HCB4502/2025

HCB4502/2025

A A B HCB 4502/2025 B [2026] HKCFI 232 C C IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION D D COURT OF FIRST INSTANCE E BANKRUPTCY PROCEEDINGS NO 4502 OF 2025 E __________________ F F Re: GAO, GUNTER (高敬德), the Debtor G G Ex Parte: KINGSTON FINANCE LIMITED, the Petitioner H __________________ H I I Before: Deputy High Court Judge Gary CC Lam in Chambers (Open to Public) J J Date of Hearing: 6 January 2026 K Date of Decision: 20 January 2026 K L L ________________ M M DECISION N ________________ N O O P I. INTRODUCTION P Q Q 1. This is the Debtor’s Summons filed on 4 September 2025 (the R “Stay Summons”) for an order to stay the Petition filed on 10 June 2025 R (the “Petition”) pending the final determination of HCMP 369/2024 S S (“HCMP 369/2024”). The debt underlying the Petition (the “Debt”) is a T judgment debt in the sum of HK$97,408,493.15 with interest under §1 of T U U V V A -2- A B Master D To’s Order dated 1 November 2024 made in HCMP 369/2024 B (“HCMP 369/2024 Order”). C C D 2. It is important first to set out the background of HCMP D 369/2024, which is proceeding commenced by the Petitioner against, E E among others, the Debtor under Order 88 of the Rules of the High Court F (Cap. 4A). F G G II. HCMP 369/2024 H H 3. The background of HCMP 369/2024 has been set out by I I DHCJ Le Pichon in §§2-15 of her decision handed down on 23 June 2025 J in HCMP 369/2024 (“HCMP 369/2024 June Decision”) ([2025] HKCFI J 2345) :- K K “2. D1 [Gaincourt Limited] is the legal owner of the Property. For tax planning purposes, the Property was purchased in D1’s L L name in January 2007. 3. At the time the Property was purchased, Gunter Gao (“D3”) M M [the Debtor] was the sole shareholder and director of D1. 4. D3 and the Intervener are husband and wife and they have N resided at the Property since it was purchased. N 5. In June 2009, D3 allotted 1 share in D1 to the Intervener and O they became equal shareholders. O 6. In February 2013, 4999 shares were allotted to each of the P Intervener and D3, and in June 2013, D3 appointed Lam Chi P Keong (“Lam”) and Chan Kit Foo as directors. Q 7. D3 transferred half his shareholding to the Intervener in Q November 2018 and the remaining half to her on 10 December 2018 making the Intervener the sole shareholder of D1 as from R that date. R 8. On 21 June 2022, the Intervener as sole shareholder of D1, S signed a shareholder resolution approving a loan between P [the S Petitioner] and D1 secured by a 2 nd legal charge over the Property (the “Resolution”). T T 9. On the same day, P and D1 entered into a loan agreement for the principal amount of $80 million (the “Loan”) secured by a U U V V A -3- A B 2nd legal charge over the Property. D2 and D3 provided B corporate and personal guarantees for the Loan. C 10. P brought proceedings on 4 March 2024 against D1 to D3 C when D1 defaulted under the Loan. D1’s former solicitors attended hearings before Master D To and on 1 November 2024, D judgment was entered against D1 to D3 together with a charging D order granted over the Property. E 11. On 19 February 2025, the Bailiff posted the Notice to E Occupier to Quit on the Property requiring possession of the premises to be delivered to P within 7 days. D3 told the F F Intervener about these proceedings the following day. 12. The Intervener’s solicitors received some information about G the present proceedings late in the evening of 21 February 2025 G that led to the urgent application made to the Court on 25 H February 2025 supported by Intervener 1 st. H 13. The application was made on an urgent basis… I 14. I allowed the Intervener to intervene (“Intervener Order”) I and ordered a stay of execution pending appeal (“Stay Order”). The Intervener was ordered to take out an inter partes summons J J for the stay within 14 days. 15. At the directions hearing for the Stay Summons on K 20 March 2025, DHCJ Norman Nip granted the Intervener K leave to file further evidence, ordered that the Appeal and the L Stay Summons be heard together and continued the stay L pending their final determination (the “March 2025 Order”).” M M 4. I should add that before Master D To granted the HCMP N 369/2024 Order on 1 November 2024 (mentioned in §10 of the HCMP 369 N June Decision), on 25 July 2024, Master Hui imposed an unless order O O (“HCMP 369/2024 Unless Order”) that unless the defendants therein P (including the Debtor) would file and serve their opposing evidence by 8 P August 2024, they would be debarred from doing so. None of them filed Q Q any evidence despite the unless order. As a result, Master D To granted R the HCMP 369/2024 Order. R S S 5. In HCMP 369/2024 June Decision, DHCJ Le Pichon ordered T that the Intervener be joined as the 4th Defendant for her appeal therein. T She also made an order of stay (“HCMP 369/2024 Stay Order”) that the U U V V A -4- A B possession order (§2 of HCMP 369/2024 Order) (“HCMP 369/2024 B Possession Order”) and the writ of fieri facias (“HCMP 369/2024 Writ C C of FiFa”) issued on 27 December 20224 for the execution of the said D possession order be stayed pending the determination of the appeal D between the Petitioner and the Intervener. I stress that the appeal is the E E appeal between the Petitioner and the Intervener only. The Debtor has F never been a party to the appeal. Further, unlike the 1st and 2nd Defendants F therein who applied for retrospective leave to appeal, the Debtor has not G G even applied at all for leave to appeal, although the 1 and 2 Defendants’ st nd H application for retrospective leave to appeal was dismissed by DHCJ Le H Pichon in her earlier decision handed down on 25 April 2025 (“HCMP I I 369/2024 April Decision”) ([2025] HKCFI 1731), a matter I shall revert J J to in some detail below. K K 6. What is the appeal between the Petitioner and the Intervener L about? L M M 7. In the notice of appeal filed by the Intervener in HCMP N 369/2024 (“HCMP 369/2024 NOA”), the Intervener seeks an order to set N aside the HCMP 369/2024 Possession Order and HCMP 369/2024 Writ of O O FiFa. As recorded in §22 of HCMP 369/2024 June Decision, it was the P common ground between the Petitioner and the Intervener that the P Intervener was the ultimate beneficial owner of the subject property. On Q Q that basis, DHCJ Le Pichon identified the following grounds in support of R the appeal as arguable and therefore held that these grounds should be R determined by trial:- S S (1) Non est factum: A condition precedent to the loan agreement T T between the Petitioner (as lender) and the 1st Defendant U therein (as borrower) was the execution of a shareholder U V V A -5- A B resolution approving the loan and the second legal charge over B the subject property. The Interverner, being the only C C shareholder, signed the Resolution not knowing what the D document was; she simply signed whatever the Debtor asked D him to sign, reposing trust in him. She was simply told that E E this was “a routine company document”. Therefore, the loan F and the mortgage were not valid (§§8, 26-37). F G (2) Undue influence: In signing the Resolution, the Intervener G was under the undue influence of the Debtor (being her H H husband) and therefore the Resolution was not a valid I resolution. Further, the Petitioner was put on inquiry but I J failed to take reasonable steps to satisfy itself that there was J no undue influence (§§38-53). K K 8. The above grounds were substantiated by the Intervener’s L L affirmations. The Debtor has never in any proceedings (even here) filed M any evidence either to confirm or deny the Intervener’s evidence, but M simply reserves his position in the present proceedings without stating what N N his position about the Intervener’s case is. O O 9. The last matter I should mention in respect of HCMP P P 369/2024 is the application of the 1st and 2nd Defendants therein for Q retrospective leave to appeal, as alluded to above. The 1st Defendant Q therein was the borrower and the 2 nd Defendant therein was the corporate R R guarantor. Their application for retrospective leave to appeal was made S riding on the Intervener’s grounds of non est factum and undue influence S as set out above, arguing that if the Resolution was found invalid or set T T aside, the loan agreement and consequentially any guarantee in respect of U the loan agreement fall away. U V V A -6- A B 10. In the HCMP 369/2024 April Decision dismissing the 1st and B 2nd Defendants’ application for retrospective leave to appeal, DHCJ Le C C Pichon considered the following:- D D (1) They accepted the money had been advanced by the Petitioner E (§17); E F (2) The Debtor was instrumental in procuring the Intervener’s F signature onto the Resolution and so both the 1st and 2nd G G Defendants were aware of the circumstances of the execution H of the Resolution (§18); H I (3) The 1st and 2nd Defendants did not apply for leave to appeal I J until a month after the Intervener was granted leave to appeal, J when the Intervener, in her application, had already made K K known her case about non est factum and undue influence L (§20); L M (4) In the absence of any explanation why the Debtor’s M knowledge of the circumstances of the execution of the N N Resolution could not be attributed to the 1st and 2nd O Defendants, delay became an issue (§24); and O P (5) There was no affidavit evidence to explain the basis of their P intended appeal (§24). Q Q R III. THE DEBTOR’S GROUNDS IN SUPPORT OF HIS APPLICATION R FOR STAY S S 11. The Debtor’s main ground in support of the Stay Summons T T advanced by his counsel, Ms Belinda Law, is, in gist, that:- U U V V A -7- A B (1) If in HCMP 369/2024 trial between the Petitioner and the B Intervener, the Court would find that the Resolution was not C C valid (due to non est factum and/or undue influence which D DHCJ Le Pichon found arguable), then the condition D precedent to the loan agreement between the Petitioner and E E the borrower (that is, Gaincourt), would not be satisfied; F F (2) Thus the loan agreement would not be valid; G G (3) It would follow that the personal guarantee of the Debtor H would also be invalid; H I (4) As a result, the HCMP 369/2024 Order was granted without I J jurisdiction, given that HCMP 369/2024 was a mortgagee J action under Order 88 of the Rules of the High Court (Cap. K K 4A) but the mortgage, hinging upon the validity of the loan L agreement, was invalid; L M (5) In any event, the HCMP 369/2024 Order was based on the M loan agreement, but the loan agreement was invalid; N N (6) Since the Debt underlying the Petition is based on the HCMP O O 369/2024 Order, the Debt would be invalid, and thus the P Petition would be dismissed; and P Q (7) Therefore, the Petition is premature, and a bankruptcy order Q would cause serious and irreparable prejudice to the Debtor. R R 12. I shall refer to this main ground as the Debt Validity Ground. S S T 13. Ms Law also submits that if the Intervener fails in her claim T over the subject property, the Petitioner would be able to enforce the U U V V A -8- A B mortgage over the subject property, which would be sufficient to settle the B Debt. I shall refer to this ground as the Security Ground. C C D 14. Mr Sunny Chan, counsel for the Petitioner, submits that none D of the two Grounds can sustain the Stay Summons. E E F IV. DEBT VALIDITY GROUND F G 15. First, the Debtor has never applied to join the Intervener’s G appeal in HCMP 369/2024. Therefore, the matter in the appeal is purely H H between the Petitioner and the Intervener. Any finding made in the appeal I will be a finding as between them only. I J J 16. Second, the order sought in the appeal would be concerning K the HCMP 369/2024 Possession Order and HCMP 369/2024 Writ of FiFa K only. The order sought in the appeal has nothing to do with the monetary L L order against the Debtor. Therefore, the order in the appeal, if granted, M would not affect the monetary order against the Debtor in HCMP 369/2024 M at all. N N O 17. Third, if the Debtor would then rely on any fact-findings in O the appeal resulting in allowing the appeal, the facts as found must be that P P there was non est factum and/or undue influence. By the nature of such Q facts, the Debtor himself must have known such facts. However, he has Q never raised any such facts and evidence. Rather, he chose not to file any R R evidence to oppose HCMP 369/2024 despite the HCMP 369/2024 Unless S Order, and he still remains silent in the present proceedings simply and S reserves his position on the Intervener’s evidence. There is no explanation T T as to why he did not raise all these earlier, and there is no explanation as to U U V V A -9- A B why he still reserves his position here when he is applying for a stay based B on matters of which he should have personal knowledge. C C D 18. Fourth, related to the third, one may understand why the D Debtor has never raised any such facts and evidence if they were true – the E E Debtor would be relying on his own wrong (namely, giving the Resolution F for her to sign alleging it to be a routine company document and exerting F undue influence over her) to say that the loan agreement and therefore his G G personal guarantee would be invalid. However, in my view, the legal H principle that one cannot take advantage from his own wrong (see H Kensland Realty Limited v Whale View Investment Limited & Another I I [2002] 1 HKLRD 87 at §§91-93) would apply here to prevent the Debtor J from relying on such fact-findings. While Kensland Realty Limited v J Whale View Investment Limited & Another, supra, was decided in K K contractual context, §§91-93 of the judgment in that case clearly shows that L this legal principle is a general legal principle of substance. While the L Court of Final Appeal there was concerned with how this general legal M M principle should be applied in contractual context (§§94-99), this does not N mean that this general legal principle is limited to contractual context only. N This legal principle, in my view, is a principle of common sense to avoid O O any clear affront to justice. P P 19. Ms Law submits that the principle does not apply here at least Q Q with regard to undue influence because the wrong would not be solely the R Debtor’s own wrong. She points out DHCJ Le Pichon’s view in §§38-53 R of HCMP 369/2024 June Decision that the Petitioner was put on inquiry S S but failed to take reasonable steps to satisfy itself that there was no undue T influence, and submits that the Petitioner also contributed to the wrong T from which the Debtor was to take advantage. The test, however, is not U U V V A - 10 - A B whether some others contributed to the wrong, but whether the advantage B was a direct consequence of the wrong: see Kensland Realty Limited v C C Whale View Investment Limited & Another, supra at §95. When analysing D the situation closely, I find that the advantage taken by the Debtor, namely, D the obtaining of the loan, was still the direct consequence of the undue E E influence. The reason for this is:- F F (1) There would be either of the two likely outcomes if the G Petitioner had taken reasonable steps. The first outcome G would be that the Petitioner found out the undue influence and H H the invalidity of the Resolution and so there would not be any I loan in the first place, and as such, the Debtor would have no I J advantage to take in any event. The second outcome would J be that the Petitioner, despite the reasonable steps taken, was K K not able to detect any undue influence, and therefore the loan L transaction continued as it did, and in such circumstances, the L Petitioner did not commit any wrong. M M (2) In other words, if the Debtor would have any advantage to N N take from the undue influence, whether the Petitioner had O taken any reasonable steps would make no difference. O P (3) Thus viewed, the advantage taken by the Debtor, namely, the P obtaining of the loan, was still the direct consequence of the Q Q undue influence. R R (4) Otherwise, the undue influencer would be playing a game of S “catch me if you can” against the lender – hoping S opportunistically that the lender would not take reasonable T T steps and then the undue influencer would then be able to reap U U V V A - 11 - A B the fruit of the undue influence. This would, in my view, be B an affront to justice. C C D 20. Fifth, even if the Debtor would like to avail of the fact-finding D of the appeal, he would have to explain why he did not apply to join the E E appeal in the first place, and have to explain such inordinate delay. I bear F in mind that the HCMP 369/2024 April Decision where DHCJ Le Pichon F dismissed the 1st and 2nd defendants’ application therein for retrospective G G leave to appeal on the ground of delay when the 1st and 2nd defendants must H have known, through the Debtor, the circumstances of the execution of the H Resolution. A fortiori, here, the Debtor himself must have known the same. I I But there is no explanation as to the delay. In fact, even now, the Debtor J has not made any application to join the appeal. In any event, I see little J chance that the Debtor would be allowed to join the appeal with such K K inexplicable, inordinate delay. As he would not be granted retrospective L leave to appeal or join the appeal, I do not see how he could avail himself L of any fact-findings in the appeal as between the Petitioner and the M M Intervener only. N N 21. Sixth, as regards Ms Law’s jurisdiction point, she submits that O O if there was no valid mortgage, the Petitioner’s claim in HCMP 369/2024 P would not have been a mortgage action under Order 88 of the Rules of the P High Court, and thus, a Master did not have any jurisdiction to enter Q Q judgment against the Debtor. She refers to China State Bank Ltd v R Goboway Investment Ltd & Ors [2002] 1 HKC 566 in support to her R submissions. S S 22. In that case, at the time of issuing the originating summons T T under Order 88, the loan in question was secured by a mortgage. The U U V V A - 12 - A B mortgage was subsequently released. The bank still pursued the claim for B monetary payment in the originating summons. The originating summons C C came before a Master, who considered evidence and submissions from D both sides, entered judgment for the monetary claim. DHCJ Longley found D that the Master did not have the jurisdiction to enter the judgment because E E (1) by the time of entering the judgment, the action was no longer a F mortgagee action and thus fell outside Order 88; (2) Order 28 rule 9 F required originating summons to be fixed for substantive hearing in open G G court and by Order 32 rule 11, a Master only has jurisdiction of a judge in H chambers but not a judge in open court; and (3) therefore, a Master did not H have jurisdiction to enter judgment in chambers outside Order 88 (see §§7- I I 17). J J 23. There is a material difference in the present case. In that case, K K the judgment in question was entered upon substantive hearing, which L should have taken place in open court before a judge. In the present case, L none of the defendants in HCMP 369/2024 filed any evidence despite the M M HCMP 369/2024 Unless Order. Therefore, when the Petitioner sought a N judgment from Master D To, it was in essence an application for default N judgment. Unlike the matter in the substantive hearing where the Master O O had to consider evidence and submissions from both parties in China State P Bank Ltd v Goboway Investment Ltd & Ors, supra, such matter could be P dealt with summarily, and therefore, by Practice Directions 14.2 §4 and/or Q Q by Wing Hang Bank Limited v Liu Kam Ying [2002] 2 HKC 57 cited in R §28/3A/2 of Hong Kong Civil Procedure 2026 Volume 1, such matter that R could be dealt with summarily could be disposed of in chambers. S S Therefore, by Order 32 rule 11, Master D To, having the jurisdiction as a T T judge in chambers, did have jurisdiction to grant HCMP 369/2024 Order U summarily in chambers. U V V A - 13 - A B 24. Further and in any event, the Petitioner has not applied for any B order or declaration that HCMP 369/2024 Order shall be invalid. Nor the C C Intervener has applied in the appeal for any such order or declaration. D D 25. For the above reason, I reject Ms Law’s jurisdiction point. E E 26. For these reasons, I find that the Debt Validity Ground does F F not support the Debtor’s application for stay. G G V. SECURITY GROUND H H I 27. The security is the subject property under the mortgage owned I by Gaincourt, not by the Debtor. It is “a well-established principle in civil J J actions that a creditor is not obliged to resort to third party-owned security K first, before suing a guarantor”: see GG v LL Ltd [2024] HKCFI 2302 at K §15 per DHCJ Yuen. Therefore, “[t]he mere fact that third party-owned L L security is available to the Lender does not change the [Debtor]’s inability M to pay into her ability to pay”: see GG v LL Ltd, supra at §17. Ms Law M fairly does not press this ground. N N O 28. This Ground therefore fails. O P P VI. CONCLUSION Q Q 29. In the premises, I dismiss the Stay Summons, and order the R Debtor to pay the Petitioner costs of the Stay Summons, summarily R assessed at HK$220,000. S S T 30. Giving the Debtor some time to consider how to proceed with T the dismissal of the Stay Summons, I also direct that the Petition shall be U U V V A - 14 - A B heard on 9 February 2026 at 10am before the Bankruptcy Judge for B directions or pronouncement of a bankruptcy order as thought fit. C C D 31. I thank counsel for their assistance. D E E F F G G (Gary CC Lam) H Deputy High Court Judge H I I Mr Sunny Chan, instructed by K.C. Ho & Fong, for the Petitioner J Ms Belinda Law, instructed by Khoo & Co., for the Debtor J K Attendance of the Official Receiver was excused K L L M M N N O O P P Q Q R R S S T T U U V V