FRIENDS FOOD (HONG KONG) COMPANY LTD v. FRIENDS FROZEN FOOD COMPANY LTD AND ANOTHER

FRIENDS FOOD (HONG KONG) COMPANY LTD v. FRIENDS FROZEN FOOD COMPANY LTD AND ANOTHER

The court found that Yeung and F Frozen Food knowingly made false pre-contractual representations and intended them to be relied upon by Mak and promoters of F Food HK; defendants had in fact formed and acted on the intention to set up Goodsview and compete before the transfer, breaching the express contract terms (including an enforceable 84-month non-compete) and fiduciary/contractual duties to transfer customers, staff and cooperate in licence transfer; misappropriation of receivables of $66,396 was proved but alleged theft of stock was not proved; rescission was inappropriate because restitution was impossible; accordingly damages in lieu were awarded ($1,200,000) plus repayment of...

Citation
[2026] HKDC 659
Parties
Plaintiff (original Action): Friends Food (Hong Kong) Company Limited; 1st Defendant (original Action); 1st Plaintiff (counterclaim): Friends Frozen Food Company Limited; 2nd Defendant (original Action); 2nd Plaintiff (counterclaim): Yeung Cho Yi; 2nd Defendant (by Counterclaim): Mak Wai Cheung
Court
District Court
Jurisdiction
Hong Kong
Judgment Date
17 April 2026
Case Number
DCCJ1670/2022
Procedural Posture
Sale of Business — Contractual and Tort Claims Arising From Sale (misrepresentation, Breach of Contract, Conversion) / Judgment After Trial (trial Heard Sept 2025; Judgment 17 April 2026)
Outcome
Judgment for Friends Food (Hong Kong) Company Limited and Mak Wai Cheung; Defendants' counterclaim dismissed
Legal Topics
Fraudulent Misrepresentation, Breach of Contract, Misappropriation and Conversion, Fiduciary Duty, Restrictive Covenants/enforceability, Rescission and Damages in Lieu, Exemplary Damages, Costs and Interest
Source Language
EN
Contract Law Tort Equity Commercial Law Fraudulent Misrepresentation Breach of Contract Misappropriation and Conversion Fiduciary Duty +4 more

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Parties

Friends Food (Hong Kong) Company Limited

Plaintiff (original Action)

Friends Frozen Food Company Limited

1st Defendant (original Action); 1st Plaintiff (counterclaim)

Yeung Cho Yi

2nd Defendant (original Action); 2nd Plaintiff (counterclaim)

Mak Wai Cheung

2nd Defendant (by Counterclaim)

Procedural Posture

Sale of Business — Contractual and Tort Claims Arising From Sale (misrepresentation, Breach of Contract, Conversion) / Judgment After Trial (trial Heard Sept 2025; Judgment 17 April 2026)

Legal Issues

  1. 1 Whether defendants made fraudulent misrepresentations inducing purchase of the business
  2. 2 Whether defendants breached express contractual terms including the non-compete clause (cl 2.7) and obligations to transfer licence, customers, staff and suppliers
  3. 3 Whether defendants misappropriated receivables and converted stock

Ratio Decidendi

The court found that Yeung and F Frozen Food knowingly made false pre-contractual representations and intended them to be relied upon by Mak and promoters of F Food HK; defendants had in fact formed and acted on the intention to set up Goodsview and compete before the transfer, breaching the express contract terms (including an enforceable 84-month non-compete) and fiduciary/contractual duties to transfer customers, staff and cooperate in licence transfer; misappropriation of receivables of $66,396 was proved but alleged theft of stock was not proved; rescission was inappropriate because restitution was impossible; accordingly damages in lieu were awarded ($1,200,000) plus repayment of...

Court Disposition

Judgment for Friends Food (Hong Kong) Company Limited and Mak Wai Cheung; Defendants' counterclaim dismissed

Orders

  • The Defendants do jointly and severally pay Friends Food (Hong Kong) Company Limited a sum of HK$1,200,000 as damages for fraudulent misrepresentation and/or breach of contract.
  • Yeung Cho Yi do pay Friends Food (Hong Kong) Company Limited HK$66,396 as damages for misappropriation.