PAN SUTONG v CHINA CITIC BANK CORPORATION LIMITED, TIANJIN BRANCH

CACV 525/2021
CACV 261, 265 & 266/2022
CAMP 294/2022
(Heard together)

[2024] HKCA 580

On Appeal From [2022] HKCFI 2076

CACV 525/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 525 OF 2021

(ON AN APPEAL FROM APPLICATION TO SET ASIDE A STATUTORY DEMAND NO 3 OF 2021)

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CACV 261/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 261 OF 2022

(ON AN APPEAL FROM BANKRUPTCY PROCEEDINGS NO 6548 OF 2021)

____________

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CACV 265/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 265 OF 2022

(ON AN APPEAL FROM COMPANIES (WINDING-UP) PROCEEDINGS NO 295 OF 2021)

____________

____________

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CACV 266/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 266 OF 2022

(ON AN APPEAL FROM BANKRUPTCY PROCEEDINGS NO 6548 OF 2021)

____________

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CAMP 294/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 294 OF 2022

(ON AN INTENDED APPEAL FROM COMPANIES (WINDING-UP) PROCEEDINGS NO 295 OF 2021)

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(Heard together)

_________________

J U D G M E N T

_________________

Hon G Lam JA (giving the Judgment of the Court):

Table of Content

A.  Introduction

1.  There are four appeals and one application for leave to appeal together with an application to adduce further evidence before the court all arising from either the bankruptcy proceedings against Mr Pan Sutong (“Pan”) or the winding up proceedings against his company, Silver Starlight Ltd (“Silver Starlight”).  The appeals and applications will be more easily identified after we have described the proceedings and orders made below.  Ultimately, what is at stake is whether Pan should be adjudicated bankrupt and Silver Starlight wound up by the court.

2.  The petitioners, both for bankruptcy and winding up, are three banks within the CITIC group, namely, (1) China CITIC Bank Corporation Limited, Tianjin Branch; (2) CITIC Bank International (China) Ltd, Beijing Branch; and (3) China CITIC Bank International Ltd.  We shall refer to them as the “1^st, 2^nd and 3^rd Bank” respectively, and together as the “Banks”. 

B.  Factual background

3.  Silver Starlight is a company incorporated in the British Virgin Islands (“BVI”) on 25 January 2017 and wholly owned by Pan.  Silver Starlight holds shares (amounting to 35.585% of the issued share capital) in a company incorporated in Hong Kong called Goldin Properties Holdings Ltd (“Goldin Holdings”).  Goldin Holdings was, until its privatisation in August 2017, a listed company on the Stock Exchange of Hong Kong.  The shares held by Silver Starlight were those acquired by it as the offeror from the public shareholders during the privatisation exercise.  The other 64.415% of the shareholding in Goldin Holdings was held by Pan (4.811%) and two other BVI companies also wholly owned by him (namely, Clear Jade International Ltd, holding 3.302%, and Goldin (Investment) Ltd, holding 56.502%).

4.  Goldin Holdings is a holding company that ultimately holds a very substantial property development project in Tianjin which comprises a landmark skyscraper called Goldin Finance 117 and high-end residential estates and leisure facilities (“Project”). 

5.  The Project is held by Goldin Holdings through a corporate chain consisting of the following wholly‑owned subsidiaries: (1) Gold Novel Ltd, a BVI company registered in Hong Kong under Part XI of the predecessor Companies Ordinance (Cap 32), which holds (2) Port Rich Ltd, a company incorporated in Hong Kong, which holds (3) Proman International Ltd, also a Hong Kong company, which in turn holds (4) Goldin Properties (Tianjin) Co Ltd (“Goldin Tianjin”), a company incorporated in the Mainland and registered in Hong Kong under Part XI of the predecessor Companies Ordinance.  Goldin Tianjin holds two pieces of land in Tianjin which form part of the site of the Project as well as four Mainland companies which hold various interests in the Project.

6.  In May 2017, the 1^st and 2^nd Banks lent HK$8 billion to Silver Starlight (HK$7.93 billion from the 1^st Bank and HK$70 million from the 2^nd Bank) pursuant to a facility agreement dated 15 May 2017, and the 3^rd Bank lent HK$4 billion to Silver Starlight pursuant to another facility agreement of the same date.  As the terms of the two facility agreements are virtually identical, we shall simply refer to them as the “Facility Agreements”.

7.  The two loans were made principally for the purpose of financing the payment by Silver Starlight of the consideration for the acquisition of the shares in Goldin Holdings from the public shareholders in the privatisation mentioned above.  The loans were for the term of 3 years, subject to an extension of 12 months at the borrower’s request upon certain conditions being satisfied.  Interest is payable at the specified rate every 3 months.  Upon the occurrence of any event of default (which includes the non‑payment of any amount due including interest), the agent (ie the 3^rd Bank) may declare all or part of the loans to be immediately due and payable.

8.  On the same date of the Facility Agreements, Pan executed a personal guarantee in favour of the lenders of the HK$8 billion loan (ie the 1^st and 2^nd Banks).  Silver Starlight also executed a share charge charging its shares in Goldin Holdings in favour of the 1^st and 2^nd Banks as security for the HK$8 billion loan.

9.  In August 2017, Goldin Holdings was privatised and delisted.

10.  Several months after the drawdown of the loans, on 20 November 2017, Silver Starlight, Pan, Goldin Holdings, Proman International Ltd and Goldin Tianjin executed a Side Letter promising to procure and ensure that Goldin Tianjin would grant a mortgage over the two pieces of land it owned in the Project (“Mortgaged Land”) in favour of the 1^st and 2^nd Banks as security for the HK$8 billion loan.  Goldin Tianjin did so on 30 November 2017.

11.  In November 2019, Silver Starlight went into default of payment of interest for both loans.  By solicitors’ letters dated 10 December 2019, the 3^rd Bank, as agent, gave notice to Silver Starlight under the Facility Agreement for the HK$8 billion loan that because of the non‑payment of interest, the entire loan of HK$8 billion had become immediately due and payable, and gave like notice to Pan as the guarantor.  Apart from paying part of the overdue interest on 8 January and 29 May 2020, no further payment was made by Silver Starlight.  Irrespective of the acceleration notice, the HK$8 billion loan would have become due for repayment on 15 May 2020.

12.  Following unsuccessful negotiations between the parties in 2020, from the end of 2020 onwards, the Banks began to take enforcement steps.  On 24 December 2020 the Banks’ solicitors issued a statutory demand to Silver Starlight for the HK$8 billion loan, which was superseded by a subsequent statutory demand issued and served on Silver Starlight on 11 January 2021.  On 16 February 2021, a statutory demand was also issued by the Banks’ solicitors to Pan to demand repayment of the HK$8 billion loan.

C.  The legal proceedings

13.  Silver Starlight’s default in payment has given rise to several sets of legal proceedings in Hong Kong.  It is necessary to refer to them in some detail to provide the context for the matters now before this court.

14.  In response to the Banks’ demand for repayment, on 22 February 2021, Silver Starlight applied by originating summons (HCMP 222/2021) for an injunction to restrain the Banks from presenting a winding-up petition based on the HK$8 billion loan.  Two main grounds were relied upon: first, that the jurisdictional requirements for winding up a foreign company are not satisfied, and secondly, that there was a bona fide dispute of the debt on substantial grounds.

15.  In particular, in relation to the dispute of the debt, Pan said that he initially did not wish to lay out as large an amount as HK$12 billion to privatise Goldin Holdings.  It was the CITIC group, which comprised the Banks, who offered to finance the privatisation with loans and, thereafter, to procure buyers to acquire properties in the Project.  Pan said that in the course of the negotiations in around April or May 2017, he and representatives of the CITIC group (in particular, Mr Sun Deshun (孫德順) (“Sun”), the former chairman of the 1^st Bank) reached a verbal agreement (“Overall Agreement”) that: (1) the CITIC group would provide loan facilities in the aggregate amount of HK$12 billion to Silver Starlight for acquiring Goldin Holdings shares in the hands of public investors for the purpose of the privatisation; (2) upon the privatisation of Goldin Holdings, the CITIC group would procure and arrange for buyers and/or investors to acquire land and properties in the Project; and (3) repayments by Silver Starlight of its liabilities under the loan facilities extended by the CITIC group “shall come from the proceeds from selling of land and properties” in the Project (whether procured and arranged by the CITIC group or otherwise).[1]  Pan also said that Sun represented to and agreed with him that the Banks would first enforce their security over the Mortgaged Land for the repayment of their loans, and would only pursue Silver Starlight and Pan for any amount outstanding after such enforcement (“Representation”).  It is said that the Banks’ intended recovery actions against Silver Starlight (including a winding-up petition) without first exhausting their security rights over the Mortgaged Land would be a breach of the Overall Agreement and the Representation.  It is further said that the Banks had acted in breach by obstructing the realisation of the Mortgaged Land.  In line with the arguments advanced before the courts, in this judgment we shall treat the Overall Agreement case as inclusive of the Representation as well.

16.  On 5 March 2021, Pan also brought an application to set aside the statutory demand served on him (HCSD 3/2021), contending that there was a bona fide dispute of the debt based on allegations similar to those raised by Silver Starlight.

17.  At a directions hearing in March 2021, DHCJ MK Liu declined to make an order for Silver Starlight’s injunction application and Pan’s application to set aside a statutory demand to be heard together.  Each of the two sets of proceedings therefore proceeded at its own pace. 

18.  As it happened, Silver Starlight’s application was determined first.  It was heard before DHCJ MK Liu on 31 May 2021.  In his judgment handed down on 3 June 2021, the deputy judge decided both the jurisdiction point and the dispute of debt point against Silver Starlight and dismissed its originating summons (“CFI Injunction Decision”).[2]

19.  Silver Starlight appealed against the CFI Injunction Decision on an urgent basis.  The appeal was heard and dismissed by this Court on 10 August 2021, with reasons handed down on 25 August 2021 (“CA Injunction Decision”).[3] It should be noted that in dismissing the appeal, this court also dismissed Silver Starlight’s application by summons dated 26 July 2021 for permission to adduce new evidence in the form of an affirmation of Peng Jianyin (彭建寅) (“Peng”) dated 3 July 2021.  We shall refer to it as “Peng’s 1^st affirmation”.  Its contents are summarised in §38 below.  This court refused to admit the new evidence.

20.  On the day following the dismissal of the appeal, 11 August 2021, the Banks presented a petition for the winding up of Silver Starlight (HCCW 295/2021) based on its indebtedness for the HK$8 billion loan.

21.  Meanwhile, Pan’s application to set aside the statutory demand against him came before the court for directions.  An order was made by Anthony Chan J on 4 June 2021 for the Banks to file evidence in opposition within 21 days, and for Pan to file evidence in reply within 14 days thereafter.  It was specifically ordered that no new issue be raised in the reply evidence without leave and no further affirmation be filed without leave.  Pan’s reply evidence was due on 9 July 2021 but not filed until 6 August 2021 and then only pursuant to an unless order made by consent (consisting of Pan’s 2^nd affirmation and the same Peng’s 1^st affirmation as sought to be adduced as new evidence in the injunction appeal).  By summons dated 7 September 2021, the Banks applied for leave to adduce evidence in reply to Peng’s 1^st affirmation.  By summons dated 4 October 2021, Pan applied for leave to adduce his 3^rd affirmation in the statutory demand proceedings which exhibited, inter alia, a draft 2^nd affirmation from Peng (“draft Peng’s 2^nd affirmation”) and the transcript of a recorded telephone conversation between Peng and Pan on 27 September 2021 (“first transcript”).

22.  Pan’s application to set aside the statutory demand and the two summonses to file further evidence were heard together before DHCJ Le Pichon on 15 October 2021.  In her judgment dated 19 November 2021 (“Statutory Demand Judgment”),[4] the judge granted the Banks leave to adduce evidence in reply to Peng’s 1^st affirmation, but allowed Pan to adduce only a small part of the further evidence he had put forward.  She went on to refuse to set aside the statutory demand, finding that Pan’s application to set aside the statutory demand was a collateral attack on the CFI and CA Injunction Decisions, and that it was an abuse of process for Pan to re-litigate settled issues.  Further, the judge did not consider that Pan had met the requisite threshold for showing that he had a defence of substance, as the evidence adduced was “far from being ‘sufficiently precise factual evidence which is believable’”.[5]

23.  On 24 November 2021, Pan lodged an appeal (CACV 525/2021) against the Statutory Demand Judgment.  We shall refer to this as the “Statutory Demand Appeal”.  On the next day, the Banks presented a bankruptcy petition against Pan (HCB 6548/2021) based on the statutory demand.

24.  Both the winding up petition against Silver Starlight and the bankruptcy petition against Pan came on for substantive hearing together before Linda Chan J on 7 June 2022.  The judge reserved her decision at the conclusion of the hearing.

25.  Whilst judgment was pending, on 28 June 2022 Silver Starlight and Pan each issued a summons in their respective proceedings, asking for leave to file a further affirmation of Pan[6] and for the determination of the petitions to be postponed to a date not earlier than 7 October 2022.  The further affirmation of Pan in each case, which was identical in substance, stated that there had been a new development since the hearing on 7 June 2022, in that there was a prospective financier, Oaktree Capital Management (“Oaktree”), who could extend a loan to Silver Starlight (to be guaranteed by Pan) to pay off the Banks’ petition debts.  He therefore believed that he and Silver Starlight should be able to repay the petition debts within “a short period of time”.

26.  The new summonses were opposed by the Banks by letter dated 29 June 2022.  On the same date, the judge, by letter, tersely refused leave, stating that judgment would be handed down in the usual way unless the debts were repaid in full.  This was treated as an order made in each case dismissing Pan’s and Silver Starlight’s summonses of 28 June 2022 respectively.

27.  On 4 July 2022, Pan filed an appeal (CACV 261/2022) against the Judge’s decision of 29 June 2022 in his bankruptcy proceedings.  We shall refer to this as the “Postponement Appeal”. 

28.  Likewise, Silver Starlight took steps to appeal, but as it needed leave, it filed a summons on 4 July 2022 to apply to the judge for leave to appeal.  On 28 July 2022, the judge heard the summons and dismissed it.  On 9 August 2022, Silver Starlight filed a summons in the Court of Appeal (CAMP 294/2022) re-applying for leave to appeal against the judge’s decision of 29 June 2022 in the winding up proceedings.  We shall refer to this as the “Postponement Leave Application”.

29.  Meanwhile, having refused to defer determining the petitions, on 8 July 2022 Linda Chan J handed down her judgment, making a winding up order against Silver Starlight and a bankruptcy order against Pan (“Bankruptcy and Winding Up Judgment”).[7] The judge held that the relevant determinations and findings made by DHCJ MK Liu in the Injunction Decision and on appeal by the Court of Appeal, and by DHCJ Le Pichon in dismissing Pan’s application to set aside the statutory demand, are binding upon Pan and Silver Starlight who were precluded from re-litigating the same issues.

30.  On 11 July 2022, Silver Starlight and Pan each lodged an appeal against the winding up order and bankruptcy order respectively (CACV 265/2022 and CACV 266/2022).  We shall refer to these appeals as the “Winding Up Appeal” and the “Bankruptcy Appeal” respectively.

31.  On 5 September 2022, the Banks issued a summons in the Postponement Appeal and the Postponement Leave Application for leave to adduce new evidence regarding primarily what had happened at the first meeting of creditors held on 11 August 2022 in Pan’s bankruptcy (as described below).

32.  By judgment dated 14 March 2023,[8] this court directed that there be a rolled-up hearing of Silver Starlight’s Postponement Leave Application (so that the hearing would be treated as the hearing of the appeal itself if leave was granted), to be heard together with Pan’s Statutory Demand Appeal, Pan’s Postponement Appeal, the Winding Up Appeal and the Bankruptcy Appeal.  The Banks’ application for leave to adduce new evidence in the Postponement Appeal was granted, but the corresponding application for leave to adduce the same new evidence in relation to the Postponement Leave Application was adjourned to be heard at the combined hearing directed.

33.  We shall deal below with the matters before us in this sequence:

(1)  Pan’s Statutory Demand Appeal (CACV 525/2021);

(2)  Pan’s Postponement Appeal (CACV 261/2022);

(3)  Silver Starlight’s Postponement Leave Application (CAMP 294/2022) (as a rolled-up hearing) and the Banks’ application to adduce new evidence for the appeal if leave to appeal was granted to Silver Starlight;

(4)  Silver Starlight’s Winding Up Appeal (CACV 265/2022);

(5)  Pan’s Bankruptcy Appeal (CACV 266/2022).

D.  Silver Starlight’s injunction application and appeal

34.  Before coming to the matters to be determined, given there are arguments about estoppel and abuse of process, it is convenient at this juncture to describe in more detail what evidence was placed before DHCJ MK Liu in Silver Starlight’s application for injunction to restrain the presentation of a winding up petition and before the Court of Appeal in the appeal from DHCJ MK Liu’s decision.

D1.  The evidence before DHCJ MK Liu

35.  The relevant evidence before DHCJ MK Liu was in summary as follows:

(1)  Silver Starlight filed an affirmation of Pan dated 19 February 2021 in support of its application for injunction.  In this affirmation, Pan said that in or around early 2017, he had discussions with key personnel and representatives from the CITIC group (which comprised the Banks) including Sun, Peng, Wang Li Wei (王立偉) and Wang Tong (王通).  They told Pan that various investors wished to acquire interests in the Project.  Regulatory requirements applicable to Goldin Holdings would however complicate matters and deter potential investors.  The idea of privatising Goldin Holdings therefore came up.  Pan was initially not interested, but the CITIC group were eager and offered to finance the entire privatisation exercise by way of loans and thereafter to procure buyers to acquire land and properties in the Project. Between February and May 2017, Pan further negotiated with the CITIC group’s representatives and reached a verbal agreement he called “the Overall Agreement” in or around April or May 2017, which he described in these terms:

“ (a) The CITIC group will provide loan facilities in the aggregate amount of HK$12 billion to [Silver Starlight] to acquire shares of Goldin Holdings in the hands of public investors for privatisation of Goldin Holdings.

(b) Upon the successful privatisation of Goldin Holdings, the CITIC group will procure and arrange for buyers and/or investors to acquire land and properties under the Tianjin 117 Project.

(c) Repayments by [Silver Starlight] of its liabilities under the loan facilities provided by the CITIC group shall come from the proceeds from selling of land and properties under the Tianjin 117 Project (whether procured and arranged by the CITIC group or otherwise).”

Pan said that the Overall Agreement was also entirely consistent with the representation by and agreement of Sun (i.e. the Representation as defined above) on behalf of the CITIC group that:

“ in respect of [Silver Starlight’s] liability under the Facility Agreement [defined to mean the HK$8 billion loan facility agreement dated 15 May 2017], the [Banks] would enforce their right to the security over the Mortgaged Land to satisfy any outstanding debt, and would only demand [Silver Starlight] and [Pan] for any outstanding, unsatisfied amount under the Facility Agreement after the enforcement of such security.”

Pan said it was pursuant to the Overall Agreement and Representation that Silver Starlight and he agreed to proceed with the privatisation of Goldin Holdings and borrow money from the Banks.

(2)  In response, the Banks filed a number of affirmations in March 2021:

(a)  Wen Jianxiu (文建秀) (“Wen”), deputy general manager of the Legal Protection Department of the 1^st Bank, made an affirmation stating that Sun was involved in a criminal investigation in the Mainland and was being held in custody in a detention centre in Ji’nan, Shandong, but was permitted by the authorities, at the 1^st Bank’s request, to provide evidence by way of a signed statement (情況説明), which Wen exhibited.

(b)  Tao Lili (陶立里), a Mainland lawyer in the employ of the 1^st Bank, witnessed Sun making the signed statement in the detention centre, and made an affirmation to that effect.

(c)  In his statement, Sun said that the privatisation was organised by Pan, and the 1^st Bank and Sun had not provided any opinions or suggestions.  Sun said the Project lacked clear orientation and deviated from the Tianjin market and that, therefore, after the privatisation, the Banks immediately linked the loans with all projects of Pan by way of risk control.  Sun said there were no oral agreements between Pan and him and that he had never promised Pan that the 1^st Bank could only request for loan repayment after the bank had enforced the security.

(d)  Wang Liwei (王立偉), former president of the Tianjin Branch of the 1^st Bank, made an affirmation that he had never heard before what Pan had alleged about the Overall Agreement.  He said it was Pan who first raised the idea of privatising Goldin Holdings.  Pan asked the Banks to take up certain previous financing provided by another financier called “China Cinda” so that China Cinda could finance the privatisation.  There were accordingly several meetings between the CITIC group and China Cinda.  China Cinda however subsequently dropped out, and the CITIC group decided it could participate in the loans for the privatisation subject to Pan’s personal guarantee and collaterals over the assets of the Project.  Wang Liwei also said that interest was paid on the loan even though the Project was under construction and not yet sold, showing that funds for repayment were not to be from the sale of interests in the Project.  He said that the Banks met with Pan in Hong Kong on 15 January 2019 when Pan said that he would pay off the Banks’ loans through refinancing.  An internal report was exhibited which stated that Pan said “other banks were supportive” and that he “would proceed with refinancing to settle our loans”.[9]  There was another meeting on 15 April 2019 in Beijing where Pan said he expected he could repay the Banks upon selling two property projects in Ho Man Tin, Hong Kong.  A copy of the minutes was exhibited, which recorded that Pan said the source of repayment of the Banks’ loans depended on offshore refinancing (還款來源依賴於境外的籌融資) and that the Banks demanded that proceeds of sale of the Hong Kong properties should be used to repay the Banks’ loans (香港項目囘款後要安排資金償還我行貸款 and 還款計劃應與何文田項目的銷售計劃掛鈎).[10]

(e)  Wang Tong (王通), the chief risk officer of the 1^st Bank at the time, made an affirmation that it was Pan who proposed the privatisation of Goldin Holdings.  The bank was not optimistic about the Project and considered the Project itself was insufficient security. He exhibited a public announcement by China Cinda in March 2016 that it would advance a loan of HK$9 billion to Goldin Holdings.  He referred to the complicated loan and security documentation and said that it was impossible to have the Overall Agreement made orally.  He said it would be quite difficult for the Banks’ loans to be repaid with sale proceeds of the Project due to exchange control, and that interest had to be paid every 3 months starting from August 2017 when the Project was still under construction.

(f)  Li Yajun (李亞軍), deputy general manager of the Legal Protection Department of the 1^st Bank, stated that, as evidenced in an internal communication,[11] in October 2016, the 1^st Bank had already refused to offer housing mortgage loan facilities in relation to a residential development within the Project, taking the view that the estimated sales prospect was not good.  He exhibited the Discussion List for the Credit Review Meeting of the Head Office of the 1^st Bank in around April 2017 which stated that it was Pan who wanted to privatise Goldin Holdings because he did not wish to share with the public what he considered to be the very high value of the Project (潘蘇通認爲天津項目大部分建成，價值巨大，不願在上市公司體現利潤分紅，一直計劃私有化).  The original plan was for China Cinda to be the principal lender of the funds for privatisation of Goldin Holdings but as China Cinda had pulled out, the Banks would form a syndicate to finance the privatisation.[12]  The source of repayment was stated to be primarily Pan’s personal funds and enterprises, given the uncertainty regarding the cash flow of the Project itself (因此項目自身現金流還款能力存在較大不確定性，未來還款可能更多依靠潘蘇通控制的其他企業資金支持，以及潘蘇通個人的資金調配和融資能力).  The secondary source of repayment included mortgage, pledge and personal guarantee.  Li Yajun also exhibited the Discussion List for a further Credit Review Meeting on 8 May 2017 as well as the internal approval of the Head Office.[13]  In relation to the events after default, he said that the 1^st Bank participated in the financial creditors committee of Goldin Tianjin but did not oppose the sale of the collaterals.

(g)  Wong Man Kin (黃文健), deputy executive general manager of the 3^rd Bank, made an affirmation.  He exhibited the credit application form and the internal approval documents of the 3^rd Bank relating to the HK$4 billion loan.  It was originally envisaged that the HK$4 billion would form a syndicate loan with a HK$9 billion loan lent by China Cinda.  The repayment was envisaged “to come from dividend upstream from the Mortgage Property, cash flow of the OEM trading business from Mr Pan’s private group, Mr Pan’s individual net worth or a combination of the above”.[14]  On 20 March 2017, Pan had already publicly announced his intention to privatise Goldin Holdings.[15]  On 29 March 2017, the details of the open offer were announced.[16] Wong Man Kin observed that Pan’s allegation of the Overall Agreement was quite different from the announcements made at the time.  In relation to post-default events, he referred to the fact that the Banks had a meeting with Pan on 7 August 2019 during which, according to the minutes exhibited,[17] Pan said he could not repay the loans by May 2020 and hoped the Banks could extend the term of the loans and that he would seek other banks for refinancing to repay them (潘蘇通表示2020年5月到期，無法清還，希望總行和信銀國際能延期。潘蘇通也表示將努力尋找其他銀行進行融資，用來償還我行貸款).  On 10 December 2019, Wilkinson & Grist issued a demand letter on behalf of the 3^rd Bank to Silver Starlight and Pan.  On 27 December 2019, Wong Man Kin had a meeting with Pan where, according to the minutes exhibited,[18] Pan agreed that Silver Starlight would pay the overdue interest before 6 January 2020 but said he was unable to repay HK$1 billion on 31 December 2019 as demanded by the 3^rd Bank.  On 27 February 2020, Wong Man Kin had another meeting with Pan where Pan agreed to provide a list of his personal assets and to find appropriate assets for restructuring the HK$4 billion loan (as evidenced by the minutes exhibited[19]).  Another meeting took place on 7 April 2020, where Pan mentioned he would repay the loan and interest by selling his project in Kai Tak and property in Shenzhen.  At a further meeting on 23 July 2020, Pan told Wong Man Kin that HK$1 billion would be received from the sale of the Kai Tak project from which he would pay HK$300 million to the 3^rd Bank for interest.  This was evidenced in an email report Wong Man Kin sent to his superiors a few days later.[20]  Wong Man Kin also referred to the fact that Pan provided five cheques dated between May 2020 and January 2021 drawn by companies controlled by him, for repayment of interest to the 3^rd Bank, all of which were dishonoured on presentation.

(3)  In reply, Silver Starlight filed the 2^nd affirmation of Pan dated 18 May 2021.  Pan disagreed with the Banks’ witnesses and reiterated the version set out in his 1^st affirmation.  He produced a valuation report relating to the Mortgaged Land.  In relation to Sun’s statement, Pan did not admit its authenticity and said Sun should have been able to make a notarised affirmation despite being detained.  Pan said Sun’s statement was untrue, and proceeded to give more details of the background on how they came to meet and make the Overall Agreement.  According to Pan, as Wang Liwei insisted on introducing Sun to him, they met in Beijing for the first time on 27 November 2016.  On 3 January 2017, Pan met Sun and Peng in Hong Kong, where Sun said he would like to purchase China Cinda’s interest in the Project.  Subsequently, at Wang Liwei’s request, Pan gave him certain information regarding the Project.  On or around 16 January 2017, in Hong Kong, Sun proposed to Pan that Goldin Holdings be privatised with loans from CITIC group and China Cinda, and told Pan that Sun had already lined up serious potential buyers for the Project.  At a lunch on 5 February 2017 in Hong Kong, Sun told Pan to have confidence in his proposal.  At a meeting on 8 February 2017 in Beijing, a preliminary understanding was reached on the basis that the CITIC group would advance RMB 10 billion and China Cinda RMB 9 billion.  Part of the funds would be used for the Project and part for the privatisation of Goldin Holdings.  On this basis, face-to-face negotiations were conducted as set out in Pan’s 1^st affirmation which eventually led to the Overall Agreement.

D2.  CFI Injunction Decision

36.  In the CFI Injunction Decision issued on 3 June 2021, DHCJ MK Liu held, inter alia, that for the purpose of winding up a foreign company, the first and second threshold requirements were satisfied.[21] No issue was taken with the third threshold requirement which was satisfied in any event.  Accordingly, there was sufficient basis for the Hong Kong court to exercise its jurisdiction to wind up Silver Starlight (§§27-33).

37.  As regards the case of the Overall Agreement, the judge found that its existence was incapable of being believed.  As stated in the CFI Injunction Decision at §§41-52, the judge took into account, inter alia, that:

(1)  It is not supported by a single contemporaneous document including any internal document of Pan and Silver Starlight.

(2)  Its gist is contradictory to the express terms of the Facility Agreements and the Guarantee, including the provision for a fixed final repayment date of 15 May 2020, the obligation to pay interest every 3 months, the right of the Banks to seek immediate repayment of the entire loan when there is an event of default, the provision that the Banks have separate and independent rights against Silver Starlight and any security provider, and the provision in the Guarantee that Pan waives any right to require the Banks to claim against other parties or enforce other securities before claiming against him.

(3)  It is inconsistent with Silver Starlight’s and Pan’s conduct in their communications with the Banks during the period from 7 August 2019 to 7 April 2020 with a view to restructuring the loans under the Facility Agreements and using Pan’s other assets for repayment. Those steps would not have been necessary if the Overall Agreement existed.

(4)  Pan and Silver Starlight did not mention the Overall Agreement in their communications with the Banks.  It was not mentioned even in Silver Starlight’s solicitors’ letter dated 6 January 2021 responding to the first statutory demand of 24 December 2020.  It was only mentioned for the first time in Pan’s affirmation dated 19 February 2021 made in support of the injunction application.  Pan’s explanation for not mentioning it at an earlier time – that he placed trust and confidence in Sun – was not believable.

(5)  It is Pan’s case that he would not have proceeded with the privatization but for the Overall Agreement which he said was made in April or May 2017, but according to public announcements, Silver Starlight had on 20 February 2017 already applied to the 3^rd Bank for a loan for the privatization exercise.  Pan’s intention to privatise Goldin Holdings was publicly announced on 20 March 2017.  This was followed by an offer announced by Silver Starlight on 29 March 2017 to purchase the shares held in the market.

(6)  The Overall Agreement makes no commercial sense.  There was no reason why the Banks would assume the risks in having to defer its right of recovery until after the sale of the properties in the Project, particularly when the contemporaneous documents show that the 1^st Bank took a dim view of the prospects of the Project, and the 1^st and 2^nd Banks agreed to advance the loan on the strength of Pan’s other personal assets.

D3.  Silver Starlight’s application to adduce new evidence on appeal

38.  As mentioned above, in the appeal from the CFI Injunction Decision to this court, Silver Starlight sought to adduce further evidence in the form of Peng’s 1^st affirmation.  That affirmation essentially stated:

(1)  Peng had been the general manager of the 3^rd Bank since January 2017 and the chief executive since January 2018 until June 2019.  In early 2021, Pan had asked Peng to make an affirmation in support of Silver Starlight’s application for injunction.  Peng refused then because, first, he did not wish to testify against his former employer and, secondly, he thought that the Banks would make use of their connections with real estate developers to cooperate or take over the Project.  After Pan told him on 3 June 2021 that Silver Starlight had failed to obtain the injunction, Peng felt puzzled because Sun and Pan had agreed that if the borrower could not repay on time, the lender needed to give priority to disposing of the Project as collateral, and recourse would be had against the guarantor for any shortfall.  Peng therefore decided to make an affirmation.

(2)  Sun believed that participating in the Project was conducive to the business development and growth of the Banks.  On 3 January 2017, Peng had a discussion with Sun and Pan in Hong Kong.  Sun told Pan that CITIC had reached an initial consensus with China Cinda.  Sun suggested that Pan privatise Goldin Holdings and mortgage the assets of the Project, and the banks could arrange financing for the privatisation. 

(3)  A few days later, Sun told Peng that there was a meeting between the CITIC team, Pan’s team and China Cinda’s team in Beijing. A consensus was reached that the Banks would finance Goldin Holdings’ privatisation.

(4)  When the specific terms of the financing were being confirmed, Sun said that “through the early due diligence, [CITIC] believe that it is feasible to use the disposal of relevant asset collateral of Tianjin project as the first repayment source, and China CITIC Bank has the strength to arrange the co-operation with or taking over by large developers. Therefore President Sun repeatedly arranged Chairman Sun Hongbin of Sunac to discuss the cooperation of Tianjin project in Beijing and Hong Kong in February and March 2018”.

(5)  The arrangements were not set out in the financing documentations because they were in the Banks’ standard form.

39.  The Banks opposed the application to adduce new evidence but, pursuant to the Court of Appeal’s directions, also filed a number of affirmations which they would wish to rely on in response if the new evidence was admitted.

D4.  The CA Injunction Decision

40.  In the appeal from DHCJ MK Liu’s decision, this court rejected Silver Starlight’s application to adduce new evidence for two reasons.  First, there was an unexplained delay in the application which was highly prejudicial to the Banks.  Secondly, when approached by the Banks in February 2021 for evidence, Peng had replied that as the events happened too long ago, he could not recall them clearly.  In the absence of any explanation why Peng nevertheless felt able to make an affirmation in July 2021 at Pan’s request, this court considered that the evidence was not such as was presumably to be believed.[22]

41.  On the merits of the appeal, this court rejected Silver Starlight’s arguments on the court’s jurisdiction to wind it up.[23]  In disputing the debt, Silver Starlight’s arguments on appeal were essentially as follows.  It was submitted the Overall Agreement must be viewed in context as a “framework oral agreement informally reached between businessmen”.  There was no evidence from the defendants to refute the existence of the Overall Agreement on which the court could place any weight.  Sun only made a one‑page unsworn statement; Peng, the next most senior officer, did not give any evidence for the Banks; and the evidence of two other officers (Wang Liwei and Wang Tong) did not directly refute the existence of the Overall Agreement.  Further, the plaintiff is a company with no business operation and no assets apart from its indirect interest in the Project and that the defendants must have known that the only way in which the plaintiff could repay the loans was from the sale of the properties in the Project or the Mortgaged Land, and that the Overall Agreement made a lot of sense against this background.  In addition, reliance was placed on the fact that the Facility Agreements did not contain an entire agreement clause.[24]  In the result, this court rejected these arguments and held that there was nothing wrong in DHCJ MK Liu’s conclusion that the allegation of the Overall Agreement was not credible and raised no bona fide dispute of the debt on substantial grounds.[25]

E.  Pan’s Statutory Demand Appeal (CACV 525/2021)

E1.  The state of the evidence before DHCJ Le Pichon

42.  It is necessary first to set out the procedural and evidential background in order to understand the Statutory Demand Judgment in its context.  Pan issued his application to set aside the statutory demand on 5 March 2021.  Evidence was filed by Pan and then by the Banks.  On 4 June 2021, Anthony Chan J made an order, inter alia, that no new issue be raised in Pan’s reply evidence without leave and no further affirmation be filed after such reply without leave.  The hearing date of 15 October 2021 was fixed on 9 June 2021.

43.  By the time of the hearing before DHCJ Le Pichon, there had already been a determination by DHCJ MK Liu that the Overall Agreement asserted by Pan was not credible, upheld in the CA Injunction Decision.

44.  The evidence before DHCJ Le Pichon for Pan’s application originally consisted of:

(1)  Pan’s first affirmation dated 4 March 2021 filed in support of his application which was effectively the same as his affirmation filed in support of Silver Starlight’s application for an injunction to restrain the presentation of a winding-up petition;

(2)  filed on behalf of the Banks in opposition: (a) a second affirmation of Wong Cho Ying, solicitor for the Banks, filed on 25 June 2021, which stated that the Banks would rely on the affirmations filed in opposition to Silver Starlight’s injunction application (HCMP 222/2021); and (b) an affirmation of Wen Jianxiu (文建秀), an officer of the Banks, explaining why there was no further evidence from Sun;

(3)  filed by Pan in reply on 6 August 2021: (a) a second affirmation of Pan dated on 6 August 2021 which relied on his second affirmation dated 18 May 2021 filed in Silver Starlight’s injunction application in reply to the Banks’ evidence there; and (b) the same Peng’s 1^st affirmation dated 3 July 2021 as sought to be adduced in the Court of Appeal in the injunction proceedings.

45.  Given that Pan referred in his reply affirmation to Peng’s 1^st affirmation, the Banks also wished to adduce before DHCJ Le Pichon the affirmations they filed in the Court of Appeal in response to the new evidence application.  The Banks accordingly applied for leave to do so by summons dated 7 September 2021.

46.  On 4 October 2021, Pan also filed a summons for leave to adduce new evidence in the form of Pan’s 3^rd affirmation dated 30 September 2021.  As summarised by DHCJ Le Pichon in her judgment at §41, in that affirmation, Pan: (1) seeks to produce draft Peng’s 2^nd affirmation and the first transcript (referred to in §21 above); (2) claims to be a victim of duress by the Bank of China in 2016 in relation to some other transactions and that experience dampened his enthusiasm about the privatization of Goldin Holdings; (3) claims that DHCJ MK Liu was wrong in relying on a public announcement made by Silver Starlight on 19 April 2017; (4) claims that the Banks had been penalized by the China Banking and Insurance Regulatory Commission, as published on 20 February 2020 and 4 March 2021, for certain under-the-table agreements, and exhibits the relevant published decisions; (5) expands on his evidence on the Banks’ obstruction to the realisation of the securities for the loans, and claims that the Court of Appeal had failed to deal with that point; (6) replies to Wong Man Kin’s affirmation dated 22 March 2021 filed in the injunction application; (7) seeks to produce a press release published on 20 March 2020 concerning Sun’s detention; and (8) seeks to explain why draft Peng 2^nd affirmation remains a draft.

47.  The gist of draft Peng’s 2^nd affirmation, which Pan sought to adduce, falls essentially into two parts: (1) paragraphs 4 to 6 deal with Peng’s address, English signature and identification documents relating to Peng’s 1^st affirmation; and (2) paragraphs 7 to 15 elaborate upon events from January to May 2017 relating to the privatisation of Goldin Holdings and the Project.

48.  Pan said in his 3^rd affirmation that Peng told him on 23 September 2021 that he was no longer able to give evidence because two representatives of CITIC had contacted him and asked him not to sign any affirmation for Pan or he would be in trouble.  On 27 September 2021, Pan had a 20-minute telephone conversation with Peng which Pan recorded. Pan caused the recording to be transcribed into the first transcript, which he sought to adduce as part of the further evidence.  Its main thrust is that Peng said that on around Mid-Autumn Festival (i.e. 21 September 2021), the Banks had put pressure on Peng not to assist Pan in the litigation with the Banks (“Mid-Autumn incident”).  The relevant passages include the following:[26]

“ 7. …前一阵儿吧，他们那个…因为…银行已经托人这个这个中秋节给我，呃．给我带信说这个这个…呃…不妥。他们知道这事了，知道我帮你作证。然后这个因为…呃…而且他们说的很明白，如果我再继续继续帮你的话可能对我不好。所以潘老板，你你要多谅解。我也不愿意，你们任何一方我都不愿意得罪，呃…不管是前雇主，还是…还是你，还是哪一方我都不得罪。”

“ 42. …那个，那个很抱歉，潘老板。那个我说过这个东西太复杂，然后就涉及的…涉及到的人又多。然后，呃…我是…我是你们哪一方我都不愿意得罪，你们哪一方我都得罪不起。但是…但是我敢肯定就是说呃…我给法庭的证据…那份证据那绝对是真实的，是我本人…本人…本人写的，这个…这个…这个我本人作证的，这个没问题。但是具体在太细…太细的东西，我…我…我也不愿意去回忆，不愿意涉及太多。特别是他们同事带话跟我打招呼，这个对我感觉极不好，我也挺恼火的。很抱歉啊，我…这个我…我只能实事求是的说我说这个…这个过程，然后更多的忙，我恐怕呃…不能…帮不上你，对不起啊。”

49.  The remainder of the first transcript contains Peng’s explanation relating to his address and signature (items 6 & 7) or is simply a repetition or elaboration of what he had already said in Peng’s 1^st affirmation.

E2.  DHCJ Le Pichon’s judgment

50.  In the Statutory Demand Judgment handed down on 19 November 2021, DHCJ Le Pichon granted the Banks’ summons for adducing further evidence.[27] In respect of Pan’s summons to adduce further evidence, the judge granted Pan leave to adduce: (1) paragraphs 4 to 6 of draft Peng 2^nd; (2) items 6 & 7 of the transcript; (3) paragraphs 6 to 8, 9 (other than references to the alleged mid-autumn festival incident) and sub-paragraphs 10(a)-(c) of Pan 3^rd; but refused leave for the rest.[28]

51.  In relation to the evidence of the Mid-Autumn incident, DHCJ Le Pichon noted that a copy of Pan’s 3^rd affirmation (together with a copy of draft Peng’s 2^nd affirmation and the first transcript) was only provided to the Banks’ solicitors on 30 September 2021 and that in fact the email and attachments were not received until after midnight, which was the National Day holiday and the beginning of the “Golden Week” holidays in the Mainland where the Banks’ main personnel were stationed.  The judge also noted that the recording of the telephone conversation, though available as of 27 September, was not provided to the Banks until after business hours on 4 October 2021.[29] 

52.  For their part, the Banks submitted that their right to present a bankruptcy petition against Pan was not only for their own benefit but for the benefit of the general body of creditors.  It would be highly prejudicial for the Banks for the new evidence to be admitted without their having a proper opportunity to respond or for the Banks to seek an adjournment risking dissipation of assets. 

53.  In her judgment, the judge said:[30]

“ As regards the alleged mid-autumn incident mentioned in the transcript, it is not a matter to be dealt with in this application. The Banks have not had a proper opportunity to prepare a substantive response and it would be unfair to deprive them of that opportunity.”

54.  On Pan’s application to set aside the statutory demand, DHCJ Le Pichon first considered the effect of the additional evidence beyond that placed before DHCJ MK Liu and this court in the injunction proceedings.  Her Ladyship considered that nothing in draft Peng’s 2^nd affirmation or the first transcript resolved the questions raised in the CA Injunction Decision over the authenticity of Peng’s 1^st affirmation.  Nor did Peng provide any explanation regarding the query raised in the CA Injunction Decision as to why he was able to make Peng’s 1^st affirmation in July 2021 when he had stated to Wong Man Kin (deputy executive general manager of the 3^rd Bank) in February 2021 that he could not recall the relevant events due to the lapse of time.  The judge noted that Peng’s 1^st affirmation produced no contemporaneous documents in support of the Overall Agreement, was inconsistent with the express terms of the Facility Agreements and the public announcements made on the privatisation, and did not address the inconsistencies with contemporaneous documents as pointed out by or the other reasons given by DHCJ MK Liu in his judgment which was handed down a month before Peng’s 1^st affirmation.  DHCJ Le Pichon further considered that Goldin Tianjin’s declaration on 3 March 2018 that there was no equity cooperation or intention of merger and acquisition in any form between Goldin and Sunac was inconsistent with Pan’s case, as supported by Peng’s 1^st affirmation, that the Banks had been helping to line up Sunac to cooperate or acquire the properties in the Project.  The judge also noted that whilst Peng’s 1^st affirmation explained the absence of a written agreement reflecting the Overall Agreement by saying that the documents entered into were the Banks’ standard financing documentation, the explanation offered in draft Peng’s 2^nd affirmation, namely, that it would be inappropriate for Sun’s promise to be put in black and white, is entirely different.[31]  DHCJ Le Pichon concluded that the additional evidence relied upon by Pan was the “very antithesis of credible evidence” and insufficiently material to have any impact on the outcome of the case.

55.  As regards the Overall Agreement, Pan’s counsel submitted to DHCJ Le Pichon that the courts had misunderstood its nature. Pan’s case was that the primary or first source of repayment was the security. The Overall Agreement would be triggered only if the Banks decided to go against Pan or Silver Starlight but refused to sell or release the security. The promise was that the Banks would go against the security first for the principal.  The duty to pay interest was accepted, and the interests in the Project did not have to be sold before Pan or Silver Starlight could be sued for interest.  DHCJ Le Pichon did not accept this “spin” on what was meant by the Overall Agreement.  She concluded that there was no reason to reach a different conclusion on the issues decided in the injunction proceedings.[32]

56.  Finally, DHCJ Le Pichon dealt with the “prevention defence” raised by Pan which alleged that the Banks had not facilitated the sale of the interests in the Project and thus breached their duty to Pan as surety.  Her Ladyship considered that the point had been rejected by DHCJ MK Liu and not raised again on appeal, and that it was an abuse of process for Pan “to seek to resuscitate that issue by a side wind”.[33]  In any event, the judge noted that a creditor generally owed no duty to a surety to exercise its power of sale over mortgaged property and that Pan’s allegation that the Banks acted in bad faith in concert with other creditors to block the sale of the mortgaged property had “no credible basis”.  Nor was there any causal link shown between the Banks’ act or inaction and the drop in the value of the Mortgaged Land.[34]

57.  DHCJ Le Pichon concluded that Pan’s application to set aside a statutory demand was an attempt to make a collateral attack on the courts’ decisions in the injunction proceedings.  It was an abuse of process for him to re-litigate settled issues for it would be manifestly unfair to the Banks and bring the administration of justice into disrepute. Pan had also failed to show a defence of substance.  His application was therefore dismissed.[35]

E3.  Pan’s grounds of appeal

58.  In his notice of appeal, Pan has raised three grounds of appeal: (1) DHCJ Le Pichon was wrong in refusing to admit that part of the further evidence that related to the Mid-Autumn incident; (2) the judge ought to have held that a bona fide dispute had been shown on the issue of the Representation and Overall Agreement; and (3) the judge erred in rejecting the prevention defence.  Pan’s counsel have stated that Ground 3 is not pursued.  It is therefore also unnecessary to deal with the Banks’ respondents’ notice which raises only one point on the prevention defence.

E4.  Whether the judge erred in not admitting the further evidence

59.  Although various parts of the proposed further evidence were excluded by DHCJ Le Pichon and Pan’s notice of appeal seeks an order that his summons for adducing further evidence be allowed in its entirety, it is clear from the grounds of appeal and his submissions in this appeal that Pan complains only against the non-admission of the “evidence relating to the Banks’ interference with Peng”,[36] i.e. the evidence on the Mid-Autumn incident.  The arguments advanced by counsel on behalf of Pan in this regard are in summary as follows:

(1)  Where a party has destroyed or impaired the evidence available to the opponent, the evidential burden of proof of the matter rendered uncertain shifts to the party who impaired the evidence.[37]  This applies a fortiori where a party interferes with a potential witness.  In this case, because of the Banks’ interference with Peng, the strongest adverse inference should be drawn against them in relation to the existence of the Overall Agreement, so that a bona fide dispute on that issue is established.  Further, since Pan’s case relies on such adverse inference, the matter should go to trial rather than be dealt with summarily.

(2)  There is an important public interest against witness tampering such that, first, it should give rise to a special ground for admitting evidence of witness tampering outside of the usual Ladd v Marshall conditions, and secondly, witness tampering is a special circumstance which can, as an exception of the kind recognised in Arnold v National Westminster Bank plc [1991] 2 AC 93, overcome an issue estoppel and permit the reconsideration of matters decided in earlier proceedings.

(3)  DHCJ Le Pichon erred in simply considering whether the Banks had an adequate opportunity to respond to the evidence, without considering the above two dimensions.  Further, even if the Ladd v Marshall conditions applied, the judge should have held they were satisfied.

(4)  Any suggestion of a lack of opportunity to respond involved a misapprehension of facts or was plainly wrong.  The Banks had ample time to respond before the hearing, and any inability to reply was simply the result of the Banks’ own act in pressurising Peng at a late stage.

60.  We do not think that this ground of appeal is made out.  Our reasoning is as follows, which largely aligns with the submissions made by counsel for the Banks. 

61.  The starting point is that whether to admit the further evidence was an exercise of the judge’s discretion in the conduct of the hearing of the application to set aside the statutory demand.

62.  Witness tampering is of course a serious impropriety, which the court will not condone.  Direct attempts at interference with witnesses may be regarded and punished as contempt of court, and may amount to the crime of perverting the course of justice: Borrie & Lowe: The Law of Contempt (4^th ed), §§10.2 & 10.3.  Although there is no express mention in her Ladyship’s decision of the implications of such impropriety if proved, we do not think that the relevant principles relied on, at least in broad terms, would have escaped such an experienced judge as DHCJ Le Pichon.

63.  It is important to have regard to the context in which her Ladyship made her decision:

(1)  The court had given directions on 4 June 2021 that after Pan’s reply evidence, no further affirmations may be filed without leave of the court.  It is unnecessary to go into the question whether with such a direction, the test for admitting further evidence is that stated in Jose Miranda Da Costa Junior v Lorenzo Yih (HCA 156/2010, 28 April 2014, and HCMP 1127/2014, 21 July 2014) or that applied in Re ZPMC-Red Box Energy Services Ltd [2022] 3 HKLRD 4.  In the former, it was said that leave would not be granted in the absence of genuine extenuating circumstances, being essentially exceptions that normally would fall within the rule in Ladd v Marshall. In the latter case, Cheng J held that there was no general requirement of exceptional circumstances before further evidence can be adduced in a case falling outside Order 32 rule 11A(4) of the Rules of the High Court, and that an approach taking into account all relevant circumstances in the light of the underlying objectives of the Civil Justice Reform should be adopted.  In the present case, irrespective of the precise test, Pan knew that he should file in reply all the evidence he wished to adduce, or he would risk being precluded from filing any further evidence subsequently. 

(2)  Peng’s 1^st affirmation, together with Pan’s own 2^nd affirmation, were filed by Pan on 6 August 2021 as his reply evidence.  There was no explanation why Pan did not at that point file all the evidence he wished to elicit from Peng.

(3)  Further, prior to the alleged Mid-Autumn incident, draft Peng’s 2^nd affirmation had already been prepared based on “multiple rounds of comments” provided by Peng.[38]  The bulk of draft Peng’s 2^nd affirmation and of the first transcript actually consists of repetition or elaboration of what is already in Peng’s 1^st affirmation.  The judge refused to admit such further evidence not because Peng had not affirmed the draft, but because there was no justification for admitting further evidence that was based on matters all known to Peng when he made Peng’s 1^st affirmation.[39]  On this appeal Pan has not challenged this reason for not admitting such evidence.

(4)  Although Peng said he had been pressurised not to assist Pan, he inexplicably did not feel inhibited from speaking to Pan on the telephone in relation to the Overall Agreement, with knowledge that the conversation was recorded by Pan for use in the litigation.  (In fact in a later draft affirmation,[40] Peng said that whilst it would be difficult for him to make an affirmation, he could speak through the telephone and was prepared to give oral evidence through video facilities.)

64.  On this basis it is difficult to see what further evidence Pan could properly have filed which he was allegedly obstructed by the Mid-Autumn incident from adducing.

65.  Whether to admit such evidence at a late stage obviously depends in part on the strength of the evidence and its relevance: see, by analogy, Karaha Bodas Co LLC v Persusahaan Pertambangan Minydak Dan Gas Bumi Negara [2007] 4 HKLRD 1002, §153; Johnson Electric International Ltd v Bel Global Resources Holdings Ltd [2014] 5 HKC 504, §12.  It needs to be emphasised that what Pan sought to adduce was Peng’s scarcely particularised allegations that the Banks interfered with him.  Peng did not identify the persons said to have contacted him and did not explain why he was able to say that the Banks had engaged them to give him a message.  This has to be seen in the light of the fact that, in relation to Peng’s 1^st affirmation and the admitted parts of draft Peng’s 2^nd affirmation, the judge formed the view that they were “the very antithesis of credible evidence”.[41] 

66.  Further, Pan’s application to adduce additional evidence was made at a very late stage (by summons on 4 October 2021 for a substantive hearing fixed for 15 October 2021).  The judge was not satisfied that Pan gave the materials to the Banks as soon as practicable: the written materials were not given to the Banks until the eve (possibly past midnight) of the Golden Week holidays from 1 to 7 October 2021;[42] the CD recording of the telephone conversation made on 27 September 2021 was not supplied to the Banks until after business hours on 4 October 2021.[43]  In these circumstances, the contention that the judge’s assessment that the Banks lacked a proper opportunity to respond was based on a misapprehension of facts or plainly wrong is quite hopeless.

67.  Moreover, it should be borne in mind that DHCJ Le Pichon was dealing with an application to set aside a statutory demand.  It was not a final adjudication of Pan’s bankruptcy but a step leading to the bankruptcy proceedings that followed.  This explains why the judge said the Mid-Autumn incident was “not a matter to be dealt with in this application”,[44] envisaging that the matter could possibly be revisited at the stage of the bankruptcy petition when the Banks had had a proper opportunity to prepare a substantive response.

68.  For the above reasons, we reject the contention that DHCJ Le Pichon erred in refusing to admit the further evidence.

E5.  Whether a bona fide dispute of the debt arose from the Overall Agreement

69.  When the matter came before DHCJ Le Pichon, there were already the CFI and CA Injunction Decisions.  In Pan’s notice of appeal, there is no challenge against DHCJ Le Pichon’s reasoning that it would be an impermissible collateral attack on the earlier decisions for Pan to re-litigate the same issues based on the same factual matrix.  In support of the ground of appeal that DHCJ Le Pichon ought to have held that a bona fide dispute had been shown on the issue of the Overall Agreement, Pan relies principally on Peng’s further evidence.  It is said that the evidence of Peng, a disinterested third party, supports the Overall Agreement, and is only addressed by the Banks through the evidence of junior officers. 

70.  We do not think there is any error in DHCJ Le Pichon’s decision in this regard.  The admissible evidence from Peng before her Ladyship was Peng’s 1^st affirmation, parts (§§4-6) of draft Peng’s 2^nd affirmation, and limited parts of the first transcript.  The judge found after careful examination that such evidence was “the very antithesis of credible evidence”.[45]

(1)  One of the reasons – described by the judge as critical – was that Peng did not explain why he told the Banks’ staff in February 2021 that he could not recall the relevant events, but made an affirmation for Pan in July 2021, despite that the Court of Appeal had already entertained doubts about Peng’s 1^st affirmation for that reason as stated in the CA Injunction Decision.[46] Counsel for Pan submit that that communication was not disclosed by the Banks initially when they filed evidence in March 2021 in opposition to Silver Starlight’s injunction application, and that this omission casts doubt on whether the Banks had indeed contacted Peng in February 2021.  But this submission cannot get off the ground given that Wong Man Kin (deputy executive general manager of the 3^rd Bank) had produced screenshots of his relevant WeChat exchanges with Peng in late February 2021, the authenticity of which was not challenged.

(2)  Counsel for Pan also submit that DHCJ Le Pichon was wrong to criticise the “technical defects” of Peng’s 1^st affirmation.[47]  In our view, the judge’s criticisms on the evidence relating to Peng’s address, signature and occupation are justified.  We do not understand the judge to have regarded these defects as sufficient in themselves to discredit the evidence, but they are matters that judge was entitled to take into account in considering the overall effect and credibility of the further evidence.

(3)  It is further submitted that DHCJ Le Pichon was wrong to regard Peng as having given two different reasons as to why the Overall Agreement was not put in writing.  Peng’s 1^st affirmation stated that the absence of writing was due to the use of standard form financing documents of the Banks (考慮到銀行融資標準文本格式).  Draft Peng’s 2^nd affirmation stated that Sun told him it was not appropriate for his promise to be written down and the document should be in the standard format of the Banks (協議亦沒有白紙黑字寫下孫總的承諾，孫總向我解說這承諾不好寫，文件形式上用中信銀行的標準文本格式就好).  It seems to us that the gist of the latter explanation was Sun’s statement that it was not appropriate for his promise to be put in writing – which was never mentioned in Peng’s 1^st affirmation.  The judge did not err in considering it to be different from the former explanation.

(4)  Fourthly, counsel for Pan submit that DHCJ Le Pichon was wrong to place weight on the announcements by Sunac and Goldin Tianjin in early March 2018 that there was no equity cooperation or intended acquisition between them.[48] We do not think it profitable to quibble with the weight to be placed on such evidence.  The fundamental point, which Pan has still not answered, that casts serious doubt in the judge’s mind on Peng’s evidence was that Peng failed to address the inconsistencies between the Overall Agreement and the available contemporaneous documents or any of the detailed reasons given by DHCJ MK Liu in the CFI Injunction Decision given on 3 June 2021 – prior to Peng’s 1^st affirmation – for reaching the conclusion that the Overall Agreement was unbelievable.[49]

71.  As to the submission that the Banks only countered Peng’s account with evidence from junior officers, it has already been dealt with and rejected in the CA Injunction Decision as follows and requires no further discussion.

“ 48. … It is said that there is no evidence from the [Banks] to refute the existence of the Overall Agreement on which the court can place any weight. It is said that Sun only made a one‑page unsworn statement; Peng, the next most senior officer, did not give any evidence; and the evidence of two other officers (Wang Liwei and Wang Tong) did not directly refute the existence of the Overall Agreement. …

49. We do not accept these arguments. The [Banks] did adduce evidence from Sun (albeit in the form of a statement), Wang Liwei and Wang Tong, all of whom were involved in the events and positively denied that the Overall Agreement existed and denied having heard of it at the time. The judge considered the point that Sun’s evidence was unsworn but accepted the [Banks’] explanation that as Sun was being held in custody it was not possible to obtain a notarised statement from him, and concluded that [Silver Starlight’s] point had no merit. [Silver Starlight] relies on its expert opinion on Mainland law to the effect that it was permissible for Sun to make an affirmation whilst in custody, but the same opinion suggests that Sun could only see his own defence lawyers and his relatives. The judge was in our view justified in questioning how Sun could make a statement for the [Banks] before a notary public in those circumstances.” (footnotes omitted)

72.  For these reasons, the second ground of appeal against DHCJ Le Pichon’s Statutory Demand Judgment also fails.

E6.  Conclusion on the Statutory Demand Appeal

73.  As neither of the two grounds of appeal relied upon is made out, Pan’s Statutory Demand Appeal is dismissed with costs on the party and party basis with a certificate for three counsel.  Reliance is placed by the Banks on Re SY Engineering Co Ltd (CACV 1896/2001, 27 February 2002) in support of their request for indemnity costs, but the order there concerned costs to be borne by a third party.  No such order has been sought by the Banks in any of the appeals in the present case.

F.  Pan’s Postponement Appeal (CACV 261/2022)

F1.  The application and the judge’s decision

74.  The relevant decision in the Postponement Appeal is Linda Chan J’s dismissal of Pan’s summons dated 28 June 2022 filed after the bankruptcy petition was heard and before judgment was given.  By that summons, Pan asked for leave to file a further affirmation in which it was said that one of the financiers Pan had approached, namely, Oaktree, was interested in extending a loan to Silver Starlight (to be guaranteed by Pan) to pay off the Banks’ debts, but only if no bankruptcy or winding up order was made against them.  A term sheet dated 28 June 2022 for a proposed loan facility of up to US$1.2 billion was exhibited (“Oaktree Term Sheet”).  Pan stated that he had every intention to cause Silver Starlight to take out the proposed loan for the purpose of paying off the debts claimed by the Banks, and was not aware of any circumstance which would make it impossible or difficult to comply with the proposed conditions precedent which were customary for transactions of this kind.  He believed that he and Silver Starlight should be able to repay the petition debts within “a short period of time”.  He therefore asked for the determination of the bankruptcy petition to be postponed to a date not earlier than 7 days after 30 September 2022.  A similar summons was issued by Silver Starlight in the winding up proceedings. 

75.  The purport of the two summonses and their accompanying affirmations was explained in the solicitors’ letter to the court dated 28 June 2022, which stated:

“ 1. As deposed to in the [further affirmation of Pan dated 28 June 2022], there have been material change of circumstances and/or new development since the hearing of the Petitions on 7 June 2022.

2. In particular, Oaktree Capital Management (‘Oaktree’) has stated that it intended to extend a loan (‘Oaktree Loan’) to the Company, to be personally guaranteed by the Debtor, to fully repay the debts claimed by the Petitioners under the Petitions.

3. The negotiation between Oaktree and the Debtor/the Company has reached its closing stages. A term sheet has already been signed by Oaktree, the Debtor and the Company … It is expected that the Oaktree Loan would be available for drawdown latest by 30 September 2022.

4. In the circumstances, provided no bankruptcy order and/or winding up order is made, the debts claimed by the Petitioners would be repaid within a very short period of time. Such a scenario would certainly be benefit to all parties concerned.

5.  As the above development is relevant to Her Ladyship’s decision on whether a bankruptcy order and a winding up order ought to be made in the captioned proceedings, we respectfully seek leave from Her Ladyship for the Summonses to be heard by Her Ladyship prior to the disposal of the Petitions.  Alternatively, if Her Ladyship sees fit, directions may be given as to the exchange of written submissions so that this matter may be disposed of on paper.”

76.  On 29 June 2022, the Banks’ solicitors wrote to the court to object to the two summonses.  Among other things, it was stated that the intended loan from Oaktree of USD1.2 billion would not be able to discharge the debts to the Banks of HK$12 billion and another sum of RMB 696 million owed by Pan to Bank of China.

77.  Linda Chan J dismissed Pan’s summons by a brief letter dated 29 June 2022 but her Ladyship’s reasons can be gleaned from the transcript of the subsequent hearing on 28 July 2022, at which the judge dismissed Silver Starlight’s application for leave to appeal from the equivalent decision in the winding up proceedings.  Essentially, the judge refused the applications on the basis that (1) what was stated in the solicitors’ letter of 28 June 2022 disclosed no ground for the court to take the exceptional course of allowing Pan and Silver Starlight to re-open the matter after a full hearing and postponing judgment; and (2) what had been put forward was merely a non-binding term sheet for a loan that would be subject to due diligence and conditions precedent including full payment of existing indebtedness which was over HK$12 billion, and there was nothing to show how that would be fulfilled.

F2.  The grounds of appeal

78.  Pan’s grounds of appeal as set out in his notice of appeal are, broadly, as follows: (1) the judge failed to give Pan an adequate opportunity to make submissions in support of his summons; (2) the judge erred in refusing leave for Pan to rely on his new affirmation and to make submissions in that she failed to have regard to the relevance of the materials which showed evidence that the petition debt would be paid in full within a reasonable time; and (3) the judge wrongly exercised her discretion by refusing to postpone judgment.

79.  For their part, the Banks have filed a respondents’ notice contending that the judge’s order should be upheld on the additional grounds that (1) a petitioner with an established debt has a prima facie right to a bankruptcy order, and the court should only adjourn the petition where there is a reasonable prospect of the debt being paid in full within a reasonable time, but the Oaktree Term Sheet was for discussion only without any commitment; and (2) there was no credible evidence that Pan would be able to pay within a reasonable time the petition debt of HK$8 billion and other indisputable debts owed by him including the debt owed to the 3^rd Bank of HK$4 billion and the debt owed to the supporting creditor, Bank of China, in the sum of RMB 740.8 million (as found by the court in HCSD 28/2021).  In support of the second point, the Banks have with leave filed additional evidence to the effect that a first creditors’ meeting was held in Pan’s bankruptcy on 11 August 2022, at which debts totalling about HK$113.7 billion were admitted by the Official Receiver for voting purpose. 

F3.  Discussion

80.  As regards the first ground of appeal, whether Pan had had an adequate opportunity to make submissions in support of his summons has to be assessed with reference to the context, nature and subject-matter of the decision.  The bankruptcy petition had been argued at a full hearing before Linda Chan J on 7 June 2022.  Pending judgment, whether or not Pan should be allowed to re-open the matter and adduce further evidence is a matter on which the judge had a discretion.  On that question, the judge had before her Pan’s solicitors’ letter of 28 June 2022 (quoted above) and Pan’s supporting affirmation (which contains 17 paragraphs) exhibiting the Oaktree Term Sheet and explaining its relevance.  The purport of the application was plain, the suggestion being that there was a prospect of the petition debt being repaid with the loan from Oaktree within a short time and that the bankruptcy petition against Pan should therefore be put on hold.  The applicable legal principle is not controversial, and would have been very familiar to the judge, namely, that even where the petition debt is established, the court may in its discretion adjourn a petition rather than make an immediate bankruptcy order if it is satisfied that there are reasonable prospects of payment of the petition debt (and the debts due to supporting creditors, if any) within a reasonable period of time: see e.g. Ho Ying Pat Bobby v Overseas Way (China) Ltd [2011] 2 HKLRD 837, §12; Re Trinity (Management Services) Ltd [2021] HKCFI 2207, §§6-7; Re Wojakovski [2021] BPIR 178, §15.  In these circumstances, we do not consider that there was any breach of natural justice as alleged by Pan.  The judge was entitled to proceed on the basis that Pan had had an adequate opportunity to make representations in support of his post-hearing application, rather than digress into a further round of submissions on a narrow issue.

81.  The second ground of appeal is unfounded in fact.  There is nothing to suggest that the judge failed to have regard to the relevance of the materials Pan sought to put in.  The point Pan wanted to make was obvious.  The difficulty for him, however, as explained by the judge in her subsequent reasons during the hearing on 28 July 2022, is that the evidence of the Oaktree Term Sheet was in the judge’s view not sufficient for his purpose.

82.  This brings us to the third ground of appeal, which attacks the judge’s discretionary decision not to postpone judgment.  It is said that the judge failed to take into account that there was credible evidence that the petition debt would be repaid in full by 30 September 2022 at the latest, that any prejudice to the Banks could be compensated by payment of contractual interest, and that a bankruptcy order would impede the full repayment of the petition debt, prejudice the ongoing restructuring efforts and adversely impact upon the interests of all stakeholders in the Project. 

83.  The judge considered but was not impressed by the prospects of full repayment within a reasonable time.  It should be recalled that the petition debt fell due in December 2019; the statutory demand was served on Pan in February 2021; the petition was presented in November 2021 and heard on 7 June 2022.  The new evidence came at the end of a long process involving both negotiations and legal proceedings, and only shortly before judgment. Even then there was no agreement for a loan, only a term sheet.  The terms, as expressly stated, were “provided for discussion purposes only and do not constitute an offer, agreement or commitment to undertake the proposed financing or transactions.”  If the financing came to pass, the actual terms and conditions would be “subject to, in the sole discretion of Oaktree and its affiliates, satisfactory completion of due diligence, credit approval and satisfactory review of documentation.”  The amount of the facility was “Up to US$1,200 million” but it was expressly stated that the amount “will be determined after completion of the Lender’s due diligence and subject to the Lender’s Investment Committee Board final approval”.

84.  Further, the financing being discussed was to be subject to “customary conditions precedent” including “evidence showing sufficient capital (including the Facility) to fully repay existing indebtedness”.  The petition debt owed to the 1^st and 2^nd Banks of HK$8 billion together with the debt owed to the 3^rd Bank of HK$4 billion, excluding interest, already exceeded the proposed Oaktree loan.  There was nothing in the intended new evidence to show how that condition precedent would be met, even without taking into account the debt owed to the supporting creditor, Bank of China, in the sum of RMB 740.8 million and the overall indebtedness of HK$113.7 billion admitted for voting purposes at the first creditors’ meeting.  All that Pan said in this regard in his new affirmation of 28 June 2022 was that he was “not aware of any circumstances which would make it impossible or difficult to comply with the proposed condition precedents [sic] which are customary to transactions of this kind.”

85.  Counsel for Pan submit that Silver Starlight has an indirect interest in the Mortgaged Land with a large valuation in the region of RMB 10.5 to 11.5 billion, and that this would be sufficient to cover any shortfall in paying HK$12 billion to the Banks.  In our view this does not assist Pan because, first, there is nothing to suggest that funds can be derived from such interest in land within a reasonable time to repay the Banks’ loans, and, secondly, there is nothing to show what value that indirect interest would have after all the encumbrances are taken into account and that this would enable all relevant “existing indebtedness” to be repaid.

86.  In our judgment, the judge’s exercise of discretion in refusing to postpone judgment to not earlier than 7 October 2022 is unassailable.

87.  It follows from the above that Pan’s Postponement Appeal must be dismissed.  The Banks are to have costs on the party and party basis, with a certificate for three counsel.

G.  Silver Starlight’s Postponement Leave Application (CAMP 294/2022)

88.  Like Pan, Silver Starlight issued a summons dated 28 June 2022 asking for leave to file a further affirmation relating to the Oaktree Term Sheet and for judgment on the winding up petition to be postponed to not before 7 days after 30 September 2022.  It was dismissed by the same letter from the court dated 29 June 2022.  As it was an interlocutory decision made in winding up proceedings, leave to appeal was required.  The judge refused to grant leave after an oral hearing on 28 July 2022.  The renewed application to this court for leave to appeal is based on the same grounds as in Pan’s Postponement Appeal.

89.  For the reasons given above on Pan’s Postponement Appeal, we consider Silver Starlight’s intended appeal has no reasonable prospects of success.  Accordingly, the application for leave to appeal is dismissed.  It follows that the Banks’ summons dated 5 September 2022 for leave to adduce further evidence on the intended appeal falls away.  We give leave for this summons to be withdrawn.  The Banks are to have the costs of both summonses on a party and party basis, with a certificate for three counsel.

H.  Silver Starlight’s Winding Up Appeal (CACV 265/2022)

H1.  The evidence before the judge

90.  At the hearing of the petition to wind up Silver Starlight, the main evidence before Linda Chan J consisted of the following:

(1)  Affirmations filed on behalf of the Banks verifying the petition.

(2)  Pan’s affirmation dated 20 December 2021 filed in opposition to the petition.  This is a lengthy document with 231 paragraphs, but most of them had appeared in evidence filed in earlier proceedings.  A detailed table in the Banks’ reply evidence[50] shows which paragraphs were new and which were old and, for the old paragraphs, their original source.  The main portion was essentially a repetition of the evidence alleging the Overall Agreement as previously filed in the injunction proceedings. 

(3)  The parts that had not been admitted as evidence in those proceedings included, so far as significant for present purposes, the following: Peng’s 1^st affirmation, a revised and finalised draft of a second affirmation of Peng (“finalised draft Peng’s 2^nd affirmation”), the first transcript, the transcript of another recorded telephone conversation between Peng and Pan on 19 December 2021 of about 3.5 minutes (“second transcript”).  In this conversation, Pan requested Peng to sign the finalised draft Peng’s 2^nd affirmation (being a draft revised from draft Peng’s 2^nd affirmation that Pan sought to adduce in his application to set aside the statutory demand before DHCJ Le Pichon), but Peng declined, saying that he was still under pressure, though he confirmed that what he said in the draft was true.  There was in addition a substantial part of Pan’s affirmation (§§148-230) which concerned the status of the Project, the financial position of Silver Starlight, Goldin Holdings, and the entire group and various subsidiaries, which was apparently transplanted from an expert accountant’s report which had been expunged by Linda Chan J by order dated 6 December 2021.

(4)  In reply, the Banks filed an affirmation from their solicitor[51] in March 2022 which, as mentioned above, analysed the provenance of the content of Pan’s affirmation.

(5)  The Banks also filed affirmations from Wen Jianxiu, Wang Liwei, Wang Tong, Li Yajun, and Wong Man Kin, all in March 2022. In reply to the main contents of Pan’s affirmation, they simply referred to their previous affirmations filed in the injunction proceedings (HCMP 222/2021) and the appeal therefrom (CACV 301/2021) and in Pan’s application to set aside the statutory demand (HCSD 3/2021). 

(6)  In reply to the evidence relating to Peng, these officers’ evidence was essentially as follows.  After learning about Peng’s 1^st affirmation in late July 2021, the Hong Kong lawyers of the Banks had advised the Banks not to contact Peng in any way, lest Pan would allege they interfered with his witness, and the Banks in fact did not contact Peng at all.  The alleged interference with Peng was made up.  By listening to the two recorded telephone conversations, the deponents could not tell whether it was Peng who was speaking.  It was found that Peng had applied to establish a company and a bank in California, casting doubt on the statement in Peng’s 1^st affirmation that he had retired.

(7)  In reply to the part of Pan’s affirmation dealing with financial information, the Banks filed the 4^th affirmation of Ng Ka Ki, a Vice President of the 3^rd Bank.

(8)  Pan filed a 2^nd affirmation on 2 June 2022 seeking an adjournment of the hearing of the petition.  This is not of relevance for present purposes since no adjournment was granted and there is no appeal in this connection.

H2.  The judge’s decision

91.  In the Bankruptcy and Winding Up Judgment handed down on 8 July 2022, Linda Chan J recited the history of the previous proceedings and conclusions reached by DHCJ MK Liu and by this court in the CFI and CA Injunction Decisions respectively, and by DHCJ Le Pichon in her Statutory Demand Judgment.[52] The judge identified the issue before her to be whether the principle of res judicata, either in the narrower sense of issue estoppel or in the wider sense of Henderson abuse, applied to prevent Silver Starlight and Pan from re-litigating the issues decided.[53] 

92.  The judge then went on to set out in summary the relevant principles on res judicata in both the narrow and the wide sense. Applying those principles, she held that Silver Starlight was barred from re-litigating the matters already determined in the CFI and CA Injunction Decisions, including that the threshold requirements were satisfied for the court properly to exercise its jurisdiction to wind up Silver Starlight as a foreign company under section 327 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) and that there was no bona fide dispute of the petition debt on substantial grounds.  In particular:

(1)  Silver Starlight argued that, on the question whether there was jurisdiction to wind up Silver Starlight, the test or threshold applicable in the application for injunction was not the same as that applicable in the determination of the winding up petition.  The judge rejected that argument.  She considered that DHCJ MK Liu had made a final determination on the question of jurisdiction which was affirmed by the Court of Appeal likewise on a final basis.[54]

(2)  The fact that Peng’s 1^st affirmation and the first and second transcripts were not part of the evidence that underlay the CFI and CA Injunction Decisions did not amount to special circumstances giving rise to an exception to issue estoppel recognised in the cases such as Arnold v National Westminster Bank plc [1992] 2 AC 93, 109, which the judge referred to as the “Arnold exception”.  It did not render it unjust to enforce the issue estoppel against Silver Starlight.  There was nothing to suggest that such evidence from Peng could not with reasonable diligence have been adduced for the injunction application.  Nor was Peng’s evidence sufficiently material to have an impact on the determination of the dispute of debt point.[55]

(3)  The judge held that, though it was unnecessary for the Banks to demonstrate it, in seeking to re-litigate the dispute of debt issue and the jurisdiction issue which had already been determined by the court, Silver Starlight was vexing the Banks again on those decided issues, and such conduct constituted an abuse of process as it would undermine the determinations and findings made by the court and bring the administration of justice into disrepute.

93.  The judge concluded that Silver Starlight was bound by the determinations and findings made by the court in the CFI and CA Injunction Decisions and precluded from re-litigating the same issues already decided by the court.  Since Silver Starlight had failed to comply with the statutory demand served on it and the petition debt remained unpaid, it was deemed insolvent.  The judge made the usual winding up order.[56]

H3.  The grounds of appeal

94.  The grounds of appeal set out in Silver Starlight’s notice of appeal are broadly: (1) that the judge erred in holding that the doctrines of res judicata, estoppel and abuse of process applied to debar Silver Starlight from raising the dispute of debt issue and the jurisdiction issue; (2) on all the available evidence, the judge ought to have found there was a bona fide dispute of the debt in light of the existence of the Overall Agreement; (3) on all the evidence, the judge ought not to have exercised the winding up jurisdiction since Silver Starlight had no meaningful assets within the jurisdiction, its indirect interests in the Mainland could not be realised by winding up proceedings in Hong Kong, and the Banks already held a charge over the shares in Goldin Holdings; and (4) the judge ought not to have made a winding up order given there was reasonably credible evidence that the debt might be discharged within a short time.

95.  The Banks have filed a respondents’ notice, contending that the winding up order should be affirmed on the additional grounds that: (1) Silver Starlight should be held to be debarred from litigating the dispute of debt point also by reason of DHCJ Le Pichon’s Statutory Demand Judgment; (2) even if the dispute of debt issue was considered afresh, the court should come to the same conclusion that the Overall Agreement was incapable of being believed; and (3) even if the jurisdiction point was considered afresh, the court should come to the same conclusion that there was sufficient basis to exercise the winding up jurisdiction.

H4.  The jurisdiction issue

H4(a) Whether Silver Starlight precluded by previous decisions from disputing jurisdiction

96.  The question here is whether Silver Starlight is precluded by the CFI and CA Injunction Decisions, whether as a matter of issue estoppel or otherwise, from disputing that the three threshold requirements for the court to exercise its winding up jurisdiction over it (specifically the first and second requirements, as the third was conceded) were satisfied.

97.  In determining whether Silver Starlight is so precluded, it is important to see what the court needed to decide for the purpose of disposing of the injunction application.  If a point was unnecessary for the decision, it does not give rise to an issue estoppel (see Sam Woo Marine Works Ltd v The Incorporated Owners of Po Hang Wah Building [2022] HKCA 733, §25), and it would also be difficult to find that it has preclusive effect on the basis of some other principle.

98.  As explained in the CA Injunction Decision, the question then was whether an injunction should be granted to prevent an abuse of process.  It was the Banks’ submission then that the question of jurisdiction should normally be determined at the hearing of the petition, and that in an application for an injunction to restrain presentation of a petition, the court should focus on whether it is a plain and obvious case.  This court, accepting the Banks’ submission, reasoned that it would ordinarily not be an abuse to invoke the winding up remedy against a foreign company where it is reasonably arguable that the three threshold requirements can be satisfied. Specifically, in §19 of the CA Injunction Decision, this court said that the injunction should not be granted on the jurisdictional ground “unless [Silver Starlight] can demonstrate that it is not reasonably arguable that the core requirements would be satisfied at the time of the hearing of the petition”. That burden was accepted by Silver Starlight.

99.  Accordingly, what the court needed to decide at that stage was simply whether there was a reasonably arguable case that the threshold requirements would be satisfied at the time of the petition.  There was no determination by this court in the CA Injunction Decision that they were actually satisfied.  To the extent that in the CFI Injunction Decision DHCJ MK Liu expressed any view that they were, it was unnecessary for his decision and does not preclude Silver Starlight from contending to the contrary, although a subsequent court can of course agree with and adopt the reasoning in previous judgments even if there is no estoppel or preclusion as such.

100.  It is true that Silver Starlight at that time submitted to this court that the jurisdiction point could and ought to be decided “once and for all”, but that submission was not accepted, as shown by the court’s observation that “the jurisdictional question may still arise in the context of the petition if one is presented”.[57] Silver Starlight has now made a submission opposite to its previous stance, but so have the Banks.  For the reasons explained we are of the view that Silver Starlight was not barred from contesting jurisdiction at the hearing of the petition, and to that extent respectfully disagree with the judge.

H4(b) Jurisdiction

101.  We turn therefore to the question whether the first and second threshold requirements are satisfied.  The first requirement is a sufficient connection with Hong Kong (though not necessarily the presence of assets within the jurisdiction).  The second requirement is that there must be a reasonable possibility that a winding up order would benefit those applying for it.  The second requirement has been elucidated by the Court of Final Appeal in Shandong Chenming Paper Holdings Ltd v Arjowiggins HKK 2 Ltd [2022] HKCFA 11.  As summarised by Linda Chan J in Re Carnival Group International Holdings Ltd [2022] HKCFI 2668 at §18:

“ The test of the second core requirement, as recently stated by the Court of Final Appeal in Shandong Chenming Paper Holdings Ltd v Arjowiggins HKK 2 Ltd [2022] HKCFA 11, is as follows:

(1) The nature of the inquiry is ‘to ascertain whether it would be appropriate to put into motion the winding-up machinery in respect of a particular overseas company’ (§83);

(2) The requirement is set at ‘low threshold’ and is met ‘as long as the benefit can be said to be a real possibility, rather than a merely theoretical one’ (§§56, 83); and

(3)     Even in cases where there are no assets for a liquidator to administer, the requirement is satisfied so long as there is ‘some useful purpose serving the legitimate interest of the petitioner’ (§54(4)).”

102.  So far as the first requirement is concerned, as stated in the CA Injunction Decision at §20, there are the following connections:

“ (1) the plaintiff holds 35.59% in Goldin Holdings, such shares being an asset in Hong Kong; (2) Pan, the sole legal and beneficial owner of the plaintiff, is a Hong Kong resident; and (3) valuable and substantial assets are held by subsidiaries which are either Hong Kong companies or registered non‑Hong Kong companies with principal places of business and authorised representatives in Hong Kong.”

103.  The same reasoning in the CFI and CA Injunction Decisions[58] which decided that these factors show a reasonably arguable case that the first threshold requirement is met also leads us to the view that the first threshold requirement is satisfied for the purpose of determining the petition, subject to the two new points raised by Silver Starlight discussed below.

104.  As to the second threshold requirement, it was found in the CFI and CA Injunction Decisions that the 35.59% shareholding held by Silver Starlight in Goldin Holdings, a Hong Kong company, was sufficient to raise a reasonably arguable case that the requirement was satisfied.[59]  Although Silver Starlight’s notice of appeal repeats the points raised before (i.e. that a barely realisable minority interest of 35.59% in Goldin Holdings is not a meaningful asset located within the jurisdiction and that the underlying assets are in the Mainland from which no benefit could be derived by a winding up of Silver Starlight in Hong Kong), they were rejected by this court in the CA Injunction Decision and not taken up by counsel in their argument.  Again, subject to the two new points raised in this appeal, the same reasoning shows that there is sufficient benefit to satisfy the second threshold requirement for the purpose of determining the petition.

105.  The first new point is that Silver Starlight’s only major asset, i.e. its 35.59% shares in Goldin Holdings, have been charged, by a deed with the title “Charge over Shares in Goldin Properties Holdings Ltd” dated 15 May 2017, in favour of the 3^rd Bank as security agent for the 1^st and 2^nd Banks, as security for Silver Starlight’s indebtedness including the HK$8 billion loan (“Share Charge”). It is argued that unless and until the Banks relinquish the Share Charge, the shares charged will not form part of Silver Starlight’s assets in the winding up.  Reliance is placed on Buchler v Talbot [2004] 2 AC 298 which explained that in a liquidation, assets subject to a charge belong to the charge holder to the extent of the amounts secured by them, and that only the equity of redemption remains the property of the chargor and falls within the scope of the winding up. 

106.  The Banks argue that a charge does not give the creditor either a general or special property in the asset charged, citing Fisher & Lightwood’s Law of Mortgage (15^th ed), §1.5.  But that passage concerns a mere charge whereas the Share Charge here is “a legal mortgage and first fixed charge”.[60]

107.  The Banks are however on firmer ground in their second submission that a secured creditor does not have to elect between resting on the security and taking part in the liquidation until after the winding up order is made: In re The Carmarthenshire Anthracite Coal and Iron Co (1875) 45 LJ Ch 200.  The rules in bankruptcy that the petition debt has to be unsecured (s 6(2)(b) of the Bankruptcy Ordinance (Cap 6)) and that a petition presented by a secured creditor has to state the creditor is willing to give up the security or that the petition is not made in respect of the secured part of the debt (see s 6B) do not apply in winding up.

108.  It follows that the Banks may yet elect to take part in the liquidation and derive benefit therefrom.  As the Court of Final Appeal stated in Shandong Chenming at §54(6), the fact that a similar result could be achieved by other means does not preclude a particular benefit from being relied upon for the purposes of fulfilling the second requirement. Furthermore, there may be reasons for the Banks to prefer a liquidation, especially if they are essentially the only creditors (and we are told that only the Banks have proved in the liquidation), having regard, for example, to the possibility of a distribution in specie in a liquidation, and the fact that the other 64.41% shareholding may be held directly or indirectly as part of the bankruptcy estate of Pan.  Compared to receivers appointed under a share charge, liquidators have wider powers who may for example work together with the trustees in bankruptcy of Pan for the purposes of dealing with the whole interest in Goldin Holdings and the assets down the chain.

109.  The second new point raised is that the shares in Goldin Holdings have no or negligible value.  The point was only faintly pursued by counsel.  The evidential basis for the assertion is Pan’s opinion based on his assessment of fragmentary and mostly unaudited financial information.  He has no recognisable qualification in the valuation of shares and as such his opinion is not reliable.  The unaudited management accounts of Goldin Holdings as at 8 October 2021 state that it had net assets of slightly over HK$7 billion.  The shares in Goldin Holdings are clearly an asset in Hong Kong belonging to Silver Starlight.  It is unnecessary to ascertain its precise value at this stage.  Taking a practical approach and adopting a low threshold in accordance with Shandong Chenming, we take the view that there is a real possibility of benefit to be derived from those shares in the liquidation.

110.  For these reasons we hold that the threshold requirements for the exercise of the court’s jurisdiction to wind up Silver Starlight are satisfied.

H5.  Whether Silver Starlight precluded by previous decisions from raising the dispute of debt issue

H5(a) The principle

111.  In an application for injunction to restrain the presentation of petition on the ground that the debt is disputed, the applicant is generally required to demonstrate a bona fide dispute of the debt on substantial grounds, for usually only then would it be an abuse of process for a petition to be presented, which the court may prevent by an injunction: Re Sinom (Hong Kong) Ltd [2009] 5 HKLRD 487, §§9‑10; Bryanston Finance Ltd v De Vries (No 2) [1976] Ch 63, 78.  In contrast to the jurisdictional issue, the threshold is the same as that on the petition itself.  In principle, therefore, a decision on an application for injunction that no bona fide dispute of the debt has been shown is capable of precluding any further contest on that same issue in the determination of the petition. As Harris J put it in Re C. Mahendra Exports (H.K.) Ltd [2019] HKCFI 1556 at §6:

“ … it is well established that where a Company fails to satisfy the Court that it is entitled to an injunction on the grounds that it has a bona fide defence on substantial grounds to a debt it cannot then attempt to reargue the same point when the Petition is presented.”

112.  In EDF Energy Customers Ltd v Re-Energised Ltd [2018] EWHC 652 (Ch), §§51-52, Deputy Judge Paul Matthews, dealing with an appeal against a winding up order, likewise held in the English High Court:

“ 51. In the present case, at the injunction hearing last April, I heard argument on behalf of the company on at least three points which in principle are pursued again now. … Mr Budworth says that the contractual penalty argument that he has put forward in this case is actually a new argument, rather than the same one put by Mr Watson on behalf of the company during the injunction hearing. In my judgment, that is not correct. It is simply a more sophisticated version of that which was put forward then, and which, having failed before me, was not appealed.

52.  Each of these three arguments was put and dealt with on its merits during the injunction hearing.  I can therefore see no justification for their being advanced now, on appeal from the decision of the district judge.  In my judgment, whether one regards this as simply a waste of time and resources, in accordance with the decision in Harvey v Dunbar Assets, or as matters which have already been decided, and therefore governed by the doctrine of res judicata, it would not be right for me to entertain any of these arguments now.”

113.  We are not aware of any discussion in previous Hong Kong cases as to whether the precise juridical basis of this preclusive effect is the doctrine of issue estoppel or a special principle in winding up for the prevention of duplicated and wasteful arguments akin to the approach in bankruptcy discussed below; nor have we heard submissions on this question.  It is probably immaterial for present purposes.  For although the application for injunction is usually made by originating summons in a separate set of proceedings, it is obviously connected to and a precursor to the winding up proceedings and takes on some of the characteristics of an interlocutory proceeding (see Australian Mid-Eastern Club Ltd v Elbakht (1988) 14 ACLR 234, 242).  Depending on the nature and substance of the ruling, the doctrine of issue estoppel, even if applicable, may be applied less strictly in relation to an interlocutory decision: Chu Hung Ching v Chan Kam Ming [2001] HKC 396 at 401-402. Furthermore, the winding up court has a power to go behind a judgment on which the petition debt is based.  It seems to us that whichever juridical basis is proceeded upon, there ought to be no significant difference in the degree of flexibility available and in the actual outcome on a given set of facts.

114.  It is convenient to discuss at this juncture the equivalent principle in bankruptcy, which is similar.  Before a bankruptcy petition is heard, the prior argument and decision, if any, on the question of the debt will usually have taken place in the context of an application by the debtor to set aside the statutory demand issued by the creditor.  It has been established in the authorities that the court’s decision rejecting the arguments raised by the debtor in his application to set aside the statutory demand precludes him from raising the same argument at the hearing of the bankruptcy petition in the absence of a change of circumstances.

115.  In Re Choy Wai Bor (HCB 8565/2001, 28 May 2002), the debtor’s application to set aside the statutory demand had been dismissed by the court but that was done under rule 48(1) of the Bankruptcy Rules (Cap 6A) without a hearing.[61] At the hearing of the petition, Kwan J held that such summary dismissal did not bar the debtor from raising his arguments, which were “not fully ventilated” at the earlier stage.  Kwan J nevertheless discussed the relevant English authorities in her judgment, including Turner v Royal Bank of Scotland [2000] BPIR 683, where Chadwick LJ, after describing the statutory procedure for bankruptcy, which is closely similar to that in Hong Kong, said:

“ 48. … Questions as to the existence of the debt at the date of the presentation of the petition, and any cross-claim, are intended to be dealt with on an application to set aside the statutory demand — that is to say, before the petition is presented.

49.  Rule 6.25 of the 1986 Rules[62] provides that on the hearing of the petition, the Court may make a bankruptcy order if satisfied that the statements in the petition are true and that the debt on which it is founded has not been paid or secured or compounded for.  So the Court is not bound to make a bankruptcy order; there is some residual discretion in the Court to decide on the hearing of the petition whether or not to make the bankruptcy order.  But it cannot have been intended, as it seems to me, that when exercising the discretion (which it undoubtedly has under Rule 6.25), whether or not to make a bankruptcy order at the hearing of the petition, the Court is required to revisit the arguments which have already been advanced on the hearing of the application to set aside the statutory demand; and which have already been rejected at that hearing.  As Vinelott J pointed out in the Brillouett case,[63] the debtor cannot go back and reargue the very grounds on which he unsuccessfully sought to have the statutory demand set aside.  It will require some change of circumstance between the unsuccessful attempt to set aside the statutory demand and the hearing of the petition before the Court (on the hearing of the petition) can be asked to go into the question which has already been determined at the hearing of the statutory demand.  To hold otherwise would be to encourage a waste of court time, and a waste of the parties’ money; and would defeat the obvious purpose of the statutory scheme.”

116.  After examining the authorities, Kwan J concluded at §30 of Re Choy Wai Bor:

“ On the basis that an issue has been properly ventilated at the stage of the application to set aside the statutory demand, and has been determined by the court at that hearing, I see no reason why res judicata should not operate to preclude the debtor from raising, at the hearing of the petition, the same argument which has been determined against him, in the absence of any change of circumstance. I should also point out that in the cases cited to me in which res judicata was held to apply, Brillouet,Turner, and Hunt v. Peasegood (English Court of Appeal, unreported, 13 October 2000), the proceedings had a long and involved history and it was apparent that the debtor had taken full opportunity to challenge the existence of the debt on setting aside the statutory demand and the issues he raised had been fully canvassed and determined against him in the earlier hearing.”

117.  In Coulter v Chief Constable of Dorset Police [2005] EWCA Civ 1113, §22, Chadwick LJ put the principle in these terms:

“ (i) that it is indeed a waste of the court’s time and the parties’ money to rehearse arguments which have already been run and have failed; and (ii) that, in circumstances where it is desired to run arguments which have not already been run, then … the court will inquire why those arguments were not run at the time when they could and should have been run.”

118.  The principle has been applied in a large number of first instance bankruptcy cases in Hong Kong: see e.g. Re Wiemer Mark [2013] 2 HKLRD 1214; Re Sy Chin Mong Stephen (HCB 5784/2014, 9 May 2014); Chan Yuk Lun v Chan Ying Chit [2015] 1 HKLRD 501; Re Jora Sisi Omar [2019] 4 HKLRD 606; Re Yip Kim Po [2022] 3 HKLRD 356. 

119.  The approach has been referred to in the Hong Kong cases as one based on res judicata or issue estoppel, but plainly only in a loose sense, for ordinarily a party bound by res judicata or issue estoppel strictly so called cannot seek to re-open the matter simply on the ground that there has been a change of circumstances.  English cases subsequent to Re Choy Wai Bor have expressly stated that the principle, which has since been referred to as the Turner principle, is not based on res judicata or issue estoppel: Coulter v Chief Constable of Dorset Police, §22; Harvey v Dunbar Assets plc [2017] EWCA Civ 60, §48.  It seems to us perhaps preferable not to use the terminology of res judicata and issue estoppel in this context, so as to avoid bringing in all the strictures attendant on those doctrines and the narrow Arnold exception (see §92(2) above).  It may also be noted that in Harvey v Dunbar Assets plc, the principle was held to be applicable, and the debtor was barred from re-arguing a point, even though there could be no issue estoppel because the relevant decision on the statutory demand had been set aside on appeal albeit on a ground unrelated to the point on which the debtor was held to be barred.

120.  For present purposes it is unnecessary to discuss the extended aspect of the principle, namely that the debtor may be prevented from raising at the hearing of the petition not only arguments that had been run and rejected in the application to set aside the statutory demand, but also arguments that had not but could and should have been run in that application.  In Re Choy Wai Bor, Kwan J left this open,[64] but more recently, Linda Chan J has espoused the development of the principle in Harvey v Dunbar Assets plc to encompass this extended aspect: Re Yip Kim Po, supra.

121.  In applying the principle, it is obviously important to see just what sort of development will amount to such a change of circumstances as to justify permitting the debtor to re-open a point decided against him in the application to set aside the statutory demand. 

122.  In this regard counsel for Pan rely on the following statement by Nugee J in the English case of Hayes v Hayes [2014] Bus LR 1238 at §53:

“ if there is something new, whether that be something new in the form of evidence or something new in the form of arguments, some new material before the court, that is a matter which can and no doubt should be taken into account by the court.”

123.  To put this passage in context, it should be noted that in that case, the debtor had raised a cross-claim in a county court against the creditor for harassment, but was only claiming damages for injury to his feelings at the time when he relied on the cross-claim in his application to set aside the creditor’s statutory demand.  That application was dismissed by the court on the ground, among others, that even if the debtor was awarded such damages it would be in a sum far below the petition debt.  By the time the bankruptcy petition was heard, however, the debtor had consulted counsel and very substantially expanded his cross-claim by including loss of earnings caused by the harassment.  An attempt by the creditor to strike out that claim in the county court had failed.  It was on these facts that Nugee J held that there was “new material” at the petition stage, namely the assertion that the harassment had not only caused the debtor anxiety but also financial loss, and the advice he had had from counsel that that was good in law and worth a great deal more.  The court also accepted the debtor’s explanation as to why this further claim had not been raised earlier.[65]

124.  It does not follow that more detailed evidence or more sophisticated submissions or argument on what is in essence the same point will justify a second bite of the cherry.  In Atherton v Ogunlende [2003] BPIR 21 at 27, Neuberger J said:

“ It seems to me that the principle enshrined in the passage in the judgment of Vinelott J, approved by Chadwick LJ, and indeed his own judgment, in Turner, indicates that the principle should not be abrogated simply because the party has found a better way of putting the same point, or wants to put in more evidence to support the same point. If there were evidence from Mr Atherton as to specific facts which really would make a difference, and which he was unable to put forward on 11 March 1999 through no fault of his own (eg because it was then unavailable or unknown to him at that hearing) different considerations might apply. However, to my mind, there is nothing in the subsequent evidence which justifies my going against the normal rule as laid down in Turner.”

125.  Likewise, it was said at Harvey v Dunbar Assets plc at first instance[66] that new evidence that “was merely more evidence of the type before the court on the first hearing and added nothing material” would not suffice to allow the point to be re-litigated.

H5(b) Applying the principle to Silver Starlight

126.  With reference to the CFI and CA Injunction Decisions, by the time of the hearing of the winding up petition, Silver Starlight had put in further evidence, namely: (1) certain new evidence in Pan’s affirmation dated 20 December 2021 not adduced before in the injunction proceedings; (2) Peng’s 1^st affirmation; (3) draft Peng’s 2^nd affirmation and finalised draft Peng’s 2^nd affirmation; (4) the first transcript; and (5) the second transcript (see §90 above).

127.  Notwithstanding such further evidence, we have reached the same conclusion as Linda Chan J that Silver Starlight should not be permitted to re-open the Overall Agreement argument which had been raised and rejected before, although we have done so through the application of the principle discussed above rather than finding there was an issue estoppel in the strict sense to which the Arnold exception was not established as discussed by the judge.

128.  First, as to Pan’s own evidence in his affirmation on the Overall Agreement, it was in essence the same evidence, or slightly more of the same kind, as that placed before the courts in the injunction proceedings.  This was not a change of circumstances sufficient to warrant re-opening the argument.

129.  Secondly, as to what the evidence regarding the Overall Agreement in Peng’s 1^st affirmation, draft Peng’s 2^nd affirmation, finalised draft Peng’s 2^nd affirmation and the first transcript, its nature is simply evidence said to be corroborative of what Pan has alleged in the Overall Agreement argument.  It is said that Peng initially declined to testify against the Banks, his former employer, and this was why the evidence was not available before July 2021.  But even after Peng’s 1^st affirmation was obtained, there was an inexplicable delay in putting it forward, and there were various defects casting doubt on it, with the result that it was excluded by the Court of Appeal (see §40 above).  The two drafts of Peng’s 2^nd affirmation and the first transcript are in relevant respects simply an elaboration of Peng’s 1^st affirmation.  In the totality of the evidence available, the effect of Peng’s evidence is limited, as discussed below.  Such new evidence is not, in our view, a sufficiently material development as to justify re-opening the argument on the Overall Agreement.

130.  Thirdly, as to what Peng said in the two drafts of Peng’s 2^nd affirmation and the two transcripts about the interference with him as a witness, it is no more than an allegation by Peng himself of pressure being put on him.  He has not identified the individuals who contacted him or explained why he said they were agents of the Banks.  The Banks have denied being involved and stated that they had been advised by the Hong Kong lawyers not to contact Peng.  Further, Pan had ample opportunity to and did elicit evidence from Peng before the alleged interference occurred, as elaborated in §63 above.  Even after the Mid-Autumn incident, Peng continued to feel at liberty to speak to Pan on the telephone and give “instructions”[67] based on which the finalised draft Peng’s 2^nd affirmation was prepared.  There is no basis to suggest that there is any further new and material evidence from Peng that Pan had been prevented from presenting to the court.  In these circumstances we do not consider that the allegation of interference with Peng amounted to a change of circumstances that should lead to a re-opening of the Overall Agreement issue.  We refer also to our discussion above at §§63-65.

131.  Accordingly, we consider, albeit based on a slightly different line of reasoning, that Linda Chan J was correct to hold that having regard to the CFI and CA Injunction Decisions, Silver Starlight could not rerun the Overall Agreement argument as a ground for disputing the petition debt.  It is unnecessary to deal with the Banks’ additional point that Silver Starlight was bound by the determination in DHCJ Le Pichon’s Statutory Demand Judgment against Pan that there was no bona fide dispute of the debt.

H6.  Merits of the Overall Agreement argument

132.  For completeness, we should say that even if the matter were to be re-opened and considered by us afresh in this appeal, we would have come to the same conclusion that the Overall Agreement argument did not raise a bona fide dispute of the debt on substantial grounds, as found in the CFI and CA Injunction Decisions.  The reasoning there is in our view compelling, including that the Overall Agreement is not evidenced by a single contemporaneous document; it is contrary to the express terms of the facility Agreements and the Guarantee; it is wholly inconsistent with Silver Starlight’s and Pan’s communications with the Banks after default; it was not mentioned by Pan at all until he made an affirmation in February 2021; it was inconsistent with the fact that Silver Starlight had already decided to offer to privatise Goldin Holdings in February and March 2017; and it made no commercial sense for the Banks to assume the risks inherent under the Overall Agreement especially given their recorded dim view of the prospects of the Project.

133.  On this appeal, in support of the Overall Agreement, counsel for Silver Starlight point to the following matters:

(1)  The existence of the Overall Agreement is supported by the evidence of Peng, a disinterested third party. 

(2)  It is corroborated by contemporaneous documents including: (i) the Side Letter referred to in §10 above which referred to security over the Mortgaged Land; (ii) clause 3.1 of the Chinese version of the Facility Agreement which stated the loan’s purpose was for developing the Project; (iii) the Banks’ internal credit approval document referring to the monitoring of sales and operating income from the Mortgaged Land; and (iv) the minutes of a meeting on 27 December 2019 between Pan and the Banks referring to the loan as the Tianjin loan (天津貸款).

(3)  Sun does not deny he introduced Sunac to take over part of the Project. 

(4)  The Banks had a history of concluding “under the table” agreements. 

(5)  The Overall Agreement makes commercial sense, in that the parties must have expected that units in the Project would be sold after the first three years during which no part of the principal of the loan need be repaid. 

(6)  Pan has explained the Overall Agreement was not put in writing because he trusted Sun and it was common in the Mainland for business to be conducted orally.

134.  These matters have to be examined in the context of all the evidence available (including that from the Banks identified in §35 above) and the improbabilities associated with the Overall Agreement (including those explained in the CFI Injunction Decision referred to in §37 above).  Thus examined, the matters relied on by counsel do not in our view render the Overall Agreement a credible allegation. 

(1)  Peng has not produced any contemporaneous documents or dealt with any of the reasons given by the courts for finding the Overall Agreement unbelievable.  His assertions were in principal respects inconsistent with the available contemporaneous documents. 

(2)  As for the contemporaneous documents referred to by counsel, the Side Letter contained the promise on the borrower’s side to procure a mortgage of the land in Tianjin as security for the loan.  The mortgage was indeed entered into subsequently on 30 November 2017.  This and the internal credit approval simply show that the Mortgaged Land was from the outset intended to be one of the securities for the loan.  The focus on the Mortgaged Land was wholly unsurprising, for ultimately Silver Starlight’s assets lay in the Project held several layers down the corporate chain.  But there is nothing in these documents to suggest that there is to be any fetter on the Banks’ remedies or that the Banks must first realise its security over the Mortgaged Land before pursuing Silver Starlight or Pan.  Likewise the fact that certain documents recorded the loan as being connected to or for the purpose of the Project says nothing about its terms.  In our view the documents relied on are not probative of the Overall Agreement case at all. 

(3)  As for the involvement of Sunac, Goldin Tianjin itself announced on 3 March 2018 that there was no equity cooperation in any form between Goldin and Sunac.  But even if Sun, the banker, had introduced Sunac to Pan as a potential business partner, this would be a commonplace business activity and is not evidence that positively supports the Overall Agreement case.

(4)  The so-called under-the-table agreements said to have been entered into by the Banks concerned completely different and unrelated transactions with other parties.  They are in our view quite irrelevant.  In any event it is also to be noted that they apparently concerned written agreements amounting to undisclosed side agreements.  There is nothing to show that the Banks had, even in unrelated cases, entered into some wholly oral side arrangements inconsistent with the written documentation.

(5)  We do not accept that the Overall Agreement case makes any commercial sense.  The nonsensical aspect was pointed out in the CFI Injunction Decision at §52 (see §37(6) above) and remains unaddressed.

(6)  As to Pan’s explanation that the Overall Agreement was not reduced into writing because of his trust in Sun and because of the alleged business culture in Mainland China where mutual trust is emphasised, we do not find it credible.  As DHCJ MK Liu stated at §50(1) of the CFI Injunction Decision:

“ Before the subject loans, [Pan] did not have any business dealings with [Sun]. It is [Pan]’s own evidence that he was introduced to [Sun] for the first time in around October 2016, and that he felt disrespected by [Sun] during his first encounter. It is inexplicable that [Pan] would place a high degree of ‘trust and confidence’ in a person who treated him with disrespect, and did not mention anything about the alleged Overall Agreement throughout the whole period until he applied for the Injunction in these proceedings.”

It is also to be noted that Pan’s explanation is different from the two explanations given by Peng (see §70(3) above).  We may add, in this connection, that according to a press release of the relevant Mainland authority dated 20 March 2020, Sun had been transferred to Mainland procuratorate authorities for investigation and prosecution.  There is no reason why, after Sun had receded from the scene, Pan did not forthwith raise the Overall Agreement to resist the Banks’ repayment demands until he made an affirmation in February 2021 for Silver Starlight’s application for injunction.

H7.  Prospect of repayment within a short time

135.  Silver Starlight’s last ground of appeal is that the winding up order should not have been made because there was reasonably credible evidence that the debt might be discharged within a short time.  The grounds relied on are those raised in support of its Postponement Leave Application.  Those matters have been considered and rejected in §§80-89 above.  It follows that this ground is also to be rejected.

H8.  Conclusion on Silver Starlight’s Winding Up Appeal

136.  For the above reasons, Silver Starlight’s Winding Up Appeal is dismissed.  There will be an order that the Banks do have the costs of the appeal on the party and party basis with a certificate for three counsel.

I.  Pan’s Bankruptcy Appeal (CACV 266/2022)

I1.  The evidence

137.  Linda Chan J had directed that for the purposes of the bankruptcy petition, the parties could refer to the evidence adduced in the winding up proceedings against Silver Starlight.  Accordingly, for the hearing of the bankruptcy petition, the court had, apart from the verifying affirmations filed by the Banks, the evidence in the winding up proceedings referred to in §90 above.

I2.  The judge’s decision

138.  Having regard to Pan’s failed attempt to set aside the statutory demand against him, Linda Chan J held that, as with Silver Starlight, it was not open to Pan to re-litigate the issues already decided by DHCJ Le Pichon against him in the Statutory Demand Judgment.  The judge also noted that the Banks’ petition was supported by Bank of China (Shenzhen Branch) based on a debt of approximately RMB 741 million in respect of which the court had already held, on Pan’s application to set aside the related statutory demand, that there was no bona fide dispute on substantial grounds.[68] Accordingly, the judge made the usual bankruptcy order against Pan.

I3.  The grounds of appeal

139.  The grounds of appeal set out in Pan’s notice of appeal are broadly: (1) that the judge erred in holding that the doctrines of res judicata, estoppel and abuse of process applied so as to debar Pan from raising the dispute of debt issue; (2) on all the evidence, the judge ought to have found there was a bona fide dispute of the debt in light of the existence of the Overall Agreement; and (3) the judge ought not to have made a bankruptcy order given there was reasonably credible evidence that the debt might be discharged within a short time.

140.  The Banks have filed a respondents’ notice, contending that the judgment should be affirmed on the additional ground that if the matter is considered afresh, the court should come to the same conclusion that the Overall Agreement was incapable of being believed. 

I4.  Discussion

141.  It seems to us that our reasons set out above for dismissing the Winding Up Appeal are equally applicable, with suitable changes in language, to the grounds raised by Pan for his Bankruptcy Appeal which are in substance identical to those raised by Silver Starlight (with the omission of the jurisdictional issue).  For those reasons:

(1)  we consider that there was no material change of circumstances and the judge was right to hold that Pan was precluded from re-litigating the dispute of debt issue based on his allegation of the Overall Agreement (see §§114-131 above);

(2)  even if it was open to Pan to re-argue the dispute of debt issue, we would have held that the Overall Agreement case does not raise a bona fide dispute of the debt on substantial grounds (see §§132-134 above); and

(3)  the judge was correct to make a bankruptcy order notwithstanding Pan’s allegation that there was a prospect for the debt to be repaid within a reasonable time.

142.  Accordingly, Pan’s Bankruptcy Appeal is dismissed.  There will be an order that the Banks do have the costs of the appeal on the party and party basis with a certificate for three counsel.

J.  Disposition

143.  As explained above, in relation to the matters before the court:

(1)  Pan’s Statutory Demand Appeal is dismissed.

(2)  Pan’s Postponement Appeal is dismissed.

(3)  Silver Starlight’s Postponement Leave Application is dismissed.  Leave is given for the Banks’ summons to adduce further evidence in the Postponement Leave Application to be withdrawn.

(4)  Silver Starlight’s Winding Up Appeal is dismissed.

(5)  Pan’s Bankruptcy Appeal is dismissed.

(6)  In each case the Banks do have costs on the party and party basis with a certificate for three counsel.

Mr William Wong SC, Mr Patrick Chong, Mr Lai Chun Ho & Mr Alex Yeung, instructed by Messrs. Howse Williams, for the Applicant in CACV 525/2021, for the Debtor in CACV 261/2022 and CACV 266/2022, for the Respondent in CACV 265/2022 & CAMP 294/2022

Mr Anson Wong SC, Mr Alex Fan & Ms Joanne Szeto, instructed by Messrs. Sit, Fung, Kwong & Shum, for the 1^st-3^rd Respondents in CACV 525/2021, the 1^st-3^rd Petitioning Creditors in CACV 261/2022 & CACV 266/2022 and 1^st-3^rd Petitioners in CAMP 294/2022 & CACV 265/2022

Joint and Several Trustees in bankruptcy of the Property of Mr. Pan Sutong, a Bankrupt, represented by Messrs DLA Piper, excused from attendance

[1]  See Pan’s affirmation in HCMP 222/2021 dated 19 February 2021, §30.

[2]  [2021] HKCFI 1595.

[3]  [2021] HKCA 1248 (Yuen, G Lam and Chow JJA).

[4]  [2021] HKCFI 3475 (not open to the public).

[5]  Statutory Demand Judgment, §125.

[6]  2ndAffirmation of Pan in HCB 6548/2021 and 3rd Affirmation of Pan in HCCW 295/2021.

[7]  [2022] HKCFI 2076.

[8]  [2023] HKCA 365 (G Lam and Chow JJA).

[9]  WLW-3

[10]  WLW-4

[11]  LYJ-1

[12]  LYJ-5

[13]  LYJ-7 and LYJ-8

[14]  WMK-1

[15]  WMK-2

[16]  WMK-4

[17]  WMK-9

[18]  WMK-10

[19]  WMK-11

[20]  WMK-14

[21]  The three threshold requirements are: (1) There must be a sufficient connection with Hong Kong, but this did not necessarily have to consist in the presence of assets within the jurisdiction; (2) There must be a reasonable possibility that the winding-up order would benefit those applying for it; and (3) The court must be able to exercise jurisdiction over one or more persons in the distribution of the company’s assets.  See Shandong Chenming Paper Holdings Ltd v Arjowiggins HKK 2 Ltd [2022] HKCFA 11, §3.

[22]  See CA Injunction Decision, §§44-45 & 47.

[23]  CA Injunction Decision, §§20-35.

[24]  as summarised in CA Injunction Decision, §§48 & 51.

[25]  CA Injunction Decision, §§49-52.

[26]  English translation:

“7.  … A while ago, their... because... the bank has entrusted somebody to … for me this Mid-Autumn Festival, uh, to send a message to me, saying that this is, this is ... uh... not proper.  They’ve learnt of the situation.  (They) know that I will testify for you.  Then this one because... uh... and they made it very clear that if I continue to help you, I may get into trouble.  So Mr Pan, please be, be understanding.  I am loath to do/see that.  I don’t want to offend either of you, uh... whether it be my former employer or... or you, or any other party, I don’t want to offend.”

 “42.  ... Well, I’m sorry about that, Mr Pan.  As I have said before, that thing is too complicated, and it involves…involves a lot of people.  And then, um... I... I don’t want to offend either of you, and I cannot afford to offend either of you.  But... but I’m sure, what I mean is that um... the evidence I submitted to court... the witness statement is absolutely truthful, and I, I, I wrote it myself...  That... that is... my own statement.  That is not a problem.  But when it comes to those minute, minute details, I... I really don’t want to recall them.  I’m reluctant to get myself embroiled in it, especially when their staff had already approached me and conveyed the message to me, which brought me utterly bad feelings.  I’m also quite angry about it.  I’m sorry.  I... about this, the best I can do is to be pragmatic in saying what I have to say... (in) the process.  As to more help, I’m afraid I uh... I can't … help you.  I’m sorry.”

[27]  §§27-28.

[28]  §§65-73.

[29]  §§35-39.

[30]  §70.

[31]  §§74-88.

[32]  §§92-98.

[33]  §§99-107.

[34]  §§108-122.

[35]  §§123-126.

[36]  Skeleton Submissions for Pan and Silver Starlight, §§25 & 27-37.

[37]  See e.g. Hongkong and Shanghai Banking Corp v Chan Yiu-wah & anor [1988] 1 HKLR 457, 510-511.

[38]  Pan’s 3^rd affirmation filed on 4 October 2021 in HCSD 3/2021, §9.

[39]  Statutory Demand Judgment, §§67-69.

[40]  The final draft Peng’s 2^nd affirmation, exhibited by Pan in his affirmation dated 20 December 2021 filed by Silver Starlight in the winding up proceedings.

[41]  Statutory Demand Judgment, §91.

[42]  Statutory Demand Judgment, §35(iii).

[43]  Statutory Demand Judgment, §39.

[44]  Statutory Demand Judgment, §70.

[45]  Statutory Demand Judgment, §91.

[46]  See Statutory Demand Judgment, §§75, 79 & 90; CA Injunction Decision, §47.

[47]  Statutory Demand Judgment, §§76-78.

[48]  Statutory Demand Judgment, §87.

[49]  Statutory Demand Judgment, §§81-82.

[50]  Wong Cho Ying’s 6^th affirmation, §10.

[51]  Wong Cho Ying’s 6^th affirmation.

[52]  Bankruptcy and Winding Up Judgment, §§12-20.

[53]  Bankruptcy and Winding Up Judgment, §24.

[54]  Bankruptcy and Winding Up Judgment, §§31(1), 33-34.

[55]  Bankruptcy and Winding Up Judgment, §§35-37.

[56]  Bankruptcy and Winding Up Judgment, §§47-50.

[57]  CA Injunction Decision, §54.

[58]  See CA Injunction Decision §§20-29.

[59]  See CA Injunction Decision §§30-33.

[60]  Clause 3(a) of the Share Charge.

[61]  Rule 48(1) provides: “On receipt of an application under rule 47, the court may, if satisfied that no sufficient cause is shown for it, dismiss it without giving notice to the creditor.”

[62]  The (UK) Insolvency Rules 1986.

[63]  Brillouett v Hachette Magazines Ltd [1996] BPIR 518.

[64]  See §§33 & 34.

[65]  See §§4-6, 54-56.

[66]  [2015] EWHC 3355 (Ch), §38.

[67]  See Pan’s affirmation dated 20 December 2021 filed in the winding up proceedings (HCCW 295/2021), at §95(1).

[68]  See Linda Chan J’s judgment in HCSD 28/2021 dated 18 May 2022: [2022] HKCFI 1450.