GENERAL HERO LTD v. TSANG KWONG KEUNG AND ANOTHER

DCCJ 5297/2024

[2025] HKDC 1811

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5297 OF 2024

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DECISION

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A.  The Application

1.  This is an application by General Hero Limited (“Plaintiff”) for default judgment against Tsang Kwong Keung (“1^st Defendant”) and Tsang Wing Yee Wendy (“2^nd Defendant”) pursuant to Order 13 Rule 6 and Order 19 Rule 7 of the Rules of the District Court (Cap 336H).

B.  Factual background

2.  The Plaintiff was, at all material times, a limited company carrying on the wholesale business of imported eggs in Hong Kong. It had traded with a company known as Ease Empire Limited (“Ease Empire”) since 2005.

3.  The 1^st Defendant was, at all material times, one of the directors and shareholders of Ease Empire. The 2^nd Defendant was the niece of the 1^st Defendant.

4.  On 21 August 2009, the 1^st Defendant and his three brothers on one part, and the Plaintiff on the other part, entered into a guarantee agreement (“Guarantee Agreement”) in which the 1^st Defendant and his three brothers jointly and severally agreed to guarantee the payment of all sums, interest and expenses owed by Ease Empire to the Plaintiff.

5.  From 3 July 2023 to 29 September 2023, Ease Empire placed purchase orders with the Plaintiff for imported eggs. The Plaintiff accepted Ease Empire purchase orders and delivered the eggs to Ease Empire. However, Ease Empire failed and/or refused to pay for the eggs amounting to a total of HK$4,151,150.

6.  Shortly before Ease Empire placed the purchase orders, on 20 June 2023, the 1^st Defendant assigned 1/F, No 262 Yau Ma Hom Road, Kwai Chung, New Territories (“Property”) to the 2^nd Defendant by way of an assignment (Memorial No 23070500180017) at an alleged consideration of HK$5,200,000 (“Disposition”).

7.  On 10 October 2023, the Plaintiff commenced an action under the case number HCA 1624/2023 against Ease Empire, the 1^st Defendant and his three brothers for the sum of HK$4,151,150 with interest and costs.

8.  On 4 December 2023, in default of notice of intention to defend, a final judgment (“HCA 1624/2023 Judgment”) was entered against Ease Empire, the 1^st Defendant and his three brothers for (1) the sum of HK$4,151,150, (2) interest on the sum of HK$4,151,150 at the judgment rate of 8.798% per annum from 10 October 2023 to 4 December 2023 thereafter at judgment rate until payment, and (3) fixed costs of HK$13,045.

9.  On 9 September 2024, the Plaintiff issued the Writ in this case seeking, inter alia, a declaration that the assignment of the Property by the 1^st Defendant to the 2^nd Defendant on 20 June 2023 constitutes a disposition with the intent to defraud creditors within the meaning of section 60 of the Conveyancing and Property Ordinance (Cap 219) (“CPO”) and is as such voidable, and is void as against the Plaintiff.

10.  On 23 May 2025, the Plaintiff filed its Statement of claim. The Defendants did not file any notice of intention to defend or defence. On 15 August 2025, the Plaintiff issued a summons applying for default judgment against the Defendants.

11.  On 23 July 2025, the Plaintiff through its solicitors sent a letter to Bank of China (Hong Kong) Limited (“BOC”), the mortgagee of the Property, informing BOC of the Plaintiff’s intention to apply for default judgment for the present action, and inviting BOC to express its objections.

12.  The Plaintiff also stated that where a declaration to set aside the Disposition was granted, it would apply for a charging order against the Property and an order for sale if HCA 1624/2023 Judgment is not satisfied in full. If such circumstances arise, the Plaintiff was willing to undertake to apply the proceeds of sale of the Property firstly to settle the debt due to BOC by the 2^nd Defendant (“Undertaking”), unless otherwise ordered directed by the Court. BOC did not reply or express their intention to appear in this hearing.

C.  Legal principles

13.  It is well established that by the combined effect of Order 13 rule 6 and Order 19 rule 7, Order 19 rule 7 applies to cases in which the defendant is in default of notice of intention to defend as well as of defence. See: Hong Kong Civil Procedure 2025, at §19/7/2.

14.  The court cannot receive any evidence in cases under Order 19 rule 7, but must give judgment according to the pleadings alone. See: Hong Kong Civil Procedure 2025, at §19/7/11.

15.  Although it is not the normal practice of the court to make a declaration without a trial, this is only a rule of practice which should not be followed when the plaintiff had a genuine need for the declaratory relief and justice would not be done if such relief were denied. See: Hong Kong Civil Procedure 2025, at §19/7/20.

D.  Applying the legal principles to the present case

16.  The Plaintiff’s pleaded case can be summarised as follows:

(1)  On 20 June 2023, the 1^st Defendant made the Disposition.

(2)  The Disposition was a sham and not supported by consideration, as can be inferred from the following facts and circumstances:

(a)  In around August 2023, the Plaintiff became aware from other individuals within the egg trade industry that Ease Empire had been selling its profit-generating assets including trucks, forklifts and/or private cars. Consequently, the Plaintiff became aware that Ease Empire was insolvent.

(b)  On a date before 29 September 2023, Ease Empire issued a cheque which was postdated to 29 September 2023 in the sum of HK$479,651.00 to the Plaintiff for 7 invoices dated 23 June 2023, 24 June 2023, 26 June 2023, 28 June 2023, 28 June 2023, 29 June 2023 and 30 June 2023 respectively. However, the said cheque was dishonoured, further evidencing Ease Empire's insolvency.

(c)  From 10 October 2023 to 4 December 2023, the Plaintiff commenced and obtained a final judgment against the 1^st Defendant for, inter alia, the sum of HK$4,151,150. As of the date of the Writ in this case, the 1^st Defendant failed to repay the outstanding sum.

(d)  By letters dated 9 February 2024 issued to the 1^st Defendant and the 2^nd Defendant respectively by the Plaintiff's solicitors, Messrs Chui and Lau, the 1^st Defendant and the 2^nd Defendant were requested to provide all documents, including but not limited to copies of cheque(s), bank statement(s), deposit slip(s), mortgage documents and any other documents demonstrating that the Disposition was supported by full consideration and it was made in good faith ("Documents"). As of the date of the Writ in this case, the 1^st Defendant and/or the 2^nd Defendant have failed to provide any of the Documents.

(3)  As a result, the 1^st Defendant rendered himself insolvent.

(4)  Further, by reason of (a) the proximity in time between the Disposition and the insolvency of Ease Empire and (b) the 1^st Defendant’s knowledge of his liability under the Guarantee Agreement, the 1^st Defendant made the Disposition with intent to delay, hinder and/or defraud the Plaintiff.

(5)  The purpose of the Disposition was to subject the Plaintiff to a risk of being unable to recover its debts in full by keeping the Property out of the reach of the Plaintiff, including but not limited to preventing the Plaintiff to obtain a charging order in respect of the Property.

17.  According to section 60 of the CPO:

“(1) Subject to subsections (2) and (3), every disposition of property made, whether before or after the commencement of this section, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

(2) This section does not affect the law of bankruptcy for the time being in force.

(3) This section does not extend to any estate or interest in property disposed of for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the disposition, notice of the intent to defraud creditors.”

18.  As explained by Ribeiro PJ in Tradepower (Holdings) Ltd v Tradepower (HK) Ltd [2010] 1 HKLRD 674, at §88:

“I would formulate the applicable rule for cases like Freeman v Pope as follows. Where it is objectively shown that a disposition of property unsupported by consideration is made by a disponor when insolvent (or who thereby renders himself insolvent) with the result that his creditors (including his future creditors) are clearly subjected at least to a significant risk of being unable to recover their debts in full, such facts ought in virtually every case to be sufficient to justify the inference of an intent to defraud creditors on the disponor’s part. In cases falling outside the rule, that is, in cases where the disposition is made for valuable consideration, or where the disponor is not insolvent or where the disposition does not deplete the fund potentially available to the creditors, an actual intent to defraud creditors must be shown as an inference properly to be drawn on the available evidence before s.60 is engaged.” (Emphasis added)

19.  Having read the Statement of Claim, I am satisfied that the Plaintiff has made out a case that:

(1)  The Disposition was unsupported by consideration and was not made in good faith;

(2)  As a result, the 1^st Defendant rendered himself insolvent;

(3)  The Plaintiff and the 1^st Defendant’s other creditors were subjected to a significant risk of being unable to recover its debts in full;

(4)  Therefore, there was an intent to defraud creditors on the part of the 1^st Defendant in the Disposition; and

(5)  The 2^nd Defendant did not provide valuable or good consideration in good faith for the Disposition.

20.  Applying Tradepower (Holdings) Ltd, supra., I am satisfied that the Disposition should be set aside.

21.  Further, I also agree that the Plaintiff has a genuine need for the declaratory relief and justice will not be done if such relief is denied in the present case.

E.  The order

22.  For the reasons above, I make the following orders:

(1)  Subject to the Undertaking given by the Plaintiff, there be a declaration that the assignment of the Property by the 1^st Defendant to the 2^nd Defendant on 20 June 2023 constitutes a disposition with the intent to defraud creditors within the meaning of section 60 of the CPO and is as such voidable, and is void as against the Plaintiff; and

(2)  The costs of this action, including the costs of this application, be to the Plaintiff, which are summarily assessed to be HK$80,000.

23.  The Plaintiff’s summons also seeks (1) a declaration that the 2^nd Defendant is holding the Property as constructive trustee for the 1^st Defendant; and (2) an order that the 2^nd Defendant do deliver up vacant possession of the Property to the 1^st Defendant. Upon inquiry of the court, the Plaintiff confirmed that it is not necessary for the Plaintiff to pursue the aforesaid relief. I therefore make no order in respect of them.

24.  It remains for me to thank Mr Wong for his able assistance to the court.