Jeanny Helena Frankslay v. Sy Wai Shan Sandy

Case No.HCB 7035/2019[2020] HKCFI 2616

Court

HCB

Date14 Oct 2020

Judge—

Case Document

100%Judiciary

HCB 7035/2019 &
HCB 7036/2019

[2020] HKCFI 2616

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 7035 OF 2019

________________________

BETWEEN

	JEANNY HELENA FRANKSLAY	Petitioner
	and
	SY WAI SHAN SANDY (施慧珊)	Respondent

________________________

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 7036 OF 2019

________________________

BETWEEN

	JEANNY HELENA FRANKSLAY	Petitioner
	and
	HUNG MAY YEE ANITA (洪美儀)	Respondent

________________________
(Heard together)

Before: Mr Recorder Eugene Fung SC in Court

Date of Hearing: 29 September 2020

Date of Decision: 14 October 2020

________________________

D E C I S I O N

________________________

1.This is the substantive hearing of two bankruptcy petitions (“the Petitions”) presented by the petitioner against Madam Hung May Yee Anita (“Madam Hung”), and her daughter Ms Sy Wai Shan Sandy (“Ms Sy”). The petitions are based on two statutory demands dated 24 October 2018, which are in turn founded upon a judgment of Madam Justice M Chan in HCCT 38/2018 dated 2 October 2018 when her Ladyship enforced an arbitral award from Singapore. On 24 July 2019, Madam Justice Au-Yeung dismissed the applications of Madam Hung and Ms Sy (collectively “the Respondents”) to set aside the Statutory Demands in HCSD 43/2018 and HCSD 44/2018. The Respondents each has a pending appeal to the Court of Appeal in CACV 388 & 389/2019 against Madam Justice Au-Yeung’s decisions to dismiss their setting-aside applications. They contend that this Court should adjourn the petitions pending the determination of the appeals.

A. THE RELEVANT FACTUAL BACKGROUND

2.On 23 April 2018, the Petitioner obtained a final arbitral award (“the Award”) in Singapore against, amongst others, the Respondents for US$4,000,000 and interest thereon, costs, and other fees and expenses.

3.The Petitioner applied to enforce the Award in Hong Kong. On 13 June 2018, the Petitioner obtained an enforcement order from Madam Justice M Chan (“the Enforcement Order”) whereby it was ordered, amongst other things, that the Respondents could apply to set aside the Enforcement Order within 14 days and that the Award should not be enforced as a judgment until the expiration of 14 days or until an application to set aside the Enforcement Order was finally disposed of.

4.On 28 June 2018, the Respondents applied to set aside the Enforcement Order. The application was dismissed by Madam Justice M Chan on 2 October 2018. On that day, her Ladyship entered judgment in HCCT 38/2018 (“the Judgment”) against, amongst others, the Respondents in favour of the Petitioner for US$4,000,000 and interest thereon, costs, and other fees and expenses, and costs in HCCT 38/2018.

5.On 5 October 2018, Ang Cheng Hock JC of the Supreme Court of Singapore dismissed the application of, amongst others, the Respondents to set aside the Award.

6.On 24 October 2018, the Petitioner pursuant to the Judgment served a statutory demand on each of the Respondents (“the Statutory Demands”) for the payment of the judgment sum of US$4,000,000, interest on the judgment sum totalling US$1,657,534.25, and costs in the sum of SG$20,000 (collectively as “the Debt”).

7.On 8 November 2018, Madam Hung applied to set aside the Statutory Demand in HCSD 43/2018. On 12 November 2018, Ms Sy applied to set aside the Statutory Demand in HCSD 44/2018. The grounds to set aside the Statutory Demands were identical, namely that (1) the Respondents each has a claim which exceeds the Debt and (2) the Debt is disputed on grounds which appear to the court to be substantial.

8.The applications to set aside the Statutory Demands were heard by Madam Justice Au-Yeung on 28 March 2019. After the conclusion of the hearing, Madam Hung and Ms Sy respectively commenced proceedings in HCA 760/2019 and HCA 789/2019 against the Petitioner on 30 April 2019 and 3 May 2019.

9.By the decisions in HCSD 43/2018 and HCSD 44/2018 dated 24 July 2019 (“the Decisions”), Madam Justice Au-Yeung dismissed the applications to set aside the Statutory Demands with costs. Pursuant to rule 48(7) of the Bankruptcy Rules, her Ladyship authorised the Petitioner to issue a bankruptcy petition against each of the Respondents upon the expiry of 14 days from 24 July 2019.

10.On 21 August 2019, the Respondents each filed a Notice of Appeal in CACV 388/2019 and CACV 389/2019 against the Decisions of Madam Justice Au-Yeung. I understand that the date of the substantive hearing of the appeals has not yet been fixed.

11.On 14 November 2019, the Petitioner filed a bankruptcy petition against each of the Respondents in these proceedings on the basis that each of them was indebted to the Petitioner in the sum of the Debt as at the date of the Statutory Demands.

B. THE RELEVANT PROVISIONS AND PRINCIPLES

12.Sections 6(1) and 6(2) of the Bankruptcy Ordinance (Cap 6) (“BO”) provide:

“(1)  A creditor’s petition must be in respect of one or more debts owed by the debtor, and the petitioning creditor or each of the petitioning creditors must be a person to whom the debt or (as the case may be) at least one of the debts is owed.

(2)  Subject to sections 6A to 6C, a creditor’s petition may be presented to the court in respect of a debt or debts if, but only if, at the time the petition is presented—

(a)  the amount of the debt, or the aggregate amount of the debts, is equal to or exceeds $10,000 or a prescribed amount;

(b)  the debt, or each of the debts, is for a liquidated sum payable to the petitioning creditor, or one or more of the petitioning creditors, either immediately or at some certain, future time, and is unsecured;

(c)  the debt, or each of the debts, is a debt which the debtor appears either to be unable to pay or to have no reasonable prospect of being able to pay; and

(d)  there is no outstanding application to set aside a statutory demand served under section 6A in respect of the debt or any of the debts.”

13.Section 6A(1) of BO defines a debtor’s inability to pay for the purposes of section 6(2)(c) as follows:

“(1)  For the purposes of section 6(2)(c), the debtor appears to be unable to pay a debt if, but only if, the debt is payable immediately and either—

(a)  the petitioning creditor to whom the debt is owed has served on the debtor a demand (known as the statutory demand) in the prescribed form requiring him to pay the debt or to secure or compound for it to the satisfaction of the creditor, at least 3 weeks have elapsed since the demand was served and the demand has been neither complied with nor set aside in accordance with the rules; or

(b)  execution or other process issued in respect of the debt on a judgment or order of any court in favour of the petitioning creditor, or one or more of the petitioning creditors to whom the debt is owed, has been returned unsatisfied in whole or in part.”

14.The court shall not make a bankruptcy order on a creditor’s petition unless it is satisfied that the debt, or one of the debts, in respect of which the petition was presented is either (a) a debt which, having been payable at the date of the petition or having since become payable, has been neither paid nor secured nor compounded for; or (b) a debt which the debtor has no reasonable prospect of being able to pay when it falls due: see section 6D(1) of BO.

15.Section 9 of BO sets out some of the powers of the Court that can be exercised at the hearing of a creditor’s petition. Relevantly, sections 9(2), 9(3) and 9(5) provide:

“(2)  At the hearing the court shall require proof of the debt of the petitioning creditor and of the service of the petition, and, if satisfied with the proof, may make a bankruptcy order in pursuance of the petition.

(3)  If the court is not satisfied with the proof of the petitioning creditor’s debt or of the service of the petition, or is satisfied by the debtor that he is able to pay his debts or has a reasonable prospect of being able to pay them, or considers that for other sufficient cause no order ought to be made, the court may dismiss the petition.

(5)  Where the debtor appears on the petition and denies that he is indebted to the petitioner, or that he is indebted to such an amount as would justify the petitioner in presenting a petition against him, the court, on such security (if any) being given as the court may require for payment to the petitioner of any debt which may be established against him in due course of law, and of the costs of establishing the debt, may, instead of dismissing the petition, stay all proceedings on the petition for such time as may be required for trial of the question relating to the debt.”

16.Where a bankruptcy petition is issued on the basis of a debt in a statutory demand which in turn is based on a judgment or order, the practice is that the court will neither in an application to set aside a statutory demand go behind the judgment or order and inquire into the validity of the debt, nor as a general rule adjourn the application to await the result of an application to set aside the judgment or order. This practice was established in England (see Practice Note (Bankruptcy: Statutory Demand: Setting Aside) [1987] 1 WLR 119 at §3) and has been repeatedly followed in Hong Kong (see eg Re Malcolm Maydwell [1999] 3 HKLRD 325 at §17 (Le Pichon J); Cheung Sun Lam v Lai Kam Man (unreported, CACV 148/2011, 18 March 2013) §§36-37 (Lam JA)).

17.Where a bankruptcy petition is presented based on a judgment debt, the bankruptcy court would treat the judgment for a sum of money as prima facie evidence that the judgment debtor is indebted to the judgment creditor for that sum. But, in appropriate circumstances, a bankruptcy court can inquire whether there was bona fide consideration for the judgment debt. See Re Tam Mei Kam (unreported, CACV 87/2012, 8 March 2013) §§22, 22.1, 22.2, 22.3, 22.4 and 23 (Yuen JA).

C. THE RESPONDENTS’ CONTENTIONS

18.Mr John Hui (appearing together with Mr Tommy Cheung), on behalf of the Respondents, submits that the only main issue for this Court on this occasion is whether his clients have any reasonable prospect of success in their appeals against the Decisions of Madam Justice Au-Yeung who refused to set aside the Statutory Demands, citing §§25.1 and 25.2 of Re Tam Mei Kam (above) to support this position.

19.Specifically, it is argued on behalf of Madam Hung that she has a counter-claim, set-off and/or cross demand against the Petitioner (1) relying on the Petitioner’s breach of an implied term of a framework agreement dated 12 October 2012, (2) in unjust enrichment based on total failure of consideration and/or mistake of fact, (3) in constructive trust based on the Pallant v Morgan equity and (4) in breach of contractual and/or tortious duties of confidentiality. She asserts that all of the counter-claims, set-offs and/or cross demands equal or exceed the amount of the Debt. Ms Sy as guarantor also relies on such counter-claims, set-offs and/or cross demands against the Petitioner.

20.In their skeleton submissions, the Respondents indicate that they would focus on the counter-claims, set-offs and cross demands based on implied term, unjust enrichment and constructive trust (ie those summarised in (1), (2) and (3) in the previous paragraph).

D DISCUSSION

D1 The Respondents’ approach

21.The Respondents’ approach is to (1) seek to demonstrate that they have a reasonable prospect of success in their appeals against the Decisions in which Madam Justice Au-Yeung refused to set aside the Statutory Demands and (2) have the Petitions adjourned pending the outcome of the appeals.

22.I do not think this approach is correct. Even if the Respondents can demonstrate a reasonable prospect of success in their appeals against the Decisions (refusing to set aside the Statutory Demands), that does not mean that the Respondents can sufficiently rebut the prima facie evidence of their indebtedness.

(1)  As mentioned above, the Debt is founded upon the Judgment, which is based on the Award. The Respondents have sought to set aside the Award in Singapore but their attempt failed in October 2018. Further, there was no appeal against the Judgment enforcing the Award in Hong Kong.

(2)  In other words, the Petitions are based on a judgment debt the judgment of which is subsisting and which the Respondents are not seeking to disturb.

(3)  In Re Tam Mei Kam (above), Yuen JA at §22.1 said the “bankruptcy court will treat a judgment for a sum of money as prima facie evidence that the judgment debtor is indebted to the judgment creditor for that sum”. Accordingly, this Court should treat the Judgment as prima facie evidence that the Respondents are indebted to the Petitioner for the Debt.

(4)  At §§25.1 and 25.2, Yuen JA said:

“25.1 If the judgment debtor has lodged either an application to set aside the judgment (in a case where the judgment did not require a decision on the merits) or an appeal, the bankruptcy court may stay the hearing of the petition to await the result of the application or appeal.

25.2  However, the bankruptcy court need not do so in every case. It may refuse to stay the petition and may proceed to make a bankruptcy order if the judgment debtor fails to satisfy the court that he has a reasonable prospect of succeeding in the application to set aside or the appeal … Put another way, an application to set aside or an appeal falling short of that standard would not be a viable or bona fide one, and the judgment debtor would have failed to rebut the prima facie evidence of indebtedness….”

(5)  It is clear that the “judgment” referred to by her Ladyship mentioned in the quote above is a reference to a judgment which gives rise to the judgment debt.

(6)  The Respondents’ appeals against the Decisions do not constitute a challenge to the Judgment or the Award, and therefore do not strictly amount to an attempt to rebut the prima facie evidence of indebtedness. Section 9(2) of the BO requires the bankruptcy court to be satisfied with the proof of the debt of the petitioning creditor and of the service of the petition before making a bankruptcy order in pursuance of the petition. It does not appear to me that an attempt to appeal against a decision refusing to set aside a statutory demand would undermine the Judgment or the Award, or cast any doubt on the Petitioner’s proof of the Debt.

(7)  In my view, what Yuen JA said in §§26.2 and 27 of Re Tam Mei Kam (above) are relevant:

“26.2 Where the judgment debtor is unlikely to be able to pursue an application to set aside or an appeal for procedural reasons eg where there has been gross and inexcusable delay, the bankruptcy court may consider his case to see if he can rebut the prima facie evidence of indebtedness. Before arriving at a decision, the bankruptcy court will consider the circumstances in which the judgment was obtained. At one end of the spectrum, the court may decide to dismiss the petition even if a regular judgment had been obtained in default, eg if service of a writ had been effected on the judgment debtor’s previous address and he can clearly establish a substantial defence. At the other side of the spectrum is a petition based on a judgment obtained after a full trial on the merits. In the latter situation, the general principle is that the bankruptcy court would inquire into such a judgment only if the judgment debtor can show fraud, collusion or miscarriage of justice, the latter term having been described as “something from which [the court] can conclude that had there been a properly conducted judicial process it would have been found, or very likely would have been found, that nothing was in fact due to the claimant”.

27. Where the judgment debtor has already failed in his application to set aside the judgment or his appeal on substantive grounds at the time of the petition hearing, it would be most unlikely in that situation that the bankruptcy court would find that the judgment debtor could nevertheless rebut the prima facie evidence of indebtedness, unless he could satisfy the court that he could impugn the judgment of the court deciding the setting aside or appeal on the grounds discussed in the paragraph above.” [emphasis added]

(8)  Given that (a) the arbitrator had considered the merits in the arbitration in making the Award and there has been a properly conducted judicial process, (b) the Respondents have failed in their attempt to set aside the Award, (c) the Respondents have not made any attempt to challenge the Judgment, and (d) the Respondents have not identified any fraud, collusion or miscarriage of justice, I do not consider the Respondents are able to rebut the prima facie evidence of indebtedness.

23.For these reasons, I consider it is appropriate for me to make the usual bankruptcy order against each of the Respondents.

24.If, contrary to my views as expressed above, the Respondents’ appeals do constitute an attempt to rebut the prima facie evidence of indebtedness, I now proceed to consider whether the Respondents have demonstrated a reasonable prospect of success in their appeals that they have the alleged cross-claims, set-offs and cross demands against the Petitioner.

D2 The alleged cross-claims, set-offs and/or cross demands

25.In order to fully understand the nature of the alleged cross-claims, set-offs and cross-demands, it is necessary to set out the background leading to the making of the Award in more detail. Such background has been helpfully summarised in §§3-6 of the Oral Judgment of Ang Cheng Hock JC dated 5 October 2018 in dismissing the Respondents’ application to set aside the Award, and I gratefully adopt the same below.

(1)  The dispute between the parties that was the subject of the arbitration arose out of a framework agreement of 12 October 2012 (“the Framework Agreement”), which is governed by Singapore law. Under that agreement, the Petitioner was to acquire the entire shareholding of a company, Good Year Corporation (“GYC”), from Madam Hung for US$5 million. Pursuant to the agreement, the Petitioner made an advance payment of US$4 million and the entire shareholding in GYC, which comprised one share, was transferred to her. At the time of the Framework Agreement, it was contemplated that GYC would become a 20% shareholder in an Indonesian company (“AJE”) which held a mining concession in Indonesia Papua province, upon AJE’s conversion into a foreign investment company (“the Conversion”). Madam Hung’s plan to ensure that GYC becomes a 20% shareholder in AJE was itself pursuant to certain arrangements set out in a joint venture agreement dated 13 September 2012 executed by Madam Hung and a shareholder of AJE.

(2)  Under the terms of the Framework Agreement, the Petitioner was entitled to demand a refund of the US$4 million advance if either of two conditions was fulfilled. The first condition was if the Petitioner, acting reasonably, was not satisfied with the due diligence on the investment. The second condition was if there as a breach, inter alia, of any undertaking given by, amongst others, the Respondents in the Framework Agreement. In such an event, Madam Hung was required to refund the US$4 million advance within 30 days of a demand being made by the Petitioner. In exchange of the repayment, the Petitioner was required to re-transfer the share in GYC back to Madam Hung.

(3)  The Petitioner’s solicitors issued a letter on 25 March 2013 claiming that the Petitioner was not satisfied with the due diligence, and also alleging that there had been breaches of undertakings given by Madam Hung. The Petitioner demanded repayment of the US$4 million advance, but this demand was not complied with. On 23 August 2013, the Petitioner commenced the arbitration against, amongst others, the Respondents to recover the US$4 million advance plus interest.

(4)  In the Award, the arbitrator decided in favour of the Petitioner. He found, inter alia, that the Petitioner acted reasonably when she was not satisfied with the results of the due diligence and also that there had been a breach of an undertaking required AJE to be converted into a foreign investment company by a certain deadline. In the result, the arbitrator ordered, amongst others, the Respondents to pay US$4 million to the Petitioner, with interest.

26.The alleged counter-claim, set-off and/or cross demand based on an implied term:

(1)  The Respondents argue that there must be an implied term in the Framework Agreement to the effect that “once the Petitioner elected to demand repayment of the [advance] pursuant to Clause 8 of the [Framework Agreement], the Petitioner would be under an obligation to return to Madam Hung the shares in GYC in the same condition as when they were transferred from Madam Hung to the Petitioner in the first place in exchange for the [advance] paid (and/or their money equivalent)”.

(2)  From the materials before this Court, I do not believe this argument was raised by the Respondents before Madam Justice Au-Yeung. Indeed, the implied term point was not even included in the Statement of Claim dated 30 April 2019 in HCA 760/2019 that was issued by Madam Hung after the conclusion of the hearing before Madam Justice Au-Yeung. The point appears to have been formally raised in Hong Kong for the first time in the Notices of Appeal dated 21 August 2019 against Madam Justice Au-Yeung’s Decisions. It is asserted by Madam Hung in §3 of her Notice of Appeal that Madam Justice Au-Yeung “erred in failing to recognise that [Madam Hung] has a counterclaim, set-off and/or cross demand in breach of an implied term of the [Framework Agreement] against the [Petitioner] which equals or exceeds the amount of the Debt specified in the Statutory Demand”.

(3)  As pointed out by Mr Kenny Lin on behalf of the Petitioner, the implied term point was in fact raised by the Respondents in Singapore when they sought to set aside the Award. However, the point was rejected by the Singapore Court. In §§13 to 15 of his Oral Judgment, Ang Cheng Hock JC said:

“13.  I must point out that the Plaintiffs [including the Respondents] tried to draw a distinction between the conspiracy allegations, which they appeared to accept the arbitrator did not have to make a finding on, and the issue of whether it would be unjust or inequitable for the refund of the advance to be ordered given that [GYC] was now an “empty shell”, which they argued the arbitrator should have decided. In this regard, the Plaintiffs argued that clause 8.5 of the Framework Agreement implicitly required the share in [GYC] to be returned in the same condition it was in when it was first transferred by [Madam Hung] to [the Petitioner]. This was no longer possible, which made it unjust then for [the Petitioner] to have to refund the advance.

14.  I cannot accept this distinction. Throughout the arbitration proceedings, the Plaintiffs had always put its case as one where the conspiracy by [the Petitioner], [N] and [P] resulted in [GYC] being worthless, and as a consequence, [the Petitioner] should not be entitled to claim the refund of the advance. The Plaintiffs never made any separate, standalone argument that clause 8.5 was no longer workable because it would produce an unjust outcome. That being the case, the arbitrator could not be criticised for not having considered this argument or not deciding this “Empty Shell Issue”. In any event, as I explained earlier, the arbitrator could not have come to a different conclusion on [the Petitioner’s] claim because his focus, quite correctly, was on whether the demand made by [the Petitioner] on 25 March 2013 should have been complied with at that time, and he had found that it should have been. That being so, the fact that [GYC] later became an “empty shell” would have been irrelevant to his reasoning.

15.  As such, I cannot accept the Plaintiffs’ argument that they are entitled to rely on s24(b) of the IAA to set aside the award. I do not find that there has been a breach of natural justice in connection with the making of the award by which the rights of the Plaintiffs have been prejudiced.”

(4)  The Respondents have not advanced any submissions to contend why the Singapore Court is said to be wrong in rejecting the implied term point. In these circumstances, I cannot see how the Respondents can be said to have a reasonable prospect of success in seeking to overturn Madam Justice Au-Yeung’s Decisions on the implied term point, particularly when the point was not even raised before her Ladyship.

(5)  On behalf of the Petitioner, Mr Lin submits that the advancement of the implied term point in the appeals in Hong Kong would constitute a collateral challenge against the decision of the Singapore Court, and would amount to an abuse of process as it would bring the administration of justice into disrepute. I see the force of the submission but it is unnecessary for me to rely on the abuse of process point to come to the view that the Respondents have not shown a reasonable prospect of success in their appeals in CACV 388 and 389/2019.

27.The alleged counter-claim, set-off and/or cross demand based on unjust enrichment:

(1)  The Respondents argue that if the court takes the view that the implied term does not exist, or that the transfer of GYC shares to the Petitioner was not done pursuant to any contract, the Respondents have a claim of unjust enrichment against the Petitioner because (a) the Petitioner is enriched by her receipt of all the shares in GYC at the value of at least HK$12.5 million, (b) the Petitioner’s enrichment is at the expense of Madam Hung and (c) the enrichment is unjust because there is a total failure of consideration and/or a mistake of fact.

(2)  Again, the unjust enrichment claim was neither advanced before Madam Justice Au-Yeung nor mentioned in Madam Hung’s Statement of Claim dated 30 April 2019 in HCA 760/2019. It too was raised for the first time in the Notices of Appeal against the Decisions.

(3)  It is a principle in the law of unjust enrichment that restitutionary remedies cannot be awarded where their effect would be to subvert what the parties have agreed in a valid contract: see eg G Virgo, The Principles of the Law of Restitution (3^rd ed, 2015) pp 133-134. Therefore, for example, where a benefit is transferred to the defendant pursuant to a contractual obligation, the continued existence of the contract will usually defeat the restitutionary claim. As Millett LJ said in Portman Building Society v Hamlyn Taylor Neck (a firm) [1998] 4 All ER 202 at 208d-e:

“The continuing validity of the transaction under which the money was paid to the firm is, in my judgment, fatal to the society's claim. The obligation to make restitution must flow from the ineffectiveness of the transaction under which the money was paid and not from a mistake or misrepresentation which induced it. It is fundamental that, where money is paid under a legally effective transaction, neither misrepresentation nor mistake vitiates consent or gives rise by itself to an obligation to make restitution.”

Similarly, in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, Ribeiro PJ at §92 said:

“While a contract continues to subsist between the parties, one party who makes a payment to the other party in accordance with his obligations under that contract cannot be allowed to mount a claim in restitution for the return of that sum since such a claim would be inconsistent with what the parties had agreed. It is in this sense that the contract would be “undermined” or, as Professor Birks puts it, that the restitutionary claim would “subvert bargains” (Birks, An Introduction to the Law of Restitution (1989 Rev ed.) p 47).”

(4)  Applying these principles, the law of unjust enrichment only becomes relevant if the Respondents have a case that the GYC shares were transferred to the Petitioner in circumstances other than pursuant to the Framework Agreement. At the hearing, the Court asked the Respondents to identify the factual basis upon which the GYC shares were transferred which would give rise to a claim of unjust enrichment. Mr Hui submitted that the GYC shares were transferred by Madam Hung to the Petitioner pursuant to some alleged common understanding (which will be discussed in further detail below).

(5)  I am unable to accept Mr Hui’s submission. There are provisions in the Framework Agreement governing how the Petitioner would acquire the GYC shares from Madam Hung. In particular, clause 2.1 provides that the Petitioner or her nominee should purchase the GYC shares from Madam Hung subject to the terms and conditions of the Framework Agreement. Further, clause 3.2 records the parties’ agreement that the GYC shares would be legally, validly and properly transferred to the Petitioner upon completion of the sale and purchase as set out in the Framework Agreement. It has never been contended by the Respondents that the alleged common understanding was to replace the entire Framework Agreement. Without seeking to set aside the Framework Agreement, I am unable to see how the Respondents can properly argue that the GYC shares were transferred to the Petitioner in circumstances other than in pursuance of the Framework Agreement so as to enable them to bring a claim in unjust enrichment for the value of the GYC shares.

(6)  In any event, as mentioned earlier, the unjust enrichment point was not put forward by the Respondents for Madam Justice Au-Yeung’s consideration. Further, no submission was made to her Ladyship that the GYC shares were transferred pursuant to some alleged common understanding, or in circumstances other than pursuant to the Framework Agreement. The unjust enrichment point that the Respondents are now seeking to raise in their appeals is a fact-sensitive point. In reliance of Cheung Sun Lam v Lai Kam Man (above) §20 (Lam VP), Mr Lin submits that the Respondents would not be able to take this new point in the appeals because of the Flywin principle. The Respondents have not sought to demonstrate how the Flywin objection may be overcome.

(7)  In these circumstances, I am unable to see how the Respondents can be said to have a reasonable prospect of success on the unjust enrichment point in the appeals.

28.The alleged counter-claim, set-off and/or cross demand based on constructive trust:

(1)  The Respondents argue that “prior to the completion of the [Conversion], the Petitioner made an undertaking to Madam Hung’s husband and/or her that the Petitioner would procure (or alternatively, not hinder, obstruct, impede and/or frustrate) the [Conversion] with 20% and 50% of AJE’s shares held by GYC and Madam Hung (by herself and/or her corporate vehicle(s)) respectively … in exchange for the transfer of the shares in GYC to the Petitioner prior to the completion of the [Conversion]”. This alleged undertaking has been referred to by the Respondents as the “Common Understanding and Conditions” (“the Alleged Common Understanding”).

(2)  The Respondents did not contend that there was the Alleged Common Understanding before Madam Justice Au-Yeung. This was confirmed by Mr Hui at the hearing. I am also unable to find the Alleged Common Understanding (in such terms as relied upon by Mr Hui on behalf of the Respondents) in Madam Hung’s Statement of Claim dated 30 April 2019 in HCA 760/2019. I note, however, that a somewhat different undertaking was pleaded by Madam Hung in paragraph 10 of her Statement of Claim that the Petitioner had allegedly given “an explicit verbal undertaking to [Madam Hung’s] husband that this sale/ purchase transaction would be kept strictly confidential and [the Petitioner] would officially become a 20% shareholder of AJE after Conversion and the Corporate Restructuring”. No explanation has been given by the Respondents on the discrepancy between the Alleged Common Understanding and the pleaded undertaking.

(3)  In any event, whether or not there was the Alleged Common Understanding is a question of fact. The issue was not raised before Madam Justice Au-Yeung and the Respondents will face the Flywin objection when they seek to raise the new point in the appeals. Again, the Respondents have not sought to demonstrate how the Flywin objection may be overcome.

(4)  Accordingly, I am not satisfied that the Respondents have a reasonable prospect of success on the constructive trust point in the appeals.

29.For the above reasons, even if it is necessary to ask whether the Respondents have demonstrated a reasonable prospect of success in the appeals, I would have answered the question in the negative.

30.I make the usual bankruptcy order against each of the Respondents. I also make an order nisi that the Petitioner’s costs of the proceedings be paid out of the bankruptcy estates, and the Official Receiver’s costs be paid out of the deposit on the petitions.