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Hundred Gain International Holding Ltd v Cheng Mei Holdings Ltd (Receivers And Managers Appointed) And Others

Judgment Cited authorities 17 Cited in Precedent Map Related
Vincent
JurisdictionHong Kong
Judgment Date24 October 2023
Neutral Citation[2023] HKCFI 2705
Subject MatterCivil Action
Judgement NumberHCA502/2023
Year2023
HCA502A/2023 HUNDRED GAIN INTERNATIONAL HOLDING LTD v. CHENG MEI HOLDINGS LTD (RECEIVERS AND MANAGERS APPOINTED) AND OTHERS

HCA 502/2023

[2023] HKCFI 2705

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 502 OF 2023

____________

BETWEEN
HUNDRED GAIN INTERNATIONAL HOLDING LIMITED Plaintiff

and
CHENG MEI HOLDINGS LIMITED 1st Defendant
(成美投股有限公司)
(RECEIVERS AND MANAGERS APPOINTED)
GOAL EAGLE LIMITED 2nd Defendant
(RECEIVERS AND MANAGERS APPOINTED)
SMART EDGE LIMITED 3rd Defendant
(賜譽有限公司)
(RECEIVERS AND MANAGERS APPOINTED)

____________

Before: Mr Recorder Stewart Wong SC in Chambers
Dates of Hearing: 2 and 3 August 2023
Date of Decision: 24 October 2023

_____________

D E C I S I O N

_____________

A. INTRODUCTION

1. This application concerns the registrability of the Writ of Summons dated 3 April 2023 in this Action (“Writ”), and of the underlying agreement (“the Agreement”) on which the plaintiff (“HGIL”) is suing in this Action,at the Land Registry (“Registry”) under the Land Registration Ordinance.[1]

2. The 3rd defendant (“Smart Edge”), which as at the date of the Writ was the registered owner of a property known as Goldin Financial Global Centre at Kai Cheung Road in Kowloon (“the Property”), says that the Writ and the Agreement are not so registrable, and by Summons dated 11 April 2023 applies for declarations to that effect as well as consequential reliefs. HGIL opposes the application. This is my decision on the said Summons.

3. At all material times, the 1st and the 2nd defendants were and are the registered shareholders of Smart Edge, holding 60% and 40% of the issued shares thereof respectively.

4. On 13 July 2020, Mr Cosimo Borrelli and Mr Ma Siu Ming Simon were appointed receivers and managers of all the shares (“Shares”) in, and certain loans (“Loans”) owed by, Smart Edge. They were also appointed receivers and managers of all the assets and undertaking of Smart Edge, including the Property. Messrs Borrelli and Ma, together with another person, were also appointed directors of Smart Edge on the same date. They remain so appointed.

B. THE AGREEMENT AND THE ACTION

5. The Agreement, which is the subject matter of this Action, is an agreement dated 25 February 2022, made between the 1st and the 2nd defendants (as “the Vendor”),[2] Messrs Borrelli and Ma, and HGIL (as “the Purchaser”). Its full title is “Agreement for the Sale and Purchase relating to the entire issued shares of and related loan owing by Smart Edge Limited (Receivers and Managers Appointed)”. Smart Edge is referred to as “the Company” therein.

6. On the title page of the Agreement, “the Receivers” are stated to be

“Mr Cosimo Borrelli and Mr Ma Siu Ming Simon as joint and several receivers and managers”.

On the first page of the Agreement, it is stated that Messrs Borrelli and Ma are parties to the Agreement

“as joint and several receivers and managers and agents of the Vendor, without personal liability”.

7. Clause 20 of the Agreement states:

“The exclusions mentioned in Schedule 9 shall apply to and form an integral part of this Agreement. The Receivers act as agent of the Vendor and without personal liability and join in this Agreement in their personal capacity solely to take the benefit of the exclusions of liabilities under this Agreement”.

8. Further, Schedule 9 to the Agreement states:

“the Receivers act only as agents of the Vendor and have not given or entered into any collateral understandings, representations, warranties or agreements as principal” (paragraph 4(c));

“The Receivers have joined in as parties to this Agreement solely for the purpose of obtaining the benefit of the provisions of this Agreement and each other provision of this Agreement in their favour” (paragraph 10);

“The Receivers are the agents of the Vendor and shall incur no personal liability from acting in the capacity of agent, nor shall any claim arise otherwise than against the Vendor as principal” (paragraph 13);

“The Receivers shall incur no personal liability as a result of acting in the name and on behalf of the Vendor” (paragraph 14).

9. “The Company Receivers” are separately defined in clause 1.1 of the Agreement as

“Cosimo Borrelli and Ma Siu Ming Simon in their capacities as the receivers and managers of the assets and undertaking of the Company”.

Thus, at, for example, clause 7.1(b)(i)(3), both the “the Receivers” and “the Company Receivers” are mentioned.

10. The Recitals to the Agreement set out the history of the dealings between the parties leading to the Agreement, which leading counsel for HGIL and for Smart Edge before me agree to be accurate (which I therefore adopt as facts):

“(A) The Vendor is the legal and beneficial owner of the entire issued shares of Smart Edge Limited (賜譽有限公司) (Receivers and Managers Appointed) (the ‘Company’) comprising 1,000,000 ordinary shares, which are fully paid up or credited as fully paid up. Basic information concerning the Company is set out in Schedule 1.

(B) The Company is the sole and legal beneficial owner of the Property (as defined below) and the principal business of the Company is holding and managing the Property.

(C) By a Security Agreement over Shares dated 10 April 2019, entered into between the Vendor and DB Trustees (Hong Kong) Limited (the ‘Security Trustee’), the Sale Shares were charged to the Security Trustee upon such terms and conditions therein mentioned.

(D) By the Deed of Appointment of Receivers (as defined below), the Receivers were appointed joint and several receivers and managers over, inter alia, the Sale Shares upon such terms and conditions therein mentioned.

(E) By a Security Agreement over Intercompany Loans dated 10 April 2019, entered into between, amongst other parties, the Vendor and the Security Trustee, the Vendor created a security interest over all the Vendor’s right, title and interest in and to the Sale Loan upon such terms and conditions therein mentioned.

(F) By the Deed of Appointment of Receivers, the Receivers were appointed joint and several receivers and managers over, inter alia, the Sale Loan upon such terms and conditions therein mentioned

(G) The Vendor and the Purchaser entered into a Sale and Purchase Agreement dated 22 December 2020 (the ‘First SPA’), pursuant to which the Vendor agreed to sell, and the Purchaser agreed to purchase, the Sale Shares and the Sale Loan (as defined in the First SPA) upon the terms and conditions set out in the First SPA. Pursuant to clause 3.1(c)(ii) of the First SPA, the Purchaser was obliged to pay a sum of Hong Kong Dollars seven hundred and fifteen million (HK$715,000,000.00) to the Vendor on or before 19 February 2021. The Purchaser failed to pay such amount by 5.00pm on 19 February 2021, and, as a consequence, the First SPA terminated with immediate effect on that date in accordance with its terms, and a deposit of Hong Kong Dollars seven hundred million (HK$700,000,000.00) was forfeited by the Purchaser to the Vendor. Following the termination of the First SPA, the Vendor also continued to hold a refundable deposit in the amount of Hong Kong Dollars fifteen million (HK$15,000,000.00) (the ‘Prior Refundable Deposit’).

(H) After the termination of the First SPA, the Vendor and the Purchaser entered into a sale and purchase agreement dated 12 May 2021 (the ‘Second SPA’). Pursuant to the Second SPA, the Purchaser was required to pay a deposit of Hong Kong Dollars seven hundred and thirty million (HK$730,000,000.00) (‘Second SPA Deposit’). The Purchaser paid the Second SPA Deposit by way of two further payments of Hong Kong Dollars four hundred and fifteen million (HK$415,000,000.00) on 12 May 2021 and Hong Kong Dollars three hundred million (HK$300,000,000.00) on 9 June 2021, and by authorising and directing the Vendor to release and apply the Prior Refundable Deposit in part-payment of the Second SPA Deposit on 12 May 2021. The scheduled date of completion under the Second SPA was 31 August 2021.

(I) The Purchaser was unable to complete the transaction under the Second SPA on or before 31 August 2021, giving the Vendor the right to terminate the Second SPA and to the forfeiture by the Purchaser of the Second SPA Deposit. The right of termination was not exercised and the Purchaser sought an extension of the completion date.

(J) On 10 September 2021, the Vendor and the Purchaser entered into the Amended and Restated Sale and Purchase Agreement to amend and restate the Second SPA (the ‘Amended Second SPA’). Pursuant to the Amended Second SPA, the Purchaser paid a further non-refundable deposit of Hong Kong Dollars one hundred million (HK$100,000,000.00) on or around 10 September 2021 (the ‘Amended Second SPA Deposit’). The date of completion of the transaction under the Amended Second SPA was 29 October 2021.

(K) On 13 October 2021, the Vendor notified the Purchaser of the Vendor’s right to terminate the Amended Second SPA due to the Purchaser’s breaches of clauses 5.1(b), 5.1(c)(ii) and 5.1(c)(iii) of the Amended Second SPA. Prior to 29 October 2021, the Purchaser advised the Vendor that it would not be in a position to complete the transaction under the Amended SPA by 29 October 2021, and requested an extension for completion to 28 January 2022.

(L) On 29 October 2021, the Vendor and the Purchaser entered into the Deed of Amendment (the ‘Amendment Deed’), which provided for certain amendments to be made to the Amended Second SPA, including an extension of the date for completion to 28 January 2022 on the condition that the Purchaser pay a further deposit of Hong Kong Dollars three hundred million (HK$300,000,000.00) on or before 5 November 2021. Also pursuant to the...

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