Read the full judgment text of CACV 232/2020 on BabelCite. This Court of Appeal judgment was delivered on 23 February 2021 before Kwan VP, Cheung JA and Au JA.
Bankruptcy – appeal against bankruptcy order – statutory demand – deeds of guarantee – sham transactions – standard of review on appeal – factual findings on affidavit evidence – sophisticated business woman – US$25 million odd debt – two term loans of US$9.2 million and US$9 million to BVI companies for acquisition of shares in Burwill Holdings Ltd – debtor's allegation that loans were sham transactions to enable petitioner to acquire approximately 10% of Burwill's shareholding without disclosure to the SEHK – whether judge correctly applied two-pronged test for sham requiring both parties to intend the document would not create the legal rights or obligations it appeared to create and to intend that it would mislead a third party – whether court restricted to four corners of document or may consider external evidence including parties' explanation and circumstantial evidence such as subsequent conduct – whether judge failed to take into account relevant evidence – whether judge's six reasons for rejecting debtor's case as unbelievable were valid – contemporaneous documents including Advice and Confirmation signed by debtor acknowledging binding nature of Guarantees – debtor's failure to raise sham ground in Notice of Intention to show cause under rule 68 of the Bankruptcy Rules, Cap 6A – appellate court applies significant reticence in interfering with primary judge's factual findings – appeal court will not lightly interfere with judge's discretion in making bankruptcy order unless judge erred in law, was under misapprehension of material facts, failed to take relevant matters into account, took irrelevant matters into account, or decision was plainly wrong – debtor's subsequent conduct including arranging payment of interest, becoming executive director of Burwill, and not challenging demands in 2018 was inconsistent with sham – alleged verbal promise by petitioner's former director that Guarantees would not be pursued was uncorroborated and inconsistent with express terms of Guarantees – appeal dismissed – costs to be taxed on party and party basis – indemnity costs not warranted – certificate for two counsel granted to petitioner.
Legal issues: Application of sham transaction test · Failure to take into account relevant evidence · Sufficiency of judge's six reasons for rejecting debtor's case · Indemnity costs on appeal
Outcome: Appeal against bankruptcy order dismissed
Cited by 14 cases · Cites 3 cases