Akai Holdings Ltd (in Compulsory Liquidation) v. Everwin Dynasty Ltd and Others
Read the full judgment text of HCCL 42/2005 on BabelCite. This HCCL judgment was delivered on 16 December 2015.
1. In this action, the liquidators of Akai Holdings Limited (“Akai”) make substantial claims against the 4 th Defendant (“Mr Ting”). During the course of a 10 day trial, I received into evidence a considerable amount of documents and heard oral evidence from Mr Cosimo Borrelli (“Mr Borrelli”) [1] , a joint and several liquidator of Akai [2] , and from Akai’s accounting expert Mr David Spence (“Mr Spence”). Despite every liberty granted to him to facilitate him giving evidence at the trial of t
Cited by 2 cases · Cites 19 cases
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HCCL 42/2005 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMMERCIAL ACTION NO 42 OF 2005 ---------------------------
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---------------------- J U D G M E N T ---------------------- INDEX F. Proof of Breach: the Burden and Standard of Proof; Evidential Value of Previous Proceedings G. Mr Ting’s Control over Akai and the Akai Group
H. The Collapse and Winding Up of the Akai Group
L. Payments made without Discernible Commercial Purpose
M. Concealment of Payments and the “free” issue of Shares
N. The Undisputed Payments and the “free” issue of Shares were not made for a Commercial Purpose O. The Undisputed Payments and the “free” issue of Shares were made by Mr Ting P. The Undisputed Payments and the “free” issue of Shares were Defalcations
S. Methods 1 to 5, Tomei Receipts and Disregarded Credits
U. My Award of Equitable Compensation V. Deductions in Respect of Recoveries from Other Parties A. Introduction 1.In this action, the liquidators of Akai Holdings Limited (“Akai”) make substantial claims against the 4th Defendant (“Mr Ting”). During the course of a 10 day trial, I received into evidence a considerable amount of documents and heard oral evidence from Mr Cosimo Borrelli (“Mr Borrelli”)[1], a joint and several liquidator of Akai[2], and from Akai’s accounting expert Mr David Spence (“Mr Spence”). Despite every liberty granted to him to facilitate him giving evidence at the trial of this action, Mr Ting did not avail himself of the opportunity to do so. The only evidence called by Mr Ting was the opinion evidence of his accounting expert Mr William Bowyer (“Mr Bowyer”). 2.Akai was a company listed on the Hong Kong Stock Exchange which, at its peak, was the holding company of one of the top 10 consumer electronics manufacturing groups in the world. The majority of Akai’s shareholders were members of the public. Akai’s collapse in August 2000 was, at the time, the largest corporate insolvency in Hong Kong’s history,its reported assets plummeting from US$2.325 billion as at January 1999 to only US$265 million within a 12 month period. 3.Mr Ting was the Executive Chairman and Chief Executive Officer of Akai at all material times and had a high level of control over Akai and the Akai Group[3]. Mr Ting’s control over Akai and the Akai group was exercised through his control of over 40% of Semi-Tech Corporation (“STC”), which in turn held over 40% of the issued shares of Akai. Mr Ting was also the principal executive officeholder of each of the other listed entities in the Akai Group, namely, Akai Electric Co Limited (“Akai Electric”), The Singer Company NV (“Singer”), Sansui Electric Company Limited (“Sansui”), Tomei International (Holdings) Limited[4] (“Tomei”) and GM Pfaff AG (“Pfaff”)[5]. B. Akai’s Case 4.Akai was represented by Mr Charles Manzoni SC leading Mr Jason Karas and they presented the following case on its behalf. 5.Akai submitted that there was a glaring absence of corporate governance controls in the conduct of Akai’s affairs, giving Mr Ting unrestricted and unfettered access to Akai’s cash and assets. Mr Ting’s power to sign cheques and authorise payments from Akai’s bank accounts singly and in unlimited amounts was admitted. This case was about Mr Ting’s blatant and serial abuse of that power, through his dishonest and concealed self-dealing with Akai’s assets, primarily its cash assets. The dishonesty and inappropriateness of Mr Ting’s misconduct, sustained over the course of at least 2.5 years from February 1997 to July 1999 (“the Claim Period”), could not be overstated. 6.Mr Ting’s dishonest misconduct benefitted himself and his wife, offshore companies under his direct and indirect control and business associates and companies they controlled. Conversely, Mr Ting’s dishonest misconduct caused Akai and its shareholders and creditors the most extraordinary losses conceivable. It was difficult to conceive of more egregious dishonest breaches of fiduciary duty and dishonest misappropriation by a trustee of other people’s assets. 7.By this action, Akai, through its court appointed Liquidators, sought to hold Mr Ting accountable for his dishonest misconduct and to recover compensation for its creditors and shareholders. Mr Ting had gone to extreme lengths to impede the Liquidators’ investigations and stifle this action, over the course of almost 10 years. This had included resort to forgery, creation of false evidence and by engaging in conduct in bad faith, these findings having been made by Chief Justice Ground of the Supreme Court of Bermuda and upheld by the Privy Council, in proceedings to which Mr Ting was a party. 8.Despite Mr Ting’s obstruction, the documentary evidence obtained by the Liquidators established beyond question the concealed payment of hundreds of millions of dollars of Akai’s cash assets by Mr Ting to offshore companies under his direct and indirect control and to his business associates and companies they controlled over the Claim Period from February 1997 to July 1999. This documentary evidence included contemporaneous records of Akai and of numerous banks. 9.Of the total claimed defalcations[6] and misappropriations of US$837,118,799, Mr Ting’s signature was on cheques and payment instructions for total payments by Akai of US$484,301,070. In addition, there was an irreducible core sum of US$408,123,278 which Mr Ting did not dispute was paid out from the assets of Akai (or which Mr Ting caused Akai to be deprived of, in the case of the share capital defalcations)[7]. Mr Ting accepted that there is no evidence of value having been received by Akai for those payments and Mr Ting had offered no explanation for them. Yet Mr Ting did not accept that Akai had established that these payments constitute defalcations from the assets of Akai. 10.These undisputed payments of US$408,123,278 comprise:
11.Of these undisputed payments of US$408,123,278, Mr Ting’s direct fingerprint was on payments totalling US$290,311,014, in that he personally signed the Akai cheque or Akai bank payment instruction to cause those payments to be made. 12.There could be no serious dispute that these payments totalling US$408,123,278 constituted defalcations and misappropriation from the assets of Akai for which Mr Ting was liable to fully restore. In particular:
13.Accordingly, Mr Ting was strictly liable to restore these misapplied assets of Akai (or their cash value plus interest) in specie to the company. 14.The remaining balance of the sum claimed by Akai from Mr Ting was US$428,995,521 (being US$837,118,799 less US$408,123,278), comprising 30 out of the 165 individual payments or other defalcations claimed by Akai. These 30 payments or other defalcations were disputed by Mr Ting, primarily on the grounds that Mr Ting’s accounting expert Mr Bowyer considered that:
15.In respect of the payments of US$428,995,521 disputed by Mr Ting:
16.Akai’s primary case was that the disputed payments were plain and obvious defalcations, by reference to the identity of the Recipient, their concealment and nature. In the particular circumstances of this case, any unexplained dealing with Akai’s assets with no obvious commercial purpose must amount to a defalcation. Accordingly, the Court was in a position to readily draw the conclusions sought by Akai. It was apparent that Mr Ting’s personal fingerprint was on the majority of those disputed payments. Of the total defalcations claimed in the sum of US$837,118,799, Mr Ting’s signature was on cheques and payment instructions for total payments by Akai of US$484,301,070.Despite Mr Ting’s pervasive and direct personal involvement in the vast majority of the claimed defalcations, including the disputed payments, Mr Ting had elected to proffer no explanation whatsoever. This was despite the fact that he was plainly best placed to provide the Court with the relevant evidence. The most cogent reason for his failure to do so was that there is no honest explanation for his conduct. Accordingly, the Court was able to more readily accept the evidence adduced by Akai and draw all reasonable inferences of fact from Akai’s evidence. 17.The extensive documentation disclosed in these proceedings and, in particular, exhibited to Mr Borrelli’s statements was obtained as the result of the full investigation of the affairs of Akai by the Liquidators as officers of the Court in accordance with their duties. The documentation established the full extent of Mr Ting’s blatant self dealing and the nature and extent of the concealment of Mr Ting’s defalcations in the accounting records of Akai. 18.The overwhelming indicia of Mr Ting’s fraud and concealment included:
19.As to the oral evidence at trial, Akai submitted that:
20.As to the quantum of equitable compensation payable by Mr Ting, Akai submitted that the starting point must be that Mr Ting was liable to restore to Akai US$837,118,799, being the total of his defalcations. A fiduciary who has misapplied assets of his beneficiary was strictly liable to restore those assets to the beneficiary. 21.The principal issue on the quantum of equitable compensation payable was the extent, if any, to which Mr Ting was entitled to a credit in respect of sums paid to Akai by the Recipients. Akai submitted that Mr Ting was only entitled to a credit to the extent that he could establish payments to Akai were specifically identifiable as repayment of a prior defalcation. As a result of Mr Ting having proffered no explanation whatsoever, the Court would be justified in not allowing Mr Ting any credit and ordering equitable compensation calculated by Method 1[12] of US$837,118,799 plus interest. 22.However, as the objective contemporaneous documentary evidence demonstrated that a limited number of transactions between Akai and the Ting Recipients were circular (such as the Tisco transactions), the Court might conclude that the sums misapplied in these transactions were restored to Akai, such that it was appropriate that credit be given. On that basis, the Court could permit Mr Ting limited credits and adopt Method 2. 23.There was no basis for any further credits in favour of Mr Ting and the Court ought not to speculate in his favour, such as to give Mr Ting the benefit of entirely disconnected and concealed payments to Akai. Mr Ting could not pierce the corporate veil of the Recipients for his own benefit. Accordingly, none of Methods 3 to 5 or any further method advanced by Mr Ting would be an appropriate method of calculating Mr Ting’s liability to pay equitable compensation to Akai. 24.The question of whether Mr Ting should be given credit for the Tomei Receipts was of little consequence if the Court adopted Method 1 or Method 2, but was material if the Court were to adopt another method. The Tomei Receipts were sums misapplied from Tomei (a separate listed company) by Mr Ting, paid to a Ting Recipient, and then paid on to Akai, for reasons unknown. Either Mr Ting (the perpetrator) or Akai (the victim) stood to benefit from these receipts. Plainly Mr Ting should not be permitted to benefit from his own wrongdoing by being given credit against his defalcations in respect of these payments. 25.Akai accepted that credit was required to be given to avoid double recovery. Akai did not dispute the revised calculation put forward by Mr Ting’s legal team. 26.Finally, Akai was entitled to compound interest, as the law would presume that Mr Ting had used the misapplied funds to earn profits. Akai submitted that the commercial rate of USD Prime + 1% at monthly rests was appropriate. 27.Applying these principles, Akai was entitled to equitable compensation, inclusive of interest, of US$2,134,784,647 (Method 1) or US$1,589,158,615 (Method 2) or US$1,583,245,277 (Method 2, less the Tomei Receipts). C. Mr Ting’s Case 28.Mr Ting was represented by Mr Nigel Kat, together with Ms Chyvette Ip and Mr Hew Yang Wahn and, in addition to their detailed submissions, they presented the following overview of his case. 29.The burden of proof was on Akai to prove fraud by compelling evidence. The Court should not draw adverse inferences against Mr Ting at any stage of these proceedings founded either upon the absence of relevant documents for which he was not responsible or because he did not give evidence, for which he has provided genuine and credible justification. 30.Akai had not proved that Mr Ting was responsible for each of the impugned payments. 31.The Liquidators over-reached. US$837 million was a gross over-claim. Akai was only entitled in law and equity to be compensated for its deficiency: Libertarian Investments[13]. Equitable compensation was awarded to compensate, not to punish the defaulter. The claim must initially be reduced by the amount which Akai has admitted it has received from Recipients and by the double-counting it has included. The Liquidators’ methodology for identifying payments as ‘defalcations’ and quantifying them did not produce equitable compensation. It excluded evidence of receipts by Akai which the Court was bound to take into account in determining any deficiency which is to be compensated. 32.Whether or not the Court applied the Liquidators’ methodology, the matters pleaded to constitute the ‘Primewood’ claim do not amount to a ‘defalcation’. They also produced no loss to, or deficiency in Akai which required to be restored. In addition, a number of significant payments claimed were, on Akai’s own documentary evidence, made for a commercial purpose and thus could not be ‘defalcations’. 33.The Liquidators’ claims were barred by limitation in any event, unless the Court found them to be fraudulent or self dealing (which was denied) within s.20(1)(a) or (b) of the Limitation Ordinance. 34.Akai’s claim must also be reduced by the amount which it has recovered in respect of these claims in other proceedings, plus any sum recovered from the 3rd defendant, Ms Lee. 35.Simple interest was appropriate in this case. If, however, compound interest was ordered, the appropriate rate(s) and rests would require evidence and argument. 36.I will address Mr Ting’s detailed submissions below. D. Akai and the Akai Group 37.The following facts have been established to my satisfaction by the evidence of Mr Borrelli and from the documentary evidence. 38.Akai was an investment holding company carrying on business throughout Asia, Europe and the USA, from its headquarters at Two Exchange Square in Hong Kong[14]. 39.Akai was incorporated in Bermuda on 10 October 1991 under the name Semi-Tech (Global) Company Limited. It was a public company at all material times. It was registered in Hong Kong as an overseas company on 19 June 1992. On 30 June 1992, pursuant to a scheme of arrangement and reorganisation, Akai became the holding company of a separate company named Semi-Tech (Global) Limited (“STG”) (formerly known as Semi Tech Microelectronics (Far East) Limited) and assumed the listing status of STG on the Hong Kong Stock Exchange[15]. 40.By the beginning of 1997, Akai was the holding company of a group that controlled the consumer electronics businesses of Akai Electric, Kong Wah, Sansui and Tomei as well as the sewing machine group Pfaff. The Akai Group was one of the top ten consumer electronic manufacturers in the world. It manufactured and distributed televisions, video recorders, audio systems, telecommunication products and component parts, under international brand names including “Akai” and “Sansui”. Akai had interests in businesses carried on in Hong Kong, China, Japan, USA, Germany, France, Austria, England, Switzerland, Singapore, Australia and Finland and had manufacturing and research and development facilities in Malaysia, Finland, England, Japan, USA and in China, amongst other places. In China alone, the Akai Group employed 25,000 workers. Akai’s consumer electronic products were distributed globally. 41.As at 31 January 1997, the audited financial statements of Akai recorded shareholders’ funds of HK$8.175 billion (equivalent to US$1.048 billion) and a net profit after tax of HK$484 million (equivalent to US$62 million).[16] 42.The following diagram is a simplified representation of the Akai Group corporate structure as at 31 January 1997:[17] 43.As at 31 July 1999, the structure of the Akai Group had changed as shown in the following diagram:[18] 44.Further corporate structure charts for the Akai Group at all material times are at Tab 16 of the Borrelli Statement.[19] Details of the major companies within the Akai Group are set out at §§17-50 of the Borrelli Statement.[20] 45.As can be seen in the relevant diagrams, in some cases the interests of persons in the Akai Group companies changed over the Claim Period. The following table sets out in simplified form the changes in ownership of key Akai Group companies:
46.STC was an investment holding company listed on the Toronto Stock Exchange and as at 31 January 1997 held 43.1% of Akai’s shares.[21] At the same time, Mr Ting controlled approximately 44.6% of the issued voting shares in STC and he was at all material times the President, Chairman and CEO of STC.[22] In September 1999, STC filed voluntary petitions for relief under Chapter 11 of title 11 of the United States Bankruptcy Code.[23] 47.Akai Electric was a public company incorporated in Japan in 1929. Its shares were listed on the Tokyo, Osaka and Nagoya Stock Exchanges. As at 31 January 1997 and 31 January 1999, Akai controlled 66% and 71% respectively of the issued shares in Akai Electric through wholly owned subsidiaries.[24] Akai Electric carried on business as a manufacturer and distributor of video and audio equipment and electronic music instruments. Akai Electric had interests in businesses operating in various countries, including Hong Kong, Australia, the UK, Germany, France, Singapore and Thailand. From February 1995 until 29 June 2000, Mr Ting was the Chairman and a director of Akai Electric.[25] 48.Akai Electric also controlled Sansui which was listed on the Tokyo and Osaka Stock Exchanges[26] and carried on business as a manufacturer of electrical appliances and communications equipment. Mr Ting was the Chairman and a director of Sansui from 30 March 1994 to 30 March 2000.[27] 49.Kong Wah was incorporated in Bermuda in 1991 and had its shares listed on thew Hong Kong Stock Exchange from January 1992 until 2 December 1996.[28] Kong Wah was engaged in the design, manufacture and marketing of consumer electronic products, primarily televisions, audio and telecommunication products. The shares in Kong Wah were held at all material times by Kilter Limited (“Kilter”) and Spiritfields Limited, both wholly owned subsidiaries of Akai Electric. Mr Ting was a director of Kong Wah from 23 August 1995 to 25 November 1997.[29] 50.Through Kong Wah and Sansui, Akai controlled Tomei, which was incorporated in Bermuda in 1991 and was also listed on the Hong Kong Stock Exchange.[30] Tomei was engaged in the design, manufacture and sale of consumer audio and video products, components and other consumer products, investment holding and investment property holding. Mr Ting was an executive director of Tomei from 15 May 1997 until 23 June 1999, when Mr Christopher Ho’s Grande group took control of Tomei (subsequently renamed Toyo Holdings Limited).[31] 51.From about 1991 until June 1993, Akai held 51% of the shares in Singer, which was incorporated in the Netherlands Antilles in 1991 and listed on the New York Stock Exchange. Akai sold its entire shareholding in Singer to STC in June 1993 for US$848 million. Thereafter Singer was approximately 50% owned by STC.[32] Singer was one of the world’s largest manufacturers of consumer and industrial sewing machines and a distributor of other consumer durable products. Its primary geographical area of business was Asia, but it carried out business internationally. Singer had investments and interests in (amongst other places) Thailand, Japan, Sri Lanka, Germany and Bangladesh. Mr Ting was the CEO of Singer from August 1991 to December 1997 and the Chairman of Singer’s board of directors from August 1991 to September 1999. Singer also filed for Chapter 11 relief in September 1999.[33] 52.Pfaff was incorporated in Germany in 1926. Its core business was manufacturing and marketing industrial and household sewing machines. Until 31 December 1997, when Akai sold all its shares in Pfaff to Singer, Akai was the controlling shareholder of Pfaff, holding approximately 80% of Pfaff’s issued shares.[34] Mr Ting was the President of the Supervisory Board of Pfaff.[35] E. Mr Ting’s Duties 53.I am satisfied that Mr Ting, as a director of Akai, owed fiduciary duties to Akai, including[36]:
54.The existence and content of these fiduciary duties pleaded by Akai is well-established at law. Moreover, as was stated by Sir Richard Scott VC (as he then was) in Re Barings Plc[37]: “the higher the office within an organisation that is held by an individual, the greater the responsibilities that fall upon him.” 55.The high standard expected of company directors is exemplified by the stringent requirements of Akai’s Bye-Laws and the Stock Exchange of Hong Kong (“SEHK”) Listing Rules. Akai’s Bye-laws required Mr Ting to disclose any personal interest in any contract with Akai and that he abstain from voting to approve any such contract.[38] The Listing Rules required disclosure of “connected transactions”, which included transactions to persons under Mr Ting’s control.[39] 56.The misappropriation of corporate assets by a director is a flagrant breach of the pleaded fiduciary duties. A director cannot honestly believe that such a transaction is in the best interests of the company. There can be no proper purpose for such a transaction and it involves a blatant conflict of interest. Such conduct can constitute preferential treatment of himself as opposed to the majority of the shareholders. 57.In a case involving the misappropriation of corporate assets by a director, the director’s duty as a trustee in respect of the company’s assets is of particular significance. As Robert Walker LJ (as he then was) stated in Bairstow v Queens Moat Houses Plc[40]:
58.A director responsible for the misapplication of corporate assets is under a strict liability to restore the misapplied asset (or its cash value plus interest) in specie to the company. The remedy against the director is the same as equity will order against a trustee who has misapplied trust property in breach of the relevant trust instrument. 59.Although a “duty not to defraud the company” or a “duty not to misapply company funds” is not generally specified in legislation codifying directors’ duties (for example in the UK and Australia), nor identified in case law as a stand-alone duty, such a duty will necessarily overlap with the other established duties. It is difficult to conceive of a more fundamental breach of duty by a fiduciary than the dishonest misappropriation of funds under his care. As Mortimore stated in Company Directors: Duties, Liabilities and Remedies[41]:
60.There is clear authority that a misappropriation of corporate funds is a breach of fiduciary duty:
61.Indeed, misappropriation of corporate assets will generally result in the breach of multiple fiduciary duties:
F. Proof of Breach: the Burden and Standard of Proof; Evidential Value of Previous Proceedings 62.The standard of proof to be applied is a matter of settled law. The leading authorities are two fairly recent decisions of the Court of Final Appeal which import into the common law of Hong Kong the standard of proof established by the House of Lords in England in Re H (Minors) (Sexual Abuse: Standard of Proof )[49]. 63.In Nina Kung v Wong Din Shin[50], both Ribeiro PJ and Lord Scott NPJ [51] applied the principle stated by Lord Nicholls in In Re H. Lord Scott stated:
64.In Re H at 586H, Lord Nicholls also held that this approach:
65.I was referred to the well known passage from the judgment of Lord Denning in Bater v Bater, cited by Morris LJin Hornal v Neuberger Products, which was also referred to by Hodson LJ in Hornal v Neuberger Products at pp.263-264:
66.This requirement of a “higher degree of probability” had been the subject of some controversy until clarified by Lord Hoffmann in Secretary of State for the Home Department v Rehman:[52]
Like English law, Hong Kong law only recognises two standards and they are distinct from each other[53]. 67.I also accept that the degree of cogency required is heightened when the Court is asked to decide upon allegations of fraud by drawing an inference from the evidence before it. As Ribeiro PJ stated at §78 of his judgment in Ming Shiu Chung v Ming Shiu Sum[54]:
68.Ribeiro PJ went on in Nina Kung v Wong Din Shin to state that inferences of fraud or serious misconduct may only be drawn where such inferences are compelling:
69.There are no contemporaneous witnesses for these transactions and events, which took place between 14 and 17 years ago. I recognize the need to look critically at the documentary and other evidence produced in order to determine whether, in respect of each transaction, the evidence ‘clearly’ shows or is sufficient to establish a ‘compelling’ inference that there was a fraudulent misappropriation of Akai’s property. 70.Mr Ting rightly took the point that, as his convictions had been set aside on appeal, the criminal proceedings could not be relied on as evidence against him in these proceedings. However, the fact of his convictions and the subsequent setting aside of the same are events that have occurred, and the fact of these events are admissible as part of the background history to these proceedings. Mr Ting also rightly took the point that, unless an issue estoppel arose in a previous civil action to which he was a party, findings by other courts in other civil proceedings could not be evidence against him in these proceedings. However, the fact of those previous proceedings is equally admissible as part of the background history to these proceedings. In addition, the evidence that had been adduced in previous proceedings, be they criminal or civil, may be adduced in these proceedings as admissible hearsay evidence. G. Mr Ting’s Control over Akai and the Akai Group 71.Mr Ting’s control over Akai and the Akai Group is confirmed by my findings set out in this part, including statements made by Mr Ting himself. In addition to those statements, the following exposition of Mr Ting’s role leads me to conclude that he had unfettered control of Akai and the Akai Group. 72.Mr Ting founded the Akai Group (previously known as the Semi-Tech Group) in the early 1980s.[55] Mr Ting was a member of the Board of Directors of Akai’s predecessors from 1982,[56] remained a director of Akai to at least 16 November 1999[57] and was, at all relevant times, the Executive Chairman and CEO of Akai.[58] 73.As set out at §§45 to 46 above, Mr Ting was the holder of approximately 44.6% of the issued voting shares in STC, which in turn held approximately 43.1% of Akai’s shares.[59] In addition, Mr Ting controlled the BVI entities, Blossom Assets Limited (“Blossom”) and Costner Holdings Ltd, which between them held approximately 5.2% of Akai’s share capital.[60] The combined effect of these shareholdings was that Mr Ting controlled the largest voting block of Akai shares and, therefore, had effective control over Akai. 74.In addition to his position as founder, Executive Chairman and CEO of Akai, Mr Ting was a signatory for Akai’s bank accounts with power to sign cheques or authorise payments on behalf of Akai singly for an unlimited amount.[61] 75.Mr Ting’s influence pervaded throughout the Akai Group and he was the primary decision maker in each of Akai, Singer and STC.[62] To summarise, Mr Ting was at all relevant times (unless otherwise specified):[63]
76.In April 1997, Mr Ting declared his control over Akai as follows:[64]
77.Moreover, as set out in greater detail below[65], Mr Ting conceded in the course of his s.221 examination conducted by the Liquidators that “everybody in the company” reported to him.[66] 78.I infer from the evidence adduced before me, including:
79.Apart from Mr Ting, the other directors of Akai at the relevant times were:[67]
80.Apart from Mr Ting, Ms Loh was the only other director based in Akai’s headquarters at 3001-3004 Two Exchange Square, 8 Connaught Place, Hong Kong (“the Hong Kong Office”), which according to Mr Ting, was a “very small office” at which “just a few people” worked.[70] Ms Loh was a subordinate to Mr Ting, and had the title of “Senior Vice President”.[71] 81.The Hong Kong Office was Akai’s principal place of business[72] at which its financial, administrative, accounting, fund raising and treasury functions were directed and conducted.[73] 82.The records obtained by the Liquidators indicate that Akai’s board meetings were conducted mostly via telephone, twice per year, solely in order to approve the financial results. The Board otherwise only met when the Director’s approval was required for a particular transaction.[74] 83.There is no evidence that Akai’s Board played any effective role in the oversight of Mr Ting’s management of Akai’s business. I find that Mr Ting’s control of Akai was unfettered by any independent oversight. 84.Mr Ting and Ms Loh were, typically, the only directors to physically attend Board meetings, whereas, Mr Tam and Dr Holmes would usually attend via telephone.[75] Mr Tam was another of Mr Ting’s subordinates, with the title “Executive Vice-President and Chief Financial Officer”.[76]Dr Holmes was based in Canada and was an executive director of STC. There is no evidence that Dr Holmes played any material role in Akai’s day to day operations.[77] 85.The remaining directors had little involvement in Akai’s board meetings during the Claim Period, whether by phone or in person. Mr Ahmed, Mr Ramanathan, Mr Kan and Mr Ito attended few meetings, whilst Dr Smith and Mr Moore attended no meetings whatsoever. The 1998 and 1999 Annual Reports of Akai describe Messrs Kan and Ito as independent non-executive directors of Akai. Mr Smith is described as such in the 1998 Annual Report.[78] 86.A number of Akai directors were also directors and executives of STC and Singer. Specifically:
87.There exist minutes purporting to be of an “Executive Committee” of Akai, comprising Mr Ting, Ms Loh, Mr Tam and Mr Holmes. The minutes of the Executive Committee were predominantly formal minutes of the type commonly required by banks in relation to the grant of new facilities or dealings in relation to existing facilities. Mr Ting himself has previously conceded that he did not regard the Executive Committee as a formal committee with any legal status, and that he routinely made decisions and executed documents without consulting the Executive Committee. In light of the findings of Stone J in the TFB Proceedings[85] that the relevant Executive Committee minute before him (which plays no part in this action) was false,[86] there is a question as to the veracity of these minutes. That, however, is not an issue that I have to determine in this action. I am satisfied that the Executive Committee minutes do not constitute evidence of any form of oversight of Mr Ting’s activities. The Executive Committee mostly dealt with formal matters and its members were executives of Akai who answered to Mr Ting and acted on his instructions. 88.Further, there is no evidence of there being any internal audit function or any functioning audit committee for Akai. Only one document has been located by the Liquidators in relation to a supposed audit committee. This is a purported minute of an audit committee meeting held at the very end of the Claim Period on 26 June 1999 whereby Mr Ito and Mr Kan approved the Audited Consolidated Results for the year ended 31 January 1999. There is no evidence of any actual audit function and there was no participation by the external auditors in any audit committee of Akai.[87] 89.As addressed in detail below, there is no record in the minutes of the Board, or of Executive Committee, of Akai for the vast majority of the alleged defalcations. 90.The only minutes that have been identified are for those transactions discussed below[88], where payments were made in respect of alleged fictitious transactions contrived by Mr Ting to conceal his defalcations of Akai’s assets. One such example is the Digiconic transaction, representing an alleged defalcation to Calculus of HK$100 million (US$12.9 million), which was purportedly approved at a meeting of Akai’s board, purportedly attended by only Mr Ting, Mr Tam and Ms Loh.[89] I address these minutes in greater detail below[90]. 91.These minutes do not dissuade me from concluding that the Board of Directors of Akai, including the non-executive directors, provided no effective oversight over the activities of Mr Ting. Mr Ting’s control over Akai was total and unfettered. G.3 Persons Acting under the Control and Direction of Mr Ting 92.The transactions in question were conducted either individually or through a number of individuals within Akai who, I find, were accustomed to act in accordance with Mr Ting’s directions. G.3.1 Ms Loh and Mr Tam 93.Ms Loh, was an executive director of Akai from 1990 to at least November 1999. She was an executive director of three other Akai Group companies: Kong Wah from August 1995 to September 1999, Singer from August 1991 to December 1997 and Tomei from 15 May 1997 to 23 June 1999.[91] 94.Mr Tam was based in the office of STC in Canada. Mr Tam was at all relevant times an executive director of STC, Akai and Akai Electric and was a director of Singer until 4 December 1997.[92] He was also, at all relevant times, Executive Vice President and Chief Financial Officer of both STC and Akai and was Vice Chairman of Singer until 4 December 1997.[93] 95.Consistent with their subordinate positions in Akai’s hierarchy,[94] Mr Ting agreed in his s.221 examination that Mr Tam and Ms Loh both reported to him.[95] G.3.2 Ms Lee 96.Ms Lee was a full time employee of Akai as Mr Ting’s personal secretary and assistant working in the Hong Kong office.[96] Ms Lee worked in the same room as Mr Ting[97] and played a substantial administrative role in Mr Ting’s business affairs.[98] Mr Ting has acknowledged that Ms Lee “would not do anything without my instruction” and that she was “just an instrument, that is all” who controlled a number of companies as “the nominee person for [Akai]”.[99] 97.By the order of Reyes J dated 30 September 2011,[100] which was made by consent following the settlement of the proceedings between Akai and Ms Lee, Ms Lee has admitted allegations against her in Akai’s Amended Points of Claim, including that:[101]
Ms Lee is now bankrupt. Her admissions constitute admissible hearsay evidence which I can rely upon in the present proceedings. I find, as Mr Ting has himself acknowledged, that Ms Lee acted throughout under the control and direction of Mr Ting. 98.Two further junior employees of Akai, who acted as directors or bank account signatories of various Ting Recipients, were:
G.5 Mr Ting’s Control of Akai was Unfettered 99.Mr Ting was the dominant individual within Akai. Corporate governance within Akai was non-existent. Mr Ting regarded Akai as “his” company and the lack of oversight within Akai enabled Mr Ting do so. Mr Ting had unrestricted and unfettered access to Akai’s cash and assets. In every practical sense, his day to day ability to deal with Akai’s assets was absolute and unfettered. Mr Ting’s extraordinary level of control over Akai and its assets placed Akai in a position of acute vulnerability to Mr Ting. Mr Ting could do as he pleased with Akai’s assets. The trust placed by Akai in Mr Ting was unfettered. H. The Collapse and Winding Up of the Akai Group 100.The collapse of Akai led to a mammoth investigation and a raft of legal proceedings. In the Bundles appear 30 judgments from the courts of Hong Kong, Bermuda and England. The winding-up of Akai commenced in Hong Kong on 13 January 2000 when winding-up petitions were issued by a syndicate of Akai’s bankers. The applications to wind-up Akai were met with strenuous opposition and, on at least six occasions, proposals were made to adjourn in order to facilitate “rescue” or “restructuring” plans.[105] These did not come to fruition and Akai was ordered to be wound up in Hong Kong on 23 August 2000.[106] Trading in Akai’s shares was suspended as from that date. On 29 September 2000, Akai was ordered to be wound up in Bermuda under the provisions of the Companies Acts 1981 (Bermuda).[107] 101.The Akai insolvency was described by Lord Millett NPJ as “the largest corporate insolvency in Hong Kong’s history”.[108] Akai’s consolidated balance sheets as at 31 January 1999 and 31 January 2000 disclose that the value attributed to the total assets of Akai fell from approximately US$2.325 billion to only US$265 million within 12 months. 102.The relevant financial information is found in Akai’s Annual Report for the year ended 31 January 1999 and two Information Memoranda prepared by Ernst & Young (Hong Kong) (“EYHK”), auditor of Akai and Akai Group during the Claim Period dated 31 January 2000 and 27 April 2000 respectively, which included Akai’s unaudited results for six months to 31 July 1999 and 12 months to 31 January 2000.[109] Mr Borrelli has summarised the information included in these reports as follows:[110]
103.By the time of the commencement of the winding-up in August 2000, Akai had a net asset deficiency exceeding US$1 billion with few, if any, assets in its control apart from potential causes of action.[111] H.1 Appointment of and Investigation by the Liquidators H.1.1 Appointment 104.The process of appointing the Liquidators of Akai was drawn out by continual opposition from Mr Ting and companies under his control as well as Mr Ho and companies under his control, including Grande HK. The opposition by Mr Ting is a fact that is recorded in the winding up proceedings. Initially in Hong Kong, by the winding up order of 23 August 2000, Le Pichon J appointed the Official Receiver as Provisional Liquidator of Akai and Kong Wah.[112] Provisional Liquidators were also appointed in Bermuda between 28 August and 29 September 2000, and a winding up order was made on the latter date.[113] In opposing the winding up order, Mr Ting made an attempt to explain Akai’s unaudited losses of nearly US$2bn as:[114]
105.Between 25 and 27 October 2000, meetings of Akai’s creditors and contributories were called for the purpose of considering the appointment of the Provisional Liquidators, Mr Christensen, Mr Fan and Mr Hodgkinson, as the Liquidators of Akai in both Hong Kong and Bermuda. However, due to opposition from Mr Ting, through Blossom Assets, and Mr Ho, through Grande HK, these meetings resulted in a deadlock. Further meetings held in Hong Kong in February 2001 again failed to achieve the appointment of liquidators.[115] 106.Following these meetings, the Official Receiver in Hong Kong and the Liquidators (as Provisional Liquidators) in Bermuda, made applications in Hong Kong and Bermuda respectively for the purpose of resolving the deadlock. Again, these applications were opposed by Mr Ho, this time through Crescent Court Enterprises Limited (“Crescent Court”). 107.As a result of the hearings, which were heard on 21 December 2000 and 7 February 2001 before the Supreme Court of Bermuda and on 9 and 10 May 2001 before the High Court of Hong Kong:
108.Mr Hill replaced Mr Hodgkinson as a Joint and Several Liquidator of Akai in Bermuda and Hong Kong by Orders of the Supreme Court of Bermuda and this Court dated 29 November 2001 and 7 February 2002 respectively. Mr Borrelli replaced Mr Fan as a Joint and Several Liquidator of Akai by Orders of the High Court dated 31 May 2005 and Supreme Court of Bermuda dated 30 June 2005. Ms Walsh then replaced Mr Hill and Mr Christensen as a Joint and Several Liquidator of Akai by Orders of the High Court dated 28 August 2008 and Supreme Court of Bermuda dated 16 October 2008. 109.I accept the evidence of Mr Borrelli in his two Witness Statements on the initial investigations of the Provisional Liquidators and the Liquidators in both Hong Kong and Bermuda showing that:[118]
110.The evidence that led Ground CJ in the Supreme Court of Bermuda to find that Mr Ting was “through a long process of evasion and prevarication, avoiding providing them with any meaningful information.”[119], as recorded in the winding up proceedings, is admissible hearsay evidence before me and leads me to also find that Mr Ting was obstructive and not co-operating with the Liquidators. That evidence is summarised by Ward JA in the Bermuda Court of Appeal:[120]
111.In addition, there were insufficient resources to fund the liquidation and the investigations required. In September 2001, Mr Borrelli was asked by the then Liquidators to investigate and facilitate the restructuring of Akai’s listed status to secure the funds necessary for investigations.[121] In sanctioning a proposed scheme of arrangement in October 2002, Kwan J highlighted the difficulties faced by the Liquidators:[122]
112.These difficulties have also been recognised by the Court of Final Appeal. As noted by Lord Hoffmann NPJ on the question of privilege attaching to s.221 transcripts in the EYHK proceedings, the only significant source of assets left for the Liquidators to pursue were claims against Akai’s former management and former auditors:[123]
113.The Liquidators accordingly set out to secure funds for the investigations through the restructuring of Akai’s listing status. H.1.3 Sale of Akai’s Listing Status on the SEHK 114.In late 2002, faced with insufficient funds in Akai to fund its liquidation, the Liquidators of Akai sought to realise the value of Akai’s listing status on the Stock Exchange of Hong Kong.[124] Akai’s listing status was the sole readily realisable asset of any value available to the Liquidators. In order to realise that value a scheme of arrangement pursuant to s.99 of the Companies Act 1981 was proposed, whereby Akai’s shares, and hence its listing status, would be transferred to a third party, Hang Ten Group Holdings Limited (“Hang Ten”). Pursuant to s.99 of the Companies Act 1981, the scheme required the approval of three quarters in value of Akai’s shareholders present and voting at a meeting convened for that purpose. 115.Prior to the scheme meeting, the Liquidators were concerned that entities associated with Mr Ting might be motivated to vote against the scheme, in order to frustrate the Liquidators in their investigations into Akai. 116.Accordingly, in advance of the scheme meeting on 22 November 2002, the Liquidators applied ex parte to the Supreme Court of Bermuda and obtained an order that the Chairman of the scheme meeting be permitted to mark votes cast by companies controlled by Mr Ting, namely, Blossom and Costner Holdings Limited (“Costner”) as “objected to”, with the validity of those votes to be subject to further hearing. 117.At the scheme meeting on 25 November 2002, Blossom and Costner voted against the scheme via proxies, those proxies being Mr Ting’s solicitors, Mr Ng and Mr Liu. At first the Chairman of the meeting rejected the proxy forms as they were simply signed by Mr Ting without any evidence that he was duly authorized to do so. Within minutes, Mr Ng produced resolutions of Blossom and Costner, purportedly signed by Mr Ting, appointing Mr Ng and Mr Liu “to attend, act and vote” at the meeting. In later proceedings in Bermuda, it was found that the signatures on these resolutions were forgeries.[125] 118.At the time of the scheme meeting the Liquidators were under a deadline, in that the agreement with Hang Ten provided that it could terminate the transaction if the scheme was not approved by 31 December 2002. That date was unlikely to be extended, due to the involvement of outside investors in Hang Ten. If the arrangement with Hang Ten failed the Hong Kong Stock Exchange would not permit some other buyer to be substituted, with the result that the value of Akai’s listing status would be lost.[126] 119.On 2 December 2002, pursuant to the orders previously obtained on 22 November 2002, the Liquidators applied to the Supreme Court of Bermuda to disallow the votes of Blossom and Costner. This application was made on the basis that:[127]
120.To facilitate an early hearing of the disallowance application, the Liquidators agreed to confine the issues to an alleged ulterior purpose. However, the Liquidators’ attempt to have the matter heard expeditiously was frustrated by what has been described as “a bizarre series of Court listing hiccups”.[128] The consent orders provided for a hearing commencing on 20 December 2002. This hearing was to be held before Acting Justice Storr. On 18 December 2002, Acting Justice Storr recused himself from the hearing, on the application of Mr Ting. The hearing was then to be held before Mrs Justice Wade-Miller on 27 December 2002. However, on 23 December 2002, the Liquidators were informed that Mrs Justice Wade-Miller had broken her arm and would be unable to hear the matter on 27 December 2002. The Liquidators then suggested the appointment of Mr Wendell Hollis as an acting Judge to hear the matter on 30 and 31 December 2002. However, on 27 December 2002, Mr Hollis also recused himself from hearing the matter, following another application by Mr Ting. At this point, there was no judge in Bermuda available to hear the matter before 31 December 2002, the deadline after which Hang Ten could, and may well have, terminated the transaction to acquire Akai’s listing. 121.Following the recusal of Mr Hollis, the Liquidators were placed in the invidious position whereby, unless they could reach an agreement with Mr Ting for Blossom and Costner to withdraw their opposition to the scheme, it would likely fail as it would not be sanctioned by the Court before the 31 December 2002 deadline set out in the Restructuring Agreement. The sale of Akai’s listing would then be lost. 122.Between 27 and 31 December 2002, Blossom, Costner and Mr Ting were able to take advantage of this substantial commercial pressure on the Liquidators and negotiate what it referred to as a “Settlement Agreement”. The Settlement Agreement provided for Blossom and Costner to withdraw their opposition to the scheme and contained a covenant in favour of Mr Ting in the following terms:[129]
123.Mr Ting has repeatedly invoked the terms of this Settlement Agreement to prevent the Liquidators from bringing the present proceedings. These attempts were finally ended by the Privy Council which, on 29 July 2010, held that Mr Ting was not entitled to rely on the Settlement Agreement due to his unconscionable conduct in obtaining it.[130] Given its terms, the validity of the Settlement Agreement is an issue that is relevant in the proceedings before me and the finding of the Privy Council creates a binding issue estoppel[131]. H.1.4 Reconstruction of Akai’s Books and Records 124.Following the securing of funds through the restructuring of Akai’s listing status, the Liquidators went on to undertake a process of reconstructing and examining Akai’s books and records.[132] The Liquidators contacted over 150 banks and over 50 professional advisors who the Liquidators believed might hold records relevant to Akai, seeking the preservation and production of documents. However, very few of those parties provided information or documents voluntarily.[133] The Liquidators thus sought to make use of the provisions of the Companies Ordinance and, in particular, s.221 in order to obtain further information. H.1.5 Mr Ting’s Attempts to Avoid Examination 125.On 10 October 2003, Mr Ting, Blossom and Costner commenced proceedings in the Supreme Court of Bermuda seeking an injunction that the Liquidators be restrained from issuing any proceedings or summons against Mr Ting in relation to the affairs of Akai and Kong Wah (“the 2003 Proceedings”). 126.On 6 November 2003, the Liquidators applied in Hong Kong to examine Mr Ting and further sought the production of documents pursuant to s.221 of the Companies Ordinance. The 2003 Proceedings were subsequently served by Mr Ting and the application for his examination in Hong Kong was stayed pending their determination. 127.The hearing of the 2003 Proceedings took place on 18 and 19 February 2004 before Kawaley J. In a judgment delivered on 24 February 2004, Kawaley J held that the Settlement Agreement was “not breached by the section 221 Summonses or prior requests by the Liquidators for his assistance”. Kawaley J also rejected Mr Ting’s claim that there was an oral agreement between the Liquidators and Mr Ting and held that the Liquidators had not made a promise to “leave Mr Ting alone”.[134] In response to Mr Ting’s submission that to allow the Liquidators to continue would be unjust, Kawaley J stated:[135]
128.Mr Ting appealed against the decision of Kawaley J by Notice of Appeal filed on 2 April 2004. The appeal pursued only issues of the construction of the Settlement Agreement and costs, the “oral agreement” argument having been abandoned. On 5 May 2004, Mr Ting amended his summons filed on 29 December 2003 seeking a stay of the s.221 examination application in Hong Kong pending the final determination of all appeals against the decision of Kawaley J, including his Notice of Appeal filed on 2 April 2004 and the delivery of verdicts in criminal proceedings against him in Hong Kong. Mr Ting’s applications for stays and the Liquidators’ applications for the examination of Mr Ting pursuant to s.221 were heard before Kwan J on 5 May 2004 and judgment was reserved. 129.Before any judgment was delivered by Kwan J, Mr Ting’s appeal in the 2003 Proceedings was heard in the Court of Appeal for Bermuda on 23 and 24 June 2004. In a judgment delivered on 2 July 2004, the Court of Appeal dismissed the appeal, upheld Kawaley J’s decision and thereby confirmed the finding that the Settlement Agreement did not preclude the Liquidators from examining Mr Ting about the affairs of Akai.[136] 130.On 7 September 2004, Kwan J’s judgment on Mr Ting’s stay application and the Liquidators’ application to examine Mr Ting was delivered. Kwan J granted the Liquidators’ application for orders that Mr Ting attend court on a date to be fixed to be examined and dismissed Mr Ting’s summons to stay the examination proceedings. Kwan J described Mr Ting as “the most important and crucial person to provide information to the Liquidators”.[137] Mr Ting appealed against Kwan J’s order for his examination. On 13 April 2005, the Court of Appeal dismissed the appeal.[138] Mr Ting was thereafter examined over the course of eight days in August 2005. H.1.6 Discovery of Serious Fraud 131.On 28 October 2004, the Liquidators made an application under s.221 to obtain from the Commercial Crime Bureau a list of the warrants issued by the Commercial Crime Bureau, the documents seized by the Commercial Crime Bureau, and individuals interviewed by the Commercial Crime Bureau in relation to the affairs of Akai.[139] On 11 November 2004, Kwan J made orders compelling the Commercial Crime Bureau to produce to the Liquidators the lists of documents sought. These lists were subsequently produced to the Liquidators.[140] On 9 May 2005, the Liquidators made a further application under s.221 for the production of certain documents specified on the lists provided by the Commercial Crime Bureau. Orders were made in relation to this application on 18 May 2005 and 9 June 2005.[141] 132.In mid-June 2005, the Liquidators received from the Commercial Crime Bureau the documents sought by the second s.221 application in relation to the affairs of Akai, consisting of 150 box files of documents.[142] I accept the evidence of Mr Borrelli that these records, once analysed by the Liquidators, disclosed to the Liquidators for the first time what appeared to be a pattern of systematic and sustained fraudulent diversion of Akai’s funds to Mr Ting’s own interests between 1996 and 1999. This had never been disclosed to the Liquidators at any prior time and had not been uncovered by the Liquidators in the course of their investigations to that time.[143] A very substantial proportion of the evidence to be adduced by Akai in these proceedings was sourced from the documents produced by the Commercial Crime Bureau. H.2 Mr Ting’s Criminal Trial 133.In the meantime, Mr Ting’s criminal trial on two counts of false accounting commenced on 12 May 2005 and he was convicted by a jury on 29 June 2005 of both counts charged. In 2001, the Liquidators had made a report to the Commercial Crime Bureau regarding an investment by Akai which did not appear to be supported by accounting documents. This was a purported purchase by Akai, through a wholly owned subsidiary, of 50% of MicroMain Systems Limited (“MicroMain”). As a result of the report by the Liquidators, on 2 June 2004, Mr Ting was charged with two counts of false accounting under s.19(1)(a) of the Theft Ordinance, Cap. 210. The first count related to the audited accounts of Akai published 26 June 1999. Mr Ting was alleged to have dishonestly made the false or misleading assertion that Akai held a 50% share interest in MicroMain. By the second count, Mr Ting was alleged to have dishonestly falsified a letter dated 26 June 1999, by stating that a subsidiary of Akai, Evora Limited (“Evora”), had purchased shares held by Winsoft Limited in MicroMain for HK$300 million. 134.At the conclusion of a 38-day trial on 29 June 2005, a jury found Mr Ting guilty of both counts of false accounting. Mr Ting was sentenced to six years imprisonment. 135.On 2 September 2006, the Court of Appeal set aside Mr Ting’s conviction on the basis of “the wrong way that the prosecution had put part of its case”[144] and resulting misdirections by the trial judge and ordered a retrial. Mr Ting successfully appealed to the Court of Final Appeal against the decision to order a retrial. Although the Court of Final Appeal found that Mr Ting was “properly found by a jury to have acted with dishonesty”,[145] the disadvantages of a further trial including the time, expense, difficulty and length of imprisonment served by Mr Ting, outweighed the advantages of a retrial. Accordingly the Court held that it was not in the interests of justice to order a retrial.[146] In a subsequent judgment regarding the costs of the trial, Li CJ noted that Mr Ting’s “convictions were only set aside because the Court of Appeal considered there had been a misdirection … which was not inconsistent with the finding of dishonestly”.[147] 136.As the conviction was set aside, the evidence of the criminal proceedings form part of the background history to the current proceedings. The fact of and the findings of the courts in the criminal proceedings do not constitute proof of any dishonesty or wrongdoing on the part of Mr Ting. 137.The decision of the Court of Final Appeal was delivered on 5 November 2007. Mr Ting’s passport was returned to him, he departed Hong Kong on that day, and he is not believed to have returned since. H.3 Mr Ting’s Section 221 Examination 138.In August 2005, during Mr Ting’s period of imprisonment, he was examined by the Liquidators pursuant to the orders under s.221 of the Companies Ordinance. The examination was a formal procedure taking place over eight days before Master De Souza. Mr Ting was represented by counsel and gave his evidence, under affirmation, in English. At the conclusion of the examination, Mr Ting signed a copy of the examination transcript confirming that it was an accurate record of his evidence.[148] 139.Although the examination transcript reveals that Mr Ting was generally uncooperative and did not assist the Liquidators[149], nevertheless, Mr Ting’s s.221 examination transcript is of particular importance in these proceedings as Mr Ting has elected not to give evidence. Akai is entitled to rely on portions of Mr Ting’s s.221 examination transcript as evidence in these proceedings, in particular the following admissions or concessions made by Mr Ting in the course of the examination:
H.4 Other Litigation Pursued by the Liquidators 140.In addition to the present action, the Liquidators have brought three major actions on behalf of Akai. H.4.1 Akai Holdings Ltd (in Liq) v Ernst & Young (a Hong Kong Firm) HCCL 29/2004 141.In May 2004, the Liquidators issued a writ in an action against EYHK, alleging that EYHK had been negligent in their audits of Akai and of the Akai Group for each of the years ending 31 January 1997, 31 January 1998 and 31 January 1999 (“EYHK Proceedings”). The matter was settled in the first week of trial in September 2009 on confidential terms for a substantial sum payable by EYHK to Akai. 142.Essentially, Akai claimed that EYHK’s negligence allowed Mr Ting to commit of the same numerous and substantial defalcations of Akai’s assets over the same Claim Period as is alleged in this case, as well as cause losses to Akai in relation to transactions involving granting various guarantees to HSBC (US$41.3 million) and cause the loss suffered on the TFB transaction (US$50.8 million) referred to below. H.4.2 Akai Holdings Ltd (in liq) v Thanakharn Kasikorn Thai Chamkat (Mahachon) HCCL 59/2004 143.In December 2004, the Liquidators commenced an action against Thai Farmers Bank (“TFB”) in which they alleged that Mr Ting breached his fiduciary duties to Akai and TFB either knowingly assisted in that breach or was a knowing recipient of trust property (“TFB Proceedings”). 144.The matter concerned a substitution, in early December 1998, of Akai as a borrower with TFB of US$30 million in place of Singer, a company which was in financial difficulty and in which Mr Ting had an interest through his very substantial interest in STC and his management responsibilities for both Singer and Akai. By this transaction, referred to as the “Switch Transaction”, Akai incurred a substantial liability to TFB and received no corporate benefit. TFB received security in the form of 56 million shares owned by Akai and Akai Electric. Mr Ting, purporting to act on behalf of Akai, executed the relevant documents himself.[157] 145.Although Stone J found that in causing Akai to enter into the Switch Transaction, Mr Ting had acted in breach of his fiduciary duties[158] , he went on to dismiss the claim on the basis that TFB was entitled to rely on the apparent authority of Mr Ting to enter into the transaction.[159] The Court of Appeal overturned Stone J’s decision, and awarded Akai compensation in the sum of some US$22 million plus compound interest.[160] As to Mr Ting’s breach of fiduciary duty, Le Pichon JA stated that “Mr Ting could not have been acting honestly when he committed Akai to the transaction”, whilst Cheung JA observed that “the switch transaction was blatantly to the disadvantage of Akai.”[161] The Court rejected the contention that Mr Ting had apparent authority to enter into the transaction.[162] 146.The Court of Final Appeal dismissed TFB’s appeal.[163] TFB argued before the Court of Final Appeal that Mr Ting’s apparent authority to enter into the Switch Transaction was reinforced by Mr Ting’s presentation of Executive Committee minutes. Lord Neuberger NPJ noted Stone J’s finding that “the Executive Committee minutes was a false document, which had been dishonestly prepared by Mr Ting, or at least on his instructions” and that “No meeting of Akai's Executive Committee was held on that day.”[164] Lord Neuberger NPJ also noted the finding, at all levels, that Mr Ting had acted dishonestly in causing Akai to enter into the Switch Transaction when he had no authority to do so.[165] However, Mr Ting was not a defendant to the TFB Proceedings and it has not been suggested that the findings there create issue estoppels against Mr Ting in these proceedings or that the defences he has raised in this action amount to a collateral attack on the judgments in the TFB proceedings. The findings of the courts in these proceedings do not constitute proof of any dishonesty or wrongdoing on the part of Mr Ting in respect of the alleged defalcations, the subject of the claims in these proceedings. H.4.3 Akai Holdings Ltd (in liq) v Ho Wing On, Christopher HCCL 34/2005, HCCL 40/2005 147.In November 2005, the Liquidators on behalf of Akai and Kong Wah commenced an action against Mr Ho, Grande HK and a number of other parties (“Grande Proceedings”). This action related to the Grande group’s covert takeover of the direction and control of Akai from about November 1999 and associated breaches of fiduciary and other duties. The proceedings were settled on confidential terms in late 2009 for a substantial sum. 148.Essentially, Akai claimed that as a result of a covert agreement with Mr Ting in November 1999 (“Management Agreement”), Mr Ho, Grande HK and other defendants connected with Grande HK took control of Akai and its subsidiaries, and in so doing, became de facto and/or shadow directors of Akai and subject to the same fiduciary duties to Akai as owed by an ordinary de jure director. Once in this position, Mr Ho, Grande HK and the other de facto/shadow directors proceeded to act with disregard for the fiduciary duties that they had assumed towards Akai and the other Plaintiffs. In particular, through a series of transactions, they caused Akai to be divested of all of its valuable assets, and Akai’s corporate opportunities to be redirected to Grande HK, resulting in a loss to Akai of hundreds of millions of US dollars. 149.By a writ of summons dated 8 December 2005, the Liquidators commenced the present proceedings to seek to recover the proceeds of Mr Ting’s alleged defalcations from Everwin, Ferbury Limited (“Ferbury”) and Ms Lee (the former first to third defendants respectively). Mr Ting was added as a defendant to these proceedings on 14 March 2006.[166] 150.The writ was served on Ms Lee and Ferbury, but it was never served on Everwin. The proceedings against Everwin were subsequently discontinued upon the Liquidators of Akai becoming the Liquidators of Everwin.[167] Judgment has already been entered by consent against Ms Lee[168] and against Ferbury,[169] leaving Mr Ting as the only remaining defendant. 151.Mr Ting applied for a stay of these proceedings on the ground of :
152.In addition, on 13 October 2006, Mr Ting, together with his companies Blossom and Costner, had commenced proceedings in Bermuda in Civil Jurisdiction Action No 312 of 2006 (“the Bermuda Proceedings”) seeking what was in effect an anti-suit injunction restraining Akai and the Liquidators from pursuing claims against Mr Ting in Hong Kong. 153.On 4 April 2007, the present proceedings were stayed in Hong Kong by consent, pending the determination of the Bermuda Proceedings.[171] The Bermuda Court ordered an expedited trial, which took place from 22 to 29 October 2007 before Ground CJ. 154.Essentially, Mr Ting sought to rely on the covenant not to sue in his favour contained in the Settlement Agreement in order to restrain Akai from pursuing these proceedings against him. By a judgment dated 5 December 2007, Ground CJ dismissed the claims of Mr Ting and his companies and granted the declaration sought by Akai that the Settlement Agreement was unenforceable. By orders made in February 2008, Akai was awarded indemnity costs. The orders also provided, in effect, that the Settlement Agreement did not apply to a claim by Akai for breach of fiduciary duty against Mr Ting which was neither disclosed by Mr Ting, prior to execution of the Settlement Agreement, nor known to the Liquidators.[172] 155.Having lost in Bermuda at first instance, Mr Ting, by summons dated 18 December 2007,[173] sought a further stay of the current proceedings, pending his appeal in the Bermuda Proceedings to the Bermuda Court of Appeal (and if applicable, to the Privy Council). On 20 December 2007, Stone J refused these applications and handed down his reasons for decision on 11 January 2008.[174] 156.As a result, Mr Ting was required to file his Defence, which he eventually did on 11 February 2008. Mr Ting also appealed against the decision of Stone J to the Court of Appeal, in CACV 15 of 2008.[175] The hearing of the appeal in Hong Kong was fixed for 18 July 2008. In the meantime, however, Mr Ting’s appeal in the Bermuda Proceedings was heard before the Court of Appeal of Bermuda from 17 to 19 June 2008. Accordingly, the parties agreed to a stay of the appeal and a further stay of these proceedings pending determination of Mr Ting’s appeal to the Court of Appeal of Bermuda.[176] 157.On 28 November 2008, the Bermuda Court of Appeal reversed the decision of Ground CJ and made orders restraining the Liquidators from pursuing these proceedings against Mr Ting. Akai and its Liquidators appealed against this decision to the Privy Council. On 12 January 2009, further consent orders were made in these proceedings staying the appeal to the Court of Appeal and the action against Mr Ting generally pending the determination of Akai’s appeal to the Privy Council.[177] 158.The Liquidators’ appeal to the Privy Council was heard in May 2010. On 29 July 2010, the Privy Council delivered its advice which allowed the Liquidators’ appeal and declared that Mr Ting was not entitled to rely upon the Settlement Agreement in order to defeat any claims advanced by the Liquidators or Akai. Accepting Ground CJ’s findings of fact, the Privy Council held that Mr Ting had engaged in unconscionable conduct in procuring the Settlement Agreement and that it was, therefore, unenforceable as a matter of law.[178] 159.Accordingly, the stay of the present proceedings lapsed and the Liquidators took steps to resume these proceedings. I.3 Resumption of these Proceedings I.3.1 Pleadings and Expert Evidence 160.The Liquidators prepared amendments to the Points of Claim to include claims against Mr Ting for the substantial defalcations of Akai’s assets, which only came to light as a result of the Liquidators’ investigations that were concluded after the issuance of the writ in these proceedings. On 22 June 2011, Akai took out a summons for leave to amend its Points of Claim.[179] Mr Ting opposed the amendments on multiple grounds, including that the amendments introduced new claims such that if leave to amend was granted, Mr Ting would be deprived of an accrued limitation defence. On 24 June 2011, Reyes J granted Akai’s summons for leave to amend[180] and Akai filed its Amended Points of Claim.[181] Mr Ting sought leave to appeal against that order,[182] which application was heard and dismissed by the Court of Appeal on 20 December 2011.[183] Reasons for the decision were handed down on 22 March 2012.[184] Barma J (with whom Hartmann JA agreed) found that the amendments did not deprive Mr Ting of an accrued limitation defence because the new claims introduced by the amendments were ones to which no limitation period applied, being based on fraud or fraudulent breach of trust within s.20(1) of the Limitation Ordinance. 161.In the interim, Mr Ting filed his Amended Points of Defence on 19 September 2011 after an unless order was made against him.[185] 162.At a case management hearing on 29 February 2012, Reyes J made directions for the exchange of discovery and the filing of witness statements, refusing to allow any expert evidence to be filed. He also directed that the action be set down for trial.[186] On 2 to 3 May 2012, the parties filed Lists of Documents.[187] 163.On 7 June 2012, Mr Ting filed his Re-Amended Points of Defence pursuant to leave granted by Reyes J.[188] Witness statements were exchanged on 28 June 2012[189] and Akai filed a 2nd List of Documents the next day.[190] On 12 July 2012, Akai filed its answers to Mr Ting’s Request for Further and Better Particulars.[191] On 29 October 2012, the Notice of Trial was issued with the trial listed for 20 days from 18 November 2013.[192] 164.Between 8 February 2013 and 27 May 2013, Mr Ting issued three summonses in these proceedings, for leave to amend, specific discovery and expert evidence.[193] By order dated 13 May 2013, I allowed the amendments in the form of the Re-Re-Amended Points of Defence dated 13 May 2013[194] and granted leave for Akai to file a Re-Amended Reply,[195] which was filed on 10 June 2013.[196] 165.On 12 July 2013, I granted leave for Mr Ting to adduce expert evidence and for Akai to adduce expert evidence in reply. Further orders were made for Akai to disclose amounts received in settlement in respect of certain claims against other parties by way of a confidential affidavit of Mr Borrelli, which was provided to Mr Ting’s solicitors on 23 July 2013, and for Akai to provide the relevant further and better particulars served in those claims.[197] Akai has since filed four further Lists of Documents, which included the further and better particulars ordered by the Court on 12 July 2013, and its pre-trial checklist.[198] 166.On 9 August 2013, Mr Ting’s expert, Mr Bowyer of BDO, delivered his report in respect of Akai’s loss and damage (“Bowyer Report”).[199] On 23 September 2013, Akai’s expert, Mr David Spence of Grant Thornton, delivered his responsive expert report on Akai’s loss and damage (“Spence Report”).[200] At the CMC hearing on 30 September 2013, I directed the experts to confer and prepare a joint report setting out the areas of agreement and disagreement and the reasons why (“Joint Expert Report”). On 28 October 2013, the Joint Expert Report was delivered.[201] The Joint Expert Report also appended a supplement to the expert report ofMr Bowyer in which Mr Bowyer set out the amendments he had made to the loss and damage calculated in his first report dated 9 August 2013.[202] I.3.2 Akai’s Bankruptcy Petition and Mr Ting’s First VCF Application 167.In addition to resuming the prosecution of these proceedings in 2012, on 4 June 2012, Akai presented a bankruptcy petition (“Petition”) against Mr Ting in respect of the unpaid costs orders made in favour of Akai by the Bermuda Court and the Privy Council in the Bermuda Proceedings. Mr Ting did not dispute the debt, which totalled US$1,067,495 and GBP319,787 (plus interest), but opposed the Petition on the basis that the Hong Kong courts lacked jurisdiction to make a bankruptcy order against him. Akai has since pursued the Petition in parallel with these proceedings. 168.On 8 March 2013, the trial of the Petition was fixed to be heard over two days on 27 and 28 August 2013. On 7 May 2013, Akai issued a summons for orders that Mr Ting attend at the hearing of the Petition for cross-examination or no affidavit filed by him shall be used in evidence at the hearing of the Petition. Ng J heard and made orders in terms of Akai’s cross-examination summons on 27 May 2013. No further steps were taken by Mr Ting until 9 August 2013, when he issued a summons to give his evidence by video conferencing facilities (“VCF”) at the trial of the Petition, which, at that time, was less than three weeks away. The summons was taken out on the basis that Mr Ting suffered from Adjustment Disorder with Depressed Mood and Post-Traumatic Stress Disorder which prevented him from coming to Hong Kong. 169.Mr Ting’s VCF application was heard and dismissed by Ng J on 20 August 2013 on the grounds that the application was inexcusably late and that Mr Ting had failed to demonstrate that he was unable to come to Hong Kong to attend the trial of the Petition. On 26 August 2013, Mr Ting issued a summons for leave to appeal against that decision. On the morning of 27 August 2013, the first day of the trial of the Petition, Mr Ting’s counsel made an oral application to adjourn the Petition pending the outcome of Mr Ting’s application for leave to appeal. Ng J granted the adjournment on the undertaking of Mr Ting’s counsel to prosecute the summons with due diligence and all dispatch. The application for leave to appeal was dismissed by the Court of Appeal on 7 March 2014[203]. I.3.3 Mr Ting’s Second VCF Application and Supplemental Witness Statement 170.Notwithstanding Mr Ting’s failure to obtain an order for VCF in the bankruptcy proceedings, on 10 October 2013 Mr Ting filed a summons seeking leave to give his evidence by VCF at the trial of these proceedings and to file a further witness statement.[204] On 16 October 2013, I dismissed Mr Ting’s VCF application on the grounds that he had not demonstrated that he was unable to come to Hong Kong to attend court in person.[205] I also rejected Mr Ting’s application for leave to appeal. No application to the Court of Appeal for leave to appeal has been made. 171.Although I was not persuaded by Mr Ting’s evidence in support of his VCF application, nevertheless, I sought to accommodate Mr Ting’s attendance at trial, including by:
172.On 29 October 2013, Mr Ting filed and served his proposed supplemental witness statement. However, at the hearing on 30 October 2013, Mr Ting’s counsel was unable to tell me that he would attend for trial. Accordingly, I did not make a ruling on Mr Ting’s application for leave to file the supplemental witness statement and gave a direction for Mr Ting to confirm, by 8 November 2013, whether he would attend the trial to give evidence. I also gave directions for the order in which witnesses were to give evidence at the trial (assuming Mr Ting’s attendance) as follows: Mr Borrelli (factual), Mr Ting (factual), Mr Spence (expert) and Mr Bowyer (expert).[206] I.3.4 Mr Ting’s Confirmation of Non-Attendance 173.On Friday, 8 November 2013, Mr Ting confirmed that he would not be attending trial. J. The Documentary Evidence 174.Mr Borrelli has detailed how the books and records of Akai were reconstructed in §§87 to 96 of his first witness statement, explaining the reasons for the absence of books in §90, including their removal from Akai’s premises and the deliberate withholding of those books from the Liquidators. It was only in 2005 when documents were received from CCB and carefully studied that evidence of defalcations emerged, as detailed in §§37 to 41 of his second witness statement. Notwithstanding these limitations, he is satisfied that he has obtained adequate documentary evidence of the defalcations. 175.It is Akai’s case that the documents required to demonstrate that a payment has been made from the bank account of Akai and received in the account of a Recipient are relatively straightforward and include paid cheques, Akai bank statements and Recipient bank statements. Where these documents were not available, Mr Borrelli has had regard to, among others, (i) instruction letters to banks; (ii) bank records of customer deposits; and (iii) bank internal documents.[207]Mr Ting’s accounting expert, Mr Bowyer, accepted that “the Plaintiff has, for the majority of the alleged defalcations, demonstrated that payments have been made”.[208] 176.I address the sufficiency of the documentary evidence to prove the alleged defalcations below. So far as the discovery made by Akai is concerned, I note that Mr Bowyer accepted that there was no basis to criticise the adequacy or appropriateness of Akai’s discovery in this action.[209] In the course of discovery applications made by Mr Ting, I did not order Akai to disclose 6,000 lever arch files of documents to Mr Ting but directed the parties to adopt a co-operative and facilitative approach and I further directed Mr Ting’s solicitors to identify the documents or class of documents relating to specific transactions that they wished to inspect. However, no request for further discovery by Mr Ting’s solicitors, whether of specific transactions or otherwise, was ever made. The Liquidators had also extended an invitation to Mr Bowyer to request and inspect further categories of documents but he did not take up the invitation to so do as he had formed the view that the Liquidators did not have any further documents that could assist him.[210] 177.At this point I deal with Mr Ting’s case that, in the particular circumstances of this case, Mr Ting is himself hampered as much if not more than the Liquidators by the absence of books and records, given that he had had no documents and has had no control over any documents of Akai since November 1999,including during the ‘Grande period’ which followed. Mr Ting had long ago left Akai by the time the Liquidators recovered papers from Akai’s offices, or from Grande HK, let alone from the CCB in 2004/2005 and Mr Borrelli had duly conceded in cross-examination that (at November 2000) Mr Ting had no control over the records Grande HK had[211]. Taking Mr Ting’s departure from Akai in 1999 together with the absence of records generally, the evidence did not show and was not consistent with any deliberate attempt by Mr Ting to hide or destroy documentation establishing the transactions now impugned. 178.I do not accept these submissions. Mr Ting, as Chairman, CEO and director of Akai was obliged to ensure that Akai maintained proper books and records. That obligation derived from applicable legislation in both Bermuda (Akai’s place of incorporation) and Hong Kong (where Akai was registered under Part XI of the Companies Ordinance). In particular, under the Bermuda Companies Act 1981:
179.These obligations under Bermuda law are the same as provided by ss.119 (minutes) and 121 (accounts) of the Hong Kong Companies Ordinance. 180.Further, s.274 of the Hong Kong Companies Ordinance (which is applicable in the winding up of Akai by virtue of ss.327(1) and 331) provides that where a company is being wound up, proper books and accounts are deemed not to have been kept if:
181.In addition to maintaining proper books and records, upon Akai’s winding up, Mr Ting also had an obligation to deliver, convey, surrender or transfer to the liquidator any property, books or papers in his hands to which Akai was prima facie entitled if so ordered by the Court or the liquidator in his capacity as an officer of the Court (s 186 of the Bermuda Companies Act and s 211 of the Hong Kong Companies Ordinance). 182.Mr Ting was not excused from these obligations on the ground that he handed over control of Akai to Mr Ho and Grande HK from November 1999. Mr Ting remained a director until Akai was ordered to be wound up. In the circumstances, Mr Ting cannot seek to undermine Akai’s case by praying in aid any alleged inadequacies in the available records that ought to have been kept by Akai whilst under the control and direction of Mr Ting. 183.As was stated by Arden LJ in Re Mumtaz Properties Ltd [2012] 2 BCLC 109 (at §§16-17):
In the same vein is the observation of Deputy High Court Judge Leslie Anderson QC in Re Idessa (UK) Ltd. (in liquidation) [2012] 2 BCLC 109 (at §§16-17) that the absence of books and records cannot be used by the respondents be as a smokescreen to avoid answering questions or as preventing them from fairly presenting their case. The fact that Mr Ting handed over control of Akai to Mr Ho and Grande HK from November 1999 cannot be used to distinguish the present case from the above cases when he remained throughout under a legal obligation to maintain proper books and records and to hand them up to the liquidators. 184.It is Akai’s case that between about February 1997 and July 1999, Mr Ting and various Akai Group employees under his direction engaged in substantial and numerous defalcations of the assets of Akai.[212] Akai claims equitable compensation for the quantum of defalcations between 1 February 1997 and 31 July 1999 of US$837,118,799. The vast majority of the defalcations were made by cheque or bank instructions signed by Mr Ting himself (or others under his direction and control). 185.The defalcations were concealed by Mr Ting through the creation and use of two fictitious deposit accounts in Akai’s General Ledger (the BT-Deposit General Ledger Account and the Temporary General Ledger Account) and by false transactions recorded in Akai’s general ledger. These are considered further below. 186.The quantum of defalcations claimed by Akai, as concealed through the BT-Deposit General Ledger Account, Temporary General Ledger Account and false journal entries in Akai’s general ledger is broken down as follows:[213]
187.The proceeds of Mr Ting’s defalcations were received by numerous persons or entities identified in Akai’s Amended Points of Claim as “the Recipients”,[214] which are discussed in further detail below. In summary, the Recipients can be divided in into five categories, namely:[215]
188.Annexure A of Akai’s Amended Points of Claim lists out particulars of every defalcation and of the 28 Recipients. A summary of Akai’s claim against Mr Ting is set out in §§9 to 16 above and in the following table:
189.It is Akai’s case that:
190.Mr Bowyer agrees that Recipients received assets of Akai amounting to at least US$407,872,263[218]. As identified in the table at §1.10 of the Joint Report,[219] the payments disputed by Mr Bowyer comprise:
L. Payments made without Discernible Commercial Purpose 191.The undisputed payments in the sum of US$408,123,278 are set out in §10 above. The experts are agreed on the basis of the evidence available to them that Recipients “received assets of Akai amounting to at least [US$408,123,278[221]] during the Claim period”[222]. I am satisfied that the documents made available to the Liquidators were sufficient to prove, and I find as a fact, that Akai made payments to, and were deprived of the proceeds of the issue of shares from, the following Recipients in the total sum of US$408,123,278. L.1 Group 1 Ting Recipients 192.I find that Evora, Conben, JT Capital and Restex, received the 23 payments set out in §188 above in the total sum of US$139,186,668. I also find, based on the admissions of Mr Ting[223], that these companies, identified as Group 1 Ting Recipients, were owned and controlled by Mr Ting at all material times. I also find that Mr Ting’s signature appeared on cheques or payment instructions for US$115,621,178 in respect of these payments. 193.I find that CTS Capital, Everwin, Goaltop, Golfland, Higher International Limited (“Higher International”), Investco Trading, Starcode Limited (“Starcode”), Tisco and Worldwide International, identified as Group 2 Ting Recipients, received 93 individual payments in the total sum of US$200,832,662. I also find that Mr Ting’s signature appeared on cheques or payment instructions for US$136,658,822 in respect of these payments. 194.I find that Calculus, Cyclonics Inc (“Cyclonics”), Fiction Corporation (“Fiction”), Primewood and Rosalie Limited (“Rosalie”), identified as Group 3 Ting Recipients, received 6 individual payments in the total sum of US$22,020,714. I also find that Mr Ting’s signature appeared on cheques or payment instructions for US$15,865,637 in respect of these payments. L.4 Ting Associates 195.I find that Mr Ting’s wife, Ms Tseng, Grande HK, TriAsia and Fu Tak International, identified as Ting Associates, received 7 individual payments in the total sum of US$23,494,311. I also find that Mr Ting’s signature appeared on cheques or payment instructions for US$22,072,995 in respect of these payments. L.5 Proceeds from Exercise of Share Options 196.I find that Akai was deprived of the proceeds of 9 amounts receivable by Akai from the exercise of share options between 4 March 1997 and 13 May 1997 in the total sum of US$22,588,923 as set out in the following table:
L.6 The Relationship between Mr Ting and the Group 2 and 3 Recipients, Ting Associates and the Share Capital Recipients 197.In his opening, Mr Ting accepted that the documents provided direct or circumstantial evidence sufficient to raise an inference of control of a number of individual Recipients, albeit mostly through Ms Lee; but that there was no evidence of Mr Ting’s control or any connection with Cyclonics, Primewood and Rosalie. He repeated the latter submission in his closing and added that there was no evidence that Mr Ting controlled his fellow director Ms Loh, or the Share Capital Recipients (save for Blossom), Grande HK or Kuo Recipients. 198.Further, although overall control of Akai by Mr Ting was accepted, it was submitted that there was little evidence that fixed Mr Ting with day-to-day control of the finances of Akai or its accounts. As regards, the latter submission, I have already found that Mr Ting was the controlling and dominant force in the management of Akai’s operations[224]. That control extended to control of Akai’s finances and accounts as so amply demonstrated by Mr Ting’s ability to issue cheques and payment instructions in the very substantial amounts set out in §§192-195 above. L.6.1 The Relationship between Mr Ting and the Group 2 Recipients 199.CTS Capital was incorporated in BVI on 20 November 1996 and was formerly known as Sonic Times Corporation. CTS Capital was struck off on 3 May 1999 for non-payment of annual licence fees and was ordered to be wound up on 14 July 2006.[225] The company had a correspondence address at 3001-3004 Two Exchange Square, 8 Connaught Place, Hong Kong, being the address of Akai’s Hong Kong Office.[226] 200.I find that Mr Ting controlled CTS Capital through his executive assistant Ms Lee, who acted as bank account signatory for CTS Capital’s only known bank account, which was held with Bank of America. That bank account was closed in March 1998.[227] I also infer that Mr Ting controlled CTS Capital from the fact that a concealed payment was made by Akai to CTS Capital of US$3,846,154 during the Claim Period, which he concealed in the GL Account entitled “Kong Wah Holdings Limited”[228], which I deal with below. 201.Everwin was incorporated in BVI on 28 January 1997 and was struck off and ordered to be wound up on 2 November 1999 and 14 June 2006 respectively. Everwin’s correspondence address was GPO Box 6667, Hong Kong, which was an address shared with the Ting Recipients, Fiction and Primewood.[229] 202.I find that Mr Ting controlled Everwin through Ms Lee who was the sole bank account signatory for Everwin’s only known bank account, which was held with Daiwa Bank. Ms Lee acted as signatory for Rituals International Limited (“Rituals”), a BVI company which was the first director of Everwin. Rituals was incorporated in the BVI on 2 January 1996 and was struck off and ordered to be wound up on 1 November 2004 and 14 July 2006 respectively. Rituals was also a director of another Ting Recipient called Fiction.[230] 203.I also infer that Mr Ting controlled Everwin from the fact that concealed payments were made during the Claim Period totalling US$80,444,958[231] from Akai to Everwin, comprising 18 payments which he concealed in the BT-Deposit General Ledger Account[232], which I refer to below. Further evidence of Mr Ting’s control stems from the fact that the funds of one payment to Everwin flowed directly to Mr Ting. DLN 98002 showed that on 2 February 1998 Akai paid HK$40 million (US$5,174,644) to Everwin and on the same day this same amount was paid to Mr Ting’s HSBC bank account.[233] 204.Goaltop was incorporated in BVI on 2 July 1997 and was ordered to be wound up on 14 June 2006. Goaltop had a correspondence address at P.O. Box 25527 Harbour Building, Hong Kong, which was also the address of the Ting Recipients Calculus, Golfland, Higher International, Invesco and Tisco.[234] 205.I find that Mr Ting controlled Goaltop through Ms Lee, who was the sole director of Goaltop and the sole bank account signatory for Goaltop’s only known bank account, which was held with Standard Chartered Bank (Hong Kong) Limited (“SCB”).[235] 206.I also infer that Mr Ting controlled Goaltop from the fact that concealed payments were made to Goaltop during the Claim Period totalling US$93,152,772[236], comprising 30 payments concealed in the BT-Deposit General Ledger Account, 14 payments concealed in the Temporary General Ledger Account and 5 payments concealed in the GL Accounts[237], which I refer to below. Two transactions involving Goaltop in respect of payments of US$6,000,000 and US$14,000,000 are the subject of dispute between the experts in this matter[238], which I refer to below. 207.Golfland was incorporated in BVI on 1 August 1997 and was struck off and ordered to be wound up on 1 May 2000 and 14 June 2006 respectively. Golfland had a correspondence address at P.O. Box 25527 Harbour Building, Hong Kong “c/o Ms Li” which was also the address of the Ting Recipients Calculus, Goaltop, Higher International, Investco and Tisco.[239] 208.I find that Mr Ting controlled Golfland through Ms Lee, who was the sole director of Golfland and the sole bank account signatory for Golfland’s only known bank account, which was held with SCB.[240] 209.I also infer that Mr Ting controlled Golfland from the fact that concealed payments were made from Akai to Golfland during the Claim Period totalling US$81,721,203[241], comprising 8 payments which he concealed in the GL Accounts[242], which I refer to below. Further evidence of Mr Ting’s control stems from the fact that the funds of one payment to Goaltop flowed directly to Mr Ting. DLN 99006 showed that on 8 February 1999 Akai paid HK$6.5 million (US$839,089) to Goaltop and this amount was then paid to Mr Ting by Goaltop on the same day. 210.Higher International was incorporated in BVI on 18 March 1998 and was struck off and ordered to be wound up on 1 November 2001 and 14 June 2006 respectively. Higher International’s correspondence address was also P.O. Box 25527 Harbour Building, Hong Kong “c/o Ms Li”, which was also the address of Calculus, Goaltop, Golfland, Investco and Tisco.[243] 211.I find that Mr Ting controlled Higher International through Ms Lee, who was the sole director of Higher International and the sole bank account signatory for Higher International’s only known bank account, which was held with SCB.[244] 212.I also infer that Mr Ting controlled Higher International from the fact that concealed payments were made from Akai to Higher International totalling US$13,937,128[245], comprising one payment concealed in the GL Accounts and one payment concealed in the Temporary General Ledger Account,[246] which I refer to below. 213.Investco was incorporated in BVI on 2 September 1994 and was struck off on 1 May 2000 for non-payment of its annual licence fees. Investco also had a correspondence address at P.O. Box 25527 Harbour Building, Hong Kong “c/o Ms Li”, which was also the address of Calculus, Goaltop, Golfland, Higher International and Tisco.[247] 214.I find that Mr Ting controlled Investco through Ms Lee, who was the sole director of Investco and the sole bank account signatory for Investco’s only known bank account, which was held with Citic Ka Wah Bank Limited (“CKW”).[248] 215.I also infer that Mr Ting controlled Investco from the fact that concealed payments were made from Akai to Investco during the Claim Period totalling US$29,143,163[249], comprising 10 payments concealed in the Temporary General Account and 3 payments concealed in the GL Accounts[250], which I refer to below. 216.Further evidence of Mr Ting’s control stems from the fact the funds of one payment to Investco flowed directly to Ms Tseng, Mr Ting’s wife. DLN 99097 showed that on 25 June 1999, Akai paid US$6,500,746 (HK$50,250,768) to Investco and HK$23,051,671 (US$2,982,105) of these funds were paid to Ms Tseng on the same day.[251] 217.Starcode was incorporated in BVI on 18 March 1997 and was struck off and ordered to be wound up on 3 November 1998 and 14 July 2006 respectively. Starcode had a correspondence address at Omar Hodge Building, Vickhams Cays I, P.O. Box 362, Road Town, Tortola, BVI “c/o Monita Inc.”[252] 218.I find that Mr Ting controlled Starcode through Ms Lee, who acted as the bank account signatory for Starcode’s only known bank account, which was held with TISCO Securities (Hong Kong) Limited (“TISCO HK”). Ms Lee acted as signatory on behalf of Monita Inc (“Monita”), which was a director of Starcode. Monita was incorporated in BVI on 15 May 1997 and was struck off on 3 November 1998 for non-payment of annual licence fees.[253] 219.I also infer that Mr Ting controlled Starcode from the fact that a concealed payment was made from Akai to Starcode during the Claim Period of US$181,113[254] which he concealed in the BT-Deposit General Ledger Account,[255] which I refer to below. On 7 October 1998 Akai paid HK$1,400,000 (US$181,113) to TISCO HK by cheque.[256] A handwritten note to Mr Ting on an execution notice addressed to Starcode from TISCO HK indicated that this was payable to TISCO HK to settle amounts due for securities purchased by TISCO HK for the account of Starcode.[257] The corresponding journal entry, dated 7 October 1998, amounted to a payment by Akai for the benefit of Starcode without any commercial purpose or value to Akai. 220.Tisco was incorporated in BVI on 10 November 1989 and was struck off and ordered to be wound up on 3 May 1999 and 14 July 2006 respectively. It was formerly known as Almeida Morano Limited. Tisco had a correspondence address at P.O. Box 25527 Harbour Building Post Office, Hong Kong which was also the address of Calculus, Goaltop, Golfland, Higher International and Investco.[258] 221.I find that Mr Ting controlled Tisco through Ms Lee, who was the sole bank account signatory for Tisco’s only known bank account, which was held with Daiwa Bank. Ms Lee acted as signatory on behalf of Larkspur Company Limited (“Larkspur”), which was the sole director of Tisco. Ms Lee was Larkspur’s only authorised signatory. Larkspur was incorporated in BVI on 9 August 1990 and struck off on 1 May 1998 for non-payment of annual licence fees.[259] 222.I also infer that Mr Ting controlled Tisco from the fact that concealed payments were made from Akai to Tisco during the Claim Period totalling US$140,280,195, comprising 4 payments concealed in the BT-Deposit General Ledger Account and 12 payments concealed in the GL Accounts[260], which I refer to below. 11 of the 16[261] payments from Akai to Tisco form part of the Primewood transaction which I refer to below. 223.Worldwide International was incorporated in BVI on 14 October 1993 and was struck off and ordered to be wound up on 1 May 1998 and 14 July 2006 respectively. Worldwide International had a correspondence address at 3001-3004 Two Exchange Square, 8 Connaught Place, Hong Kong, being the address of Akai’s Hong Kong Office.[262] 224.I find that Mr Ting controlled Worldwide International through Ms Lee, who was the sole director of Worldwide International and the sole bank account signatory for Worldwide International’s only known bank account, which was held with SCB.[263] 225.I also infer that Mr Ting controlled Worldwide International from the fact that concealed payments were made from Akai to Worldwide International totalling US$23,366,046[264], comprising 7 payments concealed in the BT-Deposit General Ledger Account and 1 payment concealed in the GL Accounts called “Kilter Ltd” and “The Singer Co N.V”[265], which I refer to below. L.6.2 The Relationship between Mr Ting and the Group 3 Recipients 226.Calculus was incorporated in the BVI on 3 January 1997 and was ordered to be wound up on 14 July 2006. Calculus’ correspondence address was Harbour Building, P.O. Box 25527, Hong Kong, which was the same address as for Goaltop, Golfland, Higher International, Investco Trading and Tisco.[266] 227.I find that Mr Ting controlled Calculus through Ms Tang, who was a full time employee of Akai who served as a personal secretary and assistant to Ms Loh. Ms Tang was the sole bank account signatory for Calculus’ only known bank account, which was held with Bank of America. As signatory, Ms Tang acted on behalf of Seebach Consultants Limited (“Seebach”), a BVI company which was Calculus’ sole director. Seebach was incorporated on 20 December 1990 and struck off for non-payment of annual license fees on 1 May 2001. Ms Tang was also the authorised signatory of Nishi Associates Limited (“Nishi”), which was Seebach’s sole director. Nishi was incorporated on 18 January 1991 and struck off on 1 November 2001 for non-payment of annual license fees.[267] 228.I also infer that Mr Ting controlled Calculus from the fact that he made a concealed payment from Akai to Calculus during the Claim Period by a cheque which he signed of HK$100,000,000, equivalent to US$12,936,611, which he concealed in the GL Account entitled “Famous Products Limited”, which I refer to below. The corresponding journal entry, dated 11 January 1999, represented a payment by Akai to Calculus, allegedly without any commercial purpose or value to Akai.[268] 229.Fiction was incorporated in BVI on 20 November 1996 and was struck off and ordered to be wound up on 1 May 1999 and 20 March 2008 respectively. Fiction had a correspondence address at GPO Box 6667, Hong Kong “c/o Mr Wong”, which was an address shared with Everwin and Primewood. The Liquidators have been unable to identify Mr Wong.[269] 230.I find that Mr Ting controlled Fiction through Ms Hung and Ms Lee. Ms Hung was an Akai accountant from 1 April 1996 to 15 December 1999, whose work included the preparation of the Receipt / Journal Vouchers and Payment Vouchers.[270] Ms Hung was the sole bank account signatory for Fiction’s only known bank account, which was held with Daiwa Bank. Ms Hung acted as signatory on behalf of Rituals, which was the first director of Fiction. Rituals was also a director of Everwin.[271] 231.I also infer that Mr Ting controlled Fiction from the fact that he made a concealed payment from Akai to Fiction[272] during the Claim Period of US$1,785,897[273], which he concealed in the GL Account entitled “Account Payable”.[274] 232.Primewood was incorporated in BVI on 12 May 1997 and struck off and ordered to be wound up on 1 November 1998 and 20 March 2008 respectively.[275] Primewood’s only known correspondence address was GPO Box 6667, Hong Kong, which was the same address used by the Ting Recipients Fiction and Everwin Dynasty.[276] 233.The only known account held by Primewood was a securities trading account with TISCO HK. The sole account signatory for Primewood was a BVI company called Moira Inc (“Moira”), which was incorporated in 22 May 1997 and was struck off on 1 November 2000. Moira was also a director of Primewood.[277] 234.It is Akai’s case that, during the Claim Period, Mr Ting engaged in two defalcations of Akai’s assets totalling US$140,333,333 to Primewood, both being concealed in the BT-Deposit General Ledger Account, and that the corresponding journal entries, dated 4 July 1997 and 31 January 1998, amount to sale proceeds not received by Akai.[278] These transactions form part of the “Primewood Defalcations” and are discussed below. Akai submitted that Mr Ting’s control over Primewood could be inferred from Primewood’s sharing of a correspondence address with Fiction and Everwin and its involvement in the Primewood defalcations.[279] I shall return to the issue of Mr Ting’s control of Primewood after I have dealt with the dispute regarding the Primewood transactions. 235.Rosalie was incorporated in BVI on 22 May 1997 and was struck off on 3 November 1998 for non-payment of fees.[280] 236.It is Akai’s case that, during the Claim Period, Mr Ting engaged in three defalcations of Akai’s assets totalling US$13,379,740 to Rosalie, all payments being concealed in the BT-Deposit General Ledger Account,[281] and that the corresponding journal entries, all dated 4 August 1997, amounted to payments by Akai on behalf of Rosalie for no legitimate commercial purpose. These transactions form part of the Primewood Defalcations and are discussed below. Akai submitted that Mr Ting’s control of Rosalie could be inferred from its involvement in the Primewood Defalcations.[282] I shall return to the issue of Mr Ting’s control of Rosalie after I have dealt with the dispute regarding the Primewood transactions. 237.Finally, I refer to Cyclonics which was incorporated in California and based at 39111 Paseo Parkway, Suite 203, Fremont, California 94538, USA.[283] 238.During the Claim Period, Akai made two payments totalling US$700,000 to Cyclonics, both payments being concealed in the GL Accounts named “Kilter Ltd” and “Turnesa Ltd”. The corresponding journal entries, dated 16 March 1999 and 30 April 1999, amount to payments by Akai to Cyclonics without any commercial purpose or value to Akai.[284] 239.It is Akai’s case that Mr Ting’s control over Cyclonics can be inferred from the receipt by Cyclonics of the proceeds of these two concealed payments for no apparent commercial purpose or value to Akai.[285] I shall return to the issue of Mr Ting’s control of Cyclonics after I have dealt with the dispute regarding the Primewood transactions. L.6.3 The Relationship between Mr Ting and the Ting Associates 240.Ms Tseng was Mr Ting’s wife. Although he made substantial payments to entities he controlled or was associated with, Mr Ting also made a single payment to his wife of US$30,862 on 8 April 1999, which was concealed by a debit entry in Akai’s Temporary General Ledger Account made on 8 April 1999.[286] 241.I find that Mr Ting made payments of Akai’s assets totalling US$18,026,627 during the Claim Period to Fu Tak International and TriAsia, two companies that were incorporated in the Bahamas and Bermuda respectively[287]. They are referred to as the “Kuo Recipients” as they were both associated with Mr Kuo, a Taiwanese businessman, who was also a director of Kong Wah from 23 August 1995 to 2 December 1996 and a director of Semi-Tech (Europe) Limited until at least 12 December 1996.[288] 242.I find, based on the documents reviewed by the Liquidators, that Mr Ting had a pre-existing relationship with Mr Kuo, who himself received unexplained payments from Akai prior to the Claim Period. The pre-existing relationship included that:[289]
243.Further, Mr Kuo received payments of HK$75,000 from Evora on 3 September 1999 and HK$180,375 from Mr Ting directly on 15 March 1999.[290] 244.Mr Kuo was the sole director of Fu Tak International, which was incorporated in the Bahamas on 8 July 1996 but struck off on 31 January 2001 for non-payment of statutory fees.[291] 245.I find that Mr Ting made payment of Akai’s assets of US$1,293,661 to Fu Tak International, which he concealed through the BT- Deposit General Ledger Account.[292] 246.I find that Mr Ting controlled Fu Tak International through Mr Kuo and/or Ms Lee. Upon opening a bank account with SCB in September 1996, Fu Tak International provided SCB with a certified copy of its Memorandum and Articles of Association as well as a board minute authorising the opening of the account. These documents as well as other banking records of Fu Tak International obtained by the Liquidators from SCB reveal that:[293]
247.TriAsia was incorporated in Bermuda on 15 August 1994 and struck off on 3 November 2000. Mr Kuo was a director of TriAsia from at least 17 January 1995. As at 6 January 1997, Mr Kuo and Ms Su Hsung were directors of TriAsia.[294] 248.I find that Mr Ting, or employees under his direction, made five payments of Akai’s assets totalling US$16,732,966 to TriAsia, which he concealed through the BT-Deposit General Ledger Account[295]. Four of the payments are disputed and will be dealt with later but Mr Bowyer conceded that he could not identify any evidence of commercial purpose or value to Akai of a payment of US$92,383 made to TriAsia on 28 December 1998. 249.Grande HK was incorporated in the Cayman Islands on 5 September 1990 and was redomiciled to Bermuda on 15 July 1997. Grande HK was and is a company listed on the SEHK, although trading in its shares has been suspended since 30 May 2011. Provisional liquidators were appointed to Grande HK on 31 May 2011 as a result of a winding up petition presented against it.[296] 250.The chairman and controlling shareholder of Grande HK was Mr Ho[297] who has had a business and commercial relationship with Mr Ting since the early 1990s. This included:[298]
251.I find that Mr Ting made four payments of Akai’s assets totalling US$22,077,406 during the Claim Period to Grande HK, which he concealed in the BT-Deposit General Ledger Account.[299] L.6.4 The Relationship between Mr Ting and the Share Capital Recipients 252.I find that shares were issued by Akai to the Share Capital Recipients detailed below worth US$22,588,923 but that Akai did not receive any payment for them. Mr Bowyer has conceded that he could not identify any evidence of payment being received by Akai pursuant to the exercise of share options. 253.I find that, between 1995 and 1996, Akai issued Mr Ting share options over a total of 9 million Akai shares, which Mr Ting exercised in 1997 without paying any consideration to Akai and which were subsequently concealed via debit entries to the BT-Deposit General Ledger Account. 254.First, on 7 June 1995, Mr Ting was granted share options entitling him to purchase 3 million Akai shares at the option price of HK$10.096 per share. I accept Mr Borrelli’s evidence that he has been unable to find any evidence of an offer being made by Akai to Mr Ting in respect of these options, but that the subsequent exercise of the options indicated that such an offer was made.[300] Next, on 2 August 1996, Mr Ting was offered an option to purchase 6 million Akai shares at an option price of HK$8.832 per share within 3 years from date of the grant. On 23 August 1996, Mr Ting accepted the offer in respect of the 6 million shares and instructed Akai to issue the option certificate to Blossom.[301] I find that Blossom was a BVI company controlled by Mr Ting, through which Mr Ting held approximately 4.6% of the issued capital in Akai.[302] 255.I find that, on 4 March 1997, Mr Ting exercised his options to subscribe for all 9 million shares available to him and that the new ordinary shares were issued to Blossom. Pursuant to the exercise of the options, Mr Ting was obliged to pay Akai a total of HK$83,280,000 (US$10,676,923).[303] 256.Mr Ting prepared two cheques dated 4 March 1997 for HK$52,992,000 and HK$30,288,000 respectively payable to Akai and these were purportedly enclosed with Mr Ting’s notices to exercise his options. However, I find that these sums were never received into Akai’s bank accounts and there was no evidence from Mr Ting’s or his wife, Ms Tseng’s, bank records to indicate that any such payments were made.[304] 257.Rather than paying Akai the exercise price for the options, a debit entry of HK$83,280,000 was made to Akai’s BT-Deposit General Ledger Account, giving the appearance that funds had been received by Akai in consideration for the exercise of the options and thereby concealing the non-payment.[305] The result of these transactions was that Mr Ting, through Blossom Assets, received the benefit of 9 million Akai shares without paying any consideration. 258.Ms Loh was a director of Akai from 1990 to at least November 1999 and was based in Akai’s Hong Kong Office.[306] Ms Loh reported to Mr Ting[307] and has been described as Mr Ting’s “underling”.[308] 259.I find that, after Akai granted Ms Loh a total of 2,925,000 share options in Akai, no demand was made for payment from Ms Loh for the subsequent exercise of those options. Further, the non-payment was concealed by entries in the BT-Deposit General Ledger Account. On 7 June 1995, Ms Loh was first granted an option to purchase 500,000 Akai shares at an option price of HK$10.096 per share within 3 years from the date of grant. Although the Liquidators were unable to find any contemporaneous evidence of this option being granted, there is evidence of its subsequent exercise.[309] On 1 March 1997, Akai offered Ms Loh a further option to purchase 2,425,000 shares at an option price of HK$7.32 within 3 years from the date of grant.[310] On 1 April 1997, Ms Loh accepted the offer and instructed Akai to issue the option certificate to a Granec Limited.[311] 260.On 1 April 1997 and 8 April 1997, Ms Loh exercised her options to subscribe for 2,425,000 shares and 500,000 shares respectively.[312] On 8 April 1997, Ms Loh on behalf of Granec Limited sent two memoranda to Akai and requested that the shares in respect of the two share options be issued to Bonny Limited (“Bonny”), a company incorporated in the BVI on the same day, 8 April 1997.[313] Pursuant to the exercise of the options, Ms Loh was obliged to pay Akai HK$17,751,000 for the 2,425,000 ordinary shares and HK$5,048,000 for the 500,000 ordinary shares, all of which were issued to Bonny.[314] 261.Ms Loh prepared two cheques for HK$17,751,000 and HK$5,048,000 made payable to Akai and dated 1 April 1997 and 8 April 1997 respectively.[315] These were purportedly enclosed with Ms Loh’s notices of exercise. However, I find that Akai never received any payment for the shares issued to Bonny.[316] 262.Rather than demanding payment from Ms Loh or Bonny, debit entries were recorded in Akai’s BT-Deposit General Ledger Account for HK$17,751,000 (US$2,275,769) and HK$5,048,000 (US$647,179), giving the appearance that funds had been received by Akai in consideration for the exercise of the options and thereby concealing the non-payment.[317] 263.Mr Liao You Ming (“Mr Liao”) was a PRC technical consultant for the Akai group between October 1996 and October 1999 with an annual retainer of HK$1,000,000. He has also been described as an Akai “Executive” from 1 August 1997 to 31 March 1998.[318] 264.I find that, following the grant of 4,365,000 Akai share options to Mr Liao, no demand was made for payment from Mr Liao for the subsequent exercise of those options and that the non-payment was concealed by entries in the BT-Deposit General Ledger Account. 265.Akai made the relevant offer to Mr Liao on 1 March 1997 at an option price of HK$7.32 within 3 years from the date of grant. On 17 March 1997, Liao accepted the offer and instructed Akai to issue the option certificate to “Concott Limited” (“Concott”). Concott was incorporated in the BVI on 3 January 1997 and was struck off on 3 November 1998 for non-payment of licence fees.[319] On 3 April 1997, Liao sent a notice of exercise to Akai exercising the 4,365,000 share options in the name of Concott. The shares were accordingly issued to Concott.[320] 266.Pursuant to the exercise of the options, Mr Liao was obliged to pay HK$31,951,800 to Akai for the 4,365,000 ordinary shares under the share option scheme.[321] Although the notice of exercise indicated that a cheque for HK$31,951,800, being the subscription money due in respect of the share options was enclosed with the notice, the Liquidators have found no evidence of such a cheque.[322] In any event, the Liquidators have not found any evidence of any such payment being made by Mr Liao to Akai and Akai’s bank records do not record any corresponding receipt of funds during the Claim Period.[323] I find that Akai never received payment for these shares issued to Concott. 267.Rather than demanding payment from Mr Liao or Concott, a debit entry was recorded in Akai’s BT-Deposit General Ledger Account for HK$31,951,800 (US$4,096,385), giving the appearance that funds had been received by Akai in consideration for the exercise of the options and thereby concealing the non-payment.[324] 268.Mr Ma was a director of Akai from 27 June 1994 to 16 May 1995 and a director of Pfaff (China) Limited (“Pfaff China”) from 29 June 1995 to 23 February 1998. Pfaff China was a subsidiary of Akai from 13 October 1997.[325] 269.I find that, following the grant of 3,230,000 Akai share options to Mr Ma, no demand was made for payment from Mr Ma for the subsequent exercise of those options and that the non-payment was concealed by entries in the BT-Deposit General Ledger Account. 270.Akai granted Mr Ma the option to purchase those shares on 7 June 1995, at an option price of HK$10.096 per share.[326] On 8 May 1997, Mr Ma exercised the same share option for 3,230,000 shares at an option price of HK$10.096 per share and instructed Akai to issue the share certificate associated with the option to Concott.[327] The shares were accordingly issued to Concott.[328] 271.Pursuant to the exercise of the options, Mr Mawas obliged to pay HK$32,610,080 to Akai for the 3,230,000 ordinary shares under the share option scheme. Although the notice of exercise indicated that a cheque for HK$32,610,080, being the subscription money due in respect of the share options was enclosed with the notice, the Liquidators have found no evidence of such a cheque.[329] In any event, the Liquidators have not found any evidence of any such payment being made by Mr Ma to Akai and Akai’s bank records do not record any corresponding receipt of funds during the Claim Period.[330] I find that Akai never received payment for these shares issued to Concott. 272.Rather than demanding payment from Mr Ma or Concott, a debit entry was in Akai’s BT-Deposit General Ledger Account for HK$32,610,080 (US$4,180,769), giving the appearance that funds had been received by Akai in consideration for the exercise of the options and thereby concealing the non-payment.[331] 273.Mr Ahmed and Mr Ramanathan were directors of Akai until 24 October 1997, but worked out of Singer’s Hong Kong office.[332] Mr Ahmed was the President and Chief Operating Officer of Singer from August 1991 to December 1997 and a director of Singer from August 1991 to at least 27 July 1999. Mr Ramanathan was Vice President and Controller of Singer from August 1991 to at least 3 January 1998 and a director of Singer from March 1998 to at least 12 September 1999. Both held concurrent directorships in other Akai Group companies at various times.[333] 274.Mr Woo Heng Choon (“Mr Woo”) is a Malaysian citizen and was a long term employee of Singer, having joined the company in 1957. From June 1993 until at least 3 January 1998 he was Vice President, Marketing for Singer.[334] 275.I find that, following the grant of a combined total of 550,000 Akai share options to Mr Ahmed, Mr Ramanathan and Mr Woo, no demand was made for payment from any of them for the subsequent exercise of those options and that the non-payment was concealed by entries in the BT-Deposit General Ledger Account. 276.On 7 June 1995, Mr Ahmed, Mr Ramanathan and Mr Woo were granted share options entitling them to purchase 300,000, 150,000 and 100,000 Akai shares respectively at an option price of HK$10.096.[335] On 13 May 1997, Mr Ahmed, Mr Ramanathan and Mr Woo exercised their options to subscribe for those shares.[336] 277.Pursuant to the exercise of the options, Mr Ahmed, Mr Ramanathan and Mr Woo were obliged to pay HK$3,028,800, HK$1,514,400 and HK$1,009,600 respectively to Akai for the exercise of their options, in the total amount of HK$5,002,800. Although the three notices of exercise indicated that cheques for HK$3,028,800, HK$1,514,400 and HK$1,009,600, being the subscription money due in respect of the share options, were enclosed with the notice, the Liquidators have found no evidence of such cheques.[337] In any event, the Liquidators have not found any evidence of any such payments being made by Mr Ahmed, Mr Ramanathan or Mr Woo to Akai and Akai’s bank records do not record any corresponding receipt of funds during the Claim Period.[338] I find that Akai never received payment for these issued shares. 278.Rather than demanding payment from Mr Ahmed, Mr Ramanathan or Mr Woo, a debit entry was recorded in Akai’s BT-Deposit General Ledger Account for HK$5,002,800 (US$711,898), giving the appearance that funds had been received by Akai in consideration for the exercise of the options and thereby concealing the non-payment.[339] 279.The matters raised in Mr Ting’s Closing Submissions at pages 56 to 57 do not dissuade me from making the above findings. It must follow from my findings that statements in Akai’s Annual Report or Reports that payment had been received for these shares must be false. The shares were issued and Akai did not receive payment for them resulting in a loss to Akai of the amount due to Akai. I reject the submission of Mr Ting that Akai suffered no loss and that, at worst, it was an overstatement of its share capital. It is a fact that these shares were issued and that Akai never received payment for the issued shares which it was entitled to. It noteworthy that Mr Ting did not adduce any evidence from any of the Share Capital Recipients to refute the allegations of the Liquidators. M. Concealment of Payments and the “free” issue of Shares 280.I find that Mr Ting concealed the payments made by Akai and the non-payment for the issued shares through the use of false journal entries recorded in the BT-Deposit General Ledger Account, and the Temporary General Ledger Account within Akai’s general ledger. 281.Mr Borrelli has provided a helpful summary of the operation of Akai’s double entry accounting system and the inclusion of the BT-Deposit and Temporary General Ledger Accounts in Akai’s general ledger at §§98-112 of his Witness Statement.[340] Mr Borrelli has also explained in detail how an ordinary transaction would be recorded in Akai’s general ledger by reference to three examples set out at §§113-171.[341] M.1 The BT-Deposit and Temporary General Ledger Accounts 282.In the Executive Summary of his Report, Mr Borrelli summarised the nature of the BT-Deposit and Temporary General Ledger Accounts and how they were used by Mr Ting to conceal the payments. He stated (at §51):
283.Mr Borrelli provided the following example of the payment recorded in DLN 97022 to demonstrate how the BT-Deposit General Ledger Account and the Temporary General Ledger Account (which worked in the same way) were used by Mr Ting to conceal the payments made by Akai:[344]
284.Mr Borrelli described the actual cash flow in relation to this payment at §§387- 390 as follows:[345]
285.Mr Borrelli noted that on several occasions that entries in the BT-Deposit and Temporary General Ledger Account lacked any supporting documentation that would usually be attached to the journal voucher to support or explain the entries.[346] 286.Further, the BT-Deposit and Temporary General Ledger Accounts lacked the characteristics of true suspense or temporary accounts as generally understood by accountants, in that:[347]
287.Throughout the Claim Period, payments were also concealed through false entries in Akai’s general ledger as set out at Tab 33 of the Borrelli Statement.[348] 288.Mr Borrelli explained two examples of general ledger entries covering up the payments.[349] By way of illustration, the first example he explained is set out below:
M.3 Unusual features of the BT-Deposit General Ledger Account 289.In his Witness Statement, Mr Borrelli identified the following unusual features of the BT-Deposit General Ledger Account and the Temporary General Ledger Account:
M.4 My findings on the nature and use of the BT-Deposit and Temporary General Ledger Accounts 290.Mr Borrelli and the experts are agreed that the BT-Deposit and Temporary General Ledger Accounts did not correspond to actual bank accounts of Akai.[363] I find that the debit entries in these ledger accounts did not represent the receipt of cash by Akai into any bank account. I also find that the BT-Deposit account was held out as a bank account to conceal the payments made by Akai and the non-payment of the shares issued by Akai.[364] 291.A significant number of the actual cash payments constituting the alleged defalcations were recorded in the BT-Deposit and Temporary General Ledger Accounts in Akai’s general ledger. I find that Mr Ting’s use of those general ledger accounts was an artificial device for concealing those cash payments in that:
292.I accept Mr Borrelli’s evidence that these matters were strong indicia of attempts to disguise the fictitious BT-Deposit General Ledger Account as a general ledger account recording entries in a real bank or deposit account held by Akai with Bankers Trust and to disguise the payments made to Ting Recipients as deposits into an Akai bank account.[369] 293.I also find that the transactions constituting the alleged defalcations of Akai’s assets were misleadingly and improperly recorded in the accounting records of Akai:
294.A further aspect of the concealment of the alleged defalcations was that the balance of the BT-Deposit and Temporary General Ledger Accounts was brought to US$ nil at each financial year end (31 January) and as at 31 July 1999 in order to avoid scrutiny, including by Akai’s auditors, EYHK. In the course of trial, there were exchanges between bar and bench as to whether or not EYHK ought to have performed audit procedures in respect of the BT-Deposit General Ledger Account. It is a fact that the BT-Deposit General Ledger Account was successfully concealed by Mr Ting from EYHK, in that EYHK (i) regarded the BT-Deposit General Ledger Account as a deposit account of Akai with a bank; (ii) did not consider it necessary to conduct audit procedures on the basis the BT-Deposit General Ledger Account had a US$ nil balance at year end and (iii) did not conduct any audit procedures in respect of the BT-Deposit General Ledger Account.[372] The failures of EYHK in this respect have been the subject of proceedings brought by the Liquidators, with the result that EYHK have paid a substantial sum by way of compensation for which credit is being given by the Liquidators so as to ensure no double recovery by Akai. 295.As a consequence of recording Akai’s payments as debit entries in the BT-Deposit General Ledger Account, there was a significant accumulation of debit balances in that account. In the period of nine months up to 31 October 1997, the total debit balance was US$164,412,795; and in the period of nine months up to 31 October 1998, the debit balance was US$132,296,567 (having been as high as US$165,860,609 at 31 May 1998).[373] As a result of these significant total debit balances Mr Ting took steps to reduce the balances to US$ nil at each financial year end (occurring on 31 January), thereby concealing the payments constituting the defalcations, in two ways:
296.Mr Bowyer agreed that a fraudster would be expected to conceal his fraud in an account in which there were legitimate transactions.[376] In this respect, Mr Borrelli identified debit entries recorded in the BT-Deposit and Temporary General Ledger Accounts during the Claim Period totalling US$320,851,618 as "Non Defalcations", being transactions which appeared to have taken place in the ordinary course of Akai’s business, or payments for which Mr Borrelli has been unable to identify any payee and/or purpose.[377] 297.Mr Bowyer did not say very much about the BT-Deposit and Temporary General Ledger Accounts[378]. Indeed, there was little he could say except to try to characterise them as “suspense” accounts to park transactions temporarily until the bookkeeper had sufficient information to allocate the transaction to the appropriate general ledger account. However, notwithstanding the matters set out above, Mr Bowyer did not accept that the BT-Deposit General Ledger Account was held out as corresponding to an Akai bank or bank deposit account,[379] but preferred to characterise it as a “suspense” account, on the basis that the balance was brought to US$ nil at each financial year end.[380] However:
298.Even if the BT-Deposit and Temporary General Ledger Accounts could be described as “suspense accounts”, I find that they were used as suspense accounts to conceal Akai’s payments to the Ting Recipients and Associates and the “free’ issue of shares to the Share Capital Recipients.[388] 299.I find, based on Mr Ting’s controlling and dominant role in the management of Akai’s operations, finances and accounts that Mr Ting knowingly concealed the payments made by Akai and the non-payment for the issued shares through the use of false journal entries recorded in the BT-Deposit General Ledger Account and the Temporary General Ledger Account within Akai’s general ledger. 300.I have sufficient evidence before me to enable me to find that Mr Ting knowingly concealed the payments made by Akai and the non-payment for the issued shares through the use of false journal entries recorded in the BT-Deposit General Ledger Account, and the Temporary General Ledger Account within Akai’s general ledger. If I am wrong to reach this conclusion on the evidence before me, I would proceed on the basis that my findings that Mr Ting was the controlling and dominant force in the management of Akai’s operations, finances and accounts, and my findings that the BT-Deposit General Ledger Account and the Temporary General Ledger Account within Akai’s general ledger were used to conceal Akai’s payments to the Ting Recipients and Associates and the “free” issue of shares to the Share Capital Recipients, were sufficient to raise a prima facie case that Mr Ting knowingly concealed the payments made by Akai and the non-payment for the issued shares through the use of false journal entries recorded in these ledgers such that the evidential burden shifted to Mr Ting to rebut the prima facie case. However, no evidence whatsoever has been adduced in this regard by Mr Ting or on his behalf. I conclude that Mr Ting has entirely failed to discharge the evidential burden that has shifted to him on this issue and that is sufficient for me to conclude that Mr Ting knowingly concealed the payments made by Akai and the non-payment for the issued shares through the use of false journal entries recorded in these ledgers. N. The Undisputed Payments and the “free” issue of Shares were not made for a Commercial Purpose 301.I have already found that Akai made payments to, and were deprived of the proceeds of the issue of shares from, the Ting Recipients, the Ting Associates and the Share Capital Recipients in the total sum of US$408,123,278. I find that there was no commercial purpose for these transactions and that Akai did not receive any value for these transactions. 302.I find that Mr Borrelli has thoroughly investigated whether there was any legitimate commercial purpose for the payments debited to the BT-Deposit and Temporary General Ledger Accounts and that he has not identified any legitimate commercial purpose for any of the alleged payments to the Ting Recipients:
303.Mr Spence has confirmed that Mr Borrelli’s view, that he has not identified any legitimate commercial purpose for any of the alleged defalcations, was reasonable in the light of the supporting documents exhibited in Tabs 22, 23, 24, 25, 26 and 35 of the Borrelli Statement.[392] 304.I refer to Mr Ting’s Opening Submission on pages 15 to 18 on the absence of documentary evidence. Both Mr Borrelli and Mr Spence have fairly noted the limitations of the documentary evidence and the absence of supporting documents and work papers that would normally have been expected. Mr Bowyer has qualified his opinion that he could not discern any commercial purpose for the undisputed payments from the available documents with the rider that there may have been documents showing a commercial purpose which were no longer available. The limitations of the documentary evidence do not dissuade me from concluding that there was no commercial purpose for these transactions and that Akai did not receive any value for these transactions. I ask, rhetorically, why there was a need to conceal the payments to the Ting Recipients and Associates, and the absence of payments for the issue of the shares to the Share Capital Recipients, if they had been made for commercial purposes. 305.I do not think it is necessary for me to do so in order to reach this conclusion but, if it were necessary, I would apply the principle in Re Mumtaz Properties Ltd. to conclude that it was not open to Mr Ting, in the circumstances of this case, to escape liability by asserting that, if other documents and papers or other evidence had been available, they would have shown that there was a commercial purpose to support these transactions or that they would have shown that Akai had received value for these payments and the issue of the shares. On the same basis, if it were necessary for me to do so, I would draw adverse inferences against Mr Ting to support my conclusion, that there was no commercial purpose for these transactions and that Akai did not receive any value for these transactions, from my findings that he not only failed to cooperate with the Liquidators of Akai but also persistently and wrongfully obstructed them, particularly by his unconscionable conduct in procuring the Settlement Agreement and his wrongful conduct in relying on the Settlement Agreement which was unenforceable[393]. O. The Undisputed Payments and the “free” issue of Shares were made by Mr Ting 306.I find that Mr Ting caused Akai to make payments to the Ting Recipients and the Ting Associates and that Mr Ting caused Akai to be deprived of the proceeds of the shares issued to the Share Capital Recipients[394]. I do so by reason of the following matters:
307.I have sufficient evidence before me to enable me to find that Mr Ting caused Akai to make payments to the Ting Recipients and the Ting Associates and that he caused Akai to be deprived of the proceeds of shares issued to the Share Capital Recipients. If I am wrong to reach this conclusion on the evidence before me, I would proceed on the basis that my findings that the payments were made and my findings on the “free” issue of shares were sufficient to raise a prima facie case that the payments and the “free issue of shares were made by him such that the evidential burden shifted to Mr Ting to rebut the prima facie case. However, no evidence whatsoever has been adduced in this regard by Mr Ting or on his behalf. I conclude that Mr Ting has entirely failed to discharge the evidential burden that has shifted to him on this issue and that is sufficient for me to conclude that Mr Ting caused Akai to make payments to the Ting Recipients and the Ting Associates and that he caused Akai to be deprived of the proceeds of shares issued to the Share Capital Recipients. 308.The above findings are sufficient for me to conclude that Mr Ting breached the duties highlighted in §53 above that he owed to Akai. Accordingly, even without any finding of fraud on the part of Mr Ting, he is liable to restore the misapplied assets of Akai (or their cash value plus interest) in specie to Akai[395]. P. The Undisputed Payments and the “free” issue of Shares were Defalcations 309.Having concluded that Mr Ting caused Akai to make payments to the Ting Recipients and the Ting Associates and that he caused Akai to be deprived of the proceeds of shares issued to the Share Capital Recipients, I proceed to consider whether there is sufficient evidence for me to find that he did so fraudulently in the sense that he deliberately misappropriated Akai’s assets and did so dishonestly. The word “defalcation” has many meanings: I use the word in this judgment to mean a fraudulent misappropriation of company assets. 310.I remind myself of the burden of proof and the injunction against a finding of wrongdoing unless the evidence of wrongdoing was clear and unless the inference of such wrongdoing was compelling.[396] I find, based on the totality of the admissible evidence on the issue and the following compelling facts, that Mr Ting deliberately misappropriated Akai’s assets, namely, the undisputed payments and the deprivation of the proceeds of shares issued to the Share Capital Recipients, and did so dishonestly:
311.I have sufficient evidence before me to enable me to find that Mr Ting misappropriated Akai’s assets dishonestly. However, if I am wrong to reach this conclusion on the evidence before me, I would proceed on the basis that my findings that the payments and the “free” issue of shares were not made for a commercial purpose were sufficient for the evidential burden to shift to Mr Ting to justify the propriety of the transactions: see, in particular, Bishopsgate v Maxwell at 265e-f; Re Idessa at 91d-92f §§24-28, especially §28; Re GHLM Trading at 401d-403h §§143-149, especially §149; and Mortimore on Company Directors p.226 at §10.19. No evidence whatsoever has been adduced in this regard by Mr Ting or on his behalf. For the reasons advanced above, I have already dismissed Mr Bowyer’s hypothesis that there may have been documents demonstrating commercial purpose which are no longer available. Mr Ting has entirely failed to discharge the evidential burden that has shifted to him and that is sufficient for me to conclude that Mr Ting caused Akai to make payments to the Ting Recipients and the Ting Associates and that he caused Akai to be deprived of the proceeds of shares issued to the Share Capital Recipients and that he did so fraudulently. 312.I am able to reach this conclusion without the need to draw adverse inferences against Mr Ting from his election not to give evidence in this case. 313.As I have found that Mr Ting acted fraudulently, he is strictly liable as a defaulting trustee and is required to restore the lost trust assets in specie, in this case by accounting to the beneficiary Akai by way of equitable compensation, the purpose of which is restitutionary or restorative. 314.The disputed payments comprise US$428,995,521 (US$837,118,799 less undisputed payments of US$408,123,278). This sum can be in turn broken down into:
315.Akai submitted that the burden rests on Mr Ting to demonstrate the propriety of the transactions, namely, by establishing that the payments were bona fide in the best interests of Akai, and were made for proper purposes, and that they were disclosed to and authorized by Akai’s board; and that, in the absence of any explanation from Mr Ting, the Court ought not speculate as to the rationale for the payment. Q.1 Everwin –The Fu Tak Transactions[397] 316.This transaction[398] represented an alleged defalcation of Akai’s assets of HK$300 million (US$38.46 million) paid to Everwin, a Group 2 Ting Recipient, on 18 November 1997. 317.It is Mr Ting’s case that there is evidence which indicates that this transaction was a genuine investment in Fu Tak International shares made by Kong Wah and that there was value provided to Kong Wah in return for the money Akai advanced through Everwin. In particular, Mr Ting submitted that:
318.It is Akai’s case that Mr Ting caused HK$300 million to be paid to Everwin, a company under his control.[407] Mr Ting then sought to conceal this defalcation by recording it initially as a “deposit” to the BT-Deposit General Ledger Account, and thereafter as a fictitious advance by Akai to Kong Wah of HK$300 million, that was purportedly used for Kong Wah’s investment in a company incorporated in the Bahamas called Fu Tak International. The payment of HK$300 million by Mr Ting was a defalcation. The funds were paid to Everwin and thereafter disbursed by Mr Ting. There is no evidence from Mr Ting of any commercial purpose for the transaction or that Akai received any commercial benefit from this payment. There is no evidence that any part of the funds was used to acquire a television factory in Tianjin or that such a factory ever existed. The purported investment in Fu Tak International was a contrivance by Mr Ting to conceal the defalcation. 319.Mr Bowyer has accepted that whether or not the transaction was a contrivance is a question of fact for the Court’s determination.[408] 320.Of the 18 payments by Akai to Everwin, 17 were undisputed. This transaction accordingly represented the only disputed Everwin payment. Mr Bowyer acknowledged that it was necessary to consider a single payment in the wider context of the other undisputed payments made by Akai to the same Recipient and the wider context of all of the payments constituting the defalcations.[409] I have already found that the 17 undisputed payments were defalcations. I agree with Akai’s submissions that there is a strong inference that this payment to Everwin, that was disputed by Mr Bowyer, was of the same character as the other payments. 321.I find the following facts proved to my satisfaction:
322.The documents put forward as showing a commercial purpose comprised:
323.In relation to the subscription agreement dated 17 November 1997[416] I find that:
324.In respect of the Senior Note[422], I make the following findings:
325.No explanation has been advanced why the payment of HK$300 million had to be made to an entity controlled by Ting. No explanation has been provided why the transaction was not disclosed to the SEHK and was not disclosed in Akai’s financial statements. No evidence has been adduced by Mr Ting or on his behalf to explain the numerous unusual features of this transaction. 326.I accept the clear evidence of Mr Borrelli that the factory could not be located. The appraisal reports in respect of the factory only suggested that the valuers were possibly shown a television factory in Tianjin, which was not evidence of ownership of the factory, much less evidence that the HK$300 million paid to Everwin was applied towards the factory for Akai’s benefit. 327.I am satisfied, from the inconsistencies in the documentary evidence and from the Liquidators’ investigations, that Akai did not receive any value for the payment of HK$300 million to Everwin. I find that Mr Ting caused HK$300 million to be paid to Everwin, a company under his control.[423] I find that the payment was a defalcation and that he concealed the defalcation by recording it initially as a “deposit” to the BT-Deposit General Ledger Account, and thereafter as a fictitious advance by Akai to Kong Wah of HK$300 million, that was purportedly used for Kong Wah’s investment in a company incorporated in the Bahamas called Fu Tak International. I find that the funds paid to Everwin were disbursed by Mr Ting. I am satisfied that the purported investment in Fu Tak International was a contrivance by Mr Ting to conceal the defalcation. There is no evidence of any payment from Everwin to Kong Wah or Fu Tak International, whether for preference shares and a series of notes or otherwise. I adopt the analysis contained in §§309-312 above to this payment and conclude that the undisclosed payment to Everwin was a defalcation by Mr Ting. 328.The CTS Capital transaction[425] represented an alleged defalcation by Mr Ting of Akai’s assets of HK$30 million (US$3.85 million) paid to CTS Capital, a Group 2 Ting Recipient. 329.It is Mr Ting’s case that Akai managed to conclude a very substantial sale of non-circulating B shares of Konka Group Company Limited (“Konka”) for Kong Wah, at a time of ‘panic conditions’[426]. On 23 January 1998, 3 days before the deal announcement and 1 week before this payment, Akai recorded a non-cash transaction of a ‘fee’ from Kong Wah of $30m ‘on disposal of Konka Shares’. This suggested that Kong Wah was remunerating Akai on its intercompany account for arranging that sale.[427] The Court ought to conclude from all the circumstances that this was indeed a fee paid out by Akai; and that such a fee might reasonably have been paid in connection with what was clearly a transaction of enormous value to Kong Wah and Akai at a time of panic in the Asian markets. Mr Ting submitted that Mr Borrelli’s retort that he knew of no reason to pay any fee other than brokerage on such a sale[428]was not credible. 330.It was Akai’s case that Mr Ting caused HK$30 million to be paid to CTS Capital, an entity whose name appears to have been designed to be a misleading acronym for “China Travel Service” but which, in fact, was a company under Mr Ting’s control.[429] Mr Ting then sought to conceal this defalcation by recording the payment as though it was for a fee to the legitimate China Travel Service for the disposal of shares held by Kong Wah in Konka, a television manufacturer listed on the Shenzhen Stock Exchange. 331.The following facts are proved to my satisfaction:
332.Mr Bowyer initially disputed this payment because he thought that “CTS Capital may be an acronym for, and an entity connected to, China Travel Service”.[432] In his revised opinion, Mr Bowyer conceded that there was no connection between CTS Capital and China Travel Service.[433] However, Mr Bowyer suggested that “it appears that the payment to CTS Capital was made at the request of Kong Wah” and hence should be excluded from the defalcations.[434] In cross-examination, however, Mr Bowyer accepted that if the Court took the view that CTS Capital was controlled by Mr Ting, it would be “surprising” that Akai was paying an entity controlled by Mr Ting on behalf of Kong Wah.[435] Mr Bowyer also accepted that his belief that Akai had received value was premised on Kong Wah having a legitimate reason to pay CTS Capital, for which he has seen no evidence other than journal narrations.[436] 333.There is no credible evidence before me, nor any documentary evidence on which I can place any weight that can satisfy me that this payment was related to China Travel Services or to Kong Wah’s sale of its shares in Konka. I find that Akai has not received any value for this payment, either at the time of payment or subsequently.[437] I find that the payment of HK$30 million by Mr Ting to the company controlled by him was a defalcation, which he concealed through the guise of creating a company under his control that appeared to be connected to China Travel Services, with whom Akai was conducting legitimate business. I adopt the analysis contained in §§309-312 above to this payment and conclude that the undisclosed payment to CTS Capital was a defalcation by Mr Ting. Q.3 Golfland – The Merrywide Transactions[438] 334.According to Akai, the Merrywide transactions[439] represented a series of contrivances by Mr Ting to conceal seven defalcations of Akai’s assets in the total sum of HK$535 million (US$68.78 million) paid to Golfland, a Group 2 Ting Recipient. 335.According to Mr Ting, the documentary evidence[440] demonstrated the reality of the transaction for which the Golfland payments were made, and by which Starfame, an Akai subsidiary, was to acquire shares in Shenzhen Kaifa Technology Limited (“Shenzhen Kaifa”). It differed significantly from that relating to Everwin or Calculus and showed that, by March 1998 and at the latest by November 1999, Golfland and Merrywide Limited (“Merrywide”) had put Starfame in a position to take control of Merrywide and compel it to transfer the Shenzhen Kaifa shares to Akai subsidiaries in accordance with the agreement between Golfland and Starfame[441] and the Akai Executive Committee Minute. This was the commercial purpose of the agreement, and evidence of value given for the payments at issue. 336.Mr Ting submitted that the fact that Akai had paid for the shares in 1997 but had been unable to register or take ownership of them by the time of its liquidation in August 2000 might have been bad business but the documentary evidence showed efforts to enforce their acquisition in accordance with the Golfland agreement, by acquiring shares in Merrywide, and that this evidence was directly disprobative of fraud. 337.Mr Ting relied on Mr Borrelli’s evidence[442] that, in 2001 and 2002, he had himself sought to enforce the security provided by these Merrywide share transfers. However, Merrywide’s other shareholders disputed those shareholdings. As the Liquidators were then unable to prove that Akai had paid for the Merryside shares, they abandoned the claim. That only showed that the Liquidators had run into problems of proof of their own. 338.It is Akai’s case that, over a series of seven transactions, Mr Ting caused HK$535 million to be paid to Golfland, a company under his control,[443] which he then sought to conceal by creating fictitious advances to Akai’s subsidiaries, Starfame and Kong Wah, that were purportedly used to acquire from Merrywide, a company incorporated in Hong Kong, shares in a Shenzhen listed company named Shenzhen Kaifa. The purported acquisitions of shares in Shenzhen Kaifa were a contrivance by Mr Ting to conceal the defalcations of Akai’s assets totalling HK$535 million. 339.I find the following facts proved to my satisfaction:
340.I find that agreements supporting these transactions did not achieve their purpose. These included five share purchase agreements (dated 11 November 1997,[452]9 December 1997,[453] 16 April 1998,[454] 24 July 1998[455] and 4 August 1998[456]), each in similar terms. These agreements were all signed by Mr Ting save for the agreement dated 9 December 1997. The deficiencies in them can be identified by reference to the first agreement dated 11 November 1997 entered into between Golfland as “Seller” and Starfame as the “Purchaser”:
341.I find that it was highly unusual and commercially implausible for Starfame to purchase from Golfland securities of which the legal, beneficial and registered owner was Merrywide. Golfland did not own the shares and only purported to have a 50% “beneficial” ownership in Merrywide. 342.As security for the due performance of the transfer of the registered ownership of the Shenzhen Kaifa shares to Starfame, Golfland was required to effect a share transfer of its two ordinary shares in Merrywide to an agent designated by Starfame (clause 2). However, the two shares purportedly assigned by Golfland to Starfame as purchaser under the 11 November 1997 agreement were exactly the same two shares which Golfland purported to assign, on the same date, to Match Top as purchaser under the 9 December 1997 agreement.[457] This causes me further doubt on the efficacy of these transactions. 343.There was no evidence that Akai, Starfame, Match Top or Cherryhill ever acquired any shares in Shenzhen Kaifa from Merrywide. There was also no evidence that any of the HK$535 million paid to Golfland was ever applied in the acquisition of Shenzhen Kaifa shares. The evidence from Mr Borrelli, which I accept, is that after detailed investigations and correspondence with Merrywide, its directors and solicitors, it was clear that neither Akai nor its subsidiaries had ever acquired any shares in Shenzhen Kaifa.[458] Consequently, the only evidence before me is that neither Akai nor any entity in the Akai Group became the registered owner of the Shenzhen Kaifa shares purportedly acquired from Golfland / Merrywide. 344.I find, based on the inefficacy of the contractual documentation and the Liquidators’ investigations, that Akai did not receive any value for the payments of HK$535 million to Golfland. My finding that Akai received no value for these payments to Mr Ting’s company is sufficient for the evidential burden to shift to Mr Ting to justify the propriety of the transactions. No evidence has been adduced by Mr Ting or on his behalf to discharge that evidential burden, other than the documents in Bundle F70, in particular, at pages 82 to 104, which I have analysed above. I do not go so far as to find these documents to be a contrivance but I conclude, from my misgivings about them, that Mr Ting has failed to rebut the prima facie case that has been established that Akai received no value for these payments. 345.I adopt the analysis contained in §§309 – 312 above to these payments, and conclude that the undisclosed payments to Golfland were defalcations by Mr Ting. 346.It is Akai’s case that, by DLN 98151 and DLN 98153, Mr Ting caused Akai to pledge a deposit of HK$180,000,000 (US$23,285,899) with BCH for the improper purpose of funding a payment of US$20,000,000 to Goaltop, a Group 2 Ting Recipient, which payment in turn caused Akai to lose its pledged deposit. 347.It was Mr Ting’s submission that the alleged defalcation to Goaltop did not involve any movement of funds from Akai to the Recipient. The diagram at Annex 2 of Akai’s Opening showed that the funds were passed to Goaltop by Good No. 1, a subsidiary of Akai, through a bank loan. According to the Liquidators’ method of looking at Akai’s fund flows only, and not payments from Akai’s subsidiaries to Recipients, this amount should not be included as a defalcation. Mr Spence accepted that[460]:
348.Akai submitted that, on the objective facts, the Goaltop transactions plainly involved the misappropriation of Akai’s assets by Mr Ting. In causing Akai’s assets to be used for the improper purpose of funding a payment to Goaltop, Mr Ting acted in blatant breach of his fiduciary duties to Akai. Further, Mr Ting controlled Goaltop as a Group 2 Ting Recipient and thus the transactions amount to impermissible and undisclosed self-dealing by Mr Ting. As a matter of law, Mr Ting was required to repay the US$20,000,000 sum misapplied to the benefit of Goaltop, unless he could demonstrate that those assets had in fact been restored to Akai.[461] 349.Of the 49 alleged defalcations paid by Akai to Goaltop, 47 are undisputed. These two transactions accordingly represent the only disputed Goaltop payments. As I have done in §320 above, I accept Akai’s submissions that there must be a strong inference that these payments to Goaltop, identified by Mr Bowyer, were of the same character as the other payments, which were undisputed and which I have found to be defalcations. 350.I find the following facts to be proved to my satisfaction:
351.I accept Akai’s submissions that Mr Bowyer’s assertion that these transactions involved payments between an Akai subsidiary and a Recipient was misguided. Mr Bowyer overlooked the fact that :
352.I agree with Akai’s submissions that the purported recognition of an amount due from Good No. 1 in Akai’s general ledger did not change the fact that Akai’s assets were used for the improper purpose of funding a payment to Goaltop. I find that Mr Borrelli properly treated these entries as disregarded credits to the BT-Deposit General Ledger Account.[473] 353.While certain entries in Akai’s general ledger gave the impression that Good No. 1 repaid the loan from CKW, in light of contradictory contemporaneous evidence, Mr Bowyer did not maintain his suggestion in his initial Report that the loans were in fact repaid in January 1999.[474] 354.I agree with Akai’s submissions that Mr Ting was required to repay to Akai the US$20,000,000 sum misapplied to the benefit of Goaltop, unless he could demonstrate that those assets had in fact been restored to Akai.[475] As it was agreed by the experts that Akai’s deposit with BCH was lost upon Space Mountain using that sum to repay its loan with BCH, Mr Ting could not show any restoration of the misapplied funds. I find Mr Ting liable for breach of fiduciary duty for misapplying Akai’s assets for the benefit of Goaltop. I adopt the analysis contained in §§309 – 312 above to this transaction and conclude that the misapplication of Akai’s assets was a defalcation by Mr Ting. 355.The Investco transaction[477] represented an alleged defalcation by Mr Ting of Akai’s assets of HK$11,407,641 (US$1,475,762) paid to Investco, a Group 2 Ting Recipient. 356.It is Mr Ting’s case that Mr Bowyer was able to identify from the accounting documents a payment made by Space Mountain to Akai seven days earlier. His proposition was that Space Mountain made a loan to Akai and seven days later, Akai repaid the loan by paying Investco on behalf of Space Mountain[478]. The accounting evidence and the evidence of numerous significant transactions in this case showed that Akai and its subsidiaries were often making payments or receiving money on each other’s behalf[479]. The obvious example was the Primewood transaction which was relied on by the Liquidators as a defalcation[480]. If the court accepted that this was the practice, then there was nothing surprising about Mr Bowyer’s proposition. There need not be a commercial relationship between Space Mountain and Akai and Investco beyond this practice. While Mr Bowyer accepted that this was speculation[481], whether or not in fact the practice was in operation here was a matter for the Court. The coincidence of the time and amount contradicted the idea that this was mere speculation. 357.Of the 13 defalcations paid by Akai to Investco, 12 are undisputed. As I have done in §§320 and 348 above, I accept Akai’s submissions there must be a strong inference that this payments to Investco, identified by Mr Bowyer, were of the same character as the other payments, which were undisputed and which I have found to be defalcations. 358.I find the following facts proved to my satisfaction:
359.Mr Bowyer contended that there is a connection between this payment, and an earlier payment made to Akai on 7 July 1999 from Space Mountain for US$1,465,000, the majority of which was immediately transferred by Akai to TFB, in the amount of US$1,461,197.92.[484]In particular, Mr Bowyer’s proposition, as accepted in cross-examination, was that:[485]
360.The evidence, however, as conceded by Mr Bowyer, was that:[486]
361.I agree with Akai’s submissions that, in the absence of evidence from or on behalf of Mr Ting, I ought not speculate as to whether or not there was any commercial relationship between Investco and Space Mountain. Even if the evidence showed numerous significant transactions of Akai and its subsidiaries making payments or receiving money on each other’s behalf, I cannot presume that those transactions were carried out for legitimate commercial purposes, particularly given my findings thus far of substantial defalcations by Mr Ting of Akai’s assets. I find that there was no evidence of any legitimate commercial purpose for the payment by Akai of HK$11,407,641 to Investco, and that there was no evidence that Akai received value for this payment. 362.I adopt the analysis contained in §§309 – 312 above to these payments, and conclude that the undisclosed payment to Investco was a defalcation by Mr Ting. 363.The Worldwide transaction[488] refers to an alleged defalcation of Akai’s assets by Mr Ting of US$14,272,905 (HK$111,328,656) paid from Akai to Worldwide International, a Group 2 Ting Recipient, on 27 February 1997.[489] On the same date, Worldwide International’s SCB bank statement recorded a payment of HK$111,626,733 to Kilter,[490] a subsidiary of Akai Electric.[491] 364.It was Mr Ting’s submission that, on any view of the evidence, this was a payment by Akai to Worldwide International which then funded Kilter. Mr Borrelli gave his reasons for classifying this payment as a defalcation of Akai’s assets in §172 of his second statement[492]:
Mr Ting submitted that this was a payment by Akai to a subsidiary, which went through an alleged Ting Recipient. Although it had been submitted by Akai that a false entry was made because the books did not reflect the payment to Worldwide International[493], the entries reflected the payment to Kilter, which was what actually occurred, albeit via Worldwide International. Mr Bowyer accepted that the payment was made to Worldwide International but opined that “the substance of this transaction was a payment made by Akai to an Akai Electric subsidiary, Kilter”, relying on accounting entries in Akai’s general ledger indicating a cash payment and an amount owing from Kilter.[494] It did not matter that there was no reason for the cash to go through Worldwide International, because the fact remained that the money was passed to Kilter, as recorded in the books. Mr Borrelli accepted that the cash to Worldwide International provided cash to Kilter[495]. For these reasons, having regard to the source and destination of the funds, this payment was not a defalcation. 365.Of the eight defalcations paid by Akai to Worldwide International, seven are undisputed. This transaction accordingly represents the only disputed Worldwide payment. As with the other transactions referred to above[496], I agree with Akai’s submissions that there is a strong inference that this payment to Worldwide International, isolated by Mr Bowyer, is of the same character as the other payments, which are undisputed and which I have found to be defalcations. 366.Akai also submitted that:
367.I accept Akai’s submissions that Mr Ting was in breach of his fiduciary duties, identified in §§53 to 61 above, by making the payment to Worldwide, a company he controlled. The transaction constituted impermissible self dealing and, in breach of the Listing Rules, the transaction was not disclosed to the SEHK and was not disclosed in Akai’s financial statements. By reason of the said breaches of fiduciary duties, Mr Ting is required to repay the US$14,272,905 misapplied by the payment to Worldwide, unless he can demonstrate that those assets have been restored to Akai. I find that the creation of a loan from Kilter to Akai did not constitute a restoration of the misappropriated asset to Akai. 368.However, in the absence of improper use of the funds by Kilter, I am unable to find, or infer, that this transaction was a defalcation or that Mr Ting was guilty of a fraudulent breach of duty. US$14,272,905 (HK$111,328,656) was paid by Akai to Worldwide International on 27 February 1997. On the same date, Worldwide International’s SCB bank statement recorded a payment of HK$111,626,733 to Akai’s subsidiary, Kilter. Mr Borrelli accepted that the cash to Worldwide International provided cash to Kilter. The payment received by Kilter was recorded as a debt due from Kilter to Akai. The use of Worldwide as a conduit to make payment to Kilter was improper and in breach of fiduciary duty. However, absent evidence of improper use of the funds by Kilter, I am unable to infer dishonesty on the part of Mr Ting for this transaction. Q.7 Calculus – The Digiconic Transaction[505] 369.It is Akai’s case that this transaction[506] was contrived by Mr Ting to conceal the defalcation of Akai’s assets of HK$100 million (US$12.94 million) paid to Calculus, a Group 3 Ting Recipient. 370.Mr Ting’s case in respect of the Calculus -Digiconic transaction is that the return of US$6.5m to Akai[507] was inexplicable other than being in accordance with the agreement in the documentation and its apparent proper purpose. Mr Borrelli’s zeal to establish that the Digiconic transaction was false led him to add a new and material claim of fact when in the witness box. Whether or not Top Rewards Inc (“TRI”), the counterparty to the transaction, had ever dealt with Akai or Mr Ting was obviously important when the bona fides of the transaction were at issue. However, Mr Borrelli had said nothing in his 2 witness statements of any enquiry made of TRI or of any reply which would tend to disprove this transaction[508]. Yet on Day 5, Mr Borrelli volunteered that one of his colleagues had spoken to TRI, who had never heard of Mr Ting or Akai. This revelation also did not sit easily with his oral and written evidence that once they had the agreement and the letter covering the return of US$6.5m, the Liquidators did not contact TRI in 2005 in order to pursue the shares[509]. 371.Mr Borrelli went on to seek corroboration for his conclusion that these were ‘fake’ transactions by reference to the lack of operational records or correspondence. To do so, he drew an entirely inappropriate comparison between the few documents seen for Digiconic Inc and the sales reports (by country) and travel expenses returned from Akai Electric, Kong Wah and Tomei. Digiconic Inc was expressly a ‘seed money’ or start up venture[510]. Akai Electric, Kong Wah and Tomei were the large and well-established subsidiaries of Akai engaged in research & development and production and sales[511]. Mr Borrelli would not accept, fairly or realistically, that no useful comparison could be made between the reporting to be seen from major subsidiaries under Akai’s control and what could be expected by Kong Wah and Akai as holders of a minority-interest in Digiconic, Fu Tak International and Shenzhen Kaifa[512]. 372.It was Akai’s submission that the evidence established that Mr Ting, for no commercial purpose, caused HK$100 million to be paid to Calculus, a company under his control, and then sought to conceal the defalcation by creating a fictitious advance to a subsidiary of Akai, Famous Product Limited (“FPL”), that was purportedly used to invest in a company incorporated in California called Digiconic Inc. The evidence established that the HK$100 million was paid to Calculus. There was no evidence of any payment from Calculus to TRI or Digiconic or otherwise for the benefit of Akai. Having caused the payment to be made in breach of his fiduciary duties to Akai, it was for Mr Ting to explain and account for the misappropriation. In the absence of evidence from Mr Ting, the Court ought not speculate as to the use of the funds. 373.Akai also submitted that the evidence was overwhelming that Akai’s purported “investment” was a contrivance and that no value was received by Akai or FPL. Rather, the supposed “investment”, namely, the purported acquisition by FPL of a 40% interest in Digiconic, a company incorporated in California, USA on 14 December 1998, was a contrivance by Mr Ting. 374.Mr Bowyer has accepted that whether or not the transaction was a contrivance is a question of fact for the Court’s determination.[513] 375.I find the following facts proved to my satisfaction:
376.The documents relied on to support the investment included:
377.I note the following unusual features of the agreement:[518]
378.I also note that there were also a number of unusual features in relation to the confirmation letter, addressed to Akai from TRI. The letter stated:[520]
The unusual features of the letter were:
379.There was no evidence that TRI or Digiconic ever refunded the US$6.5 million to Akai or any of its subsidiaries. The evidence showed that, on 22 June 1999, Mr Ting signed a letter of instruction on behalf of Space Mountain instructing BCH to transfer US$6.5 million from Space Mountain’s bank account to an account of Akai.[521] The transfer from Space Mountain was stated to be “By order of: Digiconic Inc”. Notwithstanding that the payment was from Space Mountain to Akai, Akai’s general ledger recorded a credit entry of US$6.5 million on 24 June 1999 with the reference “Deposit from Digiconic”.[522] 380.It is notable that Digiconic was dissolved on 14 June 2000, less than one year after it had purportedly received an advance of US$3.5 million according to the confirmation letter dated 23 June 1999.[523] 381.I do not accept the criticism made of Mr Borrelli’s evidence. I accept Mr Borrelli’s evidence, including his evidence of the Liquidators’ inability to identify or locate any investment of Akai or FPL in either TRI or Digiconic. I have carefully considered the evidence of Mr Borrelli in connection with this transaction on Day 5[524]. He said that, at the same time as they were conducting their investigations on Merrywide, they tried to but could not find Digiconic. It was not at the California premises. When pressed whether TRI existed, Mr Borrelli countered that TRI had never heard of Mr Ting or Akai, and that this fact had been recounted to him by one of his colleagues who had contacted TRI. The fact that this ancillary matter was not contained in his witness statements[525] does not cause me to doubt the veracity of his evidence. Further, it was entirely right for him to point to the absence of any activity between Akai and Digiconic. Although it was only a start-up, Digiconic had allegedly received over US$2.5 million, according to the confirmation letter from TRI. 382.I do not accept Mr Ting’s submissions. The patent inconsistencies in the documentary evidence, the Liquidators’ investigations and the absence of evidence from Mr Ting or on his behalf is sufficient for me to conclude that the purported investment in Digiconic was a contrivance and that Akai did not receive any value for the payment of HK$100 million (US$12.94 million) to Calculus. I find that Mr Ting caused the confirmation letter dated 23 June 1999 to be created, and then falsely recorded in Akai’s accounts that the US$6.5 million transferred from Space Mountain to Akai had in fact come from Digiconic in order to maintain the charade that Akai had a legitimate investment in Digiconic. The proposition put to Mr Borrelli in cross-examination that this payment was somehow procured by Calculus, TRI or Digiconic was speculative and was not supported by evidence.[526] I adopt the analysis contained in §§309-312 above to this payment, and conclude that the undisclosed payment to Calculus was a defalcationby Mr Ting. Q.8 Primewood (Akai Electric Bonds)[527] 383.The Primewood, Rosalie and Tisco alleged defalcations comprise:[528]
Q.8.1 Factual Backgroud: Primewood, Rosalie and Tisco Transactions 384.The following factual background to the Primewood, Rosalie and Tisco transactions is not in dispute: 385.On 4 July 1996, an Akai announcement was made by order of Mr Ting on behalf of the Board stated that Akai Electric 2000 bonds in the amount of JPY20,000,000,000 (US$184,615,385) were to be issued to “overseas institutional investors not connected with the Directors, Chief Executive or substantial shareholder of the Company or its subsidiaries, or any of their respective associates”.[529] 386.Contrary to the announcement, on 19 July 1996 Akai Electric issued 400 Akai Electric 2000 bonds for JPY20,000,000,000 (US$184,615,385) to a wholly owned subsidiary of Akai called Brinlow Investments Limited (“Brinlow”). Akai paid for these bonds on 3 July 1996.[530] 387.Notwithstanding that this was a connected and therefore disclosable transaction under the Stock Exchange Listing Rules, no disclosure was made by Akai that the bonds had in fact been issued to a subsidiary of Akai.[531] 388.In January 1997, Brinlow sold 172 of the bonds to Matchpoint Incorporated (“Matchpoint”), a subsidiary of Kong Wah, for HK$509,600,000.[532] There is no evidence of any payment being made by Matchpoint to Brinlow in respect of the bonds.[533] In June 1997 Brinlow and Matchpoint sold 360 bonds to Primewood, a Group 3 Ting Recipient, for a combined amount of HK$1,094,600,000 (US$140,333,333).[534] Matchpoint sold 172 bonds to Primewood for HK$509,600,000 (US$65,333,333)[535] and Brinlow sold 188 bonds to Primewood for HK$585,000,000 (US$75,000,000).[536] 389.On 4 July 1997 and 31 January 1998, sums equivalent to the proceeds of the sale of the 360 Akai Electric bonds to Primewood by Matchpoint (HK$509,600,000) and Brinlow (HK$585,000,000) were recorded as debit entries in Akai’s BT-Deposit General Ledger Account.[537] Despite Akai having paid for the bonds received by Primewood, Akai did not receive any funds corresponding to these journal entries.[538] 390.Akai has alleged that the total amount of the unpaid sale proceeds, US$140,333,333, were defalcations of Akai’s assets by Mr Ting. 391.On 23 July 1997, Primewood sold all 400 Akai Electric 2000 bonds back to Akai Electric for JPY18,400,000,000 (US$157,555,897) and Akai Electric then cancelled these bonds.[539] The amount due to Primewood (US$157,555,897) for the sale of 400 Akai Electric 2000 bonds was used by Primewood to fund the purchase of 2001 Akai Electric bonds by Rosalie. 392.On 18 July 1997, by order of Mr Ting on behalf of the Board, Akai announced that Akai Electric would issue Akai Electric 2001 bonds valued at JPY20,000,000,000 (US$170,935,637). The announcement falsely stated that:[540]
393.In fact, on 8 August 1997 Akai Electric issued all 400 Akai Electric 2001 bonds for JPY20,000,000,000 (US$170,935,637) to Rosalie, a Group 3 Ting Recipient.[541] 394.Primewood paid JPY18,400,000,000 (US$157,555,897) of the subscription amount for the Akai Electric 2001 bonds out of the sale proceeds of the 400 Akai Electric 2000 bonds.[542] 395.Akai paid the other JPY1,600,000,000 (US$13,379,740) on behalf of Rosalie in cash on 4 August 1997.[543] Akai’s payments on behalf of Rosalie were recorded as debit entries in Akai’s BT-Deposit General Ledger Account.[544] Akai has alleged that these payments of US$13,379,740 were a defalcation of Akai’s assets by Mr Ting. The payments on behalf to Rosalie are not disputed. Mr Bowyer has made no adjustment to the claimed defalcations in relation to this amount.[545] 396.In January 1998, Rosalie sold 368 bonds back to Akai Electric for JPY17,296,000,000 (US$136,219,633).[546] 397.In January 1998 Akai made 11 payments to Tisco totalling US$118,399,119.[547] 398.These 11 payments to Tisco were debited to the “Akai corp” account in Akai’s general ledger, with the narration “bond redemption”.[548] 399.In relation to DLN GL9710 to GL9714 and DLN GL9720 to GL9721, instructions from Tisco signed by Ms Lee directed Tisco’s bank to remit the amounts expected to be received from Akai directly back to Akai itself upon receipt of the funds.[549] 400.During January 1998 there were nine receipts by Akai from Tisco totalling US$116,357,743, representing the return of the funds paid to Tisco by Akai.[550] 401.These nine receipts by Akai from Tisco were recorded as credit entries in the BT-Deposit General Ledger Account. The effect of the Tisco receipts was that the balance of the BT-Deposit General Ledger Account was reduced by US$116,357,743 between 15 and 27 January 1998, in the lead up to the end of Akai’s financial year on 31 January 1998.[551] 402.Tables indicating the flow of funds pursuant to these payments are set out on pages 56 and 57 under Part E.6.1.3 of Akai’s Opening[552]. Q.8.2 Mr Ting’s Case 403.There was a genuine commercial purpose for the Akai Electric Bonds and accordingly, the transactions relating to them do not amount to defalcations. None of the Primewood and Rosalie transactions, nor the Tisco payments, should be included as a defalcation. 404.Mr Spence positively identified a commercial purpose for the bond issues. He said in his report that the bonds enabled the group to recognise an exceptional gain[553]. Mr Borrelli accepted that the bonds were raised for financing purposes[554]. It was clear from the documents that BT Asia was involved in the issue and prepared some of the documents. There can be no suggestion that BT Asia was involved in a sham transaction. The fact that the bonds were not issued to institutional investors, as was intended according to the announcements of the issues, does not render all the documentation false, or the bonds other than valuable securities. Q.8.2.2 No Loss to be Compensated 405.When looked at as a whole, the Akai Electric bonds did not cause any loss to Akai, and certainly not a loss equivalent to that claimed as the Primewood ‘defalcation’. At the start when the 2000 Bonds were issued to Brinlow, Akai paid Akai Electric US$184.6 million[555] for the whole issue and created a debt due to it from Brinlow[556]. Both payment and the creation of the debt were outside the Claim Period. In any event, that could not have been a defalcation as defined in the claim as no Recipient was involved at all. 406.When the bonds were sold by Brinlow and Matchpoint to Primewood, no cash changed hands[557]. When the bonds were redeemed and the 2001 Bonds were issued to Rosalie, save for the Rosalie transaction[558], again no cash left Akai. In any event, this transaction did not involve Akai. No adjustment is made for the Rosalie transaction. (Some of the 2000 issue was sold to other third parties[559].) 407.When the 2001 bonds were redeemed, Akai did not pay for the redemption (and apparently neither did Akai Electric[560]). The redemption was effected by way of the Tisco recycling payments which resulted in a net loss to Akai of only US$2 million (US$118 million - US$116 million). However, the payments of US$118 million (together with the book entry 9) created a loan of US$136 million due from Akai Electric[561]. This was summarised by Mr Bowyer:
408.This effect of the Akai Electric bonds transactions was accepted by Mr Spence[563]. It was proven on the evidence and the Court has the evidence of both experts in agreement. Mr Spence also acknowledged that the bonds issues also enabled Akai to recognise an exceptional gain in its consolidated accounts[564]. This proves an incontrovertible and proven commercial purpose and benefit in the 2000 bond repurchase, the 2001 bond issue and the redemption in January 1998. 409.Even if the Court did not accept the proven commercial purpose or that there was no loss, according to the Liquidators’ own principles for assessing any loss of Akai[565], the Primewood transaction should be disregarded. It was a transaction between subsidiaries of Akai and Primewood. Mr Spence agreed that including the Primewood claim could only be permitted by an exception to the Liquidators’ method[566]. 410.The bonds were issued to, owned by and registered in the names of Brinlow and Matchpoint, both subsidiaries of Akai. This was Mr Spence’s understanding of the evidence, set out in his report[567], which he confirmed on oath. This was also what Mr Borrelli said in his first witness statement (§§413-416), which he also confirmed on oath. Until Mr Borrelli gave oral evidence[568], there was no suggestion that the bonds were held by Brinlow and Matchpoint in any other way, and no mention of them being nominees. 411.Given that this was a transaction between a third party and subsidiaries, one would not normally expect it to be recorded in Akai’s books. The only reason according to the documentation for the entries in Akai’s books was the credit note[569], which apparently indicated that the proceeds for the sale to Primewood was received by Akai on Matchpoint’s behalf. This too was consistent with Matchpoint being the owner of the bonds. 412.The receiving of money on behalf of a subsidiary is the reverse of the receiving of money by a subsidiary on Akai’s behalf, such as the US$93.6 million disregarded non-cash credits, which were in fact payments by Recipients to subsidiaries but recorded in Akai’s books. If the Primewood transaction was to be found to be a ‘defalcation’ causing loss to Akai then, by the same token, the US$93.6 million (net the payments from subsidiaries of US$25.4 million) should be found to provide a benefit to Akai and allowed as a deduction from Akai’s claimed ‘loss’. 413.The payments were undoubtedly linked to the redemption of the 2001 bonds[570]. The first 5 payments matched exactly the payments received by TISCO HK, the broker, and the 12 entries in the general ledger identified by Mr Bowyer matched the bond redemption amount down to JPY10,000 (§§6.14-6.15 Bowyer Appendix). It was put to Mr Bowyer that this was a contrivance so as to balance the books, but if so, one would expect them to have matched exactly without a balancing non-cash entry or a Yen 10,000 difference[571]. 414.Mr Bowyer also explained that the money flow from Tisco to TISCO HK and back to Akai did not matter: “Underlying this is the fact that Rosalie is having its 9 bonds redeemed. So in some way or another, Rosalie needs to get value. One way it can get value, bearing in mind it owes Primewood money, at least I assume that is the case, is to have Primewood's debt settled. That would satisfy it.”[572] 415.On the basis that there was no loss to Akai, the actual movement of funds of the Tisco payments of US$118 million did not impact the calculation of loss. Payments up to US$116 million were in any event returned. The Tisco payments were claimed as ‘defalcations’ in its own right. In any event, the US$118 million were merely a cumulative total of several payments out of Akai of between US$20 million and US$25 million. US$118 million was never at risk. There could be no basis on which to hold Mr Ting liable to pay compensation of US$118 million to Akai in respect of these payments, as the Liquidators seek to do in their principal ‘Method 1’ claim. Q.8.3 Akai’s response Q.8.3.1 Mr Ting’s Speculative Theories 416.If there was a legitimate explanation for the transactions involving Primewood, Rosalie and Tisco, Mr Ting would be able to provide it. The fact that Mr Ting had chosen not to offer any explanation whatsoever, was a strong indicator that there was no such legitimate explanation. The result is that Mr Ting’s team was placed in the invidious position of having to pursue speculative alternative theories, none of which were supported by any evidence from Mr Ting himself, and which were in fact contradicted by the objective evidence before the Court. 417.Moreover, the speculative theories put on behalf of Mr Ting were premised on the assumption that the transactions were legitimate arm’s length commercial transactions. In circumstances, where there was clear evidence of false documentation from the outset, in addition to the usual indications of Mr Ting’s modus operandi of concealment and deception, such an assumption was plainly unfounded and inappropriate. Q.8.3.2 “Akai Group” theory 418.Mr Bowyer conceded in cross-examination that his initial report considered Akai and Akai Electric on a group basis.[573] Effectively, Mr Bowyer argued that “no value ever left the Akai Group” because on Mr Bowyer’s theory the loss sustained from Primewood never paying for the 2000 bonds was offset by Akai Electric redeeming the 2001 bonds for nil consideration.[574] For reasons set out in Part E.6.1.4 of Akai’s Opening, such an approach was inappropriate and ignored the separate legal identities of Akai and its subsidiaries. Q.8.3.3 “Payment on Behalf” Theory 419.By the “payment on behalf” theory, Mr Bowyer made two assumptions:
420.The “payment on behalf” theory was mutually exclusive from the “Akai Group” theory also put forward on behalf of Mr Ting. The “Akai Group” theory assumed that there was no payment for the redemption of the Akai Electric 2001 bonds. The “payment on behalf” theory was premised on these bonds being repaid by Akai itself on behalf of Akai Electric and received by Tisco on behalf of Rosalie (which in turn received payment on behalf of Primewood). 421.As to the first of Mr Bowyer’s assumptions, Mr Bowyer initially speculated that “a possible explanation for the payments was that Akai, on behalf of Akai Electric, was redeeming the 2001 bonds using Tisco as an agent to settle with Rosalie”[577] Mr Bowyer included figure 8 at §5.56 of his Report showing an assumed flow of funds from Tisco to Rosalie, indicating that (emphasis added):
422.Alternatively, Mr Bowyer suggested that Akai’s payments could have been received by Tisco on behalf of Rosalie without the need for any actual cash flow from Tisco to Rosalie.[578] 423.While Mr Bowyer’s conviction appeared to have strengthened in §6.16 of the Bowyer Appendix,[579] under cross examination, Mr Bowyer conceded that his first assumption was based solely on two factors:[580]
424.Any superficial resemblance between the payments to Tisco and the amount due from Akai Electric to Rosalie merely evidenced Mr Ting seeking to conceal his defalcations of Akai’s assets to Tisco. 425.The second assumption forming the basis of Mr Bowyer’s theory was that Akai received funds from Tisco which were in fact payments made by Tisco on behalf of Rosalie, which in turn was making a payment to Akai on behalf of Primewood.[582] This is shown in figure 9 at §5.56 of his Report, where Mr Bowyer noted “[t]he payments from Rosalie to Tisco are assumed on the basis that Rosalie had a debt to Akai and that this would have been settled by a payment from Rosalie to Akai routed through Tisco.” Alternatively, Mr Bowyer suggested that Tisco’s payment could have been made on behalf of Rosalie without the need for any actual cash flow from Rosalie to Tisco.[583] 426.Again, Mr Bowyer’s assumption was inconsistent with the objective evidence. Mr Bowyer’s assumptions amounted to pure speculation unsupported by contemporaneous documentary evidence or any explanation from Mr Ting himself. Q.8.3.4 “Payments to TISCO HK” Theory 427.During the course of cross examination of Mr Borrelli and Mr Spence, counsel for Mr Ting suggested that amounts paid by Akai to Tisco matched amounts on a TISCO HK statement to the Hong Kong branch of Akai Electric dated 31 January 1998 and a subsequent letter from TISCO HK dated 13 February 1998.[584] This was plainly wrong. 428.Mr Bowyer confirmed in cross examination that his initial report made no mention of TISCO HK and that he did not rely on any superficial similarity between amounts paid to Tisco and any redemption of bonds with the genuine TISCO HK, merely stating that it “may be relevant”.[585] 429.On the objective facts, arising from the available documents, the proposition put forward by Mr Ting’s counsel as to the “matching” of the TISCO HK statement with the defalcations to Tisco was demonstrably wrong. Q.8.3.5 “Brinlow Repayment” Theory 430.In the course of cross examination, Mr Bowyer accepted that on his theory, Akai spent money both to buy and to redeem the Akai Electric 2000 and 2001 bonds. When asked why this did not result in a depletion of Akai’s assets by US$280 million, Mr Bowyer speculated that “Brinlow may have paid entirely for what Akai lent it … other things might have happened … I just don’t know”.[586] Akai contended that this answer was indicative of Mr Bowyer’s general approach to his role as an expert witness, which extended well beyond the conclusions to be drawn from the objective evidence. Q.8.3.6 Akai’s Concluding Submissions 431.In circumstances, where Mr Ting has been shown to have dishonestly deprived Akai of its assets, the burden fell squarely on Mr Ting to demonstrate that such funds had been restored to Akai. 432.Rather than giving evidence to explain the transactions, Mr Ting left his expert and counsel with the impossible task of attempting to unravel his web of fraud and deception. At best, the exercise undertaken by Mr Bowyer amounted to a speculative guess at what might have happened between various parties, without reference to any contemporaneous supporting documentation, wholly disregarding the actual cash flows between Akai and Tisco, the fact that Primewood, Rosalie and Tisco were controlled by Mr Ting as well as the obvious evidence of impropriety on Mr Ting’s part, and treating the transactions as if they were legitimate commercial dealings. 433.In such circumstances and in light of contradictory objective evidence, Akai submitted that the Court should not make any assumption in favour of Mr Ting as to the intention underlying the transactions or the hypothesised return of Akai’s funds. The transactions were defalcations of Akai’s assets which Mr Ting was strictly liable to repay. 434.I believe we have reached a realm which is surreal. Akai paid out US$184,615,385 on 3 July 1996 and US$13,379,740 on 4 August 1997, and never received any of these sums back[587]; but, it is submitted that, somehow, Akai has not suffered any loss from these transactions. Q.8.4.1 Transactions between Akai Subsidiaries and Primewood 435.As I understand Mr Ting’s case, although taken originally, the point that the Akai Group did not suffer any loss from these transactions was not maintained; but the point was taken that transactions between Akai subsidiaries (Brinlow and Matchpoint) and Primewood ought not to be taken into account. I accept Akai’s submissions that a Group approach was not appropriate as it ignored the separate legal identities of Akai and its subsidiaries. 436.On 3 July 1996, Akai paid JPY20,000,000,000 (US$184,615,385) for 400 Akai Electric 2000 bonds that were issued by Akai Electric on 19 July 1996 to Brinlow, a wholly owned subsidiary of Akai. I find that no payment was made by Brinlow to Akai in respect of the bonds. In the absence of contrary evidence from or on behalf of Mr Ting, I infer, from these facts, an agreement on the part of Brinlow to pay to Akai the amount Akai had paid Akai Electric for the issue of the bonds to Brinlow. 437.In January 1997, Brinlow sold 172 of the bonds to Matchpoint, a subsidiary of Kong Wah, for HK$509,600,000. I find that no payment was made by Matchpoint to Brinlow in respect of the bonds. In the absence of contrary evidence from or on behalf of Mr Ting, I infer, from these facts, an agreement on the part of Matchpoint to pay to Brinlow the amount of HK$509,600,000. 438.In June 1997, Brinlow and Matchpoint sold 360 bonds to Primewood, a Group 3 Ting Recipient, for a combined amount of HK$1,094,600,000 (US$140,333,333). Matchpoint sold 172 bonds to Primewood for HK$509,600,000 (US$65,333,333) and Brinlow sold 188 bonds to Primewood for HK$585,000,000 (US$75,000,000). On 4 July 1997 and 31 January 1998, sums equivalent to the proceeds of the sale of the 360 Akai Electric bonds to Primewood by Matchpoint (HK$509,600,000) and Brinlow (HK$585,000,000) were recorded as debit entries in Akai’s BT-Deposit General Ledger Account. In the absence of contrary evidence from or on behalf of Mr Ting, I infer, from these facts, an agreement on the part of Primewood to pay for the bonds it bought from Matchpoint by discharging Brinlow’s liability to pay Akai for them and, thereby, discharging Matchpoint’s liability to pay Brinlow for them. In the absence of contrary evidence from or on behalf of Mr Ting, I also infer, from these facts, an agreement on the part of Primewood to pay for the bonds it bought from Brinlow by discharging Brinlow’s liability to pay Akai for them. 439.I find that the debit entries in Akai’s BT-Deposit General Ledger Account were false and that Akai never received these amounts. Akai, therefore, suffered a loss on 4 July 1997 and 31 January 1998, when the sums, equivalent to the proceeds of the sale of the 360 Akai Electric bonds to Primewood by Matchpoint (HK$509,600,000) and Brinlow (HK$585,000,000) that were recorded as debit entries in Akai’s BT-Deposit General Ledger Account, ought to have been paid to Akai. The result was that Primewood received, for no consideration, the benefit of the Akai Electric 2000 bonds, with a value of US$140,333,333 that had been paid for by Akai. The false BT-Deposit General Ledger Account masked the failure on the part of Primewood to pay for these bonds and further masked the non-receipt by Akai of the amount it had paid for these bonds. 440.For these reasons, I find that the transaction between Akai’s subsidiaries and Primewood caused loss to Akai. 441.If I am wrong in my analysis and findings, then I would find that Akai suffered this particular loss of US$140,333,333 on 3 July 1996, as this sum was part of the US$184,615,385 payment Akai had made to Akai Electric on 3 July 1996; and, further, I would permit Akai to pursue the claim for US$140,333,333 even though that payment had been made before the Claim Period from February 1997 to July 1999. All relevant matters and documents pertaining to the claim have been brought to my attention and fully ventilated before me. I accept Mr Spence’s opinion that Primewood was an exception and a special situation on its own that required special treatment.[588] 442.From the undisputed facts recited in §§384-403 above, I find that Rosalie received, for no consideration, the benefit of US$13,379,740 paid by Akai on 4 August 1997 for the Akai Electric 2001 bonds. 443.From the undisputed facts recited in §§384-403 above, I find that Tisco, a Group 2 Ting Recipient, received 11 separate payments totalling US$118,399,119 directly from Akai, which were immediately repaid by Tisco to Akai in 9 separate payments totalling US$116,357,743. 444.I do not accept Mr Bowyer’s evidence that the 11 Tisco payments debited to the “Akai corp” account (US$118,399,119), plus a 12th non cash entry of US$17,820,513, related to the settlement of an amount owed by Akai Electric to Rosalie for the redemption of the Akai Electric 2001 bonds.[589] He conceded that this assumption was based on the words “bond redemption” appearing in the journal vouchers and the similarity of the total amount debited to the “Akai corp” account and the amount owed by Akai Electric to Rosalie in respect of the redemption of the Akai Electric 2001 bonds.[590] Mr Bowyer gave evidence that since his involvement in the case, which commenced in November 2012, he had never met or spoken to Mr Ting;[591] and, further, that he knew that he would not be meeting or speaking with Mr Ting.[592] He agreed that the best way to explain transactions would be to speak to the person that was involved in them, in order to understand their commercial rationale[593] and he conceded that his opinion was severely restricted by having no access to anyone who was involved at the time.[594] Absent evidence adduced by or on behalf of Mr Ting, I cannot find Mr Bowyer’s assumptions to be fact, particularly given that:
445.The second assumption made by Mr Bowyer was that the nine cash receipts by Akai from Tisco of US$116,357,743, plus a non-cash entry of US$17,820,513 “represented the settlement of US$134,178,256 of Primewood’s debt to Akai”, namely, that Akai received funds from Tisco which were in fact payments made by Tisco on behalf of Rosalie, which in turn was making a payment to Akai on behalf of Primewood.[603] Absent evidence adduced by or on behalf of Mr Ting, I cannot find Mr Bowyer’s assumptions to be fact, particularly given that:
Q.8.4.4 TISCO HK 446.I accept Akai’s submissions that, contrary to the suggestion of Mr Ting’s counsel in cross examination, the amounts included on the TISCO HK statement did not match with the amounts paid by Akai to Tisco in that:
447.I find that Mr Ting changed the name of Almeida Morano Limited to Tisco to mislead third parties into thinking that Tisco was TISCO HK. Q.8.4.5 Commercial Purpose 448.I agree that Mr Spence identified a commercial purpose for the bond issues when he said in his report that the repurchase of the bonds by Akai Electric at a discount enabled the group to recognise an exceptional gain[614]. However, he went on to say, in the same paragraph, that if these bonds had been held by any of Akai’s subsidiaries when they were repurchased by Akai Electric, it would not have been possible for Akai to recognise the gain on their repurchase. I find that the means of obtaining this exceptional gain was illegitimate, in that it required transfer of bonds to Primewood and Rosalie. The recognition of the exceptional gain was itself an example of false accounting, where any gain recorded in Akai’s consolidated financial statements was entirely artificial and created by:
Q.8.4.6 Primewood, Rosalie and Tisco Transactions were Defalcations 449.The Primewood transactions, the payment to Rosalie and the Tisco payments were defalcations. Primewood received a benefit of US$140,333,333. The amount recorded by Akai as having been received by Akai for the Akai Electric bonds was never paid, and that non-payment was concealed in Akai’s BT-Deposit General Ledger Account. The payment of US$13,379,740 to the benefit of Rosalie for the issue of Akai Electric 2001 bonds to Rosalie, was made for no legitimate commercial purpose and was a defalcation. The 11 payments totalling US$118,399,119 to the benefit of Tisco, a Group 2 Ting Recipient, were defalcations. The recycling of cash assets was made for the improper purpose of reducing the balance of the BT-Deposit General Ledger Account to zero by the end of Akai’s financial year. 450.I also find that the recycled Tisco payments were also made to try to match the amount debited to the “Akai corp” account and the amount owed by Akai Electric to Rosalie of US$136,219,633 for the redemption of the Akai Electric 2001 bonds. However, the recycled payments only amounted to US$118,399,119, which was not enough to amount to a complete settlement of the amount owed by Akai Electric to Rosalie.[616] I accept the evidence of Mr Borrelli and find that the balance was made up by the unexplained non-cash transaction of US$17,820,513[617] as a contrivance to achieve similarity between the amount debited to the “Akai corp” account and an amount due from Akai Electric to Rosalie for redemption of the Akai Electric 2001 bonds.[618] The difference of 10,000 yen, between the Tisco payments and the non-cash transaction that were recorded in US dollars, and the amount owing in Japanese yen for the Akai Electric bonds, might have been the result of a mistake regarding the prevailing exchange rate. 451.I adopt the analysis in §§309-312 above to these payments and conclude that they were defalcations by Mr Ting. The repayment of the Tisco payments is dealt with below when I consider the method to employ to assess equitable compensation. Q.9 The TriAsia Transactions[619] 452.It is alleged that, during the Claim Period, Akai made 5 payments for the benefit of TriAsia, a Ting Associate, for no legitimate commercial purpose.[620] These payments were made by Akai to Bank of Tokyo-Mitsubishi (“BTM”) “by order of TriAsia” and were made for the improper purpose of reducing TriAsia’s loan account. 453.Mr Bowyer disputed that four of these payments totalling US$16,640,584 were defalcations on the basis that he “is unable to determine that TriAsia was the Recipient of the four payments”.[621] Mr Ting’s case is that the statement in the letters concerned that the payment was made “by order of TriAsia” was insufficient to prove that TriAsia was the beneficiary of the payment. 454.Mr Bowyer did accept that there was no evidence to justify Akai paying money to BTM or booking that payment into its BT-Deposit General Ledger Account. They were, on their face, “unexplained transactions”.[622] 455.I agree with Akai’s submissions that the lack of any commercial purpose for Akai’s payments to BTM and their concealment in the BT-Deposit General Ledger Account was of itself sufficient for me to find that they were defalcations of Akai’s assets by Mr Ting. However, there is documentary evidence in this case, in the form of third party banking documents identified by Mr Spence at §11.6 of his Report, from which I find that Akai was making repayments of TriAsia’s bank loan with BTM.[623] In particular:
456.I am able to find, from these documents, combined with the banking documents showing the equivalent funds either paid by Akai or received by BTM, that Akai was making payments to BTM on behalf of TriAsia in order to reduce TriAsia’s loan. Such payments served no legitimate commercial purpose and were defalcations of Akai’s assets by Mr Ting. I adopt the analysis contained in §§309-312 above to these payments and conclude that they were defalcations by Mr Ting. Q.10 Primewood, Rosalie and Cyclonics were Group 3 Ting Recipients 457.I refer to §§232-234 above. Absent any evidence from or on behalf of Mr Ting, I infer from Primewood’s sharing of the correspondence address with Fiction and Everwin and its involvement with the Primewood defalcations that Primewood was a Group 3 Ting Recipient. 458.I refer to §§235-236 above. Absent any evidence from or on behalf of Mr Ting, I infer from Rosalie’s involvement with the Primewood defalcations that Rosalie was a Group 3 Ting Recipient. 459.I refer to §§237-239 above. In the circumstances of the present case where hundreds of millions of US dollars were contemporaneously paid out by Akai for no apparent commercial purpose or value to Akai to other companies with which Mr Ting had an express connection and which were concealed in similar manner, I am prepared to infer, absent any evidence from or on behalf of Mr Ting, that Cyclonics was yet another company controlled by Mr Ting. Q.11 The Disputed Payments were Defalcations 460.I have found, with the exception of the Worldwide transaction, that the disputed payments were defalcations. I have done so after reminding myself of the burden of proof and the injunction against a finding of wrongdoing unless the evidence of wrongdoing was clear and unless the inference of such wrongdoing was compelling. My findings, that Mr Ting deliberately misappropriated Akai’s assets, namely, the disputed payments, and that he did so dishonestly, have been based on the totality of the admissible evidence on the issue and the following compelling facts:
461.I have sufficient evidence before me to enable me to find that Mr Ting deliberately misappropriated Akai’s assets, namely, the disputed payments totalling US$414,722,616, and that he did so dishonestly. However, if I am wrong to reach this conclusion on the evidence before me, I would proceed on the basis that my finding, that the disputed payments were not made for a commercial purpose, was sufficient for the evidential burden to shift to Mr Ting to justify the propriety of the transactions. I have already set out my reasons why I am unable to accept Mr Bowyer’s evidence that there was commercial purpose to the disputed payments. No evidence whatsoever has been adduced in this regard by or on behalf of Mr Ting. He has entirely failed to discharge the evidential burden that has shifted to him and that is sufficient for me to conclude that Mr Ting caused Akai to made disputed payments to the Ting Recipients, and that he did so fraudulently. 462.I am able to reach this conclusion without the need to draw adverse inferences against Mr Ting from his election not to give evidence in this case. 463.As I have found that Mr Ting acted fraudulently in respect of the disputed payments, he is strictly liable as a defaulting trustee and is required to restore the lost trust assets in specie, in this case by accounting to the beneficiary Akai by way of equitable compensation, the purpose of which is restitutionary or restorative. R. Equitable Compensation 464.The issues that arise on the quantification of compensation payable to Akai are:
465.The relevant principles that apply where a trustee or other fiduciary has misapplied trust property are summarised in Snell’sEquity (33rd ed, 2014) at §20-034 to §20-036 as follows:
466.The legal principles set out below have been addressed and confirmed in the unanimous decision of the Court of Final Appeal in Libertarian Investments Limited v Thomas Alexej Hall (2013) 16 HKCFAR 681 in which the Court of Final Appeal undertook a detailed review of the applicable equitable principles. 467.The starting point is that the relationship between a director and company is fiduciary in nature (at §53). 468.Secondly, there is a fundamental distinction between fiduciary obligations and obligations under the tort of negligence and contract, as explained by Ribeiro PJ (at §72) citing McLachlin J in her “dissenting but influential judgment” in Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 at §61:
469.Thirdly, the “basic obligation” of a fiduciary is to act in the interests of another (per Riberio PJ at §74):
470.Fourthly, adopting the analysis of Tipping J in BNZ v NZ Guardian Trust Co Ltd [1999] 1 NZLR 664 , there are three categories of breaches of fiduciary duties and strict rules on causation apply in respect of the first two categories of breaches, mirroring those developed in relation to traditional trusts, such that the common law rules as to foreseeability and remoteness are inapplicable. The current case, involving misapplied assets, falls into the first category. As Ribeiro PJ stated at §§75 – 79:
471.The Court of Final Appeal also set out in detail the principles relating to the remedy of equitable compensation and a fiduciary’s entitlement to an account. Moreover, Lord Millett NPJ carefully explained in his short but cogent judgment why it is incorrect to assert that account and equitable compensation are alternative remedies:
472.The following principles are of particular relevance to the present case:
473.The Supreme Court of New Zealand (Elias CJ, Blanchard, Tipping, McGrath and Anderson JJ) in Maruha Corporation and Muruha (NZ) Ltd v Amaltal Corporation Ltd [2007] NZSC 40 cited, by Ribeiro PJ (at §94), confirmed that a defaulting fiduciary is not entitled to any deduction or offset against the quantum of compensation for which it is liable unless the offset is in respect of a clear and manifest benefit conferred by the fiduciary. Moreover, the onus is on the errant fiduciary to establish any such benefit. As Blanchard J stated (at §§29 – 30):
474.The principles relating to equitable compensation are well summarised by McLachlin J in Canson at 556, as cited by Ribeiro PJ at §96:
475.A robust approach is to be adopted. In measuring the amount of equitable compensation, the Court’s approach “reflects the stern view taken of defaulting fiduciaries”. In this regard, “a fiduciary is precluded from setting up a case inconsistent with the obligations of his fiduciary position” (per Ribeiro PJ at §123). Both Ribeiro PJ and Lord Millett NPJ emphasized that where uncertainties existed due to a lack of documentary evidence, as a consequence of the fiduciary’s wrongdoing, the uncertainty would be construed against the defaulting fiduciary. In particular:
476.I find that, in causing the defalcations of Akai’s assets, Mr Ting acted in flagrant breach of his fiduciary duties to Akai and that Mr Ting’s breaches of his fiduciary duties fell within the first category classified by Tipping J in BNZ such that strict rules on causation apply. Accordingly, in measuring loss to Akai, questions of foreseeability, remoteness and mitigation are irrelevant. This case concerns a misappropriation of Akai’s assets, it is not a wilful default case. Applying the above principles, I accept that the starting point for the determination of the quantum of equitable compensation payable by Mr Ting to Akai is the total amount of defalcations[629]. 477.In the absence of evidence from Mr Ting, there can be no basis for speculation in Mr Ting’s favour. As a fiduciary, Mr Ting is strictly accountable to Akai. Holding Mr Ting to account requires that I must be satisfied, on evidence and not speculation, that sums paid to Akai were a restoration of a prior defalcation, before Mr Ting can be given any credit. 478.Mr Ting is only entitled to a deduction from this sum if I accept that payments to Akai were restorations of prior defalcations. Unlike Maruha Corporation and Muruha (NZ) Ltd v Amaltal Corporation Ltd, the present case is not a case where Mr Ting can claim an offset from Akai or where Mr Ting can claim that Akai received an incontrovertible benefit. I do not derive assistance from the authorities on unjust enrichment and the principle that the claimant must make a counter-restitution of the benefit he has received. The return of Akai’s own money is not a benefit conferred[630] but it restores a loss that occurred at the time of the defalcation. If Akai has received proceeds of defalcations by Mr Ting from Akai’s subsidiaries then such proceeds are not the return of Akai’s own money and Mr Ting cannot get credit for them. However, if Akai has received back its own money it cannot be said to be a constructive trustee of the money for the remitter of the funds. S. Methods 1 to 5, Tomei Receipts and Disregarded Credits 479.During the Claim Period, the Recipients of the defalcations also made various payments to Akai. The greater dispute between the parties centred on the extent to which these payments to Akai might reduce the compensation payable by Mr Ting to Akai. It was Akai’s case that no credit should be given for these payments in accordance with the well-established principles of director fiduciary accountability for misapplied company assets. Alternatively, if credit was to be given, then it should only be given if and to the extent that the receipt can be demonstrated by Mr Ting to be directly linked to a prior defalcation by Mr Ting to the same Recipient. 480.Mr Borrelli identified four alternative Methods of calculating the compensation payable by Mr Ting for his Defalcations (“Methods 2 to 5”). Each of Methods 2 to 5 relied on an assumption as to the connection between the defalcations of Akai’s assets by Mr Ting and the receipts from Recipients. The strength of the objective factors to establish such a connection grew weaker from Methods 2 to 5. It was Akai’s case that of these alternatives, only Method 2 involved any objective factors approaching those which might be sufficient to reduce Mr Ting’s liability: that is, the requirement of identity and traceability between defalcations and subsequent receipts. 481.The selection of the appropriate method of calculation is a legal issue and not one for expert accounting evidence, as was recognised by Mr Borrelli and Mr Spence.[631] The relevant receipts included in the calculations under each of Methods 1 to 5 are set out at §1.8 of the Joint Expert Report and reproduced below:
482.The quantum of the receipts from Recipients was largely agreed. There was a dispute between the experts, which related to receipts which had been disregarded by the Liquidators on the basis that they originated from Tomei, a non-Recipient (“Tomei Receipts”). A further dispute related to two categories of credits: cash received from subsidiaries and cash received by subsidiaries that were booked into Akai’s books[632]. 483.Under the alternative Method 2, Akai claims the sum of US$634,051,305 being the total amount of the defalcations (US$837,118,799) less those receipts from Recipients of amounts identical or similar to prior defalcations paid to the same Recipient within close temporal proximity (US$203,067,494). It is Akai’s case that, unlike Methods 3 to 5, Method 2 gives at least partial effect to the principles of Mr Ting’s accountability and the requirements for any reduction of Mr Ting’s liability for misappropriations, in that:
484.Under the alternative Method 3, Akai claims the sum of US$479,764,828, being the total amount of the defalcations (US$837,118,799) less those receipts from Recipients (excluding the Starcode Receipts and Tomei Receipts) where the payee is a notional debtor of Akai by virtue of the receipt of prior defalcations (US$357,353,971). 485.Akai claims that the difficulty with this Method is that although the Recipients are treated as notional debtors of Akai, there is no requirement of any objective identity or traceability between payments to indicate that they were given in order to offset specific prior defalcations. Therefore, unlike Method 2, there are no objective factors upon which to base an assumption that these payments by third parties operate to reduce Mr Ting’s liability to account for his misappropriations. Further, even assuming that receipts from the third party Recipients were directed at reducing Mr Ting’s liability generally, this is precisely the kind of payment “given in respect of [Mr Ting’s] liability for cash in hand generally”, for which credit was disallowed in British American Elevator Co v Bank of British North America [1919] AC 658 (see at 665 per Haldane LC). Accordingly, Akai submitted that Method 3 was inappropriate as a means of calculating the equitable compensation payable to Akai. 486.Under the alternative Method 4, Akai claims the sum of US$447,369,541, being the total amount of the defalcations (US$837,118,799) less those receipts from Recipients (excluding the Starcode Receipts and Tomei Receipts) calculated by reference to a running account maintained for all receipts from and payments to a Recipient in the Claim Period (US$389,749,258). 487.In addition to the lack of objective identity or traceability as identified in relation to Method 3, under Method 4, a prior receipt could be offset against a later defalcation. Allowing such credit was to treat the relationship between Akai and the Recipient as if it were a legitimate debtor/creditor relationship in the ordinary course of business, which clearly was not the case. Further, as a matter of logic, Mr Ting’s liability to account for a misappropriation could not be reduced before it has arisen due to a defalcation. For these reasons, Akai submitted that Method 4 was inappropriate as a means of calculating the equitable compensation payable to Akai. 488.Under the alternative Method 5, Akai claims the sum of US$406,115,559, being the total amount of defalcations (US$837,118,799) less all receipts from Recipients other than the Starcode Receipts and Tomei Receipts (US$431,003,240). 489.Under this Method, in addition to the lack of objective identity or traceability and the problem of timing associated with Method 4, receipts from one Recipient could be used to offset a defalcation made to an entirely different Recipient. This assumed that the Recipients not only made payments on behalf of Mr Ting in order to reduce his liability, but also that they made such payments to Akai without necessarily having received defalcations to that extent themselves. In other words, notwithstanding Mr Ting’s failure to provide any evidence whatsoever on the issue, there was an assumption that the Recipients acted with one another in some kind of joint enterprise for the purpose of reducing Mr Ting’s liability. Method 5 therefore disregarded the fundamental principle of separate legal personality. For these reasons, Akai submitted that Method 5 was inappropriate as a means of calculating the equitable compensation payable to Akai. S.5 Methods 4 and 5 are Rejected 490.I reject Methods 4 and 5 as being inappropriate to assess equitable compensation in this case. Method 4 operates as a running account between Akai and the various Recipients. The effect of this is that, in addition to the credit provided under Method 3, Mr Ting would also be given credit for amounts paid to Akai by a Recipient in advance of receiving defalcations – in other words, the payment to Akai would be treated as a loan that was repaid by a subsequent defalcation. This method was plainly inappropriate. A payment out was in breach of fiduciary duty even though it might have been a “repayment” of a sum that had been paid to Akai by the Recipient in a prior concealed and fraudulent self dealing transaction. If a defalcation occurred on a certain date, a payment to Akai before that date cannot be a “restoration” of that later breach of fiduciary duty. 491.Method 5 takes matters even further and provides Mr Ting with credit for all sums paid to Akai by Recipients during the Claim Period. In addition to the problems with 4, this Method impermissibly pierces the corporate veil of each of the Ting Recipients in Mr Ting’s favour, as all of the Recipients are treated as one legal entity and then equated with Mr Ting for the purpose of reducing Mr Ting’s liability. Piercing the corporate veil only occurs in exceptional circumstances to give a plaintiff a remedy against a wrongdoer who has sought to evade liability by interposing a company under his control. It is not available to a defendant: Prest v Petrodel Resources Limited [2013] 3 WLR 1 at §35 (Lord Sumption JSC). To the extent that Mr Bowyer’s evidence sought to employ accounting principles as to offsetting in support of Method 5 or some further method, this was shown to be incorrect by reference to the applicable accounting standards.[633] 492.I refer to §§397 to 402 above. I accept Mr Borrelli’s evidence in §§23 to 240 and §§432-436 of his witness statement in connection with the Tisco recycling transactions. I am satisfied from the identity between the receipt and the prior defalcation and from the close temporal proximity of the payments that the receipts were a restoration of the Tisco defalcations. I am also satisfied from the identity between the receipt and the prior defalcation and from the close temporal proximity of the payments that the receipts were a restoration of the Worldwide International, Evora, Golfland, Higher International, Goaltop and Conben defalcations identified in the exhibit to Mr Spence’s report.[634] Accordingly, the amount of equitable compensation, in the sum of US$837,118,799, should be reduced by the amount of the restored loss in the sum of US$203,067,494. 493.The acceptance or rejection of Method 3 is the most difficult decision I have to make in this case. I have received very eloquent and able submissions on behalf of Akai to the effect that the court must adopt a robust approach and not make speculative assumptions in favour of a person who is guilty of egregious breaches of fiduciary duties. I accept Akai’s submissions that Maruha Corporation and Muruha (NZ) Ltd v Amaltal Corporation Ltd is an example of the very strict application of this principle. In that case although it appeared to be the case that tax would have been payable, the court was not prepared to make the assumption that the victim might not have been able to avoid the tax. I accept that British American Elevator Co. v. Bank of British North America [1919] AC 658 is another example of the strict application of this principle. In that case, the Privy Council rightly pointed out that the Court of Appeal of Manitoba “should have treated the claim as one for replacement of trust funds and not for damages”[635] and that “the respondents did not make good the contention put forward in argument, that this cheque for $1000 was given to make good the amount of a previous draft for the same amount which had been misapplied … his cheque was given in respect of his liability for cash in hand generally [that he had received for his principals]”.[636] 494.I was also referred to Snell’s Equity (33rd ed.) p.186 where the editors stated:
Akai submitted that to speculate in Mr Ting’s favour leads inexorably to a greater level of encouragement to the breaching of fiduciary duties. 495.I agree with Akai’s submission that it would be wrong to infer that Mr Ting was cheque kiting and creating a circularity of funds so as to increase the turnover of Akai in order to give the appearance of increased value of the company. The funds were off the balance sheet and concealed in the BT Deposit and Temporary General Ledger Accounts; therefore, the circularity of funds did not confer any benefit to Akai. The Liquidators had spent years trying to understand why he did what he did and could not come up with an answer, except for the Tisco recycling transactions which were done to try to bring the BT Deposit account down to zero so that it would escape the attention of the auditors. If the Liquidators could not come up with an answer the Court should not speculate in Mr Ting’s favour. 496.I accept that Method 3 is further removed from Method 2 as it does not have the coincidence of timing and coincidence of amount present in Method 2. The schedules for Method 3 showing the receipts from Recipients are in Bundle E26 at Tab 38 for the BT Deposit account and at Tab 58 for the Temporary General Ledger Account. 497.However, notwithstanding Akai’s cogent submissions, I cannot get away from the fact that the defalcations in the total sum of US$837,118,799, over the Claim Period of 2.5 years from February 1997 to July 1999, amounted to 58% of the turnover of the year ended 31 January 1998 and 75% of the capital and reserves of that year[637] of the Akai Group on a consolidated basis; and amounted to 100.5% of the turnover of the year ended 31 January 1999 and 80% of the capital and reserves of that year[638] of the Akai Group on a consolidated basis. I cannot see how Mr Ting could have committed defalcations in these extraordinary amounts[639] unless some of the proceeds of prior defalcations were restored to Akai by Recipients. I cannot see where Akai had the cash assets to enable Mr Ting to commit these defalcations in these extraordinary amounts[640] unless some of the proceeds of prior defalcations were restored to Akai by Recipients. In the course of closing oral submissions, it was rightly submitted on behalf of Akai that, for the year ended 31 January 1998, the payments to Recipients amounted to approximately 31% of the total turnover of the Akai Group on a consolidated basis and that this was a huge indicator that the whole thing was fraudulent[641]. 498.The payments made to Recipients were made for no commercial purpose. The payments made by Recipients to Akai were also made for no commercial purpose. Although I do so with great reluctance, as I have no desire to favour a fraudster of this calibre committing frauds of this magnitude, possibly the largest corporate fraudster in Hong Kong’s entire history, the sheer amount of the defalcations, when compared with the turnover and assets of the entire Akai Group on a consolidated basis, compels me to draw the irresistible inference that defalcations of this magnitude could not have been committed by Mr Ting unless some of the proceeds of prior defalcations were restored to Akai by Recipients as shown in the schedules on Method 3. 499.Accordingly, the amount of equitable compensation, in the sum of US$837,118,799, should be reduced by the amount of the restored loss in the sum of US$357,353,971, which is inclusive of the restored loss of US$203,067,494 under Method 2. S.8 The Disregarded Receipts, including the Tomei Receipts 500.Mr Borrelli has recognised as, Disregarded Credits, a number of transactions which, according to Akai’s case, was irrelevant to the assessment of equitable compensation payable by Mr Ting. These disregarded credits included cash received by Akai from subsidiaries, cash received by subsidiaries but booked into Akai’s books, and receipts from Ting Recipients that were funded by Tomei, an affiliate of Akai[642]. S.8.1 Cash Received by Akai from Subsidiaries S.8.1.1 Mr Ting’s Case 501.Out of the US$48.1 million within this category, Mr Bowyer[643] found evidence to show that about US$20 million paid by subsidiaries (Space Mountain, KWEE and KWIC) to Akai were in fact funded by Recipients. However, these payments had been disregarded by the Liquidators. Mr Ting submitted that these payments were made by Recipients to Akai, albeit via subsidiaries, and should be taken into account in reducing Akai’s loss for that is what they did. 502.Akai submitted that, as a matter of law, the disregarded credits received by Akai from its subsidiaries of US$20,051,218 were irrelevant. In any event, the disregarded credits could only be relevant to Method 5 because:
503.Further, Mr Bowyer did not make any deduction for receipts from Akai’s subsidiaries. Mr Ting’s position was inconsistent with the expert evidence including the Joint Expert Report.[645] S.8.2 Cash Received by Subsidiaries but booked into Akai’s Books S.8.2.1 Mr Ting’s Case 504.Subsidiaries of Akai received payments of US$93.6 million from Recipients[646]. These payments were booked in Akai’s books as loans due from the subsidiaries and credited to the BT Deposit and Temporary General Ledgers. They were excluded from the calculation of loss because they were not cash received by Akai itself. Mr Spence could not see the reason why a cash transaction between a Recipient and a subsidiary was recorded in Akai’s books[647] and that it was the cash and not the accounting that was relevant.[648] 505.Mr Ting submitted that the accounting was relevant. If the Liquidators were correct to treat the Primewood transaction as one amounting to a defalcation, even though the subsidiary and not Akai was entitled to the money paid, then these receipts must also be taken into account. 506.Akai had suggested that it was not open to Mr Ting to challenge the way these credits had been categorised because Mr Bowyer had agreed in the Joint Report to make no adjustments for them[649]. That was wrong, both on the evidence and as a matter of law. On the evidence, Mr Bowyer specifically referred to the US$93.6 million at §3.2(ii) of the Joint Report as a category which may be taken into account and, at §4.11, gave the reason for their inclusion. He also explained why he then disregarded the transactions between Akai and its subsidiaries (Space Mountain, KWEE and KWIC) of US$20 million at §4.14(d) and 4.17 of the Joint Report. It was to be consistent with the Liquidators’ approach, which he had adopted in the Joint Report solely for reasons of practicality. Mr Bowyer had not conceded that these payments should be disregarded. 507.Mr Ting submitted that it was for the Court to decide the issue. These were payments by the Recipients to the subsidiaries at the holding company’s order (Mr Bowyer[650]). The fact that the transactions were credited to the BT Deposit or Temporary General Ledgers reinforced the position that the payments were intended to reduce, and accepted by Akai, as reducing the payments out Akai made through those same ledgers. Akai not only received a benefit in respect of these payments (either of cash or an asset in the form of a loan from a subsidiary), but these benefits were received from payments made by Recipients. In respect of the following Recipients, Higher International, JT Capital, Fu Tak International, Restex and Seline, Mr Borrelli acknowledged that they had paid more to Akai than they had received from it. He accepted that he had made no attempts to return the money to them[651]. Equity required that this benefit from Recipients be taken into account. 508.Akai submitted that the US$93.6 million received by Akai’s subsidiaries from Recipients was one step further removed from being a restoration of misapplied assets, in that these amounts were not even received by Akai, let alone connected with specific prior defalcations. There was no evidence whatsoever that such sums were received by subsidiaries “at the holding company’s order” or “on behalf of Akai”.[652] Mr Ting’s submission was based on a mirage of a group of third party companies negotiating some complex form of financing amongst themselves, but leaving no trace of what it was about, why it was needed, or how it worked. The false accounting in Akai’s BT-Deposit General Ledger Account could not create value where none existed.[653] 509.Mr Ting’s submission that Mr Bowyer somehow allowed for an adjustment in this amount is directly contradicted by his evidence. Specifically, Mr Bowyer stated “I don’t take any point in respect of the 93 million”.[654] Again, Mr Bowyer excluded this amount from his adjustments in his first report and the Joint Expert Report.[655] 510.The suggestion that Mr Borrelli should have returned payments to certain Ting Recipients, was unreal. Akai was in insolvent liquidation and the liquidator could not simply “return” funds to any party outside the proof of debt procedure. 511.More generally, Mr Ting suggested that “the principal objectionable effect of this methodology is that it excludes payments back to subsidiaries which have been received by Akai or simply paid on and booked into the accounts of Akai.”[656] No reason was given why such an effect is objectionable. As a matter of law, it would only be objectionable if such payments were shown to be restorations of Akai’s misappropriated assets. Mr Ting had not attempted to show such restoration. S.8.3.1 Mr Ting’s Case 512.Mr Ting submitted that these receipts were received by Akai from Ting Recipients. The evidence showed that the Recipients had been funded by Tomei, a subsidiary, which had itself been funded previously by Recipients. Mr Spence’s analysis found that all but US$2.8 million of the US$51.88 million claimed by Akai was funded by Recipients as Mr Borrelli (reluctantly) accepted in cross examination[657]. Applying the same principle to these receipts as before, the Court should have regard to the source of funding. Akai’s loss was to be reduced by US$49 million. 513.In any event, applying the Liquidators’ own methodology, the full amount of these receipts, US$51.88 million, should be taken into account because the payments were made by Ting Recipients to Akai. It was accepted by Mr Spence that to disallow these receipts was inconsistent with the Liquidators’ methodology. The departure, he said, was to reflect the particular circumstances of Tomei[658]. Mr Borrelli acknowledged that the Liquidators’ method was primarily to confine only payments to and from Akai with Recipients, but here he wanted to go behind that[659]. 514.The reason the Liquidators had originally given for excluding these receipts was because (they said) there was no evidence that the funds came from prior defalcations and that, on the contrary, there was evidence that the Recipients had received money from Tomei which was a separate publicly listed entity[660]. There was no logical or legal basis for the requirement that the funds should come from prior defalcations. So long as funds go back to Akai from Recipients, it did not matter how the Recipients obtained them. 515.Further, if these receipts were not to be taken into account, it would produce a windfall for Akai[661], and impermissible as a matter of law. 516.Akai submitted that under either Method 1 or Method 2 the Tomei Receipts were of little consequence. In particular, on Method 1, the Tomei Receipts were irrelevant (as no credit was given for any receipts by Akai). On Method 2, the Tomei Receipts make a difference of only US$2,328,590[662], which was relatively immaterial. The Tomei Receipts only made a substantial difference if the Court were to adopt one of Method 3, 4, 5 or some other method.[663] 517.The underlying cash flows and core facts regarding the Tomei Receipts were not in dispute:
518.There was no evidence explaining why sums were taken from Tomei, paid to Recipients, and then paid on to Akai. There was evidence that Mr Ting personally signed for one of the payments[665] and it could be readily be inferred that he was responsible for the balance. In the absence of any evidence from Mr Ting, the only reasonable inference was that the sums paid from Tomei to Recipients were defalcations of Tomei’s cash by Mr Ting. 519.It is an extraordinary proposition for Mr Ting to contend that he ought be permitted a credit as against his defalcations from Akai, as a result of causing Akai to receive cash misappropriated from Tomei (a separate listed company with public shareholders of its own), merely because it passed through the Ting Recipients. The Court could not ignore the fact that Akai was paid with misappropriated funds. 520.The short point therefore was that, if the Court were to adopt Method 3, 4 or 5, one of either Akai (the victim) or Mr Ting (the defaulting fiduciary) stood to benefit from the fact that sums were improperly taken from Tomei, paid to certain Recipients, and then paid on to Akai. Viewed in that light, if there was to be a benefit from the fact that Mr Ting misappropriated money from Tomei that found its way to Akai, it was not a benefit that ought to be enjoyed by Mr Ting. To allow Mr Ting the credit would permit him to gain from his wrongdoing, as he would retain the proceeds of his defalcations by virtue of having improperly taken money from Tomei. S.8.4.1 Cash Received by Akai from Subsidiaries 521.As I have already ruled out Methods 4 and 5 as a permissible means of assessing equitable compensation in this case, I am unable to conclude that the amount of US$20,051,218 received by Akai from its subsidiaries amounted to a partial restoration of Akai’s loss. There was no evidence to show that the specific payments were funded by specific Recipients who had been the beneficiary of a defalcation and, more importantly, there was no evidence to show that the specific payments had been funded by specific Recipients who had been the beneficiary of a prior defalcation. S.8.4.2 Cash Received by Subsidiaries but booked into Akai’s Books 522.Without any receipt of cash or assets by Akai from a Recipient, it is not possible to conclude that there has been a restoration of the loss suffered by Akai by a prior defalcation committed by Mr Ting. That is sufficient to dispose of this point. However, even assuming that Mr Ting could make this submission, notwithstanding the disavowal of Mr Bowyer who would not take any point in respect of the US$93 million, no evidence has been adduced by Mr Ting, or on his behalf, that these sums were received by subsidiaries “on Akai’s order” or “on behalf of Akai”. Entries in the BT Deposit account, which contained so many false accounting entries, have no evidential value and cannot prove that Akai received any value by the payments made to subsidiaries by Recipients. 523.Even though the source of funds used to pay Akai flowed from Tomei, I am able to conclude that the payment to Akai by a specific Recipient would restore the loss suffered by Akai, as a result of a prior defalcation in favour of that Recipient, without the need to show that the proceeds of that prior defalcation had flowed to Tomei. 524.However, the problem that arises here is that there is some evidence to support the case that the payments by Tomei to the Recipients were defalcations committed by Mr Ting. There was no commercial purpose for the payments from Tomei. One of the payments was personally signed by Mr Ting[666]. If the Recipients received payments from Tomei which they were not entitled to, and those payments were used to pay Akai then such payments could not restore the loss suffered by Akai by Mr Ting’s prior defalcations. The Recipients concerned, Tisco, Goaltop and Golfland, who were Group 2 Ting Recipients, would be affixed with Mr Ting’s knowledge of the defalcations and would be constructive trustees of those sums, such that Tomei could trace the moneys to Akai. 525.On the other hand, there is evidence that Tomei had also received payments from Recipients totalling US$54,194,840 during the Claim Period, albeit from different Recipients, for different amounts, and on different dates than Tomei’s payments to Recipients[667]. Even so, Tomei used US$2,786,916 of its own funds to pay Recipients.[668] I agree with the adjustments made by Mr Spence to reduce the credit under Methods 4 and 5 to US$49,093,320[669] and the credit under Method 3 to US$9,839,447[670]. In the absence of evidence from or on behalf of Mr Ting that the Recipients were entitled to the sum of US$2,786,916 received from Tomei which they used to pay Akai, I find that such payments did not restore the loss to Akai from the prior defalcations in favour of the Recipients. 526.However, insofar as the funds used by the Recipients to pay Akai came from Tomei and Tomei, in turn, received the same funds from the Recipients, then I find that those payments restored the loss suffered by Akai as a result of its prior defalcations in favour of the Recipients. 527.For these reasons, I am able to conclude that the amount of equitable compensation, under Method 3, ought to be reduced by the further amount of the payment to Akai from Recipients in the sum of US$9,839,447. Accordingly, the amount of equitable compensation, in the sum of US$837,118,799, should be reduced by the amount of the restored loss in the sum of US$367,193,418 (US$357,353,971 + US$9,839,447). 528.I refer to the written and oral submissions I received from the parties on the issue of limitations. Section 20(1) of the Limitation Ordinance, Cap 347 states:
529.It must follow from my findings in this case that every defalcation claimed by Akai in these proceedings against Mr Ting falls within section 20(1)(a) of the Limitation Ordinance, save for the Worldwide International transaction[671]. “Fraud” in this context means “dishonesty”. Mr Ting engaged in concealed misappropriation, undisclosed self-dealing and transactions for fraudulent and improper purposes. Such conduct was dishonest. In addition, Mr Ting’s payments to himself, his wife and the Ting Recipients fall within section 20(1)(b) of the Limitation Ordinance, which applies where “a trustee uses trust money to confer a benefit on a company which he controls or a director of a company helps himself to property belonging to the company.”[672] 530.The limitation defence raised by Mr Ting fails against all the claims brought by the Liquidators, except that it succeeds against the claim brought for US$14,272,905 in respect of the Worldwide International transaction.[673] My review of the schedules for Method 3 showing the receipts from Recipients in Bundle E26 at Tab 38 for the BT Deposit account and at Tab 58 for the Temporary General Ledger Account leads me to conclude that the successful limitation defence raised against the claim for US$14,272,905 does not result in a reduction of credit given under method 3. U. My Award of Equitable Compensation 531.For these reasons, I award equitable compensation to Akai against Mr Ting in the amount of US$455,652,476 (US$837,118,799 - US$367,193,418 - US$14,272,905). V. Deductions in Respect of Recoveries from Other Parties 532.This is no longer controversial. Akai has recovered some of its losses from third parties on terms that the amounts recovered are to be kept confidential. The agreed amounts must be deducted from my award. 533.I accept Akai’s submissions that the Grande HK proceedings related to entirely different heads of loss, and to damages suffered by Akai in a different time period, after the Claim Period in this action. It was also clear from the Prayer for Relief in the Amended Points of Claim filed by Akai against Grande that there was no claim against Grande HK or any other defendant to that action in respect of the defalcations which were the subject matter of these proceedings. However, even if the defalcations identified as DLN98139[674] and DLN98158[675] formed part of Akai’s claim against Grande HK, no part of the settlement received from Grande HK should be applied in reduction of the claim against Mr Ting in these proceedings in respect of these defalcations. Akai had quantified claims against Grande HK totalling US$184,204,993 which did not include claims in respect of DLN98139 and DLN98158; and the quantum of these non-overlapping claims (US$184,204,993) accordingly substantially exceeded the settlement proceeds paid to Akai. Akai had the right to allocate the settlement sums it received from Grande HK towards reducing the non-overlapping claims. For that reason, no part of the settlement received from Grande HK ought to be applied to reduce the claim against Mr Ting in these proceedings, in the total sum of US$16,877,014 in respect of DLN98139 and DLN98158. 534.I direct the parties’ solicitors to agree and submit, within 14 days, recalculations of the final award I should make after deducting the agreed amounts from my award. W. Compound Interest 535.I refer to the written and oral submissions I received from the parties on the issue of compound interest. Ribeiro PJ stated in the Libertarian case at §142 that compound interest may be appropriate in a case involving misappropriated funds as the Court will assume that the defaulting party has used the misapplied funds to earn profits and, instead of ordering an account of profits, will order him to pay compound interest. I am guided by the principles enunciated in the Libertarian case to conclude that I ought to award compound interest on my award of equitable compensation at the rate of 1% over USD prime with 6-monthly rests as from the years ended 31 January 1998[676], 31 January 1999 and 31 January 2000 up to the dates of partial recovery from third parties, and continuing at the same rate with 6-monthly rests on the balance amount, after deduction of the recovered amounts, until 17 December 2014, being a year after the date I reserved judgment and being the date when I ought to have handed down a judgment of such complexity. The fact I was not able to do so is the result of the substantial quantity of work that I, in common with all High Court judges and High Court deputy judges, have to manage. 536.The choice of monthly, quarterly, 6-monthly, or yearly rests is entirely within the discretion of the court[677]. The court may sometimes be guided by evidence on the appropriate rest to impose but I do not accede to Mr Ting’s application to adjourn this issue and to receive factual and expert evidence on the appropriate rates and rests to impose in this case. 537.It may be appropriate to order monthly rests on the basis that the fraudster undertaking legitimate business with borrowed money, rather than the misappropriated funds, would have had to pay interest with monthly rests on the borrowed amounts. However, I note the observation of Silke NPJ in China Everbright v Ch’ng Poh[678] that a legitimate businessman in the normal course of his business is likely to reduce the loan or to pay it off as soon as possible such that he was reluctant to award compound interest with monthly rests extending over a long period of time. In the present case, that period exceeds 15 years. Guided by this observation, I impose 6-monthly rests on the basis that the notional loan would be reduced, if not entirely paid off, in the latter part of this 15 year period such that a calculation based on 6-monthly rests over the entire period of 15 years is likely to be the best approximation of the compound interest payable on the notional legitimate loan. 538.Another approach may be to consider how the misappropriated funds may have been utilised if they had remained in Akai[679]. At the relevant time, Akai was a listed holding company of one of the top 10 consumer electronics manufacturing groups in the world. Assuming that the misappropriated funds would have been utilised in the various businesses of Akai and the Akai Group or invested in different classes of assets, the profits and capital gains from those funds would have been the subject matter of Akai’s 6-monthly reports to its shareholders and some of those profits and gains could have been paid out as dividends or re-invested in other businesses or to acquire other assets. And what might that profit and gain have been? Returns from corporate businesses at any particular period of time are usually higher than the cost of borrowing over the same period of time, such that it is appropriate to select the rate of prime plus 1% as a very conservative value of such returns. In the circumstances of the present case, the award of compound interest at the rate of USD prime plus 1% with 6-monthly rests best matches the business profile of a public listed company like Akai. 539.For the period from 18 December 2014 to the date of this judgment, I award simple interest on the judgment sum at the rate of 1% over USD prime for this period of time. 540.I direct the parties’ solicitors to agree and submit, within 14 days, recalculations of the final award I should make, inclusive of compound and simple interest, based on my decision herein. 541.I make a costs order nisi that Mr Ting pays Akai’s costs of the action to be taxed, if not agreed. Given the magnitude of the frauds committed by Mr Ting, I have no hesitation whatsoever in ordering such costs to be taxed on an indemnity basis with Certificate for 2 Counsel. I sincerely hope that Hong Kong will never again see the likes of such a rogue and scoundrel as Mr Ting. 542.I cannot conclude this judgment without expressing my gratitude to counsel for the assistance they have rendered to me.
Mr Charles Manzoni, SC and Mr Jason Karas (Solicitor Advocate), instructed by Hogan Lovells, for the plaintiff Mr Nigel Kat, Ms Chyvette Ip and Mr Hew Yang Wahn instructed by Robertsons, for the 4th defendant
[1] His witness statements are referred to as Borrelli Statement and Borrelli Second Statement. Bundle references are given within square brackets. For example, the Borrelli Statement appears at [D/1] being Tab 1 of Bundle D. [2] Mr Borrelli was involved in the daily conduct of the winding up since September 2001 when he was asked by the then liquidators of Akai to investigate its affairs and facilitate its restructuring. He became one of the joint and several liquidators of Akai pursuant to court orders made here and in Bermuda in May and June 2005. [3] As was conceded in §103 of Mr Ting’s Closing Submissions. [4] Now known as Omnicorp Limited and formerly known as Omnitech Group Limited, O2New Technology Limited and Toyo Holdings Limited. [5] Incorporated in Germany in 1926. [6] “Defalcation” at common law means the fraudulent use of money: Stroud’s Judicial Dictionary (2012) (8th ed). The term essentially involves fraudulent or dishonest dealing: Words & Phrases Legally Defined, (4th ed). [7] The sum agreed was identified in the Joint Expert Report as US$407,872,263. In the course of trial, it became apparent that there were two errors in the Bowyer Report. First there was an error in the Bowyer Report at Page 129 §9.6 identifying US$38,641,538 as the relevant deduction, where Akai had pleaded a defalcation to Everwin of US$38,461,538. Second, there was an error in the Bowyer Report at Page 129 §9.6, identifying US$10,090,556 as the relevant defalcation, where Akai had pleaded a defalcation to Golfland of US$10,019,541. [8] Referred to as the Group 1 Ting Recipients. [9] Referred to as the Group 2 Ting Recipients. [10] Referred to as the Group 3 Ting Recipients. [11] Referred to as the Ting Associates. [12] Method 1 does not allow for any credit or deductions from the monies paid out of Akai. Method 2 gives credit where an equivalent or near equivalent sum is received by Akai from a Recipient within a short time after the defalcation. Method 3 gives credit for any amounts paid to Akai by a Recipient at a time when the Recipient was a notional debtor of Akai by virtue of the receipt of a prior defalcation. Method 4 operated a running account and allows credit to be given for payments made to Akai by a Recipient in advance of receiving defalcations. Method 5 allows credit to be given for all sums paid to Akai by Recipients. [13] Libertarian Investments Ltd v Thomas Alexej Hall (2013) 16 HKCFAR 681. [14] Akai was named Semi-Tech (Global) Company Limited until 23 July 1999, but will be referred to throughout as Akai. [15]Akai’s Amended Points of Claim (“APOC”) at §§1&2 [A/2], Mr Ting’s Re-Re-Amended Points of Defence (“RRAPOD”) at §§3&4 [A/3], Akai’s Re-Amended Reply (“RAR”) at §4 [A/4]. [16] See Akai’s 1997 Annual Report at [TIN.028.001.0614]-[TIN.028.001.0618] [J3/4]. [17] Borrelli Statement at §24 [D/1]. [18] Borrelli Statement at §47 [D/1]. [19] [E4]. [20] [D/1]. [21] RRAPOD at §3(b) [A/3], RAR at §4.1 [A/4]. In 1998, STC owned approximately 40% of Akai’s shares: RRAPOD at §3(d) [A/3], RAR at §4.4 [A/4]. [22] RRAPOD at §3(d) [A/3], RAR at §4.4 [A/4]. [23] Borrelli Statement at §25 [D/1]. [24]APOC at §7 [A/2]; Borrelli Statement at §§24, 32, 47 [D/1], Akai Annual Report for year ended 31 January 1997 at §50 [TIN.028.001.0643][J3/4]; Akai Annual Report for year ended 31 January 1999 at §55 [TIN.028.001.0755] [J3/6]. [25] Borrelli Statement at §32 [D/1]. [26] APOC at §7 [A/2]; Borrelli Statement at §§480-482 [D/1], Tab 25 – 00089 to 00110 (Akai Circular dated 16 January 1998, extract of Akai Annual Report for year ended 31 January 1998, extracts of the Sansui Securities Reports for the years ended 31 December 1997 and 1998, extract of Akai Electric Annual Securities report for year ended 31 March 1998, extract of Akai Annual Report for year ended 31 January 1998) [E23/25]. [27] Borrelli Statement at §41 [D/1]. [28] RRAPOD at §3(b) [A/3], RAR at §4.1 [A/4]. In 1998, STC owned approximately 40% of Akai’s shares: RRAPOD at §3(d)] [A/3], RAR at §4.4 [A/4]. [29] Borrelli Statement at §35 [D/1]. [30] APOC at §9 [A/2]; Borrelli Statement at §§24, 47, 510 [D/1]; Akai Annual Report for year ended 31 January 1997 at §37 [TIN.028.001.0630] [J3/4], Akai Annual Report for year ended 31 January 1999 at §39 [TIN.028.001.0739] [J3/6]. [31] Borrelli Statement at §43 [D/1]. [32] RAR at §4.5 [A/4]; Borrelli Statement at §§24, 47 [D/1], Akai Annual Report for the year ended 31 January 1994 at §§2-3 [TIN.028.001.0428-0429] [J3/1]. [33] Borrelli Statement at §29 [D/1]. [34]Borrelli Statement at §4 [D/1], Akai Annual Report for year ended 31 January 1997 at §50 [TIN.028.001.0643] [J3/4]. [35] Borrelli Statement at §§39-40 [D/1]. [36] APOC at §17 [A/2]. [37] [1998] BCC 583 at 586E; Sinclair Investments (UK) Ltd. v Versailles Trade Finance Ltd. [2012] Ch 453 per Lord Neuberger MR at §34. [38] Akai’s Bye-Laws 103 and 104 [J1/1/66]. [39] SEHK Listing Rules, Rule 14.23(1). [40] [2002] BCC 91 at §50. [41] (2nd ed., 2013) at §10.05. [42] (2005) at §9.2, Austin, Ford and Ramsay. [43] [1994] 1 All ER 261. [44] [1999] CLC 1469. [45] Mance J’s conclusion as to a factual finding of dishonesty on the part of the third party was reversed on appeal in Grupo Torras SA v Al-Sabah (No 5) [2001] CLC 221, but the Court of Appeal did not review this statement. [46] [2004] 1 WLR 783 at §§16, 21 and 28. [47] [2002] 1 HKLRD 687 at §48. [48] HCA 4200/1995, 1 December 2009 at §181. [49] [1996] AC 563, 586 D-H. [50] (2005) 8 HKCFAR 387. [51] At §§181-184 and §625 respectively. [52] [2001] UKHL 47, [2003] 1 AC 153, §55. [53] The House of Lords in Re Doherty [2008] 1 WLR 1499 at §23 said this to be “indisputable”. [54] (2006) 9 HKCFAR 334. [55] See Akai’s Annual Report for the year ended 31 January 1996 [TIN.028.001.0536-0592] [J3/3]; Borrelli Statement at §23 [D/1]. [56] See Akai’s Annual Report for the year ended 31 January 1997 at 17 [TIN.028.001.0610] [J3/5]. [57] Borrelli Statement at §256 [D/1]. [58] APOC at §10.1 [A/2], RRAPOD at §3(b), §10 [A/3]. [59] In 1998, STC owned approximately 40% of Akai’s shares: RRAPOD at §3(d) [A/3], RAR at §4.4 [A/4]. [60] APOC at §14.3 [A/2], RRAPOD at §14(c) [A/3]; See also Ting v Borrelli [2007] SC (Bda) 64 Com at §3 (Ground CJ) [O1/14], confirmed in Borrelli v Ting [2010] UKPC 21 at §5 (PC, Lord Saville) [O3/7]. [61] APOC at §14.4 [A/2], admitted at RRAPOD at §14(d) [A/3]. See also the s.221 examination of Mr Ting on 10 August 2005 at 110-111 [H2/1/28]. [62] Borrelli Statement at §256 [D/1]. [63] See the outline of the relevant companies in the Akai Group above at §§37-52. [64] Mr Ting’s Australian Migration Application, which included a declaration of truth signed by Mr Ting [I/2]. I do not accept Mr Ting’s Closing submissions at §104 that this was a “puff”. [65] See Section H.3 below. [66] Section 221 examination of Mr Ting on 10 August 2005 at 54, 76-77 [H2/1/14, 19-20]. [67] APOC at §10 [A/2], see the Annual Reports for Akai from 1996 to 1999 [TIN.028.001.0536]- [TIN.028.001.0756] [J3/3-6]. [68] Section 221 examination of Mr Ting on 10 August 2005 at 80 [H2/1/20]. [69] Section 221 examination of Mr Ting on 10 August 2005 at 80 [H2/1/20]. [70] Section 221 examination of Mr Ting on 11 August 2005 at 122 [H2/1/31]. [71] S.221 examination of Mr Ting on 10 August 2005 at 54, 76-77 [H2/1/14,19-20]. 1997 Annual Report p.18, 1998 Annual Report p.17 and 1999 Annual Report p.17. [72] APOC at §6 [A/2], RRAPOD at §8(b) [A/3], RAR at §7 [A/4]. [73] APOC at §6 [A/2]. [74] Minutes of Akai’s Board of Directors meetings [J1/1.2-1.4]. [75] Minutes of Akai’s Board of Directors meetings [J1/1.2-1.4]. [76] S.221 examination of Mr Ting on 10 August 2005 at 54, 76-77 [H2/1/14, 19-20]; 1997 Annual Report p.18, 1998 Annual Report p.17 and 1999 Annual Report p.17. [77] Indeed, in Akai Holdings Ltd (in liq) v Thanakharn Kasikorn Thai Chamkat (Mahachon) (HCCL 59/2004, Stone J, 26 May 2008), Stone J held as such at §240 [O//1]. [78] See Akai’s 1998 and 1999 Annual Reports [TIN.028.001.0646-0647] at 17-18 [TIN.028.001.0663-00664] (1998) [J3/5] and [TIN.028.001.0717-0718] (1999) [J3/6]. [79] Borrelli Statement at §25, §29 [D/1]. [80]Borrelli Statement at §28, §373 [D/1]; see draft STC announcement dated 4 December 1997 [TIN.002.001.1887-1888] [L3/350-351]. [81]Borrelli Statement at §28, §372 [D/1]. [82]Borrelli Statement at §299 [D/1]; see draft STC announcement dated 4 December 1997 [TIN.002.001.1887-1888] [L3/350-351]. [83]Borrelli Statement at §295 [D/1]. [84]Borrelli Statement at §312 [D/1]. [85] Akai Holdings Ltd (in liq) v Thanakharn Kasikorn Thai Chamkat (Mahachon) (HCCL 59/2004, Stone J, 26 May 2008). [86]Akai Holdings Ltd (in liq) v Thanakharn Kasikorn Thai Chamkat (Mahachon) (HCCL 59/2004, Stone J, 26 May 2008) at §356 [O2/1]. [87]Minutes of Meeting of audit committee dated 26 June 1999 (TIN.002.001.0095) [J2/2.4]. [88] See Section Q below. [89] See DLN GL9813 [E25/35]. The relevant minute dated 11 December 1998 in relation to the purported Digiconic transaction is at Tab 66-00013 to the Annexure to the Borrelli Second Statement [F/66/00013]. [90] See Section Q.7 below. [91]Borrelli Statement at §299 [D/1]. [92]See draft STC announcement dated 4 December 1997 [TIN.002.001.1887-1888] [L3/350-351]. [93]Borrelli Statement at §28, §373 [D/1]; Akai’s Annual Report for the year ended 3 January 1998 [TIN.028.001.0593-0645] [J3/4] at 17 [TIN.028.001.0663] [J3/5/237]; Singer’s Annual Report for the year ended 31 December 1996 [TIN.028.001.0864-0925] at 26 [TIN.001.0891]; draft STC announcement dated 4 December 1997 [TIN.002.001.1887-1888] [L3/350-351]. [94]1997 Annual Report p.18, 1998 Annual Report p.17 and 1999 Annual Report p.17. [95] Section 221 examination of Mr Ting on 10 August 2005 at 54, 76-77 [H2/1/14, 19-20]. [96]APOC at §13.1 [A/2], Borrelli Statement at §273.1 [D/1]. [97]Section 221 examination of Mr Ting on 10 August 2005 at 141 [H2/1/36], 11 August 2005 at 3 [H2/1/60]. [98] Borrelli Statement at §273.1(e) [D/1]. [99]Section 221 examination of Mr Ting on 11 August 2005 at 66-67 [H2/1/76]; see also transcript from 15 August 2005 at 32 [H2/1/175], 16 August 2005 at 101 [H2/1/250]. [100][B2/2.2/12]. [101] APOC at §13 [A/2]. [102]As to the Ting Recipients, see Section L below. [103]Borrelli Statement at §273.1(f) [D/1]. [104] Borrelli Statement at §126, §273.7(d) [D/1]. [105] See Re Kong Wah Holdings Limited (HCCW 49 & 50/2000, Le Pichon J, 23 August 2000) [O1/1]. [106]APOC at §3 [A/2], RRAPOD at §5 [A/3], RAR at §5 [A/4]; Re Kong Wah Holdings Limited (HCCW 49 & 50/2000, Le Pichon J, 23 August 2000) [O1/1]; Order for winding up of Akai – Hong Kong [B3/3.3/1]. [107] APOC at §4 [A/2], RRAPOD at §6 [A/3]; Order for winding up of Akai – Bermuda [B3/3.3/3]. [108] Joint and Several Liquidators of Kong Wah v The Grande Holdings Limited (2006) 9 HKCFAR 766 at §8 (Lord Millett NPJ) [O1/12]. [109]See second affidavit of Borrelli at §11 [C/C.1/3]; exhibit CB-2 to second affidavit of Borrelli at Tabs 2 and 3 [C/C.2/1 and 2]. [110] Exhibit CB-2 to second affidavit of Borrelli at Tab 2 - 0005 and Tab 3 - 0005 [C/C.2/1 and 2]. [111]Akai Holdings Ltd v Ernst & Young (2009) 12 HKCFAR 649 at §§7-8, §13 (Bokhary PJ), §111 (Lord Hoffmann NPJ) [O3/1]. [112][B3/3.3/1and2]. [113] Re Akai Holdings Ltd (unreported, Supreme Court of Bermuda, Ward JA, 16 March 2001) at 1-2 [O1/2]; Order by Supreme Court of Bermuda winding-up Akai Holdings Limited [B3/3.3/3]. [114]Third Affidavit of Mr Ting, filed in the Hong Kong Winding Up Proceedings (50/2000) dated 22 June 2000 at §10 [B3/3.3/4], noted in Ting v Borrelli (Bermuda Court of Appeal, Civil Appeal no 20/2008, 28 November 2008) at §11 [O2/3]. [115]Re Akai Holdings Ltd (unreported, Supreme Court of Bermuda, Ward JA, 16 March 2001) at 2 [O1/2]; Re Akai Holdings Ltd (HCCW 49 & 50/2000, Yuen J, 24 May 2001) at [30 [O1/3]]. [116] Re Akai Holdings Ltd (unreported, Supreme Court of Bermuda, Ward JA, 16 March 2001) [O1/2]. [117] Re Akai Holdings Ltd (HCCW 49 & 50/2000, Yuen J, 24 May 2001) [O1/3]. [118] Borrelli Statement at §87 [D/1]; Borrelli Second Statement at §16 [D/3]. [119] Ting v Borrelli [2007] SC (Bda) 64 Com at §27 (Ground CJ). [120] Ting v Borrelli (Bermuda Court of Appeal, Civil Appeal no 20/2008, 28 November 2008) at 31 [O2/3]. [121]Borrelli Statement at §16 [D/1]. [122]Re Akai Holdings Limited (in Compulsory Liquidation) (HCMP 3381/2002, Kwan J, 30 October 2002) at §7[O1/4]. [123]Akai Holdings Ltd v Ernst & Young (2009) 12 HKCFAR 649 at §§112–113 (Lord Hoffmann) [O3/1]. [124]The circumstances surrounding the Liquidators’ proposed sale of Akai’s listing status and entry into the Settlement Agreement with Mr Ting are set out in the judgment of Ground CJ in Ting v Borrelli [2007] SC (Bda) 64 Com [O1/14], and reiterated in the Advice of the Privy Council in Borrelli v Ting [2010] UKPC 21 [O3/7]; See also the Borrelli Second Statement at §§19-21 [D/3]. [125]Ting v Borrelli [2007] SC (Bda) 64 Com at §21 (Ground CJ) [O1/14], noted by the Privy Council in Borrelli v Ting [2010] UKPC 21 at §7, §26 [O3/7]. This is by way of factual background. That finding does not constitute evidence before me. [126]Ting v Borrelli [2007] SC (Bda) 64 Com at §7 (Ground CJ) [O1/14]. [127] Ting v Borrelli [2007] SC (Bda) 64 Com at §8 (Ground CJ) [O1/14]. [128] Ting v Hill (Civil Jurisdiction 2003: No. 412, 24 February 2004) per Kawaley J at §74 [O1/5]. [129][N/58-63]. [130]Borrelli v Ting [2010] UKPC 21 [O3/7]. [131] See §§151-159 below. [132] Borrelli Statement at §§88-89 [D/1]. [133] Borrelli Second Statement at §22 [D/3]. [134] Ting v Hill (Civil Jurisdiction 2003: No.412, 24 February 2004) per Kawaley J at §61, §80 [O1/5]. [135] Ting v Hill (Civil Jurisdiction 2003: No.412, 24 February 2004) per Kawaley J at §80 [O1/5]. [136] Ting v Hill (Civil Appeal No. 4 & 7 of 2004, 2 July 2004) per Zacca P, Ward and Collett JJA [O1/6]. [137] Re Kong Wah Holdings Ltd (HCCW 49 & 50/2000, 7 September 2004) at §16 [O1/7]. [138] Re Kong Wah Holdings Ltd [2005] 1 HKLRD 847 [O1/8]. [139]Borrelli Second Statement at §§28-30 [D/3]. [140]Borrelli Second Statement at §33 [D/3]. [141] Borrelli Second Statement at §36 [D/3]. [142] Borrelli Second Statement at §§36-37 [D/3]. [143]Borrelli Second Statement at §§38-40 [D/3]. [144]HKSAR v Ting James Henry [2006] 4 HKC 494 at §131 (Tang JA, Woo VP and Lunn J) [O1/11]. [145] Ting James Henry v HKSAR (2007) 10 HKCFAR 632 at §52 (Lord Woolf NPJ, with whom Li CJ, Bokhary J, Chan and Ribeiro PJJ agreed) [O1/13]. [146] Ting James Henry v HKSAR (2007) 10 HKCFAR 632 at §§49-60 (Lord Woolf NPJ, with whom Li CJ, Bokhary J, Chan and Ribeiro PJJ agreed) [O1/13]. [147] Ting James Henry v HKSAR (2007) 10 HKCFAR 730 at §17 [01/15]. [148] Unsigned extracts of Mr Ting’s s.221 transcript were included in the trial bundle at [H2/1]. [149] Transcript of Mr Ting’s s.221 examination dated 10 August 2005 [H2]. [150] Section 221 examination of Mr Ting on 11 August 2005 at 122 [H2/1/90]. [151] Section 221 examination of Mr Ting on 10 August 2005 at 54, 76-77 [H2/1/14, 19-20]. [152]Section 221 examination of Mr Ting on 10 August 2005 at 141 [H2/1/36], 11 August 2005 at 3 [H2/1/60]. [153] Section 221 examination of Mr Ting on 11 August 2005 at 66-67 [H2/1/76]; see also transcript from 15 August 2005 at 32 [H2/1/175], 16 August 2005 at 101 [H2/1/250]. [154]Section 221 examination of Mr Ting on 10 August 2005 at 110-111 [H2/1/28]. APOC at §14.4 [A/2], admitted at RRAPOD at §14(d) [A/3]. [155]Section 221 examination of Mr Ting on 11 August 2005 at 107-109, 142-143 [H2/1/86-87, 95]. [156]Section 221 examination of Mr Ting on 12 August 2005 at 89-90 [H2/1/141]; Borrelli Statement at §265, §272, §273.2, §273.6, §273.12 and §273.14 [D/1]. [157]Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (in liq) (2010) 13 HKCFAR 479 at §5 (Lord Neuberger NPJ) [O3/9]. [158]Akai Holdings Ltd (in liq) v Thanakharn Kasikorn Thai Chamkat (Mahachon) (HCCL 59/2004, Stone J, 26 May 2008) at §343 [O2/1]. [159]Akai Holdings Ltd (in liq) v Thanakharn Kasikorn Thai Chamkat (Mahachon) (HCCL 59/2004, Stone J, 26 May 2008) at §424 [O2/1]. [160]Akai Holdings Ltd (in liq) v Thanakharn Kasikorn Thai Chamkat (Mahachon) [2010] 3 HKC 153 (Tang VP, with whom Le Pichon and Cheung JJA agreed) [O3/4]. [161]Akai Holdings Ltd (in liq) v Thanakharn Kasikorn Thai Chamkat (Mahachon) [2010] 3 HKC 153 at §182 (Le Pichon JA), §247 (Cheung JA) [O3/4]. [162]Akai Holdings Ltd (in liq) v Thanakharn Kasikorn Thai Chamkat (Mahachon) [2010] 3 HKC 153 at §90, §126, §142 [O3/4]. [163]Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (in liq) (2010) 13 HKCFAR 479 (Lord Neuberger NPJ, with whom Ma CJ, Bokhary, Chan and Ribeiro PJJ agreed) [O3/9]. [164]Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (in liq) (2010) 13 HKCFAR 479 at §118 (Lord Neuberger NPJ) [O3/9]. [165]Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (in liq) (2010) 13 HKCFAR 479 at §77 (Lord Neuberger NPJ) [O3/9]. [166]Amended Writ of Summons dated 14 March 2006 [A/1]; Order of Stone J dated 14 March 2006 [B2/2.2/2]. [167] Summons dated 20 June 2011 [B2/2.1/13]; Order of Reyes J dated 24 June 2011 [B2/2.2/9]. [168]Consent summons dated 30 September 2011 [B.2.1/16]; Order of Reyes J dated 30 September 2011 [B2/2.2/12]. [169]Summons dated 7 December 2011 [B2/2.2/17]; Order of Reyes J dated 19 December 2011 [B.2.2/13]; Judgment of Reyes J dated 19 December 2011 [B2/2.2/14]. [170]Summons dated 5 June 2006 [B2/2.1/5]. [171] Consent summons dated 3 April 2007 [B2/2.1/6]; Order of Stone J dated 4 April 2007 [B2/2.2/5]. [172] Ting v Borrelli [2007] SC (Bda) 64 Com (Ground CJ) [O1/14]. [173] Summons dated 18 December 2007 [B2/2.1/8]. [174]Order of Stone J dated 20 December 2007 [B2/2.2/6]; Akai Holdings Ltd v Everwin Dynasty Ltd (HCCL 42/2005, Stone J, 11 January 2008) [B2/2.2/7]. [175] Notice of Appeal dated 16 January 2008 [B3/3.1/1]. [176] Consent summons dated 8 July 2008 [B3/3.1/3]; Order of Le Pichon J dated 10 July 2008 [B3/3.1/4]. [177] Consent summons dated 8 January 2009 [B3/3.1/5], Order of Le Pichon J dated 12 January 2009 [B3/3.1/6]. [178] Borrelli v Ting [2010] UKPC 21 at §32 [O3/7]. [179] Summons dated 20 June 2011 [B2/2.1/13]. [180] Order of Reyes J dated 24 June 2011 [B2/2.2/9]. [181] [A/2]. [182] Summons dated 8 July 2011 [B2/2.1/14]. [183] Order of Hartmann JA and Barma J dated 20 December 2011 [B3/3.2/9]. [184] Reasons for decision of Hartmann JA and Barma J dated 22 March 2012 [B3/3.2/10]. [185] Order ofReyes J dated8 August 2011[B2/2.2/11]. [186] Order ofReyes J dated29 February 2012[B2/2.2/15]. [187][B1/1.1/1-2]. [188] Order ofReyes J dated7 June 2012[B2/2.2/16]. [189][D/1-2]. [190][B1/1.1/3]. [191][A/5-6]. [192][B2/2.3/4]. [193][B2/2.1/21-23]. [194][A/3]. [195] Order of Bharwaney J dated 13 May 2013 [B2/2.2/17]. [196][A/4]. [197] Order of Bharwaney J dated 12 July 2013 [B2/2.2/18]. [198]Akai’s 3rd to6th listsof documents[B1/1.1/4-7]. [199][G1/1]. [200][G1/2]. [201][G1/3]. [202][G1/4]. [203] HCMP 2136/2013, 7 March 2014, Hon Cheung CJHC & Lam VP. [204][B2/2.1/24]. [205] Decision and Order of Bharwaney J dated 16 October 2013 [B2/2.2/20]. [206] My order dated 30 October 2013 [B2/2.2/21]. [207] Spence XN [TD6/103 line 23 – 104 line 8]. [208] Bowyer Report page 128 §9.3 [G1/1]; Bowyer XXN [TD7/123 lines 11-15]. [209] Bowyer XXN [TD7/99 lines 16-23]. [210] Bowyer XXN [TD7/98 lines 21- 99 line 3; TD7/99 lines 24-101 line 10]. [211] Borrelli XXN [TD3/137 lines 7-8]. [212] APOC at §20 [A/2]. [213] APOC at §24 [A/2]. [214] APOC at §25, set out further in Annexure A to APOC [A/2]. [215] Borrelli Statement at §7.6, §255 [D/1]. [216] Borrelli Statement at §289 [D/1]. [217] A colour coded Table of these 19 recipients appears on new page 14 in Part E of Akai’s Opening which contain particulars of Recipients’ banks, registered directors, bank account signatories and correspondence addresses used. [218] Joint Expert Report at §2.1(iv)[G1/3]. See footnote 7 above. The amount should be US$408,123,278. [219] Joint Expert Report at §2.1 (iv) [G1/3]. [220] See footnote 7. [221] See footnotes 7. [222] Joint Expert Report at §2.1(iv). [223] In the s.221 examination and in HKSAR v. Ting HCCC156 of 2004 at 1145 (16 June 2005). This is conceded in Mr Ting’s Closing Submissions on p.26, footnote 115. [224] See §78 above. [225] Borrelli Statement at §273.3(a) [D/1]; APOC Annexure B at §2.3.1. [226] [TIN.030.001.0003]. [227] Borrelli Statement at §273.3(b) [D/1]; APOC Annexure B at §§2.3.2-2.3.3. [228] APOC Annexure A at §2.7, §3; Borrelli Statement at Tab 35 (DLN GL9715). [229] Borrelli Statement at §273.5(a) [D/1], see §§229 to 235 and Section Q.8 below. [230] Borrelli Statement at §273.5(b) [D/1]; APOC Annexure B at §2.5. [231] Apart from one payment of US$38,461,538, made on 18 November 1997, Mr Bowyer accepted that he could not identify evidence of commercial purpose or value to Akai from these payments. [232] APOC Annexure A at §2.9, §3; Borrelli Statement at Tab 22 (DLN 97122, 97124, 97146, 97147, 97149, 97150, 97187, 97189, 97193, 97196, 97197, 97202, 98002, 98024, 98047, 98055, 98057). [233] Borrelli Statement at §§438-439 [D/1], Tab 24 – 00012 to 00044. [234] Borrelli Statement at §273.8(a) [D/1]; APOC Annexure B at §2.8.5. [235] Borrelli Statement at §273.8(b) [D/1]; APOC Annexure B at §§2.8.1 - 2.8.3. [236] Apart from two payments of US$6,000,000 and US$14,000,000 made on 23 and 24 December 1998, Mr Bowyer accepted that he could not identify evidence of commercial purpose or value to Akai from these payments. [237] APOC Annexure A at §2.13, §3; Borrelli Statement at Tab 22 and 35 (DLN 98053, 98070, 98072, 98074, 98075, 98079, 98087, 98090, 98092, 98096, 98097, 98098, 98099, 98101, 98110, 98113, 98115, 98119, 98123, 98127, 98128, 98132, 98141, 98151, 98152, 98153, 98170, 98173, 98174, 98176, 99001, 99004, 99006, 99007, 99008, 99009, 99045, 99062, 99072, 99073, 99076, 99088, 99095, 99099, GL9801, GL9805, GL9810, GL9812, GL9814) [238] DLN 98151 and DLN 98153. [239] Borrelli Statement at §273.9(a) [D/1]; APOC Annexure B at §2.9.4. [240] Borrelli Statement at §273.9(b) [D/1]; APOC Annexure B at §§2.9.1-2.9.3. [241] Mr Bowyer accepted that he could not identify evidence of commercial purpose of value to Akai from one payment of 12,936,611 made to Golfland. [242] APOC Annexure A at §2.14, §3; Borrelli Statement at Tab 35 (DLN GL9706, GL9707, GL9808, GL9802, GL9803, GL9806, GL9807, GL9811). [243] Borrelli Statement at §273.10(a) [D/1]; APOC Annexure B at §2.10.4. [244] Borrelli Statement at §273.10(b) [D/1]; APOC Annexure B at §§2.10.1 - 2.10.3. [245] Mr Bowyer accepted that he could not identify evidence of commercial purpose of value to Akai from these 2 payments made to Higher International. [246] APOC Annexure A at §2.16, §3; Borrelli Statement at Tab 22 and 35 (DLN 99002, GL9809). [247] Borrelli Statement at §273(a) [D/1]; APOC Annexure B at §2.11.4. [248] Borrelli Statement at §273(b) [D/1]; APOC Annexure B at §§2.11.1-2.11.3. [249] Apart from 1 payment of US$1,475,762made on 19 July 1999, Mr Bowyer accepted that he could not identify evidence of commercial purpose or value to Akai from these payments. [250]APOC Annexure A at §2.17, §3; Borrelli Statement at Tab 22 and 35 (DLN 99077, 99090, 99096, 99097, 99101, 99108, 99109, 99116, 99118, 99119, GL9903, GL9904, GL9906). [251] Borrelli Statement at §§442-444 [D/1], Tab 24 – 00063 to 00084. [252] Borrelli Statement at §273.17(a) [D/1]. [253] Borrelli Statement at §§273.17(b)-(c) [D/1]; APOC Annexure B at §2.17. [254] Mr Bowyer accepted that he could not identify evidence of commercial purpose of value to Akai from this payment. [255] APOC Annexure A at §2.23, §3; Borrelli Statement at Tab 22 (DLN 98109). [256] Borrelli Statement Tab 22 - 3663 (TIN.001.001.1043). [257] Borrelli Statement Tab 22 - 3664 (TIN.001.001.1044); Spence Report at §12.1. [258] Borrelli Statement at §273.18(a) [D/1]; APOC Annexure B at §2.18.1, §2.18.5. [259] Borrelli Statement at §§273.18(b)-(c) [D/1]; APOC Annexure B at §§2.18.2 - 2.18.4. [260] APOC Annexure A at §2.24, §3; Borrelli Statement at Tab 22 and 35 (DLN 97172, 97177, 98008, 98010, GL9709, GL9710, GL9711, GL9712, GL9713, GL9714, GL9716, GL9717, GL9718, GL9719, GL9720, GL9721). [261] Mr Bowyer accepted that he could not identify evidence of commercial purpose of value to Akai from the 5 payments which were not part of the Primewood transactions. [262] Borrelli Statement at §273.19(a) [D/1]; APOC Annexure B at §2.19.4; APOC at §6; RRAPOD at §8(b), RAR at §7. [263]Borrelli Statement at §273.19(b) [D/1]; APOC Annexure B at §§2.19.1 - 2.19.3. [264] Mr Bowyer accepted that he could not identify evidence of commercial purpose of value to Akai from these payments, save for 1 payment of US$14,272,905 made on 27 February 1997. [265] APOC Annexure A at §2.26, §3; Borrelli Statement at Tab 22 and 35 (DLN 97022, 97023, 97024, 97048, 97056, 97070, 97071, GL9703). [266] Borrelli Statement at §273.1(a) [D/1]; APOC Annexure B at §2.1.8. [267] Borrelli Statement at §273.1(b)-(d) [D/1]: APOC Annexure B at §§2.1.1-2.1.7. [268] APOC Annexure A at §2.4, §3, Borrelli Statement at Tab 35 (DLN GL9813) [D/1]. See Section Q.7 below. [269] Borrelli Statement at §273.7(a) [D/1]. [270] Borrelli Statement at §126, §273.7(d) [D/1]. [271] Borrelli Statement at §273.7(b)-(c) [D/1]; APOC Annexure B at §2.7. [272] Via a bank payment instruction which Mr Ting signed. [273] Mr Bowyer accepted that he could not identify evidence of commercial purpose of value to Akai from this payment. [274] APOC Annexure A at §2.11, §3; Borrelli Statement at Tab 35 (DLN GL9704). [275] Borrelli Statement at §273.13(a) [D/1]. [276] [TIN.020.001.0007] [L2/L2.4/155]. [277] Borrelli Statement at §273.13(b)-(c) [D/1]; APOC Annexure B at §§2.13.1-2.13.3. [278] APOC Annexure A at §2.19, §3; Borrelli Statement at Tab 22 (DLN 97080, 97219). [279] APOC Annexure B at §2.13.4. [280] Borrelli Statement at §273.15(a) [D/1]. [281] APOC Annexure A at §2.22, §3; Borrelli Statement at Tab 22 (DLN 97102, 97103, 97104). [282] APOC Annexure B at §2.15. [283] Borrelli Statement at §273.4(a) [D/1] [284] APOC Annexure A at §2.8, §3; Borrelli Statement at Tab 35 (DLN GL9901, GL9902). [285] APOC Annexure B at §2.4.1. Mr Bowyer accepted that he could not identify evidence of commercial purpose of value to Akai from these 2 payments. [286] APOC at §20 [A/2]; APOC Annexure A at §2.27 [A/2], §3; Borrelli Statement at §§256-261 [D/1], Tab 22 (DLN 99058) [E19]. [287] APOC Annexure A at §2.12, §2.25 [A/2]; APOC Annexure E §1 [A/2]. [288] APOC Annexure E at §§2-3 [A/2]; Borrelli Statement at §278 [D/1]. [289] Borrelli Statement at §279 [D/1], documents at Tab 19 [E4]. [290] Borrelli Statement at §280 [D/1], documents at Tab 19 [E4]. [291] APOC Annexure E at §5.1 [A/2]; Borrelli Statement at §§281-282 [D/1]. [292] APOC Annexure A at §2.12, 3 [A/2], APOC Annexure E at §7 [A/2]; Borrelli Statement at §401 [D/1], Tab 22 (DLN 98171) [E17]. [293] APOC Annexure E at §5.2 [A/2]; Borrelli Statement at §282 [D/1], Tab 19 – 00068 to 00078 [E4]. [294] APOC Annexure E at §§6.1-6.2 [A/2]; Borrelli Statement at §§284-285 [D/1]. [295] APOC Annexure A at §2.25, §3 [A/2], APOC Annexure E at §7 [A/2]; Borrelli Statement at §401 [D/1], Tab 22 (DLN 97075, 97168, 98069, 98157, 98168) [E7, E10, E14, E17, E17]. [296] APOC Annexure F at §§1-2 [A/2]; Borrelli Statement at §287 [D/1]. [297] APOC Annexure F at §3 [A/2]. [298] Borrelli Statement at §289 [D/1]. [299] APOC Annexure A at §2.15, §3 [A/2], APOC Annexure F at §4, §10, §11 [A/2]; Borrelli Statement at §291 [D/1], Tab 22 (DLN 98130, 98139, 98143, 98158) [E16, E16, E16, E17]. [300] Borrelli Statement at §297, §316 [D/1], Tab 20 – 00041 to 00042. [301] APOC Annexure C at §§5.1-5.2; Borrelli Statement at §317 [D/1], Tab 20 – 00035. [302] See Ting v Borrelli [2007] SC (Bda) 64 Com at §3 (Ground CJ) [O1/14]; APOC at §14.3; RRAPOD at §14(c); Borrelli Statement at §298 [D/1]. [303] APOC Annexure C at §§5.3-5.4; Borrelli Statement at §§319-320 [D/1], Tab 20 – 00041 to 00042. [304] Borrelli Statement at §320, §324 [D/1], Tab 20 - 0043, 0048 to 0059 (TIN.001.001.2307 and TIN.001.001.2312 to TIN.001.001.2323 [305] APOC Annexure C at §§5.5-5.6; APOC Annexure A at §3; Borrelli Statement at §§321-324 [D/1], Tab 22 (DLN 97015). [306] APOC Annexure C at §§6.1-6.2. [307] Section 221 examination of Mr Ting on 10 August 2005 at 54, 76-77. [308] Mr Ting’s Criminal Trial in HCCC156/2004; Summing up at 47R. [309] APOC Annexure C at §6.3; Borrelli Statement at §325 [D/1]. [310] Borrelli Statement at §331 [D/1], Tab 20 – 00060. [311] APOC Annexure C at §6.4; Borrelli Statement at §300, §§326-327 [D/1], Tab 20 – 00061. [312] APOC Annexure C at §6.5; Borrelli Statement at §329 [D/1], Tab 20 - 00071 to 00074. [313] APOC Annexure C at §6.5; Borrelli Statement at §§300-301, §329 [D/1], Tab 20 – 00067 to 00068. [314] APOC Annexure C at §6.6; Borrelli Statement at §331.5, §332 [D/1], Tab 20 -.00078 to 00083, 00085 to 00087. [315] Borrelli Statement at §331.3, §332 [D/1], Tab 20 – 00075 to 00076. [316] APOC Annexure C at §6.7; Borrelli Statement at §332 [D/1]. [317] APOC Annexure A at §3, APOC Annexure C at §6.8; Borrelli Statement at §§333-335 [D/1], Tab 20 - 00088, Tab 22 (DLN 97043, 97045). [318] APOC Annexure C at §7.1; Borrelli Statement at §307 [D/1]. [319] APOC Annexure C at §7.2; Borrelli Statement at §304, §§337-338 [D/1], Tab 20 – 00089. [320] APOC Annexure C at §7.3; Borrelli Statement at §339 [D/1]; Tab 20 – 00093 to 00097. [321] APOC Annexure C at §7.4; Borrelli Statement at §342 [D/1], Tab 20 – 00093. [322] Borrelli Statement at §340 [D/1]. [323] APOC Annexure C at §7.4; Borrelli Statement at §342 [D/1]. [324] APOC Annexure A at §3, APOC Annexure C at §7.5; Borrelli Statement at §§343-345 [D/1], Tab 20 - 00099, Tab 22 (DLN 97044). [325] APOC Annexure C at §8.1; Borrelli Statement at §305 [D/1]. [326] APOC Annexure C at §8.2; Borrelli Statement at §348 [D/1]. [327] APOC Annexure C at §8.3; Borrelli Statement at §304, §347, §§349-350 [D/1], Tab 20 – 00112 to 00113. [328] Borrelli Statement at §348 [D/1], Tab 20 – 00114 to 00118. [329] Borrelli Statement at §349 [D/1]. [330] APOC Annexure C at §8.4; Borrelli Statement at §352 [D/1]. [331] APOC Annexure A at §3, APOC Annexure C at §8.5; Borrelli Statement at §§353-355 [D/1], Tab 20 - 00121, Tab 22 (DLN 97057). [332] APOC Annexure C at §9.1. [333] APOC Annexure C at §§9.2-9.3; Borrelli Statement at §295, §312 [D/1]. [334]Singer Annual Report for the year ended 3 January 1998 at 32 [TIN.013.001.0022-0081]. [335] APOC Annexure C at §9.4; Borrelli Statement at §356 [D/1]. [336] APOC Annexure C at §9.5; Borrelli Statement at §357 [D/1], Tab 20 – 00103 to 00107. [337] Borrelli Statement at §358 [D/1]. [338] APOC Annexure C at §9.6; Borrelli Statement at §360 [D/1]. [339] APOC Annexure A at §3; APOC Annexure C at §9.7; Borrelli Statement at §§361-363 [D/1], Tab 20 - 00108; Tab 22 (DLN 97058). [340] [D/1]. [341] [D/1]. [342] As explained in Borrelli Statement page 23 §103 for an asset account, a debit increases the value of the account and a credit decreases it, but for a liability or shareholders’ equity account, a debit decreases its value and a credit increases it. [343] i.e. 36% of transactions recorded were genuine. [344] Borrelli Statement at §§176-178 [D/1]. [345] See also the worked examples at Borrelli Statement at §§179-182, §§386-400 [D/1]. [346] For example, see the Borrelli Statement at §219, §227, §422, §428 [D/1]. [347] Borrelli Statement at §§191-195 [D/1]. [348] [E26]. [349] Borrelli Statement at §§547-550 [D/1]. [350] Borrelli Statement at §200, §203 [D/1]. [351] Borrelli Statement at §201, §204 [D/1]. [352] Borrelli Statement at §202, §205 [D/1]. [353] Borrelli Statement at §208 [D/1]; Spence Report at §7.5 [G1/2]. [354] In Akai’s Trial Balance as at 31 January 1998 and 31 January 1999, the BT-Deposit is given an account code 1006 and located and grouped with other bank deposit accounts: Borrelli Statement page 72-73§206. [355] Borrelli Statement at §210 [D/1]. Spence Report at §§7.6-7.11 [G1/2]. [356] Borrelli Statement at §211 [D/1]; Spence Report at §§7.6-7.11 [G1/2]. [357] Borrelli Statement at §§210-211 [D/1]. [358] Borrelli Statement at §§213-214 [D/1]. [359] Borrelli Statement at §216 [D/1]. [360] Borrelli Statement at §217 [D/1]; Spence Report at §§7.9-7.11 [G1/2]. [361] Borrelli Statement at §§230-245 [D/1]; Spence Report at §§7.9-7.11 [G1/2]. [362] Borrelli Statement at §246, §252 [D/1]; Spence Report at §§7.9-7.11 [G1/2]. [363] Borrelli Statement at §51.3 [D/1]; Bowyer Report at §3.29 [G1/1]; Spence Report at §7.4 [G1/2]; Joint Expert Report at §2.1 (ii) [G1/3]. [364] Borrelli Statement at §208 [D/1]; Spence Report at §7.6(iii) [G1/2]. [365] Borrelli Statement page 74 at §208 [D/1]; Bowyer XXN [TD7/115 line 16 – 116 line 4]. [366]Borrelli Statement page 25 §110, page 71 §206, page 74 §208 [D/1]; Spence Report page 17 §7.5 [G1/2]; Bowyer XXN [TD7/70 line 22 – 71 line 6]; [TD7/117 line 2 – 118 line 2]; [TD7/139 lines 9-13]. [367] Borrelli Statement page 59 §172, page 65 §189 [D/1], Spence Report page 17 §7.4 [G1/2]; Joint Expert Report §2.1(ii) [G1/3]. [368]Borrelli Statement page 14 §51.5, page 74 §208, page 129 §378.5 [D/1], Bowyer XXN
[369] Borrelli Statement page 74 §208 [D/1]. [370] Borrelli Statement page 59 §172, page 131 §385 [D/1]; Spence Report pages 17-18 §7.6 [G1/2]. [371] Borrelli Statement page 14 §51.3, page 59 §172, page 129 §378.3 [D/1]. [372] Borrelli XXN [TD6/81 line 10 – 86 line 14]; [M2/634-645]. [373] Borrelli Statement page 75 §212 [D/1]; Spence Report pages 17-18 §7.6 [G1/2]. [374] Spence Report pages 19-20 §§7.9-7.11 [G1/2]; Borrelli Statement pages 74-83 §§211-229, pages 91-92 §§246-252, page 109 §290 [D/1]. [375] Spence Report page 19 §7.9, §7.10 [G1/2]; Borrelli Statement pages 84-90 §§230-245 [D/1]. [376] Bowyer XXN [TD7/136 lines 16-23]. [377]Borrelli Statement pages 163-166 §§513-527 [D/1]; Spence Report pages 18-19 §§7.7-7.8 [G1/2]; Borrelli XXN [TD4/8 line 13 – 9 line 17]; [TD4/13 line 2 – 14 line 2]. A further analysis of these “Non Defalcations” appears at page 45 Borrelli Second Statement. [378] Bowyer Report pages 9 to 14 [G1/1]. [379] Bowyer XXN [TD7/70 line 22 – 71 line 6]; [TD7/115 lines 16-23]; [TD7/117 line 14 – 118 line 2]; [TD7/138 line 25 – 139 line 13]. [380] Bowyer Report page 14 §3.30 [G1/1]. [381] Bowyer XXN [TD7/116 lines 2-4]. [382] Bowyer XXN [TD7/129 lines 10-12]. [383] Bowyer Report at [3.26] [G1/1]. [384]Bowyer XXN[TD7/136line 24 –137 line1]. [385] Bowyer XXN [TD7/137 line 9 – 138 line 1]. [386] Bowyer XXN [TD7/138 line 16 - 19]. [387] Bowyer XXN [TD7/138 line 16 - 19]. [388] Spence Report at §7.14 [G1/2]. [389] Borrelli Statement page 106 §276 [D/1]. [390] Borrelli Statement page 106 §277 [D/1]. [391] Bowyer XXN [TD7/113 lines 12-23]; [TD7/129 lines 13-15]. [392] Spence Report pages 7-8 §4.6 [G1/2]. [393] See Sections H.1.5 to I.2 above. [394] See Sections L.1 to L.5 above. [395] See §58 above and cf .Bishopsgate Investment Management Ltd (In Liquidation) v Maxwell (No 2) referred to in §60(2) above. [396] See §§62 to 69 above. [397] Akai’s Opening: Part E.6.2.4; Closing Part D.2; Reply: pages 14-16; Mr Ting’s Opening: pages 45-46; Closing: pages 49-50; Reply: - ; Borrelli Statement [D/1]: [E9/1566-1587]; Borrelli Second Statement :[D/3]: Pages 19-24 §§88-108, [F/68]; Spence Report [G1/2]: Pages 31-32 §§9.17-9.23; Bowyer Report [G1/1]: Pages 53-56 §§6.34-6.39, §§6.46-6.47; Bowyer Appendix [G1/4]: Pages 19-20 §§7.1-7.6; Joint Expert Report [G1/3]: Pages 20-22 §§4.34-4.39; Borrelli Oral Evidence: [TD5/85 line 11 – 141 line 7]; Spence Oral Evidence: - ; Bowyer Oral Evidence: [TD8/47 lines 10-16],[TD8/48 line 12 – 54 line 10]. [398] The transaction was recorded in DLN 97146. [399] [F/68/008, 016]. [400] [F/68/23]. [401] [F/68/32]. [402] [F/68/27]; Borrelli XXN [TD5/133 lines 24, 25; TD5/137 line 17]. [403] Borrelli XXN [TD5/116 line 17 – 117 line 8]. [404] [F/68/6]. [405] Bowyer XXN [TD8/52]; Bowyer Statement §6.47 [G1/1/56]. [406] Relying inter alia upon the appraisal reports proving the development of the factory in question, which Mr Borrelli did not disclose in this action: Borrelli XXN [TD5/140 line 22 - 141 line 5] [407] See Akai’s Opening at Annexure 2 at §§14 – 17 and the coloured table inserted as new page 14 of Part E. [408] Bowyer Appendix page 20 §7.4 and §7.6 [G1/4]. [409] See Bowyer XXN at [TD8/63 lines 13-25]. [410]A copy of the cheque is at [F/68/00003]. Mr Ting specifically admitted to signing this cheque: paragraph 27 of the RRAPOD [A/3]. [411] See the relevant Journal Vouchers J11017 and J11035 at [F/68/00008] and [F/68/00016] respectively [412] See the admissions made by Mr Ting in §§27 to 31 of the RRAPOD [A/3]. [413] These funds were used to purchase a residential apartment owned by the 2nd Defendant Ferbury Limited from which Akai realised US$1,841,021 (HK$14,267,912) in these proceedings from the proceeds of sale. [414]A copy of the agreement is at [F/68/00024] and its key terms are summarised in the Borrelli Second Statement Statement at §103 [D/3]. [415] A copy of the Senior Note is at [F/68/00032]. [416] A copy of the agreement is at [F/68/00024]. [417] See the execution page of the agreement at [F/68/00028]. [418] See paragraph 105.1 of the Borrelli Second Statement and the relevant documentation at [F/68/00057] and [F/68/00060]. [419]See Article 5 of the articles of association of the Equity Joint Venture of Fu Tak Tianjin dated 3 March 1998 at [F/68/00047]. [420] A copy of the resolution is at [F/68/00055]. [421] Borrelli Statement page 107 §282 [D/1]. [422] A copy of the Senior Note is at [F/68/00032]. [423] See Akai’s Opening at Annexure 2 at §§14 – 17 and the coloured table inserted as new page 14 of Part E. [424] Akai’s Opening: Part E.6.2.3; Closing: pages 44-46; Reply: - ; Mr Ting’s Opening: page 45; Closing: 55; Reply: page 6 §23; Borrelli Statement [D/1]: [E24/139-155]; Borrelli Second Statement [D/3]: Pages 16-18 §§70-87 [F/67]; Spence Report [G1/2]: Pages 30-31 §§9.10-9.16; Bowyer Report [G1/1]: Pages 49-51 §§6.20-6.29; Bowyer Appendix [G1/4]: Pages 21-22 §§7.7-7.11; Joint Expert Report [G1/3]: Pages 22-23 §§4.40-4.43; Borrelli Oral Evidence: [TD5/7 line 8 – 27 line 15]; Spence Oral Evidence: “-”; Bowyer Oral Evidence: [TD8/39 line 16 – 47 line 9],[TD8/56 line 23 – 60 line 25]. [425] The CTS Capital transaction refers to the alleged defalcation recorded in DLN GL9715. [426] Borrelli XXN [TD5/19 line 9]; Borrelli Second Statement §80 [D/3/17]. [427] Bowyer Report §6.29 [G1/1/51] [428] Borrelli XXN [TD5/22-23]. [429] See Akai’s Opening at Annexure 2 at §§8 – 10 and the coloured table inserted as new page 14 of Part E. [430] A copy of the instruction letter is at [F/67/0002]. [431] A copy of the relevant journal voucher is at [F/66/00019]. [432] Bowyer Report page 51 §6.26 [G1/1]. [433] Bowyer Appendix page 21 §7.7 [G1/4]. [434]Bowyer Appendix page 21 §7.8 [G1/4]. [435] Bowyer XXN [TD8/60 lines 21-25]. [436]Bowyer XXN [TD8/58 lines 3-9], [TD8/59 lines 2-9]. [437] Borrelli Second Statement page 18 §§83 – 84 [D/3]. [438] Akai’s Opening: Part E.6.2.5; Closing: pages 47-52; Reply: 14-16; Mr Ting’s Opening: page 48-49; Closing: 50-51; Reply: page 6 §23; Borrelli Statement [D/1]: [E24/21-62],[E25/247-256],[E25/277-324]; Borrelli Second Statement [D/3]: Pages 25-36 §§109-153,[F/70-71]; Spence Report [G1/2]: Pages 32-33 §§9.24-9.37; Bowyer Report [G1/1]: Pages 71-74 §§6.101-6.111, Page 76 §§6.117-6.118; Bowyer Appendix [G1/4]: Pages 19-20 §§7.1-7.6; Joint Expert Report [G1/3]: Pages 20-22 §§4.34-4.39; Borrelli Oral Evidence: [TD5/141 line 7 – 153 line 4]; Spence Oral Evidence: “-”; Bowyer Oral Evidence: [TD8/47 lines 10-16], [TD8/54 line 10 – 55 line 23]. [439]The Merrywide transactions refers to the series of seven alleged defalcations to Golfland recorded in DLN GL9706, GL9707, GL9802, GL9803, GL9806, GL9807 and GL9808. [440] In [F70], in particular at pages 82 to 104. [441] Borrelli XXN [TD5/148 line 18 – 149 line 10]. [442] Borrelli XXN [TD5/147 line 18 – 148 line 10]. [443] See Akai’s Opening at Annexure 2 at §§31 – 33 and the coloured table inserted as new page 14 of Part E. [444] Copies of the instruction letters are at [F/70/00011-12] and a copy of Golfland’s SCB bank statement is at [F/70/00021]. [445]A copy of Schroder’s confirmation to Akai is at [F/70/00031] and a copy of Golfland’s SCB bank statement is at [F/70/00021]. [446] A copy of the instruction letter is at [E25/GL9802/00248] and a copy of Golfland’s SCB bank statement is at [E25/GL9802/00251]. [447] A copy of Golfland’s SCB bank statement is at [E25/GL9803/00260]. [448] A copy of the instruction letter is at [E25/GL9806/00278] and a copy of Golfland’s SCB bank statement is at [E25/GL9806/00284]. [449] A copy of the instruction letter is at [E25/GL9807/00299] and a copy of Golfland’s SCB bank statement is at [E25/GL9807/00301]. [450] A copy of the instruction letter is at [E25/GL9808/00309] and a copy of Golfland’s SCB bank statement is at [E25/GL9808/00317]. [451] Copies of the relevant journal vouchers are at [F/70/00024]; [F/70/00037]; [E25/GL9802/00252]; [E25/GL9803/00261]; [E25/GL9806/00285]; [E25/GL9807/00302]; and [E25/GL9808/00318]. [452] The 11 November 1997 agreement was between Golfland as “Seller” and Starfame as “Purchaser”. A copy of this agreement is at [F/70/00044]. [453] The 9 December 1997 agreement was between Golfland as “Seller” and Match Top as “Purchaser”. A copy of this agreement is at [F/70/00086]. [454] The 16 April 1998 agreement was between Golfland as “Seller” and Cherryhill as “Purchaser”. A copy of this agreement is at [F/71/00001]. [455] The 24 July 1998 agreement was between Sunnylane Inc (purportedly the beneficial owner of 25% of Merrywide’s share capital) as “Seller” and Match Top as “Purchaser”. A copy of this agreement is at [F/71/00010]. [456] The 4 August 1998 agreement was between Morning Dragon Limited (purportedly the beneficial owner of 26% of Merrywide’s share capital) as “Seller” and Cherryhill as “Purchaser”. A copy of this agreement is at [F/71/00019]. [457]Copies of the letters dated 31 March 1998 issued by Golfland to each of Starfame and Match Top are at [F/70/00095-96]. [458] Borrelli XXN [TD5/147 line 11 – 151 line 23]. [459] Akai’s Opening: Part E.6.3; Closing: pages 53-56; Reply: - ; Mr Ting’s Opening: page 46-48; Closing: 51-52; Reply: page 6 §23; Borrelli Statement [D/1]: [E17/4266-4408]; Borrelli Second Statement [D/3]: “-”; Spence Report [G1/2]: Pages 37-39 §§10.1-10.11, Page 59 §17.2(vi); Bowyer Report [G1/1]: Pages 64-70 §§6.77-6.90, §6.97, Page 129 §9.7; Bowyer Appendix [G1/4]: Pages 24-25 §§8.1-8.6, Page 30 §12.12; Joint Expert Report [G1/3]: Page 9 §3.1(v), Pages 24-25 §§4.46-4.52; Borrelli Oral Evidence: [TD5/153 line 5 – 171 line 16]; Spence Oral Evidence: [TD6/120 line 5 – 121 line 24]; Bowyer Oral Evidence: [TD8/70 line 4 – 86 line 9]. [460] Bowyer XXN [TD8/86 line 4-6]. [461]See generally Part D of Akai’s Opening. [462] Spence Report page 37 §10.3(vi) [G/2]; Bowyer XXN [TD8/71 line 10 – 72 line 1], [TD8/81 line 6 -82 line 14] [E16/98150/4124-4126, 4139]. [463]Spence Report page 37 §10.3(iii) [G/2]; Bowyer XXN [TD8/72 lines 2-8], [TD8/73 lines 8-14]; [E16/98150/4139-4145]. [464]Spence Report page 37 §10.3(iv) [G/2]; Borrelli XXN [TD5/161 lines 10-13]; Bowyer XXN [TD8/72 line 9-73 line 5]; [E16/98150/4138]. [465][E16/98150/4138, 4140]. [466]Spence Report page 37 §10.3(v) [G/2]; Borrelli XXN [TD5/161 lines 15-18]; Bowyer XXN [TD8/73 lines 20-22] [E16/98150/4157]. [467]Spence Report page 37 §10.3(i) [G/2]; Bowyer XXN [TD8/75 line 4 - 76 line 7]; [E16/98150/4153-4163]. [468]Spence Report page 37 §§10.1 - 10.2 [G/2]; Borrelli XXN [TD5/155 line 6–162 line 7]; Bowyer XXN [TD8/76 lines 8-19]; [E16/98150/4167-4168]; [E16/98150/4191-4192]. [469] Spence Report page 37 §10.3 [G/2], Borrelli XXN [TD5/161 lines 2-9]; Bowyer XXN [TD8/86 lines 4-9]. [470]Spence Report page 38 §10.10 [G/2]; Borrelli XXN [T5/160 line 23]; Bowyer XXN [TD8/77 line 9]-[TD8/81 line 1], [TD8/85 lines 3-19]; [E16/98150/4265A]. Mr Bowyer agreed that “Akai’s assets were used … to pay the loan to Space Mountain.” [T8/86 lines 2-3]. [471] Spence Report page 37 §10.3 [G/2], Borrelli XXN [T5/161 lines 2-9]; Bowyer XXN [TD8/86 lines 4-9]. [472] Spence Report page 38 §10.10 [G/2]; Joint Expert Report page 25 §4.52 [G/3]. [473]See Akai’s Opening at Part E.6.3 pages 88-89 §§216-218; DLN 98175 and 98177 [E16/98150/4123]. [474] See Akai’s Opening at Part E.6.3 page 89 §219; Bowyer Report page 67 §6.87 [G/1]; Spence Report page 38 §§10.9-10.10 [G/2]; [E16/98150/4264]. [475]See generally Part D of Akai’s Opening. [476] Akai’s Opening: Part E.6.2.6; Closing: pages 57-59; Reply: - ; Mr Ting’s Opening: page 49-50; Closing: 54; Reply: page 6 §23; Borrelli Statement [D/1]: “-”; Borrelli Second Statement [D/3]: Pages 37-38 §§154-164, [F/72]; Spence Report [G1/2]: Pages 32-35 §§9.38-9.44; Bowyer Report [G1/1]: Pages 81-83 §§6.136-6.139, §6.144; Bowyer Appendix [G1/4]: Pages 22-23 §§7.12-7.16; Joint Expert Report [G1/3]: Pages 22-23 §4.41, §4.44; Borrelli Oral Evidence: [TD5/177 line 7 – 179 line 15]; Spence Oral Evidence: [TD6/108 line 11 – 119 line 25] [TD6/127 line 8 – 129 line 23]; Bowyer Oral Evidence: [TD8/61 line 1 – 63 line 2]. [477] The Investco transaction refers to the defalcation recorded in DLN GL9906. [478] Bowyer XXN [TD8/61 lines 11-18]. [479] E.g. Disregarded non-cash credits: transactions between Akai and subsidiaries (US$22.7 million) and transactions between subsidiaries and recipients (US$93.6 million): Bowyer Statement §§8.90-8.94, 8.98-8.103 [G1/1/124-127] [480] See [E22/23/49], credit note which stated that Akai was receiving money on behalf of Matchpoint, a subsidiary. [481] Bowyer XXN [TD8/62 lines 4-5]. [482] A copy of the cheque is at [F/72/0002]. [483] A copy of the relevant journal voucher is at [F/72/00004]. [484] See Akai’s BCH bank statement at [F/72/00022]. [485] Bowyer XXN [TD8/61 lines 10-18]. [486] Bowyer XXN [TD8/61 line 25 – 62 line 5]. [487] Akai’s Opening: Part E.6.2.7; Closing: pages 60-61; Reply: - ; Mr Ting’s Opening: page 51; Closing: 52-53; Reply: page 6 §23; Borrelli Statement [D/1]: [E24/3-14]; Borrelli Second Statement [D/3]: Pages 39-40 §§165-172, [F/73]; Spence Report [G1/2]: Pages 35-36 §§9.45-9.51; Bowyer Report [G1/1]: Pages 86-87 §§6.158-6.162, Page 89 §6.167; Bowyer Appendix [G1/4]: Page 9 §§5.22-5.24, Page 23 §§7.17-7.19; Joint Expert Report [G1/3]: Pages 22-23 §4.42, §4.45; Borrelli Oral Evidence: [TD4/92 line 10 – 109 line 21]; Spence Oral Evidence: [TD7/17 line 19 – 29 line 12]; Bowyer Oral Evidence: [TD8/63 line 3 – 70 line 3]. [488]The Worldwide transaction refers to the alleged defalcation recorded in DLN GL9703. [489] [E24/GL9703/6]. [490] [E24/GL9703/7]. [491] Borrelli Second Statement page 39 §165 [D3]. [492] Borrelli Second Statement [D/3/268]. [493] Spence XXN [TD7/24 lines 6-23]. [494] Joint Expert Report pages 22-23 §4.42 [G1/3]. [495] Borrelli XXN [TD4/98 lines 15-17]. [496] In §§320, 349 & 357 above. [497] Borrelli Second Statement page 39 §166 [D3]. [498] See generally Part D of Akai’s Opening. [499][E24/GL9703/10]; Spence XXN [TD7/25 lines 6-7]. [500] Spence XN [TD7/27 line 14 - 28 line 3]. [501] Bowyer XXN [TD8/69 line 14 – 70 line 3]. [502] Borrelli Second Statement page 39 [170] [D3]; Spence XXN [TD7/27 lines 2 – 15]. [503] Spence Re-XN [TD7/34 line 9 – 35 line 3]. Mr Spence indicated that the existence of an intercompany account for a subsidiary of a subsidiary is unusual in itself: [TD7/24 lines 7-10]. [504] Bowyer XXN [TD8/67 line 9 – 68 line 11]. [505] Akai’s Opening: Part E.6.2.2; Closing: pages 63-69; Reply: 14-16; Mr Ting’s Opening: page 44; Closing: 46-49; Reply: page 6 §23; Borrelli Statement [D/1]: [E25/367-376]; Borrelli Second Statement [D/3]: Pages 11-15 §§44-69,[F/66]; Spence Report [G1/2]: Pages 29-30 §§9.3-9.9; Bowyer Report [G1/1]: Pages 46-47 §§6.6-6.14; Bowyer Appendix [G1/4]: Pages 19-20 §§7.1-7.6; Joint Expert Report [G1/3]: Pages 20-22 §§4.34-4.39; Borrelli Oral Evidence: [TD5/27 line 16 – 85 line 10], [TD6/88 line 21 – 89 line 25]; Spence Oral Evidence: “-”; Bowyer Oral Evidence: [TD8/47 lines 10 – 48 line 11]. [506] The Digiconic transaction refers to the alleged defalcation recorded in DLN GL9813. [507] Via Space Mountain and thus, inequitably, not credited in the Liquidators’ Methods; despite being expressly booked as ‘From Digiconic’ and credited to Famous Products: Bowyer Report §§6.10-6.12 [G1/1/47]; Borrelli Second Statement §67-68 [D/3/243]; [F/66/19,26]. [508] Borrelli XXN [TD5/45 line 19 – 46 line 8]. [509] Borrelli XXN [TD5/62 line 13 – 63 line 4]; Borrelli Second Statement §59. [510] [F/66/14 §B, §C]. [511] Borrelli XXN from [TD5/47 line 11]. In 1998/1999 the assets and sales of Akai Electric, Kong Wah and Tomei were US$1,103m/US$469.5m, 1655.1m/US$214.5m, and US$532.6m/ US$236.9m respectively: Borrelli Statement §§33, 36, 44 [D/1/9-10]. [512] Borrelli XXN [TD5/51 line 6 – 52 line 4]. [513] Bowyer Appendix page 20 §7.4 and §7.6 [G1/4]. [514] A copy of the cheque is at [F/66/00005]. [515] A copy of the relevant journal voucher is at [F/66/00019]. [516] A copy of the agreement is at [F/66/00014], and its key terms are summarised in the Borrelli Second Statement at §96 [D/3]. [517] A copy of the confirmation letter is at [F/66/00018]. [518]A copy of the agreement is at [F/66/00014]. [519]See a copy of Digiconic’s incorporation status as certified by the Secretary of State of California at [F/66/00027]. [520] A copy of the confirmation letter is at [F/66/00018]. [521]A copy of the instruction letter signed by Mr Ting is at [F/66/00026]. [522] A copy of the relevant extract from the general ledger is at [F/66/00024]. [523]See a copy of Digiconic’s incorporation status as certified by the Secretary of State of California at [F/66/00027]. [524] Borrelli XXN [TD5/27 line 19 – 84 line 21]. [525] Totalling in excess of 220 pages in single spacing. [526]Borrelli XXN [TD5/74 line 11 – 76 line 3]. [527] Akai’s Opening: Part E.6.1; Closing: pages 70-85; Reply: 11-13 ; Mr Ting’s Opening: pages 42-42, 51-52; Closing: 38-42; Reply: 11-14; Borrelli Statement [D/1]: Pages 138-140 §§413-425, [E7/783-873], [E22/Tab 23], Pages 141-142 §§432-437, [E24/78-244]; Borrelli Second Statement [D/3]: Page 43 §§182-189, [F/75]; Spence Report [G1/2]: Pages 22-28 §§8.1-8.27, Page 58 §17.2(iv); Bowyer Report [G1/1]: Pages 9-42 §§5.1-5.58, Page 128 §9.4; Bowyer Appendix [G1/4]: Pages 8-17 §§5.19-5.21, §§6.1-6.24, Page 19 §§6.28-6.36, Pages 29-30 §12.4(c), §§12.5-12.7, §12.9, Annexure 1; Joint Expert Report [G1/3]: Page 9 §3.1(iii), Pages 15-20 §§4.18-4.33; Borrelli Oral Evidence: [TD3/103 line 3 – 105 line 19], [TD4/128 line 19 – 169 line 15], [TD6/2 line 10 – 65 line 8]; Spence Oral Evidence: [TD6/144 line 7 – 167 line 25], [TD7/29 line 15 – 30 line 7], [TD7/35 line 4 – 36 line 11]; Bowyer Oral Evidence: [TD7/147 line 3 174 line 23], TD8/2 line 9 – 37 line 11], [TD8/113 line 24 – 121 line 19]. [528] APOC at §25.3 [A/2]; APOC Annexure D at §3.1 [A/2]; Joint Expert Report page 15 §4.18 [G1/3]. [529][E22/23/1-2]; Spence Report page 23 §8.3 [G1/2]. [530] Borrelli Statement page 139 §415 [D1]; Spence Report page 23 §8.3 [G1/2]; Bowyer Report pages 24-25 §5.8 [G1/1] Bowyer Appendix page 10 §6.4 [G1/4]; Bowyer XXN [TD7/158 lines 20-21], [TD8/4 lines 7-10]. Mr Bowyer accepted that the issuance of bonds to Akai’s subsidiary “flies in the face” of the prior announcement that they were to be issued to overseas institutional investors [TD7/173 lines 6-8]. [531]Bowyer XXN [TD7/173 line 13 – 174 line 2]. See Part D.2.4 of Akai’s Opening. [532] Borrelli Statement page 139 [416] [D1]; Spence Report page 23 §8.5 [G1/2]; Bowyer Report pages 24-25 [§5.8] [G1/1]; Bowyer Appendix page 10 [§6.4] [G1/4]; [G2/2/51-55]. [533] Bowyer Report pages 25-26 [§5.10] [G1/1]. [534]Bowyer Report pages 31-32 §§5.28-5.29 [G1/1]; Spence Report pages 23-24 [§8.8] [G1/2]; Bowyer Appendix page 10 [§6.5] [G1/4]. [535] [E22/23/46]; see Borrelli Statement page 139 §417 [D1]. [536] [E22/23/47]. see Borrelli Statement page 139 §417 [D1]. There is no evidence of any actual funds paid between Primewood and Matchpoint or Primewood and Brinlow: see Spence Report page 23 §8.5 [G1/2], Bowyer Report page 45 §6.5 [G1/1]. [537] DLN 97080 and DLN 97219. [538]Borrelli Statement pages 139-140 §§418-423 [D/1], [E22/23/42-43]; Spence Report pages 23- 24 §8.8 [G1/2]; Bowyer Appendix pages 10-11 §§6.5-6.6. [539] Borrelli Statement page 140 §424, 141 §429 [D1]; Bowyer Report page 32 §5.29 [G1/1]; Spence Report page 24 §8.9 [G1/2]; Bowyer Appendix pages 12-13 §6.11 [G1/4]. [540][E22/23/2A] (document handed up at [TD8/2 line 22]). Mr Bowyer accepted that this document represented Mr Ting disclosing to the world something which he knew was false and misleading: Bowyer XXN [TD8/6 lines 10-12], [TD8/9 line 14]. [541] Borrelli Statement page 141 §429 [D1]; Spence Report page 24 §8.10 [G1/2]; Bowyer Appendix pages 12-13 §6.11 [G1/4]. [542] Borrelli Statement page 141 §429 [D1]; Bowyer Report page 33 §5.31; Spence Report page 24 §8.11 [G1/2]; Bowyer Appendix pages 12-13 §6.11 [G1/4]. [543] Borrelli Statement page 141 §§428-429 [D1]; Bowyer Report pages 34-35 §5.36, page 39 §5.50 [G1/1]; Spence Report page 24 §8.11 [G1/2]; Bowyer Appendix pages 12-13 [§6.11] [G1/4]. [544] DLN 97102-97104; Borrelli Statement page 141 §427 [D1]; Bowyer Appendix page 17 §6.25 [G1/4]. [545] Joint Expert Report page 16 §4.20 [G1/3] Bowyer Appendix page 17-18 [§§6.26]-[6.27] [G1/4]. [546] Spence Report pages 24-25 §8.13 [G1/2]. [547] Borrelli Statement page 141 §432 [D1]; Spence Report page 25 §8.14 [G1/2]. [548]Borrelli Statement page 142 §433 [D1]; Spence Report page 25 §8.14 [G1/2]; Joint Expert Report pages 19-20 §4.31 [G1/3]. [549]See [E10/97190/2048], [E10/97194/2086], [E10/97204/2193], [E10/97208/2225]; Bowyer XXN [TD8/26 lines 16-17]. [550] Borrelli Statement page 141 [432] [D1]; Spence Report page 25 [8.14] [G1/2]. These amounts are deducted from Akai’s claimed equitable compensation under Method 2. [551] APOC Annexure D at §§5.4-5.5 [A/2]; APOC Annexure G (DLN 97190, 97194, 97195, 97204, 97205, 97208, 97210, 97213, 97214) [A/2], Borrelli Statement page 142 §§435-436 [D/1]; Spence Report page 25 §8.14 [G1/2]; Joint Expert Report pages 19-20 §4.31 [G1/3]; Bowyer XXN [TD8/31 lines 5-8]. [552] Seealso[E22/23/127-130]. [553] Spence §8.15 [G1/1/292]. [554] Borrelli XXN [TD4/158 lines 19-20]. [555] Spence §8.3 [G1/2/23] [556] Bowyer Statement §5.8 [G1/1/24] [557] The Liquidators’ claim is for payment not received in respect of this sale: Spence §8.8 [G1/2/290] [558] Spence §8.11 [G1/2/24] [559] Spence §8.12 [G1/2/24] [560] Spence §8.13 [G1/2/24] [561] Bowyer Second Statement §§6.18-6.19 [G1/4/14-15] [562] Bowyer XXN [TD8/27 lines 9-23]. See also §6.28 of Bowyer Appendix (Bowyer Second Statement §6.28 [G1/4/18]) and its Annexure 1 (Bowyer Second Statement [G1/4/Annexure 1]) and in his evidence (Bowyer ReX D8/127:1-24). The adjustments to the loss calculation according to Mr Bowyer’s opinion are set out at §6.34-6.36 of Bowyer Appendix (Bowyer Second Statement §§6.34-6.36 [G1/4/19]). [563] Spence XXN [TD6/153 lines 18-22]. [564] Spence §8.15 [G1/2/25] [565]Spence §6.2 [G1/2/13], Spence XXN [TD7/5 lines 4-12]; Borrelli Statement §522 [D/1/170], Borrelli XXN [TD4/31 line 13-32 line 11]. [566] Spence XXN [TD7/29 lines 18-19 and 30 lines 3-4]. [567] See Joint Report §4.19 [G1/3/351] and Spence XXN [TD6/145 lines 3-24]. [568] See e.g. Borrelli XXN [TD4/144 lines 13-19]. [569] [E22/T23/43]. [570] Misleadingly, Mr Borrelli told the Court that he had seen no evidence to indicate that was their purpose: Borrelli Statement §433 [D/1/142]; Borrelli XXN [TD4/150]. [571] Bowyer XXN [TD7/167 line 22]. [572] Bowyer XXN [TD8/25 lines 8-13]. [573] Bowyer XXN [TD7/168 lines 20-21]. [574] Bowyer Report pages 38-39 §5.47, page 42 §5.58 [G1/1]; Spence Report page 27 §§8.20-8.21 [G1/2]. [575] Joint Expert Report page 17 §4.24 [G1/3]; Bowyer Appendix page 14 §6.16 [G1/4]. [576] Joint Expert Report pages 17-18 §4.25 [G1/3]. [577] Bowyer Report pages 40-42 §5.56 [G1/1]. [578] Bowyer Report pages 40-42 §5.56 [G1/1]. [579] Bowyer XXN [TD7/153 line 25 – 154 line 16]. [580] Bowyer XXN [TD7/165 lines 3-6], [TD7/169 lines 15-17]. [581] See also Joint Expert Report page 17 §4.24 [G1/3]. [582] Bowyer XXN [TD8/32 lines 11-18]. [583] Bowyer Report pages 40-42 §5.56 [G1/1]. [584] [G2/6/64-65]; Borrelli XXN [TD6/38 line 14 – 39 line 24]; Spence XXN [TD6/154 lines 6-10], [TD6/156 lines 14-16], [TD6/163 lines 12-17]. [585] Bowyer XXN [TD8/17 lines 19-20], [TD8/20 lines 3-6]. [586] [TD7/165 lines 3-6]. [587] Even if I accepted Mr Bowyer’s evidence, the Tisco cash payments were only UD$116,357,743, not US$136,219,633, and certainly not US$140,333,333. [588] Spence XX D7/29:18-19 and 30:3-4. [589] Joint Expert Report page 17 §4.24 [G1/3]; Bowyer Appendix page 14 §6.16 [G1/4]. [590] See also Joint Expert Report page 17 §4.24 [G1/3]. [591] Bowyer XXN [TD7/95 line 23 – 96 line 5]. [592] Bowyer XXN [TD7/96 lines 4-20]. [593] Bowyer XXN [TD7/96 lines 6-12]. [594] Bowyer XXN [TD7/97 lines 2-8]. [595] Bowyer XXN [TD7/160 lines 2-8]; Spence Report pages 24-25 §8.13 [G1/2]. [596] Bowyer XXN [TD7/160 lines 9-25]. [597] Bowyer XXN [TD8/18 line 25]. [598] Bowyer XXN [TD7/174 lines 13-23]. [599] Bowyer XXN [TD8/18 lines 10-11], [TD8/19 lines 5-8], [TD8/22 line 8 – 26 line 17]; [E10/97190/2048], [E10/97194/2086], [E10/97204/2193], [E10/97208/02225]. [600] Bowyer XXN [TD7/169 lines 18-25]. [601] Bowyer XXN [TD7/170 line 5 – 171 line 1], [TD8/8 line 6]. [602] Bowyer XXN [TD8/10 line 3 – 11 line 14]. [603] Bowyer XXN [TD8/32 lines 11-18]. [604] Bowyer XXN [TD8/32 lines 15-18]; the non-cash transaction was recorded in J1033 dated 26 January 1998: see Akai’s general ledger at [E1/2/137]. [605] Bowyer XXN [TD8/32 lines 19-23]. [606] Bowyer XXN [TD8/32 line 24 – 33 line 2]. [607] Bowyer XXN [TD8/33 lines 3-7]. [608] See [E10/97190/2048], [E10/97194/2086], [E10/97204/2193], [E10/97208/2225]. [609] Bowyer XXN [TD8/22 line 8 – 26 line 17]; [E10/97190/2048]. [610] [E10/97194/2086]. [611] [E11/97204/2193]. [612] [E10/97208/02225]. [613] Compare the TISCO HK statement [G2/6/64-65] with the table set out in the Bowyer Appendix pages 13-14 §6.14 [G1/4]. [614] Spence §8.15 [G1/1/292]. [615] Spence Report at page 25 §§8.15-8.16 [G1/2]. [616]Bowyer XXN [TD7/160 lines 2-8]; Spence Report pages 24-25 §8.13 [G1/2]. [617] Bowyer XXN [TD7/160 lines 9-25]. [618] Borrelli XXN [TD6/45 lines 4-9]. [619] Akai’s Opening: Part E.6.4; Closing: pages 86-87; Reply: 17; Mr Ting’s Opening: pages 52-53; Closing: - ; Reply: - ; Borrelli Statement [D/1]: [E7/727-739],[E10/1815-1824],[E14/3197-3212], [E17/4537-4550]; Borrelli Second Statement [D/3]: “-”; Spence Report [G1/2]: Pages 40-41 §§11.1-11.7, Page 58 §17.2(vii); Bowyer Report [G1/1]: Pages 89-90 §§6.169-6.174, Page 92 §6.180, Page 129 §9.8; Bowyer Appendix [G1/4]: Page 2 §3.2(a), Page 25 §§9.1-9.4, Page 30 §12.13; Joint Expert Report [G1/3]: Page 9 §3.1(vi), Pages 25-26 §§4.53-4.56; Borrelli Oral Evidence: [TD5/179 line 16 – 186 line 13]; Spence Oral Evidence: “-”; Bowyer Oral Evidence: [TD8/86 lines 10 – 89 line 24]. [620] See Annexure 10 to Akai’s Opening at 4-5; DLNs 97075, 97168, 98069, 98157 and 98168. [621] Joint Expert Report page 25 §4.55 [G/3]. [622] Bowyer XXN [TD8/87 line 18 – 88 line 12], [TD8/89 lines 13-20]. [623] See bank instructions signed by Mr Ting and banking documents indicating the payments to BTM [E7/97075/728-735]; [E10/97168/1816-1817]; [E14/98069/3198-3201]; [E17/98168/4538-4539]. [624] [E7/97075/730]; [E10/97168/1816]; [E14/98069/3198]; [E17/98168/4538]. [625] [E7/97075/730]. [626] [E14/98069/3198]; [E17/98168/4538]. [627] US$428,995,521 less US$14,272,905. [628]US$193,990,056 ÷ US$414,722,616: see Annexure 10 of Akai’s Opening which collated the documentary evidence of payments personally signed by Mr Ting. [629] Including US$14,272,905 in respect of the Worldwide International transaction which, although not a defalcation, was a payment made in breach of fiduciary duty for which Mr Ting is required to repay the US$14,272,905 misapplied by the payment to Worldwide. [630] Such as the improved roof example given in Halpern v Halpern [2008] QB 195 at§74. [631] Spence Report at §5.11 [G1/2]; Borrelli Statement at §86 [D/1]. [632] Schedule 3 of Mr Ting’s Opening. [633] See SSAP 1 Hong Kong Statement of Standard Accounting Practice 1 at §34 [G1A/90]. See also Bowyer XXN [TD8/106 line 25 - 112 line 15 esp 110 line 22 - 111 line 9]. [634] Spence Report [G1/2]. [635] At p.666. [636] At p.665. [637] See Bundle J3 Tab 5 at pages 241-242. [638] See Bundle J3 Tab 5 at pages 295-296. [639] Less the “free issue” of shares. [640] Less the “free issue” of shares. [641] TD9/109 lines 8-14. [642] Tomei was a publicly listed company and about 50% of its shares were publicly held: see footnote 12 on page 12 of Akai’s Opening, Part F. [643] Bowyer Statement §§8.61-8.66 and §§8.73-79 [G1/1/119-122] [644] For example, Ting’s Closing at page 43 §§162-163. [645] Joint Expert Report at 15 §4.17 [G1/3]. [646] Bowyer Statement §8.90-97 [G1/1/124-126], Joint Report 3.2(ii) [G1/3/10] [647] Spence XXN [TD7/33 lines 9-12]. [648] Spence XXN [TD7/33 lines 17-19]. [649] E.g. Spence XXN [TD7/32 line 10]. [650] Bowyer XXN [TD7/69 lines 6-9]. [651] Borrelli XXN [TD4/74 lines 13-14]. [652] Ting’s Closing at page 44 §169, see also page 31 §125; Bowyer XXN [TD7/69 lines 6-9]. In this respect Mr Bowyer has explained that his starting point is that the payments to Recipients were not defalcations [TD7/69 lines 2-4]. [653] Spence Re-XN [TD6/34-35], Bowyer XXN [TD8/92 lines 6-7]; see Akai’s Closing at page 91 §226. [654] Bowyer XXN [TD7/84 line 23]. [655] Bowyer Report at page 130 §9.13 [G1/1]; Joint Expert Report at page 6 §1.10 and page 10 §3.2(ii) [G1/3]. [656] Ting’s Closing page 31 §124. [657] Borrelli XXN [TD4/89 lines 2-9]. [658] Spence XXN [TD7/7 lines 4-11]. [659] Borrelli XXN [TD4/92 lines 4-8]. [660] Borrelli XXN [TD6/70 lines 19-22]. [661] Borrelli XXN [TD4/86 lines 11-14]. [662] See Spence Report page 5 at §2.5 and page 47 at §§13.14-13.15 [G1/2]. [663] See Spence Report page 5 at §2.5 and page 47 at §§13.14-13.15 [G1/2]. [664] See the table at pages 45-46, §13.8 of the Spence Report [G1/2]. [665] see [E23/26/22]. [666]see[E23/26/22]. [667] Spence Report §13.9. [668] Spence Report §13.10. [669] Spence Report §13.14: US$51,880,236 – US$2,786, 916. [670] Spence Report §13.14. [671] See §§363-368 above. [672] Lewin on Trusts (19th ed.) at §44-13 [673] The limitation period for this claim expired on 27 February 2003, 6 years after the breach of fiduciary duty: see section 20(2) of the Limitation Ordinance. As the writ in these proceedings had been issued on8 December 2005, the doctrine of relation back, which treats new claims as if they had been made at the time of the issue of the writ, did not deprive Mr Ting of an accrued limitation defence. [674] [E16] [675] [E17] [676] As accepted and acknowledged by Akai, interest on the defalcations will be calculated not from the date of the defalcation but from the end of January of the following year. [677] China Everbright v Ch’ng Poh (2002) 5 HKCFAR 630at §§58-64. [678] At §§71-72. [679] The editors of Lewin on Trusts, 19th ed., state at §39-061 that the commercial rate is “available where the claimant is a commercial concern as opposed to a private trust, on the basis that commercial investments generally attain a higher rate of return”. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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