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Simpson Cheung

A Hong Kong court has ruled in favour of embattled conglomerate Evergrande in a debt-recovery case, allowing it to recoup about HK$6 billion (US$764.7 million) from a third party after a judge found the borrower’s arguments against enforcement of the loan were “fabricated”.
In a High Court judgment handed down on Friday and seen by the South China Morning Post, Judge Linda Chan dismissed an injunction application filed by Yingjia International Properties to restrain offshore entity State Hero Holdings from presenting a winding-up petition against it.
The court also rejected Yingjia’s separate bid for an interim injunction to block State Hero from filing the winding‑up petition pending a possible appeal.
State Hero is an indirect wholly owned subsidiary of China Evergrande Group, which is now controlled by court-appointed liquidators.
It served a statutory demand on February 13 this year on Yingjia International requiring the repayment of HK$5.97 billion in loan principal and accrued interest.
The court heard that the debt stemmed from March 2021, when State Hero reached an agreement in Hong Kong to lend HK$5 billion to Yingjia International, repayable in a single tranche within two years to avoid interest. Failure to repay by the deadline would trigger annual interest at 4 per cent.


The fund was transferred a month later to Honour Best International Trade to subscribe for 183 million new shares issued by China Evergrande New Energy Vehicle Group (NEV).
Honour Best was acquired by Wang Kaiguo, a business partner of Yingjia International’s sole owner Wang Lihua.
In parallel to the Hong Kong loan, Heyirong International Trade Company, a mainland company also solely owned by Wang Kaiguo, entered into an undated loan agreement to lend the yuan equivalent of HK$5 billion to Evergrande Group Company (Evergrande PRC) under the same terms of the Hong Kong loan.
However, as Evergrande’s liquidity crisis unfolded later in 2021, the court heard that Yingjia International became concerned that creditors of China Evergrande Group might treat the loan agreements as a “genuine transactions” and seek to require it to repay the debt.
Yingjia’s counsel, Bernard Man SC, argued that a “collateral agreement” existed between the parties establishing that the loans were never intended to be legally enforceable or repaid.
But Justice Chan ruled that Yingjia International failed to show any bona fide dispute on substantial grounds.
“Taking into account the evidence adduced by the parties, it is clear that the collateral agreement is nothing more than a recent fabrication,” she wrote.
In her judgment, Chan criticised the plaintiff’s case for repeatedly “shifting”, from describing the loan agreement as “a sham”, to calling it “a scheme”, and finally labelling it “a collateral agreement”.
The judge noted that Yingjia International produced no documentary evidence – such as WeChat records – to show that such a collateral agreement was ever reached.
It relied solely on affirmations from three individuals who were never directors of Yingjia International but were said to have been involved in negotiating the loans.
Chan also rejected the argument that the collateral agreement was evidenced by a “declaration letter” issued in October 2021, bearing Evergrande PRC’s seal and purporting to release the debt.
The court further noted that State Hero did not sign the letter, even if it existed, of which the only purpose was to waive the HK$5 billion debt without any commercial benefit.
The court ordered Yingjia International to pay State Hero’s legal costs on an indemnity basis. The judge said a higher scale of costs was appropriate to reflect the court’s disapproval of Yingjia’s fabrication of facts.


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Debt stemmed from March 2021, when Evergrande subsidiary State Hero reached agreement to lend HK$5 billion to Yingjia International


Debt stemmed from March 2021, when Evergrande subsidiary State Hero reached agreement to lend HK$5 billion to Yingjia International.


Evergrande crisis

China Evergrande Group

China

Evergrande wins HK$6b debt-recovery case after court rejects ‘fabricated’ claims

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Debt stemmed from March 2021, when Evergrande subsidiary State Hero reached agreement to lend HK$5 billion to Yingjia International

Debt stemmed from March 2021, when Evergrande subsidiary State Hero reached agreement to lend HK$5 billion to Yingjia International