Sun Chang Hua v. Li Qin Xi and Another

HCMP 1664/2024

[2026] HKCFI 5815

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1664 OF 2024

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BETWEEN

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JUDGMENT

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A. Introduction

1.This is the trial of the petition taken out by Mr Sun Chang Hua (the “Petitioner”) on 2 September 2024[1] pursuant to section 724 of the Companies Ordinance (Cap 622) based on the alleged unfair and prejudicial conduct of Mr Li Qin Xi (the “1^st Respondent”) in relation to the affairs of Giant Port (International) Investment Ltd (the “Company”).

B. The Petitioner’s Case

2.The Petitioner’s case is straightforward.

3.The Company was incorporated in Hong Kong on 19 September 2013.

4.The Petitioner and the 1^st Respondent respectively hold 50% shareholding in the Company.

5.The 1^st Respondent is the sole director of the Company.

6.It is not in dispute that the Petitioner and the 1^st Respondent had been friends since the 2000s.

7.According to the Petitioner, in around 2013, he was told by the 1^st Respondent that there was a lucrative opportunity to invest in Danhua Capital, which was established by Dr Shoucheng Zhang, a prominent scientist in the field of innovative technologies.

8.Upon the 1^st Respondent’s invitation, the Petitioner agreed that the Company be set up for the purpose of investing in Danhua Capital and that he should become a 50% shareholder of the Company.

9.In light of his trust and confidence in the 1^st Respondent, the Petitioner also agreed that he would only provide capital for investment and that the 1^st Respondent should control the Company and manage its affairs.

10.The Petitioner averred that this arrangement was made on the basis of his trust and confidence reposed in the 1^st Respondent, and, as such, the Company is a “quasi-partnership” between him and the 1^st Respondent on a 50:50 basis.

11.The Company had, as a limited partner in Danhua Capital, invested approximately US$5 million in it.

12.It is the Petitioner’s case[2] that he had via himself and his nominees[3] contributed investment capitals in the aggregate amounts of RMB10,381,144 and US$150,000. These contributions were paid to and received by (i) Jia Ming Fang, a financial staff of the Company; (ii) Danhua Capital; (iii) the 1^st Respondent; (iv) Luo Wei, a representative of Danhua Capital; and (v) a Mainland company named Beijing Giant Port Investment Ltd (“Beijing Giant Port”). The role of Beijing Giant Port will be discussed hereinbelow.

13.Apart from undertaking the investment in Danhua Capital, there is no suggestion that the Company has been involved in any other commercial activities.

14.The Petitioner averred that to the best of his knowledge, Danhua Capital had distributed dividends (the “Dividends”) in favour of the Company at least 9 times, totalling US$5.6 million.

15.However, the 1^st Respondent had fraudulently, wrongfully, and in breach of his fiduciary duties owed to the Company, embezzled all these Dividends by causing the Company to instruct Danhua Capital to pay the same into the bank account(s) held by his daughter in the United States of America.

16.As a result, the Company had never received the Dividends from Danhua Capital and had never declared any dividends in favour of its shareholders. As such, the Petitioner had never received one single penny.

17.The Petitioner also accuses the 1^st Respondent of failing to:-

(1) provide the Petitioner with any information about the Company’s investment in Danhua Capital;

(2) cause proper and true books of accounts to be kept;

(3) prepare audited financial statements for the Company; and

(4) convene general meetings to discuss the affairs of the Company.

18.In these premises, the Petitioner seeks the following reliefs from the court:-

(1) an order that his shareholding in the Company be bought out by the 1^st Respondent at a fair price or alternatively an order that the 1^st Respondent’s shareholding in the Company be bought by the Petitioner at a fair price;

(2) an order for account and inquiries in regard to the Dividends distributed by Danhua Capital (as well as the traceable proceeds and profits deriving therefrom);

(3) a declaration that the 1^st Respondent has been holding the Dividends distributed by Danhua Capital (as well as the traceable proceeds and profits deriving therefrom) on constructive trust for the Company;

(4) an injunction restraining the 1^st Respondent from continuing to misappropriate and/or dissipate any of the dividends to which the Company is entitled under its investment in Danhua Capital; and

(5) an order that the 1^st Respondent be removed as a director of the Company and that the Petitioner be appointed instead.

C. The 1^st Respondent’s Case

19.The 1^st Respondent admitted that:-

(1) the Petitioner was his friend;

(2) he and the Petitioner respectively hold 50% of the shareholding in the Company on record; and

(3) he is the sole director of the Company.

20.The 1^st Respondent also admitted that the sole purpose of incorporating the Company was to invest in Danhua Capital. There is no suggestion that the Company was involved in any other commercial activities.

21.However, the 1^st Respondent denied that the Company is a “quasi-partnership” as alleged by the Petitioner.

22.In gist, it is the 1^st Respondent’s case that the Company is merely a nominee or a trustee that holds the investment in Danhua Capital on behalf of those investors who had made capital contribution.

23.The 1^st Respondent emphasised that the Company is associated with Beijing Giant Port, and the Company, being a “commercial extension” of Beijing Giant Port, was incorporated to undertake overseas investment. As such, Beijing Giant Port and the Company are treated as one commercial entity.

24.What happened were as follows.

25.On 8 February 2012, the 1^st Respondent, 彭清华 (“Peng”), and 许刚 (“Xu Gang”) entered into an investment cooperation agreement (投资合作协议) for a business venture (the “2012 Investment Cooperation Agreement”).

26.Pursuant to the 2012 Investment Cooperation Agreement, Beijing Giant Port was set up on 1 March 2012, and the 1^st Respondent, Peng and Xu Gang respectively held 34%, 33%, and 33% shareholding in Beijing Giant Port.

27.Subsequently, 徐大金 (“Xu Dajin”) and the Petitioner would like to join the 1^st Respondent, Peng and Xu Gang in respect of their investment.

28.As Beijing Giant Port is a Mainland entity, the parties were aware that it would be difficult for Beijing Giant Port to engage in overseas investment activities (which transpired to be the investment in Danhua Capital). Thus, the parties decided to set up a company in Hong Kong as an associated company of Beijing Giant Port for the purpose of making overseas investments, and this transpired to be the Company.

29.Importantly, on 5 September 2013, the 1^st Respondent, Peng, Xu Gang, Xu Dajin, and the Petitioner (the “2013 Investors”) entered into an agreement titled “合伙投资协议” (the “2013 Partnership Investment Agreement”)[4]. There, the 2013 Investors agreed that:-

(1) The Company would be the entity responsible for overseas investments: see preamble 1.

(2) Beijing Giant Port and the Company should internally operate as one partnership entity (the “OPE”) for joint investment: see clause 1 (1^st paragraph).

(3) Each of the 2013 Investors should have 20% interests in the OPE: see clause 1 (2^nd paragraph).

(4) The 1^st Respondent should be responsible for managing the OPE: see clause 2 (1^st paragraph).

(5) All necessary capital shall be borne by the 2013 Investors according to the proportion of their respective interests: see clause 2 (2^nd paragraph).

(6) The rights, losses and operating expenses of Beijing Giant Port’s investments that accrued before 5 September 2013 shall be enjoyed and borne by the 1^st Respondent, Peng and Xu Gang, whereas those accrued subsequently shall be enjoyed and borne by the 2013 Investors: see clause 4.

(7) The rights, losses and operating expenses of the Company that accrued before 5 September 2013 shall be enjoyed and borne by the 1^st Respondent and the Petitioner, whereas those accrued subsequently shall be enjoyed and borne by the 2013 Investors: see clause 4.

30.Shortly after the 2013 Partnership Investment Agreement was signed, the 2013 Investors entered into a supplemental agreement (the “2013 Supplemental Partnership Investment Agreement”). There, the 2013 Investors agreed that:-

(1) The 1^st Respondent shall be entitled to receive from each of the other four 2013 Investors 2% of the total annual investment amount of the OPE as its operating expenses: see clause 1.

(2) 20% of the profits of each investment project shall be distributed to the 1^st Respondent, and the remaining 80% of the profits shall be distributed amongst the 2013 Investors pursuant to each of their actual contribution of capital to such investment project: see clause 2.

31.According to the 1^st Respondent, Xu Gang, Xu Dajin, and the Petitioner did not (i) make any capital contribution to the OPE pursuant to the 2013 Partnership Investment Agreement and (ii) contribute any operating expenses pursuant to the 2013 Supplemental Partnership Investment Agreement.

32.Notwithstanding so, in view of the fact that the Petitioner and the 1^st Respondent had other business ventures in the Mainland, the Petitioner was allowed to remain as an investor on paper, and the 1^st Respondent hoped that he would eventually contribute to the OPE.

33.On 10 November 2015, Peng and the 1^st Respondent entered into a share transfer agreement (the “1^st 2015 Share Transfer Agreement”). It was provided that:-

(1) Each of the 1^st Respondent, Peng, the Petitioner and 那旭东 (“Na”) held 25% interests in the OPE: see clause 1 (2^nd paragraph).

(2) Peng wished to transfer all his 25% interests in the OPE, and the 1^st Respondent was willing to assist in looking for a purchaser: see clause 1 (3^rd paragraph).

(3) The amount payable for the share transfer would be based on Peng’s actual capital contribution to Danhua Capital: see clause 2 (1^st paragraph).

34.On the same day (i.e. 10 November 2025), the 1^st Respondent, the Petitioner, and Na (the “2015 Investors”) entered into an agreement titled “入伙投资协议” (the “2015 Partnership Agreement”)[5]. It was provided that:-

(1) Whilst Peng had withdrawn from the investment project in respect of Danhua Capital, the 1^st Respondent and the Petitioner were willing to purchase Peng’s shares and/or interests: see recital (2^nd paragraph).

(2) The number of partners in the OPE had changed from 4 to 3, and their respective interests in the OPE were as follows:-

Interest Holder	Proportion
1st Respondent	37.5%
Petitioner	37.5%
Na	25%

35.Shortly afterwards, the 1^st Respondent and the Petitioner entered into a share transfer agreement (the “2^nd 2015 Share Transfer Agreement”). It was provided that:-

(1) As of November 2015, the 1^st Respondent, the Petitioner, and Na respectively held 37.5%, 37.5%, and 25% interests in the OPE under the Company: see recital 1 and recital 2.

(2) The Petitioner agreed to transfer his 5% interests in the OPE to the 1^st Respondent: see clause 1.

(3) The consideration in respect of the transfer of the said interests shall be 5% of the amount paid by the Petitioner to the OPE’s investment in Danhua Capital plus other related handling fees paid by the Petitioner: see clause 3.

36.Accordingly, upon signing the 2^nd 2015 Share Transfer Agreement, the interests of the 2015 Investors in the OPE should be, on paper, as follows:-

Interest Holder	Proportion
1st Respondent	42.5%
Petitioner	32.5%
Na	25%

37.On 15 December 2015, the 1^st Respondent and 張巍 (“Zhang”) entered into a 投资股权转让协议 (the “3^rd 2015 Share Transfer Agreement”)[6]. It was agreed that:-

(1) As of November 2015, the 1^st Respondent, the Petitioner, and Na respectively held 42.5%, 32.5%, and 25% interests in the OPE under the Company: see recital 1 and recital 2.

(2) The 1^st Respondent agreed to transfer his 8% interests in the OPE to Zhang, and this was confined to the investments in Danhua Capital: see clause 1.

(3) The consideration in respect of the transfer of the said interests shall be 8% of the amount paid by the 1^st Respondent to the OPE’s investment in Danhua Capital (i.e. RMB1,934,133.80) plus other related handling fees paid by the 1^st Respondent (i.e. RMB87,814.10): see clause 3

38.Accordingly, upon signing the 3^rd 2015 Share Transfer Agreement, the interests of the 2015 Investors in the OPE should be, on paper, as follows:-

Interest Holder	Proportion
1st Respondent	34.5%
Petitioner	32.5%
Na	25%
Zhang	8%

39.However, according to the 1^st Respondent, Zhang also had never contributed any capital to the OPE.

40.It is the 1^st Respondent’s case that the investors generally disregarded the investment proportions set out in the written agreements mentioned hereinabove. As such, it was understood amongst the investors that their beneficial interest in the investment would correspond to the amount of their actual capital contribution, and the Company would hold these investments on trust for the investors.

41.The 1^st Respondent denied that the Petitioner had made capital contribution to the investment in Danhua Capital via the Company. In this connection:-

(1) The 1^st Respondent averred that the following payments from the Petitioner were unrelated to Danhua Capital and that they were related to Beijing Giant Port’s investment projects and/or business dealings relating to “天津融合混凝土有限公司” and “七台河坤城矿山机械有限公司”:-

Dates	Amounts	Transferor	Transferees
5 Dec 2013	RMB350,000	Sun Li Li	Jia Ming Fang
10 Mar 2014	RMB1,262,000	Sun Li Li	Jia Ming Fang
8 July 2014	RMB360,000	Sun Li Li	Jia Ming Fang
30 Jan 2015	RMB1,964,100	Sun Li Li	Jia Ming Fang
10 Feb 2015	RMB543,000	Sun Li Li	Beijing Giant Port
20 Nov 2015	RMB1,714,410	Sun Li Li	Beijing Giant Port

(2) The 1^st Respondent averred that the following payment was made by the Petitioner for the purpose of purchasing a vehicle from the 1^st Respondent:-

Date	Amount	Transferor	Transferee
13 Nov 2015	RMB300,000	Sun Guo Feng	1st Respondent

(3) The 1^st Respondent averred that the purpose of the following payment was unrelated to the investment in Danhua Capital:-

Date	Amount	Transferor	Transferee
17 Nov 2015	RMB700,000	Sun Li Li	1st Respondent

(4) The 1^st Respondent averred that the purposes of the following payments were unknown:-

Dates	Amounts	Transferor	Transferees
13 Nov 2015	RMB318,595	Sun Li Li	Luo Wei
13 Nov 2015	US$50,000	Petitioner	Danhua Capital
16 Nov 2015	US$50,000	Sun Li Li	Danhua Capital
17 Nov 2015	US$50,000	He Miao Miao	Danhua Capital
24 Jan 2017	RMB2,869,049	Sun Li Li	Gu An Jia

42.Without prejudice to the aforesaid averments, the 1^st Respondent further averred that he had caused the Dividends to be paid into the personal overseas bank accounts of various individuals. The 1^st Respondent emphasised that as the Company used Beijing Giant Port’s bank account in the Mainland, it was difficult for the Company to receive US dollars in its own name. For this reason, the 1^st Respondent instructed Danhua Capital to pay the Dividends into the personal overseas bank accounts of those investors who contributed to the investment. Since the Petitioner did not contribute any capital, he was not entitled to receive any of the Dividends.

43.The 1^st Respondent also stressed that as a mere investment holding corporate vehicle, the Company does not (i) have any business operation; (ii) hold any bank account in its own name; (iii) advance any capital to Danhua Capital; and (iv) receive any Dividends from Danhua Capital. As such, the financial documents of the Company would not serve any utility to the Company’s shareholders.

D. Deliberation

44.The Petitioner adduced evidence from (i) himself; (ii) a friend of his daughter, namely He Miao Miao (何苗苗); (iii) his son, Sun Guo Feng (孙 国峰); and (iv) his daughter, Sun Li Li (孙丽丽).

45.Immediately after the Petitioner’s case was closed[7], Mr Tasman Tam (for the 1^st Respondent) made a “half-time” submission, contending that the Petitioner had failed to raise a case for the 1^st Respondent to answer.

46.In gist, Mr Tam submitted that on the Petitioner’s evidence and admissions, the Company is plainly a trustee of the ultimate investors, and, as such, the Petitioner has failed to show that he has suffered any prejudice in the capacity of a shareholder or a member of the Company.

47.In Geng Hua Zhong & Ors v Li Shu Hon & Anor [2023] HKCFI 3118 at paras 29 to 32, Harris J pointed out that:-

“29. It is well-established that in the context of a civil trial, a submission of no case to answer can be made on two grounds, namely (a) where the plaintiff’s case, even accepting it at its face value, does not disclose a sustainable cause of action in law; or (b) the quality of the evidence given by the Plaintiff is such that there is not even a prima facie case for the Defendant to answer…

30. An application of no case to answer is appropriate if it is clear that the claim has no prospect of success and it would be a waste of time and costs to hear the defendant’s (or, here, the 1^st Respondent’s) evidence. Such an application gives effect to, and furthers the modern policy considerations in the Rules of the High Court. As Latham LJ explained in Bentley v Jones Harris & Company[8]:

“…if a judge concludes at the end of a claimant’s evidence, whether on the application of the defendant or of his own motion, that the claimant has no real prospect of success or, in other words, is bound to fail, on his assessment of the evidence before him at that stage, he is in my view entitled to give judgment for the defendant, in the same way as if there had been an application at an earlier stage in the proceedings for summary judgment under CPR Part 24.2. In that way he will be giving effect, in the circumstances of a trial, to the overriding objective and in particular to the need to contain within limits the expenditure of time and costs on the particular case before him.”

31. In the very recent authority of the Privy Council in Roopnarine v Attorney General of Trinidad and Tobago[9], Lord Hamblen at [27] made the following observations (in upholding the lower court’s acceptance of a no case to answer submission):

“27. If such an election to call no evidence is made, then the judge decides the case on the balance of probabilities on the evidence before the court as in any other trial. As Mance LJ explained in Boyce:

‘… where a defendant is put to his election, that is the end of the matter as regards evidence. The judge will not hear any further evidence which might give cause to reconsider findings made on the basis of the claimant’s case alone. The case either fails or succeeds…’”

32. A Defendant who elects to make a no case to answer submission by doing so elects to call no evidence. When such a submission is made the court first considers whether the Plaintiff (the Petitioners in the present case) have put forward a sustainable case for the Defendant (in this case the 1^st Respondent) to answer. If, however, the court finds there is a case to answer, it will proceed to rule, on a balance of probabilities, whether the Plaintiff’s case is made out, having regard to (a) the Plaintiff’s evidence (including that given under cross-examination); and (b) the available documentary evidence, but without regard to the Defendant’s witness statement.”

48.For the reasons elaborated in sections D1 and D2 below, I accept Mr Tam’s contention that the Petitioner has failed to raise a case for the 1^st Respondent to answer.

D1 Is the Company a “Quasi-Partnership” as alleged by the Petitioner? Is the Company merely a Trustee of the Investors?

49.Having examined the respective pleaded cases of the parties, the objective circumstances of the case as evidenced by the agreements executed by the parties, the inherent probabilities, the Petitioner’s evidence, and the submissions advanced by counsel, I find that:-

(1) The Company is not a “quasi-partnership” between the Petitioner and the 1^st Respondent on a 50:50 basis.

(2) Instead, the Company is a corporate vehicle used by those investors who had made capital contribution as a nominee or a trustee to make and hold the investment in Danhua Capital.

50.I make these findings for the following reasons.

51.First of all:-

(1) There is ample contemporaneous documentary evidence showing that (i) the Company is merely a trustee or nominee that holds the investment in Danhua Capital on behalf of those investors who had made capital contribution; and (ii) the Petitioner and the 1^st Respondent do not respectively own 50% interest in the investment in Danhua Capital that was made in the name of the Company.

(2) In this connection:-

(a) The 2013 Partnership Investment Agreement[10] clearly stipulated that Beijing Giant Port and the Company should internally operate as an OPE (i.e. one partnership entity) for joint investment[11], and the Company should be the entity that was responsible for undertaking overseas investment[12]. In the premises, each of the 2013 Investors (i.e. the 1^st Respondent, Peng, Xu Gang, Xu Dajin, and the Petitioner) should only have 20% interests in the OPE[13].

(b) In light of the contents of the 2015 Partnership Agreement and the series of the Share Transfer Agreements, it is clear that the investment undertaken by the OPE via the Company is concerned with Danhua Capital[14].

(c) The 2015 Partnership Agreement provided that the partners in the OPE had changed to 3, and the respective interests of the Petitioner, the 1^st Respondent and Na in the OPE should be 37.5%, 37.5%, and 25%.

(d) There is no question that the partners of the OPE had changed on numerous occasions. According to the latest Share Transfer Agreement, i.e. the 3^rd 2015 Share Transfer Agreement, the investors were the 1^st Respondent, the Petitioner, Na and Zhang, and they were respectively entitled to 34.5%, 32.5%, 25%, and 8% interests in the OPE.

(3) In light of the aforesaid contemporaneous agreements (the authenticity of which is not disputed and cannot be disputed), there is no room for the Petitioner to aver that the Company undertakes his investment and the 1^st Respondent’s investment on a 50-50 basis. This is not the truth. I find that as evidenced by the aforesaid written agreements, the truth is that the common intention amongst the Petitioner and the 1^st Respondent (as well as those investors who have been involved) is such that the Company shall undertake the investment in Danhua Capital on behalf of those investors who had made capital contribution.

52.Second:-

(1) The Petitioner’s case that the Company is a 50/50 “quasi-partnership” between himself and the 1^st Respondent is not even borne out by the averments in the Amended Petition.

(2) In paragraph 11 of the Amended Petition, the Petitioner averred that the Company had made investment in Danhua Capital to the extent of US$5 million. However, in paragraph 12, the Petitioner admitted that putting his case to the highest, he had only made capital contribution to the extent of RMB10,381,144 and US$150,000. The Petitioner’s contribution was not even close to half of the total investment in the amount of US$5 million.

(3) In the premises, even on the Petitioner’s case, it must be the case that the investment in Danhua Capital (which was made via the Company) emanated from capital provided by people who are not shareholders of the Company. There is an irresistible inference that the Company is not a “quasi partnership” between the Petitioner and the 1^st Respondent. Instead, the Company has undertaken investment in Danhua Capital on behalf of non-shareholders. This is exactly the 1^st Respondent’s case.

53.Third:-

(1) In his Points of Reply, the Petitioner made a tacit admission that those investors who made capital contribution are entitled to the fruits deriving from their investment in Danhua Capital.

(2) In paragraphs 2.2 to 2.3 of the Points of Reply, the Petitioner averred that:-

“2.2 The Company was incorporated in Hong Kong exclusively for investment in Danhua Capital (due to lower tax rate than that in the Mainland).

2.3. The investment dividends therefrom and/or are to be distributed to its registered shareholders, namely the Petitioner and the Respondent, based on their respective registered shareholding in the Company (each 50%). Then, each of them would retain a portion of the dividends and distribute the remaining portion to other de facto investors, based on their respective beneficial interests in the Company.” (emphasis added)

(3) In the premises, it is clear that even on the Petitioner’s pleaded case, the Company was not set up for the purpose of undertaking the Petitioner’s and the Respondent’s investment in Danhua Capital on a 50:50 basis. Instead, the Company was set up for the purpose of undertaking the investment of those investors who made capital contribution, and the investors must have an interest in the investment.

(4) Pausing here, contrary to the Petitioner’s averment, I am not of the view that it can be said that the investors have any interest in the shareholding of the Company, such that they are entitled to the dividends declared by the Company. The Petitioner’s pleas and evidence do not explain why the shares in the Company are held on trust for these investors. Importantly, the capital contributions from the investors for the investment in Danhua Capital have never been treated or used as the share capital of the Company, and no new shares have been allotted in resect thereof.

(5) In my view, the reality is that as the Company simply makes the investment in Danhua Capital on behalf of the investors, the Company directly holds the investment and the fruits deriving therefrom (ie the Dividends) for the investors.

(6) In the premises, the Company, being the investors’ trustee or nominee, should directly account for the fruits arising from the investment (i.e. the Dividends) to the investors. I am unable to accept the Petitioner’s averment that the Company should first, based on the Dividends arising from the investment in Danhua Capital, declare dividends in favour of himself and the 1^st Respondent, and he and the 1^st Respondent should then make distributions in favour of the investors. This suggestion does not make sense at all. I am unable to discern any reason why the distribution exercise should involve the shareholders of the Company.

54.Fourth:-

(1) When the Petitioner was cross-examined by Mr Tasman Tam (for the 1^st Respondent)[15], he candidly admitted that:-

(a) The Company has an obligation to distribute investment returns (ie the Dividends distributed by Danhua Capital) to the ultimate investors (not only the registered shareholders of the Company), and the proportion should be as follows: (i) Petitioner: 37.5%; (ii) the 1^st Respondent: 22.5%; (iii) Na: 25%; (iv) Zhang: 8%; and (iv) Xu Yan (许艳): 7%.

(b) What should have happened was that upon receiving the Dividends distributed by Danhua Capital, the Company should, after deducting the necessary tax expenses, pay the balance to the ultimate investors based on the aforesaid proportion.

(c) If an investor has not made any capital contribution, he should not be entitled to receive any investment returns.

(d) Whilst it is acceptable that the Company may distribute the investment returns to the ultimate investors directly, it is also acceptable that the Company may first declare dividends in favour of its registered shareholders and the registered shareholders shall then distribute the money to all the investors based on the proportions of their contribution. Both methods for distribution would be workable and fair.

(e) In this connection, the Petitioner believed that if he receives 50% of the investment returns by way of dividends declared by the Company, he should pay 12.5% to Na. However, there was no express discussion in respect thereof.

(f) The Company holds the assets in question (i.e. the investment in Danhua Capital and the Dividends distributed by Danhua Capital) as a nominee, and these assets are held for the ultimate investors.

(2) When the Petitioner was re-examined by Mr Thomas Nip (for the Petitioner himself)[16], the Petitioner further candidly admitted that:-

(a) The Company should be accountable to him. This was because he was an investor who contributed real money for the investment in Danhua Capital. This was not because he was a registered shareholder of the Company.

(b) The Company should be accountable to other investors, who are not registered shareholders of the Company. This was because they contributed real money for the investment in Danhua Capital.

(c) There was no general discussion as to how the shareholders of the Company should account to the ultimate investors in regard to the Dividends distributed by Danhua Capital.

(3) The aforesaid admissions on the part of the Petitioner are fatal. According to the Petitioner’s own understanding, the role of the Company is plainly a nominee or a trustee, and the assets in question (i.e. the investment in Danhua Capital and the Dividends distributed by Danhua Capital) are held on trust for the ultimate investors. This is why the Petitioner acknowledged that the Company (i) has an obligation to distribute the Dividends distributed by Danhua Capital to the ultimate investors (not only the registered shareholders of the Company) and (ii) should be accountable to each of the investors who contributed investment capital. The admissions made by the Petitioner were logical and consistent.

(4) Although the Petitioner, out of practical concerns, accepted that the Company may first declare dividends in favour of its registered shareholders and the registered shareholders shall then distribute the money to all the investors based on the proportions of their contribution, it is only the Petitioner’s subjective belief that this method would be fair and workable. As fairly acknowledged by the Petitioner, there was no express discussion in respect thereof. In the premises, it could not be the case that the objective intention of the parties is such that the Petitioner and the 1^st Respondent shall hold the shares in the Company on trust for the ultimate investors. On the contrary, the intention of the parties is that the Company shall directly hold the investment in Danhua Capital and the Dividends distributed by Danhua Capital on trust for the ultimate investors.

55.In Zi Wang v Graham Darby [2021] EWHC 3054 (Comm) at paras 52 to 53, Deputy High Court Judge Stephen Houseman QC, citing Re Lehman Brothers International (Europe) (In Administration) [2010] EWHC 2914 (Ch) at paras 225 to 262 (per Briggs J, as he then was), pointed out that in the commercial context, the court can, based on the objective common intention of the parties, find that an express trust exists, if the requirements of certainty are satisfied. The learned Judge stated:-

“52. As regards the circumstances in which an express trust will be found to exist in a commercial transaction or relationship, the guiding principles are summarized by Briggs J (as he then was) in Re Lehman Brothers International (Europe) (In Administration) [2010] EWHC 2914 (Ch) at [225] in ten numbered propositions (i) to (x)…I do not set out the ten propositions here, save to observe that the guiding principle is one of objective common intention assuming the foundational requirements of certainty are met in the first place (propositions (i) to (v)). The parties’ language is not determinative: it is a matter of substance not form (proposition (vi)). Special care is needed in a business or commercial context, such that: (a) a trust will be imposed where the parties’ commercial objective calls for it; but (b) the law should not unthinkingly impose a trust where purely personal rights between the contractual parties sufficiently achieve their commercial objective (proposition (ix)).

53. Briggs J went on to give commentary on these ten propositions at [226]-[262]. In relation to the two limbs of proposition (ix), he commented at [261] that (a) the law should not be hidebound by traditional rules about trusts derived from their origins in family settlements; and (b) the parties’ commercial agreements and arrangements should be interpreted purposively in order to ascertain their commercial objective.”

(emphasis added)

56.Insofar as the ten propositions propounded by Briggs J (as he then was) in Re Lehman Brothers at para 225 are concerned, the following are most pertinent for present purposes:-

“i) The recognition of a proprietary interest of B in property where A has the legal or superior title necessarily assumes the existence of a trust as between A and B.

ii) There can be no such proprietary interest if the necessary trust would fail for uncertainty.

…

iv) A trust does not fail for want of certainty merely because its subject matter is at present uncertain, if the terms of the trust are sufficient to identify its subject matter in the future.

v) Subject to the issue of certainty, the question whether B has a proprietary interest in the property acquired by A for B’s account depends upon their mutual intention, to be ascertained by an objective assessment of the terms of the agreement or relationship between A and B with reference to that property.

vi) The words used by the parties such as “trust”, “custody”, “belonging”, “ownership”, “title”, may be persuasive, but they are not conclusive in favour of the recognition of B’s proprietary interest in the property, if the terms of the agreement or relationship, viewed objectively, compel a different conclusion.

…

ix) Special care is needed in a business or commercial context. Thus:

(a) The law should not confine the recognition and operation of a trust to circumstances which resemble a traditional family trust, where the fulfilment of the parties’ commercial objective calls for the recognition of a proprietary interest in B.

(b) The law should not unthinkingly impose a trust where purely personal rights between A and B sufficiently achieve their commercial objective.”

(emphasis added)

57.Applying the legal principles canvassed hereinabove, I have no doubt that the Company is a trustee of those investors who had made capital contribution for the investment in Danhua Capital, and my analysis is set out in paragraphs 58 to 73 below.

58.As a starting point, I accept the submissions of Mr Thomas Nip (for the Petitioner) that an investment-holding company is not ipso facto a trustee that holds the investment for its shareholders: see Re Hansby Co Ltd (HCMP 4610/2003, 12 May 2004) at para 20 (per Barma J, as Barma JA then was).

59.However, it is not in dispute that the Company is the entity that undertakes the investment in Danhua Capital and that the investment capital originated from the investors.

60.The question to ask is: what is the relationship between the Company and the investors?

61.To answer this question, it is noteworthy that:-

(1) It could not be the case that the investors intended to advance gifts in favour of the Company, and there is no suggestion that this was the case.

(2) Likewise, there is no suggestion that the investors had ever advanced any loans in favour of the Company, and the investors and the Company have never entered into any loan agreement. Thus, it could not be the case that there was a creditor-debtor relationship between the Company and the investors.

(3) Further, as mentioned, there is no suggestion that the investors’ capital for investing in Danhua Capital has become part of the Company’s share capital, and in this regard, it is not in dispute that no new shares in the Company have been allotted. Thus, the shareholding in the Company could not be held on trust for the investors.

62.As evidenced by the 2013 and 2015 Partnership Agreements as well as the series of Share Transfer Agreements, it was intended that the investors shall have interests in the investment in accordance with the specified proportions. As discussed in paragraph 53 above, under paragraphs 2.2 to 2.3 of his Points of Reply, the Petitioner even tacitly admitted that the investors are entitled to the fruits deriving from their investment in Danhua Capital.

63.In my view, the only plausible explanation of the relationship between the investors and the Company is that the Company holds the investment as well as the fruits arising from the investment (ie the Dividends) on trust for the investors.

64.However, Mr Nip referred me to the clauses in the subscription agreement and the limited partnership agreement between the Company and the partners of Danhua Capital, which appear to show that the Company agreed to acquire the interests in the partnership of Danhua Capital on its own account and not on account for any other person[17]. Mr Nip then went on to suggest that the common intention amongst the Company and the investors is that only the shares in the Company are held on trust for the investors, such that the provisions of the subscription agreement and the limited partnership agreement could be complied with.

65.For the following reasons, the relevant clauses in the subscription agreement and the limited partnership agreement[18] would not avail the Petitioner at all, and I disagree with Mr Nip’s submissions:-

(1) The investors did not sign, and were not privy to, the subscription agreement and the limited partnership agreement. As such, the same do not prove the common intention between the Company and the investors.

(2) In fact, there is no evidence from the Petitioner (who is an investor according to his case) that he was aware of the relevant provisions of the subscription agreement and the limited partnership agreement. Likewise, there is also no evidence showing any other investors were aware of the relevant provisions of the subscription agreement and the limited partnership agreement. More importantly, there is no evidence showing that copies of the subscription agreement and the limited partnership agreement were provided to the Petitioner and other investors. In fact, it was the Petitioner’s evidence that in light of the trust that he reposed on the 1^st Respondent, he did not bother to read the contents of the 2013 Partnership Investment Agreement and the 2015 Partnership Investment Agreement (which the Petitioner did sign). As such, it is most unlikely and inherently improbable that the Petitioner would bother to find out the terms of the subscription agreement and the limited partnership agreement between the Company and the partners of Danhua Capital (which the Petitioner did not sign).

(3) In the premises, there is no room for Mr Nip to contend that the investors (including the Petitioner) agreed and/or understood that for the purpose of complying with the provisions of the subscription agreement and the limited partnership agreement, the shares in the Company would have to be held on trust for them, so that they should only indirectly receive the Dividends distributed by Danhua Capital through the dividends declared by the Company. In my view, the argument pursued by Mr Nip is simply contrived and not borne out by the evidence at all.

(4) In any event, it would be naïve to assume that the Company would necessarily abide by the provisions of the subscription agreement and the limited partnership agreement. This is a wrong assumption. In this regard, it is important not to lose sight of the facts that the Company was controlled by the 1^st Respondent, and that the 1^st Respondent authored, and was privy to, the 2013 and 2015 Partnership Agreements and the series of Share Transfer Agreements, which clearly show that the investors shall have an interest in the investment in Danhua Capital and the Dividends distributed by Danhua Capital: see paragraphs 51 and 53 above. In my view, the 1^st Respondent (who was the Company’s sole director) did cause the Company to breach and/or ignore the provisions of the subscription agreement and the limited partnership agreement. Notwithstanding so, no material consequences have arisen. It is not in dispute that Danhua Capital has continued to distribute Dividends in respect of the investment undertaken via the Company.

66.Mr Nip further submitted that the beneficiaries of a trust ought to be able to dispose of the trust assets, but this would be impossible if the Company is the investors’ trustee. This is because under the provisions of the subscription agreement and the limited partnership agreement[19], the “investment” undertaken via the Company would be “locked up” and the Company has agreed to commit. Mr Nip then went on to submit that there could not be any trust over the “investment” in Danhua Capital.

67.I reject Mr Nip’s argument, which is based on a false premise that the trust assets are the moneys that the Company injected into Danhua Capital. This is not the case. Instead, having entered into a series of agreements with the partners of Danhua Capital, the trust assets in question are the contractual rights against the partners of Danhua Capital (including the rights to receive the Dividends). These are “chose in action”. Of course, the contractual rights are accompanied by contractual obligations. They come as a package. I fail to see how it can be said that no trust over the “chose in action” could arise simply because the contractual rights are accompanied by some obligations to commit and/or “lock up”. It simply does not follow.

68.Mr Nip also submitted that it is telling that the Petitioner was a 50% registered shareholder of the Company. I disagree:-

(1) It is important not to lose sight of the fact that under the 2013 Partnership Investment Agreement[20], Beijing Giant Port (which consisted of 3 shareholders/investors) and the Company should operate as an OPE (i.e. one partnership entity), and each of the 2013 Investors (i.e. the 1^st Respondent, Peng, Xu Gang, Xu Dajin, and the Petitioner) should have 20% interests therein. As such, it was only natural that the 1^st Respondent arranged the Petitioner to become a registered shareholder of the Company (which is one of the two companies forming the OPE). It does not follow the intention was such that the Petitioner should hold the shareholding in the Company on trust for other 2013 Investors.

(2) Contrary to Mr Nip’s suggestion, it appears to me that had the parties intended that the shareholding in the Company be held on trust for the investors, the Petitioner would not have been added as a shareholder of the Company at all. As evidenced by clause 1 (2^nd paragraph) of the 2013 Investment Agreement, the investors only entrusted the 1^st Respondent to manage the OPE. In other words, the 1^st Respondent is the only person who has been entrusted to handle and manage the investment in Danhua Capital. This is consistent with the fact that the 1^st Respondent has been the sole director of the Company. In the premises, had the parties intended that the shareholding in the Company be held on trust for the investors, the 1^st Respondent would have become the sole shareholder of the Company, such that he could, alone, account to the investors regarding the dividends declared by the Company (which emanate from the Dividends distributed by Danhua Capital). There is not an iota in the written agreements suggesting that the Petitioner should be involved in managing the investment and/or dealing with the returns of the investment. There is no reason why the Petitioner should assume the role as a trustee and be involved in accounting to the investors regarding the Dividends distributed by Danhua Capital and/or any dividends declared by the Company.

69.In my view, it is of crucial importance to refer to the Petitioner’s own evidence as to the relationship between the investors and the Company. As mentioned in paragraph 54 above, when the Petitioner gave oral evidence, he admitted, inter alia, the following:-

(1) The Company holds the assets in question (i.e. the investment in Danhua Capital and the Dividends distributed by Danhua Capital) as a nominee, and these assets are held for the ultimate investors.

(2) The Company has an obligation to distribute investment returns (ie the Dividends distributed by Danhua Capital) to the ultimate investors (not only the registered shareholders of the Company).

(3) The Company shall be accountable to all the investors (not only the registered shareholders). This is because they have contributed the capital for investing in Danhua Capital.

(4) Thus, what should have happened was that upon receiving the Dividends distributed by Danhua Capital, the Company shall, after deducting the necessary tax expenses, pay the balance to the ultimate investors.

70.These admissions flatly contradict Mr Nip’s suggestion that the shares in the Company, rather than the assets in question (i.e. the investment in Danhua Capital and the Dividends distributed by Danhua Capital), are held on trust for the investors.

71.In light of the objective conduct of the parties and the Petitioner’s candid admissions, I have no doubt that the common intention amongst the Company (of which the 1^st Respondent is the sole director), the 1^st Respondent, the Petitioner as well as other investors is such that the Company holds the investment in Danhua Capital (or more precisely the contractual rights against Danhua Capital) and the Dividends distributed by Danhua Capital (being the fruits of the investment) on trust for the investors based on the proportions of their capital contributions.

72.Accordingly, the requirement of certainty of intention is satisfied.

73.The requirements of certainty of subject matter and certainty of object are also satisfied:-

(1) The subject matters of the trust are the investment in Danhua Capital (or more precisely the contractual rights against Danhua Capital) and the Dividends distributed by Danhua Capital (ie the fruits of the investors’ investment).

(2) The beneficiaries of the trust are the investors.

74.For completeness, I should point out that applying the doctrine of common intention constructive trust, one would arrive at the same conclusion.

75.The legal principles on common intention constructive trust are well-established, and were summarized in Lam Kwok Hing v Lau Ha [2025] 4 HKC 267 at para 42 (recently cited by DHCJ Andrew Li in Pan Haifei v Tai Karen Kai Lun [2026] 3 HKLRD 718 at para 119) as follows: -

“42. The following legal principles on common intention constructive trust are well-established: -

(1) The task of the court is to ascertain the parties’ intention, and this is to be done objectively: Mo Ying v. Brillex Development Ltd [2015] 2 HKLRD 985 at para 5.16 (per Cheung JA); Liu Wai Keung (supra) at para 47 (per G Lam J, as he then was); Leung Hang Lin & Anor v. Lam Mei Yung [2019] HKCFI 2819 at para 8(3) (per DHCJ Alexander Stock SC).

(2) The court would adopt a holistic approach, and take into account the whole course of conduct of the parties. The court will also take into account that the domestic context is very different from the commercial context: Stack v. Dowden [2007] 2 AC 432 at paras 60 and 69 (per Baroness Hale); Mo Ying (supra) at para 5.13-5.14 (per Cheung JA); Primecredit Ltd v. Yeung Chun Pang Barry [2017] 4 HKLRD 327 at para 1.6 (per Lam VP, as he then was).

(3) The starting point is that beneficial ownership follows legal ownership, and the onus is vested upon the party who seeks to show that the beneficial ownership is different from the legal or registered ownership: Stack v Dowden (supra) at para 56 (per Baroness Hale); Mo Ying (supra) at para 5.16 (per Cheung JA); Leung Hang Lin (supra) at para 8(1) (per DHCJ Alexander Stock SC).

(4) The onus can be discharged by showing that: (i) there was a common intention that the beneficial ownership was to be different from the legal ownership; (ii) the plaintiff altered his or her position in detrimental reliance upon the common intention; and (iii) it is unconscionable for the property owner to assert ownership in reliance on the legal title: Luo Xing Juan v. Estate of Hui Shui See (2009) 12 HKCFAR 1 at para 38 (per Ribeiro PJ); Liu Wai Keung (supra) at para 46 (per G Lam J as he then was); Leung Hang Lin (supra) §8(2) (per DHCJ Alexander Stock SC).

(5) The court may find the parties’ common intention based on the parties’ express discussion as to how the property is to be held: Leung Hang Lin (supra) at para 8(4) (per DHCJ Alexander Stock SC); Mo Ying (supra) at para 5.8 (per Cheung JA).

(6) The court can also rely on the parties’ conduct to infer the common intention, and direct financial contributions will readily justify an inference that the parties’ common intention is such that the plaintiff is to have an interest in the property: Mo Ying (supra) at para 5.8 (per Cheung JA); Primecredit Ltd (supra) §2.4 (per Lam VP, as he then was); Leung Hang Lin (supra) at para 8(4) (per DHCJ Alexander Stock SC).”

76.For the reasons elaborated above, I find that the common intention amongst the Company (of which the 1^st Respondent is the sole director), the 1^st Respondent, the Petitioner as well as other investors is such that the Company shall hold the investment in Danhua Capital (or more precisely the contractual rights against Danhua Capital, which are chose in action) and the Dividends distributed by Danhua Capital on trust for the ultimate investors based on the proportions of the ultimate investors’ capital contributions.

77.As regards the requirement of detrimental reliance:-

(1) There has been suggestion that where a common intention constructive trust falls outside of the domestic context, it is unnecessary to show detrimental reliance: see First National Trustco (UK) Ltd v Page [2019] EWHC 1187 at paras 246 to 250 (per Deputy High Court Judge Joanna Smith QC) and Tracey Ann De Bruyne v John Adrian De Bruyne & Ors [2010] EWCA Civ 519 at para 51.

(2) In First National Trustco (UK) Ltd (supra) at paras 247 to 250, Deputy High Court Judge Joanna Smith QC stated: -

“247. However, I accept the Claimants’ submissions that cases involving co-habiting partners are not the only cases of constructive trust, which is not a closed category: “English law provides no clear and all-embracing definition of a constructive trust. Its boundaries have been left perhaps deliberately vague so as not to restrict the court in technicalities in deciding what the justice of a particular case might demand” (Carl Zeiss Stiftung v Herbert Smith & Co (No2) [1969] 2 Ch 276 (per Edmund Davies LJ at 300G)

248. The Court of Appeal has recently considered the approach to be taken to cases falling outside the “co-habiting” cases in Tracey Ann De Bruyne v John Adrian De Bruyne & Ors [2010] EWCA Civ 519. The Court of Appeal identified the circumstances in which a common intention constructive trust will arise at [49]…

249. The Court of Appeal then went on to make clear the distinction between the principles designed to resolve issues of beneficial ownership between adult co-habitees and other cases in which equity will hold the transferee of property to the terms upon which it was acquired by imposing a constructive trust to that effect. Contrary to the Defendants’ submissions (which asserted a requirement for detrimental reliance that, I agree, is an essential feature in cases involving co-habitees- see Lewison LJ in Curran v Collins [2015] EWCA Civ 404 at [77]), the Court of Appeal said that these other cases “do not depend on some form of detrimental reliance in order to re-balance the equities between the competing claimants for the property. They concentrate instead on the circumstances in which the transferee came to acquire the property in order to provide the justification for the imposition of a trust…” (De Bruyne at [51]).

250. Unconscionability, however, remains important: “It is not necessary in such cases to show that the property was acquired by actual fraud…The concept of fraud in equity is much wider and can extend to unconscionable or inequitable conduct in the form of a denial or refusal to carry out the agreement to hold the property for the benefit of the third party which was the only basis upon which the property was transferred….(De Bruyne at [51])…”

(3) In my view, usually there would be detrimental reliance in the commercial context. In a typical scenario, the parties would not have entered the transaction at all but for the common intention or consensus in question. In other words, the fact that a party entered the transaction in question could ipso facto constitute detrimental reliance. Against this background, there were occasions where the English courts appeared to take the view that it would not be necessary for the claimant to show that it suffered some “additional” detriment as a result of relying on the common intention or consensus.

(4) The present case falls squarely within the typical scenario described hereinabove. It is obvious that had the parties failed to agree that the investment in Danhua Capital and the Dividends distributed by Danhua Capital be held for the investors, none of the investors would have contributed a single penny.

(5) Accordingly, it is plain that the requirement of detrimental reliance is satisfied, and it follows that it would be unconscionable and/or inequitable if the Company (of which the 1^st Respondent is a director) reneged from the aforesaid common intention.

78.In the premises, apart from being entitled to rely on the doctrine of express trust based on the ten propositions propounded by Briggs J (as he then was) in Re Lehman Brothers at para 225, the 1^st Respondent is also entitled to rely on the doctrine of common intention constructive trust to establish that the role of the Company is a trustee.

79.For all the above reasons, I conclude that:-

(1) a trust has arisen as between the Company and the investors;

(2) the Company holds the investment in Danhua Capital (or more precisely the contractual rights against Danhua Capital, which are chose in action) as well as the Dividends distributed by Danhua Capital (being fruits arising from the investment) on trust for the investors who had made capital contribution; and

(3) the only activities engaged in by the Company are to (i) undertake the investment in Danhua Capital (the capital of which came from the investors) and (ii) hold the investment in Danhua Capital (or more precisely the contractual rights against Danhua Capital, which are chose in action) and the Dividends distributed by Danhua Capital (being fruits arising from the investment) on trust for the investors who had made capital contribution.

D2 Does the Petitioner have Locus Standi to seek relief in these Proceedings on the ground that he has Suffered Prejudice as a “Member” of the Company?

80.In Hollington on Shareholders’ Rights (10^th Ed) at para 7-26, the learned author stated:-

“A petitioner’s locus standi depends upon his status as a shareholder and he is required to show that it is his interests as a shareholder which have been prejudiced. However, “the requirement…should not be too narrowly or technically construed”…: per Lord Hoffmann in O’Neill v Philips [1999] 1 WLR 1092 at 1105…it is sufficient if he has suffered prejudice “in some capacity connected with his shareholding, such as that of a lender under a loan made as part of the same investment as the acquisition of shares”…: Re Tobian Properties [2013] Bus. L.R. 753 at [11]-12]; Gamlestaden v Baltic Partners [2007] Bus. L.R. 1521…”

(emphasis added)

81.Along the same vein, in Albion Energy Ltd v Energy Investments Global BRL [2020] EWHC 301 at para 75, Mr Justice Foxton stated:-

“…it is necessary for [the petitioner] to establish a realistic case that it has been prejudiced in its interests as shareholder. I accept that this requirement is not to be too narrowly or technically construed (Lord Hoffmann in O’Neill v Philips [1999] 1 WLR 1092, 1105). However, the prejudice in question must be “bound up” with [the petitioner’s] position as a member…It is not enough that there is conduct which prejudices the interests of persons who happen to be members of a company: Re a Company [1983] Ch 178 at p.189E and Re a Company No. 00477 of 1986 (1986) 2 BCC 97, 171, at pp.99, 174)….”

(emphasis added)

82.In the present case, the forefront of the Petitioner’s complaint (as averred in the Amended Petition) is that the 1^st Respondent had misappropriated the Dividends distributed by Danhua Capital, which should have been paid to the Company.

83.If I were to find that the Company is a “quasi-partnership” between the Petitioner and the 1^st Respondent on a 50:50 basis, the Petitioner’s case might take off the ground.

84.In this scenario, there is a legitimate basis for the Petitioner to complain that:-

(1) The Dividends distributed by Danhua Capital should have been received by the Company.

(2) Upon receiving the Dividends distributed by Danhua Capital, the Company should have declared dividends in favour of the Petitioner and the 1^st Respondent on a 50:50 basis.

(3) Since the Dividends distributed by Danhua Capital were allegedly misappropriated by the 1^st Respondent, the Company has not been in a position to declare any dividends in favour of its shareholders (including the Petitioner).

(4) Further, as the assets of the Company have been jeopardized, the value of the Petitioner’s shareholding in the Company has diminished.

(5) Accordingly, the Petitioner’s interests as a shareholder of the Company have been prejudiced.

85.However, for the reasons elaborated in section D1 above, I reject the Petitioner’s case that the Company is a “quasi-partnership” between himself and the 1^st Respondent. Based on the documentary evidence before the court, the objective circumstances surrounding the case, and the Petitioner’s candid admissions, I find that the Company merely holds the investment in Danhua Capital (or more precisely the contractual rights against Danhua Capital, which are chose in action) and the Dividends distributed by Danhua Capital on trust for the investors who had made capital contribution.

86.Assuming that the Petitioner had made capital contribution and is hence one of the investors:-

(1) The Company shall, as a trustee, account to the Petitioner with regard to the Dividends distributed by Danhua Capital in accordance with the proportion of his capital contribution.

(2) If the Company fails to account for the Dividends distributed by Danhua Capital, the Company would be in breach of trust and in breach of its fiduciary duties owed to the Petitioner.

(3) If the 1^st Respondent has allegedly misappropriated the Dividends distributed by Danhua Capital, such that the Company is unable to honour its fiduciary duties owed to the Petitioner as a trustee, the 1^st Respondent would be liable to the Petitioner on the basis of dishonest assistance.

87.In this scenario, it can be said that the Petitioner has suffered a loss as a result of the 1^st Respondent’s wrongdoing in misappropriating the Dividends distributed by Danhua Capital. It is, however, clear that the Petitioner has not suffered any loss in the capacity of a shareholder or a member of the Company. Instead, the Petitioner has merely suffered loss in the capacity of a beneficiary under the trust, of which the Company is trustee.

88.As pointed out by Mr Justice Foxton in Albion Energy Ltd (supra) at para 75:-

“…It is not enough that there is conduct which prejudices the interests of persons who happen to be members of a company: Re a Company [1983] Ch 178 at p.189E and Re a Company No. 00477 of 1986 (1986) 2 BCC 97, 171, at pp.99, 174)….”

(emphasis added)

89.It is important to stress that the 1^st Respondent’s alleged wrongdoings in misappropriating the Dividends distributed by Danhua Capital had nothing to do with the internal affairs of the Company at all. The 1^st Respondent simply misappropriated sums that are said to be beneficially owned by the Petitioner. The Company never beneficially owns the sums in question.

90.As pointed out (see paragraphs 53(4) to (6) above), the Company should, as a trustee, directly account to the Petitioner for the Dividends distributed by Danhua Capital. There is no room for suggesting that the Dividends should first be injected into the Company, and the Company’s director (i.e. the 1^st Respondent) should then subsequently distribute dividends in respect thereof to its shareholders (who would be accountable to the ultimate investors). The parties may resort to this method if and only if the 1^st Respondent and the Petitioner hold the shareholding in the Company on trust for the investors. However, I have no doubt that this is not the case. As mentioned above:-

(1) The Petitioner is unable to explain how some trusts would somehow arise in respect of the shares in the Company. In this regard, the averments in the Amended Petition are completely hollow.

(2) The capital contribution from the investors for investing in Danhua Capital has never become the share capital of the Company, and no new shares in the Company have been allotted in respect thereof.

(3) As the Company can distribute the proceeds in respect of the Dividends distributed by Danhua Capital to the ultimate investors, there is no commercial reason why the shareholders of the Company should be involved in the distribution process. It would be highly artificial to suggest that it is necessary to constitute some trusts over the shareholding in the Company, such that the registered shareholders would be involved in the distribution process. Whilst this is cumbersome, no meaningful purpose could be served at all.

(4) As evidenced by the 2013 Investment Agreement, the intention of the investors was to entrust the 1^st Respondent alone to manage and handle the investment and the returns arising therefrom. Had the parties intended that the shares in the Company be held on trust for the investors, the Petitioner would not have become a shareholder as it was not envisaged that he would be accountable to other investors: see paragraph 68(2) above.

(5) More fundamentally, the suggestion that the Company’s shareholders are entitled to receive the fruits of the investment by way of dividends declared by the Company (such that they could distribute the same to the ultimate investors) is contradicted by the Petitioner’s admissions that (see paragraphs 54 and 69 above):-

(a) the Company holds the assets in question (ie the investment in Danhua Capital and the Dividends distributed by Danhua Capital) for the ultimate investors;

(b) the Company has an obligation to distribute the Dividends distributed by Danhua Capital to the ultimate investors (not only the registered shareholders of the Company);

(c) the Company should be accountable to the ultimate investors as they had made contributions for the investment in Danhua Capital; and

(d) there was no express discussion as to how the registered shareholders should account to the ultimate investors with regard to the sums that might enter their pockets by way of dividends declared by the Company.

91.In the premises, the Petitioner does not even have a legitimate expectation to receive the sums in question in the capacity of a shareholder of the Company. I accept that on the Petitioner’s case, he may have an entitlement to receive the Dividends distributed by Danhua Capital. However, such an entitlement derives from the Petitioner’s capacity as a beneficiary of the trust, not his status as a member or a shareholder of the Company.

92.Mr Tasman Tam (for the 1^st Respondent) helpfully referred me to McEwen v Combined Coast Cranes Pty Ltd [2002] NSWSC 1227. In that case:-

(1) The company in question was formed as a service and trustee company of a unit trust constituted by a trust deed, and the founding individuals were equal shareholders and equal holders of the units in the unit trust. As the petitioner was expelled from the board of the company, he commenced proceedings under, inter alia, the Australian equivalence[21] of section 724 of our Companies Ordinance.

(2) In holding that these provisions did not apply at all, Young CJ stated:-

“46. …The sections are directed to the conduct of a company's affairs. It is well established that where oppression has occurred in a company which holds all its assets on trust, there is no diminution in value of the plaintiff's share in the company despite the oppressions: Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606; Re Polyresins Pty Ltd (1998) 145 FLR 141. In that latter case, Chesterman J said that the Court could not in an application under these sections deal with equitable interests conferred by a trust of which the company is trustee, see page 156.”

(emphasis added)

93.With respect, I agree with Young CJ’s proposition. There is no room to conflate the Petitioner’s interests as a shareholder or a member of the Company with the Petitioner’s interests as a beneficiary under the trust, of which the Company is trustee.

94.I do not lose sight of the legal principle that the requirement of locus standi shall be construed liberally: see O’Neill v Phillips [1999] 1 WLR 1092, 1105 (per Lord Hoffmann). However, on the facts of the present case, I am simply unable to see how it can be said that the Petitioner has suffered prejudice “in some capacity connected with his shareholding”: see Re Tobian Properties [2013] Bus. L.R. 753 at paras 11 to 12; Gamlestaden v Baltic Partners [2007] Bus. L.R. 1521.

95.For completeness, I do not lose sight of the cases cited by Mr Thomas Nip, including Loveridge v Loveridge [2022] BCC 324, R&H Electric Ltd v Haden Bill Eletrical Ltd [1995] 2 BCLC 280, Gamlestaden Fastigheter AB v Baltic Partners Ltd & Ors (supra), and Re Tobian Properties Ltd [2013] 2 BCLC 567.

96.In my view, these cases are confined to their own facts, and they do not avail the Petitioner. None of these cases support the proposition that a shareholder who merely suffers loss in the capacity of a beneficiary under a trust (of which the company is a trustee) shall have locus standi to present an unfair prejudice petition pursuant to the procedure under section 724 of the Companies Ordinance.

97.I have no doubt that the procedure under section 724 of the Companies Ordinance is not the appropriate avenue for redressing the Petitioner’s grievance.

98.The same analysis applies to the Petitioner’s miscellaneous complaints that the 1^st Respondent has failed to cause the Company to prepare books, accounts, and financial records and to convene general meetings.

99.As pointed out, the Company is merely a trustee that holds the investment in Danhua Capital and the Dividends distributed by Danhua Capital on trust for the investors, and this is the only activity that the Company has been carrying out. If the Petitioner were one of the investors, he would have a legitimate interest in requiring the Company to explain and/or account for the state of affairs relating to his investment. However, such an interest arises from the Petitioner’s capacity as a beneficiary under the trust, not his status as a member or a shareholder of the Company.

100.After all, the Company is merely a bare-shell corporate vehicle. Having said that the investment in Danhua Capital (or more precisely the contractual rights against Danhua Capital, which are chose in action) and the Dividends distributed by Danhua Capital (being the fruits of the investors’ investment) are held on trust for the investors, the Company does not have any assets of its own. As such, the Company also does not have any financial affairs of its own.

101.In the premises, the shares in the Company are simply valueless. It is, hence, futile and pointless for the Petitioner to ask the court to grant a buy-out order.

102.Insofar as the relief is concerned, Mr Nip submitted that even though the Company is a trustee, the court can still grant an order that the director of the Company be changed from the 1^st Respondent to the Petitioner, such that, in the future, the Dividends distributed by Danhua Capital could be channelled to the Petitioner directly. In my view, this proposed relief simply aims at protecting the Petitioner’s interests as a beneficiary under the trust (of which the Company is trustee), as opposed to the Petitioner’s interests as a shareholder or a member of the Company[22]. There are obviously other procedural means for the Petitioner to protect his interests as a beneficiary under the trust. For instance, he could have directly mounted a proprietary claim against the Company and sought an injunction (and/or even an interim injunction) that the Dividends distributed by Danhua Capital be preserved.

103.For all the above reasons, I find and conclude that the Petitioner has failed to show that he has suffered prejudice as a shareholder or a member of the Company. Accordingly, the Petitioner does not have the requisite locus standi to commence the present proceedings under section 724 of the Companies Ordinance.

104.For this reason alone, the Amended Petition should be dismissed.

D3 The Underlying Dispute between the Parties

105.In light of the aforesaid conclusion, it is unnecessary for this court to resolve the questions of:-

(1) Whether the Petitioner has contributed capital for the purpose of investing in Danhua Capital; and

(2) Whether the 1^st Respondent has misappropriated the Dividends distributed by Danhua Capital, which the Petitioner is arguably entitled to receive in the capacity of a beneficiary under the trust.

106.I do have sympathy for the Petitioner. It appears to me that the Petitioner does have viable claims against the Company and/or the 1^st Respondent based on, inter alia, breach of trust/fiduciary duties and/or dishonest assistance.

107.However, for the reasons canvassed in section D2 hereinabove, it is obvious that the procedure under section 724 of the Companies Ordinance is not the avenue for resolving the underlying disputes between the Petitioner and the 1^st Respondent/the Company. Regrettably, the Petitioner has failed to (i) invoke the correct procedure and (ii) formulate his claims properly.

108.There are other avenues for the Petitioner to seek justice, and it appears likely that the underlying disputes between the parties will be resolved in another litigation in the future.

109.As fairly acknowledged by counsel from both sides, it would not be appropriate for me to meddle with the future litigation when the views that I express would not be binding on the parties at all[23].

110.In any event, as the 1^st Respondent made a “half-time” submission, I did not have the opportunity to consider the 1^st Respondent’s oral evidence and explanations.

111.In the circumstances, the less I say, the better.

E. Disposition

112.I dismiss the Amended Petition taken out by the Petitioner on the ground that he has failed to show that he has suffered prejudice in the capacity of a shareholder or a member of the Company.

113.Costs should follow the event.

114.I make a costs order nisi that the Petitioner shall pay the 1^st Respondent’s costs in these proceedings, including all costs previously reserved, to be taxed if not agreed on a party-to-party basis.

115.Lastly, I express my gratitude to Mr Thomas Nip, Mr Jason Tang, and Mr Tasman Tam for their helpful assistance.

Mr Thomas Nip and Mr Jason Tang, instructed by JC LEGAL for the Petitioner

Mr Tasman Tam, instructed by Ravenscroft & Schmierer, for the 1^st Respondent

Giant Port (International) Investment Limited, 2^nd Respondent, in person, absent