RE HONG KONG STAR MEDIA CULTURE LTD

HCCW 205/2025

[2026] HKCFI 2099

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 205 OF 2025

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J U D G M E N T

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I.  INTRODUCTION

1.  Before me is the Petition presented on 8 April 2025 subsequently amended on 4 August 2025 (the “Amended Petition”) based on a statutory demand served by the Petitioner’s solicitors Jones Days on 17 March 2025 (the “Statutory Demand”) for a total sum of US$2,523,996 and HK$744,330 (the “Petitioning Debt”), arising from:-

(1)  A loan agreement dated 3 January 2020 (the “1^st Loan Agreement”) for a loan of US$1,000,000 (the “1^st Loan”) with interest at 3% per annum;

(2)  A loan agreement dated 16 July 2020 (the “2^nd Loan Agreement”) for a loan of US$1,000,000 (the “2^nd Loan”) with interest at 8% per annum; and

(3)  A loan agreement dated 28 September 2020 (the “3^rd Loan Agreement”) for a loan of HK$550,000 (the “3^rd Loan”) with interest at 8% per annum.

(collectively, the “Loan Agreements” and the “Loans” respectively)

2.  I shall introduce the relevant persons and relevant documents first.

II.  THE PETITIONER

3.  The Petitioner is a Hong Kong limited company.

4.  Prior to 31 December 2012:-

(1)  Shougang Concord Technology Holdings Limited (“Shougang Concord”) held 9,999 shares out of 10,000 shares in the Petitioner;

(2)  Santai Corporate Services Limited held the remaining 1 share in the Petitioner; and

(3)  Mr Chau Chit (“Mr Chau”), the executive of director of Shougang Concord until 24 October 2013, was a director of the Petitioner.

5.  On 31 December 2012:-

(1)  The 9,999 shares in the Petitioner held by Shougang Concord were transferred to one Keen Front Group Limited, a BVI company owned by Min Weiguo (“Mr Min”);

(2)  The remaining 1 share was transferred to Song Yunlin (“Madam Song”), who has been Mr Min’s friend, holding the 1 share on behalf of Mr Min;

(3)  Mr Chau resigned as director of the Petitioner; and

(4)  (a) Du Yipeng (“Mr Du”), a friend of Mr Min and the (ex-)husband of Mr Chau’s niece Madam Wan Yi, and (b) Madam Song were appointed as directors of the Petitioner.

6.  On 31 October 2023, Madam Song resigned as director of the Petitioner.

7.  On 20 August 2024, Mr Du resigned as director of the Petitioner, and Cheng Zi (“Madam Cheng”) was appointed as director, and has remained so since then.

III.  THE COMPANY AND RELATED COMPANIES

8.  The Company is a Hong Kong limited company. From 16 June 2017 to 15 September 2023, its sole director was Mr Chau.

9.  The Company is wholly owned by a Seychelles company named Star Media International Limited (星傳媒國際有限公司) (“Star Media”). Mr Chau was its first director until 13 November 2023.

10.  Star Media is in turn wholly owned by Smart Digital Technology Group Limited (the “Listco”), a Bermudan company listed in Hong Kong. One of the former names of the Listco was Starlight Culture Entertainment Group Limited. Mr Chau was a director of the Listco from 22 July 2013 to 15 September 2023.

11.  At all material times, the Company owned and still owns a PRC company named江陰星空文化傳播有限公司 (“Jiangyin Starlight”).

12.  Some other companies owned directly or indirectly by the Listco are worthy of note:-

(1)  Starlight Media Inc. (the “US Co”), a limited company incorporated in the US, is solely owned by the Listco;

(2)  Sino Green Energy Investment Co., Limited (“Sino Green”), a limited company incorporated in Hong Kong, is indirectly owned by the Listco, and Mr Chau was its director from 3 September 2013 to 1 July 2023; and

(3)  浙江中港綠能環境科技有限公司 (“Zhejiang Green”), a PRC company, is directly owned by Sino Green.

IV.  MR MIN

13.  In addition to his role in the Petitioner as mentioned above, at the material times, Mr Min was (and still is) the beneficial shareholder of the Petitioner (though the aforesaid Keen Front Group Limited), and the beneficial shareholder of one Concord Dynamic Group Limited (“Concord Dynamic”), a BVI company.

14.  Further, from around 31 August 2017 until April 2025, Mr Min was the chargee of the shares in a BVI company named Mega Start Limited (“Mega Start”) held by Mr Chau. After the charging in 2017, Mr Chau still signed cheques issued by Mega Start in 2019 and signed the remittance form for the 1^st Loan in January 2020. In April 2025, Mr Min enforced the charge.

V.  MR DU

15.  In addition to his role in the Petitioner as mentioned above, according to the Petitioner, at the material times, Mr Du owned (and still owns) 浙江允昇投資有限公司 (“Zhejiang Yunsheng”), a PRC company. He is also its legal representative (法人代表).

16.  Further, Mr Du had been an employee of Zhejiang Green.

VI.  MADAM SONG

17.  In addition to her role in the Petitioner as mentioned above, Madam Song was:-

(1)  At the material times, the legal representative (法人代表) of Jiangyin Starlight until 9 January 2023; and

(2)  From 1 November 2013 to 2022, the assistant general manager of Zhejiang Green.

VII.  MADAM CHENG

18.  In addition to her role in the Petitioner, Madam Cheng:-

(1)  Is a director of Sino Green;

(2)  From 1 July 2017 to 19 December 2023, was employed by the Listco; and

(3)  From 9 January 2023 to 5 January 2024, was the legal representative of Jiangyin Starlight (succeeding Madam Song).

VIII.  MR CHAU

19.  Mr Chau has been mentioned a number of times above. It is worth a summary here:-

(1)  From 1 August 2006 to 31 December 2012, he was a director of the Petitioner;

(2)  Until 24 October 2013, he was the executive of director of Shougang Concord;

(3)  From 22 July 2013 to 15 September 2023, he was a director of the Listco;

(4)  From 3 September 2013 to 1 July 2023, he was a director of Sino Green;

(5)  From 16 June 2017 to 15 September 2023, he was the sole director of the Company;

(6)  Until 13 November 2023, he was a director of Star Media; and

(7)  On or around 31 August 2017, he charged his entire shareholding in Mega Star to Mr Min.

20.  In addition, upon a bankruptcy petitioned presented by one Win Win Stable No. 1 Fund SP (“Win Win”), on 28 January 2025, Mr Chau was adjudged bankrupt. His bankruptcy is mentioned here not for any purpose of prejudice or embarrassment. The significance lies in the following:-

(1)  It is the timing of the bankruptcy, namely, Mr Min’s disclosure of his interest in Mega Start (namely, Mr Chau having charged his shares in Mega Start in favour of Mr Min) came shortly after Mr Chau was adjudged bankrupt, that has some significance at least according to the Company, namely, to support that Mega Start was in fact under Mr Chau’s control and the disclosure of Mr Min’s interest may be a last resort to prevent Mr Chau’s proprietary interest in Mega Start from being included in the estate for the trust-in-bankruptcy.

(2)  Further, Win Win, the petitioner of the bankruptcy petition, would be named as a recipient of the repayment of the sums in some draft deeds of termination in December 2024, prepared upon Mr Chau’s instructions according to the Company’s evidence.

IX.  THE LOAN AGREEMENTS AND LOAN EXTENSION AGREEMENTS

21.  The Loan Agreements are essentially in identical form except for the amounts of the Loans and repayment dates. In each of the Loan Agreement, Mr Du (a director of the Petitioner) signed on behalf of the Petitioner and Mr Chau (the sole director of the Company) signed on behalf of the Company.

22.  All the Loans, according to the respective Loan Agreements, were due in 2021.

23.  On the evidence, the terms of the Loans were extended. The only documentary evidence for the extensions before me is produced by the Company, namely, three documents all of which are titled “Loan Agreement” and dated 4 April 2023, respectively for the 1^st Loan (the “1^st Loan Extension Agreement”), the 2^nd Loan (the “2^nd Loan Extension Agreement”) and the 3^rd Loan (the “3^rd Loan Extension Agreement”) (collectively, the “Loan Extension Agreements”). The Loan Extension Agreements have the following features:-

(1)  As all these are related to the Loans under the Loan Agreements between the Petitioner as lender and the Company as borrower, these Loan Extension Agreements are also expressed to be between the Petitioner and the Company. However, on the execution pages, under Mr Chau’s signature, presumably appended on behalf of the Company, was appended under the company chop of the Listco with its then name “Starlight Culture Entertainment Group Limited”.

(2)  The Loan Extension Agreements were to extend the repayment dates from 1 July 2023 to 30 June 2024. In the recitals of the Loan Extension Agreements, some previous supplemental agreements to extend the repayment dates from 2021 to 2023 are recited. However, none of these supplemental agreements is adduced in the evidence.

X.  AUDIT CONFIRMATION

24.  An audit confirmation (the “Audit Confirmation”) was issued by the Company’s auditors Baker Tilly Hong Kong Limited (“Baker Tilly”) to the Petitioner for the Petitioner’s confirmation. The Audit Confirmation was for the balance as at 31 December 2023. An appendix (the “Audit Confirmation Appendix”) showing the breakdowns of the balance was attached to the Audit Confirmation. The breakdowns included the Loans. On behalf of the Company it was signed by Mr Ho Chun Sing (“Mr Ho”), the Company Secretary and Chief Financial Officer of the Listco. It was signed by Mr Du, then a director of the Petitioner.

XI.  DRAFT DEEDS OF TERMINATION

25.  In December 2024, upon the instructions of Madam Wu Xiaoli (“Madam Wu”), a current executive director, three draft deeds of termination (the “Draft Deeds of Termination”) all dated 27 December 2024 between the Company and the Petitioner were prepared. The Draft Deeds of Termination have never been signed. The terms were to terminate the payment obligation and the cross-payment obligation against each other. In the third Draft Deed of Termination, in Appendix 1, the Loans were included for the termination thereunder.

XII.  STATUTORY DEMANDS

26.  The Statutory Demand underlying the Petition and the Amended Petition was, as mentioned at the outset, issued by Jones Days on 17 March 2025. Before this Statutory Demand, on 4 March 2025, Jones Days, on behalf of the Petitioner, served a statutory demand for the same Petitioning Debt on the Listco, as the “ultimate recipient” of the 1^st Loan and the 1^st Loan Agreement and the “recipient” of the 2^nd Loan and the 3^rd Loan under the 2^nd Loan Agreement and the 3^rd Loan Agreement respectively.

27.  In reply, by letter dated 12 March 2025, the Listco’s solicitors Li & Partners pointed out the obvious – the Loan Agreements were agreements between the Petitioner as lender and the Company, not the Listco, as the borrower.

28.  Then on 17 March 2025, Jones Days served the Statutory Demand on the Listco.

XIII.  GROUNDS OF OPPOSITION TO THE PETITION AND EVIDENCE

29.  Ms Eva Sit SC (leading Mr Jonathan Fung), counsel for the Company, submits that based on the evidence, there are bona fide disputes on substantial ground on the following defences:-

(1)  The Loan Agreements were sham created to allow investors in the PRC (“Mainland Investors”) to transfer funds in the PRC out of the PRC to Listco’s corporate vehicles outside PRC for investment into film-making projects of the Listco in circumvention of the foreign exchange regulations in the PRC; and

(2)  The Loan Agreements are voidable and should be voided because they were entered into by Mr Chau on behalf of the Company on the one hand and by the Petitioner in which Mr Chau was interested as the beneficial owner.

30.  In terms of evidence, for the Petitioner, the following affirmations are filed:-

(1)  The 2^nd Affirmation of Madam Cheng, a director of the Petitioner, dated 5 August 2025;

(2)  The 1^st Affirmation of Mr Chau, dated 25 September 2025;

(3)  The 2^nd Affirmation of Mr Chau, dated 10 February 2026 (the “2^nd Affirmation of Mr Chau”);

(4)  The 1^st Affirmation of Mr Min, dated 6 March 2026; and

(5)  The 2^nd Affirmation of Mr Min, dated 6 March 2026.

31.  For the Company, the following affirmations are filed:-

(1)  The Affirmation of Li Guorong (“Mr Li”), the sole director of the Company, dated 20 June 2025 (the “Affirmation of Mr Li”);

(2)  The Affirmation of Guo Shuai (“Mr Guo”), a director of the Company, dated 13 November 2025 (the “Affirmation of Mr Guo”);

(3)  The Affirmation of Madam Wu, dated 17 November 2025 (the “Affirmation of Madam Wu”); and

(4)  The Affirmation of Mr Ho, dated 17 November 2025.

XIV.  LEGAL PRINCIPLES

32.  The legal principles in determining whether there are bona fide disputes on substantial ground in a winding up petition are well established. In her oral submissions, Ms Sit, referring to Re Guy Lam (2023) 26 HKCFAR 119, seems to suggest that the insolvency jurisdiction is summarily determinative in nature and therefore, the threshold of raising a bona fide dispute on substantial ground should now be the same as that of a summary judgment. With respect, I do not think Re Guy Lam, supra, has any effect of changing the threshold, which was not an issue for determination before the Court of Final Appeal. Insofar as relevant, I only have to refer to the Court of Appeal’s judgment in Re Leung Cherng Jiunn [2016] 1 HKLRD 850 for the well-established proposition that while in principles, the threshold of resisting a winding up petition (raising a bona fide dispute on substantial ground by precise, believable evidence establishing a defence of substance) is higher, in practice, it is “broadly similar” to that of resisting a summary judgment application (raising a fair probability of establishing a bona fide defence by believable evidence).

XV.  SHAM?

33.  For the Company to show that there is a bona fide dispute on substantial ground that the Loan Agreements are all sham, it would have to show that there is a bona fide dispute on substantial ground that:-

(1)  Both the Petitioner and the Company intended that the Loan Agreements would not create the legal rights or obligations they appear to create; and

(2)  Both the Petitioner and the Company intended that the Loan Agreements would mislead a third party into believing that they had created those rights and obligations.

See Re Posismo Limited [2018] HKCFI 344 at §§12 and 14 per Ng J.

34.  None of the deponents for the Company has any personal knowledge of the matters.

35.  In §7 of the Affirmation of Madam Wu, Madam Wu explains:-

“7. Prior to my appointment [as an Executive Director on 23 July 2019], I had not ever taken up any position within the Company and was not involved in, and had no knowledge of, the affairs of the Company or the circumstances surrounding the Alleged Debt [that is, the Petitioning Debt], the 3 Purported Loan Agreements or the underlying transactions and money flows until a much later stage. Contrary to what is stated at paragraph 12 of the Affirmation of [Mr Chau], prior to these proceedings, Mr Chau had never mentioned [Mr Min] to me and I had no knowledge of Mr Min’s existence or indeed any of the Company or Smart Digital [that is, the Listco]’s dealings with Mr Min. As I will explain further below, my knowledge (and the knowledge of the other director(s) of Smart Digital and the Company) was acquired incrementally:

7.1. After Mr Chau left Smart Digital and the Company in September 2023, since August 2024 the Hong Kong Stock Exchange (“HKEx”) sent requisitions to Smart Digital regarding (among other things) the transactions involving the Petitioner and [Zhejiang Yunsheng]. Since it was Mr Chau (the then sole director of the Company) who handled and had control over these dealings all along, I was tasked by the Board of Smart Digital to reach out to Mr Chau to seek his explanation to enable Smart Digital to reply to HKEx. At that time, Smart Digital did not know where or how to look for the relevant documents and had only managed to locate a small amount of documents (which I later realized only provided a partial picture of the dealings and transactions that Mr Chau caused the Smart Digital and the Company to undertake), and I relied heavily on what Mr Chau told me which I thought represented the whole truth.

7.2. It was only after Mr Chau caused the Petitioner… to send statutory demands to Smart Digital and the Company respectively for (among other things) the Alleged Debt in March 2025 that Smart Digital and the Company decided that they needed to undertake a thorough investigation into what had actually happened and how the 3 Purported Loan Agreements came into existence. Since then, Smart Digital and the Company have managed to locate more documents and identified staff members who are still around and who had involvement in these underlying dealings arranged by Mr Chau, and have begun to piece together a fuller picture of what actually transpired (which is different from what Mr Chau had told us previously). As explained in [the Affirmation of Mr Guo], that internal investigation is still ongoing.” (emphasis added)

36.  Echoing what Madam Wu says, in §§4 and 5 of the Affirmation of Mr Guo, Mr Guo, director of the Company appointed on 8 August 2025, explains:-

“4. … There has since been a corporate reshuffle, and Mr Chau left both the Company and the Smart Digital [that is, the Listco] Group in September 2023. Those staff members Mr Chau designated to handle the aforesaid transactions for him at that time (for example, Madam Song) also resigned shortly after Mr Chau left the Company. Thus, the current management of the Company and of Smart Digital did not have visibility into the arrangements and transactions Mr Chau put in place then, and did not have meaningful assistance to identify and trace documents and fund movements to aid their understanding (since Mr Chau has made clear by late February 2025 that he would cause the Petitioner to serve the [Statutory Demand] and has become adversarial to the Company and Smart Digital).

5. At the time of the filing of [the Affirmation of Mr Li], the Company only had 3 months to investigate into these matters, which involved events occurring some time ago since 2018; numerous corporate entities including many companies incorporated in the People’s Republic of China (“PRC”) outside the Smart Digital Group; incomplete documentation and opaque fund movements… compounded by the difficulty that the staff members who had involvement in those matters have left the Smart Digital Group. Thus, the Company’s investigation is still ongoing…”

37.  Therefore, as Ms Sit fairly points out, the Company’s case of sham is based on inferences based on circumstantial evidence, but not on any direct evidence.

38.  Mr Bernard Man SC (leading Ms Natalie So), counsel for the Petitioner, puts much emphasis on §7.2 of the Affirmation of Madam Wu that “staff members who are still around and who had involvement in these underlying dealings arranged by Mr Chau” have been identified. Such staff members are not named, and there is no affirmation evidence from any of such unnamed staff members. Mr Man submits that to raise a bona fide dispute based on sham, with reference only to indirect and circumstantial evidence, when there are identified, unnamed staff members who “had involvement in these underlying dealings arranged by Mr Chau” but such staff members have not made any affirmation to depose to their involvement, the quality of the evidence is not sufficient.

39.  In my view, it is important to assess all the relevant evidence (and implication arising from absence of certain evidence) holistically in order to determine whether a bona fide dispute on substantial ground can be established by inference.  One cannot just accept or reject the pieces of evidence one by one; instead, one has to consider all the pieces of evidence and absence of evidence one by one, and only after such consideration can one then determine which pieces of evidence to accept or reject and/or what inferences to make. In this exercise of evaluative assessment, Mr Man’s submissions on the quality of the evidence is certainly an important consideration. However, I would not say that merely on this alone should I form my view on whether there is any bona fide dispute on the sham. I should consider other evidence as well.

40.  First, I start with the Audit Confirmation, on which Mr Man places heavy reliance. As mentioned above, the Audit Confirmation Appendix included the Loans. In explaining why he signed the Audit Confirmation but now would like to disavow the Audit Confirmation on behalf of the Company, in §6 of his affirmation, Mr Ho said that he only joined the Listco in December 2023, he was new to the job, had limited understanding of the Listco and knew little about the Company, and so he heavily relied upon the Company’s books and documents reviewed by Baker Tilly, without checking the accuracy of the Audit Confirmation himself. Mr Ho further explains that he became aware of the inaccuracy of the Audit Confirmation only in March 2025 after the Company started investigation into the Loans.

41.  In my view, although Mr Ho was at such a senior position and in proper discharge of his duty, and he should have gone through all the documents and should have been alert to any unusual features, one should not forget that the purpose of preparing sham documents (if they were sham) was to mislead others. Baker Tilly, as competent as they were, would still have to rely on documents. As auditors, they would also have interviews with the management on their preliminary findings. Mr Ho, however, did not have the personal knowledge of the matters, and he would also have to rely on the documents available. One may say (but I am not making any finding) that Mr Ho may have defaulted in his duties, but this is not the same as saying that the Audit Confirmation and the acknowledgement of it would mean that the information in the Audit Confirmation was accurate.

42.  The accuracy of the Audit Confirmation brings me to the second piece of evidence, namely, the Draft Deeds of Termination, on which Mr Man also places heavy reliance. While Mr Man relies on the Draft Deeds of Termination to say that the Company itself proceeded on the basis that the Loans were genuine loans repayable by the Company to the Petitioner, Ms Sit relies on the same Draft Deeds of Termination to show inconsistencies between them and the Audit Confirmation. Specifically, Ms Sit points out that items 5 and 7 of the Audit Confirmation, stated to be outstanding as at 31 December 2023, had actually been repaid in March 2022 according to the third Draft Deed of Termination. Mr Man’s answer is that whichever Loans had been repaid or partially repaid, the underlying premise is that the Loans were indeed repaid, meaning that the Loans were genuine. I agree, but this does not detract from the fact that the Audit Confirmation does appear to be inaccurate. This is a consideration in my holistic assessment of the evidence.

43.  Third, in a similar vein, Ms Sit points to the cashflow analysis (電影業務現金流分析) adduced by Mr Chau himself in his 2^nd Affirmation filed for the Petitioner. The cashflow analysis was, according to the 2^nd Affirmation of Mr Chau, prepared by the finance teams of the Listco and the Listco’s US Subsidiary in 2021 for reporting investment situation to the majority shareholders. In the cashflow analysis, the 3^rd Loan had already been repaid. However, in the Audit Confirmation, this loan was stated still to be outstanding as at 31 December 2023. Mr Man’s answer is that the Company is changing its defence in relation to the 3^rd Loan, namely, the Company’s defence is that the 3^rd Loan (as well as the other two Loans) were sham, and in saying that the 3^rd Loan had been repaid in 2021, the Company is self-contradictory, and that in any event, this still shows that the 3^rd Loan was a genuine loan repayable by the Company. I agree that on the face of it, the Company’s case is self-contradictory. However, with respect, Mr Man misses the point that Ms Sit relies on the cashflow analysis not much for raising a defence that the 3^rd Loan had been repaid, but for pointing out, once again, that the information in the Audit Confirmation was not accurate. To this I see no answer from Mr Man.

44.  Fourth, the Draft Deeds of Termination themselves. From the inconsistency between the third Draft Deed of Termination and the Audit Confirmation in relation to which Loan had been repaid, and in the absence of any evidence to explain the inconsistency, it is fair to say that the information provided in the Draft Deeds of Termination is not completely accurate. These Draft Deeds of Termination were prepared upon Madam Wu (the executive director of the Listco)’s instructions on behalf of the Listco and the Company. Mr Man submits that Madam Wu must have had some proper basis for giving the instructions, and therefore, the Draft Deeds of Termination, though not signed by any party, is evidence of the Company’s acknowledgment of the Loans. Mr Man also asks me to reject Madam Wu’s evidence in §§7.1 and 8 of her Affirmation that she “relied heavily [on] and believed what Mr Chau told me to be correct”. However, Mr Man’s submission cannot address the inaccuracy of the Draft Deeds of Termination. If Mr Man is right that Madam Wu must have had some basis for the instructions in relation to the Draft Deeds of Termination, then considered against the Audit Confirmation, one may see that the information available was confusing at best and self-contradictory at worst, thereby giving rise to the inconsistency between the Audit Confirmation and the third Draft Deed of Termination.

45.  In this regard, Madam Wu exhibited her WeChat conversation with Mr Chau. I do not need to set out the conversation in detail. The impression I have got from reading the conversation is that Madam Wu knew very little and Madam Wu indeed relied heavily on what Mr Chau told her. She acted like a mere letterbox between Mr Chau and the board of the Listco. More startling is that in certain messages, Madam Wu acted as if she was taking instructions from Mr Chau. Therefore, in my view, there appears some ring of truth in Madam Wu’s evidence of her reliance on Mr Chau. Again, that Madam Wu may have failed her duties does not necessarily mean that the Draft Deeds of Termination should or should not be regarded as accurate. These are two separate matters.

46.  At this juncture, I would like to point out that despite the inaccuracy of the Audit Confirmation and the Draft Deeds of Termination, in my view, this is not sufficient to raise any bona fide dispute on the sham allegation raised by the Company.  However, the Company’s evidence does not stop here.

47.  Fifth, Ms Sit highlights the undisputed fact that although the Loan Agreements were between the Petitioner as lender and the Company as borrower, never was there any fund advanced direct to the Company under the Loan Agreements, and for two of the three Loans, the payors were not even the Petitioner:-

(1)  For the 1^st Loan, the payor was Mega Start (the shares in which were held in Mr Chau’s name but had, according to the Petitioner’s evidence, been charged in favour of Mr Min, as set out above) and the recipient was the US Co (a subsidiary of the Listco).

(2)  For the 2^nd Loan, the payor was Concord Dynamic indirectly owned by Mr Min (as mentioned above) and the recipient was the Listco. Again, such transfer was carried out upon Mr Chau’s instructions.

(3)  For the 3^rd Loan, the payor was the Petitioner, and the recipient was the Listco.

48.  Mr Chau explains that the Company was set up to assist the Listco in arranging for financing for film and television program projects in that the Listco would not be the direct borrower and so would avoid assuming liability to repay the loans to third party lenders directly. Such way of transfer was carried out upon the instructions of Mr Chau being the sole director of the Company and the executive director of the Listco at that time. He further points out that the Listco auditors did not question this arrangement. In my view, while it is not uncommon that a holding company may use a subsidiary company for financing purpose, at least for a holding company which is listed, there should have been some documentation or board meetings approving such arrangement and all the more, approving the borrowing of the loans, especially when the board of the holding listed company knows of such arrangement which would mean that it would actually be the holding listed company borrowing. Further, at the Company’s level, article 18 of the Company’s Articles of Association, expressly applicable to the situation where there is only one director in the Company, expressly mandates that “the director must provide the company with a written record of the decision” “that may be taken in a directors’ meeting and has effect as if agreed in a directors’ meeting”. No such written record has been provided in the evidence.

49.  Further, from the lender’s point of view, the lender would agree to lend obviously not because of the subsidiary which was set up purely to receive financing and to avoid the listed company assuming the liability to repay, but the lender would agree to lend because of the listed company or any security offered by the group. The fact that the Petitioner issued a statutory demand for the Debt first on the Listco instead of the Company shows that a proper lender would in the normal course of events not lend money to a company set up simply to help the parent company to avoid repaying. Strangely enough, there is no security offered for any of the Loans. For such substantial amounts of loans, any answer that the parties trusted each other is, in my view, not good enough.

50.  For the 1^st Loan, the recipient of which was not even the Listco but was the US Co, Mr Chau’s explanation was that the US Co had urgent need for funds to invest in the film project “The Troop” and according to Mr Chau, it would waste unnecessary time for monies to first be paid to Listco first as usual and then for further remittance to the subsidiary. I do not quite understand the logic – for a film project, even though there might have been an urgent need for fund (the particulars of the alleged urgency being in lack), I fail to see how one more layer of remittance would cause any significant delay in the overall scheme of things. Mr Chau’s explanation sounds strange to me.

51.  Sixth, the Company has identified a fund-flow pattern which it says explains that the Loan Agreements were sham:-

(1)  Listco’s business was at the time film investment;

(2)  Listco looked for Mainland Investors;

(3)  Mainland Investors would sign film investment agreements with Listco and/or its subsidiaries in the PRC (the “Listco PRC Entities”) like Jiangyin Starlight and would remit funds in RMB to Listco PRC Entities;

(4)  The Listco PRC Entities would then transfer the identical amounts of RMB to PRC companies outside the Listco group and controlled by or affiliated with Mr Chau (the “Chau’s PRC Entities”), and the Company says that Zhejiang Yunsheng was such a Chau’s PRC Entity;

(5)  Then, the Petitioner, Mega Start or Concord Dynamic (collectively, the “Petitioner’s Offshore Entities”) (offshore in the sense of being outside the PRC) would transfer similar amounts in USD or HKD to the Listco or the Listco’s offshore entitles like the US Co (the “Listco Offshore Entities”); and

(6)  The Listco Offshore Entities would then apply the funds to the film projects.

52.  This arrangement is a typical arrangement for an underground bank, and/or modelled upon an arrangement of “onshore security, offshore loans” (onshore in the sense of being in the PRC, offshore in the sense of being outside the PRC) (內保外貸). Ms Sit submits that this arrangement is to circumvent the foreign exchange regulations in the PRC, that the Loans were in fact such investment funds, and that the Loan Agreements were created to mislead the relevant regulatory authorities into believing that the funds were loans but not part of the fund flow for the Mainland Investors’ RMB funds to flow out of the PRC. Although there is no PRC legal opinion on the foreign exchange regulations, Mr Man fairly (and rightly in my view) accepts that he would not take this point for the present purpose. The Courts in Hong Kong can, in my view, take judicial notice that at least for such substantial amounts of money, the foreign exchange regulations in the PRC would not allow the money to flow out of the PRC without proper approval. As regards the legality of “onshore security, offshore loans”, however, I do not think I can take any judicial notice.

53.  The evidence of such fund-flow is, in my view, reasonably clear, at least for the purpose of showing a bona fide dispute on such fund-flow. Mr Man submits that such fund-flow does not help the Company at all, because:-

(1)  There is no sufficiently precise evidence to show that the Loans were among such fund flows;

(2)  There is no sufficiently precise evidence to show that the Petitioner’s Offshore Entities were associated with Mr Chau; and

(3)  The arrangement of “onshore security, offshore loans” (onshore in the sense of being in the PRC, offshore in the sense of being outside the PRC) is in itself not illegal, and therefore, there would not be any need for such convoluted arrangement as now suggested by the Company. That said, Mr Man’s position is that none of the Loans was for this purpose.

54.  The evidence for such fund-flow pattern for the 1^st Loan is the strongest among the three Loans. I shall adapt the table in §24.1 of Ms Sit’s Skeleton Submissions here:-

Date	Event
29.12.2019	Investment agreement between 四川峨影投資有限公司(“四川峨影”), Listco and Jiangyin Starlight re US$1m (=RMB 7,399,330) investment in “Malignant”
30.12.2019	四川峨影transferred RMB 7,399,330 to Jiangyin Starlight (described as investment fund for “Malignant”)
2.1.2020	Jiangyin Starlight transferred RMB 7,110,000 to Zhejiang Yunsheng (approved by Chau)
3.1.2020	Mega Start (signed by Chau) transferred US$1m to US Co
	1st Loan Agreement

55.  Mr Man does not make much submissions on this, although at the outset of his oral submissions, he stresses that so long as the Company fails to show bona fide dispute for any of the Loans, a winding up order should be made. Ms Sit, rightly, has no qualm about this proposition.

56.  For the 2^nd Loan, again, I adapt Ms Sit’s Skeleton Submissions, this time the table at §24.2:-

Date	Event
3.7.2020	霍爾果斯百子灣影業有限公司transferred RMB 36.3m to Jiangyin Starlight
3-7.7.2020	Jiangyin Starlight transferred 5 x RMB 7,260,000 (=RMB 36.3m) to Zhejiang Yunsheng
16.7.2020	Concord Dynamic transferred US$1m (~RMB 7,129,300) to Listco (which Listco then immediately transferred to US Co)
	2nd Loan Agreement

57.  On this, Mr Man points out, and Ms Sit has to accept, that this fund-flow pattern for the 2^nd Loan now identified in her Skeleton Submissions is entirely different from the Company’s original evidence on this. In §23 of the Affirmation of Mr Li, the Company’s evidence is that this 2^nd Loan was actually a capital investment for a film project “Malignant” under an investment agreement between the Petitioner, one Beautiful Asia Limited and the Listco.  Subsequently, in §36 of the Affirmation of Mr Guo, the whole narrative changed – now as summarised in the table above, without even any investment agreement pinpointed. Ms Sit points out the Company’s explanation in the evidence (as set out in §§35 and 36 above) that the Listco and the Company’s investigation has been ongoing and more and more evidence has been unearthed, revealing more of the underlying transactions. In response, Mr Man submits that this only shows that all these fund-flow patterns to explain the Loans are mere hypotheses but not evidence requisite to resist a winding up petition. In my view, the Court is well familiar with when an inference can be drawn and when it cannot, and when evidence is up to the requisite sufficiency to raise a bona fide dispute on substantial ground to reject a winding up petition. As I point out earlier on, this is an exercise of evaluative assessment of all the evidence holistically. While the mere fund-flow and the evolution of the explanations of the 2^nd Loan may by themselves be a mere hypothesis, I should consider all the evidence together.

58.  The evidence on the 3^rd Loan to sustain the Company’s opposition is the weakest:-

(1)  The Company points to a shortfall of US$60,000 from an investment by 上海久逸實業有限公司 (“上海久逸”) back in May 2019, and surmises that the 3^rd Loan, in the amount of HK$550,000, approximately US$70,000, is related to this shortfall.

(2)  The Company also relies on the fact that the 3^rd Loan Agreement is in the same form of the 1^st and 2^nd Loan Agreements.

(3)  But contradictorily, as mentioned in §43 above, Ms Sit also refers to the cashflow analysis which shows that by 2021 the 3^rd Loan had been repaid. If true, this would run contrary to the Company’s case that the 3^rd Loan was not genuine.

59.  No doubt, there is contradiction. However, in assessing whether there is a bona fide dispute for the present purpose, I should also look at the Petitioning Debt in itself. If the evidence in relation to the Petitioning Debt in itself is tenuous, one can say that there is a bona fide dispute. Here, while the Company’s defence seems contradictory, more fundamentally and in the first place, the evidence in relation to the 3^rd Loan in itself is also tenuous. The cashflow analysis is produced by Mr Chau in his 2^nd Affirmation dated 10 February 2026 field for the Petitioner. So, this is the Petitioner’s own evidence. In his 2^nd Affirmation, Mr Chau deposed that he himself prepared it. However, neither he nor the Petitioner has not explained in his evidence filed for the Petitioner why his cashflow analysis would seem contradictory to the Petitioner’s own case on the 3^rd Loan.

60.  As regards the association between the Petitioner’s Offshore Entities and Mr Chau, from what I have described in Parts II, IV, V and VIII above, it is clear to me that there is a bona fide dispute on the association. Further, the WeChat conversation on 2 March 2020 between Madam Song and Cynthia Wang, an employee of the Listco is pertinent. In that conversation, Cynthia Wang was asking Madam Song how to explain to the investor why Zhejiang Yunsheng was involved. Madam Song’s answer was in the affirmative to Cynthia’s question “就是说这个是就是周总他实际控制的公司” (was this company a company de facto controlled by Mr Chau?). Mr Chau, in his evidence, denies any control over Zhejiang Yunsheng. As mentioned in Parts II and VI above, Madam Song had roles in the Petitioner as well as the Listco. Neither party has explained why Madam Song has not been able to prepare an affirmation to explain this WeChat conversation. This WeChat conversation is some contemporaneous evidence I cannot lightly disregard.

61.  As regards the purpose of the arrangement for such fund-flow, the same WeChat conversation between Madam Song and Cynthia Wang shows that the fund-flow involving Zhejiang Yunsheng was related to some sensitive, strict control over money flowing out (“但是就是很…跟人家解释说具体是用什么渠道啊，什么这个最最好比较敏感啊，因为毕竟是涉及到，现在钱出去，嗯，国内也是可管的很严的嘛”). The Petitioner seems to rely on lack of evidence that “onshore security, offshore loans” is illegal, apparently in support its position that there would not be any need for such convoluted ways of transfers of money given that such “onshore security, offshore loans” is not illegal. In her submissions, Ms Sit does not appear to rely much on this “onshore security, offshore loans”. Be that as it may, the fund-flow is consistent with either of the arrangement, namely, a pure fund-flow out of the PRC, or an “onshore security, offshore loans”. On this, I have no difficulty in concluding that there is a bona fide dispute over the illegality of the fund-flow.

62.  Overall, on this fund-flow point, while I can see the force in Mr Man’s submissions that the Loans should be looked at on their own and that how the positions with regard to the 2^nd Loan have changed over time and the weakness of the evidence in relation to the 3^rd Loan, given that there was indeed such a fund-flow, I do not think I can conclusively say that the three Loans should be isolated as independent ignoring the fund-flow pattern. Again, I have to consider all the evidence in the round to see if the Company has discharged its burden to show bona fide dispute on substantial ground.

63.  Seventh, the special features in relation to the Loans are worth consideration. They all tend to show that the Loans were not seriously taken, put mildly, and that the Loans are of the same type.

(1)  As set out in Part IX above, the Loan Agreements are in identical form.

(2)  Further, having considered Parts II, V and VIII above, I am of the view that there is bona fide dispute over the association between Mr Du and Mr Chau. The Loan Agreements were all signed by Mr Du on behalf of the Petitioner as lender and Mr Chau on behalf of the Company as borrower.

(3)  The Loans were extended by the Loan Extension Agreements signed between the Listco and the Petitioner, rather than the Company and the Petitioner, and not all written agreements purported to extend the Loans have been produced.

64.  Eighth, how the Petitioner demanded the repayment of the Loans is relevant. First, the Loans had been due in 2021. There is, however, no evidence of any demand but then there are the Loan Extension Agreements executed in 2023. There is no evidence of how the extensions were come about. Second, as mentioned in Part XII above, at first, the Petitioner’s solicitors Jones Days issued a statutory demand on the Listco, but not the Company.  Mr Min’s explanation in his evidence is that in his view, the Listco was the true beneficiary of the Loan and the Company was an empty shell with limited resources. I am unable to accept this explanation at least at this stage. The statutory demand, as said, was issued by the Petitioner’s solicitors Jones Days. Such fundamental problem, going to the capacity of the Listco, must have been clear to the Petitioner. It was either that the Petitioner simply did not care about the legal advice (if any), or that the Petitioner’s own case about who should be regarded as the borrower, despite the Loan Agreements, was not clear. In mv view, either way reflects negatively on the validity of the Loan Agreements. Further, as explained in §48 above, the evidence from the Petitioner that the borrower under the Loan Agreements was deliberately chosen to be the Company rather than the Listco was to avoid the Listco assuming the liability to repay. This begs the question why a lender like the Petitioner would agree to such an arrangement in the first place. There is no good answer from the evidence. My finding in §59 above that the Petitioner is associated with Mr Chau only casts more doubt on the genuineness of the Loan Agreements.

65.  Ninth, Mr Man makes forceful submissions that making all the Loan Agreements and booking the funds as liabilities in the Company, it would be difficult for the Company and the Listco to find any justification to cancel the liabilities, that therefore, if the Loans were really sham, creating the Loan Agreements as sham would leave the Company at the risk of being held liable on the strength of the papers created, and that this would make no sense at all. In answer, Ms Sit points to some tripartite transfer agreements with the Mainland Investors whereby the Listco PRC Entitles would not be put at risk of being sued by the Mainland Investors for transferring the funds through a Petitioner / Chau’s PRC Entity like Zhejiang Yunsheng. However, this still cannot explain how the liabilities booked in the Company’s account would and could eventually be removed as sham.

66.  In my view, this point made by Mr Man is strong against the Company’s case of sham. Ms Sit reminds me that the Company’s investigation is still ongoing, and there may be more documents discovered that can address this point made by Mr Man. Normally, any suggestion that more time would allow discovery of more relevant evidence is of little value, but in the present proceedings, given that those in control have largely left the Listco and the Company, I would not disregard Ms Sit’s such reminder right away, but leave it in the consideration of the overall evidence.

67.  Tenth, Mr Man refers to a draft legal opinion prepared by Simmons & Simmons in around June 2023 to say that Zhejiang Yunsheng is not a company owned or controlled by Mr Chau. With respect, this draft opinion is of little value, if any. First, it is a draft not signed. Second, the materials available to Simmons & Simmons were not the same as those before me. Third, it remains an opinion at most, just like submissions from counsel. Whether Zhejiang Yunsheng is or is not a company owned or controlled by Mr Chau, and for the present purpose, whether there is any bona fide dispute on this question, are questions for the Court to determine upon the evidence laid before it.

68.  Having holistically considered all the above (together with subsidiary points raised by counsel which I do not think it necessary to detail here), and bearing in mind that at this stage, the Company need not prove its case but only need to raise bona fide disputes on substantial ground:-

(1)  I am satisfied that the Company has discharged its burden in relation to the 1^st Loan and the 1^st Loan Agreement;

(2)  I am satisfied that the Company has discharged its burden in relation to the 2^nd Loan and the 2^nd Loan Agreement; and

(3)  Although the evidence in relation to the 3^rd Loan and the 3^rd Loan Agreement is not entirely the same as the 1^st and 2^nd Loan Agreements (in particular, lacking evidence to show the specific fund-flows of the “Loans” in question), bearing in mind, among others, that the three Loan Agreements were in identical form and the Petitioner’s own evidence in relation to the 3^rd Loan is tenuous, I am also satisfied that the Company has discharged its burden in relation to 3^rd Loan and the 3^rd Loan Agreement;

in that they were all sham created to mislead the relevant authorities into believing that they were loans but not funds transferred out of the PRC in contravention of the foreign exchange control regulations in the PRC.

XVI.  CONFLICT OF INTEREST

69.  While I have formed the view above that there is a bona fide dispute on the association between the Petitioner, Mr Min and Mr Chau, I am not entirely sure whether this would constitute such a conflict of interest that the Loan Agreements, if they were genuine, would be void or voidable. However, I should refrain from expressing any view. My view in relation to the bona fide dispute on sham above is sufficient for me to dismiss the Amended Petition.

XVII.  CONCLUSION

70.  For the above reasons, I dismiss the Amended Petition. I order that the Petitioner shall pay the Company costs of the Petition (including the Amended Petition), with certificate for two counsel, summarily assessed at HK$2,350,000, and that the costs of the Official Receiver (the amount to be confirmed by the Official Receiver in writing to the Court) shall be deducted from the deposit.

71.  Lastly, I thank Mr Man and Ms So (counsel for the Petitioner) and Ms Sit and Mr Fung (counsel for the Company) for their able and thorough assistance.