Hansom Finance Ltd (in Creditors' Voluntary Liquidation) v. Yang Haoying
Read the full judgment text of HCA 784/2022 on BabelCite. This High Court CFI judgment was delivered on 7 November 2025.
1. This is the trial of the claim of the Plaintiff (“ Hansom ”) against the Defendant (“ Mr Yang ”) for breach of director’s duties in approving and granting 5 loans totalling HK$799,000,000 (“ the 5 Loans ”) within 6 months. All 5 Loans were uncommercial and exposed Hansom to risks of default which have materialized. All 5 Loans are now irrecoverable. Further, 2 of the 5 Loans were extended on or around their respective due dates with a lower interest rate, without any commercial basis.
Cited by 1 case · Cites 5 cases
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HCA 784/2022 [2025] HKCFI 5278 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 784 OF 2022 ____________ BETWEEN
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____________ J U D G M E N T ____________ A. INTRODUCTION 1.This is the trial of the claim of the Plaintiff (“Hansom”) against the Defendant (“Mr Yang”) for breach of director’s duties in approving and granting 5 loans totalling HK$799,000,000 (“the 5 Loans”) within 6 months. All 5 Loans were uncommercial and exposed Hansom to risks of default which have materialized. All 5 Loans are now irrecoverable. Further, 2 of the 5 Loans were extended on or around their respective due dates with a lower interest rate, without any commercial basis. 2.Whilst being a director, Mr Yang was involved in and responsible for approval of loans and the drawdown process. In particular:
3.It is Hansom’s case that Mr Yang breached his duties to act with reasonable skill, care and diligence, to exercise independent judgment and to act in the best interests of Hansom. 4.Accordingly, Hansom claims a total of HK$799,000,000 as loss by reason of Mr Yang’s breaches. 5.D’s primary contention is that his role was limited to an “approver”, with all the borrowers and documents already arranged by others. Other persons from the parent company had participated in the process, from negotiating the terms of the loan to instructions for releasing the loan proceeds. He exercised independent commercial judgment based on what he believed to be true information. After consulting other Managing Directors of the parent company, the loan agreement would be signed. The CFO (Wang) and company secretary would sign documents and Wang would finally release the loan proceeds. 6.Hansom says that this was an abdication of responsibility and plainly not an answer to its claim, as Mr Yang had a non-delegable duty to monitor and supervise others’ work and independent judgment. B. UNDISPUTED FACTS B1. The parties 7.Hansom was incorporated on 1 November 2000 as a private company under the laws of Hong Kong and was a wholly owned subsidiary of Freeman FinTech Corporation Limited (“Freeman”) (now known as ARTA TechFin Corporation Limited), a company listed on the Hong Kong Stock Exchange. 8.Mr Yang served as a director of Hansom from 22 August 2016 to 10 March 2020 (during which the 5 Loans were granted and defaulted). He served as the sole director of Hansom from 1 September 2016 to 19 September 2017 (during which period three out of the five loans were granted and defaulted). Mr Yang was also appointed as an executive director of Freeman on 20 October 2016. B2. Hansom’s Operations 9.Hansom was licensed under the Hong Kong Money Lenders Ordinance, Cap 163, and carried on a money lending business from 2009 to 14 August 2020. 10.In addition to Mr Yang:
11.By a special resolution passed on 9 September 2021, Hansom was placed into creditors' voluntary liquidation, with joint and several liquidators appointed pursuant to the Order of Linda Chan J dated 4 May 2022. B3. THE 5 LOANS 12.From 15 September 2017 to 2 March 2018, Mr Yang (on behalf of Hansom) entered into agreements to make 5 unsecured loans to 5 borrowers (“the Borrowers”), ranging from HK$109 million to $200 million out of a total of HK$799 million, which were drawn down and paid to third parties (“third party recipients”).
13.The common features of each of these 5 Loans were that:
14.Further,
15.Credit Assessments Reports were given to Mr Yang. The enclosed, amongst others, identity documents of the Borrower and the permit for the Borrower to remain in Hong Kong up to a certain date. On 13 September 2017, Yang approved the credit assessments of:
16.On 15 September 2017, Mr Yang (for and on behalf of Hansom) granted 3 unsecured loans to Xue, Ju and Li as per Table 1. 17.Mr Yang subsequently entered into loan agreements with Xue, Ju and Li at a lower interest rate of 1.25% per month, despite the Credit Assessment Reports recommending a higher interest rate of 1.5% per month. In particular, in the case of Ju, an undated set of minutes of meeting between Ju and Mr Yang recorded that Ju had already agreed to pay the 1.5% per month interest rate. 18.On 19 September 2017, a total of HK$560 million was drawn down by Xue, Ju and Li, who all instructed Hansom to pay his respective loan proceeds to Dong Sheng. Mr Yang approved the relevant drawdown requests. The amount paid to Dong Sheng was HK$560 million. 19.On 12 February 2018, Yang approved the credit assessments of:
20.On 14 February 2018, Mr Yang (for and on behalf of Hansom) granted a loan an unsecured of HK$120 million to Liu of which HK$109 million were drawn down as per Table 1. Liu instructed Hansom to pay HK$100 million to Dong Sheng, and HK$9 million to another third party called Steel Dust Limited. Yang approved these drawdown requests in respect of these payments. 21.On 2 March 2018, Yang (for and on behalf of Hansom) granted a loan of HK$130 million to Song as per Table 1. Song instructed Hansom to pay HK$100 million to Dong Sheng and HK$30 million to Bill Sheng Trade Co Ltd. Yang approved these drawdown requests in respect of these payments. 22.On 11 June 2018, Yang (on behalf of Hansom) entered into 2 repayment agreements (“Repayment Agreements”) with Xue and Ju to extend their respective repayment periods at a reduced interest rates as per Table 1 without demand for any collateral. By that time, Ju was already in default. B4. Yang’s Role in the Defaulted Loans 23.At all material times, Mr Yang approved the 5 Loans on Hansom’s behalf, in that:
24.To date, there has been no recovery in relation to the 5 Loans. C. ISSUES 25.The following are agreed issues in this case:
D. THE EVIDENCE D1. Documentary evidence 26.The key Hansom’s case primarily rested on documents in the following broad categories:
27.There is no challenge to their authenticity. 28.Mr Yang failed to produce any documents. D2. Witnesses 29.The principles for assessing the credibility of witnesses have been summarized in Hu Lan v David Golden [2023] HKCFI 873 at §36:
30.Mr Glen Ho, one of the liquidators, gave evidence on behalf of Hansom. His evidence was largely based on documents, which were not complete. That was no criticism of him as a liquidator or witness. He was truthful. 31.Whilst working with Hansom, Mr Yang was not the keeper of documents. He had left Hansom for 2 years by the time he filed his Defence in 2022. It was understandable that he would not have access to Hansom’s documents. (§§1 and 2). He was straight forward and frank. He plainly was under the belief that approving a loan and releasing loan proceeds was the work of a team. However, as will be demonstrated below, even accepting that his work was limited to certain steps, he fell below what the law expected of him. E. LEGAL PRINCIPLES 32.I gratefully adopt the summary of Mr Lam and Mr Lau, counsel for Hansom and will deal with the submissions of Ms Choy along the way. 33.The director’s duty of care is now codified in Section 465 of the Companies Ordinance (Cap. 622), which provides, amongst others, that:
34.Kwan J (as she then was) explained in Re Copyright Ltd [2004] 2 HKLRD 113 at §§34-35:
35.Ms Choy also relies on the following paragraphs in the same case in relation to delegation of duties:
36.With respect to Ms Choy, these passages that she quoted are case sensitive. They do not establish the principle that a director who delegates his duty will always be absolved from liability, but a director who had reasonable belief in a state of affairs and took reasonable steps (in that case to comply with statutory duties) will not be found liable for abrogation of responsibility. 37.More recently, Falk J (as she then was) in Re Keeping Kids Co [2021] EWHC 175 (Ch) at §§858-861 elaborated as follows:
38.By way of illustration, the courts have held directors to be liable for breach of duty of care extending credit without adequate safeguards in the following cases. In ChinTung Futures Ltd. (In Liquidation) v Arthur Lai Cheuk-kwan and Others [1994] 1 HKLR 95, the plaintiff company was a broker on the futures exchange and, as a result of the stock market crash, a customer of the company defaulted on a futures trading account held with the company, leading to a loss of about $83.97 million. Bokhary J (as he then was) held at §§112-113 that the director was liable for breach of duty as:
39.Ms Choy submits that this case is distinguishable because ChinTung involved highly volatile products, namely, futures, whereas the present case involved loans. I do not think the distinction is material. What is material is the both cases involved lending or extending credit to an obviously unreasonable extent. 40.In Australian Securities and Investments Commission v Avestra Asset Management Limited (In Liquidation) [2017] FCA 497 at §218, Beach J held that the directors failed to act with reasonable care and diligence in authorizing the company to make a loan in view of the following circumstances:
41.Ms Choy submits that this case is distinguishable on the facts as it did not involve loans granted to private individuals but a company for its further investment in funds. The considerations are wholly different. The fact that there was a breach in those circumstances does not mean the same can be said in the present case. 42.Once again, I do not find this distinction material. The reasons for decision was focused on the lack of due diligence and lack of security. 43.Ms Choy further relies on 2 authorities in her opening submission, but they are no longer applicable in the light of the authorities cited by Mr Lam. 44.The first is Re Brazilian Rubber Plantations and Estates Limited [1911] 1 C 425. Ms Choy submits that a director: (1) is not bound to bring any special qualifications to his office; and (2) is not bound to take any definite part in the conduct of the company’s business. 45.Without disrespect, her first proposition is contrary to the "second limb" envisioned under Section 465(2)(b), as clarified by the Annotated Companies Ordinance (Cap.622) at [465.04].
46.The second proposition is also contrary to Re Copyright Ltd [2004] 2 HKLRD 113 as directors have the continuing duty to acquire and maintain a sufficient knowledge and understanding of the company’s business. 47.The second case is Lagunas Nitrate Company v. Lagunas Syndicate [1899] 2 Ch.392. Ms Choy submits there would not be a breach of duty unless, in a business sense, a director’s conduct was grossly negligent. 48.With respect, gross negligence is not the applicable standard under s.465 of the Companies Ordinance. 49.This Court, of course, reminds itself that whether there was a breach of director’s duties is a highly fact sensitive exercise. Each case must be decided on its own facts. E1. Duty to exercise independent judgment 50.As explained in Law of Companies in Hong Kong, Fourth Edition, 2023 at §8.160:
51.Even if a director does rely upon others in the conduct of the company’s affairs, he must, at all times, be at liberty to satisfy himself as to any matter in relation to the company’s business: Re Boldwin Construction Co Ltd [2011] 3 HKLRD 430 at §12, CA. 52.Ms Choy submits that as held in Boldwin Construction, there needs to be evidence showing that the director could not trust his staff or that they were suspicious:
E2. Duty to act bona fide in the best interests of the Company 53.Whether a director has breached the duty to act bona fide in the best interests of the company ordinarily applies a subjective test, ie whether the director honestly believed that his act or omission was in the interests of the company. The issue is as to the director's state of mind. No doubt, where it is clear that the act or omission under challenge resulted in substantial detriment to the company, the director will have a harder task persuading the court that he honestly believed it to be in the company's interest; but that does not detract from the subjective nature of the test: China Metal Recycling (Holdings) Ltd v Chun Chi Wai [2021] HKCFI 378 at §62. 54.In any event, honest belief without any reasonable basis cannot be a defence to breach of director’s duties. It is not an excuse that a director blindly followed the act of other directors: China Metal at §214. 55.Where there is no evidence that the director gave actual consideration to the interests of the company, the proper test to be applied is an objective one, i.e. whether an intelligent and honest man in the position of a director of the company concerned could, in the whole of the existing circumstances, have reasonably believed that the transaction was for the benefit of the company: China Metal at §63. F. DUTIES OWED TO HANSOM AS A DIRECTOR 56.As Ms Choy submits, there is no document to show what the scope of Mr Yang’s duties was in Hansom. Mr Ho could not say for sure what Mr Yang’s duties were either. Mr Yang’s evidence was that there were no employees in Hansom and Mr Ho was not able to contradict this. 57.Mr Ho also admitted that there is no document to show the scope of duties of Wang and he did not know how Mr Yang and Wang divided their duties between them. 58.I do accept, as stated in Yang-WS, that Mr Yang's role was that of an “approver” (審批人) of loans. 59.Ms Choy submits that the assessment of competence will need to address the defendant’s role (assigned or assumed), duties and responsibilities, taking into consideration the part the defendant was expected to play in the management and organization of the company and its business: Re CFO Lending Ltd: Secretary of State v. Keeble [2022] EWHC 2503 (Ch) at §177, In the absence of evidence addressing the role, duties, and responsibilities of the director meant that the relevant complaint of incompetence supporting unfitness was not established: at §214. 60.In CFO Lending, the director had the “leading role” in the company but there were no specifics about the role given by P. P could not show the linkage between D’s role and the alleged wrong (ie misuse of client information). D’s case was that his role mainly related to marketing and advertising but operational compliance was the responsibility of the other 4 directors who had admitted liability. 61.The present case is different. Mr Yang was the sole or one of the 2 directors of Hansom charged with approval of loans. The other Managing Directors and officers were of Freeman. Even in the absence of contractual documents defining the scope of his duties, there is nothing to suggest that the statutory duty of care imposed by s.465 Companies Ordinance should not apply to Mr Yang in the role of an approver. 62.Specifically, Mr Yang has obtained a postgraduate degree in IMBA (Financial). He studied a 2-year course which included accounting, corporate finance and financial management. He had over 12 years of experience in the financial industry, having worked with major financial institutions including Ping An Trust Co Ltd and Zhongtai Securities (specifically on investment in shareholding). The board of Freeman recommended him to be Hansom’s director, based on his working experience and gave him high remuneration. With such qualifications and experience, Mr Yang should be held to the standard of care expected of a director under s.465 of the Companies Ordinance. G. DID MR YANG BREACH HIS DUTIES AS A DIRECTOR WITH RESPECT TO THE 5 LOANS? G1. The workflow in approving loans 63.In his Defence (§§1 and 2) and witness statement (§2), Mr Yang referred to a workflow of approving loans (“Workflow”) that involved other people (probably from Freeman). 64.I also accept that, Hansom not having staff, the process of gathering information had to be delegated to others. However, it remained Mr Yang’s duty to vet the information obtained from due diligence, review the Credit Assessment Reports and come to an independent judgment. 65.Mr Yang did in fact personally review the Credit Assessment Reports and attachments. He admitted that he had approved the 5 Loans and that, if he had refused to approve the same, Hansom would not have granted the Loans or paid them to third party recipients. 66.He would consider the source of the information and the logic of proving its veracity. He would review the terms of the loan agreement. He and other people (項目推進人), including Managing Directors of Freeman, would consider whether the loan was for the benefit of Hansom and was safe to lend, and then come to a consolidated decision. Then Mr Yang would sign the loan agreement and related agreements. 67.Where the loan proceeds were to be issued to third party recipients, Mr Yang was not involved in the process directly. However, he would ask the actual “operator” for the reason why money was to be released to third party recipients and review the due diligence done by that officer on the third party recipients. It was only after being satisfied with the logic of having the third party recipients and the operator’s confirmation that there was no risk in law that Mr Yang would sign the documents authorizing release of the loan proceeds to the third party recipients. 68.Mr Yang would supervise the loan process to ensure that it complied with the company’s requirements, discuss with the professional officers in charge at every step, and assess the logic of the loan and source of funding in the light of the “market conditions”. He exercised independent judgment in such circumstances based on what he believed to be true information. Before signing the loan agreement, Mr Yang would consider the asset position of the borrower, the purpose of the loan, the market for re-financing, match the profit with risk and supervise officers in assessing the background of the borrower. 69.In my view, the Workflow could not be faulted as a matter of principle. G2. A double-check mechanism adopted by Mr Yang 70.Ms Choy submits that Mr Yang’s evidence under cross-examination showed that Hansom adopted a “double-check” mechanism for loan approvals. Mr Yang’s decision to approve a loan was not final but the process required at least 2 executive directors from Freeman to finalize approval. Wang had the right to not sign cheques to release the loans. This mechanism ensured that there was check-and-balance within the process. Mr Yang was not responsible for conducting site visits or reading all documents before approval of loans. This was done by Wang who would report his due diligence results to him. Mr Yang would discuss the credit assessment separately with Wang and Zhao Tong (“Zhao”), to ensure that there was consistency in their assessment before signing his approval. 71.Whilst this may all be true, it has to be remembered that Hansom was a legal entity in and of itself. Zhao and Wang were not employees of Hansom. They could have been misled by Mr Yang’s (inappropriate) approval of a loan to release the loan proceeds. The fact that Zhao or Wang had wrongly given a further blessing to the loan would not absolve Mr Yang from liability. Ensuring “consistency” in the views of Wang, Zhao and/or Mr Yang would not discharge Mr Yang’s duties as a director if Mr Yang’s approval was wrongly given in the first place. That is not “elevating” (to use Ms Choy’s word) Mr Yang’s duties to essentially encompass all steps involved in the loan approval process. The Court is merely holding him to his duties as an “approver”. It is also not “courtroom hindsight” as Ms Choy submits because the Court assesses his conduct at the time of approval. 72.Accordingly, existence of the double-check mechanism in itself did not absolve Mr Yang from liability. G3. Credit assessment of the Borrowers 73.Mr Yang claimed to have followed the Workflow when doing the credit assessment of the Borrowers. The Credit Assessment Reports were prepared by Zhao. Mr Yang had asked Zhao about the source of information and logic of the assessment. He had reason to trust the professional integrity of other Managing Directors and officers whom he had consulted. However, the credit assessments were problematic. 74.Firstly, the information obtained by Zhao was seriously inadequate. All of the Borrowers were natural persons. All of Zhao’s credit assessments concluded that the Borrowers’ creditworthiness was satisfactory, solely on the basis of the alleged net asset value of the Borrowers’ shareholding in private companies in the Mainland, as stated in the financial statements. (Each of these companies in which the relevant Borrower held shares will be referred to as “the Borrower’s company”.) Zhao applied a discount of 50% to the value, except for Song, whose shareholding was subject to a discount of 30%. 75.Common to all of Zhao’s assessments were that:
76.In summary, the information available could hardly convince any reasonable lender that the Borrowers had financial ability to repay. It should have prompted a lot more questions from Mr Yang instead of blindly relying on Zhao. 77.Secondly, the lack of ability to repay was glaringly apparent. Mr Yang testified that when he met with Xue, Ju and Li, he knew that each of those Borrowers intended to (i) obtain a further loan from another financial institution to repay the loan from Hansom; and (ii) to pledge their shareholding in their respective companies for that purpose. Such information would have alerted any professional lender to the risk that these Borrowers had no ability to repay such huge loans. Even so, no security (eg over the shares of the Borrower’s respective company) was sought from the Borrowers or even considered. Mr Yang’s explanation that the interest proposed was already over the banks’ usual rates could not be an answer in such circumstances. 78.Ms Choy submits that Mr Yang did not rely on the provision of security but the ability of the Borrowers to get refinancing and the profitability of their businesses. 79.With respect, the minutes of meeting (in the form of Qs and As) with those 3 Borrowers did not even record their intention to each take out a loan to repay Hansom’s loans. Further, there simply was nothing that could show that the Borrowers could get refinancing. 80.Thirdly, there was serious lack of documentation. This was confirmed by Mr Glen Ho when he was referred to the Workflow. This tallied with Mr Yang’s own evidence that he had not read all the documents but only asked Wang about the source of information. 81.Mr Lam referred to the lack of documentary evidence as to litigation and bankruptcy searches against each of the Borrowers. I place no weight on this because it is not Hansom’s case that any of the Borrowers were bankrupt or was involved in litigation. 82.Fourthly, Zhao’s suggested discount to the value of the Borrowers’ shareholding was flawed. 83.With respect to Xue’s loan, Xue’s company was assessed to have “ordinary liquidity in assets” (资产流动性一般). Mr Yang testified that he only relied on 2 matters, namely (a) the balance sheet and (b) what Wang purportedly told him about the nature of the business of Xue’s company. Mr Yang spent a lot of time explaining why the income from receivables would be relevant in assessing liquidity in assets. However, a company’s income and expenses simply would not shed light on the nature of its assets (be they liquid or not). 84.There were also numerous apparent inconsistencies in the loan documentation as regards Xue. Her Credit Assessment Report stated that the paid-up capital of Xue’s company was RMB120 million as at 11 September 2017. However, the Credit Assessment Report in the file showed that only RMB20 million was paid-up. 85.Mr Yang claimed that Wang had confirmed with an independent accountant in the Mainland that the RMB100 million was in fact paid – in cash. Once again, there were simply no documents to confirm Wang’s assertion. Further, it was simply odd that RMB100 million was deposited by cash into the bank account for paid up capital. Even using the highest denomination of RMB100 notes, that would have required a million bank notes. 86.Yang did not notice that the date on the bank slip for cash deposit, 11 September 2017, was after the draft accounts prepared up to 31 August 2017. Inevitably the draft accounts were inaccurate and unreliable. 87.With respect to all Loans except the one to Song, the credit assessment of the Borrowers’ companies just set out the business scope as taken from the business licences, without ascertaining what each company’s actual business was. This demonstrated that the matter was never genuinely investigated. 88.The valuation of the Borrowers’ companies in the Credit Assessment Reports was only based on draft or unaudited financial statements of the companies purportedly owned by Xue, Ju, Li and Liu, and Mr Yang admitted that he did not ask why the draft financial statements were not signed. He only asked Zhao, without asking for any supporting documents as to the reliability of these statements. 89.With respect to Song’s loan, whilst the financial statements were purportedly audited, no attempt was made to conduct any due diligence on the veracity of the figures stated therein, especially the purported long-term investments worth RMB 250,000,000, purportedly all acquired in 2017. Without such long-term investments, the NAV of the company would only be RMB 16,000,000. 90.Given the substantial amount of each Loan, it was plainly insufficient for Mr Yang simply to take the companies’ financial statements at face value. In any event, there was no assurance that the Borrowers’ companies would or were able to repay the Loans in the event of default, as a review of the financial statements of the companies show:
91.Mr Yang said that he tried to ascertain whether Zhao’s assessments were reliable by consulting Wang. Mr Yang in fact claimed that Wang had considered a lot of things. Aside from this being undocumented, Mr Yang had not sought further information to substantiate Zhao’s assessments of the borrower’s creditworthiness. 92.With respect to Liu’s loan,
93.Having regard to the analyses above, the credit assessment of each Borrower was wholly flawed. Ms Choy asks whether Mr Yang had reason to distrust anybody involved in the Workflow. In my view, there was reason to do so, given the glaring deficiencies in Zhao’s due diligence. I find that a reasonable director would not have approved the 5 Loans, let alone a director with the financial experience of Mr Yang. G4. Payments of loan proceeds to third party recipients 94.Yang-WS claimed that payment of loan proceeds to third party recipients was a “reasonable and usual commercial arrangement”. Before making such payments, the “operator” had prepared the results of due diligence to Mr Yang. Mr Yang had reason to believe in the results of due diligence done by a Managing Director of a listed company. 95.However, such due diligence on the third party recipients was not documented. Based on the available request forms for drawdown signed by the third parties, there were no checks even on their identities or the reasons for making payments to them. 96.Mr Yang’s evidence was that the loan proceeds were paid to the third party recipients pursuant to an arrangement that was akin to that of “external guarantee, internal lending” (外保內貸), which was a common practice for Mainland borrowers, in order to overcome the problem of inability to carry out cross-border transfers into the Mainland:
97.Such an explanation cannot withstand scrutiny.
98.I find the payment to third party recipients to be totally unsupported by reasons. G5. Approving and extending defaulted loans without commercial bases 99.The only known assets purportedly owned by the Borrowers were their shareholding in the Borrowers’ respective company. No business or assets in Hong Kong were identified. And yet Mr Yang approved the repayment extensions in respect of the loans to Xue and Ju with no demand for security (particularly when Ju was already in default at that time) and at a substantially reduced rate of interest from 15% to 8% per annum. 100.Mr Yang admitted under cross-examination that he had considered asking for high interest rates in exchange for lack of securities, but he applied the interest rates in line with Hansom’s commercial rates. 101.Ms Choy submits that:
102.Placing oneself in the position of a director in the then circumstances, one Loan was already in default whilst another was due in 3 days. Not seeking security in such circumstances coupled with a substantial reduction in interest showed that Mr Yang did not act in the interest of Hansom. He may have acted on an honest belief but that belief did not have a reasonable basis. G6. Breach of duty to exercise independent judgment 103.Whilst Mr Yang could delegate investigation work to others and the Workflow showed teamwork, it was his duty, as approver, to satisfy himself that the due diligence done by others was adequate for him to approve a loan and make further enquiries if it was not; and that he would not mislead Wang into believing that Mr Yang’s approval was in the interests of Hansom when it was not. Wang may have his responsibility to bear but that does not absolve Mr Yang’s. 104.The breaches analyses in Sections G above demonstrated that Mr Yang granted the 5 Loans based on inadequate due diligence done by Wang on each Borrower and each Borrower’s company. He also approved the extension of time for repayment of 2 loans on wholly uncommercial bases. The 5 Loans were uncommercial, granted without proper credit assessment and detrimental to Hansom. Any subjective belief to the contrary is clearly unsustainable for lack of reasonable basis. 105.Whilst Mr Yang maintained that he exercised independent judgment and considered the source of information and logic before approving the Loans, this was inconsistent with his evidence:
106.I find that Mr Yang had failed to exercise independent judgment when reviewing the information given to him and deciding if it was adequate or reliable enough to act on. If he had relied on Wang, that reliance was wholly misplaced and unreasonable, given Mr Yang’s personal background in the financial industry. G7. Breach of duty to act bona fide in the best interests of Hansom 107.The above evidence showed that Hansom was exposed to great risk of non-recovery at the time the 5 Loans were approved. Applying a subjective test, Mr Yang may have honestly believed that his approval of the 5 Loans and their relevant extensions were in the best interests of Hansom. However, that belief had no leg to stand on in view of the analyses in Section G above. 108.Further, Mr Yang could not have acted in the best interests of Hansom when:
109.Mr Yang submitted that his actions in approving the repayment extensions led to subsequent repayments by 3 of the Borrowers (namely, Xue, Ju and Liu). However, those repayments were only for interest and the amount was insignificant (HK$24.5 million) compared to the size of the loans drawn down by these Borrowers (HK$469 million). 110.I find that Mr Yang had breached his duty to act bona fide in the best interests of Hansom. H. LOSS AND DAMAGE 111.Breach of any one or more of the 3 duties set out in paragraph 3 above is enough to establish liability in this case. But for his breaches of duty, the 5 Loans would not and ought not to have been approved by Mr Yang or repayment extended. I find causation of Hansom’s loss to be established. 112.There is no dispute between the parties as to the amount of Hansom’s loss – HK$799 million. 113.Hansom has not justified its claim for compound interest and I do not see any basis to order it. 114.Costs should follow the event and be to Hansom. I. ORDER 115.The claim in breach of director’s duties is established. I therefore order as follows:
116.I thank counsel for their assistance. The succinct presentation in respect of each Loan by Mr Lam and Mr Lau are particularly useful.
Mr Justin Lam, instructed by Karas So LLP and Mr Andy Lau, Solicitor Advocate of Karas So LLP, for the Plaintiff Ms Alison Choy, instructed by Mok & Co., for the Defendant | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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