WANG BOHENG v. YU KAFU

HCA 193/2025

[2025] HKCFI 4566

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 193 OF 2025

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BETWEEN

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J U D G M E N T

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A. INTRODUCTION

1.  The Defendant was and is the vendor of the subject property and the Plaintiff was the purchaser under a sale and purchase agreement dated 4 November 2024 (“the SPA”). The purchase price was HK$76,800,000.

2.  The Plaintiff claims that pursuant to the SPA, he had paid a 10% deposit of HK$7,680,000 (“the Deposit”) by way of set-off against a debt owed to him by the Defendant, receipt of which had been acknowledged by the Defendant on the SPA.

3.  The Defendant failed to complete on the extended completion date and asked for another extension. The Plaintiff refused and accepted the Defendant’s repudiation by letter.

4.  The Plaintiff seeks a declaration that the Defendant had repudiated the SPA and claims the return of the Deposit and damages.

5.  The Defendant denies that the Deposit had been paid. In his counterclaim, he pleads that the Plaintiff’s claim is related to and should be considered together with a separate set of agreements entered into between the parties concerning the outstanding loan advanced from the Plaintiff to the Defendant. The Defendant also challenges the legality of certain clauses in those agreements.

6.  The Defendant counterclaims for (i) a declaration that the SPA has become invalid; (ii) an order that the Plaintiff’s claim for refund of the Deposit and lien be dismissed; (iii) a declaration that the Assignment and Clause 1(c) are invalid; (iv) a declaration that the Plaintiff had not complied with Clause 1(a) of the Promissory Note, such that the Promissory Note is not enforceable; (v) that if the Plaintiff cannot prove the completeness of the contents of the Loan Agreement and Promissory Note, the Plaintiff’s claims should be dismissed.

7.  Each party has taken out a summons for summary judgment. The Defendant seeks summary judgment on his counterclaim and for this action to be dismissed. The Plaintiff denies the relevance of the separate agreements to the present claim. He points out that any dispute over the validity of those agreements is the subject matter of a separate recovery action between the parties (“the Loan Recovery Action”). In any event, the Plaintiff contends that he has an arguable defence to the counterclaim but that he should be granted summary judgment.

B. UNDISPUTED OR INDISPUTABLE BACKGROUND

8.  Joy Capital Holdings Limited (“JCH”) was the majority owner and controller of China ZhengTong Auto Services Holdings Limited (“ZT”), a company listed on the Hong Kong Stock Exchange.

9.  Up until October 2017, JCH’s sole director was Mr Wang Muqing (“Mr Wang”). The Plaintiff replaced him as sole director in or around 2020. Mr Wang is the Plaintiff’s grandfather.

10.  The Defendant was a senior executive of ZT between 2013 and 2021.

11.  In August 2021, JCH sold a substantial portion of its shares in ZT and underwent restructuring in 2022. Its ultimate goal was to distribute all of its assets to the Plaintiff and his family.

12.  The Defendant and Mr Lau Wai Kit (“Mr Lau”) joined the Plaintiff’s family office to assist in the restructuring process.

13.  One of JCH’s assets which required distribution was an outstanding loan advanced by JCH to the Defendant in or around 2017, for the Defendant to complete his purchase of the property known as Unit 7A, Cluny Park, No. 53 Conduit Road, Hong Kong and residential parking space no. P18 on 2^nd Floor, Cluny Park, No. 53 Conduit Road, Hong Kong (“the Property”) for a consideration of HK$102,654,800.00.

14.  By a Loan Agreement on 3 January 2017, JCH agreed to advance unsecured, interest-free loans to the Defendant in sufficient amount for the purchase of the Property (inclusive of the purchase price, stamp duty, miscellaneous deposits in relation to the delivery of possession and occupation of the property, and other costs and expenses).

15.  Clause 3 of the Loan Agreement provided that:

“(a) [JCH] may from time to time but with not less than 12 months’ advance notice require [the Defendant] to repay the Loan. Within 2 months from receipt of such notice, the Defendant may elect by notice to [JCH] to sell the Property and use the proceeds of sale to repay the Loan upon completion of the sale. If [the Defendant] makes the above election, he shall only be required to pay [JCH], in full and final settlement of his liabilities and obligations under this Agreement, the lesser of the following amounts: (i) the amount [the Defendant] actually receives from the sale of the Property, net of any taxes, duties, costs and expenses incidental to the sale, or (ii) the outstanding amount of the Loan.

(b) All outstanding amount of the Loan shall become due and repayable in full if [the Defendant] enters into a transaction for the sale of the Property (not being a sale of the Property pursuant to an election made under paragraph (a) above) without the prior consent of [JCH].

(c) In addition, and unless the loan has already been repaid in full, all outstanding amount of the Loan shall become due and payable in full on 2 January 2027.”

16.  By 31 March 2017, JCH advanced all the loans to the Defendant’s nominees for the purposes of purchasing the Property.

17.  On 3 April 2017, the Defendant completed his purchase of the Property and executed a Promissory Note in favour of JCH whereby (a) he promised to pay JCH a total of HK$107,241,381.00 for the value received under the Loan Agreement (“the Loan Debt”), (b) subject to substantially the same terms set out in Clause 3 of the Loan Agreement.

18.  On 28 July 2017, the Defendant mortgaged the Property (“the Mortgage”) to the Bank of East Asia Limited (“BEA”).

19.  About 5 years later, on 7 June 2022, 2 documents were executed (“the 2022 Deeds”),

(1) JCH, the Defendant and the Plaintiff entered into a Deed of Assignment of Promissory Note under which JCH assigned the Promissory Note to the Plaintiff with the Defendant’s consent. By the Deed of Assignment of Promissory Note, JCH, the Defendant and the Plaintiff “unconditionally and irrevocably” agreed to add an additional provision to Clause 3 of the Promissory Note to the effect that JCH may, from time to time, ask the Defendant to sell the Property to JCH or its nominee and to apply the sale price of the Property to settle the outstanding amount of the Loan in full (“Clause 3(c) of the Promissory Note”).

(2) JCH and the Plaintiff then entered into a Deed of Assignment of Loan whereby JCH assigned all the rights and benefit of the Loan or the Loan Agreement to the Plaintiff.

20.  By 31 October 2024, the Defendant was still indebted to the Plaintiff for the Loan. Hence, the Plaintiff informed the Defendant (through Mr Lau) that he wished for the Property to be sold to him.

21.  The Defendant agreed to the sale of the Property. The parties then proceeded to retain their respective solicitors to prepare the relevant conveyancing documents, including the SPA.

22.  By the SPA:

(1) The Defendant agreed to sell and the Plaintiff agreed to purchase the Property at a price of HK$76,800,000.00.

(2) The Deposit shall be paid by the Plaintiff to the Defendant upon signing the SPA.

(3) The balance of the purchase price of HK$69,120,000.00 shall be paid by the Plaintiff to the Defendant upon completion of the sale and purchase of the Property on 3 January 2025.

(4) Time was in every respect of the essence of the SPA.

(5) The Property shall be sold by the Defendant to the Plaintiff free from encumbrances (including the Mortgage).

(6) The Defendant expressly acknowledged receipt of the Deposit by the receipt clause in the SPA.

23.  It is worth noting that the parties eventually agreed to remove a clause in the draft SPA stipulating that payment of the Deposit shall be made to the Defendant’s solicitors (Hon & Co.) as stakeholder.

24.  Separately, the Defendant needed financial assistance in discharging the Mortgage, which Mr Lau agreed to provide. By a Deed of Set-Off dated 2 January 2025 signed by the Plaintiff, the Defendant and Mr Lau, Mr Lau agreed to advance HK$33,500,000.00 to enable the Defendant to discharge the Mortgage before the completion date.

25.  However, the Defendant did not discharge the Mortgage. He then sought to postpone the completion date from 3 to 13 January 2025, which was acceded to by the Plaintiff.

26.  On 13 January 2025, the Defendant’s solicitors informed the Plaintiff’s that the completion date should be further extended to 27 January 2025. The Plaintiff refused. Eventually, the Defendant failed to complete the sale.

27.  On 21 January 2025, the Plaintiff accepted (through Deacons) the Defendant’s wrongful repudiation.

28.  On 4 February 2025, the Plaintiff issued the present Writ of Summons and Statement of Claim.

C. LEGAL PRINCIPLES FOR ORDER 14 APPLICATIONS

29.  The principles have been recently summarized in Wang Shuai v Zhang Qiaohui [2023] HKCFI 2067, §21, DHCJ Tong:

(1) If the plaintiff’s application is properly constituted, it is prima facie entitled to judgment unless the defendant shows cause to the contrary.

(2) The mere assertion in an affidavit of a given situation by the defendant does not, ipso facto, ground leave to defend.

(3) The burden is on the defendant to show a real or bona fide defence or a triable issue by condescending upon particulars. The defendant must satisfy the Court that his evidence is believable and that on the basis of such evidence, there is a fair or reasonable probability of the Defendant having a real or bona fide defence.

(4) In assessing the credibility of the Defendant’s factual case, the Court will not embark upon a mini-trial on affidavit evidence. However, if having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the defence is not credible, the Court must say so.

(5) If the defendant’s evidence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence.

30.  The mere fact that the Defendant has put forward a counterclaim does not necessarily entitle him leave to defend. The appropriate order to make in an O.14 application where there is a counterclaim turns on the degree of connection between the claim and counterclaim, the strength of the counterclaim and the plaintiff’s ability to satisfy any judgment on the counterclaim: Hong Kong Civil Procedure 2025, Vol. 1. (“HKCP 2025”), §14/4/14B (pp 371-372).

31.  To that end, where there is no defence to the claim but a plausible counterclaim of not less than the claim, judgment should be for the plaintiff on the claim with costs with a stay. However, where a counterclaim arises out of a separate and distinct transaction or is wholly foreign to the claim, judgment should be for the plaintiff with costs without a stay. The Court should make an order according to the perceived justice of the individual case: HKCP 2025, §14/4/14.

32.  Additionally, where a counterclaim is wholly foreign to the claim or ought for any reason to be disposed of by a separate action, it may be disregarded, struck out or excluded: HKCP, §14/4/14B (p 372).

D. PLAINTIFF’S CASE

33.  The Plaintiff’s case is straightforward and is supported by documents. He has paid the deposit by set off against the Loan Debt owed to him by the Defendant. This was a permissible form of consideration: Set-Off Law and Practice: An International Handbook (3^rd ed., OUP, 2018).

34.  The Defendant unilaterally sought to extend the completion a second time, without providing any reasons. The Plaintiff was entitled to regard it as repudiation when time was of the essence of the SPA. In addition, the Defendant has failed to discharge the BEA Mortgage to enable completion to proceed.

35.  Clause 11(a) of the SPA expressly provides that if the Defendant fails to complete the sale in accordance with the terms of the SPA, the Deposit shall be returned to the Plaintiff in full forthwith and the Plaintiff shall also be entitled to recover from the Defendant such damages as the Plaintiff may sustain by reason of such failure on the Defendant’s part.

36.  The Plaintiff’s application is properly constituted and he is thus, in principle, entitled to judgment, subject to any triable issue that the Defendant can raise.

E. DEFENDANT’S CASE

37.  The Defendant raises 5 issues:

(1) That he could not complete the SPA because BEA suddenly changed the terms of the Mortgage, and discharging the mortgage was a condition for completion (“Failure to Complete Issue”);

(2) That the Plaintiff did not pay the Deposit, and that even if he did, the Deed of Set-Off is unenforceable (“Deposit Issue”);

(3) That the Plaintiff did not prove the truth and validity of the Loan Agreement and Promissory Note (“Validity of Agreement Issue”);

(4) That the Loan Recovery Action should be tried together with the present case (“Try Together Issue”);

(5) That this Action should be consolidated with any action for recovery of the Loan Debt on the ground that the claims are related (“Consolidation Issue”).

F. FAILURE TO COMPLETE ISSUE

38.  Pursuant to Clause 20(a) of the SPA, the Defendant undertook to discharge the BEA Mortgage and to ensure that the Property was free from encumbrances upon the completion date.

39.  At the hearing, the Defendant explains that he could not complete the SPA because BEA suddenly changed its terms, such that apart from HK$33.5 million, he had to pay other outstanding liabilities in the sum of HK$1.5 million in order to obtain a release of the Mortgage. He claimed that the loan and mortgage documents did not state clearly that he had to, on the date of the assignment, fulfil the terms of repayment of other loans. He now has ongoing litigation with BEA. The Plaintiff consistently avoided direct contact with the Defendant throughout the transaction.

40.  With respect, even if the Defendant’s explanation was true, the change of terms was a matter between him and BEA. The Defendant agreed with this Court that it had nothing to do with the Plaintiff. And the fact that the Plaintiff avoided direct contact with the Defendant is totally irrelevant to the Plaintiff’s entitlement in this case.

G. DEPOSIT ISSUE

41.  The Defendant’s signature on the last page of the SPA, acknowledged receipt of the Deposit (“the Receipt Clause”). The fact that physical payment did not pass from the Plaintiff to the Defendant was immaterial. The Defendant was indebted to the Plaintiff for the Loan. The parties had agreed that the Deposit would not be paid to the Defendant’s solicitor as stakeholder, but would be set-off against the Loan (which was reflected in Clause 2 to the Deed of Set-Off).

42.  The Defendant claims that he only signed on the documents evidencing payment “as a gesture of good faith” or “for convenience”. He also says that the parties had actually agreed that the Receipt Clause had not been fulfilled at the time the SPA was concluded. This defence is unsustainable both in law and in fact.

43.  As a matter of law, where a person has signed a document which purports to have legal effect, he thereby signifies his assent or adherence to what that document states. He will be held to the document unless there are vitiating factors like fraud, mistake etc: Ming Shiu Chung v Ming Shiu Sum [2006] 2 HKLRD 831 at §§84-87 (Ribeiro PJ).

44.  By the Deed of Set-Off, the Defendant has expressly acknowledged (a) owing the Plaintiff the Loan; and (b) that the Deposit was applied to partially set off the Loan. Before and at the time of execution of the Deed of Set-Off, the Defendant was represented by solicitors.

45.  Throughout the entire process including the time leading up to the extended completion date, and up until the filing of the Defence and Counterclaim on 3 March 2025, neither the Defendant nor his solicitors ever claimed that the Plaintiff had not paid the Deposit. To the contrary, from correspondence after the SPA was executed, the Defendant stated that he was keen to complete the sale (“我希望盡快完成物業轉讓”).

46.  As for the assertion that the parties had agreed that the Receipt Clause had not been fulfilled, the Defendant has not proffered any evidence in support.

47.  In his oral submissions, the Defendant raises the additional argument that the Deed of Set-Off is not a standalone document but rather a document that exists purely for the purpose of completion under the SPA. The validity of the Deed of Set-Off is contingent upon the validity of the SPA, and there must be completion of the SPA before there can be a set-off. Now that the SPA could not be completed because the Mortgage has not been discharged, the Deed of Set-Off cannot stand.

48.  Contrary to the Defendant’s submission, the validity of the Deed of Set-Off is not dependent on the performance and validity of the SPA. Rather, it is a separate legal instrument concerning a separate loan transaction related to the discharge of Mortgage.

49.  Furthermore, the failure to complete was solely caused by the Defendant himself. The Defendant cannot rely on his own breach to refute the validity of the SPA and Deed of Set-Off.

50.  For the reasons given, the Defendant should be held to the receipt clause.

51.  For the avoidance of doubt, the Plaintiff has claimed for the outstanding Loan less the amount of the Deposit in the Loan Recovery Action in HCA 1608/2025. Contrary to the Defendant’s submission, the Deposit has not been used to set off the same debt twice (一筆定金抵消兩次).

H. VALIDITY OF AGREEMENT ISSUE

52.  This Issue has several limbs.

53.  Firstly, the Defence (§§22-27) pleads that Clause 1(c) of the Assignment empowers the Plaintiff to compel the Defendant to sell the Property to repay the Loan. The Defendant submits that that was inconsistent and in conflict with Clause 1(a) of the original Loan Agreement and Promissory Note, which requires the lender to give 12 months’ notice of repayment and the Defendant would have 2 months’ time to decide if he would sell the Property himself. As the new Clause lacked consideration and commercial reasonableness, it was invalid.

54.  As the Plaintiff has pleaded in the Reply and Defence to Counterclaim, Clause 1(c) was in fact a new clause incorporated into the Promissory Note by way of the Assignment and took effect from 7 June 2022. The Defendant’s contentions affect the Loan Recovery Action rather than the present O.14 application.

55.  Even if there was inconsistency between Clause 1(c) and Clause 1(a) in the original Loan Agreement and Promissory Note, the Defendant has not even averred that the Plaintiff has breached Clause 1(a) by failing to give the requisite notice of repayment or that the Defendant was given less than 2 months to decide whether to sell.

56.  Secondly, the Defendant challenges the validity of the various documents signed by him. He points out that the alleged Loan Agreement and Promissory Note were made in 2017, and yet there were no primary documents relating to the Loan thereto. The Plaintiff was still drafting the Loan Agreement in 2022, but they were not true reflections of the Loan to the Defendant. A Mr Wang Muqing who signed on behalf of JCH in 2017 was no longer a director since 24 June 2020.

57.  For the Loan Agreement and Promissory Note, the Plaintiff can only provide the signature of the Defendant on separate sheets of paper. Hence the Defendant submits that the Plaintiff cannot prove the contents and completeness of the contracts agreement. In fact, the original Loan Agreement has been amended several times.

58.  The Plaintiff has frankly admitted that the loan agreement in 2017 was not recorded. Mr Lau thought it would be wise to formally record the terms and conditions to the agreement and to prepare a Deed of Assignment of the Loan from JCH to the Plaintiff. So Mr Lau informed the Defendant of the proposal to which the Defendant agreed. The Plaintiff does not dispute the authority of Mr Wang Muqing in signing the documents.

59.  The Defendant alleges that the 2022 Deeds do not relate to any loan made from the Plaintiff to him, but rather arose out of litigation in which the Plaintiff’s family was involved. He states that he did not know what the purpose of the 2022 Deeds was when he signed them. He only signed them because of his desire to help the Plaintiff’s family and because of the trust he had in them after having known the Plaintiff’s family for 10 odd years. The Defendant thus contends that the Loan Agreement and the 2022 Deeds lack validity.

60.  This Court asks if the Defendant is suggesting that, as an employee, he had signed documents in 2022 upon his misplaced trust in the Plaintiff, thereby incurring liability of HK$107 million. The Defendant affirms that he signed the documents in good faith without understanding their purpose. He denies that he was an employee but claims to be “the only professional” of the Plaintiff’s family in the Singapore Family Office which he had helped to set up.

61.  This defence is not capable of belief when tested against the contemporaneous circumstances. The Defendant has never denied his need for a loan to purchase the Property and that the Plaintiff’s grandfather advanced the Loan to enable him to carry out the purchase. At best, the original Loan Agreement and Promissory Note were not prepared at or about the time of the advance. However, the Loan Agreement was affirmed by documents dated 2017 and further affirmed by the 2022 Deeds signed by him. Apart from paragraph 53 above, the Defendant has not been able to identify any material difference between any of those documents and the original loan agreement as regards the Loan.

62.  The 2022 Deeds were prepared by Mr Lau in consultation with the Defendant at all relevant times. The Defendant considered draft versions of those Deeds that Mr Lau sent to him and proposed amendments before signing and returning the same to Mr Lau. Mr Lau, in turn, forwarded the same to JCH to countersign. The Defendant could not be ignorant of the purpose of signing those documents.

63.  It is also noteworthy that the Defendant has not denied signing the documents, apparently all prepared in 2022. He merely says that he did not understand their effect. As alluded to above, it is unbelievable that a professional like him would have signed documents that would incur liability of HK$107 million without knowing the purpose. He did not state how the 2022 documents or any amendment did not correctly reflect the loan advanced in 2017.

64.  Thirdly, the Defendant asserts that there are inconsistencies between the terms of the Deed of Set-Off and the Loan Agreement. He points out that in the Loan Agreement and the 2022 Deeds, there was no mention of the Defendant owing the Plaintiff HK$30.44 million as stated in Clause 2 of the Deed of Set-Off.

65.  Without disrespect, this assertion is unsound. HK$107,241,381 minus HK$76,800,000 equals HK$30,441,381. Clause 2 of the Deed of Set-Off is a correct statement of the position if the SPA had been completed.

66.  None of the Defendant’s challenges to the Loan Agreement and related Deeds can have any impact on the present claim. The Validity of Contract Issue is not triable.

I. TRY TOGETHER ISSUE AND CONSOLIDATION ISSUE

67.  The SPA is a standalone transaction that is separate and distinct from the Loan Agreement. The Defendant’s challenges set out in Section H above may properly be tried in the Loan Recovery Action. It is up to the Defendant to apply by summons for an order for trying the counterclaim together with the Loan Recovery Action or consolidating them. That application would not affect the Plaintiff’s entitlement to judgment.

J. SUMMARY JUDGMENT ON THE CLAIM

68.  All of the issues raised by the Defendant are moonshine and not capable of belief. The Plaintiff has proved, on balance of probabilities, that the Deposit is due to him.

69.  The Defendant fails to show a sufficient connection between the claim and counterclaim and/or the Loan Recovery Action. The only link between the Plaintiff’s claim and Defendant’s counterclaim is the Loan and the resultant right of JCH (under the sole directorship of the Plaintiff) to require the Defendant to sell the Property in order to repay the Debt in part. Accordingly, the Plaintiff is entitled to judgment without a stay. This will include 2 declarations. Damages would be the costs of investigation of title. The parties have agreed upon a quantum of $62,262.

K. SUMMARY JUDGMENT ON THE COUNTERCLAIM

70.  By the Counterclaim, the Defendant seeks a dismissal of the Action. This cannot be granted because the Plaintiff has succeeded on his own Order 14 Summons.

71.  I repeat paragraph 62 above about the Defendant’s involvement in the draft documents in 2022. According to the Plaintiff, the Defendant also met with Mr Lau to discuss a draft version of the Deed of Assignment of Promissory Note, including the prospect of incorporating Clause 1(c) of the Promissory Note. Mr Lau explained the rationale and implications of Clause 1(c) to the Defendant, who accepted and agreed to its inclusion to the Promissory Note before signing.

72.  On the evidence existing before the Court, the Loan Agreement and the 2022 Deeds appear to be valid and enforceable. The Plaintiff may have a complete defence to the counterclaim. I am satisfied that the Plaintiff has raised triable issues and is entitled to unconditional leave to defend the counterclaim.

L. CONCLUSION AND COSTS

73.  I grant judgment on the Plaintiff’s Summons without a stay and dismiss the Defendant’s Summons, on terms that there be:

(1) A declaration that the Defendant is in wrongful repudiation of the SPA;

(2) A declaration that the Plaintiff has an equitable lien over the Property to the extent of HK$7,680,000;

(3) A refund of the Deposit in the sum of HK$7,680,000 paid under the Agreement;

(4) Damages for breach of the Agreement in the sum of HK$62,262;

(5) Pre-judgment interest shall be P+1% on the Deposit from 13 January 2025 to the date of judgment and thereafter at judgment rate with full payment; and

(6) Unconditional leave to the Plaintiff to defend the counterclaim.

74.  The Plaintiff is the overall winner. As the Defendant ought to have known of the Plaintiff’s triable defences prior to this hearing, the Defendant should also bear costs of the Plaintiff for the Defendant’s Summons.

75.  This case has no complexity. The documents and facts are limited. There is no justification for 2 fee earners, one of 33 years’ post qualification experience and the other of 7 years. Both Summonses are inter-related. I summarily assess the overall costs of the Plaintiff, on party-and-party bases, at $350,000.

76.  I thank Mr Ismail for his assistance.