HK appeal blocks Evergrande-linked petition over HK$5bn loan dispute

A company facing a statutory demand for HK$5,971,517,808.22Judiciary under a HK$5 billion loanJudiciary can restrain a winding-up petition where it shows a bona fide dispute on substantial grounds, even after a first-instance judge rejected the dispute.Judiciary

Yingjia International Properties Limited borrowed HK$5 billion from State Hero Holdings LimitedJudiciary, an indirect subsidiary of China Evergrande GroupJudiciary in liquidationJudiciary, under a March 2021 loanJudiciary repayable in one tranche within two yearsJudiciary with no interest if repaid on time, with interest from drawdown if not. Yingjia did not repay by April 2023Judiciary. State Hero demanded payment on 15 May 2025Judiciary and served a statutory demand on 13 February 2026JudiciaryJudiciary. Yingjia applied on 3 March 2026 for an injunction restraining a petitionJudiciary; Madam Justice Linda Chan dismissed itJudiciary on 7 August 2026Judiciary. State Hero presented petition HCCW 627/2026JudiciaryJudiciary on 12 August 2026Judiciary.

On 29 October 2026Judiciary the Court of Appeal (Hon Anthony Chan JA, K Yeung JA and Harris J, appeal heard 27 October 2026) allowed Yingjia's urgent appealJudiciary, set aside the dismissalJudiciary, and ordered State Hero to pay the costs of the application and appeal to be taxed, with a certificate for two counsel, disallowing only the costs of the notice of appeal for prolixity.

The dispute centred on an alleged collateral agreementJudiciary that the Hong Kong loan and a matching undated Mainland loan between Heyirong and Evergrande PRC for the RMB equivalent of HK$5 billionJudiciary on identical terms were not enforceableJudiciary. From 7 to 9 April 2021 State Hero paid HK$5 billion to YingjiaJudiciary in three tranches, while Heyirong paid RMB 4,204,375,000 to KailongJudiciary in mirror tranches worth about HK$4,999,863,243.60. On 9 April 2021 Yingjia paid HK$5 billion to Honour BestJudiciary, assignee of Heyirong's right to subscribe for 183,150,500 shares in New Energy VehicleJudiciary for HK$5,000,008,650, and the shares were issued that dayJudiciary.

The Court of Appeal held the first-instance analysis had not confronted the currency-swap explanationJudiciary: once Hong Kong dollars were swapped for renminbi and the Hong Kong dollars funded the share subscription, with the defendant's camp receiving both the subscription proceeds and the renminbi, no repayment obligation would remainJudiciary. On that view the collateral agreement was not inherently improbableJudiciary, loan paperwork would still have been needed to move funds through banks, and the benefit of completing the subscription to the wider group meant enforceability could not be assumed from State Hero's position aloneJudiciary. Whether the agreement was ultra vires or involved breach of duty could not be decided summarily.Judiciary

Later accounting did not displace that conclusion. Once the loan agreement existed it had to appear in Yingjia's audited statements, so Other Payables of about USD 639.7 million for 2023 rising to USD 644.1 million for 2024, and the write-off of a matching receivable from Honour Best, were not decisiveJudiciary. The absence of any demand until May 2025Judiciary, long after the April 2023 due dateJudiciary and during Evergrande's liquidity crisis, further undermined the enforceable-loan viewJudiciary.

An undated October 2021 declaration bearing Evergrande PRC's seal did not by itself carry the appealJudiciary: it was unsignedJudiciary, State Hero's name had been removedJudiciary, and it is governed by Mainland lawJudiciary. The court was not persuaded it bound State HeroJudiciary, and it was unnecessary to decide the Dalian jurisdiction clause or the abstract knowledge test because the director's knowledge was attributable to State HeroJudiciary.

Legal basis: section 178(1)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32)Judiciary and section 21L of the High Court Ordinance (Cap. 4)Judiciary, applied through the bona fide dispute on substantial grounds testJudiciary stated in Re Hong Kong Aviation Support and Development Association Ltd [2025] HKCA 1010.