Chief Holdings (H.K.) Ltd and Another v. He Chenguang and Others
Read the full judgment text of HCA 2415/2014 on BabelCite. This High Court CFI judgment was delivered on 10 October 2025.
3. The rival claims and the PRC Judgments
Cites 18 cases
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HCA 2415/2014 and HCA 414/2015 [2025] HKCFI 4793 HCA 2415/2014 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2415 OF 2014 _______________________
_______________________ AND HCA 414/2015 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 414 OF 2015 _______________________
_______________________ (Heard Together)
_______________ D E C I S I O N _______________ 1.Introduction 1.1These related actions (“Actions”) are concerned with an aborted investment in a real estate project in the Miyun Region, Beijing (“Miyun Project”). By an order dated 15 March 2018, they[1] have been ordered to be tried together, with HCA 2415/2014 as the leading action for case management purpose. 1.2The parties in the Actions may be grouped as follows:
1.3There is no dispute that in late 2012/early 2013, an oral agreement was reached in respect of the Miyun Project (“Oral Investment Agreement”). Whilst the fact of reaching the Oral Investment Agreement is common ground, there are disputes on who were the parties thereto and its terms (the respective versions are referred to by the Chau Camp as the “Miyun Agreement” in HCA 2415/2014 and by the He Camp as the “Purchase Agreement” in HCA 414/2015). It is also common ground that the Oral Investment Agreement had come to an end but the parties disagree on the manner in which it was terminated and the consequences arising therefrom. 1.4HCA 2415/2014 and HCA 414/2015 were commenced respectively in November 2014 and February 2015. In very brief terms:
1.5The Actions were stayed on an application by the He Camp for a lengthy period, from 14 January 2019 to 22 November 2023 pending the conclusion of Mainland proceedings commenced by the Chau Camp (“Mainland Proceedings”) following the He Camp’s failure to stay the Mainland Proceedings in the Mainland court. The Mainland Proceedings were commenced by the Chau Camp on 7 December 2017 in the Beijing Municipal High People’s Court (“HPC”) against BSTCC only. On 30 December 2021, the HPC granted judgment in favour of Mr Chau and dismissed the claims made by Chief Holdings and the counterclaims made by BSTCC (“HPC Judgment”). BSTCC’s subsequent appeal to the Supreme People’s Court (“SPC”) was dismissed on 28 March 2023 (“SPC Judgment” and together with the HPC Judgment collectively “PRC Judgments”) and the HPC Judgment was upheld in its entirety. 1.6The evidence shows that difficulties were encountered in the enforcement of the PRC Judgments against BSTCC in the Mainland and that BSTCC had admitted in the Mainland court in July 2023 that it did not have the financial ability to satisfy the PRC Judgements. As a result, an application was made by the Chau Camp to uplift the stay of the Actions, which application was granted on 22 November 2023. Following the uplifting of the stay of the Actions, 10 applications were taken out by the parties for the further conduct of the Actions, which included applications (1) for consolidation, (2) to amend the pleadings to, inter alia, take into account the effect of the PRC Judgments and (3) to strike out the claims in the Actions by reason of the SPC Judgment and other reasons. Relevant for present purposes are the following applications:
1.7By orders made on 26 July 2024 in the Actions, the parties were ordered to file and serve their respective statements (1) to explain how the findings made in the PRC Judgments would affect the issues pleaded in the Actions and how res judicata and issue estoppel might affect such issues and (2) to identify what remaining issues would have to go to trial in the Actions. The 10 applications were adjourned to 25 September 2024 for a global case management direction hearing. 1.8On 25 September 2024, orders were made for the 4 strike-out summonses (“SO Summonses”) to be heard on 7 November 2024 and liberty was granted to the parties to refer to the then proposed amended pleadings (ie the Draft 414 ASOC and the Old 2415 Draft RASOC). The other applications for amendment and consolidation were adjourned pending the disposal of the SO Summonses. 1.9On 7 November 2024, Master Frances Lok SC dealt with SO Summonses. The Master acceded to the Lam 414 SO Summons but dismissed the strike-out applications made in HCA 2415/2014, namely the Lam Camp 2415 SO Summons, the He-Bao 2415 SO Summons and the BSTCC 2415 SO Summons. Although the Chau Camp was able to resist the strike-out applications in HCA 2415/2014, the Master ordered them to take out an application to amend the Old 2415 Draft RASOC, which order was complied with by a summons issued by the Chau Camp on 6 December 2024 appending a revised draft RASOC (“Revised 2415 Draft RASOC”). 1.10This is my decision on the appeals[3] brought by the losing parties against the orders made by the Master on each of the SO Summonses. For the purposes of the appeals, subject to any arguments on costs, the parties agree that the court should refer to the Revised 2415 Draft RASOC. 2.Background 2.1The matters set out in this section are either undisputed or gleaned from the contemporaneous documentary evidence. 2.2At all material times:
2.3The relationship between Chief Holdings and Mr Lam started in late 2011/early 2012. The evidence shows that, at that time, Mr Lee was still employed by Macquarie and he remained so until August 2012. Between April and October 2012 monthly sums ranging from HK$250,000 to HK$350,000 were paid into the bank account of Mr Lam’s wife. Further, on 8 August 2012, the Welcome Shares, then representing 9.9% of Chief Holdings’ issue shares, were transferred to Lamcap. Prior to 13 August 2012, the nature of the relationship between the Chau Camp and the Lam Camp was not reduced into writing. 2.4Significantly, on 13 August 2012, a written contract was entered into between Chief Holdings and LGLAI (“Consultancy Agreement”). Clause 1 of the Consultancy Agreement provided that LGLAI would provide consultancy services to Chief Holdings which included (1) pre-IPO preparatory works, (2) referrals of potential business partners/talents and (3) advice on long-term development directions overseas and in the Mainland[4]. Clause 2 provided that the term of the contract was 20 years, with a 6-month notice period for its cancellation. Clause 3 provided for a monthly consultancy fee of HK$340,000 with a mechanism for written variation upon the parties’ consent[5]. 2.5Importantly, clause 6 of the Consultancy Agreement provided as follows:
2.6I shall return to the effect of Clause 6 of the Consultancy Agreement below. Suffice it to point out that the Consultancy Agreement was contained in LGLAI’s letterhead and addressed to Chief Holdings for the attention of Mr Chau in his capacity of managing director and signed by Mr Lam’s wife and Mr Chau respectively on behalf of LGLAI and Chief Holdings. 2.7According to Mr Chau, a ceremony was held in August 2012 to introduce Mr Lam to the staff of the Chief Holdings group of companies and the group’s major clients. Shortly thereafter, Mr Lam introduced Mr He to Mr Chau. 2.8As mentioned above, it is common ground that the Oral Investment Agreement was reached in late 2012/early 2013:
2.9It appears from the evidence that BSTCC in fact acquired more than the 67% equity interest in the Target Company contemplated by the Acquisition Agreement. For present purposes, it is only relevant to note that, on 16 November 2015, BSTCC entered into an agreement with a third party (“Third Party”) to dispose of 88.45% equity interest in the Target Company which included the Pledged Shares, which disposal was completed on 7 January 2016 (“Disposal”). 2.10By a letter from China Law Office (acting for the Chau Camp) dated 4 December 2017 to BSTCC (“Termination Letter”), China Law Office pointed out that the Disposal to the Third Party was in breach of the Share Pledge Agreement and asserted that the performance of the Share Pledge Agreement was no longer possible. A demand was made on behalf of the Chau Camp for the termination of the Share Pledge Agreement and for the return of the Sum within 7 working days:
3.The rival claims and the PRC Judgments 3.1In this section, I will set out the rival claims pursued in the Actions which the parties contend are subject to arguments on issue estoppel and/or the wider doctrine of abuse of process. As mentioned at §1.6 above, the strike-out applications in HCA 2415/2014 are also pursued on other grounds and those issues are more conveniently dealt with in later sections of this decision. On a high level of generality:
(i) The pleaded issues in the Actions 3.2For the purpose of the present narrative, suffice it to summarize the pleaded issues in the Actions by reference to the following broad topics. 3.3First, in terms of who were the parties to the Oral Investment Agreement, it is the He Camp’s case that, consistent with the parties who signed the Share Pledge Agreement, the Purchase Agreement (ie its version of the Oral Investment Agreement) was one reached between BSTCC on the one hand and Mr Chau and Mr Lam on the other. Conversely, it is the Chau Camp’s primary case that Miyun Agreement (ie its version of the Oral Investment Agreement) was one reached between Chief Holdings and Mr He. At Revised 2415 Draft RASOC §18A, the Chau Camp contends that BSTCC entered into the Share Pledge Agreement “as [Mr He’s] agent and/or nominee and as [BSTCC’s] (sic) alter-ego”. 3.4Secondly, in relation to the terms of the Oral Investment Agreement, for present purposes, it is only necessary to set out the alleged terms of the Purchase Agreement. It is the He Camp’s case that, by the Purchase Agreement, it was agreed that Mr Lam and Mr Chau would jointly purchase from BSTCC the Pledged Shares at the price of RMB 600,000,000 (“Alleged Purchase Price”). It is said by the He Camp that the Alleged Purchase Price was to be paid in full on the Acquisition Date, ie 17 April 2013. The Sum, paid on 7 February 2013 and accepted by the parties to be the equivalent of RMB 200,000,000, was a partial payment of the Alleged Purchase Price. As such, by the Acquisition Date, the balance of the Alleged Purchase Price (ie RMB 400,000,000) became payable. 3.5Thirdly, in terms of how the Oral Investment Agreement and/or the Share Pledge Agreement came to be terminated:
(ii) Issues in the Mainland Proceedings 3.6As stated earlier, the Mainland Proceedings were between the Chau Camp and BSTCC only. In the Mainland Proceedings:
3.7Although Mr Lam was formally not a party in the Mainland Proceedings, at the request of the HPC, he provided a written declaration (“Declaration”) in which it was stated that he signed the Share Pledge Agreement but he did not make any payments in connection with that agreement, and that he did not seek to enforce any rights under the Share Pledge Agreement or make any claims against the Chau Camp or the He Camp. (iii) Decisions and finding in the PRC Judgments 3.8The HPC found as follows. 3.9First, the parties had expressly agreed that the applicable law was Mainland law (HPC Judgment page 22):
3.10Secondly, the substance of the Share Pledge Agreement was in effect a contract of nominee shareholding and share transfer (HPC Judgment page 22):
3.11Thirdly, the HPC rejected (1) the Chau Camp’s case that the parties to the Share Pledge Agreement were Chief Holdings and BSTCC and (2) the Chau Camp’s argument that Mr Chau and Mr Lam signed the Share Pledge Agreement and paid the Sum on behalf of Chief Holdings. As such, the HPC found that Chief Holdings did not have the requisite standing to bring the Mainland Proceedings and there was no basis for BSTCC to counterclaim against Chief Holdings (HPC Judgment page 23):
3.12Fourthly, although the parties to the Share Pledge Agreement decided in principle that it should be cancelled, the HPC held that the parties did not reach a valid binding cancellation agreement (HPC Judgment page 24):
3.13Fifthly, the HPC specifically rejected BSTCC’s case that the there was an agreement on the Alleged Purchase Price (HPC Judgment page 24):
3.14Sixthly, the HPC instead found that the Share Pledge Agreement was terminated by the Termination Letter (HPC Judgment page 25):
3.15Seventhly, the HPC held that BSTCC should refund the Sum to Mr Chau alone and dismissed BSTCC’s counterclaims (HPC Judgment §26):
3.16Accordingly, the HPC (1) declared that the Share Pledge Agreement was terminated on 6 December 2017, (2) ordered BSTCC to refund the Sum to Mr Chau alone within 10 days from the date when the HPC Judgment became effective, (3) dismissed the claims of Chief Holdings, (4) dismissed Mr Chau’s other claims and (5) dismissed BSTCC’s other counterclaims. 3.17By the SPC Judgment, the SPC dismissed BSTCC’s appeal. In particular, BSTCC argued on appeal that HPC was not entitled to rely on the Declaration, but this complaint was rejected by the SPC. The SPC upheld the HPC Judgment in full. 4.The applicable principles 4.1There is no dispute on the general principles applicable to a strike-out application. The court should strike out a claim only in plain and obvious cases. The burden is on the applicant to demonstrate the same. The claim must be obviously unsustainable, the pleadings unarguable bad, and it must be impossible (not just improbably) for a claim to succeed before the court will strike it out: Chan Benjamin Ki-Wood v Young Won Ken & Ors [2023] HKCFI 240 §36. More specifically:
4.2On the principles applicable to issue estoppel and the wider doctrine of abuse, I gratefully adopt Recorder Eva Sit SC’s summary in Chan Benjamin:
4.3The scope of the Mainland Proceedings is narrower than that in the Actions, in that the Oral Investment Agreement was not expressly the subject matter in the Mainland Proceedings. Therefore, in the context of the first aspect, in relation to the “same fundamental issue” requirement referred to at Chan Benjamin §52, it is important to bear in mind the observations set out in Capital Wealth Finance Co Ltd v Lai Yueh Hsing, HCA 686 of 2012, 31 July 2015:
4.4In the context of the second aspect, the wider doctrine of abuse is engaged where a party tries to raise in subsequent proceedings matter which that party could or should have raised in earlier proceedings (ie Henderson v Henderson abuse). It is not necessary to establish that the parties to the two sets of proceedings were the same or were privies, since the circumstances may be such as to bring the case within the “spirit of the rules”, if it would be manifestly unfair to a party in the later proceedings that the same issues should be relitigated or there is an element of vexation in the use of litigation for an improper purpose. However, it will be a rare case where the litigation of an issue which has not previously been decided between the same parties or their privies will amount to an abuse of process: Lo Ka Shui v HSBC International Trustee Ltd & Ors (No 2) [2023] 6 HKC 411 §§102-104. 4.5Also in relation to the second aspect, as to what constitutes “bringing the administration into disrepute”, Lo Ka Shui §116 observes as follows:
4.6Also relevant is the principle that the Hong Kong court accepts the judgment of the courts in the Mainland as evidence of Mainland law. As stated at Chan Benjamin §43(1):
4.7The above principle is not restricted to circumstances where the parties are the same in both the Mainland and Hong Kong proceedings: Chan Benjamin §§41(1), 43(2)-(3). In particular, it was observed at Chan Benjamin §43(3):
5.General Observations 5.1Before I deal with each of the SO Summonses, I should make a number of general observations. 5.2First, the Chau Camp submits that the strike-out applications in HCA 2415/2014 against it are made late and therefore the court should not embark upon hearing the strike-out applications (except perhaps in relation to the ground of issue estoppel or wider doctrine of abuse of process which did not arise until the delivery of the PRC Judgments). Reliance is placed on a number of cases, including Tang Wai Cho v Tang Wai Leung [2011] 1 HKLRD 1 and Sunni International Ltd v Kao Wai Ho Francis [2023] HKCFI 2882. The Chau Camp relies Tang Wai Cho for the proposition that strike out applications at a late stage should only be entertained in the clearest circumstances and if grounds exist then they should be apparent in the normal course of events, at the close of pleadings. The Sunni case is relied on for the proposition that the court should not embark upon hearing an application at the eleventh hour, save in the most exceptional case and on receiving a valid explanation for the lateness of the application. 5.3The Chau Camp relies on the fact that the strike-out applications were taken out some 9 years after the commencement of HCA 2415/2014, and even prior to the stay of HCA 2415/2014 on 14 January 2019, no action was taken by the He Camp or the Lam Camp for a substantial period after the close of pleadings. 5.4I do not agree with the Chau Camp’s position. In my view, it is not a correct approach to simplistically make reference to how much time has elapsed. Tang Wai Cho is concerned about a strike-out application made after the commencement of the trial. Sunni is concerned with a strike-out application pursued beyond the time limit imposed by a previous court order and was only heard at a hearing originally scheduled for the pre-trial review. Those cases, in my view, must be understood by reference to the actual progress of the proceedings. 5.5Indeed, at Tang Wai Cho §11 whilst the observation was made that any strike-out grounds should be apparent in the normal course at the close of pleadings, the Court of Appeal was of the view that an application to strike out would not be regarded as late were it taken out shortly after the exchange of witness statement (which has yet to take place in HCA 2415/2014). In the present case, pertinently, following the uplifting of the stay and by reason of the PRC Judgments, there was, in effect, a “resetting” of the issues in the Actions, as is clear from terms of the orders made on 26 July 2024 by which the parties were ordered to identify the remaining issues which would have to go to trial (§1.7 above). 5.6In the light of the procedural history of the Actions, I do not agree with the Chau Camp that the strike-out applications in HCA 2415/2014 should be regarded as “late” applications and the court should therefore either refrain from dealing with them at all (except in relation to the ground of issue estoppel or wider doctrine of abuse of process) or subject them to a more “stringent” scrutiny. 5.7Secondly, it is clear that there are competing commercial interests between the He Camp and the Chau Camp. Where it appears to be accepted that BSTCC is already in a financial predicament, the He Camp is seeking to confine liabilities arising from the termination of the Oral Investment Agreement predominantly to BSTCC and apparently to another corporate vehicle, namely Merit Power. The effect of the strike-out applications taken by the He Camp is to “free” the individuals, namely Mr He and Mr Bao. Conversely, the Chau Camp is seeking to cast a recovery net to catch as many parties as possible, which attempt is, at first glance, against the documentary evidence. The question is whether the attempt to confine liability to corporate entities only on the part of He Camp and the attempt to extend the width of the recovery net on the part of the Chau Camp are viable on the established principles. In the above regard, it seems to me an important context to bear in mind that the dealings between the parties, despite involving substantial monetary sum, were not heavily documented, and at the time of the Oral Investment Agreement, the protagonists, Mr He and Mr Chau, had only been acquainted for a short time. 6.The Lam 414 SO Summons 6.1Counsel for the Lam Camp relies on the following strike-out grounds: (1) issue estoppel, (2) the wider doctrine of abuse of process/collateral attack and (3) the ground that BSTCC’s claim is bound to fail. As I understand counsel for the Lam Camp, reliance is principally based on the latter 2 grounds. (i) Wider doctrine of abuse of process / collateral attack 6.2I agree with the Lam Camp that the Master was plainly correct to strike out the 414 SOC against Mr Lam on the basis that the continued pursuit of the claim for specific performance of the Alleged Cancellation Agreement amounts to an abuse of process and/or collateral attack on the PRC Judgments. 6.3First, counsel for the He Camp in his written submissions (§34 thereof) beguilingly did not refer to the specific findings in the PRC Judgments which flatly contradicted the existence of the Alleged Cancellation Agreement. See §§3.5(1), 3.12, 3.13 and 3.14 above. The PRC Judgments expressly found that there was no concluded cancellation agreement reached between the parties. When queried at the hearing, counsel was unable to provide a satisfactory answer on how the existence of the Alleged Cancellation Agreement can be consistent with the adverse findings in the PRC Judgments. 6.4Secondly, in my view, were BSTCC allowed to continue to pursue its claims in 414 SOC premised on the existence of the Alleged Cancellation Agreement, that would bring the administration of justice into disrepute (1) in the sense observed at Lo Ka Shui §116 as BSTCC had a full opportunity of contesting the PRC Judgments or (2) as it would amount to relitigation based on substantially the same evidence as observed at Chan Benjamin §53. I take into account the following matters:
6.5For the above reasons, it is plain and obvious that the jurisdiction to strike out the 414 SOC on the basis of the wider doctrine of abuse of process / collateral attack is engaged and should be exercised. (ii) Bound to fail 6.6The relevant principles have been set out at §§4.6 and 4.7 above. 6.7As stated above, the PRC Judgments have clearly held that there was no consensus on the Purchase Agreement or the Alleged Cancellation Agreement and that the Share Pledge Agreement was terminated by breach. The PRC Courts also accepted the evidence contained in the Declaration and ordered the Sum of to be refunded to Mr Chau alone. 6.8I accept the Lam Camp’s submission that the Purchase Agreement, the Share Pledge Agreement and the Alleged Cancellation Agreement are all in relation to the acquisition of interest in PRC land held through PRC companies. It is plain that those agreements are properly governed by Mainland law: Johnston, The Conflict of Laws in Hong Kong 4th Ed §§5.011(1)-(2) and 5.052. In any event, that was the position of the parties in the Mainland Proceedings: §3.9 above. I do not accept the submissions made by counsel for the He Camp for the first time at the hearing that there is a dispute on the governing law. 6.9For the same analysis carried out at Chan Benjamin §§42-28, the assertion that the Alleged Cancellation Agreement under Mainland law is bound to fail. In particular, as observed at Chan Benjamin §43(3):
6.10In the present case, the PRC Judgments have adversely determined against (1) the essential building blocks for the existence of the Alleged Cancellation Agreement, namely that the parties had agreed on the Alleged Purchase Price and a failure by Mr Chau and Mr Lam to pay the remainder gave rise to the Alleged Cancellation Agreement and (2) the parties had reached a binding agreement on the terms of the Alleged Cancellation Agreement. 6.11For the above reasons, I agree with the Lam Camp’s submission that BSTCC’s claim is bound to fail. (iii) Issue estoppel 6.12In view of the above, it is strictly necessary for me to deal with the Lam Camp’s arguments on Issue Estoppel. For completeness, I deal with it briefly. 6.13The He Camp first submits that it is unclear whether the SPC Judgment was a final and conclusive judgment on the contractual relationship between Mr Lam and BSTCC. Counsel argues that, as Mr Lam was not formally a party to the Mainland Proceedings, absent PRC law evidence, it is unclear whether Mr Lam as a non-party to the Mainland Proceedings is entitled to pursue alternative relief in the Mainland in respect of the Share Pledge Agreement in the future. 6.14In my view, the submission is made on a false premise. The issue is whether the PRC Judgments had already finally and conclusively decided against the existence of the Alleged Cancellation Agreement. The PRC Judgments plainly did. 6.15The He Camp next contends that Mr Lam cannot be regarded as a privy of Mr Chau. I do not agree. As pointed out by counsel for the Lam Camp, Mr Lam should be regarded as a privy of Mr Chau on BSTCC’s own case, since it is BSTCC’s case that Mr Chau and Mr Lam have joint rights and obligations under the Purchase Agreement and the Alleged Cancellation Agreement. Specifically in relation to the Alleged Cancellation Agreement, as noted above, on BSTCC’s own case, it was reached between BSTCC (via Mr He) and Mr Chau (for himself and on behalf of Mr Lam). 6.16The He Camp then argues that the same issue requirement is not met. It is the He Camp’s case that the PRC Judgments only decided that there was no agreement on the Alleged Purchase Price and BSTCC did not sue on the Alleged Cancellation Agreement, The He Camp also points out at §76(3) of its written submissions that Mr Lam did not sue on the alternative version of the cancellation agreement but seeks specific performance of it in HCA 414/2015. It is plainly incorrect for counsel to suggest that Mr Lam is suing on an alternative version of cancellation agreement since there is no counterclaim by Mr Lam. Instead, what is plain is that the PRC Judgments specifically found that the parties did not reach any cancellation agreement in October 2013. As noted above, the evidence of the Alleged Cancellation Agreement was placed before the HPC (HCP Judgment page 17) and the HPC was aware of BSTCC’s case in HCA 414/2015 (HPC Judgment page 18). It was in that context that the HPC found that the parties were not ad idem in October 2013 and did not reach a valid binding agreement to cancel the Share Pledge Agreement. That finding was also crucial in the HPC’s finding that the Share Pledge Agreement was terminated as a result of a subsequent breach, ie the Disposal. 6.17Had it been necessary, I would have found that the issue estoppel ground is made out. 6.18For the above reasons, the Master was correct in acceding to the Lam 414 SO Summons. BSTCC’s appeal is dismissed. 7.The strike-out applications in HCA 2415/2014 7.1I now turn to deal with the strike-out applications in HCA 2415/2014. As noted above, although the Chau Camp was able to resist the strike-out applications, the Master was clearly unsatisfied with the Old 2415 Draft RASOC, such that the Chau Camp was ordered to apply to amend the Old 2415 Draft RASOC. Both the He Camp and the Lam Camp submit that the Revised 2415 Draft RASOC remain demurrable. As the Revised 2415 Draft RASOC is criticized on a wholesale basis, it is convenient for me to annex the Revised 2415 Draft RASOC as Annexure 1. 7.2I should also say a few words about the scope of the He-Bao 2415 SO Summons. As mentioned at §3.1(3) above, counsel for the He Camp made submissions on the basis that by reason of the PRC Judgments, Chief Holdings lacks the standing to pursue various claims. This position is set out in the He Camp’s statement (“He Camp’s Statement”) filed pursuant to the order of 26 July 2024 (§1.7 above). At §25(2) thereof, it is stated:
7.3However, at paragraph 46 of Mr He’s affirmation, it is stated as follows:
7.4It may be seen that the scope relied on in Mr He’s affirmation is narrower than that set out in the He Camp’s Statement. Whereas in the former case, the strike-out ground is limited to striking out any claims made against Mr He, the latter is wider as it covers any claims made by Chief Holdings. 7.5It seems to me quite plain that the scope of the He-Bao 2415 SO Summons is limited to the narrower basis. The He Camp’s written submissions §8 describes the scope of the He-Bao 2415 SO Summons and the BSTCC 2415 SO Summons. Relevantly, in respect of the He-Bao 2415 SO Summons, the position taken is the narrower scope set out in Mr He’s affirmation, not the wider scope set out in the He Camp’s Statement:
7.6I also note that the other parties in the He Camp, in particular BSTCC, have not sought to strike out claims made by Chief Holdings. Indeed, as confirmed at footnote 43 of the He Camp’s written submissions, BSTCC specifically confirmed that it does not seek to strike out claims made by Chief Holdings. 7.7In my view, it is not justified for the He Camp to expand the scope of the He-Bao 2415 SO Summons only in a later part of the written submissions. Counsel for the Chau Camp has, appropriately in my view, only dealt with the He-Bao 2415 SO Summons on the narrower basis in his written submissions (Section H thereof). I proceed on that basis. 7.8It is also pertinent to note at the outset that, with all due respect to counsel who settled the documents, the 2415 ASOC, the Old and Revised 2415 Draft RASOC are, for the lack of a better description, “lazy” pleadings. The Master was plainly of the view that the Old 2415 Draft RASOC should be improved upon and an order was made to that effect. Yet, the Revised 2415 Draft RASOC continued to be a lazy pleading, in that only minor changes are made to the Old 2415 Draft RASOC (for example the conspiracy claim continues to simply repeat earlier parts of the pleading without dedicating a real effort to articulate its claim in a clear manner). However, it must be emphasized that a pleading which may be better pleaded in clearer terms is usually not a sufficient strike-out ground. Where a pleading is defectively only in not containing particulars to which the other side is entitled, application should be made for further and better particulars and not for an order to strike out the pleading: Hong Kong Civil Procedure 2025 Note 18/19/8. It is only where a pleading is unarguably bad before the court will strike it out: Hong Kong Civil Procedure 2025 Note §18/19/4. 8.The Lam Camp 2415 SO Summons 8.1As noted earlier, the Lam Camp’s appeal was brought out-of-time by about 2 weeks. The explanation proffered is that Mr Lam was busy with his work engagement and needed time to receive and consider legal advice and to organize payment of costs for the appeal. There is no disagreement on the legal principles, and the relevant considerations include the length of the delay, the reasons for the delay, the merits of the appeal and the degree of prejudice to the other party. The Chau Camp, in my view very fairly, has not suggested in its written submissions that any prejudice has been caused by the 2-week delay, given that the next procedural step in the timetable is for the court to consider various applications for amendment and consolidation. I agree with counsel with the Lam Camp that the main consideration in the present case should be the merits of the appeal. 8.2The grounds relied on by the Lam Camp are as follows:
(i) Whether contractual relationship between Chief Holdings and Mr Lam 8.3The pleaded case on the formation of Chief Holdings’ agreement with Mr Lam is at 2415 ASOC §8. It is pleaded that Chief Holdings employed Mr Lee (“Engagement Contract”), officially from August 2012 but effectively since April 2012, as its Group Chairman. Revised 2415 Draft RASOC §8A pleads an alternative case that the Engagement Contract was on the basis that Chief Holdings contracted with Mr Lam to be its independent contractor to take up the position of its Group Chairman. 8.4In its Answers to Mr Lam’s Request for Further and Better Particulars of the 2415 ASOC (“Answers”), the Chau Camp stated that the Engagement Contract was made partly orally and partly in writing, and in so far as it was made in writing, it was made by way of the Consultancy Agreement. 8.5The Lam Camp’s arguments may be summarized as follows:
8.6The Chau Camp’s argument may be summarized as follows:
8.7In my view, it is not plain and obvious that there was no contractual relationship between Chief Holdings and Mr Lam personally. 8.8The Lam Camp relies heavily on Clause 6 of the Consultancy Agreement (reproduced at §2.5 above). However, it is far from clear that Clause 6 of the Consultancy Agreement is as determinative as the Lam Camp contends, for the following reasons:
8.9As to the Lam Camp’s argument on Mr Lam’s reliance on Clause 6 of the Consultancy Agreement as an exclusion clause, it appears that the lggal position is that set out at Chitty §18-054 (to which the Chau Camp and the Lam Camp did not refer):
8.10At Chitty §21-072, the requirement of “sufficient interest” is further explained. It is observed that the requirement would not be satisfied, unless as a result of promisor’s breach, the promisee was exposed to the risk of incurring legal liability to Mr Lam, for example where the promise had contracted with the third party to procure their release from a debt or liability to the promisor and the promise would be put in breach of that contract by the promisor’s action against the third party. It is further observed that it would not be appropriate for the promisee to start a second action for an injunction to restrain the promisor from proceeding with the first action but the promisee’s remedy is to ask the court to stay the promisor’s action against the third party. 8.11In the present case, the Lam Camp has not followed the above approach and there is no evidence on whether LGLAI has a sufficient interest. 8.12For the above reasons, I am not satisfied that it is plain and obvious that (1) there was no contractual relationship between Chief Holdings or (2) Mr Lam himself can rely on the exclusion clause to defeat the claims made against him personally by Chief Holdings. 8.13Notwithstanding the foregoing, the Chau Camp says that, for the following reasons, even if there is an arguable case on the contractual relationship between Chief Holdings and Mr Lam, the claim should still be struck out on the basis that the 2415 ASOC is plainly defective and unarguably bad. (ii) Pleas of duties: 2415 ASOC §§8, 9-11 8.14The Lam Camp submits that 2415 ASOC §8 should be struck out since, on the one hand, it is pleaded at §8 that the Engagement Contract was between Chief Holdings and Mr Lam, but the Answers state that the Engagement Contract was partly in writing and evidenced by the Consultancy Agreement between Chief Holdings and LGLAI. 8.15The Chau Camp’s pleaded case on the formation of the Engagement Contract is a clear instance of “lazy” pleading. As set out at Hong Kong Civil Procedure 2025 §18/12/4, the pleading should state the date of the alleged agreement and whether it was made orally or in writing, in the former case stating by whom it was made and in the latter case identifying the document. It is plain that 2415 ASOC §8 woefully failed to comply with the requirements, necessitating the provision of the Answers. But the Answers are also woefully inadequate, as they only rely on the date of the Consultancy Agreement (ie 13 August 2012) as the date of the Engagement Contract without identifying how it is said that the Engagement Contract was effectively formed since April 2012. 8.16In my view, the pleading on the formation of the Engagement Contract is deficient to the extent that it has crossed the line into an unarguably bad pleading. In this regard, with all due respect to the Master, she was too lenient with the Chau Camp. Instead, I will adopt the approach set out in Sun Focus Investment Limited v Tang Shing Bor, HCA 538 of 2007, 5 October 2009 §§33-36, which is to strike out those parts of the pleading which are unarguably bad but refrain from dismissing the claim. The leniency of the Master in not ordering a strike-out had the effect of placing the Chau Camp into a place of complacency where only cosmetic changes were made in the Revised 2415 Draft RASOC which did not improve upon the pleading. 8.17I therefore strike out 2415 ASOC §8 which on the pleaded case on the formation of the Engagement Contract. In my view, Revised 2415 Draft RASOC §§8A-8B do not address the deficiencies at all. Although the applications for amendment are not before me, it seems to me obvious that the Chau Camp has to make an application to revised further the Revised 2415 Draft RASOC. 8.182415 ASOC §9 pleads the contractual duties by way of implied terms which implied terms are in turn premised on implied warranties. The Lam Camp submits that it should be struck out as it is frivolous, vexatious and embarrassing and discloses no reasonable cause of action, in that the implied contractual duty is uncertain and nonsensical and cannot be implied by reason of business efficacy introduced by way of the Revised 2415 Draft RASOC. 8.19Whilst convoluted, it seems to me that it is tolerably clear that the Chau Camp’s case is that Mr Lam possessed of the qualifications set out at 2415 ASOC §4 and he was remunerated commensurably. An implied term of the Engagement Contract was that he would exercise his knowledge, skill and competence in the discharging his duties under the contract, and the standard is that of a person with the commensurate qualifications. In my view, it is not plain and obvious that the plea is demurrable. As stated in Chitty §43-061, an employee who holds himself out as being skilled to do a certain type of work and is employed on that basis implied undertakes that he or she possesses and will exercise reasonable skill or competence in that work. 8.202415 ASOC §10 pleads like duties but on a common law basis and an additional equitable duty and contractual duty to act faithfully in the best interests of Chief Holdings. There may be some debate on whether the duty of fidelity should be characterized as “equitable” but it is tolerably established that a duty of fidelity is implied into an contract of employment: Chitty §43-064. I am not prepared to accede to the Lam Camp’s invitation to strike out 2415 ASOC §10. 8.212415 ASOC §11 pleads an additional express term of the Engagement Contract, namely the Welcome Shares should be returned should Mr Lam fail to achieve the matters set out at §§4(g) and (h). Those paragraphs set out a number of general matters, namely Mr Lam held himself out as a person (1) capable or reorganizing, revitalizing and developing Chief Holdings and its group companies so as to vastly expand the scale and scope of its business, to greatly increase the investment opportunities and to make it substantially more profitable and (2) with good relations with the Macquarie Group and therefore someone who was able to engage the Macquarie Group and other heavy weight financial groups (a) to be Chief Holdings’ strategic investors should it seek public listing in future and (b) to set up and sell new trust and investment products that Chief Holdings might introduce from time to time. Revised 2415 Draft RASOC pleads a further basis for the return of the Welcome Shares, namely breach of the Engagement Contract. 8.22I only need to deal with 2415 ASOC §11 as Revised 2415 Draft RASOC §11 pleads an additional basis for the return of the Welcome Shares. Whether the additional basis should be allowed by way of amendment is a matter to be debated at the amendment application. 8.23The complaint made by the Lam Camp is that 2415 ASOC §§4(g) and (h) do not plead that Mr Lam would achieve any particular or specific outcome and it is hopelessly unclear what is meant by the allegation that Mr Lam “failed to perform” when there was no guarantee of any objective level of performance. 8.24I have no difficulty with the proposition that at the time of entering of the Engagement Contract, only general targets were being discussed. Indeed, it is Mr Lam’s own evidence (Lam 2nd §§10-11) that Chief Holdings “had been in the brokerage business with no successful business partnerships in recent years” and in August 2012 he and his wife decided to accede to Mr Chau’s invitation to provide consultancy services. As set out §2.4 above, Clause 1 of the Consultancy Agreement provided for general scope such as (1) pre-IPO preparatory works, (2) referrals of potential business partners/talents and (3) advice on long-term development directions overseas and in the Mainland. As such, Mr Lam’s own evidence is not inconsistent with the averments in 2415 ASOC §11. In my view, it is not plain and obvious that matters plead at 2415 ASOC are demurrable. Obviously, whether the Chau Camp can prove the oral term and its breach is a matter of trial. (iii) Pleas of breach of duties 8.252415 ASOC §§26 pleads the breach of the Engagement Contract. I agree with the Lam Camp that there has been no attempt to relate any particulars of breach to the duties pleaded. There is in particular no plea as to what are the reasonable skills or competence required in relation to new projects such as the Miyun Project and no plea as to Mr Lam’s duties in relation to new projects. There is in particular no plea that the scope of the duties applied to the Miyun Project and the particulars are hopelessly vague. For example, in respect of 2415 ASOC §26(a), there is no plea that Mr Lam was tasked with the conducting due diligence and/or investigation and if so when. 2415 ASOC §26(b) does not plead that when and how Mr Lam advised the Chau Camp to enter into the Miyun Agreement in circumstances where it was financially and legally unsafe to do so. The same failings apply to each of the particulars set out at 2415 AOSC §26. 8.26Counsel made specific arguments on 2415 ASOC §26(m) which pleads that Mr Lam had wrongfully caused, procured, permitted or suffered the Shares to be pledged to himself thereby in effect wrongfully appropriated for himself asset belonging to the Chau Camp. The Lam Camp argues that since the PRC Judgments have accepted the content of the Declaration, namely that Mr Lam does not seek to enforce any rights under the Share Pledge Agreement or make any claims against the Chau Camp or the He Camp and the PRC Judgments have ordered the Sum to be refunded by BSTCC to Mr Chau alone, 2415 ASOC §26(m) is barred by issue estoppel or abuse of process. I do not agree with the Lam Camp. In my view, the Declaration does not state in clear terms that the position stated therein was Mr Lam’s intention at the time of execution of the Share Purchase Agreement. I accept the Chau Camp’s argument that it is at least arguable whether Mr Lam is allowed to reply on his subsequent declaration in the Mainland Proceedings as evidence of his intention at the time when the Share Pledge Agreement was signed. 8.27However, it seems to me that 2415 ASOC §26(m) is demurrable on another basis. The 2415 ASOC does not claim for any loss arising from the failure of the transfer of the Shares to the Chau Camp. At 2145 ASOC §27, the loss and damage claimed are those set out at 2415 ASOC §24, which specifically does not claim for any loss from the Shares. Evidentially, it has not been suggested that, following the Disposal, Mr Lam had in any way benefited from the sale proceeds generated from the Disposal. Neither is there any allegation or evidence that Mr Lam would have not transferred the portion of the Shares pledged to him under the Share Pledge Agreement if requested by the Chau Camp. In that way, in the context of the Disposal, Mr Lam was as much a victim as Mr Chau. 8.28In my view 2415 ASOC §26 is unarguably bad and should also be struck out. 2415 ASOC §27 which pleads the consequence flowing from 2415 ASOC §27 is also struck out. However, I will also adopt the approach set out in Sun Focus. (iv) The conspiracy claim 8.29It is common ground that the material facts that must be pleaded in a conspiracy claim are (Jackson Xu Zhao Ze v Tsai Tim Yuen, HCA 902/2011, 22 May 2013 §§11-15):
8.302415 ASOC §31 pleads an unlawful means conspiracy. The conspiratorial agreement is pleaded to be one to defraud the Chau Camp, to conceal such fraud and the proceeds of such fraud from the Chau Camp. 8.31In my view, the conspiracy claim pleaded against Mr Lam is plainly deficient and is again another example of a lazy pleading. The pleaded case at 2415 ASOC §31 against Mr Lam is that (1) Mr He was introduced to the Chau Camp by Mr Lam, (2) a wholesale repeat of the case on breach of the Engagement Contract and by the Revised 2415 Draft RASOC the breach of the Share Pledge Agreement by the He Camp, (3) an allegation that a person of Mr Lam’s qualification could not have committed his acts of incompetence and negligence without himself being a party to the conspiracy to defraud the He Camp and (4) the allegation that Mr Lam had obtained a direct benefit from the conspiracy by causing the Shares to be pledged to himself. 8.32Insofar as the first allegation is concerned, I am unable to see how it can be an overt act carried out pursuant to the alleged conspiratorial agreement. It has not been suggested that at the time of the introduction in August 2012, the conspiratorial agreement was already reached to defraud the Chau Camp. Indeed, as noted above, BSTCC only entered into an agreement with the shareholders of the Target Company in February 2013. 8.33In relation to the second and third allegations, as I have already struck out the paragraphs in relation to the breach of the Engagement Contract, it necessarily follows that the second and third allegations should also be struck out. In respect of the second allegation, the proposed amendments repeat Revised 2415 Draft RASOC §§22B-F (which assert a breach of the Share Pledge Agreement) as an overt act attributable to Mr Lam. No explanation has been put forward by in the pleading as to how the Disposal can be considered an overt act on the part of Mr Lam. There is no suggestion that the Disposal was carried out with Mr Lam’s involvement. 8.34In relation to the fourth allegation, for the same reasons set out §§8.26-8.27 above, it is unsustainable. Relatedly, I agree with the Lam Camp that unlawful means conspiracy is a serious allegation. Serios allegations of this kind must be proved by evidence of a commensurate cogency and inferences can only be drawn if they are compelling. Even in the case of the Revised 2415 Draft RASOC, the case pleaded against Mr Lam, for the reason stated above, is entirely inadequate. 8.35In summary, for the above reasons:
9.Strike-out applications by the He Camp 9.1The grounds which are particular to the He-Bao 2415 SO Summons are (1) whether the claims by the Chau Camp against Mr He (except for fraudulent misrepresentation, breach of warranty and conspiracy), premised upon Mr He being a party to the Miyun Agreement and/or the Share Pledge Agreement is barred by issue estoppel and/or the wider doctrine of abuse of process, (2) whether Mr Chau is contractually estopped from asserting that Mr He was a party to the Miyun Agreement and/or the Share Purchase Agreement and (3) whether the claim for dishonest assistance against Mr Bao is demurrable on the basis that it is devoid of particulars and is defective. 9.2The grounds which overlap the He-Bao 2415 SO Summons and the BSTCC 2415 SO Summons are whether the Chau Camp’s claims on conspiracy, misrepresentations and breach of warranty are demurrable. (i) Mr He’s reliance on issue estoppel 9.3In contrast to the Lam 414 SO Summons where the PRC Judgments had specifically found against the existence of the Alleged Cancellation Agreement, the existence and the terms of the Oral Investment Agreement were not issues before the HPC and the SPC. 9.4As pointed out at §4.2 above, one of the requirements for issue estoppel to arise is that a claim or issue has previously been determined between the parties or their privies. As further pointed out at §4.3 above, issue estoppel only applies to fundamental issues determined in an earlier proceeding which formed the basis of the judgment, and only determinations which are necessary for the decision, and fundamental to it, will create an issue estoppel. 9.5In my view, it is not plain and obvious that the PRC Judgments create an issue estoppel that Mr He was not a party to the Oral Investment Agreement. As pointed out by the Chau Camp, the Oral Investment Agreement was the overarching agreement pursuant to which the Share Pledge Agreement was executed. The PRC Judgments’ finding that the Share Pledge Agreement only bound BSTCC, Mr Chau and Mr Lam does not determine who were the parties to the Oral Investment Agreement or its terms, and in particular the issue whether Mr He was a party to the Oral Investment Agreement or the Share Pledge Agreement. 9.6As a matter of evidence, the Oral Investment Agreement was entered into shortly after Mr Chau met Mr He. In my view, the Chau Camp’s case that the dynamics at that time was such that the intention was to contract with Mr He personally instead of a project company in the form of BSTCC is not obviously unsustainable. 9.7In any event, the Chau Camp’s case is that BSTCC entered into the Share Pledge Agreement as Mr He’s nominee or alter ego. As has been observed in China Forestry Holdings Co Limited (In Official Liquidation) v Top Wisdom Overseas Holdings Limited & Anor [2025] HKCFI 2893:
9.8Whether the assertion that BSTCC entered into the Share Pledge Agreement was Mr He’s nominee or alter ego is plainly a matter for trial. 9.9I decline to strike out any parts of the 2415 ASOC by reason of Mr He’s reliance on issue estoppel. (ii) Mr He’s reliance on the wider doctrine of abuse of process 9.10The He Camp’s case is that, in the Henderson v Henderson sense, the Chau Camp was expected to bring forward in the Mainland Proceedings the case that Mr He was a party to the Oral Investment Agreement and the Chau Camp should bring forward in the Mainland Proceedings its version of the cancellation agreement. As to the latter ground, as pointed out earlier, even in the Old 2415 Draft RASOC, the Chau Camp no longer relied on its version of the cancellation agreement. As to the former ground, the He Camp says that Mr He should have been joined to the Mainland Proceedings, and the Chau Camp should have sued on the Oral Investment Agreement as opposed to limiting the scope to the Share Pledge Agreement. 9.11In the present case, it is the Chau Camp’s case that the more limited scope in the PRC Proceedings was upon legal advice. As pointed out by the Chau Camp, Tang Kin Wah v Cheng Chou Kam Chee Connie & Anor [2002] 1 HKC 552 makes the following observations:
9.12As accepted by the He Camp, it is only in rare cases where litigation which has not previously been decided between the same parties or their privies will amount to an abuse of process: §4.4 above. In my view, it is quite plain that the claim advanced in the Mainland Proceedings was a simple claim for the return of the Sum premised on the breach of the Share Pledge Agreement, which claim Mr Chau prevailed. I am unable to say that it is plain and obvious that the Chau Camp was not justified in refraining from litigating the wider issues premised on the Oral Investment Agreement. 9.13The He Camp next says that the continued pursuit of the case on the basis that Mr He was a contractual party to the Oral Investment Agreement and/or the Share amounts to a collateral attack on the PRC Judgments. 9.14I am unable to agree. As pointed out above, the PRC Judgments did not deal with the issue of who were the parties to the Oral Investment Agreement or whether the Share Pledge Agreement was entered into by BSTCC as Mr He’s nominee or alter ego. I do not see how, were the Hong Kong court to find those issues in favour of the Chau Camp at trial, those findings may be considered inconsistent with the findings in the PRC Judgments. 9.15I decline to strike out any parts of the 2415 ASOC by reason of Mr He’s reliance on the wider doctrine of abuse of process. (iii) Contractual estoppel against Mr Chau 9.16The He Camp submits that the Share Pledge Agreement creates a contractual estoppel as between Mr Chau, Mr Lam and BSTCC that BSTCC owned 67% equity interest in Target Company and Mr Lam and Mr Chau wished to invest in the Target Company. It is said that Mr Chau is contractually estopped from asserting that Mr He was a party to the Oral Investment Agreement and/or the Share Pledge Agreement. It is said that by reason of the contractual estoppel, any claims premised on the fact that Mr He was a contractual party to the Oral Investment Agreement and/or the Share Pledge Agreement are frivolous or vexations and has no proper evidential foundation. 9.17I disagree. In my view, it is not plain and obvious that the mere fact that BSTCC was the owner of the equity interest in the Target Company provides a complete answer to (1) who were the contracting parties to the Oral Investment Agreement and (2) whether BSTCC was simply the project company which entered into the Share Pledge Agreement as Mr He’s nominee or alter ego. 9.18I decline to strike out any parts of the 2415 ASOC by reason of any alleged contractual estoppel arising from the Share Pledge Agreement. (iv) The misrepresentation claim and the breach of warrant claim 9.19The complaints are:
9.20In my view, the arguments mounted by the He Camp are purely technical (which may be readily cured) or they stem from an unfair reading of the pleaded allegation. 9.21It seems to me quite plain what the pleaded case on misrepresentation is. The effect of the Representations pleaded at 2415 ASOC §13 is: The Miyun Project was lucrative and profitable because (1) the Sum (or the Start-up Fund) would not be spent and but would be returned in a few month’s time, since the Miyun Project would finance itself through the presale of units to the public, and (2) a Canadian asset management and investment company called Dundee Corporation (“Dundee”) would acquire 49% interest at a profit of RMB 30 billion. 9.22Even on the authorities cited by the He Camp itself, the above is capable of falling within the following rubric (Misrepresentation, Mistake & Non-Disclosure, 6th Ed §3-44):
9.23The above was made clear by the Chau Camp at Revised 2415 Draft RASOC §14A. Whilst it may be true that Mr He’s state of mind may be difficult to prove, it is a matter for trial. On that note, the existing evidence shows that Mr He disputes having made the Representations. On the present materials, there is no compelling evidence to show that, were the Representations made (which is an issue for trial), he had reasons to believe in them. 9.24I must confess I do not quite understand the complaint that there is nothing to support to alleged falsity. At 2415 ASOC §20, the Chau Camp pleaded (1) there was no presale of any units, (2) the Sum was in fact used for purposes unrelated to the Miyun Project by both Merit Power and Yushun, (3) the Sum was not returned and (4) Dundee had never committed or agreed to acquire any interest in the Miyun Project. Whether the Chau Camp can prove the falsity is a matter of trial. The He Camp has certainly not tried to demonstrate that the falsity is unarguable, as there is no evidence adduced of any presale of units or Dundee had in fact committed to acquire an interest in the Miyun Project. It is demonstrably true that the Sum has not been refunded within a few months’ time. 9.25The complaint about Mr Chau not having pleaded inducement and reliance is a sterile technical complaint. It is plain that in terms of the primary case (where Chief Holdings was the contracting party to the Miyun Agreement), Mr Chau (in his capacity as director of Chief Holdings) was induced by and relied on the Representations to enter into the Miyun Agreement. Whilst it might be said that the Chau Camp, after multiple rounds of amendment, should not have overlooked the necessity to plead inducement and reliance in respect of the alternative case (ie if Mr Chau was the contracting party in the Miyun Agreement, he in his personal capacity was induced by and relied on the Representations to enter into the Miyun Agreement), it seems to me that the oversight cannot constitute a valid strike-out ground. 9.26There are two further subsidiary points. First, it is said that Mr He cannot be liable under section 3 of the Misrepresentation Ordinance Cap 284. The argument is based on the argument that the Chau Camp can no longer assert that Mr He was contracting party by reason of the PRC Judgements and/or the contractual estoppel arguments, which I have already rejected. 9.27The other subsidiary argument, as I understand the He Camp, is that the misrepresentation claim is inconsistent with the claim for warranty. The argument apparently is based on the following passage at Misrepresentation, Mistake and Non-Disclosure §3-45:
9.28What counsel for the He Camp refrained from pointing out is that the above passage is directed at honest statement of future fact or intention which has no application to the present case where the Chau Camp’s case is premised on fraudulent misrepresentations. 9.29I decline to strike out the misrepresentation claim. (v) Breach of warranty claim 9.30The He Camp’s argument on the breach of warranty claim is premised again on the argument that the Chau Camp can no longer maintain the assertion that Mr He was a contracting party to the Miyun Agreement which has been dealt with above. 9.31The other argument on the apparent inconsistency with the misrepresentation claim has also been dealt with above. (vi) The dishonest assistance claim 9.32The dishonest assistance claim is made against Mr Bao. At 2415 ASOC §39, the Chau Camp, simply repeats §31(e), (f) and (g), which in turn repeats §§5, 16(a) and 20(b)(iii). 9.33The summation of the allegation is as follows:
9.34In the Revised 2415 Draft RASOC, the dishonest assistance claim further relies on an additional fact, namely at §20(iiiA) at which it is pleaded that from August 2013 to June 2014, Mr He and/or BSTCC caused a Mr Meng Fanjie to acquire shares of China Communication to the value of HK$24 million by way of funds transferred to Mr Meng’s account maintained with a subsidiary of Chief Holdings through cheques issued by or telegraphic transfers made by Merit Power. The Chau Camp asserts that it is likely that the sum of HK$24 million was part of the Sum. It has also been clarified that the breach of trust that Mr Bao dishonestly assisted in Merit Power’s breach of trust pleaded at Revised 2415 Draft RASOC, namely that the sum HK$230 million was held on trust by Merit Power for the Chau Camp. 9.35The He Camp submits that, for dishonest assistance, four requirements need to be proved: (1) breach of trust or fiduciary duty by someone other than the defendant, (2) the defendant’s assistance, (3) dishonesty and (4) resulting loss. The He Camp says that there is no pleading as to the specified deadline and circumstances upon which the Sum must be returned to the Chau Camp. There is therefore no basis to suggest that the Sum could be held on trust or that Mr Bao has any ground to suspect that the disposition of the Sum was dishonest. 9.36I do not accept the He Camp’s argument. First, there is no application by Merit Power to strike out 2415 ASOC §§33-36 which set out the breach of trust by Merit Power in respect of the part to the Sum remitted to Merit Power. It is the Chau Camp’s case that the Sum was not to be used without the consent of the Chau Camp and had to be returned in a few month’s time. Whether Mr Bao had assisted (in his role as de facto director of Merit Power) in the breach of trust (if proved) and whether he did so dishonestly is a matter for trial. (vii) The conspiracy claim 9.37The He Camp seeks to strike out the conspiracy claim against Mr He, BSTCC and Mr Bao. 9.38I agree with the He Camp that there are no particulars on the agreement itself, in particular what was agreed between Mr Bao, Mr Lam, BSTCC and Mr He. In so far as it is discernible, part of the agreement was to conceal such fraud and the proceeds of such fraud from the Chau Camp. 9.39As far as Mr Bao is concerned, one of the overt acts pleaded (at Revised 2415 Draft RASOC §31(g)) is the receipt of money and the confirmation of the receipt. I have great difficulty in understanding how confirming receipt could be an overt act to show that there was an agreement to conceal such fraud and the proceeds of such fraud. As another example, as discussed above, another overt act is that Merit Power had remitted money to the bank account of Chief Holdings’ subsidiary, for the alleged improper purpose of funding the purchase of China Communication by Mr Meng. Again, how that can be an overt act of concealing the fraud or the proceeds of such fraud has not been explained. Were the agreement to conceal the fraud, one would have thought that the improper use of the Sum to acquire shares in China Communication would have been transacted at a securities company unrelated to the Chau Camp. 9.40The He Camp also says that the conspiracy claim, in so far as it is premised on the repetition of the misrepresentation claim, has to be struck out (at Revised 2415 Draft RASOC §31a). I agree. As noted in the case of Aktieselskabet Bansk Skibsfinansiering v Wheelock Marden & Co Ltd [1994] 2 HKC 264 at 272E-I:
9.41In the Chau Camp’s written submissions, apart from barely asserting that the conspiracy claim has been adequately pleaded, no real attempt was made to answer the above complaints. 9.42However, I am not convinced that there cannot be an arguable case on unlawful means conspiracy. Similar to the Lam Camp 2415 SO Summons, I will strike out 2415 ASOC §§31-32A against Mr He, BSTCC, and Mr Bao. Unless the Chau Camp issues a summons within 28 days hereof to amend the Revised 2415 Draft RASOC, the conspiracy claim as against Mr Lam do stand dismissed. 10.Conclusion 10.1For the above reasons, I make the following orders. 10.2I dismiss the appeal in relation to the Lam 414 SO Summons. There will be a costs order nisi that BSTCC is to pay to Mr Lam the costs of the appeal to be taxed if not agreed. 10.3I allow the appeal in relation to the Lam Camp 2415 SO Summons to the extent set out at §8.35 above. In my view, a fair order, on a nisi basis, is that the Chau Camp should pay to the Lam Camp 70% of the costs of the appeal to be taxed if not agreed. 10.4Although the Lam Camp has provided a Statement of Costs, there is no attempt to segregate the costs as between its two appeals. 10.5I allow the appeal in relation to the He-Bao 2415 SO Summons and the BSTCC Summons to the extent set out at §9.42 above. The He Camp has only managed to be successful to a very limited extent and the Chau Camp has prevailed substantially. In my view, the fair orders, on a nisi basis, are that the Chau Camp should have 70% of the costs of the appeals in respect of the He-Bao 2415 SO Summons and the BSTCC 2415 SO Summons. 10.6For case management purposes, it seems to me that, having gained some familiarity with the Actions, I should hear the amendment applications. I direct that the parties to fix a hearing before me in respect of the amendment summonses within 4 months hereof with 3 hours reserved, including the further amendment application by the Chau Camp contemplated in this decision.
Mr Simon K C LAM instructed by Messrs. Kelvin Cheung & Co for the 1st - 2nd Plaintiffs in HCA 2415/2014 and the 1st Defendant in HCA 414/2015 Mr Keith CHAN instructed by Messrs. Cheung & Liu for the 2nd & 7th Defendants in HCA 2415/2014 and the 2nd Defendant in HCA 414/2015 Mr Ernest NG and Mr Raphael LEUNG instructed by Messrs CLKW Lawyers LLP for the 1st, 3rd, 4th & 6th Defendants in HCA 2415/2014 and the Plaintiff in HCA 414/2015 Annexure 1
[1] Together with HCA 411/2015 [2] The He-Bao 2415 SO Summons also seeks to strike out, unnecessarily in my view, §§1-2 and 4-6 of the Reply and Defence to Counterclaim and Counterclaim to Counterclaim. [3] The appeal against the order made in respect of the Lam Camp 2415 SO Summons is an appeal brought out of time. [4] Clause 1: “[LGLAI] 提供的策略顧問服務包括協助 [Chief Holdings] (i) 計劃在香港上市的部份前期 (投資銀行參與之前) 準備工作，(ii) 推薦適合的合作夥伴及人才，及 (iii) 計劃在內地及海外的長遠發展路向…” [5] Since August 2012, the monthly sum set out at Clause 3 was paid into LGLAI’s bank account, in addition to the payments made to Mr Lam’s wife mentioned in the preceding paragraph. [6] Yushun is no longer an active participant in HCA 2415/2014 as default judgment (for HK$40 million) was entered against it on 25 August 2016 and it was subsequently wound-up on 30 November 2016. [7] Clause 1: “甲方擁有 [Target Company] 67% 股權，同意將其中33% 股權質押給乙方。股權質押後，甲方擁有。[Target Company] 34% 股權，乙方擁有33% 股權，乙方擁有的股權由乙方兩位自由人均等持有。” [8] Clause 2: “雙方約定，股權質押後，乙方享有的股權暫時由甲方名義自由，待條件成熟時，按照相關法律法規將相應股權變更至乙方名下。” [9] Clause 4: “甲乙任何一方，在沒有得到對方書面許可的情況下，不得將本協議所約定的股權、責任、義務、權利全部或者部份轉讓給第三者。” | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCA 2415/2014