VPOWER GROUP HOLDINGS LTD v. CRRC HONG KONG CAPITAL MANAGEMENT CO LTD

HCMP 1551 & 1552/2024

(Heard together)

[2025] HKCFI 2388

HCMP 1551/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1551 OF 2024

_________________

_________________

BETWEEN

_________________

AND

HCMP 1552/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1552 OF 2024

_________________

_________________

BETWEEN

_________________

(Heard together)

_________________________________

DECISION

_________________________________

Introduction

1.  After this court handed down the decision dated 3 February 2025 (“the Injunction Decision”) in which the summonses taken out by each of the plaintiffs in these two proceedings were dismissed. By summonses both dated 13 February 2025 (“the Leave Summonses”), the plaintiffs apply for leave to appeal against the Injunction Decision.

2.  The parties with the same legal representations agree that the Leave Summonses should be determined by paper disposal and written submissions have been lodged pursuant to my directions. This court has read the written submissions and is grateful for the assistance rendered.

3.  In this decision, I shall adopt the same abbreviations used in the Injunction Decision, unless otherwise stated. I shall also refer to the Injunction Decision for the background facts narrated therein and I shall not repeat the same in this decision.

Relevant principles

4.  The applicable principles relating to applications for leave to appeal are well settled and not in dispute. Leave to appeal is not lightly granted and the court must be satisfied that the intended appeal has reasonable prospect of success or there is some other reason in the interests of justice that the matters should be heard on appeal: section 14AA(4) of the High Court Ordinance, Cap.4 (“the HCO”). A reasonable prospect of success means an appeal with prospects that are more than fanciful without having to be probable: SMSE v KL [2009] 4 HKLRD125 per Le Pichon JA at §17.

5.  Since the Injunction Decision involves an exercise of my discretion to refuse Ps’ applications for interlocutory injunctions, Mr Dawes SC, leading Mr Chen for Ps, pertinently refers to New Sparkle Roll International Group Limited v Sze Ching Lau[2024] HKCA 336 in which Kwan VP at §§67-68 said this,

“For an appeal against the granting of an interlocutory injunction, which is an exercise of discretion of the court, the well-established principles are that the appeal court must defer to the judge’s exercise of discretion and not interfere with it merely on the ground that it would have exercised the discretion differently. The appeal court will not disturb the judge’s exercise of discretion unless one or more of these grounds are established: the judge had misdirected himself with regard to the principles or the evidence in accordance with which his discretion had to be exercised; he had taken into account irrelevant matters; he failed to take into account relevant ones; his exercise of discretion is so plainly wrong that it is outside the generous ambit within which reasonable disagreement is possible. It is only if and after the appeal court has reached the conclusion that the judge’s exercise of discretion must be set aside for one or other of these reasons that it becomes entitled to exercise an original discretion of its own.”

Grounds of the intended appeal

6.  Mr Dawes has advanced 5 broad grounds and I shall deal with each of them in turn.

7.  The first group of complaints relate to my alleged mischaracterisation of Ps’ core contention. Ps say that I have mistaken that their case is that the Finance Lease Agreements were shams when they merely say that by reason of the Alleged Understanding the parties did not intend to act in strict compliance with the express terms of the Finance Lease Agreements. Such a mischaracterisation led to my failure to apply the proper test, which is whether the arrangement between the parties amounts to in substance and effect a loan of money within the definition of section 2(1) of the MLO and not whether Ps are able to discharge the onus to prove that the Financial Lease Agreements were in fact a sham.

8.  I see no merit in these complaints.

9.  The main case of Ps is premised upon the Alleged Understanding, which, according to Ps, rendered the Financial Lease Agreements to be in substance and effect a loan agreement and D, being an unlicenced money lender at the material time, should be debarred from enforcing the Financial Lease Agreements, which are disguised loan agreements.

10.  I have given my reasons why I reject the allegation of the Alleged Understanding summarily in the Injunction Decision and I shall not repeat my reasons here. I referred to the relevant evidence purportedly in support of the Alleged Understanding including the Affirmation of Mr Lo, the IPO prospectus of VP ListCo and the Feasibility Report. I expressed my view on such evidence. Nothing in the written submissions of Mr Dawes causes me any concern about the validity of the reasons given in the Injunction Decision.

11.  Mr Lo is the only one who has given direct evidence of the Alleged Understanding on behalf of Ps and his evidence is unsatisfactory and unconvincing. I find that his evidence relating to the Alleged Understanding consists of bare assertions only with little particulars and lacks cogency. His relevant evidence is contained in one single paragraph in his affirmation (§15). He merely said there was a discussion between the parties that the parties should enter into some purported finance lease agreements and Ps would buy back the machinery and equipment from D at the end of the expiry of the lease term as repayment of the principal of the loan advanced thereunder. Then, in the following paragraph, Mr Lo mentioned the execution of the agreements between the parties including the Finance Lease Agreements.

12.  Mr Lo did not give any details about the alleged discussion and how the Alleged Understanding came into being and eventually shared between the parties in the course of the alleged discussion. It is noteworthy that it was the first time when Ps had ever dealt with D and all of them were sizable business entities. Cogent evidence was expected from Ps as to why D would be attracted to share the Alleged Understanding.

13.  In light of my refusal to accept the allegation of the Alleged Understanding, I reject that the allegation that the Finance Lease Agreements were in substance and in effect loan agreements and conclude that the MLO is not engaged at all: §75 of the Injunction Decision. I do not accept that I misdirected myself as to the proper test.

14.  As regards Ps’ criticism that I have mischaracterised their case, I should first highlight what Ribeiro PJ said about the approach adopted by the courts in deciding whether a transaction should be categorised as loans or otherwise within the meaning of the MLO in Secretary for Justice v Global Merchant Funding Ltd (2016) 19 HKCFAR 192 at §§13-15:

“13. Perhaps because the legislation is penal and, if misapplied, may be commercially disruptive, the Courts have consistently taken a restrictive view of what constitutes money lending. Thus, in Olds Discount Co Ltd v John Playfair Ltd, a case dealing with the MLA 1927, it was held that an agreement for the purchase by a hire-purchase company of book debts owing by customers to a drapers company which had sold them goods on credit did not constitute a loan “notwithstanding that the operative reason in the minds of the defendants for entering into it was that they desired to raise money as a temporary matter in the same way as they would have raised it if they had merely entered into a transaction of loan”. This was because, as Branson J explained:

“... it is the nature of the agreement entered into, and not its object, at which the court has to look in order to decide whether in any particular case the agreement is a moneylending agreement or otherwise.”

14. Olds Discount was approved by the Privy Council in Chow YoongHong v Choong Fah Rubber Manufactory, where Lord Devlin elucidated the Court’s approach in the following terms:

“There are many ways of raising cash besides borrowing. One is by selling book-debts and another by selling unmatured bills, in each case for less than their face value. Another might be to buy goods on credit or against a post-dated cheque and immediately sell them in the market for cash. Their Lordships are, of course, aware, as was Branson J, that transactions of this sort can easily be used as a cloak for moneylending. The task of the court in such cases is clear. It must first look at the nature of the transaction which the parties have agreed. If in form it is not a loan, it is not to the point to say that its object was to raise money for one of them or that the parties could have produced the same result more conveniently by borrowing and lending money. But if the court comes to the conclusion that the form of the transaction is only a sham and that what the parties really agreed upon was a loan which they disguised, for example, as a discounting operation, then the court will call it by its real name and act accordingly.”

15. When the New Zealand Court of Appeal considered the meaning of “moneylending” under the applicable Act, after citing Chow YoongHong v Choong Fah Rubber Manufactory, Richardson J stated:

“... the first step in determining whether the transactions under review were loans is to ascertain their true nature or substance. ... It is well settled that, where documents have been drawn to define the relationship of persons involved in a business operation, the true nature of the transaction can only be ascertained by careful consideration of the legal arrangements actually entered into and carried out. ... It is the legal character of the transaction which is decisive, not the overall economic consequences to the parties ... That character is not determined conclusively by the nomenclature used by the parties. Consideration must be given to the whole of the contract in order to determine the true nature of the relationship.”

15.  Ribeiro PJ went on to review several authorities on this topic including Orion Finance Ltd v Crown Financial Management Ltd [1996] 2 BCLC 78. Ribeiro PJ cited the following words of Millett LJ (as Lord Millett then was) at §20:

“...proper legal categorisation is a matter of construction of the documents. This does not mean that the terms which the parties have adopted are necessarily determinative. The substance of the parties' agreement must be found in the language they have used; but the categorisation of a document is determined by the legal effect which it is intended to have, and if when properly construed the effect of the document as a whole is inconsistent with the terminology which the parties have used, then their ill-chosen language must yield to the substance.

The question is not what the transaction is but whether it is in truth what it purports to be. Unless the documents taken as a whole compel a different conclusion, the transaction which they embody should be categorised in conformity with the intention which the parties have expressed in them.”

16.  Eventually, Ribeiro PJ concluded that the approach adopted in the authorities reviewed by him was applicable. In §21, Ribeiro PJ said,

“The MLO’s definition of a “loan” to include “every agreement (whatever its terms or form may be) which is in substance or effect a loan of money” must be understood to be referring to an agreement which has the legal substance or effect of a loan and not an agreement with such an economic or commercial substance or effect. Methods of financing which may be economically indistinguishable from a loan repayable with interest may well be differently categorised in law.”

17.  It can be seen that the courts determine whether there was a loan within the meaning of the MLO by finding out the legal substance and effect of the agreement reached by the parties and a restrictive view is invariably taken in such determinations.

18.  Mr Dawes submits that the case of Ps is not that the Finance Lease Agreements were a sham. He submits that my characterisation of Ps’ case of a sham is not supported by the relevant authorities and on the undisputed/indisputable evidence.

19.  In the first place, as rightly pointed out by Mr Man SC, leading Mr Tang for D, Mr Dawes in his skeleton submissions filed for the hearing of the Summonses (“the Hearing”) and throughout the Hearing characterised the Finance Lease Agreements as “disguised loan agreements” and “a façade”. In his oral submission, he once suggested that the Finance Lease Agreements could not be a genuine finance lease arrangement. I am unable to understand how it can be argued that I was mistaken about the nature of Ps’ case to be that the Finance Lease Agreements were mere shams.

20.  Ps’ contention is that despite the provisions in the Finance Lease Agreements that Ps had an option to repurchase the Leased Assets, the Alleged Understanding was that Ps were liable to repay the loan principals to D regardless whether the option was exercised.

21.  In the Injunction Decision (§46), I set out the legal principles concerning sham transactions expounded by Arden LJ (as she then was) in Stone & Ors v Hitch [2001] STC 214 cited by DHCJ KC Chan in Aurum Pacific Finance Limited v T & V International Holdings Limited[2024] HKCFI 1798.

22.  Had the Alleged Understanding really been in existence, the right of Ps to exercise the option in the Finance Lease Agreements would have been in truth Ps’ obligations to repay the loan principals.

23.  Mr Dawes draws my attention to Belvedere Court Management Limited v Frogmore Development Ltd [1997] QB 858 and National Westminster Bank Plc v Jones [2001] 1 BCLC 98 for the proposition that an apparently artificial transaction is not a sham despite its intention to circumvent a result a statue would otherwise have brought about in the absence of an element of pretence.

24.  Mr Dawes argues that the Finance Lease Agreements were entered into to circumvent the application of the MLO, despite its potential artificialities, does not render them shams. I note that Mr Lo does not allege or suggest anything about the parties’ discussion regarding D’s status under the MLO and their intention to avoid the application of the MLO in his evidence: see §65 of the Injunction Decision. §47 of his affirmation does not suffice.

25.  I agree with Mr Man that neither Belvedere nor National Westminster Bank assists Ps.

26.  In Belvedere, at p.876D, Sir Thomas Bingham MR (as he then was) held that the arrangements in question were not a sham on the ground that there was no element of pretence and the parties were not doing one thing and saying another.

27.  In National Westminster Bank, at §40, Neuberger J (as he then was) quoted the often-cited definition of sham by Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 1 All ER 518 at 528:

“… it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the “sham” which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. One thing I think, however, is clear, in legal principle, morality and the authorities … that for acts or documents to be a “sham”, with whatever legal consequences follows from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.”

28.  Eventually, the learned judge concluded that the agreements in question, despite being artificial transactions, were not a sham in the absence of any degree of dishonesty on the part of the parties involved.

29.  With the Alleged Understanding, the Finance Lease Agreements were in fact loan agreements. The parties’ legal rights and obligations were different from what they appeared in the Finance Lease Agreements. There was an element of pretence and a degree of dishonesty. On the authorities, the case advanced by Ps cannot be anything less than a sham in my view.

30.  Mr Dawes further points out that in the skeleton submissions of Mr Man lodged for the purpose of the Hearing, Mr Man himself recognised that a case of a collateral agreement might be run by Ps which is less than a sham.

31.  The relevant part of Mr Man’s written submissions reads,

“Fifth, if Ps are permitted to run a case which is less than a sham, the argument would be that the Finance Lease Agreements are subject to a collateral undertaking (either orally or by conduct) to the effect of the Alleged Understanding.”

32.  It is evident that the alternative case of a collateral agreement is suggested by Mr Man in the subjunctive. I do not think that Mr Man was changing his primary position that P was running a sham case with the Alleged Understanding.

33.  Next, Mr Dawes submits that I was wrong to find that Clause 19.1 was akin to an entire agreement clause and Clause 19.3 was akin to a no oral modification clause. He further argues that I failed to explain why Clause 19.1 could exclude the Alleged Understanding and that no subsequent modification to the Finance Lease Agreement was ever involved with the implementation of the Alleged Understanding.

34.  In my view, the combined effect of these two provisions is that all the terms of the Finance Lease Agreements had been explained to Ps and the parties had an accurate understanding of their obligations thereunder. Further, the terms of the Finance Lease Agreements were not amenable to any subsequent oral modifications.

35.  The terms of the Finance Lease Agreements in these two provisions, read in context, must mean their written terms only. They could not possibly include the Alleged Understanding. Otherwise, these provisions are meaningless.

36.  It is plain to me that these two provisions effectively exclude all promises, understandings and assurances not embodied in any of the written terms of the Finance Lease Agreements. There is simply no room for the Alleged Understanding.

37.  I do not agree that the implementation of the Alleged Understanding does not involve any modification of the Finance Licence Agreements. To begin with, D could not enforce the disguised loan agreement alleged by Ps to demand Ps to repay any part of the loan if Ps opted not to exercise their right to repurchase the Leased Assets upon expiry of the lease term in accordance with the actual terms of the Finance Lease Agreements.

38.  Mr Dawes further points out that the Alleged Understanding is supported by Ps’ early repayments of principals. I have explained in the Injunction Decision why I could not accept this evidence of Mr Lo and I have nothing to add.

39.  Mr Dawes then complains that I erred in concluding that the examples of the parties’ actual performance of the Finance Lease Agreements negate the existence of the Alleged Understanding. He submits that they are equally consistent with Ps’ case of a disguised loan agreement in which the Leased Assets were to be held as securities.

40.  In the Injunction Decision, it is clear that after giving all the reasons why I was unimpressed by the evidence of the Alleged Understanding, I indicated my acceptance of the evidence of Mr Tang of D that the examples given by him could show that the parties did treat the Finance Lease Agreements as genuine sale and leaseback agreements.

41.  Lastly, Mr Dawes submits that I failed to consider the lack of any evidence indicating which Leased Assets were to be bought back by Ps before any payments were made. He says that this lack of evidence is supportive of the existence of the Alleged Understanding.

42.  Mr Man is right in his submission that this argument was not raised in the skeleton submissions lodged for the Hearing. It was briefly made at the Hearing. I have considered this though I did not express any view on this particular argument in the Injunction Decision. Considering all the evidence in the round, I believe that this argument could not have any significant impact on my conclusion.

43.  To conclude, I am not convinced that there is any reasonable prospect that my finding of the non-existence of the Alleged Understanding would be successfully challenged. The main case of Ps should collapse. I should continue to dispose of other grounds of Ps’ intended appeal briefly.

44.  In the Injunction Decision, this court accepted the submission of Mr Man that even if the Finance Lease Agreements were loans, they were “exempted loans” within the meaning of the Provisions, i.e. paragraphs 14 and 15 of Schedule 1 Part 2 of the MLO since they were made to a company whose shares are listed on the Stock Exchange of Hong Kong.

45.  I accepted the submission of Mr Man that though VP ListCo was listed only after the Finance Lease Agreements were executed on 2 December 2015, any loans extended to it under the Finance Lease Agreements should be exempted loans within the meaning of the MLO. The reason is that there is no express stipulation in the Provisions that at the time of the loan, the borrower must be a listed company.

46.  Mr Dawes submits that my conclusion on the applicability of the Provisions must be wrong and my interpretation of the Provisions would lead to absurd results. For example, a listed company who has borrowed a loan may subsequently become delisted. The loan would cease to be an exempted loan upon delisting and the lender would be rendered in default in its obligations under the MLO when making the loan such as section 18. This is unreasonable. He submits that the relevant time to determine whether a loan is qualified to be an exempted loan must be at the time when the loan is made.

47.  I am convinced that it is reasonably arguable that my interpretation of the Provisions of the MLO is erroneous. However, I do not think that it has any bearing on my firm conclusion that there was no loan at all and the MLO is not engaged on the evidence. Whether the alleged loan is an exempted loan within the meaning of the MLO is simply academic.

48.  In addition, I have found that there is no evidence that the parties had ever considered the Provisions before the execution of the Finance Lease Agreements and even if either parties had any doubts about their applicability, there was no consideration of a postponement of their execution pending the listing of VP ListCo. There is no evidence that the parties had any discussion about D’s lack of a money lender licence. This shows that the parties did not really consider that there was a loan since they did not do anything to ascertain their respective legal positions under the MLO: see §62 and 65 of the Injunction Decision.

49.  My interpretation of the Provisions is, therefore, of little relevance to the disputes between the parties.

50.  Another ground of Ps’ intended appeal relates to my interpretation of Clause 4 of the 2022 Repayment Schedules. It is submitted that I erred in finding that VPG and VPT are jointly liable for the debt referenced in the 2022 Repayment Schedules.

51.  I relied on the acknowledgement of the outstanding principals and interest and the promise to repay them by VPG and VPT and I construed Clause 4 in light of this acknowledgement: §79 of the Injunction Decision. I am unable to agree that it is reasonably arguable that my conclusion could be faulted.

52.  Lastly. Mr Dawes submits that firstly, this court erred in saying that he did not make submissions on Ps’ contention that the Guarantee does not cover the indebtedness of VPT. Secondly, he submits that given this court’s acceptance as non-controversial facts that under the Guarantee, VP ListCo irrevocably and unconditionally guarantees all amounts payable by VP ListCo and its subsidiaries and that VPT was not a subsidiary of VP ListCo at the time when the Guarantee was executed, it is self-contradictory for this court to find that the Guarantee covers the indebtedness of VPT as well.

53.  I accept that I did make a misstatement when I noted that Mr Dawes made no submission on the contention: §83 of the Injunction Decision. In fact, I had the benefit of the relevant submissions of both Mr Dawes and Mr Man.

54.  As shown in §76 of the Injunction Decision, I referred to Mr Lo’s evidence and stated correctly Ps’ contention concerning the scope of the Guarantee. To deal with the said contention, I first relied on my conclusion that VPG and VPT are jointly liable for the outstanding principals and interests under the 2022 Payment Undertaking. I then relied on the liabilities to be covered expressly by the Guarantee as highlighted to me by Mr Man. I finally rejected Mr Lo’s explanation that the figure in the Guarantee was a sheer mistake: see §84-85 of the Injunction Decision.

55.  Despite the misstatement, I disposed of the said contention with the benefit of counsel’s submission and gave my reasons for my rejection of the said contention.

56.  I am not convinced that my conclusion that the Guarantee covers both the liabilities of VPG and VPT is self-contradictory in light of my reasons given.

57.  All in all, I find that there is no real substance in this ground.

Conclusion and orders

58.  For the reasons stated above, I find that none of the grounds of the intended appeal is reasonably arguable. I conclude that Ps’ intended appeal has no reasonable prospect of success and Ps fail to meet the threshold in section 14AA(4) of the HCO. Leave to appeal must be refused and the Leave Summonses fall to be dismissed accordingly.

59.  There is no reason why costs should not follow the event. I make an order nisi that each of Ps do pay costs of and occasioned by their respective Leave Summons including any costs reserved to D, to be taxed if not agreed, with certificate for two counsel.

60.  It remains for me to thank Mr Dawes SC, Mr Chen, Mr Man SC and Mr Tang for their helpful submissions.

Mr Victor Dawes SC leading Mr Vincent Chen, instructed by Haldanes, for the plaintiffs in both cases

Mr Bernard Man SC leading Mr Danny Tang, instructed by Baker & McKenzie, for the defendant in both cases

HCMP 1551 & 1552/2024
(Heard together)

[2025] HKCFI 551

HCMP 1551/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1551 OF 2024

_______________

_______________

_______________

AND

HCMP 1552/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1552 OF 2024

_______________

_______________

_______________

(Heard together)

_________________________________

D E C I S I O N

_________________________________

Introduction

1.  Each of VPower Group Holdings Limited (“VPG”) and VPower Group International Holdings Limited (“VP ListCo”) (collectively “Ps”) commenced proceedings against CRRC Hong Kong Capital Management Co. Limited (“D”) by their respective originating summonses both dated 19 August 2024 (“OSs”).[1]

2.  By the OSs, Ps seek an injunction to restrain D from presenting, taking out and/or advertising any winding-up petition against Ps based on the alleged debt of US$12,634,870.95 (“the Disputed Debt”) as stated in the two statutory demands both dated 5 August 2024 separately served on them (“the SDs”).

3.  At the same time when Ps issued the OSs, each of them issued a summons for an application for an interlocutory injunction in the same term of the injunctions sought in the OSs pending the disposal and determination of the OSs or further order (collectively “the Summonses”).

4.  By the two orders of Madam Justice Linda Chan both dated 22 August 2024 made in respect of the OSs, the Summonses were, by consent, ordered to be heard together upon the undertakings of D that it will not do what Ps now seek to injunct it from doing by the OSs pending their final disposal and/or determination (“the D’s Undertakings”).

5.  This is the substantive hearing of the Summonses. Mr Dawes SC leading Mr Chen appear for Ps and Mr Man SC leading Mr Tan appear for D.

Background facts

6.  The following account of the background facts should not be controversial and they are largely taken from the skeleton submissions respectively lodged on behalf of the parties.

7.  VPG is a locally incorporated company and is wholly owned by VP ListCo, which is a public company listed on the Hong Kong Stock Exchange (“the HKSE”) (stock code: 1608) since 24 November 2016. Crest Pacific Investments Limited (“Crest Pacific”) is a BVI company and is another wholly owned subsidiary of VP ListCo.

8.  VP ListCo, VPG and Crest Pacific, together with other subsidiaries of VP ListCo including VPower Technology Company Limited (“VPT”) formed the VP Group. VPT ceased to be a subsidiary of VP ListCo in or about 2015.

9.  The VP Group owns its power plants and one of the key businesses of the VP Group is in the operation of power plants and power generation distribution.

10.  D is a limited company incorporated in Hong Kong. It is a wholly owned subsidiary of CRRC Corporation Limited (“CRRC ListCo”) which is a listed company on the HKSE (stock code: 1766) and the Shanghai Stock Exchange (stock code: 601766). CRRC (Hong Kong) Co. Limited (“CRRC HK”) is also a wholly owned subsidiary of CRRC ListCo.

11.  The CRRC Group Co Ltd is the controlling shareholder of CRRC ListCo. The ultimate controlling party of the CRRC ListCo is the State-owned Assets Supervision and Administration Commission of the State Council.

12.  CRRC HK, CRRC Group Co Ltd, CRRC ListCo and D are collectively referred to the CRRC Group herein.

13.  Since 2005, the VP Group and the CRRC Group have had business collaborations. For instance, in 2013, CRRC HK was one of the contractors for providing engineering, procurement and construction (“EPC”) services to the VP Group on a project basis.

14.  Mr Lam was the owner and controller of the VP Group until at least September 2023 and Mr Lo was the Executive Director of VP ListCo until December 2023. Mr Lo made the supporting affirmations for Ps’ Summonses.

15.  Mr Guo was appointed as the Chairman of D in 2015. He retired in around 2017.

16.  In around 2015, Mr Lam and Mr Lo on behalf of the VP Group and Mr Guo of D had discussion about collaborations involving finance leasing of power plants, equipment and facilities.

17.  To this end, D commissioned a feasibility study and as a result a feasibility report dated 16 November 2015 was produced (“the Feasibility Report”).

18.  The Feasibility Report is expressly focussed on the intended transfer of the equipment and facilities owned by the VPG to D and then lease them back from D to the VPG with a view to an expansion of the scale of financing and achievement of its financing goal of the VPG.

19.  Against this background, from around 2015 to 2017, D as lessor entered into 2 finance lease agreements with VPG as lessee on 2 December 2015 for the respective sums of US$14 million and US$20 million (“the VPG Finance Lease Agreements”).

20.  Similarly, D as lessor entered into 4 finance lease agreements with VPT on 21 December 2015 (for US$6 million), on 2 November 2016 (for US$6.65 million and US$3.24 million) and 6 March 2017 for US$25.5 million (“the VPT Finance Lease Agreements”).

21.  The material terms of the VPG Finance Lease Agreements and the VPT Finance Lease Agreements are very similar and the key provisions in common included:

(1)  VPG/VPT agreed to sell and transfer to D some of its machinery and equipment in the power plants and facilities (“the Leased Assets”) set out in the schedules to the VPG/VPT Finance Lease Agreements.

(2)  D would lease the Leased Assets back to VPG/VPT for rent payable by instalments for a term of 3 years (Clause 2.1).

(3)  The rent payable (“Lease Rent”) was a fixed interest rate of 4.5% of the transfer price per annum. The Lease Rent was payable every 6 months by 6 instalments (Clause 3.2).

(4)  In addition, VPG/VPT agreed to pay D an annual handling fee (“the Handling Fee”) of 0.7% per annum of the transfer price (Clause 1.2(3)).

(5)  VPG/VPT had an option to repurchase some or all of the Leased Assets upon satisfaction of the following conditions, namely (1) upon expiry of the lease term and (2) after VPG/VPT has repaid all payable sums under the finance lease agreements (Clause 2.2).

22.  Pursuant to VPG Finance Lease Agreements, VPG received from D the sums of US$14 million and US$20 million and VPG executed two transfer agreements to transfer the entire ownership and rights in respect of the Leased Assets as security.

23.  Since around December 2017, VPG and VPT have defaulted payments of the Lease Rent and other charges payable to D pursuant to the VPG/VPT Finance Lease Agreements.

24.  As a result, on 19 February 2019, VP ListCo executed a guarantee in favour of D (“the Guarantee”) to cover, among other matters, all the liabilities of VPG arising from the Finance Lease Agreements.

25.  It should be noted that VPT was no longer a subsidiary of VP ListCo at the time when the Guarantee was executed.

26.  The Guarantee had the following material terms:

(1)  VP ListCo irrevocably and unconditionally guarantees all amounts payable by VP ListCo and its subsidiaries, including principal and the repurchase amount of the Leased Assets totalling US$54,462,000, rent, interest, handling fee, damages for breach(es) of contract and other amounts payable.[2]

(2)  From the effective date of the Guarantee, VP ListCo irrevocably and unconditionally undertakes to make payment to D in an amount not greater than US$54,462,000. The Guarantee covers the agreements entered or to be entered into between VP ListCo and its relevant subsidiaries and D, including the agreements themselves and the supplemental agreements as well as all amendments, appendices, timetable schedules and enclosures to this Agreement.

(3)  D’s right to receive payment under the Guarantee shall not be limited, impaired or invalidated by any modifications, schedules and enclosures to any agreement.

27.  Apart from the Guarantee, VPG and VPT executed the following documents:

(a)  On around 18 February 2019, VPG executed 2 repayment undertakings (付款承诺书) in favour of D, by which the interest rate was increased to 5.5% per annum in addition to an administrative fee of 0.7% per annum.

(b)  On around 27 March 2020, D issued a document showing a summary of the account receivables as of 31 December 2019 (应收账款对账函) and asked VPG to countersign the same (“the2020 Account Receivables Confirmation”). The 2020 Account Receivables Confirmation provided for default interest of 6.2%, representing the aggregate of the 5.5% interest rate and the 0.7% administrative fee under the 2019 Repayment Undertakings.

(c)  On around 22 March 2021, VPG executed an undertaking (付款承诺书) in favour of D, by which VPG agreed to repay principal, interest and handling fee to D (“the 2021 VPG Undertaking”). The 2021 VPG Undertaking confirmed that the payment obligation was covered by the Guarantee.

(d)  On the other hand, on 18 February 2019 and 22 March 2021, Mr Lo, on behalf of VPT, executed two payment undertakings in relation to the VPT Finance Lease Agreements.

28.  In a document entitled “the 2022 Payment Undertaking” (付款承諾函) dated 31 December 2022 jointly issued by VPG and VPT, VPG and VPT agreed that:

(a)  VPG and VPT confirmed that as at 31 December 2022, they owed outstanding principal in the sum of US$45,372,820 and outstanding interest and administrative fees in the sum of US$4,489,847.

(b)  an interest of 6.20% per annum shall apply to the aforesaid outstanding debt.

(c)  VPG and VPT undertook to fully settle all outstanding sums owed to D in instalments in accordance with the 2022 Repayment Schedules set out under Clause 2 of the 2022 Payment Undertaking.

(d)  VPG and VPT shall make payments to D in instalments in accordance with the specified payment deadlines set out in the two repayment schedules (collectively “the 2022 Repayment Schedules”). One related to the outstanding principal and the other one related to the outstanding interest.

29.  The Disputed Debt in the SDs is based upon the 2022 Repayment Schedules.

30.  D applied for a money lender licence on 10 August 2016 and the application was granted on 22 November 2016.

Ps’ case

31.  Briefly stated, the grounds of Ps’ applications advanced by Mr Dawes on their behalf are:

(a)  The Finance Lease Agreements were, in fact, disguised loan arrangements. At the material times, D was not a licensed money lender within the meaning of the Money Lenders Ordinance, Cap. 163 (“the MLO”). Thus, the Disputed Debt is not recoverable under section 23 of the MLO unless the court is satisfied that it is inequitable to deny recovery thereby applying the proviso therein;

(b)  The liabilities of VPG and VPT are not joint and several on a proper interpretation of the 2022 Repayment Schedules. Hence, the SDs are defective in that they wrongfully attribute to VPG the liability of VPT; and

(c)  The rule in Holme v Brunskill is invoked by reason of material variations of the principal contract between the VPG and D.

32.  Mr Man does not accept that any one of these grounds is meritorious.

Applicable legal principles

33.  Both Mr Dawes and Mr Man have helpfully summarised the well-settled legal principles applicable to an application for similar injunctions for my reference.

34.  The starting point is that it is an abuse of the process of the court to make a statutory demand or present a winding-up petition based on a claim to which there is a valid defence: Re Sinom (Hong Kong) Ltd [2009] 5 HKLRD 487 per Kwan J (as she then was) at §11 and Madison Lab Ltd v Pu Yan[2020] HKCFI 382 per DHCJ Abraham Chan SC at §§16-17.

35.  As Chow J (as he then was) said in Re Grande Holdings Ltd (unreported, HCMP 2369/2017, 22.12.2017) (referring to his own decision in China Health Group Limited v Li Hong Holdings Ltd, unreported, HCMP 2593/2016, 29.3.2017) at §14,

“(1) The court will grant an injunction to restrain the presentation of a winding-up petition which it considers would be an abuse of the court’s process.

(2) It is an abuse of process to present a winding-up petition based on a claim of which there is a bona fide dispute on substantial grounds.

(3) The threshold for resisting a petition (requiring proof of a bona fide defence) is higher than that for resisting an application for summary judgment (requiring proof of a fair probability of establishing a bona fide defence), but the difference between the two tests is, in most cases, likely to be more a matter of semantics than substance.

(4) …

(5) The onus is on the company to put forward credible evidence that demonstrates sound reasons to think that the asserted facts may be proved at the trial.”

36.  G Lam JA in Silver Starlight Ltd v China Citic Bank Corp Ltd[2021] HKCA 1248 at §14 said this,

“There is no dispute between the parties on the applicable principles for the grant of an injunction to prevent the presentation of a winding‑up petition. They do not align with the American Cyanmid principles governing the grant of an ordinary interlocutory injunction, but are based instead on the court’s inherent jurisdiction to prevent abuse of its process: see Re Sinom (Hong Kong) Ltd [2009] 5 HKLRD 487. A company has to show that the presentation of a winding‑up petition against it would be an abuse of process, in order to obtain an injunction in advance to prevent it. Great circumspection must be exercised in respect of the grant of such injunction, for the right to petition for winding‑up in appropriate circumstances is a right conferred by statute, and a would‑be petitioner should not be restrained from exercising it except on clear and persuasive grounds: Sinom, §10.”

37.  It is not sufficient for the debtor to demonstrate that it has a bona fide defence on substantial grounds against a winding-up petition, to show that the presentation of a winding-up petition would be an abuse of process, he has to demonstrate that the creditor knows or should know that there is a genuine defence to the claim at the time when the application is issued: Harris J in Alco Holdings Ltd v World Crown Investments Ltd [2023] 1 HKLRD 335 at §4.

38.  With these principles in mind, I now examine the Ps’ grounds in turn to see whether they or any of them are supported by credible evidence and able to give rise to a bona fide dispute about the Disputed Debt.

D was a money lender in the Finance Lease Agreements?

39.  Ps’ allegation that D was a money lender and extended the loans to VPG and VPT by way of the Finance Lease Agreements must mean that the Finance Lease Agreements were mere shams and the transactions therein were loan agreements in truth. Mr Dawes makes it clear that the position of Ps is that the Finance Lease Agreements were a sheer façade.

40.  Ps rely on the evidence of Mr Lo to substantiate this allegation. Mr Lo says in his affirmation that although the buy-back option was stated to be an option under Clause 18(2) of the Finance Lease Agreements, it was understood between the parties that (1) the principal sums were liable to be repaid and (2) VPG will repurchase all the Leased Assets from D. Mr Lo says nothing more about this understanding between the parties (“the Alleged Understanding”).

41.  Then Mr Lo refers to the payments of VPG to D from January 2016 to May 2018 by way of a table. Such payments were made to settle not only the Lease Rent and the Handling Fees but also towards the repayment of the principals. Mr Lo makes the point that the parties did not act strictly in accordance with the express term of the Finance Lease Agreements and it was well understood that VPG would repurchase all of the Leased Assets from D though it was expressed as an option only.

42.  Mr Lo then goes on to say that the whole arrangement was in fact a loan agreement between VPG and D.

43.  This is all the evidence of Mr Lo relating to the alleged true nature of the Finance Lease Agreements.

44.  Mr Dawes additionally draws my attention to the repeated references to “repaying principal” or “principal” in the 2019 Repayment Schedules, the 2020 Account Receivables Confirmation and the 2021 Confirmation.

45.  Mr Dawes places strong emphasis on the fact that D applied for and obtained a money lender licence after the Finance Lease Agreements were signed. He submits that this is the best evidence to support the allegation that D operated as a money lender albeit without a licence when executing the Finance Lease Agreements.

46.  Mr Man pertinently highlights to this court the legal principles relating to findings of sham transactions. First, Arden LJ (as she then was) in Stone & Ors v Hitch [2001] STC 214 at §§63-69 said this (cited by DHCJ KC Chan in Aurum Pacific Finance Limited v T & V International Holdings Limited[2024] HKCFI 1798) at §34:

(1)  For a transaction to be a sham, it is of the essence that the parties to a transaction must intend to create one set of rights and obligations but do acts or enter into documents which they intend should give third parties the appearance of creating different rights and obligations: §63.

(2)  The test of intention is subjective. The parties must have intended to create different rights and obligations from those appearing from (say) the relevant document, and in addition they must have intended to give a false impression of those rights and obligations to third parties: §66.

(3)  The fact that parties subsequently depart from an agreement does not necessarily mean that they never intended the agreement to be effective and binding. The proper conclusion to draw may be that they agreed to vary their agreement and that they have become bound by the agreement as varied: §68.

(4)  The intention must be a common intention: §69.

47.  As rightly observed by DHCJ KC Chan in Aurum Pacific Finance Limited (at §36), an allegation of sham suggests dishonest conduct and is a matter of gravity. The court should not lightly find a transaction to be a sham and there is a strong and natural presumption against such a finding.

48.  In my judgment, Ps are unable to discharge the onus to prove that the Finance Lease Agreements were in fact a sham concealing the loan arrangements between Ps and D for the following reasons.

49.  First, the evidence of Mr Lo about the Alleged Understanding includes nothing but bare assertions with little particulars. I cannot be convinced that he and Mr Guo came up with the Alleged Understanding in the absence of cogent evidence.

50.  On the contrary, the Alleged Understanding is flatly contradicted by the contemporaneous documents of the parties.

51.  In the IPO Prospectus of VP ListCo issued in or about 2016, the nature of the Finance Lease Agreements was explained. They were in the form of sale and leaseback arrangements and pursuant to the leases, the Leased Assets were sold to D at the negotiated purchase prices. Upon expiry of the leases, Ps would repurchase the Leased Assets from D at the principal amount. These finance lease arrangements were intended to alleviate their working capital requirements. The risks relating to these finance lease arrangements were adequately considered. There is no mention about any mandatory obligations on the part of VPG to repurchase any of the Leased Assets.

52.  Making a false statement knowingly in the IPO Prospectus is a contravention of the Securities and Futures Ordinance, Cap. 571 (“the SFO”), Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap. 32 and the Listing Rules. It attracts civil and criminal liabilities and can lead to serious consequences. It begs the question why Ps, being substantial business undertakings, would give a deceptive description of the transactions with D in the IPO Prospectus to defraud the public.

53.  On the other hand, D was so serious about the finance lease arrangements that Mr Guo had instructed that the Feasibility Report should be made before entering into the Finance Lease Agreements with VPG and VPT. The subject matter of the Feasibility Report was D’s intended genuine sale and lease-back finance leasing project. There was no any mention about any mandatory obligation of repurchase the Leased Assets on the part of VPG and/or VPT. Ps do not suggest that the Feasibility Report is a sham document. I see no reason why D took the trouble to create the Feasibility Report so as to cover up the alleged true nature of the Finance Lease Agreements.

54.  Second, I fail to see any commercial reasons why the parties would have agreed on such a fraudulent scheme to conceal the true nature of their transactions. There is no evidence that Ps had any difficulties in raising funds and hence were desperately sought loans from D though it was not a licensed money lender at that time. As disclosed in the IPO Prospectus, Ps entered into two secured bank loan facilities. They did have the means to raise finance properly from licensed money lenders. There is no reason why they would agree to bear the risks in the Finance Lease Agreements such as their potential liability to pay forthwith all the payable Lease Rent and the principals in the event that the Leased Assets suffer total loss. Ps had no reason to enter into any sham transactions with D or indeed anyone else.

55.  On the other hand, I agree with Mr Man that there is utterly no reason why D would accept that the express terms of Finance Lease Agreements to allow VPG and VPT an option instead of an obligation to repurchase the Least Assets when in fact those were loan agreements. D would be left in a vulnerable position if Ps retracted the Alleged Understanding and opted against such repurchase, especially when the Alleged Understanding was not reduced into writing in any form and not supported by an iota of documentary evidence.

56.  There is nothing to suggest that D’s subsequent application for a money lender licence met with any difficulties. There is no reason why D could not wait until the grant of a money lender licence to extend loans to Ps and instead used the Finance Lease Agreements as a façade for their loan arrangements. There is no allegation that D badly needed the Lease Rent, which did not constitute any substantial portion of D’s annual income.

57.  Third, I accept Mr Man’s submission that even if the Finance Lease Agreements were loan arrangements, such loans should be exempted loans within the meaning of paragraphs 14 and 15 of Schedule 1 Part 2 of the MLO (“the Provisions”). The Provisions exempt loans made to a company whose shares are listed on a recognised stock market (as defined in the SFO) or to the subsidiary of such a listed company.

58.  When such loans were exempted loans and not subject to the MLO, there is no reason why Ps and D had to resort to underhanded manoeuvring creating sham documents and put themselves in such a precarious position.

59.  Ps contend that the Finance Lease Agreements were executed before VP ListCo became listed about a year later. I do not think this can assist Ps.

60.  Mr Man diligently takes me through the legislative history of the Provisions, which was introduced by the Money Lenders (Amendment) Bill 1988. He further invites my attention to the Financial Secretary’s explanation given in the Second Reading of the said Bill.

61.  I do not think it is necessary to go further than the express words in the MLO. There is plainly no stipulation that at the time of the loan, the borrower must be a listed company or a subsidiary of a listed company. I opine that any loans extended to VPG and VPT under the loan arrangements, if ever existed, should be exempted by the Provisions.

62.  There is no evidence that the parties ever considered the Provisions before the execution of the Finance Lease Agreements. I do not believe that the parties would decide to create bogus documents concealing the true nature of the transactions and the Alleged Understanding without ascertaining their correct legal positions under the MLO. Even if they had not been convinced the immediate applicability of the Provisions, they should have considered the postponement of the signing of any loan agreements pending the listing of VP ListCo.

63.  Fourth, I cannot agree with Mr Dawes that D’s application for a money lender licence could provide proof of its status as an unlicensed money lender when the Finance Lease Agreements were executed.

64.  Of course, the licence obtained could be a solid evidence that D intended to operate a money lender business. Yet, it per se could not show that D had already operated a money lender business prior to the grant of the licence. In my view, if anything, it just shows that D was law abiding and ready to comply with the requisite legal requirements to carry on a money lender business.

65.  There is no evidence that Ps and D had any discussion about D’s lack of a money lender licence before the signing of the Finance Lease Agreements at all. There is no allegation let alone evidence that Ps and D could not wait until the grant of such a licence before any purported loans were to be advanced to VPG and VPT and therefore they conspired to take part in sham transactions.

66.  I am also unable to accept the submission of Mr Dawes that D’s 2017 audited financial statement shows that D was an unlicensed money lender in December 2015. Quite on the contrary, the statement adequately explained why the application for a licence was made in the wake of the decision of the parent company of D that D should develop its debt financing business in November 2015.

67.  Mr Tang who is currently the Deputy General Manager of the Investment Department of D made an affirmation to oppose the OSs. There, he gave some other reasons why D applied for a money lender licence. These include D’s intention to make intra-group loans located in different jurisdictions in its position as CRRC ListCo’s offshore corporate treasury centre and to earn tax relief in certain jurisdictions as a financial institution.

68.  Mr Dawes challenges the validity of such explanations. I am not in a position to conclude whether a money lender licence could serve such purposes but I have no reason to reject Mr Tang’s explanations and find that the licence application must have something to do with the Finance Lease Agreements. There is no basis for me to do so.

69.  Fifth, the following provisions in the Finance Lease Agreements render it impossible for the Alleged Understanding to exist:

“19.1 在签署本合同时，出租人就本合同的全部条款己向承租人进行了详细的说明和解释，双方对合同的全部条款均无疑义，并对当事人有关权利义务和责任限制或免除条款的法律含义有准确无误的理解。

19.3 凡对本合同进行修改、补充或变更，须另行以书面形式作出，前述的修改、补充或变更应被视为本合同不可分割的组成部分。”

70.  The combined effect of these two provisions is akin to a conventional no oral modification clause and an entire agreement clause.

71.  Sixth, I do not accept the evidence of Mr Lo that D told him that it wanted VPG to make early repayment so as to meet its internal compliance requirement. This is not only unsupported by any contemporaneous documentary evidence but also contradicted by its own document entitled “提前还款说明函”. In that document, VPG gave notice to D that in compliance with its internal financial requirements, it would make early repayment in the sum of US$6,200,000.00 on 29 December 2017 by remittance.

72.  Further, Mr Man draws my attention to a payment of US$6,184,858 which is alleged to be one of the early repayment demanded by D. The evidence of Mr Lo clearly shows that this payment was made in relation to an altogether different transaction. Another payment of US$4.7 million made on 29 March 2018 again actually related to the Lease Rent payable by VPT under one of the VPT Finance Lease Agreements. Ps have no answer to this.

73.  On the evidence, the early repayments of the principals made by VPG could only be indicative of its intention to exercise its option to repurchase the Leased Assets under the Finance Lease Agreements. I could not accept that they were repayments of loans demanded by D.

74.  Lastly, Mr Tang in his affirmation gives some examples of the parties’ actual performance of the Finance Lease Agreements to refute the allegation that they were disguised loan agreements. These include the provision of an update of the Lease Assets by VPG to D on 28 May 2018, D’s inspection of the Leased Assets and the arrangement of inventory checking of the same in 2019. I accept that the parties did treat the Finance Lease Agreements as genuine sale and leaseback agreements.

75.  In the premises, I reject Ps’ allegation that the Finance Lease Agreements were mere loan arrangements and D was an unlicensed money lender in these transactions. The MLO is not engaged and does not assist Ps.

SDs defective?

76.  Now I turn to the complaint about the integrity of the SDs. Mr Lo in his evidence points out that there are two defects in the SDs. First, VPG and VPT did not agree to be jointly and severally liable for any debt owing to D in the 2022 Repayment Schedules. Second, the Guarantee covers the liability of VPG but not that of VPT. I have the submission of Mr Dawes on the first alleged defect only.

77.  Mr Dawes refers to the following three parts in the 2022 Repayment Schedules which in his submission show that there is no joint and several liability:

(1)  The preamble in which VPG and VPT were described as having signed the Finance Lease Agreements with D respectively.

(2)  Clause 1 provides,

“根据合同约定，伟能集团和VPower Technology 截至2022年12月31日应向贵司支付金额(含本金、利息及手续费)共计45,372,820美元(“总债务”)和利息及手续费为4,489,847美元”

(3)  Clause 4 provides,

“伟能集团和VPower Techonology 在本承诺函项下的约定不影响贵司在合同项下享有的权利，亦不影响伟能集团和VPower Technology 在合同项下应承担的义务”

78.  Mr Dawes submits that from these three provisions it can be seen that the 2022 Repayment Schedules did not alter VPG and VPT’s respective obligations under the respective Finance Lease Agreements and hence VPG should and could not be jointly liable for the debts owed by VPT.

79.  I do not think on a proper construction of the 2022 Payment Undertaking, the submission of Mr Dawes is acceptable. It is plain that VPG and VPT jointly made the acknowledgment of the outstanding principals and interest and the promise to repay them in accordance with the 2022 Repayment Schedules. The outstanding principals and the interest are not divisible and there is no reference to any severance in the entire document.

80.  I do not think Clause 4 could be taken to mean that VPG and VPT would only be responsible for their respective indebtedness under the VPG Finance Lease Agreements and the VPT Finance Lease Agreements against all other provisions or stipulations in the 2022 Payment Undertaking. It should only mean that all other payment obligations in their respective Finance Lease Agreements should remain intact.

81.  Mr Man submits that where persons join in making a promise and there are no words of severance, their obligation is joint. His submission must be right: The Argo Hellas [1984] 1 Lloyd’s Rep 296 at p.300 per Leggatt J (as he then was).

82.  All in all, I find no merit in this ground concerning the validity of the SDs.

83.  Nor is there any merit in the allegation that the Guarantee does not cover the indebtedness of VPT. In all fairness, Mr Dawes makes no submission on this allegation.

84.  For completeness, it suffices for me to point out that this is a non-issue in light of my conclusion that VPG and VPT are jointly liable for the outstanding principals and interest under the 2022 Payment Undertaking.

85.  Further, I opine that by the Guarantee, VP ListCo clearly guaranteed to cover the liabilities up to US$54.462 million. I do not accept on the evidence that it was merely a mistake.

86.  Next Mr Dawes relies on the rule in Holme v Brunskill. He submits that by reason of the variations of the payment obligations of VPG under the 2019 Payment Undertaking and the 2022 Repayment Schedules, which are material and substantial, made after the execution of the Guarantee, VP ListCo as the guarantor under the Guarantee should be discharged.

87.  I agree with Mr Man that the rule in Holme v Brunskill has no application to the present case for the following reasons.

88.  First, there is an express provision in the Guarantee which can sufficiently exclude the operation of the said rule. VP ListCo agrees that D’s right to receive payment under the Guarantee shall not be limited, impaired or invalidated by any modifications, schedules and enclosures to any agreement.

89.  Further, the Guarantee is not confined to any specific contract and it expressly covers all the indebtedness of Ps and all the subsidiaries of VP ListCo owing to D up to US$54,462,000 notwithstanding any amendments, appendices, schedules and enclosures in the agreements and the supplemental agreements entered between them and D.

90.  Finally, it is trite that the Holme v Brunskill rule does not apply where the guarantor consents to the variation before or at the time that the variation is agreed and such a consent can be given by the guarantor or those acting on its behalf in another capacity: The Modern Contract of Guarantee (4^th Ed., 2020) at §7-056 and §7-060.

91.  There is no dispute that Mr Lam was the effective owner and controller of the VP Group until September 2023 and he executed both the Guarantee and the 2022 Payment Undertaking. VP ListCo must be taken to have given consent to the variations of the payment obligations of VPG.

92.  In conclusion, none of the three grounds advanced is meritorious. Nevertheless, for completeness, I should deal with two minor points raised by Mr Dawes which could be disposed of briefly.

93.  It is common ground that D commenced an action by writ under HCA 1042/2024 (“the Writ Action”) against Ps on 31 May 2024 in respect of the Alleged Debt. Just one day after the service of the SDs, D discontinued the Writ Action.

94.  Mr Dawes submits that it is an abuse of process to serve the SDs thereby commencing the winding-up proceedings against Ps when (1) D knew or should have known that there would be factual disputes. This is the reason why D first commenced the Writ Action and (2) D must know that it was an unlicensed money lender and should have or could have expected Ps to raise the defence under the MLO.

95.  I am unable to accept his submissions. I cannot accept that there can be an inference of D’s knowledge or acceptance of any factual disputes when it opted to commence the Writ Action. As rightly pointed out by Mr Man, there could be no summary judgment in an action commenced by writ and the rules in Order 14 of the Rules of the High Court have to be rewritten if such an inference can be readily drawn.

96.  Of course, D was entitled to take whatever enforcement actions deemed appropriate to enforce, among other things, the Finance Lease Agreements, 2022 Payment Undertaking and the Guarantee against Ps. I see no abuse when D opted to switch to another action to pursue the enforcement.

97.  This court has already refused to find the alleged knowledge of D that it was an unlicensed money lender. I see no reason why D had to serve the SDs and abandon the Writ Action to avoid the same allegation. There is no need at all to start with and also Ps could, and indeed did, make the same allegation in these proceedings.

98.  This ground must be rejected.

99.  In addition, Mr Dawes submits that Ps are clearly solvent and he refers to the 2024 Interim Report of VP ListCo and the evidence of Mr Lo to support his submission.

100.  Mr Man refers to the profit warning announcements of VP ListCo made in 2023 and 2024, the increase in the net current liabilities shown in the 2023 Annual Report and the Independent Auditor’s Report in the 2023 Annual Report and the net loss shown in the 2024 Interim Results Announcement. On this information, Mr Man submits that there is a serious doubt as to the financial soundness of VP ListCo.

101.  Indeed I have the same concern but this is not really an occasion to determine the solvency of Ps. In these applications, the actual solvency of Ps is irrelevant if there is no bona fide dispute about the Disputed Debt. I conclude that Ps are liable to pay D under the Finance Lease Agreement, the 2022 Payment Undertaking and the Guarantee and it is perfectly legitimate for D to serve the SDs on them. There is no abuse of process. Any prejudice likely to be caused to Ps as a result is immaterial. Ps should comply with the SDs without further ado.

Conclusion and order

102.  For the reasons given, I find that Ps are unable to substantiate their challenge to the Disputed Debt with credible evidence. D is entitled to enforce its right under the Finance Lease Agreement, the 2022 Payment Undertaking and the Guarantee and its commencement of winding-up proceedings is a legitimate option.

103.  In the premises, the Summonses fall to be dismissed and D’s Undertakings should be discharged. This being the result, the OSs become academic and should be disposed of by consent on paper as soon as possible.

104.  There is no reason to depart from the general principle of costs following the event. I make an order nisi that costs of the Summonses including all costs reserved be to D with certificate for two counsel, to be taxed if not agreed.

105.  It remains for me to thank Mr Dawes, Mr Man, Mr Chen, Mr Tang and Mr Tan for their helpful assistance.

Mr Victor Dawes SC leading Mr Vincent Chen, instructed by Haldanes, for the plaintiffs in both cases

Mr Bernard Man SC leading Mr Danny Tang (absent on 4 November 2024) and Mr Shaun Elijah Tan, instructed by Baker & McKenzie, for the defendant in both cases