X v. A AND OTHERS

HCMP 222/2021

[2021] HKCFI 1595

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 222 OF 2021

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J U D G M E N T

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1.  The Plaintiff (“the Company”) in these proceedings is a company incorporated in BVI and is wholly owned by Mr P (“P”). On 19/2/2021, the Company made an ex parte application on notice for an injunction (“the Injunction”) restraining the defendants (“Bank A”, “Bank B” and “Bank C”, collectively “the Banks”; all the Banks are within the same group (“the Banking Group”)) from presenting a winding-up petition against it based on a statutory demand dated 24/12/2021 in respect of a debt in the principal sum of HK$8,000,000,000 (“the Debt”) under a facility agreement dated 15/5/2017 (“the HK$8b Facility Agreement”). The said statutory demand has been amended subsequently. There is no dispute that the subject matter of these proceedings should be the intended winding-up petition based upon the statutory demand dated 11/01/2021 (“the SD”).

2.  The ex parte application was heard by me on 19/2/2021.  That hearing was in chambers and not open to public.  In that hearing, the Banks offered an undertaking (“the Undertaking”) that no winding petition would be presented against the Company based upon the statutory demand dated 24/12/2021 pending the determination of the inter partes summons to be issued by the Company.  Subsequently, on 23/2/2021, the Company issued an inter partes summons (“the Summons”).  On 31/5/2021, I heard the inter partes application.

3.  Before the hearing on 31/5/2021, on 27/5/2021, I made an interim anonymity order (“the Anonymity Order”).  I made that order because at that time, it was not known whether the Company’s application for the Injunction would succeed or not.  For the purpose of preserving the status quo, I made that order to prevent the identities of the Company and the Banks being made known to the public before the determination of the Company’s application.  However, bearing in mind the openness requirement in the administration of justice, I am of the view that this judgment should be handed down in open court, but the names of the relevant companies and persons would be replaced by some abbreviations.  Some unnecessary details would also not be mentioned in this judgment.  The parties have no objection to this approach.

4.  In respect of an application for an interim injunction restraining the presentation of a winding-up petition, it is well established that the principles governing applications for interim injunctions in American Cyanamid are inapplicable, as the granting of an injunction to restrain the presentation of a winding-up petition would finally dispose of the issue in dispute in the proceedings.[1] With the parties’ agreement, I treat the hearing of the Summons as the substantive hearing of the Originating Summons issued by the Company in these proceedings (“the OS”).  Accordingly, this judgment is the final judgment determining the matters as set out in the OS.

Background

5.  I would first outline some background facts.

6.  P is a Hong Kong resident with a residential address in Hong Kong.  He is the sole legal and beneficial owner of the Company.  The Company in turn holds 35.59% of a company incorporated in Hong Kong (“the HK Co”).  The HK Co was formerly listed on the Hong Kong Stock Exchange.

7.  By the HK$8b Facility Agreement, Bank A and Bank B lent loans in the aggregate sum of HK$8,000,000,000 to the Company.  P also signed the agreement as a guarantor.

8.  The indebtedness owing under the HK$8b Facility Agreement is secured by, inter alia: -

(1)  A personal guarantee dated 15/5/2017 (the “Personal Guarantee”) executed by P;

(2)  A share charge dated 15/5/2017 executed by the Company in respect of its shares in the HK Co; and

(3)  A mortgage dated 30/11/2017 (the “Mortgage”) executed between Bank A as mortgagee and a company in Mainland China (“Sub 4”) as mortgagor in respect of two pieces of land in the Mainland (“the Mortgaged Lands”).  The Mortgaged Lands, together with other pieces of land, form a site on which there is a large real estate development (“the Project”).

9.  On the same date when the HK$8b Facility Agreement was signed, there was another facility agreement dated 15/5/2017 (the “HK$4b Facility Agreement”) signed by the Company (as borrower) and P (as guarantor) whereby Bank C lent loans in the aggregate sum of HK$4,000,000,000 to the Company on terms almost identical to those of the HK$8b Facility Agreement.

10.  There is no dispute that loans in the aggregate sum of HK$12 billion were advanced to the Company under the said two Facility Agreements, and that such loans were advanced to enable P and the Company to implement the privatisation of the HK Co, which was completed around 17/8/2017.

11.  Since November 2019, the Company has been in default of paying interest. 

12.  By letters dated 10/12/2019 from the Banks’ solicitors to the Company and to P, the Banks referred to the Company’s default and demanded the Company to immediately repay the principal sum of HK$8,000,000,000 (ie the Debt) together with outstanding interest.

13.  The Debt has not been repaid.  On 24/12/2021, Bank A and Bank B issued the first statutory demand.

14.  On 11/1/2021, the Company instructed its solicitors to accept service of the SD.

Grounds in support of the Injunction

15.  The Company relies upon the following grounds in support its application for the Injunction:

(1)  The Court has no jurisdiction to wind up the Company (“the Jurisdiction Point”).

(2)  The Debt is subject to bona fide dispute (“the Bona Fide Dispute Point”).  According to the Company, there is an overall agreement orally made in or around April or May 2017 (“the Overall Agreement”) under which the Banks have agreed that they would procure buyers to buy the properties on the Mortgaged Lands, and the proceeds of sale would be used to repay the loans.  Further, the Banking Group has also made a representation to the Company that the Banks would enforce their right to the security over the Mortgaged Lands first (“the Representation”).  However, the Banks have acted in a way contrary to the Overall Agreement and the Representation.

16.  I would examine these points in turn in the paragraphs below.

The principles

17.  The right to present a winding-up petition against a company is a right conferred on a creditor by statute.  A would-be petitioner should not be restrained from exercising that right except on clear and persuasive grounds.  See Synergy Lighting Ltd v Hongkong and Shanghai Banking Corp Ltd[2], in which G Lam J said:

“An injunction to prevent the presentation of a winding-up petition is based on the court’s inherent jurisdiction to prevent the abuse of its own process, to which the American Cyanamid approach to general interlocutory injunctions does not apply. Great circumspection is to be exercised before granting such an injunction, for the right to petition for winding-up in appropriate circumstances is a right conferred by statute, and a would-be petitioner should not be restrained from exercising it except on clear and persuasive grounds: Re Sinom (Hong Kong) Ltd [2009] 5 HKLRD 487, §§9-10; Bryanston Finance Ltd v De Vries (No 2) [1976] Ch 63, 78”

18.  In order to resist a winding-up petition, the company has to show a bona fide dispute on the debt on substantial grounds.  In Re Leung Cherng Jiunn[3], Kwan JA (as she then was) said (footnotes omitted):

“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 in §20 and rule 70 of the Bankruptcy Rules which has no equivalent in winding up. See Re Malcolm Westley Casselle, at §24.

(2)  The wording of Order 14 rule 3 is different from the test of bona fide dispute on substantial grounds.  The test of bona fide dispute involves different consideration 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 to 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 to 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.”

19.  With these principles in mind, I turn to the two points made by the Company in support of its application.

The Jurisdiction Point

20.  The Company is an “unregistered company” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (“CWUMPO”).[4] An unregistered company may be wound up in Hong Kong.[5]  For a court to exercise such jurisdiction under section 327 of CWUMPO, the following three requirements usually have to be satisfied[6]:

(1)  There is a sufficient connection with Hong Kong, but this does not necessarily have to consist in the presence of assets within the jurisdiction;

(2)  There is a reasonable possibility that the winding-up order would benefit those applying for it; and

(3)  The court is able to exercise jurisdiction over one or more persons in the distribution of the company’s assets.

21.  While the presence of assets within the jurisdiction will often satisfy both the first and second requirements, such presence is not essential, and it suffices that the petitioner will derive sufficient benefit from a winding-up order.  In deciding that question, the fact that there is a reasonable prospect that the petitioner will derive a sufficient benefit from the making of a winding-up order, whether by the distribution of the company’s assets or otherwise, will always be necessary and will often be sufficient.[7]

22.  Based on the view expressed by the Court of Final Appeal in Kam Leung Siu Kwan that the second core requirement was always essential, and often sufficient, that means the other core requirements would not necessarily be essential.[8]  Specifically, in relation to the third core requirement, it can be dispensed with in a suitable case.[9]

23.  The Company submits that both the first and the second core requirements are not satisfied, and thus this court does not have the jurisdiction to wind-up the Company.

24.  The Company submits that the second core requirement is not satisfied for the following reasons:

(1)  The only “asset” of the Company P located in Hong Kong are the following:

(a)  A small cash balance of about HK$125,000 in its bank accounts maintained with Bank C.  However, none of such balances is available to the Company and may only be used to make interest payment to Bank C; and

(b)  a minority interest of 35.59% in the HK Co, which has no direct active subsidiaries in Hong Kong and does not have any business and/or meaningful assets in Hong Kong.  All cash balances in HK Co have been assigned to Bank C.

(2)  The valuable assets of the Company are in Mainland China, in the form of land and property development, held by the HK Co or other intermediate holding companies incorporated in the BVI, Hong Kong and/or the Mainland.

(3)  In the circumstance, the Banks will only be able to benefit from winding-up the Company in Hong Kong if liquidators appointed in Hong Kong would be able to take control of and realize the valuable assets in the Mainland.

(4)  However, it is clear that the realization of assets in the Mainland cannot be achieved by a winding-up order made by the Hong Kong Court.  This position has been made clear Harris J in Re China Huiyuan Juice Group Limited[10]:

(a)  The Mainland courts would not (or at least unlikely) recognize a liquidator appointed by the Hong Kong Court over a company incorporated in the BVI.[11]

(b)  Hong Kong appointed liquidators would not be able to take control of the BVI intermediate holding company.[12]  In the Company’s submission, this is relevant as the direct subsidiary of the Hong Kong Co in the holding structure (ie 1^st Sub) is a BVI company.

(5)  In Re China Huiyuan Juice Group Limited, Harris J said:

“44.  ……it must be assumed that any liquidator appointed by this court would not be able to change control of the Company’s intermediate subsidiaries and obtain control of the Mainland companies. It follows that if the benefit that is sought by winding-up the Company is to recover assets in the Mainland, it is not a benefit that can be obtained by winding-up the Company in Hong Kong.”

The Company argues that such reasoning applies a fortiori in the present case, since the Company’s interest in the HK Co is only a 35.59% interest, with P controlling the remaining 64.41%.

(6)  For these reason, the Company says, the Bank would not be able to demonstrate any real benefit to be obtained by winding-up the Company in Hong Kong.  The second core requirement cannot be satisfied.

25.  With respect, I am unable to accept the Company’s submissions.

26.  There is no dispute that:

(1)  HK Co directly and wholly owns Sub 1, which is a BVI company and registered as a Part XI company[13] in Hong Kong.

(2)  Sub 1 directly and wholly owns a company incorporated in Hong Kong (“Sub 2”).

(3)  Sub 2 directly and wholly owns a company incorporated in Hong Kong (“Sub 3”).

(4)  Sub 3 directly and wholly owns Sub 4, a company incorporated in the Mainland.  Sub 4 is a Part XI company in Hong Kong and is holding the Mortgaged Lands.

(5)  Sub 4 directly and wholly owns 4 companies incorporated in the Mainland.  The 4 companies are companies directly involved in various matters in the Project.

27.  Having considered the evidence and the submissions, I am of the view that the first core requirement is satisfied.  By reason of the following, the Company is having a close connection with Hong Kong:

(1)  The Company holds 35.59% shares in the HK Co, which is an asset in Hong Kong.

(2)  P, the sole legal and beneficial owner of the Company, is a holder of a HKID card with his residential address in Hong Kong.

(3)  Further, the valuable and substantial assets indirectly held by the Company are being held by subsidiaries which are either companies incorporated in Hong Kong or registered as Part XI companies in Hong Kong.  For those registered Part XI companies, they have their respective principal places of business and authorized representatives in Hong Kong.

28.  I am also of the view that the second core requirement is satisfied.  The 35.59% shareholding in the HK Co owned by the Company can be realized in the winding-up process in Hong Kong, and it does not matter where the ultimate assets indirectly held by the HK Co are located.  The proceeds obtained from the sale of the said shareholding can be distributed to the creditors.  Accordingly, there is a reasonable possibility that the winding-up order, if made, would benefit those applying for it.

29.  The Company argues that the 35.59% shares in the HK Co is only a minority interest, and the Banks have failed to spell out how the liquidators of the Company can realize this minority interest.  I am aware of the fact that there may not be many investors interested in buying a minority interest in a company.  However, given the valuable assets indirectly controlled by the HK Co, it is not unrealistic to say that there would be investors interested in buying the 35.59% shareholding in the HK Co.

30.  The Banks submit that the second core requirement can also be satisfied by that fact that the individual in control of the Company is located in Hong Kong, and the subsidiaries of the Company are either incorporated in or registered as Part XI companies in Hong Kong.  Hence, the liquidators appointed by the Hong Kong Court can meaningfully investigate into the business and affairs of the Company and its subsidiaries, which may lead to identification of other avenues of recovery.  However, in view of what Harris J said in [26] – [29] in Re China Huiyuan Juice Group Limited, I am unable to accept these submissions.  For the reasons explained by Harris J in that case, these hypothetical benefits would be not sufficient for the purpose of satisfying the second core requirement. 

31.  For the reasons set out in [27] to [29] above, I hold that both the first and the second core requirements have been satisfied.

32.  The Company does not take issue with the third core requirement (ie the court is able to exercise jurisdiction over one or more persons in the distribution of the company’s assets).  In any event, this requirement has been satisfied, for Bank C is located in Hong Kong and is one of the creditors of the Company over which the Hong Kong Court is able to exercise jurisdiction.

33.  For these reasons, in my judgment, the Hong Kong Court has sufficient basis to exercise its discretionary jurisdiction to wind up the Company.  With respect, I rule against the Company on the Jurisdiction Point.

The Bona Fide Dispute Point

34.  The Company says that between late 2016 and May 2017, there were some oral discussions between P and the representatives of the Banking Group.  Eventually, in April or May 2017, the Banking Group, the Company and P personally reached the Overall Agreement.  The Company’s case is that Overall Agreement was reached by P and a Mr S (“S”, a former high-rank official in the Banking Group) orally.  By the Overall Agreement, the parties have agreed that:

(1)  The Banking Group would lend to the Company a total of HK$12 billion for acquiring shares of the HK Co from the public investors.

(2)  Upon the successful privatization of the HK Co, the Banking Group would procure and arrange for buyers and/or investors to acquire land and properties under the Project.

(3)  Repayments by the Company would come from the proceeds from selling of land and properties under the Project (whether procured and arranged by the Banking Group or otherwise).

35.  The Company’s case is that the Banks have unreasonably obstructed the sale of the properties in the Project (“the Unreasonable Obstruction”), which was intended under the Overall Agreement as the agreed means to raise the fund necessary for the repayment of the outstanding loans.  The Banks have also failed to realize the Mortgage Lands to repay the debts owed by the Company under the Facility Agreements.  In these circumstances, the Banks would not be entitled to enforce the Facility Agreements against the Company.

36.  The Company is also saying that S has made a representation to P (“the Representation”) that in respect of the Company’s liability under the Facility Agreements, the Banks would enforce their right to the security over the Mortgaged Lands to satisfy any outstanding debt, and would only demand the Company and P for any outstanding, unsatisfied amount under the Facility Agreements after the enforcement of such security.

37.  The Company is saying that by reason of the matters summarized in the above, a bona fide dispute in relation to the Debt has been shown and hence the Injunction should be granted.

38.  As to whether a debt is in bona fide dispute on substantial grounds, the relevant principles have been summarized in Re Victor River Ltd[14], in which the learned judge said:

“27. It is well established that a debtor may oppose a petition on the ground that there is bona fide dispute on substantial grounds as to the existence of the petitioning debt. A bona fide dispute is not a trivial or insubstantial dispute, but one based on solid grounds disputable both in law and on the facts of the case. (See Re Malcolm Westley Casselle (a debtor) HCB 1698/2010, unrep., 8 March 2011 at §24 per To J.)

28. The burden is on the debtor to adduce sufficiently precise factual evidence which is believable to satisfy the Court that it has a bona fide dispute on substantial grounds. (See Re Chan Hon Kwong HCB 6548/2016, unrep., 27 April 2017 at §9 per Ng J.)

29. The defence must be one of substance, not just a fair probability. (See Re ICS Computer Distribution Ltd [1996] 1 HKLR 181 at 183I-J per Rogers J (as he then was).

30. The Court should look at the company’s evidence against so much of the background and evidence that is not disputed or not capable of being disputed in good faith; in other words, the evidence is not to be approached with a wholly uncritical eye. The Court would caution itself against unsubstantiated and unparticularised assertions. (See Re Hong Kong Investments Group Ltd [2018] HKCFI 984 at §13 per Ng J.)” (Emphasis added)

39.  With regard to the alleged “collateral agreement” which seeks to vary or add to the terms of the written agreements, the court would always view the same with suspicion.  Not only the existence of the alleged collateral agreement must be strictly proved by the party alleging it, the court is entitled to find that the terms of the alleged collateral contract are too vague and uncertain so as to render it (even if such exists) to be enforceable, or that the alleged collateral contract does not exist with reference to documentary evidence and conduct of the parties.[15]

40.  Where there exists a loan agreement that is a detailed legal document, apparently professionally prepared, it would be incredible that an agreement, intended to have significant legal effect in relation to a very large sum of money, would have been arrived at orally between the parties without any written record at all.[16]

41.  As to the Overall Agreement alleged by the Company, I am of the view that the existence of this agreement is incapable of being believed.

42.  There is not a single contemporaneous document in support of the existence of the Overall Agreement.  Not only the alleged agreement has never been mentioned in any documents exchanged between the parties, there is also no internal document produced by P and/or the Company making reference to such an agreement.  No doubt the alleged Overall Agreement is a very important document conferring protection and comfort on the Company and P.  It is inexplicable why there would be no contemporaneous document making reference to this agreement, if it’s existence is true.

43.  The gist of the Overall Agreement is that the Banks’ rights under the Facility Agreements are subject to the Overall Agreement.  According to the Overall Agreement alleged by P, the Banks must assist in the sale of the properties in the Project and can only recover the loans from the proceeds of sale.  This is contradictory to the terms of Facility Agreements.

44.  As far as the HK$8b Facility Agreement is concerned: -

(1)  Clause 6.1 provides for a fixed “Final Repayment Date”, i.e. 15/5/2020, for the loan.  P’s allegation is incompatible with this clause in that, according to P, the repayment was to be done at an unknown time after the successful sale of the properties in the Project.

(2)  Clauses 9.1 and 10.1 impose an obligation on the part of the Company to pay interest once every 3 months.  P’s allegation is contradictory to such clauses in that, according to P, all liabilities under the Facility Agreements (including interests) are to be paid out of the sale proceeds of the properties in the Project.

(3)  Clauses 23.1 and 23.15 entitle the Banks to seek immediate repayment of the loan when there is an event of default, which includes the Company’s failure to pay interest.  P’s allegation is at odds with such clauses that, according to P, the Banks are not entitled to recover the loan until after the sale of the properties in the Project.

(4)  Clause 2.2 makes it clear that the Banks have “separate and independent” rights against the Company or any Security Provider, including Sub 4 which granted a security over the Mortgaged Lands in favour of the Banks.  P’s allegation is also inconsistent with such clause in that, according to P, the Banks’ right to seek recovery against the Company is dependent upon the pre-condition that recovery should first be sought against the security over the Mortgaged Lands.

45.  With regard to the Personal Guarantee, Clause 8 thereof expressly provides that P waives any right of his requiring the Banks to claim against other parties or enforce other securities before claiming him under the Personal Guarantee.  P's allegation is once again inconsistent with this clause in that, according to P, the Banks must seek recovery from the security granted over the Mortgaged Lands first.

46.  P's allegation is also inconsistent with the public announcement dated 19/4/2017 issued in connection with the privatisation in which the Company's financial advisers stated on its behalf that it had no intention or concrete plan for any disposal of assets and/or business after privatisation.  P's allegation is plainly inconsistent with such statement in that, according to P, the disposal of the properties on the Mortgaged Lands is an inseparable part of the privatisation exercise since the loans for privatising were to be repaid by the sale of such properties.

47.  Further, the Banks have adduced evidence to show that since August 2019, P and the Company had been in constant communication with the Banks with a view to restructuring the loans under the Facility Agreements and/or using P’s other assets to secure or repay such the same. The communications include the following:

(1)  On 7/8/2019, in a meeting with the Banking Group’s representatives, P said that the Company would not be able to repay the HK$12b in May 2020 in accordance with the Facility Agreements and requested for an extension of time.  At the same time, P also said that he was finding funds to repay the loans.

(2)  A written request signed by P on behalf of the Company dated 25/11/2019, in which the Company requested the Banking Group to postpone the due date for the payment of interests under the Facility Agreements to 6/12/2019.

(3)  On 10/12/2019, the Banks' solicitors wrote to the Company. The Banks served notice on the Company that the Banks exercised the right under Clause 23.15 of the Facility Agreements and demanded the immediate repayment of the loans and interests.

(4)  On 27/12/2019, there was a meeting between the Banking Group’s representatives and P, in which the repayment of the loans under the Facility Agreements was discussed.

(5)  On 27/2/2020, there was a meeting between the Banking Group’s representatives and P, in which P said that he was willing to provide a list of his personal assets to the Banking Group for the purpose of selecting appropriate securities in support of the loans under the Facility Agreements.

(6)  On 7/4/2020, there was a meeting between the Banking Group’s representatives and P, in which P said that he agreed to provided assets which would be worth HK$4 billion to the Banking Group as further securities in support of the loans under the Facility Agreements.

48.  The aforesaid communications are not disputed by P. If the Overall Agreement alleged by P exists, P would have no need to have these communications with the Banks.

49.  In the Company’s solicitors’ letter dated 6/1/2021, which is the first letter in response to the statutory demand dated 24/12/2020, the Overall Agreement is not mentioned.  In that letter, apart from some technical objections, the only substantive ground raised by the Company opposing the statutory demand is the Representation.  There is not a word in the letter mentioning the Overall Agreement.  In particular, it has not been mentioned that the Banking Group has agreed to procure and arrange for buyers and/or investors to acquire land and properties in the Project.  In my view, if there is any truth in the Overall Agreement, the Company would not have failed to mention this in their first solicitors’ letter in response to the statutory demand issued by the Banks.

50.  The alleged Overall Agreement was only mentioned by P for the first time in his affirmation dated 19/2/2021 in support of the Company’s application herein.  P’s explanation for not mentioning the Overall Agreement at an earlier time is that he placed trust and confidence in S.  P’s explanation cannot be believable:

(1)  Before the subject loans, P did not have any business dealings with S.  It is P’s own evidence that he was introduced to S for the first time in around October 2016, and that he felt disrespected by S during his first encounter.  It is inexplicable that P would place a high degree of “trust and confidence” in a person who treated him with disrespect, and did not mention anything about the alleged Overall Agreement throughout the whole period until he applied for the Injunction in these proceedings.

(2)  From his communications with the Banks, it is clear that the Banks did not at all have the alleged Overall Agreement in their minds, and had no intention to honour it (if it existed at all).  It is inconceivable that P would still have such alleged “trust and confidence” in S or the Banks, and still withhold mentioning the Overall Agreement as a ground to resist the Banks’ demands for repayment of outstanding loans and interests.

51.  In relation to the timing of the formation of the alleged Overall Agreement, P has given inconsistent evidence.

(1)  ln his supporting affirmation, P alleged that the alleged Overall Agreement was reached “in or around April or May 2017”.

(2)  In response, the Banks produced documents which show that the Company had made a loan application to Bank C for the purpose of privatisation as early as 20/2/2017, and the HK Co issued a public announcement on 20/3/2017 disclosing P’s intention to privatise Goldin Holdings.  Later, on 29/3/2017, the HK Co issued another public announcement officially making an offer to purchase shares held by the public investors for the purpose of privatisation.  The significance of these contemporaneous documents demonstrate that it could not have been the case that the alleged Overall Agreement was concluded in April/May 2017, since it is P’s case that he would not have proceeded with the privatisation but for the alleged Overall Agreement.

(3)  ln his reply affirmation, P alleged that there was “a preliminary understanding” reached between the parties at a meeting on 8/2/2017.

(4)  In my view, P is trying to change his case upon realizing that the case previously put forward by him has been contradicted by the contemporaneous documents produced by the Banks.

52.  The alleged Overall Agreement also does not make any commercial sense.  There is no reason why the Banks would assume the credit risks arising from deferring its right of recovery after the sale of the properties in the Project.  This is particular so where there are contemporaneous documents showing that (a) Bank A took a deemed view of the prospect of the Project; and (b) the Banks agreed to advance the privatisation loans on the strength of P's other personal assets.

53.  The alleged Unreasonable Obstruction is based upon the Overall Agreement.  Since I am of the view that the alleged Overall Agreement is unbelievable, the alleged Unreasonable Obstruction falls away.

54.  As to the Representation, for the reasons set out in [41] - [48] and [50] above, I am of the view that the alleged Representation is also unbelievable.

55.  There is also no merit in the point that the Banks should realize the Mortgaged Lands first.

(1)  As a matter of law, a security holder owes no duty to the debtor to exercise its power of sale over the secured assets at any particular time and could decide in its own interest whether and when to sell.[17]  A secured creditor may petition for the winding up of the debtor company.[18]  Therefore, in the absence of an express agreement, the Company cannot say that the Banks have an obligation to liquidate and realize the Mortgaged Lands before seeking recovery of the Debt from the Company as the principal borrower.

(2)  Clause 2.2 of the HK$8b Facility Agreement provides that “(b) ... any debt arising under the Finance Documents to a Finance Party from an Obligor or a Security Provider is a separate and independent debt in respect of which a Finance Party shall be entitled to enforce its rights in accordance with paragraph (c) below ... ; and (c) A Finance Party may, except as specifically provided in the Finance Documents, separately enforce its rights under or in connection with the Finance Documents”.  In accordance with this contractual provision, unless there is specific provision in the legal documents restricting the Banks’ right to choose between different remedies, the Banks are at liberty to seek recovery of the Debt from the Company as the principal borrower, without resorting to any of the other securities (including the Mortgaged Lands).

56.  For completeness, I would also briefly discuss some further points made by the Company.

57.  The Company argues that the Banks have only produced an unsworn statement from S in response to the Company's case.  In that statement, S denies that he has made any representation to P or has any agreement with P as alleged by P.  The Company argues that S’s statement is clearly insufficient for the purpose of rebutting the Company’s case.  I am of the view that there is no merit in this point.

(1)  There is no dispute that S is now detained in custody in the Mainland.  It is not known why he is being detained in custody.

(2)  The Banks have explained that since S is now in custody, it would not be possible to obtain a notarized statement from S.

(3)  The Company has produced expert evidence on Mainland Chinese law.  Relying upon the said expert evidence, the Company submits that notwithstanding the fact that S is now in custody, it is still possible to obtain a notarized statement from S.

(4)  Having read and considered the expert evidence produced by the Company, I am of the view that this submission cannot be supported by the expert evidence.  The expert evidence has not explained while S is in custody, how a notary public may see S and witness S’s signature on his statement.

(5)  The Company also criticizes S for having only made bare denials in his statement with no particular given.  In my view, from S’ perspective, the Overall Agreement and the Representation are something which do not exist at all.  One can only expect denials from S and cannot expect S to give any particular.

(6)  In any event, the burden of proving the Overall Agreement and the Representation is on the Company.  As said in the above, I am of the view that the Company’s case is unbelievable.

58.  The Company also relies upon Clause 6.1 and Clause 38.4 of the Facility Agreement.  By Clause 6.1, the Company is only required to repay the loan 3 years after the date of the Facility Agreement.  Clause 38.4 is an entire agreement clause, but that clause applies to the confidentiality duty only.  In other words, there is no entire agreement clause in relation to other duties under the Facility Agreement.

59.  With respect, I do not see how Clause 6.1 can lend support to the existence of the Overall Agreement and the Representation. As said in [44(2)] above, the Company is required to pay interest every 3 months under the Facility Agreement.  Clearly, the alleged Overall Agreement is contradicted by this.  As to the absence of an entire agreement clause, in view of what I have said in [41] - [52] above, I am of the view that this cannot be a sufficient reason inferring the existence of the Overall Agreement and the Representation.

60.  For the reasons above, in my judgment, the Company has failed to show a bona fide dispute in relation to the Debt.

No Injunction

61.  In my judgment, both the Jurisdiction Point and the Bona Fide Dispute Point fail. There is no ground to say that presentation of a winding-up petition against the Company based upon the Debt is an abuse of process.  The Company's application for the Injunction must be dismissed.

Disposition

62.  For the reasons above, I dismiss the Company’s application for the Injunction.  I dismiss both the Summons and the OS.  Since the Company’s application has been dismissed, the Banks may present a winding-up order against the Company.  There would be no need, and indeed there is no reason, to continue the Anonymity Order.  I also set aside the Anonymity Order.

63.  I am aware that the Debt is a very significant sum and my dismissal of the Company’s application would have a significant impact on the Company.  I would grant a short-term stay to give some leeway to the Company to consider the matter and to take any necessary steps as the Company deems fit.  I stay my order as set out in [62] above for 14 days.  During the 14-day period, the Banks would still be bound by the Undertaking and cannot present a winding-up petition against the Company.  However, after the expiration of the 14-day period, the stay would expire and the Banks may present a winding-up petition against the Company at any time.

64.  The parties have agreed that costs should follow the event.  The Banks seek a certificate for 3 counsel.  This is not disputed by the Company.  Since the Debt is a very significant sum, I am of the view that there is sufficient justification for a certificate of 3 counsel.  I order that costs of these proceedings (including all costs reserved) be to the Banks with a certificate for 3 counsel, to be taxed if not agreed.

65.  Lastly, it remains for me to thank all counsel for the helpful assistance rendered to the court.