LEI SHING HONG TRADING LTD v. WONG KWING KEUNG

HCA 1901/2019

[2024] HKCFI 2130

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1901 OF 2019

BETWEEN

_______________________

________________________

JUDGMENT

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1.   Introduction

1.1  The Defendant is the owner of the Twin Wealth group of companies (“TWG”). Under the umbrella of TWG are two Mainland companies, East China Oils & Fats Industries (Taixing) Co Ltd (“ECTX”) and Full Front Biotech Energy (Taixing) Co Ltd (“FF”).

1.2  In the second half of 2018, TWG ran into financial difficulties. In particular, by September 2018, ECTX and FF together became indebted to the Plaintiff for over US$7.8 million. In addition to the Plaintiff, TWG’s other creditors include a number of banks in Hong Kong, the Mainland and Malaysia and a company called FGV Trading Sdn Bhd. As at February 2019, TWG’s overall indebtedness was in excess of HK$814 million.

1.3  On 19 October 2018, a composite debenture (“Composite Debenture”) was executed by 16 companies within TWG in favour of The Hong Kong and Shanghai Banking Corporation as security trustees for the benefit of the Secured Parties (as defined therein) (“Bank Group”)[1] as part of TWG’s restructuring exercise (“Restructuring Exercise”). The Bank Group was TWG’s largest creditor at the material time.

1.4  In these proceedings, the Plaintiff’s claim against the Defendant is premised upon a guarantee said to have been offered by the Defendant in a letter dated 16 April 2019 (“16 April Letter”), which was drafted and signed by the Defendant and addressed to Mr Aaron Au (“Aaron”), the then managing director of the Plaintiff, which offer was said to have been accepted by the Plaintiff by words or conduct (Amended Statement of Claim §§6 and 7). Prior to that, the Plaintiff was effectively an unsecured creditor.

1.5  The issues[2] which require my determination are as follows[3]:

(1) Whether the 16 April Letter is a legally binding guarantee whereby the Defendant guaranteed the debts of ECTX and FF owed to the Plaintiff;

(2) Further or alternatively, whether the Defendant is estopped by convention from denying that the 16 April Letter was a legally binding guarantee.

1.6  At the trial, I was helpfully assisted by Mr Bernard Man SC (leading Messrs Julian Lam and Cristian Tsang) appearing for the Plaintiff and Ms Eva Sit (leading Mr Thomas Wong) for the Defendant.

1.7  The 16 April Letter contains 8 sentences. It is the Plaintiff’s case that part of the 8^th sentence was an offer of an enforceable guarantee. As elaborated below, both before and after the 16 April Letter, the Plaintiff requested the Defendant to, but the Defendant did not, sign a formal deed of guarantee (“Formal Guarantee”) drafted by the Plaintiff’s then solicitors Messrs Howse Williams (“HW”). It is pleaded at Amended Defence §5E(iii) that the Bank Group had made clear to the Defendant that he should not sign any personal guarantee in favour of any other creditor or it would withdraw its support and indulgence granted to TWG and the Restructuring Exercise would be jeopardized (“Alleged Prohibition”).

1.8  The parties advance two competing factual cases:

(1) On the Plaintiff’s part, it is said that the Defendant was agreeable in principle to execute the Formal Guarantee but its terms were still being negotiated. The Defendant (Mr Man submits) had failed miserably to prove that the Alleged Prohibition was on his mind or that the Plaintiff was aware of it. The 16 April Letter was a simple guarantee in response to the increasing pressure exerted by the Plaintiff since March 2019 to wind up ECTX and FF whilst the terms of the Formal Guarantee were negotiated. The Plaintiff accepted the 16 April Letter and agreed to forebear (and did forebear) from commencing winding-up proceedings against ECTX and FF; and

(2) On the Defendant’s part, it is said that the 16 April Letter, which was given by the Defendant to the Plaintiff in the midst of (a) the Defendant’s reluctance to sign the Formal Guarantee due to the Alleged Prohibition and (b) the parties’ then earnest ongoing negotiations of various proposals, when read holistically instead of selectively (as the Plaintiff has done), was only a letter of explanation and a proposal of the way forward as opposed to an immediate assumption of guarantor liability. In any event, prior to the 16 April Letter, the Plaintiff did not threaten to wind up ECTX and FF and the Defendant did not request the Plaintiff to forebear from so doing.

1.9  The above competing factual cases were analyzed in detail by counsel. By way of an overview:

(1) Mr Man portrays the facts of the present case as falling into an age-old pattern. The Plaintiff was an unsecured creditor who was indisputably owed a large sum of money. Although various proposals were explored, none of them yielded any concrete result. By March 2019 (around 6 months after the due dates for repayments), the Plaintiff was quickly losing patience, and the Defendant therefore gave the 16 April Letter to the Plaintiff with the wording of a simple guarantee to stave off the mounting pressure; and

(2) Ms Sit counters by observing that the Plaintiff’s case is not backed up by hard evidence and is an afterthought. The pleaded case on the alleged threat to wind up was only introduced by amendment in February 2021, months after the action was commenced in October 2019. The age-old pattern identified by Mr Man cannot substitute as evidence, and she emphasizes the general lack of contemporaneous documentation in support of the Plaintiff’s case and (she submits) the poor quality of the evidence given by the Plaintiff’s witnesses.

1.10  As is apparent from the summary set out in the preceding two paragraphs, the resolution of the first issue identified at §1.5 above involves a determination of the some or all of the following sub-issues: (1) whether the Defendant offered to act as a guarantor by the 16 April Letter, (2) whether there was an intention to create legal relations, (3) whether the guarantee purportedly evidenced by the 16 April Letter was supported by consideration and (4) whether there was valid acceptance on the part of the Plaintiff. The Plaintiff has to succeed on all of the sub-issues, but, as a corollary, the defence will get home should the Defendant succeed on any one of them.

1.11  Counsel have characterized the present case as a factual one, and once the relevant factual findings are made, the legal characterization thereof (and how they fit into the contractual analysis) is, save one aspect, not controversial. The area which has generated a legal debate is on the issue of whether the purported guarantee evidenced by the 16 April Letter was supported by consideration, and in particular on the proper approach to be adopted in assessing that issue.

2.   Background matters

(i) The parties and relevant personnel

2.1  The Plaintiff is a Hong Kong company and part of the Lei Shing Hong group of companies (“LSH Group”), an international conglomerate with headquarters in Hong Kong. The holding company is, as I understand the evidence, Lei Shing Hong Limited (“LSHL”).

2.2  The business relationship between the Plaintiff and the Defendant, and the companies owned and controlled by the Defendant started in around 2015.

2.3  The ultimate owner of LSH Group is Tan Sri Lau Cho Kun (“CK Lau”). CK Lau is also the largest shareholder of a listed company in Malaysia, Hap Seng Consolidated Berhad (“Hap Seng”). The Defendant met CK Lau in around 1999, well before the Plaintiff started a business relationship with the Defendant.

2.4  The other personnel within the LSH Group relevant to these proceedings are:

(1) Datuk Yong Foo San (“Datuk Yong”): Datuk Yong is one of the two witnesses called by the Plaintiff. He is an elderly gentleman and now a business advisor and non-executive director of the Plaintiff. At the material time, he was a director of the Plaintiff. Datuk Yong gave evidence from the perspective of the Plaintiff’s senior management and he was not involved in the day-to-day operations;

(2) Chong Chi Yuen Hugo (“Hugo”): Hugo is the other witness called by the Plaintiff. At the material time, Hugo was the Plaintiff’s financial controller but has since 12 July 2022 left the Plaintiff’s employment. He currently resides and holds full-time employment in the United Kingdom and the Plaintiff has properly made disclosure of the fact that the expenses for Hugo returning to Hong Kong to give evidence at the trial are met by the Plaintiff. Hugo signed the Statements of Truth contained in the Plaintiff’s pleadings. At the material time, Hugo was Aaron’s subordinate (until Aaron’s departure in May 2019);

(3) Aaron: Aaron was the managing director of the Plaintiff. It is plain from the evidence that Aaron had developed a very friendly relationship with the Defendant, each referring to the other as “brother” (兄弟). Aaron, at the material time, stated to the Defendant that they were “fighting the battle together” (喂大佬, 你唔係自己一個人打依場仗呀吓, 大家兄弟嚟呀吓, 一定支持住呀吓, 一齊打依場仗)[4]. The evidence shows that, until Aaron’s departure in May 2019, the Defendant primarily dealt with Aaron and their discussions cannot be characterized as anything but open and candid. Aaron offered advice to the Defendant and had told the Defendant that he would “manage things on the Plaintiff’s side” (OK, 你盡量說服阿HAP SENG嗰邊, 然後最重要都係令銀行嗰邊肯唔肯接受我地嗰個DEAL先, 其他D嘢我地依邊個邊你交俾我)[5]. As noted by Ms Sit, after the 16 April Letter, Aaron “disappeared from the scene”. Datuk Yong said in his 1^st statement (“Yong 1^st”)[6] that Aaron had resigned in May 2019, but under cross-examination, Datuk Yong revealed that Aaron was in fact terminated although Datuk Yong was adamant that Aaron’s termination was for reasons unrelated to the subject matter of these proceedings;

(4) Datuk Simon Shim Kong Yip (“Datuk Shim”): Datuk Shim is a director of the LSHL. Although not a director of the Plaintiff, he was involved in the process of seeking repayment from ECTX and FF.

2.5  As stated above, the Defendant is the ultimate owner of TWG. He is the only witness on the Defendant’s side. He is obviously an experienced businessman, and, on his own evidence, would not beat around the bush and would speak his mind.

2.6  The other personnel on the Defendant’s side relevant to these proceedings are:

(1) Ms Caroline Lee (“Caroline”): Caroline was at the material time the Defendant’s personal assistant. A number of important emails were sent by Caroline. She still works for the Defendant.

(2) Mr Joe Cheng (“Joe”): Joe works for FTI Consulting (“FTI”). It is pleaded at Amended Defence §5E(iv) that TWG was required by the Bank Group to and did appoint FTI as advisor for the Restructuring Exercise. In so far as there is any dispute on the role of FTI, I accept the Defendant’s pleaded case that FTI was TWG’s advisor and did not “represent” the Bank Group, in the sense that FTI was in a position to decide any matters for and on behalf of the Bank Group[7].

2.7  TWG consists of 7 investment holding companies. Relevantly, ECTX and FF are wholly-owned subsidiaries of a BVI company called Chang Wei Holdings Ltd (“Chang Wei”)[8]. Under Chang Wei are two intermediate holding companies, namely Champion Wealth Holdings Ltd (“Champion Wealth”) and Full Front Oils and Fats Investment Ltd (“FFHK”) which respectively hold ECTX and FF. Champion Wealth and FFHK (but not ECTX or FF) are chargors under the Composite Debenture. Chang Wei provided two guarantees (“CW Guarantees”) to the Plaintiff, respectively in respect of ECTX’s and FF’s indebtedness owed to the Plaintiff. The CW Guarantees in reality did not provide any extra protection to the Plaintiff, as Chang Wei’s ability to honour its obligations was equivalent to ECTX’s and FF’s ability to repay their indebtedness.

2.8  TWG’s operations in the Mainland were carried out through 3 companies, ECTX, FF and South Oils & Fats Industries (Dongguan) Co Ltd.

(ii) Indebtedness to the Plaintiff

2.9  Prior to being wound up in the Mainland in June 2020 (upon the Plaintiff’s application made in January 2020), ECTX and FF each operated a factory in Taixing, Jiangsu (collectively “Factories”) and were engaged in oilseeds processing. In order to obtain financing from the Plaintiff, an arrangement was made at the material time whereby TWG would sell palm oil products to the Plaintiff on COD (cash on delivery) basis, who then sold the same to ECTX and FF essentially on credit terms of 90 days[9], who then refined the palm oil products and sold the same to their customers. ECTX’s customers included various subsidiaries of Tingyi (Cayman Islands) Holding Corporation, the largest instant noodles manufacturer in the Mainland under the brand “康師傅”.

2.10  The indebtedness to the Plaintiff arose from the above arrangement. By way of 6 contracts dated 4 and 8 May 2018 entered between the Plaintiff and ECTX or FF (as the case may be), ECTX and FF, by 6 September 2018, became indebted to the Plaintiff in the aggregate sum of US$7,854,723.12 excluding interest (“Indebtedness”).

2.11  Between September 2018 and February 2019, the Plaintiff and the Defendant explored various proposals in the hope of reducing the Indebtedness, none of which yielded any concrete result.

3.   General comments on the evidence

3.1  As stated above, the witnesses called were Datuk Yong, Hugo and the Defendant. There is no dispute between counsel on the approach on fact-finding and assessment of credibility, namely the credibility of a witness should be assessed by reference to contemporaneous documentation where it exists, as well as inherent probabilities having regarding to all the facts that are known. It is also important to bear in mind the internal consistency of the evidence of a witness, which is often tested by a comparison between the oral testimony of the witness on the one hand and his witness statement and pleadings on the other. In addition, the court is also entitled to take into account the amendments of the pleadings, in particular on the explanation given if there is a significant change of case: Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corporation Ltd [2007] 3 HKLRD 439 §135, Hui Cheung Fai v Daiwa Development Ltd, HCA 1734/2009, 8 April 2014 §§77-82, and Au Yeung Pui Chun v Cheng Wing Sang [2021] HKCFI 463 §28-29.

3.2  As to the drawing of adverse inference, the principles are set out in Pacific Electric Wire & Cable Company Ltd v Texan Management Limited, CACV 91 of 2012, 17 September 2013 at §§106-107 which I will not repeat here.

3.3  I have evaluated the witnesses’ evidence and have come to the view that none of the witnesses’ evidence is so reliable that I can accept his evidence in full. Instead of setting out general comments here, my reasons for coming to the foregoing conclusion will become apparent as I set out my analysis of the evidence below. In such circumstances, the evidence on each contentious topic has to be assessed with care and with reference to the other evidence and overall probabilities: Au Yeung Pui Chun §27. Especially in the case of the Defendant, I find that his evidence is untruthful in a number of respects. However, I need to bear in mind the caution that a witness may lie but that does not necessarily mean that the entirety of that witness’ evidence must be rejected. The witness may lie in an ill-considered attempt to bolster his case but the actual case may nevertheless remain good irrespective of the lie: Hu Lan v David Golden [2023] HKCFI 873 §36.

3.4  There is another aspect which should be mentioned here. As the 16 April Letter was not a document under seal, it is necessary for the Plaintiff to show that any guarantee purportedly evidenced thereby is supported by consideration. In the present case, the consideration identified by the Plaintiff is the forbearance from commencing winding-up proceedings against the Factories.

3.5  The Plaintiff commenced these proceedings in October 2019. There is no specific reference to winding-up proceedings in its Statement of Claim; although it has to be said that such references were made, but in very general terms, in the witness statements filed in October 2020 (Yong 1^st and Hugo 1^st).

3.6  The Statement of Claim was amended in February 2021 to include a specific plea to winding-up proceedings. In June 2021, the Plaintiff filed its 2^nd Supplemental List of Documents which includes a document which was referred to at the trial as TWG’s List of Assets and Liabilities (“List”). It is common ground that the List was provided by the Defendant to the Plaintiff and discussed at a meeting attended by Aaron, Hugo and the Defendant on 7 March 2019 (“7/3/19 Meeting”). The List is the only contemporaneous document which contains any reference to winding-up before the 16 April Letter. The case pursued by the Plaintiff in closing is that it relies on the 7/3/19 Meeting as the first (and it seems to me the only) occasion at which the Defendant was expressly told that should he fail to pay or reach an amicable settlement by way of a personal guarantee by him, the Plaintiff would not hesitate to commence winding-up proceedings against the Factories: Plaintiff’s Closing Submissions §§46, 49 and 88.

3.7  Hugo 1^st does not mention the 7/3/19 Meeting. Hugo 2^nd was filed in September 2021. It is Hugo’s evidence that the 7/3/19 Meeting was specifically set up, inter alia, for the purpose for Aaron to propose to the Defendant to provide a personal guarantee: Hugo 2^nd §27(a). The Plaintiff’s pleaded case is that it was Aaron who told the Defendant that the Plaintiff was intending to commence winding-up proceedings against ECTX and FF, and that it was Aaron who asked the Defendant to provide a personal guarantee if he wished for the Plaintiff to grant him further indulgence and forbearance: Amended Reply §31(4)(c).

3.8  In my view, the above is an important factor to bear in mind in assessing the evidence, in particular when it is the case that there are no other contemporaneous documents to support the allegations that (1) the Plaintiff had planned the 7/3/19 Meeting as an occasion to ask for a personal guarantee and (2) prior to the meeting, the Plaintiff was already prepared to wind up the Factories. I have to assess the reliability of Hugo’s explanation that his memory was jogged by the discovery of the List against all the other available evidence: Hugo 2^nd §§23-28.

3.9  I have not lost sight of the Plaintiff’s complaint that the Alleged Prohibition was also only introduced by amendment in the Defence (amended in March 2021). The Alleged Prohibition was expressly mentioned in Wong 1^st (filed in October 2020). Whilst I will bear this aspect in mind, it does not appear to me that it comparatively calls for the same forensic scrutiny.

3.10  Another aspect which I should mention here is the documentary evidence. As pointed out by Ms Sit, whilst some of the communications between the relevant individuals at the time were by telephone or face-to-face, there is a fair volume of contemporaneous documentation (emails and WeChat) which record or reflect what was discussed between the Plaintiff and the Defendant. There is, however, a lack of documentary evidence on the discussions within the Plaintiff (for example as between Aaron, Hugo and other personnel within the senior management on the issues of personal guarantee and winding up) in terms of everyday text messages or other forms of electronic communication. This is not an observation made in the context of adverse inference, but one on credibility.

3.11  As is clear from counsel’s closing submissions, the relevant timeline may be broadly broken down into the following periods:

(1) Between September 2018 (when the Indebtedness arose) and the 7/3/19 Meeting, it is common ground that the parties explored various proposals to reduce the Indebtedness but none of them yielded any concrete results. There was, however, initially a dispute on whether Hugo and Aaron had since November 2018 mentioned to the Defendant that winding-up proceedings against the Factories were an option. Although Mr Man in closing does not pursue the Plaintiff’s initial case, the lack of cogency of that initial case is, in my view, relevant to the assessment of the Plaintiff’s case as pursued;

(2) What happened at the 7/3/19 Meeting, in particular in what context the List was discussed and what were those discussions;

(3) In the period following the 7/3/19 Meeting to 2 April 2019, there were a number of significant events. At a meeting between Aaron and the Defendant on 20 March 2019 (“20/3/19 Meeting”), Aaron requested the Defendant to provide a personal guarantee. The evidence also shows that the parties were discussing in earnest a proposal to use a plantation in Tawau (“Plantation”) as a means to reduce the Indebtedness. Another significant event is that on 2 April 2019, Hugo instructed HW to prepare a Formal Guarantee;

(4) Between 3 and 16 April 2019, the evidence shows that the discussions were ongoing regarding the Plantation and the terms of the Formal Guarantee. It is not disputed that the Plaintiff’s request for a Formal Guarantee and the amendments to its terms were discussed between the Defendant and FTI. Aaron and the Defendant had a meeting at Café Causette on 15 April 2019 (“15/4/19 Meeting”), and on the following day, another meeting was held between Aaron, Hugo, Datuk Yong and the Defendant (“16/4/19 Meeting”). There is a dispute on whether the 16 April Letter featured at the 16/4/19 Meeting, and if so, what was said in relation to the letter. What Datuk Yong accepted in cross-examination is that he was happy with how the discussions went in relation to the Plantation at the meeting. The evidence shows that on 16 April 2019, the Defendant chased for, but did not receive (or at any rate was not aware of any), comments from FTI on the Formal Guarantee before he attended the 16/4/19 Meeting;

(5) Between 17 April 2019 and 12 August 2019, the significant events were as follows. Aaron had “disappeared from the scene” after the 16 April Letter. In early May 2019, Datuk Shim (through Hugo) chased the Defendant for a personal guarantee. By letters 10 and 24 May 2019 (respectively “10/5/19 Letter” and “24/5/19 Letter”), the Defendant respectively told Datuk Yong and CK Lau, amongst other things, that (1) (to Datuk Yong) the Bank Group had instructed him not to provide a further guarantee as it would affect the Restructuring Exercise[10] and (2) (to CK Lau) he was willing to provide a guarantee to the Plaintiff but he was instructed by the Bank Group that he should not provide a further guarantee, and if he did so, the Restructuring Exercise would be halted but he promised that he would sign a guarantee when a timetable was agreed with the Bank Group on the Restructuring Exercise[11]. There is no dispute that the Plaintiff stopped chasing for a Formal Guarantee following the 10/5/19 Letter and 24/5/19 Letter;

(6) On 13 August 2019, a meeting was held between the Plaintiff’s representatives and the Defendant (“13/8/19 Meeting”). On the evidence, it is a formal meeting chaired by Datuk Yong and attended by many personnel from the Plaintiff’s side including Datuk Shim and Hugo. There is a dispute as to whether the Defendant acknowledged at that meeting that he had provided a guarantee by way of the 16 April Letter; and

(7) Between the 13/8/19 Meeting and the Plaintiff’s application to wind up the Factories in January 2020, the salient events are as follows. In October 2019, the Plaintiff commenced the present proceedings. The Plaintiff relies on the facts that the Defendant did not in his communication thereafter with CK Lau (by letter dated 21 October 2019) deny that he had provided a guarantee and later told Datuk Yong (by voice message on 2 December 2019) that his defence of the present proceedings (filed on 28 November 2019) was on the instruction of the Bank Group.

3.12  In the following sections, I will evaluate the evidence by reference to the above periods and set out my factual findings. Although the analysis is done chronologically, I have considered the evidence overall as a whole in reaching my findings. But I should first address a preliminary but important issue, namely the Alleged Prohibition.

4.   The Alleged Prohibition

4.1  The documents before me do not show that there is a contractual clause by which the Defendant was prohibited by the Bank Group from giving a guarantee to other creditors. As far as the Restructuring Exercise is concerned, only the Composite Debenture was disclosed by the Defendant. It is plain that there were other agreements executed in addition to the Composite Debenture, as the Composite Debenture itself refers to other agreements.

4.2  During the trial, the Defendant applied to discover those documents which were said to contain such contractual prohibition. The Defendant did not persist with the application, as it is plain from the documentary evidence that no one at the material time had referred to a contractual prohibition. In other words, the contractual prohibition was not relied on at the material time to guide the action or the decision-making of the Defendant. Indeed, the Defendant told me that he was not familiar with the terms of the documents relating to the Restructuring Exercise.

4.3  It seems to me, however, as a matter of commercial realities, it was entirely reasonable and credible for the Defendant to have been told by the Bank Group and to have an understanding that he had to consult the Bank Group in relation to the giving of a personal guarantee to other creditors, whether the source of such restraint was contractual or commercial. Prior to the Restructuring Exercise, the Bank Group was unsecured. It is the Defendant’s evidence that, for the purpose of the Restructuring Exercise, he provided all of his corporate and personal assets[12] to the Bank Group as security in the hope of reaching an agreement to restructure the outstanding debts and to obtain new loans. The Bank Group was by far TWG’s largest creditor and the contemporaneous documents show that the Defendant did seek FTI’s advice or comments (1) when provided with the Formal Guarantee by Hugo and (2) thereafter on the amendments of the Formal Guarantee. Mr Man made submissions on how I should view the nature of such consultations (which I will deal in the sections below), but the clear fact is that the Defendant thought he had to and did consult FTI at every step along the way.

4.4  I find as a fact that the Defendant at the material time had understood that he had to consult the Bank Group before giving a personal guarantee to other creditors. In so far as Mr Man invites me to draw adverse inference against the Defendant that the Bank Group never indicated to the Defendant the Alleged Prohibition (for not calling Joe, Caroline or representatives or lawyers of the Bank Group), I decline to do so.

4.5  But the fact that the Defendant had that understanding does not necessarily mean that he could not have intended to provide a personal guarantee to the Plaintiff or that he communicated the Alleged Prohibition to the Plaintiff. Whilst the foregoing were possibilities, the commercial realities at the material time were that the Bank Group was not TWG’s only creditor. The Plaintiff was an unsecured creditor and that was plainly an issue which the Defendant also had to manage. As such, another possibility is that the Defendant decided to provide a personal guarantee by way of the 16 April Letter despite the Alleged Prohibition.

4.6  However, as a matter of inherent probabilities, it seems to me only logical that where the Indebtedness had already arisen, the Defendant would only risk upsetting the Bank Group (ie by providing a guarantee without first ascertaining the Bank Group’s position) thereby potentially jeopardizing the Restructuring Exercise only if he felt that the circumstances enjoined him to do so. Much depends on the degree and nature of the pressure he was facing at the time from the Plaintiff.

4.7  In my view, the resolution of the above involves a careful analysis, in particular paying due (and objective) regard to the prevailing circumstances and the commercial realities.

4.8  I think the above crystallizes Ms Sit’s submission on the danger of placing too much reliance on any age-old pattern (§1.9(2) above) to “fill in the gaps” where there is no hard contemporaneous evidence. That the Plaintiff was in a position to make a threat to wind up the Factories does not necessarily mean that it did. It may be that the age-old pattern makes it more inherently probable but this is a not a straightforward case. There is a paucity of contemporaneous evidence to support the allegation that a threat to wind up was made (and such allegation was abandoned for the period pre 7/3/19 Meeting) and the Defendant was dealing with Aaron who on the contemporaneous records considered himself an “ally” (§2.4(3) above). The precise case of the threat of winding-up was not formulated initially in the Statement of Claim and only set out in Hugo 2^nd. Immediately prior to and at the 16/4/19 Meeting, there were ongoing discussions on the Plantation which Datuk Yong accepted to be proceeding to his satisfaction at that time.

4.9  I also accept Ms Sit’s submission that Aaron, being the Plaintiff’s managing director, was indisputably authorized to represent the Plaintiff. As Datuk Yong has confirmed that Aaron’s employment was terminated for reasons unconnected with this case, there is no room to suggest, and Mr Man does not suggest, that Aaron would have failed to reflect what he had learned from the Defendant to the Plaintiff.

4.10  I now turn to set out my analysis on the evidence chronologically. The parties have provided a very detailed Statement of Agreed Facts (“SAF”) and Agreed Chronology.

5.   Between September 2018 and the 7/3/19 Meeting

5.1  As stated above, it is common ground that the parties explored a number of proposals to reduce the Indebtedness but none of them yielded any concrete results. At Plaintiff’s Closing Submissions §46, Mr Man submits that it is not necessary for me to make any specific findings on those matters.

5.2  Datuk Yong’s evidence is that he had no contact with the Defendant before the 16/4/19 Meeting.

5.3  It is Hugo’s evidence that since November 2018, Aaron and he did briefly mention to the Defendant that winding-up proceedings were an option and that the Defendant had requested the Plaintiff to refrain from doing so, such that the Factories could remain in operation and generate revenue to repay the Plaintiff. Further, it is Hugo’s evidence that the Plaintiff’s Mainland lawyers had in December 2018 recommended that the Plaintiff should consider the strategy of applying to wind up the Factories. The foregoing is denied by the Defendant. It is important to note that the above evidence was given in Hugo 2^nd, upon “reconsideration of the events” and “refreshing my memory”: Hugo 2^nd §§24-25.

5.4  In cross-examination, Hugo gave very different evidence. Instead, between November 2018 and early March 2019 (before the 7/3/19 Meeting), Hugo never mentioned “winding up” to the Defendant and in conversations with the Defendant where he was present, the words “winding up” were never mentioned. Instead of the Defendant asking the Plaintiff to refrain from winding up the Factories, all the Defendant said was that he wanted to resume or continue the operation of the Factories which had come to a halt.

5.5  Ms Sit invites me to find that the Plaintiff did not threaten the Defendant that it intended to wind up the Factories before the 7/3/19 Meeting and the Defendant did not request the Plaintiff to refrain from so doing. There being no submissions to the contrary made by Mr Man, I so find. For present purposes, it is pertinent to bear in mind that, on Hugo’s evidence, he was consistently told by the Defendant that the Defendant wished to resume the operations of the Factories. This has a bearing on what transpired at the 7/3/19 Meeting, and in particular on the factual disputes on what was discussed by Aaron, Hugo and the Defendant at that meeting.

5.6  It is also important to analyze the evidence on the purpose for the Plaintiff calling the 7/3/19 Meeting. According to the Plaintiff:

(1) The meeting was arranged to obtain an update from the Defendant on his proposed payment plan and specifically for Aaron to propose to the Defendant to provide a personal guarantee and to adopt a strong stance towards the Plaintiff at the meeting (Hugo 2^nd §27(a));

(2) According to Datuk Yong, on an unspecified date in March 2019, “the management” was prepared to commence winding-up proceedings against the Factories but the Plaintiff, before doing so, approached HW for advice on the legal options available. The Plaintiff decided to go with HW’s suggestion of having the Defendant sign a deed of guarantee. Datuk Yong therefore asked Hugo to be in charge of liaising with HW and the Defendant on matters relating to the deed of guarantee (Yong 1^st §§20-21). Datuk Yong’s statement is cast in very generally terms but he clarified in cross-examination that “the management” means he alone.

5.7  The evidence set out in the preceding paragraph suggests that the Plaintiff had already consulted HW before the 7/3/19 Meeting, and having obtained HW’s advice, the Plaintiff decided to set up the 7/3/19 Meeting.

5.8  There are no contemporaneous records to support the matters set out at §5.6 above. Whilst the Plaintiff has claimed legal privilege in respect of legal advice, there is no other evidence, documentary or otherwise, to show factually that after Hugo was tasked by Datuk Yong to be in charge of the deed of guarantee, Hugo had discussed the matter with Aaron such that the 7/3/19 Meeting was set up for a specific purpose for Aaron to ask the Defendant for a guarantee. Equally, where the decision to “pull the trigger” was made by Datuk Yong alone, there is no evidence, documentary or otherwise, to show factually that Datuk Yong had communicated that decision to Aaron or Hugo or anyone else within “the management” (and if so, how and when).

5.9  Instead, the documentary evidence, the SAF and Agreed Chronology show the following:

(1) Since January 2019, the Plaintiff and the Defendant were engaged in discussions over the possible acquisition of the Plantation by the Plaintiff: Agreed Chronology;

(2) On 20 February 2019, the Defendant met CK Lau to discuss various proposals: WeChat messages between Aaron and the Defendant on 20 February 2019;

(3) On 28 February 2019, Aaron suggested to the Defendant that he should discuss with CK Lau a proposal to pledge TWG’s assets to Lei Shing Hong Credit (another company within the Lei Shing Hong Group) to obtain a loan to repay the Bank Group and the Plaintiff: Agreed Chronology;

(4) The 7/3/19 Meeting was called by Datuk Shim. On 5 March 2019, Hugo and Aaron both sent WeChat messages to the Defendant stating that Datuk Shim wanted to meet the Defendant on the following day. The Defendant told Aaron and Hugo that he was unavailable on 6 March 2019, to which Hugo replied that Datuk Shim might have travel plans after 6 March 2019. Hugo chased the Defendant to provide the List. Eventually, the meeting was scheduled to be held on 7 March 2019: WeChat messages on 5 and 6 March 2019;

(5) As I understand the evidence, Datuk Shim, despite having called for the meeting, eventually did not attend the 7/3/19 Meeting.

5.10  In my view, given the state of the documentary evidence and the agreed facts, it seems to me more likely than not that the Plaintiff’s evidence as summarized at §5.6 above is incorrect. The contemporaneous documents do not show, by the time of the 7/3/19 Meeting, the Plaintiff (1) was prepared to wind-up the Factories or (2) had already obtained advice from HW to seek a personal guarantee from the Defendant. The meeting was called by Datuk Shim (not Datuk Yong). Bearing in mind that Datuk Shim was not a director of the Plaintiff but a director of LSHL, it seems to me more likely than not that the meeting was called for the purpose of discussing issues which might relate to the other entities within the LSH Group (for example LSH Credit) in addition to the Plaintiff. Further, had Aaron known that the 7/3/19 Meeting was set up for the purpose for him to seek a personal guarantee from the Defendant, given the openness of their discussions, the inherent probabilities are that he would have informed the Defendant. The WeChat messages show that Aaron and the Defendant discussed the 7/3/19 Meeting on 5 and 6 March 2019 but they do not mention the Plaintiff’s request for a personal guarantee. To the contrary, someone with the initial KS (which may be Datuk Shim) asked Aaron to relay a message to Defendant, advising the Defendant not to lose CK Lau’s confidence as CK Lau was pivotal in the days ahead and his support would greatly assist the Defendant.

5.11  On the basis that the decision to “pull the trigger” was made by Datuk Yong alone, the 7/3/19 Meeting would have been important to him and the Plaintiff’s case as pursued, it being a specific occasion set up to communicate his decision to the Defendant. It is unclear why he did not attend the 7/3/19 Meeting (he later did attend the 16/4/19 Meeting) and the meeting is not mentioned in Yong 1^st or Yong 2^nd. It is fair to say that Datuk Yong has no specific recollection of the meeting. As stated above, the 7/3/19 Meeting was only first mentioned in Hugo 2^nd.

5.12  I do not accept the Plaintiff’s evidence summarized at §5.6 above. I find that as at the 7/3/19 Meeting, the Plaintiff had not yet decided to wind up the Factories and the meeting was not set up for Aaron to seek a personal guarantee from the Defendant.

6.   The 7/3/19 Meeting

6.1  The dispute here is whether the Defendant was told at the meeting that should he fail to pay or reach an amicable settlement by way of a personal guarantee, the Plaintiff would not hesitate to commence winding-up proceedings against the Factories and the Defendant begged the Plaintiff not to do so. I have found in the preceding section that the 7/3/19 Meeting was not set up for the purpose for Aaron to ask for a personal guarantee from the Defendant and that, prior to the 7/3/19 Meeting, the Plaintiff had not yet decided to wind up the Factories. This section deals with what happened at the meeting.

6.2  The Defendant provided the List to the Plaintiff on 6 March 2019 and made manuscript notes on a hard copy of the List at the 7/3/19 Meeting. For ease of understanding, a copy of the List is annexed as Annexure 1. The List is a two-page document.

6.3  The List contains the following information:

(1) If TWG’s assets were not disposed by forced sale, the assets exceeded liabilities by HK$400 million;

(2) The List shows that TWG’s bank creditors (including the Bank Group) had extensive security;

(3) The “*” and “#” markings on page 2 made by the Defendant on the List show that “江苏贰间工厂的价值非常重要”(ie the Factories) and FF and ECTX have the note “争取经营”;

(4) Point 3 on page 1 states “工厂只要生存才有机会还钱, 但重点是争取工厂生存”; and

(5) Point 5 on page 1 states “公司清盘, 所有资产将资不抵债, 30 年的努力也会拜拜｡银团现在没有具体方案” (emphasis added).

(i) The Plaintiff’s case

6.4  The manuscript notes were made by the Defendant at the 7/3/19 Meeting and therefore reflect what was discussed at the meeting. The Plaintiff says that they are consistent with its case (ie the Defendant was told that should he fail to pay or reach an amicable settlement by way of a personal guarantee, the Plaintiff would not hesitate to commence winding-up proceedings against the Factories and the Defendant begged the Plaintiff not to do so) for the following reasons:

(1) According to the Defendant, every asset of TWG that was worth anything was on the List;

(2) The Defendant agreed in cross-examination that given TWG’s positive asset position, it was entirely reasonable for the Plaintiff to want a personal guarantee from him;

(3) The bank creditors (including the Bank Group) had extensive security and thus had the option of enforcing their security instead of resorting to company liquidation;

(4) By contrast, the Plaintiff was unsecured and its only option was company liquidation;

(5) The Defendant agreed in cross-examination that the Plaintiff’s ultimate option, if the discussions fell apart, was to wind up ECTX and FF, and that this was not something D wanted;

(6) The Defendant agreed that if the Plaintiff took action to wind up ECTX and FF, this would have result in a “打击”to the Restructuring Exercise;

(7) Objectively, the reference to winding up was a reference to the winding up of the Factories. The inherent probabilities are that the Defendant should have been overwhelmingly more concerned about the Plaintiff seeking winding up than the Bank Group as the Bank Group had obtained security through the Composite Debenture and other bank documents. Indeed, the Defendant’s own evidence is that the Bank Group never told him it was ever contemplating winding up TWG. To-date, the Bank Group has still been giving the Defendant time to gradually dispose of his assets to repay them;

(8) There was no point for the Defendant to mention the winding up of TWG by the Bank Group to Hugo and Aaron. The Defendant’s evidence that he mentioned it because he wanted assistance from the Plaintiff, in the context of his assertion that the purpose of providing the List was for the Plaintiff to acquire TWG is untruthful, as there is no documentary evidence suggesting the Plaintiff acquiring TWG was ever on the cards;

(9) The Plaintiff’s case is consistent with the inherent probabilities. In the circumstances where the Plaintiff was indisputably owed a large sum of money for an extended period, it was only to be expected that the Plaintiff would have asked the Defendant for security in the form of a personal guarantee and used winding-up as a threat to persuade him to do so. Similarly, it is not surprising that the Defendant would have begged the Plaintiff to refrain from taking such steps to wind up the Factories;

(10) Hugo’s evidence is credible and it is not incredible that his memory as to the existence of the 7/3/19 Meeting and what happened thereat was jogged by the List.

(ii) The Defendant’s case

6.5  Conversely, the Defendant argues as follows.

6.6  There is no documentary evidence of any request for a guarantee from the Defendant. There is nothing in the documents generated before the 7/3/19 Meeting and the List makes no mention of any such request. In so far as the Plaintiff was seeking to “improve” its position as an unsecured creditor, what was sought was a second charge on the Hong Kong properties (as opposed to a personal guarantee). It is not disputed that a second charge was discussed at the meeting. It is also inexplicable that the 7/3/19 Meeting, it being a seminal event, was only mentioned in Hugo 2^nd.

6.7  It is clear that the Defendant did not request for any forbearance from winding up the Factories for the following reasons:

(1) There were proposals being actively negotiated on, including (a) the proposed sale of the Plantation and (b) a proposed refinancing of Twin Wealth group’s debts from the Bank Group which was proposed by Aaron on 28 February 2019;

(2) The List was obviously related to the proposals that the parties were discussing at the time; and

(3) The reference to winding up in Point 5 of page 1 of the List is a reference to a winding up of TWG, not the Factories.

(iii) Findings

6.8  In my view, the 7/3/19 Meeting is a clear instance where “inherent probabilities” from age-old patterns do not overcome the clear gaps in the evidence.

6.9  First, I do not find it significant that the List mentions the Defendant’s wish to resume the operations of the Factories, especially if a connection is sought to be drawn with a threat to wind up the Factories. Hugo 2^nd §25 states as follows:

“ Earlier, in November 2018, Aaron and I did briefly mention to KK. Wong that winding up proceedings against ECTX and FF were an option in my telephone conversations and/or face-to-face meetings with him. After the Plaintiff decided to seriously consider winding up proceedings against ECTX and FF, I informed KK Wong of this in our discussions from December 2018 to March 2019… Whenever I mentioned winding up proceedings against ECTX and FF, KK Wong requested the Plaintiff to refrain from doing so, so that ECTX and FF could remain in operation and generate revenue to repay the Plaintiff.”

6.10  Hugo 2^nd §28 states as follows:

“ In fact, what KK Wong conveyed during the [7/3/19 Meeting] was consistent with what he has been saying since late 2018 - that it was important for ECTX and FF to remain in operation and to continue production, so that ECTX and FF could continue to generate revenue. This was nothing new. By this time, KK Wong must have known that if he failed to provide a personal guarantee, the Plaintiff was going to take whatever steps and enforcement actions were necessary to recover the amounts due and owing, including the commencement of winding-up proceedings.”

6.11  Hugo accepted in cross-examination (§§5.4 and 5.5 above) that Hugo 2^nd §25 is incorrect. There was no mention of winding up by anyone before the 7/3/19 Meeting and all that was said by the Defendant was his wish to resume the operations of the Factories. I agree with Ms Sit that, in such circumstances, the Defendant’s communicated wish to resume the operations of the Factories (which as a matter of fact had come to a halt) cannot be equated with or understood to mean winding up. Therefore, the mere fact that the Defendant had mentioned the resumption of the operations of the Factories at the 7/3/19 Meeting (as shown by the manuscripts) does not support the Plaintiff’s case. One has to bear in mind that Hugo 2^nd §25 was as a result of Hugo having “reconsidered the events”.

6.12  Secondly, whilst I accept Mr Man’s criticism of the Defendant’s evidence (§6.4(8) above) to a certain extent, Mr Man was fair to accept that discussions were possibly carried out in respect of (1) a proposal for Lei Shing Hong Credit to obtain a security and repay the Bank Group and the Plaintiff (§5.9(3) above) and (2) a second charge over some of TWG’s properties: Plaintiff’s Closing Submissions §57.1. In fact, that a second charge was discussed at the meeting was agreed by Hugo. The information contained in the List seems to me to be relevant in that context, as either refinancing by Lei Shing Hong Credit or a second charge over some of TWG’s properties would involve consideration of TWG as a whole.

6.13  Thirdly, the mere fact that winding up was mentioned at the meeting does not mean that a threat to wind up was made by the Plaintiff. The meeting was not attended by Datuk Yong who had decided that the Plaintiff was prepared to pull the trigger. As noted above, there is no evidence to support the assertion that Datuk Yong had communicated his decision to either Aaron or Hugo before the meeting.

6.14  Fourthly, the reference to winding up at Point 5 of page 1 of the List, on the balance of probabilities, is a reference to a winding up of the TWG by the Bank Group. The winding up, if it is meant to be the winding up of the Factories, cannot objectively refer to all the assets (所有资产) and does not have the effect of rendering所有资产将资不抵债. As I understand the evidence, following the winding up of the Factories, CCB (page 1 of the List) was completely paid off, leaving only partial recovery for the Plaintiff (the other remaining China Creditor). Therefore, by a simple arithmetic calculation, TWG’s assets would still exceed its liabilities following the winding up of the Factories (ie subtracting the value of Full Front and East China on page 2 (assets) and subtracting CCB on page 1 (liabilities)). Conversely, the winding up of TWG would likely have the effect of rendering 所有资产将资不抵债 as the assets would have to be sold in a liquidation scenario. Further, as Ms Sit has noted, the Bank Group is expressly mentioned at Point 5 on page 1 of the List.

6.15  Fifthly, in the light of the proposals likely to have been discussed at the meeting, there was a clear purpose for mentioning winding up of TWG, as those proposals involve assets not owned by the Factories.

6.16  I find that at the 7/3/19 Meeting, the Plaintiff did not request the Defendant to provide a personal guarantee and the Plaintiff did not threaten to, and the Defendant did not request the Plaintiff not to, wind up the Factories.

7.   Between the 7/13/19 Meeting and 2 April 2019

7.1  It is common ground that at the 20/3/19 Meeting between Aaron and the Defendant, Aaron requested the Defendant to provide a guarantee. This is evidenced by an email which Aaron drafted on 21 March 2019 for the Defendant to send to Datuk Yong (“Draft 21/3/19 Email”). As I understand the evidence, the Defendant’s proficiency in English is limited. The Draft 21/3/19 Email states, inter alia, as follows:

“ Aaron mentioned to me about the Personal Guarantee (PG). While I have no objection to sign the PG to you, my assets are all shown and the PG can give you nothing more than the residual value of my assets after serving all the debts. In fact, I am still considering a permanent solution. I understand that you do not consider my plantation as return from similar assets is low in the market now. However, a report done by CH William in March, 2018 for my plantation indicates a market value of RM72m based on an assumption of 8% return…. CH William also gives a force value of 54m under the assumption of forced sale conditions…. Given the valuation, I am willing to offer my plantation to you at the lower end of RM60m which I believeI can give you a return of not less than 9.5% based on the same assumption of CH William.

The proposal hereby offered is based on a Condition Precedent that I can convince both HSBC and OCBC to accept an arrangement to apply RM30m to repay their loan with the other RM30m to settle your credit which now also stands at the range of HKD60-62m and the RM30m would be able to allow me to fully settle the outstanding with you all with just a small balance that we can handle later…” (emphasis added)

7.2  In response to the Draft 21/3/19 Email, the Defendant thanked Aaron and sent the following voice message to Aaron on WeChat on 21 March 2019:

“ Hello Aaron呀, 嗰個種植園唔係咁靠近你地嗰度,因為你地嗰度斗湖嗰D將佢變晒... 起晒屋, 咁我地嗰個種植園呢就近舊陣時老闆舊年準備收購嗰KRETAM就喺隔離, 咁如果佢收購咗KRETAM就啱啱正,如果唔係呢就隔得遠少少, 但係都可以獨立contribution嘅, 應該都ok嘅,，er另外我將我地尋日傾嘅嘢叫阿JOE pass 俾匯豐, 聽聽匯豐嘅意見先, 如果佢ok嘅, 咁我就出信俾你地, 如果唔ok嘅, 我再諗諗點樣做法, 因為佢都幾關鍵係嗰個價錢呀,即係俾番匯豐嗰個3000嗰度呀下唔該” (emphasis added)

7.3  I accept Mr Man’s submissions that, contrary to the Defendant’s evidence, Aaron would not have drafted the underlined words in the Draft 21/3/19 Email unless the same was told to him by the Defendant. I also do not accept Mr Sit’s submission that the underlined words in the Defendant’s WeChat on 21 March 2019 are an indication or are to be understood to be an indication that the provision of a personal guarantee was subject to the Bank Group’s consent. Read objectively, the matter which was to be passed by FTI to the Bank Group for consideration was the proposal relating to the Plantation.

7.4  What is clear, however, is that Aaron was aware that steps taken by the Defendant at that time may be subject to the Bank Group’s consent (although at that time not raised in the context of a personal guarantee).

7.5  The Draft 21/3/19 Email was not sent by the Defendant to Datuk Yong. The documentary evidence shows that there was no further discussion on a personal guarantee until 3 April 2019. On the other hand, it is plain from the contemporaneous records that the Plantation was what Aaron and the Defendant were focusing on. Messages exchanged between Aaron and the Defendant after 21 March 2019 relate predominantly to the Plantation, and on 1 April 2019, Aaron sent the following messages by WeChat to the Defendant:

“ This morning Tan Sri sounds we may takeover d plantation under diff coy n not HS plantation, subject to further findings, such as bank's reaction.”

“自己知道就可以了, 不要再傳出去”

“我們的遊說,初步成功”

“下步要看你跟銀行談判的成果了”

7.6  I think the above messages sent by Aaron show at least two matters. First, there was progress in relation to the Plantation proposal. As may be seen in the Draft 21/3/19 Email, it was the then understanding between Aaron and the Defendant that Datuk Yong was not interested in the Plantation as the pricing (and hence the return on investment) was not regarded by Datuk Yong to be attractive. However, by 1 April 2019, progress was being made at the level of CK Lau (who was the ultimate owner of the LSH Group and Hap Seng). Secondly, they show how candid and open (it may be suggested by some to be overly so) Aaron was in his communication with the Defendant.

7.7  It is the Plaintiff’s pleaded case that in or around March to early April 2019 the Defendant had orally agreed in principle to provide a personal guarantee: Amended Statement of Claim §5F(3)(c). The Plaintiff, when requested by the Defendant, did not provide the particulars of the precise date(s) on which the alleged conversation(s) took place, on the basis that such request was one for evidence.

7.8  The Defendant’s evidence is that he had told Aaron at the 20/3/19 Meeting that he was “not able to sign [a guarantee] because all my assets have been charged as security and the Bank Group had made clear to me that I could not sign any personal guarantee in favour of any creditor”: Wong 2^nd §32.

7.9  Having considered the evidence, I find that during the period between the 7/3/19 Meeting and 2 April 2019:

(1) Aaron made a request for the first time for a personal guarantee from the Defendant at the 20/3/19 Meeting;

(2) But the personal guarantee was at that time not treated as an utmost priority by Aaron and Defendant;

(3) At the 20/3/19 Meeting, the Defendant, contrary to his evidence, did not tell Aaron that he was unable to provide a guarantee and what the Defendant told Aaron is reflected in the Draft 21/3/19 Email;

(4) The focus of Aaron and the Defendant at the 20/3/19 Meeting and thereafter was on the Plantation proposal;

(5) Progress was made in the Plantation proposal between 20 March and early April 2019;

(6) Aaron informed Hugo about his discussion with the Defendant at the 20/3/19 Meeting on the guarantee, and that is why Hugo instructed HW to prepare a Formal Guarantee on 2 April 2019;

(7) There was no mention of winding-up proceedings by anyone during this period.

7.10  I should add this observation. Although I have rejected the Defendant’s evidence that he had expressly told Aaron at the 20/3/19 Meeting of any inability to provide a guarantee, where, as set out above, that was the first request for a personal guarantee and the contemporaneous focus of Aaron and the Defendant was on the Plantation proposal, any “in-principle” agreement then expressed by the Defendant is not necessarily inconsistent with the Alleged Prohibition or should be construed as fully reflecting the Defendant’s position.

7.11  As pointed out at §§4.5 to 4.7 above, what the Defendant did, and how his action is to be objectively understood, must be assessed by reference to the fact that he was managing different “camps” of competing creditors and the commercial realities attendant to that (delicate) situation. As at the 20/3/19 Meeting, the Defendant was not told of any apparent urgency on the provision of a personal guarantee (and the Plaintiff has not suggested that Aaron did so at the 20/3/19 Meeting) and the Defendant did not consult FTI on the issue of a personal guarantee before or immediately after the 20/3/19 Meeting, which is to be contrasted with, when provided with the first draft of the Formal Guarantee on 3 April 2019, he immediately provided the same to FTI (Hugo only instructed HW to draft a Formal Guarantee on 2 April 2019). As will be seen below, there was no timeframe stipulated by Hugo in his email to the Defendant on 3 April 2019 within which the Defendant was to sign the Formal Guarantee. Indeed, the Defendant, after having provided the Formal Guarantee to FTI, did not thereafter treat the matter with urgency.

8.   Between 3 April 2019 and the 16/4/19 Meeting

8.1  The disputes here are: (1) Whether the Plaintiff knew that the Defendant needed the Bank Group’s consent before he could give a personal guarantee to the Plaintiff, (2) whether both parties knew that the Defendant had not yet obtained the Bank Group’s consent and (3) whether the parties considered the possibility of winding up the Factories.

(i) The contemporaneous documents

8.2  On 3 April 2019, Hugo emailed the first draft of the Formal Guarantee (“First Draft”) and other documents to the Defendant. It is apparent that Hugo asked HW to prepare the First Draft on an urgent basis but such urgency was not communicated to the Defendant. Hugo’s email did not specify an expected timeframe within which the Defendant should provide a response.

8.3  On 4 April 2019, the Defendant had a meeting with FTI during which a number of matters were discussed. At that meeting, the Defendant gave Joe the First Draft. This is evidenced by an email from Caroline to Joe on 8 April 2019 at 11:11 am where she said: “Mr Wong has given you the [First Draft] during the meeting, please advise how we shall proceed with this guarantee”. Although the Defendant gave the First Draft to FTI at the meeting on 4 April 2019, it was only 8 April 2019 that Caroline requested Joe’s advice on how to proceed with the matter. As pointed out above, the contemporaneous documents do not show that the Defendant treated the Formal Guarantee urgently and there is no suggestion on the documents that the Plaintiff had chased for a response from the Defendant between 3 and 8 April 2019.

8.4  Mr Man submits that the query contained in Caroline’s email to Joe shows that neither Joe nor Caroline ever understood that the Bank Group had prohibited the Defendant from signing a personal guarantee. He submits that it would have been absurd for Caroline and Joe to be having a discussion as to the terms of a detailed guarantee if such a prohibition had been communicated.

8.5  I disagree with Mr Man’s characterization of the evidence. Caroline’s email did not request Joe to consider the terms of the Guarantee but sought advice as to how the matter should be proceeded with. This is the first time that the Plaintiff provided a guarantee (ie the First Draft) to the Defendant which the Defendant was asked to sign and the Defendant sought advice from Joe on how to proceed. This is consistent with my finding at §4.4 above, namely that the Defendant understood that he had to consult the Bank Group before giving a personal guarantee to other creditors.

8.6  On the other hand, there is no documentary evidence to show that the Plaintiff was told at that time that the Defendant was in discussion with FTI on the First Draft.

8.7  The documents are consistent with the Defendant’s evidence that, during the week of 7 April 2019, personnel from Hap Seng visited the Plantation.

8.8  On 10 and 11 April 2019, Aaron asked for a meeting with the Defendant. On 11 April 2019, Aaron sent the following WeChat message to the Defendant:

“ 沒關係, 只是PG的文件, 老闆那邊催了好幾次, 你要沒問題, 周一 [15 April 2019] 我幫你約一下, 過來簽丟, 過後, 我跟你喝一杯, update一下”

8.9  On the documents, Aaron’s WeChat message of 11 April 2019 was the first time that the urgency of the Formal Guarantee was communicated to the Defendant. There is no documentary evidence to suggest that Hugo had chased the Defendant for a response on the First Draft before 11 April 2019.

8.10  On 15 April 2019 at 9:57 am, Aaron messaged the Defendant on WeChat, stating: “律師正在跟進, 下午答覆。另外, 下午有時間update一下冇”. At 10:03 am, Hugo sent an email to HW stating:

“ We have received the comments from the Guarantor. He is willing to sign the Deed of Guarantee, but he would like to have a simplified version of PG in order to reduce the time & costs of negotiation? Please kindly assist it because we really want to complete it before Easter Holidays.”

8.11  Later, on 15 April 2019 at 12:27 pm, HW provided to Hugo a revised Formal Guarantee (“Revised Draft”) which “removed some of the representations and warranties and boilerplate clauses… the protection offered under the revised draft is less… however, the fundamental guarantee provisions still remain.”

8.12  At around 3:30 pm, the 15/4/19 Meeting between Aaron and the Defendant took place at Café Causette (which then extended to the two taking a stroll around the Central Pier). As to what transpired at the 15/4/19 Meeting, I accept Mr Man’s submission that the evidence shows that both Aaron and the Defendant were under pressure at the time. I have no difficulty in finding that Aaron was under pressure because his boss was chasing the execution of the Formal Guarantee. I further find that Aaron requested the Defendant to write a few words on the Defendant’s proposal to resolve the Indebtedness for him to provide an explanation to his superiors “交代”.

8.13  At 4:48 pm, Hugo forwarded the Revised Draft to the Defendant.

8.14  Almost immediately thereafter, at 5:14 pm, Caroline emailed the Revised Draft to FTI in the following terms:

“ Attached please find the revised guarantee drafted by LSH which varies from the previous version that we gave you in our last meeting. Appreciate if could comment in return. Thank you.”

8.15  By 15 April 2019, Joe had not replied on the First Draft. In my view, read objectively, when the Revised Draft was emailed to Joe, the Defendant was still seeking advice on how to proceed with the matter.

8.16  Clause 6.1 of the Revised Draft is a section on the Defendant’s representations and warranties. Relevantly, clause 6.1.9 of the First Draft (“Old Clause 6.1.9”) provides:

“ all approvals and third party's consent (including but not limited to the consent of the legal spouse of the Guarantor) required or desirable… to enable him to lawfully enter into, exercise his rights, and comply with his obligations in this Guarantee… have been obtained or effected, and are and will remain in full force and effect.”

8.17  As may be seen from the tracked-change version, the Revised Draft removed Old Clause 6.1.9 (amongst other changes). Clause 6.1 of the First Draft contains 22 sub-clauses. In the Revised Draft, the equivalent clause only contains 10 sub-clauses.

8.18  Clauses 6.1.7 to 6.1.10 of the Revised Draft provide (“New Clauses 6.1.7 to 6.1.10”):

“ 6.1.6 all information (including, without limitation, information provided through e-mail) supplied by or on behalf of him to the Beneficiary (or any adviser or representative of the Beneficiary) is true, complete and accurate as at the date it was given;

6.1.7 no litigation, investigation, arbitration or administrative proceedings of or before any court, arbitral body or agency has been started or is pending, or to the best knowledge of the Guarantor, has been threatened, against him or his assets;

6.1.9 he has not by reason of actual or anticipated financial difficulties commenced, and does not intend to commence, negotiations with one or more of his creditors with a view to rescheduling any of his indebtedness, and no moratorium has been, or may in the reasonably foreseeable future be, declared in respect of any of his indebtedness;

6.1.10 the fair value of his assets is not less than his liabilities (taking into account contingent and prospective liabilities)…”

8.19  On 16 April 2019 at 9:20 am, Aaron sent the Defendant a WeChat message saying: “我已要求律師刪除 6.1.7-6.1.10數項, 你看是否合適”. This is a reference to New Clauses 6.1.7 to 6.1.10.

8.20  At 9:38 am, the Defendant replied “馬上問”. At 10:13 am, Caroline emailed Joe Cheng saying “Per [the Defendant’s] discussion with LSH yesterday, for your information, LSH further deletes 6.1.7 to 6.1.10 from the revised deed”. As Joe had not replied on the First Draft or the Revised Draft, this further email from Caroline, in my view, was still the Defendant’s request to Joe for advice on how to proceed with the matter.

8.21  At 2:57 pm, the following messages were exchanged between Aaron and the Defendant:

(1) From Aaron: “請先到17樓, 我寫字樓”; and

(2) From the Defendant: “我在追joe的回覆”.

8.22  At 3:13 pm, the following messages were exchanged between Aaron and the Defendant:

(1) From Aaron: “過來見見Datuk [Yong],約好了,談談plantation的事情, PG能簽就簽,不能簽就過兩天”;

(2) From the Defendant: “我宜家過緊嚟, 我寫左中文信, er我叫呀阿… 我簽左帶個正本過嚟, 到時如果封信唔啱嘅再改, 我自己中文嘅信, OK”; and

(3) From Aaron: “冇問題啊, 你帶埋上嚟啊, 最緊要其實一陣間就係見Datuk [Yong] 傾傾你個plantation個valuation啊, 同埋如果第三者賣就會銀行攞晒d錢, 依兩個點你就一定要同Datuk [Yong]講清楚”.

8.23  The above messages show that:

(1) the Defendant was told by Aaron that although it was expected that the Formal Guarantee would be executed shortly, there was no immediacy to provide a personal guarantee on that day, (acknowledging that the Defendant may not be able to do so that day);

(2) the Defendant had drafted and signed a letter himself and he would bring along the original (which may be amended if necessary), indicating that it was a letter to be taken seriously; and

(3) the Defendant was told that the main focus at the 16/4/19 Meeting with Datuk Yong was the Plantation although the personal guarantee was also expected to be discussed.

8.24  At 3:19 pm, Joe sent the Defendant an email stating “Given you and the bank group has yet to reach agreement to restructure your debt, it is not suggested to provide personal guarantee to LSH”. The Defendant did not read this email before the 16/4/19 Meeting.

8.25  Throughout this period, there is no evidence that a threat to wind up the Factories was made by the Plaintiff. Instead, the 16/4/19 Meeting was set up specifically to discuss the Plantation proposal with Datuk Yong (who was opposed to the proposal as at 21 March 2019 but the proposal was thereafter looked at seriously by CK Lau).

(ii) Findings on the disputed factual issues

8.26  I do not accept the Defendant’s evidence that the two rounds of revisions to the Formal Guarantee (the first removing, inter alia, Old Clause 6.1.9 from the First Draft and the second suggesting the removal of New Clauses 6.1.9 to 6.1.10 from the Revised Draft) were made by Aaron on his own initiative. The Defendant’s evidence is, as Mr Man submits, unbelievable and against the documents. On the balance of probabilities, I find that the two sets of proposed revisions were suggested by the Defendant respectively (1) after Aaron’s WeChat on 11 April 2019 in which Aaron told the Defendant for the first time that there was urgency regarding the Formal Guarantee and (2) before Aaron’s WeChat to the Defendant on 16 April 2019 at 9:20 am.

8.27  As shown in the documentary evidence, Aaron and the Defendant only started to discuss the Formal Guarantee seriously from 11 April 2019 onwards.

8.28  The Defendant did tell Aaron when he proposed the first set of revisions that (1) he was willing to provide a guarantee (as evidenced by Hugo’s email to HW on 15 April 2019) and (2) the proposed revisions were prompted by his wish to obtain a simplified version to reduce the time and costs of negotiation. The question is whether the counterparty to that negotiation should objectively be understood to be the Plaintiff or the Bank Group.

8.29  Despite Mr Man’s arguments to the contrary, I accept Ms Sit’s submission that the way to make sense of the situation is that “negotiation” refers to negotiation with the Bank Group, for the following reasons:

(1) First, the documentary evidence shows that the Defendant asked FTI for advice on how to proceed with the Formal Guarantee and FTI was made aware of all matters relating to the Formal Guarantee. Joe was told when the Defendant was provided with the First Draft and Joe was informed of the two rounds of revisions. In proposing the two sets of revisions, negotiations were already being carried out between the Plaintiff and the Defendant. Were the negotiations between the Plaintiff and the Defendant, there was no apparent reason for Joe to be informed of all those matters;

(2) Secondly, the representations contained in Old Clause 6.1.9 and New Clauses 6.1.7 to 6.1.10 are or may be inaccurate given the factual scenario at that time. For example, no consent had been obtained from the Bank Group contrary to Old Clause 6.1.9, proceedings had already been started against the Defendant’s assets (for example proceedings in the PRC had been commenced) contrary to New Clause 6.1.7 and the Restructuring Exercise may be argued to fall within the rescheduling of his indebtedness contrary to New Clause 6.1.9. Mr Man submits that the removal of those clauses show that the Defendant was concerned about being in breach of the Formal Guarantee and the Defendant would only have such concern if he was truly intending to execute it. I do not agree. If that were the case, again, there was no apparent reason for the revisions to be forwarded to FTI for comment. It seems to me that a better interpretation is that those clauses were removed in order to present to the Bank Group a document which did not entail a breach of warranty of the Defendant’s obligations, some of which arising out of or related to the Alleged Prohibition or the Restructuring Exercise;

(3) Thirdly, although the Defendant did not read Joe’s email at 3:19 pm before the 16/4/19 Meeting, the nature of Joe’s response indicates that the Bank Group might have something to say about the Defendant executing the Formal Guarantee which is consistent with Caroline’s request to Joe to advise on how to proceed with the matter. The position taken by FTI was not one that the Formal Guarantee was strictly a matter between the Plaintiff and the Defendant and therefore did not concern the Bank Group. Mr Man places emphasis on the fact that Joe’s email contains only a suggestion. I do not attach weight to that observation. Caroline only sent an email to Joe earlier at 10:13 am and it is entirely unsurprising that Joe, who did not represent the Bank Group (§2.6(2) above) was unable to obtain a clear position from the Bank Group (consisting of 3 banks) on short notice. The fact that Joe suggested to the Defendant to refrain from giving a personal guarantee due to the ongoing Restructuring Exercise is consistent with the Defendant’s understanding that the Alleged Prohibition existed and that the Alleged Prohibition was on the Defendant’s mind. The position was made beyond doubt a month later and it is commercially unreal to postulate that between Joe’s email on 16 April 2019 and 15 May 2019 (when Joe told the Defendant expressly that the Defendant was instructed by the Bank Group not to provide a personal guarantee) that the Bank Group’s position would have materially changed in that timeframe. Objectively, the contemporaneous evidence shows that it is credible for the Defendant, as at mid April 2019, to have that concern.

8.30  Mr Man submits that there is a fundamental difference between consulting the Bank Group on the precise terms and getting the Bank Group’s in-principle consent. Aaron’s sending through the revisions, and the Defendant’s replies indicating that he was forwarding them to the Bank Group for comment, show that the Plaintiff thought that there was no in-principle objection from the Bank Group, as otherwise there would be no point in discussing the detailed terms. I do not agree. There is simply no evidence of “in-principle” consent from the Bank Group as at 16 April 2019. I cannot accept that sending through amendments should necessarily be equated with in-principle consent having been obtained from the Bank Group and understood by the Plaintiff (in particular Aaron) as such.

8.31  It seems to me that there were two strands of “in-principle” consent at play. First, there is the Defendant’s own willingness to provide a guarantee (as the Defendant told CK Lau by the 24/5/19 Letter). Secondly, there is the Bank Group’s consent for the Defendant to provide a guarantee to other creditors. There is simply no evidence that the latter type of consent was forthcoming from the Bank Group as at 16/4/19.

8.32  I find that:

(1) The Plaintiff (in particular Aaron) knew that the Defendant was seeking consent from the Bank Group in relation to the Formal Guarantee;

(2) As at the 16/4/19 Meeting, the Plaintiff (in particular Aaron) and the Defendant both knew that the Defendant had not yet obtained the Bank Group’s consent on the Formal Guarantee;

(3) As at the 16/4/19 Meeting, the Plaintiff had still not made any express threat to wind-up the Factories.

9.   The 16/4/19 Meeting

9.1  The construction of the 16 April Letter and the oral discussions at the meeting are dealt with in a subsequent section. This section deals with the factual disputes, which are (1) whether the 16 April Letter was discussed at the meeting and (2) whether the Defendant said at the meeting that he was willing to provide a simple guarantee.

(i) Whether the 16 April Letter was discussed at the 16/4/19 Meeting

9.2  The Plaintiff has 2 office locations. The Defendant suggested for the first time at the trial that the 16 April Letter was not opened or read at the 16/4/19 Meeting which took place on 8/F Tower 1.

9.3  The Defendant relies, inter alia, on (1) the 16 April Letter was addressed to Aaron, (2) Aaron asked the Defendant to first go to his office on 17/F Tower 2 before the 16/4/19 Meeting and the letter was given to Aaron before the meeting and (3) Datuk Yong’s and Hugo’s evidence that the letter was considered at the meeting was unsatisfactory.

9.4  I have no hesitation in finding that the 16 April Letter was discussed at the 16/4/19 Meeting, for the following reasons:

(1) The mere fact that the 16 April Letter might have first been delivered to Aaron on 17/F does not mean that it was not discussed at the meeting;

(2) SAF §51.5 in fact states that the 16 April Letter was handed by the Defendant to the Plaintiff during the meeting;

(3) The Defendant’s evidence that he had only discovered that the Plaintiff’s claim is based on the 16 April Letter only a few months before the start of trial is plainly untruthful. The foregoing was put forward by the Defendant in cross-examination to explain why the Defendant had only mentioned for the first time in oral evidence that the 16 April Letter was never opened at the meeting;

(4) Where, as here, there is no dispute (in closing) that the 16 April Letter was requested by Aaron to provide a few words on Defendant’s proposal to resolve the Indebtedness for him to provide an explanation to his superiors “交代”, it seems to me inherently improbable that the 16 April Letter was not discussed at the meeting;

(5) The fact that the 16 April Letter was discussed at the meeting is consistent with the Defendant’s own letter to Datuk Yong dated 18 April 2019, shortly after the meeting where he said “在這裏我首先感謝您週二抽出寶貴的時間與我見面，相信通過這次會面，貴司對我集團目前的狀況比較清楚了解”. As will be seen below, the 16 April Letter provides a summary of TWG’s situation;

(6) I do not find Ms Sit’s criticisms of Datuk Yong’s evidence (as to the inconsistencies on whether the letter was placed on the table or handed to him) and Hugo’s evidence (on precisely how the letter was discussed at the meeting) to be of sufficient gravity to affect my conclusion reached by reason of the above subparagraphs.

9.5  For the above reasons, I find that the 16 April Letter was discussed by the parties at the meeting.

(ii) Whether the Defendant said at the 16/4/19 Meeting that he was willing to provide a simple guarantee

9.6  The Plaintiff’s pleaded case is that the Defendant informed the Plaintiff at the meeting that although he did not provide a formal deed of guarantee, the Defendant was willing to provide a simple guarantee (Amended Statement of Claim §5G(2)). The foregoing is repeated at Hugo 2^nd §30.

9.7  However, Hugo at the trial gave very different evidence. In cross-examination he said he could not remember what the Defendant said in relation to the guarantee at the meeting. It was only in re-examination Hugo said that the gist of what the Defendant was “佢唔好意思����咗我哋啲錢，跟住就話佢個人會承擔呢個債務，咁佢願意保證還款”. He however agreed that his answer bears no resemblance to the Plaintiff’s pleaded case (which was repeated in Hugo 2^nd).

9.8  I have to assess Hugo’s evidence in the light of the following matters.

9.9  In terms of the inherent probabilities, I agree with Ms Sit that:

(1) Given the documentary evidence showing that the Defendant thought he had to ask the Bank Group, he did ask FTI and FTI had not told him that he could provide a guarantee to other creditors before the 16/4/19 Meeting, it is inherently improbable that the Defendant would do exactly the opposite at the meeting;

(2) Further, if the Defendant either did not think or did not care that he was under any restriction from the Bank Group, he could simply have signed the Revised Draft at the meeting. As submitted by Ms Sit, there is no apparent reason why Revised Deed was objectionable to the Defendant but somehow the 16 April Letter was agreeable.

9.10  I also take into account the following matters: (1) Aaron had told the Defendant that it was not imperative that the Defendant sign the Revised Draft on the day, (2) the meeting was set up to discuss the Plantation proposal which was progressing, (3) it was only on 11 April 2019 that the urgency of the personal guarantee was impressed upon the Defendant and it seems to me unlikely that he would have decided between 11 April 2019 and the 16/4/19 Meeting to ignore the Alleged Prohibition without having received any indication from FTI and (4) relating to the immediately foregoing point, the pressure at that time was objectively not so severe for him to feel enjoined to do so.

9.11  It is Datuk Yong’s evidence that the Plantation proposal was discussed at the meeting before the personal guarantee. As Datuk Yong accepted in cross-examination, in relation to the Plantation proposal, something concrete did come out of the meeting which the Plaintiff wanted to pursue, an outcome which he was happy with.

9.12  Drawing the above threads together, given (1) the Plantation proposal was discussed first, (2) the fact that the Defendant was still waiting for Joe’s reply (which email he had received but had not read) and (3) the Defendant was told by Aaron that there was no immediacy to provide a personal guarantee that day, it seems to me that the proposition that the Defendant said that he was willing to provide a simple guarantee (in the circumstances where the pressure was not so severe) such that he was prepared to risk upsetting the Bank Group and therefore potentially jeopardizing the Restructuring Exercise was inherently unlikely. For avoidance of doubt, I do not accept Datuk Yong’s evidence that he told the Defendant at the meeting that as the Defendant had provided a guarantee, indulgence would be granted to the Defendant.

9.13  As will be seen below, the Defendant’s action after the meeting suggests, in my view, shows quite clearly that he was prepared to hold off the giving of a personal guarantee to the Plaintiff (unless consent was forthcoming from the Bank Group) and expressly told the Plaintiff so.

10.   Between the 16/4/19 Meeting and 12 August 2019

10.1  The dispute here is whether the parties believed that the Defendant had provided a binding guarantee at the 16/4 19 Meeting by way of the 16 April Letter.

10.2  An overarching point to note is that there are no contemporaneous documents during this period which refers to the 16 April Letter as constituting a simple guarantee (except the disputed minutes of the 13/8/19 Meeting).

10.3  On 18 April 2019, the Defendant wrote to Datuk Yong recapping the discussion between the parties at the 16/4/19 Meeting regarding the Plantation. There was no mention of a simple guarantee having been provided at the 16/4/19 Meeting.

10.4  On 2 May 2019 at 6:37 pm, Hugo sent the Defendant a voice message saying “KK,今日Datuk Simon Shim落左我地office度，佢又追你個Personal Guarantee，咁你得閒call back我呀”.

10.5  Hugo's evidence is that he was referring to the Revised Draft, and he wanted to get a Formal Guarantee executed because it was more formal. Datuk Yong also explained that “the company feels it is a more formal one and it is easier to implement and enforce… So we don't mind to have it. Even if there's none, I also don't mind.”

10.6  Hugo gave evidence that, when Datuk Shim asked him to chase for a personal guarantee from the Defendant, he could not remember whether Datuk Shim was told about the 16 April Letter, and in particular that it constituted a simple guarantee.

10.7  The fact that he Plaintiff only waited until 2 May 2019 to chase for a personal guarantee (Mr Man submits) is consistent with the Plaintiff’s belief that the Defendant had already given a simple guarantee at the 16/4/19 Meeting, as the Plaintiff was chasing quite hard for a personal guarantee before the 16/4/19 Meeting.

10.8  In response to the 2 May 2019 voice message, the Defendant eventually agreed to have a meeting on 8 May 2019.

10.9  In the afternoon of 8 May 2019, Hugo and the Defendant had a meeting at the Plaintiff’s office. There is a dispute between the parties on whether the meeting was set up for the purpose of signing the Revised Draft. It seems to me what is important is that, even if it was, the Defendant did not do so. As shown in the contemporaneous records, at 5:15 pm (after the meeting between Hugo and the Defendant), the Defendant sent Hugo a voice message saying “我返到公司睇唔到你講哥份嘢 [a reference to the Revised Draft]，麻煩你再email俾我，同埋加埋我同事caroline，我一陣間俾埋佢email你，咁我即刻俾FTI哥邊，等佢同銀行傾，唔該哂”. At 6:02 pm, Hugo sent the Defendant (copying Caroline) the Revised Draft. At 6:42 pm, Caroline emailed it to Joe Cheng, saying: “LSH has made further amendments on the Deed of Guarantee as attached. Mr Wong is preparing to sign it while appreciate to have the bank group’s comment on this. Thank you.”

10.10  By the Defendant’s voice message at 5:15 pm, Hugo would have known that the execution of the Revised Draft was subject to discussions with the Bank Group.

10.11  Despite what was stated in Caroline’s email of 8 May 2019 to Joe (that the Defendant was prepared to sign the Revised Draft), the Defendant sent the 10/5/19 Letter and the 24/5/19 Letter respectively to Datuk Yong and CK Lau. In those letters, the Defendant stated that he was prevented by the Bank Group to provide a further guarantee. Between the 2 letters, on 15 May 2019, Joe told the Defendant that the Bank Group “did not agree to let [the Defendant] to execute a PG”.

10.12  Between 24 May 2019 and 13 August 2019, there were no further communications about the Revised Draft.

10.13  In my view, after the 16/4/19 Meeting, neither side proceeded on the basis that the Defendant had provided a simple guarantee by way of the 16 April Letter at the 16/4/19 Meeting, for the following reasons:

(1) On the Defendant’s part, by way of the 10/5/19 Letter and the 24/5/19 Letter (and also in an earlier letter to Datuk Yong on 8 May 2019), the Defendant sought the Plaintiff’s support to resume the operations of the Factories but at the same time told Datuk Yong and CK Lau that he could not sign the Revised Draft as requested. Had the Defendant thought that he had already provided a guarantee by way of the 16 April Letter, the inherent probabilities are that he would have sought to capitalize that fact by emphasizing although he was prevented by the Bank Group to sign the Revised Draft, he had already, despite that prohibition, shown his sincerity by giving a simple guarantee. In this regard, I do not accept the Plaintiff’s evidence that the references to “further guarantee” in the 10/5/19 Letter and the 24/5/19 Letter should objectively be construed as a tacit acknowledgment on the Defendant’s part that he had already provided a simple guarantee;

(2) On the Plaintiff’s part, it is apparent from Hugo’s message to the Defendant on 2 May 2019 that that was not the first time Datuk Shim had (internally) chased for a personal guarantee from the Defendant, which is not consistent with Datuk Yong’s and Hugo’s evidence that the Plaintiff was not insisting on the Revised Draft as the Plaintiff already had the comfort provided by the 16 April Letter. Further, throughout this period, the Plaintiff did not question the Defendant why he could provide a simple guarantee but not the Formal Guarantee or raise with the Defendant how the terms of the Revised Draft could further be amended to enable its execution;

(3) I also find it odd that Hugo could not remember, when asked by Datuk Shim to chase for a personal guarantee, whether he told Datuk Shim about the 16 April Letter. As submitted by Ms Sit, if Datuk Shim was not told about the 16 April Letter, the natural inference is that Hugo did not think it was worth drawing the 16 April Letter to the attention to Datuk Shim.

11.   The 13/8/19 Meeting

11.1  The dispute here is whether the Defendant acknowledged at the meeting on 13/8/19 Meeting that he had provided a personal guarantee by way of the 16 April Letter. According to the Plaintiff’s version of the minutes:

“ Datuk Simon Shim reminded Dato’ KK Wong of his personal guarantee signed in favour of LSH and also reminded him that if the oil palm plantation in transaction in palm plantation Tawau failed, LSH would have no choice but to enforce the personal guarantee against Dato’ KK Wong and at the same time commence winding up proceedings against two debtor companies in China.

Dato’ KK Wong said the unpaid invoices had made him feel guilty of not being able to repay the debt to LSH. He acknowledged that he did sign the letter of guarantee in favour of LSH and at the same time pleaded with us /LSH not to take action to close down the two factories in China as he needed to revive the production in order to production generate income to pay the debts and to fetch a higher price for the sale of 2 factories.”

11.2  The Plaintiff’s version of the minutes is not signed by Datuk Yong (as Chairman) and there is no evidence as to when the minutes were prepared. It is Datuk Yong’s evidence in cross-examination that if he had seen the minutes (as I understand he meant contemporaneously) he would have signed (he having chaired the meeting). Although it is Hugo’s oral evidence that everyone who was present at the meeting was asked to sign the minutes (except the Defendant), the fact is that the copy before me is an unsigned version. The Plaintiff’s version of the minutes is disputed by the Defendant.

11.3  I do not place weight on the Plaintiff’s version of the minutes. In terms of inherent probabilities, I agree with Ms Sit that the Plaintiff’s case (that the Defendant acknowledged having given a personal guarantee at the 13/8/19 Meeting) is inherently improbable. The Defendant had consistently told the Plaintiff that the Bank Group did not allow him to sign any personal guarantee: 10/5/19 Letter and 24/5/19 Letter. The two letters are the last contemporaneous documents which mention the issue of personal guarantee prior to the 13/8/19 Meeting. It is inherently improbable that the Defendant would change his stance on 13 August 2019 to say that he had done the very thing the Bank Group told him not to do.

11.4  I find that the Defendant did not acknowledge at the meeting on 13/8/19 Meeting that he had provided a personal guarantee by way of the 16 April Letter.

12.   After the 13/8/19 Meeting

12.1  On 12 September 2019, the Plaintiff’s former solicitors sent the Defendant a pre-action letter.

12.2  By a letter dated 21 October 2019, the Defendant told CK Lau that he has no assets and asked him for more time to resolve the matter.

12.3  On 2 December 2019, the Defendant informed Datuk Yong that the Bank Group instructed him to file a defence through lawyers and asked Datuk Yong for indulgence.

12.4  I do not attach any weight to, or draw any adverse inference from, the fact that the Defendant did not in his communications with CK Lau and Datuk Yong deny that the 16 April Letter was a simple guarantee. The Defendant was obviously still seeking the Plaintiff’s support and I do not find it unreasonable for the Defendant not to escalate the disputes at that time. There was certainly no admission that he did provide a simple guarantee. I also do not believe any weight should be attached to the fact that the Bank Group had instructed the Defendant to file a defence or that the same can lead to an inference that the defence should for that reason be undermined.

12.5  Having made the above factual findings, I now turn to the analysis of the Plaintiff’s claim.

13.   Analysis

(i) Whether the Defendant offered to act as guarantor

Applicable principles

13.1  There is no dispute between the parties on the following legal principles.

13.2  Whether there has been an offer to guarantee depends on the facts of each particular case, and may be a matter of the proper construction of relevant documents passing between the creditor and the alleged surety: Andrews & Millett: Law of Guarantees (7^th ed) §2-002.

13.3  On the question of construction, the modern approach is that stated in Eminent Investments (Asia Pacific) Ltd v DIO Corp (2020) 23 HKCFAR 487 §§43-45:

(1) While the starting point in the interpretation of contracts was the ordinary and natural meaning of the words of the contract, in more difficult cases this approach was not particularly helpful because there could be much debate over exactly what was the ordinary or natural meaning of words. In those cases, the surer guide to interpretation was context;

(2) Where there are conflicting interpretations, account should be taken of the natural and ordinary meaning of the provision in question, the purpose of the contract and of the provision, other relevant provisions, the facts and circumstances known or assumed by the parties at the time that the contract was executed, the quality of the drafting of the instrument, and commercial common sense;

(3) The correct interpretation of contracts which are marked by informality, brevity or the absence of skilled professional assistance may be achieved by a greater emphasis on the factual matrix.

13.4  The existence, nature and extent of the guarantor’s liability have to be clearly indicated by the wording of the document: O’Donovan & Phillips: The Modern Contract of Guarantee (4^th ed) at §5-009. The court should in general require evidence of clear intention from the words used in a contract of guarantee to justify the nature and extent of the liability undertaken by a surety: Andrews & Millett §4-002. Such requirement is no departure from, and is consistent with, guarantees being construed according to normal contractual principles.

13.5  In determining the existence or otherwise of a non-purely written guarantee (ie the alleged guarantee is only partly in writing), the court may have regard to evidence of subsequent conduct: Crabbe v Townsend [2016] EWHC 2450 (Ch) §7 (quoting Lewis J in Newbury v Sun Microsystems [2013] EWHC 2180 (QB) §27):

“ …where a contract is said to be contained in a document or documents, I do not consider that it is legitimate to have regard to the parties’ subsequent conduct for the purpose of considering whether those documents give rise to a binding agreement. In those circumstances, the question for the court will be whether, considering the whole course of events up to and including the documents in question, the parties, objectively, have reached agreement…Conduct after that date is not a legitimate aid in determining whether or not the parties had reached an agreement by that date…It may be that evidence of such conduct may be admissible and relevant if there is a dispute as to whether or not particular terms, not included in the written documents, were terms of the agreement. If the contract is oral, or partly in writing and partly oral, the parties’ conduct may be relevant to test the evidence as to whether or not the terms were agreed or which terms were included. But where the contract is said to be contained in documents, conduct occurring after the date of the documents will not be a legitimate aid in determining whether, properly construed, those documents were intended to give rise to a binding contract.” (emphasis added)

13.6  Thus, when deciding whether a contract of guarantee exists where it is said to be partly in writing and partly orally/by conduct (as in the present case):

(1) The court must construe the document, and consider the words used against the proper context, which include the context of the document as a whole as well as the factual context which gave rise to the document;

(2) The court is entitled to look at the parties’ subsequent conduct in determining whether, and if so what, the parties have agreed.

Construction of the 16 April Letter

13.7  A coloured version of the 16 April Letter was produced as an exhibit at the trial. The same is annexed hereto as Annexure 2.

13.8  As described by Ms Sit, the first 7 sentences of the 16 April Letter:

(1) explain how TWG (including the Factories) landed in financial straits (#2-#3);

(2) recount how, in ensuring survival of the TWG, the Defendant had entered into the Restructuring Exercise with the Bank Group, and had charged all the corporate and personal assets to them (#4-#5), but the progress of the Restructuring Exercise had not been smooth and was complicated by changes in the PRC environmental policies resulting in suspension of the Factories (#6);

(3) state that in these adverse circumstances the Defendant promised to find a solution and wish to have the Plaintiff’s support to have the Factories continue their operation to generate revenue to repay debts (#7).

13.9  The Plaintiff relies on part of #8 (the underlined words below) (“Key Phrase”) as an offer of a binding guarantee. The pertinent part reads as follows:

“…在目前的情況下，我只能作出個人承諾，盡全力尋求解決方案，並同時希望得到貴司的支持令兩工廠繼續營運，歸還貴司的貸款。我司同時會與銀團磋商，希望在銀團手上的資產中把兩工廠從他們的擔保中剝離以保貴司的權益，希望貴司慎重考慮，我個人也作出私人保證，必定會承擔還款責任，並儘快作出雙方認可的方案進行回款。”

13.10  In the earlier sections I have made a number of factual findings which establish the background context as at the 16/4/19 Meeting and the parties’ subsequent conduct. In summary:

(1) At the material time, the Defendant understood that he had to consult the Bank Group (ie the Alleged Prohibition) before giving a personal guarantee to other creditors (section 4);

(2) The Plaintiff did not threaten the Defendant that it intended to wind up the Factories before the 7/3/19 Meeting and the Defendant did not request the Plaintiff to refrain from doing so. The 7/3/19 Meeting was not set up for Aaron to seek a personal guarantee from the Defendant (section 5);

(3) At the 7/3/19 Meeting, Aaron did not threaten to wind up the Factories and did not request the Defendant to provide a guarantee (section 6);

(4) Aaron first asked the Defendant for a personal guarantee at the 20/3/19 Meeting but the focus of Aaron and the Defendant at that time was on the Plantation proposal. Hugo provided the First Draft to the Defendant on 3 April 2019 and the Defendant on 4 April 2019 provided the First Draft to FTI and sought advice on how to proceed with the matter. In the meantime, the Plantation proposal was making progress (sections 7 and 8);

(5) Prior to the 16/4/19 Meeting, the Defendant had proposed to Aaron a number of revisions to the Formal Guarantee and had indicated his willingness to sign a Formal Guarantee but that was subject to negotiations with the Bank Group. Aaron knew that the Defendant was seeking consent from the Bank Group and that the Defendant had not yet obtained the Bank Group’s consent on the Formal Guarantee (section 8);

(6) The urgency to provide a guarantee was only communicated by Aaron to the Defendant for the first time on 11 April 2019 and they only seriously discussed the Formal Guarantee from that point in time onwards (section 8);

(7) Between the 7/3/19 Meeting and the 16/4/19 Meeting, the Plaintiff did not threaten to wind up the Factories (sections 5 to 8);

(8) The 16 April Letter was drafted and signed by the Defendant upon the request of Aaron to provide a written explanation to Aaron’s superiors and, in that context, was a document to be taken seriously (§9.4(4));

(9) Aaron told the Defendant that it was not imperative for the Defendant to sign the Revised Draft on the day (§8.22);

(10) At the 16/4/19 Meeting, the 16 April Letter was discussed after the attendees had made positive progress on their discussions regarding the Planation proposal. The Defendant did not say at the meeting that he was willing to provide a simple guarantee (section 9);

(11) After the meeting, the Plaintiff chased the Defendant for a personal guarantee and the Defendant did not believe that he had provided a guarantee by way of the 16 April Letter (as he would otherwise have sought to capitalize on that fact). Instead, the Defendant told Datuk Yong and CK Lau that he was prevented by the Bank Group to do so (section 10);

(12) The Defendant did not acknowledge at the 13/8/19 Meeting that he had provided a simple guarantee by way of the 16 April Letter (section 11).

13.11  I acknowledge the cogency of the textual analysis put forward by Mr Man, namely that the last sentence of #8 contains 2 points. The first point concerns the discharge of the Bank Group’s security over ECTX and FF, and concludes with the words “希望貴司慎重考慮”. The second point (ie the Key Phrase) then proceeds, “我個人也作出私人保證，必定會承擔還款責任，並儘快作出雙方認可的方案進行回款。” As demarcated by: the context; the comma; and the word “也”, the second part of the last sentence makes a separate point that the Defendant was offering to provide a personal guarantee.

13.12  However, I agree with Ms Sit that when #8 is read as a whole, especially in the context of the whole letter and against the factual matrix, the 16 April Letter was a letter of explanation and proposed way forward, as opposed to an immediate offer to assume guarantor liability. Reading it objectively in context (and in the particular circumstances where the letter was drafted without any skilled professional assistance), the 16 April Letter, in my view, is not an offer by the Defendant to guarantee forthwith the debts of the Factories.

13.13  I agree broadly with the submissions made by Ms Sit:

(1) First, the words in #8 is at least equivocal whether the Defendant was offering to assume guarantor liability forthwith;

(a) The pertinent part reads as follows:

“ …在目前的情況下，我只能作出個人承諾，盡全力尋求解決方案，並同時希望得到貴司的支持令兩工廠繼續營運，歸還貴司的貸款。我司同時會與銀團磋商，希望在銀團手上的資產中把兩工廠從他們的擔保中剝離以保貴司的權益，希望貴司慎重考慮，我個人也作出私人保證，必定會承擔還款責任，並儘快作出雙方認可的方案進行回款。” (emphasis added)

(b) The phrase “必定會承擔還款責任” cannot be construed in isolation from the rest of #8. Reading #8 as a whole, the Defendant was arguably only assuring the Plaintiff that he would come up with a mutually acceptable repayment proposal, rather than agreeing to guarantee the Factories’ debts there and then.

(c) Further, this assurance was subject to the Bank Group releasing the Factories from the existing security, which was something that required the Bank Group’s consent.

(2) Secondly, when the Key Phrase is read against the whole of the 16 April Letter (ie all 8 sentences), it lends credence to the fact that it was not an offer to provide a guarantee, but a letter of explanation and the Defendant’s proposal on how to repay the debts;

(3) Thirdly, this is consistent with the Defendant’s explanation that the 16 April Letter was written in response to Aaron’s request to have something in writing from the Defendant to explain the situation of TWG;

(4) Fourthly and importantly, the 16 April Letter was delivered in circumstances where both sides knew that the Defendant’s giving of a guarantee to other creditors was under the Alleged Prohibition and he had not obtained the Bank Group’s consent;

(5) Fifthly, Aaron had told the Defendant that there was no need to provide any guarantee on that day.

13.14  I agree with Ms Sit that, in these circumstances, no reasonable person would think that the Defendant would nonetheless offer a guarantee.

13.15  As pointed out by Ms Sit, the above is also bolstered by the parties’ subsequent conduct. The post 16/4/19 Meeting events are consistent with the fact neither side believed they had reached any valid or binding guarantee via the 16 April Letter.

(ii) Whether there was intention to create legal relations

13.16  There is no dispute that the relevant principles for determining whether a contract is intended to create legal relations are set out by the Court of Appeal in Ho Lai King v Kwok Fung Ying [2020] 4 HKLRD 253 §§41-49 and Yu Man Fung Alice v Chiau Sing Chi Stephen [2021] HKCA 1456 §§49-50:

(1) The question of whether there was intention to create legal relations is a question of fact;

(2) The existence or otherwise of the intention is to be inferred from the terms of the agreement and the surrounding facts and circumstances. The court considers what was communicated between the parties in all the circumstances to decide whether, as understood by a reasonable person, the true inference is that they intended to create relations. The test is an objective one;

(3) Evidence of subsequent conduct is admissible for the purpose of determining the parties’ intention at the material time;

(4) The parties’ subjective understanding is admissible insofar as it tends to show whether, objectively, the agreement was intended to be legally binding;

(5) What will satisfy the court in a particular case must depend on the circumstances, including (without being exhaustive) the relationship between the parties, whether they are in amity or estranged, the subject matter of the agreement, the language used in the agreement, and the manner in which the agreement has been made; and

(6) In the commercial context, the evidential onus lies on the party who contends there was no intention to create legal relations to establish the absence of such intention.

13.17  It seems to me that the 16 April Letter was in any event not intended to create legal relations. As found above, the 16 April Letter was only a letter of explanation drafted by the Defendant to propose a way forward, and any guarantee by the Defendant was subject to the Bank Group’s consent which was not forthcoming at the 16/4/19 Meeting (and thereafter unequivocally withheld).

13.18  Given my conclusions on the above sub-issues on (1) whether the Defendant offered to act as guarantor and (2) whether there was intention to create legal relations, it is unnecessary for me to further consider those relating to consideration and acceptance. The question on consideration is purely a legal argument. For completeness, were I wrong on the issues of offer and intention to create legal relations, I would have found that, on the facts, the Plaintiff had accepted the offer by conduct after the 16/4/19 Meeting in forbearing to wind up the Factories for a reasonable period of time (the applications to wind up the Factories were only made in January 2020).

14.   Estoppel by convention

14.1  In order for the Plaintiff to be able to rely on estoppel by convention, it has to first demonstrate that the parties have entered into some transaction or legal relationship on the basis of an assumption that is shared by or common to them both: Unruh v Seeberger (2007) 10 HKCFAR 31 at §§133 and 142.

14.2  Given my factual findings, the Plaintiff fails at the above first hurdle. On the facts, there was no common assumption that the Plaintiff and the Defendant both believed that the 16 April Letter was a legally binding guarantee.

14.3  For completeness, I deal with the issue of detriment briefly. The detriment identified by is that the Plaintiff could have pressed harder for and obtained a Formal Guarantee and/or could have pressed harder for and obtained payment of some or all of the outstanding sums from the Defendant (Hugo 2^nd §34 and Amended Statement of Claim §7B). On the evidence, in view of the Plaintiff’s stance following the 10/5/19 and 24/5/19 Letter, it is unclear how pressing harder could have led to the Defendant executing a Formal Guarantee. As to the suggestion that the Plaintiff could have pressed harder to obtain payment, Hugo has not explained what those steps would have been and what outcome might have been expected. In my view, the Plaintiff’s factual case on detriment is not made out.

15.   Conclusion

15.1  For the above reasons, I dismiss the Plaintiff’s claim.  Not without some hesitation, I agree with Ms Sit that the Plaintiff’s claim is an afterthought. I also make a costs order nisi that the Plaintiff is to pay the costs of the Defendant (including any costs reserved) to be taxed if not agreed, with a certificate for 2 counsel.

Annexure 1 (page 1)

Annexure 1 (page 2)

Annexure 2