Harbor Prosper (HK) Investments Ltd v. Elegant Profit (Hong Kong) Ltd

HCCW 220/2019

[2020] HKCFI 2261

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP NO 220 OF 2019

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Before: Deputy High Court Judge Rachel Lam SC in Court

Date of Hearing: 22 July 2020

Dates of further written submissions: 30 July and 7 August 2020

Date of Decision: 4 September 2020

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D E C I S I O N

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A.   INTRODUCTION

1.This was the substantive hearing of the Amended Petition of Harbor Prosper (HK) Investments Limited (“the Petitioner”) dated 27 September 2019 (“Amended Petition”), seeking to wind up Elegant Profit (Hong Kong) Limited (“the Company”) on the basis that the Company is deemed insolvent and unable to pay its debts.

2.The Amended Petition relies upon a Statutory Demand (“SD”) which was served on the Company by the Petitioner (via its solicitors) on 15 April 2019. In the SD, the total amount of debt asserted was US$54,779,008.64 (“the Debt”).

3.The Debt is said to arise out of a Corporate Guarantee (defined below) granted by the Company in favour of the Petitioner on 28 November 2018. Under the Corporate Guarantee, the Company agreed to indemnify the Petitioner for any unpaid sums owed by Yihe Tourism & Healthy Lifestyle Investment Company Limited (“the Issuer”) under a Senior Guaranteed Note Due issued by the Issuer to the Petitioner in the principal amount of US$50,000,000 (“the Note”).

4.At the present hearing, the Petitioner was represented by Counsel Mr Patrick Siu and Ms Ferrida Chan. The Company was represented by Counsel Ms Cherry Xu.

5.For the purposes of this decision, I have had regard to the Amended Petition, the evidence filed by the parties (and the exhibits therein), the parties’ respective skeleton submissions and supplemental submissions, and the oral arguments at the substantive hearing.

B.   BACKGROUND

6.The relevant background is summarised below.

7.The Issuer is part of a group of companies known as the Yihe Group (“Yihe Group”). A PRC company named Yihe Di Chan Group Limited (“PRC Yihe”) is part of the Yihe Group and an indirect holding company of the Issuer.

8.On 23 October 2017, the Petitioner, the Issuer, PRC Yihe, and the Company (alongside a number of other parties) entered into an Investment Agreement whereby inter alia the Petitioner acquired from the Issuer the Note. The Note is constituted by a note certificate dated 27 November 2017 (“Note Certificate”) executed as a deed poll by the Issuer together with the terms and conditions therein (“Terms and Conditions”).

9.The original maturity date of the Note was 25 November 2018.

10.On 28 November 2018, the Petitioner, the Issuer, PRC Yihe, and the Company (alongside a number of other parties) entered into a supplemental deed (“the Supplemental Deed”) to amend and supplement the Note Certificate and the Terms and Conditions attached thereto.

11.By the Supplemental Deed inter alia:

(1)  The maturity date of the Note would be extended to 24 May 2019 (subject to compliance with a number of conditions precedent as specified in Clause 6 of the Supplemental Deed).

(2)  The Petitioner granted to the Issuer an initial grace period (via Clause 2 of the Supplemental Deed, “Grace Period”) commencing from 26 November 2018, being the original redemption date of the Note, this too being subject to a number of conditions precedent (identified in Clause 3). These conditions precedent consisted essentially of the granting of additional forms of security and collateral by various parties in favour of the Petitioner (such as personal guarantees, share charges and the like).

12.For reasons which will become apparent below, two of the conditions precedent specified in in Clause 3 of the Supplemental Deed are relevant for the purposes of this case:

(1)  The first was the due execution of the Corporate Guarantee by the Company. There is no dispute that the Corporate Guarantee was executed on 28 November 2018.

(2)  The second concerned an undertaking by PRC Yihe to pledge all of its equity (amounting to 67% of the total shareholding) in an entity named 杭州青城房地产开发有限公司 (“Hangzhou Qingcheng”) in favour of the Petitioner (“Qingcheng Pledge”).

13.Clause 9.1 of the Supplemental Deed set out a series of undertakings that were given in consideration of the amendment of the Terms and Conditions (including inter alia the extension of the maturity date). This included, in particular, the following undertakings:

“9.1 In consideration of the Initial Noteholder agreeing to amend the Terms and Conditions as set out in this Deed:

…

(d) The Corporate Guarantor [PRC Yihe] irrevocably and unconditionally undertakes to register the Hangzhou Qingcheng Equity Pledge … with SAIC as soon as possible after the execution of such documents, and in any event within thirty (30) days following the execution of such documents (or such other date as may be approved by the Initial Noteholder [the Petitioner].

(e) The Corporate Guarantor shall procure the other shareholders of Hangzhou Qingcheng to cooperate and to execute all documents necessary to complete the registration of Hangzhou Qingcheng with SAIC as required in accordance with Clause9.1(d). …”

14.There is no dispute that no such registration occurred, whether within the 30 day period or thereafter. However, the reasons underlying the failure to register are relied upon by the Company to assert that it has a bona fide defence on substantial grounds to the Debt, and will be further discussed below.

15.It is the Petitioner’s case that the failure to register the Qingcheng Pledge constituted an event of default under Clause 11 of the Terms and Conditions, which states relevantly as follows:

“11.1 Event of Default

Each of the events set out in this Clause 11 is an Event of Default (whether or not caused by any reason whatsoever outside the control of an Obligor or any other person) …

11.4 Breach of other obligations

An Obligor does not comply with any provisions of any Transaction Document or a non-compliance with Clause 10.3 of these Terms and Conditions and such failure to comply or non-compliance is not remedied to the satisfaction of the Majority Noteholder(s) within ten (10) days of the failure to comply or non-compliance …”

16.There is no dispute that PRC Yihe is one of the Obligors as defined, and that the Supplemental Deed is a Transaction Document.

17.On the basis that an event of default (namely, the failure to register the Qingcheng Pledge) had occurred, on 1 February 2019, the Petitioner issued a demand to redeem the Note (“Notice of Acceleration”).

18.It was in such circumstances that the SD was eventually served on 15 April 2019.

19.Both parties have referred to a 杭州颐和山庄项目 债务重组协议 (“the Debt Restructuring Agreement”). There is no dispute as to the following aspects thereof:

(1)  The Petitioner, Hangzhou Qingcheng, the Issuer, PRC Yihe and a 廣州世茂新里程房地產開發有限公司 (“Guangzhou Shimao”)are the named parties. The Company is not a named party.

(2)  There is an express choice of forum clause in favour of the PRC Courts located in Futian District in Shenzhen.

(3)  Both parties agree that PRC law governs the terms of the agreement and have filed PRC legal expert evidence on the nature and effect thereof.

20.The Company relies on this Debt Restructuring Agreement to assert a second ground as a bona fide defence on substantial grounds to the Debt, which is further discussed below.

C.   DISCUSSION

C1.   Relevant Legal Principles

21.The parties are ad idem on the test to be applied to consideration of a winding-up petition. It is incumbent on the Company to raise a bona fide defence on substantial grounds.

22.The relevant principles are summarised in the decision of Hon Harris J in Yueshou Environmental Holdings Ltd [2014] HKEC 1178 at §8:

“8. It is well established that a winding-up Petition should only be issued if a creditor is clearly owed a liquidated sum and the debtor company does not have any valid ground for refusing payment. If the company has a bona fide defence on substantial grounds to the debt a petition should not be brought and if the court concludes either on the hearing of a strike out application or on the hearing of the petition that the company does have such a defence, the Petition will be dismissed. Many cases consider what constitutes a bona fide defence on substantial grounds and how the court should approach determining whether such a defence has been demonstrated. I will cite three commonly cited authorities which together explain the established principles.

(1) The onus is on the Company to show that it disputes the debt on substantial grounds:

‘Importantly for this case there is a distinction between a consideration of whether the company has established a defence on substantial grounds and a consideration of whether the evidence is believable. Taken to the ultimate, the difference is between whether there is evidence and whether that evidence is believable. It seems to me that the onus must be on the company against which a petition is presented to adduce sufficiently precise factual evidence to satisfy the court it has a bona fide dispute on substantial grounds.’

Re ICS Computer Distribution Ltd [1996] 3 HKC, 440 at 444B.

(2) I have to be satisfied that the Company's assertions are believable. The test

‘... is indeed as simple as whether the defendant's assertions are believable. But it must be recognised─because failure to recognise it would create a debt-dodgers' charter─that whether the defendant's assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute.’

Re Safe Rich Industries Ltd (unreported) CA 81/94, 3 November 1994, Bokhary JA, §13.

(3) The relevant principles were summarised as follows by Kwan J (as she then was) at paragraph 6 of her Ladyship's judgment in Re Hong Kong Construction (Works) Limited (unreported) HCCW 670/2002, 7 January 2003:

‘(1) The burden is on the company to establish that there is a genuine dispute of the debt on substantial grounds. In this context, “substantial” means having substance and not frivolous. An honest belief in an insubstantial ground of defence is not sufficient to avoid a winding-up order.

(2) The court should look at the company’s evidence against so much of the background and evidence that is not disputed or not capable of being disputed in good faith; in other words, the evidence is not to be approached with a wholly uncritical eye.

(3) The court would caution itself against unsubstantiated and unparticularised assertions, especially where particulars and information have been sought by the other side. It is incumbent on the company to put forward “sufficiently precise factual evidence” to substantiate its allegations.

(4) The court does not try the dispute on affidavit but is to determine whether a substantial dispute exists. In so doing, the court necessarily has to take a view on the evidence, to see if the company is merely “raising a cloud of objections on affidavits” or whether there really is substance in the dispute raised by the company. Even where the company has obtained unconditional leave to defend in an application for summary judgment, the Companies Court is not precluded from examining the evidence and taking a view on whether the debt is disputed on substantial grounds.’”

23.Reference was made to a number of other authorities[1], but I do not think that those materially add to the above summary.

C2.    Summary of the Company’s Position

24.The Company relies on two main grounds to assert that it has a bona fide defence on substantial grounds:

(1)  First, it says that the Notice of Acceleration was invalid, because the obligation in Clause 9.1(d) and (e) relied upon by the Petitioner to assert the event of default (“EOD”) had, in fact, been waived / released.

(2)  Second, it says that the Debt Restructuring Agreement has the effect of precluding the Petitioner from seeking repayment of the Debt from the Company.

C3.   Ground 1: The EOD and the Notice of Acceleration

25.The Company’s case in this regard may be summarized as follows (as reflected in the evidence of Li Jianglian filed for and on behalf of the Company):

(1)  PRC Yihe had done all that it could to ensure compliance with the undertaking. However, it ran into difficulties because it could not secure the cooperation of the other shareholders of Hangzhou Qingcheng, who refused to provide the relevant corporate documents for the purpose of SAIC registration. The fact that there were other shareholders who might object was a matter known to the Petitioner.

(2)  The Petitioner had taken over and retained all the documents necessary for registration and presented them for registration by SAIC, and in so doing, had unequivocally represented to PRC Yihe that it would take over the responsibility to register the Qingcheng Pledge.  The Petitioner never came back to PRC Yihe to make any further requests to complete the registration.

(3)  Accordingly, the Petitioner had waived / released PRC Yihe from the obligation under Clause 9.1(d), and in those circumstances, would be estopped from relying on any such breach to establish an EOD.

(4)  In consequence, there being no valid EOD, the SD was founded upon a disputed Debt.

26.There are two preliminary points to note in discussing this ground:

(1)  In the affidavit evidence filed by the Company, some reference had been made to the urgency in signing of the Supplemental Deed and associated documents (including the Corporate Guarantee), and the inability of the Company to seek legal advice in relation thereto. This seemed to suggest some kind of undue influence defence might be taken. However, Ms Xu confirmed at the hearing that no such point was being pursued, and in the circumstances, it is unnecessary to discuss this as a standalone ground.

(2)  Insofar as the Company seeks to suggest that its obligation under Clause 9.1(d) and (e) was only to take all steps that it could to register the Qingcheng Pledge, rather than actually to register the same, and that therefore there was no breach thereof, I do not consider this to be an accurate reading of the clause. The terms of Clause 9.1(d) and (e) are clear on their face – there is no ambiguity as to what the Company was required to do, namely, to register the Qingcheng Pledge and to procure the other shareholders to sign documents to facilitate such registration.

27.In light of the above, the Company’s key argument really comes down to one of waiver / release.

28.There is no dispute between the parties as to the applicable principles on waiver. The requisite elements are that there is / are:

(1)  A legal relationship giving rise to rights and duties between the parties;

(2)  A clear or unequivocal promise or representation by one party that he will not enforce against the other his strict legal rights arising out of that relationship. This may be inferred or implied (from conduct), but nevertheless needs to be clear or unequivocal. In this regard, mere inactivity will not normally suffice;

(3)  An intention on the part of the former party that the latter will rely on the representation. It is sufficient that the promisor knew or ought reasonably to have known that the promise would be acted upon or was in fact being acted upon;

(4)  Actual reliance by the other party; and

(5)  It would be inequitable for the former party to go back on his promise.

(Chitty on Contracts, 33^rd ed., §§4-087 – 4-097).

29.Where the parties differ is in the application of the above principles to the facts.

30.Based on the evidence, the Company seeks to suggest that there are the following matters which give rise to a bona fide defence on substantial grounds:

(1)  In light of the conduct by the Petitioner (essentially, in taking over the registration process and subsequent thereto, not making further requests of the Company to complete the registration process), whether it was reasonable for PRC Yihe to believe that the Petitioner would not insist on the registration, thereby giving rise to an implied promise or representation.

(2)  Whether the Petitioner knew or ought reasonably to have known that such promise or representation would be or was being acted upon.

(3)  Whether PRC Yihe did act upon the promise or representation.

(4)  Whether it would be inequitable for the Petitioner to go back on such promise or representation.

31.The Petitioner’s answer to this consists of the following points.

32.First, it is said that the contemporaneous evidence demonstrates that:

(1)  There was no such clear or unequivocal promise; and/or

(2)  There was no inducement leading the Company to believe PRC Yihe would not insist on its strict legal rights.

33.Aside from Li’s assertions in the affirmation evidence, the sole contemporaneous evidence available in this regard consists of a series of WeChat messages exchanged between representatives of the Petitioner and those of the Company.

34.The messages do indeed show that the Petitioner was involved in the registration process. However, at each juncture, it was also clear that the Petitioner continued to require and request that the registration take place, and had, in fact, indicated that the Company should cooperate with them to facilitate such registration process efficiently. Liao Nan, the Petitioner’s representative (and the affirmant of the Petitioner’s evidence in the present case) chased up on sealing of documents and arrangements at several junctures throughout December 2018.

35.The simple fact is that there was no clear or unequivocal promise arising from the Petitioner’s conduct merely by participating in the registration process.

36.Nor is the Company’s case further assisted by the fact that there was silence or inactivity after the failed registration attempt in January 2019. It is trite that silence and inactivity is, of itself, insufficient. Seen in the context of the prior (equivocal) conduct, this does not take the matter any further.

37.The above point alone is sufficient to dispose of the waiver / release argument.

38.Second, the Petitioner also relies upon Clause 19 of the Terms and Conditions, which states that “no failure or delay by the parties hereto to exercise any right hereunder shall operate as a waiver thereof”.

39.In this regard, the Company takes the point that the Terms and Conditions pre-date the Supplemental Deed, and that Clause 9.1 of the Supplemental Deed is not affected or governed by Clause 19. However, Ms Xu also quite fairly drew to my attention that a similar clause appears in the Qingcheng Pledge, which would, in fact, apply in the context of the waiver / release argument, the end result being that the clause nonetheless needs to be addressed.

40.In answer to this clause, the Company relies upon Po On Auto Accessory v Grand Faith Holdings Ltd, HCA 180/2020, unreported judgment dated 20 August 2010 at §§72-76 per Master Marlene Ng (as she then was). This was a case decided in the context of tenancy agreements and the acceptance of rent as constituting waiver / estoppel. The Plaintiff (landlord) in that case sought to rely on clauses in the tenancy agreements which provided inter alia that no waiver would be inferred from or implied by anything done or omitted by the Plaintiff unless expressed in writing and signed by the Plaintiff. Quite apart from the fact that the relevant clause in the Po On case is somewhat different from the terms of Clause 19, the case is in any event distinguishable on the basis that the Court had already made clear that acceptance of rent with knowledge of a breach is “an unequivocal act of … waiver or estoppel” (§§70 and 76 of the decision). It was in those circumstances that there was some degree of debate as to the effectiveness (or not) of the clause. The position is different from the present case, where I have found above there was no such act of waiver to speak of. As such, I do not consider the Po On case takes the Company’s position any further.

41.For the above reasons, I find that the waiver / release argument does not give rise to a bona fide defence on substantial grounds.

C4.   Ground 2: The Debt Restructuring Agreement

42.The evidence filed in relation to the Debt Restructuring Agreement discussed at some length the execution process and various alleged issues which had arisen in relation to Hangzhou Qingcheng’s execution thereof in August 2019. However, by the time of the hearing, it would appear that matters had moved on, and the parties were agreed that certain conditions precedent (set out in Clause 2 of the agreement) had not yet been fulfilled. This being the case, it was accepted by the Company that the agreement was not yet effective (or not yet “生效” , in the words of the Company’s PRC legal expert).

43.In light of the above, the Company must accept that pending the Debt Restructuring Agreement taking effect, PRC Yihe’s debt remains due and owing (ie it has not, even on the Company’s own case, actually been restructured yet).

44.The true essence of the Company’s argument is, in fact, somewhat more complex. It is said that even if the agreement was not effective (not “生效”), it was nonetheless established (“成立”) and as a matter of PRC law, in the interim period (during what the expert termed the “过渡期”), there was / is imposed upon the Petitioner a good faith obligation not to hinder the satisfaction of the conditions or otherwise act in a way which would jeopardize or frustrate the purpose of the Debt Restructuring Agreement (“Good Faith Obligation”). It was the Company’s argument that “the Petitioner is precluded by its Good Faith Obligation from seeking to recover the Debt from the Company under the Corporate Guarantee.”

45.At the hearing, I made inquiries with Ms Xu in relation to the above argument, raising the issue of how such alleged Good Faith Obligation, even if it were established as a matter of PRC law in the PRC, could impact upon the Petitioner taking steps in Hong Kong to wind up the Company, particularly bearing in mind the fact that the Company was not party to the Debt Restructuring Agreement to begin with. I requested parties to file further written submissions on this issue.

46.In the further written submissions, the Company made reference to the principle that the court will enforce a contractual obligation not to apply for winding up (French on Applications to Wind Up Companies (3^rd ed), §7.426; Re COLT Telecom Group plc [2002] EWHC 2815 (Ch) at §§70-74). In effect, the Court was invited to apply this by way of analogy, since (i) it is recognized that the Company was not party to the Debt Restructuring Agreement, and (ii) the Good Faith Obligation was clearly not a term expressly incorporated in the Debt Restructuring Agreement. In connection with this, it was submitted that since Hong Kong law would recognize foreign illegality as a ground for refusing to enforce a contract irrespective of its proper law (Ryder Industries Ltd v Chan Shui Woo (2015) 18 HKCFAR 544 at §39), similarly, the Companies Court should recognize a foreign law obligation not to petition for winding up.

47.I am not persuaded the above argument raises a bona fide defence on substantial grounds:

(1)  It is apparent that there is no direct authority to support the proposition that a non-contractual foreign law governed obligation can preclude a party from bringing a winding up petition as per its statutory rights. The Petitioner referred to the trite principles that (i) an unpaid creditor is entitled to a winding-up order ex debito justitiae (Re Esquire (Electronics) Ltd [1996] 3 HKC 309 at 313B-C; Re Pritchard [1963] Ch 502 at 520-521); and (ii) the right to petition for such winding up is a statutory right, and it is contrary to public policy to preclude or fetter the exercise of such right (But Ka Chon v Interactive Brokers LLC [2019] 4 HKLRD 85 at §63).

(2)  In the face of these well-settled principles, there is no justification nor scope for applying the propositions cited in paragraph 46 above by way of analogy to preclude or otherwise fetter the statutory right in Hong Kong.

48.As such, I do not consider the second argument gives rise to a bona fide defence on substantial grounds either.

49.The Petitioner also takes a number of other points in relation to the Debt Restructuring Agreement.

50.First, it draws attention to the fact that the mechanism of the agreement does not actually provide for discharge of the Issuer or for novation of the Issuer’s obligation to Guangzhou Shimao:

(1)  Clauses 3 and 4 of the agreement stipulate that Guangzhou Shimao will acquire Hangzhou Qingcheng from PRC Yihe, and in exchange therefor, provide the sum required to the Issuer so that repayments can be made to the Petitioner. The mechanism involves payment from Guangzhou Shimao to flow to the Issuer, and it is the Issuer itself which would then pay off the debt owed to the Petitioner.

(2)  In drawing attention to this clause, Mr Siu invites me to disregard the PRC legal expert evidence filed for and on behalf of the Company, whose expert had opined that the arrangement would amount to something akin to novation under PRC law (if the conditions precedent were satisfied).

51.Second, the Petitioner takes the point that even if the Debt Restructuring Agreement was effective in discharging the Issuer (which the Petitioner says it is not), and even if the Issuer had already been released (which the parties are agreed has not occurred in view of the conditions precedent not yet being fulfilled), the Petitioner relies on the proposition that it can nonetheless enforce the Corporate Guarantee since the contract preserves the right of action notwithstanding any release of the principal Issuer.

52.In so doing, it relies upon Clause 3.1 of the Corporate Guarantee which states as follows:

“Neither the obligations of the Guarantor contained in this Guarantee nor the rights, powers, and remedies conferred in respect of the Guarantor upon the Noteholders by this Guarantee or by law shall be discharged, impaired or other affected by:

…

(c) any time or other indulgence being granted or agreed to be granted to any or all of the Obligors in respect of any of their respective obligations under any Transaction Document or under any other security or guarantee;

(d) any amendment (however fundamental) to, or any variation, waiver or release of, any obligation of any or all of the Obligors under any Transaction Document or under any other security or guarantee. …” (emphasis added)

53.The Petitioner then cites a number of authorities in support of the proposition that the reservation of rights would be effective as against the guarantor so as to render them liable even if the principal obligor had been released (Perry v National Provincial Bank of England [1910] 1 Ch 464 at 471-473; Modern Contract of Guarantee (3^rd ed.) at §§6-076 & 6-079.

54.The Company, on the other hand, places reliance on Commercial Bank of Tasmania v Jones [1893] AC 313 at 316 and Mahant v Singh v U Ba Yi [1939] AC 602 at 607, to assert the proposition that where a release has been given, there is no room for any reservation of rights.

55.Third, the Petitioner suggests that based on the last affirmation filed by the Petitioner dated 8 June 2020 (of Liao Nan), the latest evidence shows that Guangzhou Shimao was no longer involved in the Hangzhou Qingcheng project (ie in effect, withdrawing from performing the Debt Restructuring Agreement). In this regard:

(1)  The Petitioner relies upon WeChat messages exchanged between Liao (for the Petitioner) and Cui (for the Company), whereby Cui says the investing party for the restructuring is now an entity named Jia Yuan (“现在是佳源”), and upon inquiries by Liao about Guangzhou Shimao’s involvement, Cui further says that they are no longer involved (“杭州项目他们不參与了”).

(2)  The Company takes the point that the above cited exchange is not inconsistent with Cui’s earlier evidence dated 15 May 2020, where he said that Guangzhou Shimao was undergoing internal corporate restructuring and would designate another regional associated company to be in charge of the Hangzhou project.

56.I find it unnecessary, strictly speaking, to decide the above three points in disposing of the Amended Petition, in light of the fact that both parties are agreed that the conditions precedent to the Debt Restructuring Agreement have not yet been satisfied. This being the case, the reality is that whatever “novation” or “discharge” might take place upon satisfaction of the conditions precedent, this has not yet become a reality, or “effective” (“生效”) as the Company’s PRC legal expert puts it. It would thus be wholly academic to debate the issues at all.

57.Solely for the sake of completeness, I note that had it been necessary to do so, I would have decided that:

(1)  As to the first issue, the question of whether there had been novation (assuming the conditions precedent were satisfied, which they are not) as a matter of PRC law is an issue dependent on the application of foreign law. Foreign law is an issue of fact to be proved to the satisfaction of the Judge (Grupo Torras SA v Sheik Fahad Mohammed Al Sabah [1995] CLC 1025). I would not have considered it appropriate to simply disregard the PRC legal expert’s evidence in this regard. Indeed, the Petitioner itself had filed expert evidence addressing this very issue. In the circumstances, I would have decided in favour of the Company that there was a potential for argument on this point.

(2)  As to the second issue, I would have agreed with the Company that notwithstanding the authority of Perry (supra), there appears to be room for argument that there is a conflict in the authorities (viz. the Perry, on the one hand,and Jones, on the other (both supra)). I note in particular that even in the Petitioner’s own cited authority (The Modern Contract of Guarantee (3^rd ed.), §6-107), the learned authors accept that there is a potential conflict of authorities. The point does not appear to have been addressed in detail in Hong Kong yet.

(3)  As to the third issue, I would have decided against the Company. On the state of the evidence before the Court, it was obvious that the Petitioner would, by referring to the May 2020 WeChat messages, be relying on the point that there had been a change in the circumstances relating to the Debt Restructuring Agreement such that the agreement would not proceed at all. Being faced with this, Cui could have, but did not seek to, file further evidence to explain the situation. It being incumbent upon the Company to raise a bona fide defence on substantial grounds, I would have found that the state of the evidence demonstrated that the Debt Restructuring Agreement was not going to proceed (and indeed, as at the date of the hearing, no one has indicated otherwise).

58.The simple point is that the Company cannot, even on its own case, assert the argument that novation / release has already occurred, and/or that the principal obligor’s debt has been discharged. At best, all it has is a hope that this might occur in future if the conditions precedent are eventually met. The position dovetails, therefore, into the arguments on the Good Faith Obligation, which has already been discussed and disposed of above.

D.   CONCLUSION

59.Finally, I should note that the Petitioner drew my attention to the decision in Harbor Prosper (HK) Investments Limited v He Jianliang & Anor [2020] HKCFI 1144, where the Petitioner (as plaintiff in that case) had successfully obtained summary judgment against two parties who had provided personal guarantees in favour of the Petitioner in respect of the same Note and obligations thereunder. The Petitioner invited me to consider the reasoning of the Master Gary C C Lam in that case. At the hearing, I clarified with Mr Siu whether he was suggesting that there was any form of issue estoppel arising out of that decision, which he confirmed there was not. As such, whilst I have considered the reasoning of the learned Master in that case, I am not bound by the same, and accordingly have rendered this decision purely on the basis of the arguments and evidence as presented before me.

60.In light of the above reasons, I find that the Company has failed to raise any bona fide defence on substantial grounds. I will make the normal winding-up order accordingly.

61.I thank counsel for their assistance.

r Patrick SIU and Ms Ferrida CHAN, instructed by Kobre & Kim, for the Petitioner

Ms Cherry XU, instructed by Anthony Siu & Co, for the Respondent