Hansom Finance Ltd (In Creditors’ Voluntary Liquidation) v Yang Haoying [2026] 1 HKLRD 855; [2025] HKCFI 5278 (Alison Choy)
Alison Choy represented the defendant in Hansom Finance Ltd v Yang Haoying [2026] 1 HKLRD 855; [2025] HKCFI 5278.
P, a licensed moneylender and the wholly-owned subsidiary of a listed company, was in creditor’s voluntary liquidation. It suffered loss of $799 million because five loans made by it totalling that amount were uncommercial, had been defaulted upon and had turned out to be irrecoverable. D was a former director of P’s. P sued him for damages of $799 million on the basis that he had, in his involvement in the approval of those loans and drawdown under them, in respect of which he bore responsibility, breached his duties to it as a director to act with reasonable skill, care and diligence, to exercise independent judgment and to act in its best interests. The particulars of such involvement on D’s part were as follows. As “approver”, he signed the credit assessment reports on the borrowers. There was no record of proper due diligence conducted on the borrowers’ financial position and ability to repay. As sole director, he approved three of the loans by written resolutions. He approved two of the loans at a board meeting of two directors, him and W, which meeting he chaired. As sole signatory for P, he signed all the loan agreements and repayment agreements. He signed all the drawdown requests for payments of the loan proceeds to third parties.
D’s primary contentions were that his role was limited to that of an “approver” and he relied on a workflow where all the borrowers and documents were arranged by others. Other persons from the parent company participated in the process and the CFO (W) and company secretary released the loan proceeds.
That, P said, was an abdication of responsibility and plainly not an answer to its claim, as D had a non-delegable duty to monitor the work of others and exercise independent judgment.
The features common to all five loans were these. Each loan was to a Mainland borrower with no substantial assets in Hong Kong. All of the loans were unsecured. There was insufficient documentation to support the value of the assets or ability to repay on the part of any of the borrowers. The loan proceeds were always paid directly to a third party recipient purportedly a creditor of the borrower. Due diligence was not done on any third party recipient.
Three days prior to the original repayment date of the first loan, the repayment was extended and a lower interest rate was granted, all without commercial justification. After default upon the second loan, the repayment date was extended and a lower rate was granted, all without commercial justification.
It was agreed at trial that the issues were: (i) What duties did D owe to P as a director in respect of the five loans? (ii) Did he breach those duties in respect of the five loans? (iii) Did P suffer loss and damage by reason of breach of duties on D’s part and, if so, in what amount?
Held, entering judgment for P for $799 million damages with interest thereon at the rate of P+1% from the date of the writ to the date of judgment and thereafter at the judgment rate until payment, that:
(1) With his qualifications and experience, D should be held to the standard of care expected of a director under s.465 of the Companies Ordinance (Cap.622) which codifies a director’s duty of care, providing, among other things, this: “(1) A director of a company must exercise reasonable care, skill and diligence. (2) Reasonable care, skill and diligence mean the care, skill and diligence that would be exercised by a reasonably diligent person with – (a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by a director in relation to the company; and (b) the general knowledge, skill and experience that the director has.” (Re Boldwin Construction Co Ltd [2001] 3 HKLRD 430, Re Copyright Ltd [2004] 2 HKLRD 113, Re Keeping Kids Co [2021] EWHC 175 (Ch), China Metal Recycling (Holdings) Ltd v Chun Chi Wai [2021] HKCFI 378 applied; ChinTung Futures Ltd (In Liq) v Arthur Lai Cheuk Kwan [1994] 1 HKLR 95, Australian Securities and Investments Commission v Avestra Asset Management Ltd (In Liq) [2017] FCA 497 considered; Secretary of State for Business Energy and Industrial Strategy v Keeble [2022] EWHC 2503 (Ch) distinguished; Lagunas Nitrate Co v Lagunas Syndicate [1899] 2 Ch 392, Re Brazilian Rubber Plantations and Estates Ltd [1911] 1 Ch 425 not followed). (See paras.33-62.)
(2) The workflow in the approving of loans could not be faulted as a matter of principle. But the following had to be said:
(i) The double-check mechanism adopted did not in itself absolve D from liability.
(ii) The credit assessment of each borrower was wholly flawed.
(iii) The payment to third party recipients was totally unsupported by reasons.
(iv) Not seeking security when one loan was in default and another due in three days coupled with a substantial reduction in interest was not in P’s best interests and devoid of any reasonable basis even if done in honest belief.
(v) There was a failure to exercise independent judgment.
The foregoing showed that P was exposed to great risk of non-recovery when the five loans were approved. Even if D honestly believed that the approvals and extensions were in P’s best interests, such belief would still have had no leg to stand on. He could not have been acting in P’s best interests. The Court found that D had breached his duty to act bona fide in P’s best interests. (See paras.63-110.)
(3) Breaches of any one of the three duties concerned – namely (i) to act with reasonable skill, care and diligence, (ii) to exercise independent judgment and (iii) to act in P’s best interests – was enough to establish liability against D in this case. Had it not been for his breaches of duty, the five loans would not have been approved. They ought not to have been approved or extended. Causation of P’s loss was established. There was no dispute that the amount of loss was $799 million. (See paras.111-112.)
(4) P not having justified its claim for compound interest, there was no basis on which to order compound interest. (See para.113.)
Action
This was the trial of the plaintiff’s action against the defendant claiming for breach of director’s duties in approving and granting of loans.
[The above is excerpted from the headnote to the report in HKLRD.]
