Kun Peng I Ltd and Another v. Win Power Investment Ltd and Others

HCA 475/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 475 OF 2012

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BETWEEN

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Before : Deputy High Court Judge M Chan in Chambers

Date of Hearing : 28 March 2012

Date of Decision : 28 March 2012

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D E C I S I O N

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1.In May 2011, Mr Lin (the 2^nd defendant in these proceedings) commenced HCA 866/2011 against Jointa Ltd (“Company”) for repayment of an alleged loan made by him to the Company. In the Statement of Claim, the loan is said to be a sum of HK$62,248,190, evidenced by the minutes of a meeting of the board of directors of the Company dated 3 August 2009 (“Minutes”).

2.On 30 December 2011, Mr Lin issued an Order 14 summons for judgment to be entered against the Company for the sum of US$6,562,500, which Mr Lin claims is clearly shown to be due from the Company.

3.On 22 March 2012, Kun Peng I Ltd and Kun Peng II Ltd (“KP”) issued HCA 475/2012 against Mr Lin, the Company and other parties, on the basis of a Subscription and Investment Agreement (“Agreement”) dated 7 March 2007 made between Mr Lin, the Company, Win Power Investment Ltd (“Win Power”), KP and other parties.  Under clause 6.5 of the Agreement, Mr Lin as a guarantor covenanted (amongst other things) not to claim payment of moneys due to him from the Company, until obligations guaranteed by him under the Agreement had been discharged and satisfied in full.  One of the obligations guaranteed by Mr Lin under the Agreement is Win Power’s payment of interest under bonds issued by Win Power to KP pursuant to the Agreement.  It is claimed that Win Power had defaulted in paying interest due under the Bond and that there is an event of default under the Agreement.  A sum of RMB 71,163,000 is claimed to be due from Win Power to KP.

4.KP issued a summons on 22 March 2012 in HCA 475/2012, to restrain Mr Lin from continuing or pursuing his claims in HCA 866/2011 against the Company, in breach of his covenants under the Agreement.  KP claim that they had only discovered the fact of Mr Lin’s proceedings in March 2012.

5.KP claim that their application for the injunction should be dealt with before the disposal of Mr Lin’s application for summary judgment fixed for substantive hearing today on 28 March 2012.  In reliance on the decision of the Court of Appeal in Incorporated Owners of South Seas Centre v Great Treasure Development Ltd [1994] 1 HKC 197, KP claim that an injunction to enforce a negative covenant in the Agreement should be granted, unless the defendant sought to be restrained can establish “special circumstances of such a nature that the hardship that the making of the order would cause him so far outweigh the inconvenience to the plaintiff through denying the plaintiff specific relief that the court considers that its intervention would be unjust”.

6.On the evidence filed by KP, they rely on clause 6.5 of the Agreement.  In essence, clause 6.5 (B) restrains Mr Lin as one of the guarantors under the Agreement from seeking to enforce repayment from the Company and from exercising other rights, claims or remedies which may accrue to him “in respect of any guaranteed obligations discharged by him” (my emphasis).  Clause 6.5 (C) restrains Mr Lin from claiming payment of moneys due to him from the Company, and from exercising other rights, claims or remedies, but sub‑clause (C) expressly excludes rights, claims or remedies in respect of current accounts with Mr Lin in the course of the reorganization of the companies concerned, or as part of the IPO exercise (my emphasis).

7.In the particular circumstances of this case, I have before me the evidence filed by both Mr Lin and the Company in HCA 866/2011 to be argued at the Order 14 application before me.  On such evidence, it appears that Mr Lin’s claim against the Company in the action is not for a debt in respect of the obligations guaranteed under the Agreement and discharged by Mr Lin, to fall within clause 6.5 (B).  Mr Lin also claims that the debt from the Company is acknowledged to be due to him as a director, for funds lent to the Company to secure the listing envisaged under the Agreement, to arguably fall outside clause 6.5 (C).

8.Further, under clause 26.1 (D) of the Agreement, the Agreement terminates on Mr Lin ceasing to hold shares in Win Power.  According to the evidence filed in HCA 866/2011, Mr Lin’s shares in Win Power were transferred in 2010.  Mr Lin claims that he is no longer subject to the restrictions contained in clause 6.1 of the Agreement.

9.On the limited evidence filed in these proceedings, I am not satisfied that there is any breach or threatened breach of the negative covenant asserted by KP, or that the covenant in question clearly applies to Mr Lin’s claims in HCA 866/2011.  At most, there is a serious question to be tried as to whether Mr Lin is subject to the covenant relied upon by KP, and that can be properly and fully argued.  KP accept that their summons should be adjourned for evidence to be filed and for full argument.  I am not satisfied that there is justification to grant an immediate interim injunction pending the filing of evidence by Mr Lin in these proceedings (HCA 475/2012) and pending the determination of KP’s summons for the injunction.  KP’s claim against Win Power in these proceedings is for a fixed sum of RMB 71,163,000 and I cannot see at this stage that KP will suffer any irreparable damage should an injunction not be granted at this stage pending the determination of its summons.

10.The summons for the injunction is adjourned, and I will give directions for evidence to be filed.

Mr Paul HM Leung, instructed by WK To & Co, for the plaintiffs

Mr Kelvin Leung, instructed by MCA Lai & Co, for the 2^nd defendant