Daniel Kwok is claiming $66 million damages alleging private lender HND Holding Ltd caused a cascade of problems by being minutes late in releasing funds for settlement of a South Auckland property purchase.
After ruling he had a weak case, the High Court threw a temporary lifeline by halting a proposed mortgagee sale of a West Auckland property while the merits of his case are later considered. Mr Kwok has already sold off several other properties to pay down borrowings.
The High Court was told of Mr Kwok walking a dangerously undercapitalised path in his property dealings across Auckland.
His biggest deal was a 2021 transaction. Mr Kwok intended to join property developer Charles Ma in a five hundred site residential development in Drury.
To buy in, Mr Kwok arranged a $28 million loan facility with HND Holding. Controlled by Yaxun Zhang, HND Holding acts as an intermediary, on-lending funds from private sources.
The HND loan was for one year only, with any roll-over subject to review. An initial $2.5 million drawdown was used to pay both HND’s loan facility fees and a deposit on the Drury purchase. Further drawdowns were used to refinance loans on other properties his companies owned and to pay interest on those loans.
With settlement looming on the Drury purchase in September 2021, Mr Kwok had only $6.8 million left available from the HND facility. Another two million dollars was needed.
Evidence was given frantic wheeling and dealing by Mr Kwok on the afternoon of settlement with settlement due by 4.30 pm. Funds from HND were not available until 4.46 pm. Settlement did not take place.
Despite later negotiations, the Drury purchase was cancelled. The deposit was lost.
Mr Kwok sued HND Holding alleging it deliberately delayed releasing funds, part of a ploy to put him under pressure and to force repayment of the loan. HND says Mr Kwok failed to provide in time all the documentation required prior to settlement.
Mr Kwok’s $66 million legal claim got off to a shaky start. He drafted his own court papers, later described as being ‘vexatious and incomprehensible.’ Lawyers acting for HND asked for court assistance in progressing what was described as an ‘uncontrolled shambles.’
At a preliminary court hearing, Justice Anderson ruled Mr Kwok was entitled to his day in court to argue whether HND had acted in good faith.
HND’s proposed mortgagee sale of a west Auckland property at Lincoln was blocked.
The court was told eleven million dollars of the loan facility remains unpaid, with interest at 26 per cent accruing at some $7,800 per day. As at late 2023, the total outstanding exceeded $19.5 million.
Justice Anderson dismissed Mr Kwok’s separate argument that the loan facility was illegal and that the loan could not be recovered.
HND Holding was not registered as required under the Financial Services Providers (Registration and Dispute Resolution) Act. Lenders who fail to register cannot recover their loans until such time as they do register. Rules restricting an ability to recover overdue loans apply to consumer credit contracts only, not commercial loans.
Kwok v. HND Holding Ltd – High Court (14.05.24)
24.123