SUNG CHUNG KWUN v ADDCHANCE DYEING FACTORY LIMITED

HCA 2385/2017
and HCMP 2556/2017
(Consolidated)

[2025] HKCFI 5216

HCA 2385/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2385 OF 2017

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AND

HCMP 2556/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2556 OF 2017

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_______________

_______________

(Consolidated pursuant to the Order of Deputy High Court Judge Sherrington dated 29 November 2018)

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J U D G M E N T

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A.  INTRODUCTION[2]

1.  This is yet another case showing that context is everything. Each case turns on its own facts.

2.  This is the trial in HCA 2385/2017 and HCMP 2556/2017. The dispute in these proceedings concerns the enforceability of the Second Mortgage (“the Second Mortgage”) of the property known as G/F, 1/F – 9/F and the roof of Sung’s Tower (宋氏大廈) (“Sung’s Tower”) executed by Mr Sung Chung Kwun (“Sung Sr”)[3] on behalf of Addchance Dyeing Factory Limited (“ADFL”)[4] on 8 June 2015 in favour of the Banks[5]. The Banks assigned all the rights under the Second Mortgage to Champion Forever Group Limited (“CFGL”)[6] on or around 9 March 2017.

3.  The core issue in these proceedings is whether CFGL should be allowed to enforce the Second Mortgage against ADFL in the circumstances.

4.  The main protagonists in these proceedings are as follows:

(1)  On the one hand,

(a)  Sung Sr;

(b)  ADFL; and

(c)  Powerlink Industries Limited (“Powerlink”)[7]

For ease of reference, these parties are collectively referred to as “Ps” in this judgment.

(2)  On the other hand,

(a)  CFGL;

(b)  Hammer Capital Private Investments Limited (“HCPIL”)[8]; and

(c)  Champion Alliance Industries Limited (“CAIL”)[9].

For ease of reference, these parties are collectively referred to as “Ds” in this judgment.

5.  In this trial, Ps are represented by Mr Bernard Man SC, leading Mr Julian Lam. Ds are represented by Mr Christopher Chain SC, leading Ms Tinny Chan and Ms Clara Wong. The other parties are absent in the trial.

6.  Each side has provided me very detailed written and oral submissions, and each side has cited numerous authorities in this trial.[10]  In this judgment, I would set out the background, analyse the evidence and set out my factual findings, and provide for the reasons for the conclusion reached by me. For avoidance of doubt, the points put forward by the parties in their respective submissions (both written and oral submissions) and the authorities referred to in their submissions which have not been mentioned in this judgment have also been considered by this Court. Some points raised and some authorities cited by the parties are not mentioned in this judgment simply because for the purpose of this judgment, the matters stated herein would be sufficient.

B.  AGREED FACTS AND THE PARTIES’ RESPECTIVE CONTENTIONS[11]

7.  Save and except the matters in the paragraphs or subparagraphs beginning with the words “Ps’ Contention” or “Ds’ Contention”, unless otherwise indicated, the matters set out in this section (including the matters in the annexures) are agreed by Ps and Ds.[12]

B1.  Relevant parties and background

B1.1  Sung Sr

8.  At all material times:

(1)  Sung Sr was, until 2015 and 2016 when he divested his shares, the majority shareholder of Addchance Holdings Limited (“AHL”)[13], holding about 319,510,000 of its issued shares (approximately 72.41% of its entire issued share capital).

(2)  Such shares in AHL were held by Sung Sr: (i) directly (62,650,000 shares, amounting to around 14.20% shareholding) and (2) indirectly through Powerlink, a company beneficially owned by Sung Sr (257,000,000 shares, amounting to approximately 58.24%).

(3)  In 2012, 2013 and through to 7 November 2014, Sung Sr regularly increased his direct shareholding in AHL, which reached its highest amount of 62,650,000 shares on 7 November 2014.

(4)  Sung Sr operated textile businesses through the AHL Group (“Sung Sr’s Businesses”).

9.  As of late 2014, Sung Sr was the majority shareholder of AHL, holding over 70% of the issued shares in AHL.

10.  Throughout 2015 and 2016, Sung Sr remained the largest disclosed shareholder of AHL.

11.  Ps’ Contention: Mr Poon Sum (“Poon”)[14] controlled a greater shareholding than Sung Sr by mid-June 2015.

12.  A table setting out Sung Sr’s and Poon’s (including their related parties) respective shareholdings in AHL as disclosed from filed disclosure of interest forms in the period between 1 June 2014 and 31 May 2017 is shown in Annex 1 to the Agreed Facts, which is reproduced and annexed hereto as Annex A.

B1.2  ADFL

13.  At all material times, ADFL was and is:

(1)  A limited company incorporated in Hong Kong, whose majority shareholder was and is Sung Sr, holding 60% of ADFL’s shareholding. Mr Sung Kim Ping (“Sung KP”, Sung Sr’s second son) and Fundtop Limited (“Fundtop”, which is ultimately held by Mr Choi Yuk Chor (“Choi YC”)[15], each holds 20% (ie adding up to the remaining 40%) of ADFL’s shareholding. Sung Sr was and is also one of the directors of ADFL. The other director was Sung KP. Prior to October 2015, Sung Sr owned 60% of ADFL’s shareholding and the remaining 40% of ADFL’s shareholding was owned by Sung KP.

(2)  Since 19 November 2010, the registered owner of Sung’s Tower.

(3)  A property holding company which collects rent for Sung's Tower.

B1.3  AHL

14.  At all material times, AHL was:

(1)  A limited company incorporated in the Cayman Islands.

(2)  Since October 2005, listed on the Main Board of the HKEX with stock code 3344.

(3)  Together with its subsidiaries (“AHL Group”):

(a)  Principally engaged in the production and sale of cotton yarns, dyed yarns, knitted sweaters; the provision of dyeing and knitting services; and the trading of cottons and yarns, being businesses founded by Sung Sr and operated and managed by him and his associates (ie Sung Sr’s Businesses).

(i)  Ps’ Contention: Sung Sr’s Businesses were directly operated and managed by Sung Sr and his associates until at least May 2016, during which period Sung Sr, Sung KP, and/or Ms Sandy Sung Kit Ching (“Sandy Sung”)[16] were directors of Addchance Limited (“ACL”)[17], Chinakey (Hong Kong) Limited (“Chinakey”)[18] and Sky Emperor International Limited (“Sky Emperor”)[19].

(ii)  Ds’ Contention: At all material times before the Clean Break (see [35] below), Poon had no control over Sung Sr’s Businesses which were not transferred to Poon, still less assumed responsibility for discharging the considerable debts of Sung Sr’s Businesses.

(b)  Since the appointment of 2 directors nominated by Poon, namely Mr Lo Ping and Mr Chui Chi Yun Robert (“Robert Chui”) in December 2014, AHL further engaged in the natural gas industry through operating its new natural gas businesses (“New Natural Gas Department” or “New Natural Gas Business”), being businesses which Poon wished to inject into AHL.

At all material times, both Lo Ping and Robert Chui were under the control and/or influence of Poon.[20]

(c)  The AHL Group included the following indirectly wholly-owned subsidiaries of AHL:

(i)  CFGL, a limited company incorporated in the BVI on 25 August 2016 for debt restructuring purposes;

(ii)  ACL - At all material times since 2014, Sung KP, Mr Wong Chiu Hong (“CH Wong”) and Mr Ip Siu Lam (“Ip”) were directors of ACL, save that Sung KP was replaced by Mr Ke Yuexian on 31 May 2016. On 31 May 2016, all bank signatories were revoked and the new authorised signatories were Lo Ping, Robert Chiu and Ip.

(iii)  Chinakey

(iv)  Sky Emperor - At all material times since 2014, Mr Lin Chun Ming and CH Wong were directors of Sky Emperor, until CH Wong ceased to be a director on 7 October 2016.

15.  On 22 November 2021, the Court of First Instance ordered that AHL be wound up in HCCW 51/2020.

16.  As to the evolution of the composition of AHL’s board over the years:

(1)  The Chairmen of AHL’s board of directors (“AHL’s Board”) were:

Period	Chairman
30 September 2011 to 9 July 2015	Mr Sung Kim Wa (“Sung KW”)[21]
9 July 2015 to 7 May 2016	Sung KP
7 May 2016 to 19 April 2017	Vacant
19 April 2017 to 13 November 2017 (ie the date of the Statement of Claim in HCA 2385/2017)	Poon

(2)  As to the composition of AHL’s Board, a table distinguishing between (a) directors appointed before the 3 SPAs (see [36] below) were entered into, affiliated with Sung Sr or appointed by Sung Sr (“Sung Appointed Director”), and (b) directors affiliated with or nominated by Poon or directors appointed on or after 7 May 2016 shown in Annex 2 to the Agreed Facts, which is reproduced and annexed hereto as Annex B.

B1.4  CFGL

17.  At all material times, CFGL is a company incorporated in the BVI with limited liability on 23 August 2016.

18.  Lo Ping was until around 30 November 2018, the sole director of CFGL. With effect from 30 November 2018, Mr Cheung Tat Chung became a director of CFGL.[22]

19.  On 29 April 2020, control of the shareholding of CFGL was assumed by independent receivers appointed by CAIL (“CFGL Receivers”), which was announced by AHL on 8 May 2020.

20.  On 23 July 2020, the CFGL Receivers sold the entire shareholding of CFGL through a receivership bidding process to an independent third party investor, Ms Fung Wing Nam, Florence.

B1.5  Poon

21.  At all material times, Poon was and is:

(1)  A businessman.

(2)  An Executive Director (“ED”) and one of the co-founders of Tourong Changfu Group Limited (stock code: 850) (“Tourong”) (formerly known as PetroAsian Energy Holdings Limited), the shares of which were listed on the Main Board of the HKEX until around May 2021.

(3)  From around December 2014 until around late March 2017, disclosed as a minority shareholder of AHL.[23]

(4)  From around 31 March 2017 until around January 2020, the disclosed indirect majority shareholder of AHL.

(5)  From around 19 April 2017 until around November 2020, the Chairman and an ED of AHL.

(6)  Declared bankrupt on 26 March 2021[24].

B1.6  HCPIL

22.  At all material times, HCPIL was and is:

(1)  A company incorporated in the BVI with limited liability, associated with the asset management firm Hammer Capital;

(2)  Principally engaged in the business of structured credit transactions; and

(3)  Save for the enforcement of its security under the CAIL Loan (see [128(2)] below) on 14 January 2019 (through which HPCIL acquired the ownership of and control over CAIL as mortgagee in possession of all the shares of CAIL), not related to or associated with the other defendants in these proceedings.

B1.7  CAIL

23.  At all material times, CAIL was and is:

(1)  A company incorporated in the BVI with limited liability.

(2)  A corporate vehicle of Leung Chau Pin Paul (“Paul Leung”) until around 14 January 2019.

24.  It is Ps’ contention that Paul Leung was a nominee of Poon.

B2.  The 2014 Negotiations

25.  The AHL Group posted a profit between HK$30 million odd and HK$90 million odd from 2011 to 2013. The financial position as at 30 June 2014, as stated in AHL’s 2014 interim report (“the 2014 IR”), was as follows:

Item	Amount
Non-current assets (including property, plant and equipment of HK$845,298,000)	HK$944,289,000
Current assets (including inventories of HK$1,181,604,000)	HK$1,986,714,000
Current liabilities (including bank borrowings and bank overdraft totalling HK$1,350.8 million)	HK$1,821,437,000
Net current assets	HK$165,227,000
Net asset value (“NAV”)	HK$1,109,566,000
Gross profit	HK$94,001,000
Net profit (loss)	(HK$42,872,000)
Total comprehensive income (expense) for the period	(HK$5,093,000)

26.  The management discussion and analysis in the 2014 IR further explain that: (a) HK$577.1 million were term loans, mainly relating to the installations of additional knitting machineries in Cambodia and Mainland Chinese production bases; and (b) HK$757.1 million were trade loans, which would be released upon the delivery of goods sold.

27.  The share price of AHL in the 6 months from 1 May 2014 up to 31 October 2014 was between HK$1.03 and HK$1.23 per share.

28.  Sung Sr had been continuously increasing his shareholding of AHL until 7 November 2014.

29.  Sometime in October 2014, Poon was introduced to Sung Sr through Mr Lam Kwok Hing Wilfred (acting as a consultant and agent of Poon) and Mr Philip Chu. Prior to being introduced to each other in October 2014, Poon and Sung Sr did not know each other and did not have any dealings with each other.

30.  Ps’ Contention: Poon had previous experience in acquiring a listed company as a listed shell and injecting his own business into it. Further:

(1)  Since around 2010, Poon (through Tourong, which was then-named PetroAsian Energy Holdings Limited) and then in his own name, had acquired a substantial interest in a GEM-listed company under stock code 8266 (“Gold Tat”), formerly known as Mobile Telecom Network (Holdings) Limited.

(2)  Specifically, in April 2010, the majority shareholder and founder Mr Chan Chung disposed of a substantial shareholding in Gold Tat to Tourong. Shortly thereafter, the composition of Gold Tat’s board substantially changed. One of the new directors was, inter alios, Mr Chiu Wai Piu.

(3)  In 2011, Gold Tat was principally engaged in the development, provision and sale of mobile and internet communication telecommunications and other related services in Hong Kong and other Asia Pacific countries.

(4)  On 15 February 2011, Poon and Mr Poon Sau Tin (a connected party of Poon) agreed to sell the entire shareholding of the holding company of two Chinese Mainland property development project companies to Gold Tat. Between April and June 2011, Gold Tat conducted a fundraising exercise to raise not less than around HK$58.86 million by way of an open offer of between 588 and 592 million shares.

(5)  On 30 May 2013, a vehicle of Poon agreed to sell a 70% shareholding of the target group engaged in Mainland property development and shareholder loan to a wholly-owned subsidiary of Gold Tat for HK$109 million. One of the other shareholders of the target group was Jun Moon Limited[25].

(6)  In August and October 2013, Gold Tat changed its name from Mobile Telecom Network (Holdings) Limited to Gold Tat.

(7)  On 7 January 2014, a new Chairman and ED was appointed.

(8)  On 19 December 2014, Gold Tat disposed of Mobile Telecom (BVI) Ltd, which operated its old mobile application development and information technology consultant services business, to Wong Ming Wai. Wong Ming Wai was formerly the CEO of that subsidiary.

(9)  On 28 January 2016, Gold Tat agreed to acquire a 7% shareholding in Coulman International Limited (“Coulman”)[26] for HK$63 million from Hong Jun Global Limited (“Hong Jun”)[27].

31.  Over the course of October 2014 up to early December 2014, Poon and Sung Sr engaged in negotiations (“the 2014 Negotiations”) for:

(1)  On Ps’ case, at first the investment by Poon into AHL, which developed into the acquisition by Poon of AHL as a listed shell company with Sung Sr’s Businesses to be returned to Sung Sr;

(2)  On Ds’ case, the mere sale and purchase of Sung Sr’s shares in AHL from Sung Sr to Poon.

32.  In the course of the 2014 Negotiations, a handwritten, 2-page, 13-line, and undated memorandum of understanding (“the Written Memo”) was signed by Poon and Sung Sr. The contents of the Written Memo are as follows:

“1. 宋先生及潘先生股份落實轉讓金額

2. 草議[28]框架協議

(a) 互益及益誠公司及子公司的業務、資產、負債轉讓給宋先生

(b) 潘先生落實付款安排及交收時間表

(c) 資產及(a)項交易時間表

3. 銀行與潘先生落實解除集團擔保的安排 (金額及時間)

4. 銀行與宋先生相討落實債務重組”

33.  Ps put forward the following contentions:

(1)  As a result of the 2014 Negotiations, Sung Sr and Poon entered into an oral agreement (“the AHL Sale Agreement”) whereby it was expressly or impliedly agreed that:

(a)  Sung Sr would sell Poon (or his nominees) his controlling shareholding interest in AHL in tranches from around December 2014 to around June 2016 by the 3 SPAs;

(b)  Poon would re-transfer Sung Sr’s Businesses back to Sung Sr upon the completion of necessary restructuring exercises;

(c)  Pending re-transfer of Sung Sr’s Businesses, Sung Sr’s power over the conduct of the affairs of the AHL Group and Sung Sr’s Businesses would be transferred to Poon, who was obliged to maintain the viable existence of Sung Sr’s Businesses such that they could be re-transferred to Sung Sr;

(d)  Poon would be entitled to nominate one ED and one non-executive director (“NED”) to be appointed to AHL’s Board;

(e)  Poon would arrange for fund raising exercises to be conducted by AHL to raise funds for the AHL Group, these funds to be used partly (one-third) for Sung Sr’s Businesses and partly (two-thirds) for Poon’s New Natural Gas Business.  

(2)  Sung Sr and Poon also shared the understanding that, pending the re-transfer of Sung Sr’s Businesses, Sung Sr’s power over the conduct of the affairs of the AHL Group and Sung Sr’s Businesses would be transferred to Poon. Sung Sr entrusted Poon to exercise his power over the conduct of the affairs of Sung Sr’s Businesses in the interests of Sung Sr pending the said re-transfer, and Poon would not exploit Sung Sr’s Businesses for his own benefit.

(3)  Based on all the circumstances, pending the return of Sung Sr’s Businesses back to Sung Sr, Poon assumed contractual and fiduciary duties to Sung Sr to exercise his powers and control over the Sung Sr's Businesses in good faith and in the interests of Sung Sr.

(4)  The Written Memo was not intended to be a legally binding document and it was superseded by the AHL Sale Agreement.

34.  As to the AHL Sale Agreement, Ps’ pleaded case as per the Re-Amended Statement of Claim in HCA 2385/2017 (“RASOC”) is as follows:

“9. In or about October 2014, Poon was introduced to Sung Sr as a potential investor for the AHL Group’s businesses. Poon was said to be an experienced investor in the capital market.

10. In or around early December 2014, Sung Sr (on behalf of himself and Powerlink) and Poon arrived at an oral agreement (the “AHL Sale Agreement”) whereby:

10.1. Sung Sr would sell his controlling shareholding interest in AHL (held variously by himself directly and indirectly through Powerlink) to Poon in several tranches, from around December 2014 to around June 2016.

10.2. Poon would re-transfer the existing textile businesses of the AHL Group (“Sung Sr’s Businesses”) to Sung Sr upon the completion of all the necessary restructuring exercises.

10.3. Poon would be entitled to nominate 1 executive director and 1 non-executive director to be appointed to AHL's Board.

10.4. Poon would arrange for some fund raising exercises to be conducted by AHL. One-third of the funds would be used for Sung Sr’s Businesses and the remainder would be used for new businesses that Poon would introduce to the AHL Group.

11. When entering the AHL Sale Agreement, Sung Sr and Poon understood that:

11.1. Pending re-transfer of Sung Sr’s Businesses, Sung Sr’s power over the conduct of the affairs of the AHL Group and Sung Sr's Businesses would be transferred to Poon.

11.2. Sung Sr entrusted Poon to exercise his power over the conduct of the affairs of Sung Sr's Businesses in the interests of Sung Sr pending the said re-transfer, and Poon would not exploit Sung Sr’s Businesses for his own personal benefit.

11.3 Poon would ensure that Sung Sr and Powerlink would be paid for the shares sold.

12. Such understanding was implied from the following matters:

12.1. The terms of the AHL Sale Agreement as averred in paragraph 10 above are repeated.

12.2. On the basis of the AHL Sale Agreement, and Poon's assurance that he was not interested in Sung Sr's Businesses and would return every single part of those businesses to Sung Sr, Poon and Sung Sr understood that Sung Sr's Businesses belonged to Sung Sr and that Poon was obliged to return them to Sung Sr.

12.3. Until Sung Sr's Businesses were returned to him, Poon would have power over Sung Sr's Businesses and the AHL Group, as Sung Sr's shareholding was transferred to Poon and as Poon was able to nominate and direct members of AHL's Board and the other boards of subsidiaries in the AHL Group.

12.3A. Further, pursuant to the terms of the 3 SPAs …, Poon had the power to require Sung Sr (and Powerlink) to complete the transfer of Sung Sr's majority shareholding to Poon at any time, and thereby take full control over AHL. Sung Sr had also irrevocably committed to sell Poon his majority shareholding.

12.3B. The agreed price of Sung Sr's shareholding did not include the value of Sung Sr's Businesses.

12.4. Sung Sr thereby became vulnerable to Poon's abuse of power, and Sung Sr reposed, trust and confidence in Poon by entrusting him with such power over the conduct of the affairs of Sung Sr’s Businesses.

12.5. It goes without saying that Poon was obliged to exercise his power over the affairs of Sung Sr's Businesses in Sung Sr's interests with a view to re-transferring them to Sung Sr, and Poon could not exploit such power for his own benefit.

13. To give business efficacy to the AHL Sale Agreement and/or as a matter of obviousness, the following terms were implied terms of the AHL Sale Agreement, that until Sung Sr's Businesses were retransferred to Sung Sr:

13.1 Poon would exercise his power to conduct the affairs of Sung Sr's Businesses in good faith and not in a way to deliberately harm the interest of Sung Sr;

13.2. Poon would exercise his power over Sung Sr's Businesses for the purpose of the contemplated re-transfer and not to his own benefit or to the harm of Sung Sr;

13.3. Poon would not do anything which would prevent the AHL Group from effecting the re-transfer of Sung Sr's Businesses to Sung Sr; and/or

13.4. Poon was obliged to maintain the viable existence of Sung Sr's Businesses such that they could be re-transferred to Sung.

14. Further or alternatively, by virtue of the matters set out in paragraphs 9 to 13 above, and/or the trust and confidence reposed by Sung Sr in Poon by the entrusting him with power over the conduct of the affairs of Sung Sr's Businesses (which Poon immediately acquired through his nominees on AHL's Board, the ultimate power to acquire a majority shareholding of AHL at any time and Sung Sr's irrevocable commitment to sell Poon his majority shareholding; and which would increase as Poon acquired a greater shareholding in AHL and the power to appoint more nominees to AHL's Board), Poon owed Sung Sr fiduciary duties in respect of his power to conduct the affairs of Sung Sr's Businesses, in particular, to:

14.1. Exercise such powers in good faith;

14.2. Exercise such powers for proper purposes;

14.3. Not to make any unauthorised profits or obtain unauthorised advantages; and

14.4 Exercise such powers exclusively in the best interests of Sung Sr.

15. On around 5 December 2014, pursuant to the AHL Sale Agreement, Sung Sr and Powerlink, acting on its own behalf and on behalf of Sung Sr, on the one hand, and Poon acting through various companies controlled by him, on the other hand, variously entered into [the 3 SPAs] for the sale of a total of 257,000,000 of Sung Sr's AHL shares (amounting to approximately 58.36% of AHL's total issued shareholding) to Poon or companies controlled by Poon (as the case may be) at the price of HK$0.952 per share.”

35.  On the other hand, Ds’ contentions are as follows:

(1)  The AHL Sale Agreement never existed. Nor did Poon ever assume any fiduciary duties to Sung Sr or contractual duties to exercise his power and control over the Sung Sr’s Businesses (which he did not have) in good faith and in the interests of Sung Sr.  Instead, in the course of the 2014 Negotiations, Poon and Sung Sr shared a mutual intent for shares in AHL to be sold on a listed company shell basis (“Shell Sale Intent”):

(a)  Sung Sr wanted to monetize the listed status of AHL, by selling to Poon a majority shareholding in AHL as a listed “shell”, ie a listed company stripped of its existing businesses (made up of the assets and liabilities of such businesses), which comprise the various textiles businesses operated by the subsidiaries of AHL (ie Sung Sr’s Businesses).

(b)  Poon wanted to acquire AHL as a listed shell for purposes of developing natural gas businesses (with Sung Sr’s Businesses to be divested). Poon did not have any familiarity with or interest in Sung Sr’s Businesses.

(2)  As a result of the 2014 Negotiations, Poon and Sung Sr agreed on a broad framework for the Shell Sale Intent to be implemented, including a non-binding “agreement to agree” on the concrete terms of implementation (“the Clean Break Framework” ):

(a)  The Clean Break Framework was primarily evidenced by the Written Memo.

(b)  It was broadly envisaged by the Written Memo that up to 1.5 years of preparatory restructuring work would be required before the Shell Sale Intent could be completely implemented on the Clean Break basis (“the Clean Break” and “the “Restructuring Outline”).

(3)  At the signing of the 3 SPAs (see the paragraph below), Poon introduced Guo and Paul Leung to Sung Sr.

36.  On 5 December 2014, Poon met with Sung Sr at a hotel in Shenzhen, whereby three sale and purchase agreements (“the 3 SPAs”) were entered into with Sung Sr with an agreed sale price of HK$0.952 per share of AHL:

(1)  The 1^st SPA was entered into between Sung Sr and Gold Tat (a corporate vehicle controlled by Poon) for the sale and purchase of 21,750,000 shares in AHL (representing about 4.93% of the total issued share capital of AHL at the time) to be sold to Gold Tat before 19 December 2014 for the total consideration of HK$20,706,000.

(2)  The 2^nd SPA was entered into between Sung Sr and Jun Moon (a corporate vehicle controlled by Guo acting as a nominee of Poon), for the sale and purchase of 21,750,000 shares in AHL (representing about 4.93% of the total issued share capital of AHL at the time) to be sold to Jun Moon (or a party nominated by Jun Moon) before 19 December 2014 for the total consideration of HK$20,706,000.

(3)  The 3^rd SPA (which was titled a “Cooperation Agreement”) was entered into between Powerlink and Flotilla Holdings Limited (“Flotilla”, a corporate vehicle controlled by Paul Leung, acting as a nominee of Poon). In particular:

(a)  Pursuant to Clause 1, 86,500,000 shares (“First Tranche”, representing about 19.6% of the total issued share capital of AHL at the time) would be sold on or before 15 December 2015 to Flotilla for the total consideration of HK$82,348,000. Flotilla had the right to acquire the 86,500,000 shares prior to 15 December 2015 upon giving 3 days notice.

(b)  Pursuant to Clause 2, 127,000,000 shares (“Second Tranche”, representing about 28.78% of the total issued share capital of AHL at the time) would be sold on or before 15^th June 2016 to a party nominated by but independent from Flotilla (“沒有權益關係”) for the total consideration of HK$120,904,000. Flotilla had the right to acquire the Second Tranche of AHL shares prior to 15 December 2016 upon giving 3 days notice.

(c)  Pursuant to Clause 3, Powerlink and Sung Sr agreed to promptly give two board seats to Flotilla: one ED and one NED.

(d)  Pursuant to Clause 4:

(i)  Powerlink and Sung Sr agreed to cooperate with Flotilla in respect of any potential plan to increase the share capital and make placements, and agreed to assist AHL to properly handle its debts.

(ii)  Flotilla agreed to assist in arranging for placing of warrants for shares in AHL (not exceeding a 20% shareholding) to independent third parties at a price not below HK$0.952 per share before 31 December 2014, and again before 15 December 2015. The proceeds of such placing shall be kept in a specific bank account in the name of AHL but overseen by Flotilla. Flotilla undertook not to use any new funds unless there was a potential acquisition of a new business.

(iii)  It is Ds’ contention that the effect of Clause 4 is merely to provide Flotilla with limited control over one specific bank account of AHL for purposes of the New Natural Gas Department to be introduced by Poon into AHL. Other than that, Flotilla had no control over the finances of AHL.

(e)  Pursuant to Clause 5, the agreement for the sale and purchase of the shares was described as mandatory in nature (必買必賣). If Powerlink failed to perform, it would have to pay “賠償” in the sum of HK$60 million or the difference in share price, whichever the higher.

(f)  Pursuant to Clause 8, neither could sell their shareholding without the consent of another party within 2 years of signing the contract.

37.  It was all along Sung Sr’s and Poon’s intention and understanding that all of the shares under the 3 SPAs would be sold to Poon (held through his nominees).

38.  The sale and purchase settlement timelines under the 3 SPAs are as follows:

SPA	Number of Shares	Settlement
1st SPA	21,750,000 (or 4.93%) for HK$20,706,000	Not later than 19 Dec 2014
2nd SPA	21,750,000 (or 4.93%) for HK$20,706,000	Not later than 19 Dec 2014
3rd SPA (First Tranche)	86,500,000 (or 19.6%) for HK$82,348,000	Not later than 15 Dec 2015
3rd SPA (Second Tranche)	127,000,000 (or 8.8%) for HK$120,904,000	Not later than 15 Jun 2016, around 1.5 years after the date of the 3 SPAs, namely 5 Dec 2014

39.  Ps’ Contention: The 3 SPAs were executed pursuant to the AHL Sale Agreement. The HK$0.952 share price was proposed by Poon, on the basis that the price of a listed shell on the Main Board of the HKEX was around HK$400 million to HK$500 million for 100% of the shares. Sung Sr relied on Poon to handle the technical aspects of the transaction and restructuring exercises. Sung Sr had no particular interest in immediately monetising his shareholding in AHL, which he had been gradually accumulating prior to and through the 2014 Negotiations.

40.  Ds’ Contention:

(1)  There is no such thing as the AHL Sale Agreement, which never existed. Instead, at all material times, the terms of the 3 SPAs were consistent with the Written Memo and the Clean Break Framework, which also enabled Sung Sr to monetize the listed status of AHL, via disposing of his substantial shareholding in AHL, as he wished to:

(a)  The price of the shares of AHL at HK$0.952 per share set out in the 3 SPAs reflect the fact that only the “listed company shell” of AHL would be sold to Poon and that the shares were transacted on a clean break (“正負零交收”) basis, meaning that neither the asset value nor liabilities of Sung Sr’s Businesses were taken into account as they were expected to be returned to Sung Sr at the completion of the sale of the listed shell of AHL, which was valued at HK$420 million at the time.

(b)  The earlier completion of the 1^st and 2^nd SPAs was intended to enable Sung Sr to immediately monetize a substantial amount of his shareholding in AHL, whilst allowing Poon (through nominees) to immediately acquire a sizeable shareholding in AHL (ie 9.86%).

(c)  As for the gap between the completion of the 3^rd SPA First Tranche and the 3^rd SPA Second Tranche, Poon was conscious of the regulatory requirement that a mandatory general offer must be made by any investor acquiring more than 30% of the voting rights of a listed company to all shareholders of that listed company.

(2)  At the time of the 3 SPAs, Sung Sr controlled about 70% of the shares in AHL. As the 3^rd SPA involved transactions of larger amounts of shares in AHL compared to the 1^st and 2^nd SPAs (approximately 48.4% in total), Poon was prevented by the lock-in mechanism from dumping AHL’s shares on the market immediately and crashing its share price, thereby protecting (i) Sung Sr’s interest in his remaining shares in AHL; and (ii) the intent of Sung Sr to re-acquire Sung Sr’s Businesses from AHL after Poon acquired control over the listed shell.

41.  Pursuant to the terms of the 3 SPAs, upon the appointment of 2 persons nominated by Flotilla (Poon’s nominee) to AHL’s Board (these persons being Lo Ping and Robert Chui appointed on 22 December 2014), Poon wished to and commenced injecting the New Natural Gas Department/Business into the AHL Group.

B3.  Performance of the 1^st SPA and the 2^nd SPA, and partial performance of the 3^rd SPA

42.  In the period from December 2014 to February 2015, the 1^st SPA and 2^nd SPA were performed, and the 3^rd SPA was partially performed:

(1)  On Ps’ contention, in furtherance of the AHL Sale Agreement;

(2)  On Ds’ contention, in furtherance of the Clean Break Framework.

43.  The 1^st and 2^nd SPAs were duly performed on 15 and 16 December 2014 as follows:

(1)  For the 1^st SPA, Gold Tat nominated Poon to take up 21,750,000 shares in AHL (4.93% of the issued share capital) from Sung Sr on 16 December 2014. The purchase price for those shares was duly paid to Sung Sr.

(2)  For the 2^nd SPA, Jun Moon nominated Ever Source Enterprises Limited (“Ever Source”) (a corporate vehicle controlled by Poon) to take up 21,750,000 shares in AHL (4.93% of the issued share capital) from Sung Sr on 15 December 2014. The purchase price for these shares was duly paid to Sung Sr.

44.  By the 1^st and the 2^nd SPAs, Poon acquired control over 43,500,000 shares in AHL (about 9.86%). As of 16 December 2014, Poon held the second largest shareholding in AHL after Sung Sr, who still controlled 276,150,000 shares in AHL (about 62.58%).

45.  In the period from December 2014 to June 2015, there was partial performance of the 3^rd SPA totalling 105,920,000 shares.

(1)  Pursuant to clause 3 of the 3^rd SPA, Lo Ping and Robert Chui were duly appointed to AHL's Board on 22 December 2024 as ED and NED respectively.

(2)  Additionally, there was also an early performance of the 3^rd SPA First Tranche and part of the 3^rd SPA Second Tranche.

(3)  For the 3^rd SPA First Tranche and part of the Second Tranche of shares:

(a)  With the agreement of Flotilla (as nominee of Poon), on or around 5 February 2015, Sung Sr (on behalf of Powerlink) sold 17,920,000 shares in AHL on the open market at the price of HK$1.45 per share, which was acquired by Poon in the name of some unknown nominees from around December 2014 to August 2015.

(b)  Of the sale proceeds, Sung Sr (on behalf of Powerlink) retained the portion of the sale proceeds up to the price of HK$0.952 per share (i.e. the purchase price Powerlink would have received under the 3^rd SPA).

(c)  The portion of the sale proceeds beyond HK$0.952 per share was returned to third parties nominated by Flotilla.

(d)  Between March and June 2015, Powerlink sold a further total of 88,000,000 shares in AHL to Flotilla (as nominee of Poon), in performance of the 3^rd SPA as follows:

17 March 2015	22 million
1 April 2015	22 million
7 May 2015	11 million
27 May 2015	11 million
19 June 2015	22 million

(e)  Powerlink delivered to Flotilla 8 share certificates of 11,000,000 shares each. Powerlink also executed bought and sold notes for the transfer of shares to various nominees of Poon (through Flotilla) such as Choi YC, Mr Zhao Xu and Zheng SJ.

(4)  The remaining part of the 3^rd SPA Second Tranche of shares amounted to 107,580,000 of Sung Sr’s shares.

46.  Ps’ Contention:

(1)  On 21 November 2014, Perfect Attempt Limited (“Perfect Attempt”), a wholly-owned subsidiary of AHL, was incorporated and its directors were Robert Chui and Lo Ping.

(2)  Perfect Attempt was set up to hold the new funds from fund raising activities pursuant to the AHL Sale Agreement and Clause 4 of the 3^rd SPA.

(3)  On 24 December 2014, shortly after the appointment of Robert Chui and Lo Ping to AHL’s board, AHL announced a top-up placing whereby Powerlink would place 88 million shares and subscribe for 88 million new shares issued by AHL for HK$1.05 per share, raising net proceeds of HK$90.6 million.

(4)  The funds raised, after transaction fees, were paid into Perfect Attempt’s bank accounts.

(5)  The proceeds of the fundraising were used: in the amount of HK$50 million, for part payment for the acquisition of an interest in Coulman, which operated the New Natural Gas Business; and in the amount of HK$35.6 million, for the general working capital of the AHL Group.

(6)  Further fundraising activities were arranged by Robert Chui and Lo Ping and attempted/conducted before May 2016, including: the August 2015 Placing (see [72] below), the Rongsheng Subscription Agreement and the Paired Placing Agreement in November 2015 (see [81] below).

(7)  Although AHL’s official legal advisers were F Zimmern & Co, Poon’s regular legal adviser, Michael Li & Co (being the legal advisers to Tourong, Gold Tat and later CFGL), were retained as the legal advisers to AHL for the fundraisings mentioned in the above.

47.  P further contends that in respect of the New Natural Gas Business:

(1)  The holding company of the new Natural Gas Business was Coulman.

(2)  Coulman was, up to 24 April 2015, variously owned by the following shareholders which were all nominees of Poon:[29]

Date	Shareholders
12 October 2012	Flotilla (100%)
2 September 2013	Paul Leung (100%)
12 January 2015	Hong Jun (100%)
13 March 2015	Hong Jun (54.5%) and       Kai Lian (45.5%)

(3)  Its sole shareholder was Paul Leung until Lo Ping was added on 23 April 2015.

(4)  On 13 March 2015, AHL announced that a wholly-owned subsidiary Endless Rich Limited (“Endless Rich”) (which was incorporated on 2 January 2025, whose directors were Lo Ping and Robert Chui and whose principal activity was investment in the natural gas business) entered into a sale and purchase agreement (“the 2015 Coulman SPA”) to acquire a 13% equity interest in Coulman from Hong Jun (Paul Leung’s company) for a total consideration of HK$177.32 million.

(5)  On 24 April 2015:

(a)  AHL completed its acquisition of a 13% interest in Coulman.

(b)  Paul Leung (through Hong Jun) acquired 86,480,909 (14.05%) consideration shares of AHL valued at HK$1.357 per share as part-payment of the 2015 Coulman SPA.

(6)  Further steps were taken to introduce new businesses.

48.  By the end of June 2015, Sung Sr held a shareholding in AHL of around 27.45% to 31.02%.

49.  Ps’ Contention: Poon was entitled to, and obliged to purchase, a further 107,580,000 shares pursuant to the 3^rd SPA and AHL Sale Agreement. Poon controlled at least approximately 28.23% (149,420,000 shares) through his acquisition of shares pursuant to the performance of the 1^st and 2^nd SPAs and partial performance of the 3^rd SPA; furthermore, through Paul Leung, Poon initially controlled an additional 86,480,909 shares of AHL, which had been sold down to 67,002,909 shares as at 11 May 2024.

B4.  Second Mortgage over Sung’s Tower

50.  From time to time, the AHL Group secured the Loan Facilities from the Banks to meet the operational needs of Sung Sr’s Businesses.

51.  In February 2015, some of the Banks began to demand repayment of outstanding Loan Facilities granted to the AHL Group.

52.  On 27 March 2015, the 2014 annual results of AHL were announced. AHL’s financial position as at year-end 2014 according to its 2014 Annual Report (“the 2014 AR”) was as follows:

Item	Amount
Non-current assets (including property, plant and equipment of HK$806,644,000)	HK$903,736,999
Current assets (including inventories of HK$1,030,633,000)	HK$1,737,956,000
Current liabilities (including bank borrowings and bank overdraft totalling HK$1,139 million)	HK$1,678,179,000
Net current assets	HK$59,777,000
NAV	HK$963,513,000
Gross profit	HK$72,256,000
Net profit (loss)	(HK$184,258,000)
Total comprehensive income (expense) for the period	(HK$152,340,000)

53.  From April up to 4 June 2015:

(1)  In or around April 2015, at the request of the Banks, AHL engaged FTI Consulting (“FTI”) as its independent financial advisor to review the financial position of AHL Group and make recommendations with regard to potential debt restructuring.

(2)  The Banks further made a request for Sung Sr to procure ADFL to execute a Second Mortgage over Sung’s Tower as additional security for the AHL Group’s liabilities.

(3)  It is my finding that there was a meeting in a Thai restaurant in K11 (“the K11 Meeting”) between Poon’s Camp on the one hand and Sung Sr’s family members (Sung KP, Sandy Sung, Martin Kong, Gary Lau) on the other hand at a time before 5 May 2015. In that meeting, the idea of a Second Mortgage over Sung’s Tower was discussed.

(4)  On 5 May 2015, at a meeting between the Banks and AHL (“the 5 May 2015 Meeting”), an agreement was reached whereby the Banks agreed to grant an informal standstill (“the Standstill”) conditional upon the AHL Group’s procurement of the execution and provision of a number of security documents (“the Security Documents”), including the Second Mortgage over Sung’s Tower.

(5)  On 6 May 2015, AHL entered into a placing agreement to issue up to HK$200 million in bonds. HK$19.9 million worth of bonds were issued in 2015.

(6)  On 18 May 2015, AHL held a board meeting, at which a resolution (“the 18 May 2015 Resolution”) was passed for the execution of the Security Documents, including the Second Mortgage, in exchange for the Standstill.

(7)  Ps’ Contention: Regardless of what AHL had resolved, Sung Sr was reluctant to put up Sung’s Tower as security and would not have done so without Poon’s request and assurance to repay the Loan Facilities.

(8)  Ds’ Contention: Sung Sr executed the Second Mortgage over Sung’s Tower in light of the Banks’ Demand (see subparagraph (10) below), in return for the Banks’ offer to withdraw the Banks’ Demand, resume the Standstill and provide a new facility of HK$100 million to the AHL Group. In other words, putting up Sung’s Tower as security would enable Sung Sr to preserve the value of his shareholding and Sung Sr’s Businesses. It was requested by the Banks, not Poon; nor did Poon make any alleged assurance or otherwise assume any responsibility for repayment of the Loan Facilities.

(9)  The Banks gave a final notice to AHL Group on 29 May 2015.

(10)  On or around 3 June 2015, various of the Banks demanded in writing (“the Banks’ Demand”) that the AHL Group shall make immediate payments of money due under the Loan Facilities, failing which the Banks would consider commencing legal proceedings against the AHL Group. There was a serious possibility that, if unmet, the Banks’ Demand and the commencement of legal proceedings against the AHL Group would undermine the operations and the continued viable existence of Sung Sr’s Businesses.

(11)  On 4 June 2015, AHL announced that it had received the Banks’ Demand. Trading of AHL shares was suspended as a consequence.

54.  Ps’ Contention: In the meantime:

(1)  Even after the publication of the 2014 AR, Poon continued to acquire AHL shares and completed the injection of the 13% equity interest in Coulman into AHL in exchange for further AHL shares.

(2)  Up to April 2015, Poon had spent at least HK$100 million on acquiring 105,420,000 of Sung’s shares under the 3 SPAs. Poon subsequently spent HK$21,670,000 more, purchasing a total of 22 million shares on 7 and 26 May 2015, adding up to 127,420,000 shares. Poon had also injected 13% of Coulman into AHL, partially paid for by an additional 86,480,909 shares (14.05%) from AHL, and in May 2024 continued to hold 67,002,909 of those shares.

55.  Ps’ Contention: In or around April or May 2015, Poon, by himself and through Mr Koo Yuk Shing (“Koo”), tried to persuade Sung Sr to put up Sung’s Tower as security for the Loan Facilities.

56.  Ps’ Contention: In relation to Koo:

(1)  Koo was introduced by Poon to Sung Sr as Poon’s representative for the purpose of discharging Poon’s responsibility in carrying out the restructuring exercise (including negotiating with the Banks regarding the Loan Facilities) at all material times.

(2)  At all material times, Koo was the CEO, director and responsible officer of LW Asset Management Advisors Limited (“LWAM”). Another director of LWAM was Choi YC (Poon’s nominee).

(3)  LWAM’s sole shareholder was Kingsberg Oriental Limited (“Kingsberg”), whose sole shareholder and director was Choi YC and the company secretary was Robert Chui’s company.

(4)  In or around August and September 2016, a wholly-owned subsidiary of AHL entered into agreements to acquire a 70.83% shareholding in LWAM from Kingsberg for HK$17 million. The sale and purchase agreement was executed by Lo Ping.

57.  Ps’ Contention: At a meeting between Sung Sr and Koo, Koo requested Sung Sr to put up Sung’s Tower as security for the Loan Facilities and told Sung Sr that if Sung Sr did so, Poon would procure AHL to carry out fund raising exercises, and use the proceeds to repay the Loan Facilities and discharge the security over Sung’s Tower. Sung Sr was reluctant to put up Sung’s Tower as security, which was worth around HK$300 million. But at the request of Poon and in exchange for Poon’s assurance through Koo that Poon would procure AHL to raise funds to repay the Loan Facilities and discharge the security, Sung Sr ultimately agreed to put up Sung’s Tower for the limited purpose of securing completion of the AHL Sale Agreement and maintaining the operations and existence of Sung Sr’s Businesses until they could be returned to him; and not to support the general operations of the AHL Group. Sung Sr relied on Poon to exercise his power over the conduct of the affairs of AHL and Sung Sr’s Businesses to ensure that the said businesses did not default on the Loan Facilities and the Banks did not take enforcement action under the Second Mortgage. This understanding was shared by Poon. Accordingly, he entered into the Second Mortgage Agreement (“SMA”) and Collateral Repayment Agreement (“CRA”) with Poon.

58.  Ds’ Contention: The Second Mortgage was not procured by Poon, whether personally or through Koo. Poon did not persuade Sung Sr to put up Sung’s Tower as security for the Loan Facilities. It was instead the Banks (who have been demanding repayment of the Loan Facilities since February 2015) who requested for Sung’s Tower to be put up in around April 2015 as additional security for the AHL Group’s liabilities.

59.  Ps’ Contention: In June 2015, Sung Sr on his own behalf and on behalf of ADFL on the one hand, and Poon on the other, entered into an oral agreement whereby Sung Sr would procure ADFL to, and ADFL would, enter into the Second Mortgage as security for the repayment of the outstanding Loan Facilities (ie the SMA). It was also agreed as between Sung Sr and Poon, by way of a partly oral and partly implied agreement, or alternatively an entirely implied agreement (ie the CRA) that Sung Sr would procure ADFL to enter into the Second Mortgage in consideration of Poon agreeing to procure AHL to raise funds in order to repay the Loan Facilities and to discharge the Second Mortgage. In all the circumstances, pending discharge of the Second Mortgage, Poon assumed contractual and fiduciary duties to Sung Sr and ADFL to exercise his powers and control over the AHL Group to deal with the Second Mortgage and Loan Facilities in good faith and in the best interests of Sung Sr and ADFL.

60.  As to the SMA/CRA, Ps’ pleaded case as per the RASOC is as follows:

“19. From time to time, the AHL Group secured [the Loan Facilities] from [the Banks] to meet the operational needs of Sung Sr’s Businesses. ……

20. In or around June 2015, various of the Banks demanded (the “Banks’ Demand”) in writing that the AHL Group shall make immediate payments of money under the Loan Facilities. The Banks' Demand also indicated that if the payments were not made, the Banks would consider commencing legal proceedings against the AHL Group.

21. There was a serious possibility that, if unmet, the Banks’ Demand and the commencement of legal proceedings against the AHL Group would undermine: (i) the AHL Sale Agreement; and (ii) the operations and the continued viable existence of Sung Sr’s Businesses.

22. Poon and his representative, Mr. Koo Yuk Shing ("Koo"), on Poon’s behalf:

22.1. Requested Sung Sr to put up Sung's Tower as security for the Loan Facilities;

22.2. Told Sung Sr that if Sung Sr put up Sung's Tower as security, Poon would procure AHL to carry out fund raising exercises, and use the proceeds to repay the Loan Facilities and discharge the security over Sung’s Tower.

23. In the premises, in or around June 2015, at Poon's request as averred in paragraph 22 above, Sung Sr on his own behalf and on behalf of ADFL, on the one hand, and Poon, on the other hand, arrived at [the SMA] whereby Sung Sr would procure ADFL to, and ADFL would, enter into [the Second Mortgage] as security for the repayment of the outstanding Loan Facilities to the Banks.

24. Sung Sr and ADFL entered into [the SMA] Agreement in consideration for Poon's agreement to procure AHL to raise funds to repay the Loan Facilities and discharge the Second Mortgage [the CRA].

25. When entering into [the SMA] and [the CRA], in addition to the understandings averred in paragraph 11 above, Poon and Sung Sr understood and agreed that:

25.1. Sung Sr only procured ADFL to execute the Second Mortgage for the limited purposes of:

25.1.1. Securing the completion of the AHL Sale Agreement; and

25.1.2. Maintaining the operations and viable existence of Sung Sr's Businesses until they were re-transferred back to Sung Sr.

25.2. The Second Mortgage was not to be used to support the

operations of the AHL Group after the re-transfer of Sung Sr's

Businesses to him.

25.3. Poon would procure the AHL Group to repay the Loan Facilities and discharge the Second Mortgage.

25.4. Pending either repayment of the Loan Facilities and discharge of the Second Mortgage, or the re-transfer of Sung Sr’s Businesses to Sung Sr, Sung Sr relied on Poon to exercise his power over the conduct of the affairs of AHL and Sung Sr’s Businesses to ensure that the said businesses did not default on the Loan Facilities and the Banks did not take enforcement action under the Second Mortgage.

26. The said understanding and agreement was partly oral and partly implied, alternatively entirely implied:

26.1. The oral part was comprised of: Poon's request and representation as averred in paragraph 22 above; discussions

between Sung Sr and his family, on the one hand, and Poon and Koo, on the other hand; and the Second Mortgage Agreement.

26.2. The understanding and agreement was implied from the

following circumstances:

26.2.1. The matters averred in paragraphs 12 and 26.1 above.

26.2.2. The only reason for Sung Sr to provide the Second Mortgage was for the exclusive purposes of avoiding the risk of action being taken by the Banks which would undermine the AHL Sale Agreement and the operations and viable existence of Sung Sr's Businesses.

26.2.3. There was no understanding or agreement to vary Poon's obligations under the AHL Sale Agreement to exercise his power over Sung Sr's Businesses in Sung Sr's interests, and to raise funds to maintain such businesses.

26.2.4. Sung Sr did not gratuitously give the Second Mortgage to benefit Poon and the AHL Group.

26.2.5. By procuring ADFL to give the Second Mortgage, Sung Sr thereby placed himself and ADFL in a position of vulnerability to Poon's abuse of power, and Sung Sr reposed trust and confidence in Poon by entrusting him with such power over ADFL.

26.2.6. It goes without saying that Poon was obliged to exercise his power over AHL, and hence ADFL, in Sung Sr's interests pending the re-transfer of Sung Sr's Businesses to Sung Sr, and Poon could not exploit such power for his own benefit.

27. To give business efficacy to [the SMA/CRA], and/or as a matter of obviousness, the following terms were implied terms of [the SMA/CRA]:

27.1. Poon would exercise his power over the conduct of the affairs of the AHL Group in dealing with the Loan Facilities and the Second Mortgage in good faith, and not in a way to deliberately harm the interests of Sung Sr;

27.2. Poon would not exercise his power over the conduct of the affairs of the AHL Group in dealing with the Loan Facilities and the Second Mortgage to his own benefit or to the harm of Sung Sr;

27.3. Poon would not cause anything to be done to prevent the discharge of the Second Mortgage; and/or

27.4. Poon would use best endeavours to procure the AHL Group to repay the Loan Facilities and discharge the Second Mortgage.

28. Further or alternatively, by virtue of the matters set out in paragraphs 19 to 27 above, Poon owed Sung Sr and ADFL fiduciary duties in respect of his power over the conduct of the affairs of the AHL Group in dealing with the Loan Facilities and the Second Mortgage, in particular, to:

28.1. Exercise such powers in good faith;

28.2. Exercise such powers for proper purposes;

28.3. Not to make any unauthorised profits or obtain unauthorised advantages; and

28.4. Exercise such power exclusively in the best interests of Sung Sr.

29. On around 8 June 2015, pursuant to [the SMA], Sung Sr on behalf of ADFL executed the Second Mortgage in favour of HSB (acting as the Banks' security trustee), pursuant to which ADFL charged Sung’s Tower in favour of HSB as a continuing security for the payment and discharge in full of the debts owed by the companies within the AHL Group to the Banks.”

61.  Ds’ Contention: The SMA and the CRA alleged by Ps never existed, and allegations of their existence are inherently implausible, absurd and uncertain. It is implausible for Poon to have entered into these agreements on the terms alleged by Ps where no commercial gains can be made by Poon in light of the circumstances faced by the AHL Group highlighted above. For the same reason, Poon did not assume any fiduciary duties to Sung Sr or contractual duties to exercise his power and control over AHL to deal with the Second Mortgage and Loan Facilities in good faith and in the best interest of Sung Sr and ADFL.

62.  On 8 June 2015, a meeting was held between the AHL Group, FTI and the Banks (“the 8 June 2015 Meeting”):

(1)  AHL was represented by, inter alia, Sung Sr at the 8 June 2015 Meeting.

(2)  Sung Sr agreed to and did execute on behalf of ADFL the Second Mortgage over Sung’s Tower.

(3)  In return, the Banks agreed to immediately withdraw the Banks’ Demand and resume the Standstill to continue their discussion with the AHL Group on the restructuring of the Loan Facilities advanced to the AHL Group, and to provide a new banking facility in the principal sum of HK$100 million to the AHL Group in order to support its short-term cash flow requirements.

63.  On 8 June 2015 when the Second Mortgage was signed:

(a)  The composition of AHL’s Board was as follows:

(i)  6 directors who were appointed before December 2014 (“the Sung Appointed Directors”): Sung KW (Chairman, ED), Sung KP (ED), CH Wong (ED), Tsang Fai (ED), Zhuang Zhongxi (Independent NED, “INED”), Huang Yunjie (INED);

(ii)  2 directors in Poon’s Camp: Lo Ping (ED), Robert Chui (INED).

(b)  Sung Sr was the largest disclosed shareholder of AHL, holding 191,000,000 shares constituting 31.02% of the issued share capital of AHL. Out of those 191,000,000 shares, Sung Sr had contracted to sell an additional 129,580,000 shares at HK$0.952 per share to Poon pursuant to the 3^rd SPA.[30]

(c)  Ps’ Contention: Poon held 194,422,909 shares and had contracted to acquire an additional 129,580,000 more shares.

64.  Ds’ Contention:

(1)  At the 8 June 2015 Meeting, the Banks maintained their earlier demand for inter alia a Second Mortgage over Sung’s Tower to be put up.

(2)  It was in the face of the Banks’ insistence, and not by reason of any alleged procurement by Poon/Koo or for any alleged purpose of securing completion of the AHL Sale Agreement (the existence of which is denied), that Sung Sr agreed to, and executed, the Second Mortgage on behalf of ADFL (which was later ratified together with Sung KP), in return for the Banks’ immediate withdrawal of their demand and resumption of the Standstill, as recorded in the Second Mortgage Board Resolutions signed by Sung Sr and Sung KP.

(3)  Nor did Poon (whether through himself or Koo) “assure” Sung Sr that Poon would somehow procure AHL to carry out fund raising exercises and use the proceeds to repay the Loan Facilities and discharge the security over Sung’s Tower.

(4)  By reason of the above, Sung Sr did not in truth rely on Poon to exercise his power over the conduct of the affairs of AHL and Sung Sr’s Businesses. Nor was the execution of the Second Mortgage underpinned by any alleged “understanding” between Poon and Sung Sr for Poon to repay any part of the Loan Facilities.

There was also no such thing as the CRA, which never existed.

65.  On 10 June 2015, AHL announced that the Second Mortgage was an unconditional financial assistance provided by ADFL in circumstances where no consideration was paid and no security was provided by the AHL Group to ADFL (“the 10 June 2015 AHL Announcement”). The trading of AHL’s shares on the HKEX resumed.

66.  On around 12 June 2015, Sung Sr and Sung KP signed a written board resolution of ADFL approving the Second Mortgage. On an undated board resolution, Sung Sr and Sung KP as directors of ADFL, signed on a written board resolution of ADFL approving and ratifying the earlier execution of the Second Mortgage by Sung Sr, which stated that, inter alia:

(1)  The Banks had requested ADFL to execute the Second Mortgage; and

(2)  Sung Sr and Sung KP approved and authorised Sung Sr to execute the Second Mortgage for and on behalf of ADFL at the 8 June 2015 Meeting.

67.  Ps’ Contention: On or around 17 June 2015, Sung KP agreed to sell 20% of ADFL to Fundtop. The shareholder and director of Fundtop was Choi YC. Poon was the true buyer behind Choi YC.

B5.  The period following the execution of the Second Mortgage up to October 2015

68.  After the 8 June 2015 Meeting and the execution of the Second Mortgage:

(1)  By facility letters dated 14 and 15 July 2015 and as agreed to by the Banks, SCB and HSB offered to grant AHL additional loan facilities in the amount of HK$60,000,000 and HK$40,000,000 respectively, totalling HK$100 million.

(2)  On 29 July 2015, in order to satisfy one of the conditions for the grant of these additional loan facilities, FTI was further engaged by AHL as an independent monitoring accountant to oversee and report on the AHL's treasury function to the Banks.

69.  Ps’ Contention: By the end of June 2015, Poon held 216,422,909 shares in AHL and a further 107,580,000 shares was outstanding under the 3^rd SPA and AHL Sale Agreement.

70.  From June to September 2015, after AHL averted the crisis of the Banks’ Demand, there was a short period of calm with some changes made to the composition of AHL’s Board:

(1)  In June 2015:

(a)  Mr Zhuang Zhongxi resigned as an INED of AHL.

(b)  On 15 June 2015, Mr Chan Shu Kin (“Chan SK”) was appointed as an INED of AHL, on the introduction of Poon. Chan SK was an INED of Tourong since 2002. He stayed on as a director of AHL until 2019, even after Poon became the Chairman and an ED of AHL in 2017.

(2)  In July 2015:

(a)  Sung KW resigned as the Chairman and an ED of AHL. Sung KP, an existing ED, replaced Sung KW as the Chairman.

(b)  AHL was one INED short of the minimum requirement of the HKEX given Chan Tsz Fu Jacky's failure to be re-elected at the AGM on 29 May 2015. On 9 July 2015, Dr Tse Kwok Sang (“Tse KS”) was appointed as an INED of AHL on the introduction of Poon. He stayed on as a director of AHL until 2019, even after Poon became the Chairman and an ED of AHL in 2017.

(3)  In September 2015:

(a)  Mr Chiu Wai Piu (“Chiu WP”) was appointed as an INED of AHL on 1 September 2015, on the introduction of Poon. Chiu WP was an INED of Tourong and Gold Tat, and stayed on as a director of AHL until 2019, even after Poon became the Chairman and an ED of AHL in 2017.

(b)  Mr Wong King Yeung (“Wong KY”) was also appointed as INED of AHL on 1 September 2015, but shortly resigned on 1 November 2015.

(c)  Mr Zheng Jun was duly appointed as an ED of AHL on 29 September 2015. Zheng Jun possessed over 20 years of working experience in China’s oil and gas industry. Poon admitted in §42(d) of his witness statement (not relied on by Ds) that he introduced Zheng Jun to AHL.

(4)  As of September 2015, AHL’s Board comprised 12 directors. Sung KP had the casting vote as the Chairman of AHL’s Board.

(5)  Ps’ Contention: Chan SK, Tse KS, Chiu WP, Wong KY and Zheng Jun were Poon’s nominees on AHL’s Board, appointed at Poon’s request by reason of his increased shareholding. Together with Lo Ping and Robert Chui, 6 directors (and 7 during the period when Wong KY and Zheng Jun both sat on AHL’s Board) were Poon’s nominees.

(6)  Ds’ Contention: Chan SK, Tse KS, Chiu WP and Zheng Jun were introduced by Poon, in addition to Lo Ping and Robert Chui. It is, however, not admitted that Wong KY was nominated by Poon. In any event, the other 6 directors at the time were persons previously appointed with the influence and/or approval of Sung Sr (who was at the time AHL’s largest disclosed shareholder).

71.  In early July 2015, the shares of AHL were trading at HK$1.720 per share.

72.  On 21 August 2015, AHL announced a placing agreement to place up to 122 million new shares at HK$1.05 per share (“the August 2015 Placing Exercise”). The placing agreement was signed by Lo Ping and witnessed by Robert Chui. In the event, 90 million shares were issued and placed, raising net proceeds of HK$92.4 million. The proceeds of the placement were paid into Perfect Attempt’s bank account. They were ultimately used as follows:

(1)  HK$50 million for investments as the payment of part consideration or refundable deposit of the acquisition of certain interest in Coulman.

(2)  HK$15 million used for repayment of a loan from a shareholder.

(3)  HK$27.4 million used for general working capital of the AHL Group.

73.  By or around 28 August 2015, Sung Sr held 169,000,000 shares in AHL (ie about 27.45%).

(1)  Ps’ Contention: Poon held at least 216,422,909 shares in AHL and a further 107,580,000 shares was outstanding under the 3^rd SPA.

(2)  Ds’ Contention: Sung Sr himself (through Powerlink) was unable to sell the requisite 107,580,000 shares to Poon pursuant to the 3^rd SPA.

74.  On 22 September 2015, AHL’s Interim Report for the 6 months ended 30 June 2015 was published, which revealed that:

(1)  AHL had recorded a loss of approximately HK$61.60 million for the first 6 months of 2015;

(2)  AHL had a liquidity shortage – it only had bank balances and cash of approximately HK$73.4 million whilst its current liabilities stood at approximately HK$1.568 billion.

75.  By a letter to SCB dated 14 October 2015 (“the 14 October 2015 Letter”), Sung Sr on behalf of the AHL Group issued a letter to the Banks and pleaded for time and indulgence from the Banks.

76.  Ps’ Contention: On 23 October 2015, AHL announced that Endless Rich Limited (“Endless Rich”, an indirect wholly-owned subsidiary of AHL controlled by Lo Ping and Robert Chui, Poon’s nominees) had entered into an MOU to acquire a 38% shareholding in Coulman from Kai Lian, a company owned by Zheng SJ, Poon’s nominee.

77.  By around late October 2015, the Banks terminated the Standstill and threatened to commence legal proceedings and enforce the Second Mortgage.

B6.  The period from October 2015 to April 2016

78.  In or around October 2015, AHL (via Robert Chui, who was under Poon’s control and/or influence) connected with a potential investor, Rongsheng Asset Management Co (“Rongsheng”), for a large sum of capital to be injected into AHL through a share subscription by Rongsheng (“Rongsheng Subscription”).

79.  On 2 November 2015, AHL made an announcement (without naming the Rongsheng Subscription) that a potential investor had entered into a memorandum of understanding on 30 October 2015 which recorded AHL's intention to issue 1,500,000,000 shares to a subscriber at the price of HK$0.56 per share, for the total consideration of approximately HK$840,000,000.

80.  In November 2015, Sung Sr and Poon engaged in negotiations to deal with the situation faced by the AHL Group.

(1)  Ps’ contention: It became apparent to Sung Sr that Sung Sr’s plan to put up Sung’s Tower as a temporary stop-gap measure might not be enough, and he was at risk of losing Sung’s Tower as well as Sung Sr’s Businesses. Therefore, he was willing to explore whatever options were available and see what result could be salvaged.

(2)  Draft meeting notes on AHL letterhead, of which there are two different versions, state that there was a meeting on 10 November 2015. The contents of those notes set out, inter alia, a proposal to sell Sung’s Tower.

(3)  Sung Sr and Poon exchanged two draft agreements, one prepared by Messrs William Lee & Associates (“WLA Draft Agreement”), and another draft memorandum of understanding (“Zimmern Draft MOU”) prepared by Messrs F Zimmern & Co (“Zimmern”). Ultimately, the parties could not agree to concrete terms on the way forward.

(4)  Ds’ Contention: The WLA Draft Agreement and Zimmern Draft MOU were exchanged as Sung Sr and Poon were exploring options to avoid the dire financial situation of AHL at the time.

81.  On 27 November 2015, AHL entered into the following agreements:

(1)  A conditional subscription agreement with Rongsheng (“the Rongsheng Subscription Agreement”), pursuant to which Rongsheng conditionally agreed to subscribe for 2,010,000,000 subscription shares at the price of HK$0.56 per share, raising HK$1,125,600,000 in total; and

(2)  A conditional placing agreement paired with the Rongsheng Subscription Agreement (“the Paired Placing Agreement”) pursuant to which AHL conditionally agreed to place through a placing agent up to 1,300,000,000 placing shares, on a best effort basis, at the price of HK$0.56 per share, raising up to HK$728,000,000.

82.  At a meeting of AHL’s Board on 27 November 2015, Robert Chui reported that the first item for the application of the proceeds of the Rongsheng Subscription Agreement and the Paired Placing Agreement was repayment of the bank loan.

83.  The Rongsheng Subscription Agreement and Paired Placing Agreement were executed by Lo Ping on behalf of AHL and witnessed by Robert Chui.

84.  If the Rongsheng Subscription Agreement and Paired Placing Agreement were both completed in full:

(1)  AHL would have raised approximately HK$1,125,000,000 and HK$728,000,000 from the respective agreements, which would have been sufficient to repay the Loan Facilities in full at the material time; and

(2)  Rongsheng would have become the largest shareholder of AHL, holding approximately 50.05% of the enlarged issued share capital of AHL.

85.  On 7 December 2015, Sung Sr procured ADFL to issue a letter to AHL to claim an indemnity, for the first time, for the Second Mortgage over Sung's Tower. AHL (through its solicitors, Zimmern) replied confirming that (subject to due completion) it was the intention of AHL to use a portion of the proceeds from the Rongsheng Subscription Agreement and Paired Placing Agreement to fully repay the debts to the Banks.

86.  On 5 January 2016, AHL issued an announcement stating that the intended use of the proceeds of the Rongsheng Subscription Agreement and the Paired Placing Agreement was for the following purposes: (a) approximately HK$300 million for the repayment of existing bank loan; (b) approximately HK$500 million for the possible acquisition of a 38% interest in Coulman; (c) approximately HK$200 million for the investment in an electric car enterprise; and (d) the remaining of the net proceeds, being approximately HK$98.37 million for the general working capital of AHL.

87.  On 30 March 2016, at an Extraordinary General Meeting of AHL, the Rongsheng Subscription Agreement and the Paired Placing Agreement were approved by AHL’s shareholders.

88.  On 31 March 2016:

(1)  The 2015 annual results of AHL were published, which revealed that AHL had incurred a further net loss of approximately HK$951 million during the financial year ended 31 December 2015; and

(2)  It was announced that the long stop date for completion of the Rongsheng Subscription Agreement had been extended from 31 March 2016 to 30 June 2016.

89.  Meanwhile, in around March and April 2016, Poon (via Flotilla) took steps to complete the 3^rd SPA:

(1)  On 17 March 2016, Flotilla through Lam & Co issued a letter to Powerlink demanding that Powerlink complete the sale of the Second Tranche of the 3^rd SPA in the full amount of 127,000,000 shares at the price of HK$0.952 per share.

(2)  On or around 7 April 2016, Flotilla commenced proceedings in the BVI against Powerlink for, inter alia, specific performance of Powerlink’s obligation to complete the sale of the 3^rd SPA Second Tranche of AHL shares, on the basis that Sung Sr only held (directly and indirectly) about 107,610,000 shares at the time, ie less than the outstanding number of shares Powerlink promised to sell to Flotilla under the 3^rd SPA.

(3)  On or around 20 April 2016, Powerlink (through its solicitors) said that it had already completed part of the Second Tranche, and was willing to complete the remainder.

(4)  Flotilla did not complete the remainder of the Second Tranche under the 3^rd SPA.

(5)  Ps’ Contention: Sung Sr was ready, able and willing to complete the remainder of the Second Tranche under the 3^rd SPA. Ds have admitted that Sung Sr already completed the First Tranche and part of the Second Tranche of the 3^rd SPA totalling 105,920,000, leaving 107,580,000 shares remaining under the Second Tranche, which Sung Sr could complete with his remaining 107,610,000 shareholding.

(6)  Ds’ Contention:

(a)  Ds (as the Independent Management) have no personal knowledge of the state of completion of the Second Tranche of shares under the 3^rd SPA. It is, however, indisputable that Flotilla did bring proceedings against Powerlink in the BVI on 7 April 2016 for specific performance of (what would appear to be, on the case of Flotilla which was controlled by Poon, the uncompleted) sale of the Second Tranche of AHL shares under the 3^rd SPA.

(b)  Nevertheless, Ds accept that there is a dispute between Poon and Sung Sr as to whether Sung Sr was in a position to perform the Second Tranche at the time, given Sung Sr (through Powerlink)’s offloading of shares on the market at the time apparently to capture potential gains from the price increase brought by the announcement of the Rongsheng Subscription in November 2015.

(c)  Based on the evidence made available to Ds as the Independent Management, Ds are prepared to accept that Sung Sr might have been in a position to perform the Second Tranche, although such information is not privy to Ds.

90.  Between April and July 2016, Sung Sr (through Powerlink) continuously disposed of AHL shares – by 27 July 2016, he held 36,660,000 shares (about 5.19% of AHL’s total issued share capital).

(1)  Ps’ Contention: Sung Sr only sold 1.4 million shares in April 2016. He only started substantially selling his shares on and after 16 June 2016, after his solicitors issued an ultimatum to Flotilla on 15 June 2016 to complete the 3^rd SPA. Sung Sr sold his shares to mitigate his loss due to Poon’s failure to complete the 3^rd SPA.

(2)  Ds’ Contention: See [89(6)] above

91.  From April 2016 onwards, the share price of AHL had been steadily falling. At the same time, Poon had been acquiring AHL shares from the open market so that he and his nominees could vote to oust the directors associated with Sung Sr at the upcoming Annual General Meeting.

92.  On 29 April 2016, the Paired Placing Agreement lapsed.

B7.  The period from May 2016 to 6 January 2017

93.  On 7 May 2016 at the Annual General Meeting (“the 7 May 2016 AGM”) of AHL:

(1)  Shareholders voted to change the composition of AHL’s Board, by voting against the re-election of Sung KP, Mr Yeung Choi Yee Cedric, Mr Wu Kehao and Mr Huang Yunjie, being four directors of the Sung Appointed Directors.

(2)  A total of 64.97% of the total shares present at the 7 May 2016 AGM (ie 214,546,000 shares, or 30.4% of total issued share capital) voted against the re-election of each of the aforesaid 4 members of AHL’s Board. As of the date of the AGM, Poon through his nominees controlled about 214,546,000 shares, which represented about 30.4% of AHL's issued share capital.

(3)  Following the 7 May 2016 AGM, the directors which Poon (or his nominees) had nominated and/or introduced to the Board of AHL constituted the majority of the Board.

94.  On 9 May 2016, AHL announced that its principal place of business changed to Room 1118, 11/F, Peninsula Centre, 67 Mody Road, TST East.

95.  On 10 and 26 May 2016, Lo Ping and Robert Chui issued two internal memorandums to the staff of ACL and AHL that there had been a change in the composition of AHL’s Board, Sung Sr had nothing to do with the AHL Group and staff must not disclose any information to him.

96.  Poon further procured the removal of Sung Sr’s family members from positions of control over ACL, Chinakey and Sky Emperor.

97.  On 25 May 2016, Sung Sr wrote through his solicitors, K&L Gates, to AHL to demand the discharge of the Second Mortgage as “our client has no longer been involved in the management of [AHL]”.

98.  On or around 26 May 2016, Poon and Robert Chui attended a meeting (“the 26 May 2016 Meeting”) with Sandy Sung and other representatives of Sung Sr[31], which was secretly tape-recorded by Sung Sr’s Camp. At the meeting, the parties discussed the 3^rd SPA 2^nd Tranche of AHL shares, Sung Sr’s Businesses, the dire financial situation of AHL in light of the Banks’ Demand, and the execution of the Second Mortgage of the Sung’s Tower.

99.  Mr Chain SC submits that at the time of the 26 May 2016 Meeting, Poon and Robert Chui did not know that what they said in the meeting was being secretly recorded, and hence they were speaking openly and honestly in the meeting, according to their understanding of the situation. I agree and accept the point made by Mr Chain SC.

100.  In or around late May or early June 2016, at the request of the Banks, a draft Surrender was circulated by Robert Chui to Sung Sr through his family members requesting ADFL to surrender Sung’s Tower to HSB. The draft Surrender was not executed.

101.  With effect from 31 May 2016, Mr Ke Yuexian (“Ke YX”), a nominee of Poon, was appointed a director of ACL and Lo Ping, Robert Chui and Ip were appointed as the signatories of ACL’s bank accounts, which could be operated by two joint signatures with the company chop.

102.  Regarding the 3^rd SPA Second Tranche:

(1)  Ds’ Contention: In June 2016, Sung Sr and Poon (through their representatives) continued to discuss by email correspondence (on Ds’ contention) how they could achieve the Clean Break. In the email correspondence, Sung Sr agreed to have Sung’s Tower applied towards repayment of the Loan Facilities in consideration of Poon proceeding with completion of the purchase of the 3^rd SPA Second Tranche of AHL, as to which Poon was willing to complete.

(2)  Ps’ Contention: Sung Sr was in a commercially weak bargaining position at the time. Sung Sr was not happy to surrender Sung’s Tower, but in the interests of achieving a solution, he reluctantly indicated that he would agree to surrender Sung’s Tower upon the completion of the 3^rd SPA Second Tranche.

(3)  At the end, in mid-June 2016, Flotilla refused to give a confirmation that it would complete the deal regarding the 3^rd SPA Second Tranche. Sung Sr therefore sold his shares in AHL at a price substantially lower than HK$0.952 in the market to mitigate his loss.[32]

103.  In the meantime, from at least 22 June 2016, Kenneth Chui for AHL, and then Robert Chui, negotiated with the Banks with respect to the Loan Facilities. On 13 September 2016, Robert Chui proposed that “a new subsidiary within the Listed Group is to be formed to purchase the total outstanding indebtedness of approximately HK$500 million and normal interest accrued due by the Listed Group at 30% discount from the Bank Group.”

104.  On 30 June 2016, the Rongsheng Subscription Agreement lapsed.

105.  On 3 July 2016, AHL announced that, on 30 June 2016, Endless Rich had entered into a conditional SPA to acquire 22% of Coulman from Kai Lian for HK$160,000,000, payable by HK$40,000,000 in cash and HK$120,000,000 in cash or promissory notes (2-year term at 1% per annum) issued by AHL. This lapsed on 31 December 2016.

106.  On 4 August 2016, AHL entered into a Placing Agreement with Yuanta Securities (Hong Kong) Company Limited (“Yuanta”) as its placing agent, pursuant to which Yuanta agreed to procure not less than six placees to subscribe for up to 141,000,000 shares at HK$0.305 per share (“August 2016 Placing”). The August 2016 Placing was completed on 26 August 2016, raising about HK$42.1 million in net proceeds.

107.  On 14 August 2016, Cheung Tat Chung was appointed an ED and Zhao Xu (one of Poon’s nominees who received AHL shares from Powerlink) was appointed as an NED to AHL’s Board.

108.  In November 2016, AHL entered into a placing agreement for bonds up to HK$100 million. HK$16 million worth of bonds were issued in 2016.

109.  On 6 January 2017:

(1)  Gold Train Investments Limited (“Gold Train”), a company wholly beneficially owned and controlled by Poon, entered into a subscription agreement with AHL (“the Gold Train Subscription Agreement”), and conditionally agreed to subscribe no less than 2,500,000,000 and no more than 3,800,000,000 shares in AHL at HK$0.08 per share, representing a discount of approximately 92.1% as compared with the average closing prices of AHL for the last five consecutive trading days.

(2)  AHL also entered into subscription agreements with three other subscribers, Mr Chen Chiquan, Mr Li Shuanghui and Mr Yuan Dongjie.

B8.  Debt Restructuring Deed and Loans Advanced by CAIL and HCPIL

110.  On or around 9 March 2017, procured by Poon, AHL, CFGL, ACL, Chinakey, and Sky Emperor entered into a Debt Restructuring Deed (“the DRD”) with the Banks and HSB, whereby:

(1)  The Banks assigned to CFGL the debts due to them by AHL, ACL, Chinakey and Sky Emperor as well as the Second Mortgage, with the specific exception of the Loan Facilities due to CTBC which was waived by virtue of Clause 4 of the DRD;

(2)  As consideration, CFGL would pay the Banks in accordance with the payment schedule either (a) the total amount of indebtedness; or (b) the aggregate sum of HK$380,000,000 if the said sum was paid in full before 9 March 2018, which represented a discount of over HK$146 million (ie about 27.8% of the total amount of indebtedness);

(3)  The payment schedule was as follows:

(a)  HK$50,000,000 to be paid to the Banks by CFGL upon the execution of the DRD by CFGL on 9 March 2017;

(b)  HK$40,000,000 to be paid to the Banks by CFGL on or before 31 March 2017;

(c)  HK$140,000,000 to be paid to the Banks by CFGL on or before 9 September 2017; and

(d)  HK$150,000,000 to be paid to the Banks by CFGL before 9 March 2018, or alternatively HK$296,432,460 (being the full amount of the Loan Facilities without discount) on or after 9 March 2018.

111.  In late March to April 2017, Poon became the largest shareholder of AHL upon completion of the Gold Train Subscription Agreement, having acquired approximately 70% of AHL’s enlarged issue share capital by the said subscription.

112.  On 13 April 2017, Robert Chui issued a notice on behalf of AHL stating that a restructuring exercise had been carried out with the effect that Kinetic Treasure Limited would take over ACL’s business whilst Chinakey Global Limited would take over Chinakey’s business.[33]

113.  On 19 April 2017, Poon was appointed as an ED and the Chairman of the Board of AHL.

114.  In early and mid-2017, AHL pursued further acquisitions in completely unrelated industries, namely financial services (ie the LWAM acquisition), and “big data”.

115.  On 14 September 2017, pursuant to the DRD, the debts and the Second Mortgage were assigned to CFGL, which was through Lo Ping under Poon’s control, under various Notices of Assignment dated 14 September 2017 and a deed of assignment dated 28 September 2017 (“the DOA”). CFGL thereby became: (a) the creditor of AHL, ACL, Chinakey and/or Sky Emperor under the Loan Facilities; and (b) the creditor under the terms of the Second Mortgage.

116.  Thereafter, Poon procured CFGL to take action to enforce its rights and entitlements under the DRD:

(1)  Between September and November 2017, CFGL repeatedly demanded ADFL to repay the debts pursuant to the Second Mortgage, failing which CFGL shall exercise the power of sale under the Second Mortgage or institute legal proceedings.

(2)  By a demand letter dated 20 September 2017, CFGL informed ADFL that the debtors (including ACL, Chinakey and Sky Emperor) and the obligor (ie AHL) have defaulted in their repayment obligations and demanded ADFL for repayment of the outstanding amount of the Secured Obligations (as defined in the Second Mortgage) in the sum of HK$315,364,418.39, failing which it will take action including enforcement of the Second Mortgage.

(3)  By another letter dated 16 October 2017 from Michael Li & Co. (former solicitors for CFGL) to ADFL, CFGL demanded ADFL again for repayment of the debts, failing which CFGL shall exercise the power of sale under the Second Mortgage.

(4)  By a further letter dated 9 November 2017 from Wilkinson & Grist (solicitors for CFGL) to ADFL, which was said to be superseding the 16 October 2017 letter, CFGL demanded ADFL for repayment of the outstanding amount of the Secured Obligations in the sum of HK$288,153,195.02 plus interest, failing which CFGL would institute legal proceedings against the ADFL.

117.  On 16 October 2017, Ps issued the Writ of Summons (“the Writ”) in HCA 2385/2017. Ps further registered the Writ as a lis pendens against Sung’s Tower. (Ds’ Contention: Allegations regarding the CRA were raised for the first time in the HCA 2385/2017.

118.  On 17 October 2017, Ps’ solicitors (DLA Piper, “DLA”) issued a letter to CFGL notifying them of HCA 2385/2017 and the registration of the Writ.

119.  On 18 October 2017, AHL issued a public announcement the issuance of the Writ of Summons in HCA 2385/2017 (“the Writ”).

120.  On 24 October 2017, DLA served the Writ on the 1^st to 6^th Defendants.

121.  On 13 November 2017, Ps filed and served the Statement of Claim in the HCA 2385/2017.

122.  On 15 November 2017, CFGL commenced HCMP 2556/2017 against ADFL.

123.  On 16 November 2017, Wilkinson & Grist (solicitors for CFGL) filed at Court and issued a “Notice to Occupants” to all tenants, licensees and occupants of Sung’s Tower of CFGL's claim for possession of Sung’s Tower in the HCMP 2556/2017.

124.  On 13 December 2017, AHL’s Board resolved to change its name to GTI Holdings Limited, which was approved and effected on 23 February 2018.

125.  On 8, 21 and 22 December 2017, SCB, HSB and DBS respectively issued letters to CFGL confirming the outstanding indebtedness owed by AHL, ACL, Chinakey and/or Sky Emperor to them under the DRD.

B9.  Period from December 2017 onwards

126.  In light of the approaching deadline by CFGL to pay the final tranche of HK$150 million to the Banks on or before 9 March 2018 to qualify for the substantial discount, CFGL required urgent funding.

127.  Ds’ Contentions:

(1)  In around December 2017, Paul Leung on behalf of CAIL approached HCPIL, an independent asset management firm, requesting a loan to finance CAIL’s loan to CFGL that would enable CFGL to complete its acquisition of the debts owed by the AHL Group to the Banks.

(2)  HCPIL was only aware from Paul Leung that Poon and Paul Leung were business partners but was unaware of the historical relationship between Sung Sr and Poon.

(3)  It was proposed to HCPIL that CFGL could borrow from CAIL to complete payment of the consideration for the debt (along with security for the debt) to the Banks and assign the acquired debt (along with security for the Debt) to CAIL, while CAIL could obtain its funding from HCPIL and grant further security to HCPIL.

128.  On 28 December 2017 (“the 28 December 2017 Transactions”):

(1)  CFGL borrowed HK$200,000,000 from CAIL at an interest rate of 20% per annum (“the CFGL Loan”), HK$150,000,000 of which it then used to complete payment of consideration to the Banks. Security for the CFGL Loan included, inter alia:

(a)  a charge over CFGL’s rights regarding the DRD (“the DRD Charge”), executed by Lo Ping on behalf of CFGL; and

(b)  a guarantee from Poon.

(2)  CAIL borrowed HK$210,000,000 from HCPIL at an interest rate of 18% per annum (“the CAIL Loan”), which was secured by, inter alia, a “conditional assignment” of CAIL’s interest in the DRD Charge (“the Assignment of the DRD Charge”) and mortgage over the issued shares of CAIL (“the CAIL Share Mortgage”).

129.  The CFGL Loan and CAIL Loan documents expressly referred to the claims made in the HCA 2385/2017.

130.  Ps’ Contention: On 27 November 2018, Endless Rich entered into a conditional sale and purchase agreement to acquire 14% of Coulman from Hong Jun (a vehicle of Paul Leung, Poon’s nominee) for HK$87 million, to be paid by the issuance of 240,997,229 new consideration shares. This acquisition was completed on 19 December 2018.

131.  On 29 November 2018, DHCJ Sherrington handed down a judgment (“the 2018 Judgment”), in which the learned judge refused to grant summary judgment to CFGL in HCMP 2556/2017.

132.  On 28 December 2018, CFGL defaulted on the CFGL Loan and CAIL defaulted on the CAIL Loan.

133.  On 14 January 2019, through enforcement and exercise of its contractual security rights, HPCIL acquired ownership and control over CAIL (as mortgagee in possession of all the shares of CAIL).

134.  On 8 February 2019, AHL issued an announcement stating that on the same day, CFGL, AHL and CAIL entered into a Supplemental Loan Agreement, pursuant to which  the parties agreed that part of the outstanding principal amount of the CFGL Loan, in the amount of HK$40,000,000, shall be settled by CFGL procuring AHL to allot and issue the 222,222,000 new shares to HCPIL, as designated by CAIL and the balance of the outstanding principal amount of the CFGL Loan, of HK$160,000,000, shall be extended for a term of 18 months. Further, the AHL Group agreed to grant CAIL a share mortgage over Endless Rich’s shares in Coulman and an assignment assigning any indebtedness owed by Coulman to the AHL Group to CAIL.

135.  On 27 November 2019, CAIL and HCPIL executed a Confirmatory Deed of Assignment relating to the DRD Charge to ratify and confirm the Assignment of the DRD Charge by CAIL to HCPIL.

136.  On 29 April 2020, by enforcing and exercising its contractual security rights, CAIL (by then under ownership and control of HCPIL) appointed independent accounting professionals, Graham HY Chan and Chan Suk King Zoe of Graham Management Consultants Limited, both of whom are Chartered Public Accountants and Fellows of the Association of Chartered Certified Accountants, as receivers over the shares of CFGL (“the CFGL Receivers”) and thereby took control over CFGL.

137.  On 23 July 2020, the CFGL Receivers sold the entire shareholding of CFGL to an independent third party investor, Ms Fung Wing Nam, Florence. See [20] above.

C.  AGREED ISSUES

138.  As per the Joint Statement of Agreed List of Issues in Dispute (“the Agreed List of Issues”) filed by the parties on 30 December 2024, the agreed issues (subject to the disagreements set out in that list) to be resolved in this trial are as follows.

C1.  The Commercial/Contractual Relationship between Ps and Poon

139.  Issue 1 - In or around early December 2014:

(1)  Did Sung Sr and Powerlink and Poon enter into the AHL Sale Agreement or merely agree on the non-binding Clean Break Framework? If so, what were the terms of the parties’ agreement?

(2)  What were Sung Sr’s and Poon’s understandings at the time?

(3)  In the light of the relationship between them and the contemporaneous circumstances, did Poon owe any fiduciary duties to Sung Sr?

140.  Issue 2 - In or around June 2015:

(1)  Did Sung Sr, ADFL and Poon enter into the oral SMA and or oral CRA? If so, what were the terms of the parties’ agreement?

(2)  What were Sung Sr’s and Poon’s understandings at the time?

(3)  In the light of the relationship between them and the contemporaneous circumstances, did Poon owe any fiduciary duties to Sung Sr and ADFL?

141.  Issue 3 - Did Sung Sr or Poon exercise control over AHL from December 2014 up to 7 May 2016?[34]

C2.  Ps’ claim against Poon

142.  Issue 4 - Breach of Contract: Failure to perform the AHL Sale Agreement

(1)  Did Poon breach the AHL Sale Agreement (if any) by failing to pay an outstanding sum of HK$31,416,000 for the acquisition of 88 million shares?

(2)  Did Poon breach the AHL Sale Agreement (if any) by failing to complete the purchase of 107,580,000 shares?

(3)  Did Poon retain Sung Sr’s Businesses within the AHL Group for his own benefit and refuse to return them to Sung Sr?

(4)  If so, what loss and damage are caused to Sung Sr by the breaches and what remedies ought to be ordered against Poon?

143.  Issue 5 - Breach of Contract and/or Fiduciary Duty: DRD

(1)  Did Poon breach the AHL Sale Agreement, SMA, CRA and/or his fiduciary duties (if any) by his conduct in relation to the DRD and the 28 December 2017 Transactions?

(2)  If so, what loss and damage are caused to Sung Sr and/or ADFL by the breaches and what remedies ought to be ordered against Poon?

C3.  Ps’ Claim against CFGL and other defendants (Equitable Wrongs and Economic Torts)

144.  Issue 6 - Equitable Wrongs

(1)  Did CFGL hold its rights under the Loan Facilities and the Second Mortgage as constructive trustee for Sung Sr and/or ADFL on the ground of knowing receipt?

(2)  Did CFGL dishonestly assist Poon’s breach of fiduciary duty (if any)? If so:

(a)  Did CFGL thereby hold its rights under the Loan Facilities and the Second Mortgage on constructive trust for Sung Sr and/or ADFL?

(b)  What is the liability of CFGL to Sung Sr and/or ADFL for the profit it made and/or the loss and damage caused to Sung Sr and/or ADFL as a result of its dishonest assistance?

145.  Issue 7 - Economic Torts

(1)  Did the 1^st to 6^th defendants in HCA 2385/2017 commit the tort of unlawful means conspiracy against Sung Sr and/or ADFL?

(2)  Did CFGL commit the tort of inducing a breach of contract against Sung Sr and/or ADFL?

(3)  If so, what loss and damage are caused to Sung Sr and/or ADFL and what are the Defendants’ liabilities to Sung Sr and/or ADFL as a result thereof?

146.  Issue 8 - Should CFGL be restrained by an injunction from assigning the Second Mortgage to another party and/or taking enforcement action under the Second Mortgage?

147.  Issue 9 - Is Sung Sr disentitled to any of the equitable reliefs claimed due to illegality and/or lack of clean hands by reason of the 3 SPAs being allegedly in part sham agreements in violation of the disclosure and mandatory general offer requirements under Rule 26 of The Code on Takeovers and Mergers and ss.270(1), 291, 310 to 317 and 328 of the Securities and Futures Ordinance (Cap 571) (“SFO”)[35]?

148.  Issue 10 - Does the liability of CFGL to ADFL (if any) offset in part or in whole the debts secured by the Second Mortgage, and if so, shall the Second Mortgage be released and discharged?

149.  Issue 11 - As to CAIL and HCPIL:

(1)  Do CAIL and HCPIL have any rights or interests vis-à-vis Sung’s Tower;

(2)  Were CAIL and HCPIL bona fide purchasers for value without notice of their rights or interests (if any) against or in CFGL’s rights under the DRD and/or Sung’s Tower;

(3)  Are CAIL and HCPIL’s rights or interests (if any) against or in CFGL’s rights under the Debt Restructuring Deed and/or Sung’s Tower subject and subordinate to Sung Sr’s and/or ADFL’s claims in HCA 2385/2017 and/or their interests in CFGL’s rights under the Loan Facilities and/or the Second Mortgage?

C4.  CFGL’s Counterclaim: Liability under the Second Mortgage, the DRD and the DOA

150.  Issue 12 - Must ADFL deliver vacant possession of Sung’s Tower to CFGL?

151.  Issue 13 - Must ADFL pay all monies due to CFGL under the Second Mortgage, the DRD and the DOA (if any)?

152.  Issue 14 - Is ADFL liable to account for, and do ADFL and its directors (Sung Sr and Sung KP) hold on constructive trust for CFGL, all rental income received by them in respect of Sung’s Tower between 16 November 2017 and the date of CFGL’s delivery of vacant possession of Sung’s Tower to CFGL (“the Rental Incomes”)[36]? If so, is CFGL entitled to such equitable tracing and/or proprietary remedies in respect of the Rental Income?

D.  EVIDENCE AND FACTUAL FINDINGS

D1.  Witnesses giving evidence in the trial

153.  The following witnesses have given live evidence in the trial:

(1)  Ps’ witnesses

(a)  Sung Sr

(b)  Sung KP

(c)  Mr Kong Yat Fan Martin (“Martin Kong”)[37]

(d)  Ms Fong Kwai Kuen Catherine (“Catherine Fong”)[38]

(e)  CH Wong[39]

(2)  Ds’ witnesses

(a)  Mr Wong Kar Yee Andrew (“Andrew Wong”)[40]

(b)  Mr Lee Chi Wing Bruce (“Bruce Lee”)[41]

(c)  Mr Cheung Siu Fai Dickson (“Dickson Cheung”)[42]

154.  Ds filed a witness statement of Poon dated 12 May 2022. Mr Chain SC told me that Ds’ legal representatives obtained this witness statement from Poon and filed the same. However, after considering that witness statement in detail, Ds’ legal representatives took the view that Poon’s evidence as set out in that witness statement is not true. Hence, Ds did not put forward Poon as their witness in the trial. Poon’s witness statement is not evidence in this trial.

155.  Sung Sr gave evidence in the Fuzhou dialect and was translated to punti by an interpreter in the trial. Andrew Wong gave evidence in English. All the other witnesses gave evidence in punti.

156.  The parties have engaged a private service provider to produce the transcripts of the trial. After the trial, the parties have lodged combined agreed transcripts (“the Agreed Transcripts”)[43] with the Court. Regarding the evidence given by each witness in Chinese (ie in the Fuzhou dialect or in punti), what have been set out in the Agreed Transcripts is not the verbatim record of what the witnesses said, but is a translation of the witnesses’ words to modern standard written Chinese. However, since the transcripts provided to me are Agreed Transcripts, I would take that the evidence given by each witness in Chinese has been correctly and accurately translated to the modern standard written Chinese as shown in the Agreed Transcripts.

D2.  The principles

157.  The principles concerning assessment of evidence given by witnesses are trite. The Court would take into account the following[44]:

(1)  Whether the party’s case is inherently plausible or implausible;

(2)  Whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable;

(3)  Where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests. This is relevant to the assessment; and

(4)  the demeanour of the witnesses.

158.  Examples of a witness’s unsatisfactory approach to giving evidence include: evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleading, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure.[45]

159.  New evidence that emerges for the very first time during cross-examination should be examined with a great deal of skepticism. In Li Jian Chao v TC Orient Lighting Holdings Ltd[46], DHCJ Winnie Tsui (as she then was) said:

“89. When a witness makes a new allegation or provides for the first time an account of events at trial on an issue which has long been in dispute between the parties, the court is almost bound to treat the new allegation or the new account with some degree of scepticism. This is particularly so when the issue is all along hotly disputed in pleadings and witness statements. The court would be even more sceptical if the witness is unable to explain why he could not have made the allegation or given the account earlier and well in advance of the trial. In these circumstances, the truth of these last-minute revelations are often very much in doubt.” (Emphasis added)

160.  While there is a long passage of time between the material events and the trial, contemporaneous documentation is of particular importance. In Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corp Ltd [47], Stock JA (as he then was) said:

“…… Comparison with contemporaneous documentation is always an aid to reliability of oral testimony, unless there is reason to believe that the documentation is contrived or materially incomplete; but where the passage of time between events and trial is as long as it was in the present case, and where there is such a host of contemporaneous documentation, as there was in this case, the documentation must, I would have thought, assume a special importance. ……

I would venture to suggest that the truth, in so far as one is able to reach it or, as is sometimes the case, to reach a version of it that is more likely to be correct than not, can best be tested by reference to contemporaneous documentation where it exists, or to its absence where one would expect it to have been created, as well as to inherent probabilities (though bearing in mind that there may be occasions where the truth may run against that particular grain) having regard to all the facts that are known. This is particularly so in a case such as the present, where events have taken place so long before trial and where there exists a mountain of contemporaneous documentation that can be used to point the way. This is not to say that the documentation should have been treated as if it stood on its own, not to be explained, contradicted or supported by oral testimony. It is however to say that in this case the approach adopted to assessment of the facts placed far too much emphasis on character impression and too little upon what was suggested by the documentation and by the inherent probabilities in their historical context. That documentation, as well as conflicts within the evidence, inherent probabilities, and a study of how matters were originally pleaded and asserted in witness statements – these are the factors which in a trial such as this, so long removed from the time of the events in question, were likely to be of particular use in assessing the facts ……” (Emphasis added)

161.  Where an oral agreement is being asserted by a party, the absence of any contemporaneous record may suggest that the alleged oral agreement was not concluded. In Leung Chin Sing, Rabo v Ko Chun Hay Kelvin[48], DHCJ Jian Pao SC said:

“42. It is rare in modern commercial litigation to encounter a claim based on an agreement which is not only said to have been purely by word of mouth but of which there is no contemporaneous documentary record of any kind. The prevalence of e-mails, text messages and other forms of electronic communication is such that most agreements or discussions which are of legal significance, even if not embodied in writing, leave some form of electronic imprint. …… Because the value of a written record is understood by anyone with business experience, its absence may, depending on the circumstances, tend to suggest that no contract was concluded ......” (Emphasis added)

162.  In considering the validity of a criticism made against a witness, the rule in Browne v Dunn[49] is relevant. The following would need to be borne in mind[50]:

(1)  The rule in Browne v Dunn is a rule of practice or procedures designated to achieve fairness to witnesses and a fair trial between the parties.

(2)  The general principle is that, where an attack on a witness' evidence is to be made, notice should normally be given to the witness in cross-examination of the nature of the attack if such is not otherwise obvious.

(3)  There is no breach of the principle if the witness knew or ought to have known that his version of events was being challenged or that adverse inferences might be drawn against him.

(4)  Even if the procedural rule is transgressed, it does not inexorably follow that matters which have not been put to a witness in cross-examination cannot be relied on. It may be a question of the weight to be given to a witness’ testimony taking into account all the available evidence. Thus, for example, a witness’ evidence may be so incredible as to be incapable of belief or his evidence may be unsupported or contradicted by known facts and contemporaneous documents.

(5)  The principle does not inflexibly require every point which might be used against the witness to be put to him. There is no hard-and-fast rule. The paramount consideration is fairness to the witness. In essence, the principle is breached if in all the circumstances, an omission to cross-examine on a specific point is unfair to a witness.

163.  See also the recent comments made by the Court of Appeal on the rule in Browne v Dunn in Pang Kam Chuen v Pang Kam Bor[51]. In that case, Cheung JA said:

“89. …… the rationale of the rule is based on fairness and one should not apply it rigidly and its application depends on the circumstances. As Lord Hodge DPSC of the United Kingdom Supreme Court observed in Griffiths v TUI (UK) Ltd [2023] UKSC 48 :

‘(vii) The rule should not be applied rigidly. It is not an inflexible rule and there is bound to be some relaxation of the rule, as the current edition of Phipson recognises in [12 – 12] in sub – paragraphs which follow those which I have quoted in [42] above. Its application depends upon the circumstances of the case as the criterion is the overall fairness of the trial. Thus, where it would be disproportionate to cross – examine at length or where, as in Chen v Ng, the trial judge has set a limit on the time for cross – examination, those circumstances would be relevant considerations in the court’s decision on the application of the rule....’” (Emphasis added)

164.  The Court would approach the self-serving statements made by a witness with circumspection, but would give considerable weight to the statements made by him which are against his interest. See Wong Tak Yue v Kung Kwok Wai & Another (No 2)[52]:

Per Li CJ[53]:

“Where the occupier has made self-serving statements as to what was his intention, whether during the period of occupation or when challenged in legal proceedings, the courts should approach them with some scepticism. The courts would scrutinize the circumstances in which they were made and would give them such weight if any as they may deserve. Conversely, where the occupier has made statements as to what was his intention and such statements are against his interest, the courts would usually accord to them considerable weight.” (Emphasis added)

Per Litton PJ[54]:

“Here, the appellant has come nowhere near establishing adverse possession. He unequivocally declared that at all times he was ready willing and able to pay rent to the owners, and did not do so only because no one came along on behalf of the landlords to collect rent. Whether his acts and declarations in the course of the 1980 court proceedings amounted to an acknowledgment of the owners’ title in terms of s.23(1), or fell short of that, the fact remains that he had no intention to exclude the owners.” (Emphasis added)

Per Ching PJ[55]:

“I need only add that there can be no better evidence of the intention of an occupier of land than his express declaration against his own interest.” (Emphasis added)

The aforesaid principle is not limited to adverse possession cases but has a general application. See Leung Siu Man and Ors v Leung Yiu Tai[56], and 章晶歷 v 吳聯模 and Anor[57].

165.  With the aforesaid principles in mind, I now turn to the evidence.

D3.  Ps’ witnesses

D3.1  Sung Sr

166.  In my judgment, Sung Sr is an untruthful and unreliable witness. His evidence is contradicted by the documents on various material aspects and is inherently improbable on the crucial issues in these proceedings. Some material events mentioned for the first time from his evidence under cross-examination are clearly matters invented by him in the witness box with no truth therein. Save and except the matters agreed or not disputed by Ds, the matters as shown in the documentary evidence, and the admissions made by Sung Sr against Ps’ interest, I refuse to accept Sung Sr’s evidence. As to the admissions made by Sung Sr against Ps’ interest, I attach weight to those admissions.

D3.1.1  What was agreed between Sung Sr and Poon in December 2014?Binding AHL Sale Agreement or Clean Break Framework only?

167.  One of the contentious issues in these proceedings is as a result of the 2014 Negotiations, whether Sung Sr and Poon have entered into the AHL Sale Agreement as alleged by Ps, or whether Sung Sr and Poon has just agreed to the Clean Break Framework as contended by Ds.

168.  In his witness statement, Sung Sr said:

“32. As our discussions progressed, eventually, instead of investing in the AHL Group, [Poon] made me an offer to purchase AHL as a listed shell company, exclusive of its business / assets and liabilities, which would be returned to me. [Poon] said that AHL was “clean listed shell” as it rarely carried out equity fund raising exercises.

……

34. I understood from [Poon] that he had some new businesses that he wished to pursue through the AHL Group. [Poon] had identified a natural gas business in Shanxi (山西), Mainland China, which he wanted to introduce to the AHL Group as its new core business. ……

35. [Poon] had also told me many times that since he had no experience in the Textile Business, he was not interested in the Textile Business operated by the AHL Group at all. He said he would return every single bit of those businesses to me, using the phrase“一塊磚頭,一粒螺絲”(ie “each piece of brick and screw”).

36. Since I was having second thoughts about my decision to list the AHL Group, I saw [Poon]’s offer as an opportunity for me to run the Textile Business of the AHL Group again without the burdens and expenses of its listed status.

37. Before entering into the AHL Sale Agreement, [Poon] had carried out due diligence exercise over AHL. Lo Ping and Robert Chui had attended AHL’s office on various occasions for this purpose and Ms Agnes Fung, the then-Financial Controller of the AHL Group, had provided the AHL Group’s financial and corporate documents for their review and attended several meetings with them.

38. In the course of our discussions, we had discussed and written down notes [ie the Written Memo] for a framework for the listed shell transaction which has been signed by both me and [Poon].

39. In early December 2014, [Poon] and I arrived at an agreement whereby:

(1) I would sell my controlling interest in AHL to [Poon], to be acquired by himself or through his nominee(s), by several tranches over a period of time from around December 2014 to around June 2016;

(2) When all the necessary restructuring exercises were completed, [Poon] would re-transfer the existing 100% of the Textile Business of the AHL Group (including its assets and liabilities) ("My Businesses") back to me.

(3) Through the above arrangement, [Poon] would ultimately acquire AHL as a listed shell company, while My Businesses would be returned to me.

(4) [Poon] would immediately be entitled to appoint 2 persons, namely Lo Ping and Robert Chui, to be an ED and a Non-Executive Director (“NED”) of AHL, respectively, as his representatives on AHL’s Board.

(5) [Poon] would then, either by himself or through Lo Ping or Robert Chui, arrange for some fund-raising exercises (eg subscription of new shares or placing) to be by the AHL Group. The purpose of these fund-raising exercises was to raise funds for both My Businesses and the new businesses that [Poon] intended to introduce to AHL, pending the retransfer of My Businesses to me.

(6) In order to keep the funds and accounts of My Businesses separate from the new businesses conducted by Mr. Poon, a special purpose vehicle ("SPV") would be incorporated by AHL and a bank account would be opened under the SPV's name. The SPV and the SPV's bank account would be controlled by [Poon] through his nominee(s). The existing bank accounts of the AHL Group were referred to by the parties as the “A Account” and the bank account opened under the SPV’s name was referred to as the “B Account”.

(7) All proceeds from the fund-raising exercises would initially be deposited into the “B Account”. One third of the proceeds from the fundraising exercises would be used to meet the operational needs of My Businesses. The remaining balance would be used to acquire other new business items/projects identified by [Poon] as the new core business of AHL.

This agreement is referred to herein as the "AHL Sale Agreement".

40. It was my understanding that:

(1) As agreed in the AHL Sale Agreement, [Poon] was going to retransfer 100% of My Businesses to me.

(2) Any restructuring exercises to convert AHL into a listed shell required under the AHL Sale Agreement was the responsibility of Mr. Poon, and I would cooperate accordingly. He was the one with the expertise and not me.

(3) The discharge of corporate guarantee and other securities in respect of My Businesses were also part of the restructuring exercise.

41. I wish to emphasise that the plan to turn AHL into a listed shell was masterminded by [Poon]. He was the one who came to me with the proposal and he was the one with the expertise in capital markets who knew what to do in order to turn AHL into a listed shell.

42. The arrangement was for me to leave the fund-raising and restructuring exercise entirely to [Poon], through his nominees on AHL's Board, and thereby from the beginning [Poon] had control over the affairs of AHL.

43. From the foregoing circumstances and the terms of the AHL Sale Agreement, [Poon] must have understood that I entrusted [Poon] to be the temporary custodian of My Businesses, with power over the conduct of the affairs of the AHL Group and My Businesses, until the AHL Group was in a position to retransfer My Businesses to me after I transferred my controlling interest in AHL to him. Since the agreement and understanding between Mr Poon and myself was that My Businesses at all times belonged to me, it goes without saying that [Poon] was obliged to conduct the affairs of My Businesses in my interests with a view to re-transferring them to me, and that he could not exploit them for his own benefit.”

169.  Under cross-examination, Sung Sr conceded and admitted that what has been orally agreed between him and Poon as a result of the 2014 Negotiations is merely a framework, not a binding agreement. As shown in the Agreed Transcripts:

“錢大律師： 我想向你指出，在2014年12月你和潘先生達到買賣殼的共識，其實是一個不完整的協議。

宋忠官： 是的，明白。

錢大律師： 我的說法是，比如說紡織業的生意甚麼時候轉給你，那時其實沒有落實，因而不完整。你是否同意？

宋忠官： 因為本身是框架的協議。

錢大律師： 在2014年12月唯一有法律約束力是，你和潘先生一方所簽署的三份買賣協議，你同意嗎？

宋忠官： 是的。” [58] (Emphasis added)

170.  I attach weight to this admission made by Sung Sr. Sung Sr’s admission is evidence in support of the Clean Break Framework contended by Ds.

171.  The Clean Break Framework is also supported by terms of the Written Memo. As shown in the Written Memo, what has been agreed by Sung Sr and Poon is the Shell Sale Intent.

172.  In December 2014, Sung Sr and Poon had not yet agreed how the Clean Break Framework would be implemented. As submitted by Mr Chain SC, this is corroborated by the discussions in the 26 May 2016 Meeting, where Robert Chui said that the meeting was the occasion for the parties to further discuss how Sung Sr’s Businesses were to be taken out from the AHL’s shell and returned to Sung Sr. The relevant exchanges in the meeting are as follows:

“Robert: 其實我哋唔想攞呀。

Sandy: 你而家係已經攞緊，唔想攞已經攞緊。

Robert: 我哋想交番俾阿宋生，我哋係，本來個目的就係話阿宋生我要番啲公司。“我㗎啲公司”，得無問題，我哋俾番你，吓咁樣，啫嗰個意念係咁樣㗎吓。

Tim: 我哋公司，跟住賣俾你嗰陣時就係應該脫咗殼先啦，脫咗啲資產，賣番俾佢自己。

Robert: 其實就係一步一步呢啫去轉番俾佢㗎。

Tim: 係，但係就好似從來無做過呢個動作。

Robert: 呃。

Gary: 轉咗邊啲呀？

Sandy: 轉咩呀？

Tim: 公司呀、運營呀。

Gary: 係咪，有、有轉到呀？

Rober:t 無、無、無轉到、無轉到。

Martin: 無轉過。

Robert: 其實係只要而家就係要傾嗰個轉動嘅一個安排，其實係咁樣，諗住係咁樣呀，吓。” [59] (Emphasis added)

173.  The Clean Break Framework is a mere framework and not a complete agreement. As to how to implement the framework, there would be further matters to be discussed and to be agreed. Thus, the Clean Break Framework is merely an agreement to agree, which is not a legally binding agreement.

174.  Without prejudice to the aforesaid, I am of the view what have been alleged by Sung Sr in [39(5)] and [39(7)] of his witness statement (“the Fund Raising Matters”), ie that Poon would be responsible for arranging some fund raising exercises, and that one third of the funds raised would be used to support Sung Sr’s Businesses, are inherently improbable and cannot be true.

175.  It is clear that the responsibility for restructuring AHL’s debts is on Sung Sr, not on Poon.

(1)  As shown in the Written Memo (which is a contemporaneous document signed by Sung Sr and Poon)[60], the burden of absolving the liabilities in Sung Sr’s Businesses is on Sung Sr. Poon should have no responsibility to solve the liquidity problem in Sung Sr’s Businesses.

(2)  Further, Clause 4 of the 3^rd SPA provided that “甲方 [Powerlink/Sung Sr] …… 並承諾協助公司妥善處理公司之債務”, without imposing any such obligation on the counterparty (ie Poon or his nominee).

(3)  AHL was already heavily saddled with debts and liabilities before 2014. Before Sung Sr and Poon signed the Written Memo in December 2014, the AHL’s debts were generated by Sung Sr’s Businesses. Sung Sr’s Businesses (including assets and liabilities) would be returned to Sung Sr at the end of the day under the Clean Break Framework. Applying common and commercial sense, it would be just natural that the responsibility of restructuring these historical debts should be on Sung Sr.

(4)  According to Sung Sr, Poon was absolutely clear about AHL’s financial position as of December 2014. It is inherently improbable that Poon would agree to be responsible for restructuring the historical debts generated by Sung Sr’s Businesses, with Poon’s eyes wide open as to how heavily indebted AHL was.

176.  It is also clear that what is shown in the Written Memo is the Shell Sale Intent.

177.  In view of the above, it is inherently improbable that Poon would agree to arranging fund raising exercises and using part of the funds raised to improve the liquidity of Sung Sr’s Businesses.

178.  Further, if Poon has agreed to arrange fund raising exercises and to use part of the funds raised to support Sung Sr’s Businesses, these matters would be important to Sung Sr. Naturally Sung Sr would request to record those matters in the Written Memo, and Poon should have no objection if he had actually agreed to these matters. In my judgment, the absence of these matters in the Written Memo shows that these matters are merely fabrications made up by Sung Sr.

179.  The Fund Raising Matters are important elements in the AHL Sale Agreement alleged by Sung Sr. Since those matters are untrue, this has a severe adverse impact on the veracity of the AHL Sale Agreement. The AHL Sale Agreement as alleged by Sung Sr in [39] of his witness statement cannot be true.

D3.1.2  Steps under the Written Memo to achieve the Clean Break intended by Sung Sr and Poon

180.  As stated in the Written Memo, the Shell Sale Intent of both Sung Sr and Poon is that Poon would only take the “shell” of AHL, and Sung Sr’s Businesses (including both assets and liabilities) would be transferred back to Sung Sr (see [2(a)] of the Written Memo). The responsibility for implementing a restructuring of AHL’s debts lies with Sung Sr (see [4] of the Written Memo). Thus, Mr Chain SC submits that the sequence of the steps to achieve the Clean Break envisaged by the Written Memo are as follows:

(1)  First, the parties were to agree on the price for selling AHL to Poon as a “shell” (“the Shell Sale Price”).

(2)  Second, Sung Sr would complete the restructuring of AHL’s historical debts with the Banks.

(3)  Only after completing the second step, Poon would be able to secure the Banks’ consent to release the guarantees given by AHL in respect of the indebtedness incurred by its subsidiaries (through which Sung Sr’s Businesses were operated).

(4)  It was only after completing the above steps, Sung Sr’s Businesses could be re-transferred to Sung Sr’s together with their liabilities (which would, following the preceding steps, have been detached from AHL’s shell).

181.  Mr Chain SC submits that the aforesaid sequence makes commercial and logical sense and must have reflected what was envisaged by Sung Sr and Poon at the time:

(1)  AHL’s subsidiaries (through which Sung Sr’s Businesses were operated) had sought various loans from the Banks over the years, which were guaranteed by AHL and cross-guaranteed by other subsidiaries.

(2)  The release of AHL’s parent guarantee was necessary for the subsidiaries’ debts to be completely detached from AHL, which in turn was a precondition to enable Sung Sr’s Businesses (which were operated via AHL’s subsidiaries) to be re-transferred to Sung Sr together with their liabilities.

(3)  The release of AHL’s parent guarantee would depend upon the debts of AHL being restructured, absent which the Banks simply would not agree to release AHL’s parent guarantee.

182.  In my view, Mr Chain SC’s submissions make perfect commercial sense. I accept those submissions.

183.  The reasonableness of the sequence submitted by Mr Chain SC must be obvious to any businessman. No doubt, Sung Sr is an experienced businessman and should have no difficult to agree to that sequence. However, under cross-examination, when Mr Chain SC invited Sung Sr to agree to this obvious sequence, Sung Sr repeatedly avoided to give a direct answer to the question and made some tangential speeches. Sung Sr only conceded when the Court required a clarification from him. As per the Agreed Transcripts, the relevant exchanges are as follows:

“錢大律師： 是啊，我現在在問你和潘先生，之後我會跟你說銀行的，我們一步一步來。我們到第3段，這裏提到有一個“集團擔保”，你們兩個之間的原意就是要將子公司轉讓給你，是嗎？

宋忠官： 是。

錢大律師： 不過子公司和上市控股公司有一個擔保的關係，因為如果潘先生要了上市公司，你要了子公司，你要清了這個擔保才可以，是嗎？

宋忠官： 是啊。

錢大律師： 那你要銀行願意退這個擔保出來，你的債務方便，就要有一個重組，是嗎？

宋忠官： 是啊，企業和銀行之間的擔保是我負責的。

錢大律師： 我的意思就是說，如果你要清了上市公司和子公司之間的擔保關係，那你是要與銀行商討你債務方面要和他們重組，是嗎？

宋忠官： 我要解釋一下，但核心一件事情，企業要轉給我，我當然負責啦。

錢大律師： 企業轉給你之前，要清了集團的控股公司給的擔保，同不同意？

宋忠官： 手續是這樣的。

錢大律師： 是啦，那你要做到那個手續，就是銀行要同意才行對嗎？

宋忠官： 是啊。

錢大律師： 是啦，所以我們就到第4段，就是要落實債務重組，重組之後就退了上市公司的集團擔保出來，那些子公司就可以資產連債全部給你了，是不是這樣的意思？

宋忠官： 對。

錢大律師： 那如果債務重組不了，而且集團擔保解除不了的話，那那些子公司是給不了你的。

宋忠官： 這個是連鎖反應，如果你不重組的話，集團也要清盤。

……

宋忠官： 我剛才說過，現在要解釋長一點，你剛才說的，因為主權在阿潘那裏，如果阿潘不做的話，（廣東話）他做不到，我也沒辦法，大家都損失嘛。這些是可以值錢還給銀行的。

大律師： 你說主權在阿潘那裏。

宋忠官： （廣東話）是啊，他是大股東。

錢大律師： 你的意思是說，你簽了這個備忘錄之後，如果將來阿潘說“柬埔寨的廠我要賣了它”，你要讓他賣的，因為他是大股東，你的意思是這樣嗎？

宋忠官： （廣東話）他做主，他當時是大股東，他做主。

……

錢大律師： … 宋先生，我們現在說的備忘錄是2014年12月，你的律師團隊已經代你同意這件事實，即由這一刻2014年12月直至2016年5月，營運紡織業那些子公司是全面由你那邊的陣營去控制的。

宋忠官： 是啊。

錢大律師： 那如果那些營運紡織業的子公司仍然是由你控制，銀行戶口仍然由你的陣營去控制，子公司下那些資產全部由你的陣營去控制，那潘先生如何能像你剛才所說賣了子公司的資產去做債務重組啊？

……

錢大律師： … 既然，營運紡織業那些子公司是全面由你的陣營去控制，包括子公司的資產是全面由你的陣營去控制，那潘先生如何能賣了子公司的資產去做債務重組啊？

宋忠官： 其實我這家公司在2015年上半年，不是，2016年的下半年，2016年的下半年我家庭在董事局已經被人踢出來了。

錢大律師： 宋先生，你聽清楚問題，我現在說的是2014年12月那時候，我看備忘錄的意思，應該債務重組是你方面的陣營去負責的，這裏白紙黑字寫明，是“銀行與宋先生相討債務重組”。你現在的說法是不是說，這裏寫得不對，是潘先生去負責債務重組？

宋忠官： 你這個是斷章取義，你沒看第3點嗎，這個是連帶的，是整體連在一起的。

錢大律師： 是啊，我們是一起看第3、第4點的，宋先生。

宋忠官： 還有2啊，你不看2的嗎？

錢大律師： 我也有看2，宋先生，2那裏就是說子公司的負債也是你負責。

宋忠官： 2這裏寫著“互益及益誠公司及子公司的業務、資產”，你沒加入資產這一欄嗎？黑字白紙。

廖法官： 宋先生，我想了解一下，剛才錢大律師說根據這個備忘錄第4段，把第4段給證人看，債務重組是由宋先生你方負責的，那你的答案就說錢大律師斷章取義，不如你說說，就你對這份備忘錄的理解，債務重組是由誰負責的？

宋忠官： 你是由第2那裏資產全部給我，就由我負責。

廖法官： 我不是很明白你的答案，你可否解釋一下？

宋忠官： 2A，互益和益誠，你讀一下這一段，業務、資產、負債都要轉讓給我嘛，是啊，沒錯啊。

廖法官： 那怎樣，那債務重組？

宋忠官： 這個完成了之後，那債務就由我負責了。

廖法官： 我理解一下你的答案的意思，我理解你的證供，第一，股份轉讓完成了之後，資產就即刻轉讓給你，你現在的說法是資產轉讓給你了，你才去做債務重組，是嗎？

宋忠官： 這個就是要同步。

廖法官： 我不是很明白如何同步。

錢大律師： 或者我嘗試跟宋先生說一下。

宋忠官： 是，債務處理清楚再交給我，這個也是實際的。

錢大律師： 我想我們一步一步來，宋先生。之前我給你一起看了3和4，是嗎？我向你提出，子公司要轉給你，前提是要解除了集團擔保才可以的，你是同意的嘛。

宋忠官： 但是它這裏是整體的，你看一下這裏，第3點第一行，“潘先生落實”，有沒有看這個？

錢大律師： 是啊，要解除，解除，我再問你，就要得到銀行同意，然後你也同意這個說法，是嗎？

宋忠官： 我這個是整體的草簽，在深圳簽的。

錢大律師： 我是想理解根據你的說法步驟是怎樣的，根據我看這份文件的理解，第一你重組了債務，第二就可以解除擔保，第三就可以資產和負債、子公司全部轉讓給你了，就一二三這樣的順序去進行了，這個是我看這個文件我們提出的合理理解。如果你的理解是不同的，步驟是不同的，麻煩你現在跟我們說清楚是如何進行的。

宋忠官： 我理解1、2、3、4，是1、2、3、4一樣一樣來，你如果只是說4，我剛才是激進了點，就說你斷章取義了，我說這個是誤會就是這樣，你1也不說，2也不說，3也不說，只是說4。

廖法官： 宋先生，你可不可以告訴我們，根據你的理解，這幾件事情的先後次序應該是怎樣的，三件事情，第一件事情，我根據這個協議的次序來說，2A那裏說的業務資產負債轉讓給你，這是一件事情，另外一件事情就是第3段說的解除擔保安排，還有一件事情就是第4段說的債務重組。在你的理解裏，這三件事情的先後次序應該是怎樣的？

宋忠官： 我當日認識的阿潘，阿潘也是兩家上市公司的主席，還是馬主，還是很有錢那個王老吉的女婿，他的背景是相當強，人也挺好，對人彬彬有禮，所以簽這份合約的時候我們兩個都是真心去安排的。如果說起法律文件就說不清了。

廖法官： 宋先生，你記不記得剛才我向你了解的那個問題是甚麼問題？

宋忠官： 我明白，如果你只是說4，我很被動，是要我負責。

廖法官： 宋先生，你記不記得剛才我問了你一個甚麼問題？

宋忠官： 你就是問我這4個問題怎麼處理嘛。

廖法官： 宋先生，我再問一次，你留心聽問題，每一個問題，當然多數問題都是大律師問，請你留心聽著問題，直接給一個答案，這樣我們會節省下很多時間。我現在想向你了解一下，根據這個文件，提到有三件事情，第一件是2A裏說的業務資產負債轉讓給你，第二件事情就是第3點說的解除擔保安排，第三件事情是第4段說的債務重組。在你簽這個文件時，你理解這三件事情的先後次序應該是怎樣的？

宋忠官： 當然是銀行第一。

廖法官： 就是哪個第一？

宋忠官： 銀行解除債務第一。

廖法官： 就是債務重組第一？

宋忠官： 是。

廖法官： 第二件呢？

宋忠官： 第二要和阿潘一起真實去落實銀行的債務。

廖法官： 你也是在說處理債務的事情，剛才你說了債務重組是第一件做的事情，那第二件要做的是甚麼事情？

宋忠官： 那子公司要移交給我。

廖法官： 你現在似乎在說業務資產負債轉讓。

宋忠官： 是。

廖法官： 那解除擔保安排甚麼時候做？

宋忠官： 我這個是依靠阿潘去做的。

廖法官： 剛才我說三件事情，那解除擔保安排次序排第幾？

宋忠官： 應該排第一。

廖法官： 排第一？

宋忠官： 第一，銀行擔保要解決嘛。

廖法官： 你的意思是不是說解除擔保安排和債務重組同樣兩件事情都是排第一？

宋忠官： 是。

廖法官： 即做了這兩件事情，然後就是業務、資產、負債轉讓？

宋忠官： 是啊。

廖法官： 那我現在知道你的說法了，謝謝。”[61]

(Emphasis added)

184.  The unwillingness of Sung Sr in agreeing to this obvious sequence of steps shows that Sung Sr intended to downplay his responsibility of restructuring the debts incurred by Sung Sr’s Businesses in the Clean Break Framework agreed by him and Poon. His evasive attitude to the simple question put to him indicates that he is not a reliable witness.

D3.1.3  Control over AHL and Sung Sr’s Businesses after the 3 SPAs

185.  Mr Chain SC submits, and I agree, that after the 3 SPAs, control over AHL and Sung Sr’s Businesses remained with Sung’s Camp up to the 7 May 2016 AGM.

186.  As said in the above, under the Clean Break Framework agreed by Sung Sr and Poon, the responsibility to restructure AHL’s debts is on Sung Sr at all times. Understandably, the ability to restructure the debts of Sung Sr’s Businesses necessarily depends upon having sufficient control over Sung Sr’s Businesses. According to Sung Sr, the necessary steps for restructuring the debts would include selling the assets owned by AHL’s subsidiaries (such as their factory hardware) and the use of revenue generated by Sung Sr’s Businesses  to repay the Banks’ loans.

187.  The control over AHL’s Board and the decision-making powers over Sung Sr’s Businesses remained with Sung’s Camp after the 3 SPAs, as Clause 3 of the 3^rd SPA only conferred 2 board seats (1 ED and 1 NED) (out of the 10 board seats then ) to Poon’s nominee, Flotilla.

188.  As shown in the 3 SPAs, Poon’s acquisition of AHL’s listed shell was intended to be a gradual process. As per the 3 SPAs, Poon would acquire the AHL shares in an incremental manner, by 4 separate tranches spread across around 1.5 years.

189.  It is clear that control over Sung Sr’s Businesses, including their operations, assets and bank accounts, always remained with Sung’s Camp at all material times at least until 7 May 2016.

(1)  It is Ps’ own case that “Sung Sr’s Businesses were directly operated and managed by Sung and his associates until at least May 2016”.[62]

(2)  This is also admitted by Sung Sr under cross-examination:

“錢大律師: …… 宋先生，我們現在說的備忘錄是2014年12月，你的律師團隊已經代你同意這件事實，即由這一刻2014年12月直至2016年5月，營運紡織業那些子公司是全面由你那邊的陣營去控制的。

宋忠官: 是啊。”[63]

(3)  The same matter is also admitted by CH Wong under cross-examination:

“錢大律師： …… 一直到 2016 年 5 月這個日期，宋老先生的紡織業生意全部都是由宋老先生和宋老先生的陣營直接去營運和管理，那些子公司的董事也是包括宋老先生、宋劍平、宋潔貞等等，這個你是同意的？

王昭康： 同意。

錢大律師： 這個所謂的直接的營運和管理，也是包括銀行戶口的操作，我這樣理解對不對？

王昭康： 那時候談的就是A、B戶口，A、B戶口就是河水不犯井水的，所以我們也沒有理會他的運作情況， [Poon] 也不會理我們做了甚麼的情況，只不過在會計上，他們那邊有一個崔志仁是會計師，他會不斷跟我們的財務總監洽談或是甚麼情況，這個我就不是太清楚 ……”[64]

190.  Even though Poon gradually appointed more directors to the AHL’s Board, Poon did not have majority control in the board until May 2016. Mr Chain SC has drawn me to a fact which is an example illustrating this point. In the AHL’s Board Meeting held on 30 October 2015, Sung’s Camp proposed to appoint Mr Wu Kehao as an additional director of AHL. Poon’s Camp opposed. The Board was deadlocked and then Sung KP, as the Chairman of the Board, exercised his casting vote to break the tie and the motion was carried. I agree with Mr Chain SC that before May 2016, AHL’s Board was controlled by Sung’s Camp. Whenever there was a disagreement between the Sung’s Camp and Poon’s Camp in the Board, Sung’s Camp would have the final say on the matter.

191.  The point is further illustrated by the following exchanges in the 26 May 2016 Meeting:

“Poon: 嗱咁樣呀宋小姐，因為初頭，你都知道初頭大股東係你哋，控股權方又係你哋，去call loan 係控制唔到嘅。你明唔明我講咩？

Sandy: 其實你一早已經入哂啫將我老豆股票貪到之後，你一早已經係出邊大股東啦，講真嗰句。

Poon: 但我哋控制唔到個decision。

Robert: 有個 board 呢，有個董事會呢，你daddy 唔想我哋。

Sandy: 都係 50-50 啫嘛，已經好耐 50-50 啦。

Poon: 唔係 50-50㗎，係你哋係多咗一票呀。

Sandy: 無呀，係不嬲啫已經今年開始呢2016 年呢，開始已經係 50-50 啦。

Robert: 唔係呀，嗱咁樣，個board 呢就 12 個人，每人有6 個。

Sandy: 咁咪50-50 咯。

Robert: 主席有多一票。

Poon: 唔係唔係，所以變咗你哋係揸住個大股東，咁點去處理呢個事，呢個係你哋去處理，係嘛？爭在係你哋嘅生意你哋最識點去處理。”[65]

In the 26 May 2016 Meeting, no one from Sung’s Camp disagreed or disputed the explanation given by Poon and Robert Chui.

192.  I am in agreement with Mr Chain SC that control over Sung Sr’s Businesses remained with Sung’s Camp at all times until May 2016 makes commercial and logical sense.

(1)  In the 26 May 2016 Meeting, Poon’s Camp had made it clear that Poon had no interest and no expertise to manage Sung Sr’s Businesses, and was only desirous of acquiring AHL’s listed shell for purpose of injecting his own natural gas business into it.

(2)  The parties’ intention under the Clean Break Framework was that Sung Sr’s Businesses would be returned to Sung Sr. Thus, the far more logical arrangement was for Sung Sr was to manage retain control over his own business, pending the formal “re-transfer” of the same to Sung Sr.

D3.1.4  Clean Break Framework and the 3 SPAs tainted by illegality and Sung Sr’s knowledge of the same

193.  As per CFGL’s Re-Re-Amended Defence and Counterclaim in HCA 2385/2017 (“RRAD&C”),:

“10(e)(v). …… The 3 SPAs were in part sham agreements in violation of, inter alia, the various disclosure or mandatory (including in particular but not limited to Rule 26 of The Code on Takeovers and Mergers) and/or provisions in the SFO (including in particular but not limited to ss.270(1), 290-291 and Part XV such as ss.310 to 317 and s.328 of the SFO).

194.  Mr Chain SC submits that:

(1) The 3 SPAs were sham agreements in that they concealed Poon’s agreement to acquire a 58% stake in AHL and created the false impression that any purchaser or recipient of shares under the 3 SPAs would not acquire more than a 30% stake in AHL.

(2) The 3 SPAs were so designed to allow Poon to evade the obligation to make a mandatory general offer to all shareholders of AHL upon acquiring more than a 30% stake.

(3) All along, Sung Sr well knew that the deal agreed between himself and Poon was outright illegal.

(4) Sung Sr knowingly played a vital role in implementing the same by transferring his shares to Poon’s nominees thus helping Poon to conceal the true extent of his substantial interest in AHL from the public and the regulatory authorities.

195.  Having considered the evidence carefully, I agree with Mr Chain SC.

196.  In both his witness statements and his oral evidence, Sung Sr tried to paint a picture that he was just an ignorant factory man, and he only knew that Poon generally had some regulatory concerns. These are clear understatements of the real extent of Sung Sr’s knowledge and involvement at the material times.

197.  Sung Sr plainly knew that as a substantial shareholder of a listed company, he was required by law to publicly disclose his interest in the listed company. This is evidenced by the public disclosures made by Sung Sr from time to time. This is also admitted by Sung Sr under cross-examination:

“錢大律師： 不是，宋先生，我只想確認一件事情，你作為一個做了6年上市公司2 主席、8年上市公司執行董事，你是知道有一個大原則，就是重大股東是需3 要披露他們對上市公司的權益，你同意還是不同意？

宋忠官： 我就是說這一點全部由專業人士幫忙做的。

錢大律師： 我不是問誰幫忙，我是問你知不知道，這個大原則，很簡單，重大股東要披露上市公司的權益。

宋忠官： 我是知道，所以就叫公司職員做嘛。

錢大律師： 是啦，這麼多年，從2005年上市開始你一直有做的，一直都是叫公司職員幫你去做的。

宋忠官： 是。

錢大律師： 細節就不知道了，因為你依賴他們的專業。不過一個這麼明顯的大原則，即重大股東要披露權益，這個你是由上市那一刻已經知道的，是嗎？

宋忠官： 基本上都知道。”[66] (Emphasis added)

198.  It is indisputable that Sung Sr knew that under the Clean Break Framework, Poon would acquire a controlling stake in AHL. The percentage of the shareholding to be passed to Poon’s nominees under the 3 SPAs would be 58%. No doubt this is a substantial interest requiring proper disclosure.

199.  As said in [42]-[45] above, the 1^st and the 2^nd SPAs were completed, and the 3^rd SPA was partially completed, in the following way:

(1)  On 15 and 16 December 2014, the 2^nd and the 1^st SPAs were respectively performed, such that Poon acquired 43,500,000 shares in AHL (ie 9.86%) via himself and his nominee Ever Source.

(2)  On or around 5 February 2015, pursuant to the 3^rd SPA, , Sung Sr (via Powerlink) sold 17,920,000 shares in AHL on the open market at the price of HK$1.45 per share, which were later acquired by Poon in the name of some unknown nominees. Sung Sr then refunded the price difference between HK$1.45 and HK$0.952 (the agreed share price under the 3^rd SPA) to third parties nominated by Flotilla.

(3)  Between March and June 2015, Powerlink sold a further total of 88,000,000 shares in AHL to Flotilla as nominee of Poon, and executed bought and sold notes for the transfer of shares to various nominees of Poon such as Choi YC, Zhao Xu and Zheng SJ.

200.  In Sung Sr’s witness statement, in respect of the disposal of the 17,920,000 shares in AHL on or around 5 February 2015, Sung Sr said:

“73. [Poon] instructed me to sell the 17,920,000 shares in the foregoing manner. In hindsight, I believe this enabled [Poon] to acquire 17,920,000 shares from the market and circumvent the necessary regulatory requirements. At the end of these above transactions, after I reimbursed [Poon] the amount of HK$8,924,160, I would have disposed of 17,920,000 shares and earned HK$17,059,840; and [Poon] would have spent HK$17,059,840 to acquire 17,920,000 shares.” (Emphasis added)

201.  It is plain that by using corporate nominees to enter into the 3 SPAs, Poon’s purpose was to hide the fact that he was the ultimate purchaser of the AHL’s shares behind the scene.

202.  In my view, Sung Sr was well aware of the fact that Poon was acquiring a substantial interest in AHL by the convoluted way as set out in the 3 SPAs at the time of the signing the SPAs, not in the hindsight.

(1)  In Clause 6 of the 3^rd SPA, it is stated:

“[Flotilla] 承諾不會收購超過30%[AHL]股份。”

(2)  However, even if only the 3^rd SPA is taken into account, the percentage of AHL shares acquired by Flotilla under the 3^rd SPA would be around 48.4%. The total of the percentage of AHL shares acquired by Poon’s nominees would be around 58%.

(3)  As to why Clause 6 is inserted into the 3^rd SPA, Sung Sr did not offer any explanation under cross-examination:[67]

“錢大律師： 是的，好的，那我們回到六段那裏，第六段那裏 …… 乙方，他抽這家人頭公司出來，承諾不會收購超過30%，是嗎？

宋忠官： 我總之就賣了上市的地位給他，他這樣搞，我就不明白。我也不是內行，我是外行，我不懂。

錢大律師： 就是說你的立場，當時簽這一份的時候，你是看到第六條的時候，只是你不明白為甚麼會有這樣一條就簽了，是嗎？

宋忠官： 我當日是很相信阿潘的，他一出來合約就拿出來了，我就簽了。”[68]

203.  As an experienced businessman and the chairman of a listed company for many years, by seeing Poon to acquire a substantial interest in AHL by a convoluted way, and by seeing Clause 6 in the 3^rd SPA which is definitely untrue, no doubt Sung Sr would have known that Poon was trying to evade the necessary public disclosure requirements by all these. To say that Sung Sr was unaware of Poon’s intention to circumvent the necessary regulatory requirements at the time of the 3 SPAs is unbelievable.

204.  As shown in the evidence, Poon did not publicly disclose the true extent of his shareholding in AHL until January 2017, when the Gold Train Subscription Agreement was entered into.

D3.1.5  Sung Sr’s execution of the Second Mortgage, and the alleged SMA/CRA

205.  A contentious issue which has been vigorously argued in the trial is whether the SMA/CRA alleged by Ps are true.

206.  In order to examine the veracity of the SMA/CRA, the following undisputed or indisputable facts would need to be borne in mind:

(1)  From around February 2015, some of the Banks began to demand the AHL Group to repay the outstanding Loan Facilities.

(2)  In March 2015, the 2014 AR was published. As shown in the 2014 AR, AHL’s financial situation was very unsatisfactory:

(a)  AHL had incurred a net loss of approximately HK$184.3 million during the financial year ended 31 December 2014, which was a significant increase from the net loss of HK$32.6 million reported in the 2014 IR.

(b)  The current liability of AHL was at HK$1.68 billion, which included HK$1.12 billion of bank borrowings due within a year.

(c)  Despite holding inventories of over HK$1.03 billion, AHL only held bank balances and cash of about HK$145.7 million.

(3)  Facing the pressure from the Banks, in April 2015:

(a)  At the request of the Banks, AHL engaged FTI as its independent financial advisor to review the financial position of AHL Group and make recommendations with regard to potential debt restructuring.

(b)  The Banks further made a request for Sung Sr to procure ADFL to execute a Second Mortgage over Sung’s Tower as additional security for the AHL Group’s liabilities.

(4)  At the 5 May 2015 Meeting, the Banks granted the Standstill to AHL conditional upon the AHL Group’s procurement of the execution and provision of the Security Documents, including the Second Mortgage over Sung’s Tower.

(5)  Subsequently, the AHL’s Board passed the 18 May 2015 Resolution, agreeing to the execution of the Security Documents, including the Second Mortgage, in exchange for the Standstill.

207.  In a letter from the Banks to “[t]he Board of Directors of [AHL]” dated 29 May 2015 (“the 29 May 2015 Letter”), the Banks said:

“We refer to the meeting held between [the AHL Group] and the Banks on 5 May 2015, during which it was agreed that, among other things, [the AHL Group] would execute the following security documents as a condition for the Banks to agreeing to grant an informal standstill to [the AHL Group]:

•  [the Second Mortgage]

• a debenture creating a fixed and floating charges over all assets of all subsidiaries

• a charge/pledge over all the shares held/interests in each of the subsidiaries

• guarantee to be given by each of the subsidiaries; and

• a charge over the operating bank account … maintained with HSBC

We understand that at [the AHL Board]’s meeting held on 18 May 2015, a resolution was passed to execute the above security documents which had been delivered to your Ms Agnes Fung between 12 May 2015 and 21 May 2015.

Regrettably, to-date the relevant security documents have still not been duly executed by [the AHL Group] despite numerous reminders. Please take this as a final notice for you to return the original duly executed security documents to us or our solicitors ……

If you fail to return the duly executed security documents to us or our solicitors by 5:00 pm on Tuesday, 2 June 2015, the Banks will take such steps as they consider appropriate to protect their interests without any further prior notice to you, including but not limited to

issuing statutory demands against the relevant entities in the Group.

……” (Emphasis added)

208.  As to the 5 May 2015 Meeting:

(1)  It is clear that in the 5 May 2015 Meeting, Sung’s Camp and the Banks reached an agreement that the Banks would grant AHL Group the Standstill upon the condition that the AHL Group would execute and deliver the Security Documents, including the Second Mortgage, to the Banks.

(2)  However, it is not clear who on behalf of the Sung’s Camp attended the meeting.

(3)  Sung Sr denied having attended the meeting.

(4)  However, Sung Sr is the head of the whole family. All Ps’ witnesses (including Sung Sr himself) have given evidence saying that no one in the Sung’s family would defy Sung Sr. It is inherently improbable that the representative(s) of the Sung’s Camp in the 5 May 2015 Meeting would, contrary to Sung Sr’s will, agreed to the proposal (including the Second Mortgage) put forward by the Banks in the meeting.

209.  As to the 18 May 2015 Resolution:

(1)  There is no dispute that at that time, the majority of the AHL’s Board was from Sung’s Camp, occupying 7 out of the 9 seats on the board. The chairman of the AHL Board was Sung KW. At that time, members of the board from Sung’s Camp included Sung KW, Sung KP, and CH Wong.

(2)  Sung KP claimed that he did not attend the AHL Board Meeting on 18 May 2015.[69]

(3)  However, according to Sung KP, Sung KW (who did not give evidence in the trial) would not have decided to put up Sung’s Tower for the Second Mortgage without consulting Sung Sr.

“錢大律師： …… 你也知道那是哥哥，就是一家人，你對他做事方法應該有某個程度的理解。我現在問你，根據你的說法，宋劍華會不請示爸爸，也不請示你，因為宋氏大廈有你的名字，你有份的，沒有請示你，沒有請示你爸爸的情況下，他繞過董事會和銀行說，我拿我們宋氏家族的私人財產出來給銀行，他會不會這樣做？

宋劍平： 據我理解，應該不會，因為我哥哥這個人本身比較圓滑，他不會在私底下亂做決定。”[70] (Emphasis added)

I attach weight to this admission made by Sung KP.

(4)  Sung KP also admitted that, CH Wong, another director of AHL, would not do anything contrary to Sung Sr’s will.

“錢大律師： 另外一位做（執董）長些時間的董事，就是德高望重的董事王昭康，他是老臣子來的，他做了你爸爸的老臣子這麼久，是不是對你的爸爸有一定程度的忠誠？

宋劍平： 是的。

錢大律師： 據你所了解的，這個王昭康會不會和銀行說，在董事會層面和銀行說“宋氏家族有一個私人物業，我們可以拿出來給你” 不請示宋老先生，也不請示你，他自己一意孤行就這樣，他會不會這樣做？

宋劍平： 據我了解，王昭康一定不會，因為很多時候他在我爸爸沒有表態之前，他都不會表態。”[71] (Emphasis added)

I also attach weight to this admission.

(5)  CH Wong admitted that it would be impossible for the AHL Board to pass a resolution to agree to the Second Mortgage without Sung Sr’s approval.

“錢大律師： 王先生，我們一步一步來，因為你的答案說了挺多內容，我想慢慢去拆解，去搞清楚你的證據的立場是怎樣。你的立場是董事局不可能通過一個宋老先生不許可的就宋氏大廈二按的一個議案，不可能的。

王昭康： 是啊，不可能。

錢大律師： 如果是有通過，如果，假設是有通過，就一定是宋老先生有許可才會這麼做的。

王昭康： 沒錯。”[72] (Emphasis added)

(6)  Under cross-examination, Sung Sr denied that he had approved the consensus reached between the Banks and the AHL’s representative(s) in the 5 May 2015 Meeting, and Sung Sr also denied that he had given agreement to the passing of the 18 May 2015 Resolution:

“錢大律師： 即是你的意思是不是說，你的兒子和你那三十多年的得力助手、得力副手，是會未經你同意之下，就會答應了銀行，和宋氏大廈做個議案呀?

宋忠官： 是有這樣的事，沒經過我同意。

錢大律師： 同時間就看到整個董事局，這是銀行的記錄，在2015年5月18號開了個董事會，也都有個正式董事表決，也都是確認了5月5號答應了的事，是包括宋氏大廈拿出來議案，你的講法又是，董事局當時是，由你的，作為前大股東，你的講法啦，委任的大多數董事裏面，他們全部是未經你同意做了個表決，給宋氏大廈做個議案給銀行。

宋忠官： 是這樣的意思。”[73] (Emphasis added)

(7)  The denial is contradicted by the evidence of Ps’ other witnesses as stated in the above. Further, it is also contradicted by Sung Sr’s own evidence:

“錢大律師：也就是說無論是你的女婿，你兩個兒子或者是你的女兒，因為你也說了你們是很傳統的中國家族，就是他們都不會違反你的意願，也是要涉及你要決定的事情，他們一定會徵詢你的同意，是嗎？

宋忠官： 是的。”[74] (Emphasis added)

Sung Sr’s denial must be rejected.

210.  As submitted by Mr Chain SC, applying common and commercial sense, agreeing to the Second Mortgage is in line with Sung Sr’s own commercial and vested interest. In May 2015, Sung Sr held between 31.02% and 34.79% of AHL’s shares. Naturally, Sung Sr would try every means to find a way to avoid the immediate enforcement actions contemplated by the Banks and to preserve Sung Sr’s Businesses. In Sung Sr’s own words in his witness statement:

“113. …… My Businesses were businesses that I had spent over 40 years developing, and I very much wanted them back. I also knew that, as a matter of commercial reality, if I did not put up Sung’s Tower as security, My Businesses would be in trouble.”

211.  Mr Man SC has raised a pleading objection. Mr Man SC submits that it is not CFGL’s pleaded case that Sung Sr or ADFL had, as at 5 or 18 May 2015, decided to execute the Second Mortgage. CFGL pleaded that Sung Sr agreed to the execution of the Second Mortgage on 8 June 2015[75]. It is also stated in the Agreed Facts that Sung Sr agreed to the execution of the Second Mortgage on 8 June 2015.[76]

212.  Having examined the pleadings and the Agreed Facts, while Ds say that Sung Sr agreed to the execution of the Second Mortgage on 8 June 2015, Ds have not said that Sung Sr only agreed to the execution of the Second Mortgage on 8 June 2025, or Sung Sr did not agree to the execution of the Second Mortgage before that date. With respect, there is no substance in the pleading objection raised by Ps.

213.  As to Ps’ contention that in or around April or May 2015, Poon, by himself and through Koo, tried to persuade Sung Sr to put up Sung’s Tower as security for the Loan Facilities[77]:

(1)  Sung Sr said the following in his witness statement:

“98. Apart from the Banks / FTI, [Poon], either by himself or through [Koo], also tried to persuade me to put up Sung’s Tower as security for the Loan Facilities.

……

102. I met [Koo] a few times before. So far as I remember, the first time I met him was at [the Sportful Garden Restaurant (陶源酒家) in Mei Foo, the “Mei Foo Restaurant”]. It was [Poon] who introduced [Koo] to me as his representative for the purpose of discharging [Poon]’s responsibility in carrying out the restructuring exercises regarding the Loan Facilities. ……”

(2)  However, Sung Sr did not say that in the Mei Foo Restaurant, Poon or Koo had ever persuaded him to agree to the Second Mortgage.

(3)  Apart from the K11 Meeting, there is in fact no evidence from Sung Sr in support of the contention that Poon requested Sung Sr to agree to the Second Mortgage.

(4)  Save and except the K11 Meeting, Sung KP’s evidence and Martin Kong’s evidence concerning this contention are hearsay evidence based upon what Sung Sr said in his witness statement. Neither Sung KP nor Martin Kong has any personal knowledge regarding this contention.

(5)  CH Wong said the following in his witness statement:

“10. [Sung Sr] initially refused to put up Sung’s Tower as security. However, [Sung Sr] Sung was subsequently approached by [Koo] who eventually persuaded [Sung Sr] to enter into the Second Mortgage. I attended some of the meetings with [Koo] together with [Sung Sr], which usually took place at [the Mei Foo Restaurant]. As far as I can recall, the last meeting with Mr. Koo took place in Central, and it was during this meeting that [Sung Sr] agreed to enter into [the SMA].”

(6)  Under cross-examination, CH Wong said when they (Sung Sr and CH Wong) met Koo for the first time in the Mei Foo Restaurant, Koo told them if (ie conditional upon) the fundraising exercise was successful, the Second Mortgage could be redeemed shortly. See [264] below.

(7)  For the reasons provided in this judgment, I do not regard Sung Sr and CH Wong as reliable witnesses. Hence, there is no evidence accepted by this Court in support of the contention that in the Mei Foo Restaurant, Koo requested Sung Sr to agree to the Second Mortgage. I accept Martin Kong’s evidence. Based upon Martin Kong’s evidence, I accept that Poon requested Sung Sr’s family members to persuade Sung Sr to agree to the Second Mortgage in the K11 Meeting.

214.  I have considered the K11 Meeting mentioned by Sung Sr, Sung KP, and Martin Kong in their evidence.

(1)  In his witness statement, Sung Sr said:

“106. [Poon] also approached my other family members, asking them to persuade me to put up Sung’s Tower as security. In late May 2015, various of my family members including [Sung KP], [Sandy Sung], [Martin Kong] and [Gary Lau], met [Poon], Lo Ping and Robert Chui at a Thailand restaurant at K11.”

(2)  Under cross-examination, Sung Sr said that after the K11 Meeting, his family members tried to persuade him to agree to the Second Mortgage, but he disagreed.

“錢大律師： 帶你去看下你的證人供詞 106 段，69 頁，在這裏你有講：在五月尾的時候阿潘和你幾個家人去見面，就包括劍平，你的女兒和兩個女婿，他們是在 K11的泰國餐廳見面的。在這裏我想澄清一下，按你的說法是阿潘去和你的家人講拿宋氏大廈出來做二按啦，那他們開完會後，劍平、你的女兒和你的兩個女婿，是不是真的回來講“爸爸，你拿出來做二按啦”，是不是阿潘說服了他們，他們再來說服你呀？

宋忠官： 有這樣的事，我不同意。

錢大律師： 即你的講法是阿潘見完子女和女婿之後，子女和女婿都沒再和你就這件事情去溝通？

宋忠官： 不是，有同我講，我不同意。

錢大律師： 那他們和你講了甚麼？

宋忠官： 就是剛才講的，宋氏大廈拿去抵押、二按嘛。

錢大律師： 即可以這樣講，是不是說劍平，你的女兒和兩個女婿，他們都覺得拿宋氏大廈出來做二按，是一件，對宋老先生你，對你的權益是好的這件事情，是保護到你的一件事情，是不是？

宋忠官： 他講是有這樣講過，我沒得到保障嘛，所以我不同意咯。”[78]

“錢大律師： 是的，那我們再看你的證人供詞 106 段，69 頁，B 文件夾的 69 頁。我昨天問你這一點就是 5 月底的時候，潘先生就和劍平，你的女兒，還有兩個女婿，在尖沙咀 K11 商場的泰國餐廳吃飯的，你還記得這個環節嗎？

宋忠官： 他去餐廳我是不知道的，事後才知道的。

錢大律師： 是的，不過你就對我說，事後，劍平你的女兒和你的女婿都對你說，都回來對你說，爸爸，我們把宋氏大廈做一個二按吧，他們也嘗試去說服你的，也叫你這麼去做的，然後你仍然還是不同意的，這是你昨天給出的答案。

宋忠官： 是的。”[79]

(3)  Regarding the K11 Meeting, Sung KP’s evidence is as follows:

“廖法官： 宋先生我想先了解一下，這個K11 泰國餐廳會面，你剛才說是有發生？

宋劍平： 是的。

廖法官： 在這個會面當中，潘先生是不是遊說你們，你們回去勸宋老先生，拿宋氏大廈出來做二按，是不是這個主題？

宋劍平： 是的。

廖法官： 說到最後，你自己心裏的想法是甚麼樣的？聽完潘先生說了以後。

宋劍平： 我當然不同意。

廖法官： 你是不同意的？

宋劍平： 是的，你也知道他是我們公司的股東，禮貌上我也不能說話太難聽。

廖法官： 潘先生走了之後，你們去的那幾個家裏人有沒有談談要怎麼樣，你們幾個家人同意還是不同意？

宋劍平： 我是不同意的，我不知道他們怎麼想的。

廖法官： 你們沒聊過嗎？你們幾個家裏人在泰國餐廳會面之後。

宋劍平： 我不是很記得了。

廖法官： 不是很記得？

宋劍平： 的，不記得他們有沒有同意，不能 100%肯定。”[80]

(4)  According to Martin Kong[81], after the K11 Meeting, Sandy Sung was of the view that it would be beneficial to Sung Sr if Sung Sr would agree to the execution of the Second Mortgage.

“錢大律師： 這裏是宋老先生的證人供詞的 106 段，106 段在你自己的證人供詞也是確認過的。

江一帆： 是。

錢大律師： 這裏的說法是，在 2015 年 5 月的時候，潘先生曾經和你、你太太、宋劍平，還有一位叫 Gary Lau 劉先生在 K11 的一間泰國餐廳會面。

江一帆： 沒錯。

錢大律師： 這個會面就是潘先生想說服你和你太太和宋老先生的家人，說服你們去跟宋老先生說，將宋氏大廈拿出來做二按，這樣的說法是否正確？

江一帆： 正確。

錢大律師： 宋老先生之前給的供詞是說這個會面之後，包括你在內的這幾位家人，是受到潘先生的說服，是有回去跟宋老先生說，你將宋氏大廈拿出來做二按，是不是這樣的情況？

江一帆： 不會是包括我，因為當時我開完這個會之後我的立場就是不同意拿出來做二按，你說如果同意的話，我太太是同意的，有幾方面她是同意，開完會之後我太太有沒有回去跟宋老先生親口說她的意見呢，我就不清楚，因為太太沒跟我表達她有沒有跟宋老先生說過這番話，即說過她自己的意見，這個我就不清楚了。

錢大律師： 我想確認，這裏有說到宋老先生提到他四位家人，除了這四位之後，在這個K11 泰國餐廳參與這個會議還有沒有其他人？

江一帆： 如果家裏人包括我就三位，因為我們去之前 David 宋劍平，我們到現場的時候他已經離開了，但是我知道當晚是有份參與這個會議，除了宋劍平之外，就是我和 Sandy和另外一位 Gary Lau，Gary Lau 也是宋先生其中一位女婿，算起來就是這四位。

錢大律師： 宋劍平就是先行離開。

江一帆： 是，先行離開。

錢大律師： 你就沒跟他重疊的。

江一帆： 沒有。

錢大律師： 不過你知道他在那裏。

江一帆： 知道他在那裏。

錢大律師： 之後就是你剛才說的那三位，就是你、你太太和 ……

江一帆： Gary Lau。

錢大律師： 劉先生。那依你所知，宋劍平他是不是受到潘先生說服，同意回去叫宋老先生拿宋氏大廈出來做二按呢？

江一帆： 再說多一點我們去之前，為甚麼會出現在那個會議呢，當晚 11 點多我和太太準備睡的時候就有電話打給我太太，就叫我太太去 K11 餐廳開會，當時好像說宋劍平不同意，宋劍平談完之後藉故離開了現場，沒同意過對方潘先生的要求就離開了，所以就希望從我們的角度可以說服宋先生簽二按，如果正面回答你的問題，我相信宋劍平走的時候都是不同意簽這個二按。

錢大律師： 你剛才說你自己不同意，你太太就同意的。

江一帆： 我太太有兩方面她都覺得可以簽的，她同意的。

錢大律師： 你說兩方面應該可以簽，兩方面是？

江一帆： 她考慮到，一方面她關心宋老先生的健康狀況，她覺得如果不簽可能工作壓力會更大，她覺得簽完之後可能可以暫時舒緩工作壓力，對於他的健康也很有幫助，這是出於關心她爸爸的健康情況。另外一個方向是，因為當時Sandy Sung是負責集團裏面的生產，她很清楚集團生產的狀況怎樣，訂單是怎麼都做不完的，不斷加班來做，看到訂單不斷地進來，她對集團的生意是很清楚和很有信心，集團就算有甚麼財政上的困難可能只是一時三刻的困難，如果簽了這個二按可以暫時阻擋銀行可能有甚麼行動的話，她對公司的實力很有信心，就可以很快度過難關，所以基於這兩方面，她覺得可以簽。

錢大律師： 有沒有其他考慮，就是這兩個考慮？

江一帆： 我的了解她就是這兩個考慮。

錢大律師： 那劉先生呢，劉先生有沒有表態？

江一帆： 沒有，可能沒表態，我們都沒有問過劉先生甚麼意見。”[82]

(5)  Putting the aforementioned evidence together, after the K11 Meeting, Sandy Sung tried to persuade Sung Sr to sign the Second Mortgage, but Sung Sr disagreed.

(6)  At a later time, Martin Kong said in his evidence:

“江一帆： 我的理解是宋老先生不是被逼的情況下簽，我們就沒去深究，問過宋先生說，你為甚麼突然間 180度大轉變，本來說不肯簽的，為甚麼當日上去之後就簽，其實簽完之後我們沒人去問過他一個甚麼心理狀態或甚麼精神狀態之下簽這個二按。……”[83]

215.  I accept that shortly after the K11 Meeting, Sung Sr was not willing to agree to the Second Mortgage. Taking all the evidence into account, it is my finding that the K11 Meeting took place at a time before 5 May 2015.

(1)  There is no documentary evidence showing exactly when the K11 Meeting took place. There is also no particular reason given by Sung Sr, Sung KP and Martin Kong why they would be able to remember that the K11 Meeting took place in late May 2015.

(2)  The matters as set out in [206(4)], [206(5)], and [207] to [209] above are indisputable. In particular, the AHL Board passed the 18 May 2015 Resolution in a meeting chaired by Sung KW, who (according to Sung KP) would not make a decision to agree to the Second Mortgage without consulting Sung Sr.

(3)  In view of all the above, in my judgment, the only logical conclusion is that the K11 Meeting took place at a time before 5 May 2015. Shortly after the K11 Meeting, Sung Sr was unwilling to agree to the Second Mortgage. However, sometime later and before 5 May 2015, Sung Sr changed his stance and gave a green light to the Second Mortgage. Hence, Sung’s Camp agreed to the Second Mortgage in the 5 May 2015 Meeting, and the AHL Board passed the 18 May 2015 Resolution.

(4)  I note that it has not been expressly put to Sung Sr that the time of the K11 Meeting as stated in [106] of his witness statement, ie late May 2015, is not correct. However, in view of the matters set out in [209(6)] and [209(7)] above, it has been explored with Sung Sr as to whether he had agreed to the Second Mortgage before 5 May 2015, and it has also been put to Sung Sr that none of his family members would defy him. Thus, in my view, reaching the conclusion as stated in the above would not be unfair to Sung Sr.

216.  I find that:

(1)  The agreement reached by the representative(s) from Sung’s Camp and the Banks in the 5 May 2015 Meeting, ie the agreement that the Banks would grant AHL Group the Standstill conditional upon the execution of the Security Documents (including the Second Mortgage), was approved by Sung Sr.

(2)  Before the passing of the 18 May 2015 Resolution by the AHL Board, Sung Sr had given his approval to the Second Mortgage, which was a condition for the granting of the Standstill by the Banks.

(3)  The Banks’ Demand made on or around 3 June 2015 reinforced Sung Sr’s desire to give the Banks the Second Mortgage in exchange for the Banks’ agreement to give a breathing space to AHL.

(4)  Sung Sr’s agreement to the execution of the Second Mortgage is not conditional upon any promise made by Poon. Sung Sr’s agreement to the Second Mortgage was merely motivated by his desire to preserve his own businesses.

217.  After 18 May 2015, the following events occurred:

(1)  On 29 May 2015, the Banks gave a final notice (ie the 29 May 2015 Letter) for immediate execution and return of the Security Documents, including the Second Mortgage, by close of business on 2 June 2015.

(2)  On or around 3 June 2015, the Banks issued the Banks’ Demands requiring immediate payments of money due under the Loan Facilities, failing which the Banks would consider commencing legal proceedings against the AHL Group.

(3)  As a result of the Banks’ Demands, on 4 June 2015, the trading in AHL’s shares were suspended. On the same day, AHL wrote a letter to the Banks inviting them to meet so that “all problems will be solved”.

(4)  On 5 June 2015, the Banks replied and declined to meet. The Banks said that “we consider of paramount importance for [the AHL Group] to return to us the duly executed security documents as repeatedly requested through various channels before any further discussions will take place with [the AHL Group].”

218.  Subsequently, the 8 June 2015 Meeting took place. The meeting was held at FTI’s office in Central. There is no dispute that the Second Mortgage was executed by Sung Sr in that meeting.

219.  As pointed out by Mr Chain SC, there was no explanation, whether in Ps’ pleadings or Sung Sr’s 3 witness statements, of how, when and where the SMA/CRA was allegedly made. Sung Sr only mentioned the details of the SMA and the CRA for the first time under cross-examination.

220.  Under cross-examination, Sung Sr said that:

(1)  Koo comforted him and asked him to sign the Second Mortgage, for Poon would take back and return Sung’s Tower to him very soon. Sung Sr said that Koo gave him this assurance in front of the Banks’ representatives, including Ms Leung of SCB :

(a)  “宋忠官： 是的，但是我補充一下，我要補充一下，我這麼多銀行的貸款，渣打銀行這位梁小姐是最友善的，我內心真的感激她。

錢大律師：是的, 那你有沒有和梁小姐，其他時間有沒有跟梁小姐共同過，我拿這個宋氏大廈出來都是暫時性的，因為宋先生是已經答應了或者承諾了，潘先生已經答應了、承諾了，他會去集資贖出來的，有沒有這樣跟梁小姐說過?

宋忠官： 我就想說一下，阿顧在這麼多銀行面前說過的，梁小姐就肯定會知道, 我和梁小姐在私人感情這方面挺有緣份，也挺好的，有甚麼事情都會溝通。

錢大律師：你說是在你在場的時候，顧先生和所有銀行的代表是說過宋氏大廈擺出來是暫時性的，因為潘先生會負責去集資，去贖回來，清了這個議案，是有說過這件事的。

宋忠官： 他那天是有在銀行面前說，他說宋先生，這個是很快就會贖回給你的了。”[84] (Emphasis added)

(b)  “宋忠官： 我在這麼多間銀行面前，梁小姐面前簽的時候，阿顧就說這樣的話，我相信那幾家銀行都聽到了。

錢大律師：你的意思是其實阿顧是對你說的，不過你相信那些銀行代表也聽到了，是這個意思嗎？

宋忠官： 是，是。

錢大律師： 阿顧說了甚麼話？

宋忠官： 叫我簽了，安慰我，你很快就會拿回來的了，潘先生那裏，潘先生那裏，阿潘會幫我很快地贖回給我。”[85] (Emphasis added)

(2)  Koo repeated the assurance many times. Koo even followed Sung Sr to the washroom to repeat the assurance to persuade Sung Sr to sign the Second Mortgage.

“錢大律師： 你剛才的答案是說會很快贖出來，顧先生是這麼跟銀行說的，那我就想問清楚，顧先生是不是對銀行說，在你面前對銀行說，是潘先生會負責集資去贖回那個二按出來？

宋忠官： 他有說宋先生你安心啦，說很快會贖回來的了。

錢大律師： 他有沒有說我提出的那些東西？就是說潘先生會負責集資去贖回那個二按出來？

宋忠官： 他說過很多次，私下有說過，在那裏也有說。

廖法官： 先等一下，宋先生，你幫我先明白一下你的證供，你說潘先生，對不起，說顧先生是這麼對你說的，是在甚麼場合下說的？

宋忠官： 我向法官解釋一下，那天是在那裏有說集資的事，我去洗手間他又跟進來，所以我剛才沒有說，因為不好意思，說是去廁所。他那天跟得我很緊，一直在解釋解釋，阿潘又相信他。……”[86]

(3)  Sung Sr said that the Banks’ representatives all heard the assurance given by Koo to him.

221.  As to the matters raised by Sung Sr for the first time as set out in the paragraph above, I hold that all these are fabrications made up by Sung Sr during his cross-examination and are untrue.

222.  The SMA and the CRA are important elements in Ps’ case. If there is any truth in the matters said by Sung Sr for the first time under his cross-examination as summarized in the above, there is no reason why such matters are not mentioned in Ps’ pleadings and in all the witness statements made by Sung Sr at all.

223.  There is no contemporaneous documentary evidence corroborating what Sung Sr said in his oral evidence. Before the commencement of these proceedings, the parties have exchanged extensive correspondences between themselves and through lawyers to find a solution for the indebtedness of Sung Sr’s Businesses. However, in none of the correspondences, Ps have referred to Poon’s obligations under the alleged SMA and/or the alleged CRA.

224.  In particular, the alleged SMA/CRA was not reflected in:

(1)  The Banks’ letter to AHL dated 8 June 2015, in which the Banks recorded the agreement between the parties. In that letter, the Banks said:

“關於我行2015 年5 月29 日及6 月3 日來函及在2015 年6 月8 日會面。

我行現以本函記錄雙方達成的共識:-

在貴集團向我行提供已妥善簽署的擔保文件(包括宋氏大廈之第二按揭)的前提下,各銀行同意:

• 在一段待定的時間內,暫緩向貴集團採取催收行動,在此期間內,銀行同意與貴集團進行還款或債務重組方案之討論;

• 與貴集團商議提供約1 億港元的新增銀行授信,以滿足其短期現金流需求;及

• 立即撒回各銀行已向貴集團所發出的法定催收函。

請注意,本函之內容並不構成各銀行必需要向貴集團提供任何新增授信之法律責任或影響各銀行對貴集團現有的任何權利。各銀行之權利全部保留。”

(2)  AHL’s public announcement made on 10 June 2015, in which the Second Mortgage was described as “unconditional financial assistance” provided by ADFL, as “a condition for the Banks to withdraw the Letters and continue their discussion with the Group on the loan restructuring”.

(3)  ADFL’s board resolution dated 12 June 2015 and signed by Sung Sr and Sung KP. In that board resolution, it is stated:

“We, the undersigned, being the directors of the Company, HEREBY RESOLVE AS FOLLOWS:

  [The Second Mortgage] be and it is hereby approved, THAT any director of the Company be and he/she is hereby authorized to sign the same for and on behalf of the Company AND THAT a duly signed copy of the same be delivered to HANG SENG BANK LIMITED.”

225.  As submitted by Mr Chain SC, ADFL’s board resolution of 12 June 2015 would be a perfect place to record the alleged SMA/CRA. At the time of the resolution, ADFL was a private company owned by Sung Sr and Sung KP. ADFL’s board resolution of 12 June 2015 is a document for the eyes of Sung Sr and Sung KP only. If there is any truth in the alleged SMA/CRA, there is no reason by the SMA/CRA are not recorded in that board resolution.

226.  Further, for the reasons set out in [262(3)] and [264] below, Sung Sr’s allegations regarding the SMA/CRA are also contradicted by the evidence of CH Wong, who was also present at the 8 June 2015 Meeting.

227.  Applying common and commercial sense, Poon would have no incentive to agree to the SMA/CRA. As per the Clean Break Framework, Sung Sr’s Businesses, including both assets and liabilities, would be returned to Sung Sr. It would be absurd to suggest that Poon would be willing to take up the responsibility to raise funds to discharge the Second Mortgage, thereby exposing himself to a liability of over HK$440 million[87]. Further, in June 2015, Poon’s representatives only had 2 (Lo Ping and Robert Chui) out of 8 seats in the AHL Board. Poon’s Camp had no control over AHL at all. In these circumstances, it would also be absurd to say that Poon would be willing to take up the responsibility of repaying the debts of over HK$440 million owed by the AHL Group to the Banks.

228.  As stated in [72] above, HK$92.4 million were raised in the August 2015 Placing Exercise. The allocation of the funds raised is inconsistent with the existence of the SMA/CRA. Bearing in mind in August 2015, the AHL Board was still controlled by the Sung’s Camp (see [185]-[192] above), the allocation of the funds raised in the August 2015 Placing Exercise shows that Poon in fact did not have the obligation to use the funds raised to reduce the Loan Facilities owed by the AHL Group to the Banks.

229.  On 22 September 2015, AHL’s Interim Report was released, showing that the AHL Group was only having bank balances and cash of around HK$73.4 million, but its current liabilities stood at around HK$1.568 billion.

230.  Subsequently, Sung Sr issued the 14 October 2015 Letter to SCB, seeking time and indulgence from the Banks. That letter was drafted by CH Wong and approved by Sung Sr. The 14 October 2015 Letter is a document contradicting Sung Sr’s evidence.

(1)  In that letter, there is not a word mentioning the SMA/CRA. Further, in that letter, the description is that Sung Sr’s agreement to the Second Mortgage is not subject to any condition.

(2)  If there is any truth in Sung Sr’s allegation that in the 8 June 2015 Meeting, Koo on behalf of Poon and in front of the Bank’s representatives made the assurance to Sung Sr that Poon would be responsible for raising funds to discharge the liabilities and return Sung’s Tower to Sung Sr, and Sung Sr only agreed to the execution of the Second Mortgage because of this assurance, Sung Sr would have mentioned the SMA/CRA in the letter, and Sung Sr would have said that the Banks knew that the Second Mortgage was subject to the SMA/CRA. Further, in order to plead for indulgence from the Banks, Sung Sr would have mentioned that in accordance with the SMA/CRA, what fund raising activities Poon had done or intended to do to raise funds to discharge the liabilities owed by the AHL Group to the Banks, and hence the Banks could have a comfort that the liabilities owed by the AHL Group to the Banks were being taken care of by Poon.

(3)  In view of the absence of all the matters as stated in the subparagraphs above, Sung Sr’s allegations as to the events in the 8 June 2015 Meeting is inherently improbable.

231.  In November 2015, in the negotiations relating to the Rongsheng Subscription:

(1)  As per an email sent out by Agnes Fung[88] on 13 November 2015, there was an agreement reached by “the bank group, [Sung Sr] and [Poon]” and therefore they proposed a debt restructuring agreement. The Zimmern Draft MOU was enclosed in that email. As per the Zimmern Draft MOU:

“1.2 宋先生同意將出售股權代價用作償還該債務的一部份，並指示潘先生將出售股權代價所涉及之款項直接支付予該銀行或上市公司用作償還該債務的一部份。

1.3 宋先生同意以市場價格盡快出售宋氏大廈 … 並在遵守香港聯合交易所有限公司證券上市規則的一切規定的前提下，將相關所得款項用作收購上市公司旗下附屬公司 ……” (Emphasis added)

(2) Under the WLA Draft Agreement, Poon would use his best endeavours to procure ADFL to dispose of Sung’s Tower on the market at a reasonable price, and apply the net proceeds of sale to repay the Loan Facilities.

232.  As submitted by Mr Chain SC, both proposals are inconsistent with there being any binding obligation on Poon to raise funds to repay the Loan Facilities, discharge the Second Mortgage and return Sung’s Tower to Sung Sr under the SMA/CRA. As to this inconsistency, there is no satisfactory explanation from Sung Sr:

“錢大律師： 對的，基本上來到這裏就可以看到，雖然大家談了很多，討論了很多，準備了很多不同的協議，但最後也不用考究原因，反正是沒有簽下來，沒有執行，是嗎？

宋忠官： 是的，沒有簽。

錢大律師： 是的，之前我們不是看了很多不同版本的草擬協議嗎？在那些草擬的版本裏面，我看到其實在不同的版本當中也提及到你是願意把宋氏大廈賣掉，用於支付上市公司集團對銀行的債務。

宋忠官： 有是有，但是企業要還給我才同意。

錢大律師： 是的，也就是說那些條款，一是賣了宋氏大廈用於還債，第二是剩下一些上市公司股份賣出去，收益用於還債，那些子公司又還給你，是嗎？

宋忠官： 他是公司全部還給我，全部子公司還給我。

錢大律師： 是的，沒錯，不過最主要就是看到是你在這些協議當中，那種概念是用你的私人財產，也就是包括宋氏大廈和賣掉股份所得的收益，用這些私人財產去負責、處理集團的債務，是嗎？

宋忠官： 不是這樣的概念，我要補充一下，我是宋氏大廈加上股份賣出去1億，但是企業要全部還給我。

錢大律師： 是的，我想你說的答案跟我所說的是沒有區別的，我想我的問題是甚麼？宋先生，也就是說這個概念是和潘生去負責集資，去把二按贖回來，這種說法，你聲稱潘生有這個責任，這兩者是不符合的，是嗎？

宋忠官： 你要給我時間回答得長一點，因為時間的變化，後期你說到了 10 月份, 我看到他說要贖, 沒有看到他集資回來，我就靈活轉換一下，吃虧一點，吃虧一點吧，我要保護企業就等於保住這條命才可以有機會再賺錢。

錢大律師： 你在這些所有通信、草擬協議等等全部都沒有提及你做出你現在所說的讓步，沒有記錄下你說的所謂吃虧，是吧？

宋忠官： 你看看施文律師那裏的文件，說後期的事情，我之後都沒有再和他接觸了，我有提出，我生產是一條鏈，他只是給我柬埔寨，我生存不了，例如一輛車沒有車輪，怎麼跑？”[89] (Emphasis added)

233.  As pointed out by Mr Chain SC, Sung Sr’s evidence under cross-examination contradicts the evidence in his own witness statement.

(1)  In Sung Sr’s witness statement, Sung Sr said:

“113. … another important consideration was that My Businesses werebusinesses that I had spent over 40 years developing, and I very much wanted them back. I also knew that, as a matter of commercial reality, if I did not put up Sung's Tower as security, My Businesses would be in trouble.

114. Nevertheless, that would not have been a good enough reason in itself for me to put up Sung’s Tower as security. The crucial factor was that Mr. Poon had committed to ensuring that AHL would raise funds to discharge the security over Sung's Tower, and I trusted that he would do so. This meant that the security over Sung's Tower would only have been a short-term measure to hold off the Banks pending AHL's raising of funds. I thought that this was an acceptable trade-off.” (Emphasis added)

(2)  However, under cross-examination, Sung Sr said that due to Poon’s alleged failure to raise funds, he had no choice but to put up Sung’s Tower at a disadvantage (吃虧一點) to preserve his own businesses. Thus, contrary to the allegation in his witness statement, preserving his own businesses would be a “good enough reason in itself” for him to execute the Second Mortgage.

234.  As shown in the documentary evidence, in December 2015, there was a hope that the AHL Group would be able to repay the Loan Facilities by the funds raised in the Rongsheng Subscription. In my view, it was under this context that Sung Sr procured ADFL to issue the letter dated 7 December 2015 seeking for indemnity from AHL.

235.  It is worth to note that in the letter dated 7 December 2015, ADFL was asking for an indemnity from AHL in the event that the Second Mortgage was enforced by the Banks, and ADFL asked AHL “to settle the indebtedness owed by [the AHL Group] to [the Banks] immediately”. At that time, the AHL Group was still controlled by Sung’s Camp. If the responsibility to raise funds to repay the Loan Facilities was on Poon, it is inexplicable why Sung Sr would procure ADFL to demand AHL (under the control of Sung’s Camp), not Poon, to repay the Loan Facilities. This is another point showing that Ps’ case is inherently improbable.

236.  In the 7 May 2016 AGM, Poon successfully seized control of the AHL Board.

237.  Thereafter, Sung Sr’s family members and other representatives had a meeting with Poon and Robert Chui on or around 26 May 2016, ie the 26 May 2016 Meeting. As said in the above, this meeting was secretly tape-recorded by Sung Sr’s Camp. According to Sung Sr, before attending that meeting, Sandy Sung and Sung Sr’s two sons-in-law, ie Martin Kong and Gary Lau, had already knew the assurance given by Poon to Sung Sr (ie the SMA/CRA) when Sung Sr agreed to executed the Second Mortgage. The following part in Sung Sr’s cross-examination is important:

“錢大律師： 是的，那我現在問你的問題，麻煩您注意一點，是 2016 年 5 月的時候，你的女兒和兩個女婿代表你和潘生去交涉，那我就問你，那個時候他們是否知道潘生就宋氏大廈二按給你的承諾？

宋忠官： 他們是基本上知道，但是我告訴他們，拍板的那個人必須是我。

錢大律師： 好的，謝謝。那我們看一看核心文件夾，第 63 頁，謝謝！還得我們之前也看過了嗎？你的女兒和兩個女婿，還有潘先生、崔先生，5月 26日有一個會議，他們進行了秘密錄音，我只是想帶你去看 3 頁，首先看 72 頁那裏，你的女婿江先生在時間標籤上，第一行，他就說“同埋宋生真係有做嘢，如果宋生唔做嘢就唔會攞宋氏大廈嚟 pledge 啦。”… 看到這句話了嗎？Pledge就是二按的意思，你有看到這句話的，是嗎？那我再讓你多看兩句，我再向你提問。

宋忠官： 是的，你說是有說的。

錢大律師： 是的，我讓你多看兩句，第 80 頁那裏，在這裏，潘生說了一大段，這裏他說了一句，按道理，尾二行，他說 "按道理啲債係咪資產都要處理啊。咁變咗點解會話人哋嗰陣4 月幾點解會話, 個意思就係話喂, 一路咁你銀行又顧唔掂啲債，好似冇處理嘅跡象"，然後你的女兒就回答 “點會冇處理呀？宋氏大廈咪揼咗落去啦咩？” 你有沒有看到這一句？你看見這句話，宋先生，我還沒有問您問題，你先確認是不是看見了這一句話。…然後潘生在這裏說了一句 “冇債嘅情況之下。一樣喇，啫好簡單，你都想買間、要返間公司唔要債啦，如果我要買間公司點會要個債呢?” 然後你的女兒就說 “咁大家都要付出囉，我哋付出咗宋氏大廈，你付出咗啲咩呢，潘生講真？” 可以看到這幾句話吧？其實我們看到這三段對話，我想向您指出，其實你的女婿和女兒代表你，他們說到宋氏大廈的二按是你自願性、無條件作出的，同意嗎？

宋忠官： 不同意，當然不同意，當然不同意，同意的話，阿顧還會跑出來？”[90] (Emphasis added)

238.  Having considered the transcript of the 26 May 2016 Meeting, in my view, it is clear that in that meeting, Sandy Sung, Martin Kong and Gary Lau were under an impression that the Second Mortgage was not subject to the SMA/CRA alleged by Sung Sr. Sung Sr’s allegation that before that meeting, he had made them known the SMA/CRA is untrue. It is my finding that before the 26 May 2016 Meeting, Sung Sr did not tell Sandy Sung, Martin Kong and/or Gary Lau the SMA/CRA. In view of the purposes of that meeting (see [98] above), as to why Sung Sr did not tell them the SMA/CRA before the meeting, the reason could only be that the SMA/CRA in fact did not exist, and the alleged SMA/CRA were only made up by Sung Sr after the commencement of these proceedings.

239.  In the 26 May 2016 Meeting, the explanation given Poon and Robert Chui is consistent with the Clean break Framework. They explained that the share sale price agreed did not take into account the assets and liabilities in Sung Sr’s Businesses. Those assets and liabilities would be to Sung Sr. The relevant explanations given by Poon and Robert Chui are as follows:

(1)  Robert Chui

“啫咁樣，我諗我補充少少，正負零交收呢，就係其實呢阿潘生開頭同阿宋老先生傾㗎，係買嗰個殼，一個上市嘅地位嘅殼，吓。咁嗰時個殼嗰個價錢呢好似係四億幾㗎，吓，咁呀所以四億幾呢，當時嘅股票唔知成間公司係幾多，就計咗出嚟呢，就係每一股係0.952，係純粹係以一個殼嘅價錢。所以所有嘅資產，所有負債其實呢係唔、唔bear 㗎，係呀宋老先生你、你、你㗎。啫係咁、咁、咁樣諗嘅，嗰個、嗰個概念啊大家明唔明呢一樣嘢先？”[91] (Emphasis added)

(2)  Poon

“其實所有資產負債應該都係歸番宋先生嘅，係應該係咁嘅”[92] (Emphasis added)

(3)  Poon and Robert Chui

“Tim: 咁但係佢收嗰筆錢，咁[Sung Sr]就要處理所有債務？

Poon: 嗯，同埋攞番所有資產。

Robert: 啫嗰啲債務呢係佢哋之前公司所產生出嚟，同我哋無關。”[93] (Emphasis added)

(4)  Robert Chui

“嗱以我所知呢就咁樣嘅，當然呢有意思去成交嘅，但係只係話呢，佢如果話成交嘅話，佢只係攞返個所謂佢自己頭先一個爛殼，呢一個爛殼就係原來要有好多嘅負債，其實仲要揼、揼錢，呢啲負債呢其實呢唔係我哋搞出嚟嘅，吓，係佢哋嘅運作吖嘛，嘓個所有都係一個紡纖業嗰個產生出來嘅運作嚟㗎，係我哋嘅意念呢，嗱呢個業務係邊個嘅，就邊個負責番。係咁樣，呢個如果係嗰便我哋天然氣梗係我哋負責啦，呢個天然氣呢個係我哋搞出嚟㗎嘛。”[94] (Emphasis added)

(5)  Robert Chui

“公司呢我哋成身一褲都係㗎都係，唔係話呢我哋孭就係話啊，好開心啊，攞咗你啲嘢，都唔知幾發啊，喂大佬啊，嗰啲嘢好多，好多問題㗎大佬嗰度，嗰啲問題多到你都唔相信啊！姐係咁樣講。我哋根本唔想理嗰啲嘢，但係你又話要俾我。” [95] (Emphasis added)

240.  Sung Sr’s representatives did not dispute the explanation given by Poon and Robert Chui in the 26 May 2016 Meeting. Poon said that at the end, the assets and liabilities in Sung Sr’s Businesses would be returned to Sung Sr, but the process would take time. Again, this was also not disputed by Sung Sr’s representatives.

“Poon: 冇錯啦，你哋想成交，你想成交我哋都想成交。個問題係我哋成交完之後，你哋啲資產同啲債就係點樣去處理返，俾返你哋。

Sandy: 債就俾返我哋，資產就？

Poon: 資產俾返我哋[96]正常㗎嘛，我哋係唔係買呢樣嘢呀嘛，我哋係咪買一個控股公司啫嘛，我哋唔係買下面啲子公司呀嘛，係嘛?

Martin: 咁呢啲要時間去處理喎，你唔可以一時三刻，一時三刻做唔到晒㗎喎。

Poon: 係, 冇錯喇，所以咪大家要點樣去個時間去處理，即係咁解囉。”[97]

241.  In my judgment, the transcript of the 26 May 2016 Meeting clearly shows that following:

(1)  The agreement made by Sung Sr on the one hand and Poon on the other hand in December 2014 is the Clean Break Framework, not the AHL Sale Agreement.

(2)  The SMA/CRA alleged by Sung Sr are untrue.

D3.1.6  Conclusion on Sung Sr’s evidence

242.  The existence or non-existence of the AHL Sale Agreement, the SMA/CRA are all central and important issues in these proceedings. Since Sung Sr’s evidence on all these issues are untrue, Sung Sr is an unreliable witness. My conclusion on Sung Sr’s evidence is the one stated in [166] above.

D3.2  Ps’ other witnesses

243.  Each of Ps’ other witnesses adopts some parts of Sung Sr’s witness statements as his or her own evidence. Save and except the matters in respect of which the witness has personal knowledge, the adoption is in fact a mere repetition of Sung Sr’s evidence. Regarding the quality of Sung Sr’s evidence, I have given my ruling in the above. The mere repetition of Sung Sr’s evidence in Ps’ other witnesses’ evidence is subject to the same ruling.

244.  Without prejudice to the comments made in the paragraph above, my view on Ps’ other witnesses is set out in the below.

D3.2.1  Sung KP

245.  Sung KP’s witness statement is short and only consists of five paragraphs. Apart from the adoption of some matters in Sung Sr’s witness statements, in his own witness statement, Sung KP said that he came to know the details of the AHL Sale Agreement after the 7 May 2016 AGM.

246.  As to the core factual disputes in these proceedings, ie the existence or non-existence of the AHL Sale Agreement, the SMR/CRA, Sung KP does not have any personal knowledge.

247.  Sung KP claimed that in late 2015, Poon often interfered (插手) with the textile businesses in AHL. However, Sung KP was evasive when he was being asked to give particulars of the interference.

“錢大律師： 這是關鍵點，2016 年 5 月，這個關鍵點我想你自己印象可能也很深刻，2016 年 5 月發生了甚麼事情？你不獲續任，你作為上市公司的董事不獲續任，你之後辭職，就退出來了，你被人不獲續任，在這之前，你還在的。

宋劍平： 是的，從 2015-2016 年。

錢大律師： 在你被不獲續任之前，潘先生的陣營就沒插手是嗎？所有資產、銀行戶口、日常營運都是你這一方面在打理？

宋劍平： 不是，2015 年那時候我們簽了二按，我爸爸賣了一些股份給阿潘，阿潘可能佔了大股東，到了 2015 年末那段時間，很多事情都是潘先生話事，包括我們紡織那些事情，我還在董事局，因為（阿潘）他本身還是大股東，很多事情他都有插手。

錢大律師： 插手的意思是甚麼？

宋劍平： 就是看一下你的單，你的生產（他）也看，看一下你接的訂單，我們也在慢慢退出去。

錢大律師： 你說看的意思是甚麼？

宋劍平： 插手。

錢大律師： 是否可以具體一下，你說的插手是甚麼樣的？

宋劍平： 很多事情都要向他匯報，要向他那邊的陣營匯報。

錢大律師： 有沒有你在營運方面想做的事情，然後他不給你做？

宋劍平： 那時候我們很多的生產和營業方面，因為我爸爸不是大股東的那時候，我也在慢慢退出公司，因為很多事情他（阿潘）都要插手，其實他不炒我們，我也想著辭職，因為你也明白那個公司不是你話事，遲早都會把你炒了。

錢大律師： 宋先生我希望可以具體一點，你營運這個紡織業這麼多年，營運的不同步驟、程序你應該都很熟悉，是嗎？

宋劍平： 我只是負責一部分，主要銷售方面，生產安排那些事情由其他董事跟進。

錢大律師： 你只是做 ……

宋劍平： 做接單的多。

錢大律師： 接單的時候，潘先生有沒有說你不能接這個單，是否可以解釋一下插手的具體意思。

宋劍平： 接單方面，有時候都要向他請示。

錢大律師： 有沒有試過你想接的單，他不讓你接？

宋劍平： 這個事情印象之中沒有，但是生產在他那邊，他有些同事或者夥伴會會在那裏監管。

錢大律師： 還是那個問題，你說的監管是甚麼意思？是不是說你想生產這個，我不給你生產，有沒有這樣的事情發生？

宋劍平： 不是，（他）會給一下意見。

錢大律師： 例如呢？

宋劍平： 比如說這一單利潤那麽低，還是接單那一方面，你要買一些便宜的原料，公司利潤就高一點，類似這樣的話，都是 cut cost。

錢大律師：鼓勵你做利潤高一點的？

宋劍平： 正常都是這樣，難道叫我去做虧本生意嗎？”[98] (Emphasis added)

248.  Sung KP’s evidence on the alleged interference by Poon in the textile businesses in the AHL Group in late 2015 must be untrue. See [185]-[192] above, and [262(5)] below. In my view, Sung KP was trying to paint a picture that Poon had actively participated in the textile businesses in the AHL Group, and hence it would be reasonable for Poon to bear the responsibility to raise funds to repay the Loan Facilities. Bearing in mind that Sung KP was a minority shareholder of ADFL, he shared similar motives with Sung Sr to preserve Sung’s Tower.

249.  I do not regard Sung KP as a reliable witness. Save and except the admissions made by Sung KP[99] which are contrary to the interests of Ps’ case, the matters not disputed by Ds, and the matters shown in the documentary evidence, I refuse to accept Sung KP’s evidence.

D3.2.2  Martin Kong

250.  Martin Kong is the husband of Sandy Sung. Subject to the comments in [214]-[215], and [243] above, I regard Martin Kong as an honest and reliable witness. He would not shy away from difficult questions and gave straightforward answers. As to the matters in respect of which Martin Kong has personal knowledge, his evidence would shed light on the truth. As to those matters, I accept Martin Kong’s evidence.

251.  According to Martin Kong, after the K11 Meeting, Sandy Sung was of the view that signing the Second Mortgage would be beneficial to Sung Sr, and she went back to try to convince Sung Sr to sign the Second Mortgage. The fact that Sandy Sung had tried to convince Sung Sr to sign the Second Mortgage was also admitted by Sung Sr. Under cross-examination, Martin Kong said:

“江一帆： 我太太有兩方面她都覺得可以簽的，她同意的。

錢大律師：你說兩方面應該可以簽，兩方面是？

江一帆： 她考慮到，一方面她關心宋老先生的健康狀況，她覺得如果不簽可能工作壓力會更大，她覺得簽完之後可能可以暫時舒緩工作壓力，對於他的健康也很有幫助，這是出於關心她爸爸的健康情況。另外一個方向是，因為當時Sandy Sung 是負責集團裏面的生產，她很清楚集團生產的狀況怎樣，訂單是怎麼都做不完的，不斷加班來做，看到訂單不斷地進來，她對集團的生意是很清楚和很有信心，集團就算有甚麼財政上的困難可能只是一時三刻的困難，如果簽了這個二按可以暫時阻擋銀行可能有甚麼行動的話，她對公司的實力很有信心，就可以很快度過難關，所以基於這兩方面，她覺得可以簽。”[100] (Emphasis added)

252.  Martin Kong’s evidence shows the reasons why Sung Sr chose to execute the Second Mortgage on 8 June 2015.

253.  Martin Kong also unequivocally said that he only learned about the oral SMA/CRA when he participated in the preparation of these proceedings at a time in 2017. This clearly contradicts Sung Sr’s evidence that before 26 May 2016 Meeting, Sung Sr already told Martin Kong the SMA/CRA.

D3.2.3  Catherine Fong

254.  Catherine Fong is the long-time partner of Sung Sr. Her witness statement is brief and short. In her witness statement, apart from the adoption of some matters in Sung Sr’s witness statements, Catherine Fong only said that she had telephone conversations with Agnes Fung from time to time. Catherine Fong said that Agnes Fung has emigrated to Australia in about October 2021. Catherine Fong also said that she, on behalf of Ps, on various occasions since the commencement of these proceedings, asked if Agnes Fung could make a witness statement for these proceedings. Agnes Fung refused and indicated that she did not wish to testify as a factual witness and/or file any witness statement in these proceedings.

255.  Having considered Catherine Fong’s evidence, I consider that she is a truthful witness. However, Catherine Fong is unable to give first-hand evidence on the core issues in these proceedings, ie the existence or non-existence of the AHL Sale Agreement, the SMA/CRA. In relation to these matters, apart from what Sung Sr told her, Catherine Fong does not have any personal knowledge.

256.  However, Catherine Fong has made the following points in her evidence:

(1)  As to why she knew that Poon must be the mastermind behind the scene responsible for ousting of Sung’s Camp in the 7 May 2016 AGM, Catherine Fong said that it was Sung Sr told her that Poon would use some methods to cover the actual shareholdings controlled by him in AHL.

“錢大律師： 我知道你沒深入研究，因為你是確認了，潘森的處理方法會和宋老先生的處理方法不同，因為宋老先生的處理方法就是用他自己的名字，或者經Powerlink …公司，會很確實地看得出來宋老先生的股份，潘先生就不同，潘先生就不是很確實，看不出來的，雖然你沒去深究，你這個概念也是有一個起源，誰給你這個概念？

方桂娟： 應該是宋先生，等於宋潔貞打電話來說被人踢出局，說粗俗一點，阿潘又不知道在玩甚麼，為甚麼會是這樣。”[101]

(2)  Catherine Fong confirmed that shortly after the 7 May 2016 AGM, Sung Sr and her met Poon at a café in a hotel in Tsim Sha Tsui (“the TST Meeting”). Regarding this meeting, Catherine Fong confirmed that [186] of Sung Sr’s witness statement is correct:

“186. I, together with [Catherine Fong], met [Poon] at a café at the Marco Polo Hong Kong Hotel in Tsim Sha Tsui a few days after the AGM. I confronted [Poon] about the following issues:

(1) I asked [Poon] why he voted down Kim Ping at the AGM, amongst others. [Poon] did not deny that he was in control of the shares which voted down Kim Ping. Instead, he said that he could not work well with Kim Ping, and that in any event, I still had my representatives (namely Martin Wong and Tsang Fai) in AHL's Board.

(2) I asked [Poon] about the dispute in relation to the 2nd Tranche of AHL shares. [Poon] did not give me a concrete reply and simply changed the topic.

(3) I asked [Poon] about the re-transfer of My Businesses. He said he needed some more time to re-transfer My Businesses to me due to regulatory concerns. In the meantime, he needed to keep the Textile Business in the accounts of the AHL Group in order to maintain the turnover of the AHL Group at a certain level. He suggested that my family could continue to manage the Textile Business under the "A Account / B Account" framework.”

(3)  In the 7 May 2016 AGM, Poon ambushed Sung Sr and took control of the AHL Board. Sung Sr made complaints to Poon in the TST Meeting. However, it is worth to note that even according to Sung Sr (confirmed by Catherine Fong), in the TST Meeting, Sung Sr did not mention the SMA/CRA at all. At the time of the TST Meeting, having been just ambushed by Poon, Sung Sr should have concerns about the trustworthiness of Poon. Since the SMA/CRA would be important to Sung Sr, if there is any truth in these alleged agreements, when Sung Sr confronted Poon in the TST Meeting, Sung Sr should mention the SMA/CRA and the matters relating to these agreements.

(4)  Catherine Fong also confirmed [207] of Sung Sr’s witness statement, in which a meeting on or about 11 August 2016 between Sung Sr and Catherine Fong on the one hand, and Poon and Poon’s wife on the other hand in Wanchai was mentioned (“the Wanchai Meeting”). [207] of Sung Sr’s witness statement is as follows:

“207. On or about 11 August 2016, there was a meeting between [Poon] and me at the Renaissance Harbour View Hotel in Wanchai. Catherine Fong and [Poon]’s wife also attended the meeting. At the meeting, the parties discussed the idea of me surrendering Sung’s Tower in exchange for AHL’s subsidiaries in Cambodia. I requested [Poon] to deal with the labour disputes of the subsidiaries in Cambodia first.”

(5)  As confirmed by Catherine Fong, Sung Sr and Poon was discussing surrender of Sung’s Tower by Sung Sr in the Wanchai Meeting. When this topic was raised, the SMA/CRA should be mentioned, for under the SMA/CRA, it would be Poon’s responsibility to raise funds to repay the Loan Facilities, and Sung’s Tower would be returned to Sung Sr. However, the SMA/CRA were not mentioned in this meeting at all.

(6)  Catherine Fong only heard the SMA/CRA from Sung Sr for the first time at a time between March and October 2017, when Sung Sr was seeing lawyers and she was accompanying Sung Sr.

“錢大律師： 我想去斷定，我用這個作為一個時間起點去問你，我想跟你厘清，你本人你自己甚麼時候知道有二次按揭的附加協議的存在呢？

方桂娟： 一定知道的話，就是組織這個案情的時候，律師樓就問宋先生所有的來龍去脈，就將所有的來龍去脈說了出來，那時候我就一定知道，至於之前你問我是不是百分之百，因為有些事情我不是很在意，我只是知道宋先生對阿潘來說是比較信任，所以很多細節的東西我不會很在意，我要記得甚麼事，要跟進甚麼，最主要我也不認識阿潘。

錢大律師： 你說組織這個案情的時候，會不會是，因為這個案件是 2017 年 10 月開案的。

方桂娟： 起碼說2017 年到 3 月 8日之後，我們發覺不對勁之後，你說是不是 2017年10 月知道，我想或者早一點，可能早一點也不一定，但是你說幾月幾號，我要看記錄，甚麼時候見律師去談這個問題。

錢大律師： 你提到 2017 年 3 月 8 日那個日子，那個有甚麼意義？

方桂娟： 他們去還銀行錢，用一家子公司，好像 3 億 8，我們覺得為甚麼子公司還錢給銀行，覺得好像有點不是很正常，自然就要去問律師去了解那件事情。

錢大律師： 換言之，你自己本人第一次知道這個二次按揭的口頭協議的存在，是在2017 年 3 月 8 日至 2017 年的 10 月中間某段時間。

方桂娟： 是，沒錯。”[102]

I attach weight to the aforesaid points made by Catherine Fong in her evidence.

D3.2.4  CH Wong

257.  CH Wong was the right-hand man of Sung Sr, having assisted Sung Sr for over 30 years. CH Wong was an executive director of AHL from around 29 June 2004 to around 12 October 2016. He was also the CEO of the AHL Group at the material times. He accompanied Sung Sr in the 8 June 2015 Meeting.

258.  Under cross-examination, CH Wong conceded that the AHL Board would only pass the 18 May 2015 Resolution for the execution of, inter alia, the Second Mortgage, with Sung Sr’s approval.

“錢大律師： 沒問題，我們看下一段，銀行說到，5 月 5 日會議之後，公司董事會在2015 年 5 月 18 日通過一個議案去執行以上的安排，我就想問你，5月18 這個會你有沒有參與？

王昭康： 這個它這樣寫就不對的，因為我們董事局無權決定那個二按，因為這個是宋先生的私人財產，我們互益集團不可能有權力去表態宋先生會拿二按出來，這個我肯定是不對的。但是到底有沒有這些董事信，這個不排除，或者銀行逼得太厲害，它就出一封這樣的信去頂著銀行。

錢大律師： 由你的答案我們一步一步來。你的說法是沒有宋老先生的批准，沒有宋老先生的許可，董事局是不可能通過一個議案，說我們會執行宋氏大廈的二按，是不可能做這件事的。

王昭康： 是啊。

錢大律師：當時的主席是宋劍華，這個時候應該是宋劍華，因為是 5 月，宋劍華做主席，你作為忠誠的老臣子，你也是董事局的一部分。

王昭康： 是啊。

錢大律師： 你們兩個作為董事局一分子，也不會違反宋老先生的意願，是嗎？

王昭康： 但是這些要看實質，根本這是不可能的事情。

錢大律師： 王先生，我們一步一步來，因為你的答案說了挺多內容，我想慢慢去拆解，去搞清楚你的證據的立場是怎樣。你的立場是董事局不可能通過一個宋老先生不許可的就宋氏大廈二按的一個議案，不可能的。

王昭康： 是啊，不可能。

錢大律師： 如果是有通過，如果，假設是有通過，就一定是宋老先生有許可才會這麼做的。

王昭康： 沒錯。” [103] (Emphasis added)

259.  However, as to the 29 May 2015 Letter from the Banks to the Board of Directors of AHL, CH Wong alleged that the Banks had made a mistake by including the Second Mortgage in that letter.

260.  In my judgment, CH Wong’s challenge against the correctness of the Banks’ letter dated 29 May 2015 is without any reasonable ground and contrary to the facts known to him. The challenge shows that CH Wong is attempting to give evidence to protect Sung Sr’s interest, even the evidence is not true according to his own knowledge.

(1)  According to CH Wong, he did not attend the 5 May 2015 Meeting.

(2)  Naturally, the Banks would only have the understanding that the Second Mortgage was included in the package offered by the AHL Group because the Banks were given such an understanding by the representative(s) of the AHL Group. CH Wong was unable to explain why the Banks would have such an understanding if no one in the AHL Group told the same to the Banks.[104]

“錢大律師： 不過你同意銀行對公司的任何理解都是要經過公司授權代表跟它說，它才有這個理解的，是嗎，因為它不可能獨立去知道的。

王昭康： 是啊，不知道誰（說的）。

錢大律師： 這封信是寫給董事局的，是嗎？我們看到抬頭那裏是寫給董事局的，是嗎？

王昭康： 嗯。

錢大律師： 之前你也同意過我的說法，銀行和公司之間的關係是一個很關鍵的關係，因為銀行的貸款去支撐紡織業務的營運，是必需的，這樣的說法對嗎？

王昭康： 是。

錢大律師： 如果這麼關鍵的關係，公司為甚麼會有人跟銀行說謊，說一些不對的東西，有這樣的事情發生呢？

王昭康： 這個是我想的，但實際上我們董事局是不可能答覆這些東西，我們不可能代表宋先生拿二按出來，除非宋先生自己可以、願意。”[105]

(3)  CH Wong was also unable to explain why the AHL Board did not take any action to correct the Banks after receiving the 29 May 2015 Letter.

“錢大律師：我的問題的重點是，一個如此錯誤的文件，為甚麼沒人去更正銀行呢？為甚麼沒有一封正式的董事局的回信說，不好意思，渣打銀行，你誤解了，沒有這樣的情況，為甚麼沒有一份這樣的東西出來呢？

王昭康： 現在被阿潘那邊搞一搞，大家都很散亂，誰跟進，除了盧平和律師和會計部那邊去搞，其他都很少過問了。

錢大律師： 你自己有陪同宋老先生去見銀行的。

王昭康： 有陪他去見，但是銀行也有跟我說阿潘上去過。

錢大律師： 是啊，不過這個是 5 月，你剛才跟我確認，你見銀行是 2 月至 6 月，他們這封信送出來了，你 6 月見他們的時候，不會說這封信的內容嗎？到那時候你不會澄清有一個誤解嗎？

王昭康： 這些日子我很模糊了，我只是見事說事。

錢大律師：見事說事就是你現在看這份文件就說你的理解。

王昭康：是啊，我的感受就是不對。”[106]

(4)  CH Wong said that there was an agreement between the AHL Group and the Banks that all the Security Documents set out in the Banks’ letter dated 29 May 2015 would be executed, save and except the Second Mortgage. As to why the Second Mortgage should be taken out, CH Wong simply could not offer any satisfactory explanation.

“錢大律師：王先生，我現在的重點是，我帶你去看一封渣打銀行 5 月 29 日的信，他們就要求幾件事情，記錄了，公司董事局同意了給我這幾份東西，第一就是二次按揭，第二是有一些質押文件，你就說我們不可能同意這個東西，銀行這封信是不正確的，這個是你的說法，當然我們就沒看到董事局有任何回信去更正所謂的誤解。我現在向你再一步指出，其實董事局之後做的事情，之後通過的議案，之後的討論，也是和渣打銀行那封信所要求的東西，他們也是按照那封信要求的東西去做的，去執行這些質押文件，其實那封信的內容是正確的，同不同意？

王昭康： 這個是正確，很多銀行信都是這樣追的啦，但是誰可以拿主意答應簽這些抵押，真的不知道。

錢大律師：公平起見，我帶你去看 C 文件夾的 220 頁，就是我剛才說的渣打銀行那封信，我要確認你是清楚我的問題。你之前說這封信應該是他們亂來的，應該銀行是亂來的，這是你的解釋，我現在向你指出，你這裏看到 5 點，2、3、4、5，銀行除了要求第 1 點宋氏大廈的二次按揭之外，2、3、4、5 點有這些質押文件，他們也是要求這幾點，是嗎？

王昭康： 這幾點我承認是對的，但是二按那個我反對。

錢大律師：這封信的內容銀行是正確的，除了一提到宋氏大廈的二次按揭，你選擇出來那裏，選擇性不對的。

王昭康：是。”[107]

261.  In my view, for the reasons set out in [208] and [209] above, and bearing in mind that CH Wong was an executive director and the CEO of AHL at the material time, CH Wong must have already known that Sung Sr had agreed to the Second Mortgage in May 2015. CH Wong also knew that the agreement as stated in the 29 May 2015 Letter was correct. That is why the AHL Board did not take any action to correct anything in that letter after receiving the same. CH Wong’s challenge to the correctness of that letter by saying that the Second Mortgage should not be included in that letter is contrary to the facts known to him. I do not regard CH Wong as a reliable witness. Save and except the admissions made by him contrary to the interests of Ps’ case, and save and except the matters shown in the documentary evidence, I refuse to accept his evidence.

262.  CH Wong made the following admissions which are contrary to the interests of Ps’ case:

(1)  As to the Written Memo, CH Wong’s evidence is that he accompanied Sung Sr when Sung Sr was discussing the matters in the memo with Poon. CH Wong said that the framework in the Written Memo was not a complete agreement.

“王昭康： 這個是框架，但是框架也要寫得清楚。

錢大律師： 不像是一個完整的協議，同不同意？

王昭康： 是啊。”[108]

(2)  As said in the above, the 14 October 2015 Letter to SCB was drafted by CH Wong. CH Wong admitted that in October 2015, when he drafted this letter, Sung Sr did not tell him the SMA/CRA. CH Wong only came to know the SMA/CRA alleged by Sung Sr in the preparation of legal proceedings.

“錢大律師：當然，之前法官閣下也問過你了，就是宋老先生現在所提及的二次按揭有一個附加的口頭協議，他當時和你寫這封信的時候，他應該是沒有提及，是嗎？因為你說是到準備法律程式的時候才知道的，是嗎？

王昭康： 是的。”[109]

(3)  CH Wong said that before the commencement of these proceedings, he had never heard of the SMA/CRA.

“錢大律師：對，附加那個。他的案情就是，我做二次按揭，潘先生是口頭承諾了他會負責清二次按揭的債，而短期內是一定會清出來，這個是他的說法，就不是說如果集資就做到，是清楚承諾了他會負責，這個是他的說法。如果是有這個附加協議的話，理應上宋老先生是應該能拿回宋氏大廈的，潘先生是承諾了還給他的，所以他就應該需要出售的，是不是？表面上這個協議看到現在他有出售，就好像跟附加口頭協議有點矛盾。我就想看看，因為你在 11月份的時候收到這份草擬協議，你有沒有意識到有這個矛盾存在，還是那時候你是不知道二次按揭附加協議的存在？

……

廖法官： 不如王先生你說一說，你第一次有印象，就是宋老先生說有一個二次按揭的附加協議，就是剛才錢大律師說過的協議，你第一次聽聞這個協議，是在這單官司開始之後還是開始之前？

王昭康： 我真的沒怎麼聽到二次按揭，潘先生肯出來清這個（債務）。

廖法官： 在這場官司開始之前你沒聽過？

王昭康： 沒聽過。”[110]

(4)  CH Wong, who participated in the negotiations between Sung Sr and Poon regarding the 3 SPAs, confirmed that Sung Sr knew that Poon did not publicly disclose his shareholding interest in AHL in order to evade the disclosure requirements laid down by the SFC and the HKEX.

“錢大律師：王先生，我向你指出，其實宋老先生和潘先生買賣股份，買殼賣殼這個交易，宋老先生是知道潘先生要避開證監會和聯交所的規管，所以才不出名字，不會公佈他的個人權益，你同不同意？

王昭康： 這個同意。”[111]

(5)  Before May 2016, the control over Sung Sr’s Businesses remained in the hands of Sung’s Camp, and Poon did not interfere with Sung Sr’s Businesses.

“錢大律師：…… 一直到 2016 年 5 月這個日期，宋老先生的紡織業生意全部都是由宋老先生和宋老先生的陣營直接去營運和管理，那些子公司的董事也是包括宋老先生、宋劍平、宋潔貞等等，這個你是同意的？

王昭康： 同意。

錢大律師： 這個所謂的直接的營運和管理，也是包括銀行戶口的操作，我這樣理解對不對？

王昭康： 那時候談的就是A、B戶口，A、B戶口就是河水不犯井水的，所以我們也沒有理會[Poon]的運作情況，[Poon] 也不會理我們做了甚麼的情況，只不過在會計上，他們那邊有一個崔志仁是會計師，他會不斷跟我們的財務總監洽談或是甚麼情況，這個我就不是太清楚 ，但是我知道有這樣的事情。”[112]

“錢大律師：潘先生進來，當然我們知道他2016年5月是強行控制公司，不過那個事件之前就沒有插手紡織業，這個自動化是讓它一直營運的，是嗎？

王昭康： 他雖然沒插手，但是簽了三份協議，必買必賣之後，夥計都知道他才是幕後大老闆，宋先生創辦人，他們只不過是尊重他的意思潘先生的權力就開始滲入了整家公司，包括執董，楊賽儀、曾暉，思想上都有些偏向他們那邊的。

……

錢大律師： 不好意思，我們不要推測心態是怎樣，你剛才證人供詞我帶你看了一段，實質的營運是沒插手的，你說河水不犯井水的。

王昭康： 是，沒錯。”[113]

(6)  Before May 2016, the AHL Board was controlled by the Sung’s Camp. The appointment of Wu Kehao as an additional director of AHL on 30 October 2015 is an example showing that the board was in the control of Sung’s Camp at that time.

I attach weight to these admissions.

263.  Without prejudice to my conclusion that CH Wong is not a reliable witness, for the sake of discussion, even assuming that CH Wong’s evidence is credible and reliable, CH Wong’s evidence concerning the assurance given by Koo is in fact fatal to Ps’ case.

264.  According to CH Wong, in the meeting(s) in the Mei Foo Restaurant, and in the 8 June 2015 Meeting, Koo only told Sung Sr that Poon was assisting in doing some fundraising, and if the fundraising exercise was successful, the Second Mortgage could be redeemed shortly.

“錢大律師：這個顧先生安排，之所以安排這麼多銀行在 FTI見，在 FTI出席，全部銀行職員代表全部出席，因為想那天簽合約才會有這麼多人出席，是嗎？

王昭康： 不是，所以我說很多銀行信都是寫過來追按揭甚麼，但是我們都是拖拖拉拉，拖拖拉拉就變成了，幾次之後銀行提出來開會、會議都是斷了，其實斷了也惹怒了銀行，銀行已經不理睬我們了，不理睬我們之後，他又說要demand letter 那樣告 … 但是後期就變成了潘森出面介紹了這個顧先生，在陶源那裏跟我們見面，他介紹這個顧先生就是一個老的銀行家，對銀行那些人脈很熟悉，就介紹我們在那裏見，第一次見顧先生，顧先生也跟宋先生表示他現在給潘先生做顧問，還有他現在也插手融資的情況，而且和宋先生說如果融資成功了，短期內很快贖回二按，叫他放心，是有這樣的情況。

錢大律師： 你剛才說的是顧先生用的字眼。

王昭康： 是的。

錢大律師： 如果融資成功了就可以贖回二按出來，這是他的字眼？

王昭康： 是。

錢大律師： 宋先生也允許他，他才去安排，召集那些銀行和 FTI 在 FTI 會議室（開會），這是最後一次機會了，所以宋先生也會上去，但是上去之前也跟我說不會簽的，但是上去之後怎麼會轉變了，這真的是很驚訝了。

錢大律師： 流程是怎樣，我們一步一步來，流程是上去了 FTI辦公室，帶你去哪裏坐？

王昭康： 上到 FTI, 他就帶我們去了，有一個小型的會議室，小型的房間，顧先生也進來，大家都是說那些事情。

錢大律師： 就是和之前你形容的，都是在說同一件事情。

王昭康： 同一件事，他說銀行可以，如果簽了這份東西，銀行也可以延遲 5 億的貸款，而且還可以加多 1億給我們使用。另外就說現在融資成功，短期內可以贖回，但是宋先生還是沒表態的，他沒表態，之後坐了一會兒就說要去廁所，顧先生跟著去廁所，跟著去了廁所，不知道怎麼說服了宋先生，出來之後就跟我說可以簽了，就是這樣。

錢大律師： 由你的角度不是一般的情況，不知道為甚麼突然改變了主意。

王昭康： 是啊。

錢大律師： 之後從廁所回來了，宋先生說可以簽了，那是不是去了大房間了？

王昭康： 去簽就是顧生出去跟他們說安排，然後就帶宋先生和我們去到大會議室，就坐下，但是我聽到顧先生在旁邊還是跟宋先生說這個是短期措施，如果融資成功就很快贖回來，你放心啦，這樣的意思。

錢大律師： 好，坐下來了，是不是有一個大房間簽了。

王昭康： 是，大會議室。

錢大律師： 大會議室，大會議室就是所有全場各人士都在場，是吧？

王昭康： 是的。

錢大律師： 之後顧先生有沒有再說其他話？

王昭康： 沒有了，就說安慰宋先生的話。

錢大律師： 就是剛才你說過幾次的字眼？

王昭康： 是。

錢大律師： 現在宋老先生的案情是說潘先生透過顧先生作為一個潘先生的代表，是有一個承諾，是一個口頭上的承諾，就著二次按揭，而這個承諾就是，他說潘先生會全面負責了，去清還二次按揭的債務，是他會安排公司去集資，去還了這個債務，而贖回這個宋氏大廈的二次按揭出來給宋老先生，這個是宋老先生的案情，你是否明白？

王昭康： 我明白。

錢大律師： 這跟你剛才跟我們說的。

王昭康： 但是這個我不在場。

錢大律師： 你不在場？

王昭康： 是的。

錢大律師： 你聽到的就只是你剛才所說的，就是顧先生他有點哄宋先生的成份，就是說如果融資成功，那也應該很快贖得回來，就是這樣的字眼，是不是？你聽到的是不是這樣？

王昭康： 這個哄不哄，就不知道他是不是真心話，我聽到就是這樣。” [114] (Emphasis added)

265.  Mr Chain SC submits that as to what Koo told Sung Sr causing Sung Sr agreed to execute the Second Mortgage, the evidence given by CH Wong contradicts Ps’ case. According to CH Wong, Koo told Sung Sr the following:

(1)  Poon was involved in fundraising activities for AHL (not that Poon was obliged to raise funds for AHL); and

(2)  Sung’s Tower could be redeemed soon if (ie conditional upon) the fundraising activities were successful.

CH Wong’s evidence in fact contradicts the SMA/CRA pleaded by Ps. According to the SMA/CRA pleaded by Ps, Poon had agreed to take up a binding responsibility to procure AHL to raise funds to repay the Loan Facilities, and a binding and unconditional responsibility to repay the Loan Facilities to redeem the Second Mortgage.

266.  I agree with Mr Chain SC and accept his submission. Thus, even if CH Wong is a credible and reliable witness, his evidence does not help Ps’ case. On the contrary, CH Wong’s evidence contradicts the SMA/CRA pleaded by Ps.

D4.  Ds’ witnesses

267.  In the RASOC, Ps put the fides of HCPIL/CAIL in issue by averring that “CAIL and HCPIL knew of, alternatively, deliberately turned a blind-eye to, or had actual or constructive notice of …… [CFGL]’s trusteeship of its rights under the Loan Facilities and Second Mortgage for Sung Sr and/or ADFL’s benefit and its liability to account to Sung Sr and/or ADFL.”[115] On this basis, Ps claim that “HCPIL and CAIL hold no rights in Sung’s Tower, pursuant to the 28.12.17 Transactions or at all.”[116]

268.  In response to these challenges, Ds file the witness statements of Andrew Wong, Bruce Lee and Dickson Cheung.

269.  Mr Chain SC submits that the fides of HCPIL and CAIL should not be of any significance in these proceedings, for the legal title over the rights in the Second Mortgage are held by CFGL, not HCPIL or CAIL. Thus, HCPIL and CAIL cannot be bona fide purchasers of a legal estate for value without notice in any event. This point is not disputed by Mr Man SC.

270.  Thus, the acceptance or non-acceptance of the evidence given by Ds’ witnesses in fact would not have an impact on the outcome of these proceedings.

271.  Without prejudice to the above, I have considered the evidence given by the 3 witnesses called by Ds. These witnesses only gave evidence on how HCPIL came to finance the CAIL Loan and the CFGL Loan for CFGL to complete its payment of the purchase price under the DRD, and HCPIL’s knowledge and fides at the time. Notwithstanding the criticisms made by Mr Man SC against their evidence, I am of the view that all the 3 witnesses called by Ds are honest and reliable witnesses. Their evidence remains unshaken after cross-examination. I accept their evidence.

D4.1  Andrew Wong

272.  Mr Man SC relies upon the following in making submissions concerning Andrew Wong’s evidence:

(1)  Bruce Lee’s email of 17 December 2017 to Mr Kenneth Chui (in Poon’s Camp), in which Bruce Lee said:

“…… the second mortgage is already in litigation, there is no certainty. We tend to believe you could get some benefits out form it, but timing maybe longer than 12 months ……”

(2)  According to Bruce Lee, that statement reflected Andrew Wong’s view.[117]

273.  Mr Man SC submits that as shown by using the words “tend to believe”, the plain meaning of that statement is that there is no certainty as to the enforceability of the Second Mortgage.

274.  It is Mr Man SC’s submission that under cross-examination, Andrew Wong, seeing that Bruce Lee’s statement contradicted the earlier evidence given by Andrew Wong himself (ie there was no uncertainty in the enforceability of the Second Mortgage), Andrew Wong tried to distance himself from the statement. At first, Andrew Wong said that the statement was a negotiating tactic and not reflective of their internal thinking. However, when it was shown to Andrew Wong that according to Bruce Lee, that statement reflected Andrew Wong’s view, Andrew Wong was forced to say that Bruce Lee was not 100% correct. Finally, in an attempt to reconcile Bruce Lee’s evidence with his, Andrew Wong then said that the “no certainty” was referring to the timing and not the outcome of the enforceability of the Second Mortgage.

275.  With respect, I am of the view that there is no valid criticism against Andrew Wong’s evidence. While I agree that the words “tend to believe” in the statement in Bruce Lee’s email of 17 December 2017 suggest an uncertainty, reading the statement in context, the uncertainty relates to the time required to complete the entire enforcement process, not the enforceability of the Second Mortgage. Andrew Wong is right in saying that the uncertainty is about the time required to complete the enforcement process, not the enforceability of the Second Mortgage.

276.  Andrew Wong also said that he had questions concerning a subsidiary (CFGL) buying a debt owed by its parent (AHL), but even if he had questions whether CFGL could then enforce the full debt against ADFL (as mortgagor), he repeatedly emphasized that he could not think of why it would not work.

277.  In my view, there is nothing impugning Andrew Wong’s credibility and reliability.

D4.2  Bruce Lee

278.  Mr Man SC has put forward several criticisms against Bruce Lee’s evidence. With respect, I am unable to agree that these are valid criticisms.

279.  First, Mr Man SC submits that Bruce Lee’s answer concerning the statement in his email dated 17 December 2017 is unconvincing. Bruce Lee said that the “no certainty” in that statement was referring to the timing and not the enforceability of the Second Mortgage. Mr Man SC submits that this answer is unreasonable. For the reasons set out in the above, I am unable to agree with Mr Man SC on this point.

280.  Second, Mr Man SC submits that Bruce Lee’s evidence concerning the guarantee from AHL is not credible given (a) his description of the guarantee as a “deal breaker” in the email of 17 December 2017; and (b) the inherent improbability that an investor would insist on anything on the basis of moral obligation.

281.  The relevant part of Bruce Lee’s evidence is as follows:

“文大律師： 就算二按你深深感覺到一定可以執行，但是如果上市公司不給擔保, 你也不做了。

李志榮： 是。

文大律師： 原因就不是你覺得上市公司擔保值錢，是因為覺得是道義。

李志榮： 我不知道上市公司擔保到底最終值多少錢，但是這個必須有，是一個道義問題。

文大律師： 你們借錢出去，也不是只說道義對吧，也要計算一下究竟這個東西，你有沒有關心過上市公司擔保值不值錢？

李志榮： 上市公司擔保值不值錢，我們也會看它的 financial statement …

文大律師： 是啊，也要的，尤其是你，因為你去研究這件事情的商業考慮是否值得推薦張先生去做，所以你就一定研究過上市公司擔保值不值錢的，是嗎？

李志榮： 我沒有深入研究它值多少錢。

文大律師：沒有深入研究它值多少錢，那你有沒有考慮過上市擔保值不值錢呢？

李志榮： 上市擔保應該值一點錢。

文大律師： 為甚麼？

李志榮： 上市公司有資產。

文大律師： 好。上市公司的上市地位有沒有價值的？

李志榮： 坊間說有價值。

文大律師： 你當時覺得呢？

李志榮： 我當時不知道有多少價值。

文大律師： 你覺不覺得它有價值？

李志榮： 可能有。

文大律師： 這麼說對不對呢，我現在向你指出，當時 2017 年 12 月的時候，借款方Hammer也覺得上市公司的擔保是一件有價值的抵押品，因此如果不給就不做了，你同不同意？

李志榮： 不完全同意。

文大律師： 原因就是說其實是一個道義，是不是不同意的原因就是因為道義比較重要？

李志榮： 是因為道義它有一個 obligation …，如果二按抵押品出問題，我也有個listco guarantee 在追他，他要確保這個二按是可以執行，這個是道義，如果沒有了listco guarantee他要 walk away。

文大律師： 但是其實在你心裏面，二按就一定能執行的，也是時間問題而已。

李志榮： 12 個月，因為我是希望他 12 個月之內還錢。”[118]

282.  Understanding Bruce Lee’s evidence properly, he was not saying that requiring a guarantee from AHL was merely because he thought that AHL had this moral obligation. Bruce Lee was also of the view that AHL would have valuable assets, and hence the guarantee would be meaningful.

283.  Third, Mr Man SC submits that the answer given by Bruce Lee concerning the second sentence in [22] of his witness statement is incredible.

(1)  Bruce Lee’s witness statement [22] is as follows:

“22. Whilst I was aware at the time that there was some sort of a dispute principally between [Sung Sr] and [Poon] regarding their dealings relating to the AHL Group (as I have described above), I was not aware of any of the specific details of that dispute. I certainly did not know if, how and to what extent it affected the Second Mortgage’s enforceability and, in turn, the DRD Charge and its enforceability. ……” (Emphasis added)

(2)  Under cross-examination, Bruce Lee said that the first sentence in [22] was referring to the time of the 28 December 2017 Transactions. The second sentence in [22] was referring to the time when he signed his witness statement, ie 11 May 2022.

(3)  Mr Man SC submits that the time in the second sentence could not be the one claimed by Bruce Lee while he was giving evidence in the witness box.

284.  Bruce Lee explained that he might not have expressed himself clearly in the second sentence of [22] of his witness statement. He clarified that in the second sentence, the time was the time when he signed his witness statement. Having seen and heard his evidence, I accept Bruce Lee’s explanation. There is nothing inherently improbable that at the time of his witness statement, he did not know how and to what extent the disputes between Sung Sr and Poon would affect the enforceability of the Second Mortgage and the DRD Charge. Further, there is no reason why Bruce Lee would need to tell a lie concerning the time referred to in the second sentence of [22] of his witness statement.

285.  Fourth, Mr Man SC submits that as to what documents had been provided to Troutman Sanders (“Troutman”, one of the law firms assisting HCPIL in the 28 December 2017 Transactions), Bruce Lee claimed that the documents in this litigation were not provided to Troutman because they could not be obtained. When being told that Andrew Wong had a copy of the Writ of Summons in HCA 2385/2017 (“the Writ”), Bruce Lee then said “我記得我是不知道的”(and not that he could not remember whether he knew). When being reminded that [16(f)(i)] of his supplemental witness statement, Bruce Lee finally admitted that he knew about the Writ.

286.  The relevant part of Bruce Lee’s evidence is as follows:

“文大律師： …… 不過我想聚焦關於 Troutman 的角色，我們看B/152 頁，16g 段，這個是你補充證人陳述書的一部分，這裏你說回你第一份證人供詞的 20段，就是我們剛才看的那段，“to review "existing legal documents" - these documents reviewed by Troutman Sanders are clearly listed in writing and did not include any court papers or documents relating to HCA 2385/2017, which HCPIL [D7] simply did not have access to.”你看到嗎？

李志榮： 看到。

文大律師： 所以其實在 HCA 2385 這個案件的所有法律文件 Troutman 都是沒看過的。

李志榮： 拿不到就看不到。

文大律師： 這裏你可能就有一點不準確了，因為 HCA 2385其中一份文件你們有看過的，就是那張傳訊令狀，那張告票你們看過的，黃律師也看過的。

李志榮： 是。

文大律師： 黃律師而且也指出這張告票是可以在公眾的查冊範圍找到的。

李志榮： 是。

文大律師： 雖然他的證據，我不知道他說的時候你有沒有留意，就是說他自己就不記得做過一個法庭的查冊。你知不知道當時有一張告票呢？

李志榮： 我記得我是不知道的。

文大律師： 你不知道的。

李志榮： 是。

文大律師： 你連有一張告票你都不知道的？

李志榮： 因為當時我在做其他關於交易的工作，關於這些事情我是給黃律師處理。

文大律師： 可能我這個問題問你你是不知道答案的，如果你不知道答案就說不知道就可以了，我想問你，為甚麼有張告票你們拿到了，黃律師看過了，也不給Troutman 看呢？你知不知道為甚麼？

李志榮： 不知道，我不知道他給他看過還是沒看過。

文大律師： 但是你這裏的說法是，你又不可以這麼說，因為你這裏補充證人陳述書 16g 那裏，你的說法是 Troutman 看過甚麼文件是在檔案上有記錄的，因為你這裏說these documents reviewed by Troutman Sanders are clearly listed in writing and did not include any court papers or documents relating to HCA 2385/2017“。

李志榮： 明白，是有點不準確，因為我不知道有那份文件出現，所以我在這裏寫是會carve out … 那份文件也說他沒給他看。

文大律師： 李先生 …其實我們看這段話，你看一下 152 頁同一頁，（i）段，其實你的補充證人陳述書就說，我整個 f 段告訴你，你當時只是，即你們，第七被告人，只有一些很有限的知識，也是沒去考慮或沒覺得這個原告人是對於這份借款和第二按揭有任何的權利，特別是在（i），“Mr. Andrew Wong, having examined the publicly available Writ of Summons in HCA 2385/2017, could not see any issues with the validity and enforceability of a Second Mortgage created in favour of the banks.”  這裏就似乎是說，黃律師是看過這份告票，我想問你，你當時知不知道他看過告票？

李志榮： 如果我看回這段，應該他知道。

文大律師： 他知道，但是你本人，你在 2017 年 12 月 28 日之前，你知不知道黃律師原來是看過一份告票，我們知道你知道當時 ADFL 和宋先生是出了一單官司，因為你從徐先生給你的訴訟清單裏面看到了。

李志榮： 是。

文大律師： 你看到之後，我們這裏看到，黃律師也說他是之後看過 2385 這份告票的，這裏你也有描述黃先生看過這份告票作為你當時一些想法的支持原因。

李志榮： 是，明白。

文大律師： 所以我現在就問你在事實上，在 2017 年 12 月的時候你知不知道黃先生是看過這張告票呢？

李志榮： 他應該當時看過，在 12 月應該看過。

文大律師： 我理解，不過我問題的焦點是，你閣下在 2017 年 12 月的時候知不知道我們的律師其實拿了一張叫告票的東西回來看，你當時知不知道？

李志榮： 知道。

文大律師： 你知道的。這張告票，我們從你 16g那裏說，就是說 Troutman Sanders看過甚麼在文件上有記錄，就不包括這張告票。我再問一次這個問題，你能不能提供一個原因，為甚麼收到一張告票回來，Troutman Sanders 是有確保第二按揭可執行性滴水不漏這個責任，那張告票又不給他看呢？

李志榮： 我不知道為甚麼。”[119]

287.  As shown in the Agreed Transcripts, at first, Bruce Lee was under the impression that he did not know the Writ in December 2017. After being referred to [16(f)(i)] of his supplemental witness statement, he said that after seeing this paragraph, he recalled that he knew the Writ in December 2017. As to why the Writ was not provided to Troutman, Bruce Lee said that he did not know why. Bearing in mind that at the time of the trial, the witness was asked to recall matters occurred more than 7 years ago, I do not regard Bruce Lee has given any untrue evidence under cross-examination.

288.  In my judgment, no valid criticism against Bruce Lee has been made out.

D4.3  Dickson Cheung

289.  Under cross-examination, Dickson Cheung’s attention was drawn to [28] of his witness statement, which is as follows:

“28. Whilst I was aware at the time that there was some sort of a dispute principally between [Sung Sr] and [Poon] regarding their dealings relating to the AHL Group, I was not aware of any of the specific details of that dispute (which were not public information). I certainly did not know if, how and to what extent it affected the Second Mortgage’s enforceability and, in turn, the DRD Charge and its enforceability. ……”

290.  Dickson Cheung was asked what he meant in [28] of his witness statement. Dickson Cheung said:

“張少輝：我的演繹是我看不到這個爭拗為甚麼會影響到這個第二按揭，是我當時的理解，這句文字。”[120]

291.  Mr Man SC put to Dickson Cheung that there is a discrepancy between his understanding and the statement in [28] of his witness statement. Dickson Cheung explained that his English ability was not good.

292.  Mr Man SC submits that the explanation given is not credible, given Dickson Cheung’s educational background (having a MBA Degree and a Bachelor Degree in Electronic Engineering) and extensive work experience. Mr Man SC submits that it is more likely that Dickson Cheung gave the explanation because he was not willing to admit the uncertainty that the disputes between Poon and Sung Sr could affect HCPIL’s security.

293.  In my view, there is no material difference between the plain meaning of the sentence in [28] of Dickson Cheung’s witness statement (ie “I certainly did not know if, how and to what extent it affected the Second Mortgage’s enforceability and, in turn, the DRD Charge and its enforceability”) and the understanding said by Dickson Cheung in his oral evidence (ie “我看不到這個爭拗為甚麼會影響到這個第二按揭”).

294.  I am unable to accept the criticism made by Mr Man SC against Dickson Cheung’s evidence. In my judgment, no valid criticism against Dickson Cheung’s evidence has been made out.

D5.  My factual findings

295.  In the course of analysing the evidence given by each witness, I have made some factual findings, which have been stated in the above.

296.  Apart from those factual findings, based upon the evidence accepted by this Court, I make some further factual findings, which are stated in the paragraphs below.

297.  While I accept that Poon had experience in acquiring a listed company as a listed shell and injecting his own business into it, I do not agree that as a result of the 2014  Negotiations, Sung Sr (on behalf of himself and Powerlink) and Poon entered into the AHL Sale Agreement. In my judgment, the AHL Sale Agreement alleged by Ps has never existed. In December 2014, the matter agreed by Sung Sr and Poon was the Clean break Framework as contended by Ds.

298.  In relation to the 3 SPAs, I accept Ds’ Contentions as stated in [40] above.

299.  Since I have rejected the AHL Sale Agreement and the SMA/CRA alleged by Ps, all the matters based upon these alleged agreements are also rejected.

300.  As to Ps’ Contention in [47(2)] above, Ds dispute and say that Paul Leung, Hong June and Kai Lian were not Poon’s nominee at the material times. In my view, there is no sufficient evidence proving that these 3 individuals were Poon’s nominee. The shares in AHL acquired by Poon as stated in various Ps’ Contentions as set out in Section B should be subject to this qualification.

301.  There is no satisfactory evidence showing that before 8 June 2015, save and except the K11 Meeting, Poon and/or Koo had persuaded Sung Sr (through directly communicating with Sung Sr, or communicating with his family members or CH Wong) to execute the Second Mortgage on any other occasion.[121]

302.  The K11 Meeting took place at a time before 5 May 2015. At that time, Poon asked Sung Sr’s family members (ie Sung KP, Martin Kong, Sandy Sung and Gary Lau) to consider to ask Sung Sr to execute the Second Mortgage as an additional security for the AHL Group’s liabilities. Poon did not give any assurance to Sung Sr’s family members that if Sung Sr would agree to execute the Second Mortgage, Poon would be responsible for raising funds to repay the Loan Facilities. Sung KP and Martin Kong personally were against the idea of putting up Sung’s Tower as security. However, Sandy Sung was of the view that executing the Second Mortgage would be beneficial to Sung Sr.

303.  After the K11 Meeting, Sandy Sung tried to persuade Sung Sr to agree to the Second Mortgage, but Sung Sr was unpersuaded. However, thereafter and at a time before 5 May 2015, Sung Sr changed his view and agreed to the execution of the Second Mortgage. The agreement reached between the Banks and the AHL’s representatives in the 5 May 2015 Meeting was made with prior approval from Sung Sr. Further, the 18 May 2015 Resolution was passed with prior approval from Sung Sr. Sung Sr agreed to the Second Mortgage in the circumstances as contended by Ds as set out in [53(8)] above.

304.  In the 8 June 2015 Meeting, Sung Sr voluntarily and unconditionally executed the Second Mortgage. The SMA/CRA alleged by Ps are untrue and have never existed. Sung Sr agreed to the Second Mortgage in the circumstances as contended by Ds as set out in [58] and [61] above. The fact that the Second Mortgage was unconditionally provided by ADFL was also confirmed by the 10 June 2015 AHL Announcement, which was made by the AHL Board under the control of Sung’s Camp.

305.  In November 2015, Sung Sr and Poon engaged in negotiations to deal with the financial situation faced by the AHL Group. The WLA Draft Agreement and Zimmern Draft MOU were exchanged as Sung Sr and Poon were exploring various options. No agreement was reached.

306.  Before 7 May 2016, the AHL Board was controlled by Sung’s Camp.

307.  In the 7 May 2016 AGM, Poon succeeded in changing the composition of the AHL Board and seizing control of the AHL Board. Since Poon was able to do so in the 7 May 2016 AGM, Poon (and his nominees) must have acquired a shareholding greater than Sung Sr’s shareholding in AHL at a time before 7 May 2016. However, as to exactly at what time Poon (and his nominees) had acquired a greater shareholding, there is no clear evidence showing the exact point of time.

308.  In June 2016, Sung Sr and Poon (through their respective representatives) continued to discuss by email correspondence. In the email correspondence, Sung Sr agreed to have Sung’s Tower applied towards repayment of the Loan Facilities in consideration of Poon proceeding with completion of the purchase of the 3^rd SPA Second Tranche of AHL shares, as to which Poon was willing to complete. In my judgment, in the email correspondence, Sung Sr and Poon were discussing how they could achieve the Clean Break.

309.  I accept Ds’ Contentions as set out in [127] above.

310.  As said in the above[122], I am of the view that for the purpose of determining the issues in these proceedings, it would not be necessary to resolve all the contentions put forward by the parties respectively in the Agreed Facts. In my view, the factual findings made in this judgment would be sufficient for the disposal of these proceedings.

E.  DISCUSSION FOLLOWING THE FACTUAL FINDINGS

311.  Both Mr Man SC and Mr Chain SC submit that, these proceedings, stripped down to the essentials, are simple and straightforward.

(1)  Mr Man SC submits that the live issue in these proceedings is whether CFGL should be allowed to enforce the Second Mortgage against ADFL. Mr Man SC poses this question: Can AHL (the debtor), although it had the opportunity and the ability to discharge the Second Mortgage at a discount, it chose not to do so but incorporated a SPV in the form of CFGL to purchase the debt, and then seeks to enforce the whole undiscounted liability against ADFL. Mr Man SC submits that plainly the answer is “No”.

(2)  Mr Chain SC submits that Ps’ case hinges on the AHL Sale Agreement, and the SMA/CRA. Ds say that Ps have failed to prove these alleged oral agreements. That being the case, this is the end of Ps’ case.

312.  As said in the very beginning of this judgment, context is everything. The answer to the question posed by Mr Man SC must depend upon the context. Having considered the evidence and the parties’ respective submissions, I am in agreement with Mr Chain SC. Since I have found that the AHL Sale Agreement, and the SMA/CRA are untrue and have never existed, Ps’ case must fail.

313.  In his submissions, Mr Man SC has referred me to various parts of the 2018 Judgment. In the 2018 Judgment, the learned judge ruled that it would be arguable that CFGL should not be allowed to enforce the Second Mortgage against ADFL. Subsequent to the 2018 Judgment, the pleadings have been amended, the parties have made discovery and filed witness statements. The factual disputes have been fully canvassed in this trial, and I have made factual findings after considering the evidence, both documentary evidence and live evidence given by the witnesses. The circumstances after trial are very different from the circumstances at the time of the application made by CFGL for summary judgment. With respect, for the purpose of the trial, I do not think that Ps can derive any assistance from the 2018 Judgment. To state the obvious, the answers to the issues in this trial depend upon the pleadings and the evidence before the Court in the trial.

314.  It is my factual finding that the AHL Sale Agreement is untrue and has never existed. As a result, [10] to [13] of the RASOC[123] must fall away. Without [10] to [13], subject to the discussion in the paragraph below, [14] of the RASOC (including the fiduciary duties allegedly owed by Poon to Sung Sr) must also fall away. Further, the 3 SPAs pleaded in [15] would not be “pursuant to AHL Sale Agreement.”

315.  I have not overlooked that in [14] of the RASOC, Ps pleaded another basis in support of the alleged fiduciary duties owed by Poon to Sung Sr, ie “… or the trust and confidence reposed by Sung Sr in Poon by entrusting him with power over the conduct of the affairs of Sung Sr’s Businesses”. I reject this plea for the following reasons:

(1)  As a matter of fact, as said in the above, before 6 May 2016, the AHL Board was controlled by Sung’s Camp. Hence, the factual basis of this plea, ie “by entrusting [Poon] with power over the conduct of the affairs of Sung Sr’s Businesses”, does not exist.

(2)  Further or alternatively, as submitted by Mr Chain SC, fiduciary relationship does not arise simply because trust and confidence are reposed by one person in another. What is required is trust and confidence in the loyalty of the decision-maker to put aside his or her own interests and act solely in the interests of the principal.[124] There is no plea, let alone evidence, saying that the trust and confidence allegedly reposed by Sung Sr in Poon is of this nature.

316.  It is also my factual finding that the SMA/CRA are untrue and have never existed. As a result, [23] to [27] of the RASOC must fall away.[125] Without [23] to [27], [28] of the RASOC (including the fiduciary duties allegedly owed by Poon to Sung Sr) must also fall away. Further, the Second Mortgage would not be executed by Sung Sr “pursuant to the [SMA]” as alleged in [29] of the RASOC.

317.  In Section E of the RASOC, Ps pleaded “Poon’s Breaches of the AHL Sale Agreement”. Since the AHL Sale Agreement is untrue and has never existed, the matters in Section E must fall away.

318.  In Section F of the RASOC, Ps pleaded “Poon’s Further Breaches and Threatened Harm Against Sung Sr and ADFL”. The essential plea in this section is [45], in which Ps pleaded “[b]y virtue of such conduct, Poon acted in breach of the AHL Sale Agreement, [the SMA], [the CRA] and/or Poon fiduciary duties, as averred in paragraphs 10, 12, 14, 23, 24, 26 and 28 above.” By reasons set out in the above, [10], [12], [14], [23], [24], [26] and [28] of the RASOC are not established. Hence, [45] of the RASOC must also be rejected. As a result, the whole Section F must fall away.

319.  As a result of my ruling that the alleged AHL Sale Agreement and the alleged SMA/CRA have never existed, Ps’ claim as pleaded has no leg to stand on.

320.  Mr Man SC submits that even without the AHL Sale Agreement and without the SMA/CRA, it would suffice for ADFL to point to the fact that the Second Mortgage was given by Sung Sr on Poon’s request. With respect, I am unable to accept this submission.

(1)  Having gone through Ps’ pleaded case, I am of the view that Ps have not pleaded a case that even without the AHL Sale Agreement and without the SMA/CRA, and merely because the Second Mortgage was given by Sung Sr on Poon’s request, ADFL would be able to resist the enforcement action by CFGL.

(2)  Based upon the evidence accepted by this Court, before Sung Sr executing the Second Mortgage on 8 June 2015, the only occasion in which Poon asked Sung Sr (through Sung Sr’s family members) to execute the Second Mortgage is the K11 Meeting. At the time of the K11 Meeting, Poon had a substantial volume of shares in AHL. Hence, it is understandable that in the K11 Meeting, Poon asked Sung Sr’s family members to try to persuade Sung Sr to agree to the Second Mortgage, so that AHL would not need to immediately repay the Loan Facilities to the Banks. However, there is no evidence showing that in the K11 Meeting, Poon had offered anything to Sung Sr in return for Sung Sr’s consent to the Second Mortgage.

(3)  As shown in the transcript of the 26 May 2016 Meeting[126], in that meeting, no one from Sung’s Camp complained that Poon had failed to do what he had agreed to do in the K11 Meeting. Applying common sense, this is a clear indicator showing that Poon had not agreed to anything in the K11 Meeting.

(4)  Without prejudice to the pleading point in subparagraph (1) above, based upon the evidence accepted by this Court, it would not be possible for Ps to make out a case against Ds by merely relying upon Poon’s request made in the K11 Meeting.

321.  Notwithstanding Mr Man SC’s eloquent arguments and skillful submissions, based upon the pleadings and the evidence before this Court, I must rule against Ps and give judgment to Ds.

F.  ANSWERS TO THE AGREED ISSUES

322.  Based upon the above, I now provide my answers to the agreed issues.

F1.  The Commercial/Contractual Relationship between Ps and Poon

323.  Issue 1

(1)  In or around early December 2014, Sung Sr and Poon entered into the Clean Break Framework, not the AHL Sale Agreement. The AHL Sale Agreement alleged by Ps has never existed.

(2)  The Clean Break Framework is not a complete and legally binding agreement. Poon did not owe any fiduciary duties to Sung Sr under the Clean Break Framework.

324.  Issue 2

(1)  In or around June 2015, Sung Sr, ADFL and Poon did not enter into the SMA or the CRA.

(2)  The SMA/CRA alleged by Ps have never existed.

(3)  In the K11 Meeting (which took place at a time before 5 May 2015), Poon requested Sung Sr’s family members to try to ask Sung Sr to agree to the Second Mortgage. However, Poon did not offer anything in return.   

(4)  In the absence of the SMA/CRA alleged by Ps, merely the request made by Poon in the K11 meeting would not give rise to the fiduciary duties owed by Poon to Sung Sr as pleaded in [28] of the RASOC.

325.  Issue 3

From December 2014 up to 7 May 2016, the AHL Board was controlled by Sung’s Camp. Sung’s Camp would not do anything contrary to Sung Sr’s will. In other words, during the said period, AHL was controlled by Sung Sr.

F2.  Ps’ Claim against Poon

326.  Issue 4

I have found that the AHL Sale Agreement alleged by Ps has never existed. Accordingly, issue 4 does not arise.

327.  Issue 5

As said in my above, it is my finding that the AHL Sale Agreement, the SMA/CRA alleged by Ps have never existed. Further, there is no basis in support of the fiduciary duties alleged in Ps’ pleaded case. Accordingly, issue 5 falls away.

F3.  Ps’ Claim against CFGL and other defendants (Equitable Wrongs and Economic Torts)

328.  Issues 6 to 8

Following my findings made in the above, these issues also fall away.

329.  Issue 9

(1)  By reasons of the aforesaid, Ps’ case is rejected and no relief would be granted to Ps.

(2)  Without prejudice to the conclusion above, since I have found that the 3 SPAs are tainted by illegality, in that they are deliberately crafted in a way in contravention of the disclosure and regulatory requirements as set out in issue 9, and I have also found that Sung Sr participated in implementing the 3 SPAs by transferring his shares to Poon’s nominees with full knowledge that the 3 SPAs are tainted by illegality, Sung Sr should be disentitled to the equitable reliefs claimed by him in any event.

330.  Issue 10

For the reasons set out in the above, ADFL’s claim must be dismissed. There is no basis to say that CFGL owes any liability to ADFL. Hence, issue 10 does not arise for determination.

331.  Issue 11

For the reasons set out in [269] above, the outcome of these proceedings does not depend upon the fides of CAIL and HCPIL. It would not be necessary for me to make any determination on issue 11.

F4.  CFGL’s Counterclaim: Liability under the Second Mortgage, the DRD and the DOA

332.  Issue 12

(1)  The Second Mortgage contains the following provisions:

(a)  Clause 6.1 provides that:

“On or at any time after the Enforcement Date, the Security hereby constituted shall become enforceable as against the Mortgagor.”

(b)  Clause 6.2 provides that:

“Upon the Security hereby constituted becoming enforceable, the Security Trustee or any person appointed by it shall be entitled to put into force and exercise as and when it may see fit any and every power possessed by it by virtue of this Deed …… to:

(a) enter upon and take possession of the Property or any part, thereof (subject to the First Mortgage) and for that purpose to take any legal proceedings, hold and enjoy the Property or any part thereof and take the rents and profits thereof”.

(c)  Under Clause 1.1, “Enforcement Date” is defined as:

“the date on or after the date of this Deed, upon which any Beneficiary makes demand upon any Obligor in respect of any of the Secured Obligations or there occurs any breach of the Mortgagor's obligations under this Deed or any Finance Document”.

(2)  As set out in [116(1)] above, between September and November 2017, CFGL repeatedly demanded ADFL to repay the debts pursuant to the Second Mortgage, failing which CFGL shall exercise the power of sale under the Second Mortgage or institute legal proceedings. ADFL did not repay the debts, and CFGL commenced HCMP 2556/2017 on 15 November 2017.

(3)  Based upon the facts as found by this Court and the provisions in the Second Mortgage, ADFL must deliver vacant possession to CFGL forthwith.

333.  Issue 13

(1)  The Second Mortgage contains the following relevant provisions:

(a)  Clause 1.3 provides:

“The Mortgagor unconditionally and irrevocably covenants to pay and discharge in full the Secured Obligations when due in accordance with the Finance Documents or, if they are stated to be payable on demand, immediately on demand by the Security Trustee at any time.”

(b)  As defined in Clause 1.1, “Finance Document” includes the Loan Facilities owed by AHL, ACL, Chinakey and Sky Emperor to the Banks.

(c)  Clause 14.6 provides:

“Any purported Secured Obligations which may not be valid or enforceable against any Obligor for any reason will, nevertheless, be recoverable from the Mortgagor as principal debtor, by way of indemnity, on demand together with Default Interest on the Secured Obligations.”

(2)  Ps have admitted in their pleaded case that ACL, Chinakey and Sky Emperor have defaulted on the Loan Facilities.[127]

(3)  It is undisputed that CFGL have made multiple demands for payment pursuant to the Second Mortgage.

(4)  Thus, ADFL must be liable to pay all monies due to CFGL under the Second Mortgage.

334.  Issue 14

(1)  Under cross-examination, Sung Sr admitted that Sung’s Tower was controlled by ADFL, Sung’s Tower has had roughly an 80% occupancy rate through the years, and the Rental Incomes were controlled by Sung Sr and were still retained in ADFL.

“錢大律師： …… 基本上你是經你的公司互益染廠有限公司控制住這座大廈，是嗎？

宋忠官： 是。

錢大律師： 現在大廈是租出去收租，是嗎？

宋忠官： 是。

錢大律師： 那租金收回來也是由你控制啦？

宋忠官： 是由我控制。

錢大律師： 仍然在互益染廠有限公司裏面，還是派給股東了？

宋忠官： 沒有。

錢大律師： 就是在互益染廠有限公司裏面？

宋忠官： 是。

錢大律師： 一直有在收租？

宋忠官： 一直有收租，收八成左右。

錢大律師： 這個甚麼意思，即有些租客不交租？

宋忠官： 個個都有交租，但是沒辦法百分之百租出去。

錢大律師： 即有些是空置的？

宋忠官： 來來去去吧。”[128]

(2)  As a matter of law,

(a) A mortgagor in possession becomes accountable for the rents when it receives notice of the mortgagee’s intention to enter.[129]

(b) A mortgagee may take actual possession by an action for possession.[130]

(3)  I agree with Mr Chain SC that the above must follow from the mortgagor’s duty to account for the rents that it does so as a constructive trustee of the mortgagee, much like a mortgagee’s well-established duty to account to the mortgagor for surplus proceeds of sale as a constructive trustee.[131]

(4)  The following are undisputed or indisputable:

(a) Under Clause 6.2(a) of the Second Mortgage, upon the Second Mortgage becoming enforceable, CFGL is entitled to “enter upon and take possession of [Sung’s Tower]… and take the rents and profits thereof”;

(b) On 15 November 2017, CFGL took possession of Sung’s Tower by commencing HCMP 2556/2017; and

(c) On 16 November 2017, CFGL gave notice to all tenants, licensees and occupants of Sung’s Tower of CFGL’s claim for possession.

(5)  In my judgment, CFGL is entitled to:[132]

(a) an account from ADFL, which would allow CFGL to find out the state of the Rental Incomes received by ADFL since 16 November 2017;

(b) upon the rendering of account, the immediate payment of all Rental Incomes received by ADFL to CFGL; and

(c) a declaration that ADFL is holding such Rental Incomes on constructive trust for CFGL.

G.  DISPOSITION

335.  For the reasons above, in HCA 2385/2017, judgment must be entered against Ps and in favour of Ds. Further, in HCMP 2556/2017, CFGL’s claim against ADFL must be allowed. I make the following order:

(1)  Ps’ claim against CFGL, HCPIL and CAIL in HCA 2385/2017 be dismissed.

(2)  Judgment be entered on CFGL’s counterclaim against ADFL in HCA 2835/2017 that:

Payment of outstanding indebtedness

(a)  ADFL do pay CFGL HK$288,153,194.85[133] with interest thereon at HSBC prime rate plus 1% from 14 September 2017 to date of judgment[134], and at the judgment rate thereafter until full payment.

Order for vacant possession

(b)  ADFL do forthwith deliver vacant possession of Sung’s Tower to CFGL within 28 days.

Power of Sale

(c)  Sung’s Tower be sold and that CFGL (or its authorised representative(s)) be appointed to have the conduct of the sale of Sung’s Tower.

Account for Rental Income

(d)  A declaration that ADFL do hold all rental incomes received by and/or on behalf of ADFL in respect of Sung’s Tower from 16 November 2017 (“Date of Notification”) until the date of ADFL’s delivery of vacant possession of Sung’s Tower to CFGL (“the Rental Incomes”) on trust for CFGL.

(e)  A declaration that CFGL is entitled to all the Rental Incomes and/or any traceable proceeds thereof.

(f)  ADFL do, within 28 days hereof, render CFGL a complete and accurate account of the Rental Incomes giving (i) the details and whereabouts of all Rental Incomes received and/or any traceable proceeds thereof between the Date of Notification and the date of account, and (ii) insofar as any part(s) of the Rental Incomes have/has been transferred away, the date(s), amount(s) and recipient(s) of such transfer, and that such account be supported by documents and verified by an affirmation of Sung Sr or Sung KP.

(g)  Upon rendering of account in accordance with sub-paragraph (f) above, ADFL do forthwith pay over all Rental Incomes received to CFGL.

(3)  The registration in the Land Registry of the Writ in HCA 2385/2017 and Originating Summons in HCMP 2556/2017 by the respective memorial numbers 17101601990015 and 18061502750015 as against Sung’s Tower be vacated forthwith.

(4)  There be liberty to apply.

336.  Costs should follow the event. Mr Chain SC seeks costs of these proceedings on a full indemnity basis, with a certificate for two counsel. At the moment, I would make a costs order nisi awarding costs of these proceedings to Ds in HCA 2385/2017 and to CFGL in HCMP 2556/2017 on a party and party basis, with a certificate for two counsel. The parties may consider whether it would be necessary to make an application to vary the costs order nisi after considering this judgment. Any application for an order varying the costs order nisi shall be made by an inter partes summons. Unless an application for variation of the costs order nisi is made within 14 days after the handing down of this judgment, the costs order nisi shall become absolute without a further order. The costs order nisi made by me is as follows:

(1)  Ds’ costs in HCA 2385/2017 (including costs reserved, if any) be paid by Ps, with a certificate for two counsel, to be taxed if not agreed.

(2)  CFGL’s costs in HCMP 2556/2017 (including costs reserved, if any) be paid by ADFL, with a certificate for two counsel, to be taxed if not agreed.

337.  As a result of my conclusion as stated in [329(2)] above, to safeguard public interest, I am of the view that the illegality issue should be investigated, and if necessary, appropriate enforcement action(s) should be taken. I therefore direct that a copy of this judgment be sent to the SFC for their consideration and action.

338.  Lastly, it remains for me to express my gratitude to all counsel for the very helpful assistance rendered to the Court.

Mr Bernard Man SC and Mr Julian Lam, instructed by DLA Piper Hong Kong, for the 1st to 3rd Plaintiffs in HCA 2385/2017 and for the Defendant in HCMP 2556/2017.

The 1^st, and the 3^rd to 6^th Defendants in HCA 2385/2017 were not represented and did not appear.

Mr Christopher Chain SC, Ms Tinny Chan and Ms Clara Wong, instructed by Reynolds Porter Chamberlain, for the 2^nd, 7^th and 8^th Defendants in HCA 2385/2017 and for the Plaintiff in HCMP 2556/2017.

Annex A & Annex B