Re Gao, Gunter

HCB 4502/2025

[2026] HKCFI 232

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4502 OF 2025

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D E C I S I O N

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I.  INTRODUCTION

1.This is the Debtor’s Summons filed on 4 September 2025 (the “Stay Summons”) for an order to stay the Petition filed on 10 June 2025 (the “Petition”) pending the final determination of HCMP 369/2024 (“HCMP 369/2024”). The debt underlying the Petition (the “Debt”) is a judgment debt in the sum of HK$97,408,493.15 with interest under §1 of Master D To’s Order dated 1 November 2024 made in HCMP 369/2024 (“HCMP 369/2024 Order”).

2.It is important first to set out the background of HCMP 369/2024, which is proceeding commenced by the Petitioner against, among others, the Debtor under Order 88 of the Rules of the High Court (Cap. 4A).

II. HCMP 369/2024

3.The background of HCMP 369/2024 has been set out by DHCJ Le Pichon in §§2-15 of her decision handed down on 23 June 2025 in HCMP 369/2024 (“HCMP 369/2024 June Decision”) ([2025] HKCFI 2345) :-

“2. D1 [Gaincourt Limited] is the legal owner of the Property. For tax planning purposes, the Property was purchased in D1’s name in January 2007.

3. At the time the Property was purchased, Gunter Gao (“D3”) [the Debtor] was the sole shareholder and director of D1.

4. D3 and the Intervener are husband and wife and they have resided at the Property since it was purchased.

5. In June 2009, D3 allotted 1 share in D1 to the Intervener and they became equal shareholders.

6. In February 2013, 4999 shares were allotted to each of the Intervener and D3, and in June 2013, D3 appointed Lam Chi Keong (“Lam”) and Chan Kit Foo as directors.

7. D3 transferred half his shareholding to the Intervener in November 2018 and the remaining half to her on 10 December 2018 making the Intervener the sole shareholder of D1 as from that date.

8. On 21 June 2022, the Intervener as sole shareholder of D1, signed a shareholder resolution approving a loan between P [the Petitioner] and D1 secured by a 2^nd legal charge over the Property (the “Resolution”).

9. On the same day, P and D1 entered into a loan agreement for the principal amount of $80 million (the “Loan”) secured by a 2^nd legal charge over the Property. D2 and D3 provided corporate and personal guarantees for the Loan.

10. P brought proceedings on 4 March 2024 against D1 to D3 when D1 defaulted under the Loan. D1’s former solicitors attended hearings before Master D To and on 1 November 2024, judgment was entered against D1 to D3 together with a charging order granted over the Property.

11. On 19 February 2025, the Bailiff posted the Notice to Occupier to Quit on the Property requiring possession of the premises to be delivered to P within 7 days. D3 told the Intervener about these proceedings the following day.

12. The Intervener’s solicitors received some information about the present proceedings late in the evening of 21 February 2025 that led to the urgent application made to the Court on 25 February 2025 supported by Intervener 1^st.

13. The application was made on an urgent basis…

14. I allowed the Intervener to intervene (“Intervener Order”) and ordered a stay of execution pending appeal (“Stay Order”). The Intervener was ordered to take out an inter partes summons for the stay within 14 days.

15. At the directions hearing for the Stay Summons on 20 March 2025, DHCJ Norman Nip granted the Intervener leave to file further evidence, ordered that the Appeal and the Stay Summons be heard together and continued the stay pending their final determination (the “March 2025 Order”).”

4.I should add that before Master D To granted the HCMP 369/2024 Order on 1 November 2024 (mentioned in §10 of the HCMP 369 June Decision), on 25 July 2024, Master Hui imposed an unless order (“HCMP 369/2024 Unless Order”) that unless the defendants therein (including the Debtor) would file and serve their opposing evidence by 8 August 2024, they would be debarred from doing so. None of them filed any evidence despite the unless order. As a result, Master D To granted the HCMP 369/2024 Order.

5.In HCMP 369/2024 June Decision, DHCJ Le Pichon ordered that the Intervener be joined as the 4^th Defendant for her appeal therein. She also made an order of stay (“HCMP 369/2024 Stay Order”) that the possession order (§2 of HCMP 369/2024 Order) (“HCMP 369/2024 Possession Order”) and the writ of fieri facias (“HCMP 369/2024 Writ of FiFa”) issued on 27 December 20224 for the execution of the said possession order be stayed pending the determination of the appeal between the Petitioner and the Intervener. I stress that the appeal is the appeal between the Petitioner and the Intervener only. The Debtor has never been a party to the appeal. Further, unlike the 1^st and 2^nd Defendants therein who applied for retrospective leave to appeal, the Debtor has not even applied at all for leave to appeal, although the 1^st and 2^nd Defendants’ application for retrospective leave to appeal was dismissed by DHCJ Le Pichon in her earlier decision handed down on 25 April 2025 (“HCMP 369/2024 April Decision”) ([2025] HKCFI 1731), a matter I shall revert to in some detail below.

6.What is the appeal between the Petitioner and the Intervener about?

7.In the notice of appeal filed by the Intervener in HCMP 369/2024 (“HCMP 369/2024 NOA”), the Intervener seeks an order to set aside the HCMP 369/2024 Possession Order and HCMP 369/2024 Writ of FiFa. As recorded in §22 of HCMP 369/2024 June Decision, it was the common ground between the Petitioner and the Intervener that the Intervener was the ultimate beneficial owner of the subject property. On that basis, DHCJ Le Pichon identified the following grounds in support of the appeal as arguable and therefore held that these grounds should be determined by trial:-

(1)  Non est factum: A condition precedent to the loan agreement between the Petitioner (as lender) and the 1st Defendant therein (as borrower) was the execution of a shareholder resolution approving the loan and the second legal charge over the subject property. The Interverner, being the only shareholder, signed the Resolution not knowing what the document was; she simply signed whatever the Debtor asked him to sign, reposing trust in him. She was simply told that this was “a routine company document”. Therefore, the loan and the mortgage were not valid (§§8, 26-37).

(2)  Undue influence: In signing the Resolution, the Intervener was under the undue influence of the Debtor (being her husband) and therefore the Resolution was not a valid resolution. Further, the Petitioner was put on inquiry but failed to take reasonable steps to satisfy itself that there was no undue influence (§§38-53).

8.The above grounds were substantiated by the Intervener’s affirmations. The Debtor has never in any proceedings (even here) filed any evidence either to confirm or deny the Intervener’s evidence, but simply reserves his position in the present proceedings without stating what his position about the Intervener’s case is.

9.The last matter I should mention in respect of HCMP 369/2024 is the application of the 1^st and 2^nd Defendants therein for retrospective leave to appeal, as alluded to above. The 1^st Defendant therein was the borrower and the 2^nd Defendant therein was the corporate guarantor. Their application for retrospective leave to appeal was made riding on the Intervener’s grounds of non est factum and undue influence as set out above, arguing that if the Resolution was found invalid or set aside, the loan agreement and consequentially any guarantee in respect of the loan agreement fall away.

10.In the HCMP 369/2024 April Decision dismissing the 1^st and 2^nd Defendants’ application for retrospective leave to appeal, DHCJ Le Pichon considered the following:-

(1)  They accepted the money had been advanced by the Petitioner (§17);

(2)  The Debtor was instrumental in procuring the Intervener’s signature onto the Resolution and so both the 1^st and 2^nd Defendants were aware of the circumstances of the execution of the Resolution (§18);

(3)  The 1^st and 2^nd Defendants did not apply for leave to appeal until a month after the Intervener was granted leave to appeal, when the Intervener, in her application, had already made known her case about non est factum and undue influence (§20);

(4)  In the absence of any explanation why the Debtor’s knowledge of the circumstances of the execution of the Resolution could not be attributed to the 1st and 2nd Defendants, delay became an issue (§24); and

(5)  There was no affidavit evidence to explain the basis of their intended appeal (§24).

III.  THE DEBTOR’S GROUNDS IN SUPPORT OF HIS APPLICATION FOR STAY

11.The Debtor’s main ground in support of the Stay Summons advanced by his counsel, Ms Belinda Law, is, in gist, that:-

(1)  If in HCMP 369/2024 trial between the Petitioner and the Intervener, the Court would find that the Resolution was not valid (due to non est factum and/or undue influence which DHCJ Le Pichon found arguable), then the condition precedent to the loan agreement between the Petitioner and the borrower (that is, Gaincourt), would not be satisfied;

(2)  Thus the loan agreement would not be valid;

(3)  It would follow that the personal guarantee of the Debtor would also be invalid;

(4)  As a result, the HCMP 369/2024 Order was granted without jurisdiction, given that HCMP 369/2024 was a mortgagee action under Order 88 of the Rules of the High Court (Cap. 4A) but the mortgage, hinging upon the validity of the loan agreement, was invalid;

(5)  In any event, the HCMP 369/2024 Order was based on the loan agreement, but the loan agreement was invalid;

(6)  Since the Debt underlying the Petition is based on the HCMP 369/2024 Order, the Debt would be invalid, and thus the Petition would be dismissed; and

(7)  Therefore, the Petition is premature, and a bankruptcy order would cause serious and irreparable prejudice to the Debtor.

12.I shall refer to this main ground as the Debt Validity Ground.

13.Ms Law also submits that if the Intervener fails in her claim over the subject property, the Petitioner would be able to enforce the mortgage over the subject property, which would be sufficient to settle the Debt. I shall refer to this ground as the Security Ground.

14.Mr Sunny Chan, counsel for the Petitioner, submits that none of the two Grounds can sustain the Stay Summons.

IV.  DEBT VALIDITY GROUND

15.First, the Debtor has never applied to join the Intervener’s appeal in HCMP 369/2024. Therefore, the matter in the appeal is purely between the Petitioner and the Intervener. Any finding made in the appeal will be a finding as between them only.

16.Second, the order sought in the appeal would be concerning the HCMP 369/2024 Possession Order and HCMP 369/2024 Writ of FiFa only. The order sought in the appeal has nothing to do with the monetary order against the Debtor. Therefore, the order in the appeal, if granted, would not affect the monetary order against the Debtor in HCMP 369/2024 at all.

17.Third, if the Debtor would then rely on any fact-findings in the appeal resulting in allowing the appeal, the facts as found must be that there was non est factum and/or undue influence. By the nature of such facts, the Debtor himself must have known such facts. However, he has never raised any such facts and evidence. Rather, he chose not to file any evidence to oppose HCMP 369/2024 despite the HCMP 369/2024 Unless Order, and he still remains silent in the present proceedings simply and reserves his position on the Intervener’s evidence. There is no explanation as to why he did not raise all these earlier, and there is no explanation as to why he still reserves his position here when he is applying for a stay based on matters of which he should have personal knowledge.

18.Fourth, related to the third, one may understand why the Debtor has never raised any such facts and evidence if they were true – the Debtor would be relying on his own wrong (namely, giving the Resolution for her to sign alleging it to be a routine company document and exerting undue influence over her) to say that the loan agreement and therefore his personal guarantee would be invalid. However, in my view, the legal principle that one cannot take advantage from his own wrong (see Kensland Realty Limited v Whale View Investment Limited & Another [2002] 1 HKLRD 87 at §§91-93) would apply here to prevent the Debtor from relying on such fact-findings. While Kensland Realty Limited v Whale View Investment Limited & Another, supra, was decided in contractual context, §§91-93 of the judgment in that case clearly shows that this legal principle is a general legal principle of substance. While the Court of Final Appeal there was concerned with how this general legal principle should be applied in contractual context (§§94-99), this does not mean that this general legal principle is limited to contractual context only. This legal principle, in my view, is a principle of common sense to avoid any clear affront to justice.

19.Ms Law submits that the principle does not apply here at least with regard to undue influence because the wrong would not be solely the Debtor’s own wrong. She points out DHCJ Le Pichon’s view in §§38-53 of HCMP 369/2024 June Decision that the Petitioner was put on inquiry but failed to take reasonable steps to satisfy itself that there was no undue influence, and submits that the Petitioner also contributed to the wrong from which the Debtor was to take advantage. The test, however, is not whether some others contributed to the wrong, but whether the advantage was a direct consequence of the wrong: see Kensland Realty Limited v Whale View Investment Limited & Another, supra at §95. When analysing the situation closely, I find that the advantage taken by the Debtor, namely, the obtaining of the loan, was still the direct consequence of the undue influence. The reason for this is:-

(1)  There would be either of the two likely outcomes if the Petitioner had taken reasonable steps. The first outcome would be that the Petitioner found out the undue influence and the invalidity of the Resolution and so there would not be any loan in the first place, and as such, the Debtor would have no advantage to take in any event. The second outcome would be that the Petitioner, despite the reasonable steps taken, was not able to detect any undue influence, and therefore the loan transaction continued as it did, and in such circumstances, the Petitioner did not commit any wrong.

(2)  In other words, if the Debtor would have any advantage to take from the undue influence, whether the Petitioner had taken any reasonable steps would make no difference.

(3)  Thus viewed, the advantage taken by the Debtor, namely, the obtaining of the loan, was still the direct consequence of the undue influence.

(4)  Otherwise, the undue influencer would be playing a game of “catch me if you can” against the lender – hoping opportunistically that the lender would not take reasonable steps and then the undue influencer would then be able to reap the fruit of the undue influence. This would, in my view, be an affront to justice.

20.Fifth, even if the Debtor would like to avail of the fact-finding of the appeal, he would have to explain why he did not apply to join the appeal in the first place, and have to explain such inordinate delay. I bear in mind that the HCMP 369/2024 April Decision where DHCJ Le Pichon dismissed the 1^st and 2^nd defendants’ application therein for retrospective leave to appeal on the ground of delay when the 1^st and 2^nd defendants must have known, through the Debtor, the circumstances of the execution of the Resolution. A fortiori, here, the Debtor himself must have known the same. But there is no explanation as to the delay. In fact, even now, the Debtor has not made any application to join the appeal. In any event, I see little chance that the Debtor would be allowed to join the appeal with such inexplicable, inordinate delay. As he would not be granted retrospective leave to appeal or join the appeal, I do not see how he could avail himself of any fact-findings in the appeal as between the Petitioner and the Intervener only.

21.Sixth, as regards Ms Law’s jurisdiction point, she submits that if there was no valid mortgage, the Petitioner’s claim in HCMP 369/2024 would not have been a mortgage action under Order 88 of the Rules of the High Court, and thus, a Master did not have any jurisdiction to enter judgment against the Debtor. She refers to China State Bank Ltd v Goboway Investment Ltd & Ors [2002] 1 HKC 566 in support to her submissions.

22.In that case, at the time of issuing the originating summons under Order 88, the loan in question was secured by a mortgage. The mortgage was subsequently released. The bank still pursued the claim for monetary payment in the originating summons. The originating summons came before a Master, who considered evidence and submissions from both sides, entered judgment for the monetary claim. DHCJ Longley found that the Master did not have the jurisdiction to enter the judgment because (1) by the time of entering the judgment, the action was no longer a mortgagee action and thus fell outside Order 88; (2) Order 28 rule 9 required originating summons to be fixed for substantive hearing in open court and by Order 32 rule 11, a Master only has jurisdiction of a judge in chambers but not a judge in open court; and (3) therefore, a Master did not have jurisdiction to enter judgment in chambers outside Order 88 (see §§7-17).

23.There is a material difference in the present case. In that case, the judgment in question was entered upon substantive hearing, which should have taken place in open court before a judge. In the present case, none of the defendants in HCMP 369/2024 filed any evidence despite the HCMP 369/2024 Unless Order. Therefore, when the Petitioner sought a judgment from Master D To, it was in essence an application for default judgment. Unlike the matter in the substantive hearing where the Master had to consider evidence and submissions from both parties in China State Bank Ltd v Goboway Investment Ltd & Ors, supra, such matter could be dealt with summarily, and therefore, by Practice Directions 14.2 §4 and/or by Wing Hang Bank Limited v Liu Kam Ying [2002] 2 HKC 57 cited in §28/3A/2 of Hong Kong Civil Procedure 2026 Volume 1, such matter that could be dealt with summarily could be disposed of in chambers. Therefore, by Order 32 rule 11, Master D To, having the jurisdiction as a judge in chambers, did have jurisdiction to grant HCMP 369/2024 Order summarily in chambers.

24.Further and in any event, the Petitioner has not applied for any order or declaration that HCMP 369/2024 Order shall be invalid. Nor the Intervener has applied in the appeal for any such order or declaration.

25.For the above reason, I reject Ms Law’s jurisdiction point.

26.For these reasons, I find that the Debt Validity Ground does not support the Debtor’s application for stay.

V.  SECURITY GROUND

27.The security is the subject property under the mortgage owned by Gaincourt, not by the Debtor. It is “a well-established principle in civil actions that a creditor is not obliged to resort to third party-owned security first, before suing a guarantor”: see GG v LL Ltd [2024] HKCFI 2302 at §15 per DHCJ Yuen. Therefore, “[t]he mere fact that third party-owned security is available to the Lender does not change the [Debtor]’s inability to pay into her ability to pay”: see GG v LL Ltd, supra at §17. Ms Law fairly does not press this ground.

28.This Ground therefore fails.

VI.  CONCLUSION

29.In the premises, I dismiss the Stay Summons, and order the Debtor to pay the Petitioner costs of the Stay Summons, summarily assessed at HK$220,000.

30.Giving the Debtor some time to consider how to proceed with the dismissal of the Stay Summons, I also direct that the Petition shall be heard on 9 February 2026 at 10am before the Bankruptcy Judge for directions or pronouncement of a bankruptcy order as thought fit.

31.I thank counsel for their assistance.

Mr Sunny Chan, instructed by K.C. Ho & Fong, for the Petitioner

Ms Belinda Law, instructed by Khoo & Co., for the Debtor

Attendance of the Official Receiver was excused