Global Sparkle Holdings Iv Ltd v. Ge Yiyang and Another
Read the full judgment text of HCA 651/2024 on BabelCite. This High Court CFI judgment was delivered on 2 September 2025.
1. In each of the actions (collectively, the “ Actions ”), the same 1 st and 2 nd Defendants (collectively, the “ Defendants ”) appeals (by Notices of Appeal filed on 1 November 2024 in each action) against Master Orders made by Master Elizabeth Cheung of the High Court (the “ Learned Master ”) on 18 October 2024 granting Order 14 judgments in favour of the respective Plaintiff in each of the actions, namely:-
Cited by 1 case · Cites 8 cases
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HCA 651/2024 [2025] HKCFI 3823 HCA 651/2024 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 651 OF 2024 __________________
__________________ AND HCA 652/2024 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 652 OF 2024 __________________
__________________ AND HCA 653/2024 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 653 OF 2024 __________________
______________ (Heard Together)
_______________ D E C I S I O N _______________ I. INTRODUCTION 1.In each of the actions (collectively, the “Actions”), the same 1st and 2nd Defendants (collectively, the “Defendants”) appeals (by Notices of Appeal filed on 1 November 2024 in each action) against Master Orders made by Master Elizabeth Cheung of the High Court (the “Learned Master”) on 18 October 2024 granting Order 14 judgments in favour of the respective Plaintiff in each of the actions, namely:-
2.I shall refer to Global Sparkle, Best East and Dynamic Gain collectively as the “Plaintiffs”. II. BACKGROUND 3.The Actions arose from the following notes (the “Notes”) issued by DaFa Properties Group Limited (“DaFa”):-
4.Each of Global Sparkle and Dynamic Gain beneficially owns the 2022 Notes in the aggregate principal amounts of US$50,000,000, totalling US$100,000,000. Best Ease beneficially owns 2023 Notes in the aggregate principal amount of US$60,000,000. 5.According to DaFa’s announcement dated 22 March 2024, the 1st Defendant was and remained an executive director and chairman of the board of DaFa. On 22 March 2024, he resigned but was at the same time appointed as a strategic development consultant. Further, according to the 2022 interim report of DaFa, the 2nd Defendant was the 1st Defendant’s father and was one of the controlling shareholders of DaFa. 6.On 17 July 2020, Global Sparkle and the Defendants entered into an offshore personal guarantee. On 28 October 2021, Best Ease and the Defendants entered into an offshore personal guarantee. On 15 October 2020, Dynamic Gain entered into an offshore personal guarantee. I shall refer to these three offshore personal guarantees collectively as the “Offshore Personal Guarantees”. The Offshore Personal Guarantees contained, among others, the following terms:-
7.The Defendants also executed warning notices (the “Warning Notices”), both in English and in Chinese, in respect of the Offshore Personal Guarantees they were to sign. By the Warning Notices, the Defendants acknowledged that:-
8.On 30 January 2022, DaFa defaulted in paying interest under the 2022 Notes in the amount of US$22,275,000. On 1 April 2022, DaFa still failing to pay the interest for more than 30 days thereby constituting an event of default, DaFa received a notice of acceleration with respect to the 2022 Notes. A cross-default under the 2023 Notes resulted and a notice of acceleration under the 2023 Notes was also issued. The long and short is that the principal and the accrued unpaid interest on the Notes all became immediately due and payable. 9.Despite the Plaintiff’s repeated demands (including a statutory demand on 15 February 2024), the Defendants failed to discharge their repayment obligations as guarantors. 10.On 8 April 2024, the Plaintiffs commenced the Actions. On 7 June 2024, the Plaintiffs filed Summonses for Order 14 judgments. On 18 October 2024, having heard arguments, the Learned Master granted Order 14 judgments. On 1 November 2024, the Defendants filed Notices of Solicitors and also Notices of Appeal. 11.On 3 January 2025, the Plaintiffs’ solicitors issued a chaser to chase the Defendants’ solicitors for fixing a date for hearing of the Appeals. They gave a deadline of 10 January 2025. Only on 10 January 2025, the Defendants’ solicitors replied alleging that they would fix the date shortly. No date was fixed shortly, and so on 12 March 2025, the Plaintiffs’ solicitors wrote to chase them to fix the date again. Finally, on 24 March 2025, the parties’ representatives attended the listing office to fix the date. III. PLAINTIFF’S CASE 12.The Plaintiffs’ case is that under the Offshore Personal Guarantees, the Defendants are liable to pay the Plaintiffs as ordered by the Learned Master in her Order 14 judgments. 13.On the executed documents, the Plaintiffs have satisfied me that they do have claim against the Defendants. It is for the Defendants then to raise arguable defence or triable issue in resist the Order 14 applications. IV. DEFENDANTS’ DEFENCE 14.The Defendants have not filed any defence or any draft defence on which they would like to defend should leave to defend be granted. Before the Master, the Defendants raised defences like duress, misrepresentation and unconscionability. Now before me, Mr Jonathan Chang SC (leading Mr Sik Chee Ching), counsel for the Defendants, very sensibly narrows down the issue and relies on the following defences only:-
15.I shall analyse each of the defences below. V. DEFENCE OF INJURIOUS CONDUCT AND NEW EVIDENCE IN SUPPORT 16.For the Defence of Injurious Conduct, the Defendants have to rely on the 2nd Affirmation of the 1st Defendant (“Ge’s 2nd Affirmation”) dated 3 July 2025 and filed on 23 July 2025. Ge’s 2nd Affirmation was not available before the Learned Master. Leave is required under Order 58 rule 1(5) before it could be relied upon. For this purpose, the Defendants filed Summonses on 27 June 2025 (the “New Evidence Summonses”) returnable before me at the same hearing of the Appeals now. In the New Evidence Summonses, the Defendants provided that if leave would be granted, the Plaintiffs would have leave to file reply affirmations within 14 days. This means that I would not be able to deal with the Appeals. To save time, with the parties’ agreement, I heard arguments and consider Ge’s 2nd Affirmation on a de bene esse basis. 17.Ge’s 2nd Affirmation consists of two parts. The first part concerns the Defence of Injurious Conduct. The second part concerns the COVID-19 pandemic on which apparently, the Defendants on the affirmation contended that this gave rise to force majeure. Mr Chang, rightly in my view, does not waste the Court’s time on the second part, which I do not have to deal with. 18.For the first part, the relevant evidence relates to two development projects of DaFa in the PRC. One is known as the Lishui Project, and the other is known as the Longzhou Project. 19.In respect of the Lishui Project:-
20.In respect of the Longzhou Project:-
21.Based on such evidence, Mr Chang submits that there is at least an arguable defence or triable issue that the Plaintiffs breached their duty to refrain from conduct injurious to the debtor. For this duty, Mr Chang refers me to Watts v Shuttleworth (1860) 5 H&N 235, China and South Sea Bank Ltd v Tan Soon Gin (alias George Tan) [1990] 1 AC 536 and The Fuji Bank, Ltd v Sanko Air-Conditioning Engineering Limited, HCA 1872/2001, 4 December 2001. 22.In Watts v Shuttleworth, supra, by agreement, H agreed with the plaintiff there to complete certain fittings for a warehouse to be paid by instalments. By the agreement, the plaintiff shall insure the fittings from risk by fire. The plaintiff and the defendant then entered into a guarantee, which recited the plaintiff’s agreement to H to insure the fittings and by which the defendant agreed to guarantee the due performance of H. However, the plaintiff did not insure the fittings as agreed, and Pollock CB held that the guarantee was discharged, saying at 247-248 that:-
23.Read in context, in my view, that case only stands for the proposition that where the creditor has a legal duty to the debtor to do or not to do certain thing, and where the guarantor relies on that duty in giving the guarantee, the breach of the duty may discharge the guarantee. The phrase “if the person guaranteed does any act injurious to the surety” has to be understood in this context. Understanding the case in this context this way also sits well with the well-established legal principle that a creditor is free to pursue different sources of repayment as he wishes, simultaneously, contemporaneously or successively or not at all: see China and South Sea Bank Ltd v Tan Soon Gin (alias George Tan), supra at 545C-H per Lord Templeman delivering the judgment of the Privy Council on appeal from Hong Kong. 24.In that case, the creditor advanced a loan to the debtor, and the surety guaranteed the repayment. A company mortgaged to the creditor shares allegedly worth twice the loan advanced. The debtor defaulted, and the creditor did not enforce the mortgaged. Instead, the creditor demanded the surety to pay. Lord Templeman, having reiterated the well-established principle, held that the failure to enforce the mortgage first was “no act injurious to the surety”, “no act inconsistent with the rights of the surety” and no omission of “any act which his duty enjoined him to do”, therefore allowing the appeal and reinstating the summary judgment granted against the surety in the first instance. I do not see how that case can help the Defendants in the present circumstances. 25.The last case Mr Chang relies upon is The Fuji Bank, Ltd v Sanko Air-Conditioning Engineering Ltd, supra. The peculiar facts of that case are set out in §§19-20 of the decision:-
26.There was an element of deliberateness, or “knowingly taking advantage”, an element based on which Recorder A Ho SC distinguished the case in Fujitsu PC Asia Pacific Ltd (formerly known as Fujitsu ICL Trading Hong Kong Ltd) v Technique Computer System (H.K.) Ltd, HCA 1422/2003, 27 April 2006 at §§21-22. This element of deliberateness echoes what Godfrey JA said in Bank of Credit and Commerce Hong Kong Ltd (in liquidation) v Quadrutec Hotel Management & Development Ltd [1996] 4 HKC 316 at 323G-I:-
27.The element also echoes the learned authors’ view in The Modern Contract of Guarantee (4th ed, 2020) §8-111 that “[t]here may be support for a narrower ground of discharged based upon fraud or bad faith conduct by the creditor, which involves more than mere prejudice or ‘unfairness’ to the guarantor”. In my view, this element is essential for the Defence of Injurious Conduct absent breach of any legal duty to do or not to do certain act, because the starting point is that a creditor is entitled to choose whatever available to him to make good the debts, and what to choose and how to take it are commercial decisions that may, with the benefit of hindsight, turn out unwise, but the Court is not in any position to find any actionable wrong simply on such commercial decisions. Thus, something more than that is needed, and here, I think the element of deliberateness or “knowingly taking advantage” is appropriate. 28.In the present case, on the new evidence the Defendants would like to rely on, I cannot see any legal duty, if any, arguably breached by the Plaintiffs in what they did (or what they did not do) in respect of the Lishui Project and Longzhou Project. Nor can I see any evidence of bad faith, “deliberateness” or “knowingly taking advantage”. I also do not see any evidence to suggest that the Plaintiffs had any motive to injure DaFa or the Defendants to benefit them. While motive is not a requisite element, absence of motive enhances the inherent improbability that the Plaintiffs had bad faith. In the circumstances, even if the new evidence is believed, I do not see any arguable defence or triable issue from it. 29.In other words, I am not satisfied that the Defendants have made out Condition (2) in Ladd v Marshall, that is, the new evidence, if believed, would have an important influence on the result of the case. This is sufficient for me to dismiss the Defendants’ New Evidence Summons. 30.In any event, I am also not satisfied that the Defendants have made out Condition (1) in Ladd v Marhsall. The Defendants’ explanation for this condition is that they changed legal team in November 2024 and the relevance of the evidence and the Defence of Injurious Conduct did not occur to the previous legal team. While I agree that for Order 14 application, the Court may adopt a flexible approach towards Condition (1) given the finality of an Order 14 judgment, I am still not satisfied that Condition (1) is made out in the present case having considered the following cumulatively:-
31.In the circumstances, the Defence of Injurious Conduct fails for want of evidence, and in any event, even if Ge’s 2nd Affirmation would be admitted, this Defence would still fail. VI. DEFENCE OF ECONOMIC DURESS AND UNCONSCIONABILITY 32.For economic duress, pressure is not sufficient. As submitted by Mr Chang in reliance on Re Li Xiaoming [2019] HKCFI 2782 at §§25-28, there are two elements to duress, as summarised in §45 of his Skeleton Submissions:-
33.Referring to Fine Vision Opportunity III Ltd v Xinyuan Real Estate Co Ltd [2024] 5 HKLRD 300 at §30(i) per William Tam J, Mr Douglas Lam SC (leading Mr William Wong), counsel for the Plaintiffs, reminds me that “the scope for lawful act duress in contractual negotiations is “extremely limited”; and against the commercial background, the pressure applied by a negotiating party will “very rarely” come up to the standard of illegitimate pressure or unconscionable conduct”. 34.The evidence in support of the Defence of Economic Duress and Unconscionability is set out in §§9-16 of Ge’s 1st Affirmation. In gist:-
35.As Mr Lam points out, the Plaintiffs in each action, namely, Global Sparkle in HCA 651/2024, Best Ease in HCA 652/2024 and Dynamic Gain in HCA 653/2024, executed the Offshore Personal Guarantees and the Warning Notices on different dates. In particular, there were three occasions:-
36.Ge’s 1st Affirmation in each Actions repeats the same allegation that the Defendants were asked to sign the Warning Notices and the Offshore Personal Guarantees two to three days in advance. This would mean that the Defendants would have chance to digest and understand the documents before the second and the third occasions, and that despite such chances, the Defendants faced the same threat as alleged and still decided to sign the Offshore Personal Guarantees and the Warning Notices without registering any protests in writing. In fact, there is even no evidence of oral protests even on the second and third occasions. Bearing in mind that the Defendants were sophisticated businessmen, their version of event, in my view, is in itself inherently unbelievable. 37.Further and in any event, even on the Defendants’ own version of events, I cannot see any exertion of illegitimate pressure on the Defendants. The issuance of the Notes was in their interests, given that the Defendants were the controlling shareholder of, or at least held substantial interest in, DaFa. Also, there is no evidence to explain why if the Plaintiffs would refuse to acquire the Notes, DaFa would not be able to issue any Notes at all to raise funds. In any event, the negotiation was, in my view, a commercial negotiation where parties used their bargaining power in their own interests. I cannot see any or any cogent evidence to suggest any bad faith or other illegitimacy or unconscionability here. 38.Therefore, I find that there is no arguable defence and no triable issue on the Defence of Economic Duress and Unconscionability. VII. OTHER DEFENCES? 39.As mentioned above, in Ge’s 1st Affirmation, the Defendants also mention “misrepresentations” and “unconscionable conduct” apparently as separate defences. However, I do not see any evidence of misrepresentations. Further, in the light that the negotiation was a commercial negotiation as I pointed out above, I cannot see any unconsionability in the matter. Mr Chang, rightly, does not run these defences before me. VIII. CONCLUSION 40.In the premises, I dismiss the Defendants’ appeals. I also dismiss the Defendants’ New Evidence Summons for leave to rely on Ge’s 2nd Affirmation. 41.As regards costs, Mr Lam, for the Plaintiffs, seek costs on an indemnity basis, relying on Clause 8.3 of the Offshore Personal Guarantees which provide that the Defendants shall “indemnity and hold harmless each Investor Party (and the Receiving Agent, as applicable) on demand from and against any and all costs, claims losses, expenses (including legal fees) and liabilities”. While I still have discretion to depart from this contractual agreement, I see no reason to do so. Therefore, I order the Defendants to pay the Plaintiffs costs of the appeals (including the New Evidence Summons) on an indemnity basis, with certificate for two counsel. I summarily assess costs of each appeal at HK$220,000, totalling HK$660,000 for all the Appeals. 42.It remains for me to thanks Mr Chang and Mr Sik, counsel for the Defendants, and Mr Lam and Mr Wong, counsel for the Plaintiffs, for their assistance.
Mr Douglas Lam SC, leading Mr William Wong, for the Plaintiff in HCA 651/2024, HCA 652/2024 and HCA 653/2024 Mr Jonathan Chang SC, leading Mr Sik Chee Ching, for the 1st and 2nd Defendants in HCA 651/2024, HCA 652/2024 and HCA 653/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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