Speedy Profit International Investment Ltd v. Fung Man Tung Kenny and Others

HCA 871/2022

[2026] HKCFI 5355

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 871 OF 2022

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BETWEEN

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JUDGMENT

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A. Procedural History and Status at Trial

1.This trial was set down with an estimate of 6 days.  In the event, however, it proceeded solely with the Plaintiff proving its case without the participation of any of the 3 Defendants.  It is therefore necessary first to set out the procedural history leading to this situation.

2.In respect of the 1^st Defendant, on 3 September 2026, he signed a Consent Summons with the Plaintiff containing the following terms:-

(1)  Judgment be entered for the Plaintiff against the 1^st Defendant for the sum of HK$5,100,000;

(2)  The 1^st Defendant’s counterclaim against the Plaintiff be dismissed;

(3)  The 1^st Defendant do pay the Plaintiff pre-judgment interest on the said principal sum of HK$5,100,000 at the rate of HSBC Prime Rate plus 1% per annum from 1 January 2022 to 24 May 2023, and thereafter at the rate of 12% per annum from 25 May 2023 to the date of the order to be made, and thereafter at judgment rate until payment;

(4)  The 1^st Defendant do pay the Plaintiff’s costs of this Action (including all reserved costs) on a party-and-party basis up to and including 24 May 2023, and thereafter on an indemnity basis, such costs to be taxed if not agreed;

(5)  The 1^st Defendant's attendance at the trial of this Action scheduled to commence on 17 September 2026 be excused; and

(6)  There be no order as to costs for this application.

3.On 4 September 2026, I made an order in terms of the said Consent Summons.

4.In respect of the 2^nd Defendant, a bankruptcy order under HCB 4167/2023 was made against him on 5 September 2023.

5.On 14 November 2023, upon the joint application of the Plaintiff and the Official Receiver & Provisional Trustee of the Bankrupt, an order was made by Master Ho in the following terms:-

“Notwithstanding the bankruptcy order herein dated 5 September 2023 made against the

Bankrupt, leave be granted to the Applicant, being the Plaintiff in the High Court Action 871 of 2022 (‘the said action’), to proceed with the said action against the Bankrupt, being the 2^nd Defendant of the said action, subject to the following conditions:

(1) No judgment or order obtained by the Applicant, as the Plaintiff in the said action, shall be enforced against the Bankrupt without leave of the court;

(2) The Applicant shall not apply for any order for orders personally against the Official Receiver or the provisional trustee/trustee in bankruptcy in the said action; and

(3) The Applicant herein do pay the Official Receiver a sum of $1,500 as her agreed costs of this application.”

6.On 20 April 2026, Messrs Lee & Chow, the Trustee in Bankruptcy of the property of the 2^nd Defendant wrote to the Court, stating their neutral stance in these proceedings and seeking leave to dispense with their attendance at the Pre-trial Review and the subsequent hearings.  On 21 April 2026, Madam Justice Au-Yeung excused their attendance.

7.In respect of the 3^rd Defendant, a bankruptcy order under HCB 814/2026 was made against her.

8.On 6 May 2026, upon the joint application of the Plaintiff and the Official Receiver & Provisional Trustee of the Bankrupt, an order was made by Master S P Yip in the following terms:-

“Notwithstanding the bankruptcy order herein dated 24 March 2026 made against the Bankrupt, leave be granted to the Applicant, being the Plaintiff in the High Court Action 871 of 2022 (‘the said action’), to proceed with the said action against the Bankrupt, being the 3^rd Defendant of the said action, subject to the following conditions:

(1) No judgment or order obtained by the Applicant, as the Plaintiff in the said action, shall be enforced against the Bankrupt without leave of the court;

(2) The Applicant shall not apply for any order for orders personally against the Official Receiver or the provisional trustee/trustee in bankruptcy in the said action; and

(3) The Applicant herein do pay the Official Receiver a sum of $1,500 as her agreed costs of this application.”

9.On 15 June 2026, the Official Receiver and the trustee in bankruptcy of the property of the 3^rd Defendant (“ORT”) wrote to the Court, stating that:-

(1)  Upon making of the bankruptcy order, the 3^rd Defendant is divested of her right to defend[1] and counterclaim in this Action, and unless the ORT gives consent or assign the right of action to her, the 3^rd Defendant has no locus to defend/counterclaim in this action;

(2)  The ORT had informed the Plaintiff’s solicitors that she would not give consent nor assign the right of action to the 3^rd Defendant to defend/counterclaim in this Action;

(3)  The ORT will leave it to the Plaintiff to establish its claim against the 3^rd Defendant;

(4)  In view of her stance, she sought leave to excuse her attendance at trial.

10.On 7 September 2026, I excused the ORT’s attendance at trial.

11.In so far as the counterclaim is concerned, upon the making of the bankruptcy orders against them, the respective property of the 2^nd and 3^rd Defendants does vest in the Official Receiver and thereafter, upon the appointment of a trustee in bankruptcy, passes to the trustee appointed: section 58 of the Bankruptcy Ordinance, Cap 6 (“the Ordinance”).  Where any part of the property of the bankrupt consists of things in action, such things shall be deemed to have been duly assigned to the trustee: section 53(4) of the Ordinance.  The result is, as explained by Cheung J (as Chief Justice then was) in Choi Sze Fai v Pretty Full Development Ltd [1999] 3 HKC 261, 262-263:-

“All rights of action which relate directly to the property comprised in the bankrupt’s estate pass to the trustee … where the right of action has passed to the trustee, if the bankrupt brings an action upon it, it may be dismissed as frivolous or vexatious or the trustee may intervene and be joined or substituted as plaintiff: Halsbury' s Laws of England (4th Ed) Vol 3(2) para 424.”

12.However, the vesting of the bankrupt’s right of action in the trustee is subject to one exception – claims which were “personal” to him.  This is explained by Ma CJHC (as former Chief Justice Ma then was) in Chung Kau v Hong Kong Housing Authority [2004] 2 HKLRD 650, at [8]:-

“The one exception is this. A bankrupt retains the right, without any interference from the Official Receiver as trustee in bankruptcy, to bring or continue any proceedings (including appeals) relating to claims which are personal to him: see Heath v Tang [1993] 1 WLR 1421 at p.1423. By “personal” are meant claims which relate to the bankrupt's body, mind or character without immediate reference to his rights of property: see Beckham v Drake (1849) 2 HL Cases 579 at p.604; Wilson v United Counties Bank Ltd [1920] AC 102 at p.130; Heath v Tang at p.1423A–B. Thus, personal claims include claims for damages for personal injuries and defamation. The rationale here is that compensation awarded for personal injuries or defamation will represent, in monetary terms, that part of a person (for example, his limbs or the use of them) or his reputation that has been lost or harmed. These types of claim do not involve his property. And where a bankrupt seeks, for example, to appeal against an injunction against him to curtail a nuisance said to have been committed by him, he can do so: this would be a claim against him personally in contradiction to one that involved his property (such as, for example, an injunction to prevent a breach of contract).”

As the counterclaim raised by the Defendants in this action concerns contractual claims – namely misrepresentation, breach and frustration of contract, it is plainly not “personal”.

13.Therefore, the right to pursue the counterclaim was vested in the trustee upon the making of the bankruptcy order.  Accordingly, the 2^nd and 3^rd Defendants had no standing to continue the counterclaim on their own.  Since the respective trustees decided not to attend the trial to prosecute their counterclaim, I shall make no order in relation to it.

14.The current status of these proceedings may therefore be summarized as follows:-

(1)  The 1^st Defendant has reached settlement with the Plaintiff on the terms recorded above.

(2)  Although the 2^nd and 3^rd Defendants has filed a Defence and Counterclaim and witness statements, the respective trustees in bankruptcy decided not to attend the trial to defend the Plaintiff’s claim or to pursue their counterclaim.  No witness was ever called to prove their case.  

B.   The Plaintiff’s Claim

15.The Plaintiff called the following witnesses at trial:-

(1)  Ms Lao Chau U – a director of the Plaintiff, and the Chief Executive Officer and Executive Director of AB Builders Group Limited (“AB Builders”);

(2)  Mr Cheang Iek Wai – an Executive Director of AB Builders and a director of Lap Polly Engineering Company Limited (“Lap Polly”);

(3)  Mr Ip Kin Wa – an Executive Director of AB Builders and a former director of Lap Polly; and

(4)  Mr Wong Kam Yin – the former Financial Controller of AB Builders, the Plaintiff’s holding company and the former company secretary of Lap Polly.

16.They were not cross-examined because of the absence of the 2^nd and 3^rd Defendants.

17.After hearing their evidence and considering the documentary evidence, I find that the Plaintiff has duly proved its case, which is summarized as follows:-

(1)  Pursuant to an agreement “有關Equally Tycoon Limited並亨有限公司的出售股份之買賣協議” (“SPA”) entered into between the Plaintiff and the Defendants on 10 September 2019:-

(a)  The Plaintiff as purchaser was to purchase, and the 1^st Defendant and the 2^nd Defendant as vendors were to sell, the 100% shareholding in Equally Tycoon Limited (“Target Company”). Before the SPA, the 1^st Defendant and the 2^nd Defendant each owned 50% shareholding in the Target Company.

(b)  The SPA was completed on 10 September 2019, the Plaintiff paid HK$5.1 million to the 1^st and 2^nd Defendants on 10 September 2019, and the Plaintiff became the 100% shareholder of the Target Company.

(c)  At all material times, the Target Company was a 60% shareholder of Lap Polly, holding 6,000 shares. The 1^st, 2^nd and 3^rd Defendants respectively held 2,000 (20%), 1,999 (19.99%) and 1 (0.01 %) shares in Lap Polly respectively.

(d)  The SPA contains the following relevant terms:-

(i)  Clause 3.1:-

“受限於第 6 條款之盈利保證，並受制於第 6.1 條款所述之調整，出售股份的出讓代價合共為港幣 5,100,000 元（「代價」）；惟若發生第 6.1 條款所述的情況，代價可作出相應調整”

(ii)  Clause 6.1:-

“6.l 盈利保證

6.1.1 賣方 [i.e. the 1^st and 2^nd Defendants] 及擔保人 [i.e. the 3rd Defendant] 須各自及共同、無條件及不可撤回地向買方承諾及保證：

(a) 2020 溢利保證；及

(b) 2021 溢利保證。

6.1.2 若第 6.1.1 條款所述之溢利保證未能達到，則賣方須按以下條款所述之公式計算得出調整後之出售代價，並向買方發還出售代價之差額，上限為第 3.1 條款之代價：

調整後須發還之出售代價差額＝（2020 溢利保證 － 2020 全年實際溢利（或 + 2020 全年實際虧損）+ 2021 溢利保證 – 2021 全年實際溢利（或 + 2021 全年實際虧損））x 60%（買方在立保利 [i.e. Lap Polly] 所佔的權益比例）

按實際而定，2020全年實際虧損及2021全年實際虧損分別為立保利於截至 2020 年及2021年12月31日的年結日錄得經審計除稅後但未計非經常項目前虧損。

在不影響買方根據本協議之任何其它權利的情況下，買方有權要求賣方及／或擔保人於買方發出有關書面要求之 5 個營業日內以現金向買方支付有關差額。

6.1.3為確保賣方履行上述支付有關差額之承諾，賣方和擔保人同意以下擔保措施：

(a) 將其因持有立保利合共 40 ％股權所擁有的稅後利潤 ／ 應收股息優先無償轉讓予買方 ；

(b) 以上 (a) 項不足以支付有關差額之餘額，將以立保利之應付董事款項無償轉讓予買方（即從應付董事款項轉變為應付買方款項），

(c) 應付董事款項之償付須待賣方及 ／ 或擔保人完成履行上述支付有關差額後方可進行 。

6.1.4 為求清晰， 除本第 6 條款明文規定者外，經調整出售代價後，賣方無須就立保利未能實現 2020 溢利保證或 2021 溢利保證或就立保利於 2020 年及 ／ 或 2021 年錄得虧損而承擔任何額外的賠償 ； 唯若立保利於 2020 年及 ／ 或 2021 年未能實現保證溢利 ， 買方已向賣方支付按 6 . 1. 2 條款調整的出售代價後，買方應被視為已履行第 3 條款項下所指的支付出售代價的責任 。”

(e)  The SPA defines the following terms:-

(i)  「審核帳目」:-

“指立保利而言 ， 其終結於帳目日年度的經審核帳目（包括截至帳目日止年度之損益表及於帳目日結算時之資產負債表）， 其文本之副本附於本協議作為附件 一；此等帳目乃根據香港公認的會計原則及符合由香港會計師公會頒佈的會計準則”

(ii)  「2020 溢利保證 」:-

“指立保利於截至 2020 年 12 月 31 日止的財政年度期間以買方指定核數師根據香港公認會計原則計算及符 合 由香港會計師公會頒佈的會計準則預備之經審計帳目之除稅後但未計非經常項目前純利不少於港幣 4,250,000 元”

(iii)  「2020 全年實際溢利」:-

“指立保利於截至 2020 年 12 月 31 日止的財政年度期間以買方指定核數師根據香港公認會計原則計算及符 合 由香港會計師公會頒佈的會計準則預備之經審計帳目之除稅後但未計非經常項目前實際純利”

(iv)  「2021 溢利保證」:-

“指立保利於截至 2021 年 12 月 31 日止的財政年度期間以買方指定核數師根據香港公認會計原則計算及符合由香港會計師公會頒佈的會計準則預備之經審計帳目之除稅後但未計非經常項目前純利分別 不少於港幣 4,250,000 元”

(v)  「2021 全年實際溢利」:-

“指立保利於截至 2021 年 12 月 31 曰止的財政年度期間以買方指定核數師根據香港公認會計原則計算及符合由香港會計師公會頒佈的會計準則預備之經審計帳目之除稅後但未計非經常項目前實際純利”

(f)  Clause 5.5 of the SPA further provides: “儘管已成交，本協議中提及尚待履行之條款應繼續完全有效”.  

(g)  Clause 9 similarly provides: “除已經被履行的事情外，本協議所有條文應在成交後繼續有效”.

(2)  Lap Polly suffered loss in the 2020 and 2021 financial years.

(3)  As evidenced in the 2020 and 2021 audited accounts of Lap Polly:-

(a)  The amount of post-tax loss recorded in the 2020 audited account is HK$4,768,493.  There was a non-recurring revenue item, namely HK$531,500 being one-off government grant.  The amount of “2020 全年實際虧損” within the meaning of Clause 6.1 is therefore HK$5,299,993.

(b)  The amount of post-tax loss recorded in the 2021 audited account is HK$5,428,078.  There was no non-recurring item. The amount of “2021 全年實際虧損” within the meaning of Clause 6.1 is therefore HK$5,428,078.

(4)  According to Clause 6.1.2:-

(a)  “調整後須發還之出售代價差額 = (2020 溢利保證 – 2020 全年實際溢利（或 +2020 全年實際虧損）+ 2021 溢利保證－2021 全年實際溢利（或+2021 全年實際虧損））x 60%（買方在立保利所佔的權益比例）”.

(b)  The amount is HK$11,536,842.6, being (HK $4,250,000 + HK$5,299,993 + HK$4,250,000 + HK$5,428,078) x 60%.  Given the entitlement is limited to the extent of the consideration in Clause 3.1 (“上限為第3.1 條款之代價”), the sum payable shall be HK$5,100,000.

(c)  The Plaintiff is therefore entitled to this sum, payable by the Defendants jointly and severally.

(5)  Therefore, the Plaintiff is entitled to the sum of HK$5,100,000.

18.The 2^nd and 3^rd Defendants have raised a number of defences, which include:-

(1)  The SPA was voidable and/or unenforceable for the Plaintiff’s misrepresentation as to the contents of the SPA, how Lap Polly was to conduct its businesses and its financing (paragraph 3 of their Defence);

(2)  The Plaintiff’s proactive and unreasonable interferences of Lap Polly’s businesses, constituting acts of prevention which impede, fetter and hinder the Defendants’ performance of their obligations under the SPA; hence, the Plaintiff is prevented from benefitting from its own wrong and insisting on the Defendants’ performance of the obligations under the SPA (paragraphs 10, 11 and 15(a) of their Defence); and

(3)  “force majeure”, on the basis that the Defendants were prevented from performing their obligations under the SPA due to COVID-19 Pandemic, which was unforeseeable when the SPA was signed and beyond the control of the parties (paragraph 15(b) of their Defence).

19.These defences are all fact-heavy.  The burden of proving those facts rests on the 2^nd and 3^rd Defendants who raised them.  As the 2^nd and 3^rd Defendants now did not participate the trial and adduce any evidence, these defences simply cannot get off the ground.

C.  Conclusion and Disposal

20.In the premises, based on the evidence available to the Court, the only conclusion that I can reach is that the Plaintiff is entitled to be paid by the 2^nd and 3^rd Defendants jointly and severally the said sum of HK$5,100,000.

21.In the Statement of Claim, the Plaintiff has also prayed for a number of injunctions seeking specific performance of Clause 6.1.3 of the SPA, including compelling the 2^nd and 3^rd Defendants to transfer to the Plaintiff the dividends  or post-tax profits payable by Lap Polly to them, to assign to the Plaintiff any debt or director's loan owed by Lap Polly to them; restraining the 2^nd and 3^rd Defendants from recovering any debt owed by Lap Polly to them until they have paid the said sum of HK$5,100,000 to the Plaintiff.  At trial, I questioned the necessity of granting these injunctions.  After taking instructions, Mr Tom Ng, Counsel for the Plaintiff indicated to the Court that the Plaintiff would no longer pursue those remedies.

22.I therefore make the following order:-

(1)  Judgment in the sum of HK$5,100,000 in favour of the Plaintiff be entered against the 2^nd and 3^rd Defendants.

(2)  There be pre-judgment interest at 1% per annum above the HSBC Prime Rate on the said sum of HK$5,100,000 from 3 May 2022 to the date of this judgment.

(3)  There be post-judgment interest at the judgment rate from the date of this judgment to the date of payment.

(4)  There be no order on the 2^nd and 3^rd Defendants’ counterclaim.

(5)  Costs of this action (including all reserved costs) be paid by the 2^nd and 3^rd Defendants to the Plaintiff, to be taxed if not agreed.

23.I thank Mr Ng for his assistance.

Mr Tom Ng, instructed by David Fong & Co, for the Plaintiff

Attendance of the 1^st Defendant was excused

Attendance of Lee & Chow, trustee in bankruptcy of the property of the 2^nd Defendant was excused

Attendance of the Official Receiver, trustee in bankruptcy of the property of the 3^rd Defendant was excused