Landway Investments Ltd v. Area Asia Ltd
Read the full judgment text of HCA 756/2016 on BabelCite. This High Court CFI judgment was delivered on 25 February 2021.
1. This is the trial of the Plaintiff’s action based on misrepresentation relating to a sale and purchase agreement (the “Sale Share Agreement”) under which the Defendant agreed to sell its entire direct and indirect interest in Brave Win Industries Ltd (“Brave Win”) to the Plaintiff at a consideration of US$3.2 million. The only relief sought by the Plaintiff is damages in the sum of US$700,000 or the Hong Kong dollar equivalent, but not rescission of the Sale Share Agreement which has already
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HCA 756/2016 [2021] HKCFI 231 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 756 OF 2016 ______________ BETWEEN
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______________ J U D G M E N T ______________ INTRODUCTION Introduction 1.This is the trial of the Plaintiff’s action based on misrepresentation relating to a sale and purchase agreement (the “Sale Share Agreement”) under which the Defendant agreed to sell its entire direct and indirect interest in Brave Win Industries Ltd (“Brave Win”) to the Plaintiff at a consideration of US$3.2 million. The only relief sought by the Plaintiff is damages in the sum of US$700,000 or the Hong Kong dollar equivalent, but not rescission of the Sale Share Agreement which has already been performed. The Background 2.The Plaintiff is a company incorporated in the British Virgin Islands (“BVI”) owned and controlled by Lee Chi Keung, Russell (“Lee”). The Defendant, formerly known as KTP Holdings Ltd (“KTP”), is a company incorporated under the laws of Bermuda whose shares are listed on the Main Board of The Stock Exchange of Hong Kong Ltd (the “Stock Exchange”). 3.Lee was the majority shareholder, chairman and executive director of KTP. On 5 January 2011, he sold about 60% of his shareholding to Chua Chun Kay (“Chua”), who then became the majority shareholder. On 26 February 2011, Lee resigned from his position as chairman and executive director of KTP. KTP changed to its present name on 19 March 2012. Hereunder, I shall refer to the Defendant as KTP while it was under the ownership and control of Lee until January 2011, and thereafter as the Defendant. 4.KTP was the parent company of another BVI company, China Compass Investments Ltd (“China Compass”), which in turn is the holding company of Brave Win. KTP was principally engaged in the manufacturing and sale of athletic footwear and footwear products in China. It carried on such business through Brave Win which operated a factory on a piece land in the Mainland situated at Dongguan Changan Xiaobian Community Second Industrial Zone (東莞長安鎮宵邊社區第二工業區) (the “Dongguan Land”). Brave Win has acquired the right to use the Dongguan Land (the “Land Use Right”), but not the ownership of the land. 5.KTP used to have another subsidiary incorporated in the BVI known as KTP (BVI) Company Ltd (“KTP (BVI)”), which is the holding company of Dongguan Hung Yip Shoes Manufacturing Co Ltd (“Hung Yip”). Hung Yip had entered into three agreements with the Dongguan Changan Xiaobian Community Committee[1]（東莞長安鎮宵邊社區居委會）(the “Committee”) which gave it the right to use the Dongguan Land and buildings up to 2040 or 2046 (the “Dongguan Lease Agreements”). Then, by virtue of a policy directive issued by the Mainland authority on 15 April 2009, Hung Yip was given the right to apply to the Mainland authority to perfect its legal ownership of the Dongguan Land together with its constructions (the “Land Rights”). On 11 May 2009, Hung Yip commenced proceedings to perfect its ownership of the Dongguan Land. 6.On 22 July 2009, Peak Rise Holdings Limited, which is another BVI company wholly owned by Lee, entered into an agreement with KTP to acquire the entire shareholding of KTP (BVI). Thus, upon completion of that agreement, Lee acquired the Land Rights through Hung Yip. 7.That was the position in January 2011, a year and half later, when Lee sold his 60% shareholding in KTP to Chua. While Lee and his wife resigned from the board of directors of the Defendant upon the sale, they retained their position as executive directors of Brave Win in order to facilitate Hung Yip’s application for perfecting its ownership of the Dongguan Land. Junaidi Yap (“Jun”) became the Defendant’s Chief Executive Officer since June 2012. 8.The dispute between the parties arose out of the Defendant’s sale of its entire shareholding of China Compass and Brave Win (collectively, the “Shares”) to Lee’s company, ie the Plaintiff, to enable Brave Win to assist Hung Yip in its application to perfect its ownership of the Dongguan Land. The Parties’ Case 9.In a nutshell, the Plaintiff’s case is that induced by and acting in reliance on the representation made by the Defendant, the Plaintiff increased the purchase price for the Shares from US$2.5 million to US$3.2 million under the Sale Share Agreement, thereby suffering damages in the sum of US$700,000. It relies on two separate but related representations:
The representations were false and that Jun and the Defendant made the representations knowing that they were false or were reckless, not caring whether they were true or false. 10.The defence is essentially putting the Plaintiff to strict proof; that the Defendant could not have intended to induce the Plaintiff to increase its offer price for the Shares; that the Plaintiff is precluded by the express term of the Sale Share Agreement to make a claim; and that the Plaintiff failed to establish it has suffered the damages claimed in the sum of US$700,000. The Law 11.The parties have no dispute about the legal principles applicable to the tort of misrepresentation. The ingredients of a fraudulent representation as set out in Derry v Peek[2] are as follows:
12.As for proof of the defendant’s knowledge of the falsity of its representation, there is no need to prove actual knowledge of the falsity. It is enough to establish the defendant suspected that his representation might be inaccurate, or he neglected to inquire into its accuracy, or he was reckless whether it was true or not: Chitty on Contract[3]. Witnesses and Their Credibility 13.The Plaintiff called two witnesses, Lee and his assistant, Yip Kwok Keung Eric (“Yip”) who is also a director of Hung Yip. 14.Lee is the principal owner and person in control of the Plaintiff and Hung Yip. He stands very much to gain from this action. I am conscious of the need for caution before accepting his evidence, particularly where it is at odds with objective facts and incontrovertible evidence. His evidence is on the whole consistent with contemporaneous documents and emails. His and Chua’s conducts were consistent with the historical background of the parties’ dealing. 15.Lee relied on his notes of the meetings with the Committee to support his evidence. Those minutes were not signed by any member of the Committee. Even though contemporaneous, those notes may be treated as self-serving statements. I treat those notes and Lee’s evidence in relation to the matters stated therein with extreme caution. On the major issues, those notes are supported by credible and contemporaneous documents from the Committee. They corroborated Lee’ and Yip’s evidence. 16.Mr Chan criticized Lee heavily of exhibiting a tendency to make assertions or assumptions whenever they suit his case regardless of the true position. He gave as an example that in order to support his allegation that a consideration of US$2.5 million had been agreed prior to the meeting on 29 January 2014, Lee asserted that he had gone through the draft announcement (“Draft Announcement”) provided to him and saw the consideration inserted therein and further asserted that the Defendant failed to disclose to him that the Defendant knew that the Xiaobian Offer was invalid and that the Draft Announcement was less complete than the final announcement. But when it was pointed out to him that the Draft Announcement did fully disclose the legal invalidity and the practical impediments to the Defendant’s accepting the Xiaobian Offer, Lee changed tact and said that he did not actually read the Draft Announcement carefully. Lee was shown a lot of documents. The Draft Announcement alone consisted of 12 pages. The main concern was about the consideration. China Compass and Brave Win were empty shells not worth anything. It is understandable that Lee would not be too concerned about fine details and might have made some assumptions. This is a small blemish, which is not unusually found in a witness. Such blemishes have little bearing when the evidence is overall consistent with the contemporaneous documents, is inherently credible and make sense in the totality of the evidence, which I think Lee’s evidence is. I find him credible. 17.Yip’s evidence was principally to vouch for the accuracy of the various meeting minutes prepared by Lee which he attended with Lee. That evidence stands or falls with Lee’s. The evidence of what took place during the meetings is largely supported in major issues by documentary evidence from the Committee. He has no evidence to give on independent matters. I take note that he is Lee’s cousin and an employee of the Plaintiff. He may have pressure to keep his evidence in line with Lee’s. Having considered the totality of the evidence and having warned myself of the need for caution, I find him credible. 18.The Defendant called two witnesses, Sydney Yeung (“Yeung”) and Mario Ngan (“Ngan”). They are independent non-executive directors. In that position, they were not involved in the negotiation of the Sale Share Agreement with Lee, save on 29 January 2014. Their knowledge was limited to matters which they were either personally involved, such as the various meetings of the Independent Board Committee appointed by the Defendant’s Board (“IBC”) or the Defendant’s board meetings or to information derived from contemporaneous documents. They were not very precise in certain matters, such as the reason for not calling Jun, Raymond Tsoi (“Tsoi”), the Chief Financial Officer and his assistant Victor Ng (“Ng”). Apart from the very crucial point of what happened during the Board’s meeting with Lee on 29 January 2014, they appeared to be honest and credible witnesses. Failing that issue, their evidence was not helpful to the Defendant. 19.Yeung adopted the witness statement of Ngan. Their evidence on the most important issue of what happened during Lee’s meeting with the Board on 29 January 2014 is consistent with one another, but inconsistent with handwritten note of the meeting prepared by the Defendant’s legal team (the “Note”). That cast serious doubt on their credibility. When their evidence is tested against the Note and the totality of the evidence, I do not find them credible. THE FACTS Circumstances leading to Defendant’s Draft Agreement 20.In June 2012, ie a year and half after Chua’s acquisition of KTP, Brave Win was planning to close its factory. The shoe manufacturing business was the only business of the Defendant at the time. The closure of the factory would be a price sensitive information which, according to the listing rules of the Stock Exchange, the Defendant should immediately disclose to the public. In an email dated 29 June 2012, Chua asked Lee to “help to keep thing status quo” and that he was sure a solution could be found to let Lee have Brave Win back within three months. 21.At a meeting on 4 July 2012 at the Defendant’s office attended by Lee, the Defendant’s executive directors, Chua, Jun and a financial advisor from Bridge Capital Limited, the issue of closure of the factory and sensitive information was discussed. Chua and Jun requested Lee to keep the impending closure secret and to continue with the operation of Brave Win until the Defendant could find another principal business for Brave Win. They assured Lee that after injection of an alternative principal business to the Defendant to maintain its listing status, the Defendant will return Brave Win to Lee so that it could assist Hung Yip in its application to perfect ownership of the Dongguan Land as long as the inter-company loan of US$3.8 million as at 31 March 2012 was settled. They also assured Lee that any loss incurred during Brave Win’s extended period of operation would be absorbed by the Defendant. After the meeting, Lee sent an email to Chua and Jun to confirm his agreement to the arrangement. 22.Pursuant to the above arrangement, Lee and his wife were released of their responsibilities in the daily operation of Brave Win and deleted as authorized signatories of all bank accounts of Brave Win on 9 July 2012. Jun and Irene Poon (“Poon”), the Defendant’s company secretary, became the new authorized signatories. Towards the end of July 2012, Brave Win’s factory was closed. The employment of its employees were terminated. The employees were paid severance payments of around US$2 million. 23.On 7 August 2012, Jun confirmed to Lee that Hung Yip had taken up the rights to apply to perfect its legal ownership of the Dongguan Land. Hung Yip continued to proceed with the legal procedure, while Brave Win continued with its closing down process. Brave Win was eventually closed down at the end of January 2013 and became a shell company. The Dongguan Land was left idled. In the meantime, the Defendant developed coal trading as its principal business in late 2012. 24.Lee pressed Chua and Jun to fulfill their promise to return Brave Win to him. In late February 2013, Lee was invited to a meeting with Chua, Yeung, and a financial advisor from Bridge Capital Limited at Hong Kong Shangri-la Hotel. At the meeting, Chua assured Lee that Brave Win would be returned to him as long as the US$3.8 million funding to Brave Win as at 31 March 2012 would be repaid to the Defendant. 25.On 5 July 2013, Lee had a meeting with Tsoi, the Chief Financial Officer of the Defendant, and a representative of the Defendant’s solicitors, King & Wood Mallesons, to formally discuss about disposal of the entire issued share capital of China Compass which in turn owned 100% equity interest in Brave Win. 26.On 24 July 2013, Lee asked Chua and Jun to confirm the terms and consideration for the potential disposal of China Compass. They exchanged emails. At a meeting in early August 2013, Jun told Lee that the net assets of China Compass had been reduced and was insufficient to pay the sum of US$3.8 million. He asked Lee to meet the shortfall of US$1.5 million which arose out of the extended period of Brave Win’s operation after 31 March 2012. Lee agreed to make the concession. 27.On 20 August 2013, the Defendant issued a memorandum of understanding (“MOU”) requesting Lee to place a deposit of HK$7,750,000 in exchange for an exclusive right to further negotiate for the potential disposal of China Compass. Half of the deposit was expressed to be non-refundable even if the deal could not go through. Jun told Lee that the Defendant was being approached by various buyers to buy Brave Win and he would only be willing to sell at US$2.5 million. 28.On the same day, Jun wrote to Lee’s financial adviser, Alex Tai, explaining why an earnest money of 50% was raised in the MOU and urged him to finalize the MOU that very day. Lee felt the 50% non-refundable deposit unreasonable and sought help from Chua. During a telephone conference call on 22 August 2013, Chua suggested Lee to send a simple draft sale and purchase agreement for Jun’s consideration. Lee sent a draft sale and purchase agreement to Jun and increased the consideration to US$2.5 million. On the following day, the Defendant issued a public announcement pursuant to the listing rules in respect of the potential disposal of China Compass to a connected person, whom Lee understood to be himself. 29.In mid-September 2013, a draft sale and purchase agreement (the “Draft Agreement”) and a deed of assignment prepared by King & Wood Mallesons was circulated between the parties for discussion. Lee made some amendments in early October 2013. The consideration stated in the Draft Agreement was US$2.5 million. On 11 October 2013, Lee pressed Chua for finalization of the deal. 30.Twelve days later, the Defendant allegedly received a letter dated 22 October 2013 from Cai Manhong(蔡滿洪), a supervisor of the Committee containing an offer from the Committee for early termination of the Dongguan Lease Agreements at a compensation of RMB55 million (the “Xiaobian Offer” or the “Offer Letter” as appropriate). The Xiaobian Offer 31.The documents disclosed by the Defendant showed that on 18 April 2013, three and half months after the closure of Brave Win’s factory, there were some discussions between Tsoi, Ng and representatives of King & Wood Mallesons on behalf of the Defendant and Cai Weiquan, Cai Manhong on behalf of the Committee about use of the Dongguan Land after closure of the factory. The Committee was concerned about the loss of employment opportunity and income to the residents as a result of the closure. Three options had been suggested by the then party secretary Cai Weiquan: (1) Brave Win to resume using the Dongguan Land may be for other purposes; (2) Brave Win to lease the land to other users; and (3) the Committee to buy back the land and arrange for it to be used by other users. The theme was to enable the land to be used productively to generate income or employment for the residents. The option to buy back was a very conceptual one. It was no more than an idea for discussion. There was no mention of any terms of the repurchase. There was no suggestion that it was an offer by the Committee, not even a preliminary one. 32.Between 28 April 2013 and 8 May 2013, there were some emails exchanged among Tsoi, Ng and King & Wood Mallesons circulating a draft minutes of a meeting with Cai Weiquan and Cai Manhong on 26 April 2013. The final minutes showed that at the meeting Cai Weiquan repeated his request to the Defendant to put the Dongguan Land into active use. He expressed preference for the first option and threatened to recover the land without compensation if the Defendant allowed the land to idle for a long term. The option of repurchase was off the table at this second meeting. Despite the urgency mentioned in the emails, the matter just went dead since. Probably, the Defendant was dragging its feet waiting for their coal plant business or the sale of Brave Win to Lee to materialize. As mentioned in the preceding subsection, at that time the Draft Agreement was being circulated for discussion between Lee and Jun. That was the background against which the Xiaobian Offer was allegedly received. 33.After a total silence of six months, all of a sudden on 23 October 2013 the Defendant allegedly received the Offer Letter from Cai Manhong. To put the evidence in context, at that time, Cai Weiquan who had discussed with the Defendant about the use of the Dongguan Land had been removed as party secretary since 20 August 2013. The incumbent Committee confirmed that it had not made and had no knowledge of the making of the Xiaobian Offer. The parties are in dispute as to the authenticity of the Offer Letter. 34.There is no direct evidence as to how the Offer Letter came to be received by the Defendant, other than the fact it was received. There is no paper trial whatever other than a mention of such an idea in the context of a discussion on the use of the Dongguan Land at the two meetings on 18 and 26 April 2013. As could be gleaned from the available documents, it was received by Tsoi unsolicited. Who authorized the issue of the Offer Letter is unknown, other than that it was not issued with the authority of the Committee. 35.The first documentary evidence about the receipt of the Xiaobian Offer came from Tsoi’s email to his assistant, Ng, at 10:15 am on 23 October 2013, in which Tsoi wrote:
That email seemingly contained the email from Cai Manhong which was totally blank. Presumably annexed to Cai Manhong’s email was the Offer Letter dated 22 October 2013. 36.Presumably, Tsoi, Ng and Jun brought the matter up with Adwin and Adwin immediately agreed to accept the Xiaobian Offer. Adwin signed a letter accepting the offer (the “Acceptance Letter”). In his email to all the directors at 2:34 pm later the same day reporting acceptance of the Xiaobian Offer, Jun wrote as follows:
At around 9:52 pm on the same day, Jun caused the Defendant to make the Defendant’s Announcement that it had received an intended offer of compensation dated 22 October 2013 in the sum of RMB55 million (equivalent to US$9.03 million) from the Committee for the early termination of the Dongguan Lease Agreements with Brave Win. Circumstances leading to the Preparation of the Sale Share Agreement 37.On the following day, Jun telephoned Lee’s financial advisor, Alex Tai (“Tai”) and told him to read the Defendant’s Announcement. He said that the Defendant would no longer want to finalize the Draft Agreement as it had received an offer from the Committee. 38.In a telephone conversation, Poon told Lee that Jun and his subordinates, Tsoi and Ng had certain meetings and communications with Cai Weiquan since mid-2013 until 23 October 2013. 39.By a letter dated 25 October 2013, Jun, in his capacity as a director of China Compass, announced China Compass’s intention to propose two resolutions to remove Lee and his wife as director of Brave Win with effect from 23 November 2013. By another letter of the same date, Jun gave notice to all directors of Brave Win to convene a board meeting on 1 November 2013 to consider the above resolutions. Probably through the intervention of Chua, the announcement was disallowed by the Defendant’s Board and Jun cancelled the board meeting. A warning letter dated 29 October 2013 was issued by the Board to Jun, expressing the Board’s disappointment with the way Jun handled the Xiaobian Offer. The IBC was formed to consider in detail the potential sale of the Shares and the Xiaobian Offer. 40.On 6 November 2013, Lee flew to Singapore with Poon, Yeung and another independent non-executive director to meet with Chua and Adwin. Ngan also attended that meeting by video conferencing. There was some dispute as to the purpose of the meeting. According to Lee, it was to finalize the Draft Agreement and he was assured that Brave Win would be sold to him at US$2.5 million and the Defendant would commence preparing the documentation and regulatory compliance procedures. According to Yeung, Chua explained to Lee that nothing was finalized as the Defendant was waiting for IBC’s fact finding and opinion. Chua only assured Lee that there was no deal with the Committee at the moment. I think the truth lies somewhere in between. The difference between the parties is one of perception. It makes no sense for the Defendant to fly two of its directors and the company secretary to Singapore and to have another director attending via video conferencing to meet with the majority shareholder and the chairman just to give the simple message related by Yeung. On the other hand, the Defendant had constituted the IBC and instructed a legal team to make finding of fact and to advise the Board. The Defendant would not have in the circumstances invited Lee to Singapore to finalize the Draft Agreement. Lee’s version was probably closer to the truth. In view of the historical background between Lee and Chua and their negotiations hitherto, Chua must be trying to give Lee a strong assurance through such an arrangement so as to put his mind at ease. The assurance is of course short of a contractual commitment. 41.On 24 November 2013, the IBC issued its report and recommended the Board to accept Lee’s offer. However, at around the same time, Poon smelt that something untoward was going on with Jun’s team. She informed Lee that Jun and his team were still negotiating with the Mainland people, whom Lee understood to mean Cai Weiquan, about the Xiaobian offer. At that time, Poon did not know Cai Weiquan had been removed from his position as party secretary. Lee issued an email to Chua to press for finalization of the Draft Agreement. Chua assured him again that Brave Win would be sold to him at US$2.5 million and that the Defendant would speed up the procedures. Richards Butler was instructed by the Defendant to handle the formalities including the necessary applications to the Stock Exchange. The consideration stated in all the documentations up to 29 January 2014, such as emails, the Draft Agreement, and Draft Announcements, was US$2.5 million or the equivalent of HK$19.45 million. 42.Against the above background, Lee was invited to attend the Defendant’s board meeting on 29 January 2014 to finalize the Draft Agreement. Board Meeting on 29/1/2014 before Final Round of Negotiation with Lee 43.Before meeting with Lee on 29 January 2014, the Defendant’s Board, consisting of Chua, Adwin, Jun, Yeung and Ngan, had a board meeting. Tsoi and a three-member legal team from Richards Butler were also in attendance. The legal team took the Board through the background leading to the proposed sale and purchase of the Shares and the recommendation of the IBC. A trainee solicitor from the legal team took notes of the board meeting. 44.There was some discussion on the recommendation of the IBC. Adwin noted that the IBC considered it difficult to find someone other than Lee to be the buyer and that if there was to be a sale, it should be to Lee. Jun noted that to avoid litigation risks, Lee was the only person to whom the Defendant should sell. Yeung also confirmed that the IBC’s view was either not to sell or to sell to Lee only. He suggested that the Defendant could try to negotiate with Lee for a higher price. If Lee agreed to pay more, this was good for the Defendant; but if Lee did not agree, then the Defendant could still accept US$2.5 million. Jun agreed and noted that there was no downside if Lee refused. Then the Board discussed about the ceiling price. Based on an estimate that the Defendant’s expenses in the proposed transaction in terms of the fees of its professional advisers would be around US$700,000 for the whole transaction, it was decided to ask Lee to increase the price from US$2.5 million to US$3.2 million. The agreed approach was to “sell for US$2.5 million, if not for US$3.2 million”. Then, Yeung and Ngan went downstairs to pick up Lee to the meeting. 45.The above is a summary of what was discussed at the board meeting according solely to the Defendant’s evidence. It is important to note three points. First, there was all along consensus to sell to Lee for US$2.5 million. This consideration was stated in all the correspondence up until the meeting, including the agenda of the board meeting and documents used at the meeting with Lee. Second, the consensus at the board meeting was either not to sell or to sell to Lee or his company, ie the Plaintiff only. Third, and most importantly is that the Board adopted Yeung’s suggestion to try to negotiate with Lee for a higher price and, if Lee refused to increase the consideration, to sell for US$2.5 million. The ceiling was based on the professional costs of the transaction. Impliedly, those costs would be absorbed in the consideration whether Lee would increase his offer or not. In other words, the consideration depended on what Lee would offer. 46.Pausing here, it should be noted that the third point mentioned above is inconsistent with the contemporaneous notes taken by the legal team as reflected in the Note. At page 4 of the Note, it was recorded:
47.The reference in the Note to Xiaobian Offer of RMB 55 million and the offer now of US$2.5 million plus US$700,000 must reflect the Board’s consensus that because of the Xiaobian Offer, the offer to be made to Lee had to be increased by US$700,000. The two arrows pointing to the two sums indicate the connection between the two. 48.The next item is the estimate of the adviser’s costs. The fact that this item appeared after the price stated below the words “offer now” suggests the costs was not part of the consideration in determining the offer to be made to Lee. The increase was pre-determined. The estimated costs just happened to be approximately the same amount the Board determined to increase. These costs had to be incurred anyway with or without the Xiaobian Offer, though the costs may be less if the IBC had not been constituted. They were just incidental expenses. 49.Then, what is important is the last two rows quoted above. The note taker recorded the “Bottom line” of US$3.2 million and the words, “all or nothing”. It is significant to note that no ceiling was recorded, reflecting that finally no ceiling had been discussed or set, contrary to the witnesses’ evidence of setting a ceiling. Instead, a bottom line was set. These two last lines quoted above reflect that the Board did not adopt the “ceiling down approach” of setting a ceiling offer and allowing it to be bargained down to US$2.5 million or such counter-offer as Lee would make. The Board’s decision was to give Lee the bottom line and Lee must pay US$3.2 million (to take the deal) or the deal would be off (to leave it). The Defendant would either get “all” that it offered (ie the full price of US$3.2 million) or to have “nothing”. In other words, the final consensus of the Board was that the bottom line was US$3.2 million and Lee should take it or leave it. The Note contradicted Yeung’s and Ngan’s evidence in material respects and destroyed their credibility. It supported the inference that the strategy agreed by the Board was to use the Xiaobian Offer as a reason to justify an increase in price from the one previously assured. In the light of my finding as to what happened during Lee’s meeting with the Board, I do draw this inference. Lee’s meeting with the Board 50.Lee’s evidence is that at about 12:30 pm on 29 January 2014, he was presumably met by Yeung and Ngan who took him to the conference room. He was presented the agenda of the meeting, a copy of the Draft Agreement, the Draft Announcement in respect of the sale and a draft copy of board minutes of the board meeting approving the sale. The consideration stated in the draft documents was HK$19.45 million (being equivalent to US$2.5 million). 51.According to Lee, Jun represented to him that because of the Xiaobian Officer, China Compass and Brave Win could not be sold at US$2.5 million and could only be sold at US$3.2 million. This was the Jun’s Representation. Jun then issued an ultimatum to Lee that he needed to immediately accept otherwise the deal would be off permanently. He said “there is no room for you to negotiate anything.” After flipping over the documents presented to him, Lee agreed to increase the consideration to US$3.2 million. Adwin signed the board minutes and left the meeting to catch his flight back to Indonesia. In short, Jun’s approach was “take it for US$3.2 million or leave it” and that the Defendant was to have “all or nothing”. That was different from Yeung’s and Ngan’s evidence about the agreed approach of the Board; but was wholly consistent with the approach as recorded in the Note. 52.According to Ngan, whose evidence was adopted by Yeung, as Jun was not on good terms with Lee, the Board asked Jun not to participate in the meeting with Lee. Jun was not present in the conference room during the meeting. It was Chua who had further negotiations with Lee. Chua told Lee that the Defendant would not accept the offer of US$2.5 million and the price would be US$3.2 million. Chua told Lee that he should “take it” and Lee agreed. That was the top down approach as asserted by Yeung and Ngan as what was agreed during the board meeting. But that is inconsistent with the agreed approach as recorded in the Note. 53.The two versions are wholly different as to the identity of the negotiator acting on behalf of the Defendant and his approach. At page 3 of the Note, there was a mention of the question of “Who to negotiate with Russell?” But the name is illegible. It appeared that someone had agreed to negotiate with Lee. Whatever that name is, it does not bear any resemblance to the name of Jun or Chua. The Note is unhelpful in this respect. The note taker took down details such as Yeung leaving the meeting to pick up Lee. If there was detailed discussions such as those mentioned by Ngan that Jun should stay out of the meeting because of his poor relationship with Lee, it would have been recorded. There was no such record. 54.Mr Chan, counsel for the Defendant, suggested that Chua was on good terms with Lee and it would have been credible that it was Chua who negotiated with Lee. On the other hand, given that the approach agreed at the board meeting was “all or nothing”, in view of the assurance Chua had given to Lee, it would be embarrassing for Chua to negotiate with Lee for an increased price. 55.Mr Chan submitted that it is quite unreal that none of the board members made any comment or response when Jun used the Xiaobian Offer as a reason to increase the asking price and Lee accepted without protest. I do not see why any board members would have made any comment or response as Jun was proceeding along the line as agreed according to the Note. The absence of bargaining or complaint from Lee is understandable. On Ngan’s evidence, he had already told Lee when he picked Lee up to the meeting that the price had to be increased. It was Lee’s mental state that he must secure Brave Win. If Jun gave him the ultimatum, there was nothing he could do than to submit. Besides, US$700,000 is not a great deal of money given the benefit Lee could derive from having ownership of the Dongguan Land perfected. 56.Mr Chan argued that Lee’s evidence that when Chua said to Lee “take it, Russell”, Lee had already indicated agreement to the price was wholly illogical. There was no reason why Chua would say so when Lee had already accepted. On the other hand, it appeared to me to be just a pat on the shoulder to wind up the meeting in an amicable manner by expressing sympathy for the increase or encouragement for the prospect of having ownership of the Dongguan Land going to be perfected, depending how Lee would take it. Those words, even if said, were, in my view, neutral. 57.Mr Chan referred to some post-agreement conducts to support his argument that Jun was not present at the meeting with Lee. He referred to Lee’s email to Chua saying that he accepted the increase “to give him face” and thanking him for his help. This is just common courtesy. After all, Chua had been very supportive. Mr Chan also referred to Chua’s email thanking various colleagues for their involvement in the transaction but notably not mentioning Jun. He argued that that reflected Chua was keenly aware that Jun had been excluded from the final negotiation. On the other hand, it may be construed as Chua showing displeasure in the high-handed manner Jun forced the increase on Lee contrary to Chua’s assurances. In my view, these are neutral events open to different interpretation. They are not conclusive of anything. 58.However, the Note supports fully Lee’s account of the course of the negotiation. It is common ground that the negotiator (be it Jun or Chua) started off with the price of US$3.2 million. According to Lee, the negotiator said because of the Xiaobian Offer the price had to be increased to US$3.2 million. The Xiaobian Offer was no secret. It would be a convenient way to start a conversation. It is supported by page 4 of the Note I mentioned above. The words “bottom line” and “all or nothing” are practically the same as “take it or leave it”. 59.According to Ngan and Yeung, there were further negotiations between Chua and Lee. But all they could say was that Chua just told Lee bluntly that the Defendant would not accept the offer of US$2.5 million and the price would be US$3.2 million. No reason for the increase was given. According to Ngan, there was a principled approach to determine the amount of increase. He said that was because costs had to be incurred because the sale was to a connected person. This matter had been known to the Defendant from the very beginning. Those costs had never been raised in the previous discussions. If this was a new issue considered by the Board to be relevant in determining the price, it would have been reasonable for the negotiator to open the discussion with this reason. However, even according to the Defendant’s case, Chua did not attribute the increase to those costs. Chua just mentioned the price and it was accepted. More importantly, Ngan’s evidence is inconsistent with the Note which showed that the increase was pre-determined before the amount of costs was estimated. The evidence also suggests that the costs were intended to be absorbed in the consideration hitherto agreed. The so called “principled approach” is just an attempt to distance away from the Xiaobian Offer. I do not find Ngan’s evidence credible. 60.Ngan’s and Yeung’s demeanour under cross-examination was unsatisfactory. When the Plaintiff’s case about the conversation between Lee and Jun during Lee’s meeting with the Board was put to them, they invariably answered that they did not know, instead of a simple denial because Jun did not take part in the negotiation. Those were simple questions which they could not have difficulties in understanding. Ngan salvaged himself during re-examination by saying that he did not see Jun and Lee having any discussion. That answer impliedly admitted that Jun was present but Ngan did not see him talking with Lee. If Jun were not at the meeting, what could be simpler than an emphatic denial. On the whole, their demeanour carried an air of uncertainty. Having tested the parties’ case against the totality of the evidence, particularly the Note, I accept Lee’s evidence. I find that Jun’s Representation was made by Jun at the meeting. 61.The final Sale Share Agreement was signed on 26 February 2014. An announcement and circular were issued by the Defendant. The transactions were approved at the Defendant’s shareholders meeting. The Sale Shares Agreement was completed on 10 April 2014. Authenticity of the Xiaobian Offer 62.In September 2014, Cai Weiquan approached Lee and told him that Hung Yip would encounter serious difficulties in perfecting its ownership of the Dongguan Land because the Defendant had accepted the Xiaobian Offer. Cai Weiquan gave Lee a copy of the Xiaobian Offer and a copy of the Defendant’s Acceptance Letter signed by Adwin. Lee took the gesture as a suggestion that he should sell the Dongguan Land to Cai Weiquan who was known to Lee as being engaged in business of coveting land in the Mainland. This provoked Lee to make investigations leading to his discovery that the Xiaobian Offer was not authentic. The Plaintiff’s case that the Xiaobian Offer was a forgery is built on the five premises. 63.First, there are certain peculiar features in this Offer Letter which suggest it could not have been a genuine official correspondence. The Committee does not appear to have letterhead for its correspondence. The correspondence issued by the Committee exhibited in the trial bundles, such as notices and replies, were all written on plain paper authenticated with a seal of the Committee. The Offer Letter was written on what purported to be an official letterhead. In this connection, it is noted that units higher up in the government hierarchy, such as the Dongguan Changan Town People’s Government, use letterheads in their official correspondences. Another very peculiar feature is that the Offer Letter was written substantially in traditional Chinese characters. Though many simplified Chinese characters are identical to traditional Chinese characters, it is peculiar that only eleven simplified Chinese characters were used in the letter. It is most peculiar that even the name of the Committee was written in traditional Chinese characters. This stands in stark contrast to all official correspondence exhibited in the trial bundles in which simplified Chinese characters were used. The Offer Letter is as much a pin in the eye for a mainlander to see the name of the People’s Republic of China in official documents being written in traditional Chinese characters instead of simplified Chinese characters. 64.Second, Lee was introduced to the party secretary of the Committee, Cai Shoupeng（蔡壽鵬）and discovered that Cai Weiquan had been removed from his position as party secretary by the end of August 2013 before the Xiaobian Offer was allegedly made. This fact is supported by official records obtained from the Changan Town Committee Office(長安鎮委組織辦公室)which show that Cai Weiquan and Cai Shoupeng were respectively appointed as party secretary and deputy party secretary on 24 March 2008; and that Cai Weiquan was removed and replaced by Cai Shoupeng as party secretary on 20 August 2013. Hitherto, it was the Defendant’s belief that Cai Weiquan was the party secretary who was in the position to make the Xiaobian Offer. Thus, Cai Weiquan had been removed from his position as party secretary of the Committee two months before the Xiaobian Offer was allegedly made. 65.Third, at a meeting on 10 March 2015, Lee showed Cai Shoupeng a copy of the Xiaobian Offer and the Defendant’s Acceptance Letter signed by Adwin. Cai Shoupeng told Lee and his assistant Yip that he had no knowledge of the Xiaobian Offer; that the Committee had never discussed about the early termination of the Dongguan Lease Agreements; and that he and the Committee had never authorized the issue of the Xiaobian Offer. Cai Shoupeng said that he would investigate into the offer. It is significant to note that Cai Manhong, who according to the Defendant’s case was the supervisor who sent the Offer Letter to Tsoi, was present at the meeting but he did not bring up the Offer Letter. On 19 August 2015, the Committee replied in writing that upon reviewing the relevant record, they confirmed that both the Xiaobian Community Committee and the Chinese Communist Party Xiaobian Community Work Committee had not discussed or considered the offer. 66.Fourth, at a meeting 13 October 2015, Cai Jiongchao (蔡炯朝), the incumbent party secretary who replaced Cai Shoupeng, reconfirmed that all important financial matters had to be approved by the Xiaobian Residents Committee; that the Committee had never and would not pay compensation of RMB 55 million for the purpose of bringing about an early termination of the Dongguan Lease Agreements with Brave Win; and that the Committee had never discussed about such termination with Brave Win. Cai Manhong who was present at the meeting did not draw the meeting’s attention to the Offer Letter which according to the Defendant’s case was sent by him to Tsoi. Cai Manhong’s silence suggests that the Offer Letter was unknown to him and the Committee. 67.Fifth, after the aforesaid meeting, Lee was informed by an unidentified assistant of Cai Weiquan that the Xiaobian Offer was a forgery written by Tsoi and Ng and did not emanate from the Committee. The assistant said that the Xiaobian Offer was originally addressed to Brave Win but was later changed to be addressed to the Defendant because Jun did not want the offer to be disclosed to Brave Win, lest Lee and his wife would know about it. The assistant also told Lee about Cai Weiquan meeting representatives of the Defendant, GFE Law Office and Richards Butler and telling them that the Xiaobian Offer was not a legally valid document which the Defendant should disregard. 68.The peculiar features in the Offer Letter and the evidence from the Committee suggest that it is not a genuine document issued by the Committee. Though the evidence is hearsay, but insofar as it relates to the authenticity of the Xiaobian Offer, it is supported by incontrovertible official documents of the Committee. It is credible. I am satisfied that the Plaintiff has discharged the burden of proving that the Offer Letter is a forgery. The Maker of the Offer Letter 69.The following is the sum total of the Defendant’s evidence about how the Offer Letter came to be received by the Defendant. There is Jun’s conflicting assertion on the one hand that Tsoi and Ng worked very hard to obtain the offer and on the other that the offer came unsolicited. There were some discussions in early 2013 between Tsoi, Ng on behalf of the Defendant or Brave Win and Cai Weiquan and Cai Manhong on behalf of Committee about the use of the Dongguan Land after closure of Brave Win’s factory. Three options had been suggested by Cai Weiquan: (1) Brave Win to resume using the Dongguan Land may be for other purposes; (2) Brave Win to lease the land to other users; and (3) the Committee to buy back the land and arrange for it to be used by other users. There was another meeting on 26 April 2013 in which Cai Weiquan repeated his request and his preference for the Defendant to put the Dongguan Land into active use and his threat to recover the land without compensation, if the Defendant allowed the land to idle for a long term. The option of repurchase was not pursued. At the time, Cai Weiquan was still the party secretary. Thereafter, it was a total silence, until 23 October 2013 when all of a sudden a concrete offer was purportedly made under the Offer Letter when Cai Weiquan had been removed as party secretary. 70.There is absolutely no paper trail relating to the Xiaobian Offer at all. The last written correspondence from the Committee was an official notice issued on 26 April 2013 about an unrelated matter. The last written document from the Defendant was the final draft minutes of the meeting with Cai Weiquan and Cai Manhong on 26 April 2013. The Offer Letter allegedly first emerged in Cai Manhong’s email to Tsoi dated 23 October 2013. On the Defendant’s case, the Offer Letter originated from Cai Manhong who was a deputy supervisor in the Xiaobian Community Committee and it was authentic. Thus, there are five people who were closely connected to the Offer Letter who might have knowledge about its authenticity or otherwise: Jun, Tsoi, Ng, Cai Weiquan and Cai Manhong. 71.The purported email from Cai Manhong containing the Offer Letter is peculiar. Other emails sent by the Committee to the Defendant usually contains a brief covering message addressing the addressee and stating the subject matter of the correspondence. It is authenticated by the writer’s name. The official notice annexed was written on plain paper[4]. In contrast, Cai Manhong’s email was totally empty without content; the subject matter of the correspondence was generally stated as “公函” (official letter); and the official letter annexed was written on a letterhead[5]. This and the Hong Kong flavor in the Offer Letter (which I shall explain below) purportedly annexed to the email suggest that the email purportedly issued by Cai Manhong may also be forged and had nothing to do with Cai Manhong. 72.The traditional Chinese characters used in the Offer Letter carries with it a Hong Kong flavor. Simplified Chinese characters were introduced in the Mainland since 1950s. People of Cai Manhong’s or Cai Weiquan’s age educated and brought up in the Mainland could have no knowledge of traditional Chinese characters. If they were the ones who issued or prepared the Offer Letter, it would not have been written the way it was, with a letterhead and substantially using traditional Chinese characters in the body of the letter, particularly in the heading and its own title. On the available documents produced by the Defendant, the persons nearest to the chain leading to the author of the letter were Cai Manhong on the Committee’s side and Tsoi on the Defendant’s side. With Cai Manhong excluded, Tsoi must be the author of the Offer Letter. He must know that the Xiaobian Offer was a forgery as it was his own fabrication. 73.The Plaintiff has pleaded that Lee had been informed by an officer of the Committee that the Offer Letter was written by Jun’s subordinates, Tsoi and Ng. The evidence relied on by the Plaintiff has been set out in the Plaintiff’s Opening Submission. The forgery of the Offer Letter and its knowledge of the forgery go to the very heart of the issues in this action, particularly in the face of the incontrovertible evidence that it was forged or unauthentic. Naturally, only Tsoi knew how he came to receive that email and annexure allegedly sent by Cai Manhong. Only he can explain why the Offer Letter was not a forgery or why he and the Defendant have no knowledge of its falsity. 74.It is a well-established principle that absence of explanation, a party’s failure to call a witness who is expected to have evidence in support of his case or to contradict the opponent’s case, would entitle adverse inference to be drawn against that party. The general and usual inference is that the party knows that the evidence that witness will give will be adverse to his case or supportive of the opponent’s. The effect of the silence in the face of the opponent’s evidence may be to convert that evidence into proof in relation to matters which are, or likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence: see R v IRC, ex p TC Coombs & Co[6], per Lord Lowry. These principles were recently applied by the UK Supreme Court in Prest v Prest[7]. Cross & Tapper on Evidence[8] even went that far as to submit:
75.Yet, in the face of such damaging evidence, the Defendant chose not to call Tsoi to testify on how he had come into possession of the Offer Letter and did not know it was a forgery. The evidence given by Yeung on the Defendant’s failure to call Tsoi, Ng and Jun was that they had left the Defendant’s employment before the action commenced and he did not contact any of them but that he could not speak for other people. That may be his position as an independent non-executive director. He admitted under cross-examination that these witnesses were senior officers and the Defendant must have their contact details after they left the Defendant’s employment and went on to speculate what would have happened if the Defendant had contacted them. He was unable to tell what steps had been taken by the Defendant to contact these witnesses. Ngan’s evidence is even worse. Under cross-examination, he agreed that they were important witnesses. When asked why they were not called, he said he could not remember. He was evasive and changed his evidence about whether the Defendant had the contact telephone numbers of these witnesses. That is insufficient to discharge the Defendant’s burden to give a credible explanation. It is obvious from the tenor of the evidence of Yeung and Ngan that the Defendant deliberate chose not to call Tsoi. From its failure to call Tsoi, I am entitled to draw adverse inference against the Defendant that it knew Tsoi’s evidence would be adverse to its case. This adverse inference reinforces the already very strong inference that Tsoi was the maker of the Offer Letter and knew it was forged. Jun’s and the Defendant’s Knowledge of the Forgery of the Offer Letter 76.Around and even after the Acceptance Letter was signed and presumably issued, the company secretary smelt something was brewing about the Dongguan Land and Jun’s team was negotiating with people in relation to it in the Mainland. Tsoi was the maker of the Offer Letter and knew it was a forgery. He would not have committed the forgery for no purpose. He was the one who brought up the letter which led to a chain of events beginning with Jun causing Adwin to take the very exceptional step of signing the Acceptance Letter without prior approval from the Board and ending with the Sale Share Agreement at a higher price. The Xiaobian Offer was accepted within hours of the offer. That was a very bold action to take and it resulted in a warning letter being issued to Jun. The other thing Jun did was to tell Lee that the Defendant would not let him have Brave Win back. That was contrary to the decision of Chua, if not the Board. That was another bold step to take. Jun was Tsoi’s immediately superior officer and who decided the course of action to be taken upon receipt of the Offer Letter. He took active actions on the basis that the Offer Letter was genuine. To a lesser degree the same may be said against Ng who was Tsoi’s junior whom Tsoi consulted. The three of them were closely connected to the Offer Letter. The inference may reasonably be drawn that they acted under a common design. 77.It should be noted that despite the prompt acceptance, the Committee had no knowledge of the Xiaobian Offer or the Offer Letter or Adwin’s Acceptance Letter. This suggests that the Acceptance Letter had never been sent to the Committee. Had it been sent, the Committee, which was under the new party secretary and which did not have RMB 55 million to pay, would have quickly responded denying that such an offer had been made. The lack of response from the Committee further confirms that the Offer Letter was a forgery. What is remarkable is the total absence of no paper trail other than the Offer Letter and the Acceptance Letter and no follow up from the Committee or Jun. The circumstances suggest that the Offer Letter and the Acceptance Letter were just window dressing created by Tsoi and Jun. Tsoi and Jun, at least, were parties to a common design to use the forged Offer Letter for some improper or unauthorized purpose relating to the Dongguan Land. Probably Jun was the mastermind, Tsoi and possibly Ng were his associates, Adwin may be an innocent dummy being made used of in the design. On the face, they have no personal benefit to gain by this design. I do not wish to speculate if there were other further ulterior motives. But I bear in mind that absence of motive or benefit makes it difficult, but not impossible, to draw the inference that they were parties to the forgery. 78.Yet, the Defendant chose not to call any of the three of them and failed to offer a credible explanation for their failure to do so. In the circumstances, I draw the inference that Tsoi and Jun were parties to a design to use the forged Offer Letter knowing it was forged. For the purpose of this action, I need not go that far as to draw the inference that Tsoi and Jun were parties to a common design to use the Offer Letter to extract a higher price for the Shares or had other conspiracy with Cai Manhong or Cai Weiquan, though the temptation is high especially as it is alleged that Cai Weiquan was in the business of coveting land. 79.Tsoi was the maker of the forged Offer Letter. He was the Chief Financial Officer of the Defendant, the most senior officer in charge of the financial affairs of the Defendant. Though not a director, he was in a position which was senior enough to be the mind, eyes and ears of the Defendant in respect of matters which were within his realm of responsibilities. His knowledge in relation to those matters may be attributed to the Defendant, notwithstanding that the knowledge related to something which he did outside the scope of his employment. The Xiaobian Offer was a matter within his realm of responsibilities. He presented the Offer Letter through Jun to the Defendant, which he knew was forged. The Defendant is therefore fixed with the knowledge of the falsity of the Offer Letter. It is not open to the Defendant to argue that it had no knowledge of its falsity as it was as much a victim of the fraud of its employee as was the Plaintiff. 80.Furthermore, Jun, as I have found, was a party to the design to use the forged Offer Letter. He knew the letter was forged. He was the Chief Executive Officer of the Defendant. He presented the Offer Letter to the Board and invited the Board to act on it. In that position, his knowledge of the forgery must also be attributed to the Defendant. Accordingly, through Tsoi or Jun or both of them, the Defendant had knowledge of the forgery of the Offer Letter and that the Xiaobian Offer was a concoction. MISREPRESENTATION Jun’s Representation 81.The Plaintiff pleaded two representations: (1) the representation contained in the Defendant’s Announcement and (2) Jun’s Representation. As submitted by Mr Ng, counsel for the Plaintiff, it is convenient to consider Jun’s Representation first, which in fact is the Plaintiff’s primary case. 82.The following facts are either not in dispute or have been found by this court in the preceding subsections. In June 2012, Lee and Chua were discussing about returning Brave Win to Lee after its closure of business. Lee was asked to “keep thing status quo”, ie to keep Brave Win’s close of business secret. In July 2012, they agreed in principle that Brave Win would be returned as long as the inter-company loan of US$3.8 million as at 31 March 2012 was settled. More serious negotiation commenced in July 2013 with participation by the Defendant’s solicitors. China Compass was unable to settle the inter-company loan in full and the loss incurred after 31 March 2012. Lee was asked to meet the shortfall. In August 2013, Chua and Lee reached the consensus that the price for the Shares shall be US$2.5 million. Jun proposed the parties to sign a MOU with Lee paying a non-refundable deposit of 50%. Lee did not agree. At the suggestion of Chua, Lee offered a draft sale and purchase agreement. In mid-September 2013, the Draft Agreement and a deed of assignment prepared by the Defendant’s solicitors were circulated for discussion. On 11 October 2013, Lee pressed Chua for finalization of the sale and purchase. Hitherto, the consideration for the sale and purchase was stated to be US$2.5 million. That was the setting before Jun’s Representation was made. 83.On 24 October 2013, Jun telephoned Tai, the Plaintiff’s financial adviser, stating that the Defendant would no longer want to continue with the negotiation for the sale of the Shares as it had received a much higher price for buy-back of the right to use the Dongguan Land. He asked Tai to inform Lee and to read the Defendant’s Announcement published in the Stock Exchange website dated 23 October 2013. The Defendant’s Announcement states, inter alia, that the Defendant received the Xiaobian Offer:
84.Against the background I have set out above, Lee was understandably surprised to hear what Jun had told Tai to relate to him. Reading the Defendant’s Announcement, he realized that Hung Yip’s Land Rights would be at risk because, on the assumption that the Xiaobian Offer was genuine, the Committee as landlord of the Dongguan Land would resume the land thereby extinguishing Hung Yip’s Land Rights to apply to perfect its legal ownership of the Dongguan Land. While he could take legal action against the Defendant for damages for breach of the Peak Rise Agreement should it proceed with accepting the Xiaobian Offer, such litigation would be a long drawn and wasteful process and, even if it was successful, the amount of damages would not outweigh the benefit of Hung Yip’s success in perfecting ownership of the Dongguan Land. Therefore, he realized he must speed up the purchase of Brave Win. He considered Hung Yip’s interest in the Dongguan Land could be best protected by buying Brave Win because then he could ensure that Brave Win would not accept the Xiaobian Offer. He considered the change of intention on the part of the Committee from supporting Hung Yip’s application to perfect ownership of the Dongguan Land to early termination of the Dongguan Lease Agreements an important factor for his decision whether to increase the consideration for the purchase of Brave Win. If the Xiaobian Offer was not genuine and the Committee had no intention to early terminate the Dongguan Lease Agreements, Lee would not have to increase the consideration. Lee’s evidence of his thinking was logical and inherently credible. I accept that was what was in Lee’s mind when he attended the meeting with the Defendant’s Board on 29 January 2014. 85.For reasons as I have given, I accept Lee’s account of what happened during the meeting. Lee’s account is more consistent with Note than Yeung’s or Ngan’s. I accept Lee’s evidence that Jun confirmed and represented to him that the Defendant had received an intended offer of RMB55 million from the Committee for the early termination of the Dongguan Lease Agreements and as such the Defendant would not sell the Shares to the Plaintiff at US$3.2 million. Jun further represented to Lee that if the Plaintiff wanted to buy the Shares, it had to increase the offer price. Jun then issued an ultimatum to Lee that he needed to immediately accept otherwise the deal would be off permanently, saying “there is no room for you to negotiate anything.” 86.On the evidence, I am satisfied that the Plaintiff has proved Jun’s Representation as pleaded in the Re-Amended Statement of Claim. In the preceding subsections, I have found that the Offer Letter was a forgery to which Tsoi and Jun were parties, the Xiaobian Offer was a concoction and hence Jun’s Representation was false. The Defendant must have knowledge of the falsity through its Chief Financial Officer, Tsoi and its Chief Executive Officer, Jun. Defendant’s Intention to Induce the Plaintiff to Act on the Representation 87.As a matter of law, the Plaintiff must establish that the Defendant had the actual intention to induce the Plaintiff into entering into the Sale Shares Agreement at the price of US$3.2 million in making the Representation. The Plaintiff relied on the usual inference to be drawn from Jun’s Representation and the surrounding circumstances. The Defendant argued that plainly its officers had no such intention. 88.Mr Ng submitted that Lee’s reliance on the genuineness of the Xiaobian Offer and the Committee’s intention and means to early terminate the Dongguan Lease Agreements is reflected in his demand for information relating to the offer via his letter of 14 December 2013. In that letter, Lee wrote in his capacity as a director of Brave Win and sought information related to:
The Defendant took the view that the demand was made by Lee in his capacity as director of Brave Win and not as intended purchaser. Hence, it decided not to entertain the demand. Mr Chan further argued that despite the Defendant did not respond, Lee still accepted the increase in price suggesting that Lee did not act on the Xiaobian Offer, 89.The information requested was very detail and precise as if it were interrogatories in legal proceedings. It goes to prove the existence of the Xiaobian Offer. Though the demand was made by Lee in his capacity as a director of Brave Win and not as a purchaser of the shares in Brave Win, it nevertheless demonstrated the seriousness Lee looked upon the existence and genuineness of the Xiaobian Offer. He might have made the demand in his capacity as a director of Brave Win, thinking that would give him a stronger locus standi and more justified demand for information than as a prospective purchaser of the Shares. Besides, as Jun had said that the Defendant would not be selling Brave Win to him, he has no locus to demand for the information. In any event, given the circumstances, as Lee was an eager buyer, his reliance on the genuineness of the information may be readily inferred. 90.Mr Chan submitted that Lee could not have relied on the Xiaobian Offer because the Defendant had expressly disclosed to Lee in the Draft Announcement to be made in connection with the Sale Share Agreement that the Xiaobian Offer was not legally valid and that accepting it would have exposed the Defendant to liability for compensation such that it was not a practical option for the Defendant to consider. Still Lee accepted the increase showing that the Xiaobian Offer was immaterial to Lee’s decision to accept the increase in price. Mr Chan further argued that the Defendant had no obligation to provide a copy of the Draft Announcement to Lee prior to their meeting and if the intention was to use the Xiaobian Offer to induce Lee to offer a higher price, it would have kept the information about the validity and practical difficulties in accepting the offer secret until a price had been agreed. Mr Chan also drew my attention to the following statement in the Draft Announcement:
91.The Defendant’s Announcement which I have quoted in paragraph 83 clearly stated the compensation of RMB 55 million. On the evidence, which is not really disputed, Jun expressly told Tai that the Defendant no longer wanted to finalize the Draft Agreement and asked him to draw Lee’s attention to the Defendant’s Announcement. On my finding, at the meeting of 29 January 2014, Jun told Lee in unequivocal terms that because of the Xiaobian Offer, the Shares could not be sold at US$2.5 million and could only be sold at US$3.2 million. It can hardly be argued that the Xiaobian Offer was not an important consideration for Lee to agree to the increase in price. 92.As for the disclosure about the invalidity of the Xiaobian Offer and the litigation risk to the Defendant, its effect was wholly neutralized by the ultimatum. Jun told Lee that he had no room to negotiate and that he had to immediately accept otherwise the deal would be off permanently. What was unspoken must be “if Lee does not accept, the deal would be off permanently because the Defendant would accept the Xiaobian Offer”. The deal would then be beyond recall. The use of the word “permanently” reinforced the implied threat to accept the Xiaobian Offer. It was also because of the Xiaobian Offer that the price had to be increased. As for the risk exposure, it would be a commercial decision whether to take in view of the very attractive offer of RMB55 million, which was equivalent to US$9.03 million compared with the Plaintiff’s offer of US$2.5 million. It is also important to bear in mind that at the time, Lee acted on the belief that the Xiaobian Offer was genuine and did not know the Committee did not have the funds to pay the compensation. Given Jun’s “take it or leave it” approach, it would have been reasonable for Lee to assume that the Defendant had considered the risk worth taking. The ultimatum is both a threat and an inducement. It clearly reflected Jun’s and therefore the Defendant’s intention to induce Lee to accept the increase in price in view of the Xiaobian Offer. 93.As for the statement in the Draft Announcement quoted above, it must be viewed in the context that it was to be published only if the deal was struck, ie to tell the shareholders why the Board supported the deal. It did not reflect the view of the Board was to proceed with the sale and purchase without an increase in price. If the Board decided to accept the Xiaobian Offer, that statement could easily be rephrased to recommend acceptance of the Xiaobian Offer because the reward was worth the litigation risk. That statement in the factual context is neither here nor there. 94.Mr Chan argued that the Defendant had a principled reason for the increase. It had nothing to do with the Xiaobian Offer. The increase was to compensate the Defendant for the professional advisor’s costs incurred which were sizable due to the fact that the disposal was to a connected person rather than an unconnected third party. In my analysis of what happened during the board meeting on 29 January 2014, I have rejected this argument. Principally, this is because according to the Note the amount of increase was pre-determined before the issue of costs was raised or the quantum estimated. As the Note showed, the Board first mentioned the Xiaobian Offer of RMB 55 million and then decided to increase the price by an amount which happened to be the amount of professional costs subsequently estimated. It is also not the Defendant’s evidence that Jun or anybody on the Defendant’s behalf had told Lee that the increase was called for because of the professional costs. The evidence was “because of the Xiaobian Offer, the consideration had to be increased to US$3.2 million”. 95.In fact, the principled approach as shown by the uncontested historical background was to return Brave Win to Lee so long as the inter-company loan of US$3.8 million as at 31 March 2012 was settled. Then the principle was extended to cover the loss incurred during Brave Win’s extended operation. The shortfall was assessed to be US$1.5 million. Then the price of US$2.5 million was agreed with another increase of US$1 million which might have been intended to cover those professional costs. The principle was never “US$2.5 million plus costs”. 96.Right from the beginning, the Defendant knew Lee was a connected person. All along, Chua and Lee negotiated on the basis that the price was US$2.5 million. That price was written on all the documents. It appeared in the Draft Agreement prepared by King & Wood Mallesons, the draft Sale Shares Agreement and the agenda of the Board meeting on 29 January 2014. The price of US$3.2 million first appeared after it was agreed during the meeting on 29 January 2014. 97.From the above, I find that the Xiaobian Offer must be the single and most important factor in Lee’s mind when agreeing to the increase. Having regard to the course of the negotiations in the past two years and with the knowledge of the operation of Brave Win, the Defendant through Jun or Chua must know how desperately Lee wanted to buy Brave Win for the purpose of enabling Hung Yip to continue its application to perfect its legal ownership of the Dongguan Land. They knew the complication in terms of time and costs it would cause Lee if the Dongguan Land were bought back by the Committee. They also knew Hung Yip would lose the Land Rights altogether if Brave Win were acquired by a third party. Simply put, they knew they could hold Lee to the ransom. The inescapable inference to be drawn from these circumstances is that Jun’s Representation, particularly his mentioning “because of the Xiaobian Offer” and his take it or leave it attitude, was precisely to achieve that purpose. Jun’s Representation was said with the intention to induce the Plaintiff into entering into the Sale Shares Agreement at the price of US$3.2 million. Jun’s conduct and Representation must be taken as the acts of the Board. 98.In conclusion, I am satisfied that Jun’s Representation was made, that it was false and the Defendant knew it was false. I am satisfied that it was made by the Defendant with the intention to induce the Plaintiff through Lee into entering into the Sale Shares Agreement at the increased price of US$3.2 million. Given the importance of Brave Win to Hung Yip and Lee, I accept Lee’s evidence that he acted on Jun’s Representation made on 24 October 2013 and repeated and further elaborated at the meeting on 29 January 2014. I find that he agreed on behalf of the Plaintiff to the consideration of US$3.2 million for the Shares which he otherwise would not have accepted but for Jun’s Representation. I am satisfied that misrepresentation by way of Jun’s Representation is proved. Representation by way of the Defendant’s Announcement 99.The Plaintiff’s further or alternative case is that by the Defendant’s Announcement the Defendant made a representation to the Plaintiff that the Committee had the intention and/or could and/or was in a position to early terminate the Dongguan Lease Agreements, with the intention that the Plaintiff would act on it. The representation was made when Jun asked Tai to inform Lee that the Defendant would not sell Brave Win and asked Lee to read the Defendant’s Announcement. It was a continuing representation which was repeated throughout the interval between the time it was made on 23 October 2013 through to the time when it was acted upon ie when the Sale Shares Agreement was entered into on 26 February 2014. The Defendant knew from Richards Butler’s letter dated 13 December 2013 and from its IBC’s report dated 24 January 2014 that Cai Weiquan had informed the IBC that the Committee did not have the cash to pay the compensation under the Xiaobian Offer. Therefore, the Defendant knew the Committee did not have the intention, means or capability to early terminate the Dongguan Lease Agreements. The Defendant was well aware that Lee was genuinely concerned about this fact as the early termination would extinguish Hung Yip’s right to apply to perfect its legal title to the Dongguan Land. However, the Defendant deliberately concealed or withheld this fact from the Plaintiff up to 26 February 2014 when the Sale Shares Agreement was executed. This fact constituted a change in circumstances which to the Defendant’s knowledge showed that its implied representation was no longer true. The Defendant was therefore under a duty to disclose the fact to the Plaintiff, which it did not. Its breach turned the implied representation into misrepresentation. The Plaintiff relied on the representation and suffered detriment by paying a price for the Shares which it otherwise would not have paid. The most important building block of the Plaintiff’s alternative case is the implied representation. The other elements are facts and legal issues which are either not in dispute or incontrovertible. Under this alternative case, the Plaintiff has to prove the Defendant’s representation as to the Committee’s intention, means and capability, but does not have to prove the Defendant’s knowledge that the Xiaobian Offer was a concoction or was reckless as to whether it was true or false. 100.Mr Ng submitted that the Defendant’s Announcement was published pursuant to Rule 13.09(2) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Cap 571). It was a serious legal document. The Defendant would not have issued the announcement if to its knowledge the Committee did not have the intention and/or could not and/or was not in a position to early terminate the Dongguan Lease Agreements. By publishing this announcement and stating therein that the Defendant’s Board was currently assessing the Xiaobian Offer, the Defendant necessarily made a representation that the Committee had the intention and/or could and/or was in a position to early terminate the Dongguan Lease Agreements. 101.This alternative case was advanced on the basis that the Defendant did not know the Xiaobian Offer was not genuine or was reckless as to whether it was true or not. The Defendant’s obligation under Rule 13.09(2) is to announce information necessary to avoid a false market in its securities. If to the Defendant’s knowledge, the Committee did not have the intention, means and capability to early terminate the Dongguan Lease Agreements, it should not have published the Defendant’s Announcement. That does not mean by publishing the information, the Defendant is deemed to warrant its genuineness. Whether the Committee had the intention, means and capability to early terminate the Dongguan Lease Agreements was a matter exclusively known to the Committee. If so, I fail to see how the Defendant, which was under a duty under the listing rules to make the announcement about this offer it received from a third party, should be taken to have warranted the intention, means and capability of that third party as to constitute an implied representation of such a warranty on the part of the Defendant. For this reason alone, the Plaintiff’s alternative case cannot even get off the ground. THE DEFENCES The Entire Agreement Clause, Clause 9.1 and 9.2 102.The Defendant raised Clause 9.1 and 9.2 of the Sale Shares Agreement as an entire agreement clause which excludes a claim based on misrepresentation. However, it is established by strong authorities from the House of Lords that no exemption can protect a person from liability for his own fraud: see Chitty on Contracts[9]. The rationale for this well-established principle can be found in the House of Lords judgment in S Pearson & Son, Limited Dublin Corp[10]. In that case, the court had to construe the effect of the following clause:
Though these provisions are very much different from those in Clause 9.1 and 9.2, in substance they are similar in that they sought to exempt the corporation from liability caused by inaccuracy in its representation and to exclude liability for damages arising as a result. The rationale for this principle was stated by Lord Atkinson as follows[11]:
(Emphasis highlighted in bold and italic print) 103.The principles stated by Lord Atkinson may be said to be immortal. An entire agreement clause or exemption clause which amounts to a contract to submit to a fraud to be practised on a party to a contract is so unreasonable and so offending to the common law which is built on the notion of justice and fairness that it must be illegal, void or voidable and unenforceable. A construction which gives an entire agreement clause or exemption clause the effect of permitting a party to take advantage of his own fraud could only be upheld on very clear and unequivocal wording and against a background which makes such construction not unreasonable. Hence, subject to the aforesaid, at the highest, such a clause could be construed to apply to errors, mistakes, or matters of that sort, but not to fraud, conscious or unconscious; or misrepresentation. Despite the clear wording in S Pearson & Son, the House of Lords held that it did not have that effect. 104.While accepting that an entire agreement clause normally does not have that effect, Mr Chan argued that it ultimately depends on the wording of the relevant clause; and a properly worded clause may achieve such an effect. He referred to the following dicta by Rix LJ in AXA Sun Life Services plc v Campbell Martin Ltd[12]:
Subject to the very powerful dicta of Lord Atkinson, I have no disagreement with the above proposition. The effect of such a clause depends on its construction. A construction which permits a party to take advantage of his own fraud could only be upheld on very clear and unequivocal wording and against a background which makes such construction not unreasonable. 105.In AXA Sun Life, Rix LJ was concerned with construction of clause 24 of the agreement which provided:
This clause is essentially similar to Clause 9 in the present case. Though the wording was somewhat different, the operative words were the same. After considering a number of authorities, particularly BSkyB Ltd v HP Enterprise Services UK Ltd (formerly Electronic Data Systems Ltd)[13], Rix LJ held that the clause in AXA Sun Life should not be construed as if the parties had agreed that no representations had been relied on. He said:
Thus, despite the dicta quoted by Mr Chan, Rix LJ actually went the other way and held that the wording in the entire agreement clause was not strong enough to cover misrepresentation or to exclude liability for misrepresentation. 106.Clause 9.1 and 9.2 of the Sale Share Agreement provides as follows:
107.The operative words in the clauses relied on in AXA Sun Life and BSkyB Ltd are “whole agreement”, “entire agreement”, “contains all the terms agreed”, “supersede any prior promises, agreements, representations”, “supersede any prior promises, agreements”, and “supersede any previous discussions, correspondence, representations and agreement”. Similar words are used in Clause 9. I am unable to see how I can come to a contrary construction in the present case. Mr Chan relied particularly on Clause 9.2. His construction is what Lord Atkinson precisely rejected as a contract to submit to a fraud, which could not be upheld on the wording as the clause stood. 108.Mr Chan quoted the Court of Appeal judgment in Montrio Ltd & Another v Tse Ping Shun David[14] in which AXA Sun Life was cited. In that case, Kwan JA only listed the issue but did not go further to construe the entire agreement clause in that case. 109.Mr Chan also quoted Yang Dandan v Hong Kong Resort Co Ltd[15] in support of the proposition that such clauses, which are designed to allow parties to ensure commercial certainty, may be given effect by way of an estoppel (sometimes termed a “contractual estoppel”) which arises in circumstances where the parties have agreed to conduct their affairs on a particular basis, for example that no representations were made, or that there has been no reliance on any representations and hence no inducement. In that case, the court held that there was no oral or written misrepresentation. The discussions which followed thereafter were obiter. The learned judge was referred to the entire agreement clause and the court proceeded on the basis, contrary to S Pearson & Son, that the clause has the effect of excluding liability for misrepresentation. Then the focus of the parties and the court turned to the issue of contractual estoppel. The learned judge concluded that contractual estoppel applied. On appeal, the Court of Appeal upheld the judgment of the learned judge but declined to express any view on the issue of contractual estoppel. Suffice it is to say that that case was not about construction of an entire agreement clause. It does not assist the Defendant. 110.I prefer to follow S Pearson & Son. I find that Clause 9.1 and 9.2 does not have the effect of excluding liability for misrepresentation. Proof of Damages 111.The Defendant argued that as a matter of law, the burden is on the Plaintiff to plead and prove its damages, failing which it can only recover nominal damages: McGregor on Damages[16]. The normal measure of damages for misrepresentation in a sale of shares is the purchase price of the shares less their actual value, if any at the time of acquisition. For these purposes, the time at which the value of the shares to be taken is the date of allotment in the case of an issue of new shares from the company, and the date of contract in the case of a transfer of shares from an existing shareholder: McGregor on Damages. Mr Chan submitted that the Plaintiff has not even pleaded, let alone proved the actual or market value of the interest in Brave Win sold under the Sale Shares Agreement as at that date. There is also no logical or legal basis to contend that the interest was worth only US$2.5 million for the simple reason that there was no agreement on the Plaintiff’s previous offer of US$2.5 million; and on the contrary, the consensus of the Defendant’s Board was to require the Plaintiff to increase its offer. Hence, based on these principles, Mr Chan submitted that the Plaintiff is only entitled to nominal damages even if it succeeds in proving misrepresentation. 112.The proper method of calculating the loss caused by deceit as stated by Lord Steyne in the House of Lords decision in Smith New Court Securities Ltd v Citibank NA[17] is the price paid less the real value of the subject-matter of the sale. Insofar as this method is applied to the sale and purchase of shares, the date of valuation is taken to be the day after the posting of the notice of allotment in the case of new allotments by the company or the date of sale in the case of transfer between existing shareholders. As stated by Lord Steyne and Lord Browne-Wilkinson, this general rule is not to be inflexibly applied and was in fact not applied in Smith New Court Securities. It is also inapplicable to shares which have no real value at the time of purchase as in Halston Holdings SA v Simons[18]. The method as stated in McGregor was adopted from the above general principle. It is applicable to most cases which appeared before the courts, ie cases where there is a market for the shares and market value for the shares as in the case of listed securities. 113.In the same case, Lord Browne-Wilkinson set out more comprehensive general principles for assessing the damages payable where the plaintiff has been induced by a fraudulent misrepresentation to buy property. These principles are as follows:[19]
For reasons as I shall explain, principle (3) is particularly pertinent for the facts of this case. It should also be noted that Lord Browne-Wilkinson expressly stated that principle (4) is the general principle, but it is not to be inflexibly applied. 114.The facts in this case are peculiar. This case is not one to which the general principles are applicable. The IBC was constituted by the Board to study the Xiaobian Offer. It engaged Richards Butler and GFE Law Office to provide legal opinions under Hong Kong and Mainland law relating to the Dongguan Land as well as the offers received by the Defendant in respect of its interests in Brave Win. The IBC was advised of the following:
115.The IBC had also engaged Peak Vision to perform valuation on the market value of the Dongguan Land and the Land Rights. Peak Vision advised that the Dongguan Land has no commercial value due to lack of proper title certificate; and that Brave Win’s land use rights have no commercial value because it is not in a position to transfer the rights, its ability to sublet the land is limited and any subletting agreement is not legally enforceable due to the absence of relevant certificates. 116.Brave Win is not carrying on any business. Its factory was closed down. Its land use right has no commercial value. It has no ownership in the Dongguan Land. In summary, it has no tangible or intangible value. This was the situation at the time of negotiation of the Sale Shares Agreement and after completion of the agreement. Brave Win has no value to anyone except Hung Yip which has the Land Rights. There is some evidence in Jun’s email of 23 October 2013 about an offer of RMB31.4 million from Lingwan Group, a local property developer. Given that the Xiaobian Offer brought up by Jun was a concoction, I could place little weight on his evidence about this offer from Lingwan Group. It was probably part of the same scam. Besides, as the IBC’s report revealed, there are so many hurdles and litigations to overcome and so much compensations to pay before a buyer could actually acquire ownership of the Dongguan Land, it is doubtful if such offer would materialize into a sale and purchase. Brave Win’s shares have no market. The normal method of calculating damages under principle 4 could not be meaningfully applied. 117.Looking back at the evolution of the negotiation of the Sale Shares Agreement, there was at least a gentlemen’s agreement between Lee as the vendor and Chua as the purchaser of 60% of the shareholding in KTP in January 2011 that Lee’s interest in the Dongguan Land would be protected. Lee had segregated the interest in Dongguan Land from KTP in July 2009 and placed it under Hung Yip before the sale leaving Brave Win with the right to use the Dongguan Land. After the completion of the sale, Lee and his wife retained their directorship in Brave Win to ensure that they could continue with processing their application to perfect the ownership in Dongguan Land. Time and again, Chua as the majority shareholder of the Defendant promised to return Brave Win to Lee after it had turned into an empty shell company so that Lee could continue with his application to perfect ownership of the Dongguan Land. Then the principle for determining the consideration for the sale of Brave Win was agreed, ie it would be returned as long as the inter-company debt of US$3.8 million was settled by China Compass. That was the starting principle. Then, the parties worked out there was a shortfall of US$1.5 million. There was further discussion. Lee agreed to top up with another US$1 million. Eventually, the starting principle turned into a consensus, if not an agreement on the price, of US$2.5 million. 118.Mr Ng went further and submitted that the parties had actually reached a concluded agreement for sale and purchase at the price of US$2.5 million. Presumably, that was to set the basis for his argument for damages to be assessed in the sum of US$700,000. Such submission is unsustainable. There is no pleading of a concluded agreement. In paragraph 4 of the Re-Amended Statement of Claim, the Plaintiff pleaded:
119.The pleading is amply clear. What was pleaded was agreement on the price but not a binding sale and purchase agreement for the Shares. The pleading actually acknowledged that the agreement was an agreement in principle which was subject to contract. I have invited the Plaintiff to amend the pleading if that was the way it wished to argue its case. However, Mr Ng declined and argued that absence of pleading does not preclude a finding of a contract. I respectfully disagree. It is trite principle that parties are bound by their pleadings. Here, no concluded agreement has been pleaded. While I am satisfied that the facts pleaded in paragraph 4 are proved, what was agreed was the amount of the consideration in an agreement to be agreed in writing. There was no binding agreement. If there was, the Plaintiff could have sued on that agreement for specific performance instead of agreeing to an increase in price. In any event, by agreeing to the increase, the Plaintiff have agreed to a novation of that agreement. Even if there was an agreement, it could not help the Plaintiff. 120.However, the fact that the parties reached consensus on the price is useful. All along, no issue had been raised about the professional costs. The fact that the disposal would be to a connected party was known to the Defendant. The Defendant must be taken to have knowledge of such costs and deemed to have agreed to absorb them in the consideration agreed. That may well be one of the reasons why the consideration was increased from the shortfall of US$1.5 million to US$2.5 million. The fact that these professional costs were not advanced as a reason for the increase in price supports the above proposition. The reason for the increase was just the Xiaobian Offer. There was no market for the Shares and no possible buyer other than the Plaintiff. The Board also concluded that the Defendant should only sell to Lee or not to sell. In the circumstances, it would be open for this court to find that the consideration which the Shares could command was US$2.5 million before the Representation was made. The damages should be assessed in the sum of US$700,000, which was as Jun said “because of the Xiaobian Offer”. Accordingly, I award damages in the sum of US$700,000. CONCLUSION 121.I am satisfied that the Plaintiff entered into the Sale Share Agreement at the increased price of US$3.2 million as result of Jun’s Representation. Jun’s Representation was false in that it was a concoction created by the Defendant’s Chief Financial Officer and there was no underlying Xiaobian Offer. I also find that the Defendant knew Jun’s Representation was false and made the representation with the intention to induce the Plaintiff to increase the consideration for the Shares to US$3.2 million. But for the representation, the Plaintiff would not have accepted the offer to purchase the Shares at the increased price; and the parties would have adhered to their original consensus and concluded the Sale Share Agreement at the price of US$2.5 million. Accordingly, I enter judgment in favour of the Plaintiff and award damages in the sum of US$700,000 or the Hong Kong Dollars equivalent at the time of payment, with a costs order nisi that the Defendant shall pay the Plaintiff’s costs of the action, to be taxed if not agreed.
Mr. Lawrence K. F. Ng instructed by Messrs. Lam & Co. for the Plaintiff Mr. Derek J. Y. Chan instructed by Messrs. Minterellison LLP for the Defendant [1] There are two committees, a residents’ committee and an official Communist Party Committee. For the purpose of this judgment the term refers to either or both of these committees as appropriate. [2] (1889) 14 App Cas 337 at 374 [3] 33rd Ed, Vol 1, at §7-51 [4] Bundle C13/Tab 298/3522 [5] Bundle B2/Tab 57/560 [6] [1991] 2 AC 283, per Lord Lowry at 300F-H [7] [2013] 2 AC 415 at §44, per Lord Sumption JSC [8] Cross & Tapper on Evidence (12th Ed.), at P. 41 [9] 32nd Ed, §15-150 [10] [1907] AC 351 [11] Supra, at 365 [12] [2012] 1 All ER (Comm) 268 at §94 [13] [2010] EWHC 86 (TCC); (2010) 129 ConLR 147 [14] [2013] 4 HKC 505 at §§39-41 [15] [2015] 6 HKC 126 at §§68-74 [16] 20th Ed at 52-001 [17] [1997] AC 254 [18] [2005] EWHC 30 (QB) [19] Op cit, at 266H-267C | |||||||||||||||||||