Securities and Futures Commission v. Zheng Dunmu and Others

HCMP 1462/2019

[2024] HKCFI 928

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1462 OF 2019

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J U D G M E N T

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1.Before the court is a petition presented by the Securities and Futures Commission (“SFC”) on 12 September 2019 (“Petition”) under s.214 of the Securities and Futures Ordinance, Cap. 571 (“SFO”) against inter alios the 3^rd respondent, Mr Chen Ruomao (“Mr Chen”), a former director of Changgang Dunxin Enterprise Company Limited (“Company”).

2.In the Petition, the SFC seeks:

(1)  as against Mr Chen, (a) a disqualification order;[1] and (b) an order requiring him to pay HK$163 million (with interest) to the Company;[2] and

(2)  an order directing the Company to bring proceedings against the 1^st to 4^th respondents to recover HK$163 million and/or equitable compensation for breaches of fiduciary duties.

3.The Company remains neutral and has not taken any steps in the proceedings.[3] The liquidators of the Company have recently explained to the SFC that they do not have funds to pursue legal proceedings against Mr Chen[4]. Taking into account the position of the Company, the SFC does not seek an order under s.214(2)(b) of the SFO against the Company.

4.As the Company is a nominal respondent, its attendance at the trial has been excused.

5.On 2 January 2020, the SFC obtained leave to serve the Petition on the 1^st to 4^th respondents in the Mainland[5]. However:

(1)  The Petition was only served on Mr Chen[6]. He has not entered appearance or taken any step in defending the Petition.

(2)  Despite repeated attempts by the relevant judicial authorities to effect service of the Petition on the 1^st, 2^nd and 4^th respondents, the same remain unsuccessful.[7]

(3)  On 29 July 2022, this Court granted leave to the SFC to set the case down for trial against Mr Chen and the Company.

6.Mr Chen does not attend the trial. It falls on the SFC to prove its case against Mr Chen.

A.  BACKGROUND

A1.  The Company and its management

7.The Company was incorporated in the Cayman Islands and was registered under Part XI of the former Companies Ordinance (Cap. 32) as an oversea company on 6 December 2012. From 26 June 2014 to 16 October 2019, the shares of the Company were listed on the Main Board of The Stock Exchange of Hong Kong Limited[8].

8.The Company and its subsidiaries (together “Group”) principally engaged in the business of manufacturing upstream packaging paperboard products and downstream paper products[9]. The senior management of the Group was as follows:

(1)  The 1^st Respondent (“R1”), the 2^nd Respondent (“R2”) and Mr Chen were executive directors of the Company;

(2)  R1 was Chairman of the board, R2 was CEO of the Company while Mr Chen was Chief Financial Officer (“CFO”);

(3)  The independent non-executive directors (“INEDs”) were the 4^th Respondent (“R4”), Mr Hu Zenghui, Mr Kwong Kwan Tong (“Kwong”), who resigned in December 2015 and was replaced by Mr Lo Pak Ho (“Lo”);

(4)  The company secretary and financial manager was Mr Lester Lam Ho Keung (“Lam”);

(5)  The Company had a principal subsidiary in the Mainland, Dunxin Paper Co., Ltd (敦信紙業有限責任公司) (“Dunxin Paper”). Mr Chen was its supervising manager (監事) and his sister, Ms Chen Ruoxiu (who is R2’s wife), was an executive director and general manager (執行董事兼總經理); and

(6)  The Company maintained a bank account at Bank of China (Hong Kong) Limited (“BOCHK”) with account number ending 914-7 (“BOCHK Account”).

9.The Group was co-founded by R1 and Mr Chen with the assistance of R2. R1 and R2 are brothers, and R2 is the brother-in-law of Mr Chen[10].

A2.  Share Placement & Bond Placement

10.On 17 November 2015, the Company published an announcement (“Share Placement Announcement”) stating that it would issue and place up to 198,560,000 new shares at HK$0.55 per share (“Share Placement”) and the net proceeds were intended to be “used to enrich the operational requirements and/or for future investments of the Group”.

11.On 3 December 2015, the Company announced that the Share Placement was completed, and the net proceeds of HK$108,375,530.98 were deposited into BOCHK Account.

12.On 24 January 2016, the Company published another announcement (“Bond Placement Announcement”) stating that bonds with a principal amount of up to HK$80 million would be issued and placed by way of private placement (“Bond Placement”) and the net proceeds were intended to be “applied towards the general working capital of the Group and deployment of solid waste utilization project”.

13.On 28 January 2016, the net proceeds of the Bond Placement in the amount of HK$65,286,000 were deposited into BOCHK Account.

A3.  Transfers of HK$163 million to R1’s Account

14.The banking records obtained by the SFC revealed that a very substantial part of the net proceeds from the Share Placement and the Bond Placement were subsequently withdrawn by R1 (who could sign singly) from BOCHK Account and transferred to his personal account at BOCHK with account number ending 300-0 (“R1’s Account”) in that:

(1)  as at 2 December 2015, BOCHK Account only had a credit balance of HK$23,720.89;

(2)  on 3 December 2015, HK$108,375,530.98 (i.e. net proceeds from Share Placement) were deposited into BOCHK Account;

(3)  on 4 and 9 December 2015, R1 withdrew HK$95 million and HK$6.5 million respectively (total HK$101.5 million) from BOCHK Account, and transferred the same to R1’s Account;

(4)  as at 20 January 2016, BOCHK Account only had credit balance of HK$1,244.53;

(5)  on 28 January 2016, HK$65,286,000 (i.e. net proceeds of Bond Placement) were deposited into BOCHK Account; and

(6)  on 29, 30 January 2016 and 2 February 2016, R1 withdrew HK$35 million[11], HK$26 million and HK$0.5 million respectively (total HK$61.5 million) from BOCHK Account, and transferred the same to R1’s Account.

15.Prior to receiving the HK$95 million on 4 December 2015, R1’s Account only had a credit balance of HK$111,191.89.

A4.  Misapplication of HK$163 million

16.The banking records obtained by the SFC show that R1 applied the funds he received from the Company for his personal purposes[12] in that an aggregate amount of HK$32,756,643 million was transferred from R1’s Account to the bank accounts of the following persons / entities:

(1)  On 4 December 2015, HK$10 million was transferred to the bank account of Ms Cai Biyu (R1’s wife) (“Cai”) (number ending 3889-0)[13].

(2)  On 4 December 2015, HK$10 million was transferred to the bank account of Tin On Sing Medicine Trading Co. (number ending 71819) to repay R1’s personal loan owed to one Li Chiu Yue.

(3)  On 4 December 2015, HK$990,000 was transferred to the bank account of Cheng Ka Ki Joanne (number ending 6763-9).

(4)  On 7 December 2015, HK$1.5 million was transferred to the bank account of 鄭瑞麗 (Zheng Ruili) (number ending 35888).

(5)  On 29 January 2016, HK$1 million was transferred to the bank account of Cheng Chi Kai (number ending 3786-7), the son of Cheng Tun-sang, who is the third eldest brother of R1-R2.

(6)  On 30 January 2016, HK$5 million was transferred to Cai’s account.

(7)  On 1 February 2016, HK$2,466,643 was transferred to the bank account of Dah Chong Hong Motors (Binli) Ltd (number ending 61001).

(8)  On 2 February 2016, HK$100,000 was transferred to the bank account of Cheng Chi Kai.

(9)  On 3 February 2016, HK$1.7 million was transferred to the bank account of Cheng Chi Kai.

B.  DISCUSSION

17.Against the above background, the SFC contends that the business or affairs of the Company have been conducted in a manner specified in s.214(1)(b) – (d) of the SFO:

(1)  involving defalcation, fraud, misfeasance or misconduct towards the Company or its members or any part of its members;

(2)  resulting in its members or any part of its members not having been given all the information with respect to its business or affairs that they might reasonably expect; and/or

(3)  unfairly prejudicial to its members or any part of its members.

B1.  Applicable principles

18.The SFC has to satisfy 3 conditions for relief under s.214(1) of the SFO namely, (1) the corporation is or was a listed corporation; (2) the business or affairs complained of is that of the corporation; and (3) the conduct complained of falls within one or more heads of misconduct specified in subsections (a) to (d).

19.The SFC relies on s.214(1)(b)-(d) of the SFO.

20.In respect of s.214(1)(b):

(1)  “Defalcation” is defined as “misapplication, including misappropriation, of any property”[14].

(2)  “Misfeasance” is defined as “the performance of an otherwise lawful act in a wrongful manner”. The notion of misfeasance overlaps with that of breach of fiduciary duty and seemingly covers a wide range of conduct (SFC v Yeung Chung Lung, HCMP 205/2013, 17 February 2017, §81). It covers a director’s breach of his duties to exercise reasonable care and diligence in his management of the company, and to act in good faith in the best interests of the company (SFC v Kwok Wing, HCMP 3392/2013, 9 October 2014, §§7-11; SFC v Xu Jinpei [2023] HKCFI 2908, §10).

(3)  The words “other misconduct” connote improper or wrong behaviour or mismanagement, or culpable neglect of duties. This term is something of a “belt and braces exercise”, and is intended to cover the “widest range of possible misconduct” (Re DBA Telecommunication (Asia) Holdings Limited [2022] HKCFI 653, §10; Re Long Success International (Holdings) Ltd [2021] HKCFI 624, §37).

21.A breach of the duty to exercise reasonable care and diligence in the management of company may constitute both “misfeasance” and “other misconduct” (Re DBA Telecommunication, §10; Re Long Success, §37). The duty has been explained as follows:

(1)  A duty to exercise reasonable care, skill and diligence as would be exercised by a reasonably diligent person with the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions as director in relation to the company (Re Long Success, §31; Re D'Jan of London Ltd [1993] BCC 646, at 648).

(2)  Directors have a continuing duty to acquire and maintain a sufficient knowledge and understanding of the company’s business and affairs to enable them to properly discharge their duties. Whilst directors are entitled to delegate particular functions to those below them in the management chain, and to trust their competence and integrity to a reasonable extent, the exercise of the power of delegation does not absolve a director from the duty to supervise the discharge of the delegated functions. A proper degree of delegation and division of responsibility is permissible, and often necessary, but total abrogation of responsibility is not (Re Copyright Ltd [2004] 2 HKLRD 113, §§34-35; Re Long Success §33).

(3)  In the context of a group of companies, the directors have to properly supervise the affairs of the company’s subsidiaries (Re Long Success §32).

22.As for s.214(1)(c) (i.e. members not having been given all the information with respect to its business or affairs that they might reasonably expect), it can be complementary to the other subsections (SFC v Yeung Chung Lung, §84; Re Long Success §38), and covers situations such as (1) the making of misleading or false announcements; and (2) situations requiring publication of periodic financial statements and announcements, as members are entitled to expect the listed company to provide complete and accurate information in respect of such matters (SFC v Li Wo Hing, HCMP 1023/2011, 26 September 2012, §§10(1)(b), 10(2)(a); Re Shandong Molong Petroleum Machinery Company Limited [2021] HKCFI 497, §19(2)).

23.With respect to s.214(1)(d):

(1)  The conduct in question does not have to be wrongful per se (Re Shandong Molong, §19(3)).

(2)  “Unfairly prejudicial” conduct covers a range of conduct, from fraud at the one end to neglect or inaction on the part of those to whom the affairs of a company are entrusted on the other end. The question to be asked in such circumstances is whether the conduct concerned is that which can be expected from the managers of the company to whom those affairs have been entrusted (SFC v Fung Chiu [2009] 6 HKC 423, §22; Re Long Success §39).

(3)  It covers the case where the listed company has (a) failed to comply with the disclosure requirements (SFC v Kwok Wing, HCMP 3392/2013, 9 October 2014, §12), (b) made misleading or false announcements, and (c) failed to publish periodic financial statements and announcements, as members are entitled to expect the listed company to provide complete and accurate information in respect of such matters (SFC v Sound Global Ltd [2022] HKCFI 3025, §96).

B2.  First and second conditions

24.The first and second conditions are satisfied:

(1)  The Company was a listed corporation when the impugned transactions took place; and

(2)  The matters complained of by the SFC are concerned with the propriety of the application of the Company’s assets and whether the Company complied with the disclosure and reporting obligations.

B3.  Third condition

25.The SFC contends that there were the following misconduct on the part of Mr Chen:

(1)  Caused or allowed the Company to give false or misleading information in the Announcements, which constituted a misconduct under s.214(1)(b), (c) and (d);

(2)  Procured or caused the overstatement of cash and bank balance in the Company’s financial statements, which constituted a misconduct under s.214(1)(b) and (c); and

(3)  Allowed the proceeds of the Share Placement and Bond Placement (together “Placements”) to be misappropriated by R1 and concealed the misappropriation, which constituted a misconduct under s.214(1)(b) and (d).

26.I consider these in turn.

B3.1  False or misleading information in Announcements

27.There is compelling evidence before the court to show that the Share Placement Announcement and the Bond Placement Announcement (together “Announcements”) contained false or misleading information regarding the intended use of the net proceeds.

28.The Share Placement Announcement stated that the net proceeds of the Share Placement were intended to be “used to enrich the operational requirements and/or for future investments of the Group”. The statement was clearly false in light of the following fact and evidence:

(1)  In fact, 93.66% of the net proceeds from the Share Placement were not retained or used by the Group but were transferred to R1’s Account and, thereafter, used by R1 for his personal purposes (see §§14, 16 above).

(2)  At his interview with the SFC, Lam said that the intended use of the net proceeds was based on what R1 had said, and Lam was not aware of any plans which might involve use of the proceeds from the Share Placement, whether before or at the board meeting at which the Share Placement was approved[15].

(3)  Kwong, an INED involved in approving the Share Placement Announcement, stated in his interview with the SFC that he was not aware of any plans to purchase machines or equipment at the time[16]. Kwong was told by R1 that the purpose of the fundraising was to replenish the Company’s cash reserves, but he doubted whether there was such a need as the Company’s 2015 Interim Report stated that it had cash in excess of RMB590 million[17].

29.As for the Bond Placement Announcement, it stated that the net proceeds of the Bond Placement were intended to be “applied towards the general working capital of the Group and deployment of solid waste utilization project”. The statement was false having regard to the following facts and matters:

(1)  In fact, 94.2% of the net proceeds of the Bond Placement were transferred to R1’s Account within a week and subsequently used by R1 for his personal purposes (see §§14, 16 above).

(2)  Lo, an INED involved in approving the Bond Placement Announcement, stated in his interview with the SFC that R1 had informed him that the proceeds of the Bond Placement were to be used for upgrading equipment for compliance with a new environmental regulation in the Mainland[18]. Lo was not aware of any budget for any upgrading of equipment which had been prepared[19].

(3)  Although R2 stated in his interview with the SFC that the purpose of the Bond Placement was to raise capital for completion of the Company’s project(s)[20], he was not able to identify any solid waste utilization project.

30.While it may be said that the impugned statements were statements of intention such that the actual use of the proceeds does not per se render the statements to be false or misleading, both Kwong and Lo, who were privy to the false or misleading statements, confirmed that at the time the Announcements were approved and thereafter, the Group did not in fact have any project or investment which required the use of the proceeds from the Placements. This confirms that the statements in the Announcements to be false.

31.As the information stated in the Announcements was false, the Company’s members had not been given all the information with respect to its business or affairs as they might reasonably expect, and such conduct was unfairly prejudicial to them.

32.In my judgment, Mr Chen was responsible for causing or allowing the Company to publish the false information in the Announcements for the following reasons:

(1)  The Announcements were approved by the board at the meetings held on 17 November 2015 and 22 January 2016. Mr Chen attended both meetings, evidenced by the minutes he signed.

(2)  Mr Chen was an executive director and CFO of the Company, and was part of the senior management. He was responsible for overseeing the finance and operations affairs of the Group including formulating internal accounting and reporting policy[21]. He must knew that there was no project or investment which required using the proceeds raised through the Placements. With that knowledge, he could not have honestly believed that the impugned statements in the Announcements were true.

33.Such conduct on the part of Mr Chen constituted a misconduct under s.214(1)(b), (c) and (d) of the SFO.

B3.2  Overstatement of Group’s cash and bank balance

34.The documentary evidence before the court shows that the Group’s cash and bank balance for the year ended 31 December 2015 was overstated by RMB 251 million:

(1)  In the Company’s Annual Results for the year ended 31 December 2015, the 2015 Annual Report and the Interim Report 2016 (collectively “Financial Reports”), it was stated that as at 31 December 2015, the Group had cash and cash equivalents of RMB251.5 million.

(2)  According to the audit working papers of Zhonghui Anda CPA Limited, the Company’s auditors at the time (“Auditors”):

(a)  The bulk of the Group’s cash / cash equivalents in the amount of the RMB251,078,906.33 was the balance kept at the account maintained by Dunxin Paper with Changtai County Branch of the Agricultural Bank of China (“ABC”), account number ending 09166 (“ABC Account”).

(b)  The balance was confirmed by a confirmation signed on behalf of Changtai County Branch of ABC.

(3)  However, according to the records provided by China Securities Regulatory Commission (“CSRC”), the actual balance in ABC Account as at 31 December 2015 was RMB452,514.17.

(4)  The detailed transaction history list of ABC Account for the month of December 2015 shows that the ABC Account did not have any 8-digit balance at the time.

35.Mr Chen caused or procured the Company to publish the Financial Reports which had overstated the cash and bank balance of the Group by RMB 251 million having regard to the following facts:

(1)  As executive director and CFO of the Company, Mr Chen was responsible for overseeing the financial and operation affairs of the Company and of the Group. He was under a duty to review and monitor the cash and bank balance kept at all the major bank accounts held by the companies within the Group so as to ensure that the amounts reported in the Financial Reports were accurate.

(2)  As executive director and CFO of the Company and supervising manager of Dunxin Paper, Mr Chen must have the means to review, monitor and check the balance kept in all the accounts in particular the ABC Account where 99.8% of the Group’s cash was purportedly kept.

(3)  Mr Chen asserted that he did not know the transfers of the Company’s funds to R1’s Account until the same were allegedly transferred to the Company’s bank accounts in the Mainland and that he did not quite agree with this practice[22], This confirms that Mr Chen was aware of the transfers of the Company’s funds to R1’s Account.

(4)  More importantly, it was Mr Chen who provided the purported bank records and documents which showed that R1 had transferred the funds withdrawn from BOCHK Account into ABC Account[23] (collectively “Purported Bank Records”). The Purported Bank Records were fictitious as the records obtained by CSRC from ABC reveal that R1 did not transfer the funds withdrawn into ABC Account.

(5)  On 3 June 2016, Mr Chen attended a meeting of the audit committee together with representatives of the Auditors during which the draft consolidated financial statements of the Group and the Annual Report for the year ended 31 December 2015 were reviewed and approved, as recorded in the minutes of the meeting.

(6)  Also on 3 June 2016, Mr Chen attended the board meeting at which the same draft consolidated financial statements of the Group for 2015 were approved.

(7)  The announcement on the Annual Results for 2015 dated 3 June 2016 was issued by the board of which Mr Chen was a member.

(8)  The 2016 Interim Report stated that the interim consolidated financial statements had also been approved by the board.

36.The conduct of Mr Chen in causing or procuring the Company to publish the Financial Reports which contained the overstatement of cash and bank balance by RMB251 million constituted a misconduct under s.214(1)(b) and (c) of the SFO.

B3.3  Misappropriation of Placements’ proceeds

37.The relevant principles have been helpfully set out in the Opening submissions of Mr Roger Phang, counsel for the SFC and may be summarised as follows:

(1)  The power to dispose of the company’s property must be exercised by the directors for the purposes and in the interests of the company. The directors owe fiduciary duties to the company in relation to those powers and a breach of those duties is treated as a breach of trust (JJ Harrison (Properties) Ltd v Harrison [2002] B.C.C. 729, §25).

(2)  A credit in a company’s bank account which the directors are authorised to operate are moneys of the company under the control of those directors and are held by them on trust for the company in accordance with its purposes. To apply the company’s property other than for proper purposes of the company amounts to a misapplication and a breach of trust (Selangor United Rubber Estates Ltd v Cradock (No.3) [1968] 1 W.L.R. 1555, 1575B-F, 1577G).

(3)  If a director gave away the company’s asset for no consideration or to his personal account, it was prima facie an abuse of his powers as a director for an improper purpose. The burden is on the director to demonstrate the propriety of the transaction. If no grounds have been put forward upon which it could honestly have been thought that the transactions were for the benefit of the company, the director will be liable to compensate the company for the transfer of assets (Liu Chun Kau Andy v Hung Lee Construction Engineering Limited [2019] HKCFI 1269, §13).

38.As stated in §§14, 16 above, a very substantial part of the proceeds of the Placements in the amount of HK$163 million was transferred to R1’s Account and, thereafter, used by R1 for his personal purposes. This constituted a misappropriation of the Company’s assets. There is no evidence to suggest that R1 (or anyone on his behalf) has ever repaid the HK$163 million or any part thereof to the Company.

39.Mr Chen allowed the misappropriation to take place and took steps to conceal the misappropriation from the Auditors, the audit committee and the board in that:

(1)  Mr Chen knew that R1 had transferred the Company’s funds to R1’s Account (see §35(3) above).

(2)  He did not take any step to request R1 to repay the amount transferred to R1’s Account.

(3)  He concealed the misappropriation by:

(a)  providing the Purported Bank Records to Lam (see §35(4) above);

(b)  failing to bring to the attention of the Auditors, the audit committee and the board of the fact that R1 had misappropriated HK$163 million from the Company; and

(c)  approving the Financial Reports which had overstated the Group’s cash and bank balance (see §35 above).

40.The above conduct of Mr Chen constituted a misconduct under s.214(1)(b) and (d) of the SFO.

B4.  RELIEF

B4.1  Disqualification order

41.The principles governing the exercise of discretion in making a disqualification order have been summarised in Sound Global Ltd, §102.

42.The SFC submits that a disqualification period of 10 years is appropriate to reflect the gravity of Mr Chen’s conduct, which includes:

(1)  acted in breach of fiduciary duties and duty of care and skill in allowing R1 to misappropriate HK$163 million from the Company and concealed the misappropriation from the Auditors, the audit committee and the board; 

(2)  caused or allowed the Company to make false statements in the Announcements as to the intended use of the net proceeds; and

(3)  procured or caused the Company to make and publish the Financial Reports which had overstated the Group’s cash and cash balance as at 31 December 2015 by RMB 251 million.

43.Mr Phang submits that the case does not fall within the top bracket of the disqualification period as there is no evidence to suggest that Mr Chen has received any of the misappropriated funds or that he was aware of the fact that R1 had transferred the misappropriated funds to his wife and other persons related to him.

44.I agree with the SFC that the conduct is one which justifies a disqualification period of 10 years, being the top end of the middle bracket.

B4.2  Compensation order

45.The SFC seeks a compensation order against Mr Chen under s.214(2)(e) of the SFO.

46.Mr Phang submits that:

(1)  Section 214(2)(e) confers a very broad jurisdiction on the court and provides the court with the widest powers to do justice (e.g. SFC v Tse On Kin [2023] 5 HKLRD 810, §33; Yeung Chung Lung, §109).

(2)  The court has in the past made various types of order under s.214(2)(e), such as (a) order for payment of compensation, (b) order for restitution of the amount embezzled by a director from his company, and (c) order for payment of profits which a fiduciary obtained by diversion of a business opportunity of the company in breach of his fiduciary duty (Tse On Kin, §§33-34).

(3)  A compensation order can, in an appropriate case, be made irrespective of whether a respondent has received any financial benefits although the court declined to make the order for the reasons which are not material for present purpose (SFC v Wong Wai Kwong David (No 1) [2020] 3 HKLRD 606, §24). On appeal, the Court of Appeal in SFC v Wong Wai Kwong David (No.1) [2021] HKCA 897 allowed the SFC’s appeal and made a compensation order requiring the 1^st to 3^rd respondents (who had not received any financial benefits from the impugned transactions) to pay HK$622 million together with interest to the Company (§§23, 45).

(4)  Similarly, in SFC v Tong Shek Lun & Ors [2020] HKCFI 435, §§38, 45(5), the parties agreed under the Carecraft procedure to compensation orders, which the court considered appropriate notwithstanding the fact that the 2^nd and 3^rd respondents had not received any financial benefit from the wrongful diversion of the company’s funds to the 1^st respondent.

47.Taking into account the very serious nature of the misconduct on the part of Mr Chen in particular, his conduct in concealing the misappropriation of funds and failing to alert the Auditors, the audit committee and the board of the overstatement of the misappropriation, which led to the Company not being able to take step to recover the HK$163 million from R1, it is appropriate and just for the court to make a compensation order requiring Mr Chen to pay the Company the amount of HK$163 million together with interest at HSBC prime lending rate plus 2% from the date of the Petition to the date of judgment and, thereafter, at judgment rate.

48.As for costs, I make a costs order nisi that Mr Chen is to pay the costs of and occasioned by the Petition including all costs reserved, to be taxed if not agreed.

Mr Roger Phang, instructed by Securities and Futures Commission, for the Petitioner

The 3^rd Respondent is not represented and absent

The 5^th Respondent is not represented and is excused