Liu Guiqiao v. Mak Lok Man (also known as Mak Lok Man Mandy) and Another

HCA 1489/2019

[2024] HKCFI 3648

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1489 OF 2019

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REASONS FOR JUDGMENT

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A.  INTRODUCTION

1.In these proceedings, the Plaintiff (“Mr Liu”) claimed recovery of a loan of $15m (“the Loan”), against the 1^st Defendant (“Ms Mak”) as one of the borrowers under a loan agreement dated 24^th September 2017 (“the Loan Agreement”), and against the 2^nd Defendant (“Mr Lok”) as the guarantor under a personal guarantee and indemnity also dated 24^th September 2017 (“the Personal Guarantee”).

2.Ms Mak and Mr Lok filed defences and witness statements, but ultimately did not appear at the trial of the claim. I was satisfied that they had been given notice of the trial dates. The trial proceeded in their absence.

3.Mr Liu and his assistant Ms Ma Fung Wah (“Ms Ma”) gave evidence at trial, which I accepted.

B.  THE FACTS

4.The following appeared from the witness statements of Mr Liu and Ms Ma, and the documents placed before the court, and were undisputed. I find them as facts.

5.Mr Liu got to know Mr Lok in about 2015. Some time in 2017, Mr Liu was told by Mr Lok that he and his son (“Lok Junior”; together with Mr Lok “the Loks”) were operating profitable restaurants in Hong Kong. Mr Liu said that his business was, in comparison, underperforming. After some discussions, the Loks proposed to Mr Liu the establishment of a joint venture and the merger of Mr Liu’s restaurants with the Loks’ existing and future restaurants.

6.It was against that background that Mr Liu, Lok Junior and Ms Mak entered into the following agreements:

6.1  a Share Transfer and Share Subscription Agreement dated 24^th September 2017 (“the JV Agreement”), setting out the terms on which the parties were to carry out their joint venture business, under Union On Holdings Limited (“Union On”), which prior to the agreement was beneficially owned solely by Mr Liu. Amongst other things:

6.1.1  Lok Junior and his girlfriend Ms Mak were to sell their interests in a restaurant business to Union On, in consideration of which Union On would issue and allot 1,125 shares to them;

6.1.2  Lok Junior and Ms Mak were to subscribe for shares in Union On at the subscription price of $15m for 3,375 shares;

6.1.3  Mr Liu was to set up a Hong Kong company to hold shares in Union On to be issued to him under the JV Agreement;

6.1.4  Lok Junior and Ms Mak were to set up a Hong Kong company to hold shares in Union On to be issued to them, and to be subscribed for by them, under the JV Agreement. The company so set up was United Harvest Limited (“United Harvest”);

6.2  the Loan Agreement, pursuant to which Mr Liu was to lend $15m on 24^th September 2017 to Lok Junior, Ms Mak and United Harvest for the purpose of subscribing for shares in Union On. Relevantly for present purposes:

6.2.1  cl.8(b) provided that the Loan would become immediately due and payable if the borrower commenced any act of bankruptcy;

6.2.2  cl.18 provided that use of the singular included the plural, and that where the borrower consisted of more than one person, their obligations were joint and several;

6.3  the Personal Guarantee, pursuant to which Mr Lok guaranteed the performance of the obligations of Lok Junior, Ms Mak and United Harvest under the Loan Agreement. Relevantly for present purposes:

6.3.1  under cl.3.1, Mr Lok guaranteed that the debt under the Loan Agreement would be paid when it fell due and payable by the borrowers thereunder;

6.3.2  cl.3.2 provided that when the debt under the Loan Agreement fell due and payable, Mr Lok would immediately pay on written request. Clause 4.1 provided that Mr Lok was also to be liable as if he were the principal debtor.

7.The Loan was advanced on 24^th September 2017, as evidenced by the following.

7.1  Lok Junior, Ms Mak and United Harvest signed an acknowledgement of receipt of the Loan on 24^th September 2017 on the last page of the Loan Agreement;

7.2  Union On’s return of allotment dated 24^th September 2017 and annual return for the date up to 1^st August 2018 show that on 24^th September 2017, Union On allotted 3,375 shares for $15m, and that United Harvest was allotted 4,500 shares in total;

7.3  Mr Liu’s evidence that the Loan was made upon the signing of the documents of 24^th September 2017.

8.Lok Junior was adjudged bankrupt on 27^th February 2019.

9.On behalf of Mr Liu, Messrs Au, Thong & Tsang issued demand letters to Mr Lok on 6^th May 2019 and Ms Mak on 25^th June 2019 respectively, seeking repayment of the Loan.

10.The Loan was not repaid.

C.  LIABILITY UNDER THE LOAN AGREEMENT AND THE PERSONAL GUARANTEE

11.Upon Lok Junior’s bankruptcy, the Loan became immediately due and payable by Ms Mak in accordance with clause 8(b) of the Loan Agreement, and by Mr Lok in accordance with cll.3.1, 3.2 and 4.1 of the Personal Guarantee.

12.Ms Mak and Mr Lok pleaded a number of factual matters in their defences, but as they did not appear at trial to give evidence, none of these were substantiated.

13.In relation to interest, counsel for Mr Liu, Ms Queenie Ng, indicated that Mr Liu would not seek the (unpleaded) contractual interest, but only interest at the rate of 1% above prime rate.

14.I therefore gave judgment for Mr Liu for $15m, together with (a) interest at the rate of 1% above the prime rate of HSBC from 15^th August 2019 to 19^th June 2024 and thereafter at judgment rate until payment, and (b) costs of the action, to be taxed if not agreed.

Ms Queenie Ng and Ms Tessa Chan, instructed by Au, Thong & Tsang, for the Plaintiff

The 1^st Defendant was not represented and did not appear

The 2^nd Defendant was not represented and did not appear