RE LI YONGHONG

HCB 874/2025

[2025] HKCFI 3307

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 874 OF 2025

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REASONS FOR JUDGMENT

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1.  At the second “Monday morning” hearing of the Petition presented by the Petitioners on 4 February 2025[1] seeking a bankruptcy order against the debtor, Mr Li Yonghong (“Debtor”), this Court made a usual bankruptcy order against the Debtor. These are the reasons for my judgment.

2.  The Petitioners are investment funds incorporated in the Cayman Islands. They are indirect subsidiaries of China CITIC Financial AMC International Holding Limited, which is listed on The Stock Exchange of Hong Kong Limited and is a State-Owned Enterprise in the Mainland[2].

3.  The Debtor is a businessman who was previously the owner of the well-known Italian football club AC Milan, which he held through various corporate vehicles including Rossoneri Advance Co., Limited (“Issuer”), a BVI company[3].

4.  In the Petition, the Petitioners rely on the Debtor’s failure to comply with a statutory demand served upon the Debtor on 18 October 2024 (“SD”) requiring him to pay the sum of US$289,168,250, being the amount due and payable as of 30 August 2024 (“Debt”).

5.  The Debt arose out of a Deed of Guarantee dated 27 February 2017 (“Guarantee”) entered into between the Debtor and the Petitioners whereby the Debtor agreed to guarantee the debts owed by the Issuer to the Petitioners under the Bonds[4] issued by the Issuer pursuant to 5 subscription agreements (“Subscription Agreements”).

6.  In the notice of intention to show cause filed by the Debtor on 14 April 2025 (“Notice”)[5], the Debtor raised the following grounds in opposition to the Petition:

(1)  The SD and the Petition are “defective” in that:

(a)  The Petitioners only paid US$148,987,454.92 on 5 and 25 April 2017, rather than US$150 million relied on in the SD and the Petition;

(b)  The Petitioners are not entitled to charge any interest from 27 February 2017 to 5 and 25 April 2017 as the US$150 million had not been paid;

(c)  The interest rate of the Bonds was 10% per annum, and the interest for the principal under the Bonds was US$30 million, rather than US$38 million as claimed by the Petitioners; and

(d)  The Petitioners failed to set off the sum of US$11,427,060.24 (“$11M”) which had been paid to the Petitioners under the Bonds.

(2)  The Guarantee is “not enforceable by reasons of the defences of estoppel by representations, promissory estoppel and/or estoppel by convention and collateral contract”.

7.  In support of the aforesaid grounds, the Debtor filed 2 affirmations dated 14 April 2025 and 23 May 2025 (“Debtor 1^st” and “Debtor 2^nd”). The Petitioners filed an affirmation of Qin Bo dated 23 June 2025 (“Qin 3^rd”) in reply.

8.  Having considered Qin 3^rd and the skeleton of Mr Joshua Yeung, counsel for the Petitioners, the Debtor abandons most of the grounds raised in the Notice. In his skeleton, Mr Frederick Fong, counsel for the Debtor, confirms that the Debtor only relies on the following[6] to demonstrate a bona fide dispute on substantial grounds:

(1)  There has been no valid demand under the Guarantee, such that there is nothing due from the Debtor as a guarantor to the Petitioners. This is a new point raised for the first time with no prior notice given to the Petitioners (No Valid Demand point); and

(2)  The SD and the Petition are “defective on the starting date for interest to be incurred, the amount of interest charged by the Petitioners, and the set-off of the total sum of US$11,427,060.24” (Dispute on Quantum point).

9.  The principles are well-established. In opposing a bankruptcy petition, a debtor bears the burden of showing that there is a bona fide dispute on substantial grounds in respect of the debt, and for this purpose, the debtor has to adduce sufficiently precise factual evidence which is believable, and must establish that he has a defence of substance, not just a fair probability of one (Re Leung Cherng Jiunn [2016] 1 HKLRD 850, at §27, per Kwan JA (as she then was); Re Soetrisno Farida [2019] HKCFI 2756, at §11, per Ng J). It is not sufficient for the debtor to merely raise “a cloud of objections on affidavits” (Artech Development Ltd v Posismo Ltd [2018] HKCFI 344, at §10(4), per Ng J).

10.  For the reasons explained below, the Debtor has failed to show that there is a bona fide dispute on substantial ground in respect of the Debt or that there is any reason why the court should not make a bankruptcy order against him.

No Valid Demand point

11.  Mr Fong submits that:

(1)  While this is a new point, it “does not introduce any new facts or new investigation, or result in the existing facts to be considered in a different angle. The question is simple - whether there was a valid demand by the Petitioners to the Debtor under the Guarantee”.

(2)  On the basis of existing evidence, it is the Debtor’s case that there has been no valid demand under the Guarantee given that:

(a)  It is the Petitioners’ case that they had issued a demand letter to the Issuer on 15 August 2024; they believed the Debtor has obligation as a guarantor and they started to enforce the Guarantee by issuing the SD on 18 October 2024. If the Petitioners had made any written demand pursuant to the Guarantee before the service of the SD, the Petitioners would have said so[7]; and

(b)  It is the Debtor’s case that before the service of the SD, as far as he can recall, he had not received any letter before action in respect of the Subscription Agreements and the Guarantee[8].

(3)  Where a guarantee requires a demand to be made before liability arises on the part of the guarantee, no cause of action arises until the demand is made, and there is nothing due from the guarantor unless and until such demand is made (Bradford Old Bank Ltd v Sutcliffe [1918] 2 KB 833 p. 840, 843, 844 & 849). Nevertheless, in the case of primary obligations as opposed to secondary ones like guarantees, a provision for demand in writing is not regarded as creating a contingency (MS Fashions Ltd v Bank of Credit and Commerce International SA (in liquidation) [1993] Ch 425 at 436D-F).

(4)  The material clauses are Clauses 2.1, 2.3, 17.1 and 17.2 of the Guarantee which provides that:

“2.1 担保. 鉴于被担保方同意认购债券，及同意与发行人订立债券认购协议，担保人特此同意向被担保方提供无条件且不可撤销的个人无限连带责任保证担保，并同时向被担保方无条件且不可撤销地担保、承诺及同意：(a) 担保（作为或有义务）足额、及时地支付未偿责任，以及发行人充分、及时地履行和遵守其负有的与交易文件有关和/或因其引起的一切义务； (b) 承诺若发行人在任何时间未支付或以其他方式履行交易文件项下或与之有关的到期的未偿责任，则担保人应立即按要求支付该等未偿责任、或以其他方式履行或促使履行该等未偿责任，就如同担保人是第一债务人的身份一样； (c) 如担保人所担保的任何未偿责任现在或将来变得不可执行、无效或不合法，则立即按要求就任何花费和费用、被担保方所遭受的损失或责任对被担保方作出赔偿。担保人在本契约下承担连带保证责任。担保契据的担保期间截至所有未偿责任已经全部按照被担保方所合理满意的方式予以履行及偿还。

2.3 要求. 在发生交易文件有关的文件项下的发行人及/或担保人的违约事件或潜在的违约事件后该等违约仍继续存在，担保人应有责任，一经被担保方要求，立即支付根据本契约项下所要求支付全部的金额。

17.1 交付. 任何需在本契约项下发出或做出的通知、要求或其他通讯应当采用书面形式，并按照以下地址或传真号（或提前五（5）天发出书面通知另行告知另一方的其他地址或传真号）交付或送交至相关方…

17.2 向相关各方的上述地址发出的任何通知、要求或其他通讯应在下列时间被视为有效送达:

(a) 通过专人送达的通知应在专人送达当日被视为有效送达。

(b) 通过邮递送达的通知应在投递日（以邮戳显示为准）之后第五（5）日视为有效送达。

(c) 通过知名快递服务送达的通知应在交付给快递服务后第三（3）日视为有效送达。

(d) 通过传真送达的通知应在成功发送并收到传真后第一（1）个营业日视为有效送达。”

(5)  It is at least “highly arguable” that the Debtor’s obligations under the Guarantee were conditional upon a written demand having been made, but no such written demand was ever served on the Debtor:

(a)  First, the requirement of a demand (“要求”) is expressly made in clause 2 under the heading of Guarantee (“担保”) in respect of the Debtor’s covenant to pay.

(b)  Second, clause 2.3 envisages that the Debtor’s obligations to pay as a guarantor arise upon the demand made by the Petitioners (“担保人应有责任，一经被担保方要求，立即支付根据本契约项下所要求支付全部的金额”).

(c)  Third, the deemed service clause (clause 17) reinforces the view that a demand is a condition precedent to the Debtor’s liability to pay as a guarantor, since it prevents the Debtor from contending that his obligations under the Guarantee did not arise because of difficulties in delivery of the demand (Bank of India v Gimajasa Limited and others [2021] HKCFI 354 §47.2).

12.  I do not think that the paragraphs in Qin 3^rd and Debtor 1^st relied upon by Mr Fong can be said to be evidence that “there has been no valid demand under the Guarantee”.

13.  As the No Valid Demand point has never been raised in the Notice or the Debtor’s affirmation, it is not properly open to Mr Fong to pursue the point.

14.  In any event, there is no merits in the point:

(1)  Clause 2.1 of the Guarantee is a “principal debtor” clause, which can be seen from the sentence “就如同担保人是第一债务人的身份一样” at the end of clause 2.1(b).

(2)  Under clause 2.1(b), the Debtor covenants to pay as principal debtor any debt which the Issuer has not paid (“未偿责任”), and “未偿责任” is defined in clause 1.1 as covering all the amounts payable by the Issuer.[9]

(3)  The effect of a principal debtor clause has been explained by Dillon LJ in MS Fashions in this way:

“the effect of that must be to dispense with any need for a demand in the case of [surety 1] since he has made the companies’ debts to BCCI his own debts and thus immediately payable out of the deposit without demand. In the case of [surety 2] there must be immediate liability even though the word ‘demand’ was used, because he accepted liability as a principal debtor and his deposit can be appropriated without further notice.”[10]

(4)  Even if, contrary to my view, clause 2.1 imposes an obligation on the Petitioners to make a written demand for the Debt, such demand was made when the SD was served on the Debtor on 18 October 2024. There is nothing in the Guarantee which mandates the demand to be made in the form of a letter. Nor is there any unfairness in the demand being made in the form of the SD.

Dispute on Quantum point

15.  Mr Fong submits that the Debt, as stated in the SD and the Petition, is inaccurate for the following reasons:

(1)  The Debt comprises (a) principal of US$186.5 million and (b) interest of US$102,668,250 at 10% on US$186.5 million from 30 March 2019[11] to 30 August 2024 (“Interest”). The amount of Interest must be incorrect because in the SD, the Petitioners adopted a longer period (31 days more) when calculating interest for the year 2019.

(2)  The Financing Fee in respect of the 1^st Petitioner (US$3,000,000) is described as “a lump sum representing the fees for arranging financing for [the Issuer]”[12]. It does not explain the basis upon which it was calculated and the amount is “plainly arbitrary”. The total amount of Financing Fee (US$9,000,000)[13] under the Subscription Agreements is “significant”.

(3)  The Issuer via Rossoneri Champion Co., Ltd (“Champion”) paid $11M to the Petitioners[14]. The Petitioners’ position is that the 6 payments made on 16 March 2017 amounting to US$2,166,666.66 (“$2.16M”) were for payment of Commitment Fee under the Supplemental Agreements[15]. Other than these 6 payments, the Petitioners are unable to verify whether the other amounts within the $11M had been received by them.[16] Even if $2.16M were to be deducted from $11M, the remaining sum of US$9,260,393.58 is still significant in amount.

(4)  The Petitioners’ reliance on “no set off clause” is misplaced[17]. The $11M went towards payment of the outstanding liability (“未償責任”) owed by the Issuer for which the Debtor guaranteed under clauses 1.2 and 2.1 of the Guarantee. It has nothing to do with any set-off, counterclaim, limitation or deduction in respect of any separate claim by the Debtor.

(5)  Whilst there is no evidence as to the prejudice suffered by the Debtor nor is there any evidence to suggest that the Debtor would have been prepared to pay the correct amount of the debt (cf. Chan WS & anor v CC Bank [2022] 3 HKLRD 520 §35), this is one of the overall circumstances to be taken into account by the court. The Court of Appeal in Chan WS §§16-17 upheld the judge’s ruling that one of the debts could not be relied on even though the debt was not a large sum and there was no evidence as to any prejudice suffered by the debtor.

16.  The Dispute on Quantum point is equally without merits.

17.  As submitted by Mr Yeung, it is well-established that even if the amount claimed in a statutory demand/petition has been overstated, a bankruptcy order may still be made if no injustice is caused to the debtor:

(1)  In Re Ashit Sud and Re Adoniss Ltd [2022] 4 HKC 575, at §§67-68, Le Pichon J (as she then was) described the approach in this way:

“67. … the real question is whether the overstatement causes any prejudice to the Debtor: see Re Kwok Chok Yee [2000] 2 HKC 543 at 548G; Bright Islands Corporation v Joachim Chao, appointed representative of the estate of Chao Sze Bang Frank, deceased [2002] 2 HKLRD 97, [2002] HKCU 278 at §92; and Re Lo Kwai Ying Louisa [2017] HKCU 880, unrep., HCB 3145/2015, 5 April 2017 at §§48-49.

68. Where substantial indebtedness is shown notwithstanding an overstatement of the Subject Debt, I cannot see any injustice being done to the Debtor who has not made any repayment. In my view, Lim Por Yen is distinguishable.”

(2)  Similarly, in Chan WS, Au JA said:

“It is well-settled that an over-statement of the indebtedness in the statutory demand will not automatically entitle the debtor to have the demand set aside. The relevant question is whether injustice would be caused to the debtor by allowing the particular demand to stand. See Re Kwok Chok Yee at 548G-H per Le Pichon J, citing Re a Debtor (No. 1 of 1987) [1989] 1 WLR 271 at 276 and 279.”

(3)  The approach is consistent with the purpose of a statutory demand, which is “to establish the debtor’s ‘inability to pay’ the debts founded on the demand and no more” (Re Wong Chiu Wo Richard [2021] HKCFI 531 at §16). The focus is on the fact that the debtor cannot pay, not the exact amount he/she cannot pay.

18.  Mr Yeung submits that taken to the highest, even if all of the Debtor’s disputes on quantum are accepted,[18] the Debtor is still indebted to the Petitioners in the total sum of US$165,844,930.71[19], which has not been paid. I agree.

19.  The SD was served upon the Debtor more than 10 months ago. No attempt has been made by the Debtor to pay the Debt or the part which he does not dispute. Nor is there any evidence to suggest that the Debtor has the financial means to pay the undisputed amount. The Debtor is plainly unable to pay his debts. There is no injustice for the court making a bankruptcy order against him.

20.  For completeness, I do not consider the arguments advanced by Mr Fong (summarised in §15 above) to have any merits:

(1)  §15(1): The complaint about the Petitioners having calculated the Interest for 31 days more has never been raised in the Notice. At the highest, its effect is to overstate interest by US$1,583,973[20], which only represents 0.548% of the Debt.

(2)  §15(2): The Financing Fee is not a point raised in the Notice or Debtor 1^st and 2^nd. In any event, the Financing Fee was agreed to be paid by the Issuer to each of the Petitioners under clauses 6.4-6.5 of each of the Subscription Agreement[21]. I am unable to see how the Debtor can dispute the amounts paid pursuant to the Subscription Agreements.

(3)  §15(3): The debit advices adduced by the Debtor, at their highest, only show that Champion (not the Issuer) remitted $11M to the Petitioners’ receiving agent[22].

(a)  While I agree with Mr Fong that the $11M is not a matter for set-off and should be accounted for, the court can take into account the fact that the $11M was paid in 2017, more than 7 years before the Petitioners demanded the Issuer to pay the Debt, followed by the service of the SD on the Debtor on 18 October 2024. This is significant as the Petitioners say that due to the passage of time (7-8 years), they are not able to verify whether the full amount of the $11M was received by the Petitioners[23]. If the Petitioners had not accounted for the $11M as the Debtor now alleges, I would expect the Issuer to complain about it a long time ago. No explanation has been proffered by the Debtor as to why the Issuer did not complain about the matter in the past 7 years.

(b)  In any event, it is indisputable that the $2.16M was applied to pay the Commitment Fee payable by the Issuer to the Petitioners under the Supplemental Agreements dated 16 March 2017[24]. It cannot be applied to reduce the amount owed by the Issuer.