assessment shall be conducted on the papers.

88.  I thank Ms Ho for her assistance.