Yingheng Co Ltd v. Sang Kangqiao

HCA 674/2025

[2025] HKCFI 5506

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 674 OF 2025

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BETWEEN

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DECISION

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A. Introduction

1.This is the substantive hearing in respect of the Plaintiff’s summons dated 3 April 2025 seeking an interlocutory injunction (the “Interlocutory Injunction Application”)  to restrain the Defendant from disposing of 140 million shares in a listed company named Qian Xun Technology Ltd (stock code: 1640)  (the “Listed Co”)[1].

2.Shortly before the present hearing took place, on 6 November 2025, the Defendant belatedly took out 2 summonses against the Plaintiff seeking (i)  fortification of undertaking as to damages for the amount of HK$250,000,000 (the “Fortification Application”); and (ii)  security for costs in the amount of HK$2,101,600 (the “Security for Costs Application”).

B.  Material Background

3.The Plaintiff is a corporate vehicle controlled by Ms Wang Lei (“Ms Wang”).

4.Prior to 3 October 2024, the Plaintiff beneficially held 161,704,734 shares in the Listed Co.  This amounted to approximately 33.69% of the Listed Co’s issued share capital.

5.The Defendant is an individual involved in the business of financing.

6.On 16 December 2021:-

(1)  The Plaintiff (as borrower), the Defendant (as lender), and other shareholders (as guarantors)  entered into a facility agreement (the “Facility Agreement”).  In gist, it was agreed that the Defendant should provide a loan of up to HK$27 million at 18% per annum.

(2)  The Plaintiff executed a deed of charge (the “Charge Deed”). It charged its 161,704,734 shares in the Listed Co in favour of the Defendant as security (the “Charged Shares”)  against the indebtedness under the Facility Agreement.

(3)  The Plaintiff (as chargor), the Defendant (as chargee), and Roofers Securities Ltd (“Roofers”)  (as custodian agent)  entered into a custodian agreement with regard to the Charged Shares, which were deposited under a securities account maintained with Roofers.

7.From 2022 to 2023, the Facility Agreement was amended pursuant to 3 supplemental agreements.  In short, the gross effect was that:-

(1)  The Defendant agreed to increase the credit limit of the facility provided to the Plaintiff.

(2)  The Plaintiff procured other shareholders of the Listed Co (the “Other Shareholders”)  to put forward their shares as security in favour of the Defendant.

(3)  The term of the facility was extended.

8.It is not in dispute that from December 2021 to September 2023, the Plaintiff drew down facilities totalling RMB36,959,125.88 and HK$3,000,000.

9.In around 2022/2023, some of the Other Shareholders indicated to Ms Wang that they were interested in selling their shares in the Listed Co, and they authorized Ms Wang to negotiate with third parties on their behalf.  The shareholding held by the Plaintiff and the Other Shareholders (who were interested in selling their shares)  constituted 72.5% of the Listed Co’s issued share capital (the “72.5% Stake”).

10.In around late 2023, the Defendant proposed to acquire the 72.5% Stake for HK$110 million.  Ms Wang considered that this offer was unattractive, and she did not accept the same.

11.It transpired that on 17 January 2024, the Defendant suddenly demanded that the indebtedness under the Facility Agreement (totalling HK$52,395,933)  be repaid.

12.As the Plaintiff’s request for time extension[2] was rejected[3], the Plaintiff made several repayments totalling RMB8,200,000.  As of January 2024, the total indebtedness owed to the Defendant was HK$49,847,351.15.

13.The Plaintiff says that in around early February 2024, the Defendant reiterated the proposal to acquire the 72.5% Stake in the Listed Co.  This time, the Defendant offered HK$116 million.

14.According to the Plaintiff, Ms Wang rejected the Defendant’s offer.  However, Ms Wang continued to liaise with the Defendant.  In this connection:-

(1)  The Defendant was only willing to offer HK$116 million for the 72.5% Stake.  However, to address the financial need of the Plaintiff and the entities associated with her, the Defendant agreed to advance a further sum of HK$66,152,648.85, topping up the then outstanding indebtedness to a total of HK$116 million.

(2)  Meanwhile, the Defendant agreed to assist the Plaintiff and other Shareholders to locate a buyer for acquiring the 72.5% Stake at a higher price, and he said that if he was unable to locate an interested buyer who was capable of putting forward a better offer, his offer would remain open.

15.Against the aforesaid background, the parties entered into a fourth supplemental agreement on 20 February 2024.  Clause 1 provides that[4]:-

(1)  The outstanding indebtedness under the Facility Agreement and the previous supplemental agreements was HK$49,847,351.15.

(2)  The Defendant agreed to grant a non-committed term loan facility in the aggregate amount of HK$66,152,648.85[5], and the same should be paid in accordance with a drawdown schedule.

(3)  If no share purchase agreement is entered into before 30 June 2024, the Defendant shall enter into a share purchase agreement with the Plaintiff and other relevant parties for the purpose of repaying the indebtedness, and the purchase price for the shares in the Listed Co used as security for the facility shall be equal to the total outstanding amount of the loan and all interest accrued thereon.

(4)  The Defendant shall not require the Plaintiff to repay the indebtedness before the completion or termination of the share purchase agreement (as the case may be).

16.In the circumstances, Ms Wang appended her signature on a draft sale and purchase agreement (the “Draft SPA”).  It is the Plaintiff’s　case that Ms Wang did so upon the Defendant’s request, and this was for the sole purpose of demonstrating her sincerity to potential purchasers.

17.Ms Sabrina Ho (for the Plaintiff)  emphasized that the Draft SPA could only be a draft.  She pertinently pointed out that:-

(1)  The Draft SPA is completely silent on the identity of the purchaser.

(2)  Recital G is not confirmed, and there is a note stating that the relationship between the lender and the purchaser should be elaborated if they are not the same person.

(3)  The consideration of the shares is not confirmed (see clause 3.1).

(4)  Whilst clause 10.3 is marked subject to confirmation, clause 12.1 contains incomplete information.

18.According to the Plaintiff, the Defendant and Ms Wang had continuously liaised with each other in regard to the terms of the Draft SPA. However, no agreement was reached.

19.According to the Defendant, he entered into a finalized agreement with Ms Wang and a Mr Leng, whereby he would purchase the 72.49% Stake at the price of HK$116,000,000.

20.On 30 September 2024, the Defendant, via WeChat, indicated to Ms Wang that he would transfer 140 million shares in the Listed Co within the week.  However, Ms Wang did not respond.  Her explanation was that she believed that without her consent, no transfer could be effectuated, and anyhow Roofer would notify her.

21.On 3 October 2024, the Listed Co issued a public announcement.  It was stated, inter alios, that the Plaintiff had sold 140 million shares to the Defendant, and that the Defendant had become a majority shareholder and the single largest shareholder (holding 25% shareholding).

22.On 28 October 2024 and 31 October 2024, Ms Wang issued complaint letters to Roofer, whose response was that the Defendant had issued a notice of exclusive control as early as 6 September 2024: see Roofer’s letter dated 1 November 2024.

23.On 22 November 2024, Ms Wang, via solicitors, issued a letter to the Defendant, raising various demands and enquiries.

24.The Defendant did not respond to the aforesaid letter until 7 March 2025.  In the letter dated 7 March 2025, the Defendant’s solicitors stated that “the transfer of the 140,000,000 Charged Shares to [the Defendant] was consistent with the promise of Ms Wang on behalf of [the Plaintiff] after the parties’ negotiation”.

25.In the subsequent letter dated 21 March 2025, the Defendant’s solicitors alleged that the Defendant and the Plaintiff reached an agreement on 8 February 2024 whereby the Plaintiff agreed to sell the 72.5% Stake to the Defendant (or his nominee)  at HK$116,000,000.  The amount would be set off against the indebtedness owed to the Defendant in the amount of HK$49,847,351.15, and the balance of HK$66,152,648.85 would be paid to the Plaintiff subsequently.

26.On 3 April 2025, the Plaintiff (i)  commenced the present action, and (ii)  took out the Interlocutory Injunction Application.

27.On 23 April 2025, Queeny Au-Yeung J provided directions in regard to the Interlocutory Injunction Application.

28.On 6 November 2025, the Defendant took out (i)  the Fortification Application and (ii)  the Security for Costs Application.

C.  The Fortification Application and the Security for Costs Application

29.Pursuant to Queeny Au-Yeung J’s directions given on 23 April 2025, the purpose of the present hearing is to determine the Plaintiff’s Interlocutory Injunction Application.

30.For reasons best known to the Defendant, his legal representatives belatedly took out the Fortification Application and the Security for Costs Application 3 work days before the present hearing took place.

31.Bearing in mind that the Plaintiff’s statement of claim and supporting affirmation were filed more than 6 months ago in April 2025, I cannot see any legitimate reason why the Fortification Application and the Security for Costs Application were not taken out earlier.

32.There is an overwhelming impression that these Applications are strategic moves that aim at hijacking the present hearing and ambushing the Plaintiff.  I am not impressed by the Defendant’s litigation conduct.

33.It is obvious that the Plaintiff had no opportunity to respond.

34.In the premises, the appropriate course to take is to adjourn the Fortification Application and the Security for Costs Application, and provide directions for the parties to file evidence.  I order that:-

(1)  The Plaintiff do file affirmation(s)  in opposition within 28 days;

(2)  The Defendant do file affirmation(s)  in reply (if so advised)  within 21 days thereafter;

(3)  No further affirmation be filed without leave of the court;

(4)  The Fortification Application and the Security for Costs Application be adjourned for substantive argument before this court on a date to be fixed in consultation with counsel’s diary, with 3 hours reserved; and

(5)  Costs be reserved.

D.  The Interlocutory Injunction Application

35.Relying on its equitable right of redemption (see Hengshi International Investments Ltd v Bayspring International Ltd (HCMP 1916/2015, 18 December 2015)  at paras 25 to 27 (per Quenny Au-Yeung J), citing Common Luck Investment Ltd v Cheung Kam Chuen (1999)  2 HKCFAR 229 at 235E-F), the Plaintiff asserts that it has a proprietary interest over the 140 million shares in the Listed Co, and it accordingly seeks an interlocutory proprietary injunction in respect thereof.

D1.  Legal Principles

36.It is trite that a party who seeks an interlocutory proprietary injunction has to satisfy the court that:-

(1)  There is a serious issue to be tried in relation to a proprietary claim over property that is bona fide the subject matter of the cause of action.

(2)  The balance of convenience is in favour of granting the injunction, and it is just and convenient to grant the injunction. The court will readily find that the balance of convenience lies in favour of preservation of the property pending trial.

(3)  While there is no need to show a real risk of dissipation, something ought to be done for the security of the property, and damages may not be an adequate remedy.

See Heitkamp & Thumann v Living Profit Trading [2018] HKCFI 1006 at paras 55 to 58 (per DHCJ Marlene Ng, as Marlene Ng J then was), affirmed by the Court of Appeal in [2019] HKCA 119 at para 32); Create Together Technology Co Ltd v Welltec Industrial Equipment Ltd [2024] HKCFI 2819 at para 29 (per Recorder Rachel Lam SC)

D2.  Serious Issues to be Tried

37.The Defendant does not suggest that he acquired proprietary interests over the 140 million shares by reason of exercising the rights under the Charge Deed.  It is the Defendant’s pleaded case that in late January to early February, there was an agreement amongst himself, Ms Wang, and a Mr Leng that the Defendant would purchase the 72.49% Stake for HK$116,000,000[6].

38.As pointed out by Ms Sabrina Ho, on the Defendant’s own pleadings, it is uncertain as to how the parties reached the alleged agreement.  I see the force of Ms Ho’s submissions. The Defendant’s pleas are woefully devoid of meaningful particulars, and there is an impression that the Defendant seeks to rely on an oral agreement. Obviously, the court is not in a position to conduct a mini-trial on affidavits.

39.For the reasons canvassed in paragraph 17 above, the Draft SPA would not avail the Defendant’s case at all, and this document does not show that the parties had concluded an oral agreement:-

(1)  As mentioned, the Draft SPA is silent on (i)  the identity of the purchaser and (ii)  the consideration.  Further, the clauses in this document are subject to comments or confirmation.

(2)  On the available evidence, I accept Ms Ho’s submissions that the draft SPA, though signed, is nothing more than a draft. I am not in a position to summarily reject Ms Wang’s evidence that she put her signature on the Draft SPA for the sole purpose of demonstrating her sincerity to potential purchasers. Based on the materials available to the court, Ms Wang’s explanation seems credible.

(3)  I do not lose sight of the Defendant’s explanation that he did not sign the Draft SPA due to his alleged concern that provisions of the Code on Takeovers and Mergers would be triggered.

(4)  However, the Defendant’s explanation is inconsistent with the contents of the Draft SPA.  The first page of the Draft SPA contains a note that expressly raises a query as to whether the Defendant would be the purchaser.  It is stated that if the Defendant is not intended to be the purchaser, he should still be added as a party.  This indication is consistent with the Plaintiff’s case that at the material times, Ms Wang entrusted the Defendant to locate a potential purchaser.

(5)  In any event, the Defendant is unable to explain why (i) the Draft SPA is silent on the consideration (see clause 3.1); and (ii)  some of the clauses are incomplete or subject to comments or confirmation (see eg clause 10.3).

(6)  In the premises, I am not of the view that the Draft SPA shows that the parties had already reached a final or conclusive agreement.  On the contrary, the Draft SPA tends to support the Plaintiff’s case that no conclusive agreement had been reached (at least up to the time when Ms Wang put her signature thereon).

40.However, Mr Enzo Chow, together with Mr Wu Yingpeng, (for the Defendant)  submitted that there is no issue to be tried at all. They suggest that the parties must have already reached a final and conclusive agreement, and they relied on the following matters:-

(1)  There are WeChat messages that allegedly show that Ms Wang urged the Defendant for the transfer of the 140 million shares in the Listed Co.

(2)  Ms Wang on behalf of the Plaintiff handed over the common seal as well as internal banking and corporate documents of the Listed Co to the Defendant’s staff.

(3)  The former directors of the Listed Co had resigned.

(4)  On 30 September 2024, the Defendant notified Ms Wang that the 140 million shares in the Listed Co would be transferred, and she did not object.

(5)  Ms Wang’s sister, Ms Wang Xin, was the former chairlady and a former director of the Listed Co.  There is no evidence showing that Ms Wang made enquiry with her sister regarding the transfer.

(6)  The Defendant had made payments to Ms Wang, and these payments were part of the consideration paid to the Plaintiff pursuant to the agreement between the parties.

(7)  Whilst the Listed Co’s announcement was made on 3 October 2024, the Plaintiff did not voice out until about a month later in late October or early November 2024.

41.Whilst I accept that some of the aforesaid matters may tend to support the Defendant’s case, I am not of the view that they conclusively show that the parties had reached an agreement that the 140 million shares be sold at HK$116,000,000.

42.My observations on the points taken by Mr Chow and Mr Wu are as follows:-

(1)  I have studied the WeChat messages relied on by the Defendant[7]. In my view, they are, at best, equivocal. Without hearing the live evidence of the parties, I cannot form a conclusive view as to what the parties meant in the messages. It does not escape my attention that after the Defendant sent the Draft SPA to Ms Wang, on 12 September 2024, Ms Wang indicated that (i)  she did not read the Draft SPA in detail and (ii)  it appeared that the Draft SPA did not even contain the 3 years’ post-completion duties.  In response, the Defendant indicated that he did not know what Ms Wang wanted.  In light of the exchange between the Defendant and Ms Wang, I am simply not in a position to form a view that the parties had already reached a conclusive agreement as of 12 September 2024.  As such, it is doubtful as to whether the Defendant was entitled to issue a notice of exclusive control to Roofer on 6 September 2024.

(2)  Whilst Ms Wang admitted that the common seal and internal documents of the Listed Co were provided to the Defendant’s staff, she explained that this was done upon the Defendant’s request for the purposes of facilitating completion in the future.  Based on the available evidence, I am not of the view that the court should summarily reject Ms Wang’s explanation on affidavit.  After all, Ms Wang did put her signature on the Draft SPA for the purpose of facilitating the Defendant to locate a potential buyer.  Bearing in mind the totality of the evidence, I am unable to rule out the possibility that Ms Wang provided the common seal and internal documents of the Listed Co for the purpose of facilitating the Defendant to demonstrate to potential purchasers that the Plaintiff was sincere and that the intended transaction could be completed smoothly and expeditiously.

(3)  In my view, the fact that some former directors resigned from the Listed Co could be consistent with the Defendant’s case. However, this fact does not ipso facto show that the Defendant and Ms Wang had reached a conclusive agreement.  On the available evidence, I am unable to form a view as to the underlying reason why some former directors resigned. This is a matter to be canvassed at trial.

(4)  It is true that Ms Wang did not respond to the Defendant’s WeChat message on 30 September 2024, wherein he indicated that he would transfer the 140 million shares in the Listed Co. However, Ms Wang did provide an explanation, ie she took the view that the shares could not be transferred away without her consent, and Roofer would inform her in advance.  Although I have some reservation about Ms Wang’s explanation, I am unable to conclude that the same is an ex post facto concoction. Indeed, after Ms Wang discovered that the 140 million shares were transferred away, she and/or the Plaintiff did, via solicitors, issued letters to Roofers and the Defendant on 28 October 2024, 31 October 2024, and 22 November 2024. Arguably, had the Defendant and Ms Wang reached a conclusive agreement, the Defendant would have promptly issued a letter making clear that this was the case.  This was not what happened.  The Defendant only came up with a response nearly 4 months after receiving letter from the Plaintiff’s solicitors dated 22 November 2024.  In their first letter in reply dated 7 March 2025, the Defendant’s solicitors merely indicated the transfer was consistent with Ms Wang’s promise on behalf of the Plaintiff.  This was equivocal, and the alleged agreement between the Defendant and Ms Wang was not expressly mentioned.  Only in their subsequent letter dated 21 March 2025 did the Defendant’s solicitors mention that the parties had reached an agreement on 8 February 2024. However, the Defendant’s legal representatives were unable to state how the alleged agreement came about.  It appears that the Defendant has been unable to ameliorate his case. As pointed out, in the defence filed on 30 July 2025, the Defendant was still unable to provide meaningful particulars to demonstrate how Ms Wang and the Defendant reached an agreement for the sale and purchase of the 72.5% Stake at HK$116 million.

(5)  On the evidence, it is uncertain as to whether Ms Wang made enquiries with her sister (who was formerly the chairman and a director of the Listed Co)  about the transfer of the 140 million shares[8]. In any event, it is doubtful as to whether Ms Wang’s sister was capable of taking any steps to stop or reverse the transfer.  This seems to be a matter controlled by Roofers.  It appears that even if Ms Wang did not make an enquiry with her sister at the material times, this did not ipso facto show that the Defendant and Ms Wang had already reached a conclusive agreement.

(6)  The facts that Ms Wang and/or the Plaintiff received payments from the Defendant and made repayments to the Defendant do not show that the parties had reached a conclusive agreement for the sale and purchase of the 72.5% Stake at HK$116 million.  These payments and repayments were effectuated pursuant to the Facilities Letter and the supplemental agreements.  In any event, there is no evidence showing that Ms Wang and/or the Plaintiff had already received the balance of HK$66,152,648.85 (ie HK$116 million (ie the alleged consideration)  less HK$49,847,351.15 (ie the admitted outstanding indebtedness under the facility)).

(7)  Lastly, the Defendant criticized Ms Wang and/or the Plaintiff for not taking issue about the transfer of the 140 million shares until a month after the Listed Co made the announcement on 3 October 2024.  As mentioned, whilst Ms Wang issued letters to Roofer on 28 October 2024 and 31 October 2024, the Plaintiff’s solicitors issued a letter to the Defendant on 22 November 2024.  I accept that Ms Wang and the Plaintiff could have acted more promptly.  However, the time gap was not entirely inexplicable.  Bearing in mind the factual complexity involved, it obviously took time for Ms Wang and the Plaintiff to (i)  sort out the factual matters, (ii)  seek legal advice, and (iii)  consider their position.  This was understandable.  Meanwhile, one could make the same criticism in respect of the delay on the part of the Defendant in coming up with a response to the Plaintiff’s complaint. As pointed out in sub-paragraph (4)  above, it took nearly 4 months for the Defendant’s solicitors to come up with an assertion that there was an alleged agreement between Ms Wang and the Defendant.  As of today, the Defendant is still unable to plead how the parties reached such an alleged agreement.

43.For the above reasons, I am unable to say that the merits of the present case lie in favour of the Defendant, rather than the Plaintiff. On the available evidence, there appears to be holes in the respective cases of the parties, and the factual disputes in this action can only be resolved at trial.

44.I am satisfied that there must be serious issues to be tried in respect of the Plaintiff’s proprietary claim for recovering the 140 million shares in the Listed Co.

D3.  Balance of Convenience

45.For the following reasons, I am of the view that the balance of convenience lies in favour of granting the interlocutory proprietary injunction sought.

46.First of all, the Plaintiff has an arguable proprietary claim over the 140 million shares in the Listed Co.  This is a significant factor in favour of granting the proposed interlocutory proprietary injunction: see Hengshi International Investments Ltd (supra)  at para 84 (per Queeny Au-Yeung J); and Wason Holdings Ltd & Ors v BHP International Markets Ltd & Anor (HCA 1692/2014, 20 March 2015)  at para 39 (per Chow J, as Chow JA then was).

47.Second, I accept Ms Ho’s submissions that damages would not be an adequate remedy.  The 140 million shares represent 25% shareholding in the Listed Co, and the Plaintiff, by virtue of being the single largest shareholder, was able to exercise control over the Listed Co. In this connection, it is important to bear in mind that share prices fluctuate and that depending on the circumstances, it may or may not be possible for one to acquire a controlling stake in a listed company.  Thus, even if the Plaintiff manages to obtain a monetary judgment that is capable of being enforced effectively at the end of the day, there is no guarantee that the Plaintiff will necessarily be able to acquire a controlling stake in the Listed Co again in the future.  It would be difficult to quantify the potential jeopardy suffered by the Plaintiff.  In my view, the balance of justice must lie in favour of preserving the 140 million shares.

48.Third, in his affirmation in opposition, the Defendant did not adduce evidence suggesting that the proposed interlocutory injunction would cause loss or prejudice to him.  In his skeleton submissions[9], Mr Chow even emphasizes that the Defendant has been managing the Listed Co and holding the 140 million shares.  It has not been suggested that the Defendant plans to (i)  sell the 140 million shares and (ii)  relinquish his control over the Listed Co. In the premises, it does not appear that the proposed interlocutory injunction (which does not aim at interfering with the management of the Listed Co)  would disrupt the status quo, and based on the materials available to the court at this stage, it is not likely that real prejudice would be caused to the Defendant.  In any event, if there are changes in the circumstances in the future, it is open to the Defendant to make an appropriate application to the court.

D4.  Disposition

49.For all the above reasons, I allow the Plaintiff’s Interlocutory Injunction Application[10].

50.I am persuaded that it would be just and indeed necessary to grant an ancillary disclosure order, such that the Plaintiff will be able to (i) ascertain the whereabouts of the 140 million shares in the Listed Co, and (ii)  take necessary steps to preserve the same or the traceable substitutes thereof.

51.I make an order in terms of paragraphs 1, 3(2)-(5), 4, 5, 6, 7, and 10 of the draft order annexed to the Plaintiff’s inter partes summons dated 3 April 2025.

52.In her skeleton submissions, Ms Ho indicated that despite the Defendant is unable to show that he will suffer prejudice (which I agree: see paragraph 48 above), the Plaintiff is, out of an abundance of caution, willing and able to pay a sum of HK$1 million into court to fortify her undertaking as to damages.  In light of this concession, I order the Plaintiff to pay HK$1 million into court within 14 days as fortification of her undertaking as to damages.

53.As regards costs, having heard the parties’ submissions, I order that the costs of the Interlocutory Injunction Application be in the cause, save and except that the Defendant do forthwith pay the costs incurred by the Plaintiff arising from his opposition to the Interlocutory Injunction Application (including the costs in respect of perusing the Defendant’s affirmation in opposition, preparing the affirmation in reply, and attending the present substantive hearing), summarily assessed at HK$450,000.

54.I thank Ms Ho, Mr Chow, and Mr Wu for their helpful assistance.

Ms Sabrina HO, instructed by M/s Chen & Lee Law Office, for the Plaintiff

Mr Enzo WH CHOW and Mr WU Yingpeng, instructed by M/s Patrick Mak & Tse, for the Defendant